F.N.B. Corporation Reports First Quarter 2016 Results

PRESS RELEASE

April 22, 2016 - PITTSBURGH, PA

F.N.B. Corporation (NYSE: FNB) reported results for the first quarter of 2016.  Net income available to common stockholders for the first quarter of 2016 totaled $24.1 million, or $0.12 per diluted common share, including $0.09 per diluted common share in merger-related costs.  Comparatively, fourth quarter of 2015 net income available to common stockholders totaled $37.1 million, or $0.21 per diluted common share, and first quarter of 2015 net income available to common stockholders totaled $38.3 million, or $0.22 per diluted common share.  Operating results are presented in the tables below.

Vincent J. Delie, Jr., President and Chief Executive Officer, commented, “We are pleased with this quarter’s results, including the successful integration of Metro Bancorp which was the largest acquisition in our history and positions FNB with another top market share in Central Pennsylvania.  We achieved record revenue of $186 million and record operating net income of $40.8 million.  Our employees delivered strong results through new client acquisition and successful cross-selling as evidenced by continued organic growth in loans and low-cost deposits, as well as strong growth in fee-income from mortgage banking, wealth management, insurance and capital markets.”

Quarterly Results Summary	1Q16	4Q15	1Q15
Reported Results
Net income available to common stockholders ($ in millions)	$24.1	$37.1	$38.3
Net income per diluted common share	$0.12	$0.21	$0.22
Operating Results (Non-GAAP)
Operating net income available to common stockholders ($ in millions)	$40.8	$38.1	$38.3
Operating net income per diluted common share	$0.21	$0.22	$0.22
Average Diluted Shares Outstanding (in 000’s)	194,878	176,907	175,826

First Quarter 2016 Highlights

(All comparisons to the fourth quarter of 2015, except as noted; Organic growth in loans and deposits refers to growth excluding the benefit of initial balances acquired via an acquisition.)

Results include the impact from the acquisition of Metro Bancorp, Inc. (METR) on February 13, 2016.

• Organic growth in total average loans was $246 million, or 8.2% annualized, with average commercial loan growth of $190 million, or 11.3% annualized, and average consumer loan growth of $58 million, or 4.5% annualized.
• On an organic basis, average total deposits and customer repurchase agreements grew $201 million, or 6.2% annualized.  Average transaction deposits and customer repurchase agreements grew organically $207 million, or 7.9% annualized.
• The net interest margin increased two basis points to 3.40%, compared to 3.38% in the prior quarter.
• The efficiency ratio was 56.4%, compared to 56.3% in the prior quarter and 56.6% in the year-ago quarter.
• Credit quality results reflect slightly increased non-performing loan levels and generally consistent total delinquency levels.  For the originated portfolio, non-performing loans and other real estate owned (OREO) were impacted by $13 million in Metro OREO transfers, the majority of which are bank-owned facilities and one energy-related commercial relationship.  Non-performing loans and OREO to total loans and OREO was 1.18%, compared to 0.99% in the prior quarter and total originated delinquency remained stable at 0.93% at March 31, 2016.  Net originated charge-offs were 0.21% annualized of total average originated loans, compared to 0.25% annualized in the fourth quarter of 2015, and 0.24% annualized in the year-ago quarter.
• The tangible common equity to tangible assets ratio was 6.93% at March 31, 2016, compared to 6.71% at December 31, 2015.  The tangible book value per share decreased $0.02 to $6.36 at March 31, 2016.       

First Quarter 2016 Results – Comparison to Prior Quarter

(All comparisons refer to the fourth quarter of 2015, except as noted; Organic growth in loans and deposits refers to growth excluding the benefit of initial balances acquired via acquisitions.)

Results include the impact from the acquisition of Metro Bancorp, Inc. (METR) on February 13, 2016, and Bank of America branches (BofA) on September 19, 2015.

Net Interest Income/Loans/Deposits

Net interest income on a fully taxable equivalent (FTE) basis totaled $142.8 million, increasing $13.4 million or 10.3%. The reported net interest margin increased slightly to 3.40%, compared to 3.38%.  Average earning assets grew $1.7 billion, or 10.9%, mostly due to the benefit of Metro balances and continued strong organic loan growth.  

