Operator: Good morning and welcome to the FNB Corporation second quarter 2026 earnings call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw the 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.
Lisa Hajdu: 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 overlooking 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 available on our corporate website. A replay of this call will be available until Friday, July 24th, 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.
Vince Delie: Thank you, and welcome to our second quarter earnings call. Joining me today are Vince Calabrese, our Chief Financial Officer, and Gary Guerrieri, our Chief Credit Officer. FMV's second quarter earnings per share grew 17% year over year. to 42 sets with net income of $149 million. Our results included another quarter of record revenue totaling $463 million driven by net interest income of $366 million and solid non-interest income of $97 million. The solid quarterly performance contributed to pre-provision net revenue increasing 9% from the year-ago quarter and positive operating On a year-over-year basis, tangible book value per common share increased 10% to $12.24, demonstrating our strong profitability levels and commitment to peer-leading internal capital generation. FNB repurchased 47 million, or 2.7 million, shares of common stock at a weighted average share price of $17.46. FNB's capital levels remain strong With PCE at nearly 9% and with a solid return on average tangible common equity at 14%. Period end loans increased 7.5% on an annualized link quarter basis with growth led by commercial and industrial, consumer lending, and seasonal residential mortgage production. D&I's 8% annualized link quarter growth was driven by lower-risk-rated, high-quality commercial borrowers. By leveraging our deep products at capital markets, we were able to produce double-digit returns for the overall relationship while maintaining our strict credit discipline and originating lower-risk assets in a volatile geopolitical and economic environment. Our commitment to deepening customer relationships and serving as their primary operating bank was a key driver for 3% annualized growth in total average deposits with average non-interest bearing deposit balances growing nearly 5% annualized despite the competitive environment. At quarter end, non-interest bearing deposit balances were over $10 billion for the second consecutive quarter allowing us to maintain a 26% mix of non-interest bearing to total deposits for the seventh consecutive quarter. Our data analytics team has been able to leverage the success of our proprietary e-store and common application to gather additional data points for meaningfully improved insights on customers' preferences and competitive pricing. This ability enables us to use our significant investments in our data hub and machine learning to analyze the relationships holistically to strategically price deposits. Our ability to utilize insights to drive pricing decisions contributed to the total cost of deposits decreasing three basis points in quarter and 21 basis points from the year-ago quarter. Our wealth management revenue is up 8% year over year, aided by the utilization of new tools to improve client engagement with advanced financial planning, better portfolio analysis, and increased efficiencies. For example, our brokerage advisors have been able to quickly translate complex financial data into intuitive visuals for our clients. These tools paired with the key strategic financial advisory hires across our footprint help to expand client relationships and produce record brokerage fee income this quarter. We have also achieved solid progress on the development of our new AI-enabled customer aggregation and insight tool, Insight360. The ultimate goal will provide our clients and bankers with the ability to optimize their banking relations and improve product penetration. Our Insight360 tool is expected to go live by the end of the year with additional enhancements to be introduced over time. In combination with the Common App, Insight360 will enable FNB to continue to grow our share of wallet and customer primacy based upon positive outcomes for our clients. As we've demonstrated over the past decade, we can successfully introduce innovative digital and data solutions while also achieving a top quartile efficiency ratio. We will maintain the same disciplined approach We believe FNB is one of the best positioned financial institutions to strategically expand AI and data analytics usage to drive efficiency and accelerate revenue growth. Our value proposition is is being a trusted and regulated financial institution with FinTech capabilities. These attributes will serve us well as we continue to adapt to a changing competitive landscape. With that, I will now turn the call over to Gary to discuss our credit results for the quarter.
Gary Guerrieri: Gary? Thank you, Vince, and good morning everyone. We saw improvement in our continued solid asset quality metrics this quarter, with both Delinquency and NPLs and Oreo decreasing 3 bps compared to the prior quarter, totaling 71 and 31 basis points, respectively. Net charge-offs continued to show solid performance, totaling 19 basis points, up 1 bp compared to the prior quarter. Criticized loans declined slightly in the quarter with a 68 basis point reduction compared to the prior year. Total funded provision expense for the quarter stood at $21.3 million, again supporting strong loan growth. Our ending funded reserve now stands at $447 million, an increase of $4.3 million, ending at 1.25%. When including acquired unamortized loan discounts, our reserve stands at 1.3%, and our NPL coverage position remains strong at 420%, inclusive of the discounts. We continue to maintain qualitative overlays for potential supply chain impacts due to the events in the Middle East and ongoing tariff uncertainty. Our consistent underwriting and strong credit risk curriculum allow us to grow high-quality earning assets throughout various economic cycles, as shown in our results. With our focus on less volatile industries and asset classes, we remain optimistic that our diversified customer base will continue to show resilience as it has in the past. Our consumer portfolio is very strong despite continued inflationary pressures. Average origination FICO scores were 784 in the quarter, with delinquency of 66 basis points and charge-offs of 6 BIP, both remaining at multi-year lows. During the quarter, we saw solid C&I loan growth, including a slight uptick in line utilization, along with higher CRE production. However, our overall CRE exposure declined in the quarter due to planned secondary market activity, ending at 187% of Tier 1 capital plus allowance. We are continuing to see increasing levels of CRE activity in our desired asset classes throughout our markets. In closing, despite the continued volatility in the markets, We saw solid loan growth across the portfolios. Our loan book is strong and well diversified, and pipelines continue to remain at solid levels, positioning us to achieve our growth targets as we move into the second half of the year. I will now turn the call over to Vince Calabrese, our Chief Financial Officer, for his remarks.
