F.N.B. Corporation — Q1 2021 Form 10-Q
Business context and reporting period. F.N.B. Corporation is a diversified financial services company operating across seven states and Washington, D.C., through community banking, wealth management and insurance businesses. This unaudited filing covers the three months ended March 31, 2021; balance-sheet comparisons are to December 31, 2020, unless noted.
Key financial results
| Metric | Q1 2021 | Comparable period / change |
|---|---|---|
| Total revenue | $305.7 million | Up 1.5% year over year |
| Net interest income | $222.9 million | Down 4.2% year over year |
| Net interest margin, FTE (non-GAAP) | 2.75% | Down 39 basis points year over year |
| Non-interest income | $82.8 million | Up 20.8%; record quarterly level |
| Non-interest expense | $184.9 million | Down 5.1%; excluding prior-year significant items, up 0.1% |
| Provision for credit losses | $5.9 million | Down 87.6% year over year |
| Net income / diluted EPS | $93.2 million / $0.28 | Net income available to common shareholders was $91.2 million; diluted EPS was $0.14 in Q1 2020 |
| Efficiency ratio (non-GAAP) | 58.7% | 59.0% in Q1 2020 |
| Cash flow from operations | $215 million | Cash increased $1.285 billion during the quarter |
Financial position, credit and liquidity
- Balance sheet: Total assets were $38.5 billion, up $1.1 billion (3.0%) from year-end. Loans and leases were $25.5 billion, up 0.3%; deposits were $30.4 billion, up 4.2%.
- Funding and borrowings: Cash and cash equivalents totaled $2.7 billion. Total borrowings were $2.8 billion, including $1.7 billion short-term and $1.1 billion long-term. The loan-to-deposit ratio was 84.1%.
- Liquidity: Unused wholesale credit availability was $16.3 billion. Parent-company liquidity coverage ratio was 2.5 times and months of cash on hand were 18.0, above stated internal limits of more than 1 times and more than 12 months, respectively.
- Capital: The company’s CET1 ratio was 10.0%, up from 9.1% a year earlier. Management said FNB and its bank subsidiary exceeded regulatory capital requirements and remained well-capitalized. Tangible book value per share (non-GAAP) was $8.01, versus $7.46 a year earlier.
- Credit quality: Non-performing loans were $157 million, or 0.62% of loans, compared with $170 million and 0.67% at year-end. Non-performing assets were $166 million. The loan-loss allowance was $362 million, or 1.42% of loans; excluding PPP loans, the ratio was 1.57% (non-GAAP). Net charge-offs were $7.1 million, or 0.11% annualized of average loans.
- PPP exposure: PPP loans outstanding were approximately $2.5 billion at quarter-end, including $0.9 billion originated and $0.5 billion forgiven during Q1. These loans are 100% SBA-guaranteed.
Material changes versus prior periods
- Common earnings per diluted share doubled to $0.28 from $0.14. The lower Q1 2020 earnings base included $8.3 million of branch-consolidation costs and $2.0 million of COVID-19 expenses; Q1 2021 reported no such significant items.
- Net interest income and FTE margin declined amid low rates and lower asset yields. Management cited growth in earning assets, lower deposit costs, increased non-interest-bearing deposits and the termination of higher-rate FHLB borrowings as offsets.
- Non-interest income rose primarily on stronger mortgage banking and fee-based business activity. Mortgage banking income was $15.7 million versus a loss of $1.0 million in Q1 2020.
- Deposits increased substantially, supported by customer growth, PPP funding and government stimulus inflows. Non-interest-bearing deposits were $9.9 billion, up 52.6% year over year; cash balances increased $1.3 billion from year-end.
- The allowance was nearly unchanged from year-end as management cited an improving macroeconomic outlook. The filing’s modeled forecast assumed GDP growth of 6% in 2021 and 2% in 2022, with average unemployment of 5% over the forecast period.
Outlook, risks and unusual items
The filing does not provide specific earnings or revenue guidance. Management said Q1 results are not necessarily indicative of full-year results. It described customer activity as increasing as the economy moved toward reopening and emphasized ongoing technology investment and growth in relationship-based deposits.
- Principal uncertainties include COVID-19 and the pace of economic and labor-market recovery, credit deterioration, interest-rate and market changes, competition, regulatory and accounting developments, litigation, and operational, cybersecurity and third-party risks.
- FNB was transitioning away from LIBOR; the financial impact on pricing, valuation and operations was not yet known. New adjustable-rate mortgages had transitioned to SOFR.
- About $269 million of loans had short-term COVID-related modifications at March 31, 2021; these were not classified as TDRs under applicable relief guidance. Total TDRs were $98 million.
- The company repurchased 3.0 million shares for $36.2 million in Q1 under its buyback program and declared a common dividend of $0.12 per share.
- Management said pending or threatened legal matters were not expected, based on current knowledge, to materially adversely affect financial position or liquidity, though they could affect net income in a period. The filing reported no material changes in risk factors since year-end.
Important facts for investors to verify
- Whether deposit growth from PPP and stimulus inflows persists, and how liquidity is redeployed as cash balances remain elevated.
- Whether margin pressure continues as asset yields and deposit costs reprice, including the effect of interest-rate changes and the LIBOR transition.
- How PPP forgiveness and fee recognition affect reported loan growth, interest income and the mix of commercial loans.
- Whether the improving economic assumptions and lower credit-loss provision remain appropriate as loan modifications and borrower performance evolve.
- Capital and liquidity resilience, including regulatory ratios, buybacks and dividends under adverse scenarios; the filing does not provide a specific earnings outlook.