F.N.B. Corporation Q1 2026 Earnings Call Transcript

F.N.B. Corporation (NYSE: FNB) Q1 2026 Earnings Call dated Apr. 17, 2026

Presentation

Operator

Good day, and welcome to the F.N.B. First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Lisa Hajdu. Manager of Investor Relations. Please go ahead.

Lisa Hajdu — Manager of Investor Relations

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

A replay of this call will be available until Friday, April 24th, and the webcast link will be posted to the About Us, Investor Relations section of our corporate website.

I will now turn the call over to Vince Delie, Chairman, President and CEO.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Thank you, and welcome to our first quarter earnings call. Joining me today are Vince Calabrese, our Chief Financial Officer; and Gary Guerrieri, our Chief Credit Officer. F.N.B. produced a solid quarter with net income of $137 million. EPS increased 19% over the first quarter of 2025 to $0.38. Pre-provision net revenue increased 17% from the year ago quarter as we generated positive operating leverage of 4.9%. Our capital ratios remained strong and continue to move favorably, all while producing a strong return on average tangible common equity of 13.2%. Tangible book value per share of $12.06 represents an 11% increase from the year-ago quarter.

Since 2009, which spans the tenure of our leadership team’s management of the bank and holding company, we have focused on a disciplined and strategic approach to developing and executing our long-term growth plan. Our actions have resulted in the company’s robust capital accumulation, sustainable superior financial performance, investments in a resilient risk management framework, and a strong balance sheet.

Over time, we have grown our capital to record levels and effectively managed the dividend payout ratio from nearly 80% down to 31%, in line with our peers. During that time period, we also grew the balance sheet 477%, with an organic compounded annual growth rate of 8%. We invested in our enterprise risk management framework, built out our advisory and capital markets businesses to diversify our revenue streams, and established F.N.B. as an industry innovator with an award-winning digital and data analytics capability, including the eStore. These significant investments occurred over time, while maintaining an industry-leading efficiency ratio in the low to mid-50% range.

I can’t emphasize enough the hard work and superior execution by our team to get to where we are today. These efforts have produced sustained levels of increased profitability, significant returns, and strong capital generation. This strategy was fully aligned with shareholders’ interests. We recently announced an 8% increase to our quarterly cash dividend to $0.13 per share, starting with the dividend to be paid in June.

Our Board of Directors also unanimously approved our management’s recommendation for an additional $250 million for the repurchase of our common stock on top of the $50 million remaining in our existing share repurchase program. Inclusive of the March dividend and $35 million repurchased in the first quarter of 2026, F.N.B. has returned a total of $2.4 billion in capital to shareholders through both dividends and repurchases since 2009, demonstrating our long-term commitment to optimize value for our shareholders while also growing and reinvesting in the company for continued future success.

F.N.B.’s financial performance is achieved through consistent execution and sustained growth in our engaged customer base. We were thrilled to recently announce our partnership as the official and exclusive retail bank and financial provider to the Pennsylvania State University. Beginning in July, Penn State’s 90,000 students, faculty, and staff will have exclusive access to F.N.B.’s on-campus banking services, including our proprietary eStore.

F.N.B. was also selected as the primary treasury management provider to all Penn State campuses. Our continued success of winning despite significant competition demonstrates our capabilities and leadership in the industry. As a core business, University Banking highlights another differentiated product offering.

In addition to significant investments in AI and digital, F.N.B.’s innovative solutions also extend to our ATM network. This month, our first ATM that offers foreign currency disbursement for Canadian dollars and Mexican pesos opened at the new Pittsburgh International Airport. Once again, an industry leader, our ability to offer foreign currency disbursement through an ATM is very rare across the banking industry and builds upon our momentum to improve the ease of banking for current and new customers. We congratulate the airport authority and its leadership on the completion of the new terminal, which includes F.N.B.’s state-of-the-art, visually stunning banking center. We are proud to play a role in this transformational Pittsburgh asset with our ATMs and sponsorship.

The first quarter reflected a promising start to 2026 with our ability to continue to attract top-tier talent, deploy innovative solutions, and deepen customer relationships. Period-end loan growth of 3.9% annualized linked quarter was driven by core middle market C&I. It is important to note that our growth has not benefited from NDFI or lending into private credit, a category that we continue to avoid.

With that, I would like to now turn the call over to Gary to discuss all of our credit results for the quarter. Gary?

Gary L. Guerrieri — Chief Credit Officer

Thank you, Vince; and good morning, everyone. We ended the quarter with our asset quality metrics remaining at solid levels. Delinquency, along with NPLs and OREO, increased slightly, each up 3 bps compared to the prior quarter, totaling 74 basis points and 34 basis points, respectively. Net charge-offs continued to show strong performance, totaling 18 basis points, down 1 bp compared to the prior quarter. Criticized loans increased slightly, consistent with the seasonality we have seen in the first quarter over the last several years.

Total funded provision expense for the quarter stood at $19.4 million, supporting the C&I loan growth and charge-offs. Our ending funded reserve now stands at $443 million, an increase of $3.5 million, ending at 1.26%, unchanged from the prior quarter. When including acquired unamortized loan discounts, our reserve stands at 1.32% and our NPL coverage position remains strong at 393% inclusive of the discounts. While we have not experienced any impact related to tariffs, we are maintaining the related qualitative overlays from a year ago due to the ongoing conflict and uncertainty in the Middle East.

Our comprehensive risk management oversight, including concentrations of credit, line utilization, proactive CRE management, stress testing, and a 360-degree risk view of our client relationships allows us to maintain a strong risk profile throughout economic cycles and during periods of economic uncertainty. We are monitoring the situation in the Middle East closely, as we have done in the past during the pandemic, the Ukrainian conflict, supply chain disruptions, inflationary periods, and tariff increases. Throughout all of these periods of disruption, our loan portfolio and customer base have proved resilient and did not experience any material adverse impacts.

Our consumer portfolio remains very strong with average origination FICO scores of 782, with delinquency and charge-offs ending the quarter at multi-year lows of 67 basis points and 5 basis points, respectively. We continue to originate loans within our commercial and consumer portfolios under our longstanding and consistent credit underwriting philosophy. In the quarter, we had solid C&I activity, leading to increased loan growth with a slight uptick in line utilization. Additionally, we are seeing increased levels of high-quality CRE opportunities. However, our exposure declined in the quarter, ending at 194% of Tier 1 capital plus allowance.