Vince Calabrese: Thanks, Gary, and good morning. Today I will review the second quarter's financial results and walk through our third quarter and full year guidance. Second quarter net income totaled 148.7 million or 42 cents per share, 17% year over year increase driven by total revenues up 5.6% and prudent management of operating expenses generating a 9% PPNR increase. Turning to the balance sheet, loan activity was robust spot total loans and leases Ending the quarter at $35.8 billion, a 7.5% annualized length quarter increase. Growth of $547 million in consumer loans and $111 million in commercial loans and leases drove the increase. Spot C&I loans and commercial leases were up over 8% length quarter annualized, or $186 million, driven primarily by growth in the Mid-Atlantic and Pittsburgh markets. CRE balances continued to be impacted by payoffs as expected and were down 129 million linked quarter. Seasonal strength in residential mortgages and HELOC growth fueled the rise in consumer loans. Average total deposits grew at a 3% annualized rate the first quarter, driven by growth in non-interest-bearing balances, low-cost transaction deposits, and time deposits. Of note, spot non-interest-bearing deposits increased $53 million, exceeding $10 billion for the second consecutive quarter, and remaining stable at 26% of total deposits. Looking forward, public funds deposits typically build in the second half of the year, and the Treasury management deposit pipeline was strong at quarter end. The loan-to-deposit ratio ended the quarter at a healthy level of 92.5%. While the second quarter's net interest margin of $325 was equal to last quarter's NIM, net interest income increased more than 7% on a linked quarter annualized basis. Total yield on earning assets declined only one basis point linked quarter to $513, with a four basis point decline in loan yields offset by a seven basis point increase in investment securities yields. The decline in loan yields reflects the impact of lower one-month SOFR on adjustable rate loans and tighter spreads on new originations. Reinvestment rates on investment securities remained well above the overall portfolio yield. Interest-bearing deposit costs declined four basis points, driven by lower rates on money market and CD balances, while total borrowing costs improved by one basis point. As a result, the total cost of funds decreased two basis points to 199. On a year-over-year basis, net interest income increased 5.3% from the year-ago quarter as the NIM expanded six basis points and earning assets grew 3%. Turning to non-interest income and expense, non-interest income totaled $97 million, up 6.5% from the second quarter of 2025. Capital markets income increased 16% to $8 million on solid contributions from debt capital markets Interest rate derivatives and international banking, as well as early contributions from our newer businesses of investment banking and public finance. Wealth management revenues increased nearly 8% year-over-year to $22 million with contributions across the geographic footprint. Non-interest expense totaled $253 million, a 2.9% increase from the year-ago quarter. Salaries and employee benefits increased 4.4%, reflecting strategic hiring and normal merit increases. Occupancy and equipment increased 5.1%, primarily due to technology-related investments and higher occupancy costs. Outside services increased 11.6%, driven by higher third-party legal and consulting costs. Even with these increases, the second quarter efficiency ratio remained solid at 53.7%, Now more than 100 basis points from the year-ago quarter, and we continue to manage our expense base in a disciplined manner. FNB continues to actively manage our capital position to support balance sheet growth and optimize shareholder returns while appropriately managing risk. Share repurchases totaled $47 million in the second quarter, more than $80 million for the first half of the year, More than 300% increase from the dollar amount repurchased during the first half of 2025. Over $250 million in share repurchase authorization remained at quarter end. The stepped-up repurchase pace and our recent quarterly common dividend increase reflect our strong financial performance and capital levels as evidenced by the TC ratio of nearly 9% and the stable CET1 ratio of 11.4% in the quarter. Let's now look at guidance for the third quarter and full year of 2026. All guidance is based on current expectations while remaining cognizant of the highly uncertain macroeconomic 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 billion 1.515 billion due to a combination of our first half results and our expectation for a continuation of heightened deposit competition within the industry. We are assuming no Fed interest rate actions for 2026. Third quarter net interest income is projected between 375 and 385 million. Non-interest income full year guide remains 370 to 390 million. The third quarter level is expected between $93 and $98 million. The full year guidance range for non-interest expense has been tightened $1.01 billion, $1.02 billion, and we expect to be toward the high end of the range. Third quarter non-interest expense is expected to be between $255 and $260 million. Continue to expect strong positive operating leverage for full year 2026. Full-year provision guidance has been revised to a range of $80 to $95 million, down from $85 to $105 million previously, given our favorable credit performance during the first half of the year, and will be dependent on net loan growth and charger-up activity for the rest of the year. 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.
Vince Delie: Thank you, Vince. Our results are a testament to the talent, dedication, and hard work of our employees, supported by our ongoing investments in AI and data analytics. The culture at FNB is rooted in teamwork and collaboration, where we strive to collectively win together. FNB continues to earn independent recognition for our client service, financial performance, and culture. This quarter, We were proud to be named as the lender of the year by the Export-Import Bank of the United States and a top workplace by Newsweek, as well as earning the top financial innovations in North America award by Global Finance. These select examples of FNB's third-party recognition highlight the strength of our business model, financial achievements, and quality of our team. We've been able to recruit a number of highly talented executives in recent months, which adds to the depth of our leadership team and bankers. Earlier this month, Ryan Mitchell retired as Chief Wholesale Banking Officer. Since joining FNB in 2018, he has played a significant role in executing our strategy and was particularly instrumental in the early build-out of our capital markets capabilities. I would like to thank Brian and convey our appreciation for his contributions over the past nine years as F&B continues to evolve into an elite commercial bank and a formidable competitor in our markets. I wish him all the best in his retirement. With that, I will now 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 1 on your telephone keypad. 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. Our first question comes from Daniel Tamayo with Raymond James. Please go ahead.
Daniel Tamayo: Thank you. Good morning, everyone. Maybe starting just on the reduction in the interest income guidance, just curious where you think the biggest change that occurred in the second quarter that drove that was, and then assuming it's On the competition side, I know you talked a little bit about tighter loan spreads, but as well as on the deposit side, just curious if you think we are nearing the end of the improvement on the deposit cost side.
Vince Calabrese: I would say a couple of things, Danny. If you look at where we came in, $366 million, slightly below the guidance range. The two factors you just mentioned are part of it, for sure, that we commented on in the prepared remarks. And the decline in one month SOFR, like from peak to trough, was nine basis points during the quarter, kind of bottomed right at the end of May. So that has a significant impact. We have $13 billion worth of loans that are tied to one month SOFR. So that really, coming from peak to trough, down nine basis points during the quarter, the expectation is, with the futures market saying that that kind of nine comes back, and gets to like 373 on average in the third quarter. So that clearly affected the second quarter quite a bit. But competitive environment for deposits is there for everybody. We still had an ability to reduce our interest bearing deposit costs by four basis points. So that was an accomplishment given the kind of the environment that we were in during the quarter. And then the spreads on kind of higher quality, lower risk loans that are tighter than other loans was definitely a factor too. But if you kind of go forward to the next quarter, I mean, so the SOFR bounce back, as I mentioned, the normal seasonality in deposits that occurs from July through October, November on the municipal side, we do expect that to come through. And that replaces short-term borrowings and helps to pay and fund for the loans. I mean, the higher short-term borrowings in the second quarter loan is like an extra $4 million interest expense or reduction in interest income. that seasonality comes through, continue to have a very strong treasury management deposit pipeline on the commercial side of the house, kind of over a billion dollars that we're going after. And some of those are larger, there's more, a longer lead time, but that's still very active and continues to be worked. And then the CRE headwind from payoffs, we expect another quarter of that, the third quarter, and then expect that to dissipate some as you get into the fourth quarter. And those are loans that are probably, you know, 25 basis points or so higher and other loans. So as those pay down, it definitely has an impact on the overall margin. And then the reinvestment rates on the security side, you know, we're reinvesting 125 to 150 basis points above kind of the roll-off rate. And for the next 12 months, it's 100 million a month in cash flow, kind of 309 on average rolling off and picking up 125 to 150 basis points on that. I guess the last thing I'll pause then is just kind of the exit margin. So for the month of June was at 327, a couple basis points higher than where the full quarter came in. And there's fees and stuff that fluctuate from month to month, but that's kind of our exit point into the third quarter.
