Good day, and welcome to the FNB First Quarter 2026 Earnings Conference Call. Please note this event is being recorded. I would now like to turn the conference over to Lisa Hajdu, Manager of Investor Relations. Please go ahead.

Good morning, and welcome to our earnings call. This conference call of FNB Corporation and the reports it files with the Securities and Exchange Commission often contain forward-looking statements and non-GAAP financial measures. Non-GAAP financial measures should be viewed in addition to and not as an alternative for our reported results prepared in accordance with GAAP. A reconciliation of GAAP to non-GAAP operating measures to the most directly comparable GAAP financial measures are included in our presentation materials and 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, April 24, and the webcast link will be posted to the About Us, Investor Relations section of our corporate website. I will now turn the call over to Vince Delie, Chairman, President and CEO.

Thank you, and welcome to our first quarter earnings call. Joining me today are Vince Calabrese, our Chief Financial Officer; and Gary Guerrieri, our Chief Credit Officer. FNB produced a solid quarter with net income of $137 million. EPS increased 19% over the first quarter of 2025 to $0.38. Pre-provision net revenue increased 17% from the year-ago quarter as we generated positive operating leverage of 4.9%. Our capital ratios remained strong and continue to move favorably, all while producing a strong return on average tangible common equity of 13.2%. Tangible book value per share of $12.06 represents an 11% increase from the year-ago quarter. Since 2009, we expanded the tenure of our leadership team's management of the bank and holding company. We have focused on a disciplined and strategic approach to developing and executing our long-term growth plan. Our actions have resulted in the company's robust capital accumulation, sustainable, superior financial performance, investments in a resilient risk management framework, and a strong balance sheet. Over time, we have grown our capital to record levels and effectively managed the dividend payout ratio from nearly 80% down to 31%, in line with our peers. During that time period, we also grew the balance sheet by 477% with an organic compounded annual growth rate of 8%. We invested in our enterprise risk management framework, built out our advisory and capital markets businesses to diversify our revenue streams, and established FNB as an industry innovator with an award-winning digital and data analytics capability, including the eStore. These significant investments occurred over time while maintaining an industry-leading efficiency ratio in the low to mid-50% range. I can't emphasize enough the hard work and superior execution by our team to get to where we are today. These efforts have produced sustained levels of increased profitability, significant returns, and strong capital generation. This strategy was fully aligned with shareholders' interests. We recently announced an 8% increase to our quarterly cash dividend to $0.13 per share, starting with the dividend to be paid in June. Our Board of Directors also unanimously approved our management's recommendation for an additional $250 million for the repurchase of our common stock on top of the $50 million remaining in our existing share repurchase program. Inclusive of the March dividend and $35 million repurchased in the first quarter of 2026, FNB has returned a total of $2.4 billion in capital to shareholders through both dividends and repurchases since 2009, demonstrating our long-term commitment to optimize value for our shareholders while also growing and reinvesting in the company for continued future success. FNB's financial performance is achieved through consistent execution and sustained growth in our engaged customer base. We were thrilled to recently announce our partnership as the official and exclusive retail bank and financial provider to the Pennsylvania State University. Beginning in July, Penn State's 90,000 students, faculty, and staff will have exclusive access to FNB's on-campus banking services, including our proprietary eStore. FNB was also selected as the primary treasury management provider to all Penn State campuses. Our continued success of winning despite significant competition demonstrates our capabilities and leadership in the industry. As a core business, University Banking highlights another differentiated product offering. In addition to significant investments in AI and digital, FNB's innovative solutions also extend to our ATM network. This month, our first ATM that offers foreign currency disbursement for Canadian dollars and Mexican pesos opened at the new Pittsburgh International Airport. Once again, as an industry leader, our ability to offer foreign currency disbursement through an ATM is rare across the banking industry and builds upon our momentum to improve the ease of banking for current and new customers. We congratulate the airport authority and its leadership on the completion of the new terminal, which includes FNB's state-of-the-art visually stunning banking center. The first quarter reflected a promising start to 2026, with our ability to continue to attract top-tier talent, deploy innovative solutions, and deepen customer relationships. Period-end loan growth of 3.9% annualized linked quarter was driven by middle market C&I. It is important to note that our growth has not benefited from NDF or lending into private credit, a category that we continue to avoid. With that, I would like to now turn the call over to Gary to discuss all of our credit results for the quarter.

