Hello and thank you for standing by. My name is Bella and I will be your conference operator today. At this time, I would like to welcome everyone to Northwest Bankshare's Inc. Q3 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad to withdraw your question. Press star one again. I would now like to turn the conference over to Michael Perry, Managing Director, Corporate Development and Strategy and Investor Relations. You may begin.

Good morning, everyone, and thank you, operator. Welcome to Northwest Bank Shares Third Quarter 2025 Earnings Call. Joining me today are Lou Torchio, President and CEO of Northwest Bank Shares, Doug Chaucer, our Chief Financial Officer, and T.K. Krill, our Chief Credit Officer. During this call, we will refer to information included in the supplemental third quarter earnings presentation, which is available on our Investor Relations website. If you'd like to read our forward-looking and other related disclosures, you can find them on slide two. Thank you. And now I'll hand it over to Lou.

Thank you, Michael. And good morning, everyone. Thank you for joining us today to discuss our third quarter results. It was a busy and productive third quarter, and I'm pleased with our results and the team's performance. At the end of July, we closed the Penswood merger, the largest transaction in our company's history, and completed customer and data conversion and financial center rebranding. This is Northwest's first quarter as a combined entity, with about two-thirds of a full quarter of combined company results. Deal synergies are as expected, and the various financial impacts of the merger, including cost savings, are all on target or better than expected. I would like to thank and congratulate our team on the successful execution and integration of this merger. In early August, in celebration of that achievement and joining the ranks of the nation's 100 largest bank holding companies, we rang the NASDAQ opening bell in New York City. During the third quarter, we continued to make strategic additions to our leadership team. We welcomed a new chief legal officer, treasurer, and the head of wealth management, a new role to lead our expanding wealth management team. We now have more than 150 financial centers across Pennsylvania, New York, Ohio, and Indiana. And yesterday, we had an official groundbreaking ceremony for our first DeNovo Financial Center in the Columbus market, and we're joined by the Mayor of New Albany and the Chair of its Chamber of Commerce. This is the first of three new financial centers we'll be opening in the Columbus market next summer. We're already building out our Columbus DeNovo teams to support local deposit gathering, customer acquisition, and developing business relationships for a fast ramp-up when we open our doors. Our newest DeNovo Financial Center in Fishers, Indiana, which we opened in June, is performing well and on target. And as we look out over the next 12 to 18 months, we expect to open additional new financial centers in key locations in the high-growth Columbus and Indianapolis markets. I'll now walk through some of the highlights of the third quarter, directing everyone to slide four. I'm pleased with the performance of our first quarter as a combined company, with the team staying focused on executing our strategy and delivering on our commitment to sustainable, responsible, and profitable growth. The merger enhanced our balance sheet scale. At quarter's end, we had $16.4 billion in total assets, $13.7 billion in deposits, and $12.9 billion in loans. We delivered more than 25% year-over-year average commercial C&I growth with strong progress on our continuing strategic rebalancing of the portfolio. We're in the third year of our commercial banking transformation, and we're seeing the benefits of that focus and investment with progress in our specialty verticals, commercial deposits, and continued growth in SBA lending. Northwest was recently named as a top 50 SBA lender nationally by volume. We delivered $168 million in revenue for the third quarter, a record in the company's history, resulting in more than 20% year-over-year revenue growth. Net interest margin improved nine basis points quarter-over-quarter to 3.65%, benefiting from higher average loan yields and purchase accounting accretion. Our EPS on a gap basis was up $0.08 or 15% for the nine months ended September 30, 2025, and our adjusted EPS increased $0.16 or 21% for the same period. Turning to credit, which we know is currently a topic of significant interest across the industry, for the record, we have no direct exposure or known indirect exposure to any of the companies with high-profile credit issues that have recently been referenced in the media coverage on regional banking. The headline is that we continue to manage risk tightly, and our credit costs continue to be in line with our expectations. We're happy with our progress in reducing the level of our criticized and classified loans that we highlighted last quarter. Prior to accounting for acquired loans, which resulted in an increase of $9 million to classified loans of the combined company, Legacy Northwest classified loans decreased by $74 million this quarter, and we've seen further improvement post-quarter end, as we continue to manage our loan book in a focused and methodical manner. And finally, as we have for the previous 123 quarters, the Board of Directors has declared a quarterly dividend of $0.20 per share to shareholders of record as of November 6, 2025. Based on the market value of the company's common stock as of September 30, 2025, this represents an annualized dividend yield of approximately 6.5%. that. This quarter's results are the product of an extremely talented team's hard work. I want to thank our entire Northwest team for their continued dedication to our company's success. Looking forward to the final quarter of 2025, we continue to focus on managing the factors within our control, serving our core customers and communities, building on our strong financial foundations, and maintaining tight cost controls and risk management discipline. Now, I'll hand it over to Doug Schosser, our Chief Financial Officer.

