F.N.B. Corporation (NYSE:FNB) Q4 2023 Earnings Call Transcript

F.N.B. Corporation (NYSE:FNB) Q4 2023 Earnings Call Transcript January 19, 2024

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Operator: Good morning, everyone, and welcome to the F.N.B. Corporation Fourth Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please also note today’s event is being recorded. At this time I’d like to turn the floor over to Lisa Hajdu, Manager of Investor Relations. Ma’am, please go ahead.

Lisa Hajdu: Thank you. Good morning, and welcome to our earnings call. This conference call of F.N.B. Corporation and the reported files with the Securities and Exchange Commission often contain forward-looking statements and non-GAAP financial measures. Non-GAAP financial measures are often viewed in addition to and not as an alternative for our reported results prepared in accordance with GAAP. Reconciliations of GAAP to non-GAAP reporting measures to the most directly comparable GAAP financial measures are included in our presentation materials and in our earnings release. Please refer to these non-GAAP and forward-looking statement disclosures contained in our related materials, reports, and registration statements filed with the Securities and Exchange Commission and available on our corporate website.

A replay of this call will be available until Friday, January 26th, and the webcast link will be posted to the About Us, Investor Relations section of our corporate website. I will now turn the call over to Vince Delie, Chairman, President and CEO.

Vince Delie : Thank you, and welcome to our fourth quarter earnings call. Joining me today are Vince Calabrese, our Chief Financial Officer; and Gary Guerrieri, our Chief Credit Officer. FNB’s fourth quarter net income available to common shareholders was $49 million on a reported basis and $139 million on an operating basis. Full-year 2023’s operating performance was highlighted by record revenue of $1.6 billion, record net income available to common shareholders of $569 million, and record earnings per diluted common share of $1.50. Tangible book value per share has increased 15% year-over-year to a record high of $9.47 per share, steadily approaching a $10 milestone. Since 2009, FNB’s internal capital generation, representing tangible book value and dividends, has been strong with 10% compounded annual growth.

With this strong profitability, full year positive operating leverage totaled 1.5% and is expected to remain in the upper quartile on a pure relative basis. FNB’s exceptional financial performance in 2023 was a direct result of the consistent execution of our strategic initiatives. The banking disruption in the first quarter of the year placed a spotlight on the importance of balance sheet resilience, including our deposit base, strong capital and liquidity position, and prudent underwriting standards. It also reinforced the value of our quality customer relationships and comprehensive delivery channels. These attributes have always been integral to FNB’s long-term strategy, which has been proven through multiple cycles over the last decade and are ingrained in the foundation upon which FNB operates.

Our commitment to maintain a stable deposit base is evidenced in our total deposits, which ended the year at $34.7 billion, unchanged from the prior year even with the elevated competition for customer deposits. The non-interest-bearing deposits to total deposit mix ended the year at 29.4%. While we have seen customer migration away from non-interest-bearing deposits, we continue to substantially outperform our peers in the industry and our total deposit costs and overall cost of funds. Our spot deposit costs ended the year below 2%, and is over 50 basis points better than our peers in the third quarter. Our better-than-peer funding cost and strong liquidity provide balance sheet optionality. Our tangible common equity to tangible assets of 7.8% is the highest level in the company history and exceeds the peer median.

FNB remains committed to optimally deploy capital in a manner that is fully aligned with our shareholders’ interests and best positions FNB for future success. As part of that commitment, FNB recently completed the sale of approximately $650 million of available-for-sale securities, announced the redemption of $110 million of preferred stock, and transferred $355 million of indirect auto loans to held for sale with the sale expected to close in the first quarter. Together, these actions resulted in a capital-neutral transaction that improves forward returns in earnings with expected EPS accretion in the low-single-digits. Our continued ability to meet our client’s needs is critical to our performance. FNB has continued to make strategic investments in our delivery team to deepen customer relationships, gain market share and further outpace our competitors.

In June 2023, we introduced the eStore Common application for the majority of our consumer loan products and recently introduced deposit products in December, allowing customers to apply for up to 18 consumer deposit and loan products simultaneously. Our goal for 2024 is to bring small businesses into the fold, with business loans, deposits, and payments included in the Common application in eStore. These additional features further enhance the customer experience and deepen product penetration as customers can apply for multiple loan and deposit products simultaneously in a very streamlined manner, eliminating keystrokes, providing a portal to upload supporting documents, and automating account funding. We also made significant enhancements in our physical delivery channel in 2023.

In addition to expanding our footprint with four de novo locations, we entered into a partnership with the Washington Metropolitan Area Transit Authority, that establishes FNB as the sole ATM provider with the third largest heavy rail system in the United States. With ATM banking services at every metro station, the partnership will add more than 120 machines to FNB’s network in 2024. Our physical delivery channel is approaching 2,000 combined branches, ATMs, and interactive television. Paired with our digital eStore, FNB has significantly enhanced access for our current and future customers for augmenting brand awareness across our footprint. With the success of our eStore and our exceptional bankers, total loans and leases ended the year at a record $32.8 billion, an increase of $2.4 billion since year-end 2022.

We are beginning the year from a strong position and will continue to closely monitor the macroeconomic environment, with market-specific trends to manage risk proactively as part of our core credit philosophy. We will remain steadfast in our approach to consistent underwriting and risk management to maintain a balanced, well-positioned portfolio throughout economic cycles. I will now turn the call over to Gary to provide additional information on the fourth quarter’s credit performance. Gary?

Gary Guerrieri: Thank you, Vince, and good morning, everyone. We ended the quarter and year-end period with our asset quality metrics remaining at solid levels. Total delinquency finished the year at 70 basis points, seasonally up 7 basis points from the end of September and down 1 basis point from the prior year-end period. NPLs and OREO decreased 2 basis points from the prior quarter and 5 bps from the year ago period to end at a very good level at 34 bps. Criticized loans were down 13 basis points compared to both the prior quarter and year-end with net charge-offs for the quarter and full year at 10 basis points and 22 basis points, respectively. I’ll conclude my remarks with an update on our credit risk management strategies and CRE portfolio.

Total provision expense for the quarter stood at $13.2 million, providing for loan growth and charge-offs. Additionally, provision expense had a positive benefit from a reduction in criticized loans and NPLs. Our ending funded reserve increased $4.9 million in the quarter and stands at $406 million or a solid 1.25% of loans, reflecting our strong position relative to our peers. When including acquired unamortized loan discounts, our reserve stands at 1.39% and our NPL coverage position remains strong at 418%, inclusive of the unamortized loan discounts. We remain committed to consistent underwriting and credit risk management to maintain a balanced well-positioned portfolio throughout economic cycles. Each quarter, we performed specific in-depth reviews of our portfolios in addition to ongoing full portfolio stress test.

