Q3 2023 F.N.B. Corp Earnings Call

Speaker 1: Good morning and welcome to the FNB Corporation third quarter 2023 earnings call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I'd now like to turn the conference over to Lisa Haidu. Please go ahead.

Good morning, and welcome to the F N B Corporation third quarter 2023 earnings call.

All participants will be in listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero.

After today's presentation there'll be an opportunity to ask questions. Please note. This event is being recorded I would now like to turn the conference over to Lisa <unk>. Please go ahead.

Speaker 2: Thank you. Good morning and welcome to our earnings call. This conference call of FMB Corporation and the report it files with the Securities and Exchange Commission often contain forward-looking statements and non-GAAP financial measures.

Thank you good morning, and welcome to our earnings call.

Conference call of F N B Corporation, and the reported filed with Securities and Exchange Commission you can take them forward.

non-GAAP financial measures.

Speaker 2: non-GAAP financial measures should be viewed in addition to and not as an alternative for our reported results prepared in accordance with GAAP. Reconciliations of GAAP to non-GAAP financial measures to the most directly comparable GAAP financial measures are included in our presentation materials and in our earnings release.

<unk> financial measures can be viewed in addition to and not as an alternative for our reported results prepared in accordance with GAAP reconciliations of GAAP to non-GAAP financial measures. The most directly comparable GAAP financial measures are included in the presentation materials and in our own.

Earnings release, please refer to these non-GAAP and forward looking.

Speaker 2: Please refer to these non-GAAP and border-multiple disclosure contained in our related materials, reports, and registration statements, file looks, theories, and exchange commissions, and available on our Club of the Web site.

Pleasure.

Later, this year Yelp and.

Registration statement filed with Securities and Exchange Commission and available on our corporate website.

Speaker 2: A replay of this call will be available until Thursday, October 26th, and the webcast link will be posted to the About Us investor relations section of our corporate website. I will now turn the call over to Ben Stille, Chairman, President, and CEO .

Replay of this call will be available until Thursday October 26, and the webcast link will be closer to the.

Yeah.

The relations section of our corporate website I will now turn the call over arching silly Chairman President and CEO .

Thank you and welcome to our third quarter earnings call. Joining me today are Vince Calabrese, our Chief Financial Officer, and Gary Guerrieri, Our Chief Credit Officer.

Speaker 3: Joining me today are Vince Calabrese, our Chief Financial Officer, and Gary Guarari, our Chief Predator Officer.

Speaker 3: FMB reported third quarter net income available to common shareholders of $143 million, or 40 cents per diluted common share.

F&B reported third quarter net income available to common shareholders of 143 billion or 40 cents per diluted common share.

Speaker 3: This quarter's performance represents EPS growth of 3% in quarter.

This quarter's performance represents EPS growth of 3% linked quarter.

Speaker 3: Our results reflect the execution of FMB's long-term strategy.

Our results like the XP.

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Long term strategies geared towards risk management.

Speaker 3: geared towards risk management, client primacy, generating organic growth, and diversifying key basins.

Generating organic growth and diversifying gvhd.

Speaker 3: Our third quarter efficiency ratio equals 51.7% and is expected to remain in the upper quartile on a peer relative.

Our third quarter efficiency ratio equaled 51, 7% and is expected to remain in the upper quartile peer relative to these.

Speaker 3: In addition, operating leverage on a year-to-date basis is 8%.

In addition, operating leverage on a year to date basis is 8%.

Speaker 3: Tangible book value per share has increased 12.5% year over year to $9.02.

Tangible book value per share has increased 12, 5% year over year to $9. Since you said, despite the impact of higher interest rates and.

Speaker 3: and return on tangible common equity was again at a solid level of 18.2.

Return on common equity.

It was again, a solid level of 18, 2%.

Speaker 3: As we have previously mentioned, FMB is well positioned to steadily increase market share in this volatile environment given the strength of our capital and liquidity position and adherence to our consistent, conservative under oath.

As we have previously mentioned that's going to be well positioned it's definitely increased market share in this volatile environment, given the strength of our capital liquidity position adherence to our consistent conservative underwriting.

Total deposits in the third quarter is 34 6 billion, a two 3% increase from the second quarter, while maintaining a relatively stable.

Speaker 3: All deposits ended in the third quarter at $34.6 billion, a 2.3% increase from the second quarter, while maintaining a relatively stable mix of non-interest bearing deposits at $31.6 billion.

Interest bearing deposit at 31%.

Our third quarter.

Deposit growth once again outpaced the settlement.

H eight data.

The trend quarterly outperformance versus the industry and demonstrating the strength of our granular deposit base and diversified geographic footprint as well as our goal to be the primary bank for our clients in.

Speaker 3: and diversified geographic footprint, as well as our goal to be the primary bank for our climate.

Speaker 3: In fact, FDIC deposit market share data released in September revealed that FMB ranks in the top five in nearly 50% of the MSAs we operate in, and in the top three in nearly 30...

In fact, FDIC deposit market share data released in September revealed that F&B ranks in the top five nearly 50% of the Msas, we operate in and then the top three and nearly 30%.

Despite the acceleration of the path.

Speaker 3: despite the acceleration of deposit competition throughout the banking industry.

Is it competition throughout the banking industry.

Speaker 3: F&B spot deposits have decreased less than a half percent since year end 2022, demonstrating our trusted position as our customers.

Spot deposits have decreased less than a half percent since year end 2022, demonstrating our trusted position as our customers' partners operating yet.

Speaker 3: Our deposit growth this quarter was effectively funded dollar-for-dollar by our 2.5% link for growth and loans which also meaningfully outperformed HAD.

Our deposit growth this quarter was affected refunded dollar for dollar by our two 5% linked quarter.

Loans, which also meaningfully up warm.

Isn't it.

Speaker 3: Commercial loan growth of 2.4% benefited from the highest level of quarterly production year to date, which was spread across the entire

Commercial loan growth of two 4% benefited from the highest level of quarterly production year to date, which was spread across the entire footprint.

Since year end 2022, we have achieved $6, 3% spot loan growth while building our CET one ratio of 10, 2%.

Speaker 3: Tangible common equity to tangible asset ratio also continues to build, totaling 7.54% this quarter even against the backdrop of higher...

Common equity to tangible asset ratio also continues to build totaling 754% this quarter, even against the backdrop of higher rates.

Speaker 3: Additionally, our solid liquidity position and better than peer funding costs provides balance sheet optionality and the ability to support our clients capital.

Additionally, our solid liquidity position and better than peer funding costs provides balance sheet optionality and the ability to support our clients capital needs.

Speaker 3: The loan-to-deposit ratio remains at a comfortable level of 92.9%.

Loan to deposit ratio remains at a comfortable level of 92, 9%.

Speaker 3: We also continue to invest in capabilities to gain market share and further outpace our competitors, particularly in the digital offerings we deliver for retail and business customers.

We also continue to invest in capabilities to gain market share further outpace our competitors, particularly in the digital offerings in retail and business customers.

Speaker 3: Our award-winning eStore offers unique platform driving a better customer experience in product penetration.

Our award winning E store offers a unique platform driving a better customer experience.

<unk> penetration.

Speaker 3: Our most recent implementation, the eStore common application, creates a single universal account application for the majority of our consumer loan products and services, enabling customers to apply for multiple products simultaneously in a very streamlined manner.

Our most recent implementation the E store common application creates a single Universal account application for the majority of our consumer loan products and services, enabling customers to apply for multiple products.

And a very streamlined manner.

Speaker 3: In a few months, we will add our consumer deposit products to the common application, which will facilitate faster customer onboarding across multiple products and should immediately accelerate the adoption of the common application.

In a few months, we will add our consumer deposit products to the common application, which will facilitate faster customer onboarding across multiple products. It should meaningfully accelerate the adoption of the common application.

We will capitalize on our competitive advantage with our superior digital offering and the strength of our balance sheet to acquire and grow customer relationships across our seven state footprint.

Speaker 3: We will capitalize on our competitive advantage with our superior digital offering and the strength of our balance sheet to acquire and grow customer relationships across our seven state flip-flops.

Speaker 3: During the quarter, we fully charged off the commercial industrial loan we mentioned in our second quarter earnings call. Gary will provide more information during his presentation.

During the quarter, we charged off the commercial industrial alone we mentioned in our second quarter earnings call Gary will provide more information during his presentation.

Speaker 3: absent that isolated charge off, total net charge offs would have been a modest seven basis points and total delinquent be stood at

Absent that isolated charge off total net charge offs would have been a modest seven basis points and total delinquency stood at 63 basis.

Speaker 3: Our growth strategies are balanced by diligent focus on risk management.

Our growth strategies are balanced by a diligent focus on risk management.

Speaker 3: We closely monitor macroeconomic and market-specific trends to manage risk as part of our core credit philosophy, which has served us well in softer economic trends.

Closely monitor macroeconomic and market specific trends to manage risk as part of our core credit philosophy, which has served us well in softer economic times, we remain steadfast in our approach to consistent underwriting and managing credit risk to maintain a balanced well positioned portfolio throughout economic cycles.

Speaker 3: We remain steadfast in our approach to consistent underwriting and managing credit risk to maintain a balanced, well-positioned portfolio throughout economic cycles, enabling us to serve our customers through business cycles in ways our competitors cannot.

Enabling us to serve our customers through business cycles in ways, our competitors cannot.

Speaker 3: I will now turn the call over to Gary to provide additional information on our credit performance.

I will now turn the call over to Gary to provide additional information on our credit performance.

Thank you Vince and good morning, everyone. We.

Speaker 4: Thank you, Vince. And good morning, everyone. We ended the quarter and year to date period with our asset quality metrics remaining at good level.

We ended the quarter and year to date period with our asset quality metrics remaining at good levels.

Speaker 4: Total delinquency decreased 12 basis points in the quarter to end at 63 bps, and NPL Zonario decreased 10 basis points to end at a solid 36 bps.

Total delinquencies decreased 12 basis points in the quarter, and 63 bps and Npls and Oreo decreased 10 basis points to end at the solid 36 Bips.

Speaker 4: Criticized loans were down 18 basis points with net charge offs for the quarter and year to date of 47 and 26 basis points respectively.

Criticized loans were down 18 basis points with net charge offs for the quarter and year to date.

47, and 26 basis points respectively.

Speaker 4: excluding the isolated credit that Vince noted, net charge offs for the quarter and year-to-date period were 7 and 12 basis points respectively.

Excluding the isolated credit that Vince noted net charge offs for the quarter and year to date period were seven and 12 basis points respectively.

Speaker 4: I'll conclude my remarks with an update on our credit risk management strategies and CRE portfolio.

I'll conclude my remarks, with an update on our credit risk management strategies and CRE portfolio.

As previously disclosed in the second quarter earnings call, we placed a single $31 $9 million C&I loan on non accrual.

Speaker 4: As previously disclosed in the second quarter earnings call, we placed a single $31.9 million C&I loan on Monocruel.

Speaker 4: Based on alleged fraud and upon later findings uncovered during our ongoing investigation, including subsequent bankruptcy filings by our borrower and its primary supplier, the outstanding balance was charged off.

Based on the alleged fraud and upon later findings uncovered during our ongoing investigation, including subsequent bankruptcy filings by our borrower and its primary supplier.

Outstanding balance was charged off.

Speaker 4: We will continue to monitor the bankruptcy process closely and aggressively pursue all opportunities to recover a portion of the charge of.

We will continue to monitor the bankruptcy process closely and aggressively pursue all opportunities to recover a portion of the charge offs.

Speaker 4: Total provision expense for the quarter stood at $25.6 million, providing for loan growth and the previously mentioned charge-off in excess of the $13 million specific reserve that we allocated to it at the prior quarter.

Total provision expense for the quarter stood at $25 6 million, providing for loan growth and the previously mentioned charge offs in excess of the $13 million specific reserve that we.

We allocated to it at the prior quarter ahead.

Speaker 4: are ending funded reserve decreased 12.1 million in the quarter and stands at $401 million or a solid 1.25% of loans reflecting our strong position relative to our peers.

Our ending funded reserve decreased $12 1 million in the quarter and stands at $401 million or a solid 1.25% of loans, reflecting our strong position relative to our peers.

Speaker 4: When including acquired unamortized loan discounts, our reserve stands at 1.39% and our NPL coverage position remains strong at 394% inclusive of the unamortized loan discount.

When including acquired Unamortized loan discounts our reserve stands at 1.39% and our NPL coverage position remains strong at 394% inclusive of the unamortized loan discounts.

We remain committed to consistent underwriting and credit risk management to maintain a balanced well positioned the portfolio throughout economic cycles and continued to perform full stress test of the loan portfolio on a quarterly basis.

Speaker 4: We remain committed to consistent underwriting and credit risk management to maintain a balanced, well-positioned portfolio throughout economic cycles, and continue to perform full stress tests of the loan portfolio on a quarterly basis.

Speaker 4: We were pleased with the outcome of the result of the recent exercise, which confirms that our diversified loan portfolio enables us to withstand various economic downturn scenarios.

We were pleased with the outcome of the result of the recent exercise, which confirms that our diversified loan portfolio enables us to withstand various economic downturn scenarios.

Speaker 4: Regarding the non-owner-occupied CRE portfolio, delinquency and NPLs remain very low at 31 and 20 basis points respectively, confirming that our consistent underwriting and strong sponsorship demonstrates the ability to perform in a rising rate environment.

Regarding the non owner occupied CRE portfolio delinquency and Npls remained very low at 31, and 20 basis points, respectively, confirming that our consistent underwriting and strong sponsorship demonstrates the ability to perform in a rising rate and black.

Right.

In closing asset quality metrics ended the quarter at good levels, and we continue to generate diversified loan growth in attractive markets.

Speaker 4: In closing, asset quality metrics ended the quarter at good levels, and we continue to generate diversified loan growth in attractive marks.

We closely monitor macroeconomic trends and the individual markets in our footprint and we'll continue to manage risk aggressively as part of our core credit philosophy, which has served us well throughout various economic cycles.

Speaker 4: We closely monitor macroeconomic trends and the individual markets in our footprint, and will continue to manage risk aggressively as part of our core credit philosophy, which has served us well throughout various economic sites.

Speaker 4: I will now turn the call over to Vince Calabrese, our Chief Financial Officer, for his remarks.

I'll now turn the call over to Vince Calabrese, our Chief financial Officer for his remarks.

Thanks, Gary and good morning.

Speaker 5: Today I will focus on the third quarter's financial results and offer guidance updates for the fourth quarter.

Today, I will focus on the third quarter's financial results and offer guidance updates for the fourth quarter.

Speaker 5: Third quarter net income available to common shareholders totaled $143.3 million, or 40 cents per share, bringing year-to-date earnings per share to $1.18.

Third quarter net income available to common shareholders totaled $143 3 million or <unk> 40 per share bringing.

Bringing year to date earnings per share to $1 18.

Speaker 5: The results include contributions from our commercial leasing team, who originate Renewable Energy Financing Transactions as part of their business model, and this quarter they closed a large solar deal with a related investment tax credit.

The results include contributions from our commercial leasing team, who originate renewable energy financing transactions as part of their business model and this quarter. They closed a large solar deal it's a related investment tax credit.

Loans and leases ended the quarter at 32 billion growing $796 million or two 5% linked quarter.

Speaker 5: Lones and Leases ended the quarter at 32 billion, growing 796 million or 2.5% linked quarter. To give them by the success of our strategy to grow high quality loans across our diverse wonderful questions. If you have a ..." You should look at Christ." He was growing altogether. The establishment of the Government's

And by the success of our strategy to grow high quality loans across our diverse footprint.

Commercial loan growth of $470 million or two 4% was across our seven state geography with notable contributions in the Pittsburgh mid Atlantic and North Carolina markets.

Speaker 5: Commercial loan growth of $470 million, or 2.4%, was across our seven-state geography, with notable contributions in the Pittsburgh, Mid-Atlantic, and North Carolina markets.

Speaker 5: Consumer loans ended the third quarter at 12 billion, a linked quarter increase of 326 million, or 2.8%, led by growth in residential mortgages.

Consumer loans ended the third quarter at 12 billion, a linked quarter increase of $326 million or two 8% led by growth in residential mortgages.

The investment portfolio remained flat at $7 1 billion with a fairly even split between <unk> and HTM.

Speaker 5: The investment portfolio remained flat at $7.1 billion with a fairly even split between AFS and HTM.

Speaker 5: The duration of our securities portfolio at September 30th is 4.4, similar to last quarter.

The duration of our securities portfolio at September 30 is $4 four similar to last quarter.

Speaker 5: Total deposits ended September at $34.6 billion with a healthy increase of $790 million linked quarter, or 2.3%, reflecting organic deposit growth and seasonal municipal deposit inflows.

Total deposits ended September at $34 6 billion with a healthy increase of $790 million linked quarter or two 3%.

Affecting organic deposit growth and seasonable seasonal municipal deposit inflows.

Speaker 5: Our deposit gathering capabilities have continued to outperform the industry, as illustrated by the Federal Reserve H8 deposit data, where our deposit growth was nearly 220 basis points higher for the quarter and 320 basis points higher since year end 2022.

