Good morning, everyone, and welcome to the F.N.B. Second Quarter 2025 Earnings Conference Call. [Operator Instructions] Please also note today's event is being recorded. At this time, I'd like to turn the conference call over to Lisa Hajdu, Manager of Investor Relations. Ma'am, please go ahead.

Good morning, and welcome to our earnings call. This conference call of F.N.B. Corporation and the reports and files with the Securities and Exchange Commission often contain forward-looking statements and non-GAAP financial measures. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, our reported results prepared in accordance with GAAP. Reconciliations of GAAP to non-GAAP operating measures to the most directly comparable GAAP financial measures are included in our presentation materials in our earnings release. Please refer to these non-GAAP and forward-looking statements disclosed within our related materials, reports and registration statements filed with the Securities and Exchange Commission and available on our corporate website. A replay of this call will be available until Friday, July 25, 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 of President and CEO.

Thank you, and welcome to our second quarter earnings call. Joining me today are Vince Calabrese, our Chief Financial Officer; and Gary Guerrieri, our Chief Credit Officer. The second quarter's strong financial performance led to net income available to common shareholders of $130.7 million, or $0.36 per share. F.N.B. achieved linked-quarter revenue growth of 6.5%, driven by net interest income of $347 million and noninterest income of $91 million, all at record levels. Pre-provision net revenue rose 16% from the prior quarter to $192 million. Because of our sustained strong profitability, we continue to grow capital and have achieved record levels with the CET1 ratio approaching 11%, tangible common equity at 8.5%, and tangible book value per share of $11.14, up 13% year-over-year. The expansion of our capital base provides flexibility as F.N.B. repurchased 725,000 shares this quarter at a weighted average price of $13.85. Even with strong growth of capital, we continue to produce solid returns with return on average tangible common equity at 14%. There was significant margin expansion of 16 basis points linked-quarter resulting in a net interest margin of 3.19%. F.N.B. benefited from continued organic growth throughout our diverse geographic footprint as spreads on new commercial originations in the second quarter remained relatively stable, and average annualized loan growth totaled 5.3%. Additionally, our aggregate funding cost declined linked-quarter, while overall deposit balances and other funding sources grew nearly $600 million. Average total deposits grew to over $37 billion, while we continue to maintain a noninterest-bearing demand deposit level of 26%. Our success in growing deposits and maintaining a favorable deposit mix is a key part of our strategy to grow profitably. The loan-to- deposit ratio ended the quarter at 91.9%, down slightly from the last quarter, and down 450 basis points since June 2024. These results…

Thank you, Vince, and good morning everyone. We ended the quarter with our asset quality metrics showing notable improvement. Total delinquency ended the quarter at 62 basis points, down 13 bps from the prior quarter, with NPLs and OREO down 14 bps, ending at a very solid 34 basis points. Net charge-offs totaled 25 bps, bringing the year-to-date results to 20 basis points, reflecting good performance despite the somewhat volatile economic environment. Criticized loans were down 4.5% on a linked-quarter basis, driven by a 20% decline in classified loans. We were pleased with the improvements we saw across these categories during the quarter. Total funded provision expense for the quarter stood at $24.9 million, supporting loan growth and charge-offs, as we were successful in removing some risk from the loan portfolio. Our ending funded reserve stands at $432 million, an increase of $3.2 million, ending at 1.25%, unchanged from the prior quarter. When including acquired unamortized loan discounts, our reserves stands at 1.32%, and our NPL coverage position improved significantly to 393%, inclusive of the discounts. As mentioned in the previous quarter, we continue to closely review the loan portfolio for tariff impacts, which remains a fluid situation. This includes very granular monitoring of line utilization and industry concentrations by portfolio and country, which we highlighted during the Q1 survey. Of note, our C&I line utilization was down in the quarter as we are not experiencing significant tariff-related draw activity. Each quarter, we continue to run allowance sensitivities in a full portfolio stress test. The stress test results reflected further improvement with our current ACL more than covering our projected charge-offs in a severe economic downturn. Regarding the nonowner CRE portfolio, credit metrics also improved, contributing to the decline in rated credits that I mentioned earlier, with delinquency and NPLs at 64 and 62 basis points, respectively. This reflects an improvement from 82 and 77 bps at the prior quarter end. We continue to aggressively manage this portfolio as we have throughout this interest rate cycle with a nonowner exposure declining by another $137 million in the quarter, bringing the year-to-date decline to $420 million, ending at 223% of capital. In closing, our active credit risk management further strengthened the position of our portfolio as shown in this quarter's results. I would like to thank our banking teams for managing risk in their portfolios throughout a challenging economic environment. With more clarity now around fiscal policy, and a somewhat stabilizing economy, we look forward to increasing opportunities to achieve prudent loan growth through the remainder of the year. I will now turn the call over to Vince Calabrese, our Chief Financial Officer, for his remarks.