Our stress testing results for this quarter have shown lower forecasted net charge-offs and stable provision, compared to the prior quarter’s results, again confirming that our diversified loan portfolio enables us to withstand various economic downturn scenarios. Regarding the non-owner-occupied CRE portfolio, in 2023, we were successful in addressing maturities and the impact of the rising rate environment on the portfolio. In 2024, we will continue with the same strategy monitoring the rate environment and proactively addressing upcoming maturities. At year-end, delinquency and NPLs for the non-owner-occupied CRE portfolio continued to remain very low at 32 basis points and 18 basis points respectively, which confirms our consistent underwriting and strong sponsorship.

In closing, asset quality metrics ended the year at very good levels, and we are well-positioned going into 2024. We continue to generate diversified loan growth in attractive markets in a competitive environment for high-quality borrowers, while maintaining our consistent underwriting standards. We closely monitor macroeconomic trends and the individual markets in our footprint and will continue to manage risk aggressively, while maintaining a consistent credit profile across all of our portfolios. I will now turn the call over to Vince Calabrese, our Chief Financial Officer for his remarks.

Vince Calabrese: Thanks, Gary, and good morning. Today, I’ll focus on the fourth quarter’s financial results, provide additional detail on the recent actions taken to further optimize our balance sheet, and offer guidance for 2024. Fourth quarter operating net income available to common shareholders totaled $139 million or $0.38 per share, excluding $114 million of significant items impacting earnings. On a full-year basis, operating earnings totaled a record $1.57 per share and tangible book value totaled $9.47, 15% increase from December 2022. As part of our ongoing proactive balance sheet management strategy, we took several actions to enhance future profitability and capital positioning. Late in the fourth quarter, we sold approximately $650 million of available-for-sale investment securities, transferred $355 million of indirect auto loans to held for sale, and announced the redemption of $110 million of the Series E preferred stock that was issued ten years ago.

The cumulative impact of these balance sheet actions generates incremental earnings and has a tangible book value earn-back period of less than one year versus an earn-back of five years for stock buyback, while retaining capital flexibility in 2024. The sale of investment securities resulted in a realized loss of $67.4 million in the fourth quarter as we sold securities yielding 1.08% on average and reinvested the proceeds into securities with yields approximately 350 basis points higher with similar duration and convexity profiles. We recorded a $16.7 million negative fair value mark in other non-interest expense on the indirect auto loans classified as held for sale at December 31, reflecting changes in interest rates from the time of origination.

The sale of these loans is expected to close during the first quarter with the proceeds being used to repay borrowings that have a similar yield to the sold loans. Our year-end loan-to-deposit ratio benefited by approximately 100 basis points. Excluding the $355 million of held-for-sale indirect auto loans, underlying period-end loan growth was 8% since year end 2022. Fourth quarter loan production reflected high quality loans across our diverse footprint with quarterly commercial loan growth of $351 million and consumer loan growth of $178 million. Investment portfolio remained essentially flat linked quarter at $7.2 billion inclusive of the securities portfolio restructuring. There remains a fairly even split between AFS and HTM with 45% in available for sale at the end of the year.

The duration of our securities portfolio at December 31 is 4.2 years, similar to last quarter. Total deposits ended the year at $34.7 billion, a slight increase of $96 million linked quarter. As of December 31, non-interest-bearing deposits comprised 29.4% of total deposits, compared to 30.9% at September 30. Given our granular stable deposit base, we believe we will continue to outperform the industry with a favorable mix of non-interest-bearing deposits to total deposits and lower deposit costs, which meaningfully outperformed the peers as our team remains actively focused on managing deposit mix. With our spot deposit costs ending the year at 1.93%, our cumulative deposit beta totaled 34.3% in line with our expectations discussed last quarter.

Fourth quarter’s net interest margin was 3.21%, a decline of only 5 basis points, which is better than our expectations discussed last quarter. The yield on earning assets increased 14 basis points to 5.25%, due to higher yields on both loans and investment securities. Total cost of funds increased 21 basis points to 2.14% as the cost of interest-bearing deposits increased 29 basis points to 2.65%. Net interest income totaled $324 million, a slight decrease of $2.6 million from the prior quarter. Turning to non-interest income and expense, operating non-interest income totaled $80.4 million and adjusting for the $67.4 million realized loss on investments securities restructuring. Mortgage banking operations income increased $3.1 million linked quarter, due to improved gain on sale margins aided by the decline in mortgage rates in the fourth quarter.

Other non-interest income declined $2.4 million, and small business investment company funds income decreased reflecting normal fluctuations based on the performance of the underlying portfolio companies. Additionally, we broke out our service charges fee income line on the income statement and to service charges and a new line item for interchange and card transaction fees, which was previously captured in the service charge line. This will create better transparency into our various revenue streams in non-interest income. Operating non-interest expense of $218.9 million was relatively stable, compared to the prior quarter, when adjusting for the fair value mark on the held for sale indirect auto loans of $16.7 million and the $29.9 million FDIC special assessment related to replenishment of the deposit insurance fund for the bank failures.

The linked quarter increase in outside services of $2.4 million reflects higher third-party cost. Bank shares and franchise taxes declined $2.3 million, reflecting charitable contributions that qualify for Pennsylvania Bancshares tax credits and marketing expenses decreased $1.2 million, due to the timing of digital marketing campaigns in the third quarter. The fourth quarter efficiency ratio of 52.5% continues to be in the top quartile of our peers. The efficiency ratio of 51.2% on a full-year basis demonstrates our commitment to effectively managing costs, while growing our diverse revenue streams. We ended the year with our capital ratios, some of the strongest levels in recent history. Our CET1 ratio of 10.1%, which includes the impact of the previously discussed balance sheet management items and the FDIC special assessment remains above our stated operating targets.

Tangible common equity totaled 7.8% and when excluding the 54 basis point impact of AOCI would equal 8.3%. Tangible book value per common share was $9.47 million at December 31, an increase of $0.45 per share from September 30. AOCI reduced the tangible book value per common share by $0.65 as of year-end, compared to $1.06 last quarter, primarily due to the impact of interest rates on the fair value of available for sale securities. Because of the investment securities that were sold in December were unavailable for sale, the realized loss did not incrementally impact TCE or tangible book value since the market value was already reflected in AOCI. Let’s now look at the 2024 guidance for both the first quarter and the full-year, starting with the balance sheet.

