MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
−Removed: MD&A represents an overview of and highlights material changes to our financial condition and consolidated results of operations at and for the six-month periods ended June 30, 2024 and 2023.
+Added: MD&A represents an overview of and highlights material changes to our financial condition and consolidated results of operations at and for the nine-month periods ended September 30, 2024 and 2023.
This MD&A should be read in conjunction with the Consolidated Financial Statements and Notes thereto contained herein and our 2023 Annual Report on Form 10-K filed with the SEC on February 26, 2024.
−Removed: Our results of operations for the six months ended June 30, 2024 are not necessarily indicative of results expected for the full year.
+Added: Our results of operations for the nine months ended September 30, 2024 are not necessarily indicative of results expected for the full year.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
7 unchanged sentences
Our forward-looking statements are subject to the following principal risks and uncertainties:
−Removed: • Our business, financial results and balance sheet values are affected by business, economic and political circumstances, including, but not limited to:
+Added: • Our business, financial results and balance sheet values are affected by business, regulatory, economic and political circumstances, including, but not limited to:
(i) developments with respect to the U.S.
and global financial markets;
−Removed: (ii) supervision, regulation, enforcement and other actions by several governmental agencies, including the FRB, FDIC, Financial Stability Oversight Council (FSOC), DOJ, CFPB, UST, OCC and Department of Housing and Urban Development (HUD), state attorney generals and other governmental agencies whose actions may affect, among other things, our consumer and mortgage lending and deposit practices, capital structure, investment practices, dividend policy, annual FDIC insurance premium assessment and growth, money supply, market interest rates or otherwise affect business activities of the financial services industry;
+Added: (ii) supervision, regulation, enforcement and other actions by several governmental agencies, including the FRB, FDIC, Financial Stability Oversight Council (FSOC), DOJ, CFPB, UST, OCC and Department of Housing and Urban Development (HUD), state attorney generals and other governmental agencies whose actions may affect, among other things, our consumer and mortgage lending and deposit practices, capital structure, investment practices, dividend policy, annual FDIC insurance premium assessment, growth opportunities, money supply, market interest rates or otherwise affect business activities of the financial services industry;
(iii) a slowing of the U.S.
7 unchanged sentences
Our ability to anticipate, react quickly and continue to respond to technological changes and significant adverse industry and economic events can also impact our ability to respond to customer needs and meet competitive demands.
−Removed: • Business and operating results can also be affected by difficult to predict uncertainties, such as widespread natural and other disasters, wars, pandemics, including post-pandemic return to normalcy, global events and geopolitical instability, including the Ukraine-Russia conflict and the military conflict in Israel and Gaza, shortages of labor, supply chain disruptions and shipping delays, terrorist activities, system failures, security breaches, significant political events, cyber-attacks, international hostilities or other extraordinary events which are beyond our control and may significantly impact the U.S.
+Added: • Business and operating results can also be affected by difficult to predict uncertainties, such as widespread natural and other disasters, wars, pandemics, global events and geopolitical instability, including the Ukraine-Russia conflict and the potential for broader conflict in the Middle East, shortages of labor, supply chain disruptions and shipping delays, terrorist activities, system failures, security breaches, significant political events, cyber-attacks, international hostilities or other extraordinary events which are beyond our control and may significantly impact the U.S.
or global economy and financial markets generally, or us or our counterparties, customers or third-party vendors specifically.
• Our ability to take certain capital actions, including returning capital to shareholders, is subject to us meeting or exceeding minimum capital levels.
−Removed: Our regulatory capital ratios in the future will depend on, among other things, our financial performance, the scope and terms of final capital regulations then in effect and management actions affecting the composition of our balance sheet.
+Added: Our regulatory capital ratios in the future will depend upon, among other things, our financial performance, the scope and terms of capital regulations then in effect and management actions affecting the composition of our balance sheet.
• Historically we have grown our business in part through acquisitions, new strategic and business initiatives and new products.
−Removed: Potential risks and uncertainties include those presented by the nature of the business acquired, the strategic or business initiative or the new product, including in some cases those associated with our entry into new business lines or new geographic or other markets and risks resulting from our inexperience in those new areas, as well as risks
−Removed: and uncertainties related to the acquisition transactions themselves, increased scrutiny associated with the regulatory approval process, other regulatory issues stemming from such acquisitions or new initiatives or product lines, the integration of the acquired businesses into us after closing or any failure to execute strategic or operational plans.
+Added: Potential risks and uncertainties include those presented by the nature of the business acquired, the strategic or business initiative or the new product, including in some cases those associated with our entry into new business lines or new geographic or other markets and risks resulting from our inexperience in those new areas, as well as risks and uncertainties related to the acquisition transactions themselves, increased scrutiny associated with the regulatory
+Added: approval process, other regulatory issues stemming from such acquisitions or new initiatives or product lines, the integration of the acquired businesses into us after closing or any failure to execute strategic, risk management or operational plans.
• Legal, regulatory and accounting developments could have an impact on our ability to operate and grow our businesses, financial condition, results of operations, competitive position, and reputation.
5 unchanged sentences
◦ Changes to laws and regulations, including changes affecting the oversight of the financial services industry along with changes in enforcement and interpretation of such laws and regulations, and changes to accounting standards governing bank capital requirements, loan loss reserves and liquidity standards.
−Removed: ◦ Changes in monetary and fiscal policies, including interest rate policies and strategies of the FOMC.
+Added: ◦ Changes in governmental monetary and fiscal policies, including interest rate policies and strategies of the FOMC.
◦ Unfavorable resolution of legal proceedings or other claims and regulatory and other governmental investigations or inquiries.
1 unchanged sentence
◦ Results of the regulatory examination and supervision process, including our failure to satisfy requirements imposed by the federal bank regulatory agencies or other governmental agencies.
−Removed: ◦ Business and operating results are affected by our ability to effectively identify and manage risks inherent in our businesses, including, where appropriate, through effective use of policies, processes, systems and controls, third-party insurance, derivatives, and capital and liquidity management techniques.
+Added: ◦ Business and operating results that are affected by our ability to effectively identify and manage risks inherent in our businesses, including, where appropriate, through effective use of policies, processes, systems and controls, third-party insurance, derivatives, and capital and liquidity management techniques.
◦ The impact on our financial condition, results of operations, financial disclosures and future business strategies related to the impact on the ACL due to changes in forecasted macroeconomic conditions as a result of applying the “current expected credit loss” accounting standard, or CECL.
9 unchanged sentences
USE OF NON-GAAP FINANCIAL MEASURES AND KEY PERFORMANCE INDICATORS
−Removed: To supplement our Consolidated Financial Statements presented in accordance with GAAP, we use certain non-GAAP financial measures, such as operating net income available to common stockholders, operating earnings per diluted common share, return on average tangible common equity, operating return on average tangible common equity, return on average tangible assets, tangible book value per common share, the ratio of tangible common equity to tangible assets, pre-provision net revenue (reported), operating pre-provision net revenue , operating non-interest expense, efficiency ratio and net interest margin (FTE) to provide information useful to investors in understanding our operating performance and trends, and to facilitate comparisons with the performance of our peers.
+Added: To supplement our Consolidated Financial Statements presented in accordance with GAAP, we use certain non-GAAP financial measures, such as operating net income available to common stockholders, operating earnings per diluted common share, return on average tangible common equity, operating return on average tangible common equity, return on average tangible assets, tangible book value per common share, the ratio of tangible common equity to tangible assets, pre-provision net revenue (reported), operating pre-provision net revenue , operating non-interest expense, net loan charge-offs, excluding an isolated commercial loan charge-off due to alleged fraud (annualized) to total average loans and leases, efficiency ratio and net interest margin (FTE) to provide information useful to investors in understanding our operating performance and trends, and to facilitate comparisons with the performance of our peers.
Management uses these measures internally to assess and better understand our underlying business performance and trends related to core business activities.
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Reconciliations of non-GAAP operating measures to the most directly comparable GAAP financial measures are included later in this report under the heading “Reconciliations of Non-GAAP Financial Measures and Key Performance Indicators to GAAP”.
−Removed: Management believes items such as merger expenses, preferred deemed dividend at redemption, FDIC special assessment, loss on indirect auto loan sale and branch consolidation costs are not organic to run our operations and facilities.
+Added: Management believes items such as merger expenses, preferred deemed dividend at redemption, FDIC special assessment, software impairment, loss on indirect auto loan sales and branch consolidation costs are not organic to run our operations and facilities.
These items are considered significant items impacting earnings as they are deemed to be outside of ordinary banking activities.
3 unchanged sentences
FINANCIAL SUMMARY
−Removed: Net income available to common stockholders for the second quarter of 2024 was $123.0 million or $0.34 per diluted common share, compared to net income available to common stockholders for the second quarter of 2023 of $140.4 million or $0.39 per diluted common share.
−Removed: On an operating basis, earnings per diluted common share (non-GAAP) was $0.34 for the second quarter of 2024, excluding less than $0.01 of significant items impacting earnings per diluted common share, while the second quarter of 2023 was $0.39, excluding less than $0.01 of significant items impacting earnings per diluted common share.
−Removed: Pre-provision net revenue (non-GAAP) increased over 4%, on a linked-quarter basis, supported by our well-managed expenses and strong non-interest income levels.
−Removed: Tangible book value per share grew 12% year-over-year to reach a record high at $9.88.
−Removed: We continue to execute on our strategy to steadily increase market share by leveraging our investments in eStore® and our experienced banking teams, shown by our linked-quarter loan and deposit growth of 3.6% and 0.7%, respectively, including non-interest-bearing deposit growth of 0.8%.
−Removed: Our capital position remained strong as we were able to support robust loan growth and maintain the tangible common equity ratio (non-GAAP) near 8% and the CET1 regulatory capital ratio at 10.2%.
−Removed: Our comprehensive approach to credit risk management has led to strong and stable asset quality results with non-performing loans and OREO to total loans and leases plus OREO ending at 0.33%, a multi-year low, and net charge-offs to total average loans and leases at 0.09%.
−Removed: Income Statement Highlights (second quarter of 2024 compared to second quarter of 2023, except as noted)
−Removed: • Net interest income decreased $13.4 million, or 4.1%, to $315.9 million primarily due to higher deposit costs, including balance migration to higher yielding deposit products, as well as higher total average borrowings, partially offset by growth in earning assets and higher earning asset yields.
−Removed: • Net interest margin (FTE) (non-GAAP) decreased 28 basis points to 3.09% as a 49 basis point increase in the total yield on earnings assets (non-GAAP) was more than offset by total cost of funds increasing 82 basis points.
−Removed: • On a linked-quarter basis, the net interest margin (FTE) (non-GAAP) decreased 9 basis points to 3.09% largely due to increased short-term borrowings to fund the strong loan growth in the quarter as a 3 basis point increase in the total yield on earning assets (non-GAAP) to 5.43% was more than offset by a 13 basis point increase in the total cost of funds to 2.46%.
−Removed: • The provision for credit losses of $20.2 million supported the strong loan growth as well as net charge-off activity.
−Removed: • Non-interest income totaled $87.9 million, benefiting from our diversified business model.
−Removed: • Pre-provision net revenue (non-GAAP) totaled $177.2 million, a 4.4% increase from the prior quarter.
−Removed: On an operating basis, pre-provision net revenue (non-GAAP) totaled $178.0 million, a 3.0% increase from the prior quarter, driven by a decrease in non-interest expense and continued strong non-interest income generation, more than offsetting the decrease in net interest income.
−Removed: Reported non-interest expense included an additional FDIC insurance special assessment expense (pre-tax) of $0.8 million due to last year's bank failures, bringing the year-to-date FDIC special assessment expense to $5.2 million.
−Removed: • Non-interest expense totaled $226.6 million, a decrease of $10.5 million, or 4.4%, on a linked-quarter basis.
