Q2 2025 FNB Corp Earnings Call

Unknown Executive: F.N.B.

Unknown Executive: Second Quarter 2025 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

Good morning everyone and welcome to the FNB second quarter 2025 earnings conference call.

All participants will be in a listen-only mode.

Unknown Executive: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then 1 using a touch-tone telephone. To draw your questions, you may press star and two. Please also note today's event is being recorded.

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Lisa Hajdu: At this time, I'd like to turn the conference call over to Lisa Hajdu, Manager of Investor Relations. Ma'am, please go ahead.

please also note, today's event is being recorded

Speaker Change: At this time, I'd like to turn the conference call over to Lisa hiu manager of investor relations. Ma'am. Please go ahead.

Unknown Executive: Good morning and welcome to our earnings call. This conference call of FNB Corporation and the reports it files with the Securities and Exchange Commission often 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. Reconciliations of GAAP to non-GAAP operating measures to the most directly comparable GAAP financial measures are included in our presentation materials in our earnings release.

Speaker Change: Good morning and Welcome to our earnings. Call this conference call of FNB Corporation and the reports that files with the Securities and Exchange Commission, often contain a forward-looking statements and non-gaap financial measures. Non-gaap Financial measures should be viewed. In addition to, and not as an alternative for a reported results prepared in accordance with gaap.

Unknown Executive: For more information visit www.fnb.org Please refer to these non-GAAP and forward-looking statements disclosed within our related materials, reports, and registration statements filed with the Securities and Exchange Commission and available on our website.

Speaker Change: Reconciliations of gaap to non-gaap operating measures to the most most directly comparable. Gaap, Financial measures are included in our presentation materials in our in our earnings release.

Unknown Executive: A replay of this call will be available until Friday, July 25th, and the webcast link will be posted to the About Us Investor Relations section of our corporate website.

Speaker Change: Please refer to these non-gaap and forward-looking statements disclosed within our related. Materials reports and registration. Statements filed with the Securities and Exchange Commission and available on our 4 foot website.

Vincent Delie: I will now turn the call over to Vince Delie, Chairman, President, and CEO. Thank you and welcome to our second quarter earnings call. Joining me today are Vince Calabrese, our Chief Financial Officer, and Gary Guerrieri, our Chief Credit Officer. The second quarter's strong financial performance led to net income available to common shareholders of $130.7 million, or $0.36 per share. FNB achieved link quarter revenue growth of 6.5%, driven by net interest income of $347 million and non-interest income of $91 million, all at record level. Pre-provisioned net revenue rose 16% from the prior quarter to $192 million.

A replay of this call will be available until Friday July 25th, and the webcast link will be posted to be about us investor relations section of our corporate website.

I will now turn the call over to Vince Delite chairman president and CEO.

Speaker Change: Thank you and Welcome to our second quarter earnings call. Joining me today, are Vince colibries our Chief Financial Officer and Gary guerreri, our chief credit officer.

Speaker Change: The second quarter, strong financial performance. Led to net income available to Common shareholders of 130.7 million for 36 cents per share.

Speaker Change: FNB achieved link quarter Revenue, growth of 6.5% driven by net interest, income of 347 million, and non-interest income of 91 million, all at record levels.

Vincent Delie: Because of our sustained strong profitability, we continue to grow capital and have achieved record levels with the CET1 ratio approaching 11%, tangible common equity at 8.5%, and tangible book value per share of $11.14, up 13% year over year. The expansion of our capital base provides flexibility as FNB repurchased 725,000 shares this quarter at a weighted average price of $13.85. Even with strong growth of capital, we continue to produce solid returns, with return on average tangible common equity at 14%. There was significant margin expansion of 16 basis points linked quarter, resulting in a net interest margin of 3.19%.

Pre-provision net revenue, Rose 16% from the prior quarter to 192 million.

Speaker Change: $1.14 up 13% year-over-year.

Speaker Change: In our Capital base, provides flexibility as FNB repurchased 725,000 shares. This quarter at a weighted average price of $13.85.

Speaker Change: even with strong growth of capital, we continue to produce solid returns with return on average tangible common Equity at 14%

Vincent Delie: FNB benefited from continued organic growth throughout our diverse geographic footprint as spreads on new commercial originations in the second quarter remained relatively stable and average annualized loan growth totaled 5.3 percent. Additionally, our aggregate funding costs declined last quarter, while overall deposit balances and other funding sources grew nearly $600 million. Average total deposits grew to over $37 billion, while we continue to maintain a non-interest bearing demand deposit level of 26%. Our success in growing deposits and maintaining a favorable deposit mix is a key part of our strategy to grow profits. The loan-to-deposit ratio ended the quarter at 91.9 percent, down slightly from the last quarter and down 450 basis points since June 2024.

Speaker Change: There was significant margin expansion of 16 basis points. Linked quarter resulting in a net interest margin of 3.19%

Speaker Change: FNB benefited from continued organic growth throughout our diverse, Geographic footprint as spreads on new commercial. Originations in the second quarter remained relatively stable and average annualized loan growth totaled, 5.3%.

Speaker Change: Additionally, our aggregate funding costs declined, link quarter while overall deposit balances and other funding sources, grew nearly 600 million.

Average total deposits grew to over 37 billion. While we continue to maintain a non-interest-bearing demand deposit level of 26%.

Speaker Change: Our success and growing deposits and maintaining a favorable deposit. Mix is a key part of our strategy to grow profitably.

Vincent Delie: These results were driven by our focus on deepening customer relationships by growing deposits and serving as their primary bank.

Speaker Change: The loan to deposit ratio ended the quarter at 91.9% down slightly from the last quarter and down 450 basis points since June 2024.

Vincent Delie: FNB continues to invest in capabilities to gain market share and further outpace our competitors, particularly around non-interest income and initiatives to diversify our revenue Adding to a series of records, we reported the highest level of non-interest income in the company's history, more than doubling our non-interest income over the last 10 years. Debt, capital markets, and treasury management reached record levels this quarter and are examples of how FNB has established or significantly expanded eight business lines that are now multi-million dollar revenue generators. The returns produced are significantly greater than our cost of capital, creating value for our share.

Speaker Change: These results were driven by our focus on deepening customer Relationships, by growing deposits and serving as their primary Bank.

Speaker Change: FMB continues to invest in capabilities to gain market. Share and further, outpace our competitors, particularly around non-interest income, and initiatives, to diversify our revenue streams

Speaker Change: Adding to a series of Records. We reported the highest level of non-interest income in the company's history, more than doubling, our non-interest income over the last 10 years.

Speaker Change: Debt, Capital markets and treasury management. Reached record levels this quarter and our examples of how FNB has established or significantly expanded 8 business lines that are now multi-million dollar Revenue, generators,

Vincent Delie: We continue to deploy this strategy with additional high-value business.

Speaker Change: The returns produce are significantly greater than our cost of capital creating value for our shareholders.

Vincent Delie: Including our recent expansion into public finance and corporate investment banking services.

We continue to deploy this strategy with additional high-value businesses, including our our recent expansion into Public Finance and corporate investment banking services.

Vincent Delie: We have fulfilled an important milestone in our click-to-brick strategy by integrating the eStore common application into our in-branch origination platform across our physical delivery This is a major milestone as we've completed our industry-leading omnichannel approach to onboarding customers with the eStore common app now aligning originations across online, mobile, and in-branch channels. This aids in quicker processing times for our retail team, stronger risk and fraud controls, and provides a better experience for our clients. Common App Submissions increased 108% link order with our full branch network originating applications on this platform starting in June. through the use of the common application.

We have fulfilled, an important milestone in our clicks to Brick strategy by integrating the east, or common application into our, in Branch origination platform across our physical delivery Channel.

Speaker Change: This is a major Milestone as we've completed. Our industry-leading Omni Channel approach to onboarding customers with the East door, common app. Now aligning originations across online mobile and in Branch channels,

This AIDS in quicker processing times for our retail team stronger risk and fraud controls and provides a better experience for our clients.

Speaker Change: Common App submissions increased 108% link quarter with our full branch networking applications on this platform. Starting in June,

Vincent Delie: Multiproduct purchasing is expected to grow as our bankers will now be able to leverage AI to identify the next best products and services tailored for our customers within the same streamlined application process.

Speaker Change: Through the use of the common application.

Vincent Delie: In addition, Business Deposit Account Origination was launched this week, providing small business owners with the opportunity to open a business checking account and apply for a loan product simultaneously with the common The increasing utilization of the Common App provides additional data that our data science team leverages for personalization and better customer experience.

Multi-product purchasing is expected to grow as our Bankers, will now be able to leverage, AI to identify the next best products, and services, tailored for our customers within the same streamlined application process.

Speaker Change: In addition business deposit account origination was launched this week, providing small business owners with the opportunity to open a business, checking account, and apply for a loan product simultaneously with the Common App.

Vincent Delie: AI, data science, and digital technology play such an integral role in our operations and ongoing success that we've realigned our organizational structure . FNB's digital channels, e-commerce, data science, data management and governance, corporate strategy, and a new vertical of AI and innovation will now report to our Chief Strategy Officer. This organizational structure further expands the utilization of our digital tools, data-driven analysis, predictive modeling, and artificial intelligence to position the company for ongoing success. Our organizational alignment is necessary as we continuously invest in our digital and data capabilities to efficiently scale development, data consumption, business insights, lead generation, and client personalization across FNB's digital eco.

Speaker Change: The increasing utilization of the Common App provides additional data that our data science team leverages for personalization and better customer experiences.

Speaker Change: AI data science, and digital technology play such an integral role in our operations and ongoing success.

Speaker Change: That we realigned our organizational structure.

Speaker Change: Fmb's digital channels, e-commerce data science data management and governance corporate strategy and a new vertical of AI and Innovation will now report to our chief strategy officer.

This organizational structure further, expands the utilization of our digital tools. Data-driven analysis, predictive modeling and artificial intelligence to position the company for ongoing success.

Vincent Delie: From clips to bricks to our proprietary e-store and opportunity IQ, FNB has been an innovation leader in bank Our team is working to further expand our use of AI and evaluate other emerging technologies such as stablecoin and tokenization.

Speaker Change: And data capabilities to efficiently scale development data, consumption business insights lead generation and client personalization across fmb's digital ecosystem.

Speaker Change: From clicks to Bricks to our proprietary e store and opportunity. IQ FMB has been an innovation leader in banking,

Vincent Delie: We have created a generative AI task force to monitor our existing applications, intake and source new use cases across the enterprise, and ensure that we are upholding responsible risk management frameworks and controls around our growing AI use This past year, our credit team developed an internal performance monitoring tool that provides a 360-degree view of our commercial clients. by using internal and external data aggregation through our Enterprise Data Warehouse. We are able to evaluate the real-time risk profile of our customers and monitor change. Our team continues to assess the impact from tariffs and geopolitical events as we monitor our loan portfolio and manage our strong liquidity and capital.

Speaker Change: our team is working to further, expand our use of AI and evaluate other emerging Technologies such as stable coin and tokenization.

Speaker Change: We have created a generative AI task force, to monitor our existing applications intake and Source, new use cases across the Enterprise and ensure that we are upholding responsible, risk management Frameworks and controls around our growing, AI usage.

This past year our credit team developed an internal performance monitoring tool. That provides a 360 degree view of our commercial clients.

Speaker Change: By using internal and external data aggregation, through our Enterprise data warehouse.

Speaker Change: We are able to evaluate the real-time risk profile of our customers and monitor changes.

Vincent Delie: Gary and his team remain steadfast in our consistent underwriting standards and credit management program, with aggressive and proactive actions, which led to continued strong credit results for the quarter.

Speaker Change: Our team continues to assess the impact from tariffs and geopolitical events. As we monitor, our loan portfolio, and manage our strong liquidity and capital positions.