Thanks, Gary, and good morning. Today, I will review the second quarter's financial results and walk through our third quarter and full year guidance. Second quarter operating net income totaled $130.7 million, or $0.36 per share. Total revenues were a quarterly record at $438 million with both net interest income and noninterest income exceeding the high end of our prior quarterly guidance ranges. As a result, second quarter operating pre-provision net revenues grew 7.9% from the year-ago period. Second quarter average loans and leases totaled $34.5 billion, a 5.3% annualized linked-quarter increase, driven by growth of $365 million in consumer loans, and $86 million in commercial loans and leases. Seasonal growth in residential mortgage loans was the primary driver of the consumer loan increase. Owner-occupied commercial real estate advances and commercial leases were the primary growth drivers on the commercial side. While C&I loan production was solid in the second quarter, it was largely offset by a decrease in line utilization that Gary mentioned. Looking ahead, we are optimistic for a pickup in commercial loan growth in the second half of 2025, given the strong increase in the short-term commercial loan pipeline we saw during the second quarter. Average deposits totaled $37.1 billion, a 1.7% annualized linked-quarter increase, reflecting organic growth in new and existing customer relationships. Average noninterest-bearing demand, and interest-bearing demand balances, grew linked-quarter while time deposits were relatively stable and savings deposits declined. Spot noninterest-bearing demand deposits were up slightly the last 2 quarters and stable at 26% of total deposits, and the loan-to- deposit ratio held steady at 91.9%. The cumulative total deposit beta since the interest rate cuts began in September of last year was 28% at quarter end. Net interest income of $347.2 million was more than $12 million above the high end of…

F.N.B. consistently achieves great results through superior execution from the hard work and dedication of our employees. We remain keenly focused on driving long-term shareholder value, benefiting from our strong balance sheet with record capital levels and ample liquidity, organic loan and deposit growth across our dynamic geographic footprint, investments in our eStore initiatives, diversified fee income streams and exceptional credit risk management. Thank you, and we will now open the call up for questions.

[Operator Instructions] And our first question today comes from Daniel Tamayo from Raymond James.

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

No, the margin, I would say, flattish to up a tick as we go through the next 2 quarters of the year. I mean just to comment on results for the second quarter, too. I mean, you saw the dollar increase, net interest income up $23 million. Really a combination of a few things kind of hitting very well. We had growth in earning assets. We had higher yields on earning assets. We had a lower cost of funds as we had some good success bringing down interest-bearing deposit costs during the quarter, as well as benefit from $250 million a quarter in swaps that rolled off. So that all contributed to that big jump in the margin moving up 16 basis points. And when you look at the underlying activity, I mean we were putting new loans on 56 basis points above the portfolio rate. We are reinvesting securities, 165 basis points above the roll-off rate and then the interest-bearing deposit costs that I mentioned. So what's baked into our guidance is kind of flattish to up a little bit and net interest income moving forward. And we have a September rate cut and a December rate cut baked in there. So right, none of us really know what the Fed is going to do, but that's what's baked into our numbers.

Okay. So flat to up on the margin, so probably not much average earning asset growth, I suppose to get to that upper end of the...

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

Okay. All right. I will -- I'll follow up with you offline if I have additional questions on the margin. And then I think you guys kind of addressed what was going to be my second question on the expenses. It sounds like most of the increase in the guide was due to the payment assistance program. Anything else on that? Is there any kind of additional investment that you're looking to make now that you're expecting the NII side to be stronger than 3 months ago in the credit environment looking to be more clear?

