F.N.B. Corporation

Hello, and welcome to the FMB Corporation Third Quarter 2020 Quarterly Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please see the World Conference Specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchstone phone. To withdraw your question, please press star, then two. Please note, today's event is being recorded. And now I'd like to turn the conference over to your host today, Matthew Lazaro. Mr. Lazaro, please go ahead.

Thank you. Good morning, everyone, and welcome to our earnings call. This conference call of F&B Corporation and the reports it files with the Securities and Exchange Commission often contain forward-looking statements and non-GAAP financial measures. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, our reported results prepared in accordance with GAAP. Reconciliations of GAAP to non-GAAP operating measures to the most directly comparable GAAP financial measures are included in our presentation materials. and in our earnings release. Please refer to these non-GAAP and forward-looking statement disclosures contained in our earnings release related presentation materials and in our reports and registration statements filed with the Securities and Exchange Commission and available on our corporate website. A replay of this call will be available until October 27th, and the webcast link will be posted to the About Us, Investor Relations, and Shareholder Services section of our corporate website. I'll now turn the call over to Vince DeLee, Chairman, President, and CEO.

Good morning, and welcome to our earnings call. Joining me this morning are Vince Calabrese, our Chief Financial Officer, and Gary Guerrero, our Chief Credit Officer. Today, I'll provide third-quarter highlights and an update to our strategic initiatives. Gary will discuss asset quality, and Vince will cover the financials. Third-quarter operating EPS of 26 cents reflects strong fundamental performance as we continue to have success across many business units despite a challenging operating environment. and provision expense totaling $27 million. This quarter's performance reflects growth in average loans and deposits of 2% and 4%, respectively, as well as continued strength in our fee-based businesses, with strong contributions from capital markets activity and record mortgage banking income of $19 million. On a linked quarter basis, tangible book value per share increased 18 cents to $7.81 as we continue our commitment to paying an attractive dividend by declaring our quarterly common dividend of $0.12 last week. In addition, our CET1 and TCE ratios increased meaningfully, and after adjusting for the indirect loan sale, CET1 improves almost 20 basis points to the strongest level in the company's history. Our bolstered capital base should provide us with increased flexibility to deploy capital in the best interest of the shareholders. Return on tangible common equity was again peer-leading at 14%, and the efficiency ratio equaled 55%. These results illustrate the resiliency of FMB's business model and are truly remarkable given the challenges presented and unique circumstances the industry is facing amidst the global pandemic. I'm extremely proud of our team for going above and beyond to support our customers in this challenging macroeconomic environment. Their hard work was critical to providing timely assistance to our impacted customers through the Paycheck Protection Program, by offering loan deferral options and consumer relief, as well as other programs to help clients manage their finances during these difficult times. Customer feedback has been overwhelmingly positive, and we are encouraged by the low single-digit level of second loan deferral requests as a percentage of total loans as of October 15, 2020. Lower demand for second deferral requests is indicative of the quality of our customer base, our consistent approach to credit risk management, and FMB's dedication to disciplined underwriting standards throughout various business cycles. our bankers and credit teams will continue to actively evaluate and work with COVID-19-impacted borrowers as they manage through their pandemic-related disruption. Earlier in the third quarter, our organization was recognized as a 2020 standout commercial bank by Greenwich Associates, with FMB being one of only 10 banks in the country to be recognized for its response to the COVID-19 pandemic. If you look at the credit metrics on FMV's COVID-19 sensitive sectors, we are favorably positioned to peers on a relative basis. Our disciplined approach to underwriting and portfolio management ensures granularity, diversification, and appropriate credit structure within our loan portfolios. On the deposit side, organic growth in government programs have resulted in increased liquidity in our customer base. Looking at the recent FDIC data compared to 2019, F&B has successfully gained share in fortified top market share positions in Pittsburgh, Baltimore, Cleveland, Charlotte, Raleigh, and the Piedmont Triad, with our largest market, Pittsburgh, surpassing the $8 billion mark in total deposits. Additionally, as of June 30, 2020, F&B ranked in the top 10 in retail deposit market share across seven major MSAs. And when looking at our footprint in total, F&B has a top 10 market share in more than 80% of the 53 markets categorized by the FDIC. Compared to June 2019, F&B continued to gain market share as total deposits increased nearly 5 billion or over 20% overall. If you look back over the last six months, we've added thousands of new households and more than $4 billion in total deposits. Diving deeper by examining the regional market share trends, F&B has five MSAs with greater than $1 billion in deposits and 16 MSAs with greater than $500 million in deposits. These market positions reflect successful execution of our deposit gathering strategy centered on attracting low-cost deposits through household acquisition and deepening commercial relationships, thereby enabling F&B to eliminate our overnight borrowing position. The surge in core deposits has strengthened our overall funding mix as the loan-to-deposit ratio further improved to 89.1%. We continue to be absolutely focused on generating non-interest bearing and transaction deposits growth, given the impacts of the expected lower for longer interest rate environment. To complement our deposit gathering strategy, we are focused on supporting our customers and expanding our relationships as their primary capital provider with value-added products and services, while staying true to our credit culture. Looking ahead to the fourth quarter, we are encouraged by the current position of the balance sheet with ample liquidity to support growth opportunities and an expanded capital base. Additionally, with our PPP efforts, we've added more than 5,000 prospects for non-customer PPP lending to pursue as long-term relationships. Given our success and the quality of our bankers, We have firmly established ourselves as a formidable competitor across our seven-state footprint, providing competitive financial products and services supported by technology investment and the best personnel. With that, I'll turn the call over to Gary for more detail on asset quality.