Good day and welcome to the FNB third quarter 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 1 on a touchtone phone. To withdraw your question, please press star, then 2. 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.

Good morning and welcome to our earnings call. This conference call of N.B. 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, October 27th, and the webcast link will be posted to the About Us Investor Relations section of our corporate website. I will now turn the call over to Vince Delie, Chairman, President, and CEO.

Thank you and welcome to our third quarter earnings call. Joining me today are Vince Calabrese, our chief financial officer, and Gary Guerrieri, our chief credit officer. FMB reported third quarter net income of $153 million, or 43 cents per share. This brings year-to-date earnings per share to $1.23, a 13% increase over the same period in 2025. FMB produced solid revenue of $469 million, benefiting from a diverse income stream with record net interest income of $377 million. This quarter, FMB 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. Total loans ended the quarter at $36.5 billion, an 8.5% annualized link order increase, FMB'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 link 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. 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 5 in 50%, and top 3 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. 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 left lead 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?

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 bps in the quarter and down 4 bps on a year-over-year basis. Net charge-offs reflect strong performance at 12 basis points and 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%. 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. 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 fourth quarter, positioning us well to achieve our desired growth targets this quarter and in the year ahead. I will now turn the call over to Vince Calabrese, our chief financial officer, for his remarks.

Thanks, Gary. Good morning. Today I will review the third quarter financial results and walk through our full year guidance. Third quarter net income totaled $153 million, or 43 cents per share, driven by strong growth in C&I and consumer loans, and a four basis point sequential increase in the net interest margin. BOT 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. BOT CNI loans grew at a 20% annualized linked quarter rate, or $407 million, given by growth across multiple markets, most notably the Cleveland and Pennsylvania markets. TRE 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. BOP 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. Spot non-interest-bearing deposits increased $78 million sequentially and remained stable at 26% of total deposits. The loan-to-deposit ratio was also stable from last quarter at a healthy 92.4%. The third quarter 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 five basis points sequentially to 5.18% as one month term SOFR moved higher and the securities portfolio yield jumped 12 basis points to 373 as reinvestment rates remained well above the overall portfolio yields. Total cost of funds increased two basis points from the second quarter to 2.01%, with rates paid on the interest-bearing deposits up only one basis point and rates paid on total borrowings down four 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. Non-interest expense totaled $257 million, a 4.5% increase from the year-ago quarter when adjusting for an FTIC 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 third-quarter efficiency ratio remains solid at 53.7%. N.B. 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. Our strong financial performance and profitability have enabled FNB to increase share repurchase activity and still maintain solid capital levels as evidenced by CET1 ratio 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. 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 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, 1.02 billion, with the results expected to be toward 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. 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.

F&B continues to be an innovative leader in our industry, introducing tech-forward digital and data solutions, including our proprietary e-store and common application. 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 omnichannel 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 Insight360 platform. 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, FMB 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. Our investments in these initiatives contributed to a strong third-quarter performance and create sustainable value for the future. With that, I would now like to turn the call over to the operator for questions.

We will now begin the question and answer session. To ask a question, you may press star then 1 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 2. At this time, we will pause momentarily to assemble our roster. The first question today comes from Kelly Mata with KBW. Please go ahead.

Hey, good morning. Thanks for the question. 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 27, but based on your pipeline for investments and kind of just outlook for revenue growth, do you think that your investment should enable a continuation of the positive operating leverage we are poised to see for this year? Thank you.

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. I mean, you're going to be able, the customers are going to be able to aggregate all their banking relationships at one place, view transactions across various cards at various institutions, and we're going to be able to do a lot with AI and You know, promos and it's going to help us tremendously drive, you know, household penetration here. So 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, you know, in our guide for this year. And, you know, we are very optimistic about, you know, positive operating leverage moving forward. 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's 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, data governance, building out the data infrastructure, We're in a much better position than others to capitalize on it from a revenue perspective. And 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.