Thank you, Vince, and good morning, everyone. We ended the quarter with our asset quality metrics remaining at solid levels. Delinquency, along with NPLs and OREO, increased slightly, each up 3 bps compared to the prior quarter, totaling 74 and 34 basis points, respectively. Net charge-offs continued to show strong performance totaling 18 basis points, down 1 bp compared to the prior quarter. Criticized loans increased slightly, consistent with the seasonality we have seen in the first quarter over the last several years. Total funded provision expense for the quarter stood at $19.4 million, supporting the C&I loan growth and charge-offs. Our ending funded reserve now stands at $443 million, an increase of $3.5 million, ending at 1.26%, unchanged from the prior quarter. When including acquired unamortized loan discounts, our reserve stands at 1.32%, and our NPL coverage position remained strong at 393%, inclusive of the discounts. While we have not experienced any impact related to tariffs, we are maintaining the related qualitative overlays from a year ago due to the ongoing conflict and uncertainty in the Middle East. Our comprehensive risk management oversight, including concentrations of credit line utilization, proactive CRE management, stress testing, and the 360-degree risk view of our client relationships allows us to maintain a strong risk profile throughout economic cycles and during periods of economic uncertainty. We are monitoring the situation in the Middle East closely, as we have done in the past during the pandemic, the Ukrainian conflict, supply chain disruptions, inflationary periods, and tariff increases. Throughout all of these periods of disruption, our loan portfolio and customer base have proved resilient and did not experience any material adverse impacts. Our consumer portfolio remains very strong with average origination FICO scores of 782, with delinquency and charge-offs ending the quarter at multiyear lows of 67 and 5 basis points, respectively. We continue to originate loans within our commercial and consumer portfolios under our long-standing and consistent credit underwriting philosophy. In the quarter, we had solid C&I activity leading to increased loan growth with a slight uptick in line utilization. Additionally, we are seeing increased levels of high-quality CRE opportunities. However, our exposure declined in the quarter, ending at 194% of Tier 1 capital plus allowance. In closing, despite the continued volatility in the markets, we look forward to building on the momentum we had in the first quarter with our pipelines at near record levels across the majority of our portfolios. With the quality and diversification of our portfolio, we are well positioned to achieve our growth objectives in the year ahead. 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 first quarter's financial results and walk through our second quarter and full year guidance. First quarter net income totaled $137 million or $0.38 per share, with total revenues up a strong 9.4% from the year-ago period and coupled with prudent management of operating expenses, PPNR increased nearly 17%. Turning to the balance sheet, loan activity began to accelerate late in the quarter with spot total loans and leases ending the quarter at $35.1 billion, a 3.9% annualized linked quarter increase driven by growth of $198 million in consumer loans and $136 million in commercial loans and leases. Spot C&I loan balances were up over 4% linked quarter on an annualized basis, driven by growth in the Carolinas, Cleveland, and the Mid-Atlantic. CRE balances continue to be impacted by expected payoffs and were down $110 million linked quarter. Residential mortgages, indirect, and HELOCs all contributed to the consumer loan growth. Spot total deposits ended the quarter at $38.9 billion, a linked quarter increase of $142 million with the first quarter impacted by normal seasonal outflow for corporate deposits. Noninterest-bearing deposits increased $89 million or 3.6% linked quarter annualized and remained stable at 26% of total deposits. The loan-to-deposit ratio held steady at 90%. First quarter's net interest margin was 3.25% and down 3 basis points sequentially as the timing of the Fed rate cut in December 2025 impacted NIM for the quarter. Additionally, normal seasonal outflows in deposits were funded temporarily with higher cost short-term borrowings. Interest-bearing deposit costs declined 13 basis points linked quarter, driven by lower rates paid on money market CD balances, and total borrowing costs decreased 12 basis points. Our cumulative total spot deposit beta since the fed interest rate cuts began in September 2024 was 27% at quarter end. The total yield on earning assets declined 11 basis points to 5.14 on an 11 basis point decline in loan yields and a slight 2 basis point decline in investment securities yields. Reinvestment rates on investment securities remained well above the overall portfolio yield. Looking ahead to next quarter, the margin for the month of March was at 3.30 on net interest income, increased nearly 11% from the year-ago period as the NIM expanded significantly, increasing 22 basis points with earning asset growth of 3.5% year-over-year. Turning to noninterest income and expense, noninterest income totaled $91 million, up 3.7% in the first quarter of 2025. Capital markets income increased 27.8% to $6.8 million on solid contributions from debt capital markets, swap fees, and international banking. Wealth management revenues increased 2.8% year-over-year to $21.8 million, with contributions across the geographic footprint. Noninterest expense totaled $257.9 million, a 4.5% increase from the year-ago quarter. Salaries and employee benefits increased less than $1 million or 0.4% as lower performance-based compensation and healthcare costs offset strategic hiring and normal merit increases. Occupancy and equipment increased $5.1 million or 11%, primarily due to technology-related investments and higher occupancy costs, which included unusually high seasonal snow removal costs. Other noninterest expenses increased $6.8 million or 30% due to a combination of higher fraud losses, litigation-related expenses, and the impact of our mortgage down payment assistance program. The first quarter efficiency ratio remained solid at 56.1%, down meaningfully from 58.5% a year ago, 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. Given the new share repurchase authorization, Vince mentioned earlier, we now have remaining capacity of $300 million after repurchasing a total of $35 million in the first quarter of this year. The 8% quarterly common dividend increase marks our first quarterly dividend increase since 2007 and reflects our strong financial performance and capital levels as evidenced by the TCE ratio of nearly 9% and the CET1 ratio of 11.4%. Let's now look at guidance for the second quarter and full year of 2026. All guidance is based on current expectations, remaining cognizant of the highly uncertain macroeconomic and geopolitical environments. We are maintaining our full year balance sheet guidance for spot balances, projecting period-end loans and deposits to grow mid-single digits on a full-year basis as balances continue to build on the growth acceleration we experienced late in the first quarter. Our projected full year income statement guide is largely unchanged from last quarter. Full year net interest income is still expected to be between $1.495 billion and $1.535 billion. We are assuming no Fed interest rate cuts for 2026 versus our previous expectation for 225 basis point cuts while maintaining our previous net interest income range due to our expectation of continued deposit pricing pressures in an environment with no Fed cuts and accelerating loan growth in the industry. Second quarter net interest income is projected between $370 million and $380 million. The noninterest income full year guide remains $370 million to $390 million with second quarter levels expected between $90 million and $95 million. The full year guidance range for noninterest expense remains unchanged between $1 billion and $1.02 billion, but we now expect to be at the higher end of that range due to increased investments in franchise growth and new strategic initiatives. Second quarter noninterest expense is expected to be between $250 million and $255 million. We continue to expect strong positive operating leverage for the full year of 2026. Full year provision guidance is maintained at $85 million to $105 million, given the stability in our credit performance to start the year and will be dependent on net loan growth and charge-off activity. 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.

