10-K: F.N.B. Corporation Reports Record Full-Year Earnings Amidst Banking Sector Volatility

F.N.B. Corporation announces record full-year earnings for 2023, driven by strategic balance sheet management and strong performance across its business segments, despite challenges in the banking industry.

Summary

• F.N.B. Corporation reported a net income available to common stockholders of $476.8 million, or $1.31 per diluted common share, for the full year 2023.
• This compares to $431.1 million, or $1.22 per diluted common share, for the full year 2022.
• Operating earnings per diluted common share (non-GAAP) reached a record $1.57 for 2023, excluding $116.2 million of significant items.
• The company achieved record revenue of $1.6 billion and a tangible book value per common share (non-GAAP) growth of $1.20, or 14.5%, year-over-year, reaching $9.47.
• Average deposits grew by $568.3 million, or 1.7%, with approximately 78% of total deposits insured or collateralized.
• A strategic sale of $648.7 million in AFS investment securities and transfer of $355 million of indirect auto loans to held-for-sale were executed to optimize the balance sheet.
• The company announced the redemption of all $110 million of Series E preferred stock in February 2024.
• Net interest income increased by 17.6% to $1.3 billion, driven by earning asset growth and a higher interest rate environment.
• The net interest margin (FTE) (non-GAAP) increased 32 basis points to 3.35%.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with record earnings and strategic initiatives, but acknowledges industry challenges and regulatory scrutiny, resulting in a strong but tempered sentiment.

Positives

• Record full-year earnings and revenue demonstrate strong financial performance.
• Significant growth in tangible book value per common share indicates increased shareholder value.
• Strategic balance sheet management actions are expected to improve future earnings.
• High percentage of insured or collateralized deposits provides stability.
• The company's commitment to promoting equity and economic prosperity in the markets that it serves.

Negatives

• Non-interest income decreased due to a realized loss on investment securities restructuring.
• The provision for credit losses increased due to loan growth and a commercial loan charge-off due to alleged fraud.
• The company is subject to a special FDIC assessment.
• The company entered into consent orders with the DOJ and the State of North Carolina to resolve their fair lending allegations related to the assessment of mortgage lending activities.

Risks

• The company is subject to environmental, social and governance (ESG) risks that could adversely affect our reputation and the market price of our securities.
• The company is subject to supervision and examination by U.S. government authorities and may become subject to investigations, enforcement actions, fines, and other adverse effects.
• The company could be adversely affected by changes in the law, especially changes in the regulation of the banking industry.
• The company is subject to the Community Reinvestment Act (CRA) and fair lending laws, and failure to comply with these laws could lead to material penalties.
• The company's overdraft protection programs and corresponding revenue may be impacted by possible new federal regulatory requirements or scrutiny or industry trends regarding such practices.
• The company is subject to a variety of risks arising from ESG matters.
• The company is subject to climate change and related legislative and regulatory initiatives may result in operational changes and expenditures that could significantly impact our business.

Future Outlook

The FOMC signaled that current FRB direction is to begin lowering rates at some point during 2024 as inflation returns to more normalized levels.

Management Comments

• We were well-positioned to meet the needs of our customers and communities through those challenges given our strategic focus to maintain a diversified and granular deposit base, conservative and prudent balance sheet management for the long-term, and sound risk management policies and governance as we achieved full year operating earnings per diluted common share (non-GAAP) totaling a record $1.57, record revenue of $1.6 billion and tangible book value per common share (non-GAAP) growth of $1.20, or 14.5%, year-over-year, to an all-time high of $9.47.

Industry Context

The report acknowledges the banking industry disruption caused by the failures of Silicon Valley Bank and Signature Bank, highlighting F.N.B. Corporation's ability to navigate these challenges due to its diversified deposit base and conservative balance sheet management.

Comparison to Industry Standards

• The report states that the average customer deposit account balance at approximately $30,000 (below the peer median) and our median consumer deposit account balance at approximately $5,600 as of December 31, 2023.
• The report states that FDIC-insured or collateralized deposits represented approximately 78% of our total deposits at December 31, 2023, which was higher than our peer median (based on peer data as of September 30, 2023) and we had ample liquidity to fund up to an estimated 146% of our uninsured and non-collateralized deposits.

Corporate Governance

Legal Proceedings

• FNBPA is required to have a fair lending program that is of sufficient scope to monitor fair lending and that appropriately remediates issues which were identified during the DOJ investigation as well as add additional branches, increase marketing and mortgage and home equity loan subsidies in majority Black and Hispanic census tracts (MBHCTs).

Stakeholder Impact

• Shareholders benefit from increased earnings and tangible book value.
• Customers benefit from the company's commitment to serving underserved communities.
• Employees benefit from the company's focus on attracting, retaining, and developing talent.

Next Steps

• Continue to monitor and stress test capital consistent with the safety and soundness expectations of banking regulators.
• Prepare for implementation of the joint final rule issued by Federal Regulators that makes extensive amendments to the regulations that implement the CRA.
• Continue to modify overdraft practices to conform to recent regulatory guidance and expectations, and industry practices.

Key Dates

Keywords

earnings, financial results, net income, deposits, loans, capital, FNB Corporation, banking, financial services