F.N.B. Corporation (NYSE:FNB) Q4 2023 Earnings Call Transcript

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Gary Guerrieri: Well, I think the CRE book just in general, I mean, we’ve been all over that and the team has done a really nice job of building out risk management practices around that. Tom Fisher and his team are all over those books of business as they are the rest of the portfolio. But the office space, naturally, and we’ve said it for years, that was going to be a longer term portfolio segment in the industry that is going to have to be dealt with over time. I mean, that change was, I would say, not temporary. There’s been permanent change in that market. Fortunately, I think we chosen well there over time with good solid sponsors that have liquidity. And I think that’s why that portfolio has continued to perform as it has to this point. But that CRE space in that office portfolio, I think it has a way to go. So we’ll continue to be all over that.

Brian Martin: Okay, perfect. Yes. And then maybe just last two, just on the fee income side, just kind of looking at the pickup in mortgage and you talked a little bit about kind of a little bit of the changing strategy there, just kind of the puts and takes on mortgage outlook for here and then just the capital markets revenue, it was pretty consistent, maybe a little bit lower level from where it was previous years. Just kind of wondering how to think about that or just how the pipeline looks there.

Vince Calabrese: Yes, I would just say the noninterest income again shows the benefit of having merged by revenue base, right. I mean, we’ve had another good quarter above 80. We’ve been above 86 out of the last seven quarters, getting there different ways, but again, the benefit of diversification. So capital markets was a solid quarter for us. I mean, it’s up from the prior quarter, down from last year when I had a ten handle. But there’s still a lot of opportunity there. And I think when the rate environment starts to shift, there will continue to be opportunity there. But we have really solid contributions from all the components there from the swap perspective, international syndications, debt capital market. So there’s a lot of pieces even within that business.

And then the mortgage bounce back, I mean, we had a really strong ’23 in an environment where the market was down from an origination standpoint. The overall industry was down, we were up. And we’re forecasting from an origination standpoint close to double digit increase in originations in ’24 versus ’23. And then my comments on pricing was more just about saleable versus portfolio. Not really affecting the level of originations, but kind of what we bring on a balance sheet and what we sell.

Vince Delie: The other thing I would say is that in a lower rate environment, if we do get the rate decreases, we should see more activity in derivatives, more activity in debt capital markets with our large corporate customers going to market to raise capital and syndication should pick up in the second half of the year. So — and then the mortgage business gain on sale should accelerate. So like Vince said, having a portfolio — and then we’ve had good steady growth I should mention. Our asset management and the wealth and trust shops have done extraordinarily well. So they’re up in revenue, net income. They’ve grown net assets on — we’re at record level. We’re in good markets where we should see continued growth in that book. So we have a good balanced set of fee generators that I think in the coming year, if rates play out the way some are forecasting, we should do okay with non-interest income.

Vince Calabrese: And then initiatives on the small business and TM side will be additive.

Brian Martin: Yes, no, the businesses you guys have built out are really paying dividends here. And like you said, the diversification and I guess on the mortgage. I was just trying to understand, Vince, if part of the increase this quarter was really just you selling more. And so if you do have an increase in originations next year and you continue to sell at a higher rate, maybe that also contributes to a better outlook for ’24?

Vince Delie: Yes, the gain on sale margin is lower though, it depends on the rate environment. When you look at it, we may have sold, but we’re not making as much per unit. We’re just moving it off the balance sheet because the rate environment doesn’t provide us with the opportunity to do that. Remember, we focus principally on purchase money. That activity has been lower, right. I mean, we’re not — in a declining rate environment, we would see more refinance activity even though we focus more on purchase money, we would get some benefit from the refinance market. There’s trade-offs, but I think it’s a pretty balanced approach. And I think that’s — we’ve been able to sustain our fee income levels through this period, even with declining consumer fee. But we’ve done pretty good.

Vince Calabrese: Brian, I would just add the mortgage income in the fourth quarter had benefit from rates coming down, too. So the fair value mark on the pipeline is contributed to that in the fourth quarter.

Brian Martin: Got you. Okay, perfect. Then just the last one, just on the margin Vince, just the one question. Just remind me, I mean, from a variable rate perspective, I mean, the percentage of variable rate loans. And then if a 25 basis point cut on that piece, how much does that move the margin for each kind of 25 basis point cut?

Vince Calabrese: You need to look at the whole balance sheet. I think our percentage is still, 47% of the total loans that are very little just down and that was talking about earlier. And you have all the different movement parts. The CDs are 10 months average maturity, so there’s pluses and minuses there. That’s kind of all baked into the market, kind of bottoming in the first-half of the year, Brian and then [Technical Difficulty]

Brian Martin: Okay, that helps out the 47. All right, I appreciate. Thanks for taking the questions, guys.

Operator: And ladies and gentlemen, at this time I’m showing no additional questions. I’d like to turn the floor back over to Vince Delie for any closing remarks.

Vince Delie: Yes, I’d like to thank everybody for the questions — great questions. Thank you for your interest. And I think given what’s gone on this year, FNB has performed very well. And many of the key strategies that we’ve deployed that we’ve talked about over the years really played out during the liquidity crisis earlier this year. You got to see firsthand what we’ve been talking about in terms of client primacy, the quality of our deposit portfolio, and our credit underwriting. So I think it really showed itself this year, and I’m very excited about moving into next year, hopefully moving into a better economic environment as we move into ’24, particularly the latter half of ’24. And, again, would like to thank our employees because they step up and get things done and did an admirable job last year. So thank you.

Gary Guerrieri: Thank you, everybody. Take care.

Operator: Ladies and gentlemen, with that, we’ll conclude today’s conference call and presentation. We thank you for joining. You may now disconnect your lines.

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