Daniel Tamayo: Really helpful. Thanks, Vince, for all that color. And you hit on this a little bit on my next question on the CRE payoffs remaining elevated in the second quarter, but just kind of Thank you for joining us. has outpaced so far. You've got some seasonality in the second quarter certainly that impacts that, but just curious how you think about that mix going forward. If you have a reduction in payoffs and the CRE starts to pick up, do you think you portfolio fewer residential mortgage loans and that mix starts to get back to where it was, or you're still willing to grow the balance sheet with the resi side even as the CRE starts to pick up?
Vince Delie: Yeah, I think the residential, the contributions to growth from the resi portfolio, and that's largely, you know, physicians' loans, very, very, very high quality, you know, larger mortgage loans coming on the book. Our expectation, we're not trying to rely on that to drive interest income. That's not the case. And we've actually sold portfolios. So we've actually sold portfolios. Thank you for joining us. on one particular asset class. I think the CRE runoff, you know, that's a train that you can't stop easily. You know, we're financing construction, and, you know, this stuff's going to the permanent market, and quite frankly, there just isn't enough, there aren't enough projects driving on demand in that space. But that's starting to change, so I think, I don't know, Gary, you could comment on that.
Gary Guerrieri: Yeah, during the quarter, Danny, the CRE runoff Growth was right at about $284 million. That compared to $190 in Q1. We are seeing a lot of very solid opportunities in that space. It is competitive, as I think everyone is aware. The industry is really focused on CRE at this point, and there are some nice opportunities that have come through the organization. So we do expect that to continue to ramp up in the asset classes that we want to play in. In reference to the mortgage that you had mentioned and Vince referenced, the second quarter is an extremely high seasonal quarter for us because the doctors come out of school in March and they move into their new roles at the hospital organizations that that they're joining, and they go right into purchasing the home. So the second quarter is our seasonal peak there. Third quarter is the volume is still good, but generally lower around that doctor's program, and then it really tails off in Q4 and Q1 from that part of the program.
Vince Delie: You know, I'll add to that, too. We were talking about this a little earlier, you know, Gary and I. is at a record, a total pipeline, which includes CRA, is at a record level for us at this point. So again, remember, it lagged for a little bit. Historically, it had been growing, and then we flattened out, and it actually declined for a period or two. But now it's back up above the all-time highs. So the short-term pipeline has contracted because we pushed a lot of volume through. We closed a lot of deals this quarter, so You know, we should see that pick up again because it'll pull through, right, from the larger pipeline. It's up, you know, at least nearly 10% over where it was last quarter. So we expect the second half of the year, particularly this quarter coming up, to see some good activity in CNI and CRI fundings, right, Gary? And then, you know, that'll make up the fall off of the resi mortgage and the consumer. We're expecting to have a pretty decent second half of the year from a commercial perspective. With that, there are a bunch of deposit clients, treasury management clients that we have in the pipeline that we're pulling through. Again, some of the largest clients in our history. We were able to win business at some pretty sizable entities. It's going to help us and the second half of the year with deposit growth in addition to the seasonal inflows that we should see. I don't know if you want to comment, Alfred, on the deposits in general and what's happening to the consumer bank. Yeah, I mean, it continues to remain competitive. I think what we've had great success with is driving engagement with our existing clients and oftentimes, particularly in the mortgage space, oftentimes that comes with Low-cost DBA accounts. And we're being strategic about how we price deposits in some areas. We have opportunities to reduce deposit costs in some areas. We want to be competitive, particularly in some of our new markets. Well, I'm never pleased with our cost of funds. You know, I'm always critical of every move that our people make. I think it's part of my job. Alfred, you know, you made a comment earlier about monitoring. The reporting that's occurred to date. So how do we compare? Yeah, I mean, from a deposit perspective. And to that point, we're obviously managing to the dual mandates of lowering our deposit costs and growing debt as a balance, the impossible chore. But this quarter, we were one of the few banks, I think, you know, we're tracking something like 15 banks that have reported so far. I think we're one of three that actually had a lower cost of deposit from the prior quarter. So despite the fact that the rate environment meaningfully changed from the beginning of the quarter to now, it kind of highlights the discipline that we've had in how we price these things. Yeah, it's actually two things. It's discipline from a pricing perspective and strategy in the pricing using the insights that we have to maintain or try to maintain our margin. Plus, the investments that we've made to maintain privacy and some of the initiatives that Alfred and his team have launched, particularly the mortgage company with Wingspan, which is a bundling of services that we do. So you'll see more of that. And our Insight360 tool that we mentioned is going to be right in the sweet spot of driving better outcomes from cost of deposit perspective and gaining share and primacy. So I'm very excited about that. I can't wait until You guys get to see it. Really cool. Anyway, hope that was helpful.
Daniel Tamayo: Very, very helpful, Vince, and appreciate the color, Vince, Gary, and Alfred as well. I'll step back. Thanks, guys.
Vince Delie: Thank you. Thanks, James. Thanks, Ben.
Operator: Our next question comes from David Smith with Truist. Please go ahead.
David Smith: Hey, good morning. Good morning, David. Can you help us size the impact of the public funds deposit seasonality? Just deposits are down a little bit year-to-date right now, and you're still calling for mid-single-digit growth, and it sounds like it's going to be another solid quarter of loan growth for your commentary. So just thinking about the impact here and how much of the deposit cost decrease this quarter might have to come back amid the continued competitive backdrop for deposits you cite, particularly if we do end up getting Fed hikes.