On a full-year spot basis, we expect loans to grow mid-single-digits as we continue to increase our market share across our diverse geographic footprint. Total projected deposit balances are expected to grow low-single-digits on a year-over-year spot basis. Full-year net interest income is expected to be between $1.295 billion and $1.345 billion, with the first quarter of 2024 between $318 million and $328 million. Our guidance assumes three 25 basis point rate cuts, aligning with the Fed’s Dot plot, which we are projecting to occur in May, July, and November 2024. Non-interest income is expected to continue to benefit from our diversified fee-based income strategy, with the full-year results between $325 million and $345 million and the first quarter between $80 million and $85 million.

Full-year guidance for non-interest expense is expected to be between $895 million and $915 million, which includes the impact of approximately $6 million of rent expense during the buildout phase of our new headquarters, while we still occupy our current office space. Adjusting for this impact, the midpoint of our expense guidance results in a 3.7% increase from 2023 operating expense levels. The first quarter non-interest expense is expected to be between $225 million and $230 million as the compensation expense is higher in the first quarter, largely due to normal seasonal long-term stock compensation and higher payroll taxes at the start of the new year. Full-year provision guidance is $80 million to $100 million and is 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.

Vince Delie: During 2023, FNB completed a number of initiatives that align with our strategic priorities, including introducing the eStore Common application for consumer loans and deposit products, expanding our physical delivery channel, and investing in systems and processes that enable us to streamline operations. We continue to expand our data analytics capability and the use of AI to improve performance. These strategic initiatives have directly contributed to our pure relative outperformance in 2023, amidst the banking industry disruption, with the company generating record operating EPS of $1.57 and strong organic loan growth of $2.4 billion. Deposit balances remain flat with non-interest-bearing deposits comprising 29.4% of total deposits and a top quartile cost of funds.

We’ve completed over $75 million in cost savings over the last five years, excluding acquisition synergies leading to positive operating leverage and an efficiency ratio in the top quartile relative to peers at 51.2%. Operating return on average tangible common equity totaled 18% and tangible book value grew 15% to a record $9.47. Our asset quality continues to be a strength as we ended the year at or near historically low levels. This year’s exceptional performance was made possible by our employees. Their commitment to FNB’s mission and values drive success for all of our stakeholders. In 2023, our team’s efforts were evident as FNB received more than 30 prestigious awards. Multiple independent organizations recognized FNB’s financial performance, outstanding culture, and innovative technology, with eStore earning international [Technical Difficulty].

We believe that these honors and our performance are a direct result of our engaging and rewarding workplace environment. I am proud of what we’ve built together. Thank you.

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Q&A Session

Operator: Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] And our first question today comes from Daniel Tamayo from Raymond James. Please go ahead with your question.

Daniel Tamayo: Good morning, guys. Maybe we start on the impact of the balance sheet restructuring on the margin. I appreciate the guidance for 2024. But just as we think about the impact on — in the first quarter, curious if you can walk through how you’re thinking about the impact of the restructuring, looking at it as a 5 basis point or 6 basis point impact relative to kind of just continued deposit pressure, and then how that — the path of the margin is moved throughout the year in your assumptions?

Vince Calabrese: Yes, I would say a couple of things. You know, first of all, if we look at the fourth quarter — and then I’ll get to go forward. Net interest income only declined $2.6 million linked quarter, which was the same as the prior quarter. You know, the NIM compression for the quarter was only 5 basis points, last quarter was 11 basis points. In fact, November and December were at 320 basis points. So the level kind of stabilized there, at least for those two months. You know, the restructuring is fully baked into our guidance that we provided. I think as far as the path with the margin here, I would still say what we said last quarter, that probably bottomed somewhere in the first-half of the year and then kind of some slight improvement from there as far as when you get into the second-half of the year.

But there’s a lot to happen with the Fed cuts. I mean, we have three fed cuts in ours, whether it’s three, four, or five, the three felt most reasonable to us, that’s what’s baked into our guidance, with the benefit of the restructuring. And as we have over time, we’ll continue to actively go after the demand deposits We’re going to focus here. I think our percentage of total deposits has performed very well relative to the peers and the changes in that bucket have also stacked up very well. So the NII guide kind of has everything baked into it, Danny.

Daniel Tamayo: No, I understand and I appreciate that. I guess another way of asking maybe, do you think the deposit pressure in the first quarter offsets the — I mean, it sounds like you’re saying we still maybe get more compression in the first quarter on an overall basis. So you think that offsets — more than offsets the balance sheet restructuring and that just continues in the first-half or in the first quarter?

Vince Calabrese: Well, we’re not going to guide — we’re not going to specifically comment on margin for the quarter, right? You know, the net interest income has all of that baked in. The mix shift that has happened during the quarter, we’ve continued to see customers going after higher rate products, that’s natural. People are sitting here feeling like, okay, the Fed is at the top, they haven’t raised rates since July, when are they going to start to cut? So there’s definitely been some of that mix shift still occurring. In the first quarter, our demand deposit, that’s usually our weakest quarter seasonally, because the municipal deposits bottom and then filled up. So all of that does put some pressure on the margin and then the restructuring helps to offset some of those impacts in the first quarter. Probably one way that I could comment on that.

Daniel Tamayo: Got it. Okay, I guess just lastly, just digging on the balance sheet sensitivity side. Just curious how we should be thinking about, you mentioned bottoming in the middle of the year. I think in the past we’ve talked about maybe being liability sensitive in the medium term, but maybe asset sensitive in the near term with rate cuts. That’s still how we should be thinking about it, perhaps some negative impact early on and then maybe after a few quarters, that’s when you start to benefit more from the rate cuts?

Vince Calabrese: Yes, no, that’s the right way to think about it. You know, the sensitivity, whether we get additional cuts beyond the three, as you know, there’s a lot of moving parts to this question and there’s actions we may take depending on the economic environment. So — but as you described, the time frame is key, right? In the short run, you have a negative impact, particularly from the cuts or an additional cut. And then I think the deposit lags will catch up over time. I mean, historically, if you look at our beta today, right, we’re around 34%. In the last upgrade cycle, we kind of maxed out at 35%, it seems reasonable to assume that, but that would take kind of more in the medium term, longer term to catch back up, probably the medium term with deposit rate lags to catch up and have that benefit.

