Executive Summary / Key Takeaways

• F.N.B. Corporation (FNB) is executing a multi-faceted strategy focused on disciplined organic growth, revenue diversification through high-value fee businesses, and robust risk management, underpinned by significant investments in digital technology and data analytics.
• The company demonstrated solid performance in Q1 2025, achieving net interest income growth, stable asset quality metrics near historical lows, and strong capital generation, with record CET1 and tangible common equity ratios.
• FNB's differentiated digital platform, including the award-winning eStore and recent automated direct deposit switch capabilities, is a key competitive advantage driving customer acquisition, primacy, and operational efficiency.
• Strategic expansion of fee-based businesses, particularly in Capital Markets and Wealth Management, is successfully diversifying revenue streams and contributing to non-interest income growth, offsetting pressures in traditional banking fees.
• Management maintains a positive outlook for 2025, projecting mid-single-digit growth in both loans and deposits, anticipating modest net interest income improvement, and expecting positive operating leverage in the second half of the year, supported by ongoing expense management and strategic investments.

A Regional Powerhouse Forges Ahead

F.N.B. Corporation, with roots tracing back to 1864 through its flagship First National Bank of Pennsylvania, has evolved into a diversified financial services company operating across a strategic footprint spanning seven states and the District of Columbia. Headquartered in Pittsburgh, Pennsylvania, FNB serves a mix of major metropolitan areas including Baltimore, Cleveland, Washington D.C., Charlotte, Raleigh, Durham, the Piedmont Triad, and Charleston, South Carolina. This geographic diversity, coupled with a comprehensive suite of commercial banking, consumer banking, and wealth management solutions, forms the bedrock of FNB's business model.

In an industry marked by intense competition from both large national banks and agile fintechs, FNB distinguishes itself through a deliberate strategy centered on disciplined organic growth, strategic revenue diversification, and a deeply ingrained culture of robust risk management. The company's approach is not merely reactive to market dynamics but proactive, leveraging its established community ties while aggressively investing in forward-looking capabilities, particularly in the digital realm.

The competitive landscape in FNB's markets is varied. Larger institutions like PNC Financial Services Group (PNC), Fifth Third Bancorp (FITB), Huntington Bancshares (HBAN), and KeyCorp (KEY) possess greater scale and often more extensive branch networks and R&D budgets. These larger peers can leverage their size for operational efficiencies and broader brand recognition. For instance, PNC's digital platform is noted for faster processing speeds, potentially leading to lower operating costs per customer interaction compared to FNB. Similarly, FITB emphasizes cost leadership, resulting in lower operating expenses per branch. However, FNB counters these scale advantages by focusing on building deeper, primary relationships within its communities, particularly with small- and medium-sized businesses, where a high-touch, personalized approach can be a significant differentiator. FNB's management highlights that its loan and deposit growth in 2024 materially outpaced the industry average, suggesting successful market share gains despite the presence of larger rivals. The company holds a top five deposit share in 50% of its markets and a top 10 share in over 80%, including a strong number two position in true retail deposit market share in Pittsburgh, demonstrating its ability to compete effectively on the ground.

Beyond traditional banking peers, FNB also faces competition from indirect players, including fintech firms offering specialized services like digital-only banking, online lending, and payment processing. These competitors often boast lower cost structures and faster digital service delivery, potentially eroding market share in specific product areas. FNB's strategic response involves not only enhancing its own digital capabilities but also integrating fintech solutions through partnerships, aiming to offer competitive digital experiences while retaining the benefits of a full-service bank relationship.

Technological Differentiation and the Digital Edge

Central to FNB's competitive strategy is its significant investment in technology and digital innovation, aimed at creating a differentiated customer experience and driving operational efficiency. The company's "clicks-to-bricks" strategy seamlessly integrates its physical branch network with its digital platforms. The cornerstone of this approach is the proprietary eStore, an omnichannel banking platform.

The eStore, and its integrated Common App, represent FNB's core differentiated technology. This platform allows customers to apply for multiple consumer loan and deposit products simultaneously through a single application. This offers a tangible benefit over traditional banking processes, reducing friction and improving the customer journey. Management has reported impressive results since the launch of the eStore Common App in December 2024, with average monthly consumer loan application volume increasing by 41% and average monthly consumer deposit application volume increasing by nearly 30% compared to pre-launch levels over the same period. Total eStore interactions were up 22% year-over-year in Q2 2024, indicating strong customer engagement.

Further enhancing this digital edge, FNB launched automated direct deposit switch capabilities in March 2025, leveraging an investment in FinTech Atomic. This technology provides customers with the option to instantaneously move their payroll direct deposits with a few simple steps. Management views this as a critical enhancement that removes a significant barrier to customers making FNB their primary bank, which is key to driving low-cost deposit growth and customer primacy.