Our deposit gathering capabilities have continued to outperform the industry as illustrated by the Federal Reserve H eight deposit data, where our deposit growth was nearly 220 basis points higher for the quarter and 320 basis points higher since year end 2022.

Speaker 5: The deposit mix shift slowed modestly this quarter as customers moved into time deposits and interest-bearing demand deposits, which grew 458 million and 712 million respectively, more than offsetting the decrease in non-interest-bearing deposits of 210 million.

The deposit mix shift slowed modestly this quarter as customers moved into time deposits and interest bearing demand deposits, which grew $458 million and $712 million, respectively more than offsetting the decrease in noninterest bearing deposits of $210 million.

Speaker 5: As time deposits have grown, we have intentionally kept the portfolio short with a weighted average maturity of 11 months so that when rates do fall, we will have the ability to reprice these balances downward.

As time deposits have grown we have intentionally kept the portfolio short.

With a weighted average maturity of 11 months. So then when rates do fall, we will have the ability to reprice these balances downwards.

Speaker 5: As of September 30th, non-interest bearing deposits comprise 31% of total deposits, compared to 32% at June 30th and 34% at year end.

As of September 30th noninterest bearing deposits comprised 31% of total deposits compared to 32% at June 30, and 34% at year end.

Speaker 5: Given our granular, spable deposit base, we believe we will continue to outperform the industry with a favorable mix of non-interest bearing deposits to total deposits, even in a higher for longer interest rate environment.

Given our granular stable deposit base, we believe we will continue to outperform the industry with a favorable mix of noninterest bearing deposits to total deposits even in a higher for longer interest rate environment.

The loan to deposit ratio remains at a comfortable level of 92, 9% flat with June 30th.

Speaker 5: The loans to deposit ratio remains at a comfortable level of 92.9%, flat with June 30.

Speaker 5: Revenue totaled $408 million, driven by net interest income of $327 million, and growth in net interest income reflecting our diversified fee income strategy.

Revenue totaled 408 million driven by net interest income of $327 million and growth in noninterest income, reflecting our diversified fee income strategy.

Speaker 5: The third quarter's net interest margin was 326, a decline of 11 basis points, moderating from the 19 basis point decline last quarter.

The third quarter's net interest margin was 326, a decline of 11 basis points moderating from the 19 basis point decline last quarter.

Speaker 5: The yield on earning assets increased 17 basis points to 511, reflecting higher yields on loans and investment security.

The yield on earning assets increased 17 basis points to 511, reflecting higher yields on loans and investment securities.

Speaker 5: Total cost of funds increased 29 basis points to 193 as the cost of interest bearing deposits increased 39 basis points to 236 and was partially offset by the contribution from non-interest bearing deposits.

Total cost of funds increased 29 basis points to 193 as the cost of interest bearing deposits increased 39 basis points to 236 and was partially offset by the contribution from noninterest bearing deposits.

We continue to actively manage our total deposit cost and ended the quarter at $1 75, bringing the cumulative deposit beta to 31%.

Speaker 5: continue to actively manage our total deposit cost and end of the quarter at 175 bringing the cumulative deposit rate at 31%.

Speaker 5: We are projecting cumulative beta to end 2023 in the mid 30s.

We are projecting cumulative beta to end 2023 in the mid thirties.

Turning to noninterest income and expense.

Speaker 5: Turning to non-interesting common expense, non-interesting common total of 81.6 million, a 2% increase from the second quarter, at capital market income increased 1.2 million, led by international banking, with solid contributions from swap fees, syndications, and debt capital markets income.

Noninterest income totaled $81 6, million% to 2% increase from the second quarter as capital markets income increased $1 2 million led by international banking with solid contributions from swap fees syndications and debt capital markets income.

Unknown Executive: Good morning, and welcome to the F.N.B. Corporation, 3rd quarter, 2023 earnings call. All participants will be in listen only mode.

Unknown Executive: Should you need assistance? Please signal a conference specialist by pressing the start key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded.

Speaker 5: Mortgage banking operations income decreased $1 million due to negative fair value marks given the sharp increase in mortgage rates during the third quarter that more than offset a 46% increase in total saleable mortgage production versus last quarter.

Mortgage banking operations income decreased $1 million due to negative fair value marks given the sharp increase in mortgage rates during the third quarter more than offset a 46% increase in total sellable mortgage production versus last quarter.

Lisa Hajdu: I'd now like to turn the conference over to Lisa Hajdu. Please go ahead. Thank you.

Lisa Hajdu: Good morning and welcome to our earnings call. This conference call of F.N.B. Corporation and the reported files with the Fisheries and Exchange Commission have to contain forward looking statements and non-GAAP financial measures. Non-GAAP financial measures should be viewed in addition to and not as an alternative for our reported results prepared in accordance with GAAP. Reconciliation of GAAP to non-GAAP financial measures to the most directly comparable GAAP financial measures are included in our presentation materials and in our earnings release. Please refer to these non-GAAP and forward looking disclosures contained in our related materials, reports, and registration statements, files with the Fisheries and Exchange Commission and available on our Club of the Web site.

Noninterest expense totaled $218 million, an increase of $6 2 million or 3% from last quarter.

Speaker 5: Non-interest expense totaled $218 million, an increase of $6.2 million or 3% from last quarter.

Speaker 5: Net occupancy and equipment expense increase $3.5 million largely due to the impact of technology investments in the inflationary macroeconomic environment.

Net occupancy and equipment expense increased $3 5 million largely due to the impact of technology investments and the inflationary macroeconomic environment.

Speaker 5: Marketing expenses increased 1.5 million due to the timing of digital marketing campaigns which helps drive deposit growth and acquire additional households.

Marketing expenses increased $1 5 billion due to the timing of digital marketing campaigns, which helped drive deposit growth and acquire additional households.

Speaker 5: Efficiency ratio equaled a solid 51.7% up slightly from 50% last quarter.

The efficiency ratio equaled a solid 51, 7% up slightly from 50% last quarter.

Speaker 5: For the first nine months of 2023, the efficiency ratio totaled 50.8%, compared to 54.7% for the same time frame in 2022.

For the first nine months of 2023 efficiency ratio totaled 58% compared to 54, 7% for the same timeframe in 2022.

Unknown Executive: A replay of this call will be available until Thursday, October 26, and the webcast link will be posted to the About Us Investor Relations section of our corporate website.

While supporting our strong loan growth our capital ratios remained robust through the quarter.

Vincent Delie: I will now turn the call over to Ben Sili, Chairman, President, and CEO. Thank you and welcome to our third quarter earnings call. Joining me today are Vince Calibri's, our Chief Financial Officer, and Gary Guerrero, our Chief Credit Officer. F.N.B, reported third quarter net income available to common shareholders of $143 million for 40 cents for diluted common share. This quarter's performance represents EPS growth of 3% in quarter. Our results reflect the execution of F.N.B's long-term strategies, geared towards risk management, client privacy, generating organic growth, and diversifying fee-based income.

Speaker 5: While supporting the strong loan growth, our capital ratios remain robust through the quarter. Our TCE finished the quarter at 754, and went adjusted for health and maturity investment marks would equal 6.7%.

Our TCE finished the quarter at $7 54, and when adjusting for held to maturity investment marks would equal six 7%.

Speaker 5: Our CET1 ratio at 10.2% is in line with peer median, and we remain well capitalized even when including the fair value marks in our AFS and HTM portfolios.

Our CET one ratio of 10, 2% is in line with peer median and we remain well capitalized even when including the fair value marks in our <unk> and HTM portfolios.

Speaker 5: Tangible book value per common share was $9.02 on September 30th, an increase of 23 cents per share from June 30th largely from the higher level of retained earnings more than offsetting the increased impact of AOCI, which reduced the current quarter-end tangible book value per common share by $1.06.

Tangible book value per common share was $9 <unk> at September 30, an increase of 23 per share from June 30th largely from the higher level of retained earnings more than offsetting the increased impact of OCI.

Which reduced the current quarter and tangible book value for common share by $1 six sets.

Vincent Delie: Our third quarter efficiency ratio equals 51.7% and is expected to remain in the upward quartile on a pure relative basis. In addition, operating leverage on a year-to-day basis is 8%. The tangible book value for share has increased 12.5% year-over-year to $9.2%, despite the impact of higher industry. And return on tangible common equity would, again, at a solid level of 18.2%. As we have previously mentioned, F.N.B, is well-positioned, steadily increased market share in this volatile environment, given the strength of our capital and liquidity position, and adherence to our consistent conservative under of that month.

Speaker 5: On a year-over-year basis, tangible book value per common share increased a full dollar, or 12.5%, demonstrating our commitment to internal capital generation.

On a year over year basis tangible book value per common share increased a full dollar or 12, 5% demonstrating our commitment to internal capital generation.

Speaker 5: Let's now look at the fourth quarter financial objectives, starting with the balance sheet.

Let's now look at the fourth quarter financial objectives, starting with the balance sheet.

Speaker 5: On a full year spot basis, we increased our previous guide for loans to grow mid to high single digits year over year as we take this time to invest in our capabilities to gain market share across our diverse geographic footprint.

On a full year spot basis, we increased our previous guide for loans to grow mid to high single digits year over year as we take this time to invest in our capabilities to gain market share across our diverse geographic footprint.

Speaker 5: Total projected deposit balances are revised upward to end 2023, relatively flat to year end 2022 spot balance.

Total projected deposit balances our revised upward to end 2023 relatively flat to year end 2022 spot balances.

Vincent Delie: Over the positive end of the third quarter, at 34.6 billion, at 2.3% increase from the second quarter, while maintaining the relative stable mix of non-interest variance of 3.1%. Our third quarter links to positive growth, once again, health base, the Federal Reserve, H.A., to positive data. Continuing a trend of quarterly outperformance versus the industry, and demonstrating the strength of our granular deposits, and diversified geographic footprint, as well as our goal to be the primary bank for our clients.

Speaker 5: The fourth quarter net interest income is expected to be between 315 and 325 million, assuming no additional interest rate hikes for the rest of the year.

The fourth quarter net interest income is expected to be between 315 325 million assuming no additional interest rate hikes for the rest of the year.

Speaker 5: Fourth quarter non-interest income is expected to be around 80 million, which is similar to our guidance levels for the first three quarters of the year as we continue to benefit from our strategy of diversified fee-based business.

Fourth quarter noninterest income is expected to be around $80 million, which is similar to our guidance levels for the first three quarters of the year as we continue to benefit from our strategy of diversified fee based businesses.

Speaker 5: Fourth quarter guidance for non-interest expense is expected to be between $215 and $220 million driven by increased investment spend and the impact of the inflationary macroeconomic environment.

Fourth quarter guidance for noninterest expense is expected to be between 215 $220 million driven by increased investment spend and the impact of the inflationary macroeconomic environment.

Vincent Delie: In fact, FDIC deposit market share data released in September revealed that F.N.B, ranks in the top five and nearly 50% of the MSAs we operate in, and in the top three in nearly 30%. Despite the acceleration of deposit competition throughout the banking industry, F.N.B, spot deposits have decreased less than a half percent since year end, 2022, demonstrating our trusted position and as our customers, customers operating in. Our deposit growth, this quarter, was effectively funded dollar for dollar by our 2.5% link for growth and loans, which also meaningfully outperformed H.A.D, data.

Speaker 5: Full year provision guidance is revised to a tighter band of $70 to $80 million and will be dependent on net loan growth and charge off activity in the fourth quarter.

Full year provision guidance is revised to a tighter band of $70 million to $80 million and will be dependent on that net loan growth and charge off activity in the fourth quarter.

Lastly, the full year effective tax rate should be between 17.5 and 18% in the fourth quarter effective tax rate is expected to be between 17.8, and 18, 2% reflecting benefits of investment tax credits generated through the financing transactions of our commercial leasing business in the quarter.

Speaker 5: Lastly, the full year effective tax rate should be between 17.5 and 18 percent, and the fourth quarter effective tax rate is expected to be between 17.8 and 18.2 percent, reflecting benefits of investment tax credits generated through the financing transactions of our commercial leasing business in the quarter. With that, I'll close the presentation. Thank you. Thank you,

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With that I'll turn the call back to Vince.

Speaker 3: Once again, this quarter's financial performance was achieved through the dedicated efforts of all of our

Once again this quarter's financial performance was achieved the dedicated efforts of all of our employees the culture at F&B rooted in teamwork and collaboration to collectively reach our goals F&B continues to earned national recognition for our inclusive culture based on independent feedback from our own.

Speaker 3: The culture at F&B is rooted in teamwork collaboration to collectively reach our...

Vincent Delie: Commercial loan growth of 2.4% benefited from the highest level of quarterly production year-to-date, which was spread across the entire footprint. Since year end, 2022, we have achieved 6.3% spot loan growth, while building our C.E.T.1 ratio to 10.2%, tangible common equity to tangible asset ratio also continues to build, totaling 7.54% this quarter, even against the backdrop of higher rate. Additionally, our solid liquidity position and better than peer funding costs provides balance sheet optionality and the ability to support our client capital needs.

Speaker 3: Epid be continues to earn national recognition for our inclusive culture based on independent feedback from our own team.

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Speaker 3: Building on the multiple awards we received earlier this year for innovation, leadership, and our family-friendly benefits and compensation program.

Building on the multiple awards, we received earlier this year innovation leadership, and our family friendly benefits and compensation programs. We also garnered additional national culture excellent honors.

Speaker 3: We also garnered additional national culture excellence honors.

Speaker 3: highlighting our commitments of diversity and employee appreciation and wellness and development.

Lighting, our commitment to diversity and inclusion.

Depreciation and wellness and developed.

Speaker 3: We strongly believe having an outstanding culture with engaged employees results in superior performance and shareholder value of issues.

We strongly believe having an outstanding culture with engaged employees result in superior performance and shareholder value appreciation.

Vincent Delie: The loan-to-deposit ratio remains at a comfortable level of 92.9%. We also continue to invest in capabilities to gain market share and further outpace our competitors, particularly in the digital offerings we deliver for retail and business customers. Our award-winning eStore offers a unique platform driving a better customer experience than product penetration. Our most recent implementation, the eStore Common Application, creates a single universal account application for the majority of our consumer loan products and services, enabling customers to apply for multiple products simultaneously in a very streamlined manner.

Speaker 3: We are pleased with this quarter's results as we continue to outperform the industry, reporting loan into positive growth while adhering to our conservative risk management philosophy, all while strengthening our capital and liquidity.

We are pleased with this quarter's results as we continued to outperform the industry reporting loan and deposit growth, while adhering to our conservative risk management philosophy, all while strengthening our capital and liquidity position.

Speaker 3: Given the strength in our performance, FNB is well prepared to meet the needs of our consumer in business planning.

Given the strength in our performance F&B is well prepared to meet the needs of our consumer and business clients with a broad array of products and services, our strong balance sheet and our commitment to achieving success for all of our stakeholders. Thank.

Speaker 3: broader array of products and services, a strong balance sheet and a commitment to achieving success for all of our stakeholders. Thank you.

Thank you.

Okay.

We will now begin the question and answer session.

Speaker 1: To ask a question, you may press star then one on your touch tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble it or ask.

To ask a question you May Press Star then one on your Touchtone phone.

Vincent Delie: In a few months, we will add our consumer deposit products to the Common Application, which will facilitate faster customer onboarding across multiple products and should meaningfully accelerate the adoption of the Common Application. We will capitalize on our competitive advantage with our superior digital offering and the strength of our balance sheet to acquire and grow customer relationships across our seven state footprint.

If youre using a speakerphone please pick up your handset before pressing the keys.

Your question. Please press Star then two at this time, we'll pause momentarily to assemble our roster.

Yeah.

Speaker 1: Our first question comes from Daniel Tamiyo from Raymond James. Please go ahead.

Our first question comes from Dan.

Daniel Tamayo from Raymond James Please go ahead.

Speaker 6: Good morning, guys. I'm wondering if you could talk a little bit about updated thoughts on when you think the margin might bottom. And if you had any more details on what the month of September looked like from a margin perspective and yield.

Good morning, guys.

I'm wondering if you could talk a little bit about our updated thoughts on when you think the margin might bottom.

Vincent Delie: During the quarter, we fully charged off the commercial industrial loan we mentioned in our second quarter earnings call.

And if you had any more details on what the month of September looked it looked like from a margin perspective and yields that kind of stuff.

Gary Guerrieri: Gary will provide more information during his presentation.

Vincent Delie: Absent that isolated charge-off, total net charge-off would have been a modest seven basis points, and total length would be stood at 63 basis points. Our growth strategies are balanced by a diligent focus on risk management. We closely monitor macroeconomic and market-specific trends to manage risk as part of our core credit philosophy, which has served us well in softer economic times. We remain steadfast in our approach to consistent underwriting and managing credit risks to maintain a balanced, well-positioned portfolio throughout economic cycles, enabling us to serve our customers through business cycles in ways our competitors cannot.

Speaker 3: Yeah, good morning, Danny. I guess a couple of comments on that. I think given everything industries was good this year, clearly the peak was in the first quarter. If you look at our net interest income for the third quarter, we only declined 2.6 million.

Yes, good morning Dani.

I guess a couple of comments on that.

I think given everything.

