FNB CORPPA

Previous wording

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. 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. Our results of operations for the six months ended June 30, 2024 are not necessarily indicative of results expected for the full year.

Current wording

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. Our results of operations for the nine months ended September 30, 2024 are not necessarily indicative of results expected for the full year.

Previous wording

•Our business, financial results and balance sheet values are affected by business, economic and political circumstances, including, but not limited to: (i) developments with respect to the U.S. and global financial markets; (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; (iii) a slowing of the U.S. economy in general and regional and local economies within our market area; (iv) inflation concerns; (v) the impacts of tariffs or other trade policies of the U.S. or its global trading partners; and (vi) the sociopolitical environment in the U.S.

Current wording

•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; (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. economy in general and regional and local economies within our market area; (iv) inflation concerns; (v) the impacts of tariffs or other trade policies of the U.S. or its global trading partners; and (vi) the sociopolitical environment in the U.S.

Previous wording

•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. or global economy and financial markets generally, or us or our counterparties, customers or third-party vendors specifically.

Current wording

•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.

Previous wording

•Our ability to take certain capital actions, including returning capital to shareholders, is subject to us meeting or exceeding minimum capital levels. 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.

Current wording

•Our ability to take certain capital actions, including returning capital to shareholders, is subject to us meeting or exceeding minimum capital levels. 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.

Previous wording

•Historically we have grown our business in part through acquisitions, new strategic and business initiatives and new products. 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 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.

Current wording

•Historically we have grown our business in part through acquisitions, new strategic and business initiatives and new products. 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 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.

Previous wording

◦Changes in monetary and fiscal policies, including interest rate policies and strategies of the FOMC.

Current wording

◦Changes in governmental monetary and fiscal policies, including interest rate policies and strategies of the FOMC.

Previous wording

◦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.

Current wording

◦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.

Previous wording

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. Management uses these measures internally to assess and better understand our underlying business performance and trends related to core business activities. The non-GAAP financial measures and key performance indicators we use may differ from the non-GAAP financial measures and key performance indicators other financial institutions use to assess their performance and trends.

Current wording

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. The non-GAAP financial measures and key performance indicators we use may differ from the non-GAAP financial measures and key performance indicators other financial institutions use to assess their performance and trends.

Previous wording

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. These items are considered significant items impacting earnings as they are deemed to be outside of ordinary banking activities. These costs are specific to each individual transaction and may vary significantly based on the size and complexity of the transaction.

Current wording

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. These costs are specific to each individual transaction and may vary significantly based on the size and complexity of the transaction.

Previous wording

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. 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.

Current wording

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. 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.

Previous wording

Income Statement Highlights (second quarter of 2024 compared to second quarter of 2023, except as noted)

Current wording

Income Statement Highlights (third quarter of 2024 compared to third quarter of 2023, except as noted)

Previous wording

•Non-interest income totaled $87.9 million, benefiting from our diversified business model.

Current wording

•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.

Previous wording

•Pre-provision net revenue (non-GAAP) totaled $177.2 million, a 4.4% increase from the prior quarter. 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. 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.

Current wording

•Pre-provision net revenue (non-GAAP) totaled $163.6 million, a 7.7% decrease from the prior quarter. 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.

Previous wording

•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.

Current wording

•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.

Previous wording

•Period-end total loans and leases increased $2.4 billion, or 7.7%, compared to June 30, 2023. Commercial loans and leases increased $1.4 billion, or 7.2%, and consumer loans increased $989.5 million, or 8.5%. 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.

Current wording

•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.

Previous wording

•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.

Current wording

•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.

Previous wording

•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.

Current wording

•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.

Previous wording

•The ratio of non-performing loans plus OREO to total loans and leases plus OREO decreased 14 basis points to 0.33%. Total delinquency decreased 12 basis points to 0.63%, compared to 0.75% at June 30, 2023. Both measures continue to remain at or near historically low levels.

Current wording

•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. Total delinquency increased 16 basis points to 0.79%, compared to 0.63% at September 30, 2023. While these two metrics increased compared to the prior periods shown, the overall asset quality metrics continue to remain near historically low levels.

Previous wording

•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.

Current wording

•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%.