Vince Delie: Before Vince answers that, I just wanted to make a comment. The municipal business that we have is we're the primary operating bank for the municipalities. We don't just go out and accept deposits to replace, you know, click it for one of the high-yielding money market options that they have. So that's not our strategy. Our strategy is to go in, provide the operating accounts, you know, provide the treasury management services for Thank you for joining us. associated with that, that they offset with demand deposits. But why don't you answer directly this question?
Vince Calabrese: Yeah, the volume side of it, I mean, it's historically been about a half a billion dollars, kind of plus or minus a couple hundred million dollars from kind of peak to trough. It used to be the 300 to 500, and as we've grown and have larger, more relationships, you know, it's a little bit bigger. But half a billion or so kind of we would expect to kind of surge through as we go through the end of the second quarter through kind of the October, November time frames. and to Vince's point, it's a mix. It's clearly a mix of different deposit categories.
David Smith: Okay, so the public funds are a little bit of the implied increase in deposits for the second half, but it's not the majority or anything. And then on expenses, we just take kind of the midpoints of the 3Q and full year guidance implies a decent step down in non-interest expenses in the fourth quarter. Your seasonality has typically been for a small increase quarter-on-quarter in the fourth quarter, just looking at adjusted expense trends the past few years. I was wondering if you could help us unpack that a little bit, if there's anything unusual either in the third quarter or fourth quarter that's driving that abnormal seasonality.
Vince Delie: you know they're very the way we book them which is important yeah I'm told you know we end up with this big expense up front so that's reflected in the fourth quarter for at least the last three fourth quarters right so there's going to be a little bit of distortion there but Vince I don't know if you want to comment generally on you know the total expenses seasonality and the expense base in the last two quarters of the year yeah I would I guess a couple of things right so
Vince Calabrese: Again, for the quarter, we came in right in the middle of our range. Deficiency ratio down to 53.7, over 100 basis points year over year, which takes out the seasonality there. As we go forward, there's things that in the first couple of quarters that have occurred. We had higher fraud losses. We brought that down significantly. We have a down payment assistance program that's come down meaningfully in dollars second to third quarter and I mean, we expect a nice step down second, third quarter, and then again into the fourth quarter. I mean, that should reduce by one to one and a half million dollars kind of per quarter. I mean, there's a commission component that's tied to revenue largely on the mortgage origination side. So that kind of fluctuates, you know, as the activity fluctuates. And then on the marketing side, you know, there's some seasonality in marketing or more timing of it when we choose to do that. So we expect to see some increase in marketing dollars as you go from kind of the second to the third quarter. So, you know, there's a lot of moving parts in there. And with all those kind of normal bank operation items, you know, we continue to invest, as Vince was talking about, in our tech investments between the digital initiatives we have and the AI initiatives. But we're being very disciplined in how we fund that.
Vince Delie: Yeah, we also have, you know, it's also lumpy on the DeNovo branch expansion, too, because we announced we were opening up branches over a five-year period The timing of when those branches open isn't, you know, it isn't scheduled out, you know, month by month, so it's lumpy. So you'll see some lumpiness from the expense base, particularly in the first half of this year. We opened, you know, two branches, one online in Charleston, South Carolina. It brought the expense online as well. And then we also have the investments in Insight360, the tool that I mentioned. So that's reflected in the first half of the year. probably will continue to be an expense into the second half, right, until development's completed and it's launched. So there are some impacts. But I think the important points here are we have positive operating leverage, and we're forecasting positive operating leverage. The expense base, our guidance is what? Well, yeah, the efficiency ratio is below 50s. By the end of the year. So the expense base itself and the guidance on the single, little single digits. Yeah, the full year. So we've been able to take costs out and invest in tools, AI tools. And that's, you know, that's a unique thing because, you know, a lot of companies are expending tremendous resources taking on capital expenditures prior to receiving any benefit from an AI investment. and we're seeing that all over the place. So it takes time to get the actual benefits. And we're focusing more on revenue opportunities right now than we are expense takeouts. And there's a combination of both. We're more heavily weighted towards generating revenue with our AI investment, which also speaks to the infrastructure that's being built because that requires a much more are all complex data governance framework within the company. So I believe we're in a really good position. I said that in my prepared comments to benefit from this, and it should not impact materially our expense base on a run rate basis. Thank you.
Operator: Our next question comes Our next question comes from Casey Hare with Autonomous. Please go ahead.
Casey Hare: Great, thanks. Good morning, guys. So, Vince, the question for you following up on the NIM. So, the guide does not assume any Fed action, but it does, it sounds like you do expect SOFR to bounce back to 373. That's 11 BIFs higher than where it is today. Just wondering where, assuming SOFR holds this level, where does NII track versus within this guide?
Vince Calabrese: Yeah, what I was referring to, Casey, was if you look at what happened during the quarter, went from a peak of 367 April 15th down to 358 May 20th. We have a lot of loans that we set at the end of the month. I think today we're at 367. So, you know, what the futures market is saying, there's just another six basis points of pickup in that. So, you know, on the $13 billion, if that comes through, I mean, it may or may not. There's, you know, there's a lot of volatility with interest rates, with everything going on in the world. And, you know, whether the, you know, we went from an environment where the Fed was going to cut to an environment where, They're going to raise, and it's October, it's December. I mean, it moves around quite a bit. So just based on what we know today, I mean, if six basis points up from where we are today on that $13 billion is kind of the math you would do there. Okay.
Casey Hare: Okay, yeah, I'll... It's one month till for two. you might have been referring to overnight right oh right it's one month yes yeah oh gotcha okay gotcha all right I'll take a look um okay and then just I guess switching to capital um any updated thoughts on on what the Basel III proposal does for you guys I think you you didn't quantify it last quarter you said it was meaningful um and then you know Do you lean into that in terms of buyback? The buyback was very strong this quarter. How do we think about that appetite going forward? Are we going to hold this 11-4 level, or is there room to even push the payout ratio? Just trying to think about how you guys think about the buyback.
Vince Calabrese: Yeah, I would say, I mean, for the puzzle three, and then I'll turn it over to Frank. I mean, you know, based on what we know, and You need to get the final, final rules, right, where you can say with certainty. I mean, it's an 80 to 100 basis point kind of pickup to the capital ratios. And, you know, if that does happen at that point, and I don't know if they're talking January 1 of next year, potentially, you know, once that would happen, we'd definitely step back and take a fresh look at the overall capital allocation approach that we want to use going forward. Turn it to Frank for kind of the combat on our buyback philosophy today.