FNB is also actively integrating Artificial Intelligence (AI) and data analytics into its operations. The company leverages its extensive data infrastructure to run algorithms and apply machine learning to analyze customer behaviors. This enables the presentation of personalized product offers and optimizes the customer experience, both online and within branches. The planned addition of a Director of AI and Innovation underscores the strategic intent to focus on enterprise AI implementation and fintech partnerships to efficiently scale development, data consumption, business insights, lead generation, and client personalization across the digital ecosystem.

The "so what" for investors is clear: FNB's technological investments are not merely defensive but are designed to be a competitive moat. The eStore and associated digital tools directly contribute to customer acquisition and retention, driving loan and deposit growth more effectively than peers. The focus on customer primacy through features like the direct deposit switch supports the growth of stable, low-cost non-interest-bearing deposits, which is crucial for margin management in varying interest rate environments. Furthermore, the application of AI and data analytics aims to drive operational efficiency, potentially lowering costs over time and improving the efficiency ratio, a key profitability metric. While larger competitors may have more extensive R&D budgets, FNB's targeted investments in areas like the eStore and AI for customer engagement appear to be yielding quantifiable benefits in market share capture and operational effectiveness within its specific strategic focus areas.

Financial Performance and Operational Momentum

FNB's strategic execution is reflected in its recent financial performance. For the first quarter of 2025, the company reported net income available to common shareholders of $116.5 million, or $0.32 per diluted common share.

Net interest income totaled $323.8 million for the quarter, representing a 1.5% increase compared to the first quarter of 2024. This marked the first year-over-year increase in net interest income since the third quarter of 2023, signaling a potential turning point. The net interest margin (FTE, non-GAAP) was 3.03%, stable linked-quarter (down only 1 basis point) and down 15 basis points year-over-year. While the yield on earning assets (FTE, non-GAAP) declined, this was largely offset by a decrease in the total cost of funds. Management noted that the margin bottomed early in the quarter, with March's net interest margin showing directional improvement, finishing 5 basis points above the quarterly average. The decrease in earning asset yields was primarily driven by a decline in loan yields, partially mitigated by an increase in investment securities yields, benefiting from the strategic portfolio restructuring completed in Q4 2024. The decrease in the cost of funds reflected lower costs for interest-bearing deposits and borrowings.

Non-interest income remained stable year-over-year at $87.8 million. This stability highlights the success of FNB's revenue diversification strategy. Record wealth management revenues of $21.2 million, an 8.4% increase year-over-year, and a solid 8.7% increase in service charges (driven by treasury management and consumer volumes) helped offset declines in capital markets income (down 15.9% due to lower commercial customer activity) and mortgage banking operations income (down 11.6% due to lower gain-on-sale margins). Increased income from bank-owned life insurance also contributed positively.

Non-interest expense totaled $246.8 million in Q1 2025, a 4.1% increase year-over-year. This increase was primarily driven by strategic hiring aimed at growing market share and continued investments in the risk management infrastructure, as well as higher performance-related compensation and increased outside services costs related to ongoing investments in the enterprise risk management framework. The efficiency ratio (non-GAAP) was 58.5%, seasonally higher but still at a solid level. Management expects improved performance with positive operating leverage in the second half of 2025, indicating an expectation for revenue growth to outpace expense growth.

Operationally, FNB continued to demonstrate growth momentum. Period-end total loans and leases increased by $296.4 million, or 3.5% annualized, on a linked-quarter basis in Q1 2025. This growth was balanced, with consumer loans increasing by $224.3 million and commercial loans and leases increasing by $72.1 million. Year-over-year, total loans and leases were up 5.1%. Period-end total deposits increased by $131.7 million, or 1.4% annualized, linked-quarter, despite Q1 typically being a seasonally slower period. This growth was led by increases in interest-bearing demand deposits and non-interest-bearing demand deposits, offsetting declines in time and savings deposits as customers continued to seek higher yields. Year-over-year, total deposits grew a robust 7.2%. The mix of non-interest-bearing demand deposits remained stable at 26.5% of total deposits. The loan-to-deposit ratio stood at 92.0% at quarter-end, slightly up from 91.0% in the prior quarter but down from 94.0% a year ago, reflecting successful deposit gathering efforts, including the strategic $431 million indirect auto loan sale in Q3 2024 which improved the ratio.

Asset Quality and Risk Management Discipline

Maintaining strong asset quality and a robust risk management framework is a cornerstone of FNB's strategy, particularly in the current uncertain economic environment. The company's asset quality metrics remained stable and near historically low levels in the first quarter of 2025. Non-performing loans and leases totaled $161 million, a slight increase linked-quarter but still representing a low 0.47% of total loans and leases. Total non-performing assets (including OREO) were $163.2 million, or 0.48% of total loans and leases plus OREO, consistent with the prior quarter. Total delinquency increased year-over-year but declined linked-quarter.