Previous wording

•Tangible book value per common share (non-GAAP) of $9.88, increased $1.09, or 12.4%, compared to June 30, 2023. AOCI reduced the tangible book value per common share (non-GAAP) by $0.67 as of June 30, 2024, primarily due to 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.

Current wording

•Tangible book value per common share (non-GAAP) of $10.33, increased $1.31, or 14.5%, compared to September 30, 2023. 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.

Previous wording

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. 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. 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.

Current wording

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. 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. By comparison, third quarter of 2023 earnings per diluted common share (non-GAAP) was $0.40 on an operating basis.

Previous wording

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. The net interest margin (FTE) (non-GAAP) decreased 28 basis points to 3.09%. 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. 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%. 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. The provision for credit losses was $20.2 million, compared to $18.5 million with the current quarter's level supporting strong loan growth. 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. Non-interest expense for the second quarter of 2024 increased $14.7 million, or 6.9%. 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. Income taxes of $34.0 million declined $2.7 million, or 7.4% from lower pre-tax income levels.

Current wording

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%. 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%. 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. The provision for credit losses was $23.4 million, compared to $25.9 million. 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. Non-interest expense for the third quarter of 2024 increased $31.4 million, or 14.4%. 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). 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. 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.

Previous wording

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. 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. Average interest-bearing liabilities of $29.5 billion increased $2.7 billion, or 9.9%, driven by an increase of $1.9 billion in average interest-bearing deposits and an increase in average borrowings of $761.7 million to support strong loan growth. 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%.

Current wording

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. 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. 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%.

Previous wording

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. The increase in earning assets was primarily driven by a $2.2 billion, or 7.1%, increase in average loans and leases, partially offset by a decrease of $365.6 million in average cash balances. Average commercial loan growth of $1.3 billion, or 6.4%, was led by increases of $970.6 million in commercial real estate, $224.7 million in commercial and industrial loans and $68.3 million in commercial leases. 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. The Pittsburgh and Cleveland regions and commercial equipment finance also posted strong contributions. The increase in commercial real estate included fundings on previously originated projects. Average consumer loans increased $943.7 million, or 8.3%, with a $1.3 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. 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. 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. The 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%.

Current wording

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. 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. 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. The yield on average earning assets (non-GAAP) increased 40 basis points to 5.51% for the third quarter of 2024, 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%.

Previous wording

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. 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. The growth in average total deposits reflected organic growth in new and existing customer relationships. 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. 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. The rate paid on interest-bearing liabilities increased 97 basis points from 2.32% to 3.29%. 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. 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.

Current wording

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. 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. 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. 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%. 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. Since the current interest rate increases began in March 2022, our total cumulative spot deposit beta equaled 40% at August 31, 2024.

Previous wording

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. 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. The net increase supported the strong loan growth. 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. 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.

Current wording

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. 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. 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. 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.

Previous wording

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. The variances in the individual non-interest income items are explained in the following paragraphs.

Current wording

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.

Previous wording

Service charges of $23.3 million increased $2.8 million, or 13.6%, with strong treasury management activity and higher consumer transaction activity.

Current wording

Service charges of $24.0 million increased $2.8 million, or 13.1%, with strong treasury management activity and higher consumer transaction levels.

Previous wording

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.

Current wording

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.

Previous wording

Capital markets income decreased $0.7 million, or 12.6%, reflecting lower commercial customer transaction activity.

Current wording

Capital markets income decreased $0.9 million, or 12.5%, reflecting lower commercial customer transaction activity.

Previous wording

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. 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. The variances in the individual non-interest expense items are explained in the following paragraphs.

Current wording

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. 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.

Previous wording

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.

Current wording

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.

Previous wording

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. The effective tax rate increased for the six months ended June 30, 2024 as a result of these offsetting items.

Current wording

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. 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. The effective tax rate increased for the three months ended September 30, 2024 as a result of these items.