Obviously, we've said this before, but we're not just going to jump in and tackle everything because the expense bill, the CapEx spend, and additional build and infrastructure

and you know token utilization relative to data consumption is expensive so you know we're going to leg into it and take out what we think are the or accomplish the best opportunities take out the expenses that are you know most notable or largest and then we're going to move in the same at the same time parallel with our strategies on revenue generation and improving share of wallet within our customer base so So the answer to the question is we have some great things coming out in the first quarter. We're 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's a migration down the road to enhancements to our mobile application in 27. There are some things coming at the end of 27 that are pretty interesting and cool. and we're excited about all of that. And then we continue to invest in the wholesale bank as well. We've just started really digging in to the processes and looking at ways to significantly improve, you know, turnaround times and the construction of underwriting documents and analysis. So a lot of very exciting things, but I do not think that, you know, 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. So the fee income bill, too, is exciting. And the departments that we launched, corporate finance, the investment banking initiative, and public finance are taking off, too. So that should help the cause next year.

That's super helpful. Kelly, I would just add too that 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 lay again. 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 $26, $20 million. Some of that goes towards that. And then as we grow, just create 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.

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, you know, 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 maybe if you have a spot rate at the end of the quarter, that would also be helpful. Thank you.

Yeah, I would say, I mean, 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're bringing those on in the month of September came on at like a 322 rate. Now, our best rate is a 415 rate for kind of our most attractive product that we have. which is a 13 month CD. One of the things we did kind of strategically is put the best rate on a longer term CD. You know, if we go back a little bit, we were focusing on kind of five and seven month CD. So we have that 415 on the 13 month is really our acquisition strategy product that we're using. But even with that, you know, so that helps with new accounts. The blend overall is that that 322 will be brought in in the month of September. So we're not bringing everything on at that 415. So The 322 is a good reference point. The non-interest bearing deposit growth, you know, even with the very strong deposit growth, we still held the 26%. So having that mix of non-interest bearing deposits is key to kind of the overall cost of funds. And as we've talked about in the past, we have a very rigorous process. We have weekly pricing every Monday at 4 o'clock. We have deposit strategy meetings once or twice a month to talk about where we want to be priced. You know, the goal that we've had for a while is to grow volume but also manage the cost side very diligently. So I think that worked well this quarter.

The key is client primacy, the non-interest-bearing deposits. We've had great success maintaining that 26% threshold even with the growth. And that's directly correlated to the strategies that we've deployed to be the principal bank for our clients. So less gimmicks, more hand-to-hand combat, bringing over customers that and actually produce, you have float and free balances that helps bring those costs down. As you know, we've been pretty competitive and we've grown market share across the footprint. 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's say it that way. So I think we've had really good performance 80% of our markets were in the top 10, 30% were in the top three in terms of deposit share. So we continue to work on improving that and have had great success both commercially and from a consumer perspective in these markets. 50% in the top five. Yeah, 50% in the top five and good, strong performance across the board from a deposit perspective. So what excites me the most is the Insight360 tool and what it's 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, you know, promos to move that money to FMB. That, to me, is very exciting.

Thank you so much for all the color. I'll step back.

The next question comes from David Smith with Truist Securities. Please go ahead.

Good morning. Starting off on credit, you had a really good quarter for net charge-offs, but the NPL and delinquency ratios picked 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 fourth quarter provision, since the range there is pretty wide right now.

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. And as it relates to the delinquency, it was up four basis points. We do see some seasonality, usually in this third quarter 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. And 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 a normal course of business. But all said, really strong performance across the portfolio throughout the whole quarter.

And then you're kind of already at mid-single loan growth from the fourth quarter of 25 as of the third quarter, 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 the fourth quarter? I know you've got the public funds balances that can move around in the second half.

Yeah, there's still some continued seasonal growth on the municipal side. I mean, you know, there was a nice surge in the third quarter. That usually continues through October, November. You know, as we've talked about, we have a pipeline over a billion dollars that's being actively pursued on the deposit side. for new relationships. So that's kind of part of our thinking as to what's in there. The range, mid-single digits is pretty broad. So we'd be at the lower end of mid-single digits if you do the math as far as the deposit growth, but it's still pretty strong deposit growth.

And by the way, in public finance, we are the principal bank. So we do not go after the money market offerings or compete on CDs or We have to be the principal disbursement bank to get the noninterest bearing deposits to drive the returns in that business, just to be clear. So what happens is we're 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. And you can see it's supported across the board because the deposit mix stayed consistent. What Vince is saying is we continue to see that late into the fourth quarter. So, you know, last quarter we kind of got penalized because there were delays in it. This quarter everybody discounts it because they say, well, it's seasonal. Well, you know, it is what it is. So 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'm clear on that because Vince keeps talking about it. Municipal Deposits. This is not a function of going after the high-priced deposit.