Vincent Delie: I will now pass the poll over to Gary to provide further detail on the overall asset quality. Gary.

Speaker Change: Gary and his team remained steadfast in our consistent underwriting. Standards and Credit Management program with aggressive and proactive actions, which led to continued strong credit results for the quarter. I will now pass the call over to Gary to provide further detail on the overall asset quality Gary.

Gary Guerrieri: Thank you, Vince, and good morning, everyone. We ended the quarter with our asset quality metrics showing notable improvements. Total delinquency ended the quarter at 62 basis points, down 13 bps from the prior quarter, with NPLs and Oreo down 14 bps, ending at a very solid 34 basis points. Net charge-offs totaled 25 bps, bringing the year-to-date results to 20 basis points, reflecting good performance despite the somewhat volatile economic environment. Criticized loans were down 4.5% on a linked quarter basis, driven by a 20% decline in classified loans. We were pleased with the improvements we saw across these categories during the quarter.

Gary Guerreri: Thank you, Vance, and good morning, everyone.

Gary Guerreri: We ended the quarter with our asset quality metrics showing notable Improvement.

Speaker Change: Total, the lengthy ended. The quarter at 62 basis, points, down 13, Bibb from the prior quarter with npls and Oreo, down 14, Bingo basis points.

Speaker Change: That charge offs totaled, 25 BS, bringing the year to date results to 20 basis points reflecting good performance despite the somewhat volatile economic environment.

Speaker Change: Criticized loans were down 4 and a half percent on a linked quarter basis driven by 20% decline in classified loans.

Speaker Change: We were pleased with the improvements. We saw across these categories during the quarter.

Gary Guerrieri: Federal-funded provision expense for the quarter stood at $24.9 million, supporting loan growth and charge-offs, as we were successful in removing some risk from the loan portfolio. Our ending funded reserve stands at $432 million, an increase of $3.2 million, ending at 1.25% unchanged from the prior quarter. When including Acquired Unamortized Loan Discounts, our reserve stands at 1.32% and our NPL coverage position improved significantly to 393% inclusive of the discount.

Speaker Change: Federal funded provision expense for the quarter. Stood, at 24.9 million supporting loan growth and charge offs as we were successful in. Removing some risk from the loan portfolio.

Speaker Change: Our ending funded reserves stands at 432 million and increase of 3.2 million ending at 1.25% unchanged from the prior quarter.

When including acquired unamortized loan, discounts, our Reserve stands at 1.32% and our NPO coverage position, improved significantly to 393% inclusive of the discounts.

Gary Guerrieri: As mentioned in the previous quarter, we continue to closely review the loan portfolio for tariff impacts, which remains a fluid situation. This includes very granular monitoring of line utilization and industry concentrations by portfolio and country, which we highlighted during the Q1 survey. Of note, our C&I line utilization was down in the quarter as we are not experiencing significant tariff-related draw activity. Each quarter, we continue to run allowance sensitivities in a full portfolio stress test. The stress test results reflected further improvement with our current ACL more than covering our projected charge-offs in a severe economic downturn.

Speaker Change: As mentioned in the previous quarter, we continue to closely review the loan portfolio for tariff impacts, which remains a fluid situation.

Speaker Change: This includes very granular monitoring of line, utilization and Industry concentrations by portfolio and Country which we highlighted during the q1 survey.

Speaker Change: Of note, our cni line utilization was down in the quarter, as we are not experiencing significant tariff related, draw activity.

Speaker Change: Each quarter, we continue to run allowance sensitivities in a full portfolio stress test.

The stress test results, reflected further improvement with our current ACL more than covering our projected charge offs in a severe economic downturn.

Gary Guerrieri: Regarding the non-owner CRE portfolio, credit metrics also improved, contributing to the decline in rated credits that I mentioned earlier, with delinquency and NPLs at 64 and 62 basis points, respectively. This reflects an improvement from 82 and 77 BIPs at the prior quarter end. We continue to aggressively manage this portfolio, as we have throughout this interest rate cycle, with a non-owner exposure declining by another $137 million in the quarter, bringing the year-to-date decline to $420 million, ending at 223% of capital.

Speaker Change: Regarding the non-owner CRA portfolio, credit metrics. Also improved contributing to the decline in rated credits that I mentioned earlier with delinquency and npls at 64 and 62 basis points respectively.

Speaker Change: This reflects an improvement from 82 and 777 bips at the prior quarter end.

Speaker Change: 420 million ending at 223% of capital.

Gary Guerrieri: In closing, our active credit risk management further strengthened the position of our portfolio as shown in this quarter's results.

Gary Guerrieri: I would like to thank our banking teams for managing risk in their portfolios throughout a challenging economic environment. With more clarity now around fiscal policy and a somewhat stabilizing economy, we look forward to increasing opportunities to achieve prudent loan growth through the remainder of the year.

Speaker Change: In closing, our active credit risk management further, strengthened the position of our portfolio as shown in this quarter's results.

Speaker Change: I would like to thank our banking teams for managing risk in their portfolios throughout a challenging economic environment.

Vincent Calabrese: I will now turn the call over to Vince Calabrese, our Chief Financial Officer, for his remarks. Thanks, Gary, and good morning. Today, I will review the second quarter's financial results and walk through our third quarter and full year guide. Second quarter operating net income totaled $130.7 million or $0.36 per share. Total revenues were a quarterly record at $438 million, with both net interest income and non-interest income exceeding the high end of our prior quarterly guidance range . As a result, second quarter operating pre-provision net revenues grew 7.9% from the year-ago period. Second quarter average loans and leases totaled $34.5 billion, a 5.3% annualized length quarter increase given by growth of $365 million in consumer loans and $86 million in commercial loans and leases.

Speaker Change: With more clarity, now around fiscal policy and a somewhat stabilizing economy. We look forward to increasing opportunities to achieve prudent longer growth through the remainder of the year.

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

Vince Calibers: Thanks Gary and good morning.

Vince Calibers: Today, I will review the second quarter's Financial results and walk through our third quarter and full-year guidance.

Vince Calibers: Second quarter, operating net income totaled 130.7 million or 36 cents per share.

Vince Calibers: Total revenues were a quarterly record at 438 million with both net interest income and non-interest income exceeding. The high end of our prior quarterly, guidance ranges,

Vince Calibers: As a result, second quarter operating pre-provision net revenues, Grew 7.9% From the year ago. Period.

Vince Calibers: Second quarter average, loans and leases total 34.5 billion of 5.3% annualized. Linked quarter increase driven by growth of 365 million in Consumer loans and 86 million in commercial loans and leases

Vincent Calabrese: Seasonal growth in residential mortgage loans was the primary driver of the consumer loan increase. Owner-occupied commercial real estate advances and commercial leases were the primary growth drivers on the commercial side. While C&I loan production was solid in the second quarter, it was largely offset by decrease in line utilization that Gary mentioned.

Vince Calibers: Seasonal growth in Residential. Mortgage Loans, was the primary driver of the consumer loan increase.

Vincent Calabrese: Looking ahead, we are optimistic for a pickup of commercial loan growth in the second half of 2025, given the strong increase in the short-term commercial loan pipeline we saw during the second quarter. Average deposits totaled $37.1 billion, a 1.7% annualized linked quarter increase, reflecting organic growth and new and existing customer relationships. Average non-interest bearing demand and interest bearing demand balances grew linked quarter while time deposits were relatively stable and savings deposits declined. Spot non-interest bearing demand deposits were up slightly the last two quarters and stable at 26% of total deposits. and the loan-to-deposit ratio held steady at 91.9%.

Vince Calibers: Owner occupied commercial real estate advances and Commercial leases where the primary growth drivers on the commercial side, while cni Loan, Production was solid in the second quarter. It was largely offset by decreasing line utilization to Gary mentioned

Looking ahead. We are optimistic for a pickup of commercial loan growth. In the second half of 2025, given the strong increase in the short-term commercial loan pipeline, we saw during the second quarter,

Vince Calibers: Average deposits told 37.1 billion, a 1.7% annualized, linked quarter, increase reflecting organic growth in new and existing customer relationships.

Average, non-interest bearing demand, and interest bearing, demand balances grew linked quarter while time, deposits were relatively stable and savings deposits declined.

Vincent Calabrese: The cumulative total deposit beta since the interest rate cuts began in September of last year was 28% at quarter end. Net interest income of $347.2 million was more than $12 million above the high end of the quarterly guide and grew nearly 10% from the year-ago period. The quarter's net interest margin of 319 was up 16 basis points sequentially and 10 basis points from last year to the highest level since the fourth quarter of 2023. Earning Asset Yields Increased 10 Basis Points Linked Quarter to $5.33 Driven by Increased Yields for Both Loans and Investment Security. The second quarter average loan origination yield was more than 50 basis points above the total loan portfolio yield, and cash flows from the investment portfolio were reinvested 165 basis points higher than the roll-off rate.

Vince Calibers: Spot non-interest bearing demand deposits were up slightly at the last 2 quarters and stable at 26% of total deposits and the loan to deposit ratio held steady at 91.9%.

Vince Calibers: The cumulative total deposit data. Since the interest rate Cuts began in September of last year was 28% at quarter end.

Vince Calibers: That interest income of 347.2 million was more than 12 million above the high, end of the quarterly guide and grew nearly 10% from the year ago period.

the quarter's net interest margin of 319 was up, 16 basis points, sequentially and 10 basis points from last year to the highest level since the fourth quarter of 2023

Vince Calibers: Earning asset yields increased 10 basis points linked quarter to 533 driven by increased yields for both loans and investment securities.

Vincent Calabrese: Purchase accounting accretion from payoffs of previously acquired loans added two basis points to the margin for the quarter. On the funding side, interest bearing deposit costs fell 10 basis points linked quarter on lower average rates paid across the deposit franchise.

Vince Calibers: The second quarter average loan origination yield was more than 50 basis points above the total loan portfolio, yield and cash flows from the Investment. Portfolio were reinvested 165 basis points higher than the rolloff rate.

Vince Calibers: Purchase accounting accretion from payoffs of previously acquired loans, added 2 basis points to the margin for the quarter.

Vince Calibers: On the funding side, interest bearing deposit costs fell 10, basis points. Linked quarter on Lower average rates paid across the deposit franchise.

Vincent Calabrese: Turning to non-interest income and expense, non-interest income totals a record $91 million. Capital markets income grew strongly from the year ago period due to record debt capital markets income and contributions from international banking and customer swap activities. Wealth management revenues increased 5.2% year over year with contributions across the geographic footprint and other income included higher than normal gains from our leasing. Operating non-interest expense total $246.2 million. Salaries and employee benefits increased $8.9 million from the year-ago period, primarily reflecting strategic hiring associated with our efforts to grow market share and continued investments in our risk management infrastructure, as well as higher production-related compensation.

Vince Calibers: Turning to non-interest income and expense non-interest income, total the record 91 million.

Vince Calibers: Capital markets income grew strongly from the year ago period, due to record debt, Capital markets income and contributions from International Banking and customer swap activity.

Wealth management. Revenues increased 5.2% year-over-year with contributions across the geographic footprint and other income included higher than normal gains from our leasing business.

Vince Calibers: Operating non-interest expense total 246.2 million.

Vince Calibers: Investments in our risk management infrastructure.

Vincent Calabrese: Net occupancy in equipment increased 10% year over year, largely from technology investments and de novo branch expansion. Other non-interest expense increased $4.3 million from the year-ago period, primarily due to the impact of Community Uplift, our mortgage down payment assistance program that was enhanced and expanded in conjunction with our previously announced settlement agreement with the Department of Justice. The second quarter efficiency ratio remained favorable at 54.8% as we continue to manage our expense base in a disciplined manner and expect positive operating leverage for the second half and full year of 2025.

