Operator: Good day, and welcome to the FNB Q3 2026 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. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Lisa Hajdu, Manager of Investor Relations. Please go ahead.
Lisa Hajdu: 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 and in our earnings release. Please refer to these non-GAAP and forward-looking statement disclosures contained in our related materials, reports and registration statements filed with the Securities and Exchange Commission, and are available on our website. A replay of this call will be available until Tuesday, 27 October, and the webcast link will be posted to the About Us Investor Relations section of our corporate website.
Lisa Hajdu: I will now turn the call over to Vince Delie, Chairman, President, and CEO.
Vincent Delie: Thank you, and welcome to our Q3 earnings call. Joining me today are Vince Calabrese, our Chief Financial Officer, and Gary Guerrieri, our Chief Credit Officer. FNB reported Q3 net income of $153 million, or $0.43 per share. This brings year-to-date earnings per share to $1.23, a 13% increase over the same period in 2025. FNB produced solid revenue of $469 million, benefiting from a diverse income stream with record net interest income of $377 million. This quarter, FNB repurchased $51 million, or 2.7 million shares of common stock, bringing the year-to-date buyback to $133 million, or 7.4 million shares, representing 2.1% of total shares at the beginning of the year. Tangible book value per common share increased 7% year over year to $12.28. Even with the buyback activity and negative impact of AOCI, demonstrating strong profitability levels and peer-leading internal capital generation.
Vincent Delie: Total loans ended the quarter at $36.5 billion, an 8.5% annualized linked quarter increase. FNB's loan growth has once again exceeded the published H.8 data as we continue to gain market share across our geography, led by commercial and industrial, equipment finance, consumer lending, and seasonal residential mortgage production. Annualized linked quarter deposit growth of 9% also outpaced the industry, benefiting from deepening customer relationships as well as seasonal deposit inflows. Even with the strong deposit growth and increased competition, the cost of interest-bearing deposits was stable, with only a one basis point increase. Non-interest-bearing deposits ended the quarter over $10 billion, an annualized increase of 3%. The mix of non-interest-bearing deposits to total deposits ended the quarter at 26%, a level we have held for eight straight quarters.
Vincent Delie: As we have frequently discussed, we utilize all our tools, including data science, to price our deposits and support our client base while protecting net interest margin. This quarter, net interest margin increased four basis points to 3.29%. The FDIC deposit market share data released in September revealed that FNB outperformed overall market deposit growth to maintain strong market share positions. We now rank in the top 10 in over 80% of our MSAs, top five in 50%, and top three in 30%. We continue to build out our fee-based platform, including our recent announcement to expand our family wealth program to serve ultra-high net worth clients with additional investments in specialized, sophisticated advisory services and advanced solutions.
Vincent Delie: This elite wealth advisory office aligns with our strategic approach to develop and expand new high-value business units that complement our existing products and services, driving a larger percentage share of total revenue. Our leadership team has established or significantly expanded 11 business lines, including two added last year, investment banking and public finance, with both contributing to fee income this year. Investment banking has closed several deals with many opportunities in the pipeline. Public finance has participated in a number of large bond underwritings and was recently awarded a significant lead left opportunity this quarter. We remain steadfast in our approach to consistent underwriting and managing credit risk to maintain a balanced, well-positioned portfolio, enabling us to serve our customers through various business cycles. I would now like to turn the call over to Gary to discuss our credit results for the quarter. Gary?
Gary Guerrieri: Thank you, Vince, and good morning, everyone. We had another solid quarter of consistent credit performance across our portfolios. Delinquency totaled 75 basis points, up slightly in the quarter, with NPLs and OREO remaining at near historical lows totaling 33 basis points, up 2 bips in the quarter and down 4 bips on a year-over-year basis. Net charge-offs reflect strong performance at 12 basis points, an improvement from 19 basis points in the prior quarter. Criticized loans increased 40 basis points in the quarter, with anticipated resolutions expected to offset this increase in the quarter ahead. Total funded provision expense for the quarter stood at $19.2 million, once again supporting our strong loan growth. Our ending funded reserve now stands at $455 million, an increase of $8.1 million ending at 1.25%.
Gary Guerrieri: When including acquired unamortized loan discounts, our reserve stands at 1.29%, and our NPL coverage position remains strong at 396%, inclusive of the discounts. We continue to maintain qualitative overlays for potential supply chain impacts due to the events in the Middle East, oil and diesel price volatility, and ongoing tariff uncertainty in North America. Our consistent and proactive approach to managing credit risk and solid allowance coverage enables us to maintain a strong credit profile through various economic environments. Turning to loan growth, we are pleased with the resilience of our customer base, which continues to perform well despite recent rate increases and ongoing inflationary pressures. Once again, we saw strong production across all consumer categories this quarter while maintaining our solid credit metrics with average origination FICO scores of 785 and delinquency and charge-offs of 72 and 5 basis points respectively.
Gary Guerrieri: Despite a slight downtick in utilization, C&I loan growth was strong in the quarter, particularly in the manufacturing sector. CRE continued to decline as expected due to secondary market activity, ending at 182% of Tier 1 capital plus allowance. The declines were partially offset by a number of new projects originated in the quarter, and we are encouraged by the level of new opportunities we are seeing across our markets. In closing, despite the continued macroeconomic volatility, our loan growth was strong in the quarter in both the wholesale and retail portfolios. Our loan portfolio remains well-positioned, reflecting solid performance across each asset class with credit metrics near historical lows. Pipelines continue to be robust as we enter the Q4, positioning us well to achieve our desired growth targets this quarter and in the year ahead.
Gary Guerrieri: I will now turn the call over to Vince Calabrese, our Chief Financial Officer, for his remarks.
Vincent Calabrese: Thanks, Gary, and good morning. Today, I will review the Q3 financial results and walk through our full year guidance. Q3 net income totaled $153 million, or $0.43 per share, driven by strong growth in C&I and consumer loans and a 4 basis point sequential increase in the net interest margin. Total loans and leases ended the quarter at $36.5 billion, an 8.5% annualized linked quarter increase. Growth of $435 million in consumer loans and $333 million in commercial loans and leases drove the increase. C&I loans grew at a 20% annualized linked quarter rate for $407 million, driven by growth across multiple markets, most notably the Cleveland and Pennsylvania markets. CRE balances continued to be impacted by payoffs as expected and were down $90 million linked quarter. Seasonal growth in residential mortgages and growth in HELOCs and indirect auto fueled the rise in consumer loans.
Vincent Calabrese: Total deposits grew $871 million sequentially, a 9% annualized rate driven by growth in non-interest-bearing deposits, low-cost transaction deposits, and money market accounts. Seasonal treasury management inflows and deepening of customer relationships fueled the overall deposit growth. Non-interest-bearing deposits increased $78 million sequentially and remain stable at 26% of total deposits. The loan to deposit ratio was also stable from last quarter at a healthy 92.4%. The Q3 rise in the net interest margin to 3.29%, coupled with strong loan growth and a higher day count, resulted in a nearly $11 million sequential increase in net interest income. The yield on earning assets increased 5 basis points sequentially to 5.18% as one-month term SOFR moved higher and the securities portfolio yield jumped 12 basis points to 3.73% as reinvestment rates remained well above the overall portfolio yield.