Industries, we stood this year clearly the peak was in the first quarter. If you look at our net interest income for the third quarter. You know, we only declined $2 6 million.

Speaker 3: in the NIM compression as I commented on, moderated to 11 after decreasing 19 basis points last quarter. The monthly decline in NIM has been averaging around three or four basis points a month since May. So it's been coming down, but pretty steady within that range. Our outlook for the fourth quarter of the 315 to 325, it doesn't have any rate increases as I mentioned, with the decline in margin kind of similar to what we saw in the third quarter is kind of what's baked into our guide.

Compression as I commented on moderated to 11.

After decreasing 19 basis points last quarter.

The monthly decline in NIM has been averaging around three basis points a month since may so its been a its been coming down but pretty steady within that range our outlook for the fourth quarter of the $2 15 to 325. It doesn't have any any rate increases as I mentioned with the decline in margin kind of similar to what we saw in the third.

Gary Guerrieri: I will now turn the call over to Gary to provide additional information on our credit requirements. Thank you, Vince, and good morning, everyone. We ended the quarter and year-to-date period with our asset quality metrics remaining at good levels. Total delinquency decreased 12 basis points in the quarter to end at 63 bips and NPLs in Oreo decreased 10 basis points to end at a solid 36 bips. Criticized loans were down 18 basis points with net chargeoffs for the quarter and year-to-date of 47 and 26 basis points respectively. Excluding the isolated credit that Vince noted, net chargeoffs for the quarter and year-to-date period were 7 and 12 basis points respectively.

<unk> is kind of what's baked into our guidance.

Speaker 6: Okay, that's helpful, appreciate it. And then kind of moving over to loan growth. You know, I'm just curious, you know, how you're thinking about loan growth, potentially next year if the economy does slow. You know, it's sustained at a pretty, pretty...

Okay. That's.

That's helpful. I appreciate it.

And then kind of moving over to loan growth.

I'm just curious.

How youre thinking about loan growth potentially next year, if the economy does slow.

Yeah, it's it's sustained at a pretty pretty.

Speaker 6: strong growth level here throughout the 2023, in particular, Physicians First and the residential mortgage book. But just curious on kind of higher level thoughts about the ability to sustain that kind of long growth.

Strong gross level here through throughout the 2023.

In particular physicians first in the residential mortgage book, but just curious on.

And I'm kind of higher level thoughts about the ability to sustain that kind of loan growth.

Yeah.

Speaker 3: Yeah, I think first of all, I think that we're in a really strong position relative to many competitors, particularly many of the smaller bands who are struggling with capital and liquidity issues. So it puts us in a position where F and B can become, you know, we go on the offense basically and we're able to go after more opportunities with confidence. We can support our clients capital in the move through 2024.

Yes, I think first of all I think that we're in a really strong position relative to many competitors, particularly maintenance smaller banks who are.

Gary Guerrieri: I'll conclude my remarks with an update on our credit risk management strategies and CRE portfolio. As previously disclosed in the second quarter earnings call, we placed a single $31.9 million CNI loan on molecule. Based on alleged fraud and upon later findings uncovered during our ongoing investigation, including subsequent bankruptcy filings by our borrower and its primary supplier, the outstanding balance was charged off. We will continue to monitor the bankruptcy process closely and aggressively pursue all opportunities to recover a portion of the chargeoff.

Struggling with capital and liquidity issues. So it puts us in a position where F N b can become.

We go on the offense basically we're able to go after more opportunities with confidence.

Can support our clients cap homes.

2024, we didn't give guidance.

Speaker 3: For 24, I can't really speak to specific numbers, but my expectation moving into next year, it's gonna be choppy for everybody from a loan demand perspective. I think for us to be successful, we're gonna have to stay very focused.

For 'twenty worse, I can't really speak to specific numbers, but my expectation moving into next year.

To be choppy or everybody from a loan demand.

I think for us to be successful, we're going to have to stay very focused.

Speaker 3: on maximizing our growing market share in the markets that we've moved into, where there still continues to be good solid growth in those markets from a GDP perspective. I think that's one thing that will help us. Secondarily, I think given the size span of the company today versus where we were years ago, we have multiple markets that are going to be more than a year from now. So, I think that's one thing that will help us. Secondarily, I think given the size span of the company today versus where we were years ago versus where we were years ago, we have multiple markets that are going to be more

Maximizing our growing market share in the markets that we've moved into what were still continues to be.

Gary Guerrieri: Total provision expense for the quarter stood at 25.6 million, providing for loan growth and the previously mentioned chargeoff in excess of the $13 million specific reserve that we allocated to it at the prior quarter end. Our ending funded reserve decreased 12.1 million in the quarter and stands at $401 million or a solid 1.25% of loans, reflecting our strong position relative to our peers. When including acquired unamortized loan discounts, our reserve stands at 1.39% and our NPL coverage position remains strong at 394% inclusive of the unamortized loan discounts.

Good solid growth in those markets from a GDP perspective, that's one thing that will help us.

Secondarily I think given that.

Size span of the company today versus where we were years ago.

We have multiple markets to pursue opportunities in.

Speaker 3: to pursue opportunities in. So I think going into 24, depending on how the economy shakes out.

I think going into 'twenty work, depending on how the economy shakes out.

Speaker 3: It will be more challenging to find quite a worthy borrower that we would want to bank, right? In that environment, I think it's gonna be more competitive. So I think having the right people spread across, those areas would be a benefit to us versus somebody that's heavily concentrated and take pencil manure or high.

It will be.

More challenging defined credit worthy borrowers differently would one day right now.

That environment, I think it's going to be more competitive so.

I think having the right people spread across those areas.

A benefit to us versus somebody who is heavily concentrated in Pennsylvania or Ohio.

Gary Guerrieri: We remain committed to consistent underwriting and credit risk management to maintain a balanced well-positioned portfolio throughout economic cycles and continue to perform full stress tests of the loan portfolio on a quarterly basis. We were pleased with the outcome of the result of the recent exercise which confirms that our diversified loan portfolio enables us to withstand various economic downturn scenarios. Regarding the non-owner-occupied CRE portfolio, the linkancy and NPLs remain very low at 31 and 20 basis points respectively, confirming that our consistent underwriting and strong sponsorship demonstrates the ability to perform in a rising rate in back.

Speaker 3: So I think all of that will play in our favor. I think we've also invested pretty heavily in certain platforms that will continue to drive the income for us. So in addition to loan growth, we did perform pretty well from a fee income perspective, given the pressures that we were facing. But we've invested in our digital platform, which should help us in small business.

I think all of that will play in our favor I think we've also invested pretty heavily in certain platforms.

To drive fee income cross selling you know in addition to loan growth.

Did pretty well.

Fee income perspective, given the pressures facing.

But we've invested in our digital platform, which should help us in small business and.

Speaker 3: with gathering positives and moving into this forward and the common app is totally built out. We've invested pretty heavily in Treasury management systems. You know, our payment processing capabilities.

Gathering deposits.

And the common App is fully built out we've invested pretty heavily in treasury management system or.

Our payments our payment processing capabilities.

Speaker 3: Lockbox capability that we still offer clients has been upgraded in the last year. So capital markets, we built out our ability to participate in bond op-ins for the capital markets platform.

Lockbox capability, we still offer clients has been upgraded in the last year or so.

Capital markets, we built out our ability to participate.

Gary Guerrieri: In closing, asset quality metrics ended the quarter at good levels, and we continue to generate diversified loan growth in attractive markets. We closely monitor macroeconomic trends and the individual markets in our footprint, and we'll continue to manage risk aggressively as part of our core credit philosophy, which has served us well throughout various economic cycles.

Bond offering our debt capital markets platform them.

Speaker 3: that continues to perform well for us and enables us to move up market and participate in lower risk transactions and still meet the return thresholds that we have internally. All of that will play well for us.

That continues to perform well for us and enables us to move up market and participate in lower risk transactions and still meet the return thresholds that we have internally. So all of that will play well for us as we move into next year. So those are the reasons why I'd fuel.

Speaker 3: as we move into next year. So those are the reasons why I feel more confident about our performance.

We're confident about our performance this quarter and then into next quarter, but I will caution you I think.

Speaker 3: this order and then into next order, but I will caution you, I think the macroeconomic environment will play a role. You know, demand has to be there as well, so, and capital investment has to be occurring. Anyway.

Vincent Calabrese: I will now turn the call over to Vincent Calabrese, our chief financial officer for his remarks. Thanks, Gary, and good morning. Today, I will focus on the third quarter's financial results and offer guidance updates for the fourth quarter. Third quarter net income available to common shareholders totaled 143.3 million or 40 cents per share, bringing here-to-date earnings per share to $1.18. The results include contributions from our commercial leasing team who originate renewable energy financing transactions as part of their business model, and this quarter they closed a large solar deal with a related investment tax credit.

The macroeconomic environment will play a role.

Demand has to be there as well so the capital investment house right.

Anyway.

On the commercial side.

Speaker 6: Terrific color. I appreciate all of that. I'll step back. Thanks, guys.

That's terrific color I appreciate all that color I'll step back thanks, guys.

Okay. Thank you.

Speaker 7: The next question comes from Michael Peruto from KBW. Please go ahead. Hey.

The next question comes from Michael Perito from K B W. Please go ahead.

Yeah.

Hey, good morning, guys. Thanks for taking my questions.

Yeah.

Vincent Calabrese: Loans and leases ended the quarter at 32 billion, growing 796 million or 2.5% linked quarter, driven by the success of our strategy to grow high quality loans across our diverse footprint. Commercial loan growth of 470 million or 2.4% was across our seven state geography with notable contributions in the Pittsburgh, Mid-Atlantic, and North Carolina markets. Consumer loans ended the third quarter at 12 billion, a linked quarter increase of 326 million or 2.8% led by growth in residential mortgages.

I want to start on a comment you made Vince about.

Speaker 8: making investments on the op-back side and trying to take advantage of, you know, a lot of the sure of being the show's wonder if you guys are rolling the time.

Making investments on the Opex side and trying to take advantage of the posture of the industry. I was wondering if you guys are willing to kind of go.

Speaker 8: Go a layer deeper on that. I mean, I think it's evident and obvious from the financials that, that you guys are in a strong position here. So, so what type of investments are you looking at? What do you think could make the biggest difference as you look to the next 12 months here and, and obviously still have some growth opportunities in front of you and a lot of peers that probably have some opportunities, but don't have the balance sheets to really kind of fully take advantage.

Oh, a layer deeper on that I mean, I think it's evident and obvious from the financials that you guys are in a strong position here. So so what type of investments are you looking at what we're what do you think could make the biggest difference as you look to the next 12 months here.

And obviously still have some growth opportunities in front of you and a lot of peers that probably have some opportunities, but don't have the balance sheets to really kind of fully take advantage of them.

Vincent Calabrese: The investment portfolio remained flat at 7.1 billion with a fairly even split between AFS and HTM. The duration of our securities portfolio at September 30 is 4.4 similar to last quarter. Total deposits ended September at 34.6 billion with a healthy increase of 790 million linked quarter or 2.3% reflecting organic deposit growth and seasonal municipal deposit inflows. Our deposit gathering capabilities have continued to outperform the industry as illustrated by the Federal Reserve H8 deposit data, where our deposit growth was nearly 220 basis points higher for the quarter, and 320 basis points higher since year-end 2022.

Speaker 3: I'm sorry, you broke up a little bit. You're speaking specifically to digital.

I'm, sorry, you broke up a little bit you're speaking specifically to digital.

Speaker 8: Yeah, I mean, I imagine most of the things you're looking at are digital, but just more broadly, I think like initiatives or kind of areas of investment that you guys are particularly focused on that, you think could be, you know, pretty fruitful in the next 12 months in terms of kind of continuing growth and being able to take share while the industry is in a weaker position.

That's your question, Yeah, I mean, I imagine most of the things Youre looking at our our our digital but just more broadly if he like initiatives are or kind of areas of investment that you guys are particularly focused on that you think could be pretty fruitful over the next 12 months in terms of kind of continuing growth and being able to take share while the industry.

<unk> is in a weaker position.

Okay.

Speaker 3: Well, first of all, I think it's a great question and we've talked about this in turn. You know, there are two paths to go down as we move into next year. I mean, let's face it, the banking industry in general is facing margin, compression, you know.

Yeah, well first of all I think it's a great question and we've talked about this internally.

There are two path to go down as we move into next year.

Face it.

Banking industry in general is facing margin compression.

Speaker 3: Some banks are struggling to grow revenue, entirely competitive from the depository perspective. So I certainly understand why there's a lot of caution moving in the next year. But I think given our position, we have strong capital, we're in a strong capital position, we have tremendous liquidity. We have made investments in the NOVO expansion. The

Some banks are struggling to grow revenue.

Vincent Calabrese: The deposit makes ships slowed modestly this quarter as customers moved into time deposits and interest bearing demand deposits, which grew 458 million and 712 million respectively, more than offsetting the decrease in non-interest bearing deposits of 210 million. As time deposits have grown, we have intentionally kept the portfolio short with a weighted average maturity of 11 months, so that when rates do fall, we will have the ability to reprise these balances downwards.

Highly competitive from a depository perspective, so I certainly understand why there's a lot of caution moving into next year.

Given our position we have strong capital we're in a strong capital position, we have tremendous liquidity, we have made investments in de novo expansion in the retail space, which are coming online.

Speaker 3: that you're coming online. You know, expense comes along with that, so we've already started to invest.

<unk> comes along with that so we've already started to invest in that.

Speaker 3: in those projects and you'll see depreciation expense coming online with those that, you know, we're at the point now where they should start to generate revenue or contribute to our effort, right? Because it's...

These projects that you'll see depreciation expense coming online with those that we're at the point now where they should start to generate revenue or contribute.

Vincent Calabrese: As of September 30, non-interest bearing deposits comprise 31% of total deposits compared to 32% at June 30 and 34% at year-end. Given our granular, stable deposit base, we believe we will continue to outperform the industry with a favorable mix of non-interest bearing deposits to total deposits, even in a higher for longer interest rate environment. The loans to deposit ratio remains at a comfortable level of 92.9% flat with June 30.

Our effort right.

We launched a number of them at the beginning of this year.

Speaker 3: launched a number of them at the beginning of this year or late last year. So we should be seeing some good success there. And those are principally at higher vote markets that are not.

Last year, so we should be seeing some good.

Success, there and those are principally at higher Bull markets.

Or not really.

Speaker 3: feeling as much pain as some of the other more legacy markets in the growth perspective. So, you know, we're very optimistic about the performance there. We're also optimistic.

As much pain at some of the other legacy markets in the world.

Perspective, so we're very optimistic about the performance. There. We're also optimistic about our build out of a common app that I spoke about.

Speaker 3: about our build out of the Common App that I spoke about. You know, you can purchase multiple loan products on our platform today. By the end of this quarter, we'll be able to buy multiple loan products and multiple positive products with one application.

You can purchase multiple loan products on our platform today by the end of this quarter, we'll be able to buy multiple loan products in multiple depositary product with one application.

Vincent Calabrese: Religious income reflecting our diversified fee income strategy. The third quarter's net interest margin was 3.26 at the kind of 11 basis points moderating from the 19 basis point to climb last quarter. The yield on earning assets increased 17 basis points to 5.11, reflecting higher yields on loans and investment securities. Total cost of funds increased 29 basis points to 193 as the cost of interest bearing deposits increased 39 basis points to 2.36 and was partially offset by the contribution from non-interest bearing deposits.

Speaker 3: And the training's going on and you'll, we've been doing training on our systems and on our capabilities for some time. I think you're gonna start to see that.

The training is going on and we've been doing training.

On our systems and our capabilities for some time I think youre going to start to see that pay off we also changed our model and the branches several years ago in the consumer bank.

Speaker 3: Pay off, we also changed our model in the branches several years ago in the consumer bank. We started rolling out relationship bankers instead of having tellers and platform people. So more highly trained bankers in the branches and we're finally...

<unk> rolling out relationship bankers, instead of having tellers and platform people. So more highly trained bankers in the branches. We're finally.

Speaker 3: closing out the last region in terms of converting those folks over to this higher profile banking.

Closing out the last region in terms of converting those folks over to this higher higher profile banking condition, which should help with cross sell and driving.

Vincent Calabrese: We continue to actively manage our total deposit cost and end of the quarter at 175 bringing the cumulative deposit beta to 31%. We are projecting cumulative beta to end 2023 in the mid-30s. Turning to non-interest income in expense, non-interest income totaled 81.6 million, a 2% increase from the second quarter at capital market income increased 1.2 million led by international banking with solid contributions from swap fees, syndications, and debt capital markets income.

Speaker 3: with cross cell and driving, you know, a lot of it fails in the branches, but I'm just doing transactions.

Product sales in the branches beyond just doing transactions.

Speaker 3: And then we have bankers basically.

Hmm.

We have bankers.

Lee.

Speaker 3: There are a number of bankers that are pulling back to other institutions. So I think we'll have opportunities to go after business that presents itself.

Are there are a number of bankers that are pulling back in other institutions. So you know I think we will have opportunities to.

We go after business.

<unk> itself.

We've been for companies that we've been calling on for a long time in the commercial space, we've made investments and so to be more specific we've made investments in treasury management, which I think will assist us in becoming a primary client.