Vince Calibers: As well as higher production, related compensation.

Vince Calibers: Net occupancy and Equipment. Increased 10% year-over-year largely from technology Investments and denovo Branch expansion.

Other non-interest expense increased, 4.3 million from the year ago period primarily due to the impact of community. Uplift, our mortgage down payment, assistance program that was enhanced and expanded in conjunction with our previously. Announced settlement agreement with the Department of Justice.

Vince Calibers: The second quarter efficiency ratio remained favorable at 54.8%, as we continue to manage our expense base in a disciplined manner.

Vince Calibers: And expect positive operating, leverage for the second half and full year of 2025.

Vincent Calabrese: FNB continues to actively manage our capital position for ample flexibility to support balance sheet growth and optimize shareholder returns while appropriately managing risk. Our financial performance and capital management strategies resulted in our CET1 ratio reaching 10.8% and our TCE ratio reaching 8.5%. Tangible book value was $11.14 per share at quarter end, an increase of $1.26 or 12.8% compared to last year.

Vince Calibers: FNB continues to actively manage our Capital position for ample flexibility, to support balance sheet growth and optimize shareholder returns while appropriately managing risk.

Vince Calibers: Our financial performance and Capital Management strategies resulted in our cet1 ratio, reaching 10.8%, and our tce ratio, reaching 8.5%.

Tangible Book value was $11.14 per share at quarter end, an increase of a 126 or 12.8% compared to last year.

Vincent Calabrese: Let's now look at guidance for the third quarter and full year of 2025. All guidance is based on current expectations while remaining cognizant of risks in an uncertain economic environment. We are maintaining our balance sheet guidance for spot balances, projecting period end loans and deposits. to grow Spitzingle Digits on a full-year basis as we increase our market share across our diverse geographic footprint. We are raising our 2025 net interest income guidance to incorporate the strong performance in the second quarter. Our revised full year guidance range is $1.37 to $1.39 billion. This guidance includes an expectation for 25 basis point rate cuts in both September and December compared to our previous expectation for cuts in June and September.

Vince Calibers: let's now, look at guidance for the third quarter and full year of 2025

all guidance is based on current expectations while remaining cognizant of risks in an uncertain economic environment.

We are maintaining our balance sheet. Guidance for spot balances, projecting period and loans and deposits to grow bit single digits on a full year basis. As we increase our market share across our diverse Geographic footprint.

We are raising our 2025 and interest income guidance to incorporate the strong performance in the second quarter.

Vince Calibers: Our revised full year. Guidance range is 1.37 to 1.39 billion.

Vincent Calabrese: For the third quarter, we expect to be in the upper half of our $345 million to $355 million guidance range. The non-interest income full year guidance range has been revised to $355 million to $365 million. with third quarter levels expected between 87.5 and 92.5. building off the record levels in the second quarter. Full year guidance for non-interest expense has been revised to $975 million to $985 million. A $10 million increase to the low end of the prior guidance range, with the high end of the range left unchanged. This guide reflects results through the first half of the year and the down payment assistance program costs referenced earlier.

Vince Calibers: This guidance includes an expectation for 25 basis, point rate Cuts in both September and December compared to our previous expectation, for cuts in June and September.

Vince Calibers: For the third quarter, we expect to be in the upper half of our 345 million to 355 million guidance range.

The non-existent income full year. Guidance range has been revised to 355 million to 365 million.

Vince Calibers: With third quarter levels, expected between 87.5 and 92.5 million building off the Record levels in the second quarter.

Vince Calibers: Will your guidance for non-interest expense? Has been revised to 975 million to 985 million.

Vince Calibers: By 10 million dollar increase to the low end, the prior guidance range with the high end of the range left unchanged.

Vincent Calabrese: Third quarter non-interest expense is expected to be between $240,000 and $250,000. The revised full-year provision guidance range of $85 to $100 million reflects a $5 million decrease on the high end, given our first-half performance and the improvement in asset quality metrics during the second quarter. As always, provision will be dependent on net loan growth, charge-off activity, and we continue to monitor risks posed by the current economic environment.

Vince Calibers: This guide reflects results through the first half of the year and the down payment assistance program costs referenced earlier.

Third quarter, not interest interest expense is expected to be between 240 and 250 million.

Vince Calibers: The revised full year provision. Guidance range of 85 to 100 million reflects, a 5 million, decrease on the high end, given our first half performance and the Improvement in asset quality metrics during this second quarter.

Vince Calibers: As always, provision will be dependent on net loan growth to charge off activity and we continue to monitor risks posed by the current economic environment.

Vincent Calabrese: Lastly, the full year effective tax rate should be between 21 and 22 percent, which does not assume any investment tax credit activity that may occur.

Vincent Delie: With that, I will turn the call back to Ben. F.N.B. consistently achieves great results through superior execution from the hard work and dedication of our employees.

Vince Calibers: Lastly, the full year effective tax rate should be between 21 and 22%, which does not assume any investment tax credit activity that may occur.

With that, I will turn the call back to Vince.

Vincent Delie: We remain keenly focused on driving long-term shareholder value, benefiting from our strong balance sheet with record capital levels and ample liquidity, organic loan and deposit growth across our dynamic geographic footprint, investments in our e-store initiatives, For more information, visit www.FEMA.gov Diversified Fee Income Streams, and Exceptional Credit Risk Management.

Vince Calibers: FNB consistently achieves, great results, through Superior execution, from the hard work, and dedication of our employees.

Vince Calibers: We remain keenly focused on driving long-term shareholder value, benefiting from our strong, balance sheet with record Capital levels, and ample liquidity, organic loan and deposit growth across our Dynamic. Geographic footprint, investments in our East or initiatives.

Unknown Executive: Thank you, and we will now open the call up for questions. Ladies and gentlemen, at this time, we'll begin the question and answer session. To ask a question, you may press star and then one using a touchtone telephone. To withdraw your questions, you may press star and two. If you are using a speakerphone, we do ask that you pick up the handset prior to pressing the keys to ensure the best sound quality. Once again, that is star and then one to join the question queue. We'll pause momentarily to assemble the roster.

Diversified fee income streams and exceptional credit risk management.

Thank you. And we will now open the call up for questions.

Ladies and gentlemen, at this time, we'll begin the question and answer session.

to ask a question, you may press star and then 1 using a touchdown telephone to withdraw your questions, you may press star and 2

Vince Calibers: If you are using a speaker-phone, we do ask that you pick up the handset prior to pressing the keys to ensure the best sound quality.

Daniel Tamayo: Our first question today comes from Daniel Tamayo from Raymond James. Please go ahead with your question. Thank you. Good morning, guys. Thank you again.

Speaker Change: In our first question today comes from Daniel tamiyo from Raymond James. Please go ahead with your question.

Daniel: Thank you. Good morning, guys.

Speaker Change: um, hey, Dan

Vincent Delie: Maybe one for Vince on the margin guidance to start. Looks like the third quarter number, I mean, you had a significantly wider margin in the second quarter, including some benefit from payoffs, but is there an assumption of a little bit of a contraction in the third quarter to get to that guidance you're talking about before it starts to expand again in the fourth quarter? Is that the way to think about it?

Maybe, uh, maybe 1 for, uh, for for events on the, um, on the margin guidance to to start. Um, looks like the, uh, the third quarter number. I mean, you had a significantly, um, wider margin in the second quarter, including some benefit from payoffs. Um, but it is there a, an assumption of a little bit of a contraction in the third quarter to get to that guidance? You're talking about before it. It, uh, it starts to expand again in the fourth quarter is at the way to think about it.

Vincent Delie: No, the margin, I would say, flattish to up a tick as we go through the next two quarters of the year.

Vincent Delie: I mean, just a comment on the results for the second quarter, too. I mean, you saw the dollar increase, net interest income up $23 million, really a combination of a few things kind of hitting very well. We had growth in earning assets. We had higher yields on earning assets. We had a lower cost of funds as we had some good success bringing down interest-bearing deposit costs during the quarter. We had some good success bringing down interest-bearing deposit costs during the quarter. as well as benefit from $250 million a quarter in swaps that rolled off. So, you know, that all contributed to that big jump in the margin, moving up 16 basis points.

Speaker Change: No, the margin. I would say flattish to to up a tick as we go through the next 2 quarters of the year. Um I mean just to just to comment on the results for the second quarter too. I mean that you saw the dollar increase.

Vincent Delie: And when you look at the underlying activity, I mean, we were putting new loans on 56 basis points above the portfolio rate. We were reinvesting securities 165 basis points above the roll-off rate, and then the interest bearing deposit costs that I mentioned. So, what's baked into our guidance has kind of we have a September rate cut and a December rate cut baked in there. So, right, none of us really know what the Fed's going to do, but that's what's baked into our numbers. Okay, so flat to up on the margin, so probably not much.

Speaker Change: That interesting, come up, 23 million, um, really a combination of, of a few things kind of hitting very well, you know, we had growth in our assets, we had higher yields on earning assets. We had a lower cost of funds as we had some good success bringing down, um, interest bearing deposit costs during the quarter, um, as well as benefits from 250 million a quarter in swaps, that rolled off. So, um, you know, that all contributed to that big jump into margin moving up 16 basis points. And when you look at the, the underlying activity, I mean,

Speaker Change: We were putting new loans on 56 basis. Points above the portfolio rate. We were reinvesting Securities. 165 basis points above the roll off rate and then the, the interest bearing deposit costs that I mentioned. So, what's baked into? Our guidance is kind of flattish to up a little bit and that interest income, um, moving forward. And we have a September rate cut in a December rate cut, um, baked in there. So right none of us really know what the feds going to do, but that's what's baked into our numbers.

Okay, so so Flats up on the margins, so probably not much.

Vincent Delie: The Average Earning Asset Growth in the second half of the year, to get to our mid-single digits, and we had a really nice move in our short-term pipeline, less than 90 days on the commercial side, so if we get a significant pickup in commercial activity, that would even move us above the kind of mid-single-digit level.

Speaker Change: um,

Average earning asset growth. I suppose excuse me um to get to that up, will still be there Danny I'm sorry the average earning asset growth in the second half of the year you know to get to our mid single digits and and you know we had a really nice move in our our short-term pipeline less than 90 days on the commercial side. So you know we're if we get a, a significant pickup in commercial activity, you know, that would even move us above the kind of mid single digit level.

Daniel Tamayo: All right, I'll follow up with you offline if I have additional questions on the margin. And then I think you guys kind of addressed what was going to be my second question on the expenses. It sounds like most of the increase in the guide was due to the payment assistance program.

Speaker Change: Okay.

Daniel Tamayo: Anything else on that?

Speaker Change: All right, I will uh I I'll follow up with you offline if I if I have additional questions on the margin. Um and then I I I think you guys kind of addressed what was uh was going to be my second question on the expenses. It sounds like most of the increase in the um in in the guide was was due to the payment uh assistance program. Um

Vincent Calabrese: Is there any kind of additional investment that you're looking to make now that you're expecting the NII side to be stronger than three months ago and the credit environment looking to be more clear? Yeah, I would say, I mean, the down payment assistance program you mentioned, which was $3.1 million for the quarter, probably at that same kind of level is what's baked into the guidance for the rest of the year. And then that should start to come down next year as we've kind of fulfilled the commitments that we had from that from that settlement. So, you know, the higher commissions are always a swing item, those are tied to revenue.

Speaker Change: Any anything else on on that is it is there any kind of uh additional investment that you're you're looking to make now that you're you know, expecting the the knee um side to be stronger than than through 3 months ago and and the credit uh environment looking to be more clear.

Vincent Calabrese: So, you know, that was that was high this quarter, a lot of it tied to the mortgage volume. And depending on how well we do on the revenue side, right, you always have that of the Commission.

