F.N.B. Corporation

Good morning, everyone, and welcome to the FMB fourth quarter 2022 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a 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 and then one. To withdraw yourself, you may press star and two. Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Lisa Hajdu, Manager of Investor Relations. Ma'am, please go ahead.

Thank you. Good morning and welcome to our earnings call. This conference call of F&B Corporation and the report it files with the Securities and Exchange Commission contains 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 material and in our earnings release. Please refer to these non-GAAP and forward-looking statement disclosures contained in our related materials, 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 Tuesday, January 31st. And the webcast link will be posted to the About Us Investor Relations section of our corporate website. I will now turn the call over to Vince DeLee, Chairman, President, and CEO.

Thank you, and welcome to our fourth quarter earnings call. Joining me today are Vince Calabrese, our Chief Financial Officer, and Gary Guerrero, our Chief Credit Officer. F&P closed strong in 2022, continuing our streak of outstanding performance. and is positioned to capitalize on our momentum as we navigate a complex economic landscape in 2020. F&B's fourth quarter operating earnings per share totaled a record 44%, increasing 13% on a linked quarter basis and bringing the full year operating earnings per share to $1.40. The success of this quarter was further highlighted by record revenue, continued strong loan growth, disciplined deposit cost management, and the closing and conversion of the UB Bancorp acquisition in December. The fourth quarter's exceptional performance is captured in its strong profitability metrics, with operating return on average tangible common equity totaling 22%, and the quarterly efficiency ratio below 46%. In the fourth quarter, total revenue grew 10% in the fourth quarter to $416 million, with net interest income as the primary driver, contributing 13% growth. In addition to benefiting from the Fed rate hikes, our net interest income reflects strong loan growth, favorable funding costs, and the strategic steps our team has taken with the asset-sensitive position of our balance sheet. Net interest margins significantly expanded quarter over quarter, from 3.19% to 3.53%. Operating expenses were well managed, increasing 1.5% linked quarter. The revenue growth and disciplined expense management resulted in strong positive operating leverage and an 18% linked quarter increase in pre-provisioned net revenue. FMB ended the year with nearly $44 billion in total assets and $30 billion in loans and leases, a 5% increase linked quarter. On an annualized basis excluding UB Bancorp, period-end commercial and consumer loans grew 14% and 6% respectively. Continuing a trend we have upheld throughout the entire year, we saw strong loan growth in markets spanning our full footprint, once again demonstrating the importance of our diverse geographic coverage and presence in both mature and high-growth markets. The acquisition of UB Bancorp closed on December 9, 2022, with the systems conversion successfully completed and integrated. With the addition of UB Bancorp's rich deposit mix, which includes 43% non-interest-bearing deposits, we ended the year with a total non-interest-bearing deposit mix at 34%. This result was in line with the end of 2021, despite Fed funds increasing 425 basis points. demonstrating the strength of our deposit franchise. We are pleased with the financial benefits and dedicated employees the UB Bank Corp acquisition has brought to us and expect to generate additional revenue as these customers are introduced to FMB's more robust product set. FMB's impressive fourth quarter and four-year results demonstrate our significant success driving value for our clients, communities, employees, and shareholders. I'd like to call out a few of our many accomplishments. FMB achieved operating earnings per share of $1.40, one of the highest levels in company history, led by record revenue of $1.4 billion. Total loans grew by $5.3 billion year-over-year, or 21%, through strategic combination of footprint-wide organic growth and the completion of two accretive acquisitions, bringing total assets to $44 billion. Despite the challenging economic environment, we grew total deposits to an all-time record of $35 billion and reported average balance growth in all four quarters of 2022, while also maintaining a favorable deposit mix comprised of 34% noninterest-bearing deposits. We currently hold the top five deposit market share in nearly 50% of our MSAs, according to data provided by the FDIC. We generated over $1.1 billion in net interest income, up 24% year-over-year, driven by solid loan growth, the favorable deposit mix, and the asset-sensitive portion of our balance sheet. Our team controls expenses in a high inflationary period. It's contributed to FMB's full-year efficiency ratio of 52%. FMB reported total shareholders' equity at $5.7 billion, and a CET1 ratio of 9.8%. Our growing capital base provided our company with unprecedented flexibility, even after returning $220 million to shareholders through common dividends and our active share repurchase program, which has $175 million remaining. Our strong earnings also resulted in a 40% dividend payout ratio and 34% on an operating basis. providing our company more internal capital to support future growth and capital action. Credit quality remains solid with consistent and prudent underwriting standards throughout the footprint, with total delinquencies ending the year at 71 basis points, net charge-offs at six basis points for the full year, and a reserve position of 1.33%. We will maintain our steadfast focus on our disciplined credit culture as we continue to navigate changing economic cycles. We closed and converted two acquisitions, Howard Bancorp in January and UB Bancorp in December, which have enhanced our market position in Maryland, Washington, D.C., and North Carolina. Driven by our continued investment in FMV's digital delivery channel and our dedicated mortgage employees, the Physicians First program comprised 25% of retail mortgage production in 2022, and grew those high-value households significantly. We continued to expand our e-store platform, which received over 500,000 interactions in 2022, up 104% year-over-year, and introduced online applications for multiple consumer loan and small business deposit products. The success of our digital strategy will have increased adoption across our expanding customer base, including a 17 percent increase in online applications. Our consistent performance does not happen without the right culture and the commitment of exceptional people. We focus on fostering a positive, productive workplace where engaged employees provide superior service for our clients and attractive returns for our shareholders. Our success in this regard has led to extensive third-party recognition. Since 2011, FMB has received more than 80 prestigious Greenwich Excellence and Best Brand awards, with 17 in 2022 alone. These results are based on direct feedback from our commercial, middle market, and small business banking funds. Additionally, FMB received approximately 50 awards as an employer of choice, including multiple national and regional honors in 2022, earning a place as one of Newsweek's America's Top Workplaces for Diversity in 2023, and most recently named to Just Capital's list of America's Most Just Companies for the sixth consecutive year, with exceptionally high marks for community development, employee benefits, and work-life balance. Our board and leadership team are proud of this year's achievements, and we are confident in our company's continued ability to execute on our strategic plan in 2023. Even in times of economic uncertainty, we are well positioned given our diversified loan portfolio, investments in technology, strong liquidity position, capital flexibility, and strong historical credit performance. I will now turn the call over to Gary to provide additional detail on our asset quality.