10-Q: F.N.B. Corporation Reports Solid Third Quarter Results with Record Non-Interest Income and Strong Deposit Growth

F.N.B. Corporation's third quarter results show a decrease in net income compared to the previous year, but also record non-interest income and strong deposit growth.

Summary

• F.N.B. Corporation reported a net income available to common stockholders of $110.1 million, or $0.30 per diluted share, for the third quarter of 2024, compared to $143.3 million, or $0.40 per diluted share, for the same period in 2023.
• Operating earnings per diluted common share (non-GAAP) were $0.34 for the third quarter of 2024, excluding $0.04 per share of significant items impacting earnings.
• The company experienced a 15% year-over-year growth in tangible book value per share (non-GAAP) to a record $10.33.
• F.N.B. saw strong sequential annualized revenue growth of 9%, with record non-interest income of $90 million.
• The operating return on average tangible common equity (non-GAAP) was a solid 14%.
• The company achieved robust linked-quarter deposit growth of $1.8 billion, or 5%, improving the loan-to-deposit ratio to 91.7%.
• Capital levels reached all-time highs with a tangible common equity ratio (non-GAAP) at 8.2% and a CET1 ratio at 10.4%.
• Net interest income totaled $323.3 million, a 2.4% increase from the prior quarter.
• The net interest margin (FTE) (non-GAAP) remained stable at 3.08%.
• The provision for credit losses was $23.4 million, with net charge-offs of $21.5 million.
• Non-interest income reached a record $89.7 million, a 10.0% increase from the year-ago quarter.
• Non-interest expense totaled $249.4 million, including $15.3 million of significant items.
• Period-end total loans and leases decreased slightly by 0.1% on a linked-quarter basis, but increased 4.9% compared to September 30, 2023.
• Period-end total deposits increased $1.8 billion, or 5.1%, on a linked-quarter basis and 6.2% compared to September 30, 2023.
• The loan-to-deposit ratio was 92% at September 30, 2024.
• The ratio of non-performing loans plus OREO to total loans and leases plus OREO totaled 0.39%.

Sentiment

Score: 6

Explanation: The document presents a mixed picture with strong deposit growth and record non-interest income, but also a decrease in net income and increased expenses. The sentiment is cautiously optimistic, reflecting the company's efforts to manage challenges while capitalizing on opportunities.

Positives

• The company achieved record non-interest income, demonstrating the strength of its diversified business model.
• Tangible book value per share saw significant year-over-year growth.
• The company experienced strong deposit growth, improving its loan-to-deposit ratio.
• Capital levels reached all-time highs, indicating a strong financial position.
• The sale of indirect auto loans improved key financial ratios.
• Net interest income increased from the prior quarter.

Negatives

• Net income available to common stockholders decreased compared to the same quarter of the previous year.
• The provision for credit losses increased from the prior quarter.
• Non-interest expense increased, including significant items impacting earnings.
• The net interest margin (FTE) (non-GAAP) decreased 18 basis points year-over-year.
• Net loan charge-offs increased compared to the prior quarter.

Risks

• The company is exposed to interest rate risk, which could impact net interest income and capital.
• Changes in economic conditions, including inflation and potential slowing of the U.S. economy, could affect business and financial results.
• Competition could impact customer acquisition, growth, and retention.
• The company is subject to various regulatory requirements and potential legal proceedings.
• The company faces risks related to technology changes, cyber-attacks, and system failures.

Future Outlook

The report includes forward-looking statements regarding the company's outlook for earnings, revenues, expenses, tax rates, capital and liquidity levels, asset quality, and other matters, which are subject to various risks and uncertainties.

Management Comments

• Management believes that the company's strong client relationships, digital and data analytics capabilities, and diverse geographic footprint are key to managing the loan-to-deposit ratio.
• Management stated that the company's capital levels reached all-time highs.
• Management noted that credit metrics ended the quarter at solid levels with the reserve coverage ratio up slightly given a proactive approach to credit risk management.

Industry Context

The report reflects the challenges and opportunities faced by financial institutions in the current economic environment, including interest rate fluctuations, deposit migration, and regulatory scrutiny. The company's focus on growing high-quality loans and deepening customer relationships aligns with industry trends.

Comparison to Industry Standards

• The company's net interest margin of 3.08% is within the range of other regional banks, but is impacted by the current interest rate environment.
• The company's loan-to-deposit ratio of 92% is a strong result compared to many peers, reflecting effective deposit gathering strategies.
• The company's capital ratios are above regulatory requirements and are considered strong compared to industry benchmarks.
• The company's non-performing asset ratio of 0.39% is low compared to historical averages and many peers, indicating strong asset quality.

Legal Proceedings

• Yadkin Bank and its successor by merger, FNBPA, reached a settlement with the DOJ and the State of North Carolina to resolve their fair lending concerns, which FNBPA disputes, related to the assessment of mortgage lending activities during a four-year period in the Winston-Salem and Charlotte, North Carolina markets that began prior to Yadkins merger with FNBPA in March 2017.
• The settlement includes FNBPA's commitment to provide $11.75 million in subsidies on mortgages and home equity loans originated in the Charlotte and Winston-Salem, North Carolina markets beginning in 2024, continuing until the full amount has been deployed.

Stakeholder Impact

• Shareholders may be concerned about the decrease in net income but encouraged by the growth in tangible book value and capital levels.
• Employees may be affected by changes in compensation and benefits.
• Customers may benefit from the company's focus on growing high-quality loans and deepening relationships.
• Creditors may view the company's strong capital position and liquidity favorably.

Next Steps

• The company will continue to monitor its risk management practices and make investments as necessary.
• Management will continue to evaluate appropriate levels of liquidity based on expected loan and deposit growth and other balance sheet activity.
• The company will continue to focus on growing high-quality loans and deepening customer relationships.

Key Dates

Keywords

financial results, net income, non-interest income, deposit growth, loan portfolio, capital ratios, credit losses, interest rate risk, tangible book value, operating expenses