Previous wording

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. 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. Net interest income totaled $634.9 million, a decrease of $31.0 million, or 4.7%, compared to $665.9 million. The net interest margin (FTE) (non-GAAP) decreased 33 basis points to 3.13%, as the total cost of funds increased 99 basis points to 2.40% with a 115-basis point increase in interest-bearing deposit costs to 2.88%, as well as an increase of 32 basis points in long-term debt costs. These funding cost increases were partially offset by an increase in the yield on earning assets (non-GAAP) of 60 basis points to 5.41%, primarily due to higher yields on loans and investment securities. 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. The provision for credit losses for the first six months of 2024 totaled $34.1 million, compared to $32.6 million. 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. Non-interest expense totaled $463.7 million, increasing $31.8 million, or 7.4%. 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. Salaries and benefits increased $15.9 million, or 6.8%, due largely to normal annual merit increases and higher production-related commissions from strong non-interest income activity. Additionally, net occupancy and equipment expense increased $8.9 million, or 11.4%, largely from technology-related investments. 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.

Current wording

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. 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. The net interest margin (FTE) (non-GAAP) decreased 28 basis points to 3.11%, as the total cost of funds increased 87 basis points to 2.46% with a 100-basis point increase in interest-bearing deposit costs to 2.95%, as well as an increase of 29 basis points in long-term debt costs. 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. The provision for credit losses for the first nine months of 2024 totaled $57.5 million, compared to $58.5 million. 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%. 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. 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. 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.

Previous wording

Net interest income on an FTE basis (non-GAAP) totaled $640.7 million, decreasing $31.7 million, or 4.7%, primarily due to higher interest-bearing deposit costs from continued balance migration to higher yielding deposit products in the current interest rate environment and higher total average borrowings, partially offset by growth in earning assets and higher earning asset yields. Average earning assets grew $2.0 billion, or 5.0%, primarily driven by loan growth. Total average commercial loans increased $1.2 billion, or 6.1%. 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. 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. 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. For interest-bearing liabilities, average time deposits increased $1.9 billion, or 40.9%, given the continued migration into higher-yielding deposit products. Total average borrowings increased $1.3 billion due to maintaining additional liquidity on the balance sheet following the banking industry disruption in 2023 and to support strong loan growth. The net interest margin (FTE) (non-GAAP) decreased 33 basis points to 3.13%.

Current wording

Net interest income on an FTE basis (non-GAAP) totaled $967.0 million, decreasing $35.0 million, or 3.5%, primarily due to higher interest-bearing deposit costs from continued balance migration to higher yielding deposit products in the current interest rate environment and higher total average borrowings, partially offset by growth in earning assets and higher earning asset yields. Average earning assets grew $2.0 billion, or 5.1%, primarily driven by loan growth. Total average commercial loans increased $1.2 billion, or 6.1%. 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. 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. For interest-bearing liabilities, average time deposits increased $1.8 billion, or 35.5%, given the continued migration into higher-yielding deposit products. Total average borrowings increased $1.0 billion due to maintaining additional liquidity on the balance sheet following the banking industry disruption in 2023 and to support strong loan growth. The net interest margin (FTE) (non-GAAP) decreased 28 basis points to 3.11%.

Previous wording

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:

Current wording

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:

Previous wording

The provision for credit losses was $34.1 million, compared to $32.6 million in the first six months of 2023. The provision for credit losses for the first six months of 2024 was primarily due to loan growth and charge-off activity. 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. Our non-performing loan coverage position remains strong at 388%. 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. 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.

Current wording

The provision for credit losses was $57.5 million, compared to $58.5 million in the first nine months of 2023. The provision for credit losses for the first nine months of 2024 was primarily due to loan growth and charge-off activity. 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%. 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. 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%.

Previous wording

The breakdown of non-interest income for the six months ended June 30, 2024 and 2023 is presented in the following table:

Current wording

The breakdown of non-interest income for the nine months ended September 30, 2024 and 2023 is presented in the following table:

Previous wording

Total non-interest income increased by $16.1 million, or 10.1%. The variances in significant individual non-interest income items are explained in the following paragraphs.

Current wording

Total non-interest income increased by $24.2 million, or 10.0%. The variances in significant individual non-interest income items are explained in the following paragraphs.

Previous wording

Service charges increased $3.1 million, or 7.6%, primarily due to strong treasury management activity and higher consumer transaction activity.

Current wording

Service charges increased $5.9 million, or 9.5%, primarily due to strong treasury management activity and higher consumer transaction levels.