Thank you, Lou, and good morning, everyone. As Lou indicated, we are pleased with our financial performance. This is the product of the efforts of our entire team working tirelessly to deliver these results, while also ensuring that our merger and conversion activities win smoothly for our new customers and associates. Now, let's continue on page five of the earnings presentation, where I'll walk you through the highlights of Northwest financial results for the third quarter of 2025. As a reminder, we closed our merger on July 25th, so this quarter includes approximately two months benefit from the merger. The fourth quarter will be our first full quarter of reporting as a combined entity. Given the overall size of this transaction, our fully completed conversion and opportunities as a combined organization, we don't intend to disaggregate results unless doing so would aid in the explanation in this first combined quarter of reporting. Our GAAP EPS for the quarter was $0.02 per share, which reflects the merger and restructuring charges related to the merger. On an adjusted basis, our EPS was $0.29 per share for the third quarter. Net interest income grew $16.5 million, or 14 percent, quarter over quarter, with the net interest margin improving to 3.65%, benefiting from higher average loan yields, increased average earning assets, and the benefit from purchase accounting accretion. Non-interest income increased by $1.3 million, or 4%, quarter over quarter, driven primarily from an increase in service charges. These items combined drove total revenue to a record of $168.1 million in the quarter. A $17.7 million increase quarter over quarter Additionally, we saw an increase in our adjusted pre-tax, pre-provision net revenue, which came in at almost $66 million, an 11.5% increase quarter-over-quarter, and a 36% improvement from third quarter 2024. And finally, our adjusted efficiency ratio of 59.6% in third quarter 2025, improved by 80 basis points quarter-over-quarter, and 520 basis points year-over-year. Turning to page six, I'll spend a moment covering the highlights of our merger. We successfully completed all remaining merger conversion activities in third quarter 2025. All acquired branches are operating under the Northwest Bank name. All associates have been onboarded, and the strong cultural fit is as we anticipated. All customers are converted and are being served under the Northwest brand. Deal synergies are on target, and our capital position remains strong. Tangible common equity to tangible assets of 8.6% at quarter end is better than originally projected. This is a good time to cover a few other points that are important. First, I'd like to cover our liquidity position that is very strong. We have readily available incremental sources of liquidity that would cover approximately 250% of the company's uninsured deposits, net of collateralized and intercompany deposits at quarter end. As for capital, we have disclosed our current preliminary CET1 ratio at 12.3%, which is only about 60 basis points lower than the level recorded in second quarter 2025 and significantly in excess of the levels required to be considered well-capitalized for regulatory purposes. Turning to page 7 and the purchase accounting impacts, loan mark accretion was $2.7 million in the third quarter of 2025, and based on projected contractual cash flows, it's expected to be $1.9 million in the fourth quarter of 2025. We provided some additional information covering contractual accretion for 2026 and 2027. Actual results will vary with customer activity. Day 1 non-PCD and unfunded provision expense was $20.7 million and our core deposit intangibles, or CDI, for $48 million with $1.6 million of CDI amortization in the third quarter of 2025. The preliminary goodwill created was $61.2 million. On page 8, we cover loan balances. Average loan balances grew $1.32 billion quarter over quarter benefited from the acquired loan balances. Loan yields increased to 5.63% in third quarter 2025, growing by eight basis points quarter over quarter. We have provided information by loan category throughout our investor presentation. I will also note that the increase in CRE balances did not meaningfully change our overall regulatory CRE concentration. On page nine, we covered deposit balances. Deposit balances similarly benefited from the acquired balance sheet as average total deposits grew by $1.14 billion quarter over quarter, while brokered deposits decreased $2.2 million quarter over quarter. Cost of deposits remained flat at 1.55%, benefiting from proactive management of the overall portfolio and still near best in class relative to our peers. We saw growth of deposit balances in most categories while maintaining reasonable deposit costs and we are pleased with our progress here. We also saw no appreciable change in our deposit mix other than small increases in demand deposits offset by minor reductions in borrowings. Moving to slide 10 and our net interest margin. Net interest income increased 13.8% quarter over quarter or $17 million inclusive of the benefit from purchase accounting accretion with NIM expanding nine basis points to 3.65% in third quarter 2025. Purchase accounting accretion net impact equated to six basis points of our margin expansion. This continues our track record of growing both net interest income and improving our net interest margin by focusing on our loan pricing and our funding costs as the rate environment has been more favorable in 2025. Security's portfolio yields continue to increase as we reinvest cash flows at higher yields than the current portfolio. of. This is clearly a bright spot for our bank and will further improve many of our key profitability and return metrics. Slide 11 provides some details on our earning asset and funding