Yes. I would say, I mean, the down payment assistance program you mentioned, which was $3.1 million for the quarter, probably at that same kind of level is what's baked into the guidance for the rest of the year and then that should start to come down next year as we've kind of fulfilled the commitments that we had from that settlement. So the higher commissions are always a swing item. Those are tied to revenue. So that was high this quarter. A lot of it tied to the mortgage volume, and depending on how well we do on the revenue side, right, you always have that higher commission level that would come through in accordance with that. As far as investments, I mean, we mentioned last quarter about a couple of the new things that will drive fee revenue going forward. The commodities hedging that we added, as well as adding public finance and the investment banking firm that joined the team. So those are items that are on board, and we expect to start to contribute revenue in the second half of the year. So those are our newest investments as far as driving fee revenue.

Our next question comes from Russell Gunther from D.A. Davidson.

Russell Gunther, Stephens. I wanted to follow up on the margin conversation we just had. What are you guys expecting from a deposit cost perspective? We've heard some kind of increased competition in Mid-Atlantic Southeast this quarter. I know you guys are trying to continue to match loan growth like you've done successfully. So really just trying to get a sense for how that incremental margin, or spread, would be with a focus on deposit costs? And then in the past, I think you've shared sort of where that deposit rate ended the quarter even end of the month NIM. So all of those puts would be helpful.

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

Russell, we feel pretty confident about our ability to gather deposits given the diverse geographic footprint. I had our folks go back and calculate organic growth rates in loans and deposits over the last 15 years. We've averaged 9%, roughly 9% in both loans and deposits in organic growth, not including any acquired loans or deposits. So I think we're pretty well situated and we've invested in the right tools to help our team gather deposits as we move forward. You can see that we had a decent pickup in margin, and we still grew our deposits, and the demand deposit mix remained at 26%. So some of the things we've been talking about is playing out in the numbers here, which is very positive for us.

And then our total spot deposit cost at the end of the quarter was [1.96%] and all in. The other thing I should mention, too is that, Russell, we do have -- we continue to have a strong pipeline of commercial deposit prospects that we're calling on, and we've had good success bringing in new relationships and which helps to support the noninterest- bearing deposit growth. So there's a pretty strong pipeline that the team is going after, as we sit here today.

So our goal internally, whether we achieve it or not is a question given the competitive environment, but we would like to grow earning assets and get the loan-to-deposit ratio down if we can, continue to drive it down. So it gives us the capacity to scale when things start to really turn. So that's the internal strategy. And it's not a huge pipeline.

That's all very helpful color, guys. I appreciate it. And then just going through, yes, the NII side. I hear you on 3Q and the upper half of that. I'm just trying to get a sense for the puts and takes that would potentially get you to the high end. It sounds like commercial loans could pick up again in the absence of any Fed cuts, could we see you guys through the high end? It just seems like you're in a good position relative to guide, and it would be helpful to get a sense for the drivers behind the high end or potentially exceeding?

Yes, I would say the September Fed cut is a big swing item, right? So that doesn't happen. Our -- we still have a benefit from that. We're still very slightly asset sensitive. I mean I think we've done a nice job kind of managing the overall balance sheet, interest rate risk position. And we're at a point now where I think it's like 1%. If you go to a down 100 basis point ramp, it's like 1.2%. So it's really -- we're very much approaching kind of neutral there. But if we don't have the September cut that's additive, that moves up into that upper end. And then the mix of loans that we put on, obviously, I mean, we've -- the second quarter had a good level of mortgage loans that we put on, which are in the mid- to high 6s. So that kind of comes through. And even on the reinvestment side, I mean, we continue to have $1.1 billion cash flows over the next 12 months, rolling off at like 3.22%. So we're reinvesting in the 4.5 -- kind of mid-4 -- mid- to high 4s right now. So depending on where we can reinvest that could be additive, too. And then the success we have bringing in noninterest-bearing deposits, right? So we mentioned that the pipeline, the better we do there, the better the net interest income and margin is.

And our next question comes from Casey Haire from Autonomous Research.

Another margin question for you guys. So I guess number one, like the guide for NII feels a little conservative. Just wondering if you're doing that on purpose? And then two, just color on the loan yields and the bond yields, which were obviously a positive swing factor for you guys in the second quarter. How are they trending, or looking ahead?