In closing, despite the continued volatility in the markets, we look forward to building on the momentum we had in the first quarter with our pipelines at near record levels across the majority of our portfolios. With the quality and diversification of our portfolio, we are well positioned to achieve our growth objectives in the year ahead.

I will now turn the call over to Vince Calabrese, our Chief Financial Officer, for his remarks.

Vincent J. Calabrese, Jr. — Chief Financial Officer

Thanks, Gary, and good morning. Today I will review the first quarter’s financial results and walk through our second quarter and full-year guidance. First quarter net income totaled $137 million or $0.38 per share, with total revenues up a strong 9.4% from the year ago period. And coupled with prudent management of operating expenses, PPNR increased nearly 17%.

Turning to the balance sheet, loan activity began to accelerate late in the quarter with spot total loans and leases ending the quarter at $35.1 billion, a 3.9% annualized linked quarter increase driven by growth of $198 million in consumer loans and $136 million in commercial loans and leases. Spot C&I loan balances were up over 4% linked quarter unannualized were $314 million, driven by growth in the Carolinas, Cleveland, and the Mid-Atlantic.

CRE balances continued to be impacted by expected payoffs and were down $110 million linked quarter. Residential mortgages, indirect, and HELOCs all contributed to the consumer loan growth. Spot total deposits ended the quarter at $38.9 billion, a linked quarter increase of $142 million, with the first quarter impacted by normal seasonal outflows [Technical Issues] for corporate deposits. Non-interest-bearing deposits increased $89 million or 3.6% linked quarter annualized and remained stable at 26% of total deposits. The loan-to-deposit ratio held steady at 90%.

First quarter’s net interest margin was 3.25%, down 3 basis points sequentially, as the timing of the Fed rate cut in December 2025 impacted NIM for the quarter. Additionally, normal seasonal outflows in deposits were funded temporarily with higher-cost short-term borrowings. Interest-bearing deposit costs declined 13 basis points linked quarter, driven by lower rates paid on money market and CD balances, and total borrowing costs decreased 12 basis points. Our cumulative total spot deposit beta since the Fed interest rate cuts began in September of 2024 was 27% at quarter end.

The total yield on earning assets declined 11 basis points to 5.14% on an 11 basis point decline in loan yields, and a slight 2 basis point decline in investment securities yields. Reinvestment rates on investment securities remained well above the overall portfolio yield.

Looking ahead to next quarter, the margin for the month of March was at 3.30%. Net interest income increased nearly 11% from the year ago period as the NIM expanded significantly, increasing 22 basis points with earning asset growth of 3.5% year-over-year.

Turning to non-interest income and expense. Non-interest income totaled $91 million, up 3.7% from the first quarter of 2025. Capital markets income increased 27.8% to $6.8 million on solid contributions from debt capital markets, swap fees, and international banking. Wealth management revenues increased 2.8% year-over-year to $21.8 million with contributions across the geographic footprint.

Non-interest expense totaled $257.9 million, a 4.5% increase from the year ago quarter. Salaries and employee benefits increased less than $1 million or 0.4% as lower performance-based compensation and healthcare costs offset strategic hiring and normal merit increases. Occupancy and equipment increased $5.1 million or 11%, primarily due to technology-related investments and higher occupancy costs, which included unusually high seasonal snow removal costs. Other non-interest expense increased $6.8 million or 30% due to a combination of higher fraud losses, litigation-related expenses, and the impact of our mortgage down payment assistance program.

The first quarter efficiency ratio remained solid at 56.1%, down meaningfully from 58.5% a year ago, and we continue to manage our expense base in a disciplined manner. F.N.B. continues to actively manage our capital position to support balance sheet growth and optimize shareholder returns, while appropriately managing risk. Given the new share repurchase authorization Vince mentioned earlier, we now have remaining capacity of $300 million after repurchasing a total of $35 million in the first quarter of this year. The 8% quarterly common dividend increase marks our first quarterly dividend increase since 2007 and reflects our strong financial performance and capital levels, as evidenced by the TCE ratio of nearly 9% and the CET1 ratio of 11.4%.

Let’s now look at guidance for the second quarter and full-year of 2026. All guidance is based on current expectations while remaining cognizant of the highly uncertain macroeconomic and geopolitical environments. We are maintaining our full-year balance sheet guidance for spot balances, projecting period-end loans and deposits to grow mid-single digits on a full-year basis as balances continue to build on the growth acceleration we experienced late in the first quarter.

Our projected full-year income statement guide is largely unchanged with last quarter. Full-year net interest income is still expected to be between $1.495 billion and $1.535 billion. We are assuming no Fed interest rate cuts for 2026 versus our previous expectation for two 25 basis point cuts, while maintaining our previous net interest income range due to our expectation of continued deposit pricing pressures in an environment with no Fed cuts and accelerating loan growth in the industry. Second quarter net interest income is projected between $370 million and $380 million.

The non-interest income full-year guide remains $370 million to $390 million with second quarter levels expected between $90 million and $95 million. The full-year guidance range for non-interest expense remains unchanged between $1 billion and $1.02 billion, but we now expect to be at the higher end of that range due to increased investments in franchise growth and new strategic initiatives. Second quarter non-interest expense is expected to be between $250 million and $255 million. We continue to expect strong positive operating leverage for the full-year of 2026.

Full-year provision guidance is maintained at $85 million to $105 million given the stability in our credit performance to start the year and will be dependent on net loan growth and charge-off activity. Lastly, the full-year effective tax rate should be between 21% and 22%, which does not assume any investment tax credit activity that may occur.

With that, I will turn the call back to Vince.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Thank you. Our team has cultivated an environment that succeeds through passion, collaboration, hard work, and respect. We pair the advantages of our scale with the discipline of agility to win business that is heavily sought after by both large and small competitors. As a regional bank, F.N.B.’s differentiated investments in technology and product offerings have enabled us to win against competitors of all sizes to gain market share, drive shareholder value, and meet the needs of our commercial and consumer customers.

I would also like to thank our Independent Lead Director, Bill Campbell, who announced his upcoming retirement from our Board in May. I want to extend my great appreciation for his distinguished service, independence, dedication, leadership, and mentorship to many, including myself. He instilled in all of us a desire to put the shareholders first, and his insight on the Board will be missed. Best wishes to Director Campbell in his future endeavors. His presence will be missed, but his legacy at F.N.B. will live on.