And as you know, we’ve taken a lot of actions. I mean, the CD book has been growing in the shorter term, seven and 13 months type area. Our total average maturity of the CD portfolio right now is 10 months. So there’s opportunities there to reprice that as we go forward, kind of, sync up with the timing of when the Fed would move. But yes, I think that’s — we’re still slightly asset sensitive and really philosophically managing to neutral. And then we think that if you look at our margin path for the year, it shows kind of more of neutral with the expected three cuts that we have baked in.

Daniel Tamayo: Okay, great. Thank you for all the color. Appreciate it.

Vince Calabrese: Sure.

Operator: Our next question comes from Frank Schiraldi from Piper Sandler. Please go ahead with your question.

Frank Schiraldi: Good morning. Just wondering if you could talk a little bit about the dynamics of loan growth versus deposit growth year-on-year. Obviously, your guide has you getting closer to 100% loan to deposit over time. Just trying to think through what might be the main governor on loan growth here. And how you’re bringing deposit dollars in the door in what continues to be a, you know, pretty competitive environment.

Gary Guerrieri: Yes. I think, you know, let me start out, and then I can turn it over to Vince Calabrese. First of all, I think some of the things that we talked about in the prepared comments relative to acquiring new clients is a way for us to drive deposit balances. I mean, adding the ability to simultaneously open a deposit account with a loan application without additional keystrokes, that’s huge for us. So I think that’ll help. Once the field starts utilizing these tools and customers start engaging online and realize that they can do that, you know, it’ll increase our probability of capturing more of the client relationship, particularly the deposit side. So, when the loan request comes in, we’ll be able to act a little more quickly on opening the deposit account.

So, that’s one thing that we plan for, and we think it will help us as we move forward. If you look at engagement with the eStore, we looked at the — we rolled that out about mid-year. So, if you look at the six months in ‘22 versus the six months in ‘23 in the same period, and you compare the number of applications that we were able to obtain online, they doubled. We doubled the number of consumer loan applications, that’s without the deposit account opening capability, by the way. And 30% of those applications were with non-FNB customers. So, that’s one piece of it, the enhancement to the digital strategy. The second opportunity for us is really in small business and middle market banking on the TM side. We’ve invested pretty heavily in our treasury management capabilities.

We have some product capabilities coming online. We mentioned that we’re going to bundle products in the small business space in ‘24, probably towards the latter half of the year, we’ll be rolling that out. That will also help us grow deposit balances. And if you look at what we’ve done historically, we’ve historically grown deposit balances around the 10% — 8% to 10% range organically. So, I think, we’ve kept pace, like, with the organic loan growth that we’ve achieved, which is similar, right, over a long period of time. And I think some of the things that we’ve done strategically and entering into new markets that have more opportunities because of population growth and business formation, we’re going to be able to continue to achieve our objective, which is to fund our loan growth with the deposit balances that we secure from new customers.

I don’t know, Vince, do you want to add anything numeric, please?

Vince Calabrese: Yes. No, all I would add, Frank, is that we don’t get all the way to 100% in within our guidance. We’re in that 95%, 96%, 97% kind of area as you kind of forecast it out. But as we’ve done in the past, historically, when we got to 97%, going back a bunch of years, we took action this quarter selling the indirect auto loans creates more shelf space for us. I mean, that gave us a 1% in the loan deposit ratio. So we will manage that level. We won’t go all the way to 100. We’re in the mid-90s what’s baked into the guidance, as I mentioned, we’ll start to manage — we get to 95. We’ll look at what’s the environment? How fast are loans growing and what things action as we always have, just kind of manage.

Vince Delie: For us, it’s not a function — it’s not a question as to whether or not we can fund our balance sheet with deposit growth. We can do that. And we have the capability of doing it, it would just be a margin or whatever, right? So we’re trying to balance it all out right.

Frank Schiraldi: Got it.

Vince Delie: We’re very confident in good growth. We want to price up, we want to compete with everybody else out there, prices up our CDs and our money market rates, we could bring a lot of money in.

Vince Calabrese: We brought in $1.2 billion in new money.

Vince Delie: I mean, we — back half of the year, it’s a function of trying to manage it all so that we maintain relative profitability. Our goal is to outperform. So we’re not trying to give everything away or balloon our balance sheet. We understand what our funding constraints could potentially be. And the trade-off is margin. So we have to be getting it on the other side with the loan originations to justify it. That’s how we look at it.

Frank Schiraldi: Sure. Understood. That’s great color. Thanks. And then I guess just to follow up there, Vince, you mentioned the — making some room with the small sale of the loans. Obviously, you know, you’re always thinking about balance sheet optimization, but that being said, just wonder, you know, if this is — if you see more opportunities here in the near term to do just that. Maybe jettison some smaller pieces that for whatever reason, you know, the total returns not there. Is that a way in the near term to continue to hold the loan-to-deposit ratio where it is? Or do you see this as more of like a one-and-done in the near term?

Vince Calabrese: Yes. We spent a lot of time during the fourth quarter sizing what we wanted to do as far as the amount of securities and the loans that we would sell. So we don’t have any plans to do any additional sales that we’re sitting here today. I think we’re fine like Vince said, we have the ability to fund and grow the projects we’ve done in forever. So at this point, I wouldn’t say one and done forever, right, because we’re always studying the balance sheet, and if there’s opportunities, we’ll look at it, but there’s no plans right now. Like I said, we spent a lot of time sizing it and came up with what we executed on.

Vince Delie: If the rate environment enables us to unload loan yielding assets and we get a gain and we can roll that into something else. Sure, we’ve done that historically, we’ve sold over a billion dollars over the years. So we’ll look selectively, Frank, and we constantly look at the balance sheet. Our objective is to produce the highest returns possible, and we’ll look at opportunities to get out, particularly with indirect auto, the limited relationship, right? We’ll look at that and we’ll trade out of it, or we’ll pair it back, right? We’ve used pricing mechanisms to move the portfolio around, right? And we’ll see, it’s all a function of what the interest rate environment is, what demand looks like in higher yielding categories, what the risk profile of the balance sheet looks like.

We take all of that into consideration and make decisions based on that. But our plan is to manage in the range from a loan to deposit perspective that we have historically. We’re not looking to move outside of that.

Vince Calabrese: Yes, I would just say, too, Frank, we don’t feel constrained as far as loan growth that we would want to go after. I mean, the mid to high single digits that we’ve done, we can do that. We’ve done things like Vince is describing and then, like in the mortgage business, we’ve adjusted our pricing a little bit there to make more saleable product. So we’re kind of reducing the amount of growth that’s going on to the balance sheet, which is kind of part of how we manage the balance sheet. So there’s a lot of different levers there.