−Removed: The second quarter of 2024 included significant items of $0.8 million (pre-tax) of FDIC special assessment.
−Removed: The second quarter of 2023 included a significant item of $0.2 million (pre-tax) of merger expenses.
−Removed: On an operating basis, non-interest expense (non-GAAP) totaled $225.8 million and increased $14.0 million, or 6.6%, when adjusting for significant items.
−Removed: • The efficiency ratio (non-GAAP) remained at a solid level of 54.4%, compared to 50.0% at June 30, 2023, and 56.0% at March 31, 2024.
+Added: Net income available to common stockholders for the third quarter of 2024 was $110.1 million or $0.30 per diluted common share, compared to net income available to common stockholders for the third quarter of 2023 of $143.3 million or $0.40 per diluted common share.
+Added: On an operating basis, earnings per diluted common share (non-GAAP) was $0.34 for the third quarter of 2024, excluding $0.04 per share of significant items impacting earnings, while the third quarter of 2023 was $0.40.
+Added: Our third quarter operating earnings per diluted common share (non-GAAP) totaled $0.34 with significant tangible book value per share (non-GAAP) growth of 15% year-over-year to a record $10.33, strong sequential annualized revenue growth of 9%, with record non-interest income of $90 million, and a solid operating return on average tangible common equity (non-GAAP) of 14%.
+Added: We had robust linked-quarter deposit growth of $1.8 billion, or 5%, highlighting our ability to leverage our significant client relationships, digital and data analytics capabilities as part of our Clicks-to-Bricks strategy and our diverse geographic footprint to manage the loan-to-deposit ratio which improved nearly 500 basis points from last quarter to 91.7%.
+Added: Our capital levels reached all-time highs with a tangible common equity ratio (non-GAAP) at 8.2% and CET1 ratio at 10.4%.
+Added: Our credit metrics ended the quarter at solid levels with the reserve coverage ratio up slightly given our proactive approach to credit risk management.
+Added: Income Statement Highlights (third quarter of 2024 compared to third quarter of 2023, except as noted)
+Added: • Net interest income totaled $323.3 million, an increase of $7.4 million, or 2.4%, from the prior quarter, primarily due to improved earning asset yields and loan growth, as well as lower short-term borrowing levels, offsetting the higher cost of interest-bearing deposits.
+Added: • On a linked-quarter basis, the net interest margin (FTE) (non-GAAP) remained stable with a 1 basis point decline to 3.08%, reflecting an 8 basis point increase in the total yield on earning assets (non-GAAP) and a 10 basis point increase
+Added: in the total cost of funds.
+Added: In September 2024, the FOMC lowered the targeted Federal Funds interest rate by 50 basis points.
+Added: • The provision for credit losses was $23.4 million , an increase of $3.2 million from the prior quarter, with net charge-offs of $21.5 million compared to $7.8 million in the prior quarter.
+Added: • Non-interest income totaled a record $89.7 million, an increase of 10.0% from the year-ago quarter, benefiting from our diversified business model and related revenue generation.
+Added: • Pre-provision net revenue (non-GAAP) totaled $163.6 million, a 7.7% decrease from the prior quarter.
+Added: On an operating basis, pre-provision net revenue (non-GAAP) totaled $178.8 million, a 0.5% increase from the prior quarter, driven by continued strong non-interest income generation and growth in net interest income, offset by an increase in non-interest expense.
+Added: • Non-interest expense totaled $249.4 million, compared to $226.6 million in the prior quarter, including $15.3 million (pre-tax) of significant items in the third quarter of 2024 and $0.8 million in the second quarter of 2024.
+Added: When adjusting for the significant items, non-interest expense increased $8.4 million, or 3.7%, linked-quarter on an operating basis (non-GAAP).
+Added: • The efficiency ratio (non-GAAP) remained at a solid level of 55.2%, compared to 51.7% for the year-ago quarter and 54.4% for the prior quarter.
Balance Sheet Highlights
−Removed: • Period-end total loans and leases increased $2.4 billion, or 7.7%, compared to June 30, 2023.
+Added: • Period-end total loans and leases increased $1.6 billion, or 4.9%, compared to September 30, 2023.
Commercial loans and leases increased $1.0 billion, or 5.1%, and consumer loans increased $530.9 million, or 4.4%.
Our loan growth was driven by the continued success of our strategy to grow high-quality loans and deepen customer relationships across our diverse geographic footprint.
−Removed: • On a linked-quarter basis, period-end total loans and leases increased $1.2 billion, or 3.6%, as consumer loans increased $632.7 million and commercial loans and leases increased $540.1 million, including healthy growth in commercial and industrial loans and equipment finance, as well as the seasonal peak for residential mortgage originations.
−Removed: • Period-end total deposits increased $1.2 billion, or 3.5%, compared to June 30, 2023, driven by an increase of $1.6 billion in time deposits and $879.2 million in interest-bearing demand deposits which more than offset the decline in non-interest-bearing demand deposits of $851.5 million and savings deposits of $410.6 million as customers continued to opt for higher-yielding deposit products given the interest rate environment.
−Removed: • On a linked-quarter basis, period-end total deposits increased $258.6 million, or 0.7%, with an increase in non-interest-bearing deposits of 0.8%.
−Removed: The mix of non-interest-bearing deposits to total deposits equaled 29% at June 30, 2024, consistent with the prior two quarter-ends.
−Removed: • The loan-to-deposit ratio was 96% at June 30, 2024, compared to the prior quarter at 94%, driven by the strong seasonal loan growth.
−Removed: • The ratio of non-performing loans plus OREO to total loans and leases plus OREO decreased 14 basis points to 0.33%.
−Removed: Total delinquency decreased 12 basis points to 0.63%, compared to 0.75% at June 30, 2023.
−Removed: Both measures continue to remain at or near historically low levels.
−Removed: • The second quarter of 2024 reflected net charge-offs of $7.8 million, or 0.09% annualized of total average loans.
−Removed: • The ACL was $418.8 million, an increase of $6.0 million compared to June 30, 2023, with the ratio of the ACL to total loans and leases decreasing 8 basis points to 1.24% reflecting net loan growth and charge-off activity.
−Removed: • Tangible book value per common share (non-GAAP) of $9.88, increased $1.09, or 12.4%, compared to June 30, 2023.
−Removed: AOCI reduced the tangible book value per common share (non-GAAP) by $0.67 as of June 30, 2024, primarily due to
−Removed: the impact of higher interest rates on the fair value of AFS securities, compared to a $0.70 reduction as of March 31, 2024, and a $0.99 reduction as of June 30, 2023.
−Removed: • Our capital position remained strong as we were able to support robust loan growth and maintain the tangible common equity ratio near 8% and the CET1 regulatory capital ratio at 10.2%.
−Removed: • During the second quarter of 2024, we repurchased 250,000 shares of our common stock at a weighted average share price of $13.56 while maintaining capital at or above stated operating levels and supporting loan growth in the quarter.
+Added: • On a linked-quarter basis, period-end total loans and leases decreased $39.6 million, or 0.1%, with an increase in commercial loans and leases of $92.6 million and a decrease in consumer loans of $132.2 million.
+Added: In September 2024, we sold $431 million of performing indirect auto loans as part of our balance sheet repositioning actions.
+Added: The related loss on sale of $11.6 million is reflected as a significant item impacting earnings in other non-interest expense.
+Added: The loan sale positively impacted the loan-to-deposit ratio by approximately 120 basis points and the CET1 regulatory capital ratio by approximately 10 basis points.
+Added: Excluding the indirect auto loan sale, period-end total loans and leases increased $391.4 million, or 1.2%.
+Added: • Period-end total deposits increased $2.2 billion, or 6.2%, compared to September 30, 2023, driven by an increase of $1.9 billion in shorter-term time deposits and $1.5 billion in interest-bearing demand deposits offsetting the decline in non-interest-bearing demand deposits of $833.2 million and savings deposits of $357.6 million as customers continued to opt for higher-yielding deposit products given the interest rate environment.
+Added: • On a linked-quarter basis, period-end total deposits increased $1.8 billion, or 5.1%, with an increase in interest-bearing deposits of $1.3 billion, or 8.9%, and shorter-term time deposits of $783.4 million, offsetting the slight decline in non-interest-bearing demand deposits of $191.5 million and savings deposits of $117.0 million.
+Added: The mix of non-interest-bearing deposits to total deposits equaled 27% at September 30, 2024, compared to 29% at the prior quarter-end, reflecting the strong interest-bearing deposit growth and fairly stable non-interest-bearing deposit balances.
+Added: • The loan-to-deposit ratio was 92% at September 30, 2024, compared to the prior quarter at 96%, reflecting $1.8 billion of linked-quarter deposit growth and the previously mentioned indirect auto loan sale.
+Added: • The ratio of non-performing loans plus OREO to total loans and leases plus OREO totaled 0.39%, compared to 0.33% in the prior quarter.
+Added: Total delinquency increased 16 basis points to 0.79%, compared to 0.63% at September 30, 2023.
+Added: While these two metrics increased compared to the prior periods shown, the overall asset quality metrics continue to remain near historically low levels.
+Added: • The third quarter of 2024 reflected net charge-offs of $21.5 million, or 0.25% annualized of total average loans, compared to $37.7 million, or 0.47% annualized, in the third quarter of 2023.
+Added: • The ACL on loans and leases was $420.2 million, an increase of $19.5 million compared to September 30, 2023, with the ratio of the ACL to total loans and leases stable at 1.25%.
+Added: • Tangible book value per common share (non-GAAP) of $10.33, increased $1.31, or 14.5%, compared to September 30, 2023.
+Added: AOCI reduced the tangible book value per common share (non-GAAP) by $0.43 as of September 30, 2024, primarily due to the impact of higher interest rates on the fair value of AFS securities, compared to a $1.06 reduction as of September 30, 2023, an improvement of $0.63 on a year-over-year basis.
+Added: • Our capital levels reached all-time highs with the tangible common equity ratio (non-GAAP) at 8.2% and the CET1 regulatory capital ratio at 10.4%.
Three Months Ended
+Added: September 30,
Quarterly Results Summary 2024 2023
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Significant items impacting earnings (1) (millions)
−Removed: Pre-tax merger-related expenses $ — $ (0.2)
−Removed: After-tax impact of merger-related expenses — (0.1)
−Removed: Pre-tax FDIC assessment (0.8) —
−Removed: After-tax impact of FDIC assessment (0.6) —
+Added: Pre-tax software impairment $ (3.7) $ —
+Added: After-tax impact of software impairment (2.9) —
+Added: Pre-tax loss on indirect auto loan sale (11.6) —
+Added: After-tax impact of loss on indirect auto loan sale (9.1) —
+Added: Total significant items pre-tax $ (15.3) $ —
Total significant items after-tax $ (12.0) $ —
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Tangible book value per common share (non-GAAP) $ 10.33 $ 9.02
−Removed: Six Months Ended
+Added: Nine Months Ended
+Added: September 30,
Year-to-Date Results Summary 2024 2023
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After-tax impact of FDIC assessment (4.1) —
−Removed: Pre-tax reduction of previous estimated loss on indirect auto loan sale 2.6 —
−Removed: After-tax impact of previous estimated loss on indirect auto loan sale 2.1 —
+Added: Pre-tax software impairment (3.7) —
+Added: After-tax impact of software impairment (2.9) —
+Added: Pre-tax loss on indirect auto loan sales (9.0) —
+Added: After-tax impact of loss on indirect auto loan sales (7.1) —
Total significant items after-tax $ (19.0) $ (1.8)
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RESULTS OF OPERATIONS
−Removed: Three Months Ended June 30, 2024 Compared to the Three Months Ended June 30, 2023
−Removed: Net income available to common stockholders for the three months ended June 30, 2024 was $123.0 million or $0.34 per diluted common share, compared to $140.4 million or $0.39 per diluted common share for the three months ended June 30, 2023.
