Release Date: October 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- F N B Corp (FNB, Financial) reported a strong third quarter with operating net income of $122 million or $0.34 per diluted share, demonstrating robust financial performance.
- The company achieved significant deposit growth, with total deposits increasing by 5.1% or $1.8 billion from the previous quarter, highlighting successful deposit initiatives.
- F N B Corp (FNB) improved its loan-to-deposit ratio to 91.7%, a decrease of nearly 5 percentage points from the last quarter, showcasing effective balance sheet management.
- The company reported a record CET1 ratio of 10.4%, indicating a strengthened capital position.
- F N B Corp (FNB) gained market share in several MSAs, achieving a number two traditional retail deposit share position in Pittsburgh, despite competition from larger banks.
Negative Points
- Operating non-interest expense increased to $234 million, driven by higher salaries and benefits, which could impact profitability if not managed effectively.
- The company experienced a slight increase in total delinquency, finishing the quarter at 79 basis points, up 15 basis points from the prior quarter.
- Net charge-offs totaled 25 basis points, reflecting some pressure on asset quality.
- The mix of non-interest-bearing deposits to total deposits decreased to 27% from 29% last quarter, indicating a shift towards more costly interest-bearing deposits.
- F N B Corp (FNB) faced a $11.6 million loss on the indirect auto loan sale, which impacted earnings despite being part of balance sheet management strategies.
Q & A Highlights
Q: Could you talk about the average rate you're seeing on deposit inflows and how this growth affects your interest rate position?
A: Vincent J. Calabrese, CFO: We brought in $1 billion of new money at around 4.25%, primarily in short-term CDs and money markets. This helps us reduce our loan-to-deposit ratio significantly. We have flexibility to reduce rates on these liabilities as we move forward, positioning us well for future rate changes.
Q: What are your expectations for deposit beta following the recent rate cut?
A: Vincent J. Calabrese, CFO: Our guidance includes a 15% deposit beta by year-end, but we aim to do better. Many competitors have already lowered rates, giving us room to adjust our pricing accordingly.
Q: Can you provide more details on the indirect auto loan sale and whether you plan to exit this business?
A: Vincent Delie, CEO: We're not exiting the business. The sale was a strategic move to manage our balance sheet and loan-to-deposit ratio, not a credit play. We retain servicing rights and use client information for cross-selling opportunities.
Q: What drove the higher expenses in Q3, and what should we expect for Q4?
A: Vincent J. Calabrese, CFO: Q3 expenses were driven by a $2 million increase in marketing and a $5 million rise in compensation due to production-related incentives and strategic hiring. For Q4, we expect expenses to be between $225 million and $235 million, slightly down from Q3.
Q: How do you view the potential for positive operating leverage in 2025?
A: Vincent J. Calabrese, CFO: Achieving positive operating leverage in 2025 is possible, especially with a more favorable yield curve. We expect some portion of 2025 to benefit from this, driving higher net interest income and margin.
Q: What are your thoughts on the current credit environment and net charge-offs?
A: Gary Lee Guerrieri, Chief Credit Officer: Our credit metrics remain strong, with net charge-offs at 25 basis points year-to-date. We expect continued solid performance, although there may be slight normalization as the economic environment evolves.
Q: Can you elaborate on your deposit acquisition strategy and its impact on the loan-to-deposit ratio?
A: Vincent Delie, CEO: We focus on bringing in primary clients, which helps us maintain a strong loan-to-deposit ratio. Our strategy includes leveraging data analytics and maintaining competitive pricing to attract new clients and deposits.
Q: What are your expectations for loan growth in 2025, and how does the current rate environment affect this?
A: Vincent Delie, CEO: While there's uncertainty, we believe we're well-positioned for loan growth once demand picks up. Historically, we've achieved consistent mid- to high-single-digit growth, and we expect to continue this trend as the market stabilizes.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