Casey, what was the first part of your question because we had to raise the volume a little bit. It was kind of coming in softly.

I'm sorry, guys. So I was just making a point. The NII guide seems a little bit conservative given you have your NIM up and accelerating loan growth. Just wondering if that's on purpose. And then I have a follow-up question on the loan and bond yields, which were obviously -- can that momentum continue going ahead.

No, I would say, I mean, we're guiding to the upper half. And I think to Russell's question kind of went to the -- what are the things that moved you into the higher end of that and just I just commented on. So I think it's a reasonable the September cut, who knows what's going to happen. Again, that's probably the biggest swing item if that doesn't happen, then that's...

I think it's too early to really call -- there's still a lot of noise out there. Who knows what could happen. There's geopolitical issues. You've got the interest rate scenario changing. So that's why our guide is what it is. I don't think it's too conservative. I think it's bottom line. I don't know, Vince what do you think?

Yes. And there's still lot of uncertainty. So...

If we had more clarity, Casey, we would be more optimistic, but there's still a lot of fog. So it's...

So we're guiding to upper half?

Yes, the upper half. So I don't know if that helps.

Okay. Yes. No, no, that's fine. And then just Vince Delie, a question for you. As we potentially enter an up-cycle in M&A activity here. You guys in the past have been pretty acquisitive. And that's really the Yadkin deal obviously has provided a lot of the growth -- organic growth opportunities that you're enjoying today. But it's not -- it was not without its -- without its pause, given the tangible book value dilution at that time. I'm just wondering how do you guys -- do you guys feel the need to be as aggressive going forward? Or do you feel like you can enjoy the current footprint that you have without being very aggressive?

Well, we haven't really done -- we've done very little over the last 10 years. That was almost 10 years ago. So I mean, we're starting to get to the point where that's ancient history. I mean it's part of the company. It's contributed nicely. We're very optimistic about the markets we're in. We've made heavy investments in tech that are paying off. I mentioned in the prepared comments, our applications as we integrate the eStore Common App into the branch delivery channel. So now in-store originations are happening on that same platform. The reason that's important is because now the client can start an application online, come into the branch and finish it, right? And that AI oversight that helps those salespeople find opportunities is going to be available to them in the branches, so we can accelerate additional sales, hopefully, of products and services that meet the needs of the customers that come in. So we're very excited about that. We're very excited about the markets that we entered and the market share growth that we've experienced over the last few years. And if you go back and look at our company over the last 10 years, we've grown tangible book value, it accelerated in the last 5 years, I think we're an outlier. We're one of the better growers of tangible book value, and it's been 12% over the last 2 years. So it's a high single-digit growth. I think that all keeps me pretty excited. And sure, I mean, I know the landscape changes. The M&A landscape changes all the time, and I think we're in a great position where we sit today.

And 9% organic growth, too, the growth...

Yes, the organic growth. By the way, we look back over the last 15 years, our loan and deposit growth organically was 9%, loan and deposit. That's setting aside the assets that we acquired. So our business model from an origination perspective, organic origination perspective, it works perfectly fine and there's opportunity for us to continue to grow. And that becomes much more with the capital that we're accumulating, the deployment of that capital. We're much better off deploying that capital with loan growth, because the returns on that capital deployed is much greater. So we're seeing high teens to low 20 returns on those -- on that capital that's going towards loan and deposit growth, customer growth, in the commercial segment in particular. So I think that's why we're pivoting and have pivoted, and I think we have a great franchise, and we're going to leverage that.

Plus the new businesses we've entered that I mentioned earlier.

Yes, we've also invested. You can go back and look at that chart, too, it's in our deck. I mean -- we said a long time ago, 10 years ago, this is really going to help us accelerate our noninterest income. It's more than doubled. So from $160 million to $350 million last year and growing. And I think there's opportunities for us to continue to grow those businesses. And they were organically grown. We didn't go out -- other than the small boutique we bought in the investment banking business and having a very, very small mortgage business. The rest of those businesses were all organically grown, well north of our cost of capital and are extremely accretive to the shareholders. So I think all of that keeping the same focused on that, keeping people focused on the deployment of AI and the tools that we've developed internally, which is why we restructured, realigned the company's organizational structure to focus on it. That excites me more than M&A. So of course, opportunistically, if something comes up, sure, we might look at it, but it better be pretty high-quality opportunity and provide us with the right tools like really good deposit mix or additional clients that we could use our -- deploy our model against.