The allowance for credit losses (ACL) on loans and leases was $428.9 million, increasing slightly linked-quarter. The ACL coverage ratio remained stable at 1.25% of total loans and leases. The ACL as a percentage of non-performing loans increased to 267% linked-quarter, indicating strong coverage of impaired assets. The provision for credit losses was $17.5 million in Q1 2025, compared to $13.9 million in the prior year period. Net charge-offs were $12.5 million, representing a low annualized rate of 0.15% of average total loans.

FNB employs a comprehensive enterprise risk management (ERM) framework, supported by a three lines of defense model and active oversight from the Board and management committees. The CECL model for estimating credit losses incorporates macroeconomic forecasts, including expected trends in housing and commercial real estate prices, S&P volatility, and bankruptcies. Quarterly stress testing indicates that regulatory capital ratios and liquidity levels would remain above required minimums even under severe economic scenarios, with the current ACL covering 97% of projected charge-offs in a severe downturn.

In response to potential impacts from recent tariff announcements and other governmental policies, FNB conducted a detailed evaluation of its loan portfolio in Q1 2025. A mandatory assessment was implemented in commercial underwriting, and a survey of customers in five potentially impacted C&I sectors revealed that less than 5% of surveyed exposures were estimated to have a high direct impact. Management concluded that FNB remains well-positioned with manageable exposure, emphasizing ongoing monitoring and dialogue with customers.

Interest rate risk (IRR) is actively managed using derivative instruments and balance sheet strategies. FNB is moderately asset sensitive but is strategically moving towards a more neutral position given expectations for lower short-term rates. Actions include adjusting investment securities duration, managing loan repricing characteristics, and optimizing the deposit and borrowing mix. The twelve-month cumulative repricing gap to total assets has decreased, and modeling indicates a more neutral impact on net interest income in various rate scenarios compared to the prior quarter. The maturity of approximately $0.75 billion notional of interest rate swaps in 2025, which currently have a low average receive rate, is expected to provide a positive contribution to net interest income as they roll off.

FNB maintains strong capital levels, with a record CET1 ratio of 10.7% and a tangible common equity to tangible assets ratio of 8.4% at March 31, 2025. These levels provide significant flexibility for supporting future growth and capital deployment. The company successfully issued $500 million in senior debt in Q4 2024 and repurchased $10 million of common stock in Q1 2025, while maintaining capital well above regulatory requirements.

Outlook and Future Trajectory

FNB management provided clear guidance for 2025, reflecting confidence in the company's strategic direction and execution capabilities. For the full year 2025, the company projects period-end loans and total deposits to grow at a mid-single-digit rate year-over-year, driven by continued market share gains across its diverse footprint.

Full-year net interest income is expected to be between $1.345 billion and $1.385 billion, based on an assumption of two 25 basis point rate cuts in June and September. The second quarter 2025 net interest income is projected between $325 million and $335 million, suggesting modest sequential improvement.

Non-interest income for the full year is guided to be between $350 million and $370 million, with the second quarter expected in the range of $85 million to $90 million. This outlook reflects the anticipated continued strength from diversified fee-based businesses, including contributions from the recently acquired investment banking boutique and ongoing expansion of capital markets and treasury management offerings.

Full-year non-interest expense is expected to be between $965 million and $985 million. The second quarter non-interest expense is guided between $235 million and $245 million, reflecting a decrease from the first quarter's seasonally higher level. While expenses include investments in strategic initiatives and risk infrastructure, ongoing cost savings efforts are expected to support the outlook. Management specifically anticipates achieving positive operating leverage in the second half of 2025.

The full-year provision for credit losses is guided between $85 million and $105 million, dependent on net loan growth and charge-off activity. This range implies continued stable asset quality, consistent with recent performance and stress testing results. The effective tax rate is expected to be between 21% and 22%, excluding potential investment tax credit activity.

Management indicated a willingness to pursue opportunistic share repurchases, particularly given the stock's perceived attractive valuation, once there is greater clarity regarding the impact of tariff policies. While not explicitly guiding for M&A, the company remains open to in-market, accretive opportunities that align with its strategic and financial criteria.

Conclusion

F.N.B. Corporation presents a compelling investment thesis grounded in its proven ability to execute a disciplined growth strategy, effectively diversify its revenue streams, and maintain a strong, resilient balance sheet. The company's strategic investments in digital technology, particularly the eStore platform and automated direct deposit switching, are providing a tangible competitive edge in customer acquisition and primacy, positioning FNB for continued market share gains. The successful build-out of high-value fee-based businesses is enhancing revenue stability and contributing to profitability, offsetting pressures in traditional banking. Supported by robust risk management practices, including proactive credit monitoring and stress testing, FNB's asset quality remains solid. With strong capital levels, ample liquidity, and a positive outlook for loan and deposit growth, net interest income improvement, and operating leverage in 2025, FNB appears well-positioned to navigate the current economic landscape and deliver value for shareholders. Investors should monitor the pace of loan and deposit growth, the effectiveness of ongoing expense management initiatives, and the impact of evolving macroeconomic conditions, including interest rate movements and potential tariff-related impacts, on the company's performance.