In closing, we are proud of our differentiated culture, which continues to be one of the most recognized in the industry for leadership, innovation, employee engagement, and client experiences. This quarter, F.N.B. received numerous awards, including America’s Best Customer Service in Financial Services by USA Today, America’s Best Financial Services by TIME, America’s Greatest Workplaces for Entry-Level Employees by Newsweek, a Top Workplace USA by Energage, and a Greenwich Excellence Awards winner for Client Service, a recognition we have earned annually since 2011. These awards and recognition occur because of the dedication and commitment of our employees. On behalf of the Board and executive team, I would like to thank them for their extraordinary accomplishments.

With that, I will turn the call over to the operator for questions.

Question & Answers

Operator

[Operator Instructions] Our first question comes from Daniel Tamayo with Raymond James. Please go ahead.

Daniel Tamayo — Analyst, Raymond James

Thank you. Good morning, everyone.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Good morning, Daniel.

Vincent J. Calabrese, Jr. — Chief Financial Officer

Good morning.

Daniel Tamayo — Analyst, Raymond James

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

Gary L. Guerrieri — Chief Credit Officer

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

Daniel Tamayo — Analyst, Raymond James

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

Vincent J. Calabrese, Jr. — Chief Financial Officer

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

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Yeah. And I would say that we’ve redesigned how we’re approaching development within the company. We moved from a traditional IT development environment where IT coordinates all of the — with business analysts and interactions with the frontline, they would coordinate all of the development assets that we have, which includes a large number of consultants. We’ve kind of changed the model. We’re pushing those programmers to the three areas that we feel are the most impactful for us from a revenue and efficiency perspective. So that’s part of the expense bill. We’re looking at some AI initiatives that we’ve invested in. So there’s personnel expense related to bringing those development contractors on that’s reflected in the guide. And most of it ends up being capitalized for software applications that we develop and then put online.

Vince mentioned the 360 view of the customer, that’s essentially both an inward and outward tool. It’s a tool for clients to review their relationship within F.N.B. There’s an AI overlay that permits those clients to see the products and services that they’re using and how they can best improve their circumstances either from a cash flow perspective or from managing risk. It’s a really cool product, it’s proprietary. Yeah, I don’t see it anywhere. We’re slated to put it out by the end of the year, should be in production on — at the end of the year and then into the first quarter of next year. But it’ll also help internally because what it does is it evaluates, it actually evaluates what’s going on.

It looks at numerous data fields based on what the customer is doing within our organization. And when we open it up to outside, it will be opened up to bring in external aggregation as well. That’ll help us guide the customer to better products and services and a better solution within F.N.B.’s product offering. So if they have a high-rate mortgage somewhere else and we offer a better product, it’s — this tool will actually tell them and it’ll actually explain that they could save X amount of dollars by refinancing.

And then to tie it all together, because we’ve built out this platform that enables us to apply for multiple products simultaneously, which is also being improved with AI, we will be able to move those clients into an environment where they’re seeing their 360 view, they’re actually getting recommendations on things that they should be doing to improve their banking relationship. And then they’ll be able to purchase the products because [Technical Issues] tab and it will actually — they can just put them in the cart and then proceed to checkout. We have automated data flooding and authentication and all that stuff built into the common app. So that’s the game plan and that’s why there’s a little extra — we’re saying there’s going to be a little extra spend in the forecast.

Vincent J. Calabrese, Jr. — Chief Financial Officer

Yeah. Part of that we’ve also baked in — investing in treasury management, some of our offerings to make it easier for customers, wealth management. There’s initiatives that are part of that as well. And then on top of that, just normal process improvement. I mean, leveraging AI and machine learning that we’ve — some of that we’ve had in place for many years, leveraging those tools to extract costs as we move forward, which will help improve the run rate.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

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

Vincent J. Calabrese, Jr. — Chief Financial Officer

Right, yep.

Daniel Tamayo — Analyst, Raymond James

That’s great color, Vince and Vince. Appreciate that. I’ll step out.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Okay. Sure.

Vincent J. Calabrese, Jr. — Chief Financial Officer

Thanks, Dan.

Operator

And the next question comes from Casey Haire with Autonomous. Please go ahead.

Casey Haire — Analyst, Autonomous

Yeah, great. Thanks, guys. So wanted to touch on the NIM outlook, the 3.30% NIM in March. So you get some pretty good momentum entering the second quarter here. I’m guessing that was on the funding side of things given the seasonal outflows in DDA, but just a little color on where that’s trending, maybe the spot deposit cost rate at the end of the quarter and some thoughts on how the 2Q NIM trends? Thanks.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Sure.

Vincent J. Calabrese, Jr. — Chief Financial Officer

I guess just looking at net interest income overall, the $6 million decrease from the fourth quarter — right in the middle — the number we landed at $359 million was right in the middle of our range that we provided in January, which was $355 million to $365 million. The timing of the last Fed cut clearly makes a difference on loan yields for us. As you know from talking about that in the past, that 45% or so of our loan portfolio reprices based on SOFR changes. So initially — originally we had that in January and that coming forward to December kind of affects the net interest income for the first quarter.

The other element is, we have our normal trough in deposits that happens every year in the first quarter. And we fund that temporarily with short-term borrowings. That’s about 2 basis points of margin, $2.5 million in net interest income in the first quarter, and then that kind of goes away as we move forward. But we have been operating with a dual mandate of trying to grow deposits to fund the loan growth that Gary talked about and Vince talked about that we saw accelerate in March and expected loan growth as we go forward. So we’re trying to balance growing deposits to help fund that loan growth as well as managing the deposit cost down. So there’s clearly a balancing act there.

And then Casey, as you mentioned, the 3.30% exit margin for the month of March is key. And as we look forward, I mean, our guidance implies that going up gradually a few basis points or so a quarter between first quarter and the end of the year. And without the Fed cut expected for the rest of the year at this point, there’s several levers we have to support net interest income growth. I mean, average earning asset growth obviously is the key.

In our investment portfolio, we’re reinvesting 75 basis points to 125 basis points above the roll-off rate. For CDs, we’re still picking up 20 basis points to 25 basis points. Next quarter alone, that’s on $3.3 billion worth of CDs maturing. And then in our fixed rate loan portfolio, we’re picking up about 35 basis points on $2.5 billion over the next 12 months. So there’s a lot of levers there that will kind of work off of that 3:30% launch point. The spot deposit cost — is somebody else up there?