Speaker 3: Well, we didn't, for companies, we'd be calling off for a lot of time in the commercial.

Vincent Calabrese: Mortgage banking operations income decreased 1 million to the negative fair value marks given the sharp increase in mortgage rates during the third quarter that more than offset a 46% increase in total saleable mortgage production versus last quarter. Non-interest expense totaled 218 million an increase of 6.2 million or 3% from last quarter. Net occupancy and equipment expense increased 3.5 million largely due to the impact of technology investments in the inflationary macroeconomic environment.

Speaker 3: We made investments in, to be more specific, we made investments in Treasury Management, which I think will assist us in becoming primary client from the market and larger companies. We made investments in the digital platform, the LRUS Collactor.

Middle market larger company, we made investments into digital platform to help us go after.

Speaker 3: more share of wallet more quickly with clients by presenting them to a more efficient platform to onboard clients. We invested pretty heavily in our institutional capabilities from a capital market perspective.

More share of wallet.

With clients by presenting them to the more efficient platform to onboard clients.

<unk> invested pretty heavily in our institutional capabilities from a capital market perspective.

Speaker 3: position of clients. So I think really we we the number of areas that we work on and that you know, I think that we're definitely going to experience better than peer results because

Physician clients. So I think really we we have a number of areas that we work on.

Vincent Calabrese: Marketing expenses increased 1.5 million due to the timing of digital marketing campaigns which helps drive deposit growth and acquire additional households. Efficiency ratio equal to solid 51.7% up slightly from 50% last quarter. For the first nine months of 2023, efficiency ratio totaled 50.8% compared to 54.7% for the same timeframe in 2022. While supporting the strong loan growth, our capital ratios remain robust through the quarter. Our TCE finished the quarter at 754 and went adjusted for health and maturity investment marks would equal 6.7%.

I think that.

We're definitely going to.

Variants.

Better than peer results because of it.

Speaker 3: Well, that's my commentary. We also, by the way, built out our small business.

Well.

That's my commentary, we also by the way built out our small business lending.

Speaker 3: One big platform we continue to focus on that where our plan is to integrate merchant and Treasury management services into a bondable program similar to the common app. So that is going to be worked on in the first floor of next year. We have about 90,000 clients, they're either depositoring for loan clients in the small business segment. So there's quite a bit. I think we have about three to five percent penetration.

<unk> platform, we continue to focus on that our plan is in a great merchant and Treasury management services and to a bundle.

Program similar to the common app, so that is going to be work done in the first quarter of next year, we have about 90000 clients, they're either depository.

Among clients and the small business segment, so theres quite a bit I think we have about 3% to 5% penetration with merchant in that space. So theres quite a bit of opportunity there from a fee income perspective, what we've been focusing on model moving into next year. Those are some of the strategic investments that we've made.

Vincent Calabrese: Our CET1 ratio at 10.2% is in line with peer median and we remain well capitalized even when including the fair value marks in our AFS and HTM portfolios. Tangible book value for common share was $9.02 at September 30th, an increase of 23 cents per share from June 30th, largely from the higher level of retained earnings, more than offsetting the increased impact of AOCI, which reduced the current quarter end tangible book value for common share by $1.06. On a year-over-year basis, tangible book value for Common Share increased a full dollar, or 12.5% demonstrating our commitment to internal capital generation.

Speaker 3: with merchant in that space. So there's quite a bit of opportunity there from a key income perspective. We've been focusing on moving into next year. Those are some of the strategic investments that we've made. And I do believe that at this time, it makes sense for this company to continue to pursue those investments in private revenue.

And I do believe that at this time it makes sense for this company to continue to pursue those investments to drive revenue.

Speaker 3: during 2021 world might be more difficult for others to do that.

During 2000.

Be more difficult for others.

Speaker 8: Yeah, no, that makes a lot of sense. That's great flavor. Thank you for walking through all that. Then just lastly for me, and then I'll step back with someone else jumping in. Just curious, more of a high level question than in your term question, but as you think about the franchise, the size, the growth projections.

Yeah, no that makes a lot of sense for them. So thats great flavor. Thank you for walking through all that.

Just lastly for me and then I'll step back and let someone else jump in.

Just curious more of a high level question, then a near term question, but.

As you think about the franchise the size.

Vincent Calabrese: Let's now look at the fourth quarter financial objectives starting with the balance sheet. On a full year spot basis, we increased our previous guide for loans to grow mid to high single digits year-over-year as we take this time to invest in our capabilities to gain market share across our diverse geographic footprint. Total projected deposit balances are revised upward to end 2023, relatively flat to year end 2022 spot balances. The fourth quarter net interest income is expected to be between 315 and 325 million, assuming no additional interest rate hikes for the rest of the year.

Projections.

I imagine you guys have constant conversations with the board and the executive team around what the right level of capitalization is and obviously at the higher end of the spectrum on the asset side Theres a lot of conversations about capital I'm just curious.

Speaker 8: I imagine you guys have constant conversations with the board and the executive team around what the right level of capitalization is. And obviously, at the higher end of the spectrum on the asset side, there's a lot of conversations about capital. I'm curious.

Speaker 8: What any update is the odds around what you think kind of the right capital level for F&D is like over the next few years here. I mean, do you think it's a higher number than maybe what it was in the last 24 months? I mean, obviously you don't have to get there right now, but just kind of curious what the conversation is internally around capital, just giving everything to tap in. And as you take a ballot, you know, taking chair and continuing to grow the ballot sheet, you know, moving forward.

What what any updated thoughts around what you think kind of the right capital level for for F&B is like over the next few years here I mean do you think it's a higher number than maybe what it was over the last 24 months I mean, obviously you don't have to get there right now, but just kind of curious what the conversation is internally around capital just given everything that's happened and then as you think about it.

Taking share and continuing to grow the balance sheet, you know moving forward.

Vincent Calabrese: Fourth quarter net interest income is expected to be around 80 million, which is similar to our guidance levels for the first three quarters of the year as we continue to benefit from our strategy of diversified fee-based businesses. Fourth quarter guidance for non interest expense is expected to be between 215 and 220 million driven by increased investment spend and the impact of the inflationary macroeconomic environment. Full year provision guidance is revised to a tighter band of 70 to 80 million and will be dependent on net loan growth and charge of activity in the fourth quarter.

Oh, Yeah, well, we cover capital capital and liquidity position of the company in every board meeting.

Speaker 3: Yeah, well, we cover capital and liquidity in the company and every board meeting that we have. So we have a pre-sector team where we go over various elements of our financial performance. We discuss the balance sheet and detail and strategies around maximizing returns. That happens in every board.

So we have a preceptor team when we go out with various elements of our financial performance, we discuss the balance sheet in detail and strategies around maximizing returns.

Happens in every board meeting.

Speaker 3: And then we talk about what the investors expect and what the street expects and how we're performing relative to those expectations. I think capital is

And then you talk about what the investors expect and what the street expects and how we're performing relative to those expectations I think capital is a topic.

Speaker 3: that we had on the table for a long time. I think given the AOCI impairment that you've seen, you know, impact others capital position, you know, we reviewed as having less capital because we actually operate with a lower risk profile within the commercial loan categories that we participate in in the consumer. This is what we're very conservative.

We had on the table for a long time, I think given the OCI impairment that you've seen.

Vincent Calabrese: Lastly, the full year effective tax rate should be between 17.5 and 18%. And the fourth quarter effective tax rate is expected to be between 17.8 and 18.2%. Reflecting benefits of investment tax credits generated through the financing transactions of our commercial leasing business in the quarter.

Packed others Apple position.

We've reviewed as having less capital because we actually operate.

With a lower risk profile within the commercial loan categories.

Participate in consumer.

Vincent Delie: With that, I will turn the call back to Vince. Once again, this quarter's financial performance was achieved through the dedicated efforts of all of our employees. The culture at FNB is rooted in teamwork and collaboration to collectively reach our goals. FNB continues to earn national recognition for our inclusive culture based on independent feedback from our own team members. Building on the multiple awards we received earlier this year for innovation leadership and our family-friendly benefits and compensation programs, we also garnered additional national culture excellence honors.

What we're very conservative.

If you look at where we are today with CET, one and 10%.

Our TCE ratio was seven 5% and drawing.

We feel pretty comfortable.

We are.

From a capital perspective, I understand that $100 billion in greater youre going to see a greater expectations from regulators.

Speaker 8: for capital. But I think, even where we are today, you know, we're in one of the better positions we've been in here.

Capital, but I think given where we are today.

We're in one of the better positions we've been in in years.

Speaker 3: We have a very solid portfolio. We've spent a lot of time in energy. Gary's done a tremendous job. He risking that portfolio with the sale of regency, with the sale of hospitality, the sale.

We have a very solid portfolio.

Spent a lot of time and energy Gary has done a tremendous job derisking.

Folio with the sale of regency, and the sale of hospitality saleable.

Vincent Delie: Highlighting our commitments of diversity and employee appreciation and wellness and development. We strongly believe having an outstanding culture with engaged employees results in superior performance and shareholder value appreciation. We are pleased with this quarter's results as we continue to outperform the industry, reporting loan into positive growth, while adhering to our conservative risk management philosophy, all while strengthening our capital equity division. Given the strength in our performance, FNB is well prepared to meet the needs of our consumer and business clients with a broad array of products and services, a strong balance sheet, and a commitment to achieving success for all of our stakeholders.

Adverse.

Speaker 8: adverse credits and we basically have done a lot. We've moved over a billion dollars off the balance and people will endemic even occurred. So I think we're in great positions through a capital perspective.

Yes.

Basically have done a lot we've moved over $1 billion off the balance sheet.

And then even occurred so I think we're in a great position from a capital perspective.

Speaker 3: You know, we feel comfortable where we are today and we address it in every word.

We feel comfortable where we are today and we addressed it in every board.

Speaker 3: If you look at our returns on tangible common activity, we're up for a quartile. So even with higher capital ratios, we're still in an 18% art.

And if you looked at our returns on tangible common equity.

File so you.

Even with higher capital ratios, we're still at 18% R&D.

Speaker 8: You know, pretty good solid performance in pop.

Pretty good solid performance and profitability.

Speaker 9: Alright, thank you Vince. I appreciate you taking my questions.

Great Alright, Thank you Vince I appreciate you taking my questions today.

Speaker 3: But one more thing on capital, by the way, we've divinated out to go over a billion and a half dollars or through share refurges is our dividend. Over a billion and a half dollars in capital employment to share orders as well. So I think when you think about the company and capital management, that's part of the discussion that we have with the board just to throw that in there. Our share orders have benefited from that distribution of capital. A few updates right on the number again!

One more thing on capital by the way, we've dividend it out over a billion and a half dollars were.

Through share repurchases or dividend over a billion and a half dollars in capital deployment to shareholders as well so.

Unknown Executive: We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you're using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we'll pose no materially to assemble a roster.

I think when you think about the company and capital management.

The discussions that we have.

We're just throw that in there. So you know our shareholders have benefited from that distribution of capital immensely and obviously, we have retained that tap with much higher capital ratios.

Speaker 3: And obviously we had retained that cap, but we had much higher cap.

Daniel Tamayo: Our first question comes from Daniel Tamayo, from Raymond James. Please go ahead. Good morning, guys.

Speaker 9: you know that that's part of the equation. We deal with that. We need to evaluate where we are every quarter, but anyway. Sorry. No, I appreciate the public color. Thank you guys.

You know that.

Part of the equation we feel.

We need to evaluate where we are every quarter.

Vincent Calabrese: I'm wondering if you could talk a little bit about updated thoughts on when you think the margin might bottom. And if you had any more details on what the month of September looked like from a margin perspective and yields, I can't say. Yeah, good morning, Danny. I guess a couple of comments on that, I think given everything industry was good this year, clearly the peak was in the first quarter. If you look at our net interest income for the third quarter, we only declined 2.6 million.

Anyway, sorry, no no I appreciate all the color. Thank you guys.

[laughter].

Thank you.

Speaker 1: Again, if you have a question, please press star then one. The next question comes from Manuel Navas from D8 Davidson. Please go ahead.

Again, if you have a question. Please press Star then one the next question comes from Manuel Novice from D. A Davidson. Please go ahead.

Hey, good morning, I, just wanted to follow up on the NIM.

Okay.

Speaker 5: What are thoughts on where could bottom next year? Just kind of updated there and then I'll follow up on this.

What are your thoughts on where it could bottom next year.

Just kind of updated there and then I have a follow up on deposits.

Vincent Calabrese: And then compression as I commented, I moderated to 11 from after decreasing 19 basis points last quarter. The monthly decline in them has been averaging around three or basis points a month since May. So it's been coming down, but pretty steady within that range. Our outlook for the fourth quarter of the two 15 to 325 doesn't have any rate increases, as I mentioned, but the decline in margin kind of similar to what we saw in the third quarter is kind of what we're moving over to loan growth.

Speaker 8: Yeah, I'm not sure that I, you know, I don't think we're guidance for next year. I'll let them answer the question. Go ahead, man. No, I was just going to call it a while.

Yeah, I'm not sure that I.

I'll be right.

Guidance for next year, I'll, let Vince answer that.

Go ahead Vince.

No I was a little bit of color what we are today.

Speaker 10: I mean, as far as it provides our thoughts when we've arrived down in for next year in January , but I think as I mentioned, fourth quarter kind of coming down at a similar level to third quarter. And I mean, maybe first half of the year next year, but again, we have to do our, we just started our budget crossings for next year. I think there's still some movement down. Exactly when it bottoms is a hard thing to call for short, but somewhere in the kind of middle of.

I mean as far as we'll provide our thoughts when we provide guidance for next year in January but you know I mean, I think as I mentioned in the fourth quarter kind of coming down and at similar levels of third quarter and I mean, you know.

Maybe first half of the year next year, but again, we have to do are we just started our budget process for next year. So.

I think there's still some movement down exactly when it bottoms is a hard thing to call for sure, but you know somewhere in the kind of middle of <unk>.

Vincent Delie: You know, I'm just curious, you know, how you're thinking about loan growth potentially next year, if the economy does slow, you know, it's sustained at a pretty, pretty strong growth level here throughout the 2023 in particular positions first and the residential mortgage book. But just curious, I'm kind of higher level thoughts about the ability to sustain that kind of on growth. Yeah, I think, first of all, I think that we're in a really strong position relative to many competitors, particularly made a smaller ban to have or struggling with capital and liquidity issues.

Speaker 10: 24 would be kind of based on the way things are today, but they could change by the time we finalize our budget and You know put out guidance in January , but the compression I talked about is clearly it's moderated You know if the fourth quarter comes down similar to the third quarter and that interesting come as I mentioned earlier Only came down three million so I think the

24 would be kind of based on the way things are today, but they could change by the time, we finalize our budget.

You know put put out guidance in January but the compression I talked about it's clearly it's moderated if the fourth quarter comes down similar to the third quarter. The net interest income as I mentioned earlier only came down $3 million. So I think the the.

Speaker 10: sustainability of the net income is very important, right? And driving our efficiency ratio in the low 50, has to keep part of it.

The sustainability.

The net interest income is very important right.

Driving our efficiency ratio in the low 50.

That's a key part of it so.

Speaker 10: So more to come in January , as far as what level it actually might bottom out. But it's definitely moderated.

So more to come in January and room as far as what level, it actually might bottom out but.

But it's definitely moderated the compression as it comes.

Vincent Delie: So it puts us in a position where FMB can become, you know, we go on the offense, basically, and we're able to go after more opportunities of confidence. We can support our clients capital in this room through 2024. We didn't give guidance for 24, so I can't really speak to, you know, specific numbers. But, you know, my expectation moving in the next year is it's going to be choppy for everybody from a loan demand perspective.

Speaker 5: I appreciate the color there on the positive the CD engine is Definitely powerful. It's what customers are looking for. Are you seeing yes some breakdown on what you're seeing from Is that from new customers current customers bringing over more funds? Can you just kind of talk through?

I appreciate the color there on deposits the CV engine.

It's definitely powerful it's what customers are looking for are you seeing do you have some breakdown on what youre seeing from is that from new customers current customers, bringing over more funds can you just kind of talk through.

Where you are winning there.

Yeah, I would say I think it's a comedy.

Speaker 8: Yeah, I would say I think it's a comedy. Oh god, that's been so sorry. What's up? Are you bad?

Oh go ahead sorry.

Vincent Delie: I think for us to be successful, we're going to have to stay very focused on maximizing our growing market share and the markets that we've moved into will still continue to be, you know, good, solid growth in those markets from a GDP perspective. I think that's one thing that will help us. Secondarily, I think, given the size span of the company today versus where we were years ago, you know, we have multiple markets to pursue opportunities in.

Yes.

No.

Speaker 3: I was just going to say, I think it's a combination of all of the above. I think the part of the strategy is to persuade folks to bring additional dollars over. So, you know, some of the campaigns focus principally on that, you know, on the money market offering, some of the CD offerings that we have. I think we've had, you know, quite a bit of success bringing in new customers.

I was just going to say I think it's a combination of all of the above I think part of the strategy.

<unk>.

Swain.

To bring this.

<unk> dollars over so some of the campaigns focused principally on that money market offering some of the CD offerings that we have.

