KBRA Affirms Ratings for F.N.B. Corporation

KBRA affirms the senior unsecured debt rating of A-, the subordinated debt rating of BBB+, and the short-term debt rating of K2 for Pittsburgh, PA-based F.N.B. Corporation (NYSE: FNB) (“the company”). KBRA also affirms the deposit and senior unsecured debt ratings of A, the subordinated debt rating of A-, and the short-term deposit and debt ratings of K1 for the lead subsidiary, First National Bank of Pennsylvania. The Outlook for all long-term ratings is Stable.

Key Credit Considerations

FNB’s relatively stable earnings (ROA near 1.3% in each of the last four quarters) despite the turbulent operating environment in recent periods is viewed favorably. The company has sustained its sound earnings, in part, due to a more moderate decrease in NIM relative to peers (NIM has decreased just 16 bps since 4Q22 to 3.39% for 2Q23, as compared to an average 43 bp decrease over the same time period for all publicly rated KBRA names) as well as meaningful stable fee income. The more moderate NIM compression is, in large part, due to the company’s durable, low-cost deposit base. Benefitting from its diversified operating markets, including meaningful market share throughout the more rural, less rate-sensitive markets across its footprint, FNB continued to report below average deposit costs (1.32% for 2Q23).

The ratings are further supported by the company’s long-term track record regarding asset quality, with a reported NCO ratio below 0.3% since 2012. Moreover, FNB’s focus on maintaining a well-diversified loan mix was reflected in its more moderate concentration in investor CRE (less than 200% of risk-based capital at 2Q23), demonstrating the company’s risk-minded approach to growth, focusing on high-quality loans while limiting concentration risks. Moreover, while noninterest income was relatively moderate, at roughly 0.7% of average assets over multiple periods, the mix was rather diverse and included meaningful contributions from account service fees, trust services, insurance, securities brokerage fees and mortgage banking, among other items. Despite the company’s broad array of fee generating business lines and its expansive branch network, FNB has built a rather cost-effective business model with operating costs tracking below 2% of average assets over a multi-year period.

The company has managed its capital rather consistently, with a CET1 ratio tracking near 10% in recent years. While capital ratios have generally trended below peer averages, FNB’s capital position is viewed as suitable considering the company’s lower-risk profile and long-term performance.

Rating Sensitivities

While the Stable Outlook reflects KBRA’s view that ratings are unlikely to change over the medium term, should FNB report a material deterioration in credit quality with elevated credit losses over multiple periods that impact the profitability of the company or a measurable negative shift in the funding profile, rating pressure could result.

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