F.N.B. Corporation Reports Second Quarter 2020 Earnings per Share of $0.25, a 79% Increase from Prior Quarter

PITTSBURGH, July 16, 2020 /PRNewswire/ -- F.N.B. Corporation (NYSE: FNB) reported earnings for the second quarter of 2020 with net income available to common stockholders of $81.6 million, or $0.25 per diluted common share. Comparatively, first quarter of 2020 net income available to common shareholders totaled $45.4 million, or $0.14 per diluted common share, and second quarter of 2019 net income available to common stockholders totaled $93.2 million, or $0.29 per diluted common share. The results for the second quarter of 2020 reflect the impact of $2.6 billion of loans originated through the United States Department of Treasury Paycheck Protection Program (PPP), as well as expenses related to COVID-19 of $2.0 million and an estimated $17.1 million of incremental provision for credit losses due to the COVID-19 related impacts on our allowance for credit losses (ACL) modeling results. Total significant, outsized, or unusual items were $19.4 million (pre-tax), or $0.05 per diluted common share.

Vincent J. Delie, Jr., President, Chairman and Chief Executive Officer of F.N.B. Corporation, said of its results, "As we all continue to experience many new challenges, our most recent performance demonstrates the tremendous power and dedication of our workforce and their ability to innovate and adapt to serve our constituents. As essential workers, our team has put in thousands of hours to ensure that customers have access to the funding, tools and expertise they need to maintain their livelihoods. As we move forward, I am confident that our team's compassionate and resilient attitudes will continue to shape our performance and will translate into results for our customers, communities and shareholders.

Our Company's efforts are apparent in the performance we achieved in this challenging and difficult economic environment. Operating earnings per share in the quarter increased 63% to $0.26, even with a substantial credit reserve build due to the potential impact of COVID-19 and changing macroeconomic conditions. Core revenue trends remained solid with total revenue increasing 6% annualized to $306 million, and total assets growing nearly $3 billion to end June at $38 billion. Compared to the first quarter, loans and deposits increased $2.3 billion and $3.6 billion, or 10% and 15%, respectively. Capital markets and mortgage banking set new records with revenues of $13 million and $17 million, respectively. Operating expenses were well-controlled as our efficiency ratio equaled  53.7% for the quarter."

Second Quarter 2020 Highlights
(All comparisons refer to the second quarter of 2019, except as noted)

• Growth in total average loans was $2.8 billion, or 12.5%, with average commercial loan growth of $2.8 billion, or 19.5%, and average consumer loan growth of $59 million, or 0.7%. Total loan growth included $2.6 billion of PPP commercial loans originated during the second quarter of 2020.
• Total average deposits grew $3.4 billion, or 14.3%, primarily due to an increase in average non-interest-bearing deposits of $2.1 billion, or 34.2%, and an increase in average interest-bearing demand deposits of $2.1 billion, or 21.4%, partially offset by a managed decrease in average time deposits of $1.1 billion, or 19.7%. Growth in average deposits reflected inflows from the PPP and government stimulus checks, in addition to organic growth in customer relationships.
• The loan to deposit ratio was 92.1% at June 30, 2020, compared to 95.0% at June 30, 2019 as deposit growth outpaced loan growth.
• Net interest income decreased $2.4 million, or 1.1%, attributable to lower interest rates compared to 2019 due to the Federal Open Market Committee (FOMC) lowering its target rate to 0-0.25% from 2.25%-2.50% between July 2019 and March 2020.
• On a linked-quarter basis, the net interest margin (FTE) (non-GAAP) decreased 26 basis points to 2.88%, driven by the impact of the FOMC actions. Average loan yields declined 69 basis points and the total cost of funds decreased 34 basis points, as the cost of interest-bearing deposits decreased 37 basis points. Compared to the second quarter of 2019, the net interest margin declined 32 basis points from 3.20%.
• Non-interest income increased $2.8 million, or 3.7%, led by an $8.9 million, or 117.4%, increase in mortgage banking income and a $2.6 million, or 26.8%, increase in capital markets. Service charges decreased $8.1 million, or 25.4%, largely due to significantly lower transaction volumes in the COVID-19 environment.
• The effective tax rate was 16.0%, compared to 19.7%, primarily due to renewable energy investment tax credits recognized during the second quarter of 2020.
• The efficiency ratio (non-GAAP) improved 80 basis points to 53.7%, compared to 54.5%.
• The annualized net charge-offs to total average loans ratio decreased 3 basis points to 0.13% from 0.16%.
• The ratio of tangible common equity to tangible assets (non-GAAP) decreased 35 basis points to 6.97%, with net PPP loan balances impacting the June 30, 2020 TCE ratio by 52 basis points. The June 30, 2020 metric also includes the Day 1 Current Expected Credit Losses (CECL) adoption impact of $50.6 million, or 14 basis points, as well as incremental provision for credit losses related to the estimated impact of COVID-19 on our ACL modeling results. The significant, unusual, or outsized items in 2020 totaled $63.7 million after-tax, or 18 basis points, and impacted tangible book value per common share (non-GAAP) by $0.20 per share. On a linked-quarter basis, tangible book value per common share (non-GAAP) increased $0.17, or 2.3%, to $7.63.