mix. You will notice a few changes from last quarter. We've seen a modest shift in our earning asset mix as the acquired loans drove changes in our fixed and periodic repricing categories, while our funding mix was largely unchanged. You'll also note our time deposits have a very short duration, allowing us to continue to benefit from future repricing opportunities in a falling rate environment and lower interest expense. We hold a granular diversified deposit book with an average balance of over $18,000. Customer deposits consist of over 728,000 accounts with an average tenure of 12 years. The similar average customer balance and tenure pre and post merger illustrates the similar high quality and granularity of the acquired deposit book. On slide 12, our securities portfolio continues to be a strong source of liquidity for us. The yield on our securities portfolio continues to increase as we continue to reinvest cash flows at higher yields in the runoff portfolio. Yields increased 10 basis points to 2.82% in the quarter. Slide 13 contains details on our non-interest income, which increased $1.3 million from last quarter, driven by an increase in service charges and fees benefiting from a larger customer base resulting from our acquisition and other operating income primarily from a gain on equity method investments. Non-interest income increased 15.7% or $4.4 million year-over-year driven by a $3 million increase in other operating income and continued growth across other fee income categories. Slide 14 details our non-interest expense. We incurred approximately $133 million of expenses on a GAAP basis, which included about $31 million of merger-related costs this quarter. Core expenses of $102 million are up $11 million from Q2 levels, resulting from higher levels of compensation and other expenses from the newly acquired employees and facilities. Additionally, core expenses also increased in the third quarter as we incurred additional expenses related to accruals for performance-based compensation. Our adjusted efficiency ratio of 59.6% after excluding those merger and restructuring expenses is an improvement from the 64.8% in the prior year period. This reflects our continued focus on managing expenses without an impact on our core operations for sacrificing customer service while still investing in talent to support future growth. On the next few slides, we'll cover credit quality. On slide 15, you can see our overall allowance coverage ratio has increased to 1.22 percent, up slightly from second quarter of 2025, with provision expense of $11.2 million net of day one non-PCD impacts versus $11.5 million in the second quarter of 2025 due to individual assessments within the commercial portfolio. Our annualized net chargeoffs of 29 basis points for the quarter are in line with expectations and guidance. We believe our coverage is appropriate, prudent, and in keeping with our rigorous credit risk management approach. On slide 16, you will note that our 30-day plus loan delinquencies increased slightly from 1 to 1.10%, mostly from acquired loans within the consumer book. This increase does contain some more administrative consumer delinquencies as customers need to manage certain changes in online bill pay and other electronic payment methods resulting from impacts from the conversion. We expect this trend to decline over time. NPAs increased by $26.3 million, approximately $17 million of which is attributed to the acquired loans. Our NPAs as a percentage of loans outstanding plus Foreo has increased to 100 basis points. We provide some additional details on the drivers of this change on that slide. Turning to page 17, we've included some additional information on changes within the classified loans reported this quarter. The third quarter 2025 increase in our classified loans is a result of the acquired loan book, but overall classified loans declined as a percentage of total loans. Northwest Legacy classified loan both decreased $74 million quarter over quarter, resulting primarily from payoffs. Net chargeoffs remained within guidance at 7 basis points, or $9.2 million for the quarter, or 29 basis points annualized. We included our commercial loan distribution and CRE concentration information on a slide in the appendix. As Lou alluded to earlier, we have no direct exposure or no indirect exposure to tricolor, first brands, or cancer groups. Regulatory CRE concentrations is approximately 156% of target Tier 1 plus ACL, up slightly from the prior quarter at 152%. On slide 18, we have provided an updated perspective on our outlook. We continue to be confident about Northwest Business and would expect to maintain our net interest margin at the third quarter 2025 levels of the mid-360s. Future NIM will be a bit more volatile as prepayments of the acquired loans will accelerate purchase accounting accretion, making it difficult to forecast. We are effectively reaffirming the rest of our previous fourth quarter 2025 guidance, including non-interest income expected to be $32 million to $33 million, Non-interest expense expected to be in the range of $102 million to $104 million. Tax rate expected to remain flat to the 2024 tax rate. And finally, net charge-offs to average loans expected to end the year at the low end of the 25 to 35 basis point range, which could mean net charge-offs up to $13 million in the fourth quarter of 2025. As a reminder, we said last quarter we will not have fully realized all the cost savings from the merger in the fourth quarter of 2025, but expect to achieve 100% of the savings by second quarter of 2026. We will provide full year 2026 guidance during our fourth quarter 2025 earnings release call in January 2026. Now we'll turn the call over to the operator who will open the lines for live Q&A session.