All I would add, too, is our de novo expansion strategy has been a key part of us expanding. And we've continued to be active into Northern Virginia and D.C. and other key markets for us, Charleston. So that's been kind of quietly way for us to expand geographically and get more customer opportunity.

We basically either plan to open, or have opened 30 branches, in these high-growth areas over the last few years. So some of the expense build is related to the expansion of those de novo operations. But if you look at the markets that we went into, they're performing very well. Charleston's purely de novo, purely organic and is doing extraordinarily well. So that's an example of the market we went into. And we didn't buy anything. So I think given our model and what we have, what we've invested in, we're positioning the company to grow without capital dilutive acquisitions.

Excellent. Totally agree. I didn't mean to bring up ancient history. But it's just good to hear that you guys...

You gave me an opportunity Casey, to lecture. So thank you for letting me go on. I just want to thank you.

Our next question comes from Timur Braziler from Wells Fargo.

Hoping to get some color on what you guys think the composition of future loan growth is going to look like. Obviously, it's been led by mortgage more recently, some constructive comments around the C&I pipeline. I guess as commercial loan growth becomes a more meaningful part of the story, does that lessen your appetite on the resi side? Or is that additive? And I guess, where do you think loan growth could ultimately end up once commercial starts to manifest in a more meaningful capacity?

Yes. I think our guide kind of directs you to what our expectations are globally. So I don't think we want to shift off of the guide, yes, right? We will update you next quarter once we see what's happening. Like I said, it's a very difficult time to forecast because it is so volatile. But I will tell you that the commercial pipeline, as Vince mentioned, the short-term pipeline. We have a 90-day pipeline. We have a long term pipeline. And long-term pipeline is kind of flat and the 90-day pipeline is up 20%. So we've got a lot of deals moving through our pipeline head towards closure in the C&I business. CRE, continues to decline. We expect that to continue to come down. I think we're what, Gary?

[223%] of capital at the moment.

Yes. So our expectation is that continues to decline over time. The mortgage lending business should start to taper off because we're moving out of the peak of the mortgage lending business. And the commercial business that we have in that short-term pipeline, hopefully, lands in the next quarter. So the shift will be towards commercial, probably less emphasis on mortgage, right? And then we'll see some growth in the balance sheet in the C&I segment, offset by probably continued CRE declines. That's what we're seeing. That's what we're using in our forecast for the model. And I will tell you, like Vince said, we haven't exclusively been focusing on the asset side of the balance sheet because it's very competitive. We've been focusing our folks on the depository side with very, very significant treasury management opportunities, and we've landed some huge deals recently. So that strategy seems to be paying off. And as I mentioned earlier, I'd love to see our loan-to- deposit ratio continue to come down with high-quality deposits. And I'm very excited to see the FDIC data when it comes out because we've been monitoring our performance relative to last year's FDIC data, and we're showing some pretty strong results across the board in market share gains. So I'm going out on a limb here, I don't know what it's going to say. Maybe I'll be wrong. But we've grown ourselves in those markets, in some of those markets fairly substantially. So we've closed the gap. And we want to be in the top 5 share in most of the markets, top 10 and the ones that are dominated by some of the largest banks. But anyway, that's what we're seeing. And I think we're optimistic about deposit growth. We're optimistic about our C&I pipeline in the short run. I think real estate will taper off a little bit on the resi side and CRE commercial real estate loans should continue to decline with institutional takeouts on the construction financing that we've done.

And I would just add, too, that Vince mentioned earlier, the 9% long-term loan growth organically. I mean, while we're guiding at mid-single digits today, we've historically been in that mid- to high single digits. And for that period, we were high single digits at 9%. So I think that gives you kind of a range.

Yes, that's good. Well said, thank you Vince.

Timur actually, during the quarter, we had really strong gross C&I originations. It was a really solid quarter. As I mentioned in my remarks, the line utilization was down fairly significantly, which reduced that loan growth there. With tax policy now finalized and the 100% depreciation, clients are very excited about that. And I think there's going to be some heavy investment as we move forward. So we're very optimistic when we look at those...

