F.N.B. Corporation (FNB) Earnings Call Transcript & Summary

Good day, and welcome to the F.N.B. Corporation Annual Meeting of Stockholders. At this time, I'd like to turn the conference call over to Jim Orie, Chief Legal Officer and Corporate Secretary. Sir, please go ahead.

Welcome, everyone. May I have your attention, please? Recording of this meeting is absolutely prohibited. I'm required to inform you that today's meeting may contain information considered forward-looking statements. Under federal law, whenever we provide information of this nature, you should be aware it does not constitute a guarantee of future performance. Further, FNB will not update information presented at this meeting. To ensure we have an orderly and productive meeting, we ask that you adhere to the annual meeting rules of conduct, which may be found by clicking on the rules of conduct document in the bottom right-hand corner of the meeting webcast screen. After addressing the official business of the meeting, we will then move to the management presentation portion of the meeting and provide you with some comments on FNB's response to the COVID-19 challenges and discuss our 2019 and first quarter 2020 financial performance. After completion of the management presentation, we have allocated 15 minutes to respond to shareholder questions. [Operator Instructions] Now please allow me to introduce F.N.B. Corporation's Chairman, President and CEO, Vince Delie, who will preside at this morning's annual meeting.

Thank you, Jim. Good morning, everyone. Welcome to the 2020 F.N.B. Corporation's Annual Meeting of Shareholders. It's a pleasure to be here with you today. As many of you may know, FNB has been in existence since 1864, and today marks the first annual meeting where we are not meeting face-to-face with our shareholders. This is not a decision we took lightly since we see great value in providing our shareholders with the opportunity to meet directly with our Board and executive management team. However, in light of the COVID-19 pandemic, we made the decision to conduct this meeting using a virtual format in consideration of the well-being and safety of our shareholders and employees. We want to thank you for your patience and understanding during these unprecedented times. And we believe that the virtual nature of the meeting format will not inhibit our ability to effectively conduct the business purpose of this meeting by making it both informative and transparent. I hope that everyone is staying safe during these trying times. Our thoughts are with those who have been impacted by COVID-19. With everything that's going on, I want to take a moment to thank our employees, the management team and the FNB Board of Directors for their efforts during this challenging time. Let me please take a minute to introduce members of the FNB management team who are here with us today: Jim Orie, our Chief Legal Officer and Corporate Secretary; Vince Calabrese, our Chief Financial Officer; and Gary Guerrieri, our Chief Credit Officer. It's now 8:30 a.m., and this meeting is hereby called to order. Official business to be addressed at today's meeting will be voting on the matters brought before the shareholders, as noted in our 2020 proxy statement that was published on March 27, 2020. Jim Orie, Corporate Secretary, is hereby appointed to act as Secretary for this meeting. Jim will now report on the mailing of the notice of this meeting, the filing of an amended notice of this virtual meeting and the presence of a quorum. Jim?

Thank you, Vince. Good morning. This meeting is held pursuant to a printed notice mailed on March 27, 2020, to each shareholder of record on March 6, 2020, who is entitled to vote. An amended notice was also filed with the SEC on April 30, 2020, to inform shareholders of our decision to hold the meeting in a virtual-only format. Based on the proxies presented immediately prior to commencement of this meeting, a quorum is present. In view of the nature of the virtual meeting format, we are waiving the reading of the minutes of the May 15, 2019, Annual Meeting of Shareholders. We have appointed Matthew Lazzaro, Divya Ramalingam, and Lisa Constantine as judges of election for this meeting. Jane Ludlow of Broadridge Financial Solutions has been appointed Inspector of Election for this meeting. All of the votes cast before the beginning of today's meeting have been tabulated by the judges and inspector of election. Before we begin, I would like to remind our shareholders joining us that if you have already voted your shares by proxy, mail, Internet, QR code or telephone, unless you wish to change your previous vote, you do not need to recast your vote at this meeting. To vote or change your vote, click on the Vote Here button at the bottom-right corner of the meeting webcast screen. Chairman Delie, we can now proceed with the business of this meeting.

