F.N.B. Corporation (FNB) Earnings

Management highlights

- Overall Financial & Capital Performance - Q2 2026 EPS grew 17% year-over-year to $0.42, with net income of $149 million. Tangible book value per common share increased 10% year-over-year to $12.24, demonstrating strong profitability and peer-leading internal capital generation. - FNB repurchased $47 million of common stock in Q2, totaling $80 million for the first half of 2026 (a 300%+ increase from H1 2025), with over $250 million in remaining repurchase authorization at quarter end. Capital levels remain strong: tangible common equity (TCE) is nearly 9%, and CET1 ratio is 11.4%, with return on average tangible common equity at 14%. - Credit Quality & Portfolio Composition - Asset quality metrics improved sequentially: delinquency, non-performing loans (NPLs), and OREO all decreased 3 bps from Q1 2026, totaling 71 bps and 31 bps respectively. Net charge-offs were 19 bps, up 1 bp sequentially, while criticized loans declined 68 bps year-over-year. - Provision expense for the quarter was $21.3 million, with total ending loan reserves at $447 million (1.25% of total loans, 1.3% including acquired unamortized discounts). NPL coverage remains strong at 420% including discounts. The consumer portfolio has an average origination FICO score of 784, with delinquency and charge-offs at multi-year lows of 66 bps and 6 bps respectively. CRE exposure ended the quarter at 187% of Tier 1 capital plus allowance, following planned paydown activity. - Digital & Data Innovation - The bank leverages its proprietary e-store and common application to gather customer data, which is analyzed via the bank's data hub and machine learning tools to enable strategic deposit pricing. This capability contributed to a 3 bps sequential decline in total deposit costs (and 21 bps decline year-over-year). - Development of the new AI-enabled customer aggregation tool, Insight360, is progressing on schedule, with full launch expected by the end of 2026. When combined with the bank's existing common application, Insight360 will improve product penetration and customer share of wallet by enabling personalized product and service recommendations. - New client engagement tools in wealth management have helped drive 8% year-over-year revenue growth, with strategic advisory hires across the footprint expanding client relationships and producing record brokerage fee income in Q2. - Strategic Positioning - FNB's value proposition is positioned as a regulated, trusted bank with FinTech-style AI and data capabilities, allowing the bank to maintain a top-quartile efficiency ratio while investing in innovation. The bank has recently received third-party recognition including Export-Import Bank of the United States Lender of the Year, Newsweek Top Workplace, and Global Finance Top Financial Innovations in North America award.

Guidance

- Full year 2026 period-end loan and deposit growth guidance is maintained at mid-single digits, with guidance assuming no Federal Reserve interest rate actions in 2026. - Full year 2026 net interest income guidance was revised downward to a range of $1.485 billion to $1.515 billion, from the prior range, due to Q2 performance impacts from lower one-month SOFR and ongoing industry-wide deposit competition. - Full year 2026 non-interest income guidance is maintained at $370 million to $390 million, with Q3 2026 non-interest income expected between $93 million and $98 million. - Full year 2026 non-interest expense guidance was tightened to a range of $1.01 billion to $1.02 billion, with management expecting to land toward the high end of the range. Q3 2026 non-interest expense is projected between $255 million and $260 million. Positive operating leverage is still expected for full year 2026. - Full year 2026 provision guidance was revised downward to a range of $80 million to $95 million, from the prior range of $85 million to $105 million, reflecting stronger than expected credit performance through the first half of the year. The final provision outcome will depend on net loan growth and charge-off activity in H2 2026. - Full year 2026 effective tax rate is expected to be between 21% and 22%, not assuming any unannounced investment tax credit activity. - Q3 2026 net interest income is projected between $375 million and $385 million.