Lisa Hajdu — Manager of Investor Relations

1.99% [Phonetic]. Well, sorry, the total deposit is 1.77% [Phonetic].

Casey Haire — Analyst, Autonomous

1.77% total. Yeah. And IBD versus the 2.40%?

Vincent J. Calabrese, Jr. — Chief Financial Officer

That’s total deposits.

Casey Haire — Analyst, Autonomous

Right.

Vincent J. Calabrese, Jr. — Chief Financial Officer

Total IBD is…

Casey Haire — Analyst, Autonomous

Okay.

Lisa Hajdu — Manager of Investor Relations

2.36%.

Vincent J. Calabrese, Jr. — Chief Financial Officer

2.36%, Casey. It’s interest-bearing. The 1.77% includes the non-interest bearing.

Casey Haire — Analyst, Autonomous

Okay. Great. Just one more on the capital front. So very strong buyback this quarter. The CET1 ratio kind of held flat. I’m just wondering, is that kind of what you guys want to — is that how you’re going to manage it here, just keep it at this level within balancing in between loan growth and buyback? And then any thoughts on the Basel III proposal?

Vincent J. Calabrese, Jr. — Chief Financial Officer

Yeah. I would say, I mean, with the CET1 ratio at 11.4%, the payout ratio now in the low-30s, combined with our guidance, implying continued strong internal capital generation, as we talked about last quarter, we’re in the best position to deploy capital, which is why we made announcement that we made earlier in the week.

Beyond supporting the expected balance sheet growth, we continue to see buybacks attractive at current valuation levels for sure. I think to earn back is maybe three years at this point with where the stock is trading. We bought back $50 million for the full-year of last year and I talked about buying at least that or more. First quarter we did $35 million. So I think we’ll continue to be opportunistic on the buyback program. We were down to $50 million, so it was the right time to increase the authorization. So kind of have $300 million worth of powder there. And with the earnings generation level, we would expect capital ratios to still build.

I mean, I would just say off the cuff, not looking to reduce 11.4%, but being active on the buyback, the dividend, another component of that, which isn’t a lot in dollars from the capital standpoint, but I think it’s important. If you go back to — last time we had raised dividend was 2007. And in 2009, for those that were following us, when everybody went to a nickel or a penny, we went from $0.24 to $0.12. So our Board made a decision only to go at that point. So we had this super high payout ratio, but investors were getting paid a very nice dividend yield over that entire period. So that was important. And we reached a point with the way capital is building that we were comfortable not only having a buyback but increasing the dividend at this point in time. And the goal would be over time to be able to move that up as we grow and as earnings continue to grow. So I think that’s another important point.

Casey Haire — Analyst, Autonomous

Great. Thanks, Vince.

Operator

And the next question comes from [Speech Overlap]

Vincent J. Calabrese, Jr. — Chief Financial Officer

Oh, I guess, Casey — yeah, on Basel III too. Casey, I’m sorry, that was the last part of your question. I mean, we’re studying it. I mean, it’s — it has a meaningful impact if it gets in place the way it is. I mean, we’ve looked at different ways of analyzing it and it’s definitely meaningful. So I guess we’ll see how that plays out in the end. We’ve studied what’s in the proposal. And that’s not baked into our plans here as far as capital deployment, right. That would be a new factor if it gets approved the way it’s proposed.

Operator

And the next question comes from Russell Gunther with Stephens. Please go ahead.

Russell Gunther — Analyst, Stephens

Hey, good morning, guys.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Good morning.

Vincent J. Calabrese, Jr. — Chief Financial Officer

Good morning.

Russell Gunther — Analyst, Stephens

Just to — good morning. I wanted to follow up on the deposit pricing pressure commentary you guys made. Would be helpful to get a sense for how you would expect deposit costs to trend from here? The spot rates you gave us were pretty darn close to the full quarter average. And I think in the past you’ve talked about a mid-30s terminal deposit beta versus the 27% we’ve got right now. So it would be helpful to just understand whether we should expect some upward pressure on total deposit costs, that that’s what’s embedded in that kind of March 3:30% [Phonetic] guide moving higher.

Vincent J. Calabrese, Jr. — Chief Financial Officer

Yeah. No, I would say, I mean, there’s still opportunity for that cost of deposits to come down. I mentioned the CDs picking up 20 basis points to 25 basis points on $3.3 billion. So that obviously affects that. Our success bringing in non-interest-bearing deposits, which has been a strategy forever, obviously is key to the overall cost of deposits there and the cost of funds. So I think there’s still room for us to bring it down strategically, Russell, is the way I would say it. Because without the cover of the Fed cuts, you have to be very strategic and I think our team has done a very nice job analyzing the different components and maybe customers that don’t have as much with us, you’re a little more aggressive on how you adjust their rates.

And it’s just a constant day-to-day process for us to look at where are there opportunities. But there’s still opportunities for the total deposit cost to come down. And like I said, the focus on non-interest-bearing is key. The going after some larger kind of accounts to bring in larger deposit balances has been something we’ve focused on over the past year and have had some good success bringing in some larger deposit. Yeah. No, go ahead.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

We basically — we brought some very attractive, large, complex treasury management relationships over. They’re in the pipeline. They’re moving over to us and they’re coming from all over. I mean, some of the larger banks bank them today. So that’s going to have an impact. It’ll have an impact on our free balances, because they use balances to pay for services. So there’s quite a bit in that pipeline. That’s what Vince is referring to.

But if you look at it globally, take a step back, that’s one of the only ways we can really control. We’re not a price setter. We have to react to the marketplace. So the way we drive our costs down is by increasing the non-interest-bearing component in the mix. And that’s a strategy that we have talked about for a long time, continue to do. So I think there’s some optimism here from a cost, funding cost perspective because of those opportunities that we have and some success that we’re seeing, particularly in the consumer bank as well with new clients coming over and increasing share of wallet with the consumer. Some of the things we’ve done, we’ve invested in a number of tools to create client primacy and it’s really starting to pay off. And the investment in our AI tools to analyze lots of data to make pricing decisions is also paying off, so…

Vincent J. Calabrese, Jr. — Chief Financial Officer

That’s a large corporate calling out for its credit.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Yeah.