Frank Schiraldi: Great. Okay. Thanks for the color.

Vince Delie: All right. Thank you.

Operator: Our next question comes from Timur Braziler from Wells Fargo. Please go ahead with your question.

Timur Braziler: Hi, good morning. Maybe starting Vince Delie, you had made a comment, positive operating leverage in ’23 look to be in the top quartile in operating leverage going forward. Does that put positive operating leverage on the table for ’24? Or is the revenue backdrop challenging enough where that’s more likely not going to happen next year?

Vince Delie: Yes, I think as we move through this interest rate cycle, it becomes more challenging, obviously, right? Because you’re seeing declining revenue and your expense base is pretty much fixed. So we’ve taken expense out, but it’s hard to dig deeper. I think the second-half of the year, I certainly would expect us to go produce positive operating leverage. So as we move through that inflection point that Vince spoke about earlier, right, margin compression, with the rate cuts, we should be able to move through that and into the second-half of the year experience positive operating leverage. If you look at FMB on a full year basis in 2023, we outperformed others, right, because we produced full year operating leverage, there was negative operating leverage all over the place, at least based on what I saw. So I think I would expect us to do everything we can to be in a similar position in ’24. If that helps.

Timur Braziler: Okay. That’s helpful. Yes, that’s helpful. Thank you. And then one for Gary. Just looking at the office maturities in ’24, it looks like 20% of that book is maturing. I’m just wondering how much of that maturation is for loans kind of vintage 2019 and earlier. And then as you look at your CRE portfolio, again, looking at the vintages 2019 and earlier, how different are those loans from a credit quality standpoint, just given us how different the world is today versus pre-pandemic?

Gary Guerrieri: Yes, generally speaking, we’re going to underwrite those things from the origination date in the low to high 60s range. So when you look at those maturities, in addition to that LTV level, which has been very helpful through this cycle so far, they’re also underwritten very short. So with maturities of inside of five years, or slightly less in some cases. So a number of those transactions have been renewed over the last year or two. Many of those borrowers right sized those transactions. It has been our intent to keep those maturities very short, and we’ll continue to do that during these times. That all said, we feel as focused as we are on that office space, as is everyone, we feel quite good about the portfolio at this point.

We’ve only had a couple of credits over the last number of years since this space has taken a tough go of it from all of the pandemic issues that we’ve seen, and we’ve only had a couple of credits that we’ve had to deal with from a loss standpoint. So we feel good about the position of it. There is a 20% roll rate in the coming year and we expect to move through that with our sponsors, which have shown the ability to right size, post additional interest reserves to pay down debt, and bring it back to a 120 type of debt service coverage. So we’ll continue to do the same thing in ’24 that we did in ’23.

Vince Delie: I’ll add on to what Gary said. I think from a prudent underwriting perspective, most of the transactions that we would have underwritten in 2019 would have had long term leases that go out longer than the maturity date. Gary mentioned having a shorter maturity date. What that means is that while cap rates may change and the valuation may change with a lower LTV and a longer lease term, that the debt service coverage remains intact. So it’s a lot easier to deal with a devaluation because of the rise in cap rate if you have substantial liquidity and a long-term tenant locked up. So I think that in almost every case, that’s what we would look at when we would underwrite these transactions, which gives us a great degree of confidence.

I also can tell you that most of the portfolio, the vast majority of the portfolio, sits outside of the urban office scenario. So I think that we have quite a bit of protection in that suburban office and higher growth areas is not as subject to vacancy like you see in the large cities.

Gary Guerrieri: The other thing to add to the size of the annular is 40% of the portfolio is less than $5 million in terms of loan size. You move that up to $5 million to $10 million, it’s another $17 million. So you’re pushing 60% of the portfolio is less than — almost 60% is less than $10 million. And you move that up one more level to $15 million, and you’re at 70% of the book of business. And in total, the top 25 credits average right at just a touch above $30 million. I think it’s right at $31 million. So the portfolio is very granular. I think we’ve been very prudent in taking granular hold positions across that space. And it’s really shown in the performance through what’s been a difficult time.

Vince Delie: It’s geographically diverse too, it’s spread across seven states, concentrated in one city, one specific area. Obviously, it’s something we watch. There’s definitely weakness in urban office. So it’s a good question. That helps? Are we good?

Timur Braziler: That’s helpful. Yes. I appreciate the color. Thank you.

Operator: Our next question comes from Casey Haire from Jefferies. Please go ahead with your question.

Casey Haire: Great, thanks. Good morning, guys. I wanted to follow-up on the NII guide. So Vince C, it sounds like deposit beta is going to peak at around — cumulative deposit beta peaks around 35%. Just wondering, when does that take place relative to your first Fed cut? And then what does your guide assume for deposit beta on the way down for ’24?

Vince Calabrese: Yes, I would say we would drift a little higher. We ended the year of 34.3%. I think it says in the slide. We’ll drift a little bit higher here another point or two is what we’re thinking. And then when that happens for second quarter, kind of, consistent with the margin, kind of bottoming in the first half of the year. And then what we were thinking, I mentioned the update has — it’s been 35% now twice on the upside. I think that as we look to the point when the Fed pivots and starts to reduce rates, using a similar over the medium term, right, 35% makes sense to us, but within ’24, depending on the timing of the Fed cuts, right. We get some portion of that, probably get more than half of it, but you wouldn’t get 35% all in calendar ’24.

So as we have been, we will actively be managing our deposit book and the pricing. And in our weekly pricing committee meetings, we’re already starting to talk about, okay, when do we lower rates? Some of our competitors have. So we’re going to monitor very closely, discuss it constantly, and we’ll take the right action at the right time. But somewhere in that 35%, it might get this year.

Casey Haire: Got you. Thank you.

Vince Delie: Casey [Multiple Speakers] just logically.

Casey Haire: Yes, no, understood. And just switching to credit, Gary, if I’m interpreting your remarks correctly, it sounds like you expect net charge-offs to go — to decline this year. I’m just wondering what kind of loss rate your provision guide contemplates.

Gary Guerrieri: Yes. I mean, in terms of the provision guide, at the $80 million to $100 million, naturally that supports loan growth as well as charge-offs. The specific charge-off level that we’ve got baked into our plans, I mean, that’s a number we don’t disclose, but I would concur with your thoughts. I mean, we do expect performance there to be stable, to slightly improve [Technical Difficulty]

Vince Delie: But I think, Casey, if you go to page nine in our presentation, you can see net charge-offs, average loans, third quarter, ‘23 has — we have that one-time event that occurs. So I mean, we’re…

Casey Haire: Yes, fair enough. That was great, okay.