Vincent Calabrese: Total cost of funds increased 2 basis points from the Q2 to 2.01%, with rates paid on the interest-bearing deposits up only 1 basis point and rates paid on total borrowings down 4 basis points. Turning to non-interest income and expense, non-interest income totaled $93 million. Service charges increased 5.7% from the year ago period on increased treasury management fee revenue and higher consumer transaction volumes. Insurance commissions and fees were up 20%, primarily due to growth in the property and casualty business. Wealth management revenues increased nearly 4% year-over-year to $21 million, with contributions across the geographic footprint. Capital markets income reflected solid contributions across these businesses, even with an 18% reduction due to record debt capital markets and international banking income in the year-ago quarter. Other non-interest income declined primarily due to a $5.4 million asset recovery recorded last year.
Vincent Calabrese: Non-interest expense totaled $257 million, a 4.5% increase from the year ago quarter when adjusting for an FDIC special assessment reduction last year. Salaries and employee benefits increased only 1%, as strategic hiring and normal merit increases were offset by lower variable compensation. Occupancy and equipment increased 14%, primarily due to technology-related investments and higher occupancy costs. Outside services increased 15%, driven by higher third-party legal and consulting costs. Even with these increases, the Q3 efficiency ratio remains solid at 53.7%. FNB continues to actively manage capital to support balance sheet growth and optimize shareholder returns while appropriately managing risk. Share repurchases totaled $133 million for the first three quarters of 2026, more than four times the amount repurchased in the same period of 2025, and well within our disciplined capital deployment strategy. Over $200 million in share repurchase authorization remained at quarter end.
Vincent Calabrese: Our strong financial performance and profitability have enabled FNB to increase share repurchase activity and still maintain solid capital levels, as evidenced by a CET1 ratio of 11.3% and TCE ratio of 8.7% at quarter end. Tangible book value per share increased modestly from last quarter, even with the increased buyback activity and impact of rising interest rates on AOCI. Let's now look at guidance for the full year of 2026. All guidance is based on current expectations while remaining cognizant of the highly uncertain macroeconomic and geopolitical environments. We are maintaining our full year balance sheet guidance for spot balances, projecting period end loans and deposits to grow mid-single digits on a full year basis.
Vincent Calabrese: Full year net interest income guidance has been revised to a range of $1.485 to $1.5 billion, based upon results for the first nine months of 2026, and our expectation for a continuation of heightened deposit competition within the industry. The non-interest income full year guide has been tightened to $370 to $380 million. The full year guidance range for non-interest expense remains unchanged at $1.01 to $1.02 billion, with the results expected to be towards the higher end of the range. We continue to expect strong positive operating leverage for full year 2026. Full year provision guidance has been revised to a range of $80 to $90 million, down $5 million at the high end, given our favorable credit performance year to date and will be dependent on net loan growth and charge-off activity in the last quarter.
Vincent Calabrese: 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: FNB continues to be an innovative leader in our industry, introducing tech-forward digital and data solutions, including our proprietary eStore and Common app. These tech innovations deliver convenient access to our products and services for our customers and allow us to serve as their trusted financial advisor. As evident by being named one of the world's best digital banks by Global Finance and a finalist for several of FinTech Futures banking tech awards, we have created a platform that enhances our customer experience across our omni-channel network, enabling FNB to continue to grow our share of wallet and expand customer primacy based upon positive outcomes for our clients. Our technology-based competitive advantage will be further enhanced by the introduction of our proprietary Insight 360 platform.
Vincent Delie: The AI-enabled customer aggregation and insight tool will provide our clients and bankers with the ability to optimize their broader banking relationship, all while consolidating their services with FNB and contributing to improved household penetration. Given our focus and investment in data capabilities, FNB is one of the best-positioned financial institutions to strategically leverage AI and data analytics to drive efficiency and accelerate revenue growth in an increasingly competitive landscape. Our ability to increase revenue, grow loans and deposits, and expand market share has benefited greatly from these initiatives, and we are excited to deploy our newest capability. By strategically investing in innovative technology to grow primary relationships and low-cost funding deposits, while also maintaining a focus on expanding high-value fee-based businesses to diversify revenue streams, we are building a stronger, more resilient franchise.
Vincent Delie: Our investments in these initiatives contributed to a strong Q3 performance and create sustainable value for the future. With that, I would now like to turn the call over to the operator for questions.
Operator: We will now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question today comes from Kelly Motta with KBW. Please go ahead.
Kelly Motta: Hey, good morning. Thanks for the question.
Vincent Delie: Good morning.
Kelly Motta: Lee, I think I might want to start off with your last comment about technology and layering in positive operating leverage. You guys were very committed to driving positive operating leverage this year, and clearly some of these investments in technology have been helpful for that. As you think about the outlook ahead, I know it's a little early to start talking about 2027, but based on your pipeline for investments and just outlook for revenue growth, do you think that your investments should enable a continuation of the positive operating leverage we are poised to see for this year? Thank you.
Vincent Delie: Yeah, sure. Thank you for the question, Kelly. We're very excited about the tech that we're rolling out. I don't know if I was excited enough in my prepared comments, but I sat through a demo yesterday of our Insight 360 tool. It is fantastic. The customers are going to be able to aggregate all their banking relationships in one place, view transactions across various cards at various institutions. We're going to be able to do a lot with AI and promos, and it's going to help us tremendously drive household penetration here. It's a very exciting time for us. We've spent a lot of time building this strategy out over the last 10 years, so the CapEx spend is kind of embedded in our guide for this year. We are very optimistic about positive operating leverage moving forward.
Vincent Delie: I think it says a lot about the company when you think about the deployment of data science and AI relative to revenue generation and revenue opportunities. It is not as frequent. You do not see companies at this stage in the game talking about revenue initiatives from an AI perspective because of the cost. But because we started a long time ago focused on data governance, building out the data infrastructure, we are in a much better position than others to capitalize on it from a revenue perspective. Then there are about 100 initiatives across the company where the utilization of AI to improve either efficiency or drive revenue are still on the docket.
Vincent Delie: Obviously, we have said this before, but we are not just going to jump in and tackle everything because the expense build, the CapEx spend and additional build and infrastructure and token utilization relative to data consumption is expensive. We are going to leg into it and take out what we think are accomplished the best opportunities, take out the expenses that are most notable or largest, and then we are going to move at the same time parallel with our strategies on revenue generation and improving share of wallet within our customer base. The answer to the question is, we have some great things coming out in Q1. We are on track to deliver Insight 360. The eStore Common App has been improved, and we continue to work on it to improve it over time. There is a migration down the road to enhancements to our mobile application in 2027.