At this time I would like to remind everyone in order to ask a question press star then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Daniel Tamayo with Raymond James. Your line is now open. Please go ahead.

Thank you. Good morning everyone.

Morning Danny.

Maybe we start on the loan growth side. I don't know if I heard any commentary on loan growth expectations, but as you address that, just curious if you could talk about the new de novo branches that you're adding in Indianapolis and Columbus and how that kind of fits into the loan growth guidance. Thanks.

Okay, I'll start and then I'll let Luke comment on the new branches and expansion. So This quarter, we would have had a big impact from the acquisition, and we didn't disaggregate all of that movement. But I would say for next quarter, we are looking, again, to hold the balance sheet stable to the extent there's opportunities to create some balance sheet growth on the loan side. Of course, we'll take advantage of that, but the overall environment has been pretty good. Our pipelines look pretty good, but again, closings in any given quarter are a little bit hard to predict. So certainly looking to continue to grow the franchise, and we'll look to that in the fourth quarter as well.

Yeah. Hi, Daniel. Good morning. It's Lou. Thanks for calling in. On the DeNovo strategy, we're already out in the market. We've hired commercial real estate business bankers. We're recruiting for the wealth team, and we'll start the deposit gathering sometime in 26 in anticipation of the new launches. We did break ground yesterday in the high-growth suburb of New Albany, Ohio. As you know, we opened suburban Indianapolis last quarter. And so, yeah, we look to plan to grow in market and use our national verticals that we created to be complementary. And, again, in January, we'll give 26 guidance on loan growth. But we feel really comfortable with all the different levers that we have and where our pipelines currently are, including our commercial pipeline.

That's helpful, guys. Guys, I guess just to dig in a little bit more, I know you're not giving guidance in 26 yet, but, you know, you're thinking it was legacy growth was was pretty flat in the third quarter. And you're saying flat again in the fourth quarter. I'm assuming you're hoping to grow in 26. I mean, is that a fair statement? Is it should we be looking for something in the in the in the low to mid single digit range or or you think you can do a little bit better than that?