Segment performance

FNB reported total Q2 2026 revenue of $463 million, consisting of net interest income of $366 million (79.0% of total revenue) and non-interest income of $97 million (21.0% of total revenue). Net income for the quarter was $148.7 million, with earnings per share of $0.42, representing a 17% year-over-year increase. Within net interest income: net interest margin held steady at 325 bps sequentially, with total yield on earning assets declining 1 bp linked quarter to 513 bps. Interest-bearing deposit costs declined 4 bps, bringing the total cost of funds down 2 bps to 199 bps. On a year-over-year basis, net interest income grew 5.3%. Within non-interest income: capital markets income increased 16% year-over-year to $8 million, driven by debt capital markets, interest rate derivatives, international banking, and early contributions from new investment banking and public finance businesses. Wealth management revenue grew nearly 8% year-over-year to $22 million, producing record brokerage fee income this quarter. Non-interest expense totaled $253 million, a 2.9% year-over-year increase, resulting in a solid efficiency ratio of 53.7%, 100+ bps better than the year-ago quarter. On the balance sheet: ending total loans and leases were $35.8 billion. Commercial and industrial (C&I) loans grew 8% annualized linked quarter, adding $186 million. Consumer loans grew $547 million linked quarter, driven by seasonal residential mortgage and HELOC growth. Commercial real estate (CRE) balances declined $129 million linked quarter due to planned secondary market payoff activity. Average total deposits grew 3% annualized linked quarter, with non-interest-bearing deposits exceeding $10 billion for the second consecutive quarter, holding at 26% of total deposits for the seventh straight quarter. The loan-to-deposit ratio ended at 92.5%.

Risks & headwinds

- Ongoing heightened industry-wide competition for deposits, which puts pressure on deposit costs and net interest margins. - Geopolitical volatility, including ongoing events in the Middle East, creates uncertainty around supply chains and energy prices that could impact economic conditions and credit performance. - Persistent tariff uncertainty adds to macroeconomic unpredictability, which management has accounted for via qualitative credit reserve overlays. - Sustained competitive pressure on loan spreads, particularly for higher-quality, lower-risk C&I loans, compresses net interest margin. - Implementation of the Basel III capital proposal is expected to require an 80 to 100 basis point increase in required capital, which will prompt a review of capital allocation strategy after final rules are released. - Volatility in short-term interest rates (specifically one-month SOFR, which $13 billion of FNB's loans are tied to) creates quarterly variability in net interest income.

Analyst Q&A

• Q: What drove the downward revision to full-year net interest income guidance, and are we nearing the end of deposit cost improvements? /

  A: Lower one-month SOFR (down 9 bps peak-to-trough in Q2) impacted the $13 billion of SOFR-linked loans, reducing net interest income. Competitive deposit pressure was also a factor, though FNB still achieved a 4 bp sequential decline in interest-bearing deposit costs, an accomplishment in the current environment. Management expects seasonal public funds deposit inflows in H2 2026 ($500 million typical peak-to-trough) which will replace higher-cost short-term borrowings, and has a $1+ billion commercial treasury management deposit pipeline. Another quarter of elevated CRE payoffs (which remove higher-yielding loans from the balance sheet) is expected in Q3 before payoffs dissipate in Q4. Reinvestment of maturing securities is occurring at 125-150 bps above current portfolio yields, supporting margin over time. The June exit NIM was 327 bps, 2 bps above the full quarter average, entering Q3.

• Q: How will loan mix shift as CRE payoffs slow and origination picks back up, and will residential mortgage growth decline as commercial growth accelerates? /

  A: The current residential mortgage growth is concentrated in high-quality physician mortgage loans, and the Q2 seasonal peak is expected to normalize in H2. CRE runoff, which hit $284 million in Q2, will slow as new origination ramps up in management's target CRE asset classes. Total commercial loan pipeline (C&I and CRE) is now at an all-time high, up nearly 10% linked quarter, so commercial originations will offset slowing residential mortgage growth in H2. Strategic pricing discipline and data/AI tools like Insight360 will help maintain deposit costs and grow customer share of wallet.

• Q: What are the key drivers of fee income growth in H2 2026, and what is the long-term target for fee income as a percentage of total revenue? /

  A: Key upside drivers include new growth in investment banking, public finance, debt capital markets, interest rate derivatives, foreign exchange, merchant interchange, and brokerage wealth management. Seasonal strength in residential mortgage originations will also support Q3 mortgage fee income. Management aims to grow fee income as a percentage of total revenue over the long term, with a target of 25% eventually (and potentially 30% further out), up from ~21% currently. All new fee business lines are being launched efficiently, so growth will not meaningfully hurt the efficiency ratio, and diversified fee income reduces reliance on net interest income and improves overall revenue stability.

• Q: How does Basel III impact capital planning and share repurchase appetite going forward? /

  A: Based on current proposed Basel III rules, FNB expects an 80-100 bps increase in required capital. Management will conduct a full review of capital allocation strategy after the final rules are released (expected to go into effect January 1 2027). Share repurchases remain attractive at current valuations, with a ~4-year earn-back at current prices, which is a strong risk-adjusted return. Management plans to maintain CET1 capital around the current 11.4% level, with continued repurchases at the current pace as long as capital levels hold.