8-K: F.N.B. Corporation Reports Mixed Third Quarter Results with Strong Deposit Growth and Tangible Book Value Increase

F.N.B. Corporation announced third quarter 2024 earnings with a notable 5% linked-quarter deposit growth and a 15% year-over-year increase in tangible book value per share, despite a decrease in net income compared to the previous year.

Summary

• F.N.B. Corporation reported a net income available to common stockholders of $110.1 million, or $0.30 per diluted common share, for the third quarter of 2024.
• This compares to $143.3 million, or $0.40 per diluted common share, in the third quarter of 2023, and $123.0 million, or $0.34 per diluted common share, in the second quarter of 2024.
• Operating earnings per diluted common share (non-GAAP) were $0.34, excluding $0.04 per share of significant items.
• The company experienced a robust linked-quarter deposit growth of $1.8 billion, or 5%.
• Tangible book value per share (non-GAAP) grew 15% year-over-year to a record $10.33.
• FNB's loan-to-deposit ratio improved to 91.7%, a nearly 500 basis point improvement from the previous quarter.
• Capital levels reached all-time highs with a tangible common equity ratio (non-GAAP) at 8.2% and a CET1 ratio at 10.4%.
• Total loans and leases increased by $1.6 billion, or 4.9%, year-over-year, while decreasing slightly by $39.6 million, or 0.1%, on a linked-quarter basis.
• Total deposits increased by $2.2 billion, or 6.2%, year-over-year, and $1.8 billion, or 5.1%, on a linked-quarter basis.
• Net interest income totaled $323.3 million, a 2.4% increase from the prior quarter.
• Non-interest income reached a record $89.7 million, a 10.0% increase from the year-ago quarter.
• The provision for credit losses was $23.4 million, an increase of $3.2 million from the prior quarter.
• The company sold approximately $431 million of performing indirect auto loans, resulting in a $11.6 million loss.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive due to strong deposit growth and tangible book value increase, but tempered by decreased net income and increased expenses. The company is performing well in some areas but faces challenges in others.

Positives

• FNB experienced strong deposit growth of $1.8 billion, or 5%, on a linked-quarter basis.
• Tangible book value per share increased by 15% year-over-year to $10.33.
• Non-interest income reached a record high of $89.7 million.
• The loan-to-deposit ratio improved significantly to 91.7%.
• Capital levels reached all-time highs with a tangible common equity ratio of 8.2% and a CET1 ratio of 10.4%.
• Net interest income increased by 2.4% from the prior quarter.
• The company's diversified business model contributed to strong revenue generation.

Negatives

• Net income available to common stockholders decreased to $110.1 million, or $0.30 per diluted share, compared to $143.3 million, or $0.40 per diluted share, in the third quarter of 2023.
• Pre-provision net revenue decreased by 7.7% from the prior quarter.
• Non-interest expense increased by $31.4 million, or 14.4%, year-over-year.
• The company incurred a $11.6 million loss from the sale of indirect auto loans.
• Net charge-offs increased to $21.5 million compared to $7.8 million in the prior quarter.
• The ratio of non-performing loans and other real estate owned to total loans and leases increased to 0.39% from 0.33% in the prior quarter.
• Total delinquency increased 16 basis points from the prior quarter to 0.79%.

Risks

• The company faces risks related to changes in interest rates, which impact the cost of deposits and the value of securities.
• There are risks associated with credit quality, as evidenced by the increase in non-performing loans and delinquencies.
• The company is exposed to market risks, including fluctuations in the value of available-for-sale securities.
• The company's performance is subject to economic conditions and regulatory changes.
• The company faces competition in the financial services industry.
• There are risks associated with the integration of acquired businesses and new strategic initiatives.
• The company is exposed to operational and security risks, including cyber-attacks.

Future Outlook

The company is well-positioned to continue execution of its proven strategies for ongoing success, but no specific forward-looking financial guidance was provided.

Management Comments

• FNB's third quarter operating earnings per diluted common share (non-GAAP) totaled $0.34 with significant tangible book value per share (non-GAAP) growth of 15% year-over-year to a record $10.33, strong sequential annualized revenue growth of 9% with record non-interest income of $90 million, and a solid operating return on average tangible common equity (non-GAAP) of 14%, said F.N.B. Corporation Chairman, President and Chief Executive Officer, Vincent J. Delie, Jr.
• FNB's robust linked-quarter deposit growth of $1.8 billion, or 5%, highlights our ability to leverage our significant client relationships, digital and data analytics capabilities as part of our Clicks to Bricks strategy and our diverse geographic footprint to manage the loan-to-deposit ratio which improved nearly 500 basis points from last quarter to 91.7%.

Industry Context

The results reflect a challenging environment for regional banks, with increased deposit costs and a need to manage credit risk, while also highlighting FNB's ability to grow deposits and maintain strong capital levels. The company's focus on digital capabilities and diverse geographic footprint aligns with industry trends.

Comparison to Industry Standards

• FNB's deposit growth of 5% linked-quarter is strong compared to many regional banks that are facing deposit outflows or slower growth.
• The 15% year-over-year growth in tangible book value per share is a positive indicator of the company's financial health and is above average for the industry.
• The loan-to-deposit ratio of 91.7% is a healthy level, indicating a good balance between lending and deposit gathering.
• The CET1 ratio of 10.4% is above the regulatory minimum, suggesting a strong capital position.
• The increase in non-performing loans and delinquencies is a concern, but the overall asset quality metrics remain near historically low levels, which is better than some peers.
• The efficiency ratio of 55.2% is solid but could be improved compared to the best-in-class banks.

Stakeholder Impact

• Shareholders may be concerned about the decrease in net income but encouraged by the growth in tangible book value.
• Employees may be impacted by the company's strategic hiring and investments in risk management.
• Customers may benefit from the company's focus on digital capabilities and diverse geographic footprint.
• Creditors may view the company's strong capital levels positively.

Next Steps

• The company will host a conference call on October 18, 2024, to discuss the financial results.
• The company will continue to execute its strategies for ongoing success.

Key Dates

Keywords

financial results, earnings, deposit growth, tangible book value, net income, loan growth, non-interest income, credit quality, capital ratios, net interest margin, FNB, banking