Speaker Change: Yeah, I would say I mean the the down payment assistance program you mentioned, which was 3.1 million for the quarter. Probably at that same kind of level is, what's baked into the guidance for the rest of the year? And then that should start to come down next year, as we've kind of fulfilled. The commitments that we had from that from that settlement. So, you know, the higher commissions are always a swing item. Those are tied to revenue, so, um, you know, that was, that was high this quarter, a lot of it, tied, to the mortgage volume and depending on how well we do on the revenue side, right? You always have that um,

Vincent Calabrese: and the investment banking firm that joined the team. So those are items that are on board, and we expect to start to contribute revenue in the second half of the year. So those are those are our newest investments as far as driving revenue.

Speaker Change: You know, higher commission level, that would come through in accordance with that as far as Investments. I mean, you know, we mentioned last last quarter about, um, a couple of the new things that will drive fee Revenue, going forward. Um, you know, the Commodities hedging that we added um, as well as adding Public Finance, um, and the investment banking firm that that joined the team. So those are items that are on board and we expect to start to contribute Revenue in the second half of the year. Um, so those are those are our newest Investments as far as uh, driving a few Revenue.

Daniel Tamayo: Okay, terrific.

Daniel Tamayo: Well, thanks for taking my questions. Well, thank you, Dan.

Speaker Change: Okay terrific. Well thanks for taking my questions.

Russell Gunther: Our next question comes from Russell Gunther from D.A. Davidson. Please go ahead with your question. Hey, good morning, guys. Russell Gunther, Steve Martin. I wanted to follow up on the margin conversation we just had.

Speaker Change: Thank.

Our next question comes from Russell Gunther from da Davidson. Please go ahead with your question.

Russell Gunther: What are you guys expecting from a deposit cost perspective? We've heard some kind of increased competition in the Atlantic Southeast this quarter. I know you guys are trying to continue to match loan growth like you've done successfully. So really just trying to get a sense for how that incremental margin or spread would be, with a focus on deposit costs. And then in the past, I think you've shared sort of where that deposit rate ended the quarter, even a end of the month NIM. So all of those puts would be would be helpful. Yeah, I would say, I mean, the total bank deposit cost is between now and the end of the year, probably around the level that it's at until you get the Fed move, right?

Hey uh good morning guys. Russell Gunther hey wanted to follow up on the margin uh conversation. We just had what do you guys expect from a deposit cost perspective? Uh, we've heard some kind of increased competition in Midland, South East this quarter. I know you guys are trying to continue to match uh, loan growth like you've done successfully.

Speaker Change: Trying to get a sense for how that incremental margin, uh, or spread would be, uh, with a focus on deposit costs. And then in the past, I think you've shared sort of where that deposit rate ended the quarter, even the end of the month, Nim. So all of those puts would be would be helpful.

Vincent Delie: So I think we've reduced rates where it's made sense strategically for us to do that, and we got the benefit of that in the second quarter. I think as far as any meaningful move down going forward, it's really going to be more tied to a Fed cut. And our team has tactics and strategies kind of in place to how we're going to try to capture as much of that as possible once there is movement down there.

Speaker Change: Yeah, I would say, I mean the the total current deposit cost is between now and the end of the year, probably kind of round the level that it's at until you get the FED, right? So I think we, we've reduced, um, rates where it's made sense, strategically for us to do that. And we got the benefit of that in the second quarter. Um, I think, as far as any meaningful move down going forward, it's really going to be more tied to a Fed cut and, you know, our team has tactics and strategies kind of in place to how we're going to try to capture as much of that as possible. Um, once there is is movement down there.

Vincent Delie: Russell, we feel pretty confident about our ability to gather deposits given the diverse geographic footprint. I had our folks go back and calculate organic growth rates in loans and deposits over the last 15 years. We've averaged 9%. roughly 9% both loans and deposits in organic growth, not including any acquired loans or deposits. So I think we're pretty well situated and we've invested in the right tools to help our team gather deposits as we move forward. And you can see that we had, you know, a decent pickup at margin and we still grew our deposits and the demand deposit mix remained at 26%.

Speaker Change: Russell, we we uh, we feel pretty confident about our ability to gather deposits given the the diverse Geographic footprint.

Speaker Change: I I had our folks go back and calculate organic growth rates in loans and deposits over the last 15 years. We've averaged 9%

Vincent Calabrese: So some of the things we've been talking about is playing out in the numbers here, which is very positive for us. And then our total spot deposit cost at the end of the quarter was $196. kind of all in. Okay.

You know, 9 roughly 9%, both loans and deposits in organic growth not including any acquired uh zero deposit. So I I think we're, we're pretty well situated and we've invested in the right tools to help our team gathered deposits. As we move forward, you can see that we had, you know, a decent pickup at margin and we still grew our deposits and the demand deposit mix remained at 26%. So some of the things we've been talking about is playing out and the numbers here which is very positive for us.

Speaker Change: And then our total spot deposit cost at the end of the quarter was 196.

Vincent Calabrese: The other thing I should mention, too, is that, Russell, we continue to have a strong pipeline of commercial deposit prospects that we're calling on, and we've had good success bringing in new relationships, which helps to support the non-interest-bearing deposit growth. So, there's a pretty strong pipeline that the team's going after as we sit here today. So, our goal internally, whether we achieve it or not, is a question, given the competitive environment, but we would like to grow earning assets and get the loan-to-deposit ratio down if we can, continue to drive it down. So, it gives us the capacity to scale when things start to really turn.

Kind of all in, okay?

Speaker Change: The other thing I should mention too is that Russell we do have a, we continue to have a strong pipeline of commercial deposit, prospects that were, I'm calling on. And we've had good success bringing in new new relationships and which helps to support the non-existence bearing, deposit growth. So, there, there's pretty strong pipeline that the teams going after as we sit here today. So our our goal internally, whether we achieve it or not to question given the competitive environment, but we would like to grow earning assets and get the loan to deposit ratio down, if we can't continue to drive it down. So it gives us the capacity to scale.

Vincent Calabrese: So that's the internal strategy. And, you know, we've got a huge pipeline.

Speaker Change: When things start to really turn.

Speaker Change: So that's that's the internal strategy.

Speaker Change: And it, you know, we've got a huge pipeline.

Russell Gunther: That's all very helpful color guys. I appreciate it.

Vincent Calabrese: And then just staying through, you know, yeah, the NII guide, I'll share you on 3Q and the I just wanted to get a sense for the puts and takes that would potentially get you to the high end. It sounds like commercial loans could pick up again in the absence of any Fed cuts. Could we see you guys through the high end? It just seems like you're in a good position relative to guide and would be helpful to get a sense for. You know, the drivers behind the high end are potentially exceeding. Yeah, I would say the September Fed cut is a big swing item, right?

Speaker Change: That's all very helpful caller guys. I appreciate it. Uh and then just being through, you know, yeah, the nii guide, um I hear you on 3 Q in the, you know,

Speaker Change: Upper half of that, um, just trying to get a sense for the puts and takes that would potentially get you to the high end. Um, it sounds like commercial loans could pick up again, um, in the absence of any fed Cuts, you know, could we see you guys through the high-end just seems like you're in a good position, uh, relative to guy and would be helpful to get a sense for

You know, the drivers behind the high end or potentially exceeding.

Vincent Calabrese: So that doesn't happen. You know, are we still have a benefit from that? We're still very slightly asset sensitive. I mean, I think we've done a nice job kind of managing the overall balance sheet interest rate risk position. And, you know, we're at a point now where I think it's like 1%. If you go to a down, down 100 basis point ramp, it's like 1.2%. So it's really, we're very much approaching kind of neutral there. But if we don't have the September cut, that's additive that moves you up into that that upper end. And then the mix of loans that we put on, obviously, I mean, we've, you know, the second quarter, at a good level of mortgage loans that we put on, which are in the mid to high sixes.

Speaker Change: Yeah, I would say the September fed cut is a big swing item, right? So that doesn't happen. Um, you know, our, we still have a benefit from that. We're still very slightly asset sensitive. I mean, I think we've done a nice job kind of managing the overall balance sheet interest rate risk position. And you know, we're we're at a point now where I think it's like 1% if you go to a down down a 100 basis point ramp it's like 1.2%. So it's really we're very much approaching kind of neutral there. Um, but if we don't have the, the September, um, cut that's additive that moves you up into that, that upper end and then to mix the loans that we put on, obviously I mean we've, you know, the second quarter had a good level of more.

Vincent Calabrese: So that that kind of comes through. And even on the reinvestment side, I mean, you know, we continue to have a billion one cash flows over the next 12 months, you know, rolling off at like 322. So, you know, we're reinvesting in the four and a half, you know, kind of mid four, mid to high fours right now. So depending on where we can reinvest, that could be additive too. And then the success we have bringing in non-expanded deposits, right, so that we mentioned that the pipeline, the better we do there, the better the net interest income margin.

Speaker Change: Mortgage loans that we put on which are in the mid to high sixes. So that, that that kind of comes through. Um, and even under the reinvestment side. I mean, you know, we continue to have, you know, a billion 1, um, cash flows over the next 12 months. Um, you know, rolling off at like 3:22. So, you know, we're reinvesting in the 4 and a half, you know, kind of mid 4, mid to high fours right now. So depending on where we can reinvest, that could be additive too. And then to success, we have bring in non-restricted deposits, right? So that, that we mentioned that the pipeline, um, the better we do there, the better, the net is just income and margin is

Russell Gunther: Great. All right, guys, that's it for me. Thanks so much for taking my questions. Thanks, Russell.

Great. All right guys, that's it for me. Thanks so much for taking my questions.

Casey Hare: Thank you. And our next question comes from Casey Hare from Autonomous Research.

Speaker Change: Thank you.

Casey Hare: Please go ahead with your question. Great. Thanks.

And our next question comes from Casey hair. From autonomous research. Please go ahead with your question.

Vincent Calabrese: Good morning, everyone. So another margin question, another margin question for you guys. So. And just number one, like the guide for NII feels a little conservative. If you're doing that on purpose and then to just color on the loan yields and the bond yields, you know, which were obviously a positive swing factor for you guys in the second quarter. How are they trending?

Speaker Change: Great. Thanks. Good morning, everyone.

Speaker Change: so, um,

I guess number 1, like the guide for knee feels a little conservative. Um, just wondering if if you're doing that on purpose and then 2 just color on the the loan yields and the bond yields, um, you know, which were obviously a positive swing back to you factor for you guys at the second quarter um how are they uh trending uh, looking ahead?

Vincent Calabrese: Casey, what was the first part of your question? Because we had to raise the volume a little bit. It was kind of coming in soft. I'm sorry, guys. So, I was just making the point, the NII guide seems a little bit conservative, given you have, you know, you're NIM up and accelerating loan growth. I'm just wondering if that's on purpose. I mean, a follow-up question on the loan and bond yields, which were obviously, you know, can that momentum continue going ahead? You know, I would say, I mean, we're guided to the upper half, and I think.

Speaker Change: Casey what was the first part of your question? Because we had to raise the volume a little bit. It was kind of coming in Softly.

Speaker Change: I'm sorry, guys. So I I, I was just making the point. The knee guys seems a little bit conservative. Uh, giving you have, you know, your your Nim up and accelerating long growth. Um, just wondering if that's on purpose. I mean, a follow-up question. On the on the uh the loan and bond yields, which were obviously, you know, can that momentum continue going ahead?

Vincent Calabrese: Russell's question kind of went to the, what are the things that move you into the higher end of that? I think it's too early to really call. There's still a lot of noise out there. Who knows what could happen? There's geopolitical issues. You've got the interest rate scenario changing, so that's why our guide is what it is. Yeah, there's a lot of uncertainty, so if we had more clarity, Casey, we would we would be more optimistic, but there's still a lot of fog. So it's... But we're guiding to the upper half. Yes. Set the upper half, right?

