8-K: F.N.B. Corporation Reports Mixed First Quarter Results with Strong Non-Interest Income and Record Tangible Common Equity Ratio

F.N.B. Corporation announced its first quarter 2024 results, highlighting a record tangible common equity ratio of 8.0% and strong non-interest income of $87.9 million, while net income declined compared to the previous year.

Summary

• F.N.B. Corporation reported a net income available to common stockholders of $116.3 million, or $0.32 per diluted common share, for the first quarter of 2024.
• This compares to $144.5 million, or $0.40 per diluted common share, in the first quarter of 2023, and $48.7 million, or $0.13 per diluted common share, in the fourth quarter of 2023.
• Operating earnings per diluted common share (non-GAAP) were $0.34, excluding $0.02 of significant items, compared to $0.40 in the first quarter of 2023 and $0.38 in the fourth quarter of 2023.
• The company achieved a record tangible common equity ratio (non-GAAP) of 8.0% and a tangible book value (non-GAAP) of $9.64, representing an 11% year-over-year increase.
• Total loans and leases increased by $1.9 billion, or 6.2%, year-over-year, while total deposits increased by $545.3 million, or 1.6%.
• Net interest income totaled $319.0 million, a decrease of $17.6 million, or 5.2%, compared to the first quarter of 2023.
• Non-interest income reached $87.9 million, a 10.7% increase compared to the first quarter of 2023.
• The ratio of non-performing loans and other real estate owned (OREO) to total loans and OREO decreased to 0.33%, while total delinquency increased slightly to 0.64%.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive due to strong non-interest income and capital ratios, but tempered by decreased net income and net interest margin. The company is performing well in some areas but faces challenges in others.

Positives

• The company achieved a record tangible common equity ratio of 8.0%.
• Non-interest income was strong at $87.9 million.
• Tangible book value grew 11% year-over-year, reaching an all-time high of $9.64.
• The company experienced growth in both loans and deposits.
• The Common Equity Tier 1 (CET1) regulatory capital ratio was a record 10.2% (estimated).
• Wealth Management revenues reached record levels.
• The company's credit quality remains strong with low levels of non-performing loans.
• FNB's investments in digital technology and data science are contributing to customer growth.

Negatives

• Net income available to common stockholders decreased to $116.3 million, compared to $144.5 million in the first quarter of 2023.
• Net interest income decreased by $17.6 million, or 5.2%, year-over-year.
• The net interest margin (FTE) (non-GAAP) decreased 38 basis points year-over-year to 3.18%.
• The mix of non-interest-bearing deposits to total deposits decreased from 33% to 29% year-over-year.
• Non-interest expense increased by $17.2 million, or 7.8%, year-over-year.
• The effective tax rate increased to 21.5% from 19.5% in the first quarter of 2023.

Risks

• The company faces risks related to changes in interest rates, which impact net interest income and deposit costs.
• There is a risk of continued migration of deposits into higher-yielding products, which could further pressure net interest margin.
• The company is exposed to economic and political risks that could affect its business and financial results.
• Competition in the financial services industry could impact customer acquisition and pricing.
• The company is subject to regulatory risks and potential legal proceedings.
• Cybersecurity threats and operational disruptions pose a risk to the company's operations.

Future Outlook

The document includes forward-looking statements regarding F.N.B. Corporation's outlook for earnings, revenues, expenses, tax rates, capital and liquidity levels, asset quality, and financial position, but cautions that actual results may differ due to various risks and uncertainties.

Management Comments

• FNB's continued profitability grew our capital base and led to a record tangible common equity ratio (non-GAAP) of 8%.
• We also are very pleased with our strong credit results in this environment which is a testament to our risk management culture.
• FNB's investments in digital technology and data science continue to be at the center of our desire to gain efficiency and execute on our client acquisition strategy.
• FNB's unique digital and data strategies are key to our continued success driving customer expansion and primacy, increasing product penetration and delivering an innovative and comprehensive banking experience for our consumer, wealth management and commercial clients.

Industry Context

The results reflect the challenges faced by regional banks in the current interest rate environment, including increased deposit costs and pressure on net interest margins. However, FNB's strong non-interest income and capital position indicate a diversified business model and effective risk management.

Comparison to Industry Standards

• FNB's tangible common equity ratio of 8.0% is strong compared to many regional banks, indicating a solid capital base.
• The company's net interest margin of 3.18% is lower than some peers, reflecting the impact of higher deposit costs.
• The growth in loans and deposits is in line with industry trends, but the shift from non-interest-bearing deposits to higher-yielding products is a common challenge.
• FNB's non-performing loan ratio of 0.33% is favorable compared to many regional banks, indicating strong credit quality.
• The company's wealth management revenue growth of 8.8% is a positive sign, as many banks are focusing on fee-based income.

Stakeholder Impact

• Shareholders may be concerned about the decrease in net income and net interest margin, but encouraged by the strong capital ratios and non-interest income.
• Employees may benefit from the company's continued growth and investments in technology.
• Customers may experience improved digital banking services and a wider range of products.
• Creditors may view the company's strong capital position favorably.

Next Steps

• The company plans to host a conference call on April 18, 2024, to discuss the financial results.
• The company will continue to focus on digital technology and data science to drive customer acquisition and efficiency.
• FNB will continue to manage its balance sheet and credit risk in the current economic environment.

Key Dates

Keywords

financial results, earnings, net income, non-interest income, tangible common equity, loans, deposits, net interest margin, capital ratio, wealth management, mortgage banking, credit quality, digital banking