We've had.

Quite a bit of success.

Bringing in new customers.

Speaker 8: So, you know, north of 50% of the new money that comes in is New Cost.

You know north.

North of 50%.

Vincent Delie: So I think going into 24, depending on how the economy shakes out, you know, it will be more challenging to find, you know, quite a worthy borrowers that we would want to bank, right? In that environment, I think it's going to be more competitive. So I think having the right people spread across those areas would be, you know, a benefit versus somebody that's heavily concentrated and take Pennsylvania or So I think all of that will play in our favor.

The new money that comes in as new customers.

Speaker 8: So, you know, it's better than 50-50, but, you know...

So it's better than 50 50.

Yes.

Speaker 8: It's worked. It was put in that way. But I think the principal reason why we're successful, we've been able to manage the data.

It's worked well, let's put it that way, but I think the principal reason why we are successful and we've been able to manage the betas and.

Speaker 3: The migration a little better really is because of the insight that we have within our customer base with the tools that we put into place with AI and our data scientists and the data hub that we have. We were able to spend a lot of time analyzing the behavior and I think that's really helped us with price.

The migration a little better really is because of the insight that we have.

Our customer base with the tools that we put into place.

Hi, Dennis data scientists.

Vincent Delie: I think we've also invested pretty heavily in certain platforms that will continue to drive the income for us. So, you know, in addition to long growth, we did perform pretty well from a fee income perspective, you know, given the pressures that we were facing. But we've invested in our digital platform, which should help us in small business and with gathering positive to move into this forward and the common app is totally built out.

The data hub that we have.

We're able to spend a lot of time analyzing behavior and I think that's really helped us with pricing.

Speaker 3: And we've been a little more disciplined than others. I think if you look at our cost of funds, on our margins, we're a little better. So it kind of shows there.

And we've been a little more disciplined than others I think if you look at our cost of funds on our margins a little better so.

It shows there.

Speaker 3: But I also believe that being the principal bank for consumers and businesses, as I said in my remarks, is critically important. And that requires a consistent investment in technology, revenue management services, all the things that I that I mentioned earlier. So, you know, they both go hand in hand.

But I also believe that.

The principal bank.

For consumers and businesses as I said in my remarks is critically important and that requires a consistent investment in technology and management services, all the things that I did.

Vincent Delie: We've invested pretty heavily in Treasury management systems, you know, our payments, our payment processing capabilities and, you know, lockbox capability that we still offer clients has been upgraded in the last year or so, capital markets, you know, we built out our ability to participate in the bond offer for capital markets platform. And that continues to perform well for us and enables us to move up market and participate in lower risk transactions and still meet the return thresholds that we have internally.

I'd mentioned barrel so.

Both go hand in hand.

Okay.

Speaker 11: I appreciate that. Do you have a rough, I give a rough, a rough, uh, percent on a rough average rate on the new CDs or what's your current best author? And then, um, just talk about the, uh, personality in the, in the, in the beauty book recently. Yeah, Vince, I don't know.

I appreciate that do you have a rough.

Give us a rough percentage.

Rough average rate on the new Cds or what's your current best offer.

And then just talk about that I don't know.

And the Muni book briefly.

Yeah, Vince I don't know I don't have those details of the tip of my.

Speaker 10: fingers. You have that? Yeah, I would say, I mean, a couple of things, the rates on the promotional CDs and money market rates have been right around five, little below or little above. So, you know, we've had, as Vince said, with all the data analytics supporting it, and the tools we have in place, you know, we've brought in...

Vincent Delie: So, you know, all of that will play well for us as we move into next year. So, those are the reasons why I feel more confident about our performance. This this order and then in the next quarter, but I will caution you, I think the macroeconomic environment will play a role, you know, demand has to be there as well. So, capital investment has to be fine. Anyway, I've been commercial side. That's terrific color. I appreciate all that all the off the back. Thanks, guys. Okay.

Fingers do you have that.

Yes, I would say I mean, a couple of things.

The rates on the promotional Cds and money market rates had been right around five little below a little above.

So we've had it's been said with all the data analytics supporting it and the tools we have in place.

We brought in.

Speaker 10: you know, close to $800 million in new money really since May through that. And that's kind of the overall balance sheet. And then the money flows, I've always talked about is $300 to $500 million is kind of the range of what comes in and you know.

Close to $800 million in new money really since since may.

Do that and that's kind of benefited the overall balance sheet and then the Muni flows I've always talked about is three to 500 million is kind of the.

Wage of what comes in and.

During the most recent quarter, it's at the higher end of that and really.

Speaker 10: during the most recent quarter, it's just a higher end of that. And really kind of spread throughout the categories.

Michael Perito: Thank you. The next question comes from Michael operato from KBW. Please go ahead. Hey, good morning, guys. Thanks for taking my questions. I want to start on a comment you made Vince about making investments on the outback side and trying to take advantage of, you know, a lot of the pressure of the industry. I was wondering if you guys are willing to kind of go a little deeper on that. I mean, I think it's evident and obvious from the financials that you guys are in a strong position here.

Really kind of spread throughout the categories, it's a small amount.

Speaker 10: Small amount is really in the DDA and most of it's more in the money market and sweep account Where that money flows through and that you know that peaks and troughs as you go through the year Kind of builds throughout October November and then the first quarter is only the trough of that

It's really in the DDA and most of it's more in the money market and sweep accounts were that.

Money flows to or that you know that peaks and troughs as you go through the year.

Builds through October November and then the first quarter is always the trough of that.

Alright, I appreciate that and then just switching topics switching gears for a second.

Speaker 11: Oh, I appreciate that. And then just switching topics, switching gears for a second. What are kind of updated thoughts on buyback? You just had so much growth this quarter. Is that the main kind of limit, limit are there? And obviously that probably comes first organic growth. But can you just kind of walk through or buy back fits in, given that CET1 is above your target?

What are kind of updated thoughts on buyback you just had so much growth this quarter is that the main.

Kind of limit limiter, there and obviously that probably comes first organic growth, but can you just kind of walk through where buybacks fit saying given the CET one is above your target.

Michael Perito: So, so what type of investments are you looking at? What do you think could make the biggest difference as you look to the next 12 months here and and obviously still have some growth opportunities in front of you and and a lot of peers that probably have some opportunities, but don't have the balance sheets to really kind of fully take advantage of them. I'm sorry. You broke up a little bit. You're speaking specifically to digital.

Sure I can comment on that I mean, what have you.

Speaker 10: He had at 10.2, so we're a little above our target. I think during the second quarter, when we were active, there were great opportunities to put some money to work there. And in the third quarter with the growth we had, plus the time you had a special assessment, there was an expectation that might happen in the third quarter, and just the uncertainty, we decided not to be active during the third quarter.

Again it <unk>.

10 point too so we're a little above our target I think during the second quarter. When we were active you know there are great opportunities to put some money to work there and in the third quarter with the growth we had plus the timing of the special assessment. You know there was an expectation that might happen in the third quarter.

Michael Perito: Does that your question? Yeah. I mean, I imagine most of the things you're looking at are digital, but just more broadly, I think like initiatives or kind of areas of investment that you guys are particularly focused on that. You think could be, you know, pretty fruitful. The next 12 months in terms of kind of continuing growth and being able to take share while the industry is in a weaker position. Well, first of all, I think, you know, it's a great question and we've talked about this internally.

And just the uncertainty we decided not to be active during the third quarter.

Speaker 10: You know, as always, we're committed to managing capital in a manner that's fully aligned with shareholders. So, you know, we're closely monitoring it. We may become active in the fourth quarter, but, you know, we wanna really see how the overall environment plays out. But clearly there's room to do that.

As always we are committed to managing capital in a manner that is fully aligned with shareholders. So we're closely monitoring it we may become active in the fourth quarter, but you know we want to really see how the overall environment plays out, but there's clearly there's room to do that.

Michael Perito: There are two paths to go down as we move into next year. Let's face it, the banking industry in general, spacing margin, compression, you know, some banks are struggling to grow revenue. I'm highly competitive from the depository perspective, so I certainly understand why there's a lot of caution moving in the next year. But I think given our position, you know, we have strong capital, we're in a strong capital position, we have tremendous liquidity.

Speaker 10: with a dividend-pout ratio that we've all worked really hard to count to 30%. You know, we now have flexibility in the strong earnings generation that we have.

You know with a dividend payout ratio that we've all worked really hard to get down to 30%.

We now have flexibility.

And the strong earnings generation that we have where this number will build and we'll put it to work loan growth stays strong you know, we'll use that to support loan growth. That's always in our kind of first and best use.

Speaker 10: where this number will build and we'll put it to work. Longer, stay strong. We'll use that to support longer. That's always our first and best use.

Yeah, Hey, Vince the other thing I wanted to mention is the tax credit transaction.

Speaker 3: The other thing I wanted to mention is, you know, the tax credit transaction that we close this quarter, you know, some folks have asked, is that like a one-time event? No, we actually have a business-

Michael Perito: We have made investments in the NOVO expansion in the retail space which are coming online. You know, expense comes along with that. So we've already started to invest in those projects and you'll see depreciation expense coming online with those. But, you know, we're at the point now where they should start to generate revenue or contribute to our effort, right? Because we launched a number of them at the beginning of this year or late last year.

Was this quarter.

Some folks have asked is that like a one time event no. We actually have a business that pursues tax credit transactions, particularly in the energy field.

Speaker 3: that pursues tax credit transactions, particularly in the energy field. So we've done a number of.

So we've done a number of them over.

Speaker 3: over the last few years. And the group, there's a pipeline of tax credit transactions.

Over the last few years.

There is a pipeline of tax credit transactions.

Speaker 8: that we pursue. So sometimes it's won't be because it takes time to build out a solar field.

We pursue so sometimes it's lumpy because it takes time to build out a small deal or it takes time to get certified and get that stuff up and running because they actually have to be delivering power right, where you can start a process from a financial perspective, but.

Michael Perito: So we should be seeing some good success there. And those are principally at higher growth markets that, you know, are not willing as much pain as some of the other more legacy markets in the growth perspective. So, you know, we're very optimistic about the performance there. We're also optimistic about our build out of a common app that I spoke about. You know, you can purchase multiple loan products on our platform today.

Speaker 8: or you know, it takes time to get certified and get that stuff up and running because they actually have to be delivering power, right? It's where you can start a process from a financial perspective.

Speaker 8: You know, it is a business that we have. It's in our corporate finance area and they've done a terrific job over the last few years. So I would expect that to continue as well into next year.

It is a business that we have and it's in our corporate finance area and they've done a terrific job over the last few years. So I would expect that to continue as well into next year.

Speaker 8: because we developed that expertise and we're confident that the people that we have doing that can and this team have done you know many of these.

Because we develop that expertise and often the people that we have doing that Tim and his team has done.

Michael Perito: By the end of this quarter, we'll be able to buy multiple loan products and multiple positive products with one application. And, you know, the training is going on and you'll, you know, we've been doing training on our systems and on our capabilities for some time. I think you're going to start to see that payoff. We also changed our model in the branches several years ago in the consumer bank. We started rolling out, you know, relationship bankers instead of having tellers and platform people.

Many of these in.

Speaker 8: very well positioned to keep pursuing opportunities. But I would add that to the mix as well, because it doesn't show up the same way from a profitability perspective, because we book an asset that has a very low margin, that ends up impacting margin, and then we get a tax benefit. And then you all say, well, why, you're just winning on a tax benefit, but that's actually part of the profit, it will be the extension of the credit to Saurid Williams.

We're very well positioned to keep pursuing opportunities I would add that to the mix as well because it doesn't show up the same way from a profitability perspective, because we book an asset that has a very low margin right.

Ends up impacting margin and then we get a tax benefit and then you all say well why.

Youre, just winning on a tax benefit.

Michael Perito: So more highly trained bankers in the branches, you know, we're finally, you know, clothing out the last region in terms of converting those folks over to this higher, higher football banking condition, which should help with cross sell and driving, you know, products sales and branches beyond just doing transactions. And then we have bankers basically, there are a number of bankers that are pulling back other institutions. So, you know, I think we'll have opportunities to go after business that presents itself that we've been for companies that we've been calling off for a long time in the commercial space.

Actually part of the profitability.

The extension of the credit just so everybody understands.

Speaker 8: So, you know, some folks have asked us about that and I wanted to.

So some folks have asked us about that and I wanted to make sure.

Speaker 12: We were clear that that's something that we pursue on an ongoing day system will be added to next year as well. And it provides capital too, right?

We were clear that that's.

I'm thinking that we pursue on an ongoing basis will be additive to next year as well.

And it provides capital to right.

Yeah Yeah.

So.

I appreciate that added color. Thank you.

Okay.

Yeah.

Speaker 1: All right, the next question comes from Frank Scharaldi from Piper Sandler. Please go ahead.

Alright. The next question comes from Frank Schiraldi from Piper Sandler. Please go ahead.

Speaker 1: Good morning. Hey guys, in terms of the guide for NII,

Good morning.

Hey, guys.

Michael Perito: We've made investments in to be more specific. We've made investments in Treasury management, which I think will assist us in becoming primary client for the market and larger companies. We made investments in the digital platform to help us go after more share of wallet more quickly with clients by presenting into more efficient platform to onboard clients. We've invested pretty heavily in our institutional capabilities from a capital market perspective which is a different position with clients.

Terms of the.

Right.

God for.

Hi.

You know you mentioned no additional rate hikes, if we do get in November or December rate hike I mean, I'm just wondering if that's meaningful anymore in terms of what that adds on an annualized basis to NII.

Speaker 1: If we do get a November or December rate hike, I mean, just wondering if that's meaningful anymore in terms of what that adds on an annualized basis to NII. And maybe if you could just talk a little bit about how you're managing the balance sheet sensitivity for the higher for longer rate outlook. Thanks.

And maybe if you could just talk a little bit about how you're managing the balance sheet.

<unk> for the higher for longer rate outlook. Thanks.

Michael Perito: So, I think really we've, we've a number of areas that we've worked on. And, you know, I think that we're definitely going to experience better than peer results because of it. Well, that's my commentary. We also, by the way, built out our small business lending platform, we continue to focus on that for our clients to integrate merchant and Treasury management services into a bundle program similar to the common app. So, that is going to be worked on in the first floor of next year.

Speaker 11: Yeah, I would say any. I'll let this.

Yeah, I would say I'll, let Vince answer that.

Okay.

Speaker 10: Yeah, I mean, any rate movement, Frank, right, it's late in the quarter doesn't really do much for the fourth quarter, so there's not much benefit that you would get there. And with where rates are, I mean, it's not that big of an impact even to next year.

Yeah, I mean any rate movement, Frank right. It's late in the quarter. It doesn't really do much for the for the fourth quarter.

So there's not much much benefit that we'd get there.

And with where rates are I mean, it's it's not that big of an impact eat into next year.

Speaker 10: You know, if you look at our IRR position, you know, we've been kind of gradually moving towards neutral.

Yeah, if you look at our our position you know we've been.

Gradually moving towards neutral.

Speaker 10: you know, as each quarter has gone by, kind of naturally getting there.

As each quarter has grown by kind of naturally naturally getting there you know when you look at what our IRR stack will be out in the Q I mean, the plus 100 ramp to a minus 100 ramp is around one 2%. So there.

Speaker 10: you know when you look at when our IRR stats will be out in the queue I mean

Michael Perito: We have about 90,000 clients, they're either depository or a loan clients in the small business segment. So, there's quite a bit, I think we have about three to five percent penetration with merchant in that space. So, there's quite a bit of opportunity there from a key income perspective. We've been focusing on moving into next year. Those are some of the strategic investments that we've made. And, I do believe that at this time, it makes sense for this company to continue to pursue those investments and deliver them during the 2001 world and might be more difficult for others to do that.

Speaker 10: The plus 100 gram to a minus 100 gram is around 1, 2%. So there's actually a benefit both ways because you have the rates on loans and investment securities were putting on continue to be higher than the portfolio rate. So you kind of get benefits from that.

There is actually a benefit both ways because you have the rates on loans and investment securities were putting on continue to be higher than the portfolio rate. So you kind of get benefits from that.

Speaker 10: But 25 basis points in the grand scheme of things, it's not gonna do that much.

But 25 basis points in the Grand scheme of things it doesn't it's not going to do that much.

Speaker 10: And we'll bake it into the guidance in January when we can over give it out, but it's really not going to move the dots.

And we'll bake it into the guidance in January when we give it out, but it's really not going to move the dial.

Speaker 8: Okay. And then just thinking about the 4Q expense guide.

Okay.

And then I'm just thinking about the <unk> expense.

Good.

Michael Perito: Yeah, no, that makes a lot of sense. That's great flavor. Thank you for walking through all that. Then just lastly for me, and then I'll step back with someone I'll jump in just curious more of a high level question than in your term question. But as you think about the franchise, the size, you know, the growth projections, I imagine you guys have constant conversations with the board and the executive team around what the right level capitalization is.

Speaker 4: It's the right way to think about that. You talked a lot about the investments being made. Shrinking more about that as an acceleration of investments and potentially, so there's a potential leg down at expense or given everything you guys are doing is that just better to think about as one rate at this point.

It was the right way to think about that you've talked a lot about the investments being made.