Frank: Casey, yeah, you know, we think buybacks continue to be attractive here. We transacted them at around $17.50 on average in the quarter. As we talked about at that point, that was sort of a three-year earn-back. Obviously, markets have moved higher, but even at these levels, we're still talking about, you know, sort of a four-and-change-year earn-back here. And, you know, for buybacks where you don't have things like deal integration risk, obviously, you can be pretty confident in that earn-back. I still think that we still think that's a pretty good return. and so good return, good capital management tool. You know, as you pointed out, over the last few quarters, we've reported flattish CT1 ratio at 11.4, obviously very comfortable at those levels. And, you know, while we don't give quarterly guide on repurchases, I think holding capital around those current levels is a pretty good sort of expectation or bogey here. Great. Thank you. Thank you, Casey.
Operator: Our next question comes from Russell Gunther with DA Davidson. Please go ahead.
Russell Gunther: Hey, guys. Yeah, hey, good morning. I appreciate all the color on the margin dynamics this quarter. I was hoping to unpack some of the assumptions or what underbellies that June 327 MIM. I really focus on the loan yield. The 552. Maybe just give us a sense for where overall new loan production is coming on, if possible, to share kind of where pipeline loan yield stands and perhaps the spot loan yield as of June.
Vince Calabrese: Yeah, the new loans, we look at what happened in the second quarter. Russell came on at 554 for the second quarter. For reference, that was 557 in the first quarter. So I'm just a few basis points lower. If you look at kind of on a spot basis, the overall portfolio yield was down eight basis points to 553, again, with no Fed actions, but with the impact of one month's SOFR running through there. So, again, that obviously affects the yield level. So the portfolio came down that eight pips. Harrison last quarter was kind of down one basis point. So it's the new stuff is coming on at 554. Okay.
Russell Gunther: Got it. Thank you. And then just the other side of that, please, on the deposit front. So it sounds like you should have some good growth this quarter, bring that loan-to-deposit ratio kind of back into the 90s perhaps where you're more comfortable. But could you give us a help in terms of where spot deposit costs were for the quarter or for June?
Vince Delie: Let's see. All right. On the loan-to-deposit ratio, we have been higher than 92% historically. I mean, it's not that we want to, you know, I would prefer to be sub-90, of course, but Alfred can't produce deposits without pricing. So, you know, we're being very selective in trying to maintain the margin. But, you know, there's a tradeoff between that strategy of margin preservation. And even though I want everything, and the loan to deposit ratio. But typically, as we move into the second half of the year, we do see those seasonal inflows and we do get back to the area that you mentioned as a comfortable spot for us, just to be candid. I mean, it was somewhat intentional for us to be where we are. We're not uncomfortable where we are. I just want to make sure we said that. But go ahead.
Vince Calabrese: No, I think that strategy was important for us to get it down to 90 so that... If you have quarters where loans are growing faster than deposits, you know, we're at 92.5, 93. So there's plenty of buffer there to levels in the past, you know, where we started to take action with it, 96, 97%. So, you know, being at 90 as a reference point, going up a few percentage points is fine. So I think that was an intentional strategy, and I think that's working very well for us. As far as the spot rate, so for the month of June total deposits, we're at 174%. Total Interest Bearing Deposits, we're at 233.
Russell Gunther: Okay. No, that's very helpful, guys. Thank you. Thank you. I guess last one for me, guys, on the fee income side. As you look at the back half of the year, you know, what verticals are kind of the key drivers of growth in 3Q, 4Q? And if you were to kind of come in at the high end, What operating environment and see verticals get you there?
Vince Delie: Yeah, I think, you know, clearly there's opportunity in our investment banking segment. We have a number of deals, both public finance and corporate finance transactions that are in the pipeline, so that should benefit us. Moving into the second half of the year, so there's some benefit there. We're still optimistic about derivatives. Our derivatives business has been down because of We use derivatives. We don't put large extra loans on our balance sheet. Typically, we will. We prefer to push it off balance sheet. So those businesses should do particularly well. We have opportunities on the upside. Merchants, as we move into the second half of the year with interchange fees and some of the initiatives So there's a lot of momentum there. We have record levels of growth in brokerage, and we continue to add to the team and continue to build out in the Carolinas, which has been very helpful for us. So those are the areas that I would view as being pretty favorable. And obviously, you also asked about the economic backdrop. Of course, if we were in a different scenario where we were expecting rates I think you'd see an acceleration in some of those business units, particularly mortgage, would continue to contribute probably at a stronger level. Given where we are, I would expect our mortgage business to be pretty stable in the second half of the year, not declining because a lot of the production that we do is purchased money production, and you tend to see more activity You know, people buy homes between now and September, right? So we'll see that coming through in the next quarter or so. But third quarter, mortgage banking should step up nicely. Right. Second quarter. Yeah, exactly.
Gary Guerrieri: That's what I was trying to say. So thank you. We've also seen, as we've talked, some increasing opportunities in the FX space. Oh, yeah. I mean, they've really continued to ramp those opportunities up and we're seeing some
Vince Delie: will see more cross-border activity, and we were able to benefit from that. Our foreign exchange area did particularly well, and they should continue to do well throughout the rest of the year. So all of that combined, and while individually they're not huge numbers, but combined, it gives you a pretty good base moving into the second half of the year.
Vince Calabrese: And the debt capital markets piece, too, has been performing at a really high level consistently
Vince Delie: This quarter, we have a lot of very large tourism management customers in the pipeline that are coming online in the second half of this year, which will contribute to the income because billions of They'll pay fees and not just use balances, so you'll see an increase there as well.
Gary Guerrieri: Yeah, I think what you're seeing a bit here, Russell, is the building out and the diversity of all these fee income business lines is really taking hold and really providing a good source of fee income that's diverse across the company.
Vince Delie: And there's puts and takes throughout the mix, and it's insane. We've been able to own different interest rate departments, so So we're very optimistic about the fee income categories and the upside there.
Russell Gunther: That's great, guys. I appreciate all your thoughts, and thank you for taking my question. Thanks, Russell.
Operator: Our next question comes from Manuel Navas with Piper Sandler. Please go ahead.