Average loans totaled $13.2 billion and increased $1.2 billion, or 10.2%, reflecting the acquired METR average loan balances and organic average loan growth of $246 million, or 8.2% annualized.  Organic total average commercial loan growth totaled $190 million or 11.3% annualized, with a majority of the contributions coming from Pittsburgh, Baltimore and Cleveland.  Average organic consumer loan growth was $58 million, or 4.5% annualized. 

Total average deposits and customer repurchase agreements totaled $14.5 billion and increased $1.4 billion, or 10.9%, including average organic growth of $201 million or 6.2% annualized.  Organic growth in low-cost transaction deposit accounts and customer repurchase agreements was $207 million, or 7.9% annualized.

Non-Interest Income

Non-interest income totaled $46.0 million, increasing $2.9 million, or 6.8%.  The first quarter of 2016 included a $2.4 million gain on redemption of trust preferred securities.  The increase in total non-interest income was driven by positive results in insurance and wealth management, with solid contributions from mortgage banking and capital markets.  Total non-interest income was 24% of total revenue.  

Non-Interest Expense

Non-interest expense totaled $136.6 million, increasing $35.4 million, or 35.0%, and included merger and severance costs of $24.9 million, compared to $1.4 million of merger and severance costs in the prior quarter.  The first quarter of 2016 included a $2.6 million impairment charge on investments in low income housing tax credit projects from previous acquisitions.  Absent these merger-related costs, non-interest expense would have increased $9.2 million, or 9.2%, primarily attributable to the additional costs related to the expanded operations from METR.  The efficiency ratio remained stable at 56.4%, compared to 56.3%.

Credit Quality

Credit quality results reflect slightly increased non-performing loan levels and generally consistent total delinquency levels.  The increase in non-performing loans and OREO reflects $13 million in Metro OREO transfers, the majority of which are bank-owned facilities and one energy-related commercial relationship.  The ratio of non-performing loans and OREO to total loans and OREO increased 4 basis points to 0.95%, and for the originated portfolio, the ratio of non-performing loans and OREO to total loans and OREO increased 19 basis points to 1.18%, largely driven by a single commercial relationship in the energy sector and Metro OREO transfers.  Total originated delinquency, defined as total past due and non-accrual originated loans as a percentage of total originated loans was 0.93% at March 31, 2016 and December 31, 2015.

Net charge-offs totaled $6.0 million, or 0.18% annualized of total average loans, compared to $6.8 million, or 0.23% annualized.  For the originated portfolio, net charge-offs were $5.9 million, or 0.21% annualized of total average originated loans, compared to $6.7 million or 0.25% annualized.  The ratio of the allowance for loan losses to total originated loans was 1.26% at March 31, 2016, compared to 1.23% at December 31, 2015.  The provision for loan losses totaled $11.8 million, compared to $12.7 million in the prior quarter.

First Quarter 2016 Results – Comparison to Prior-Year Quarter

(All comparisons refer to the first quarter of 2015, except as noted; Organic growth in loans and deposits refers to growth excluding the benefit of initial balances acquired via acquisitions.)

Results include the impact from the acquisition of Metro Bancorp, Inc. (METR) on February 13, 2016, and the acquisition of five Bank of America branches (BofA) on September 19, 2015.

Net Interest Income/Loans/Deposits

Net interest income on a FTE basis totaled $142.8 million, increasing $19.1 million, or 15.5%, reflecting average earning asset growth of $2.6 billion, or 17.8%.  The reported net interest margin was 3.40%, compared to 3.48%, due to the extended low interest rate environment and competitive landscape for earning assets.

Average loans totaled $13.2 billion and increased $2.0 billion, or 17.4%.  Organic growth in total average loans equaled $976 million, or 8.6%.  Organic growth in average commercial loans totaled $627 million, or 9.9%, and organic growth in average consumer loans was $348 million or 7.1%.  Total organic commercial loan growth was led by the increased production levels from the metropolitan markets of Pittsburgh, Baltimore and Cleveland.  Total average consumer loan growth was primarily due to broad-based organic growth in the residential, indirect and home equity-related loan portfolios.

Average deposits and customer repurchase agreements totaled $14.5 billion and increased $2.1 billion, or 17.2%, supported by the acquired METR and BofA balances and included average organic growth of $760 million or 6.1%.  On an organic basis, average total transaction deposits and customer repurchase agreements increased $879 million or 9.0%.  Total loans as a percentage of deposits and customer repurchase agreements was 90.3% at March 31, 2016.