More about that as an acceleration of investments and potentially so there's a potential leg down in expense or given.

Michael Perito: And obviously, at the higher end of the spectrum on the asset size, there's a lot of conversations about capital. I'm just curious. What any update at the odds around what you think, kind of the right capital level for F&B is like over the next few years here, I mean, do you think it's a higher number than maybe what it was over the last 24 months? I mean, obviously you don't have to get there right now, but just kind of curious with what the conversation is internally around capital, just giving everything to tap in.

Everything you guys are doing is that.

A better to think about it.

As one right at this point.

Okay.

Yes.

I don't know if you want to cover.

Sure I can comment on that I mean.

Speaker 10: You know, as Vince talked about, we've continuously invested in the company, you know, that frame, recovered us for a long time. So.

As Vince talked about we've continuously invested in the company that Frank covered us for a long time so.

Speaker 10: It's been it's part of how we run the company investing to generate future revenue And we've been able to do that maintaining, you know, very good efficiency ratio in the low 50s So it's it's just part of running the business and

It's been it's part of how we run the company investing to generate future revenue.

We've been able to do that maintaining very good efficiency ratio in the low $50. So it's just part of running the business and the conversations we have internally are always.

Speaker 10: Conversations we have internally are always about, you know, focusing our CapEx spend where we can drive future revenue and investing in markets, right? We've added new markets to the DeNovo strategy through expanding our HM strategy, going to Northern Virginia, Charleston, and, you know, markets that are very attractive. So that's also part of the investment is investing in those new markets, which then generates, you know, future revenue.

Michael Perito: And as you take a ballot, you know, taking chair and continuing to grow the balance sheet moving forward. Well, you know, well, we cover capital and liquidity position of the company and every board meeting that we have. So we have a pretty separate team where we go over various elements of our financial performance. We discussed the balance sheet in detail and strategies around maximizing returns. You know, that happens every board being.

Focusing on our Capex spend where we can drive future revenue and investing in markets right. We've entered new markets through the de Novo strategy through expanding our HCM strategy going into Northern Virginia Charleston.

Markets that are very attractive. So that's also part of the investment is investing in those markets, which then generates future revenue for us I mean, the expenses in the fourth quarter.

Speaker 10: I mean, the expenses in the fourth quarter, you know, it's always a.

Michael Perito: And then we talk about what the investors expect and, you know, what the street expects and how we're performing relative to those expectations. I think capital is a topic that we had on the table for a long time. I think given the OCI impairment that you've seen impact others capital position, you know, we reviewed as having less capital because we actually operate with a lower risk profile. Within the commercial loan categories that we participate in in the consumer business is what we're very conservative.

It's always a.

Speaker 10: The end of the year can be a little lumpy or finishing up and setting up and playing the rules and those types of things that comes in. So, you know, when we do our guidance in January for next year, we'll have a cost savings target as we have every year. I mean, we've taken out 60 million or so in cost as we've grown and created the scale. So, you know, that's always part of how we run the company. And the initiatives events talked about the Denelvo's digital investments infrastructure to support that growth.

At the end of the year, which can be a little lumpy or finishing up incentive plan accruals and those types of things that comes in.

So you know when we do our guidance in January for next year, we will have a cost savings target as we have every year I mean, we've taken out $60 million or so in cost as we've grown.

Created the scale. So you know that's always part of how we.

From the company.

The initiatives that Vince talked about the de novo's, a digital investments in infrastructure to support that growth.

Speaker 10: You know, we focus on generating that positive operating leverage and having a low 50% efficiency ratio. So it's...

You know, we focus on generating positive operating leverage and having a low 50% efficiency ratio. So it's a it's.

Michael Perito: But if you look at where we are today with CDT one and 10 percent, you know, our TCU ratio is seven and a half percent growing. You know, we feel pretty comfortable with where we are from a capital perspective. I understand that, you know, 100 billion in greater, you know, as we're going to see greater expectations from regulators for capital. But I think given where we are today, you know, we're in one of the better positions we've been in years.

Speaker 10: It's not easy, but it's a focus within the company and I think investments have served us well. So it'll continue to be part of it. So it's not really a step-function to a frank, it's a good question, but the truly just part of how we run the company.

It's not easy, but it's a focus within the company and I think our investments have served us well. So it'll it'll continue to be part of it. So there's not really a step function to it Frank it's a good question, but it's really just part of how we run the company.

Okay, Great and then and then just lastly on the tax rate.

Speaker 1: Okay, great. And then, and then just lastly, um, on the, uh, the tax rate and the, uh, and the renewable energy, um, transaction and, and, and.

On the renewable energy.

Transaction and totally get that.

Speaker 1: you know, just part of the deal that's just part of the economics or these tax credits that you get. Would you say that if I look at the 4 Q2 3 guide, you know, it's a bit lower, I'd say then your rate over the last several quarters, except for the 3Q. You know, is that...

Michael Perito: We have a very solid portfolio. We've spent a lot of time in energy areas, done a tremendous job, keep risking that portfolio with the sale of regency, the sale of hospitality, the sale, and adverse credits. And we basically have done a lot. We've moved over a billion dollars off the balance before the pandemic even occurred. So I think, you know, we're in a great position through a capital perspective. You know, we feel comfortable where we are today and we address it in every board.

It's just part of the deal that's just part of the economics of these tax credits, but you got.

Would you say that if I look at the <unk> 23 guide.

It's a bit lower I.

I'd say, then you're right over the last several quarters.

For the <unk>.

Is that.

Speaker 1: Would you say that kind of lumpy too? Is there kind of more activity expected in 4Q? Or has that business just ramped up to a degree where you could see that as potentially?

What did you say that is kind of lumpy too is there kind of more activity expected in <unk> or is that just you know.

Has that business just ramped up towards the green where.

You could see that as.

Potentially sustainable.

Michael Perito: And if you look at our returns on tangible common acne, we're up for a quartile. So even with higher capital ratios, we're still in 18% R.A.G.P. So, you know, pretty good solid performance and profitability. All right. Thank you, Vincent. I appreciate you taking my question. One more thing on capital, by the way. You know, we've dividended out to go over a billion and a half dollars or, you know, through share references or dividend.

Speaker 10: Yeah, the fourth quarter level Frank is really tied to the same solar deal that we just closed in the third quarter. The bulk of the tax credit gets recorded in the third quarter, and then there's carryover kind of smoothing out the effective tax rate for the year that...

Yeah, the fourth quarter level, Frank is really tied to the same solar deal that we just closed in the third quarter.

The bulk of the tax credit gets recorded in the third quarter, and then Theres carryover kind of smoothing out the effective tax rate for the year that.

Speaker 10: also benefits the fourth quarter and that kind of completes it for for this transaction, but there's been that there's a pipeline of Transactions that we continue to go after and

Also benefits the fourth quarter and that kind of completed or for this transaction, but there's been said, there's a pipeline of transactions that we continue to go after them.

Speaker 10: The team is already working actively on others that could happen next year and into 2025. But the 4Q is really just...

The team is already working actively on others that could happen next year and into the into 25, so but the <unk> is really just tied to.

Michael Perito: Over a billion and a half dollars in capital employment to shareholders as well. So, you know, I, I think, you know, when you think about the company and capital management, that's part of the discussion that we have with the board just to throw that in there. So, you know, our shareholders have benefited from that distribution of capital immensely. And obviously, we have retained that capital. We have much higher capital ratios. You know, that part of the equation that we deal with, that we need to evaluate where we are every order. But anyway, sorry. No, I appreciate the public color. Thank you guys. Thank you. Again, if you have a question, please press star then one.

Speaker 10: this transaction and kind of the smoothing of it into the fourth quarter. Got it.

This transaction and kind of the smoothing of it into the fourth quarter.

Got it okay. That's helpful. Thank you.

Thanks.

Speaker 1: Again, as a reminder, if you have a question, please press star then one. Our next question comes from Brian Martin from Janie Montgomery. Please go ahead.

And again as a reminder, if you have a question. Please press Star then one on our next question comes from Brian Martin from Janney Montgomery. Please go ahead.

Hey, good morning, guys.

Just Brian .

Speaker 13: Hey, just one one for me on the back of the margin just for an event. So I guess the Appreciate the color on that you know the the abatement of the funding pressure here and

Just one one for me on the on back to the margin just for a minute Vince I guess.

I appreciate the color on that.

The abatement of the funding pressure here.

But I guess as far as the DD as go I mean, I guess the contraction slowed a bit again this quarter just kind of wondering if you think we're nearing a bottom there or just how youre thinking about that in general and maybe just an update on kind of where new loan production is coming on.

Speaker 14: But I guess as far as the DDAs go, I mean, I guess the contractions load a bit again this quarter, just kind of wondering if you think we're nearing a bottom there, just how you're thinking about that in general, and maybe just an update on kind of where new loan production is coming on.

Manuel Navas: The next question comes from Manuel Navas from D.A. Davidson. Please go ahead. Hey, good morning. I just want to follow up on the name. What are thoughts on where could bottom next year? Just kind of updated there and then I have a follow up on deposits. Yeah, I'm sure that I, you know, I don't think we're guidance for next year. I'll let them answer the question. Go ahead, man. No, I was just going to call it what we are today.

Yeah, I would say I guess, let me talk to I don't know.

Go ahead Vince.

Sure.

Hello, Yes your events.

Speaker 8: I wasn't sure which Vince Bryan was asking, but go ahead.

Answer, which Vince Brian was asking.

Go ahead.

Speaker 10: Well, I can comment on the loans, and then maybe, Vince, if you want to talk about the strategy on non-interest sparing afterwards, that would probably be good.

Well I can comment on the roads and then maybe Vince if you want to talk about the strategy on noninterest bearing afterwards that would probably be good.

Manuel Navas: I mean, you know, as far as it provides our thoughts when we've arrived down in for next year and January. But, you know, I mean, I think as I mentioned, fourth quarter kind of coming down at a similar level to third quarter. And I mean, you know, maybe first half of the year next year. But again, we have to do our, we just started our budget crossings for next year. So, you know, I think there's still some movement down exactly when it bottoms is as a hard thing to call for short, but, you know, somewhere in the kind of middle of 24 would be kind of based on the way things are today.

Speaker 10: The new loans that we made during the third quarter, they came on at $685,000.

The new loans that we made during the third quarter. They came on at 685 mm.

Speaker 10: which was up from 637 in the second quarter. So, you know, the commercial loans came on in the sevens and mortgages in the mid to high sixes during the third quarter. And those are kind of mid-7s as we sit here today, just given where mortgage rates are. So, you know, 685, a pretty good level. And, you know, above overall portfolio yields, so you're getting that benefit coming through. I mean, the overall portfolio rate on a spot basis with up 15 basis points, you know, with that high-

Which was up from 637 in the second quarter. So you know the commercial loans came on in the Sevens in mortgages in the mid to high <unk> during the third quarter and those are kind of mid sevens as we sit here today.

Given where mortgage rates or so.

85, a pretty good level.

Above overall portfolio yield so you're getting that benefit.

Coming through I mean, the overall portfolio rate on a spot basis went up 15 basis points.

Manuel Navas: But they could change by the time we finalize our budget and, you know, put out guidance in January. But the compression I talked about is clearly it's moderated. You know, if the fourth quarter comes down similar to the third quarter. The net interest income, as I mentioned earlier, only came down 3 million. So, I think the sustainability of the net interest income is very important, right? And, you know, driving our efficiency ratio in the low 50.

With that higher level of made you know rates on the new loans that we've made versus where the portfolio is.

Speaker 10: made, you know, Ray Tom and Goulons that we made versus where the portfolio is.

Speaker 10: And then we have a slide in the deck, where I'm familiar with, I mean, do not expect deposits has been at the focus as long as I've been here and Vince before me. You know, we've grown from 16 to, I think we peaked to 34. We were 26 kind of pre-pivot, right? And, you know, we're gonna work hard to keep that number as high as we can, and it's just part of everything we do, every week of pricing, every Alco meeting, every point of the week.

And then we have a slide in the deck Ryan you've been familiar with and then the noninterest bearing deposits has been a focus as long as I've been here and Vince before me.

We've grown from 16 to and I think we peaked at 34 mm. We were 26 kind of pre build it right.

Manuel Navas: That's a key part of it. So, so more to come in January, as far as what level it actually might bottom out. But it's definitely moderated. The compression is a comment. Thank you. I appreciate the color there on the positive. The CD engine is definitely powerful. It's what customers are looking for. Are you seeing, do you have some breakdown on what you're seeing from, is that from new customers, current customers bringing over more funds?

And you know we're going to work hard to keep that number as high as we can and it's just part of everything we do every week of pricing every Alco meeting every day so.

Yeah, it's actually on page 13 in the Investor deck.

Speaker 8: It's actually on page 13 in the investor deck.

Speaker 3: You know, we comment on it frequently, but if you look, it goes to what I've been saying. Strategically, our goal was to drive up non-interest-bearing deposits.

We comment on frequently but if you look it goes to what I've been saying strategically our goal was to drive up noninterest bearing deposits.

Manuel Navas: Can you just kind of talk through? Where you're winning there. Yeah, I would say I think it's a comedy. Oh, God, that's fantastic. Sorry. What's that? Are you bad? No. I was just going to say, I think it's a combination of all the above. I think part of the strategy is to persuade folks to bring additional dollars over. So, you know, some of the campaigns focus principally on that. You know, the money market offering, some of the CD offerings that we have.

Speaker 3: Basically, I know during the lower interest rate environment, people didn't value them as much. I used to talk about them all the time, talk about our performance here, but people didn't pay attention because back then, the FTP benefit wasn't that great, but today, it really provides us with a pretty substantial buffer from a margin perspective.

Basically I know during the lower interest rate environment people didn't value. The mismatch I used to talk about them. All the time talking about our performance here and people didn't pay attention because back then the ft. The benefit the FTP benefit it wasn't that great but today.

It really provides us with a pretty substantial buffer from a margin perspective, and if you go back to 2019, we were at 26% demand deposits 31 in 'twenty.

Speaker 3: And if you go back to 2019, we were at 26%. Demand the positive 31 and 20.

Manuel Navas: I think we've had, you know, quite a bit of success, bringing in new customers. So, you know, you know, north of 50% of the new money that comes in is new customers. So, you know, it's it's better than 50, 50, but, you know, it's, it's, it's worked. Let's put it that way. But I think the principal reason why we're successful, we've been able to manage the bait as an[inaudible] You know, it kind of shows there, but I also believe that being the principal bank or consumers and businesses, as I said in my remarks, is critically important.

Speaker 3: No, I mean, you then can see the surge coming in with stimulus.

I mean, you then can see the surge coming in with stimulus.

Speaker 3: So, you know, we're feeling pretty good about where we are. We focused on client primacy.

So we're feeling pretty good about where we are we focused on client primacy.

Speaker 3: First chance term, you have the trademark on that. So he calls it client primacy. It's our internal strategy.

Britain chance term he has.

He has a trademark on that.

Now he calls the client privacy, it's our internal strategy.

Speaker 8: to make sure that we're the principal depository bank and disbursement bank for consumers and businesses. And again, we continue to make investments in the NOVO branch locations to drive new households where we can be disbursement bank on the consumer side. We've invested in digital, we've invested in TM products and services like this.

Make sure that we're the principal depository bank and disbursement bank for consumers and businesses and again you know we've continued to make investments in de Novo branch locations to drive.

<unk>, where we can be the disbursement back on the consumer side, we've invested in digital.

Invested in T M products and services like I said the payment that.

Speaker 3: that we put in place and some of the other products that we just rolled out.

We put in place in some of the other products just rolled out that help us establish ourselves as the principal depository bank. That's why these.

Speaker 8: that help us establish ourselves as the principal depository bank. That's why these demand deposits don't move around that much.

Demand deposits don't move around that much so relative to others. There theyre not its not just cash parked here I mean in many instances those balances are being used to copper services.

Speaker 3: So relative to others, they're not, it's not just cash.

Speaker 3: I mean, in many instances, those balances are being used to cover services. The balances have to remain to cover disbursements that go on, you know, throughout a month or a week. So, you know, it's pretty much embedded.

The balances have remained calm and disbursements that go on throughout a month or.

Manuel Navas: And that requires a consistent investment in technology or management services, all the things that I, that I mentioned earlier. So, you know, they both go hand in hand. I appreciate that. Do you have a rough, I give a rough, a rough, a rough average rate on the new CDs or what's your current best offer? And then just talk about the reality in the, in the beauty book recently. Vince, I don't know.

So it's pretty much embedded.

Speaker 8: So we're feeling pretty confident about our deposit makes here. That's not to say there wasn't pressure because when rates were lower of course, companies and individuals, including myself, were a little sloppy about leaving their money sitting and demand deposits. So that's changed, I think.

So we're feeling pretty confident about our deposit next year, that's not to say there wasn't pressure because when rates were lower of course companies and individuals including myself, a little sloppy about leaving their money sitting in demand deposits. So that's changed I think.

Speaker 3: consumers expect and the businesses expect to invest those balances given the returns they can achieve today. So I think we've demonstrated here over a pretty long period of time that we are a very solid depository institution with heavy emphasis on low cost funding sources.