Yeah. I mean, I definitely think we're going to, when we provide that guidance, you would expect to see a loan growth number that would look pretty comparable to GDP growth. So I think that's fair kind of thinking right now. I think the other thing to keep in mind is we are working through the criticized classified assets. That's obviously going to have an impact on our ability to show growth as well. So as those refinance off the book, of course, that creates a little bit of a tailwind to actually showing growth in the portfolio. So I would just mention that as well. Again, as we talked about last quarter and we kind of continue the conversation this quarter, we're hoping to see a good amount of movement on that portfolio. In our opening comments, we talked about, you know, that was $75 million of change this quarter alone.

Understood. Yeah. And that's that's helpful. Um, and maybe just touching on the expenses here, the, the, the number was, was better than I was looking for in the, in the third quarter. And, um, guidance looks, uh, looks pretty good for the fourth road. Again, you talked about, um, continued cost savings coming through, um, the beginning of next year. Uh, you know, how should we think about expense numbers going for I mean, if that run rate's still, what is it, is it stable, as you think, off of the fourth quarter number into 2026, or because you've got the hirings or the de novo branches opening that you'll be growing expenses a decent clip next year? so i think that's a good way to think about it we again we'll get into more details when we do guidance for 26 but i think the way lou and i think about it right now is we really want to focus on continuing to manage positive operating leverage so and we want to continue to invest for

growth so the de novo is being a good example of that so i think next year we need to take a look at where our revenue growth is going to be and then we want to continue to invest to grow so we would definitely hold some level of ability to think about our expenses in that way. But, you know, we're certainly not talking about a significant increase from here. And then we will have the benefit of those costs on the Penswood side starting to become a little bit more rationalized as we get into third quarter. Again, so we've got some opportunities there as well.

But I think the way you're thinking about it around, does it make sense to kind of hold at these levels yeah but we'll obviously try to try to do better than that great thanks for all the color guys i'll step back thanks thanks your next question comes from the line of brian foran with truest securities please go ahead morning brian welcome oh thanks uh just on the tangible common equity ratio and cg1 coming in uh better than expected post the acquisition you know could you just give us your updated thoughts on kind of the levels you think you would target over time and as you look to next year you know how you're thinking about trade-offs between buybacks uh potential acquisitions maybe just running with a little bit of excess uh just how we should think about managing that uh capital position uh uh in the next uh 12 to 18 months yeah sure i mean clearly we're at we're well in excess of regulatory minimums for capital and we like that position i think that, you know, just helps support safe and sound banking franchise.

The other thing I would say is it's also, you know, as we want to be able to take advantage of any opportunities in the market, we would hold that capital level there. We've never gotten into capital level targets per se, but, you know, I think we're significantly comfortable with the capital levels that we carry now. And as we find opportunities to deploy that capital, because obviously that would, you know, your returns on tangible common equity would be benefited if you had a little bit less capital. Similar returns, we obviously think about that. But, you know, I wouldn't say that you're looking at a massive change in the capital position for the company, just kind of normal operating. But, you know, we like having a strong capital base, certainly, to operate from.

Great. And then on the margin commentary, you know, I definitely hear you on the, I think the word used was volatile, but the difficulty managing or forecasting purchase accounting accretion, you know, outside of the quarter-to-quarter moves and paydowns in the PAA book, you know, does it feel like the second half of this year is kind of a good run rate, or should we build in a little bit of haircut is PAA and rate cuts and all that factors through?

Yeah, no, I think we said that there was about six basis points impact from the purchase accounting side, so that would take our core margin, if you will, to like a 359 level. So when I sort of guided to that mid-360s, that was conceptually thinking about that 359, we feel pretty good about that and being able to maintain that. You know, you'll get a couple basis points here or there depending on a quarter over quarter. If you had more paydowns and purchase accounting acceleration in one quarter versus another, that was the piece of the volatility I was thinking about. but I think we're pretty well positioned as it relates to kind of rates and are comfortable that we can keep that 360 core, like right around 360, and then we'd have some, you know, a little bit of movement from purchase accounting here or there. Does that help?

That's great. Maybe one last one just on the credit slide. Just kind of comparing the last quarter, it seems like the nursing home book had some nice payoffs. As you alluded to the fourth quarter, potentially seeing additional payoffs of classified loans. Is it still concentrated there? Is it spreading a little bit? And related to that, when you talk about up to 13 million of charge-offs, is that just a mathematical statement? Or are you kind of saying, look, we've got maybe a couple of larger resolutions we're working through and fourth quarter might be a little higher than 3Q?

