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F.N.B. Corporation Reports Second Quarter 2008 Earnings and Declares Third Quarter Dividend

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PRESS RELEASE

- HERMITAGE, PA

F.N.B. Corporation (NYSE: FNB), a diversified financial services company, today reported financial results for the second quarter of 2008.  Second quarter 2008 net income was $14.5 million, or $0.17 per diluted share, compared to $16.5 million, or $0.27 per diluted share for the first quarter of 2008 and $17.6 million, or $0.29 per diluted share for the second quarter of 2007. 

In addition to the acquisition of Omega Financial Corporation on April 1, 2008, results for the second quarter of 2008 include $11.9 million, pre-tax, or $0.09 per diluted share, after-tax, for an additional provision for loan losses, merger-related costs, costs associated with the retirement of one of the Corporation’s executives and charges related to lower bank stock values. The Corporation’s return on average tangible equity for the second quarter of 2008 was 14.3%, its return on average equity was 6.3%, its return on average tangible assets was 0.82% and its return on average assets was 0.73%.  

“We are very pleased to welcome the customers and employees from Omega Financial Corporation to the F.N.B. family,” stated Bob New, President and Chief Executive Officer of F.N.B. Corporation. “This strategic combination benefited our second quarter results by growing our loan portfolio and funding base, enhancing our capital base, expanding our net interest margin, creating more scale in our fee income businesses, and, most importantly, giving our combined customers a larger product set and footprint with which to service their financial needs.  With our larger franchise and stronger capital position, organized around our new management committee, we believe we are well-positioned to continue to deliver on our investment thesis. As evidence of this confidence, the Board has reaffirmed our commitment to our strong dividend.”

Third Quarter Dividend  

The Board of Directors of the Corporation declared a dividend of $0.24 per common share for the third quarter of 2008. The dividend is payable on September 15, 2008 to shareholders of record as of September 1, 2008.

Second Quarter 2008 Results 

The Corporation’s loan portfolio increased in the second quarter due to a combination of the loans added in the Omega transaction and organic growth. The acquisition of Omega improved the proportion of relationship-building, higher-yielding commercial loans. Total average loans increased 27% compared to the first quarter of 2008 and 31% compared to the second quarter of 2007, with Omega contributing increases across the loan portfolios. While Omega added approximately $1.1 billion in loans, average loans grew organically 3.8% annualized compared to the prior quarter and 4.4% versus the same quarter in 2007. 

This organic growth was led by new commercial loans. The Corporation’s average earning assets increased 27% relative to the prior quarter. 

Compared to the first quarter of 2008, average deposits and treasury management balances increased 31% with deposits from Omega and organic increases contributing to the growth. The acquisition of Omega improved the proportion of low-cost core deposits as a percentage of overall deposits. While Omega added approximately $1.3 billion in total deposits, on an organic basis average deposits and treasury management balances increased 8.1% annualized compared to the prior quarter and 2.3% versus the same quarter one-year ago.  

Net interest income, on a fully taxable equivalent basis, increased 34% in the second quarter of 2008 compared to the prior quarter, reflecting the Corporation’s loan growth and an improved net interest margin. The expansion in the net interest margin, which widened to 3.92% from 3.73% in the prior quarter, primarily reflects the benefits from the Omega acquisition. 

Growth in key fee revenue lines helped total non-interest income for the second quarter of 2008 increase 24% from the prior quarter and 35% from the second quarter of 2007. Noninterest income for the second quarter of 2008 includes $0.9 million of charges on three equity investments consisting of $0.5 million for other-than-temporary impairment on two bank stock investments and $0.4 million related to an investment in a limited partnership that invests in bank stocks (recorded in other non-interest income). Non-interest income represented 29% of net revenue for the second quarter of 2008.  

Non-interest expense increased 40% compared to the prior quarter and 48% versus the second quarter of 2007. Total expense for the second quarter of 2008 includes approximately $3.6 million in merger-related costs. During June, the Corporation began realizing the cost synergies associated with redundancies from the strategic combination of the Corporation and Omega. The second quarter also includes $1.1 million in costs associated with an executive retirement. The Corporation’s efficiency ratio was 64.3% for the second quarter of 2008 compared to 59.8% in the prior quarter and 58.3% in same quarter one year ago. The merger-related costs and retirement costs increased the efficiency ratio by 500 basis points in the second quarter. 