Vincent Delie: There are some things coming at the end of 2027 that are pretty interesting and cool. We are excited about all of that. Then we continue to invest in the wholesale bank as well. We have just started really digging into the processes and looking at ways to significantly improve turnaround times and the construction of underwriting documents and analysis. A lot of very exciting things, but I do not think that none of it really presents a barrier to us achieving positive operating leverage or performing at the same levels or better from an efficiency ratio perspective. The fee income build too is exciting, and the departments that we launched, corporate finance, the investment banking initiative and public finance are taking off too. That should help the cause next year.
Kelly Motta: That is super-
Vincent Calabrese: Kelly, I would just add too that
Kelly Motta: Oh, sorry. Go ahead.
Vincent Calabrese: No, we have a very robust prioritization process too because you can't do everything at once. So really being very methodical in the investments that we're going after initially, kind of those with higher value, maybe less cost to initiate, to pursue. And then as we've done with new businesses, we kind of leg in. So we'll start with it and then expand it once it's kind of in place. Part of how we're funding that too is we have our cost savings target for the year for 2026, $20 million. Some of that goes towards that. And then as we grow, this creates scale for us. So maybe we don't have to add as many positions as we would otherwise. We'll still add, but it gives us the ability to create scale as these initiatives that Vince was talking about are deployed.
Kelly Motta: Got it. I appreciate all the color. That's super helpful. One more picky-tacky question, and then I'll step back. You had really nice margin expansion this quarter, especially in light of the really strong balance sheet growth you had. Just wondering, part of that was cost of deposits was very well controlled. I'm wondering what the incremental cost of funding is coming on at, and if maybe if you have a spot rate at the end of the quarter, that would also be helpful. Thank you.
Gary Guerrieri: Yeah, I would say from a pricing standpoint, if we look at our overall funding, the CDs are a key part of that, of course. The rates that we are bringing those on in the month of September came on at like a 3.22 rate. Our best rate is a 4.15 rate for our most attractive product that we have, which is a 13-month CD. One of the things we did strategically is put the best rate on a longer-term CD. If you go back a little bit, we were focusing on 5 and 7-month CD. So we have that 4.15 on the 13 month is really our acquisition strategy product that we are using. But even with that helps with new accounts. The blend overall is at that 3.22 what we brought in in the month of September.
Gary Guerrieri: We are not bringing everything on at that 4.15. So the 3.22 is a good reference point. The non-interest-bearing deposit growth, even with the very strong deposit growth, we still held the 26%. So having that mix of non-interest-bearing deposits is key to the overall cost of funds. As we have talked about in the past, we have a very rigorous process. We have weekly pricing every Monday at 4:00PM. We have deposit strategy meetings once or twice a month to talk about where we want to be priced. The goal that we have had for a while is to grow volume but also manage the cost side very diligently. So I think that worked well this quarter.
Vincent Delie: The key is client primacy, the non-interest-bearing deposits. We have had great success maintaining that 26% threshold even with the growth. That is directly correlated to the strategies that we have deployed to be the principal bank for our clients. So less gimmicks, more hand-to-hand combat, bringing over customers that actually produce. You have float and free balances that helps bring those costs down. As you know, we have been pretty competitive and we have grown market share across the footprint.
Vincent Delie: If you look at the FDIC data that came out, we have significant market share expansion relative to the markets overall. I guess on a relative basis with the market shrinking, we were still able to expand, let us say it that way. So I think we have had really good performance. 80% of our markets were in the top 10, 30% were in the top 3 in terms of deposit share.
Vincent Delie: We continue to work on improving that and have had great success both commercially and from a consumer perspective in these markets.
Gary Guerrieri: 50% in the top 5.
Vincent Delie: 50% in the top 5 and good, strong performance across the board from a deposit perspective. What excites me the most is the Insight 360 tool and what it is going to enable us to do in terms of identifying deposit opportunities within our customer base and using our insights and data analytics tools to drive promos to move that money to FNB. That to me is very exciting.
Kelly Motta: Thank you so much for all the color. I will step back.
Operator: The next question comes from David Smith with Truist Securities. Please go ahead.
David Smith: Hey, good morning.
Vincent Delie: David.
Gary Guerrieri: Good morning.
David Smith: Starting off on credit, you had a really good quarter for net charge-offs, but the NPL and delinquency ratios ticked up slightly. Was there anything suppressing the charge-off rate in the quarter, like a big recovery or anything, or anything that led you to elevate that reserve build? Just trying to get a better sense of what we might expect for the Q4 provision, since the range there is pretty wide right now.
Gary Guerrieri: Yeah, David, the quarter was really very pure. Nothing from a large recovery standpoint. We just had really solid performance from a loss perspective across all of our portfolios, and that really drove the 12 basis points that we saw there. Yeah, as it relates to the delinquency, it was up four basis points. We do see some seasonality usually in this Q3 with vacations and whatnot. We've seen it over time, so it's a few basis points. No changes in the performance of those portfolios. When you're driving metrics at these levels, which are near historical low levels for us, you're going to have a few basis point movements here and there just in the normal course of business. But all said, really strong performance across the portfolio throughout the whole quarter.
David Smith: Sure. You are kind of already at mid-single loan growth from Q4 2025 as of Q3, but deposit balances still have a ways to go. Can you remind us just on either side of the balance sheet, anything we should be thinking about from a seasonality perspective going into Q4? I know you have the public funds balances that can move around in the H2.
Gary Guerrieri: Yeah, there is still some continued seasonal growth on the municipal side. There was a nice surge in Q3 that usually continues through October, November. As we have talked about, we have a pipeline over $1 billion that is being actively pursued on the deposit side for new relationships. That is kind of part of our thinking as to what is in there. The range mid-single digits is pretty broad, so we would be at the lower end of mid-single digits if you do the math as far as the deposit growth, but it is still pretty strong deposit growth.
Vincent Delie: By the way, in public finance, we are the principal bank. We do not go after the money market offerings or compete on CDs. We have to be the principal disbursement bank to get the non-interest-bearing deposits to drive the returns in that business, just to be clear. What happens is, we are the operating bank. There are cash outflows that happen pre ad valorem tax collection, so the balances shrink, and then over time, they surge back in. You can see it is supported across the board because the deposit mix stayed consistent. What Vince is saying is we continue to see that into Q4. Last quarter, we kind of got penalized because there were delays in it. This quarter, everybody discounts it because they say, "Well, it is seasonal." Well, it is what it is.
Vincent Delie: It is deposit balance growth, and it is across the board, and we are the principal treasury management bank. I just want to make sure I am clear on that because Vince keeps talking about municipal deposits. This is not a function of going after the high-priced deposit.
Vincent Calabrese: Been customers for a long time.
Vincent Delie: Right.