It was a bit of both, right? I think what we wanted to clarify is when we came out in the second quarter, we said expect a couple of quarters in the $11 to $13 million range and that we were expecting to have total charge-offs at around that low end of our guidance or 25 basis points of loans. In order to kind of be clear about what that could mean in the fourth quarter is that could mean $13 million and we'd still hit all of that guidance. So we just didn't want anybody to sort of say oh nine and then nine we wanted to say yeah well you know as we work through this book we may have some elevated charge-offs for a period of time but not elevated to the extent that we felt like we were going to be above or even within that sort of 25 to 35 range that we said we said you know we'd be at the lower end of that range for around 25 so it's more doing the math I think you know there is a little bit of work to do on the classified loans as we work some amount, so we would expect that there'll be some impact there, but we feel pretty good that we're reserved for all of that. But again, when you hit a charge-off versus reserves, we just wanted to be clear.

Perfect. Thanks so much.

Your next question comes from the line of Tim Switzer with KBW. Please go ahead.

Hey, good morning, Tim. Thanks for taking my question. First question I have to follow up on the credit in terms of the consumer portfolio. I'd love to get an idea of like what trends you guys are seeing there and then maybe even outside of the loan book what you're seeing um across your deposit accounts in terms of like activity and behavior just because there's been some noise around the health of the consumer particularly it's like the lower end of the credit spectrum which i don't think you guys have much exposure to but um if you could update us on that too please sure um so first of all on the consumer side i think we referenced it in our comments so we have a little bit of elevated delinquencies as we brought on the Pennswoods customers and the acquired loans.

However, some of that is definitely administrative in nature. So if you think about going through a conversion, be able to reestablish their payment channels through new online portals and other things. So you do tend to see a little bit of incremental activity there. We continue to see that sort of work its way through the system. So we don't see that as being a negative trend on the overall consumer book, just more a process of some administrative things that are going on with the customer base. So that would be one thing. I'd also say that we continue to be very comfortable with our consumer exposure. Beyond that, our auto loan book is very high credit quality, super prime book, very low delinquencies on that book. And we have not seen a meaningful change in those delinquency rates between the second and third quarter. And then the only other thing I might comment on is I don't think we're seeing any significant impact from any of the government showdown, slowdown activities, we wouldn't have expected to see it this early either. But generally speaking, I think we're seeing, you know, the consumers be very similar in the third quarter as they were in the second quarter, sort of across the book.

Got it. That's helpful. And the other question I have is, I know you guys just closed in the woods, but how do you think about scaling up the bank from here? Is there target size for the bank where you hit optimal efficiency or returns over the next, you know, five years or so? And you have a management team with a lot of experience at larger banks. So, you know, how would you like to get there through Organic Growth, DeNovo, or M&A?

Yeah, Tim, it's Lou, I'll take that. So, as you know, you know, at this point, we're looking at really maximizing the integration and the efficiency and then the accretion of the Penns-Woods merger, which being the largest in franchise history, is really important on the execution side. It's going extremely well. As you noted, we now have an executive management team that we're really comfortable with being able to go out to the market and do M&A. Notwithstanding an M&A strategy, I would say that's just, it's complimentary. You know, we are focused on improving our financial returns, our metrics at the core organic bank. And I think that, you know, the de novo branching opportunity, while meaningful for us in higher growth markets that we currently don't have a large presence in, i.e. Columbus, Ohio, and Indianapolis, Indiana, will continue to be a focus of ours, but we will have to do complementary, whether it be look at acquiring a branch deal, opportunistically M&A in order to scale that. So I think that we're focused on, as we stated in the past, a dual strategy, run the bank organically, continue to create efficiencies. We think there's some upside there. And then look for M&A that's in and around our market that either fits us strategically, geographically, that can add value to the franchise and then to the shareholder.

Got it. That's very helpful.