Thank you. Our team is cultivated in an environment that succeeds through passion, collaboration, hard work and respect. We pair the advantages of our scale with the discipline of agility to win business that is heavily sought after by both large and small competitors. As a regional bank, FNB's differentiated investments in technology and product offerings have enabled us to win against competitors of all sizes to gain market share, drive shareholder value, and meet the needs of our commercial and consumer customers. I would also like to thank our Independent Lead Director, Bill Campbell, who announced his upcoming retirement from our Board in May. I want to extend my great appreciation for his distinguished service, independence, dedication, leadership, and mentorship to many, including myself. He instilled in all of us a desire to put the shareholders first, and his insight on the Board will be missed. Best wishes to Director Campbell in his future endeavors. His presence will be missed, but his legacy at FNB will live on. In closing, we are proud of our differentiated culture, which continues to be one of the most recognized in the industry for leadership, innovation, employee engagement, and client experiences. This quarter, FNB received numerous awards including America's best customer service in financial services by USA TODAY, America's best financial services by TIME, America's greatest workplaces for entry-level employees by Newsweek, a top workplace U.S.A. by Energage, and a Greenwich Excellence Awards winner for client service, a recognition we have earned annually since 2011. These awards and recognition occur because of the dedication and commitment of our employees. On behalf of the Board and executive team, I would like to thank them for their extraordinary accomplishments. With that, I will turn the call over to the operator for questions.

Our first question comes from Daniel Tamayo with Raymond James.

Maybe starting on the C&I loan growth, really strong in the first quarter. You made a comment in the release that it accelerated towards the end of the quarter. Maybe you can expand a little bit on what that looked like. And I think Gary made a comment about Vince about near-record pipeline. Just curious what those look like in C&I and kind of the path forward, given the strong quarter.

Yes, Dan, we saw a lot of activity. It started building fairly early in the quarter and finished up really strong. The pipelines have increased significantly and are pretty close to near record levels. It's really across the whole company. On top of that, we've seen a lot of high-quality opportunities from very strong investment-grade type of larger corporate borrowers. We saw some M&A activity, so it's really been across the board and very diverse. We did have one maturing loan that paid out, which impacted the growth even further, right at the end of the quarter or that number would have even been stronger. So we really like the position of the pipeline right now and the activity that we're starting to see. We expect it to build throughout the year.

Great. And maybe one for Vince. Just curious if you can expand on the strategic initiatives comment in the release about, which drove the increase in the expense guide to the higher end of the range?