−Removed: On an operating basis, second quarter of 2024 earnings per diluted common share (non-GAAP) was $0.34, excluding $0.8 million (pre-tax) of FDIC insurance special assessment expense.
−Removed: By comparison, second quarter of 2023 earnings per diluted common share (non-GAAP) was $0.39 on an operating basis, excluding $2.1 million (pre-tax) in merger-related significant items.
−Removed: Net interest income totaled $315.9 million a decrease of $13.4 million, or 4.1%, primarily due to higher deposit costs resulting from balance migration to higher yielding deposit products, as well as increased total average borrowings, partially offset by growth in earning assets and higher earning asset yields.
+Added: Three Months Ended September 30, 2024 Compared to the Three Months Ended September 30, 2023
+Added: Net income available to common stockholders for the three months ended September 30, 2024 was $110.1 million or $0.30 per diluted common share, compared to $143.3 million or $0.40 per diluted common share for the three months ended September 30, 2023.
+Added: On an operating basis, third quarter of 2024 earnings per diluted common share (non-GAAP) was $0.34, excluding the $11.6 million loss on indirect auto loan sale and $3.7 million software impairment.
+Added: By comparison, third quarter of 2023 earnings per diluted common share (non-GAAP) was $0.40 on an operating basis.
+Added: Net interest income totaled $323.3 million, a slight decrease of $3.3 million, or 1.0%, primarily due to higher deposit costs resulting from balance migration to higher yielding deposit products, partially offset by growth in earning assets and higher earning asset yields.
The net interest margin (FTE) (non-GAAP) decreased 18 basis points to 3.08%.
−Removed: The yield on earning assets (non-GAAP) increased 49 basis points to 5.43%, reflecting the higher interest rate environment as the FOMC raised the target federal funds rate by 25 basis points on July 27, 2023.
−Removed: The earning assets yield increase was driven by a 65 basis point increase on investment securities to 3.14% which benefited from the balance sheet restructuring in late 2023 and a 43 basis point increase on loans to 5.96%.
−Removed: Total cost of funds increased 82 basis points to 2.46% with a 96 basis point increase in interest-bearing deposit costs to 2.93%, and an increase of 122 basis points in short-term borrowing costs.
−Removed: The provision for credit losses was $20.2 million, compared to $18.5 million with the current quarter's level supporting strong loan growth.
−Removed: Non-interest income increased by $7.6 million, or 9.5%, reflecting increased service charges income, mortgage banking operations income, wealth management revenues and dividends on non-marketable equity securities, offset by reduced capital markets income and interchange and card transaction fees.
−Removed: Non-interest expense for the second quarter of 2024 increased $14.7 million, or 6.9%.
−Removed: The biggest drivers of the non-interest expense increase were salaries and benefits expense with an increase of $7.0 million, or 6.1%, primarily from production-related commissions and normal annual merit increases, and net occupancy and equipment expense with an increase of $4.9 million, or 13.0%, largely from technology-related investments.
−Removed: Income taxes of $34.0 million declined $2.7 million, or 7.4% from lower pre-tax income levels.
+Added: The yield on earning assets (non-GAAP) increased 40 basis points to 5.51%, driven by a 50 basis point increase on investment securities to 3.33% which benefited from the balance sheet restructuring in late 2023 and a 34 basis point increase in yields on loans to 6.03%.
+Added: Total cost of funds increased 63 basis points to 2.56%, with a 72 basis point increase in interest-bearing deposit costs to 3.08% and an increase of 66 basis points in total borrowing costs.
+Added: The provision for credit losses was $23.4 million, compared to $25.9 million.
+Added: Non-interest income increased $8.1 million, or 10.0%, reflecting increased service charges income, mortgage banking operations income, wealth management revenues, bank owned life insurance and dividends on non-marketable equity securities, offset by reduced capital markets income and interchange and card transaction fees.
+Added: Non-interest expense for the third quarter of 2024 increased $31.4 million, or 14.4%.
+Added: Excluding significant items impacting earnings of $15.3 million, operating non-interest expense increased $16.2 million, or 7.4%, on an operating basis (non-GAAP).
+Added: The biggest drivers of the non-interest expense increase were salaries and benefits expense with an increase of $12.7 million, or 11.2%, primarily from higher production-related commissions and normal annual merit increases, net occupancy and equipment expense with an increase of $4.3 million, or 10.3%, largely due to $3.7 million of software impairment and other non-interest expense, reflecting the $11.6 million loss on the indirect auto loan sale.
+Added: Income taxes of $30.0 million increased $11.1 million, or 58.8%, as we had a reduction in 2023 income taxes due to renewable energy investment tax credits recognized in the third quarter of 2023 as part of a solar project financing transaction.
Financial highlights are summarized below:
Three Months Ended
+Added: September 30, $ %
(in thousands, except per share data) 2024 2023 Change Change
12 unchanged sentences
Three Months Ended
+Added: September 30,
Return on average equity 7.10 % 9.80 %
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The following table provides information regarding the average balances and yields earned on interest-earning assets (non-GAAP) and the average balances and rates paid on interest-bearing liabilities:
−Removed: Three Months Ended June 30,
+Added: Three Months Ended September 30,
(dollars in thousands) Average
47 unchanged sentences
Net Interest Income
−Removed: Net interest income on an FTE basis (non-GAAP) decreased $13.7 million, or 4.1%, to $318.8 million for the second quarter of 2024 primarily due to higher deposit costs resulting from the continued deposit balance migration to higher yielding products as well as increased total average borrowings, partially offset by growth in earning assets and higher earning asset yields.
−Removed: Average earning assets of $41.4 billion increased $1.9 billion, or 4.8%, driven by an increase in average loans and leases from solid origination activity.
+Added: Net interest income on an FTE basis (non-GAAP) decreased $3.2 million, or 1.0%, to $326.3 million for the third quarter of 2024, primarily due to higher deposit costs resulting from the continued deposit balance migration to higher yielding products as well as increased total average borrowings, partially offset by growth in earning assets and higher earning asset yields.
+Added: Average earning assets of $42.3 billion increased $2.1 billion, or 5.3%, driven by an increase in average loans and leases from the continued success of our strategy to grow high-quality loans and deepen customer relationships across our diverse geographic footprint.
Average interest-bearing liabilities of $30.4 billion increased $2.8 billion, or 10.2%, driven by an increase of $2.4 billion in average interest-bearing deposits and an increase in average borrowings of $441.8 million to support strong loan growth.
−Removed: Our net interest margin FTE (non-GAAP) decreased 28 basis points to 3.09%, as the total cost of funds increased 82 basis points to 2.46% which more than offset the increase in the yield on earning assets (non-GAAP) of 49 basis points to 5.43%.
−Removed: The following table provides certain information regarding changes in net interest income on an FTE basis (non-GAAP) attributable to changes in the average volumes and yields earned on interest-earning assets and the average volume and rates paid for interest-bearing liabilities for the three months ended June 30, 2024, compared to the three months ended June 30, 2023:
+Added: Our net interest margin FTE (non-GAAP) decreased 18 basis points on a year-over-year basis to 3.08%, as the total cost of funds increased 63 basis points to 2.56% which more than offset the increase in the yield on earning assets (non-GAAP) of 40 basis points to 5.51%.
+Added: The following table provides certain information regarding changes in net interest income on an FTE basis (non-GAAP) attributable to changes in the average volumes and yields earned on interest-earning assets and the average volume and rates paid for interest-bearing liabilities for the three months ended September 30, 2024, compared to the three months ended September 30, 2023:
(in thousands) Volume Rate Net
20 unchanged sentences
We believe this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and non-taxable amounts.
−Removed: Interest income on an FTE basis (non-GAAP) of $560.1 million for the second quarter of 2024, increased $72.6 million, or 14.9%, from the same quarter of 2023, resulting from the interest rate increases by the FOMC and an increase in average earning assets of $1.9 billion.
+Added: Interest income on an FTE basis (non-GAAP) of $585.7 million for the third quarter of 2024, increased $69.4 million, or 13.4%, from the same quarter of 2023, resulting from the interest rate increases by the FOMC and an increase in average earning assets of $2.1 billion.
The increase in earning assets was primarily driven by a $2.1 billion, or 6.5%, increase in average loans and leases, partially offset by a decrease of $219.7 million in average cash balances.
Average commercial loan growth of $1.2 billion, or 6.2%, was led by increases of $972.8 million in commercial real estate, $213.8 million in commercial and industrial loans and $62.1 million in commercial leases.
−Removed: The increase in average commercial loans and leases was driven by activity across the footprint, with double-digit year-over-year growth across the Carolinas.
−Removed: The Pittsburgh and Cleveland regions and commercial equipment finance also posted strong contributions.
+Added: The increase in average commercial loans and leases was driven by activity across the footprint, with over half of the year-over-year growth in North and South Carolina.
The increase in commercial real estate included fundings on previously originated projects.
Average consumer loans increased $819.7 million, or 6.9%, with a $1.4 billion increase in residential mortgages largely due to the continued successful execution in key markets by our expanded mortgage banker team and long-standing strategy of serving the purchase market.
−Removed: This growth was partially offset by a decrease in indirect auto loans of $363.0 million reflecting the sale of $332 million that closed in the first quarter of 2024.
−Removed: The yield on average earning assets (non-GAAP) increased 49 basis points to 5.43% for the second quarter of 2024, primarily due to higher yields on loans and investment securities reflecting the higher interest rate environment.
−Removed: The increase was driven by a 65 basis
−Removed: point increase on investment securities to 3.14%, which benefited from the balance sheet restructuring in late 2023 and a 43 basis point increase on loans to 5.96%.
−Removed: Interest expense of $241.3 million for the second quarter of 2024 increased $86.3 million from the same quarter of 2023, primarily due to the higher interest rate environment and an increase in average interest-bearing deposits and borrowings.
−Removed: Average interest-bearing deposits increased $1.9 billion, or 8.3%, while average non-interest-bearing deposits decreased $1.1 billion, or 9.9%, as customers continued to migrate balances into higher-yielding products.
+Added: This growth was partially offset by a decrease in average indirect auto loans of $528.4 million reflecting the sale of $332 million of such loans that closed in the first quarter of 2024 and $431 million that closed in September of 2024, partially offset by new organic growth in the portfolio.
+Added: The yield on average earning assets (non-GAAP) increased 40 basis points to 5.51% for the third quarter of 2024,
+Added: primarily due to higher yields on loans and investment securities, which benefited from the balance sheet restructuring in late 2023 and a 34 basis point increase in yields on loans to 6.03%.
+Added: Interest expense of $259.4 million for the third quarter of 2024 increased $72.7 million from the same quarter of 2023, primarily due to the higher interest rate environment and an increase in average interest-bearing deposits and borrowings.
+Added: Average interest-bearing deposits increased $2.4 billion, or 10.1%, while average non-interest-bearing deposits decreased $905.9 million, or 8.4%, and average savings deposits of $394.5 million as customers continued to migrate balances into higher-yielding products.
The growth in average total deposits reflected organic growth in new and existing customer relationships.
−Removed: Average short-term borrowings increased $300.4 million, or 12.8%, primarily reflecting increases of $251.9 million and $99.1 million in short-term FHLB advances and Federal Funds purchased, respectively, partially offset by a decrease of $56.5 million in repurchase agreements.
−Removed: Average long-term borrowings increased $461.3 million, or 27.1%, primarily reflecting an increase in long-term FHLB advances as we have maintained additional liquidity following the banking industry disruption and in a continued effort to support strong loan growth.
+Added: Average short-term borrowings increased $100.9 million, or 4.5%, primarily reflecting an increase of $149.5 million in Federal Funds purchased, partially offset by a decrease of $62.3 million in repurchase agreements.