So to that point, our equipment finance business has done phenomenally well also.

It has done very...

It used to be strong, good credit metrics. Good leadership there, even though I tease them all the time. Vince's done a great job. I think they're going to do well in this environment. That's another area that could potentially start to accelerate because of the bonus depreciation.

Great. That's good color. And then one for Gary. You had mentioned that you had some success in reducing some of the risk on the balance sheet this quarter. Can you just maybe provide a little bit of color around that statement?

Yes. We were successful in resolving and removing a few CRE credits from the balance sheet. We also saw a little improvement from a migration standpoint, but bringing some CRE exposure down, as I mentioned in my remarks, another significant amount there continues to be a strategy that we focus on. And in terms of the performance of the migration, we were very pleased with a 20% reduction in classified loans is a significant move in any period, let alone 1 quarter. And it's the work that we're doing earlier in the year and late in last year in setting those credits up to be removed from the balance sheet. So it doesn't happen overnight, I'll tell you. But we saw some resolutions, and we were really, really pleased with those results.

Great. And then just a final modeling question. The increase in down payment, [assistance cost] this quarter, is that onetime in nature? Is that more or less a catch-up? Or is that something that sticks around with us as we go forward?

Yes. I was saying that we'd be at that same level kind of next quarter and it would start to kind of come down.

It's not a forever thing. Just so you know, I mean, that -- we made a commitment. We significantly increased the grant money that we were providing on a per loan basis significantly to jump start our lending activity in certain areas where we need [loans]. And I think that's going to taper off. It's going to be sustained for a little bit and then it's going to taper off. We're going to revert back to our normal -- we always have a grant program. It's reflected in the run rate, just so you understand, we significantly increased it to search volume in certain markets for fair lending purposes. And we expect that to taper off because we're -- the markets that we were targeting were above -- well above the peer median. So that will taper off over time. But it is something that we felt was important to call out. So you understood what was happening there with the expenses.

Our next question comes from Kelly Motta from KBW.

Maybe turning to the capital base. Capital impressively continues to grow, it's at near record levels. Even with the balance sheet growth you're seeing. It sounded like from your commentary, M&A is in top of mind, but maybe you could walk us through how you're thinking of managing your capital base? It's a good problem to have excess capital, but how you're thinking of managing that and if there's any target ratios in mind that you're looking -- you have in mind while managing the balance sheet?

Yes. I would just say that when the 10% level we've been talking about was a target, obviously, when we were below that. And now that we're above that, we kind of think about that as like an operating floor. I guess, is one way to refer to it. We think it's very appropriate given the risk profile of the balance sheet, combined with the higher levels of earnings and capital that we're generating, and PAT ratio in the low 30s. So I think it talks about the overall position. And with the prospect of earnings and internal capital generation moving forward, we have flexibility. We've been active on the share repurchase. We've had some level of that each quarter. We're studying dividend as another way, something that we may do at some point. So we have that opportunity. And then to Vince's point earlier, the first thing we're going to do is fund loan growth. So I think having the capital cushion, or buffer that we have, to fund the loan growth when it does accelerate, I think, is important. But we have the flexibility really to generate shareholder value through all those different means.

To sum it all up for you, we're going to do it is absolutely best for the shareholders. We're going to look at the earn back on share repurchases versus valuation and earn back. We're going to look at -- well, everything is on the table, right, because we want to be as efficient as possible.

And we feel the shares are still undervalued. So at this point, we'd still be active repurchasing.

Right.

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

Yes. No, that's a great question. I think because we haven't been very hopeful about our expansion. But as those locations start to take off. We've also been hiring commercial bankers in these markets, right? Charleston, Richmond. We're looking at Virginia, Southern Virginia. There are some very attractive markets there, from both the C&I lending perspective and from a consumer perspective. Mortgage banking, consumer depository services and the like. So we're -- that's where we've been focusing. D.C. we've continued to add in the D.C. market. I think those will be accretive. It takes a while for a de novo branch, right? That's the difference between going with M&A taking costs out and having customers immediately versus investing capital, having expenditure and then needing to grow the customer base over time. There's a period of time that it takes to get to breakeven and then get to the returns that you're targeting. And usually, that's 3 to 5 years to get the maximum return on capital, is usually 5 years on these things. 3 years to breakeven...