There's a variety. As you know, we've consistently been investing in our Fit-to-brick strategy. And as part of the normal capital investment that we're doing. I mean there's a variety of things. We've announced that we were going to be launching 30 de novos over the next 5 years. So that's part of it. We're fully launching that with DC Metro as far as the ATMs throughout that network. We continue to invest in the eStore and have some new initiatives looking to create a 360 view of our customers. We began that initiative to be able to pull in internal data as well as external data so that our customer-facing employees have all the data right at their fingertips on what customers have here and somewhere else and then leverage AI to kind of say, well, what's the next product that would make sense for them. So it's really continuing those key tech investments that we've been making.

And I would say that we've redesigned how we're approaching development within the company. We moved from a traditional IT development environment where IT coordinates all of the assets that we have, which include a large number of consultants. We've kind of changed the model. We're pushing those programmers to the 3 areas that we feel are the most impactful for us from a revenue and efficiency perspective. So that's part of the expense build. We're looking at some AI incidences that we've invested in. So there's personnel expense related to bringing those development contractors on that's reflected in the guide. Most of it ends up being capitalized for software applications that we develop and then put online. Vince mentioned the 360 view of the customer, which is essentially both an inward and outward tool for clients to review their relationship within FNB. There is an AI overlay that permits those clients to see the products and services that they're using and how they can best improve their circumstances, either from a cash flow perspective or from managing risk. It's a really cool product. It's proprietary. I don't see it anywhere. We're slated to put it out by the end of the year. It should be in production at the end of the year and then into the first quarter of next year. But it will also help internally because what it does is it actually evaluates what's going on. It looks at numerous data fields based on what the customer is doing within our organization. When we open it up to outside, it will be opened up to bring in external aggregation as well. That will help us guide the customer to better products and services and a better solution within FNB's product offering. If they have a high-rate mortgage somewhere else and we offer a better product, this tool will tell them, and they will actually explain that they could save X amount of dollars by refinancing. And then to tie it all together, because we built out this platform that enables us to apply for multiple products simultaneously, which is also being improved with AI. We will be able to move those clients into an environment where they're seeing their 360 view, they're actually getting recommendations on things that they should be doing to improve their banking relationship, and then they'll be able to purchase the products because they can just put them in the cart and then proceed to check out. We have automated data flooding and authentication built into the common app. So that's the game plan. And that's why we're saying there's going to be a little extra spend in the forecast.

Yes, we've included investments in treasury management and some of our offerings to enhance customer experience in wealth management. Additionally, we are focusing on normal process improvements by utilizing AI and machine learning, which we've been implementing for several years. These tools will help us reduce costs as we progress, ultimately improving our run rate.

Yes, some of this is transitory, though. This is not embedded in the run rate of the company. And there's quite a bit of contract expense or contractor expense built into that guide, the change that we're pro.

The next question comes from Casey Haire with Autonomous.

Yes. Great. So I wanted to touch on the NIM outlook, the 330 NIM in March, so you get some pretty good momentum entering the second quarter here. I'm guessing that was on the funding side of things, given the seasonal outflows in DDA, but just a little color on where that's trending. Maybe the spot deposit cost rate at the end of the quarter and some thoughts on how the 2Q NIM trends.

I guess just looking at net interest income overall, the $6 million decrease from the fourth quarter, right in the middle, the number we landed out at $359 was right in the middle of our range we provided in January, which was $3.55 to $3.65. The timing of the last Fed cut clearly makes a difference on loan yields for us. As you know, I’m talking about that in the past that 45% or so of our loan portfolio reprices based on SOFR changes. So originally, we had that in January and that coming forward to December affected the net interest income for the first quarter. The other element is we have our normal trough in deposits that happens every year in the first quarter, and we fund that temporarily with short-term borrowings that's about 2 basis points of margin, $2.5 million in net interest income in the first quarter, and then that kind of goes away as we move forward. But we have been operating with a dual mandate of trying to grow deposits to fund the loan growth that Gary talked about and Vince talked about that we saw to accelerate in March and the expected loan growth as we go forward. So we're trying to balance growing deposits to help fund that loan growth as well as managing the deposit cost down. So there's clearly a balancing act there. And then, Casey, as you mentioned, the 330 exit margin for the month of March is key. And as we look forward, I mean, our guidance implies that going up gradually a few basis points or so a quarter between the first quarter and the end of the year. Without the Fed cut expected for the rest of the year at this point, there are several levers we have to support net interest income growth. I mean, average earning asset growth, obviously, is the key. In our investment portfolio, we're reinvesting 75 to 125 basis points above the roll-off rate. For CDs, we're still picking up 20 to 25 basis points. Next quarter alone, that's $3.3 billion worth of CDs maturing. And then in our fixed-rate loan portfolio, we're picking up about 35 basis points on $2.5 billion over the next 12 months. So there's a lot of levers that will kind of work off with that 3/3 launch point.