Vincent J. Calabrese, Jr. — Chief Financial Officer

Helping on the loan side as well as deposit side.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Right. So we’re — we’ve got some good — there are some good things coming, but if you look at it overall, what Vince was saying in his comments if the industry’s going to be trying to loan up, particularly in C&I, there’s going to be pricing pressure from a funding perspective kind of globally. That’s the expectation. So that’s the uncertain part about it is, how aggressive do others get from a pricing perspective. We’re sitting in one of the best positions we’ve been in from a loan-to-deposit standpoint at this point in the year too. So there’s…

Vincent J. Calabrese, Jr. — Chief Financial Officer

Right, that’s the point. Yep.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

There’s definitely — we’re definitely sitting in a much more favorable place to give us some flexibility on pricing.

Russell Gunther — Analyst, Stephens

That’s really helpful, guys. I appreciate all of that color.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Yeah. Okay.

Russell Gunther — Analyst, Stephens

And then let me just…

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Yeah.

Russell Gunther — Analyst, Stephens

…follow up on the capital front. If you guys could just remind us of how you think about a CET1 floor and how active you would expect to be with the buyback against your kind of mid-single-digit loan growth expectation?

Vincent J. Calabrese, Jr. — Chief Financial Officer

I mean, we’ve been using 11% as a floor for CET1. We’re at 11.4%. We’re not looking to really drive that down. We like to have the powder there if the loan growth and when the loan growth really accelerates and comes on board, you want to have that capital to support the loan growth. So — but I mean, if I had to state a floor, I would say 11% would be a floor for that level for the CET1 ratio. Previously we had said 10% and we grew above 10%. Now we’re at 11.4%. So…

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

I’d be okay with 10%. But [Speech Overlap] I’m just going to say the floor is 11%.

Vincent J. Calabrese, Jr. — Chief Financial Officer

Yeah. I’m more conservative.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Yeah, he’s very conservative. Just so you know.

Russell Gunther — Analyst, Stephens

That’s what I’m talking about.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

That’s true. Yeah.

Russell Gunther — Analyst, Stephens

Let’s see that 10%, guys.

Vincent J. Calabrese, Jr. — Chief Financial Officer

That’s right.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Okay.

Russell Gunther — Analyst, Stephens

Thank you.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Thank you, Russell.

Russell Gunther — Analyst, Stephens

Let’s do it. I appreciate the time. Thank you.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Yep. All right.

Gary L. Guerrieri — Chief Credit Officer

Thanks, Russell.

Vincent J. Calabrese, Jr. — Chief Financial Officer

Thanks, Russell.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Thank you.

Operator

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

David Smith — Analyst, Truist Securities

Hey, good morning.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Good morning. Good morning, David.

Vincent J. Calabrese, Jr. — Chief Financial Officer

Good morning, David.

David Smith — Analyst, Truist Securities

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

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Yeah. I mean, we — as we’ve said, our short-term — if you look at the short-term C&I pipelines, commercial pipelines, they’re up 10% same period. So this is typically a seasonally slower period. So we’re starting to see more activity. If you look at our leasing and finance — project finance area, they’ve had — they continue to have really strong pipelines and had great production last year. There’s — because of the tax law changes, that’s going to continue. If you look at the commercial bank or the consumer bank, we’ve — our pipelines are up significantly in the consumer bank. So I think nearly at an all-time high.

Vincent J. Calabrese, Jr. — Chief Financial Officer

Yeah. Correct.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

So there are some bright spots out there. On the flip side of that, CRE still continues to try because we — yes, we’ve already gotten into all this, but we’ve pulled back a little bit and we’re just letting those large loans go to the permanent market. Right, Gary?

Gary L. Guerrieri — Chief Credit Officer

Yeah. And even with that, we are starting to see some extremely strong new CRE credit opportunities.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Yeah.

Gary L. Guerrieri — Chief Credit Officer

So there is — there are some shoots there that are starting to show, and we’ve liked what we’ve seen so far.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Yeah. So as I mentioned on the last call, our capital growth, the reduction in that exposure, we’re below 200%. I expect that probably to continue to [Speech Overlap]

Gary L. Guerrieri — Chief Credit Officer

Continue their [Speech Overlap]

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

So it gives us the ability to go out and pick good high-quality projects to do in the CRE space. You have it — that’s not even reflected in our pipelines yet because that all comes — should be coming in the second half of the year. But there are some bright spots. So that’s why we’re not changing our guide. And that’s why we still believe pretty strongly in our ability to produce the net interest income that we — that’s reflected in our guide.

David Smith — Analyst, Truist Securities

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

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Sure. The investment banking segment should produce some pretty significant fee events. So the public finance and the investment banking group that we brought on, there are some deals that are slated to happen in the second half of the year that will contribute to that. That are already in the works. I think that’s one contributor. We also think that when there’s less interest rate volatility here, if things settle down a little bit, there should be a pickup in derivative activity. We’re still pretty optimistic about our ability to grow market share in mortgage business. So there’s gain on sale. Opportunities up and down the Eastern Seaboard, because those markets are continuing to grow. We’ve got wealth growing. We have some great momentum in our wealth shop. So we’re building out a group to handle family office opportunities. So we’re going to be moving upmarket in that space, and there’s some promising opportunities there. So I think we — fee income sort of [Speech Overlap]

Vincent J. Calabrese, Jr. — Chief Financial Officer

We have in mortgage too, right.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Yeah, treasury management. As I mentioned earlier, we have some fairly significant treasury management clients. Penn State is one of them. There are others that we have won that are even larger that will come over. So fee income in the treasury management space should continue to expand.

And then there’s interchange. We’ve seen a pickup lately in interchange activity. We’ve not even really spent a lot of time activating our debit portfolio, and it’s a fairly sizable fee income stream for us. So there’s going to be a focus on that, particularly with the use of AI and some tools that we have to try to drive more activity on our — in our debit card platform and with our small credit card portfolio. But it’s small relative to the debit side. Those are the drivers.

Vincent J. Calabrese, Jr. — Chief Financial Officer

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

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Yeah. And we’ve been doing really well from an international perspective as well. We just won another award. I’m not allowed to mention what it is, but those people have done well. The person that runs it, Jenner, is a longtime associate of mine and I respect him. And he’s done a terrific job and that continues to grow too. So we’re seeing more and more opportunities with international banking, with hedging, spot transactions for our clients. Particularly as we’re moving upmarket. So I’d say given that we have a really low relative share to some of these large players in the capital market space and the revenue lines associated with some of these businesses is relatively small and it’s already reflected in the run rate, there’s upside.