David Smith: That is helpful. Thank you. Vince Calabrese, did I hear you right that you are thinking the deposits will probably be on the lower end of mid-single digits for Q4?
Vincent Calabrese: Yeah, that is exactly what I said. If you just look at the range from visits. Based on the growth in Q3, what we expect for Q4. The more wins we get for new business, it gets higher into the middle of that range. There is opportunity right in the middle of it. It all depends on our success bringing in new accounts.
David Smith: Okay. Thank you. I will step out.
Operator: The next question comes from Daniel Tamayo with Raymond James. Please go ahead.
Daniel Tamayo: Thank you. Good morning, everybody.
Vincent Delie: Morning, Daniel.
Daniel Tamayo: Yeah, maybe just digging into the loan growth side. First on the C&I side, really strong growth again in Q3. You talked about, I think it was just mentioned that you are basically already at the midpoint of the guidance range for the year. You had utilization down in Q3. Just curious how you see pipelines and expectation for C&I loan growth kind of near term, and then if you are seeing anything or anticipating any impact from the increase in rates.
Vincent Delie: Yeah. I think a couple of things. First of all, I do think we have had good solid C&I performance across the board. It is coming from areas that we would not have normally expected to come from, too. We are seeing good pipeline expansion in our more rural areas that we cover, more traditional areas where manufacturing might represent a little bit more of the GDP coming out of these markets like Erie and what we call our Northwest market, which is Hermitage, Sharon, Erie into Youngstown, Ohio.
Vincent Delie: We are starting to see some decent growth there in those areas. Then the central part of the state where Penn State is located, that is a big market for us. It is pretty big geography. We have had great success there. We have good leadership there and probably one of our best teams end-to-end retail all the way through to commercial.
Vincent Delie: As you know, we won the Penn State business, so everyone is pretty excited about that. There is a lot of activity there, and it shows in the numbers as we move throughout the year. They both have good, solid pipelines. Cleveland, who has not performed in the past few years, is starting to come back pretty significantly. Pittsburgh is pretty solid. The Mid-Atlantic region, there is a lot of activity in the DC area that we are seeing. There is a lot of good activity for us there. Baltimore is coming around. Then the Carolinas. We have had some transition in Raleigh. We have just hired a terrific leader in Raleigh and have recruited some really good bankers, have some bankers in the queue. We are looking forward to getting that turned around with strong leadership. Charlotte has performed pretty well.
Vincent Delie: Charleston, South Carolina, is a performer from a commercial loan perspective, and we expect that to continue. We have expanded across most of South Carolina. We have plans to build branches in markets that we were not in through acquisition like Spartanburg and Greenville. We are on our third branch, I think. We are getting some additional penetration there. We are very excited and optimistic about it. I think we have a pretty large C&I pipeline, a short-term pipeline anyway, moving into Q4. We are feeling pretty good about that with some fairly large funded deals that are coming. Equipment finance continues to perform very well obviously because of the tax law changes and strong leadership there for us. Good team. We have seen some pretty outsized growth in those portfolios relative to historical levels, and that continues. That should help drive us.
Vincent Delie: From an interest rate perspective, I do not think that even though rates have spiked, I know prime is sitting a little higher today than it has been in the last few years, but I am not seeing that as a barrier to CapEx spend, to be honest. The economy seems to be ripping. I know there are certain things that you look at and you worry about inflation and other things, but from a CapEx spending perspective, maybe some of it is data centers and a good bit of it is, but there is a ripple effect. Manufacturing is taking off in a number of these markets, so there is some considerable CapEx spend and we would expect that to continue into next year. I do not know, Gary, do you have anything you want to add to that?
Gary Guerrieri: No, I think you have covered it, Vince. The pipeline is robust. It is diverse across all the markets, which Vince kind of touched on. Interest rates moving up a quarter I do not think has significant impact. The key question is: Where is it all going? I think you will see some significant CapEx spend here before the end of the year from a tax perspective. We are seeing opportunities. It is very
Vincent Delie: The CRE concentration at what, 1. What is it, 180% now?
Gary Guerrieri: We are at 182 from a CRE standpoint. I think we talked about it at the last quarter's call. We are moving towards that inflection point. The opportunities are starting to increase in that space. We are seeing some very nice opportunities, solid equity positions with really top-tier clients. We expect that to be productive as we move into 2027 as well.
Vincent Delie: Yeah. Where I see a tougher road to hoe would be in the mortgage business moving forward with higher rates. That is going to be a headwind for mortgage. Go ahead, Boo.
[Company Representative] (FNB): Yes, Vince is right. We will probably see some headwinds in mortgage, but our mortgage business is very different from
Vincent Delie: Oh, yeah.
[Company Representative] (FNB): other banks. It is primarily purchase. It is much less dependent on refi. We actually did an analysis a couple of weeks ago looking at the correlation to mortgage originations to interest rates. Our correlation is less than 1%, whereas the mortgage industry is over 97%.
Vincent Delie: Yeah. We do have an advantage in the purchase money strategy, and it shows statistically. We are well ahead of the industry in terms of originations for purchase money.
[Company Representative] (FNB): The great thing about our mortgage business is that it brings new clients to our bank. They tend to be younger. We focus a lot on our Physicians First, which makes up a good portion of our portfolio mortgage. With that brings deposits, it brings direct deposits, it brings primary accounts and the like. So to Vince's point, none of this stuff is rocket science, but it's hard.
Vincent Delie: Yeah. I think the aggregation tool that we deployed in the consumer space, in the consumer app's also going to help us on the loan side. I've been focusing on deposits, but we're going to be able to look at aggregated loan balances within our customer base and provide promotional offers to get them to refinance with us or outright analyze the implied interest rate and try to work with them to provide them with a product that maybe works a little better for them.
[Company Representative] (FNB): The bundling too.
Vincent Delie: Yeah, the bundling is another thing that we're working on. There's a lot of very exciting things, Danny. Loan growth, I'm not that concerned about. A loan-to-deposit ratio of 92%, a concentration in CRE of 180% is pretty solid for us. There's a lot of opportunity moving into next year that hinges on more of a geopolitical and economic environment than a lack of FNB opportunity, let's put it that way.
Daniel Tamayo: That is terrific color. Appreciate all of that from everyone. Maybe a follow-up on credit for Gary. It sounds like you are saying things are still pretty good, even though the charge-off rate was so low in Q3. I think, did you make a comment that there were some resolutions you are expecting in Q4 that might bring that up higher in terms of charge-offs and then kind of a higher level similar to the loan growth side? Just curious on your thoughts on what these rates here and maybe a bit higher, if we get another hike in December, could mean for how you are thinking about overall credit quality.