The spot deposit cost rate was 199.

That's total deposits?

Right.

Total IBD 236, Casey, is interest-bearing. $177 million includes noninterest.

Okay. Great. Just one more on the capital front. There was a very strong buyback this quarter. The CET1 ratio remained stable. I'm curious if this is the level you intend to maintain while balancing loan growth and buybacks. Also, do you have any thoughts on the Basel III proposal?

Yes. With the CET1 ratio at 11.4% and a payout ratio in the low 30s, along with our guidance suggesting strong internal capital generation, we are well-positioned to deploy capital, which is why we announced earlier this week. In addition to supporting anticipated balance sheet growth, we find buybacks appealing at current valuation levels. I estimate a payback period of about three years based on the current stock price. Last year, we repurchased $50 million worth of shares, and I mentioned plans to buy at least that much or more. In the first quarter, we bought back $35 million, and I expect to continue being opportunistic with our buyback program. We initially had a limit of $50 million, so it was the right time to increase the authorization to about $300 million. Given our earnings generation, we anticipate that capital ratios will continue to strengthen. While we’re not looking to reduce the 11.4% ratio, we are active with buybacks and maintaining the dividend, which may not be significant in terms of capital but is important nonetheless. The last time we raised the dividend was in 2007. In 2009, during tough times, we increased from $0.24 to 12%. Our Board decided to act during that period despite a high payout ratio, and investors benefitted from a solid dividend yield. We have reached a point where we feel comfortable with both the buyback and the dividend increase now. Over time, our goal is to raise the dividend as we continue to grow earnings. Regarding the Basel III proposal, we are studying it. If implemented as proposed, it would significantly impact us. We have analyzed the proposal thoroughly, and it is not currently included in our capital deployment plans. If approved as proposed, it would introduce new considerations.

And the next question comes from Russell Gunther with Stephens.

I wanted to follow up on your comments about deposit pricing pressure. It would be helpful to understand how you expect deposit costs to trend from here. The spot rates you provided were very close to the average for the full quarter. In the past, you mentioned a mid-30s terminal deposit beta compared to the current 27 we have. It would be beneficial to know if we should anticipate some upward pressure on total deposit costs, especially regarding the guidance for March 30 moving higher.

Yes, I believe there is still potential for deposit costs to decrease. I mentioned that CDs have increased by 20 to 25 basis points on $3.3 billion, which impacts that figure. Our ongoing strategy to attract noninterest-bearing deposits plays a crucial role in managing the overall cost of deposits and funds. I think we still have opportunities to reduce costs in a strategic manner, especially since we cannot rely solely on fed cuts. Our team has done an excellent job analyzing various components, and for customers with lower balances, we are adjusting rates more aggressively. It's a continuous effort to identify opportunities. However, there are still avenues for total deposit costs to decline. As I mentioned, focusing on noninterest-bearing accounts is essential. We have also been targeting larger accounts to increase deposit balances, and we’ve seen success in attracting these larger deposits over the past year.

We brought some very attractive, large, complex treasury management relationships over. They're in the pipeline. They're moving over to us. They're coming from all over. I mean, some of the larger banks bank them today. That's going to have an impact. It will have an impact on our free balances because they use balances to pay for services. So there's quite a bit in that pipeline. That's what Vince is referring to. But if you look at it globally, take a step back, that's one of the only ways we can really control. We're not a price setter. We have to react to the marketplace. The way we drive our costs down is despite increasing the noninterest-bearing component in the mix. That's a strategy that we have talked about for a long time and will continue to do. We have some optimism here from a cost funding perspective because of those opportunities that we have and some success we're seeing, particularly in the consumer bank as well. Some of the things we've done, we've invested in a number of tools to create client primacy, and it's really starting to pay off. The investment in our AI to analyze lots of data to make pricing decisions is also paying off.

That's really helpful, guys. I appreciate all of that color. And then let me just follow up on the capital front. If you guys could just remind us of how you think about a CET1 floor and how active you would expect to be with the buyback against your kind of mid-single-digit loan growth expectation.

We've been using 11% as our minimum for CET1. Currently, we're at 11.4%, and we don't intend to decrease that. We want to maintain some cushion for when loan growth accelerates, so we have the capital to back that growth. If I had to specify, I would say that 11% remains our minimum for the CET1 ratio. Previously, we mentioned 10%, and we had been around that level. Now we're at approximately 4%.