Vincent J. Calabrese, Jr. — Chief Financial Officer

Plus public finance is another newer business that we’re in. So that…

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Yeah. I mentioned it earlier…

Vincent J. Calabrese, Jr. — Chief Financial Officer

Yeah.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

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

David Smith — Analyst, Truist Securities

Got it. Thank you.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Yeah. Thanks, Dave.

Operator

And the next question comes from Kelly Motta with KBW. Please go ahead.

Kelly Motta — Analyst, KBW

Hey, good morning. Thanks for the question.

Vincent J. Calabrese, Jr. — Chief Financial Officer

Good morning, Kelly.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Hey, Kelly.

Kelly Motta — Analyst, KBW

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

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Sure.

Kelly Motta — Analyst, KBW

…it does seem like your organic outlook is quite strong? Thanks.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Yeah. I’ve said it a number of times that we’re going to be opportunistic. There’s not a lot out there that we see that is high value, even if it were available. Like, there are things that we could look at that would make a lot of sense, but a bank has to be for sale to do a transaction. We’re not actively in the market. I’m just referring to deals that have been done and things that I’m hearing in the marketplace. But I think our early drive to do M&A was to gain the scale to get over some of the regulatory hurdles and to be able to do some of the things that we’re doing today.

And I think given the size of the organization, we’re in the sweet spot even though some don’t believe it, we’re able to compete very effectively with everybody. And we have a very deep product set. And I think what you get from us is a $50 billion balance sheet and maybe $1 trillion bank’s product offering, at least for our clients, right. Because we’re not banking Fortune 100 companies as their primary bank. So the middle market and large middle market clients that we bank, we can do everything that a lot of the other banks that are much, much larger than us do. But we do it in a way that is more boutique-ish. There’s more attention paid to getting stuff done. There’s less bureaucracy. We’re a little more creative, because we don’t have the same level of infrastructure or systemic methods of doing things. So it lets us be a little more entrepreneurial. And I think the customers enjoy that and we’re seeing great opportunities because of that.

And I think that, and I’ve said this, I just did a podcast, it’s not out yet with the ABA, but the smaller banks have an incredible opportunity right now to build product that’s unique because of AI, because of the changes that are occurring from a tech perspective. With cloud-based computing, the speed of computing, the ability to develop software with AI, I think you’re going to see some pretty interesting things come about. And I think it’s changing the equation on scale, particularly relative to technology. So that’s — and if you look at our cost of funds and you look at our returns and our return profile and our efficiency ratio, we’re right there with the larger bank. So efficiency within the consumer bank was actually better when we did the analysis. So we’re able to do that because we’re very smart about how we deploy our resources. We’re able to do it because we don’t have the bureaucracy. We’re able to do it because we’re not arrogant. There’s a bunch of things that we’ve seen out there that certainly play in our favor. I’m sorry for the long answer, but we’ve talked a lot about this internally. Yeah, go ahead.

Kelly Motta — Analyst, KBW

I really appreciate all the color. That’s very helpful. Maybe to turn back on the margin, I appreciate the commentary about C&I growth being really strong and pipelines near record levels. Help — I apologize if I missed it, but if you could provide additional color as to how loan pricing and spreads are holding up. I know you gave some color about the continued repricing opportunities here, but just hoping to get more on pricing? Thank you.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Yeah. You would expect in this environment for credit spreads to broaden just because of the geopolitical environment that we’re in. We’re not seeing that necessarily in the middle market. I think there’s still some pretty significant tailwinds from an economic perspective that keep people optimistic and I think that the tax law changes were very favorable for capital investment. So you’re not seeing what you typically would see when we have the geopolitical environment that we have. So I would say what that means is that you’re not going to see a broadening of credit spreads because of issues with repayment or problems.

I don’t know, Gary, you could speak to that, but there is competitive pressure, obviously, But there’s always competitive pressure. I’ve been doing this for a long, long time. I’ve been in corporate banking my whole career. And one of my pet peeves is when I sit there with the commercial bankers and they tell me that it’s so competitive.

I can remember back 30 years ago when I was competing for deals in the upper middle market and transactions were priced at 50 basis points over LIBOR on a sub-investment-grade credit opportunity. That pricing doesn’t exist today. So the margins are better today. So it goes through ebbs and flows, it changes, and credit spreads impact how pricing is impacted. So we’ll see what happens with the economy. We’ve always benefited because we were more conservative. So when credit spreads were broadening, what that means is that we’re going to get paid more for lower risk transactions, because we have the capital and the appetite to deploy capital.

And Gary’s talked about that many times. Others will get out over their skis from a lending perspective and then have to pull back during those periods. And during frothy periods, credit spreads are thinner.

Gary L. Guerrieri — Chief Credit Officer

Yeah.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

So I would say, if you want a short answer — sorry for all these long answers, Kelly — but the reality is, it’s a complicated business. And in certain segments, like if you move deep down into small business lending, I think spreads have come in because there’s increased competition for C&I opportunities. When you move up into the larger end of the spectrum, I think spreads are pretty consistent with how they’ve been underwritten, particularly on syndicated deals. They may have come in a little bit.

I don’t know, Gary, do you have any…

Gary L. Guerrieri — Chief Credit Officer

No. I mean, I think, Vince, you’ve hit it pretty well. Spreads, spreads are where you expect them to be today. On a transaction-by-transaction basis, you can get squeezed a little bit, but we’re very comfortable with the spreads that we’re seeing in the marketplace today. And based on where the economy is, is it going to probably get a little more competitive as we move forward? It wouldn’t surprise me, Kelly. So we’ll keep an eye on that and continue to manage it accordingly.

Kelly Motta — Analyst, KBW

Great. I really do appreciate all the color. I’ll step back. Thank you so much.

Gary L. Guerrieri — Chief Credit Officer

Great.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Thank you.

Gary L. Guerrieri — Chief Credit Officer

Thanks, Kelly.

Operator

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

Manuel Navas — Analyst, Piper Sandler

Hey, just a quick follow-up on Kelly’s question. What are kind of new loans coming in at? What yield?

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Well, it depends on the category. Can you talk to C&I…

Vincent J. Calabrese, Jr. — Chief Financial Officer

I can say.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

…in total.

Vincent J. Calabrese, Jr. — Chief Financial Officer

Yeah.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Go ahead.