Speaker Change: Yeah, no I would say I mean we're we're guiding to the upper half and I think you know, Russell's question kind of went to the, what are the things that move you into the higher end of that? Um,

Speaker Change: Just that the just commented on. So, um, I think it's a reasonable, um, the September cut, who knows what's going to happen again? That's probably the biggest swing item if that doesn't happen, then that's, you know. Yeah, I think, I think it's too early.

To really call I, you know, there's there's a still a lot of noise out there, you know, who knows what could happen. There's there's geopolitical issues, you've got, you know, the interest rate scenario changing. So that's why our guide is what it is. I don't think it's, I don't think it's too conservative. I think it's spot on. I don't even. What do you think? Yeah, there's a lot of uncertainty. So if if we had more clarity in Casey, we would we would be more optimistic but there's still a lot of fog.

Vincent Calabrese: Yeah. So I don't know if that helps. Okay. Yeah, no, no, no, that's fine.

So it's well, we're guiding to the upper half. Yes, right. Yeah.

So, I don't know if that helps. Okay.

Vincent Delie: And then just, Vincent Delie, question for you, you know, as we, you know, potentially enter an upcycle on M&A activity here, you guys, you know, in the past have been pretty acquisitive, and that's really the Yadkin deal. has provided a lot of the growth, organic growth opportunities that you're enjoying today.

Speaker Change: Yeah, no, no, no. That's fine. Um, and then just instantly question for you. Um, you know, as we, you know, potentially enter a, a an upcycled on m&a activity here. Um, you guys, you know,

Speaker Change: In the past have been pretty inquisitive and that that's really the the yacht can deal obviously.

Vincent Delie: But it's not, it was not without its, you know, Without a pause, given the tangible book value dilution at that time, I'm just wondering how do you guys Do you guys feel the need to be as aggressive going forward, or do you feel like you can You know, enjoy the current footprint that you have without without being very aggressive. Well, we haven't really done, we've done very little over the last 10 years. That was almost 10 years ago. So I mean, we're starting to get to the point where that's ancient history. I mean, it's part of the company, it's contributed nicely.

Speaker Change: um, has provided a lot of the growth organic growth opportunities that you're enjoying today, um, but it it's not, it was not without its, you know, uh,

Speaker Change: without its cost given the, the tangible Book value dilution. At that time, I was just wondering, how do you guys do? You guys feel the need to be as aggressive going forward, or, or do you? Do you feel like you can, uh,

You uh, you know, enjoy the, the current footprint that you have without without being very aggressive.

Vincent Delie: We're very optimistic about the markets we're in, we've made heavy investments in tech that are paying off. And I mentioned in the prepared comments, our applications as we integrate the eStore Common App into the branch delivery channel. So now, in-store originations are happening on that same platform. The reason that's important is because now the client can start an application online, come into the branch and finish it, right. And that AI oversight that helps those salespeople find opportunities is going to be available to them in the branches. So we can accelerate, you know, additional sales, hopefully, of products and services that meet the needs of the customers that come in.

Vincent Delie: So, you know, we're very excited about that. We're very excited about the markets that we entered in the market share growth that we've experienced over the last few years. And if you go back and look at our company over the last 10 years, we've grown tangible book value. It accelerated in the last five years, I think we're an outlier, one of the better growers of tangible book value. And it's been 12% over the last two years. So, you know, it's high single digit growth. I think that all keeps me pretty excited.

Speaker Change: Well, we haven't really done. We've we've done very little over the last 10 years, that was almost 10 years ago. So, I mean, we're starting to get to the point where that's ancient history. I mean, it's part of the company. It's contributed nicely, we're very optimistic, about the markets, we're in, we've made heavy Investments, intact, that are paying off. You know, I mentioned in the prepared comments, our applications as we integrate the ETO common apps into the branch delivery channel. So now in store originations are happening on that same platform, the reason that's important is because now the client can start an application online, come into the branch and finish it, right? And that AI oversight, that that helps those sales people find Opportunities is going to be available to them in the branches. So we can accelerate, you know, additional sales, hopefully of products and services that meet the needs of the customers that come in. So, you know, we're very excited about that. We're we're very excited about

Speaker Change: Uh, the markets that we entered and the market share growth that we've experienced over the last few years, and if you go back and look at our company over the last, uh, 10 years. We've grown tangible Book, value. It it it accelerated in the last 5 years, I think we're an outlier we're 1 of the better. Growers of tangible Book value and it's been 12% over the last 2 years.

Vincent Delie: And sure, I mean, I know the landscape changes, the M&A landscape changes all the time. I think we're in a great position where we sit today. And a 9% organic growth, too. Oh, yeah, the organic growth. By the way, we look back over the last 15 years. Our loan and deposit growth organically was 9%, loan and deposit. That's setting aside the assets that we acquired. So our business model from an origination perspective, organic origination perspective, it works perfectly fine, and there's opportunity for us to continue to grow. And that becomes much more, you know, with the capital that we're accumulating, the deployment of that capital, we're much better off deploying that capital with loan growth, because the returns on that capital deployed is much greater.

So, you know, I it's it's high single-digit growth. I I think that all keeps me pretty excited and sure. I mean, I know the landscape changes, the m&a landscape changes all the time and

I think we're in a great position where we sit today.

Vincent Delie: So, you know, we're seeing, you know, high teams to, you know, low 20 returns on that capital that's going towards loan and deposit growth, customer growth. Commercial Segment in particular. So I think that's why. You know, we're.

Speaker Change: We're much better off deploying that Capital with loan growth because the Returns on that Capital deployed is is much greater. So, you know, we're seeing, you know, High Teens to, to, you know, low 20, uh, Returns on those on that Capital that's going towards loan. And, and deposit growth customer growth in the commercial segment in particular. So I, I think that's why

Vincent Delie: for Pivoting and Have Pivoted. I think we have a great franchise, so we're going to leverage that. Plus, the new businesses we've entered that I mentioned earlier. Yeah, we've also invested. You can go back and look at that chart, too. It's in our deck. I mean, we said a long time ago, 10 years ago, this is really going to help us accelerate our non-interest income. It's more than doubled. So, you know, from $160 million to $350 million last year and growing. And I think there's opportunities for us to continue to grow those businesses. And they were organically grown.

Speaker Change: you know, we're

Speaker Change: we're pivoting and have pivoted, and

Speaker Change: I think we have a great uh franchise so we're going to leverage that plus to new businesses. We've entered that I mentioned earlier. Yeah we we've also invested you can go back and look at that chart too. It's in our deck. I mean we said long time ago, ten years ago, this is really going to help us accelerate our non-interest income. It's more than doubled.

Vincent Delie: We didn't go out other than the small boutique we bought in the investment banking business and having a very, very small mortgage business. The rest of those businesses were all organically grown. well north of our cost of capital and are extremely accretive to the shareholders.

So, you know, from 160 million to 350 Million last year, in growing, and I, I think there's opportunities for us to continue to grow those businesses. And they're, they were organically a growth. We didn't go out other than small, the small boutique, we bought in the investment banking business, and having a very, very small Mortgage business. The rest of those businesses were all organically grown,

Vincent Delie: So, you know, I think all of that, keeping saying focused on that, keeping people focused on the deployment of AI and and the tools that we've developed internally, which is why we restructure, realign the company's organizational structure to focus on it. That excites me more than M&A. So, of course, you know, opportunistically, if something comes up, sure, you know, we might look at it, but it better be pretty high quality opportunity and provide us with the right tools like the really good deposit mix or additional clients that we could use our deployer model against.

Speaker Change: Well north of our uh, cost of capital and or extremely accretive to the shareholders. So, you know, I think all of that keeping staying focused on that keeping people focused on the deployment of AI and and the tools that we've developed internally, which is why we restructured realigned, the company's organizational structure to focus on it. That excites me more than m&a.

Speaker Change: So of course, you know, opportunistically, if something comes up sure, you know, we might look at it but it better be pretty high quality.

Opportunity and provide us with the right uh tools. Like, you know, really good deposit, mix or additional clients that we could.

Vincent Delie: All I would add, too, is our de novo expansion strategy has been a key part of us expanding, and we've continued to be active into Northern Virginia and D.C. and other key markets for us, Charleston. So that's been kind of quietly a way for us to expand geographically and get more customer opportunities. We basically either plan to open or have opened 30 branches. in these high growth areas over the last few years. So, some of the expense billed is related to the expansion of those de novo operations. But if you look at the markets that we went into, they're performing very well.

Vincent Delie: Charleston's, you know, purely de novo, purely organic, and it's doing extraordinarily. So, that's an example of a market we went into, you know, and, you know, we didn't buy anything. So, I think given our model, what we have, what we've invested in, we're positioning the company to grow without, you know, without capital dilutive acquisition.

Speaker Change: Uh, use our deploy, our model against all I would add too. Is our denovo. Expansion strategy has been a key part of us expanding. And, you know, we've continued to be active into Northern Virginia and DC and other key markets for us Charleston. So, you know, that's been kind of quietly way for us to expand geographically, and get more customer opportunity. Yeah, we we, you know, basically, either either plan to open or have open 30 branches in these high high growth areas or the last few years. So, some of the expense build is related to the expansion of those denovo operations. But if you look at the markets that we went into, they're performing very well Charleston's, you know, purely denovo, purely organic and it's doing extraordinarily well.

Speaker Change: So that's an example of a market. We went into, you know, and you know, we didn't, we didn't buy anything. So I think given our model, what we have, what we've invested in, we're positioning the company to grow without, you know, without uh, Capital dilutive acquisitions.

Vincent Delie: Excellent, you know, totally agree. Didn't mean to bring up ancient history, but it's just good to hear that you guys gave me an opportunity to lecture. So thank you for letting me go on and on. Thanks, guys. Appreciate it. All right. Thanks, Vince. We'll see you.

Excellent. Uh, you know, totally agree, uh, didn't mean to bring up agent history, but, uh, uh, it's just good to hear that. Uh, you guys. Oh, you gave me an opportunity to, to lecture. So, thank you for letting me go on and on. Thank you. All right. Thanks guys. Appreciate it.

Timur Braziler: Our next question comes from Timur Braziler from Wells Fargo. Please go ahead with your question. Hi, good morning. I don't know if it's... I'm hoping to get some color on what you guys think the composition of future loan growth is going to look like. Obviously, it's been led by mortgage more recently, some constructive comments around the C&I pipeline. I guess as commercial loan growth becomes a more meaningful part of the story, Does that lessen your appetite on the resi side, or is that additive? And I guess, where do you think loan growth could ultimately end up once commercial starts to manifest in a more meaningful capacity?

We'll see you.

Speaker Change: All right. Next question comes from Tamar.

Brasilia: Brasilia from Wells, Fargo, please, go ahead with your question.

Speaker Change: Hi, good morning.

I'm hoping to get some color on what you guys think the composition of future long growth is going to look like. Obviously it's been led by mortgage more recently. Some constructive comments around the the cni pipeline

Vincent Delie: Yeah, I think our guide kind of directs you to what our expectations are globally. So I don't I don't think we want to shift off of the guide yet. Right. Well, we will update you next quarter once we see what's what's happening. It's like I said, it's a very difficult time. Forecast, because it is so volatile. But I will tell you that the commercial pipeline, as Vince mentioned, you know, the short-term pipeline, we have a 90-day pipeline, we have a long-term pipeline, and long-term pipeline's kind of flat, and the 90-day pipeline's up 20%. So we've got a lot of deals moving through our pipeline in, you know, head towards closure in the CNI business.

I guess as commercial loan growth becomes a more calm, more meaningful part of the story. Does that lessen your appetite on the resi side or is that additive? And I guess, where do you think loan growth? Could ultimately end up once commercial starts to manifest in a more meaningful capacity?