“Our late-May conversion of Omega’s systems was successfully accomplished with the sensitivity for customers and employees for which F.N.B. has come to be known. We look forward to servicing these new markets and realizing additional synergies in the second half of 2008,” noted Mr. New. 

The $11.0 million loan loss provision for the second quarter of 2008 includes an additional provision of $6.4 million, which is comprised of $5.4 million related to the Corporation’s Florida portfolio and $1.0 million related to loans acquired in the Omega transaction. The provision for Omega relates to aligning the former Omega reserve methodology with that of the Corporation. At June 30, 2008, the allowance for loan losses was a solid 1.28% of total loans, representing an 8 basis point increase from March 31, 2008. The allowance represents 1.2 times total non-performing loans. 

States Mr. New, “This quarter we increased our provision in recognition of the prolonged difficulty in the Florida economy. It is important to note that our Florida loan portfolio represents approximately 5% of our total loan portfolio. Our Pennsylvania loan portfolio is performing very well, and as a company, our overall asset quality is good.” 

Asset quality conditions in the Corporation’s Pennsylvania and Ohio markets continue to be stable, while the economic environment in Florida continues to be weak. Non-performing assets increased $29 million compared to March 31, 2008, solely due to two Florida nonperforming assets totaling $15.5 million and the addition of $13.2 million in non-performing assets from the Omega acquisition. As a result, the ratio of non-performing assets to total loans and other real estate owned was 127 basis points at June 30, 2008, compared to 95 basis points at March 31, 2008 and 68 basis points at June 30, 2007. 

In terms of actual losses, the Corporation’s net charge-off ratio remains at a manageable level. Annualized net loan charge-offs for the second quarter of 2008 were 30 basis points of average loans, representing a 3 basis point increase from 27 basis points in the first quarter of 2008 and a 6 basis point increase over a historically low ratio for the second quarter of 2007. 

Capital Position  

The Corporation’s capital ratios continue to exceed federal bank regulatory agency “well capitalized” thresholds. The capital position of the Corporation improved in the second quarter of 2008 as a result of the Omega transaction. Shareholders’ equity at June 30, 2008, was $919.5 million, or $10.69 per common share, representing an increase from $543.6 million, or $8.97 per common share, at March 31, 2008. Tangible book value was $4.58 per common share. The Corporation’s leverage and tangible capital ratios were 8.17% and 5.21%, respectively, at June 30, 2008, representing increases from 7.51% and 4.80%, respectively, at March 31, 2008.

Six Month Results

For the six months ended June 30, 2008, the Corporation posted net income of $31.0 million, compared to $35.0 million for the same period of 2007. On a per share basis, year-to-date earnings were $0.42 per diluted share, compared to $0.58 per diluted share for the first half of 2007. The Corporation’s return on tangible equity for the six months ended June 30, 2008, was 18.3%, its return on equity was 8.4%, its return on tangible assets was 0.98% and its return on assets was 0.88%. 

Net interest income, on a fully taxable equivalent basis, for the six months ended June 30, 2008 was 19% higher than the same period of last year, reflecting growth in average loans of 18% and growth in average deposits and treasury management balances of 16%. Additionally, the Corporation’s net interest margin for the six months ended June 30, 2008 increased 10 basis points to 3.83%, when compared to the six months ended June 30, 2007.  

Non-interest income for the six months ended June 30, 2008 increased 20% to $49.6 million from $41.3 million during the same period of 2007. Non-interest income was 29.7% of net revenue for the six months ended June 30, 2008.

Non-interest expense for the six months ended June 30, 2008 was $106.4 million, a 27% increase compared to $83.7 million for the same period of 2007. The efficiency ratio was 62.3% for the six months ended June 30, 2008 versus 58.3% for the six months ended June 30, 2007, reflecting the negative impact of merger-related and executive retirement costs in the second quarter of 2008. 

Conference Call  

Management will host a quarterly conference call to discuss results for the second quarter of 2008, tomorrow, Tuesday, July 22, 2008, at 8:30 AM Eastern Daylight Time. Hosting the call will be Bob New, President and Chief Executive Officer, and Brian F. Lilly, Chief Financial Officer. 

The call can be accessed via the telephone by dialing (888) 218-8184 or (913) 312-0411 for international callers; the confirmation number is 5554934. 