Vincent J. Calabrese, Jr. — Chief Financial Officer

New loans originated during the first quarter came on at 5.57%. If you look at it compared to the fourth quarter on average, I mean, it’s 5.89% in the fourth quarter. You had two Fed cuts affecting fourth quarter levels. So on a spot basis, so the overall portfolio yield is at 5.61%. It’s only down 1 basis point in total, which includes all of the different categories of loans. No Fed cuts during the quarter. So total moving 1 basis point. The lines have kind of have approached each other now where we have been — if you go back a few quarters, the new loans were coming on 25 basis points, 30 basis points higher than the portfolio yield. It’s kind of more in line based on the mix of what we originated during the first quarter.

Manuel Navas — Analyst, Piper Sandler

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

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

It’s a hard — that’s a hard — that’s a good question. It’s a hard one to answer on the fly, because you’re going to have different levels of demand deposits based upon floor balances that are set, because they use an earnings credit to pay for services. So it depends on the client and the level of services. So I don’t know if I have a good answer for you, but it’s a great question.

Vincent J. Calabrese, Jr. — Chief Financial Officer

And the pipeline, some of it you really don’t know yet because it’s…

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Yeah, I mean [Speech Overlap] Well, I think most of the stuff we’re doing, we’re the operating bank, right? So you will see higher cost deposits coming on board as well, but that’s the excess balances that are being swept. So if you look at that, typically they’re swept into our standard pricing. It doesn’t change our stated pricing. So we don’t exception price that. The focus is on setting the floor balance and whether the client is going to pay with fees or use demand deposits. So — and the level of [Technical Issues] what the…

Manuel Navas — Analyst, Piper Sandler

Okay.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

…cost is for us.

Vincent J. Calabrese, Jr. — Chief Financial Officer

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

Manuel Navas — Analyst, Piper Sandler

Well, that’s great. I appreciate that. Just my last one is, can you talk about how quickly some of your investments in account privacy or AI and when they should kind of pay off? And how kind of should we track your progress beyond deposit growth, solid returns? You’ve pointed to some market share gains. Any other metrics you’d like to point us to kind of see how this is paying off?

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Well, we have mentioned in the past applications our application volumes up considerably using the platform that we’ve developed that utilizes AI in our Common App. So I think 38% increase in deposit applications through that network. It’s kind of hard to give a global number because you’ve got disintermediation going on with traditional origination methods. But we track how many come through that channel, and it’s up significantly and continues to grow significantly. I think loans were up — I don’t remember what the number is — 10%? Oh, yeah, there we go. Thank you. Yeah, 5% actually. Loan application volume’s up 5% quarter-over-quarter, and 31% is the increase in deposit applications. So you’re seeing increases in those categories that should accelerate over time.

The best way to look at this, I think, for any bank would be to look at their overall performance, because it’s so dispersed throughout the organization and we’re trying to balance. Obviously we have limited resources, as I’ve said earlier, so we don’t want our expenses to grow and then not get a benefit, right. So we’re not a tech company, we can’t burn cash and then tell you, hey, we’re not going to make any money. So we’re a bank. So we basically have to gain the efficiency, pick the project, deploy it, gain the efficiency, and it’s reflected in the numbers.

But I will say we have a number of things that we’ve already pulled off. We have upgraded our ability to monitor deposit betas and affect deposit betas with analysis that we’ve done. And we had a system before Opportunity IQ. We have a new Opportunity IQ 2, which is much more sophisticated and speedy, because we’re using AI to assist with it, not just machine learning tools and insights. So I think that’s one example. We’ve got a project underway to automate our call center based on some research that we’ve done. So we’ve — there’s some pretty spectacular AI software that’s available that really could have a significant impact on the customer experience and our cost of servicing a customer via the call center. So we’re engaged in looking at that.

We are in the throes of building out our 360 view, which has an AI overlay I mentioned it earlier. That we’re in, I’d say, mid-phase there and we’re moving very quickly. We’re building out a proprietary mortgage application that’s going to be embedded into the Common App. That’s coming. Which will help us in the long run with cross-sell opportunity, because we’ll be able to — as we originate an mortgage loan, use those data fields instantly for the customer to purchase other products like insurance, homeowner’s insurance depository products. And then we’ve already announced we have embedded in our mobile app the ability to move your direct deposit instantly and repetitive ACH transactions. We’re working on bill pay. We’re going to get there. We’re integrating that into the origination platform. And we have pushed that Common App origination platform into the field. So the entire branch network is originating on the same digital platform that consumers use online.

So there’s a lot, we’ve done a lot. There’s a lot that’s already done that’s reflected in the expense run rate. And then there are some things that we’re finalizing that should come online very shortly here and be additive probably in ’27 either from an efficiency perspective or generating additional revenue for us. I don’t know if that’s helpful, but I don’t have a precise number to give you. I can only tell you…

Vincent J. Calabrese, Jr. — Chief Financial Officer

We’re going to be building out external dashboards.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Yeah.

Vincent J. Calabrese, Jr. — Chief Financial Officer

We’ve been building internal and I think we mentioned before having more dashboard-type data that we’ll be sharing as we proceed with these initiatives.

Manuel Navas — Analyst, Piper Sandler

No. I thought the answer was very thoughtful. I appreciate it.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Thank you.

Vincent J. Calabrese, Jr. — Chief Financial Officer

Thank you.

Operator

And the next question comes from Brian Martin with Brean Capital. Please go ahead.

Brian Martin — Analyst, Brean Capital

Hey, good morning, guys. Thanks for all the insight so far.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Yep. Good morning, Brian.

Brian Martin — Analyst, Brean Capital

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

Gary L. Guerrieri — Chief Credit Officer

Yeah. Brian, we still have projects that we’ve been involved with for the last couple of years that are coming on a quarterly basis regularly. That are moving into the secondary market. So we will continue to see that as we work our way through the year ahead here. That being said, we were pleasantly surprised by the ramp-up in new CRE opportunities, and pretty much across the board those opportunities have been really solid. So we’re going to aggressively pursue those solid transactions in that space.

I will tell you that it — that is, as we talked about competition earlier, it’s very competitive because many banks are getting back in the CRE business. So we’re seeing that there’s a lot of activity there, and we expect that to build throughout the year. So in terms of those payouts and moves into the secondary market, they will continue. That will be a headwind in that category, but we’re going to be very choosy of the assets that we’re putting on, and we will see activity from a new booking standpoint there build throughout the year.