+Added: Average long-term borrowings increased $340.9 million, or 17.3%, primarily reflecting an increase in long-term FHLB advances as we have maintained additional liquidity following the banking industry disruption in early 2023 and in a continued effort to support strong loan growth.
The rate paid on interest-bearing liabilities increased 70 basis points from 2.69% to 3.39%.
−Removed: The total cost of funds increased 82 basis points to 2.46% with a 96 basis point increase in interest-bearing deposit costs to 2.93%, and an increase of 122 basis points in short-term borrowing costs to fund the strong loan growth.
−Removed: Since the current interest rate increases began in March 2022, our total cumulative spot deposit beta equaled 38% at June 30,2024, consistent with our expectations.
+Added: The total cost of funds increased 63 basis points to 2.56% with a 72 basis point increase in interest-bearing deposit costs to 3.08%, and an increase of 66 basis points in total borrowing costs to fund the strong loan growth.
+Added: Since the current interest rate increases began in March 2022, our total cumulative spot deposit beta equaled 40% at August 31, 2024.
Provision for Credit Losses
2 unchanged sentences
Three Months Ended
+Added: September 30, $ %
(dollars in thousands) 2024 2023 Change Change
8 unchanged sentences
n/m - not meaningful
−Removed: Provision for credit losses was $20.2 million during the second quarter of 2024, an increase of $1.7 million from the same period of 2023.
−Removed: The second quarter of 2024 is comprised of a $20.3 million provision for loans and leases outstanding and a $0.1 million net benefit on provision for unfunded loan commitments.
−Removed: The net increase supported the strong loan growth.
−Removed: The second quarter of 2024 reflected net charge-offs of $7.8 million, or 0.09% annualized of total average loans, compared to $8.7 million, or 0.11% annualized, in the second quarter of 2023.
+Added: Provision for credit losses was $23.4 million during the third quarter of 2024, a decrease of $2.5 million from the same period of 2023.
+Added: The third quarter of 2024 is comprised of a $22.9 million provision for loans and leases outstanding and a $0.6 million provision for unfunded loan commitments.
+Added: The third quarter of 2024 reflected net charge-offs of $21.5 million, or 0.25% annualized of total average loans, compared to $37.7 million, or 0.47% annualized, in the third quarter of 2023.
+Added: During the third quarter of 2023, there was a $31.9 million isolated commercial loan that was charged off due to alleged fraud.
For additional information relating to the allowance and provision for credit losses, refer to the Allowance for Credit Losses on Loans and Leases section of this Management’s Discussion and Analysis.
Non-Interest Income
−Removed: The breakdown of non-interest income for the three months ended June 30, 2024 and 2023 is presented in the following table:
+Added: The breakdown of non-interest income for the three months ended September 30, 2024 and 2023 is presented in the following table:
Three Months Ended
+Added: September 30, $ %
(dollars in thousands) 2024 2023 Change Change
11 unchanged sentences
Total non-interest income $ 89,688 $ 81,551 $ 8,137 10.0 %
−Removed: Total non-interest income increased by $7.6 million, or 9.5%, to $87.9 million for the second quarter of 2024, compared to $80.3 million for the second quarter of 2023.
+Added: Total non-interest income increased by $8.1 million, or 10.0%, to $89.7 million for the third quarter of 2024, compared to $81.6 million for the third quarter of 2023.
The variances in the individual non-interest income items are explained in the following paragraphs.
−Removed: Service charges of $23.3 million increased $2.8 million, or 13.6%, with strong treasury management activity and higher consumer transaction activity.
−Removed: Wealth management revenues increased $1.8 million, or 10.2%, as securities commissions and fees and trust income increased 13.7% and 7.9%, respectively, through contributions across the geographic footprint and the $506.8 million, or 5.9%, increase in the market value of assets under management.
+Added: Service charges of $24.0 million increased $2.8 million, or 13.1%, with strong treasury management activity and higher consumer transaction levels.
+Added: Wealth management revenues increased $1.9 million, or 11.1%, as securities commissions and fees and trust income increased 19.8% and 5.6%, respectively, through continued strong contributions across the geographic footprint and a $949.3 million, or 11.1%, increase in the market value of assets under management to $9.5 billion.
Capital markets income decreased $0.9 million, or 12.5%, reflecting lower commercial customer transaction activity.
−Removed: Mortgage banking operations income increased $2.0 million, or 41.8%, driven by improved gain on sale from strong production volumes.
−Removed: During the second quarter of 2024, we sold $324.9 million of residential mortgage loans, compared to $228.7 million for the same period of 2023.
−Removed: Dividends on non-marketable equity securities increased $1.4 million, or 26.1%, reflecting higher FHLB dividends due to additional borrowings.
+Added: Mortgage banking operations income increased $1.6 million, or 41.5%, driven by improved gain on sale, partially offset by an MSR impairment of $2.8 million in the third quarter of 2024 reflecting accelerating prepayment speed assumptions given the recent declines in mortgage rates at the end of the quarter.
+Added: During the third quarter of 2024, we sold $339.2 million of residential mortgage loans, compared to $334.4 million for the same period of 2023.
+Added: Bank owned life insurance increased $3.3 million, or 102.4%, reflecting higher life insurance claims.
Non-Interest Expense
−Removed: The breakdown of non-interest expense for the three months ended June 30, 2024 and 2023 is presented in the following table:
+Added: The breakdown of non-interest expense for the three months ended September 30, 2024 and 2023 is presented in the following table:
Three Months Ended
+Added: September 30, $ %
(dollars in thousands) 2024 2023 Change Change
7 unchanged sentences
Bank shares and franchise taxes 3,931 3,927 4 0.1
−Removed: Merger-related — 163 (163) (100.0)
Other 28,735 19,626 9,109 46.4
Total non-interest expense $ 249,431 $ 217,998 $ 31,433 14.4 %
−Removed: Total non-interest expense of $226.6 million for the second quarter of 2024 increased $14.7 million, or 6.9%, from the same period of 2023.
−Removed: Non-interest expense increased $14.0 million, or 6.6%, when excluding significant items of $0.8 million of FDIC special assessment expense in the second quarter of 2024 related to last year's bank failures and merger-related costs of $0.2 million in the second quarter 2023.
+Added: Total non-interest expense of $249.4 million for the third quarter of 2024 increased $31.4 million, or 14.4%, from the same period of 2023.
+Added: Non-interest expense increased $16.2 million, or 7.4%, when excluding significant items of $15.3 million in the third quarter of 2024.
The variances in the individual non-interest expense items are explained in the following paragraphs.
−Removed: Salaries and employee benefits of $120.9 million increased $7.0 million, or 6.1%, primarily from normal annual merit increases and higher production-related commissions from strong non-interest income activity.
−Removed: Net occupancy and equipment of $43.0 million increased $4.9 million, or 13.0%, largely from continued technology-related investments.
−Removed: Outside services of $23.3 million increased $2.7 million, or 13.2%, with higher third-party and volume-related technology costs.
−Removed: FDIC insurance of $10.0 million increased $2.2 million, or 29.0%, reflecting a $0.8 million estimated special assessment to further replenish the FDIC's Deposit Insurance Fund associated with protecting uninsured depositors following the failed banks in early 2023 based on updated loss information provided by the FDIC, as well as loan growth and balance sheet mix changes.
−Removed: The following table presents non-interest expense excluding significant items for the three months ended June 30, 2024 and 2023:
−Removed: Three Months Ended June 30, $ %
+Added: Salaries and employee benefits of $126.1 million increased $12.7 million, or 11.2%, primarily from normal annual merit increases and higher production-related commissions from strong non-interest income activity, as well as strategic hiring associated with our focus to grow market share and continued investments in our risk management infrastructure.
+Added: Net occupancy and equipment of $45.9 million increased $4.3 million, or 10.3%, largely due to the $3.7 million software impairment.
+Added: Outside services of $24.4 million increased $3.6 million, or 17.2%, due to higher volume-related technology and third-party costs.
+Added: FDIC insurance of $10.1 million increased $1.8 million, or 21.8%, primarily due to loan growth and balance sheet mix shift.
+Added: Other non-interest expense of $28.7 million increased $9.1 million, or 46.4%, primarily due to the $11.6 million loss on the indirect auto loan sale during the third quarter of 2024.
+Added: The following table presents non-interest expense excluding significant items for the three months ended September 30, 2024 and 2023:
+Added: Three Months Ended September 30, $ %
(dollars in thousands) 2024 2023 Change Change
1 unchanged sentence
Significant items:
−Removed: Merger-related — (163) 163
−Removed: FDIC special assessment (804) — (804)
+Added: Software impairment (3,690) — (3,690)
+Added: Loss on indirect auto loan sale (11,572) — (11,572)
Total non-interest expense, excluding significant items (1)
$ 234,169 $ 217,998 $ 16,171 7.4 %
−Removed: Current period significant items relate to a continuation of prior period significant items.
The following table presents information regarding income tax expense and certain tax rates:
Three Months Ended
+Added: September 30,
(dollars in thousands) 2024 2023
2 unchanged sentences
Statutory federal tax rate 21.0 21.0
−Removed: Income tax expense was lower due to lower pre-tax earnings, partially offset by lower stock compensation vesting deductions, higher disallowance of FDIC premium deductions, and higher levels of proportional amortization for certain tax credit investments resulting from the adoption of FASB ASU 2023-02 on January 1, 2024.
−Removed: The effective tax rate increased for the three months ended June 30, 2024 as a result of these offsetting items.
−Removed: Six Months Ended June 30, 2024 Compared to the Six Months Ended June 30, 2023
−Removed: Net income available to common stockholders for the first six months of 2024 was $239.4 million or $0.66 per diluted common share, compared to $284.9 million or $0.78 per diluted common share for the first six months of 2023.
−Removed: On an operating basis (non-GAAP), net income available to common stockholders for the first six months of 2024 was $246.4 million, or $0.68 per diluted common share, compared to $286.6 million or $0.79 per diluted common share for the first six months of 2023.
+Added: Income tax expense was higher due to the recording of renewable energy investment tax credits recognized in the third quarter of 2023 as part of a solar project financing transaction.
+Added: The increase was also attributable, to a lesser extent, from lower stock compensation vesting deductions, higher disallowance of FDIC premium deductions, and higher levels of proportional amortization for certain tax credit investments resulting from the adoption of FASB ASU 2023-02 on January 1, 2024.
+Added: The effective tax rate increased for the three months ended September 30, 2024 as a result of these items.
+Added: Nine Months Ended September 30, 2024 Compared to the Nine Months Ended September 30, 2023
+Added: Net income available to common stockholders for the first nine months of 2024 was $349.5 million or $0.96 per diluted common share, compared to $428.1 million or $1.18 per diluted common share for the first nine months of 2023.
+Added: On an operating basis (non-GAAP), net income available to common stockholders for the first nine months of 2024 was $368.5 million, or $1.02 per diluted common share, compared to $429.9 million or $1.18 per diluted common share for the first nine months of 2023.
Net interest income totaled $958.2 million, a decrease of $34.3 million, or 3.5%, compared to $992.5 million.
1 unchanged sentence
These funding cost increases were partially offset by an increase in the yield on earning assets (non-GAAP) of 54 basis points to 5.45%, primarily due to higher yields on loans and investment securities.
−Removed: Between June 30, 2023 and June 30, 2024, the FOMC raised the target Federal Funds interest rate by 25 basis points in July of 2023.
−Removed: The provision for credit losses for the first six months of 2024 totaled $34.1 million, compared to $32.6 million.
−Removed: Non-interest income totaled $175.8 million, a 10.1% increase compared to $159.7 million, reflecting increased mortgage banking operations income, continued strong wealth management revenues, and higher levels of service charges and dividends on non-marketable equity securities, partially offset by lower insurance commissions and fees.