Tumors and expect in the businesses and expect to invest those balances given the returns they can achieve today. So I think we've.

Demonstrated here over a pretty long period of time that we are very solid depository institution with heavy emphasis on low cost funding sources.

Manuel Navas: I don't have those details of the tip of my fingers. Do you have that, Vince? Yeah, I would say, I mean, a couple of things. The rates and the promotional CDs and money market rates have been right around 5, little below or a little above. So, you know, we've had, as Vince says, with all the data analytics supporting it and the tools we have in place, you know, we've brought in, you know, close to 800 million in new money, really.

Right.

I hope that helps you yeah no that's helpful.

Speaker 13: Yeah, no, that's helpful. It's something that could still go a bit lower but it'll be better than peer and holding up well. So, okay. And then maybe one of the...

They can still could go a bit lower about building better than peer and holding up well. So okay and then maybe.

Great.

Go ahead.

Speaker 3: Yeah, I think we'll outperform the peers. I can't speak to where we're going to be in the future, because who knows, if I could predict interest rates, I wouldn't be here, I'd be trading bonds. But I think that we're going to outperform because of our business model.

I think we'll outperform the peers I can't speak to where we're going to be future in the future because who knows what I can predict interest rates that would be Europe trading bonds.

Manuel Navas: Since May, do that. And that's a kind of benefit of the overall balance sheet. And then the beauty flows have always talked about the three to 500 million is kind of the, you know, the range of what comes in and, you know, during the most recent quarter, it's just a higher end of that and really kind of spread throughout the categories. It's a small amount is really in the DDA and most of it's more in the money market and sweep accounts for that money flows through and that, you know, that peaks and troughs as you go through the year, kind of builds throughout October, November, and then the first quarter is always the trough of that.

Thank God.

I think that we're going to outperform because of our business model.

So that's okay.

Gotcha, Okay makes sense Mike.

Speaker 13: Maybe just one for Gary on the reserve. I mean, the reserve is down to touch this quarter. It's still a pretty healthy level, inclusive of the marks, but just kind of wondering how to think about the reserve and conjunction with the strength and credit.

Maybe just one for Gary on the reserve I mean, the reserve was down a touch this quarter, it's still a pretty healthy level inclusive of the marks but just kind of wondering how to think about the reserve in conjunction with the strength in credit.

Yep.

Speaker 4: Yeah, Brian , in terms of the reserve, I mean, it's a constant focus from our perspective. You know, at 125 and 139 with the unamortized discounts, I mean, it's upper quartile, strong compared to peers. We feel good about where it is and the position of the portfolio here entering the end of the year. So I would expect it to continue to track similarly as we go forward.

And then in terms of the reserve.

Manuel Navas: Oh, I appreciate that. And then just switching topics, switching gears for a second. What are kind of updated thoughts on buyback. You just had so much growth this quarter. Is that the main kind of limit, limiter there and obviously that that probably comes first organic growth, but can you just kind of walk through or buy back fits in given that CET one is above your target. Sure, I can comment on that.

It's a constant focus from our perspective are you now at $1 25, and 139 with the unamortized discount I mean, it's.

<unk> upper quartile strong compared to peers and we feel good about where it is and the position of the portfolio here entering the end of the year. So I would I would expect it to continue to track Similarly, as we as we go forward.

Speaker 13: Okay, in Remimey Gear, I think there was a credit out there this quarter, some other banks with a Snickportfolio. How big your Snickportfolio is today?

Okay, and remind me Gary I think there was a.

Manuel Navas: I mean, I've been at 10.2, so we're a little above our target. I think during the second quarter, when we were active, there were great opportunities to put some money to work there. And in the third quarter, with the growth we had, plus the time we had the special assessment, there was an expectation that might happen in the third quarter. And just the uncertainty, we decided not to be active during the third quarter.

Credit out there this quarter some other banks with a snick portfolio, how big your snick portfolio is today.

Speaker 4: Our SNCC portfolio today is $3 billion. 40 plus percent of it is investment grade and essentially the balance.

Our our snacks portfolio today is $3 billion.

40, plus percent of it is investment grade and essentially the balance of it.

Speaker 4: out on yourself. Have you heard??? slide?

As you.

Speaker 4: you know, essentially right up against investment grade.

Manuel Navas: You know, it's, as always, we're committed to managing capital in a manner that's fully aligned with shareholders. So, you know, we're closely monitoring it. We made the come active in the fourth quarter. But, you know, we want to really see how the overall environment plays out. But clearly, there's room to do that. And, you know, with the dividend power ratio that we've all worked really hard to count to 30%. You know, we now have flexibility in the strong earnings generation that we have where this number will build.

Essentially right up against investment grade.

Speaker 4: So, you know, that portfolio has performed extremely well. It's extremely strong. Our focus, we don't buy paper.

So you know that that portfolio has performed extremely well it's extremely strong our focus we don't buy paper.

Speaker 4: Our focus is really on customers that we know and customers in our market, so that focus has really proven itself very well in that portfolio over a long period of time. We've generated significant deposits that Vince has referenced.

Our focus is really on customers that we know and customers in our market. So you know that that focus has really proven itself very well in that portfolio.

Manuel Navas: And we'll put it to work longer, stay strong. You know, we'll use that to support longer. That's always our kind of first and best use of the capital. Yeah, he's been. The other thing I wanted to mention is, you know, the tax credit transaction that we've closed this quarter. You know, some folks have asked, is that like a one time event? No. We actually have a business that pursues tax credit transactions, particularly in the energy field.

<unk> is over a long period of time.

We've generated significant deposits that Vince has referenced around that portfolio as well.

Speaker 4: around that portfolio as well and continue to, it continues to perform exceptionally well. It's a very strong portfolio.

And continue to it continues to perform exceptionally well so a very strong portfolio.

Speaker 8: Gotcha. Okay. You know, I hate to answer the question though because

Got you okay.

I hate to answer question, though because.

Speaker 3: You can't compare every bank's syndicated loan portfolio.

You can't compare every banks.

Manuel Navas: So, we've done a number of them over the last few years, right? In the group, you know, there's a pipeline of tax credit transactions that we pursue. So, sometimes it's lumpy because it takes time to build out a solar field. Or, you know, it takes time to get certified and get that stuff up and running because they actually have to be delivering power. Right? It's where you can start a process and a financial perspective.

Syndicated loan portfolios and so on.

Speaker 3: So, you know, on the on the by side in particular, we're not a leverage finance player.

On the buy side in particular, we're not a leveraged finance player.

We're buying these patients if we participate in that deal because we think we're gonna get ancillary business, we're participating in bond economics their customers one of the ones. We have is that our bankers have to have a relationship with the company. They can't just rely on bank of America PNC to bring us into the deal.

Speaker 8: with this patient if we participate in a deal because we think that we're gonna get ancillary business, we're participating in bond economics, their customers, one of the rules we have is that our bankers have to have a relationship with the company. They can't just rely on bank of America or PNC to bring us into the deal. You know, those are, that's a different type of portfolio than having a levy portfolio that you just go out by leverage transactions and for yield.

Manuel Navas: But, you know, it is a business that we have. It's in our corporate finance area. And they've done a terrific job over the last few years. So I would expect that to continue as well. And to next year, because we developed that expertise and, you know, we're confident that the people that we have doing that, him and his team have done, you know, many of these are very well positioned to keep pursuing opportunities.

Those are that's a different type of portfolio than having a lesson portfolio that you just go out by leveraged transactions and for yield so to Gary's point, we've a big chunk of the investment grade.

Speaker 3: So, to Gary's point, we have a big chunk of investment grade credits in that syndication portfolio. And then also, we need a number of credits because we have a syndication effort that we built out. So, that would be included in that number where we're left with.

Credits in that syndication portfolio and then also you read a number of credits.

Have a syndication effort.

Manuel Navas: But I would add that to the mix as well because it doesn't show up the same way from a profitability perspective, because we book an asset that has a very low margin, right? That ends up impacting margin and then we get a tax benefit. And then you all say, well, why, you know, you're just winning on a tax benefit, but that's actually part of the profit of it will be the extension of the credit to certainly understand.

So that would be included in that number were less.

Speaker 4: So all of that needs to be taken into consideration. Yeah, as Vince indicated, we're not in the leveraged finance business. We don't have a private equity business. It's really customers in our markets that we call on and have relationships with. So it's been a very strong book of business for us.

So all of that needs to be taken into consideration.

Yeah, it's been it's been as Vince indicated we were not in the leveraged finance business, we don't have a private equity business.

It's really customers in our markets.

We call on.

And you know has relationships with so it's it's been a very strong book of business for us.

Manuel Navas: So, you know, some folks have asked us about that and I wanted to make sure we were here that that's, you know, something that we pursue on an ongoing day system will be added to next year as well. And it provides capital to, right? Yeah. So I appreciate that added color. Thank you. All right.

Before.

Speaker 13: Got you. I appreciate all the color there. And then maybe just last one was on the commercial and consumer pipeline. I know you're not giving any guidance on 24, but just kind of given the growth of this quarter. Just kind of want to see where the pipelines are at today relative to last quarter. Just, you know, have your frame.

Got you I appreciate all the color there and then maybe just last one was on the commercial and consumer pipeline I know youre, not giving any guidance on 'twenty four but just kind of given the growth. This quarter, just kind of want to see where the pipelines are at today relative to last quarter.

Or would you frame it.

Good morning.

Speaker 8: We're coming off of a pretty good funding.

We can't we're coming off of a pretty good funding.

Frank Schiraldi: The next question comes from Frank Charaldi from Paper Sandler. Please go ahead. Good morning. Hey guys, in terms of the guide for NII, you know, you mentioned no additional rate hike. If we do get a November or December rate hike, I mean, just wondering if that's meaningful anymore in terms of what that adds on an annualized basis to NII. And maybe if you could just talk a little bit about how you're managing the balance sheet sensitivity for the higher for longer rate outlook.

Speaker 3: So typically what happens is the pipelines we said, I think we're down between five and 10 percent. And most of the markets, I just looked at the statistics across the market, and trash it for you.

Water. So typically what happens is the pipelines, where you said I think were down between five and 10% and most of the markets I just looked at the statistics across the markets contracted.

Rigorously itch.

Speaker 3: So I'd say down 5 to 10% but still building.

So I'd say, you know down 5% to 10%, but still building.

Speaker 8: I think when you look at the portfolio overall, the dynamics of our commercial loan portfolio.

I think when you look at the portfolio overall, the dynamics of our commercial loan portfolio.

One I think that attrition has slowed dramatically because of the decline in rates. So that's going to help stabilize the balances. That's number one number two I think demand for.

Speaker 8: I think that the attrition that slows dramatically because of the climate rates, so that's gonna help stabilize the balances, that's number one. Number two, I think demand for capital is slowed going into next year, so that's part of why.

For capital is slow going into next year. So that's part of why.

Frank Schiraldi: Thanks. Yeah, I would say, you know, any knowledge. Yeah, I mean, any rate movement Frank, right? It's late in the quarter. It doesn't really do much for the fourth quarter. So that there's not much, much benefit that you would get there. And what's where rates are, I mean, it's not that big of an impact even to next year. I mean, you know, if you look at our IRR position, you know, we've been kind of gradually moving towards neutral.

Speaker 3: the pipeline to have slowed or decreased a little bit. Particularly, I focus more on the 90-day pipeline, which is down about 4 or 5%.

<unk> pipeline system have slowed.

Decreased a little bit, particularly I'd focus more on the 90 days.

Nine which is down about four 5%.

That's what.

Speaker 3: What I tend to focus on is we look at it both ways, right? Oh, versus what was in the short one. And I think it will build again, going into next year, obviously depending on what happens, which is straight, and the economy overall, but I'm pretty confident that...

When I tend to focus on as we look at it both ways right overall versus what was in the short run.

Frank Schiraldi: You know, as each quarter has gone by kind of naturally naturally getting there, you know, when you look at when our IRR stats will be out in the queue, I mean, the plus 100 gram to a minus 100 gram is around one two percent. So there's actually a benefit both ways because you have the rates on loans and investment securities we're putting on continue to be higher than the portfolio rates. So you can kind of get benefits from that.

And I think I think it will build again going into next year, obviously, depending on what happens with interest rates and the economy overall, but <unk>.

<unk>.

Speaker 3: that will be some build. And then the third thing I wanted to mention was that utilization rates have declined slightly, which is an indication that there's a fullback. So we're seeing in the commercial book, one to two percent decline in utilization rates.

Yeah.

And Bill and then the third thing I wanted to mention was that.

Utilization rates have declined slightly which is an indication.

There is a pullback so we're seeing in the commercial book, you know, 1% to 2% decline in utilization rates.

Speaker 8: And to me, that's an indicator that the borrowers are kind of full and accurate.

And to me that's an indicator that the borrowers are we're kind of pulling back.

Frank Schiraldi: But 25 basis points in the grand scheme of things, it doesn't, it's not going to do that much. And we'll bake it into there's guidance in January when we can over give it out, but it's, it's really not going to move the dial.

Gotcha and those type I hope that's helpful. Yeah, the pipelines, you're talking 45% lower at both for consumer and commercial or was that just primarily commercial.

Speaker 3: Yeah, the pipelines you're talking, you know, 45% lower, both for consumer and commercial, was that just primarily commercial. So I was, sorry, I was speaking, I was speaking only to commercial. I,

Vincent Calabrese: Okay. And then just thinking about the 4Q expense guide. You know, it's the right way to think about that. You talked a lot about the investments being made. So we think more about that as an acceleration of investments and potentially, so there's a potential leg down and expense, or given, you know, everything you guys are doing is that just a better to think about as one rate at this point. You actually think that you want to cover.

Sorry, I was speaking I was speaking only.

Commercial.

Speaker 3: Consumer is, you know, the pipelines for consumer depends on which space you're in. You know, we want to talk mortgage. We have more mortgage than we need to. So we're basically, you know, becoming more competitive to push off to balance sheet, right? So we're more competitive in the conformance space, which impacts.

Consumer is.

Now the pipelines for consumer depends on which space you want to talk mortgage we have more mortgages than we need you.

We're basically.

Becoming more competitive to push.

The balance sheet right.

More competitive in the conforming space, which impacts margin a little bit she gets it off the balance sheet, where we've been very successful growing our consumer and mortgage.

Speaker 8: Marginal little bit should get it off the balance sheet. We've been very successful growing markets, or in mortgage, business.

Vincent Calabrese: Sure, I can comment on that. I mean, you know, as Vince talked about, we've continuously invested in the company, you know, that frankly, it covered us for a long time. So it's been, it's part of how we run the company, investing to generate future revenue. And we've been able to do that maintaining, you know, very good efficiency ratio in the low 50s. So it's, it's just part of running the business, and conversations we have eternally are always, you know, focusing on our, our CAPEX spend, where we can drive future revenue.

Speaker 3: So, I'm not too worried about that. Small business has performed pretty well. The pipelines are up. You know, that's the Dishonest First Program and you have to just on healthcare as kind of paid off for that group. We have some really good people that we brought on the head of our small business lending area has a specific expertise in healthcare, which is why we're developing this product that I mentioned earlier in the fall. The pipeline there looks pretty good.

So I'm not too worried about that small business has performed pretty well pipeline drop that physicians first program and an emphasis on health care and just kind of paid off.

With that group, we have some really good people that we brought on the head of our small business lending area has a specific expertise in health care, which is why were developing those products that I mentioned earlier in the call.

The pipeline there looks pretty good.

Speaker 3: And I think we do have an opportunity moving into 24, as I said, in the small business segment, which falls under a consumer, to grow that for the business. We have a boat load of small business customers across seven states. I mentioned 92,000, else in them. So, you know, far as

Vincent Calabrese: And investing in markets, right? We've entered new markets through the Lenovo strategy, through expanding our HM strategy, on it's in Northern Virginia, Charleston, and, you know, markets that are very attractive. So that's also part of the investment is investing in those markets, which then generates, you know, future revenue for us. I mean, the expenses in the fourth quarter, you know, it's always the end of the year, it can be a little lumpy or finishing up instead of playing in pools and those types of things that comes in.

I think we do have an opportunity moving into 'twenty four as I said in the small business segment, which falls under a consumer to grow that book of business. I mean, we have a boat load.

Small business customers across seven states I mentioned 90 to 100000 customers. So you know.

Our small business pipeline.

Speaker 3: At the most recent quarter, was it record levels and I would expect us to continue to capitalize on that. I know it doesn't contribute as much to the total, but that should go well.

The most recent quarter was at record levels and I would expect us to continue to capitalize on that I know it doesn't contribute as much.

Vincent Calabrese: So, you know, when we do our guidance in January for next year, we'll have a cost savings target as we have every year. I mean, we've taken out 60 million or so in cost as we've grown and created the scale. So, you know, that's always part of how we run the company. And the initiatives that Vince talked about, the Lenovo's digital investments, infrastructure to support that growth, you know, we focus on generating that positive operating leverage and having a low 50% efficiency ratio.

That should bode well for the detail.

Consumer pay.

Speaker 3: But that's where we are. I don't really, we're not anticipating issues with.

But that's where we are.

Really we're not anticipating issues with.