Manuel Navas: Hey, good morning. Can we go back to some of the Can we go back to some of the deposit pipelines? You have those in the treasury management area. You talk about the seasonality in munis. How are retail deposits flowing as well? And as you look at those pipelines, what kind of are they coming in above current deposit costs? What is kind of the pipeline rate on the deposits?
Vince Delie: Well, I mean, I think that our deposit activity within the consumer bank has been pretty favorable. You know, we've begun to grow households at a faster clip. We've got the Penn State initiative that we haven't even, you know, really launched yet. It's in its infancy. But, you know, those initiatives should contribute. Wingspan, we mentioned in the mortgage business, they're all starting to contribute. And, you know, I would say that, you know, our goal is When we bring on a consumer depositor, and I'll segment it because there's a difference between a consumer and a small business depositor, but a consumer depositor is coming on with very low cost, right, because we typically are striving to be the disbursement. Thank you for joining us. The business side is a little different. The deposit balances are, I think, averaging what, Alfred, in business banking, like $12,000 per account. It's a bit higher, but again, it's still relatively granular. And to Vince's point, when we're bringing on any kind of client, it's always a holistic onboarding process. So it's not just, hey, it's a single service. Our focus is really to drive... And on the TM side, there's two pieces to it as well. I mean, there's the free balance piece, which we forecast. We can't really predict whether a client will use earnings credits or not. But, you know, there's the fee income side, and then there's the forecasting that goes on with free balances to compensate for services. So, you know, we're feeling pretty good about both the income piece and our ability to drive compensated balances by bringing in new clients because we have a pretty strong pipeline. That's what we're trying to say. I don't know if I answered your question or not, but I would say if you look at our cost of deposit, we've done a pretty good job of bringing clients over and picking up non-interest-bearing deposits, which has really helped us because it's very competitive right now, and we basically are pricing to retain our existing customer base, and then we'll go out and we'll become a little more aggressive on new opportunities and try to position those opportunities to benefit from the free balances and the compensating balances and the structure.
Vince Calabrese: And the new relationships are designed to go after the whole relationship, the lending side, the deposit side, the wealth businesses, the entire kind of capital market side of it.
Vince Delie: So you can't just look at one and the pipeline to draw a conclusion about what the direction of the deposits are. So, it varies from order to order. But I would say in the second half of the year, we're expecting contributions from both consumer and the treasury management pipeline for deposit growth. That's why we're, you know, optimistic about the guide. Yep.
Manuel Navas: John Wiesman That's really helpful. I just wanted to make sure to kind of pin down, where's greater competition expected?
Vince Delie: I think we've got some really good opportunities and we're willing to compete. But we can compete with higher yielding competitors, particularly smaller competitors. We may see them more frequently in the consumer space and then we move into the larger depositors in the commercial space. It's a function of being able to win both, not just go after. We don't want to just go after the high yielding, low margin We want the whole thing. So holistically pursuing those opportunities is the right game. And that tends to bring the cost of those deposits down considerably, based on the component, the no-cost component. And the overall profitability of the relationship expands. So there's a lot of science associated with it. It's not as simple as just looking at a pipeline report.
Manuel Navas: I appreciate that color. Hopefully it's a simpler question. Are loan yields also structurally going to benefit? I understand the SOFR side. Are loan yields also going to structurally benefit from resi real estate originations kind of falling off a little bit seasonally and more commercial originations? Is that also part of the go forward on loan yields?
Vince Delie: Yeah, that's also a very complex question, Manuel. I'm just kidding. I'm just teasing you. No, actually, we should see, we were talking about that. If you look at the originations that we experienced this quarter, we have some higher yielding growth in the, you know, commercial finance segment. You know, our leasing financing arm is seeing, you know, pretty decent margin. It's still under competitive pressure, but better than you would see in the CNI book because the CNI book is a lot of very, and many other large middle market and upper middle market transactions that we've seen CapEx spend in. So higher quality originations with lower yields this quarter, it really impacted the numbers. You know, when you look at it, it's fairly sizable impact. You know, our goal is to bring those in. Typically, if you just want straight credit, you know, extending your balance sheet pricing to market in that space, you're going to see like a 6% to 9% which isn't good enough for us. So we would have to have some ancillary business, either the depository business or our debt capital markets business or FX business that we look at in our models that takes us north of 12%, 13%, 14% or more in return. So we want to be way above our cost of capital in terms of bringing these things on. So we have models that the line runs. But the point of this is a lot of those originations that occurred this past quarter were larger, either syndicated deals or large middle market single names where they're lower priced, lower risk. You brought those on this quarter. I'd say as we move into the second half of the year, the real estate originations price higher. So, you know, there's a big differential, probably, you know, 75 to 100 basis points in spread. on those CRE opportunities. And then, you know, as we gain traction in the traditional middle market in CNI as well, we should see better yields coming in. Still under competitive pressure, but better than what we originated so far this year from a yield perspective. I hope that helps. There's scary payoffs diminish as we go through the year.
Vince Calabrese: Yeah, that all makes that happen.
Vince Delie: That's right. That helps. You're seeing stuff going out that's $2.25 to $2.75 over SOFR, and we're originating at $1.50. That's not a great sustainable environment, but that's an anomaly because you've brought in, you've got the tailwind from the big deals coming in, and then you've got the headwind of the higher margins here running off, and then lower originations in that space. But we see that turning because the CRE runoff is pretty much done. And as we move into the second half of the year, the real estate lenders are more optimistic. If you look at the pipeline, they've got some good stuff coming on. That doesn't mean the higher quality paper is not under pressure. It is, but it's a higher margin than what we've originated. Right. So this would be a better story. Thank you. It's kind of tough to model. I know you're trying to model it. I hope I helped you.
Manuel Navas: It helps. Thank you.
Operator: Our next question comes from Brian Martin with Breen Capital. Please go ahead.
Brian Martin: Hey, good morning, guys. Thanks for all the callers so far. So just one or two things for me. Most of it was just covered in the last question. But just on the loan pipeline, Vince, I think you commented that, you know, the pull through this quarter. So the short term is maybe a little bit down, but the long term is the strongest. Just kind of if you could just frame up just big picture, you know, just either geographically or kind of by segment, were that long term pipeline that's at the peak today kind of where the strength is there?