+Added: The provision for credit losses for the first nine months of 2024 totaled $57.5 million, compared to $58.5 million.
+Added: Non-interest income totaled $265.5 million, a 10.0% increase compared to $241.2 million, reflecting increased mortgage banking operations income, continued strong wealth management revenues, and higher levels of service charges and dividends on non-marketable equity securities, partially offset by lower capital markets income and insurance commissions and fees.
Non-interest expense totaled $713.1 million, increasing $63.3 million, or 9.7%.
−Removed: On an operating basis (non-GAAP), non-interest expense totaled $459.9 million, an increase of $30.2 million, or 7.0%, compared to the first six months of 2023.
+Added: On an operating basis (non-GAAP), non-interest expense totaled $694.1 million, an increase of $46.4 million, or 7.2%, compared to the first nine months of 2023.
Salaries and benefits increased $28.6 million, or 8.2%, due largely to normal annual merit increases and higher production-related commissions from strong non-interest income activity.
−Removed: Additionally, net occupancy and equipment expense increased $8.9 million, or 11.4%, largely from technology-related investments.
−Removed: FDIC insurance increased $7.8 million, or 52.4%, primarily due to incremental FDIC special assessment expense of $5.2 million to further replenish the FDIC's Deposit Insurance Fund after the 2023 bank failures.
+Added: Additionally, net occupancy and equipment expense increased $13.1 million, or 11.0%, due to the $3.7 million software impairment, combined with technology-related investments.
+Added: FDIC insurance increased $9.6 million, or 41.5%, primarily due to incremental FDIC special assessment expense of $5.2 million to further replenish the FDIC's Deposit Insurance Fund after the 2023 bank failures, as well as loan growth and balance sheet mix changes.
Financial highlights are summarized below:
−Removed: Six Months Ended
+Added: Nine Months Ended
+Added: September 30, $ %
(in thousands, except per share data) 2024 2023 Change Change
11 unchanged sentences
The following table presents selected financial ratios and other relevant data used to analyze our performance:
−Removed: Six Months Ended
+Added: Nine Months Ended
+Added: September 30,
Return on average equity 7.81 % 9.98 %
11 unchanged sentences
The following table provides information regarding the average balances and yields earned on interest-earning assets (non-GAAP) and the average balances and rates paid on interest-bearing liabilities:
−Removed: Six Months Ended June 30,
+Added: Nine Months Ended September 30,
(dollars in thousands) Average
50 unchanged sentences
Total average commercial loans increased $1.2 billion, or 6.1%.
−Removed: Average consumer loans increased $901.8 million, or 8.0%, with an increase in residential mortgage loans of $1.3 billion, or 23.6%, largely due to the continued successful execution in key markets by our expanded mortgage banker team and long-standing strategy of serving the purchase market.
−Removed: Partially offsetting the growth in residential mortgage loans, indirect installment loans decreased $382.4 million, or 24.9%, reflecting the $332 million sale that closed in the first quarter of 2024.
+Added: Average consumer loans increased $873.5 million, or 7.7%, with an increase in average residential mortgage loans of $1.3 billion, or 22.9%, largely due to the continued successful execution in key markets by our expanded mortgage banker team and long-standing strategy of serving the purchase market.
+Added: Partially offsetting the growth in average residential mortgage loans, average indirect installment loans decreased $431.4 million, or 28.1%, reflecting the $332 million sale that closed in the first quarter of 2024 and $431 million sale that closed in September of 2024.
Additionally, we reinvested the proceeds of the AFS securities sold in December 2023 as part of our balance sheet repositioning with an average yield of 1.08% into securities with yields approximately 350 basis points higher and a similar duration and convexity profile.
2 unchanged sentences
The net interest margin (FTE) (non-GAAP) decreased 28 basis points to 3.11%.
−Removed: The following table provides certain information regarding changes in net interest income on an FTE basis (non-GAAP) attributable to changes in the average volumes and yields earned on interest-earning assets and the average volume and rates paid for interest-bearing liabilities for the six months ended June 30, 2024, compared to the six months ended June 30, 2023:
+Added: The following table provides certain information regarding changes in net interest income on an FTE basis (non-GAAP) attributable to changes in the average volumes and yields earned on interest-earning assets and the average volume and rates paid for interest-bearing liabilities for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023:
(in thousands) Volume Rate Net
22 unchanged sentences
The following table presents information regarding the provision for credit loss expense and net charge-offs:
−Removed: Six Months Ended
+Added: Nine Months Ended
+Added: September 30, $ %
(dollars in thousands) 2024 2023 Change Change
6 unchanged sentences
Net loan charge-offs (annualized) / total average loans and leases 0.17 % 0.26 %
−Removed: The provision for credit losses was $34.1 million, compared to $32.6 million in the first six months of 2023.
−Removed: The provision for credit losses for the first six months of 2024 was primarily due to loan growth and charge-off activity.
−Removed: The provision for credit losses in the first six months of 2023 was primarily due to loan growth, CECL-related model impacts from forecasted macroeconomic conditions and charge-off activity.
+Added: The provision for credit losses was $57.5 million, compared to $58.5 million in the first nine months of 2023.
+Added: The provision for credit losses for the first nine months of 2024 was primarily due to loan growth and charge-off activity.
+Added: The provision for credit losses in the first nine months of 2023 was primarily due to loan growth, CECL-related model impacts from forecasted macroeconomic conditions and charge-off activity, including a $31.9 million isolated commercial loan that was charged off due to alleged fraud.
Our non-performing loan coverage position remains strong at 327%.
−Removed: The first six months of 2024 reflected net charge-offs of $20.6 million, or 0.13% annualized of total average loans, compared to $21.9 million, or 0.14% annualized, in the first six months of 2023.
−Removed: The ACL was $418.8 million, an increase of $6.0 million, with the ratio of the ACL to total loans and leases decreasing 8 basis points to 1.24%, reflecting net loan growth and charge-off activity.
+Added: The first nine months of 2024 reflected net charge-offs of $42.1 million, or 0.17% annualized of total average loans, compared to $59.6 million, or 0.26% annualized, in the first nine months of 2023.
+Added: The ACL on loans and leases was $420.2 million, an increase of $19.5 million, with the ratio of the ACL to total loans and leases remaining stable at 1.25%.
Non-Interest Income
−Removed: The breakdown of non-interest income for the six months ended June 30, 2024 and 2023 is presented in the following table:
−Removed: Six Months Ended
+Added: The breakdown of non-interest income for the nine months ended September 30, 2024 and 2023 is presented in the following table:
+Added: Nine Months Ended
+Added: September 30, $ %
(dollars in thousands) 2024 2023 Change Change
13 unchanged sentences
The variances in significant individual non-interest income items are explained in the following paragraphs.
−Removed: Service charges increased $3.1 million, or 7.6%, primarily due to strong treasury management activity and higher consumer transaction activity.
+Added: Service charges increased $5.9 million, or 9.5%, primarily due to strong treasury management activity and higher consumer transaction levels.
Wealth management revenues increased $5.3 million, or 10.0%, as securities commissions and fees and trust income increased 14.4% and 7.1%, respectively, through continued strong contributions across the geographic footprint.
−Removed: Mortgage banking operations income increased $5.1 million, or 52.3%, driven by improved gain on sale from strong production volumes.
−Removed: During the first six months of 2024, we sold $654.1 million of residential mortgage loans, a 49.2% increase compared to $438.3 million for the same period of 2023.
+Added: Additionally, the market value of assets under management increased $949.3 million, or 11.1%, to $9.5 billion.
+Added: Capital markets decreased $2.1 million, or 10.6%, reflecting lower commercial customer transaction activity.
+Added: Mortgage banking operations income increased $6.7 million, or 49.2%, driven by improved gain on sale from strong production volumes, partially offset by an MSR impairment of $2.8 million in the third quarter of 2024 reflecting accelerating prepayment speed assumptions given the recent declines in mortgage rates.
+Added: During the first nine months of 2024, we sold $993.3 million of residential mortgage loans, a 28.5% increase compared to $772.7 million for the same period of 2023.
Dividends on non-marketable equity securities increased $4.3 million, or 28.0%, reflecting higher FHLB dividends due to additional borrowings.
+Added: Bank owned life insurance increased $4.2 million, or 46.8%, reflecting higher life insurance claims.
Non-Interest Expense
−Removed: The breakdown of non-interest expense for the six months ended June 30, 2024 and 2023 is presented in the following table:
−Removed: Six Months Ended
+Added: The breakdown of non-interest expense for the nine months ended September 30, 2024 and 2023 is presented in the following table:
+Added: Nine Months Ended
+Added: September 30, $ %
(dollars in thousands) 2024 2023 Change Change
10 unchanged sentences
Total non-interest expense $ 713,139 $ 649,870 $ 63,269 9.7 %
−Removed: Total non-interest expense of $463.7 million for the first six months of 2024 increased $31.8 million, a 7.4% increase from the same period of 2023.
−Removed: On an operating basis, non-interest expense (non-GAAP) totaled $459.9 million and increased $30.2 million, or 7.0%, when adjusting for significant items of $3.8 million and $2.2 million in the first six months of 2024 and 2023, respectively.
−Removed: See Table 18 in this section for a list of significant items.
+Added: Total non-interest expense of $713.1 million for the first nine months of 2024 increased $63.3 million, a 9.7% increase from the same period of 2023.
+Added: On an operating basis, non-interest expense (non-GAAP) totaled $694.1 million and increased $46.4 million, or 7.2%, when adjusting for significant items of $19.1 million and $2.2 million in the first nine months of 2024 and 2023, respectively.
+Added: See Table 18 in this section for a list of the significant items.
The variances in the individual non-interest expense items are further explained in the following paragraphs.
−Removed: Salaries and employee benefits increased $15.9 million, or 6.8%, related to normal annual merit increases and higher production-related commissions from strong non-interest income activity.
+Added: Salaries and employee benefits increased $28.6 million, or 8.2%, related to normal annual merit increases and higher production-related commissions from strong non-interest income activity, as well as strategic hiring associated with our focus to grow market share and continued investments in our risk management infrastructure.
Included in salaries and employee benefits in the first quarter of 2024 and 2023 were $6.9 million and $6.7 million, respectively, related to normal seasonal long-term compensation expense.
−Removed: Net occupancy and equipment expense of $86.3 million increased $8.9 million, or 11.4%, primarily from continued technology-related investments.
+Added: Net occupancy and equipment expense of $132.2 million increased $13.1 million, or 11.0%, primarily from continued technology-related investments, in addition to a $3.7 million software impairment.
+Added: Amortization of intangibles of $13.2 million decreased $2.0 million, or 13.2%, as certain intangibles have been fully amortized.
Outside services increased $9.8 million, or 16.1%, with higher volume-related technology and third-party costs.
−Removed: Marketing expense of $9.4 million increased $1.8 million, or 23.5%, primarily due to the timing of marketing campaigns.
+Added: Marketing expense of $15.5 million increased $2.4 million, or 18.3%, primarily due to the opportunistic timing of marketing campaigns related to our successful deposit initiatives.
FDIC insurance increased $9.6 million, or 41.5%, primarily due to special assessment expense of $5.2 million in 2024 to further replenish the FDIC's Deposit Insurance Fund associated with protecting uninsured depositors following the failed banks in early 2023 based on updated loss information provided by the FDIC, as well as loan growth and balance sheet mix changes.
−Removed: We recorded $2.2 million in merger-related costs for the first six months of 2023 related to the UB Bancorp acquisition completed in December 2022.
−Removed: Other non-interest expense was $32.3 million and $37.3 million for the first six months of 2024 and 2023, respectively.