That's helpful. Thank you. Vince Calabrese, did I hear you right that you're thinking the deposits will probably be on the lower end of mid-single digits for the fourth quarter?

Yeah, that's exactly what I said. If you just look at the range from digits, so based on the growth in the third quarter, what we expect for the fourth quarter... The more wins we get for new business, it gets higher into the middle of that range. There's opportunity right in the middle of it. It all depends on our success bringing in new accounts.

Okay. Thank you. I'll step out.

The next question comes from Daniel Tamayo with Raymond James. Please go ahead.

Thank you. Good morning, everybody.

Good morning, Danny.

Yeah, maybe just digging into the loan growth side. So first on the C&I side, really strong growth again in the third quarter. You know, you talked about, I think it was just mentioned that, you know, you're basically already at the guidance, the midpoint of the guidance range for the year. But just curious kind of, and you had utilization down in the third quarter. Just curious how you see pipelines and expectation for I think, you know, a couple of things.

First of all, I do think, you know, we've had good solid CNI performance across the board. You know, it's coming from areas that we wouldn't have normally expected to come from, too. So we're seeing good client expansion in our more rural areas. areas that we cover, you know, more traditional areas where manufacturing might be, you know, a little represent a little bit more of the GDP coming out of these markets like Erie and, you know, we call what we call our Northwest market, which is hermitage share and Erie into Youngstown, Ohio. So we're starting to see, you know, some decent growth there in those areas. and then you know the central part of the state where Penn State's located you know there's a big that's a big market for us it's a pretty big geography but we've had great success there we have good leadership there and probably one of our best teams I mean end-to-end retail all the way through to commercial as you know we won the Penn State business so everyone's pretty excited about that so there's a lot of activity there and it shows in the numbers as we move throughout the year. So they both have good, solid pipelines. Cleveland, who hasn't performed in the past few years, is starting to come back pretty significantly. Pittsburgh's pretty solid. The mid-Atlantic region, there's a lot of activity in the D.C. area that we're seeing, so there's a lot of good activity for us there. Baltimore's coming around. And then the Carolinas, they're We've had some transition in Raleigh. We've just hired a terrific leader in Raleigh and have recruited some really good bankers, have some bankers in the queue. So we're looking forward to getting that turned around with strong leadership. And Charlotte's performed pretty well. Charleston, South Carolina is a performer from a commercial loan perspective, and we expect that to continue. We've expanded. across most of South Carolina. We have plans to build branches and markets that we weren't in through acquisition, like Spartansburg and Greenville were on our third branch, I think, right? So, you know, we're getting some additional penetration there. So we're very excited and optimistic about it. I think we have a pretty large C&I pipeline, a short-term pipeline anyway, moving into the fourth quarter. We're feeling pretty good about that with some fairly large funded deals that are coming. Equipment finance continues to perform very, very well, obviously because of the tax law changes and strong leadership there for us. Good team. We've seen some pretty outsized growth in those portfolios relative to historical levels, and that continues. That should help drive us forward. From an interest rate perspective, I don't 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'm not seeing that as a barrier to capex spend, to be honest. I mean, 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 its data centers and a good bit of it is, but there's a ripple effect. Manufacturing's taking off in a number of these markets, so there's some considerable capex spend, and we would expect that to continue. into next year. I don't know, Gary, do you have anything you want to add?

No, I think you covered it, Vince. I mean, the pipeline is robust. It is diverse across all the markets, which Vince kind of touched on. You know, interest rates moving up a quarter, I don't think has significant impact. The key question is, where's it all going? I think you'll see some significant CapEx spend here. before the end of the year from a tax perspective. And we're seeing opportunities.

With CRE exposures at what, one point? Why is it 180% now?

We're at 182 from a CRE standpoint. And I think we talked about it at the last quarter's call. We're moving towards that inflection point. The opportunities are starting to increase in that space. We're seeing some very nice opportunities, solid equity positions with really top-tier clients, and we expect that to be productive as we move into 2027 as well.

Where I see a tougher road to hoe would be in the mortgage business, moving forward with higher rates. That's going to be a headwind for mortgage. Go ahead, Booker.

Yes, Vince is right. We'll probably see some headwinds in mortgage, but our mortgage business is very different from regular banks. It's primarily purchase. It's much less dependent on refi. We actually did an analysis a couple weeks ago looking at the correlation to mortgage originations to rates. Our correlation is less than 1%.