I'd be okay with 10.

And the next question comes from David Smith with Truist Securities.

So now that you've taken those cuts out of the outlook, it seems like it's a little bit of a tougher backdrop for loan growth, although you kept the guidance the same in that mid-single-digit range. Can you talk about any puts and takes there? Has your expectations for where that loan growth is coming from evolved over the last 3 months?

Yes. As we've said, if you look at the short-term C&I pipeline, commercial pipelines, they're up 10% in the same period. This is typically a seasonally slower period, so we're starting to see more activity. Our leasing and finance project finance area continues to have really strong pipelines and had great production last year. Because of the tax law changes, that's going to continue. If you look at the commercial bank or the consumer bank, our pipelines are up significantly in the consumer bank. So I think nearly all correct. There are some bright spots out there. On the flip side of that, CRE still continues to trite because we’ve already gotten into all this, but we pulled back a little bit, and we're just letting those large bonds go to the permanent market.

Yes. And even with that, we are starting to see some extremely strong new CRE credit opportunities. So there are shoots that are starting to show and we've liked what we've seen so far.

Yes. As I mentioned in the last call, our capital growth and the reduction in that exposure are now below 200%. I anticipate this will change in the future. This gives us the opportunity to select high-quality projects in the CRA space, which are not yet represented in our pipeline, as we expect these to come in the second half of the year. There are some positive developments, which is why we are not altering our guidance, and we remain confident in our ability to generate net interest income as indicated in our guidance.

Okay. And then the fee guidance implies a little bit of a ramp-up in the second half from $90 million in the first quarter and $90 million to $95 million this coming quarter. Can you just unpack your expectations there, like where you see that growth coming from?

Sure. The investment banking segment is expected to generate significant fee events. The public finance and investment banking group we brought on has some deals lined up for the second half of the year that are already in progress. That’s one factor contributing to our outlook. Additionally, if interest rate volatility decreases, we anticipate an increase in derivative activity. We're optimistic about our potential to grow market share in the mortgage sector, with opportunities for gains on sales along the Eastern seaboard as those markets continue to expand. Our wealth management segment is also experiencing strong growth; we're building a team to engage in family office opportunities and are planning to move upmarket in that area, presenting some promising options. Fee income from mortgage treasury management is expected to increase, especially with significant clients like Penn State and even larger ones that will be joining us soon. Treasury management fee income should continue to grow. We’ve also noticed an uptick in interchange activity recently, even though we haven't fully activated our debit portfolio, which represents a substantial fee income source. We will focus on enhancing this, particularly using AI and tools we have to drive more activity on our debit card platform and our smaller credit card portfolio, which is minor in comparison to the debit side. Those are the key drivers.

And this is our fourth consecutive quarter with fee income at $90 million or above. So I think that's a key point for us. I think there's good momentum in the businesses that Vince talked about in debt capital markets and public finance. There's a lot of excitement about what the rest of the year holds for us on the fee side.

Yes. And we've been doing really well from an international perspective as well. We just won another award, I'm not like to mention what it is, but those people have done well. The person that runs it, Gener, is a long-time associate of mine and respected. He's done a terrific job, and that continues to grow, too. We're seeing more and more opportunities with international banking with hedging and spot transactions for our clients, particularly as we're moving upmarket. Given that we have a really low relative share to some of these large players in the capital market space and the revenue lines associated with some of these businesses are relatively small, it's already reflected in the run rate. There’s upside.

Less public finance is another door business.

Yes, as I mentioned earlier, with investment banking, that's another one. We think hundreds, maybe thousands of municipalities across our footprint. We have a specialization in handling their principal treasury management fees. I think that, that will open the door building out that team opens the door to some significant opportunities in the public finance space for us. That's a highly competitive business, but we have the relationships already. We've been farming it out or turning it over to others, and we can now capitalize on it. So very granular, I mentioned all these areas. So there's a lot of granularity. It doesn't take much of a number of those areas increase even low single digits. It starts to really drive the total revenue number.

And the next question comes from Kelly Motta with KBW.

We've talked a lot about your capital as well as the organic loan pipeline and the opportunities in C&I, I'd like to circle back to M&A and get another updated thoughts here on your appetite for deals and a reminder of what you look for given it does seem like your organic outlook is quite strong.

