FNB Corp (NYSE: FNB) is a diversified $48 billion regional financial institution with a strong presence across seven states and the District of Columbia. FNB Corp, which celebrated its 160th anniversary in 2024, has continued to prosper and evolve through the execution of its strategic growth initiatives, positioning it as a leading player in its markets.
Business Overview
FNB's business model is centered around three key pillars: gaining market share through loan and deposit growth, diversifying revenue streams, and prudent risk management. FNB Corp's performance in the second quarter of 2024 reflects the success of this multifaceted approach, with solid financial results and continued progress on its strategic priorities.
Financials
For the full year 2023, FNB reported annual net income of $485 million, annual revenue of $2.23 billion, annual operating cash flow of $423 million, and annual free cash flow of $335 million. In the second quarter of 2024, FNB Corp reported net income available to common shareholders of $123 million, or $0.34 per diluted common share. This represents a 12.4% decrease from the prior-year quarter, primarily due to higher provisions, higher expenses, and lower net interest income (NII).
The decrease in NII was largely attributable to higher deposit costs, partially offset by growth in earning assets and higher earning asset yields. The net interest margin (FTE basis) contracted 28 basis points year-over-year to 3.09%. Non-interest income, on the other hand, increased 9.5% to $87.9 million, driven by growth across various fee income components, including mortgage banking, wealth management, and treasury management.
On the expense side, non-interest expenses rose 6.9% year-over-year to $226.6 million, primarily due to higher salaries and benefits, as well as increased occupancy and equipment costs. FNB Corp's efficiency ratio remained strong at 54.4% in the second quarter.
FNB's balance sheet and capital position remain robust, with a common equity Tier 1 (CET1) ratio of 10.2% as of June 30, 2024. FNB Corp's tangible book value per common share grew 12.4% year-over-year to $9.88, reflecting its ability to generate capital and support its strategic initiatives.
In terms of loan and deposit growth, FNB reported a 3.6% linked-quarter increase in total loans and leases, reaching $33.8 billion as of June 30, 2024. This growth was driven by both commercial and consumer segments, with the consumer portfolio benefiting from a seasonal peak in residential mortgage originations. On the deposit side, total deposits increased 1% linked-quarter to $35 billion, with growth in both non-interest-bearing and interest-bearing accounts.
Geographic Diversification
FNB's geographic diversification has been a key strength, with FNB Corp seeing particularly strong performance in the Carolinas, Pittsburgh, and Cleveland markets. The Carolinas region, which includes North and South Carolina, has been a standout, contributing double-digit year-over-year growth in commercial loans. FNB's Pittsburgh and Cleveland markets have also shown promising momentum, with the commercial equipment finance business posting solid contributions.
Revenue Diversification
In terms of revenue diversification, FNB has made significant strides in growing its non-interest income streams. FNB Corp is targeting a long-term goal of 30% of total revenue coming from fee-based businesses, and it is making progress towards this objective. In the first half of 2024, non-interest income totaled $176 million, a 10% increase over the same period in 2023. Key drivers of this growth include mortgage banking, wealth management, and treasury management.
Outlook
Looking ahead, FNB has provided guidance for the third quarter and full year of 2024. FNB Corp expects full-year net interest income to be between $1.27 billion and $1.29 billion, assuming a 125-basis-point rate cut in September. Non-interest income for the full year is expected to be in the range of $350 million to $355 million, reflecting the continued strength of FNB's diversified revenue streams.
On the expense front, FNB anticipates full-year non-interest expenses to be between $900 million and $915 million, driven by production-related compensation. FNB Corp's provision for credit losses is expected to be in the range of $75 million to $95 million for the full year, dependent on net loan growth and charge-off activity in the second half of 2024.
Risks and Challenges
FNB's comprehensive approach to risk management has been a key differentiator, contributing to its strong and stable asset quality. In the second quarter, FNB Corp's non-performing loans and other real estate owned (OREO) to total loans and OREO ratio decreased 14 basis points to 0.33%, while net charge-offs to total average loans were 0.09%, down 2 basis points year-over-year.
FNB's credit team proactively monitors its loan portfolios and concentrations, which has enabled FNB Corp to navigate various economic cycles successfully. Quarterly in-depth portfolio reviews and comprehensive stress testing have further reinforced the resilience of FNB's credit profile.
Recent Developments
FNB's strategic focus on innovation and digital transformation has also been a source of competitive advantage. FNB Corp's eStore platform, which saw a 22% year-over-year increase in total interactions, has been a key driver of customer engagement and deposit growth. Additionally, FNB's recognition as a finalist for several prestigious banking technology awards, including Best Digital Initiative and Best Use of Technology in Consumer Banking, underscores its commitment to innovation and digital leadership.
FNB Corp's strong performance has been recognized by industry publications, with FNB being ranked as one of America's Best Banks by Forbes and included in the Global 2000 list of the world's largest public companies by Forbes. These accolades reflect FNB's ability to consistently deliver value to its shareholders, customers, and communities.
Conclusion
In conclusion, FNB Corp's diversified business model, prudent risk management, and strategic focus on growth have positioned FNB for continued success. With a strong balance sheet, ample liquidity, and a talented team of banking professionals, FNB Corp is well-equipped to navigate the evolving financial landscape and capitalize on opportunities for further expansion and value creation.