We do have an advantage in the purchase money strategy, and it shows statistically. We're well ahead of the industry in terms of originations for purchase money.

And 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 physician's program, which makes them a good portion of our portfolio mortgage business. and with that, 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.

I think the aggregation tool that we deployed in the consumer space, in the consumer app is 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 You know, 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, you know, try to work with them to provide them with a product that maybe works a little better for them. Yeah, the bundling is another thing that we're working on. So There's a lot of very exciting things, Danny. So loan growth, I'm not that concerned about. A loan-to-deposit ratio of 92%, the concentration in CRE of 180% is pretty solid for us. So there's a lot of opportunity moving into next year that hinges on more of a geopolitical and economic environment than an FNB, lack of FNB opportunity, let's put it that way.

That's terrific, Collar. Appreciate all of that from everyone. And maybe a follow-up on credit for Gary. It sounds like you're saying things are still pretty good, even though the charge-off rate was so kind of low in the third quarter. And I think, did you make a comment that there were some resolutions you're expecting in the fourth quarter 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're thinking about overall credit quality.

Yeah, just to clarify my prepared remarks. In terms of the resolutions that I referenced, so criticized loans were up slightly, 40 basis points during the quarter. We already have expected upgrades and payoffs without any charge-offs, no charge-offs relating to that, that will reduce that slight increase back to a net zero position. So that's 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?

Just the impact of higher rates on kind of longer-term credit quality.

Okay, yeah, sure. In terms of the rate environment, We've not seen any impact at this point. Naturally, it's only 25 basis points and it's early. In terms of our CRE portfolio, our maturity walls during the fourth quarter will have about a half a billion dollars that we'll 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 normal course of business. Half of it is being extended. The majority of that extended on a long-term basis because it's a solid project that needed a little more time. Very little of it is being extended on a short, extremely short-term basis because we're concerned about those particular projects. As we look to 27, 400 million, a quarter to come up from a maturity wall standpoint. And we're all over those credits, you know, due to what we've all been through from an industry standpoint with CRE over the last three to four years or so. And there's nothing in there that's overly concerning to us at this point. So 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, but 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.

Great college. Thank you, Gary. I'll step back, guys. Thanks, Dana.

The next question comes from Casey Hare with Autonomous Research. Please go ahead.

Great. Thanks. Good morning, everyone. I wanted to follow up on the deposit costs. The spot, I'm not sure if I missed the spot deposit costs at 930, and then just some updated thoughts on where, what cumulative data 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.

Yeah, I would say regarding the betas, Casey, I mean, the last cycle is a good reference point to have kind of the 30 to 40. You know, if you look at the last year, we were 40% for total deposits through that last up cycle. I mean, it's a good reference point to use. I mean, we're very early in this cycle and, you know, as we've done, you know, we've done a very nice job managing the deposit cost side of things. So, you know, over this next cycle, who knows how long it's 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, was like 179, 240 kind of total and interest bearing for the average for the month of September.

Okay, great. Excellent. And then just wanted to circle back on the loan growth pipeline. So it's, you know, it's after a good quarter, it sounds like pipelines are robust and you guys have a lot of confidence that another hike won't won't slow down loan growth. But at what point, because there are three heights 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.

Yeah, I mean, we don't play in the higher risk space. So if we were in left then, for example, it would cause delays. It would cause people to say, hey, I can't accept the leverage. I can't make the debt service payments. We're not in high LTV, high velocity real estate transactions. So that's an area where it would impact. So you really have to drill into the portfolio. I've said it for a long time. Gary and his team are excellent. They're very conservative. We take returns where there's 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. So 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 don't know if you remember the last call. You should look at the transcript. But, you know, basically, it's true. It is true. It worked out. It worked out. I don't know how.

No, that was good. It was 373 on the nose. Thank you.

We've been rubbing his head, like trying to figure out where rates are going. We're like, Vince, tell us what's happening next. But I think, you know, those are the businesses that are going to suffer the most. That's where you're going to see delays in capex spend, maybe pullback 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. I mean, 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. I know the media doesn't really cover it much, but over $20 billion, I think it might be $20 trillion. I can't remember the number. It's huge. It's $20 billion in investment coming into the United States, not just in data centers, but across a broad spectrum. of industries. Ultimately, that leads to expansion of manufacturing capabilities and the need for cap expense. I think that that is a positive, especially for the businesses that we went to.