The first official matter of business to be acted upon today is the election of 12 directors. Based on the recommendation of the Nominating and Governance Committee, the Board has nominated the following individuals, as identified in the 2020 FNB proxy statement and on the meeting slide, to serve a 1-year term until the 2021 Annual Meeting. In accordance with the procedures set forth in the bylaws, no other nominations have been made. Each of these individuals is a shareholder and collectively do an excellent job of representing the best interest of all FNB shareholders. The second matter to be acted upon is voting on the approval of an amended and restatement of the 2007 F.N.B. Corporation incentive compensation plan. The third matter to be acted upon is voting on the adoption of the Say-on-Pay advisory resolution for the 2019 compensation of our named executive officers. The fourth and final matter to be acted upon is ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm for 2020. We will now proceed with the voting. As we previously stated, shareholders who have already voted their shares prior to the meeting do not need to recast their vote, unless they wish to change their vote. The polls are now open and will remain open until voting has been completed. I will pause for a moment. [Voting]

I hereby declare the polls closed, and that completes the voting. Let's give the judges and the inspector of election the opportunity to complete the preliminary tally of the vote. In a moment, our Corporate Secretary, Jim Orie, will report the preliminary results.

Judges and inspector of election have counted the votes cast and submitted their preliminary report of the voting results to me. It is a pleasure to report that each of the director nominees identified in our 2020 proxy statement and identified on the FNB director election slide were elected to serve as a director for a 1-year term until the 2021 Annual Shareholder Meeting. Also, each of the meeting proposal described in our 2020 proxy statement and identified on the FNB Annual Meeting -- Shareholder Meeting proposal slide have been approved by our shareholders. We will report the final vote results in a Form 8-K to be filed within 4 business days of today's meeting.

There being no further business to be acted upon by the shareholders, the 2020 Annual Meeting of F.N.B. Corporation is hereby adjourned. Next, I will provide an update on FNB's response to the COVID-19 pandemic and support provided to employees, customers, communities, and shareholders. I'll then cover key performance measures and first quarter 2020 highlights before opening the meeting for questions. During 2020, we formed our COVID-19 response from FNB's existing pandemic preparedness plan, which included participating in ongoing exercises in recent years. These preemptive efforts enabled FNB to stay at the front of these escalating prices and offer support to those in need. Looking at the COVID-19 time line. In 2018, our management team went through a pandemic simulation and collaborated with our business continuity team to develop a formal pandemic response plan. During this process, sustainability was thoroughly evaluated and ultimately formed the foundation of the comprehensive plan currently in place. As it relates to FNB's COVID-19 response, there were 4 key pillars that were the primary focus: employee protection and assistance; operational response and preparedness; customer and community support; and risk management and actions taken to preserve shareholder value given the extreme challenges presented. Regarding our employees, we provided support to all employees with up to 15 days paid leave and expanded our existing 10-day paid caregiver leave program. Additionally, FNB provided a special assistance payment to essential employees working on the front line and in our operations areas to ensure that our customers continue to receive vital financial services. In support of our communities, the FNB Foundation committed to provide $1 million in relief in response to COVID-19, benefiting food banks and providing essential medical supplies. Beyond this commitment, FNB is also supporting numerous food banks, local businesses and health care professionals through financial support and volunteer activity. For our customers, in addition to participating in the SBA's Paycheck Protection Program, FNB was one of the first banks to announce a formal program providing additional support measures to alleviate the financial burden on businesses and consumers from the COVID-19 pandemic, including relief efforts and deferral programs. I will expand on some of the incredible results of the PPP program later in my comments. For risk management and shareholder impact, the shareholders will benefit as we have continued to prudently manage risk, liquidity and capital action to better position our company. While this is a very difficult period, employee engagement and commitment remain high as we continue to strengthen our customer base and build goodwill in the community. Regarding our PPP efforts, I'm extremely proud of our employees, who worked tirelessly around the clock, 7 days a week, to ensure that tens of thousands of small businesses receive critical funding they need. Under the program, the funds will go directly to protect their livelihood and to retain their employee base, supporting the retention of hundreds of thousands of jobs from the FNB relief funds. To date, FNB is approaching 100% funding of the loan requests, resulting in over $2.5 billion in relief refunds deposited. Of the approved SBA PPP loans processed through FNB to date, 98% of eligible applications received preferred lending program numbers, or PLP numbers as they're referred to. Lastly, 97% of the loans benefited businesses with fewer than 100 employees. And of those businesses, approximately 70% had fewer than 10 employees. Nearly 3,700 loans or approximately 20% were approved for businesses operating in a low-to-moderate income or LMI neighborhood, and nearly 2,500 or approximately 13% were approved for businesses in rural communities, otherwise known as non-MSAs. Turning to risk management and shareholder impact. The total shareholder return of 35% in 2019 significantly exceeded peers. FNB outperformed the peer group and banking index during 2019, ranking in the upper quartile. While we have made steady progress on improving total shareholder return, 2020 returns have felt the impact of COVID-19 on equity markets. But I'll note FNB's total shareholder return continues to perform above the peer median through the end of March. During 2020, we further demonstrated our commitment to shareholders by repurchasing $25 million of shares during the first quarter and committed nearly $40 million in cash dividends as we declared our second quarter 2020 dividend of $0.12 on April 22, 2020. Let's briefly look at our first quarter results and some key performance measures over the last decade. Looking at the results for the quarter, the underlying performance in our business units remained strong. Top line results were solid as revenue increased to more than $300 million, driven by strong results in loan and deposit growth, coupled with positive results across our fee-based businesses. This is highlighted by record capital markets revenue of more than $11 million. Loan and deposit growth continued with 6% loan growth during the quarter and 5% total deposit growth over the last year, with noninterest-bearing deposits growing 7%. The team completed our CECL implementation successfully, and asset quality results continued to trend favorably in this early stage of COVID-19 and its effects on the economy. FNB's results are fueled by our continued market share gains and diversified footprint. We are one of the largest banks in the U.S. and the second largest bank headquartered in Pittsburgh, PA. We continue to maintain a very attractive profile with operations in Pittsburgh, PA; Cleveland, Ohio; Baltimore, Maryland; Washington, D.C.; Charlotte, North Carolina; Raleigh, North Carolina; and the Piedmont Triad in North Carolina, with the top 10 deposit share in 5 of the major markets. During 2020, we've continued to expand our footprint with new locations in Northern Virginia, Charleston, South Carolina and Eastern Ohio. Looking at key performance metrics since 2009, the added benefit of scale and geographic diversification provides FNB with reduced concentration risk and ample growth opportunities to support a sustainable long-term business model that can perform through various business cycles without changing our desired risk profile. As proof points of successful execution of our business model, we delivered strong net income and total revenue with compounded annual growth rate of 28% and 13%, respectively, since 2009. FNB's proven track record is evident in the performance metrics illustrated on these slides. The result of successful execution of our financial objectives leads to increased profitability and is shown with our peer-leading metrics and return on tangible common equity and efficiency ratio. During the past decade, FNB has delivered tangible book value per share growth, all while returning more than $1 billion in capital to our shareholders and cumulative dividends that have significantly exceeded our peers. During the past decade, the dividend yield has ranked consistently among the highest in the industry. Our commitment to growing tangible book value while providing an attractive dividend is important to how we manage capital and ultimately deliver value. In summary, I'm proud of our accomplishments over the last year and decade as FNB has continued to outperform peers. We are in an excellent position to continue to grow, pursue revenue-generating opportunities, deliver superior returns and create relative shareholder value. Our Board of Directors and our management team is committed to working through this current health care crisis while advancing the interests of our shareholders and balancing the needs of our employees, customers and the communities we serve. With that, we will now address any questions you may have. We will pause for a moment to review the questions being submitted.