A replay of the call will be available from 11:30 AM Eastern Daylight Time on the day of the call until midnight Eastern Daylight Time on Tuesday, August 5, 2008. The replay can be accessed by dialing (888) 203-1112 or (719) 457-0820 for international callers; the confirmation number is 5554934. A transcript of the call will be posted to the “Shareholder and Investor Relations” section of F.N.B. Corporation’s Web site at www.fnbcorporation.com. 

About F.N.B. Corporation  

F.N.B. Corporation, headquartered in Hermitage, PA, is a diversified financial services company with total assets of $8.1 billion at June 30, 2008. F.N.B. Corporation is a leading provider of commercial and retail banking, leasing, wealth management, insurance, merchant banking and consumer finance services in Pennsylvania and Ohio, where it owns and operates First National Bank of Pennsylvania, First National Trust Company, First National Investment Services Company, LLC, F.N.B. Investment Advisors, Inc., First National Insurance Agency, LLC, F.N.B. Capital Corporation, LLC, Regency Finance Company and Bank Capital Services. It also operates consumer finance offices in Tennessee and loan production offices in Pennsylvania, Ohio, Tennessee and Florida.  

Mergent Inc., a leading provider of business and financial information about publicly traded companies, has recognized F.N.B. Corporation as a Dividend Achiever. This annual recognition is based on F.N.B. Corporation’s outstanding record of increased dividend performance. F.N.B. Corporation has consistently increased dividend payments for 35 consecutive years. 

The common stock of F.N.B. Corporation trades on the New York Stock Exchange under the symbol “FNB”. Investor information is available on F.N.B. Corporation’s Web site at www.fnbcorporation.com. 

ADDITIONAL INFORMATION ABOUT THE MERGER  

F.N.B. Corporation and Iron and Glass Bancorp, Inc. have filed a definitive proxy statement/prospectus and other relevant documents with the SEC in connection with the merger.

SHAREHOLDERS OF IRON AND GLASS BANCORP, INC. ARE ADVISED TO READ THE PROXY STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY CONTAIN IMPORTANT INFORMATION.

The proxy statement/prospectus and other relevant materials and any other documents filed by F.N.B. Corporation with the SEC may be obtained free of charge at the SEC's Web site at www.sec.gov. In addition, investors and security holders may obtain free copies of the documents filed with the SEC by F.N.B. Corporation by contacting James Orie, F.N.B. Corporation, One F.N.B. Boulevard, Hermitage, PA 16148, telephone: (724) 983-3317, and by Iron and Glass Bancorp, Inc. by contacting Mike Hagan, CEO, Iron and Glass Bancorp, Inc, 1114 East Carson Street, Pittsburgh, PA 15203-1187, telephone: (412) 488-5200. 

Iron and Glass Bancorp, Inc. and its directors, executive officers and other members of its management and employees may be deemed to be participants in the solicitation of proxies from its shareholders in connection with the proposed merger. Information concerning such participants' ownership of Iron and Glass Bancorp, Inc. common stock will be set forth in the proxy statement/prospectus relating to the merger. This communication does not constitute an offer of any securities for sale.

Forward-looking Statements 

This press release of F.N.B. Corporation and the reports F.N.B. Corporation files with the Securities and Exchange Commission often contain “forward-looking statements” relating to present or future trends or factors affecting the banking industry and, specifically, the financial operations, markets and products of F.N.B. Corporation. These forward-looking statements involve certain risks and uncertainties. There are a number of important factors that could cause F.N.B. Corporation’s future results to differ materially from historical performance or projected performance. These factors include, but are not limited to: (1) a significant increase in competitive pressures among financial institutions; (2) changes in the interest rate environment that may reduce interest margins; (3) changes in prepayment speeds, loan sale volumes, charge-offs and loan loss provisions; (4) less favorable than expected general economic conditions; (5) legislative or regulatory changes that may adversely affect the businesses in which F.N.B. Corporation is engaged; (6) technological issues which may adversely affect F.N.B. Corporation’s financial operations or customers; (7) changes in the securities markets or (8) risk factors mentioned in the reports and registration statements F.N.B. Corporation files with the Securities and Exchange Commission. F.N.B. Corporation undertakes no obligation to release revisions to these forward-looking statements or to reflect events or circumstances after the date of this press release.

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DATA SHEETS IN PDF

 

Media Contact

Jennifer Reel
724-983-4856
724-699-6389 (cell)
reel@fnb-corp.com

Analyst/Institutional Investor Contact
Matthew Lazzaro
724-983-4254 
412-216-2510 (cell) 
lazzaro@fnb-corp.com

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