3 years to break breakeven...

To breakeven or accrete. And I think we're going to be seeing that growth -- is going to come through because we have those locations rolled out. So that will be part of our guidance as we move forward. But we're doing very well. I mean, we're surprisingly doing well in these markets, even with big competitors. So I think it's been a good strategy, and it's going to pay off for us in the long run.

Our next question comes from Manuel Navas from D.A. Davidson & Company.

Can you talk about that confidence on deposit growth? Kind of touch on seasonal trends and where the current pipeline is strong? I mean you talked a little bit about commercial. CD growth was really strong. I'm just wondering how much of that was new versus old customers? Just kind of talk through that confidence on the deposit side.

I mean it's been a focus here for as long as we've been here, particularly on the noninterest-bearing deposit side. So I think we've had -- if you look at our success last year, remember, the loan-to-deposit ratio got up into the 96s and really had tremendous growth in deposits across the footprint. What we have in the guidance to mid kind of mid-single digits is very comfortable. And the prospect list and pipeline that I commented on, on the commercial side could even bring us above that, so...

Yes, if you go to Page 13 in the deck that we put out with the deposit composition, we take you all the way back to 2009, which is one I think [you're rooting this in] when I took over, right, as President of the bank. You could see the difference. I mean, my God, we've done extraordinarily while there was 9% organic growth driving this deposit growth. The mix has improved substantially over time. We were able to maintain a fairly high demand deposit level even after the surge, right, that occurred during the pandemic in '21 and '22. And that's despite almost $38 billion in total deposits. So we're -- again, I'm very optimistic about our ability to grow deposits organically and to do it in a way that's accretive to earnings. And we have a very strong -- we're a very strong deposit franchise. And I think if you really drill into the banking industry, that's what matters the most. So your ability to fund yourself to have granularity, to be able to be the primary bank. All that stuff that we talk about is really important to ensuring that we can continue to sustain that growth in a very profitable way. So I think this kind of sums it up if you look at it. Manuel, that's why I'm optimistic about what's coming. In addition to that, we have retold, we've refocused people. We've changed our comp structure slightly. We reorganized our -- we reorganized our data management and the digital bank put it up under Chris. So we've got corporate strategies in alignment with the data consumption area, that your data hub and the digital folks, and we now have an AI [Czar] that we put into effect. So I mean, we're trying to really use all of those tools to drive the appropriate deposit mix and growth. We've rolled out the eStore Common App across all those branches so that we can feed leads to those people in real-time that are actionable, and they can just simply ask the client if they would like an additional product, put it in the cart, and they don't have to do anything additional. That Common App basically enables them to do that seamlessly.

It removes obstacles.

Yes. So I think all of that, plus our commercial calling effort, beefing up treasury management, we've added significantly to the treasury management area. We have an initiative to upgrade our treasury management products and services we're in the middle of. And that's happening. Our investment in payments is occurring. And I think that's going to be an area we're going to have to stay keenly focused on given the changes that are happening, particularly with the GENIUS Act and stablecoin, and the use of blockchain technology. So we're all -- we're focused on it, and I think we're going to continue to be focused on it, continue to drive deposit growth.

And the de novo strategy obviously feeds that.

Right.

And if you look at some of the regions, I mean, year-over-year, Carolinas are up 17% in deposits. Pittsburgh is up 7%. So I mean some of our critical market is really growing quite nicely.

Did I answer your question? Or did I just go on too long? I don't know.

No, that's all great. The Carolinas is -- good to see that regional strengthen. That is an area attracting more interest, but you are winning there. How are you kind of fending off competition?

How are we fending off competition? Was that the question? I'm having trouble hearing you.

Yes, the Carolinas. I'm still...

We have really good people that work really hard and they're very focused. We're very focused on it. So we monitor pipelines. I know the team down there monitors calling activity, our incentive compensation plans are lined up. You should watch my podcast, Manuel, I talk about it. But we try to align all of those things so that we can compete more effectively. And I think it works. I think paying attention and ensuring that we have compensation aligned with what our expectations are, being able to report information back to the field very quickly about their performance. That all matters. So it's not just one thing. And it's not just hiring talent or -- it's everything. There's a lot that goes into it. So the banks that are succeeding are doing the same thing.