Thank you, Luke. thank you our next question comes from the line of david bishop with hogdy group please go ahead hey good morning gentlemen good morning you're welcome hey hey thank you thank you very much hey i appreciate the uh the details on uh 511 regarding the funding mix just curious in terms of the uh the short duration nature of the cds maybe what you're seeing in terms of weighted average costs rolling off over the next year what you're sort of put on rate these days Yeah, I don't know that I have that number right at my fingertips.

What I would say, though, is over 90% of that CDE portfolio will mature before the middle of next year. So that does give us quite a bit of flexibility around what the new rates would go on as the overall interest rate environment sort of goes down theoretically with these rate cuts. So we like the way that book is positioned right now. We don't have a ton of really long exposures there. So we should be able to take advantage of sort of the rate curve wherever it is and still be fairly priced for our customers.

Got it. And in terms of the funding of expected loan growth, securities runoffs expectations here and cash flows, is that going to be securities funding that? Do you think deposit funding could cover the funding? I'm just curious how you're thinking about sort of the balance sheet ebbs and flows on sort of cash and securities. Thanks.

Yeah, I mean, I think we would we have the ability to fund as much loan growth as we want. We have pretty low positions overall and brokered CDs. And in fact, we've been able to pay down a lot of that. So we've got plenty of funding capacity, certainly opening up some of these branches. We help to have that result in deposit growth, and we continue to focus on our ability to continue to help our customers on the commercial side with deposits. So we feel good about the opportunity to grow deposits organically. It's always super competitive, though, but we have other sources of funding, including the securities portfolio, if we would need it. So we don't have any real concerns or constraints in that place that we see right now.

So it looks like the security is about 13% of assets you think it holds around this level or maybe builds or falls slightly. Just curious how you see that trending over time.

Yeah, well, we can provide a little bit more color on that. We don't really have a target that we've ever talked about publicly. But, you know, depending on what opportunities exist and how we want to manage our interest rate position and liquidity position, we'll make those determinations. Appreciate the color.

Your next question comes from the Lion of Matthew Breeze with the Stevens Inc. Please go ahead.

Hey, good morning. Good morning. Doug, do you happen to have the most recent kind of spot rate of deposits either at quarter end or more recently? And then maybe I was hoping for some color or expectations for deposit betas over the next, call it, 12 to 18 months.

Yeah, so we gave total cost of deposits at that $155,000 level, and they've been very stable. We actually were able to bring on a good set of deposit mix from the acquisition, which helped. So, again, I don't think we're seeing any upward pressure there. I think you're seeing money market, you know, promotional rates would be obviously higher than that. They might be in the fours. But, again, we're able to sort of manage that mix and operate in some really good markets that have a bit less competitive intensity than a lot of other markets. But, again, you know, we have to respond to market rates just like everybody else does. What was the second part of your question?

Just expectations for deposit betas, particularly given the low overall cost of deposits here.

Yeah, we feel – I think our overall depositability has been in the mid-20s through this rate cycle, and we don't see it – we still have room when we kind of think about our opportunities as – because we have a generally fixed or periodic repricing on the asset side we are able to benefit as rates go down and sort of hold those hold those margins pretty comparable with the amount of funding that we have available on the deposit side that does pay rate like cds money market rates etc so we feel pretty neutral pretty neutral position right now for the next series of rate cuts okay and then you'd also mentioned that pipelines were were good or pretty good could you just better quantify for us you know what that looks like and and maybe maybe within the pipeline what are you seeing in terms of pockets of strength of areas that that might grow a little bit more than others yeah i mean i would say our pipeline commentary we have nice nice developed pipelines in all of the national verticals that we support and those continue to be strong and again that is an ability to pull you know from businesses sort of all around the country in those specialty areas that we have um you know those would be sports finance franchise finance our equipment financing business and a couple of others we also feel pretty good about where our commercial real estate exposure is there's obviously room there so we would look to all of those businesses to drive some decent support i think if you looked at our pipelines you'd probably see a little bit more pipeline growth or support in the national verticals versus the in-market but that's you know that ebbs and flows over time but i think that pipeline's been pretty consistent for the last couple of quarters got it and then just on that last point the specialized verticals particularly um you know the national one sports equipment finance um what is the total you know within cni that you kind of consider in the the national or or specialty verticals.