Brian Martin — Analyst, Brean Capital

Got you. And [Speech Overlap]

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

And by the way — yeah, by the way, the…

Brian Martin — Analyst, Brean Capital

Go ahead.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

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

Gary L. Guerrieri — Chief Credit Officer

Yeah. The consumer book has been really strong. The performance of it continues to be exceptional at record low credit metric levels at this point, high quality paper. And the teams are doing a really good job generating opportunities and those pipelines are very high.

Brian Martin — Analyst, Brean Capital

Thanks.

Vincent J. Calabrese, Jr. — Chief Financial Officer

Just as a reference point too, if you looked at our changes since the end of the year, there are NDFI balances which are very low. I mean, we’re in probably the lowest decile there. Ours came down 5%, 7%. The other — all banks were up 7%.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Right.

Vincent J. Calabrese, Jr. — Chief Financial Officer

So it’s driving a lot of the loan growth at some of our competitors.

Brian Martin — Analyst, Brean Capital

Perfect. That’s a great segue. Just one last one on the CRE, Gary. I’m assuming that that CRE concentration level around 200%, probably stands there, it’s not moving a whole lot based on origination, potential originations with payoffs. So that’s not like it’s going to ramp up?

Gary L. Guerrieri — Chief Credit Officer

We’re at 194% at the end of the quarter, Brian, to Tier 1 plus the allowance. I would tell you that I would expect that to be lower as we move into the second and third quarters before we start to see some stabilization.

Brian Martin — Analyst, Brean Capital

Got you. Okay. And then just to Vince’s comment or both Vince’s comments on NDFI, can you just remind us that your — how low that exposure is today just so we have that clarity in terms of that exposure relative to other banks?

Gary L. Guerrieri — Chief Credit Officer

Yeah. In terms of our bucket, the largest bucket that we have in there is the other category, which is a mix of wealth management, advisory, family office, and insurance companies for non-lending purposes. The credit facilities that we have in place there support working capital acquisitions and lift-out strategies for our clients. Remaining is a handful of customer REITs, which is a little over $100 million in clients who we do C&I business with that have formed some REITs. And our BDCs, which we got from an acquisition a number of years ago, and we pared it back to the strongest of the strong. There are five of them. Four of them are investment-grade companies. The balance is $40 million.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

So it’s really small, right?

Vincent J. Calabrese, Jr. — Chief Financial Officer

Yeah.

Gary L. Guerrieri — Chief Credit Officer

Yeah, it’s $40 million.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

And again, we’ve not focused — that is not a focus of this company. That’s the byproduct of acquisitions and clients, accommodating certain clients, but we don’t have a practice of going out and originating in that space.

Brian Martin — Analyst, Brean Capital

Yeah. Okay.

Vincent J. Calabrese, Jr. — Chief Financial Officer

So [Speech Overlap] and it’s only 1% of the total loan book too, so it’s tiny.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Yep.

Brian Martin — Analyst, Brean Capital

De minimis. Yep. Okay. Good to highlight that. And just maybe the last one.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Thank you.

Brian Martin — Analyst, Brean Capital

Yeah. Maybe just the last one for me was your comments on the cost of deposits. It sounds like — it sounds as though they are kind of flat to down maybe over the balance of the year just with that balance of the C&I, your potential growth of the — and I guess that’s assuming that there’s no rapid growth in loans and no change in rates. But that funding cost trending down seems like the outlook we should be looking at. A, is that right? And B, just can you talk about that pipeline of commercial deposits, is that — do you see the baseline of 26% today trending a bit higher given your outlook for that pipeline?

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

That’s too — it’s too hard to say given the inflows and outflows in that bucket what can happen potentially with disintermediation. I think it’s a hard thing to say, right? Yeah. We’ve been pretty steady at that level. It’s risen and then the yield curve changes and then it migrates away and then comes back. So it’s kind of hard to say, but we tend to target that level, right. So it’s reflected in our guide. And that’s what you have. If we can do better, it’s going to come from the things that I mentioned earlier.

Brian Martin — Analyst, Brean Capital

Yeah.

Vincent J. Calabrese, Jr. — Chief Financial Officer

Yeah. Just from in a higher-for-longer environment, Brian, I mean…

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Right.

Vincent J. Calabrese, Jr. — Chief Financial Officer

…there’s still some room for the deposits to come down, but It’s going to be a function of the overall loan growth and the competitiveness, like Vince mentioned earlier, on the deposit pricing side. So I think there’s room for it to come down a little bit from here, but the rest of — the back half of the year is going to be a function of what’s happening with the overall loan growth.

Brian Martin — Analyst, Brean Capital

Yeah. Okay. Makes sense. All right. Thanks for taking the questions, guys.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

All right. Thanks, Brian.

Vincent J. Calabrese, Jr. — Chief Financial Officer

Yeah. Thank you, Brian.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Thank you.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Vince Delie for any closing remarks.

Vincent J. Delie, Jr. — Chairman, President and Chief Executive Officer

Thank you. Thank you for the questions. And thank — I want to thank our shareholders for sticking with us for so long. I think it’s — I’ve been in this seat for a long time. I’ve been here 20 years. So it’s pretty amazing how time goes by. But it’s great to be able to be here and to really deliver a dividend increase. I know a lot of shareholders, individual shareholders have wanted that. We’re finally at a point here we’ve accumulated capital. We have capital flexibility. So it gives us the opportunity to defend the company from a risk perspective, to invest in some of the great things we’re investing in that drive returns, right. We’re very return-oriented.

And now because of the capital position we’re in, we could continue to repatriate capital at even higher levels. And just so everyone doesn’t forget, we have returned $2.4 billion in capital since I became CEO here; Vince, CFO. So we are focused on taking care of our shareholders. And we did that all while we acquired banks and grew 8% to 9% on an organic basis over a sustained period. So, anyway, thank you. And it’s a great honor.

And I also want to say one more thing. I want to thank Bill Campbell again, because he was a tremendous Director and a phenomenal advocate for shareholders. He’s done a lot of creative things over time. Early in his Board career, he was focused pretty heavily on governance and that built the framework for what we have today. So he was kind of ahead of his time. He’s a great person, a great mentor, and we’re going to miss him. So thank you for everything you’ve done, Bill.

Operator

[Operator Closing Remarks]