−Removed: The first six months of 2024 included a $2.6 million reduction to the previously estimated loss on the indirect auto loan sale.
+Added: Other non-interest expense was $61.0 million and $56.9 million for the first nine months of 2024 and 2023, respectively, with the increase primarily related to the $9.0 million loss on indirect auto loan sales which completed in the first and third quarters of 2024 offset by various miscellaneous items.
The following table presents non-interest expense excluding significant items impacting earnings:
−Removed: Six Months Ended
+Added: Nine Months Ended
+Added: September 30, $ %
(dollars in thousands) 2024 2023 Change Change
4 unchanged sentences
FDIC special assessment (5,212) — (5,212)
−Removed: Reduction in previously estimated loss on indirect auto loan sale 2,603 — 2,603
+Added: Software impairment (3,690) — (3,690)
+Added: Loss on indirect auto loan sales (8,969) — (8,969)
Total non-interest expense, excluding significant items (1)
1 unchanged sentence
The following table presents information regarding income tax expense and certain tax rates:
−Removed: Six Months Ended
+Added: Nine Months Ended
+Added: September 30,
(dollars in thousands) 2024 2023
2 unchanged sentences
Statutory federal tax rate 21.0 21.0
−Removed: Income tax expense was lower in the first six months of 2024 due to lower pre-tax earnings, partially offset by lower stock compensation vesting deductions, higher disallowance of FDIC premium deductions, and higher levels of proportional amortization for certain tax credit investments resulting from the adoption of FASB ASU 2023-02 on January 1, 2024.
−Removed: The effective tax rate increased for the six months ended June 30, 2024 as a result of these offsetting items.
+Added: Income tax expense was higher in 2024 due to the recording of renewable energy investment tax credits recognized in the third quarter of 2023 as part of a solar project financing transaction.
+Added: The increase was also attributable, to a lesser extent, from lower stock compensation vesting deductions, higher disallowance of FDIC premium deductions, and higher levels of proportional amortization for certain tax credit investments resulting from the adoption of FASB ASU 2023-02 on January 1, 2024.
+Added: The effective tax rate increased for the nine months ended September 30, 2024 as a result of these items.
FINANCIAL CONDITION
The following table presents our condensed Consolidated Balance Sheets:
−Removed: (dollars in millions) June 30,
+Added: (dollars in millions) September 30,
2024 December 31,
24 unchanged sentences
Following is a summary of loans and leases:
+Added: September 30,
2024 December 31,
12 unchanged sentences
The growth in commercial loans and leases was across our footprint.
−Removed: For consumer lending, average residential mortgages increased $1.3 billion, primarily driven by seasonal growth in mortgage originations in the second quarter of 2024.
−Removed: Our commercial real estate portfolio included $8.9 billion of non-owner-occupied loans of which 19.6% represented office space.
−Removed: Our top 25 non-owner-occupied commercial real estate loans averaged approximately $24 million per exposure although the office space was primarily made up of mid-sized offices located outside of metropolitan business districts with 41% of the office portfolio averaging less than $5 million per exposure.
+Added: Our commercial real estate portfolio included $9.1 billion of non-owner-occupied loans of which 18.7% represented office loans.
+Added: Our top 25 non-owner-occupied commercial real estate loans averaged approximately $23 million per exposure with the office component primarily made up of mid-sized offices located outside of central business districts with 43% of the office portfolio averaging less than $5 million per exposure.
+Added: For consumer lending, average residential mortgages increased $1.3 billion, compared to September 2023, primarily driven by seasonal growth in mortgage originations in the second quarter of 2024.
Non-Performing Assets
Following is a summary of non-performing assets:
−Removed: (in millions) June 30,
+Added: (in millions) September 30,
2024 December 31,
12 unchanged sentences
Total non-performing assets $ 131 $ 110 $ 21 19.1 %
−Removed: Non-performing assets increased slightly by $0.6 million, from $110.0 million at December 31, 2023 to $110.5 million at June 30, 2024, and remain at or near historically low levels.
+Added: Non-performing assets increased $21.1 million, from $110.0 million at December 31, 2023 to $131.1 million at September 30, 2024, remaining at or near historically low levels.
Allowance for Credit Losses on Loans and Leases
5 unchanged sentences
• the historical through-the-cycle default mean calculated using an expanded period to include a prior recessionary period.
−Removed: At June 30, 2024 and December 31, 2023, we utilized a third-party consensus macroeconomic forecast reflecting the current and projected macroeconomic environment.
−Removed: For our ACL calculation at June 30, 2024, the macroeconomic variables that we utilized included, but were not limited to:
−Removed: (i) the purchase only Housing Price Index, which increases 7.2% over our R&S forecast period, (ii) a Commercial Real Estate Price Index, which increases 5.9% over our R&S forecast period, (iii) S&P Volatility, which increases 12.3% in 2024 and decreases 0.8% in 2025 and (iv) personal and business bankruptcies, which increase steadily over the R&S forecast period but average below the historical through-the-cycle period.
+Added: At September 30, 2024 and December 31, 2023, we utilized a third-party consensus macroeconomic forecast reflecting the current and projected macroeconomic environment.
+Added: For our ACL calculation at September 30, 2024, the macroeconomic variables that we utilized included, but were not limited to:
+Added: (i) the purchase only Housing Price Index, which increases 6.5% over our R&S forecast period, (ii) a Commercial Real Estate Price Index, which increases 12.7% over our R&S forecast period, (iii) S&P Volatility, which increases 8.0% in 2024 and 4.7% in 2025 and (iv) personal and business bankruptcies, which increase steadily over the R&S forecast period but average below the historical through-the-cycle period.
Macroeconomic variables that we utilized for our ACL calculation as of December 31, 2023 included, but were not limited to:
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Net Loan Charge-Offs Net Loan Charge-Offs to Average Loans ACL at
−Removed: Six Months Ended
−Removed: June 30, Six Months Ended
−Removed: June 30, June 30,
+Added: Nine Months Ended
+Added: September 30, Nine Months Ended
+Added: September 30, September 30,
2024 2023 2024 2023 2024
11 unchanged sentences
Allowance for credit losses/non-performing loans 326.65 % 353.73 %
−Removed: The ACL on loans and leases of $418.8 million at June 30, 2024 increased $13.2 million, or 3.3%, from December 31, 2023.
−Removed: Our ending ACL coverage ratio was stable at 1.24% at June 30, 2024 compared to 1.25% at December 31, 2023.
−Removed: Total provision for credit losses for the six months ended June 30, 2024 was $34.1 million, compared to $32.6 million for the same period in 2023.
−Removed: Net charge-offs were $20.6 million for the six months ended June 30, 2024, compared to $21.9 million for the first six months of 2023.
−Removed: The ACL as a percentage of non-performing loans for the total portfolio increased slightly to 388% as of June 30, 2024, compared to 378% as of December 31, 2023.
+Added: The ACL on loans and leases of $420.2 million at September 30, 2024 increased $14.6 million, or 3.6%, from December 31, 2023.
+Added: Our ending ACL coverage ratio was stable at 1.25% at both September 30, 2024 and December 31, 2023.
+Added: Total provision for credit losses for the nine months ended September 30, 2024 was $57.5 million, compared to $58.5 million for the same period in 2023.
+Added: Net charge-offs were $42.1 million for the nine months ended September 30, 2024, compared to $59.6 million for the first nine months of 2023.
+Added: When excluding the impact of the previously disclosed $31.9 million isolated commercial loan that was charged-off during the third quarter of 2023, net charge-offs would have been $27.7 million, or 0.12% annualized of total average loans (non-GAAP).
+Added: Net charge-offs for both years remain at historically low levels.
+Added: The ACL as a percentage of non-performing loans for the total portfolio decreased to 327% as of September 30, 2024, compared to 378% as of December 31, 2023.
Our primary source of funds is deposits.
1 unchanged sentence
Following is a summary of deposits:
−Removed: (in millions) June 30,
+Added: (in millions) September 30,
2024 December 31,
4 unchanged sentences
Total deposits $ 36,771 $ 34,711 $ 2,060 5.9 %
−Removed: Total deposits increased $283.1 million, or 0.8%, from December 31, 2023, however we continued to experience balance migration into higher-yielding deposit products.
+Added: Total deposits increased $2.1 billion, or 5.9%, from December 31, 2023, however we continued to experience balance migration into higher-yielding deposit products.
We ended the quarter with approximately 78% of all deposits insured by the FDIC or collateralized.
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FNB’s and FNBPA’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
−Removed: At June 30, 2024, the capital levels of both FNB and FNBPA exceeded all regulatory capital requirements and their regulatory capital ratios were above the minimum levels required to be considered “well-capitalized” for regulatory purposes.
+Added: At September 30, 2024, the capital levels of both FNB and FNBPA exceeded all regulatory capital requirements and their regulatory capital ratios were above the minimum levels required to be considered “well-capitalized” for regulatory purposes.
In December 2018, the FRB and other U.S.
5 unchanged sentences
Beginning on January 1, 2022, we were required to phase in 25% of the previously deferred capital impact of CECL, with an additional 25% to be phased in at the beginning of each subsequent year until fully phased in by the first quarter of 2025.
−Removed: Under the final rule, the estimated impact of CECL on regulatory capital that we will defer and later phase in is calculated as the entire day-one impact at adoption plus 25% of the subsequent change in the ACL during the two-year deferral period.
−Removed: As of June 30, 2024, the total deferred impact on CET1 capital related to our adoption of CECL was approximately $17.2 million, or 5 basis points, which will be eliminated in 2025.
+Added: Under the final rule, the estimated impact of CECL on regulatory capital that we will defer and later phase in is calculated as
+Added: the entire day-one impact at adoption plus 25% of the subsequent change in the ACL during the two-year deferral period.
+Added: As of September 30, 2024, the total deferred impact on CET1 capital related to our adoption of CECL was approximately $17.2 million, or 5 basis points, which will be eliminated in 2025.
In this unprecedented economic and uncertain environment, we frequently run stress tests for a variety of economic situations, including severely adverse scenarios that have economic conditions like the current conditions.
6 unchanged sentences
(dollars in millions) Amount Ratio Amount Ratio Amount Ratio
−Removed: As of June 30, 2024
+Added: As of September 30, 2024
Total capital $ 4,582 12.28 % $ 3,732 10.00 % $ 3,918 10.50 %
39 unchanged sentences
We have historically been opportunistic when accessing the capital markets, and we will continue with that strategy.
−Removed: The parent company's cash position at June 30, 2024 was $282.9 million, down $92.5 million from year-end, primarily due to the redemption of all $111 million of our Series E, 7.25% Fixed Rate / Floating Rate Non-Cumulative Perpetual Preferred Stock in February 2024.
−Removed: The Board of Directors declared the redemption of the preferred stock given its higher relative cost of capital and our strong capital position with the regulatory CET1 ratio and Total Capital ratios at 10.2% and 12.0%, respectively, at June 30, 2024 with the Total Capital ratio reflecting the preferred stock redemption.
+Added: The parent company's cash position at September 30, 2024 was $286.8 million, down $88.6 million from year-end, primarily due to the redemption of all $111 million of our Series E, 7.25% Fixed Rate / Floating Rate Non-Cumulative Perpetual Preferred Stock in February 2024.
+Added: The Board of Directors declared the redemption of the preferred stock given its higher relative cost of capital and our strong capital position.
+Added: Our regulatory CET1 ratio and Total Capital ratios were 10.4% and 12.3%, respectively, at September 30, 2024 with the Total Capital ratio reflecting the completed preferred stock redemption.
Two metrics that are used to gauge the adequacy of the parent company’s cash position are the Liquidity Coverage Ratio (LCR) and Months of Cash on Hand (MCH).