Gary Guerrieri: Yeah. Just to clarify my prepared remarks. In terms of the resolutions that I referenced, criticized loans were up slightly 40 basis points during the quarter. We already have expected upgrades and payoffs without any charge-off, no charge-offs relating to that. That will reduce that slight increase back to a net zero position. So that is what I was referencing, Danny, in reference to the expected resolutions. Again, those resolutions are occurring here early in the quarter with no charge-offs expected from that group of transactions that I referenced. What was the other part of the question?
Daniel Tamayo: Just the impact of higher rates on longer-term credit quality.
Gary Guerrieri: Okay. Yeah, sure. In terms of the rate environment, we have not seen any impact at this point. Naturally, it is only 25 basis points and it is early. In terms of our CRE portfolio, our maturity walls during Q4, we will have about $500 million that we will be looking at from a renewal standpoint. As we look back over the last 12 to 18 months, generally speaking, about half of that is just paying off in the normal course of business. Half of it is being extended. The majority of that extended on a long-term basis because it is a solid project that needed a little more time. Very little of it is being extended on an extremely short-term basis because we are concerned about those particular projects.
Gary Guerrieri: As we looked at 2027, $400 million a quarter to come up from a maturity wall standpoint, and we're all over those credits due to what we've all been through from an industry standpoint with CRE over the last three to four years or so. There's nothing in there that's overly concerning to us at this point. We're not expecting the current rate environment to impact our portfolio. Shocks of 100 to 150 basis points would cause some issues, I think, across the industry. We've been very successful in working through that, as you've seen over the last three to four years, and we feel very confident that our portfolio will perform through any uptick in rates.
Daniel Tamayo: Great, Colleen. Thank you, Gary. I'll step back, guys.
Gary Guerrieri: Thanks, Dan.
Operator: The next question comes from Casey Haire with Autonomous Research. Please go ahead.
Casey Haire: Great. Thanks. Good morning, everyone.
Vincent Delie: Hey.
Casey Haire: Wanted to follow up on the deposit costs. I am not sure if I missed the spot deposit costs at 9:30. Then just some updated thoughts on what cumulative beta expectations you guys are thinking about versus, I think it was 38% during the last cycle on a total basis and 53% on an interest-bearing.
Vincent Delie: Yeah. I would say regarding the betas, Casey, the last cycle is a good reference point to have the 30% to 40%. If you look at the last year, we were 40% for total deposits through that last upcycle. It is a good reference point to use. We are very early in this cycle and as we have done, we have done a very nice job managing the deposit cost side of things. So, over this next cycle, who knows how long it is going to last, right. But I think just for reference, history is probably just a good reference point to have there. As far as the deposit costs for the average for the month of September. What was I? Yeah, 179, 240 kind of total and interest-bearing for the average for the month of September.
Casey Haire: Okay, great. Excellent. Then just wanted to circle back on the loan growth pipeline. So after a good quarter, it sounds like pipelines are robust and you guys have a lot of confidence that another hike will not slow down loan growth. But at what point, because there are three hikes in the curve currently, at what point does Fed policy start to impact loan growth? Because we are hearing anecdotes where commercial borrowers are starting to balk at some of the prices they have to pay for capital.
Vincent Delie: Yeah. We do not play in the higher risk space. If we were in lev fin, for example, it would cause delays. It would cause people to say, "Hey, I cannot accept the leverage. I cannot make the debt service payments." We are not in high LTV, high velocity real estate transactions. That is an area where it would impact. You really have to drill into the portfolio. I have said it for a long time. Gary and his team are excellent.
Vincent Delie: They are very conservative. We take returns where there is measured risk, and we feel confident that the ability to repay is there. Most of our borrowers engage in some sort of swap or derivative to fix the rate. As you noticed, we got the benefit from the SOFR elevation. Vince was right. I want to tell him he forecasted SOFR to the penny. I do not know if you remember the last call. You should look at the transcript. Basically, it is true.
Gary Guerrieri: It worked out.
Vincent Delie: It worked out. I do not know how.
Casey Haire: No, that was good. It was 373 on the nose.
Vincent Delie: Exactly
Casey Haire: not looking at the line, but it
Vincent Delie: Thank you, Casey.
Casey Haire: Yeah.
Vincent Delie: We've been rubbing his head, trying to figure out where rates are going. We're like, "Vince, tell us what's happening next." I think those are the businesses that are going to suffer the most. That's where you're going to see delays in CapEx spend, maybe pull back from lenders that aren't going to accept thinner debt service coverage. I think in our book, most of the companies that we deal with have substantial cash flow and significant debt service coverage. So the interest rate environment is a factor.
Vincent Delie: They're going to take it into consideration, but it's not going to stop them from moving forward on something that's going to benefit them in the long run. If you look at what's happening with investment in the United States, there's billions of dollars flowing in. The current administration talks about it, but it is for real.
Vincent Delie: I know the media doesn't really cover it much, but over $20 billion in I think it might be $20 trillion, right? I can't remember the number. It's huge, right? No, it's $20 billion. $20 billion in investment coming into the United States, not just in data centers, but kind of across a broad spectrum of industries. Ultimately, that leads to expansion of manufacturing capabilities and the need for CapEx spend. I think that is a positive, right? Especially for the businesses that we lend to.
Gary Guerrieri: Casey, the other thing that I would add, we're pretty aggressive on the origination side of things from an underwriting perspective with shock rates. We'll shock these underwriting to 300 and 400 basis points. I'm sure that's happening across the industry. We probably pay more attention to that than most in our credit selection. So we have a built-in cushion there pretty much across the board that is important to us. I think that helps through cycles.
Vincent Delie: That goes back to what I said earlier, Gary, because those shocks wouldn't work. If you have a highly levered transaction and you do a pro forma and you're shocking interest rates 300 basis points. Typically, they don't carry debt service. So that underwriting methodology is automatically going to eliminate borrowers that essentially may be pulling back at this stage of the game, right? Or could worse trigger defaults, right? If you've already put them on the books. Anyway, I think Gary does a great job and his team's terrific, Tom and Gary, and we've benefited from that for a long time. Continue to.
Casey Haire: Great. Thanks, guys.
Vincent Delie: Anything else, Case?
Casey Haire: All set. Thank you.
Vincent Delie: All right. Thank you.
Gary Guerrieri: Thank you.
Operator: The next question comes from Russell Gunther with Stephens. Please go ahead.
Nick Lorenzoni: Hey, good morning, guys. This is Nick filling in for Russell.
Vincent Delie: Hey, Nick.
Nick Lorenzoni: Hey. I wanted to start off on fees. Last quarter, I believe you guys highlighted investment banking, treasury, and wealth as areas that should support fee growth in H2. Given the Q3 performance, how are you guys thinking about the composition of that roughly $94 million implied Q4 fee contribution? Are there any areas that are now tracking differently from what you expected coming into the quarter?