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, the 300 and 400 base points. And 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. So I think that helps through cycles.

And 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.

Great. Thanks, guys.

Anything else, Case?

All set. Thank you.

All right. Thank you. Thank you.

The next question comes from Russell Gunther with Stevens. Please go ahead.

Hey, good morning, guys. This is Nick filling in for Russell.

Hey, Nick.

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 the second half. and you know given the 3Q performance how are you how are you guys thinking about the composition of that roughly 94 million implied 4Q fee contribution and are there any areas that are now tracking differently from what you expected coming into the quarter?

Well I mean we had a surge in in derivative activity after the quarter so you know unfortunately the timing Thank you for joining us. and we're pretty optimistic about that. We've got several investment banking opportunities in the queue, public finance and corporate finance that should help there. We're doing really well from the TM perspective with treasury management fees and merchant fee income, working to optimize interchange. So there's upside in interchange. So I think when we look at it, We've got a good, you know, we gave you the guide because we feel confident that we can deliver, and that's what we're going to try to do.

Yeah, I would add, too, if you look at it from a PPNR standpoint, you know, 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 2Q to 3Q that It's kind of lumpy. You don't have that every quarter. And then if you go through kind of the components, so the fee income, that plus the fee income was the main driver to it not being up more. The capital markets decreased reflected. We had record level debt capital markets in the second quarter. You know, the move in interest rates delayed swap execution, as Vince talked about, that would start to the fourth quarter. 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. And then if you kind of look ahead and why we're confident in hitting the PPNR number for the fourth quarter, there's several things. Loans and deposits on a spot basis were $400 to $700 million higher than the average balance. 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 that happened in mid-September. We get a full quarter's benefit of that. In the investment portfolio, we're investing 250 basis points higher than where rates are rolling off. And then we do expect to bounce back, like Vince commented on, in capital markets as well as mortgage capital markets as a very strong pipeline. And then expenses overall, as 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. And then the down payment assistance component. Those are three kind of chunky things that will lessen as you go into the fourth quarter. So if you roll all that up, you know, well, I know people commented on the PPNR missing the third quarter, but, you know, we're confident in having a nice rebound in that in the fourth quarter. And for the full year, the PPNR growth is nice and the operating leverage is very strong.

Got it. That's very good. I'll step back. Thank you for taking my questions. Thank you, Frank.

The next question comes from Terry McElvory with Wells Fargo. Please go ahead.

Hi, thanks. Good morning. Thanks for taking my questions. Market expectations have changed over the last couple 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?

I would say, you know, 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.

I thought your comments on the manufacturing sector driving the CNI 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?

Well, I think there's a lot of it's coming through in the equipment finance business early, right? So the first We're seeing that, and there's an incentive with bonus depreciation to do it quickly. So there was a surge in that type of investment. Usually that's a precursor to overall large CapEx investment. So I think that's to follow. I don't even think we've seen it yet. So we're starting to see it emerge. You know, the supply chain for these industries is pretty deep. Automotive, you know, even the data centers that are being built, you know, there's structural steel components. There's all kinds of stuff that goes into building these data centers. And, you know, there's quite a bit of new construction going on. across the Southeast, you know, the light manufacturing facilities, owner-occupied facilities, expansion of owner-occupied. You know, in the supply chain for a variety of industries, you know, there's a ripple effect. So it kind of ripples through the manufacturing sector. So we're seeing benefits across the board. And then, you know, transportation remains strong. Even though there are periods where it slows, it seems like it's still coming back pretty strong. At least our clients are doing pretty well. I think that all bodes well for us moving into next year, barring some, like I said before, some crazy geopolitical or economic scenario.

Just to add to Vincent's comments, The manufacturing space has always been important to us organizationally. It's what we've 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, many years over the course of our careers and It continues to be a really, really key segment for us, you know, moving forward.

Appreciate the caller. Thank you.

The next question comes from Timur Braselber with UBS. Please go ahead.

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 3Q or 4Q? And then I guess maybe more broadly, as you're thinking about the investment banking rollout, public finance, I think last time we spoke, you guys mentioned they're both kind of in the first inning of the build-out there. Just what does that trajectory look like, and 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?