Vince Delie: Yeah, we were just. Gary and I were just talking about it. I mean, Cleveland's starting to come on pretty strong. You know, the central Pennsylvania areas, you know, we call it the central mountain capital region, are both doing really well. And they've got pretty strong pipelines. From a historical perspective, both of them are at an all-time high. And then, you know, South Carolina is at a high or near an all-time high. I mean, they're right at their all-time So there was one other quarterback at 24 when they were at a similar level. So that's all looking good. Pittsburgh is really strong. I don't know if it's an all-time high, but it's at least a high relative to the last three or four years. It's up big. So there's some really bright spots. The more competitive markets, we're still up in Charlotte and Rawley, but not at all-time high. So there's upside I see in some of those markets as we build out those teams because we're still focusing on adding to the teams there.
Brian Martin: Gotcha. And then just by segment, where is the real strength there? Yeah, I'd say C&I is the winner.
Gary Guerrieri: I mean, I don't care if you're seeing it. It's definitely on the C&I side. The CRE pipelines are building, Brian, but the C&I is carrying today. Small business has been building, too. Small business has been building, and it has been a steady increase in the first half of the year.
Vince Delie: Equipment finance has been a nice steady increase. It's been good. Equipment finance is all C&I. That's been very strong because of the capex spend that's going on and the taxes.
Brian Martin: And that C&I, to your point, it's got better yields. It's not all the stuff you put on this quarter, kind of the higher quality, I guess called lower risk. There's a mix in there that those yields are better than what you brought on this quarter. That's kind of your point?
Vince Delie: Yeah, because it was very lumpy this quarter. There were a lot of large transactions, M&A transactions, refinancing transactions. activity going on within the large corporate market space. You know, and some of them even, you know, they restructured and went to the bond market, which is why we had strong performance in our brokers, in our, you know, debt capital markets group, the broker dealer that we stood up for capital markets. You know, that was all concentrated. So we saw a lot of concentration in the order of lower yielding assets. I don't mind doing that in this environment. I would rather our teams not go out and compete foolishly for assets because it is still very volatile. I know we feel like we're in a great economic environment, but, you know, you're seeing cracks here and there. You've got the war in Iran that could, you know, throw us into a weird situation, you know, with oil. It contracted and then expanded for no apparent reason, not consistent with the rest of the yield curve. There was a little inflection in supply and demand. That happens from time to time. I'd rather see us go out and do higher quality paper and then stage what we go after in the second half of the year to bring some higher yielding assets on that are manageable and we can manage from a risk perspective. I still think We're one of the best banks in the country in terms of risk management, and we have yet to be tested here for a long time. We performed extraordinarily well through the last downturn, which was a long time ago. I've been in this seat, I've been at least president of the bank for 20 years, nearly 20 years, so I got to see it last time. We performed extraordinarily well through that period. Gary's very good and very conservative, and our portfolio is extraordinarily well positioned. Our reserves are strong given the risk profile in our portfolio. So I think the way we go about doing things is the right way because when the floor does fall out, you will see us stand up. I mean, we're going to be a high performer throughout that period. So based on the quality of the portfolio and the asset classes that we blend into. Anyway, Gary, I hope you feel the same way.
Gary Guerrieri: I feel exactly that way, and I think the portfolio is very nicely positioned for today, and we're excited for the future opportunities that we have in front of us.
Vince Delie: And Gary and I are in lockstep. We don't disagree on many things. I think we're pretty consistent here. Forever, right? For a long time. We've been together for a long time.
Brian Martin: Yeah, thankfully. Thanks for that, and great job, Gary, and your team on the credit side. That's a proven long-term front for you guys and great work. So just the last two for me, just on the net, I appreciate all the color on the CRE. I guess bottom line is if you look at the net growth in CRE, do you expect that to rebound in 27? So I get the payoff. It sounds like they're dissipating. So maybe some net growth you'd expect in 27. Is that fair?
Gary Guerrieri: I think that's a very fair view of it at this point, Brian. Based on what we're seeing here, you know, halfway through the year and, you know, looking out through the end of the year and into early 27, I would expect that to be the case.
Brian Martin: Okay. That's clear enough. And then the last two, just the funding costs, it sounds like this quarter is kind of, you know, being obviously standout relative to those 16 banks, but Maybe this is kind of the bottom on funding costs. I appreciate all that. I mean, what's going to happen in the second half with the dynamics with the municipal funding and the treasury deposits you've got coming in, but maybe kind of we're at a bottom here on the funding side. Is that especially given a potential outlook for rate hikes?
Vince Calabrese: It really depends on what we bring in. I mean, the new relationships that Vince was talking about that's worthy operating bank for those clients, them bringing in and many more. and the CDs that are maturing. So that's been like that probably for the last quarter or two. So it's really a function of our success bringing in the new relationships.
Brian Martin: Yeah. Okay. And then the very last one, sorry, was just appreciate the color on the fee income side. Just where do you see, you know, given all the momentum you have with all the build out and the broadening out on the fee income side, that where it's at today at 21% of, you know, total revenues or core revenues, Do you see that trending up on a relative basis? Is it kind of pretty steady in this range? Or how are you thinking about that just maybe longer term, given the momentum you have?
Vince Delie: Yeah, obviously, we would like it to be higher always because it creates more stability for us rather than relying on net interest income solely. So I think we would like to see it higher. I think it's hard for us, given the interest rate environment and the impact on revenue, Throw a number out there because it'll get higher with lower net interest income. You wouldn't like that. So we want to make sure we're throwing both. And, you know, we would love to see it, you know, approaching 25 percent, someday 30 percent. So some of these businesses are very new and there's a lot of upside.
Brian Martin: Yeah.
Vince Delie: So I think, you know, we're going to continue to manage this like we have. We grew it. If you remember, you know, back in 2017, we were about $160, $180 million. 2015 was $172, yeah. And we're guiding to what this year? It's almost $400. It's been a pretty remarkable ride. But I think there's upside as we build out these other business units, particularly investment banking, public finance. We're adding team members in large corporates so that we can pursue more. I think derivatives has been flat, you know, for several years. And, you know, maybe we're getting through the end of some of those fixed rate cycles. So some of these borrowers are going to have to do something. So we'll probably see that pick up a little bit. Commercial real estate activity certainly will create it because that's a big driver of derivative fee incomes. Those are all the benefits. We haven't even begun to focus on optimization of interchange. We're building out payment platforms today that will enable us to do certain things. Insight 360 is an exciting tool that should drive the income because we're going to give customers the ability to use AI looking at an aggregate portfolio of products and then make product recommendations, which includes wealth and Insurance products, right? So all that is exciting. I think there's upside there long term. Yeah.