Gary Guerrieri: That’s what you’re seeing in your charge-off.

Vince Delie: Yes. If you look over the last three years, Casey, last three years would have been 6 basis points, 6 basis points, and ’23 would have been 10 basis points, excluding that one item. So you’ve got really solid, steady performance there over a very — pretty, sizable, extended and somewhat tumultuous period. And like I said, we like the position of the portfolio. We feel quite good about it going into 2024. Naturally, we’re all concerned a bit about where’s this economy going and what will that all mean. And that has to play out, as we all know. But we’ve seen good steady performance and stable outcomes across the portfolio.

Casey Haire: Okay, great. And just last one for me. Vince Delie, you mentioned your TCE is at the highest level, I think, in your history, and the CET1 one above 10. How are you guys thinking about what’s the share buyback appetite with your capital ratios at current levels?

Vince Delie: We still have — we have authorization to repurchase shares from the board. We plan on evaluating that as we move along. If we see opportunities to buy shares back, we’re certainly going to do it., if the earn back is reasonable, right? Because we’re trying to manage tangible book value levels as well. So I think we’re going to continue to look at it and evaluate it and opportunistically execute transactions if they make sense. The deployment of capital as we move forward, really, we’re looking at the potential for changes in the economy and loan growth as well, because we want to deploy that capital in the most meaningful way. But if we see slowness, we’re not just going to sit here and continue to build capital, do what we have to do to make sure the returns are. I don’t know if that answers your question or not. In other words, still on the table, and we’re still going to consider it as we move along.

Casey Haire: Got you. Thanks, guys.

Operator: Our next question comes from Michael Perito from KBW. Please go ahead with your question.

Michael Perito: Hey, guys, good morning. Thanks for all the color so far. I really just have one last question I wanted to hit on for Gary on the credit piece. Just — yesterday Discover reported earnings and had some uptick on the consumer side in their prime book, lines of credit, auto and things of that nature. Just curious what you guys are seeing on the consumer side and from a credit health perspective, most of those portfolios outside the mortgage book I think shrunk this year. Just what type of growth is baked into 2024 and what are some of the — maybe the key things that could drive some better growth performance on the consumer side? Is it just kind of a macro health environment? Is it pricing, competitive dynamics? Just would love some color around all those topics. That’d be great. Thanks.

Gary Guerrieri: Yes. Total delinquency across that all-inclusive portfolio, which is right at about $12 billion, is 89 basis points. So that’s all in consumer. The fourth quarter, it’s always up a little bit seasonally at the end of the year with the holidays and whatnot. But if you look over a rolling 13-month time frame, it’s been from 70 basis points to the low 90s. So we’ve seen very consistent performance across that portfolio. The underwriting that we do there, I feel very good about. I think it’s very prudent and very stable. We’re able to generate good loan growth through those portfolios. And when you look at the investment that we’ve made in the teams there, it’s an important part of our business. So as we look forward, we continue to expect good solid growth there.

And that being a slightly higher range in this environment, did the higher single digit range in this environment and expect that portfolio to continue to perform well through the cycle that we’re in.

Michael Perito: That’s helpful. So it sounds like in the mid-single-digit growth guidance, there’s some consumer growth baked into that for ’24. That’s the expectation as you stand today.

Gary Guerrieri: Yes.

Vince Delie: Including mortgage. But if you stripped out mortgage, we’re still expecting growth. And again, I think some of the investments we’ve made in the digital tools, the fact that we’re spread across a pretty broad geography, we have 60 million consumers in our footprint. Some of the build out with the ATM delivery channel that heightens provides consumers with accessibility to cash and our brand. I think all of that gives us a little bit of confidence. Even though I would say the consumer, with inflation and some of the changes economically that are going on are going to be a little challenged. I think we’re in a pretty good spot that it’s continued to grow. The book, not as robustly as we have in the past. I know it’s been — last year was tough, but things are going to stabilize and we should see in a lower rate environment some opportunities to grow that portfolio that’s baked into the guide.

Michael Perito: Great. Very helpful. Thank you, guys. And for all the other color this morning. Appreciate it.

Gary Guerrieri: Okay. Thank you.

Vince Delie: Thank you. Take care.

Operator: Our next question comes from Russell Gunther from Stephens. Please go ahead with your question.

Russell Gunther: Hey, good morning, guys. I just wanted to follow up on the balance sheet repositioning and around the tangible book value earned back math. So I get the securities repositioning. I just wanted to confirm that the preferred stock dividend saving is included in that calculation. And then just ask for some additional color on the indirect auto piece. What rate borrowings would be paid down, whether there’s any reserve release associated with those loans included in that map? Just trying to get the puts and takes.

Vince Calabrese: Yes. So, Russell, so, as you know, the securities repositioning was done on the available-for-sale portfolio. So that was already baked into the tangible book value. So there’s no incremental hit from that. There’s very slight hit from the loan sale. But just given the overall strong earnings accretion from the combined transaction, that earn back is less than a year. When you add in the preferred dividend, it still stays, obviously, because that’s accretive for that would be less than a year. So pretty strong earn-back metric. Anything — sorry, did I address all your questions there?

Russell Gunther: The auto piece, and what just kind of puts and takes of the savings were there, just the rate of borrowings you’d expect to pay down and whether there’s any reserve release associated with those loans that’s included in that calculation?

Vince Calabrese: Got you. Yes. No, so the borrowings we talked about paying off at a similar rate as the yield on the loans. So we’re talking roughly 5% to 5.5% type yield on those loans. So it’ll pay down borrowings at a similar rate. And just as a reminder, that loan sale hasn’t closed yet, so we actually haven’t seen the capital benefits from that full transaction. So just on a pro forma basis, when the loans do go off the balance sheet, we’d expect CET1 to increase an estimated 10 basis points and TCE to increase roughly 6 basis points as well on top of that.

Russell Gunther: Okay. Okay, great.

Vince Calabrese: There’s no additional income statement impacts, Russell, in the first quarter because with us marking it to the market, that captures everything in the fourth quarter. So really it’s just actually executing the sale itself.