Non-Interest Income

Non-interest income totaled $46.0 million, increasing $7.9 million or 20.6%.  Non-interest income reflects the benefit of METR and BofA acquisitions, with continued positive organic growth results in service charges and wealth management, as well as solid contributions from mortgage banking and capital markets. 

Non-Interest Expense

Non-interest expense totaled $136.6 million, increasing $42.0 million, or 44.4%.  The first quarter of 2016 included merger costs of $24.9 million and a $2.6 million impairment charge on acquired other assets.  Absent these items, total non-interest expense increased $14.5 million, or 15.3% compared to the first quarter of 2015, with the increase primarily attributable to the expanded operations of BofA and METR.   The efficiency ratio was 56.4%, improved slightly from 56.6% in the first quarter of 2015.

Credit Quality

Credit quality results reflect slightly increased non-performing loan levels and generally consistent total delinquency levels.  For the originated portfolio, non-performing loans and OREO to total loans and OREO was 1.18%, compared to 1.08%, and total originated delinquency increased seven basis points to 0.93% at March 31, 2016.  The increase in non-performing loans and OREO levels was largely driven by a single commercial relationship in the energy sector and Metro OREO transfers. 

Net charge-offs for the first quarter totaled $6.0 million, or 0.18% annualized of total average loans, compared to 0.20% annualized, in the prior-year quarter.  Net originated charge-offs were 0.21% annualized of total average originated loans, compared to 0.24% annualized in the first quarter of 2015.  For the originated portfolio, the allowance for loan losses to total originated loans was 1.26%, compared to 1.22% at March 31, 2015, reflecting additional reserves related to the energy and metals-related credits.  The ratio of the allowance for loan losses to total loans decreased 9 basis points to 1.04%, with the movement due to additional loan balances from the METR acquisition without a corresponding allowance for loan losses in accordance with accounting for business combinations.  The provision for loan losses was $11.8 million, compared to $8.1 million in the prior-year quarter.  The increase is attributable to strong originated loan growth and limited credit migration in the energy and metals sectors. 

Capital Position

The tangible common equity to tangible assets ratio (non-GAAP measure) was 6.93%, compared to 6.71% at December 31, 2015.  The tangible book value per common share (non-GAAP measure) decreased to $6.36, from $6.38 at December 31, 2015.  The common dividend payout ratio for the first quarter of 2016 was 104.86%.

Conference Call

F.N.B. Corporation will host a conference call to discuss financial results for the first quarter of 2016 on Friday, April 22, 2016, at 10:30 a.m. Eastern Time. Participating callers may access the call by dialing (866) 652-5200 or (412) 317-6060 for international callers. Participants should ask to be joined into the F.N.B. Corporation call. The Webcast and presentation materials may be accessed through the “About Us - Investor Relations & Shareholder Services” section of the Corporation’s Web site at www.fnbcorporation.com.

A replay of the call will be available shortly after the completion of the call until midnight ET on Friday, April 29, 2016. The replay can be accessed by dialing (877) 344-7529 or (412) 317-0088 for international callers; the conference replay access code is 10082208. Following the call, a transcript and the related presentation materials will be posted to the “About Us - Investor Relations & Shareholder Services” section of F.N.B. Corporation’s web site at www.fnbcorporation.com.

About F.N.B. Corporation

F.N.B. Corporation (NYSE: FNB), headquartered in Pittsburgh, Pennsylvania, is a diversified financial services company operating in six states, including three major metropolitan areas. It holds a top retail deposit market share in Pittsburgh, PA, Baltimore, MD, and Cleveland, OH. F.N.B. has total assets of over $20 billion and more than 300 banking offices throughout Pennsylvania, Maryland, Ohio and West Virginia. F.N.B. provides a full range of commercial banking, consumer banking and wealth management solutions through its subsidiary network, which is led by its largest affiliate, First National Bank of Pennsylvania, founded in 1864. Commercial banking solutions include corporate banking, small business banking, investment real estate financing, international banking, business credit, capital markets and lease financing. The consumer banking segment provides a full line of consumer banking products and services including deposit products, mortgage lending, consumer lending and a complete suite of mobile and online banking services. F.N.B.’s wealth management services include asset management, private banking and insurance. F.N.B. also operates Regency Finance Company, which has more than 70 consumer finance offices in Pennsylvania, Ohio, Kentucky and Tennessee. The common stock of F.N.B. Corporation trades on the New York Stock Exchange under the symbol “FNB” and is included in Standard & Poor’s MidCap 400 Index with the Global Industry Classification Standard (GICS) Regional Banks Sub-Industry Index. Customers, shareholders and investors can learn more about this regional financial institution by visiting the F.N.B. Corporation web site at www.fnbcorporation.com.