Non-GAAP measures referenced in this release are used by management to measure performance in operating the business that management believes enhances investors' ability to better understand the underlying business performance and trends related to core business activities. Reconciliations of non-GAAP operating measures to the most directly comparable GAAP financial measures are included in the tables at the end of this release. 

Quarterly Results Summary		2Q20		1Q20		2Q19
Reported results
Net income available to common stockholders (millions)		$	81.6			$	45.4			$	93.2
Net income per diluted common share		0.25			0.14			0.29
Book value per common share (period-end)		14.82			14.67			14.30
Pre-provision net revenue (reported) (millions)		129.7			106.3			130.0
Operating results (non-GAAP)
Operating net income available to common stockholders (millions)		$	83.2			$	53.5			$	95.4
Operating net income per diluted common share		0.26			0.16			0.29
Tangible common equity to tangible assets (period-end)		6.97	%		7.36	%		7.32	%
Tangible book value per common share (period-end)		$	7.63			$	7.46			$	7.11
Pre-provision net revenue (operating) (millions)		$	135.7			$	116.5			$	132.9
Average diluted common shares outstanding (thousands)		325,153			326,045			325,949
Significant items impacting earnings1 (millions)
Pre-tax COVID-19 expense		$	(2.0)			$	(2.0)			$	—
After-tax impact of COVID-19 expense		(1.6)			(1.6)			—
Pre-tax branch consolidation costs		—			(8.3)			(2.9)
After-tax impact of branch consolidation costs		—			(6.5)			(2.3)
Other unusual or outsized items impacting earnings1 (millions)
Pre-tax provision for COVID - impacted ACL modeling results		(17.1)			(37.9)			—
After-tax impact of provision for COVID - impacted ACL modeling results		(13.5)			(29.9)			—
Pre-tax MSR impairment		(0.3)			(7.7)			(1.3)
After-tax MSR impairment		(0.3)			(6.1)			(1.0)
Pre-tax accelerated vesting of certain 2020 stock grants		—			(5.6)			—
After-tax accelerated vesting of certain 2020 stock grants		—			(4.4)			—
Total significant, unusual or outsized items pre-tax		$	(19.4)			$	(61.5)			$	(4.2)
Total significant, unusual or outsized items after-tax		$	(15.4)			$	(48.5)			$	(3.3)
Year-to-Date Results Summary		2020		2019
Reported results
Net income available to common stockholders (millions)		$	127.0			$	185.3
Net income per diluted common share		0.39			0.57
Pre-provision net revenue (reported) (millions)		235.9			260.2
Operating results (non-GAAP)
Operating net income available to common stockholders (millions)		$	136.7			$	188.9
Operating net income per diluted common share		0.42			0.58
Pre-provision net revenue (operating) (millions)		252.2			264.8
Average diluted common shares outstanding (thousands)		325,716			325,697
Significant items impacting earnings1 (millions)
Pre-tax COVID-19 expense		$	(4.0)			$	—
After-tax impact of COVID-19 expense		(3.1)			—
Pre-tax branch consolidation costs		(8.3)			(4.5)
After-tax impact of branch consolidation costs		(6.5)			(3.6)
Other unusual or outsized items impacting earnings1 (millions)
Pre-tax provision for COVID - impacted ACL modeling results		(55.0)			—
After-tax impact of provision for COVID - impacted ACL modeling results		(43.4)			—
Pre-tax MSR impairment		(8.0)			(2.6)
After-tax MSR impairment		(6.3)			(2.1)
Pre-tax accelerated vesting of certain 2020 stock grants		(5.6)			—
After-tax accelerated vesting of certain 2020 stock grants		(4.4)			—
Total significant, unusual or outsized items pre-tax		$	(80.9)			$	(7.1)
Total significant, unusual or outsized items after-tax		$	(63.7)			$	(5.7)