Vince Calabrese: And Brian, that's why 17 we have in the deck is a key one to summarize it. I mean, we've established or expanded 10 business lines that we started from scratch or started small and really expanded. And the newer ones, Vince mentioned, investment banking, public finance are brand new. They're starting to contribute this year. And there's quite a bit of upside there. And TM, we're at record. I think the important thing to note here is that all these fee income businesses are being brought on efficiently.
Vince Delie: It's not as though our efficiency ratio jumps. And that's the same with our AI approach. We want to make sure that we're taking costs out to invest in certain businesses that have a higher growth trajectory and produce higher returns for our shareholders. So we basically are very careful about launching these businesses. So we launch them very gradually and then build them over time so that we can sustain profitability and sustain growth. Thank you for joining us.
Brian Martin: It's all super helpful just with the, I mean, I guess kind of just worth shining a spotlight on. It's going to grow for the right reason, and that's what you just were talking about there, rather than at the expense of NII and just a better ratio. So thank you for all the help.
Vince Delie: And it's not pie in the sky. I mean, you can see the growth over a long period of time. It's not like we're making this up. I mean, there's a historical framework that you can point to, and, you know, we're very excited about continuing to grow it.
Brian Martin: Yeah, no, it sounds like a lot of opportunities ahead, so especially given the young businesses here. So, well, thank you for all the help and all the color today.
Vince Delie: All right, thanks, Brian. Thanks, Brian.
Operator: Our next question comes from Kelly Mota with KBW. Please go ahead.
Kelly Mota: Hey, good morning. Thanks for the question. A lot of great things have been covered today. I think most of mine have been asked and answered at this point, but maybe stepping back at a high level, when I look at F&B through the years, you have generally generated above average profitability on a Roxy basis at least. And the peers have narrowed that gap here with you guys at 14%. You clearly have made a lot of investments in the platform and technology and AI. I'm wondering, as you look ahead and you're thinking about a normalized profitability for F&B, if there's still additional room for improvement as you leverage those investments, generate positive operating leverage, or at this point, we're thinking this is where we're leveling off here with the reinvestment back in the business. I'm just trying to kind of balance how to think about that. Thank you.
Vince Delie: Yeah. I think, you know, we, Alfred and I had a long conversation about that exact topic last night when I called him on my walk for an hour. He basically, you know, what our conversation was about was our returns, you know, 14% return on tangible common equity. It doesn't sound impressive, but if you look at the capital accumulation because of our profitability, it is pretty impressive considering that we're near 9%. TCE, CET1s, 11.4, and we've got a 14% return. I mean, we don't need to, because of the risk profile within the portfolio, we are operating with less leverage than our peers. So we have opportunities to drive the returns two ways. One, by continuing to invest in the businesses that produce a higher return on capital, and two, basically We're repatriating capital, returning capital to the shareholders because of our risk profile. So both of those things are going to happen because we're not going to sit here and accumulate capital for no reason. Our goal is to drive shareholder value, and to do that, we have to be very judicious about capital deployment. So we're going to continue to focus on ways to leverage that capital and drive returns. And managing both sides of it, really. Yeah, I mean, it's, it's, but you're spot on. I mean, we were having a conversation last night because I don't want to be, you know, in the middle of the pack. It's part of our compensation, right? We get, we get scored on that. The board says relative to peers. So, you know, we need the highest return on tangible common equity in the risk environment, risk profile that we maintain, right? Which means we can't, we really shouldn't have Thank you for joining us.
Vince Calabrese: and looking at the overall return on equity there. And as Vince said, we're going to continue to manage the denominator.
Vince Delie: You know, our growth and our capital is not AOC. We're not benefiting. We didn't have big impairments. So we're not getting accretion from, you know, AOC impairments. We're actually earning our way to these higher capital levels. And, you know, that's a distinction that people fail to take into consideration when you look across the peer group.
Kelly Mota: Got it. That's helpful.
Operator: Oh, sorry.
Kelly Mota: Go ahead. No, I'm sorry.
Vince Delie: Go ahead.
Kelly Mota: Okay. Maybe last question for me. I apologize if you've answered it already, but just in terms of your rate sensitivity profile here, you know, if you look at a static balance sheet, you are asset sensitive, but I am wondering, given the competitive pressures, like through your markets, How you feel NIM reacts in response to a rate cut and absent cuts? You know, I think you said the spot is in the high 320s. If there's any further levers or if that's kind of a stasis point or potential pressure off of that. Thank you.
Vince Calabrese: Yeah, I would say, I mean, we've brought our interest rate position down. I mean, we're pretty near neutral now. We're still slightly asset sensitive. But as we've kind of gone back towards more like neutral positions, I mean, the impact of one cut, you know, if we get an increase, let's use that as a reference point, in October, I mean, that's worth probably a penny or so for the fourth quarter potentially. I don't know whether we're going to get it or not. I guess we'll see how the year plays out. But the magnitude of the impact of either a cut or a hike is not as large as it used to be because we intentionally brought it back down towards near neutral. This way we're not taking a risk either way. Let growth in loans and deposits and investments drive the net interest income.
Kelly Mota: Got it. And I guess the last question about NIM, you did take your NII guide down. Just wondering if this high 320s margin, it seems like loan yields are coming in right around where the book is. There's probably limited room on deposits or is some increased pressure if this is You know, it's up relative to the blended quarter, and if this is kind of flattish from here, absent moves in the rates. Thank you.
Vince Calabrese: Yeah, I would say what's baked in is kind of, I would call it a drifting up from this level. You know, very kind of, very gradual. Not a lot, but there's some movement up.
Kelly Mota: Drifting's a good word. Thank you so much for all the time.
Vince Delie: All right. Thank you. Thank you, Kelly.
Operator: This concludes our question and answer session. I would like to turn the conference back over to Vincent J. Delie for any closing remarks.
Vince Delie: I'd just like to thank everybody, thank the employees again for another great quarter. I know, you know, a little disappointing on the NIM, but more macroeconomic than effort. And I look forward to a really strong ending to the year. A lot of momentum in a lot of areas. We're going to keep that momentum up and work really hard for the shareholders. Thank you. Thank you for the questions, too. They were great questions. I'm glad we had a chance to answer. Take care, everybody. Thank you. Bye.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