Yeah, those are great questions. The public finance transaction, we were left late, occurs in the fourth quarter, so it has not closed yet. We won the business. We won the mandate, which we were excited about. But we've already closed several large transactions where we were a participant in the bond offering. So we benefited from the economics of issuing debt. And that should continue into the fourth quarter. There are others that were other larger deals that are coming that we're going to be part of the syndicate. So we'll benefit there in public finances. If you look at investment banking, our team that we hired basically is only now starting to make penetration into the customer base. So we're starting to see some really good leads coming out. I was on a call last week where there was tremendous opportunity for us to partner with one of our clients who's acquisitive. There's going to be continued opportunities there without a lot of added expense. In public finance, there's some that has to occur from a sales and trading perspective as we continue to evolve and grow. But as we've said before, our plan is to generate revenue and leg into the build-out. So the CapEx or the investments, let's say, not necessarily CapEx, but personnel investment that goes into those areas, we should be able to handle within our efficiency ratio guide. And I think It's because we're balancing revenue, right, with the addition of personnel. And we've been able to do that with a pretty thin staff to date.

And that's how we've grown most of our business. National banking is a good case for that, right? I mean, that's consistently a couple million dollars a quarter. And we started that from scratch and added to it as we grew.

So that started with one person. So all of our business units that we're not, you know, we're not going to launch. We're not a huge investment bank that we're going to bring in. A lot of people put them on the bench and tell them to go generate revenue. We're kind of lagging into this based upon opportunities.

We've done that with 11 businesses now from scratch. We're small and then growing.

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. We've grown the number of clients. If you look at the fees per Thank you for joining us.

Page 17 of our investor deck, and you look at where the contributions of the income are, they're largely demonstrating from CWISR clients, right? Right. It's transaction charges as wealth management. And if you look over time, we've been able to do this without meaningfully increasing our efficiency ratio. Right. These are historically higher efficiency ratio businesses, but by virtue of a lot of the expense management that you've seen over time, Thank you for joining us.

on the efficiency ratio because there's a larger expense burden associated with the personnel that are brought in. So, you know, with compensation, variable compensation, base compensation. So, you know, we've been able to manage that very well over a long period of time. Anyway, I hope that answers your question.

Now that's good color. I appreciate all that. Thank you. And then maybe just another one on the mortgage portfolio. It's been a couple quarters now where the commentary has been that it's 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?

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. So 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, you know, the stuff that's going on the balance sheet is very high quality for the you know super high credit scores a lot of physicians loans are coming on putting them on the balance sheet right because they have certain special aspects to the offering but you know outside of that you know I would expect us to continue to move performing mortgage loans out and service them so you know we would expect that to continue and moving into a purchase money environment like we are that'll happen more frequently so you know The margins will be a little thinner because interest rates went up so significantly. So selling a mortgage loan, servicing retained, you're going to get a lower margin than you would have 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. So 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. 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.

Yeah, there's also some seasonality that drives that percentage up with the physician's program. So, you know, 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, you know, we've been having payoffs. That's been kind of running down. When that turns, you know, that'll move that back up and also affect the concentration of our mortgages.

That was the point he raised is that, yeah, maintain this given the changes that are coming with long demand. and I would say it comes down as a percentage. More like 25.

25%.

Thank you guys. Appreciate the call.

The next question comes from Manuel Navas with Piper Sandler. Please go ahead.

Good morning. The midpoint in the NII for next quarter implies pretty, you know, continued strong NIM expansion. You talk a little bit more in depth about the near-term NIM dynamics. Do you have a September NIM as well?

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 kind of gradually in the low to mid single digits kind of movement in margin kind of third quarter to fourth quarter. and the items that I mentioned before you're going to get the full quarters benefit of the repricings that occurred in the middle of September plus so for being higher you know in the 390s 393 I think it was yesterday you know that affects you get full quarters benefit of that so that also kind of feeds into that.

And there's still some seasonality in the pocket flows that and the pipeline for commercial is still pretty strong too so there's some potential of deposit help as well?

Yeah, and as I mentioned too, the spot balance is being significantly above the average for the quarter, you know, particularly on the loan side to drive an interest income is also a factor. Any reinvestment on the securities portfolio, which is like, like I said, two to 250 today, it's probably 250 basis points above where securities are rolling off.

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?

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.