2 unchanged sentences
The LCR and MCH ratios and Parent company cash on hand are presented in the following table:
+Added: September 30,
2024 December 31,
3 unchanged sentences
Parent company cash on hand (millions) $ 286.8 $ 375.4 n/a
−Removed: As previously mentioned, our parent company cash on hand declined from December 31, 2023 due to the preferred stock redemption, however our liquidity coverage ratio and months of cash on hand metrics improved primarily due to the lower
−Removed: projected 12-month net cash outflow related to the preferred stock redemption.
+Added: As previously mentioned, our parent company cash on hand declined from December 31, 2023 due to the preferred stock redemption.
+Added: The decrease in the LCR and MCH at September 30, 2024 are due to the scheduled maturity of $350 million in
+Added: senior debt due in August of 2025, which is considered a cash outflow for the ratio calculations.
+Added: Assuming we replace the maturing senior debt, the ratios would be 2.8 times LCR and 15.3 MCH.
Management has concluded that our cash levels remain appropriate given the current market environment.
5 unchanged sentences
Over time, our liquidity position has been positively impacted by FNBPA's ability to generate growth in relationship-based accounts.
−Removed: Organic growth in low-cost transaction deposits has been complemented by management’s continued strategy of deposit gathering efforts focused on attracting new customer relationships across our geographic footprint and deepening relationships with existing customers, in part through internal lead generation efforts leveraging data analytics capabilities.
−Removed: At June 30, 2024, approximately 78% of our deposits were insured by the FDIC or collateralized, stable with December 31, 2023.
−Removed: Non-interest-bearing demand deposits decreased $160.4 million, compared to December 31, 2023.
−Removed: Interest-bearing demand deposits decreased $111.6 million and savings account balances decreased $117.0 million, while time deposits increased $672.0 million, compared to December 31, 2023, as customers continue to migrate deposits into higher-yielding deposit products.
+Added: Organic growth in low-cost transaction deposits has been complemented by management’s continued strategy of deposit gathering efforts focused on attracting new customer relationships across our geographic footprint and deepening relationships with existing customers, in part through internal lead generation efforts leveraging our data analytics capabilities.
+Added: These strategies helped management successfully grow total deposits by $2.1 billion, when compared to December 31, 2023.
+Added: These efforts resulted in time deposits and interest-bearing demand deposits increasing $1.5 billion and $1.2 billion, respectively, when compared to December 31, 2023.
+Added: Non-interest-bearing demand deposits decreased $351.8 million and savings account balances declined $233.9 million compared to December 31, 2023 as customers continue to migrate deposits into higher-yielding deposit products.
The mix of non-interest-bearing deposits to total deposits remained consistent with the prior quarter at 27%.
−Removed: Our cash balances held at the FRB were $1.4 billion at June 30, 2024 and $1.1 billion at December 31, 2023.
+Added: At September 30, 2024, approximately 78% of our deposits were insured by the FDIC or collateralized, stable with December 31, 2023.
+Added: The liquidity position of FNBPA was further strengthened by the sale of $431 million of indirect auto loans in the third quarter of 2024.
+Added: Our cash balances held at the FRB were $1.5 billion at September 30, 2024 and $1.1 billion at December 31, 2023.
Management will continue to evaluate appropriate levels of liquidity based on expected loan and deposit growth and other balance sheet activity.
The following table presents certain information relating to FNBPA’s credit availability and salable unpledged securities:
−Removed: (dollars in millions) June 30,
+Added: (dollars in millions) September 30,
2024 December 31,
4 unchanged sentences
Cash and salable unpledged government and agency securities as a % of FNBPA assets 4.7 % 3.8 %
−Removed: Our bank-level liquidity position was strong throughout the first half of 2024.
+Added: Our bank-level liquidity position has remained strong throughout 2024.
+Added: The strong deposit generation noted earlier provided management the flexibility to reduce short- and long-term borrowings by a combined $400 million.
Our contingency funding policy and periodic liquidity stress testing of multiple stress scenarios is particularly valuable as we successfully manage our liquidity.
−Removed: We continue to have ample unused borrowing capacity that could cover 1.9 times the uninsured deposit and non-collateralized deposit balances as of June 30, 2024.
+Added: We continue to have ample unused borrowing capacity that could cover 2.0 times the uninsured deposit and non-collateralized deposit balances as of September 30, 2024.
A portion of this capacity includes the FRB's Discount Window.
We have no borrowings under this facility.
−Removed: Additional sources of unused wholesale credit availability for FNBPA include the ability to borrow from the FHLB, correspondent bank lines, and access to other channels.
−Removed: In addition to credit availability, FNBPA also possesses salable unpledged government and agency securities that could be utilized to meet funding needs and has excess cash to meet its pledging requirements.
−Removed: At June 30, 2024, FNBPA has $2.5 billion of cash and salable unpledged government and agency securities representing 5.4% of total assets.
+Added: Additional sources of unused wholesale credit availability for FNBPA include the ability to borrow from the FHLB, correspondent bank lines, and access to other funding channels.
+Added: In addition to credit availability, FNBPA also has salable unpledged government and agency securities that could be utilized to meet funding needs and has excess cash to meet its pledging requirements.
+Added: At September 30, 2024, FNBPA has $783 million of cash and salable unpledged government and agency securities representing 4.7% of total assets.
This compares to a policy minimum of 3.0%.
Another metric for measuring liquidity risk is the liquidity gap analysis.
−Removed: The following liquidity gap analysis as of June 30, 2024 compares the difference between our cash flows from existing earning assets and interest-bearing liabilities over future time intervals.
+Added: The following liquidity gap analysis as of September 30, 2024 compares the difference between our cash flows from existing earning assets and interest-bearing liabilities over future time intervals.
Management calculates this ratio at least quarterly and it is reviewed regularly by ALCO.
1 unchanged sentence
A reasonably matched position lays a better foundation for dealing with additional funding needs during a potential liquidity crisis.
−Removed: A positive gap position means that more assets are expected to mature over the next 12 months than liabilities.
+Added: A positive gap position means that more assets are
+Added: expected to mature over the next 12 months than liabilities.
The allocation of non-maturity deposits and customer repurchase agreements to the twelve-month categories is based on the estimated lives of each product.
10 unchanged sentences
Cumulative Gap to Total Assets 1.2 % (0.9) % (4.3) % (4.3) %
−Removed: The twelve-month cumulative gap to total assets ratio was (5.9)% as of June 30, 2024, compared to (2.6)% as of December 31, 2023.
−Removed: The change in the twelve-month cumulative gap to total assets was primarily related to the active management of deposit pricing across the deposit product maturity tenors which reduced our asset sensitivity.
+Added: The twelve-month cumulative gap to total assets ratio was (4.3)% as of September 30, 2024, compared to (2.6)% as of December 31, 2023.
+Added: The change in the twelve-month cumulative gap to total assets was primarily related to management's shorter-term time deposit pricing that effectively reduced the average maturity of new time deposits, which reduced our asset sensitivity.
In addition, the ALCO regularly monitors various liquidity ratios, stress scenarios of our liquidity position and assumptions considering market disruptions, lending demand, deposit behavior, and funding availability.
20 unchanged sentences
Reviewing these various measures provides us with a comprehensive view of our interest rate risk profile, which provides the basis for balance sheet management strategies.
−Removed: The following repricing gap analysis as of June 30, 2024 compares the difference between the amount of interest-earning assets and interest-bearing liabilities subject to repricing over a period of time.
+Added: The following repricing gap analysis as of September 30, 2024 compares the difference between the amount of interest-earning assets and interest-bearing liabilities subject to repricing.
The allocation of non-maturity deposits and customer repurchase agreements to the one-month maturity category below is based on the estimated sensitivity of each product to changes in market rates.
13 unchanged sentences
Cumulative Gap to Earning Assets 12.6 % 9.8 % 5.5 % 6.7 %
−Removed: The twelve-month cumulative repricing gap to total assets was 5.6% and 10.3% as of June 30, 2024 and December 31, 2023, respectively.
+Added: The twelve-month cumulative repricing gap to total assets was 6.7% and 10.3% as of September 30, 2024 and December 31, 2023, respectively, primarily as a result of management's deposit pricing actions on shorter-term time deposits which effectively reduced the average maturity of new time deposits.
The positive cumulative gap positions indicate that we have a greater amount of repricing earning assets than repricing interest-bearing liabilities over the subsequent twelve months.
−Removed: The change in the cumulative repricing gap at June 30, 2024, compared to December 31, 2023, is primarily related to customers moving into shorter-term time deposits and the increase in short-term and variable-rate borrowings.
+Added: The change in the cumulative repricing gap at September 30, 2024, compared to December 31, 2023, is primarily related to customers moving into shorter-term time deposits and the increase in short-term and variable-rate borrowings.
In addition to the repricing gap analysis above, we model rate scenarios which move all rates gradually over twelve months (Rate Ramps).
1 unchanged sentence
Using a static Balance Sheet structure and utilizing net interest income simulations, the following table presents an analysis of the potential sensitivity of our net interest income to changes in interest rates using Rate Ramps and the sensitivity of EVE using Rate Shocks.
−Removed: The variance percentages represent the change between the net interest income and EVE calculated under the particular rate scenario compared to the net interest income and EVE that was calculated assuming market rates as of June 30, 2024.
+Added: The variance percentages represent the change between the net interest income and EVE calculated under the particular rate scenario compared to the net interest income and EVE that was calculated assuming market rates as of September 30, 2024.
The calculated results do not reflect management's potential actions.
+Added: September 30,
2024 December 31,
11 unchanged sentences
There are multiple factors that influence our interest rate risk position and impact net interest income.
−Removed: These include external factors such as the shape of the yield curve, the competitive landscape and expectations regarding future interest rates, as well as internal factors regarding product offerings, product mix and pricing of loans and deposits.
−Removed: Our current interest rate risk position is primarily driven by our loan portfolio.
−Removed: Total variable and adjustable-rate loans were 62.8% and 62.2% of total net loans and leases at June 30, 2024 and December 31, 2023, respectively.
+Added: These include external factors such as the shape of the yield curve, the competitive landscape and expectations regarding future interest rates, as well as internal factors regarding product offerings, product mix and pricing and re-pricing of loans and deposits.
+Added: Our current interest rate risk position is modestly asset sensitive.
+Added: A key driver of this position resulted from the origination of consumer and commercial loans with short-term repricing characteristics, some of which have been swapped to a fixed rate.
+Added: Total variable and adjustable-rate loans were 63.5% and 62.2% of total net loans and leases at September 30, 2024 and December 31, 2023, respectively.
Forty-eight percent of our net loans and leases reprice within the next three months and are indexed to short-term SOFR, Prime and other indices.
−Removed: Furthermore, we regularly sell long-term fixed-rate residential mortgages in the secondary market and have been successful in the origination of consumer and commercial loans with short-term repricing characteristics.
+Added: Furthermore, we regularly sell long-term fixed-rate residential mortgages in the secondary market.
Management continues to be proactive in managing our interest rate risk (IRR) position with the intention to manage to a more neutral position given the current market expectations for future interest rates.
−Removed: During the first half of 2024, management adjusted the IRR position by slightly extending the duration of the investment securities portfolio, originating adjustable rate mortgage loans with longer-duration fixed periods, strategically meeting our customers' preferences for higher yielding deposit products, in particular, with shorter-term time deposits, and utilizing borrowings of variable rates and varying maturities.
+Added: During the first nine months of 2024, management adjusted the IRR position by slightly extending the duration of the investment securities portfolio, originating adjustable-rate mortgage loans with longer-duration fixed-rate reset periods, strategically meeting our customers' preferences for higher yielding deposit products, with shorter-term time deposits, and utilizing borrowings of variable rates and varying maturities.
As a result, the net interest income change over 12 months shown above in both the up and down rate ramp scenarios is closer to neutral compared to December 31, 2023.