And how much of that are, you know, how much of those are participations versus kind of standalone relationships?

Yeah. So those would be in the 20% range of the CNI book. And I would say generally not significant amounts of participations within that side. That would be more in our corporate finance book where we would have those, which is not one of the newer verticals that we built.

And I would just add that, you know, we're very prescriptive and very measured in how we're growing those businesses. I would, you know, in general terms, describe them as complementary. We're scaling them. They're scaling nicely. The performance, the credit performance is very good, as Doug mentioned. Limited participation activity. What we're looking to do is, notwithstanding the equipment finance group, we're looking to also gather deposits and fees in those businesses. We have hired experts that have longstanding reputations in those industries, and they include sponsor, restaurant finance, SBA lending group, equipment, and sports. So we're watching those closely. we're scaling them appropriately within our credit risk tolerances, and they're performing wonderfully to date.

Great. Just last one, if I could sneak it in. On the pipeline, what are you seeing for overall blended loan yields? There have been others, perhaps your peers, that are discussing a little bit of spread compression, and I'm curious if you're seeing that as well. Thank you.

Yeah. I mean, I would say overall rates coming on the book are in the sevens, low sevens. Certainly it's competitive out there. You know, as everyone's expecting rate reductions, obviously we're pricing a lot of that on the forward curve. So you would expect to see those yields come under a little bit of pressure as well as you get into future environments that would have lower rates, but they're certainly not bad.

Great. That's all I had.

Your last question comes from the line of Daniel Cardenas, Janie Montgomery Scott. Please go ahead.

Hey, morning, guys. Thanks for all the call. So just a couple of quick questions here. On the expansion efforts, the de novo expansion efforts, do you have the talent already identified to run those new offices or is that kind of a search in progress right now?

Yeah, Daniel, I would say that it is a search in progress. It's a little early. We have gone out to the market here in Columbus with Tangent Business Partners. We're currently evaluating wealth talent, small business talent. We've hired in the commercial space, middle market, CRE, and then, as I stated, in 26, when the calendar turns, we'll be out with some deposit gathering campaigns so that we can fully load the branches and when we open the doors, hit the ground running. But as far as we have a few people internally identified that will lead the early retail efforts, and then, of course, it's a little early to go to the marketplace and hire the other staff that are needed for the branch development.

Got it. Good. And then last question for me is just in terms of the Pence Woods transaction, can you provide any color as to what runoff on the loan and deposit portfolios is looking like? Is it in line with expectations? Not as great as you thought or any color would be helpful?

Yeah, no, it's definitely in line with our expectations. I would say maybe it's slightly better, but certainly not materially different from where we thought it would be. Again, I think, you know, new market, we have different credit standards than where the original franchise would have been. And so that's going to take a little bit of time to work its way through the market, but we have not seen significant spikes that have concerned us at all. So I would say it's sort of steady as she goes, and we're comfortable with what we've seen come through thus far.

Yeah, in addition to Doug's comments, we have been very focused on integration and execution. We spent a lot of time in the marketplace, our senior leadership. Culturally, it has developed exactly like we thought. We are, as I think we pointed out, both in the release and verbally, achieving the cost safe that we expect. We expect also to get to the marketplace with an improved product set, SBA lending, Penns Woods didn't have, some other products and services, trust and wealth. So, you know, we're pleased with the upside that the future, we think, from the Pennswoods acquisition will bring from a value standpoint.

Thanks, guys. That's all I have.

Thank you.

That concludes our Q&A session. I will now turn the call back over to Lou Torchio for closing remarks.

Thank you. On behalf of the entire leadership team and the Board of Directors, thank you for joining our call this morning. With strong and stable financial foundations, tight cost controls, and risk management discipline that we've described, additional scale from a larger balance sheet, we are well prepared to capitalize on the opportunities for driving sustainable, responsible, and profitable growth. I look forward to updating you on the progress on our fourth quarter earnings call early next year. Have a good day.

Ladies and gentlemen, thank you all for joining. And you may now disconnect. Everyone have a great day.