(1) Favorable (unfavorable) impact on earnings.

Second Quarter 2020 Results – Comparison to Prior-Year Quarter

Net interest income totaled $228.0 million, decreasing $2.4 million, or 1.1%, as significant growth in average loans and deposits of $2.8 billion and $3.4 billion, respectively, partially offset the repricing impact from lower interest rates on variable and adjustable-rate loans. Total average earning assets increased $2.9 billion, or 9.8%, due to the average loan growth. The net interest margin (FTE) (non-GAAP) declined 32 basis points to 2.88%, as earning asset yields decreased 83 basis points reflecting lower yields on variable-rate loans as the quarterly average LIBOR and Prime rates significantly decreased. The total cost of funds also decreased 53 basis points to 0.67%, compared to 1.20%, due to reduced costs on interest-bearing deposits of 51 basis points and lower borrowing costs.

Average loans totaled $25.6 billion, an increase of $2.8 billion, or 12.5%, primarily due to PPP loans originated during the quarter. Average total commercial loan growth totaled $2.8 billion, or 19.5%, including $1.7 billion, or 34.6%, growth in commercial and industrial loans and $960 million, or 10.8%, growth in commercial real estate balances. Excluding PPP loans, origination activity remained solid with organic growth in the Pennsylvania, Cleveland, North and South Carolina, and Mid-Atlantic (Greater Baltimore-Washington D.C. markets) regions. Average consumer loan growth was $59 million, or 0.7%, with growth in residential mortgages of $191 million, or 5.8%, and direct installment loans of $165 million, or 9.5%, partially offset by a decline in consumer lending heavily impacted by COVID-19 as indirect auto loans decreased $162 million, or 8.3%, and consumer lines of credit decreased $135 million, or 8.8%.

Average deposits totaled $27.3 billion, an increase of $3.4 billion, or 14.3%, supported by growth in non-interest bearing demand deposits of $2.1 billion, or 34.2%, and interest-bearing demand deposits of $2.1 billion, or 21.4%. The growth in deposits was driven by deposits for PPP funding and government stimulus activities, as well as solid organic growth in customer relationships. The loan-to-deposit ratio was 92.1% at June 30, 2020, compared to 95.0% at June 30, 2019.

Non-interest income totaled $77.6 million, increasing $2.8 million, or 3.7%. Mortgage banking operations income increased $8.9 million, or 117.4%, primarily due to $16.8 million in origination and secondary marketing revenue, compared to $8.8 million in the second quarter of 2019, as sold mortgage production volume increased 31% to $438 million and gain on sale margins have improved. Capital markets income grew $2.6 million, or 26.8%, to a record $12.5 million, reflecting balanced activity across the footprint. Insurance commissions and fees increased $1.4 million, or 32.3% representing the benefit from new business in North and South Carolina, as well as org