Speaker Change: Yeah, I think our guide kind of directs you to what our expectations are globally. Uh so I don't I don't think we want to shift off of the guide. Yeah right we we will update you next quarter once we see what's what's happening. It's like I said it's a very difficult time to forecast because it is so volatile.

Vincent Delie: You know, CRE, it continues to decline. We expect that to continue to come down. I think we're what, Gary? 123% of capital at the moment. Yeah. So, you know, our expectation is that continues to decline over time. You know, the mortgage lending business should start to taper off because we're moving out of the peak of the mortgage lending business. And the commercial business that we have in that short-term pipeline hopefully lands in the next quarter.

Vincent Delie: So the shift will be towards commercial, probably less emphasis on mortgage, right? And then we'll see some growth in the balance sheet in the CNI segment, offset by probably continued CRE declines. That's what we're seeing, that's what we're using in our forecast for the model. And, you know, I will tell you, like Vince said, you know, we haven't exclusively been focusing on the asset side of the balance We've been focusing our folks on the depository side with, you know, very, very significant treasury management opportunities. And, you know, we've landed some huge deals recently. So that strategy seems to be paying off.

Speaker Change: Is that continues to decline over time? Uh, you know, the mortgage lending business should start to taper off because we're moving out of the peak of the mortgage lending business. And the commercial business that we've have a short-term P pipeline, hopefully lands in the next quarter. So the shift will be towards commercial probably less.

Speaker Change: Emphasis on on mortgage, right. And then we'll see some some growth in the balance sheet in the cni segment offset by probably continued CRA declines. That's, that's what we're seeing. That's what we're using in our forecast for the model. And, you know, I will tell you, like Vince said, you know, we have an exclusively been focusing on, on the asset side of the balance sheet because it's very competitive. We've been focusing our folks on the depository side with, you know, very, very significant treasury management opportunities. And, you know, we've landed some huge

Vincent Delie: And as I mentioned earlier, I'd love to see our loan-to-deposit ratio continue to come down with high-quality deposits. And I'm very excited to see the FDIC data when it comes out, because we've been monitoring our performance relative to last year's FDIC data, and we're showing some pretty strong results across the board in market share gains. So I'm going out on a limb here. I don't know what it's going to say. Maybe I'll be wrong. But we've grown ourselves in those markets, in some of those markets, fairly substantially. So we've closed the gap. And, you know, we want to be in the top five share in most of the markets, top 10 in the ones that are dominated by some of the largest banks.

Speaker Change: Uh deals recently. So that's strategy seems to be paying off. And as I mentioned earlier, I'd love to see our

Speaker Change: Uh loan to deposit ratio, continue to come down with high quality uh deposits. And I'm very excited to see the FDIC data when it comes out because we've been monitoring our performance relative to last year's FDIC data and we're showing some pretty strong results across the board and market share gains. So I'm I'm ex, you know, I've gone out on a limb here. I don't know what it's

Vincent Delie: Anyway, that's it. That's what we're seeing. And I think we're optimistic about deposit growth. We're optimistic about our C&I pipeline in the short run. I think real estate will taper off a little bit on the resi side. And CRE, you know, commercial real estate launch should continue to decline with, you know, institutional takeouts on the construction financing that we've done. Now, we just add to that, you know, Vince mentioned earlier the nine percent long term growth organically. I mean, while we're guiding it mid single digits today, we've historically been in that mid to high single digits.

Speaker Change: Going to say, maybe I'll be wrong, but we've grown ourselves in those markets and some of those markets, fairly substantially. So, we've closed the Gap and, uh, you know, we want to be in the top 5, share in most of the markets, top 10 and the ones that are dominated by some of the largest banks. But, uh, you know, anyway, that's

Speaker Change: That's what we're seeing. And I, I think we're optimistic about deposit growth. Uh, we're optimistic about our cni pipeline in the short run. I think real estate will taper off a little bit on the resi side and, uh, Siri, you know, commercial real estate launch should continue to decline with, uh, you know, institutional takeouts on the construction financing that we've done.

Vincent Delie: And over that period, we were high single digits at nine percent. So I think that gives you kind of a range. Yeah, that's good. Well said.

Speaker Change: That we just add too that you know, if Vince mentioned earlier the 9% long-term flow and growth organically, I mean while we're guiding its mid single digits today, we've historically been in that mid to high single digits and over that period, we were high single digits at 9%. So I think that gives you kind of a range

Vincent Delie: Thank you, Vince. Yeah, Timur, actually, during the quarter, we had really strong gross C&I originations. It was a really solid quarter. As I mentioned in my remarks, the line utilization was down fairly significantly, which reduced that loan growth there. With tax policy now finalized and, you know, the 100% depreciation, you know, clients are very excited about that, and I think there's going to be some heavy investment as we move forward. So, you know, we're very optimistic, you know, when we look at those. Yeah, to that point, our equipment finance business has done phenomenally well also.

Speaker Change: Yeah, that's good. Well said, Thank you miss ya tomorrow, actually during the quarter we had really strong. Uh, gross cni. Originations. It was a really solid quarter. Uh, as, as I mentioned, in my remarks, the line utilization was down fairly significantly, uh, which reduced, uh, that loan growth there with tax policy. Now finalized and, you know, the 100% depreciation. You know, clients are very excited about that and I think there's going to be

Vincent Delie: It has. It has been very strong. It continues to be strong, good credit metrics, good leadership there, even though I tease them all the time. Sim's done a great job. You know, I think they're going to do well in this environment. That's another area that could potentially start to accelerate because of the bonus depreciation. Great, that's good color.

Peace and heavy investment uh, as we move forward. So, you know, we're we're very optimistic. Uh, you know, when we look at the to that point, our equipment Finance business is done, phenomenally. Well, I'll say that. So continues to be strong. Good credit metrics. Good good leadership there. Even though I tease them all the time, Tim's done a great job. Uh, you know, I think they're, they're, they're going to do well, in this environment, that's another area that could potentially start to accelerate because of the bonus depreciation.

Vincent Delie: Thank you.

Gary Guerrieri: And then one for Gary, you had mentioned that you had some success in reducing some of the risk on the balance sheet this quarter. Can you just maybe provide a little bit of color around that? Yeah, we were successful in resolving and removing a few CRE credits from the balance sheet. We also saw a little improvement from a migration standpoint, but bringing some CRE exposure down, as I mentioned in my remarks, you know, another significant amount there, continues to be a strategy that we focus on. And, you know, in terms of the performance of the migration, we were very pleased with, you know, a 20% reduction in classified loans is a significant move in any period, let alone one quarter.

Speaker Change: Great. That's a good caller. Thank you. And then, um, 1 for Gary. You had mentioned that you had some success in reducing some of the the risk on the balance sheet. This quarter. Can you just maybe provide a little bit of color around that statement.

Gary Guerreri: Yeah, we we were successful in resolving, and removing uh, a few CRA credits from the balance sheet. We also saw a little improvement from a migration standpoint, uh, but bringing bringing, you know, some CRA exposure down, as I mentioned in my remarks, um, you know, another, another significant amount there, uh, continues to be a strategy that we focus on and uh, you know, in terms of the performance of the, of the migration, we were very pleased with, you know, a 20% reduction in classified loans as a significant

Gary Guerrieri: And, you know, it's the work that we were doing earlier in the year and late in last year in setting those credits up to be removed from the balance sheet. So, you know, it doesn't happen overnight, I'll tell you, but, you know, we saw some resolutions and we were really, really pleased with those results.

Pleased with those results.

Gary Guerrieri: Great. And then just a final modeling question.

Gary Guerrieri: The increase in down payment assistant costs this quarter, is that one time in nature? Is that more or less a catch up or is that something that sticks around with us? I'm saying that we'd be at that same level kind of next quarter and it would start to kind of come down. It's not a forever thing. Yeah.

Gary Guerreri: Great. And then just a final modeling question, the increase in down payment, assistant costs. This quarter is that 1 time in nature is that more or less a catch-up or is that something that sticks around with us as we go forward?

Gary Guerrieri: Just so you know, I mean, that we made commitment. We significantly increased the grant money that we were providing on a per loan basis significantly to jumpstart our lending activity in certain areas where we need, you know, need loans. And I think That's going to taper off. It's going to be sustained for a little bit, and then it's going to taper off. We're going to revert back to our normal. We always have a grant program. It's reflected in the run rate, just so you understand that we significantly increased it to surge volume in certain markets for fair lending purposes.

Gary Guerreri: No, I was saying that we'd be at that same level kind of next quarter and it would start to kind of come down. It's not a forever thing. Yeah, I just so you know, I mean that we made commitment, we significantly increase the the grant money that we were providing on a per loan basis significantly to jumpstart our lending activity in certain areas that where we need uh, you know, meet lots. And I I think

Gary Guerreri: That's going to taper off. It's, it's going to be sustained for a little bit, and then it's going to taper off. We're going to revert back to our normal.

Gary Guerrieri: And, you know, we expect that to taper off because we're the markets that we were targeting were above well above the pure median. So, you know, that'll taper off over time, but it is something that we felt was important to call out so you understood what was happening there with the expense. Got it. Thank you. Sorry. Appreciate it. No, no. Absolutely.

We we always have a grant program, it's reflected in the Run rate just so you understand that we significantly increase to to search volume in certain markets. For fair, lending purposes.

And you know, we expect that to TA taper off because we're the markets that we were targeting were above well above the pure median.

Gary Guerreri: Uh, so, you know, that'll that'll taper off over time. But it is something that we felt was important to call out. So so you understood what was happening there with the expenses.

Speaker Change: Got it. Thank you. Sorry. No, no.

Kelly Motta: Our next question comes from Kelly Motta from KBW. Please go ahead with your question. Hey, good morning. Thanks for the question. Maybe turning to the capital base, capital, you know, impressively continues to grow. It's at near record levels, even with the balance sheet growth you're seeing.

Gary Guerreri: Thank you.

Speaker Change: Our next question comes from Kelly Ma from KBW, please go ahead with your question.

Hey, good morning, thanks for the question. Um,

Vincent Calabrese: It sounded like from your commentary M&A is on top of mind, but maybe you could walk us through how you're thinking of managing your capital base. It's a good problem to have excess capital, but how you're thinking of managing that and if there's any target ratios in mind that you're looking-you have in mind while managing the balance sheet. Thank you. Yeah, I would just say that, you know, when the 10% level we've been talking about was a target, obviously, when we were below that, and, you know, now that we're above that, we kind of think about that as like an operating floor, I guess, is one way to refer to it.

Speaker Change: Uh, maybe turning to the capital base, um, Capital you know, impressively continues to grow its at near record levels. Um, even with the balance sheet growth, you're seeing, um, it it sounded like from your commentary m&a is in top of mine, but maybe you could walk us through how you're thinking of managing your Capital base. It's a, it's a good problem to have, uh, excess Capital, but how you're how you're thinking of managing that and, um, if there's any Target ratios in mind that you're you're looking, um, you have in mind while while um, managing the balance sheet. Thank you.

Vincent Calabrese: We think, you know, it's very appropriate, given the risk profile of the balance sheet, combined with the higher levels of earnings and capital that we're generating and pay ratio in the low 30s. So, I think, you know, that it talks about to the overall position, and with the prospect of earnings and internal capital generation moving forward, we have flexibility. You know, we've been active on the share repurchase. We've had some level of that each quarter. We're studying dividends as another way, something that we may do at some point. So, we have that opportunity.

