FNB(FNB) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics - Net income available to common shareholders was $123 million, or$0.34 per diluted common share [5] - Pre-provision net revenue increased over 4% linked-quarter, supported by well-managed expenses and strong non-interest income levels [5] - Tangible book value per share grew 12% year-over-year to a record high of $9.88 [5] - Loan and deposit growth was 3.6$176 million, a 10% increase over the same period in 2023 [8] - Total provision expense for the quarter was $20.2 million, with$12.8 million supporting loan growth [11] - Net interest margin was 3.09%, a 9 basis point decrease due to increased short-term borrowings [145] Business Line Performance - Mortgage banking operations grew over 50%, contributing to non-interest income growth [8] - Consumer loans grew 5% linked-quarter, led by residential mortgages [32] - Equipment finance business exceeded $1 billion in balances, showing significant growth [51] - Commercial loans and leases increased by$540 million, reflecting healthy activity in C&I and equipment finance [133] - Non-interest income totaled 87.9 million, consistent with the prior quarter, driven by treasury management revenues [43] Market Performance - Double-digit year-over-year growth in commercial loans across the Carolinas, Pittsburgh, and Cleveland regions [129] - Strong deposit growth in the Southeast, particularly in Charlotte and Wilmington [158] - Pittsburgh market continues to perform well, with significant share and growth opportunities in consumer lending and C&I [159] - Cleveland market shows upside potential in C&I, with equipment finance performing well [160] Strategy and Industry Competition - The company is strategically positioning its balance sheet to benefit from lower interest rates, with 4.5 billion in short-term or floating rate borrowings [41] - FNB aims to diversify revenue streams, targeting 30% of total revenue from non-interest income [138] - The company is focused on digital engagement, with its eStore winning Best Digital Initiative at the 2024 Banking Tech Awards USA [146] - FNB is building out its presence in Virginia and the Carolinas through de novo expansion and branch openings [164] Management Commentary on Operating Environment and Future Outlook - Management expects loan growth to return to historical levels in the second half of the year, with pipelines declining due to strong production in Q2 [40] - The company anticipates a decline in the loan-to-deposit ratio in the medium term, supported by deposit initiatives [15] - FNB is well-positioned to handle economic cycles, with strong asset quality metrics and a focus on credit risk management [13] - Management is optimistic about the company's ability to gain market share and deliver positive financial outcomes in the second half of the year [181] Other Important Information - The company has a $6.9 billion CD portfolio with a nine-month duration and$1 billion in swaps maturing from 2025 [17] - FNB's spot deposit cost ended the quarter at 2.13%, with a cumulative spot deposit beta of 38% since March 2022 [18] - The company expects full-year provision expense to be between $75 million and$95 million, dependent on loan growth and charge-off activity [21] - FNB's efficiency ratio remained at a leading level of 54.4% in Q2 [44] Q&A Session Summary Question: Loan growth mix in the second half of the year [49] - Mortgage growth is expected to decline seasonally, while equipment finance and renewable energy deals will continue to grow [50][51] - Commercial pipelines are down by 10%, with sluggish activity on the consumer side [52] Question: Deposit initiatives and funding costs [82] - The company is focusing on treasury management opportunities and digital initiatives to attract low-cost deposits [83] - Deposit growth initiatives are expected to show benefits in the second half of 2024 and into 2025 [84] Question: Fee income growth and diversification [86] - FNB aims to grow fee-based businesses, particularly in capital markets, wealth management, and treasury management [87][88] - The company targets 30% of total revenue from non-interest income, with opportunities in public finance and advisory services [62][63] Question: Buyback activity and capital allocation [89] - The company plans to support loan growth with its capital and does not expect significant buyback activity in the near term [90] Question: Deposit pricing competition [98] - Competitors have reduced promotional pricing, but irrational pricing still exists in some markets [99][100] - FNB's deposit beta performance has been strong, with gradual increases from 36.5% to 38% [56] Question: NIM and balance sheet repricing [97] - An initial Fed cut may have a short-term negative impact on NIM, but further cuts could provide upside [97] - The company has flexibility in repricing deposits and borrowings, with $4.5 billion in short-term borrowings and$4 billion in non-maturity deposits [96] Question: M&A and expansion opportunities [161] - FNB is focused on internal initiatives but remains open to opportunistic M&A, particularly in Virginia and the Carolinas [162][164] Question: Credit quality and stress testing [177] - Stress testing results show improvements in potential charge-offs and losses, with strong credit risk management [177] Question: Expense management and lease carryover [166] - The company expects $7 million in double lease expenses to end in Q4 2024, with no carryover into 2025 [166]