Vincent Delie: Well, we had a surge in derivative activity after the quarter. Unfortunately, the timing wasn't great for this quarter, but for next quarter, that bodes well. We had some fairly substantial derivative fee income that rolled in the last week or so. I do not know. It is hard to forecast where that goes from here because we saw a big jump in rates from the last Fed increase. I would suspect that anybody that is looking to fix a rate should be considering it, given the outlook, for at least 50% of their debt. We are pretty optimistic about that. We have got several investment banking opportunities in the queue, public finance and corporate finance that should help that are. We are doing really well from a TM perspective with treasury management fees and merchant fee income, working to optimize interchange, so there is upside in interchange.
Vincent Delie: I think when we look at it, we gave you the guide because we feel confident that we can deliver, and that is what we are going to try to do.
Vincent Calabrese: Yeah, I would add, too, if you look at it from a PPNR standpoint, the modest increase you saw second to third quarter, which a couple of things. First of all, in the second quarter, we had much higher residual gains in our equipment finance business, like $3.7 million. So that was in other income, kind of Q2 to Q3, that it is kind of lumpy. You do not have that every quarter. Then if you go through the components, so the fee income, that plus the fee income was the main driver to it not being up more. The capital markets decrease reflected we had record level of debt capital markets in the second quarter. The move in interest rates delayed swap execution. As Vince talked about, we have a good start to the fourth quarter.
Vincent Calabrese: But with rates moving up, some customers decided to hold off on swaps they were looking to execute. Mortgage banking had impacts from higher rates on production as well as fair value impacts that affected the third quarter figure. Then if you kind of look ahead and why we are confident in hitting a PPNR number for the fourth quarter is for several things. Loans and deposits on a spot basis were $400 to $700 million higher than the average balance.
Vincent Calabrese: So that gives you a good start from a net interest income standpoint to the fourth quarter. The full quarter benefit of loans repricing to SOFR as well as prime rate changed that happened in mid-September to get a full quarter’s benefit of that. In the investment portfolio, we are investing 200 to 250 basis points higher than where rates are rolling off.
Vincent Calabrese: And then we do expect to bounce back, like Vince commented on, in capital markets as well as mortgage. Capital markets has a very strong pipeline. Then expenses overall is in our guides expected to decrease. We had some inflated legal costs. Fraud losses were elevated. We have a SWAT team going after that to bring that number back down. New leadership in our financial crimes unit. Then the down payment assistance component. Those are three kind of chunky things that will lessen as you go into Q4. So if you roll all that up, well, I know people commented on the PPNR miss in Q3, but we are confident in having a nice rebound in that in Q4 and for the full year.
Vincent Calabrese: The PPNR growth is nice and the operating leverage is very strong.
Nick Lorenzoni: Got it. That is great color. I will step back. Thank you for taking my questions.
Vincent Delie: Yeah. Thank you.
Gary Guerrieri: Frank.
Operator: The next question comes from Terry McEvoy with Wells Fargo. Please go ahead.
Terry McEvoy: Hi. Thanks. Good morning. Thanks for taking my questions. Market expectations have changed over the last couple of months in terms of what the Fed's expected to do with rates. How has that impacted your asset liability positioning, and how are you evaluating derivatives to either protect capital or protect net interest income?
Gary Guerrieri: Yeah. I would say we continue to manage our asset liability position to fairly neutral or a little bit asset sensitive right now. I think there's really very little change Q2 and Q3, and I think we'll continue to manage that way.
Terry McEvoy: Right. I thought your comments on the manufacturing sector driving the C&I growth was insightful. Was that specific industry verticals you're focused on? Was that simply the markets or maybe some of the investments coming into the country that was mentioned a few minutes ago?
Vincent Delie: Well, I think a lot of it is coming through in the equipment finance business early, right? The first thing that happens is the companies go out and start to procure equipment to deal with increase in demand. We are seeing that. And there is an incentive, with bonus depreciation, to do it quickly. So there was a surge in that type of investment. Usually that is a precursor to overall large CapEx investment. So I think that is to follow. I do not even think we have seen it yet. So we are starting to see it emerge.
Vincent Delie: The supply chain for these industries is pretty deep. Automotive, even the data centers that are being built, there is structural steel components. There is all kinds of stuff that goes into building these data centers. And there is quite a bit of new construction going on across the Southeast. The light manufacturing facilities, owner-occupied facilities, expansion of owner-occupied.
Vincent Delie: In the supply chain for a variety of industries, there is a ripple effect. So it kind of ripples through the manufacturing sector. So we are seeing benefits across the board. And transportation remains strong. Even though there are periods where it slows, it seems like it is still coming back pretty strong. So at least our clients are doing pretty well. So I think that all bodes well for us moving into next year. Barring some, like I said before, some crazy geopolitical or economic scenario.
Gary Guerrieri: Yeah, just to add to Vince's comments. The manufacturing space has always been important to us organizationally. It is what we have all done for our banking careers, from Vince all the way through many of our bankers. And so we hold a good position there. We understand the business, and we have a lot of clients that we have banked for many years over the course of our careers, and it continues to be a really key segment for us moving forward.
Terry McEvoy: Great. Appreciate the color. Thank you.
Gary Guerrieri: Thank you.
Vincent Delie: Sure thing.
Operator: The next question comes from Timur Braziler with UBS. Please go ahead.
Timur Braziler: Hi. Good morning. Going back to some of the fee income comments. I think, Vince, you had called out that you were lead left on a pretty large public finance deal. Was that in Q3 and Q4? Then I guess maybe more broadly as you are thinking about the investment banking rollout, public finance, I think last time we spoke, you guys mentioned they are both kind of in the first inning of the build-out there. Just what does that trajectory look like? Is there incremental investments that need to take place within some of these fee income verticals to get them up to where you think they ultimately get to?
Vincent Delie: Yeah, those are great questions. The public finance transaction where we were lead left occurs in Q4, so it has not closed yet. We won the business, we won the mandate, which we were excited about. We have already closed several large transactions where we were a participant in the bond offering. So we benefited from the economics of issuing debt. That should continue into Q4. There are others that were other larger deals that are coming that we are going to be part of the syndicate. So we will benefit there in public finance. If you look at investment banking, the team that we hired basically is only now starting to make penetration into the customer base. So we are starting to see some really good leads coming out.
Vincent Delie: I was on a call last week where there was tremendous opportunity for us to partner with one of our clients who is inquisitive. There is going to be continued opportunities there without a lot of added expense. In public finance, there is some build-out that has to occur from a sales and trading perspective as we continue to evolve and grow. But as we have said before, our plan is to generate revenue and leg into the build-out.
Vincent Delie: So the CapEx or the investments, let us say. Not necessarily CapEx, but personnel investment that goes into those areas. We should be able to handle within our efficiency ratio guide. I think it is because we are balancing revenue, right, with the addition of personnel, and we have been able to do that with a pretty thin staff to date. That is how we have grown most of our businesses.