Speaker Change: Yeah, I would just say that you know, when the 10% level we've been talking about was a Target. Obviously, when we were below that and you know, that there were above that we kind of think about that is like an operating floor, I guess is 1 way to to refer to it. Um we think you know it's very appropriate given the risk profile of the balance sheet combined with the higher levels of earnings and capital that we're generating and payout ratio and the low

Vincent Calabrese: And then, to Vince's point earlier, the first thing we're going to do is fund loan growth. So, I think having the capital cushion or buffer that we have to fund the loan growth when it does accelerate, I think, is important. But we have the flexibility, really, to generate shareholder value through all those different means. to sum it all up for you, we're going to do it, it's absolutely best for the shareholder. We're going to look at the earn back on share repurchases versus, you know, valuation and earn back. We're going to look at, well, everything's on the table, right, because we.

Speaker Change: 30. So, um, I think you know, that it talks about to the overall position and with the prospect of earnings and internal Capital generation. Moving forward, we have flexibility. Um, you know, we've been um active on the share repurchase, we've had some level of that each quarter. Um we're studying dividends is is a, is another way something that we may do at some point. Um, so we have that opportunity and then to Vince's Point earlier, the first thing we're going to do is find loan growth. So um, I think having the capital cushion or buffer that we have to fund the loan growth when it does accelerate I think is important. But um, we have the flexibility really to generate shareholder value through all those different means.

Kelly Motta: We want to be as efficient as possible. We feel the shares are still undervalued. So at this point, we'd still be active repurchasing. Right. got it. That's helpful.

Speaker Change: To sum it all up for you. We're going to do it is absolutely best for the shareholders. We're going to look at these earn back on, share repurchases, versus you know, valuation and earn back. We're going to look at well everything's on the table, right? Because we

we want to be a sufficient as possible.

And we feel the shares are still undervalued. So at this point we can still be active repurchasing, right?

Vincent Delie: And then on a high level, you've mentioned at length the de novo expansion you've done in the past couple of years, I think, 30 branches. As you look at your footprint, can you opine on any areas where you see additional need for expansion or density of the footprint? Just wondering how much of a driver that is if the growth outlook over the longer term horizon.

Got it, that's helpful. Um, and then, on a, on a high level, um, you've mentioned at like the Nova expansion and you've done in the past couple of years, I think, uh, 30 branches, um,

Vincent Delie: Thank you. Yeah, no, that's a great question. I think, you know, because we haven't been very vocal about our expansion, but as those locations start to take off, we've also been hiring commercial bankers in these markets, right? Charleston, Richmond, you know, we're looking at Virginia, you know, southern Virginia, there's some very attractive markets there from both the C&I lending perspective and from a consumer perspective, mortgage banking, consumer depository services and the like. So, you know, that's where we've been focusing. D.C., we've continued to add in the D.C. market. You know, I think those will be a creative, you know, it takes a while for a de novo branch, right?

Speaker Change: As you look at your footprint are are can you opine on any any areas where you see additional need, um, for expansion or um, density of the footprint just wondering how how how much the driver that is. That's the growth Outlook over the longer term Horizon. Thank you.

Speaker Change: Yeah, no, that's a great question. I I think you know, because we haven't been very vocal about our expansion, but as those locations start to take off, we've also been hiring commercial Bankers in these markets, right? Charleston Richmond. You know, we're looking at Virginia,

Speaker Change: get, um, you know, I think those will be a creative

Vincent Delie: That's the difference between going with M&A, taking costs out and having customers immediately versus, you know, put investing capital, having expenditure and then needing to grow the customer base over time. There's a period of time that it takes to get to break even and then get to the returns that you're targeting. And usually that's three to five years to get the maximum return on capital. It's usually five years on these things, three years, three years to break even or three. And I think we're going to be seeing that growth. That's going to come through because we have those locations rolled out, so that'll be part of our guide as we move forward.

Speaker Change: You know that takes a while for a denovo branch right? That's the difference between going with m&a taking cost out and having customers immediately versus, you know, put investing Capital having exposure and then needing to grow the customer base over time. There's, there's a period of time that that it takes to get to break even and then get to the returns that you're targeting. And usually that's 3 to 5 years, to get the maximum return on Capital. So usually 5 years on these things, 3 years is 3 years to break even break, even or 3. Uh, and I, I think we're, we're going to be seeing that growth.

Vincent Delie: But we're doing very well. I mean, we're surprisingly doing well in these markets, even with big competitors. I think it's been a good strategy and it's going to pay off for us in the long run.

Speaker Change: Is going to come through, because we have those locations rolled out so that that'll be part of our guide as we move forward, but we're doing very well. I mean, we're surprisingly doing well in these markets, even with big competitors. So,

Speaker Change: I think it's been a good strategy and it's going to pay off for us in the long run.

Unknown Executive: Awesome. I appreciate all the callers today. Thank you guys. Yes. Thank you. Appreciate your time. Thank you.

Unknown Executive: Our next question comes from Manuel Navas from D.A. Davidson and Company. Please go ahead with your question. Hey, good morning. Can you talk about that confidence on deposit growth? Kind of touch on seasonal trends and where the current pipeline is strong. I mean, you talked a little about commercial. CD growth was really strong. I'm just wondering how much of that was new versus old customers. Just kind of talk through that confidence on a deposit I mean, it's been a focus here for as long as we've been here, particularly on the non-insuring deposit side. So I think we've had, if you look at our success, you know, last year, remember the deposit ratio got up into the 96s and really had tremendous growth in deposits across the footprint.

Speaker Change: Awesome. I appreciate all the callers today. Thank you guys, yep. Yeah, yeah. Yeah. Thank you, thank you. Appreciate your time. Thank you.

Our next question comes from Emmanuel navis from da Davis. And in Company, please, go ahead with your question.

Hey, good morning. Uh, can you talk about that confidence on deposit growth? Um, kind of touch on seasonal Trends and where where are the current pipeline is strong? I mean, you, you talked a little bit about commercial, um, CD growth was really strong. I'm just wondering how much of that was new versus old customers. Just kind of talk through that confidence on a deposit side.

Manuel Navas: What we have in the guidance to kind of mid-single digits is very comfortable, and the prospect list and pipeline that I commented on on the commercial side could even bring us above that. Yeah, if you go to page 13 in the deck that we put out with the deposit composition, we take you all the way back to 2009, which is when I think you were bringing this in when I took over as president of the bank. You know, you can see the difference. I mean, my God, we've done extraordinarily well. There was nine percent organic growth driving this deposit growth.

Speaker Change: I mean, it's been a focus here for as long as we've been here, particularly on the non-expiring deposit side. So I think we've had if you look at our success, um, you know, last year, remember the content ratio got up into the 966 and um, really had tremendous growth in deposits across the footprint. Um, you know, the the what we have in the guidance to Mid kind of mid single digits is is very comfortable and the prospects list and Pipeline and I I commented on on the commercial side, you know, could even bring us above that. So yeah, if you go to page 13 in the deck that we put out with the deposit composition, we take you all the way back to 2009, which is 1. I think you're bringing this in when I took over, right as president of the bank.

Um,

Vincent Delie: The mix has improved substantially over time. You know, we were able to maintain a fairly high demand deposit level, even after the surge, right, that occurred during the pandemic in 21 and 22. And that's despite almost $38 billion in total deposits. So, you know, again, I'm very optimistic about our ability to grow deposits organically and to do it in a way that's accretive to earnings. And, you know, we're a very strong deposit franchise. And I think if you really drill into the banking industry, that's what matters the most. So, you know, your ability to fund yourself, to have granularity, to be able to be the primary bank, all that stuff that we talk about is really important to ensuring that we can continue to sustain that growth in a very profitable way.

Speaker Change: You know, you could see the difference. I mean my God we we've done extraordinarily. Well, there was 9% organic growth driving this deposit growth, the mix has improved substantially over time. Uh, you know, we were able to maintain a fairly High

Speaker Change: Uh, demand deposit level even after the surge, right? That occurred during the pandemic in 21 and 22.

Speaker Change: And, you know, that's despite that almost 38 billion in total deposits. So, you know, we're I I again, I'm very optimistic about our ability to grow deposits organically and to do it in a way that secrete of their earnings. And, you know, we have a very strong, we're a very strong deposit franchise and I think if you really drill into the banking industry, that's what matters the most

Vincent Delie: So, I think this kind of sums it up. If you look at it, Manuel, that's why I'm optimistic about what's coming. In addition to that, you know, we have retold, we've refocused people, we've changed our comp structure slightly. We reorganized our, you know, we reorganized our data management, and, you know, the digital bank put it up under Chris. So, you know, we've got corporate strategies in alignment with the data consumption area, the data hub, and the digital folks, and we now have an AI czar that we put into effect. So, you know, I mean, we're trying to really use all of those tools to drive the appropriate deposit mix and growth.

Speaker Change: So, uh, you know, your ability to fund yourself to have granularity to be able to be the primary Bank. All that stuff that that we talk about is is really important to ensuring that we can continue to sustain that growth in a very profitable way. So I I think this kind of sums it up if you look at it, man. Well, that's why, I I'm optimistic about what's coming in addition to that. You know, we have retold, we've refocused people, we've we've changed our comp structure slightly. We we reorganized our uh, you know, the we reorganized our data management and you know the the digital Bank put it up under Chris. So you know, we've got corporate strategies in alignment with the data consumption area that you're a data Hub and the digital folks. And we we now have an AIS are that we place to affect. So, you know, I mean we're we're trying to really use all of those

Vincent Delie: We've rolled out the eStore common app across all those branches so that we can feed leads to those people in real time that are actionable, and they can just simply ask the client if they would like an additional product, put it in the cart, and they don't have to do anything additional. You know, that common app basically enables them to do that seamlessly. Removes obstacles. Yeah. So, you know, I think all of that, plus our commercial calling effort, beefing up treasury management, you know, we've added significantly to the treasury management area. We have an initiative to upgrade our treasury management product and services.

Vincent Delie: We're in the middle of, and, you know, that's happening. Our investment in payments is occurring. And I think that's going to be an area we're going to have to stay keenly focused on, given the changes that are happening, particularly with the Genius Act and You know, stablecoin and the use of blockchain technology. So we, you know, we're all we're focused on it. And I think, you know, we're going to continue to be focused on it, continue to drive deposit. And its de novo strategy obviously feeds that, and if you look at some of the regions, year over year, Carolinas are up 17% in deposits, Pittsburgh's up 7%, so some of our critical markets really grown quite nicely.

To drive the appropriate deposit mix and growth. We've rolled out the esto Common App across all those branches so that we can feed leads to those people in real time that are actionable. And they can just simply ask the client if they would like an additional product, put it in the cart and they don't have to do and it did anything additional. You know, that Common App, basically enables them to do that, uh, seamlessly. It was obstacles. Yeah. So, you know, I think all of that plus our commercial calling effort beefing up treasury management. You know, we've added significantly to the treasury management area. We have an initiative to upgrade our treasury management product and services. We're in the middle of

Speaker Change: And you know that's that's happening. Our investment in payments is is our current

going to be an area, we're going to have to stay keenly focused on giving the changes that are happening particularly with the genius act and

Speaker Change: You know, stable coin that the use of blockchain technology. So we, you know, we're all we're focused on it and I think, uh, you know, we're going to continue to be focused on it. Continue to drive deposit growth

Speaker Change: And its denovo strategy obviously feeds that and right you know if you look at some of the the regions I mean year-over-year Carolinas are up 17% in deposits Pittsburgh's up 7%. So I mean some of our critical markets really grown quite nicely

Vincent Delie: Is that, did I answer your question or did I just go on too long? I don't know. No, that's, that's all, that's all great. Big Carolinas is good to see that regional strength and that is an area that's attracting more interest, but you are winning there. How are you kind of fending off competition? How are we fending off competition? Was that the question? I'm sorry. I'm having trouble. Yeah, the Carolinas. I'm sorry, Carolinas, if you really good people that work really hard and they're very focused, you know, we're very focused on it. So we monitor pipelines.