Okay, I appreciate that. And then my last question here is kind of a refresh on capital deployment priorities. CT1 is still really strong. Could the buyback accelerate here? And what could get you to become interested in M&A? Just some comments on capital deployment at this current moment.

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. So 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. So I think there's room to do things. From an 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 IRR, 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 built a very attractive franchise. It's 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. If somebody came along that looked good, fit, was a creative, worked in some of the smaller deals that we did, In the last few years, that makes a lot of sense to us. You know, 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's how it has to go. And I think the key point is it gives us optionality. Our UCI adjusted CET1 ratio is higher than the stated CET1 ratio for a lot of the banks that reported already. and then Basel III probably adds some pickup there as well. So we've gotten a lot of capital flexibility. You've seen us deploy that into lending, which is on a sense. You've seen us deploy that into buybacks and dividends. And I think that's a reflection of the capital generation capability of the organization. So as investors, you'll see a ton of optionality that we have by virtue of the business model.

I think we haven't changed our philosophy. I guess that's what I'm saying. It's still the same.

Yeah, just to put the buybacks in context, right? So for the first nine months, we purchased $133 million. Last year it was $32 million. We did $51 billion in risk quarters. I think it continues to be very attractive. The stock's lower than it was where we were buying in the third quarter. So clearly there's opportunity to continue to be active on the buyback side.

Thank you. I appreciate the commentary. Thank you.

The next question comes from Brian Martin with Brain Capital. Please go ahead.

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, it sounds like the outlook heading into, you know, next year, this fourth quarter and next year is more C&I and CRE focused. Is that kind of that's leading the charge? That's if that's accurate. Just make sure I understand what you're saying there.

I would agree with that, Brian, yes.

Gotcha. Okay. And 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 preliminary, given you haven't given guidance for, or at least outlook for next year, but just the impact of the potential rate hikes and how you're thinking about those as you look into 2027?

Yeah, I would just say, just building off what Scott said earlier, I mean, you know, from an interest rate risk standpoint, we're at slightly asset sensitive, but, you know, pretty close to neutral. So, you know, the impact really, as you look ahead into next year, it's not material.

Gotcha. Okay. Just confirming that. And then just, Vince, the new loan yields, you know, you talked about deposits, but just where are new loans coming on today, if you can, I guess, broadly comment on that?

Yeah, for the month of September, they came on at 570, which is 13 basis points higher than the portfolio yield. So that was the level four for the month of September.

Okay. And are they better for the, you know, the CNI and CRE that are going to lead, I guess, potentially that the growth is, are they better on those? I guess the yield there, you know, how are those versus kind of that average for the September?

I mean, that's the all-in, Brian, because it's the next change order. So I don't want to get that precise.

Yeah, yeah. Okay. I got you. And then 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 kind of gain on sale line or maybe just if that's what I guess what I was wondering on just to clarify that into fourth quarter.

Yeah, no, just fee income moving up from third quarter level. Not materially, but that it would bounce back up from where it was in the third quarter. You know, the other element to your initial question, Brian, too, is on the commercial real estate. You know, the rates on those that are paying off are higher. So that's a headwind to the margins that when that turns, as Gary commented, that also will be additive from a margin standpoint.

Right. Okay. That's what I was asking. So thanks for clarifying that, Vince. And 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?

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, you know, it's part of our management of risk across the portfolio when interest rates start changing. And, you know, we're looking at each and every portfolio on a regular basis, Brian, to stay ahead of that. So, you know, 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.

Okay. That's it for me, guys. Thank you very much.

Thank you. Take care, Brian.

The next question comes from Kelly Mata with KBW. Please go ahead.

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.

Yeah, no, the mid-single digit guys, what I'm saying is there's 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 treasure management pipeline. We have a variety of initiatives on the retail side to drive additional deposits. So the more successful we are on those, you get more into the kind of the mid of the mid-single digits. So that was what I was saying. It's probably confusing the way that I said it.

I really appreciate the clarity. Thank you so much.

You're welcome. Thanks. Thanks.

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

Thank you, everybody. Really appreciate the questions. A lot of very detailed questions. And, you know, I'd like to congratulate our team. Thank everybody. We had a whole village here presenting. to you. Everybody chipped in and I appreciate that. We've got a very good, strong leadership team across the company. We have a group of people here that are very capable of driving the business that we have and answering these questions. So we're lucky to have them here. But thank you for your interest and we appreciate you participating at all. Thank you.

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