Yes, I've mentioned several times that we plan to be opportunistic. There isn't much in the market that we consider to be high value, even if it were available. There are potential opportunities worth exploring, but a bank must be on the market for a transaction to occur. We're not currently looking to make acquisitions. I'm simply referencing deals that have occurred and what I've been hearing in the marketplace. Initially, our interest in M&A was driven by the need to scale to navigate regulatory challenges and to enable the current initiatives we are pursuing. Given our size, we are well-positioned to compete effectively, even if some doubt it, and we offer a comprehensive range of products. We provide a balance sheet of $50 billion and a product offering akin to that of a $1 trillion bank, at least for our clients, since we don't serve Fortune 100 companies as their main bank. For the middle market and large middle market clients we engage with, we can offer the same services as many larger banks, but with a more tailored approach that emphasizes getting things done. There is less bureaucracy, and we can be more innovative because we don't operate under the same extensive infrastructure or rigid processes. This allows us to maintain an entrepreneurial spirit, which our customers appreciate, leading to great opportunities. I recently discussed in a podcast, which will be released later, that smaller banks have a unique opportunity right now to develop distinct products. With advancements in AI and technology, including cloud computing and increased processing speeds, I believe we will see remarkable developments that are shifting the dynamics of scalability in relation to technology. When considering our cost of funds, returns, and efficiency ratio, we perform on par with larger banks. Our efficiency in the consumer bank even surpassed that of the larger banks we analyzed. We've managed to achieve this by being strategic in resource deployment, benefiting from lower bureaucracy, and maintaining a humble approach. We've encountered several factors in the market that certainly work in our favor.

I really appreciate all the information shared. It's very helpful. Regarding margins, I value the comments on commercial and industrial growth being very strong and the pipeline reaching record levels. I apologize if I missed any details, but could you provide more insight on how loan pricing and spreads are performing? I know you mentioned continued repricing opportunities, but I would like to hear more about pricing.

Yes, you would expect in this environment for credit spreads to broaden because of the geopolitical environment that we're in. We're not seeing that necessarily in the middle market. I think there's still some pretty significant tailwinds from an economic perspective that keep people optimistic, and I think the tax law changes were very favorable for capital investment. You're not seeing what you typically would see when we have the geopolitical environment. What that means is that you're not going to see a broadening of credit spreads because of issues with repayment or problems. I don't know, Gary, you could speak to that. But there is competitive pressure, obviously, but there's always competitive pressure. I've been doing this for a long, long time. I've been in corporate banking my whole career. One of my pet peeves is when I sit there with the commercial bankers and they tell me that it's so competitive. I can remember back 30 years ago when I was competing for deals in the upper middle market and transactions were priced at 50 basis points over LIBOR on a sub-investment-grade credit opportunity. That pricing doesn't exist today, so the margins are better today. It goes through ebbs and flows and changes, and credit spreads impact how pricing is impacted. So we'll see what happens with the economy. We've always benefited because we were more conservative. When credit spreads were broadening, what that means is that we’re going to get paid more for lower risk transactions because we have the capital and the appetite to deploy capital. Gary has talked about that many times. Others will get out over their skis from a lending perspective and then have to pull back during those periods. During frothy periods, credit spreads are thinner. If you want to shorten — sorry for all these long answers, Kelly. The reality is it's a complicated business. In certain segments, like if you move deep down into small business lending, I think spreads have come in because there's increased competition for C&I opportunities. When you move up into the larger end of the spectrum, I think spreads are pretty consistent with how they've been underwritten, particularly on syndicated deals. It may have come in a little bit.

You hit it pretty well. Spreads are where you expect them to be today on a transaction-by-transaction basis; you can get squeezed a little bit, but we're very comfortable with the spreads that we're seeing in the marketplace today and based on where the economy is. It's probably going to get a little more competitive as we move forward. It wouldn't surprise me, Kelly. So we'll keep an eye on that and continue to manage it accordingly.

Great. I really do appreciate all the color.

And the next question comes from Manuel Navas with Piper Sandler.

Just a quick follow-up on Kelly's question. What are kind of new loans coming in at what yield?

It depends on the category.

New loans originated during the first quarter came out at $557 million. If you look at it compared to the fourth quarter on average, I mean, it's 589 in the fourth quarter; you had 2 Fed cuts affecting fourth quarter levels. So on a spot basis, the overall portfolio yield is at $561; it was only down a basis point in total, which includes all of the different categories of loans; no Fed costs during the quarter. Total moving a basis point; the lines have kind of approached each other now where we have been. If you go back a few quarters, new loans were coming on 25, 30 basis points higher than the portfolio yield; it's kind of more in line based on the mix of what we originated during the first quarter.

Okay. I appreciate that. The deposit pipeline, you're speaking to some commercial clients that are going to come on over time with treasury management solutions. How does that pipeline also compare to your current deposit costs?