Russell Gunther: Thank you, guys. And then I guess just the last follow up then would be back to the CET1 discussion, pro forma, still north of that 10%. You guys addressed repurchases, but also sensitivity around earn back. So not willing to let capital accrete. Are additional securities repositionings on the table, or how are you thinking about that?

Vince Calabrese: No, I think we spent a lot of time in the fourth quarter sizing what we did. So we don’t have any plans to do any additional security sales just to sit here. Remember, during the last few years, I mean, we stayed short del more investment portfolio. We stayed conservative in how we managed that. So the total dollar amount that we did there was kind of the total we’re looking to do. We don’t have any plans to do anything additionally. And then, you know, from a capital ratio perspective, within our guidance, and in our capital ratios will drift up as you go through the year, which is important. And then to Vince’s point earlier, opportunistically that will create an ability to do share buybacks if it makes sense.

Vince Delie: Yes. And I like to see tangible book value above $10, right? I mean, that would be something that we could all celebrate because I think ultimately that translates into a higher valuation for us given our profitability. But — so we’re going to be managing all of that. We’re going to be watching all of that and making smart decision based upon return pressure.

Russell Gunther: Understood. Thank you, guys. I appreciate you all taking my question.

Vince Delie: Yes. Thank you.

Operator: Our next question comes from Manuel Navas from D.A. Davidson and Company. Please go ahead with your question.

Manuel Navas: Hey, good morning. Just wanted to get a bit of your economic backdrop behind your loan growth guidance and then behind the provisioning guidance.

Vince Calabrese: The economic environment is kind of what the consensus economists would be saying. I mean, it’s slowing growth in the second half of the year. We’re not making kind of calls on our own. We’re kind of looking at what the expectations are from economists throughout the country. And that’s kind of what’s baked in, I think the GDP, and our plan goes down to like a zero point, but it’s still growth, still two on average for the year.

Manuel Navas: Right. Okay. So if the expectation got…

Vince Delie: Sorry. Go ahead.

Manuel Navas: So that expectation, if it was to worsen, would the provision be above the range?

Vince Delie: I think we’re very comfortable with the range we have.

Gary Guerrieri: Yes, no, we feel very comfortable with the range at this point based on where the economy is today and how the portfolio is positioned.

Manuel Navas: And then loan growth, the pace has been really strong here to close the year. Is that kind of more front-end loaded as it kind of slows across the back half of the year or is it, you feel pretty good about that mid-single digits kind of staying consistent across the year?

Vince Delie: Yes, I mean, there’s seasonality within the originations depending on the portfolio. If you look at the commercial book, it tends to grow more in the second into the third quarter. If you look at mortgage banking, I mean, move that up a little bit, maybe a quarter. Really first and second quarter is when it starts to take off. So there are differences in the portfolios. I just use those two as an example. But I think when we build our plan to give consensus, we look at both macro and micro scenarios. So basically we build our plan from the ground up. We survey our business units, we look at our production capability historically in the markets we’re in, and then we look at the macroeconomic environment, say, is this achievable?

And what’s happening? And we basically use — that’s why Vince said, we use consensus estimates by economists. We don’t forecast ourselves somebody else’s forecast, and then we apply that to our model. So it’s all kind of baked in to what we give you. So we’re building it from inside of our own company, and then we’re looking at the macroeconomic factors that could influence that. That goes for provision expense, loan growth, commercial consumer mortgage, kind of break it down by segment, and then build it from the ground up. So I think given where we are in the cycle and what we’re seeing, kind of hard to predict, but we’re a little more optimistic than we were a quarter ago going into next year. And I think that’s reflected in the guide on the loan growth.

I’m hoping we can do better. If you look at our pipelines, we did pretty well commercially in the last quarter, and it’s reflected in the loan growth and the surge in the fourth quarter, that can change from year to year commercially. But we did well last quarter. So when you look at our pipelines moving forward, we’re relatively flat. So we don’t have this big pipeline that we’re looking at that says, hey, yes, we’re going to achieve 3% or 4% or 5% or whatever the mid-single-digit in that portfolio equates to. So I would say that — I feel pretty confident about what we’re putting forward, given what we know about the economy today. I don’t know if it’s helpful.

Manuel Navas: That’s great. No, no, that’s really helpful. No, no, that’s great. Can I add, there any kind of regional takeaways from your eStore performance? You have a lot of activity, you have a lot of non-account holders using the e-store. Can you break it down regionally at all? Or is it just great trends in general?

Vince Delie: Yes. That’s an interesting question. And I just asked our people that question. So I ask the same question internally. It’s still relatively new we’re trying to figure out how to devise that gets us as granular. Gets as granular as we need to be from an origination perspective. But when they initially looked at it, it’s pretty much across the board. Which is interesting. It wasn’t in one particular geography. It was spread across a pretty broad geography. So I think anywhere where we have name recognition, branch locations, right? We tend to get more action. Once you move outside of that, we don’t advertise a lot so you don’t see as much activity. Which is part of the reason why we decided to go with branded ATMs and do the ATM deployment, because our theory was that the more frequently consumers see us, the more likely they are to engage us digitally.

That was part of the strategy. So it seems to be working. If you look at where our geographic locations are where we have signage and some recognition, there’s more activity digital.

Manuel Navas: Great.

Vince Delie: And then obviously we’re going to — now that we’ve added the deposit products, in December, we are going to start advertising. So we will try to grow that through some advertising, bring some awareness to the consumer about the capability. And I know locally I saw during the Super Bowl week, we managed a couple of badge, right, or not the Super Bowl, but the national championship for the college football side of me to say Super Bowl, I don’t know what I was thinking. Steelers are already out, so I’m lost. But we did some sport, let’s put it this way. We were in the playoff game. We ran during the Steeler Buffalo Bills game. We ran during the national championship, probably locally, right? Because we have customers that are in tune with those events.

So we ran some advertising and some people commented on it. And then the branding of the buildings in certain markets has helped us with visibility, particularly Pittsburgh. I think we’ve seen more activity from a prospecting perspective because of the signage on our headquarters building and that activity that’s brought some people in. And then the sponsorships with the Penguins, the away jersey, the patch. You’ve got a lot of play on that as well. Anyway, that’s how we’re trying to build awareness.

Manuel Navas: That’s great. Thank you. Appreciate it.

Operator: [Operator Instructions] Our next question comes from Brian Martin from Janney. Please go ahead with your question.

Brian Martin: Hey, good morning, guys. Most of my questions have been answered. Just one question. Vince, you answered it. I think the last question was just on the cadence of the commercial growth or the commercial pipeline. It sounds like it’s a little bit slower to start here, given what fourth quarter looked like, but it probably builds from there. That’s just in general what I heard. Is that fair?