Non-GAAP Financial Measures

F.N.B. Corporation uses certain non-GAAP financial measures, such as operating net income available to common shareholders, operating diluted earnings per common share, net interest income on a fully taxable equivalent basis (FTE), core net interest margin, tangible book value per common share and the ratio of tangible common equity to tangible assets, to provide information useful to investors in understanding F.N.B. Corporation’s operating performance and trends, and to facilitate comparisons with the performance of F.N.B. Corporation’s peers. The non-GAAP financial measures used by F.N.B. Corporation may differ from the non-GAAP financial measures other financial institutions use to measure their results of operations.  Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, F.N.B. Corporation’s reported results prepared in accordance with U.S. GAAP.  Reconciliations of certain non-GAAP financial measures to the most directly comparable U.S. GAAP financial measures are included in the tables at the end of this release under the caption “Non-GAAP Financial Measures.”

Cautionary Statement Regarding Forward-looking Information

We make statements in this press release and the related conference call, and may from time to time make other statements, regarding our outlook for earnings, revenues, expenses, capital levels, liquidity levels, asset levels, asset quality and other matters regarding or affecting F.N.B. Corporation and its future business and operations that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act.  Forward-looking statements are typically identified by words such as “believe,” “plan,” “expect,” “anticipate,” “see,” “look,” “intend,” “outlook,” “project,” “forecast,” “estimate,” “goal,” “will,” “should” and other similar words and expressions.  Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. 

Forward-looking statements speak only as of the date made.  We do not assume any duty and do not undertake to update forward-looking statements.  Actual results or future events could differ, possibly materially, from those anticipated in forward-looking statements, as well as from historical performance.

Our forward-looking statements are subject to the following principal risks and uncertainties:

Our businesses, financial results and balance sheet values are affected by business and economic conditions, including the following:

• Changes in interest rates and valuations in debt, equity and other financial markets.
• Disruptions in the liquidity and other functioning of U.S. and global financial markets.
• The impact of federal regulatory agencies that have oversight or review of F.N.B. Corporation’s business and securities activities, including the bank regulatory examination and supervisory process.
• Actions by the Federal Reserve, U.S. Treasury and other government agencies, including those that impact money supply and market interest rates.
• Slowing or reversal of the rate of growth in the economy and employment levels and other economic factors that affect our liquidity and the performance of our loan portfolio, particularly in the markets in which we operate.
• Changes in customer preferences and behavior, whether due to changing business and economic conditions, legislative and regulatory initiatives, or other factors.

Legal and regulatory developments could affect our ability to operate our businesses, financial condition, results of operations, competitive position, reputation, or pursuit of attractive acquisition opportunities.  Reputational impacts could affect matters such as business generation and retention, liquidity, funding, and ability to attract and retain employees.  These developments could include:

• Changes resulting from legislative and regulatory reforms, including broad-based restructuring of financial industry regulation; changes to laws and regulations involving tax, pension, bankruptcy, consumer protection, and other industry aspects; and changes in accounting policies and principles.  We will continue to be impacted by extensive reforms provided for in the Dodd-Frank Wall Street Reform and Consumer Protection Act and otherwise growing out of the recent financial crisis, the precise nature, extent and timing of which, and their impact on us, remains uncertain. 
• Results of the regulatory examination and supervisory process.
• Changes to regulations governing bank capital and liquidity standards, including due to the Dodd-Frank Act, Volcker rule, Dodd-Frank stress testing rules (DFAST) and Basel III initiatives. 
• Impact on business and operating results of any costs associated with obtaining rights in intellectual property, the adequacy of our intellectual property protection in general and our operational or security systems or infrastructure, or those of third-party vendors or other service providers, and rapid technological developments and changes.

Business and operating results are affected by judgments and assumptions in our analytical and forecasting models, our reliance on the advice of experienced outside advisors and our ability to identify and effectively manage risks inherent in our businesses, including, where appropriate, through effective use of third-party insurance, derivatives, swaps, and capital management techniques, and to meet evolving regulatory capital standards.