F.N.B. Corporation (NYSE:FNB) Q3 2017 Earnings Conference Call Transcript

Oct 19, 2017 • 10:30 am ET

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F.N.B. Corporation (NYSE:FNB) Q3 2017 Earnings Conference Call Transcript

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Q & A
Executive
Vince Delie

portfolios, which adds to it. So given that, we did two large acquisitions. The commercial loan growth that was largely centered in C&I lending in the last quarter was actually stronger than it appears, and we keep telling people that. I think, it will play out over time. As the runoff in that portfolio stabilizes, we should be able to achieve higher growth trajectory in the commercial segment moving and in consumer for that matter as we move forward in those markets, which will help net interest income that we're very optimistic about.

Executive
Gary Guerrieri

And as Vince mentioned, you've got a lot of trading out off assets during the first six to 12 months of any acquisition as we move less desirable assets off the balance sheet. So that masks the growth coming out of any acquisition on the early side of it.

Executive
Vince Calabrese

The other dynamic too is, those loans tend to have higher rates on them. So that in the short-term runs against the margin.

Executive
Vince Delie

Yes, part of the core margin decline is attributable to an exchange of assets that's going on. They were engaged in more small ticket CRA or CRE lending in the markets in North Carolina. We tend to focus more on C&I. I mean, there was a focus on C&I. But we've embellished that with some of the hires we've made particularly in Charlotte -- in the Charlotte market, and we're seeing good progress there. What ends up happening, as you're trading term, you're moving out of longer-term higher yielding assets not necessarily better spread, but higher yielding, because you're out 10 years on the curve. And you're exchanging that for LIBOR-based lending at equivalent spreads, but at a much lower yield. So that's -- some of that's going on too. But that's all very positive, because it puts us in a better position from an asset liability standpoint as we move forward. I don't know, if you want to comment any more on that, Vince, but I mean.

Executive
Vince Calabrese

No, I would say that, clearly, those loans in a rising rate environment are beneficial to us. Similarly, what we did during the quarter as far as growing deposits, as I commented on the average deposit growth was about 1%. But with our loan to deposit ratio reaching 97.5% at the end of June, we embarked on a strategy to generate additional deposit growth to really bring that number down to a more manageable level and getting that under 95% was a big accomplishment in the company and something that positions us well, because basically we've traded that CDs for short-term borrowings that are just going to keep repricing up, obviously, when -- as the Fed moves. And between now and the end of next year, I guess, the current expectation is before Fed moves. So having those CDs on the books kind of trading that out serves us well. We added thousands of new households, which also is very important as part of that initiative. And