Speaker Change: is that did I answer your question or did I just go on too long? I don't know.

Speaker Change: No, that's that's all that's all great. But Carolina is, is uh, good to see that Regional strength and that is an area. That's attracting more interest. Uh, but you are winning their how how you kind of spending off, uh, competitions.

Are we vending off competition? Was that the question? I'm so I'm having trouble hearing. Yeah. And the Carolina.

Vincent Delie: I know the team down there monitors, you know, calling activity, our incentive compensation plans are lined up. You should watch my podcast. Manuel, I talk about it, but, you know, we try to align all of those things so that so that we can compete more effectively. And I think it works. I think, you know, paying attention and ensuring that we have compensation aligned with what our expectations are, being able to report information back to the field very quickly about their performance, that all matters. So, it's not just one thing. It's not just hiring talent or, you know, it's everything.

Speaker Change: I'm sorry, the Carolinas really good. People that work really hard and they're very focused. I, you know, we're very focused on it. So we we monitor pipelines. I know the team down there monitors, you know, calling activity or incentive compensation. Plans are lined up. You should watch my podcast manual. I talk about it. But, you know, we try to align all of those things so that so that we can compete more effectively.

Speaker Change: And I I think it works. I I think, you know, paying attention and ensuring that we have a compensation aligned with what our expectations aren't being able to report information, back to the field very quickly about their performance that all

Vincent Delie: There's a lot that goes into it. So, you know, the banks that are succeeding are doing, you know, the same thing. And the lead generation, it's just getting better and better. Yeah, our ability to produce leads and focus people. There's a finite amount of time per person. So, you know, all this technology really helps. make people that maybe weren't able to focus as well as others focus on what they need to do to get the job done, to win, to get paid, to benefit the shareholders. So that's, I think that's what's happening. I spend a lot of time with those people and down there, so I can tell you they're very hungry.

Speaker Change: Matters. So it's not just 1 thing and there's, it's not just hiring Talent or, you know, it's it's everything. It's there's there's a lot that goes into it. So you know the banks that are succeeding, are doing, you know, the same thing. You know, lead generation gets getting better and better. Yeah, our ability to produce leads and focus people every there's a finite amount of time per person so you know all this technology really helps

Speaker Change: Make people that maybe weren't able to focus as, as well as others focus on what they need to do to get the job done to win to get paid to, to benefit the shareholders. So that's I think that's what's happening. I

Vincent Delie: They're good people. It's a good culture, too. That's the other thing. They want to be there. They want to work. They get awards, and they get recognized for what they're doing, and it keeps driving success.

Speaker Change: I spend a lot of time with those people and down there, so I I can tell you. They're, they're very hungry. They're good people. It's a good culture too. That's the other thing they want to be there. They want to work.

They get, you know, they, they get Awards and they they get recognized for what they're doing and it keeps driving success.

Vincent Delie: Shifting over to the asset side. I mean, I appreciate all that commentary. Shifting over to the asset side, the C&I pipeline increase, is there any like one single driver that kind of Increased optimism this quarter in the pipeline? Is it the tax bill? Gary touched on that. I would say it briefly. I think we were a little slower, so there's a lot of penned-up demand and people were waiting to see what happened with tax reform because of the bonus depreciation. So this is my guess. This is anecdotal. I haven't gone out and surveyed the clients.

Speaker Change: Shift shifting over to the asset side, I mean, I appreciate all that commentary shifting over to the asset side. The CI pipeline increased is there any like, 1 single driver, that kind of, uh,

Vincent Delie: I've talked to some of them, and they've said the same thing. So all of a sudden, that just broke, right? And we're doing it now. So we're going to finance this piece of equipment. We're going to expand our facility. We're a little more optimistic about demand in the future. A little bit tamer view on tariffs. People were very concerned. Now they're not as concerned, still concerned, but not as concerned. So they were worried about supply chain disruption and other things. So I think with that out of the way, that's what happened. Everything got pushed forward.

Vincent Delie: The deals that were more likely to get done moved into the 90-day category, and hopefully we can get them closed and impact the C&I footing. But I appreciate that. Thank you. Yep, yep.

Speaker Change: Increased optimism. This quarter in the pipeline, is it the tax bill uh Gary Gary touched on that? I would say it's briefly. I I think I think we you know we were a little slower so there's a lot of penned up demand and people were waiting to see what happened with tax reform because of the bonus depreciation. So this is my guess I haven't. This is an adult. I haven't gone out. The survey the clients have talked to some of them and they've said the same thing. So all of a sudden that just broke right and they're all like we're doing it now. So there's you know we're going to finance this piece of equipment, we're going to expand our facility. Uh you know, we're a little more optimistic about demand in the future. Uh a little bit Tamer view on tariffs, people were very concerned. Now they're not as concerned still concerned but not as concerned. So, you know, they were worried about supply chain, disruption and other things. So, I think with that out of the way, that's what happened, everything got pushed forward, the deals that were more likely to get done moved into the 90-day category.

and hopefully we can get them closed and and impact the cni uh, you know, uh, footings

Speaker Change: But I appreciate that. Thank you.

Brian Martin: And our next question comes from Brian Martin from Janney, Montgomery. Please go ahead with your question. Hey, good morning, guys. I joined here a little bit late, so if you address this, you can, I'll go back and re-listen, but just, I know you talked a little bit about M&A and less focus there. Just to be clear, just on the M&A, but if you do look at M&A strategically, is it, would it be more today given all the opportunities you have elsewhere? It's just kind of like a fill-in, that's the way to think about how you'd be looking at M&A rather than entrance to a new market, or is that the wrong way based on kind of less focus on M&A today?

Yep. Yep.

Brian Martin: And our next question comes from Brian, Martin from Janney Montgomery, please go ahead with your question.

Brian Martin: Hey, good morning, guys.

Vincent Delie: I'm just less focused on M&A. I have been for the last, since we built out the franchise and we spread across that broad geography, we've not been as focused. People keep talking about it because early on – by the way, if you look at the total number – if you look at total assets, acquired assets here, since Vince and I started in 2009, I think it's like $15 billion. So, at $8.7 to $8.15, half the company came from organic growth. So, let's stop talking about it. We have a better opportunity to grow accretive earnings through – I mean, honestly, you have to really take a step back and say, what did they really buy?

Brian Martin: Say say, I joined here a little bit late, so if you address this, you can, uh, I'll go back and relist him, but just I, I need to talk a little bit about m&a and less less Focus. There's just just to be clear. I, I just on the m&a, but if if you do look at m&a, strategically is it, would it be more today given all the opportunities you have elsewhere? It's just kind of like a fill-in. That's the way to think about how you'd be looking at m&a, rather than entrance to a new market. Or is that the wrong way, based on kind of less focus on m&a today?

Vincent Delie: Other than Yadkin, everything is small. So, you know, the reality is we're focused on what I think are the right things to drive organic growth as a company, and we're going to continue to focus on it. I think we have big enough. Yeah, that's I figured that was a question is more filling because like you say, you've got great opportunities with what you've already done and what you're doing, but it's just more more clarification. So I'm not not suggesting you need to do more. What you've done has been great. And but the what you've gotten that in front of you now that you've gone to those markets is pushing M&A.

That brought geography, we've not been as focused on it, people keep talking about it because early on, by the way, if you look at the total number, if you look at total assets acquired assets here, since since Vince and I started and was it 2009? I think it's like 15 billion dollars so add 8.7 to 15 half the company came from organic growth. Okay. So let's start talking about it. I mean we have a better opportunity to grow a Creed of earnings through. I mean honestly that you have to really take a step back and say, what did they really buy other than Yadkin, everything was small.

Brian Martin: So, you know, the reality is we're focused on what I think of the right things to drive organic growth as the company, and we're going to continue to focus on it.

I think.

Brian Martin: Okay. I'm not pushing on you. I appreciate the color, Vincent. And then how about just on one other question? I know you talked about a little bit earlier about M&A, but on the margin, just in terms of, you know, if we see some benefit to the yield curve, kind of a more normalized level, kind of where the margin could trend, you know, over time in the out quarters, maybe as you get into 26, and you get a little bit of benefit there from the curve. You know, I appreciate the comment that it's more static here.

Speaker Change: Said sorry. Yeah that's I I figured that was a question. It was more a filling because like you said you got great opportunities with what you've already done and what you're doing but it's just more more clarification. So I I'm not uh, not suggesting you need to do more. What you've done has been great and that the uh, what you've gotten out in front of you, now that you've gone to those markets is even stop pushing m&a on me, okay? All right, stop, I'm not pushing on you. I I I appreciate the color then and then how about just on uh 1 other question, I know you talked about a little bit earlier about m&a, but on uh the margin just in terms of you know, if we see some benefit to the yield curve, kind of a More normalized Level, kind of where the margin could Trend you know over

Vincent Calabrese: But just longer term, what that could look like. Thank you. We're going to let our corporate strategy guy answer this question because it's long term. So go ahead. Yeah, no, right. I think, you know, there's still a great opportunity for margin in the long term to head higher. I mean, if you just look at the building blocks, you know, clearly loan origination, security yields will continue to move up. If you get more rate cuts, I mean, that's just going to help us generate more deposits and continue to grow that base. So, I mean, you can look at where the pieces can go ultimately and kind of come to your own determination as where that level is.

Brian Martin: But, you know, this is a better rate environment that we're potentially heading to than we've had for the last 15, 20 years in the banking industry. So, I think you can kind of think about it that way as well. Gotcha. Okay. I appreciate the taking the questions, guys. Thank you. Thanks, Brian. Thank you, Gary.

Speaker Change: Over time in the out quarters, maybe as you get into 26 and you get a little bit of benefit there from the the curve. Um, you know, I appreciate the comment that it's more static here in the near term but just longer term, what what that could look like? Thank you. We're going to let our corporate strategy guy. Answer this question because it's long term. So go ahead. Go ahead. Yeah. Know, Brian, I I think, you know, there's still a great opportunity for margin in the long term to, to head higher. I mean, if you just look at the building blocks, you know, clearly loan origination security yields will continue to move up. Um, if if you get more rate Cuts, I mean that's just going to help us generate more deposits and and, and continue to grow That Base. So, I mean, you can look at where the pieces can go ultimately and kind of come to your own. Determination is where that level is. But, you know, this is a better rate environment, um, that we're potentially heading to than we've had for the last, you know, 15 20 years in the banking industry. So I think you can kind of think about it that way as well as.

Speaker Change: Gotcha. Okay, I appreciate the uh taking the questions guys. Thank you.

Vincent Delie: And ladies and gentlemen, with that, we'll conclude today's question and answer session. I'd like to turn the floor back over to Vince Delie for any closing remarks. Okay, thank you very much. Again, I'd like to thank all of our employees for the hard work that they've done. This was a terrific quarter. We got to keep it going. It's over. So we now need to focus on the next quarter. Okay, so everybody keep doing what you're doing. You're doing a great job. And I want to thank the shareholders for continuing to support us. The best is yet to come, so we're very excited about it.

Thanks, bye. Thank you so very much.

And ladies and gentlemen, with that, we'll conclude today's question and answer session. I like to turn the floor back over to Vince to leave for any closing remarks.

Vincent Delie: Thank you.

Unknown Executive: And ladies and gentlemen, with that we'll conclude today's conference call and presentation. We thank you for joining. You may now disconnect your line.

Speaker Change: Okay, thank you very much. I I, again, I'd like to thank all of our employees for the hard work that they've done. This was a terrific quarter. We got to keep it going. We we, this it's over. So we now need to focus on the next quarter. Okay, so everybody keep doing what you're doing, you're doing a great job and I want to thank the shareholders for continuing to support us and uh The Best Is Yet To Come, so we're very excited about it. Thank you.

Speaker Change: And ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We thank you for joining, you may now disconnect your lines.