[Company Representative] (FNB): I think national banking is a good case for that, right? I mean, that is consistently a couple-
Vincent Delie: Yeah
[Company Representative] (FNB): million dollars a quarter, and we started that from scratch and added to it as we grew. So we do not-
Vincent Delie: That started with one person. All of our businesses do. We're not going to launch. We're not a huge investment bank that we're going to bring in a lot of people and put them on the bench and tell them to go generate revenue. We're kind of legging into this based upon opportunities.
[Company Representative] (FNB): We've done that with 11 businesses now.
Vincent Delie: Yeah
[Company Representative] (FNB): from scratch. We're small and then grew it.
Vincent Delie: Significant increase in non-interest income over time is attributed to those 11 businesses because we shrunk the consumer fee income significantly during that same period. Right? Even though we've grown the number of clients. If you look at the fees per account, they're down with overdraft fees and other things declining. We've been able to do a pretty good job of creating a very diverse set of businesses that generate high-value fee income. If you go back, I think if we go back 15 years, right, $160 million up to where we are today.
[Company Representative] (FNB): $169 million.
Vincent Delie: More than doubling.
[Company Representative] (FNB): Yep.
Vincent Delie: It seems to work.
[Company Representative] (FNB): If you look at page 17 of our investor deck and you look at where the contributions of fee income are, they are largely demonstrating primacy with our clients, right?
Vincent Delie: Right.
[Company Representative] (FNB): It is transaction charges, it is wealth management. If you look over time, we have been able to do this without meaningfully increasing our efficiency ratio.
Vincent Delie: Right.
[Company Representative] (FNB): These are historically higher efficiency ratio businesses, but by virtue of a lot of the expense management that you have seen over years, I mean, this is over 10 years now. The efficiency ratio has really maintained over time.
Vincent Delie: Yep. There is one other. We started another boutique business within the wealth segment itself because we are now going to support family offices with our high-net worth team. So there is some opportunity there as well. Alfred is right. We have been able to maintain the efficiency ratio. These typically are higher return businesses, but they have an impact on the efficiency ratio because there is a larger expense burden associated with the personnel that are brought in. So with compensation, variable compensation, base compensation. So we have been able to manage that very well over a long period of time. I hope that answers your question.
Timur Braziler: No, that is good color. I appreciate all that. Thank you. Then maybe just another one on the mortgage portfolio. It has been a couple of quarters now where the commentary has been that it is either slowing or more of that is going to maybe get sold into the secondary market, and the growth there still remains pretty robust. Is the thought here that concentration stays right around 30% and that business line grows alongside some of the commercial verticals? Or maybe as CRE comes back online, either production slows or more of that is sold off?
Vincent Delie: No, I think the percentage will decline over time simply because we're going to out-generate others' deposits, and we're going to deploy those deposits into our C&I and other categories. I think as a percentage, to your point, this should decline just by the nature of the opportunities that exist out there for us. I think the mortgage business for us, the stuff that's going on the balance sheet is very high quality for the most part, very high-quality mortgage loans that, super high credit scores. A lot of Physicians First loans are coming on. We're putting them on the balance sheet.
Timur Braziler: Right.
Vincent Delie: Because they have certain special aspects to the offering. But outside of that, I would expect us to continue to move performing mortgage loans out and service them. So, we would expect that to continue. Moving into a purchase money environment like we are, that'll happen more frequently. So the margins will be a little thinner because interest rates went up so significantly. Selling a mortgage loan servicing retained, you're going to get a lower margin than you would've in the lower rate environment. But nonetheless, our goal is to move it off the balance sheet. We also periodically look at portfolios to sell. Some banks have announced big sales. We do little bites. I don't know, if you go back and look, you'll see we package up a small portfolio and then sell it.
Vincent Delie: That's happened pretty regularly over the last seven, eight years, and that continues to be our plan. We constantly evaluate single household mortgage loans, anything that doesn't fit our franchise footprint, or we don't see opportunities to grow with the customer. We'll package it up and sell it post-close once it's on the balance sheet. So we don't rule that out either.
[Company Representative] (FNB): Yeah, there's also some seasonality that drives that percentage up with the Physicians First. So we keep those on balance sheet, and that kind of moves the percentage up. One other factor, too, the commercial real estate we talked about. We've been having payoffs. That's been kind of running down. When that turns, that'll move that back up and will also affect the concentration on the mortgage side of it.
Vincent Delie: That was the point he raised is that.
[Company Representative] (FNB): That is right.
Vincent Delie: Yeah. Maintain this given the changes that are coming with loan demand. I would say it comes down as a percentage of the total.
[Company Representative] (FNB): Yeah, more like 25 would be how I would value it.
Timur Braziler: Yeah.
Timur Braziler: 25%. Great. Thank you, guys. Appreciate the color.
Gary Guerrieri: Thanks.
Operator: The next question comes from Manuel Navas with Piper Sandler. Please go ahead.
Manuel Navas: Hey, good morning. The midpoint.
Gary Guerrieri: Good morning.
Manuel Navas: in the NII for next quarter implies pretty continued strong NIM expansion. Can you talk a little bit more in depth about the near-term NIM dynamics? Do you have a September NIM as well?
Vincent Calabrese: Yeah. September NIM was within a basis point of the quarter. It was 328. The quarter was 329, so pretty much in line with that. What's baked into our guidance is the margin going up gradually in the low slow to mid-single digits kind of movement in margin, Q3 to Q4. The items that I mentioned before, you're going to get the full quarter's benefit of the repricings that occurred in the middle of September. Plus, SOFR being higher in the 390s, 393 I think it was yesterday. That affects. You'll get a full quarter's benefit of that. So that also feeds into that.
Manuel Navas: And there's still some seasonality in deposit flows that, and the pipeline for commercial is still pretty strong too. So there's some potential deposit help as well?
Vincent Calabrese: Yeah. As I mentioned too, the spot balance is being significantly above the average for the quarter. Particularly on the loan side to drive net interest income is also a factor in any reinvestment on the securities portfolio. Which is like I said, 2 to 250. Today, it's probably 250 basis points above where securities are rolling off.
Manuel Navas: Okay. We've talked about the CRE balances kind of turning at some point. Could you just remind us some of the dynamics there and what timing do you think that that could start building again?
Gary Guerrieri: Yeah. Manuel, in terms of where we sit today with expected moves out of the portfolio into the secondary market. We actually look at Q4 as right now being a little less than originally expected. We've had a few transactions click over the calendar at year-end into the first quarter. I would say early in 2027, you will see the lines cross over there, and we'll start to see that balance move in the other direction, to the positive side of that equation.
Manuel Navas: Okay. I appreciate that. My last question here is kind of a refresh on capital deployment priorities. CET1 is still really strong. Could the buyback accelerate here? What could get you to become interested in M&A? Just some comments on capital deployment at this current moment.