Yes, that's a good question, but it's difficult to answer on the spot. The levels of demand deposits will vary based on the established floor balances because they utilize an earnings credit to cover their services. It really depends on the client and the services provided. I'm not sure I can give you a definitive answer, but it’s an important question. Regarding the pipeline, some aspects are unpredictable since we operate as the primary bank. You can expect to see higher-cost deposits being added as well, but those are the excess balances that are being swept.

So I would just add one thing, Manuel, but the commercial deposit pipeline is up meaningfully. I mean, we were a little under $1 billion at the end of the year, and we're around $1.2 billion now. So we convert and we continue to add new names into that.

That's great. I appreciate that. Just my last one is can you talk about how quickly some of your investments in account primacy or AI should kind of pay off and how should we track your progress beyond deposit growth, solid returns? Any other metrics you'd like to point us to kind of see how this is paying off?

We have previously discussed our applications, and our application volume has risen significantly. We’ve developed a platform that leverages AI along with our common app, resulting in a 38% increase in deposit applications through that network. It's challenging to provide a global figure due to the ongoing disintermediation affecting traditional origination methods. However, we do track how many applications come through that channel, and the growth has been substantial and continues to trend upward. I believe loan application volumes increased by 5% quarter-over-quarter, while deposit applications rose by 31%. We are witnessing growth in these areas, and this trend should accelerate over time. For any bank, it’s best to evaluate overall performance as growth is spread across various segments of the organization. We are mindful of our limited resources and do not want our expenses to increase without yielding benefits. As a bank, we need to ensure efficiency and strategically choose and execute projects, as reflected in our results. We have already implemented several upgrades, enhancing our capacity to monitor our deposit base and analyze deposit betas. We're moving from an older system to a much more advanced one that uses AI to enhance performance. One example is a project aimed at automating our call center based on research that has identified advanced AI software that could significantly enhance customer experience and lower servicing costs. We are actively pursuing this project and are currently developing our 360 View with AI integration, which is progressing quickly. Additionally, we are building a proprietary mortgage application to be included in the common app, which will aid us in cross-selling by enabling us to instantly use customer data to offer other products like insurance and deposit accounts as we originate mortgage loans.

We've already announced; we have embedded in our mobile app, the ability to move your direct deposit instantly and repetitive ACH transactions. We're working on bill pay. We're going to get there. We're integrating that into the origination platform, and we have pushed that common app origination platform into the field. So the entire branch network is originating on the same digital platform that consumers use online. We've done a lot. There's a lot that's already done that's reflected in the expense run rate. There are some things that we're finalizing that should come online very shortly here and be additive probably in '27 either from an efficiency perspective or generating additional revenue for us. I don't know if that’s helpful, but I don't have a precise number to give you.

And the next question comes from Brian Martin with Green Capital.

Maybe one follow-up for Gary. Just maybe it's Vince. Just on the loan growth, just on the CRE side, in terms of the sales into the secondary market and just kind of managing that. How are you thinking about that? It sounds like there are opportunities, but you're still seeing payoffs just in terms of contribution to growth this year. It sounds like C&I is obviously was strong this quarter. The pipelines are good there. But just on the CRE side, given your capacity and how you're thinking about that in the secondary market.

Yes, Brian, we still have projects that we've been involved with for the last couple of years that are coming on a quarterly basis regularly that are moving into the secondary market. So we'll continue to see that as we work our way through the year ahead there. That being said, we were pleasantly surprised by the ramp-up in new CRE opportunities. Pretty much across the board, those opportunities have been really solid. So we’re going to aggressively pursue those solar transactions in that space. I will tell you, that is, as we talked about competition earlier, it's very competitive because many banks are getting back in the CRE business. So we're seeing that there's a lot of activity there, and we expect that to build throughout the year. So in terms of those payouts and moves into the secondary market, they will continue. That will be a headwind in that category, but we're going to be very choosy of the assets that we're putting on, and we will see activity from a new booking standpoint there build throughout the year.

By the way, the C&I growth that we have does not include MDFR. So I've been saying this for a long time. I think people finally started looking at it. When you look at the H8 data, it included basically warehouse lending for consumer borrowings that get reflected in the commercial line because you can't segment it out or there's another category that you can't really figure out what's sitting in that bucket when you look at the public disclosures. But we don't have that. So we're growing with traditional C&I. We haven't had any help in any way from it. I think that's an important distinction. So as the economy starts to accelerate, you’ll see us perform even better as we continue to build out some of these tools that I mentioned. We'll see better penetration in the small business segment. We should get there. The consumer business we talked about; we're starting to see pretty explosive opportunities in certain segments and consumers.