And the lead generation is getting better and better.

Our ability to produce leads and focus people every -- there's a finite amount of time per person. So all this technology really helps make people that maybe weren't able to focus as well as others, focus on what they need to do to get the job done, to win, to get paid, to benefit the shareholders. So that's -- I think that's what's happening, right? I spend a lot of time with those people and down there. So I can tell you they're very hungry. They're good people. It's a good culture, too. That's the other thing. They want to be there, they want to work. They get awards and they get recognized for what they're doing and it keeps driving success.

Shifting over to the asset side. I mean, I appreciate all that commentary. Shifting over to the asset side, the C&I pipeline increase. Is there any like one single driver that kind of increased optimism this quarter in the pipeline? Is it the tax bill? Gary touched on that.

I would say it briefly. I think we were a little slower. So there's a lot of pent-up demand and people are waiting to see what happened with tax reform because of the bonus depreciation. So this is my guess. I haven't -- this is anecdotal. I haven't gone out and surveyed the clients. I have talked to some of them, and they've said the same thing. So all of a sudden, that just broke, right? And they're all like we're doing it now. So there's -- we're going to finance this piece of equipment. We're going to expand our facility. We're a little more optimistic about demand in the future. Little bit [tamer] view on tariffs. People were very concerned. Now they're not as concerned. Still concerned, but not as concerned. So they were worried about supply chain disruption and other things. So I think with that out of the way, that's what happened. Everything got pushed forward. The deals that were more likely to get done moved into the 90-day category, and hopefully, we can get it closed and impact the C&I footings.

And our next question comes from Brian Martin from Janney Montgomery.

Sorry. I joined here a little bit late. So if you address this, you can -- I'll go back and relisten but just -- I know you talked a little bit about M&A and less focus there. Just to be clear, just on the M&A bit, if you do look at M&A strategically, is it -- would it be more today given all the opportunities you have elsewhere? Is it just kind of like a fill-in? That's the way to think about how you'd be looking at M&A rather than entrance to a new market? Or is that the wrong way based on kind of less focus on M&A today?

I'm just less focused on M&A. I have been for the last -- since we built out the franchise and we spread across that broad geography. We've not been as focused on it. People keep talking about it because early on -- by the way, if you look at the total number, if you look at total assets, acquired assets here, since Vince and I started and when was it?

2009...

2009, I think it's like $15 billion. So add $8.7 billion to $15 billion, half the company came from organic growth, okay? So let's stop talking about it. I mean we have a better opportunity to grow accretive earnings through -- I mean, honestly, that -- you have to really take a step back and say, what did they really buy other than Yadkin everything is small. So the reality is we're focused on what I think are the right things to drive organic growth of the company. We're going to continue to focus on it.

Sorry. Yes, that's -- I figured that was a question. It was more filling because like you said, you've got great opportunities with what you've already done and what you're doing, but it's just more clarification. So I'm not suggesting you need to do more -- what you've done has been great and that the -- what you've gotten out in front of you, now that you've gone to those markets...

Yes. Stop pushing M&A on me, okay? All right? Stop pushing it on me all right?

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

We're going to let our corporate strategy guy answer this question because it's long term. So go ahead, Chris. Go ahead.

Yes. No, Brian, I think there's still a great opportunity for margin in the long term to head higher. I mean if you just look at the building blocks, clearly, loan origination, security yields will continue to move up. If you get more rate cuts, I mean that's just going to help us generate more deposits and continue to grow that base. So I mean, you can look at where the pieces can go ultimately and kind of come to your own determination as where that level is. But this is a better rate environment that we're potentially heading to than we've had for the last 15, 20 years in the banking industry. So I think you can kind of think about it that way as well.

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

Okay. Thank you very much. Again, I'd like to thank all of our employees for the hard work that they've done. This was a terrific quarter. We got to keep it going. It's over. So we now need to focus on the next quarter, okay? So everybody keep doing what you're doing. You're doing a great job. And I want to thank the shareholders for continuing to support us and -- the best is yet to come. So we're very excited about it. Thank you.

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