Vincent Calabrese: So, it's... It's not easy, but it's a focus within the company and I think investments have served as well. So it'll continue to be part of it. So it's not really a step function to it. Frank, it's a good question, but it's really just part of how we run the company.

Speaker 3: The mortgage is top or right in the higher industry environment. The majority of the loans that we're originating across a pretty broad footprint are purchased money loans. And we've invested pretty heavily in the platform recently. So we're pretty confident we can achieve better than peer results in the mortgage business like we have. And then that needs to home equity opportunities.

Mortgage or so mortgages hopper right and the higher interest rate environment. The majority of the loans that we're originating across a pretty broad footprint, our purchase money loans and we've invested pretty heavily.

Platform recently, so we're pretty confident we can achieve better than peer results in the mortgage business like we have in there.

And that leads to home equity opportunities.

Speaker 3: other opportunities in the consumer segment. And with the application that we rolled out, we also think that'll help us in 24. So being able to open a depository account and apply for a home equity loan simultaneously will help us originate loans.

Other opportunities consumer sentiment and with the application that we rolled out. We also think that will help us in 2004, so being able to open a depository account and apply for a home equity loan simultaneously will help us originate.

Frank Schiraldi: Okay, great. And then just lastly, on the tax rate and the renewable energy transaction and totally get that, you know, just part of the deal that's just part of the economic service tax credit, but you get. But would you say that if I look at the 4Q 23 guide, you know, it's a bit lower, I'd say than your rate over the last several quarters, except for the 3Q, you know, is that, would you say that kind of lumpy, too, is there kind of more activity expected in 4Q or is that just, you know, has that business just ramped up to a degree where, you know, you could see that as potentially sustainable.

Loans in the consumer space.

Got you, Okay and the last one for me was just on on the efficiency just it feels like given the comments about managing expenses and what we saw this quarter.

Speaker 13: Okay, and the last one for me was just on the efficiency. It feels like, given the comments about managing expenses and what we saw this quarter, that we should think of the low 50 efficiency ratios, kind of a sustainable level here going forward.

We should think of the low level of <unk> efficiency ratio as kind of a sustainable level here going forward.

Yes.

Speaker 8: We've always said we target 50 to 55% that's...

Yeah, we target we've always said, we target 50% to 55%. That's you know that's what.

Speaker 3: What we hope to it. Ie, we want to stay obviously LO Vol.

What we hope to achieve what we wanted to stay obviously impossible right. We're all incentive to keep expenses low here part of Armstrong flooring.

Frank Schiraldi: Yeah, the fourth quarter level, Frank, is really tied to the same solar deal that we just closed in the third quarter. The bulk of the tax credit gets recorded in the third quarter, and then there's carry over kind of smoothing out the effective tax rate for the year that also benefits the fourth quarter, and that kind of completes it for for this transaction. But it's been said, there's a pipeline of transactions that we continue to go after.

Speaker 3: Right, we're all incentive to keep expenses while here part of our incentive program. So I think that, you know, we're gonna be very diligent, but I also think that even our capital liquidity, our digital investment, what we have going on here, we need to stay focused on growing revenue as we move through this difficult time. We're capable of managing risks very effectively, and I think we're in a very strong position to grow as we move into

So I think that we're going to be very diligent and I also think that given our capital liquidity, our digital investment what we have going on here, we need to stay focused on growing revenue as we move through this difficult time, we're capable of managing risk very effectively and I think we're in a very strong.

Frank Schiraldi: And the team is already working actively on others that could happen next year and into the 25, so, but the 4Q is really just tied to this transaction and kind of the smoothing of it into the fourth quarter. Got it. Okay, that's helpful.

<unk> position to grow as we move into 2000 or so on the revenue side.

Speaker 8: or so on the revenue side. You know, I believe we'll have an opportunity to manage, to contribute to positive operating leverage with outside the relative.

I believe we will have an opportunity to.

To manage.

Contribute to positive operating leverage.

Unknown Executive: Thank you. All right, thanks. Again, as a reminder, if you have a question, please press star, then one.

Outside relative to the peers. So there is expense build but there's also revenue growth coming along with it so.

Speaker 3: So there was expense bill, but there's also, you know, ready for a coming along with it. So...

Brian Martin: Our next question comes from Brian Martin from Janie Montgomery. Please go ahead. Hey, good morning, guys. Just a ride. Hey, just one, one for me on back to the margin, just for an advance, I guess, the, appreciate the color on the, you know, the, the abatement of the funding pressure here.

Speaker 8: That's kind of the strategy. It's been the strategy for a long time. I know there's periods where it's lumpy and people ask, you know, wait, listen to your issues. You can see the results. Over a long period of time, we've been an outperformer relative to the peers for a decade, I believe. So anyway, that's where we are.

That's kind of the strategy, it's been the strategy for a long time.

I know, there's periods, where it's lumpy and people ask why.

Key ratios.

You can see the results over a long period of time, we've been at.

The outperformer relative to the peers for.

Vincent Delie: But I guess as far as the DDAs go, I mean, I guess the contractions load a bit again this quarter, just kind of wondering if you think we're nearing a bottom there, just how you're thinking about that in general and maybe just an update on kind of where new loan production is coming on. Yeah, I would say, I guess we've talked to. I don't know. Or go ahead, then. I know the answer has been.

A decade, so anyway.

That's that's where we are.

Perfect. Thanks for taking all the questions guys.

Yes. Thank you. Thanks. Thanks.

Thanks, Greg.

This concludes our question and answer session I would like to turn the conference back over to Vince <unk> for any closing remarks.

Speaker 1: This concludes our question and answer session. I would like to turn the conference back over to Vince DeLee for any closing remarks.

But again I'd like to thank everybody for the questions very detailed questions very good questions.

Speaker 3: Well, I just, again, I'd like to thank everybody for the questions, you know, very detailed questions, very good questions. You know, so thank you for participating. I also would like to thank our employees again, you know, I say it every time, but you know, you can't do this without great people. So I'm engaged in enthusiastic employees, no matter what basis, you know, we come through at the end because

Vincent Delie: I want to answer which Vince Brian was at. Go ahead. Well, I can comment on the loans. And then maybe Vince, if you want to talk about the strategy on honor, she's bearing afterwards, that's probably good. You know, the new loans that we made during the third quarter, they came on at 685, which was up from 637 in the second quarter. So, you know, the commercial loans came on in the sevens and mortgages in the mid to high six is during the third quarter.

So thank you for participating I also would like to thank our employees again.

I've seen every time, but you can't do this without great people and so on.

Engaged and enthusiastic employees no matter what basis.

We come through at the end because we work together as a team.

Speaker 3: But thank you to the employees, and then thank you to the shareholders for continuing to have a call.

Thank you to the employees and thank you to the shareholders for continuing to have confidence in us we will continue to deliver as we move through these choppy years here. So thank you.

Vincent Delie: And those are kind of mid heavens as we sit here today, just given where mortgage rates are. So, you know, 685, a pretty good level and above overall portfolio yields. So you're getting that benefit coming through. I mean, the overall portfolio rate on a spot basis, without 15 basis points. You know, with that higher level of made, you know, rates on the new loans that we made versus where the portfolio is.

Speaker 8: continue to deliver as we move through these chopping years here.

Okay everybody.

Yes.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Speaker 1: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker 15: The.

[music].

Vincent Delie: And then we have a slide in the deck, Brian, I'm familiar with it. I mean, Denonis is very deposits, has been a focus as long as I've been here, and Vince before me. You know, we've grown from 16 to, I think we peaked to 34. We were 26 kind of pre, prephobic, right? And, you know, we're going to work hard to keep that number as high as we can, and it's just part of everything we do, every week of pricing, every outcome meeting, every day meeting.

Vincent Delie: Yeah, it's actually on page 13 in the investor deck point. You know, we comment on a frequent one, but if you look, it goes to what I've been saying strategically, our goal was to drive up non-interest bearing deposits. You know, basically, I know during the lower interest rate environment, people didn't value them as much. I used to talk about them all the time, talk about our performance here. People didn't pay attention with the fact that the FTP, the benefit, the FTP benefit wasn't that great, but today, you know, it really provides us with a pretty substantial buffer from a margin perspective.

Vincent Delie: And if you go back to 2019, we were at 26 percent demand deposit 31 and 20. You know, I mean, you then can see the surge coming in with stimulus. So, you know, we're feeling pretty good about where we are. We focused on client primacy, rich chance term. He has, you know, he has a trademark on that. He calls it client primacy. It's our internal strategy to make sure that we're the principal depository bank and disbursement bank for consumers and businesses.

Vincent Delie: And again, you know, we've continued to make investments in the know of a branch locations to drive new households where we can be disbursement bank on the consumer side. We've invested in digital. We've invested in TM products and services, like I said, the payment help that we put in place and some of the other products that we just rolled out that help us establish ourselves as the principal depository bank. That's why these demand deposits don't move around that much.

Vincent Delie: So, relative to others, they're not, it's not just cash parked here. I mean, in many instances, those balances are being used to cover services. The balances have to remain to come in disbursement to go on, you know, around a month or a week. So, you know, it's pretty much embedded. So, we're feeling pretty confident about our deposit mix here. That's not to say there wasn't pressure because when rates were lower, of course, you know, companies and individuals, including myself, we're a little sloppy about leaving their money sitting in demand deposits.

Vincent Delie: So, that's changed that I think the consumers expect and the businesses expect to invest those balances given the returns they can achieve today. So, I think we demonstrated here over a pretty long period of time that we are very solid depository institution with heavy emphasis on low cost funding sources. Does that help you? Yeah, no, that's helpful. It's not like it still could go a bit lower, but it'll be better than here and holding up well.

Vincent Delie: So, okay. And then maybe I agree. Yeah, I think it will. I think we'll outperform the peers. I can't speak to where we're going to be future in the future because who knows? You know what? I can predict that it's great. I wouldn't be here. I'd be pretty boss. But I think I think that, you know, we're going to outperform because of our business model. So that's got you. Okay, make sense.

Gary Guerrieri: Maybe just one for Gary on the reserve. I mean the reserve is down the touch this quarter is still a pretty healthy level inclusive. Of the marks, but just kind of wondering how to think about the reserve and conjunction with, you know, the strength and credit. Yeah, Brian, in terms of the reserve. I mean, it's a constant focus from our perspective, you know, at 125 and 139 with the unamortized discounts. I mean, it's upper court, how strong compared to peers.

Gary Guerrieri: We feel good about where it is. And the position of the portfolio here. Entering the end of the year. So I would, I would expect it to continue to track similar lia as we, as we go forward. Okay, in remind me, Gary, I think there was a credit out the discord of some other banks with a snake portfolio. How big your snake portfolio is today. Yeah, our snake portfolio today is $3 billion, $40 plus percent of it is investment grade.

Gary Guerrieri: And essentially the balance of it is, you know, essentially right up against investment grade. So, you know, that that portfolio has performed extremely well, it's extremely strong. Our focus, we don't buy paper. Our focus is really on customers that we know and customers in our market. So, you know, that that focus has really proven itself very well in that in that portfolio as over a long period of time. We've generated significant deposits that Vince has referenced around that portfolio as well and continue to it continues to perform exceptionally well. So very strong portfolio. Gotcha. Okay.

Vincent Delie: You know, I hate to answer the question though, because you can't compare every banks syndicated loan portfolio. So, you know, on the on the buy side in particular, we're not a leverage finance player. We're buying this patient if we participate in a deal because we think that we're going to get ancillary business. We're participating in bond economics. They're customers. One of the rules we have is that our bankers have to have a relationship with the company.

Vincent Delie: They can't just rely on bank of America or DNC to bring us into the deal. You know, those are, that's a different type of portfolio than having a lesson portfolio that you just go out by leverage transactions and for yield. So, at the Gary's point, you know, we've a big chunk of investment grade credits in that syndication portfolio. And then also, you need a number of credits because we have a syndication effort built out.

Vincent Delie: So, that would be included in that number where we're left with. So all that needs to be taken into consideration. As Vincent indicated, we're not in the leveraged finance business. We don't have a private equity business. It's really customers in our markets that we call on and have such relationships with. So it's been a very strong book of business for us. Gotcha. I appreciate all the color there.

Vincent Delie: And then maybe just last one was on the commercial and consumer pipeline. I know you're not giving any guidance on 24, but just kind of giving the growth this quarter. Just kind of want to see where the pipelines are at today. Relative to last quarter, just, you know, have you frame it? We're coming off of a pretty good funding order. So typically, what happens is the pipelines we said, I think we're down between five and 10%.

Vincent Delie: In most of the markets, I just looked at the statistics across the markets. We trashed it pretty rigorously. So I'd say, you know, down five to 10% but still building. I think when you look at the portfolio overall, the dynamics of our commercial loan portfolio, one, I think the attrition that slows dramatically because of the climate rates. So that's going to help stabilize the balances. That's number one. Number two, I think demand for capital has slowed going into next year.

Vincent Delie: So that's part of why pipeline city have slowed the increase a little bit. Particularly, I focus more on the 90 days pipeline, which is down about four or five percent. You know, that's what I tend to focus on because we look at it both ways, right, overall versus close in the short punch. And, you know, I think I think it will build again going into next year. Obviously, depending on what happens, which is straight and the economy overall, but I'm pretty confident that that will be some build.

Vincent Delie: And then the third thing I wanted to mention was that utilization rates have declined slightly, which is an indication, you know, there's a fullback. So, you know, we're seeing in the commercial book, you know, one to two percent decline in utilization rates. And, you know, to me, that's an indicator that the borrowers are accountable exactly. That's it. In those pipelines, yeah. The pipelines you're talking, you know, four to five percent lower, both for consumer and commercial was that just primarily commercial.

Vincent Delie: No, I'm sorry, I was speaking, I was speaking only to commercial. I consumer is, you know, the pipelines for consumer, depends on which space you're in. You know, we want to talk mortgage. We have more mortgage than we need to. We're basically, you know, becoming more competitive to push all to balance it, right? So we're more competitive in the conformance space, which impacts margin a little bit should get it off the balance sheet.

Vincent Delie: We've been very successful growing markets for mortgage business. So, you know, I'm not too worried about that. Small business has performed pretty well. The pipelines are up. You know, that's the addition first program and you have to just on healthcare as kind of paid off. For that group, we have some really good support that we brought on the head of our small business lending area. Has a specific expertise in healthcare, which is why we're developing this product that I mentioned earlier in the fall.

Vincent Delie: The pipeline there looks pretty good. And I think we do have an opportunity moving into 24, as I said, in the small business segment, which falls under a consumer, to grow that for the business. I mean, we have a boatload of small business customers across seven states. I mentioned 90, 200,000. So, you know, for our small business pipeline, at the most recent quarter, was it record levels? And I would expect us to continue to capitalize on that.

Vincent Delie: I know it doesn't contribute as much to the flow. That should go well for the itself consumer value. That's where we are. I don't really, we're not anticipating issues with the mortgage or some mortgage is top or right in the higher industry environment that the majority of the loans that we're originating across a pretty broad footprint are purchased money loans and we've invested pretty heavily in the platform recently. So we're pretty confident we can achieve better than peer results in the mortgage business like we have.

Vincent Delie: And then that leads to home equity opportunity from other opportunities and consumer segments. And with the application that we rolled out, we also think that'll help us in 24. So being able to open, you know, a depository account and apply for a home equity loan, so I'm afraid we will help us originate loans in the consumer space. Gotcha. Okay.

Vincent Delie: And the last one for me was just on the efficiency. It feels like, you know, given the comments about managing expenses and what we saw this quarter that, you know, we should think of the low, low 50 efficiency ratios kind of a sustainable level here going forward. Well, we target, you know, we've always said we target 50 to 55%. That's, you know, that's what we hope to achieve because we want to stay obviously as low as possible, right?

Vincent Delie: Because we're all incentive to keep expenses while here part of our incentive program. So I think that, you know, we're going to be very diligent, but I also think that given our capital liquidity, our digital investment, what we have going on here, we need to stay focused on growing revenue as we move through this difficult time. We're capable of managing risk very effectively, and I think we're in a very strong position to grow as we move into what we're, so on the revenue side, you know, I believe we'll have an opportunity to manage the contribute to positive operating leverage with outside relative to the peers.

Vincent Delie: So there's expense bill, but there's also, you know, a record coming along with it. So that's kind of the strategy. It's been the strategy for a long time. I know there's periods where it's lumpy and people ask, you know, wait, there's your efficiency ratio. You can see the results over a long period of time you've been an outperformer relative to the peers for decade, I believe. So anyway, that's where we are.

Unknown Executive: Perfect. Thanks for taking all the questions, guys. Yes, thank you. Thanks. Thanks, Chris.

Vincent Delie: This concludes our question and answer session. I would like to turn the conference back over to Vince Delie for any closing remarks. Well, I just, again, I'd like to thank everybody for the questions, you know, very detailed questions, very good questions. You know, so thank you for participating. I also would like to thank our employees again, you know, I say it every time, but you know, you can't do this without great people.

Vincent Delie: So I'm engaged and enthusiastic employees, no matter what they say, and we come through at the end because we work together as a team. But thank you to the employees and and thank you to the shareholders for continuing to have confidence. And as we will continue to deliver as we move through these chopping years here. So thank you. Take care everybody.

Unknown Executive: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.