FNB CORP/PA/ Q3 FY2024 earnings call

• FNB reported third quarter operating net income available to common shareholders of $122 million, or $0.34 per diluted common share after adjusting for $15 million of significant items. - Completed a $431 million indirect auto loan sale, improving capital and loan-to-deposit ratio. - Deposits grew 5.1% from Q2, driven by deposit initiatives and digital analytics. - Loan-to-deposit ratio improved to 91.7%. - Non-interest income at all-time high of $90 million. - Credit metrics stable, net charge-offs 25 bps YTD, criticized loans down linked quarter. - Stress testing shows ACL covers ~90% of projected charge-offs in severe downturn.

Total loans ended the quarter at nearly $33.7 billion, a 4.6% annualized linked quarter increase when excluding the loan sale. Total deposits ended the quarter at $36.8 billion, an increase of 5.1% or $1.8 billion from the second quarter. Non-interest income reached an all-time high of $90 million. Loans contributed approximately [calculated based on total loans and total assets, but exact percentage not specified], deposits contributed approximately [calculated based on total deposits and total assets, but exact percentage not specified].

• Loans expected to grow mid-single-digits full-year inclusive of loan sale. - Deposits projected to grow mid-single-digits YOY (up from low-single-digits). - Q4 non-interest income $85-90 million. - Q4 non-interest expense $225-235 million (lower than Q3). - Q4 provision $20-30 million. - Full-year effective tax rate 21%-22%.

• Uncertainty around recognition of investment tax credit for renewable energy financing. - Potential impact of economic cycles on credit risk. - Competition in deposit gathering and loan markets.

Q: Good morning, and welcome to the F.N.B. Corporation Third Quarter 2024 Earnings Call. All participants’ will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Lisa Hajdu, Manager of Investor Relations. Please go ahead.

A: Good morning and welcome to our earnings call. This conference call of FNB Corporation and the reports that filed with the Securities and Exchange Commission also contain forward-looking statements and non-GAAP financial measures. Non-GAAP financial measures should be viewed in addition to and not as an alternative for our reported results prepared in accordance with GAAP. Reconciliations of GAAP to non-GAAP operating measures to the most directly comparable GAAP financial measures are included in our presentation materials and in our earnings release. Please refer to these non-GAAP and forward-looking statement disclosures contained in our related materials, reports and registration statements filed with the Securities and Exchange Commission and available on our corporate website. A replay of this call will be available until Friday, October 25, and the webcast link will be posted to the About Us, Investor Relations section of our corporate website. I will now turn the call over to Vince Delie, Chairman, President and CEO.

Q: Good morning. You know, obviously always a good time to be bringing in core deposits, but could you just talk about the average rate you're seeing on these inflows and Vince you mentioned moving towards a neutral -- a more neutral interest rate position. Wouldn't all this growth on the deposit side work against that a bit at least in the near-term?

A: Yes, I would say a couple of things. You know, as we said last quarter, we had significant growth in short-term borrowings to fund this very strong loan growth that we had in the second quarter. So the goal was to bring in meaningful deposits. And we did. I mean, we brought in $1 billion of new money. In total, it was a $1.8 billion, a $1 billion of new money around 4.25% rate. And nature of those deposits are very short-term, combination of money market and very short-term CDs, five month CDs. So we have a lot of flexibility as we move forward to reduce the rates. I'm a liability to be brought in. I think it positions us well from a loan-to-deposit ratio. You know, we were in the 96%s. Our goal was to bring it down and we brought it down meaningfully to 91.7%. And if you look at kind of the balance sheet as a whole as we sit here at the end of the quarter, we have $11 billion of liabilities that are repricable today, subject to market forces of course, about $11 billion. We have another $5.4 billion in CDs that mature in the next six months, $2.9 billion of that in the next three months that are forced $4.75 billion rate. And then we have a $1 billion in cash flows from the investment portfolio that kind of rolls off around $2.91 billion and today we're investing between $4.25 billion and $4.50 billion. So there's a lot of levers obviously there that help us reprice. With the Fed moving 50 basis points in September, kind of bigger than maybe what was expected, that has an impact on our loan portfolio over a three-month period. So we'll be kind of playing some cash up there. But we have the levers here that can kind of offset that. And our team is very well positioned. And we've already started to bring interest rates down. We brought rates down 50 basis points on our CD offer and a variety of different deposit categories, we've started to bring rates down and kind of ready to continue to bring rates down. So I said a lot there, but we have a feel that we have the levers positioned well to move forward so that we can kind of adjust as rates move down.