Vince Delie: I mean, we had a really strong third quarter, so it kind of cleared out the 90 day bucket on the pipeline and that has to rebuild. So it’s relatively flat. We had good production out of the Carolinas. There’s double-digit growth in some of the Carolina portfolios, which is pretty positive without CRE, without a big contribution from CRE. So we’re pretty excited about that. And I think there’ll be opportunity in the Mid-West and in the northeast as well from a C&I perspective as we move into next year, the latter half of next year.

Brian Martin: Got you. Okay. And then just one for Gary. Gary, the credit just, it sounds very mean. I guess if you point to one area today that you’re maybe a bit more watchful of — the criticize, sounds like they were down this quarter. But just in general, is there any area that you’re paying a bit more attention to as you kind of head into ’24 given the strength of the portfolio?

Gary Guerrieri: Well, I think the CRE book just in general, I mean, we’ve been all over that and the team has done a really nice job of building out risk management practices around that. Tom Fisher and his team are all over those books of business as they are the rest of the portfolio. But the office space, naturally, and we’ve said it for years, that was going to be a longer term portfolio segment in the industry that is going to have to be dealt with over time. I mean, that change was, I would say, not temporary. There’s been permanent change in that market. Fortunately, I think we chosen well there over time with good solid sponsors that have liquidity. And I think that’s why that portfolio has continued to perform as it has to this point. But that CRE space in that office portfolio, I think it has a way to go. So we’ll continue to be all over that.

Brian Martin: Okay, perfect. Yes. And then maybe just last two, just on the fee income side, just kind of looking at the pickup in mortgage and you talked a little bit about kind of a little bit of the changing strategy there, just kind of the puts and takes on mortgage outlook for here and then just the capital markets revenue, it was pretty consistent, maybe a little bit lower level from where it was previous years. Just kind of wondering how to think about that or just how the pipeline looks there.

Vince Calabrese: Yes, I would just say the noninterest income again shows the benefit of having merged by revenue base, right. I mean, we’ve had another good quarter above 80. We’ve been above 86 out of the last seven quarters, getting there different ways, but again, the benefit of diversification. So capital markets was a solid quarter for us. I mean, it’s up from the prior quarter, down from last year when I had a ten handle. But there’s still a lot of opportunity there. And I think when the rate environment starts to shift, there will continue to be opportunity there. But we have really solid contributions from all the components there from the swap perspective, international syndications, debt capital market. So there’s a lot of pieces even within that business.

And then the mortgage bounce back, I mean, we had a really strong ’23 in an environment where the market was down from an origination standpoint. The overall industry was down, we were up. And we’re forecasting from an origination standpoint close to double digit increase in originations in ’24 versus ’23. And then my comments on pricing was more just about saleable versus portfolio. Not really affecting the level of originations, but kind of what we bring on a balance sheet and what we sell.

Vince Delie: The other thing I would say is that in a lower rate environment, if we do get the rate decreases, we should see more activity in derivatives, more activity in debt capital markets with our large corporate customers going to market to raise capital and syndication should pick up in the second half of the year. So — and then the mortgage business gain on sale should accelerate. So like Vince said, having a portfolio — and then we’ve had good steady growth I should mention. Our asset management and the wealth and trust shops have done extraordinarily well. So they’re up in revenue, net income. They’ve grown net assets on — we’re at record level. We’re in good markets where we should see continued growth in that book. So we have a good balanced set of fee generators that I think in the coming year, if rates play out the way some are forecasting, we should do okay with non-interest income.

Vince Calabrese: And then initiatives on the small business and TM side will be additive.

Brian Martin: Yes, no, the businesses you guys have built out are really paying dividends here. And like you said, the diversification and I guess on the mortgage. I was just trying to understand, Vince, if part of the increase this quarter was really just you selling more. And so if you do have an increase in originations next year and you continue to sell at a higher rate, maybe that also contributes to a better outlook for ’24?

Vince Delie: Yes, the gain on sale margin is lower though, it depends on the rate environment. When you look at it, we may have sold, but we’re not making as much per unit. We’re just moving it off the balance sheet because the rate environment doesn’t provide us with the opportunity to do that. Remember, we focus principally on purchase money. That activity has been lower, right. I mean, we’re not — in a declining rate environment, we would see more refinance activity even though we focus more on purchase money, we would get some benefit from the refinance market. There’s trade-offs, but I think it’s a pretty balanced approach. And I think that’s — we’ve been able to sustain our fee income levels through this period, even with declining consumer fee. But we’ve done pretty good.

Vince Calabrese: Brian, I would just add the mortgage income in the fourth quarter had benefit from rates coming down, too. So the fair value mark on the pipeline is contributed to that in the fourth quarter.

Brian Martin: Got you. Okay, perfect. Then just the last one, just on the margin Vince, just the one question. Just remind me, I mean, from a variable rate perspective, I mean, the percentage of variable rate loans. And then if a 25 basis point cut on that piece, how much does that move the margin for each kind of 25 basis point cut?

Vince Calabrese: You need to look at the whole balance sheet. I think our percentage is still, 47% of the total loans that are very little just down and that was talking about earlier. And you have all the different movement parts. The CDs are 10 months average maturity, so there’s pluses and minuses there. That’s kind of all baked into the market, kind of bottoming in the first-half of the year, Brian and then [Technical Difficulty]

Brian Martin: Okay, that helps out the 47. All right, I appreciate. Thanks for taking the questions, guys.

Operator: And ladies and gentlemen, at this time I’m showing no additional questions. I’d like to turn the floor back over to Vince Delie for any closing remarks.

Vince Delie: Yes, I’d like to thank everybody for the questions — great questions. Thank you for your interest. And I think given what’s gone on this year, FNB has performed very well. And many of the key strategies that we’ve deployed that we’ve talked about over the years really played out during the liquidity crisis earlier this year. You got to see firsthand what we’ve been talking about in terms of client primacy, the quality of our deposit portfolio, and our credit underwriting. So I think it really showed itself this year, and I’m very excited about moving into next year, hopefully moving into a better economic environment as we move into ’24, particularly the latter half of ’24. And, again, would like to thank our employees because they step up and get things done and did an admirable job last year. So thank you.

Gary Guerrieri: Thank you, everybody. Take care.

Operator: Ladies and gentlemen, with that, we’ll conclude today’s conference call and presentation. We thank you for joining. You may now disconnect your lines.