Vincent Delie: I think as we look at deploying capital, we continue to maintain the same strategy, which is to do what we think is best from an earn back perspective and an accretion perspective. We are focused on a couple of things. You've seen a big pickup in our buyback activity because we have capital. We get flexibility to do that. We increased the dividend a quarter or so ago. I think there's room to do things. From M&A perspective, if we found something that was accretive to capital, accretive to earnings, and didn't hurt our deposit mix and provided really high IRRs, sure, we would look at a deal with an earn back that's reasonable. But as far as I'm concerned, there's not as much as people think out there that is attractive, and we've built a very attractive franchise.
Vincent Delie: It is performing extraordinarily well from an organic growth perspective. We continue to invest in our capabilities to take share from larger competitors and smaller ones alike. We are going to continue to drive that, ride that train, right? If something came along that looked good fit, was accretive, worked in like some of the smaller deals that we did in the last few years, that makes a lot of sense to us. We would look at it. But again, this is all being looked at relative to the absolute best deployment of capital with the highest returns and the best outcome for the shareholders. That is how it has to go.
[Company Representative] (FNB): I think the key point is it gives us optionality.
Gary Guerrieri: Right.
[Company Representative] (FNB): Our OCI-adjusted CET1 ratio is higher than the stated CET1 ratio for a lot of the banks that reported already, right? Basel III endgame probably adds some pickup there as well. So we have gotten a lot of capital flexibility.
Gary Guerrieri: Right.
[Company Representative] (FNB): You have seen us deploy that into lending, which makes a ton of sense. You have seen us deploy that into buybacks and dividends. I think that is a reflection of the capital generation capability of the organization. So as investors, you will see a ton of optionality that we have by virtue of the business model.
Gary Guerrieri: Right.
Vincent Delie: I think we haven't changed our philosophy. I guess that's what I'm saying. It's still the same.
Vincent Calabrese: Yeah. Just to put the buybacks in context, right? For the first 9 months, we repurchased $133 million. Last year was $32 million. We did $51 billion risk reports. I think it continues to be very attractive. The stock's lower than it was where we were buying in Q3. Clearly there's opportunity to continue to be active on the buyback side.
Manuel Navas: Thank you. I appreciate the commentary.
Gary Guerrieri: No problem. Thank you.
Operator: The next question comes from Brian Martin with Brean Capital. Please go ahead.
Brian Martin: Hey, good morning, everyone. Thanks for taking the questions. Just a couple of follow-ups, I guess, just from what you guys have said. On the loan outlook, sounds like the outlook heading into this Q4 and next year is more C&I and CRE focused. Is that leading the charge? That is accurate? Just making sure I understand what you are saying there.
Gary Guerrieri: I would agree with that, Brian. Yes.
Vincent Calabrese: Yep.
Brian Martin: Got you. Okay. Then just on, I guess Vince Calabrese, I guess just on the margin, I think just in general, can you just remind us given the, I know it is preliminary given you have not given guidance for, or at least outlook for next year, but just the impact of the potential rate hikes and how you are thinking about those as you look into 2027 on the margin.
Vincent Calabrese: Yeah. I would just say, just building off what Scott said earlier. From an interest rate risk standpoint, we are slightly asset sensitive, but pretty close to neutral. So, the impact really, as you look ahead into next year, it is not material.
Brian Martin: Got you. Okay. Just confirming that. Then just Vince, the new loan yields. You talked about deposits, but just where are new loans coming on today, if you can, I guess, broadly comment on that?
Vincent Calabrese: Yeah. For the month of September, they came on at 5.70%, which is 13 basis points higher than the portfolio yield. So that was the level for the month of September.
Brian Martin: Okay. Are they better for the C&I and CRE that are going to lead, I guess, potentially the growth? Are they better on those, I guess, the yields there? How are those versus that average for the September?
Vincent Calabrese: That's the all in, Brian, because it-
Brian Martin: Yeah. Okay.
Vincent Calabrese: mix changes quarter, so I don't want to get that precise.
Brian Martin: Yeah. Okay. I got you. Did you say, Vince, maybe I misunderstood you. I think you commented somewhere there about a rebound in mortgage. I didn't know if that was in relation to fee income and gain on sale line. I guess that's what I was wondering on just to clarify that into Q4.
Vincent Calabrese: Yeah. No, just fee income moving up from Q3 level. Not materially, but that it would bounce back up from where it was in Q3. The other element to your initial question, Brian, too, is on the commercial real estate. The rates on those that are paying off are higher.
Brian Martin: Yeah.
Vincent Calabrese: So that's a headwind to margins that when that turns, as Gary commented, that also will be additive from a margin standpoint.
Brian Martin: Right. Okay. That's what I was asking. Thanks for clarifying that, Vince. Then just last one for you is on Gary. Given the uptick in rates here, I guess any industries, obviously credit's great, and your team's done a great job. Just any areas you're watching more closely today from a credit standpoint as you look into the next couple quarters or into next year?
Gary Guerrieri: Yeah. Naturally, the CRE maturity wall quarter-by-quarter outlook is one that we watch very closely because interest rate movements can impact values and can impact debt service coverages. So that's something that we're constantly all over. Naturally, the commercial C&I borrowers get impacted as well. Primarily, the smaller business clients can see some more impact from that. So it's part of our management of risk across the portfolio when interest rates start changing. We're looking at each and every portfolio on a regular basis, Brian, to stay ahead of that. So again, just a focus of the team in managing the risk on a day-to-day basis, and we'll continue to do that as we have.
Brian Martin: Okay. That's it for me, guys. Thank you very much.
Gary Guerrieri: Yeah. Thank you. Take care, Brian.
Operator: The next question comes from Kelly Motta with KBW. Please go ahead.
Kelly Motta: Hey, thank you so much. I have a really quick follow-up. Just a minor point of clarification from the transcript thus far. The comment about deposits being on the lower end of the mid-single digit range, was that a comment about the full year or indeed a comment about Q4? Thank you.
Vincent Calabrese: Yeah, no, the mid-single digit guide, what I am saying is there is a range that that would imply. So kind of normal activity gets you to the low end of that range, but we have a variety of initiatives. We have a very strong treasury management pipeline. We have a variety of initiatives on the retail side to drive additional deposits. The more successful we are on those, you get more into the mid of the mid-single digits. So that was what I was saying. It is probably confusing the way that I said it.
Kelly Motta: No, I really appreciate the clarity. Thank you so much.
Gary Guerrieri: You are welcome. Thanks.
Vincent Calabrese: Thanks.
Operator: This concludes our question and answer session. I would like to turn the conference back over to Vince Delie for any closing remarks.
Vincent Delie: Thank you, everybody. Really appreciate the questions. A lot of very detailed questions. I would like to congratulate our team and thank everybody. We had a whole village here presenting to you. Everybody chipped in, and I appreciate that. We have a very good, strong leadership team across the company, and we have a group of people here that are very capable of driving the business that we have and answering these questions. So we are lucky to have them here. Thank you for your interest, and we appreciate you participating in the call. Thank you.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