Chairman, we have a question on FNB's participation in the PPP program. The question is, was FNB involved in financing PPP government loans for SBA? If so, how many were issued? Were they national chain companies or small local companies?

Thank you. Thank you for the question. I'll refer that -- the shareholder to the press release dated May 7, 2020. And I think I've covered some of the elements of that question in my prepared comments, but FNB originated $2.6 billion in PPP loans, which on a -- when you look at it on a pro rata basis relative to total assets, we did a slightly larger share proportionately. So FNB has done a pretty good job of distributing this necessary funding source for small business -- small businesses. A majority of those funds went to what I would consider to be micro businesses, so businesses with 10 or fewer employees. The average loan amount was $139,000. And then the elements that I called out in the prepared comments, which I think are important, is that the low-to-moderate income and rural communities were also included in our effort. We reached out to over 100 community groups and LMI communities and rural communities, and we had 21% coverage of the LMI communities and actually approximately 13% in rural communities. And there were very, very few loans that were above $1 million in outstanding. So on a relative basis, it was very, very small. And we focus principally on small businesses, so we weren't focusing on national chains. So that concludes my answer. Are there any other questions?

Chairman, there are no other questions in the queue.

Okay. At this time, we have no further relevant questions. As I previously mentioned, if you do have additional questions, we encourage you to reach out to our Investor Relations team via the contact information on our website. There being no more questions, that concludes our meeting. I'd like to thank you for attending, and thank you for your interest and support in F.N.B. Corporation. And please stay safe and healthy. Thank you.

Ladies and gentlemen, the conference has now concluded. We thank you for attending today's presentation. You may now disconnect your lines.