2 unchanged sentences
The volume, maturity and mix of derivative positions change periodically as we adjust our broader interest rate risk management objectives, and the balance sheet positions to be hedged.
−Removed: We currently have $1.2 billion (notional) of receive-fixed interest rate swaps designated as cash flow hedges for variable rate commercial loans with $1.0 billion (notional) of these swaps maturing at various dates throughout 2025 and $0.2 billion (notional) maturing in May 2026.
+Added: We currently have $1.2 billion (notional) of receive-fixed interest rate swaps designated as cash flow hedges for variable rate commercial loans that have an average rate of 1.37% and average maturity of 9.7 months with the last hedge scheduled to expire in May 2026.
Additionally, we have a $0.2 million (notional) interest rate collar on variable rate commercial loans with strike rates between 2.8525% and 5.50% that matures in April 2026.
−Removed: We also designated $0.2 billion (notional) of interest rate swaps as hedges of variable rate short-term debt with $0.1 billion and $0.1 billion maturing in July and November 2024, respectively.
+Added: We also designated $0.1 billion (notional) of interest rate swaps as hedges of variable rate short-term debt maturing in November 2024.
Derivative financial instruments are also offered to enable commercial customers to meet their financing and investing objectives and for their risk management purposes.
We typically enter into offsetting third-party contracts with reputable counterparties with substantially matching terms to economically hedge the exposure related to these derivatives.
−Removed: At June 30, 2024, the commercial customer-related interest rate swaps totaled $5.8 billion (notional), up from $5.7 billion (notional) at December 31, 2023.
+Added: At September 30, 2024, the commercial customer-related interest rate swaps totaled $5.9 billion (notional), up from $5.7 billion (notional) at December 31, 2023.
For additional information regarding interest rate swaps, see Note 10, "Derivative Instruments and Hedging Activities" in the Notes to Consolidated Financial Statements in this Report.
1 unchanged sentence
These results use historical long-term deposit rate beta assumptions that are regularly analyzed and adjusted as necessary for both rising and falling rate scenarios.
−Removed: Assuming a static Balance Sheet, a +100 basis point Rate Shock increases net interest income (12 months) by 2.5% at June 30, 2024 and 3.4% at December 31, 2023.
−Removed: For a +200 basis point Rate Shock, net interest income (12 months) increases by 4.9% at June 30, 2024 and 6.7% at December 31, 2023.
−Removed: The corresponding
−Removed: metrics for a minus 100 basis point Rate Shock are (2.7)% and (3.6)% at June 30, 2024 and December 31, 2023, respectively.
+Added: Assuming a static Balance Sheet, a +100 basis point Rate Shock increases net interest income (12 months) by 3.1% at September 30, 2024 and 3.4% at December 31, 2023.
+Added: For a +200 basis point Rate
+Added: Shock, net interest income (12 months) increases by 5.9% at September 30, 2024 and 6.7% at December 31, 2023.
+Added: The corresponding metrics for a minus 200 basis point Rate Shock are (7.2)% and (7.7)% at September 30, 2024 and December 31, 2023, respectively, compared to a minus 100 basis point Rate Shock of (3.4)% and (3.6)% at September 30, 2024 and December 31, 2023, respectively.
The drivers of the change in net interest income in the rate shock scenarios include the mix shift of deposit products into shorter-term time deposits, the pace of deposit repricing and assumed betas and loan prepayments.
4 unchanged sentences
While management believes that its methodology for developing such assumptions is reasonable, there can be no assurance that modeled results will be achieved.
−Removed: Furthermore, the metrics are based upon the Balance Sheet structure as of the valuation date and do not reflect planned growth or management actions that could be taken.
+Added: Furthermore, the metrics are based upon the static Balance Sheet structure as of the valuation date and do not reflect planned growth or management actions that could be taken.
CREDIT RATINGS
16 unchanged sentences
In particular, holders of deposits which exceed FDIC insurance limits may perceive such a downgrade or warning negatively and withdraw all or a portion of such deposits.
−Removed: The following table presents the credit ratings for FNB and FNBPA as of June 30, 2024:
+Added: The following table presents the credit ratings for FNB and FNBPA as of September 30, 2024:
Moody's Standard & Poor's Kroll
38 unchanged sentences
As such, we monitor a series of Key Risk Indicators for various business lines and operation units to measure performance alignment with our stated risk appetite.
−Removed: Our top-down risk
−Removed: appetite process serves as a limit for undue risk-taking for bottom-up planning from our various business functions.
+Added: Our top-down risk appetite process serves as a limit for undue risk-taking for bottom-up planning from our various business functions.
Our Board Risk Committee, in collaboration with our Risk Management Council, approves our risk appetite on an annual basis, or more frequently, as needed to reflect changes in the risk, regulatory, economic and strategic plan environments, with the goal of ensuring that our risk appetite remains consistent with our strategic plans and business operations, regulatory environment and our shareholders' expectations.
1 unchanged sentence
Reports relating to our risk appetite and strategic plans, and our ongoing monitoring thereof, and our aggregate risk profile, are regularly presented to our various management level risk oversight and planning committees and periodically reported up through our Board Risk Committee.
+Added: We continue to assess our risk management practices on an ongoing basis and are making investments as necessary to position ourselves for continued growth and heightened regulatory risk management expectations for large banking institutions over $50 billion.
The Board of Directors believes that our enterprise-wide risk management process is effective and enables the Board of Directors to:
7 unchanged sentences
Three Months Ended
−Removed: June 30, Six Months Ended
+Added: September 30, Nine Months Ended
+Added: September 30,
(in thousands) 2024 2023 2024 2023
7 unchanged sentences
Tax benefit of FDIC special assessment — — (1,095) —
−Removed: Reduction of previous estimated loss on indirect auto loan sale — — (2,603) —
−Removed: Tax expense of reduction of previous estimated loss on indirect auto loan sale — — 547 —
+Added: Software impairment 3,690 — 3,690 —
+Added: Tax benefit of software impairment (775) — (775) —
+Added: Loss on indirect auto loan sales 11,572 — 8,969 —
+Added: Tax benefit of loss on indirect auto loan sales (2,430) — (1,883) —
Operating net income available to common stockholders (non-GAAP) $ 122,160 $ 143,271 $ 368,522 $ 429,898
The table above shows how operating net income available to common stockholders (non-GAAP) is derived from amounts reported in our financial statements.
−Removed: We believe certain charges, such as merger expenses, preferred deemed dividend at redemption, FDIC special assessment, loss on indirect auto loan sale and branch consolidation costs are not organic costs to run our operations and facilities.
+Added: We believe certain charges, such as merger expenses, preferred deemed dividend at redemption, FDIC special assessment, software impairment, loss on indirect auto loan sales and branch consolidation costs are not organic costs to run our operations and facilities.
These costs are specific to each individual transaction, and may vary significantly based on the size and complexity of the transaction.
1 unchanged sentence
Three Months Ended
−Removed: June 30, Six Months Ended
+Added: September 30, Nine Months Ended
+Added: September 30,
2024 2023 2024 2023
−Removed: Net income per diluted common share $ 0.34 $ 0.39 $ 0.66 $ 0.78
+Added: Earnings per diluted common share $ 0.30 $ 0.40 $ 0.96 $ 1.18
Preferred dividend at redemption — — 0.01 —
5 unchanged sentences
Tax benefit of FDIC special assessment — — — —
−Removed: Reduction of previous estimated loss on indirect auto loan sale — — (0.01) —
−Removed: Tax expense of reduction of previous estimated loss on indirect auto loan sale — — — —
+Added: Software impairment 0.01 — 0.01 —
+Added: Tax benefit of software impairment — — — —
+Added: Loss on indirect auto loan sales 0.03 — 0.02 —
+Added: Tax benefit of loss on indirect auto loan sales (0.01) — (0.01) —
Operating earnings per diluted common share (non-GAAP) $ 0.34 $ 0.40 $ 1.02 $ 1.18
1 unchanged sentence
Three Months Ended
−Removed: June 30, Six Months Ended
+Added: September 30, Nine Months Ended
+Added: September 30,
(dollars in thousands) 2024 2023 2024 2023
11 unchanged sentences
Three Months Ended
−Removed: June 30, Six Months Ended
+Added: September 30, Nine Months Ended
+Added: September 30,
(dollars in thousands) 2024 2023 2024 2023
11 unchanged sentences
Three Months Ended
−Removed: June 30, Six Months Ended
+Added: September 30, Nine Months Ended
+Added: September 30,
(dollars in thousands) 2024 2023 2024 2023
9 unchanged sentences
Tangible book value per common share
−Removed: June 30, 2024 June 30, 2023
+Added: September 30, 2024 September 30, 2023
(dollars in thousands, except per share data)
8 unchanged sentences
Tangible common equity to tangible assets
−Removed: June 30, 2024 June 30, 2023
+Added: September 30, 2024 September 30, 2023
(dollars in thousands)
12 unchanged sentences
Three Months Ended
−Removed: June 30, Six Months Ended
−Removed: 2024 2023 2024 2023
+Added: September 30, Three Months Ended Nine Months Ended
+Added: September 30,
+Added: 2024 2023 June 30, 2024 2024 2023
(dollars in thousands)
3 unchanged sentences
FDIC special assessment — — (804) (5,212) —
−Removed: Reduction of previous estimated loss on indirect auto loan sale — — 2,603 —
+Added: Software impairment (3,690) — — (3,690) —
+Added: Loss on indirect auto loan sales (11,572) — — (8,969) —
Operating non-interest expense (non-GAAP) $ 234,169 $ 217,998 $ 225,808 $ 694,074 $ 647,655
+Added: Net loan charge-offs, excluding isolated commercial loan charge-off due to alleged fraud (annualized) / total average loans and leases
+Added: Nine Months Ended
+Added: September 30,
+Added: (dollars in thousands) 2023
+Added: Net loan charge-offs $ 59,596
+Added: Isolated commercial loan charge-off (31,900)
+Added: Net loan charge-offs, excluding isolated commercial loan charge-off (non-GAAP) $ 27,696
+Added: Total average loans and leases $ 31,070,965
+Added: Net loan charge-offs (annualized) / total average loans and leases 0.26 %
+Added: Net loan charge-offs, excluding isolated commercial loan charge-off (annualized) / total average loans and leases (non-GAAP) 0.12 %
Key Performance Indicator s
1 unchanged sentence
Three Months Ended
−Removed: (Dollars in thousands) June 30, 2024 March 31, 2024
+Added: (Dollars in thousands) September 30, 2024 June 30, 2024
Net interest income $ 323,329 $ 315,890
3 unchanged sentences
Pre-provision net revenue (reported) (annualized) (non-GAAP) $ 650,789 $ 712,695
−Removed: Branch consolidation costs (non-interest expense) — 1,194
FDIC special assessment (non-interest expense) $ — $ 804
−Removed: Reduction of previous estimated loss on indirect auto loan sale (non-interest expense) — (2,603)
+Added: Software impairment (non-interest expense) 3,690 —
+Added: Loss on indirect auto loan sales (non-interest expense) 11,572 —
Operating pre-provision net revenue (non-GAAP) $ 178,848 $ 178,004
2 unchanged sentences
Three Months Ended
−Removed: June 30, Six Months Ended
−Removed: (dollars in thousands) 2024 2023 2024 2023
+Added: September 30, Three Months Ended
+Added: (dollars in thousands) 2024 2023 June 30, 2024
Non-interest expense $ 249,431 $ 217,998 $ 226,612
4 unchanged sentences
FDIC special assessment — — (804)
−Removed: Reduction of previous estimated loss on indirect auto loan sale — — 2,603 —
+Added: Software impairment (3,690) — —
+Added: Loss on indirect auto loan sales (11,572) — —
Adjusted non-interest expense $ 229,439 $ 212,641 $ 221,229
8 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.