F.N.B. Corporation Reports Third Quarter 2009 Results

PRESS RELEASE

October 22, 2009 - HERMITAGE, PA

F.N.B. Corporation (NYSE: FNB) today reported financial results for the third quarter ended September 30, 2009. Net income available to common shareholders was $4.8 million, or $0.04 per diluted common share, compared to net income available to common shareholders of $9.1 million, or $0.10 per diluted common share, in the second quarter of 2009.

Results for the third quarter of 2009 included $5.5 million in costs (after-tax basis) associated with F.N.B.’s redemption of the preferred stock it sold to the U.S. Treasury (UST) pursuant to the Capital Purchase Program (CPP). Results for the third quarter also included $3.3 million ($2.1 million on an after-tax basis) in non-cash other-than-temporary impairment charges primarily related to pooled trust preferred securities. These expenses reduced net income available to common shareholders for the third quarter of 2009 by $7.6 million or $0.07 per diluted common share.

“FNB continues to execute its organic growth strategy to take advantage of the opportunities created by the competitive disruption in our Pennsylvania markets,” said Stephen J. Gurgovits, President and Chief Executive Officer of F.N.B. Corporation. “I am pleased to report that we are executing well. As a result of our ongoing customer calling program, increased marketing activities and successful advertising campaign, our growth demonstrates that we are capturing market share.”

F.N.B. Corporation’s performance ratios this quarter were as follows: return on average tangible common equity (non-GAAP measure) was 4.85%; return on average equity was 3.62%; return on average tangible assets (non-GAAP measure) was 0.56% and return on average assets was 0.47%. A reconciliation of GAAP measures to non-GAAP measures is included with the tables that accompany this press release.

Net Interest Income

Net interest income on a fully taxable equivalent basis for the third quarter of 2009 totaled $69.2 million, an increase of $2.4 million, or 14.0% annualized, over the second quarter of 2009. The improvement reflects a combination of a 5 basis point increase in the net interest margin, a 5.7% annualized increase in average earning assets and one additional day compared to the second quarter. The net interest margin equaled 3.78% for the third quarter of 2009, compared to 3.73% in the second quarter of 2009, which included a 3 basis point net benefit related to certain non-accrual loans. Average loans in the third quarter of 2009 were essentially unchanged at $5.8 billion, compared to the prior quarter, reflecting growth in the Pennsylvania loan portfolio that was largely offset by reductions in average balances for the Florida loan portfolio. Based on period-end balances, total loans grew $70.3 million or 4.8% annualized since June 30, 2009, led by commercial loan growth of $44.7 million or 5.6% annualized. Changes in the consumer loan portfolio since June 30, 2009 reflected growth of $22.2 million or 23.6% annualized in consumer lines of credit that was partially offset by a decrease of $11.9 million or 4.7% annualized in direct installment loans given customer preferences in a low interest rate environment. 

Mr. Gurgovits noted, “I am particularly impressed with our team’s focused efforts in a challenging banking environment. Demonstrating our success in attracting commercial customers from our competitors, our middle market commercial lending team has generated over $250 million in new commitments this year. We also continue to demonstrate great success building our valuable core funding base, with strong growth in core transaction deposits and treasury management balances. Our aggressive marketing campaign in Pennsylvania is working very well as we continue to win new commercial and consumer banking relationships every day.” 

Average core transaction deposits increased $68.8 million or 6.8% annualized and average treasury management balances grew $31.0 million or 28.3% annualized in the third quarter of 2009, compared to the second quarter of 2009. Contributing to the more favorable mix of deposits, higher cost average time deposits decreased $67.4 million or 11.7% annualized in the third quarter of 2009 compared to the prior quarter as FNB continues to focus its strategy on building core transaction accounts. 

Non-Interest Income

Non-interest income totaled $24.0 million in the third quarter of 2009, compared to $28.5 million in the second quarter of 2009. The lower non-interest income is primarily due to a $2.6 million increase in non-cash other-than-temporary impairment charges primarily related to pooled trust preferred securities.  

The impairment losses recognized for the third quarter of 2009 totaled $3.3 million, compared to $0.7 million for the second quarter of 2009. The current quarter impairment charges were primarily related to three pooled trust preferred securities that experienced worse than previously projected collateral performance. The pooled trust preferred securities portfolio is comprised of 13 securities with an original cost of $41.3 million. To date, creditrelated impairment charges of $12.5 million have been recorded on this portfolio, which have reduced the carrying value to $28.8 million as of September 30, 2009. 

In looking at the other major components of non-interest income, wealth management revenue decreased $0.7 million or 14.2% in the third quarter of 2009, reflecting market conditions and the impact of the low level of interest rates on annuity sales. Additionally, compared to the second quarter of 2009, lower gains on sales of residential mortgage loans (down $0.5 million or 41.6%) and lower swap fee income (down $0.8 million or 77.7%; reported in other income) were partially offset by seasonally higher service charges (up $0.2 million or 4.4% annualized) and seasonally higher insurance commissions due to school district revenue received in the third quarter (up $0.1 million or 12.7% annualized). 

Non-Interest Expense

Non-interest expense totaled $62.3 million in the third quarter of 2009, compared to $66.3 million in the second quarter of 2009, which is flat after considering the $4.0 million FDIC special assessment in the second quarter. The efficiency ratio was 65.0% in the third quarter of 2009, compared to 67.7% in the second quarter of 2009, reflecting the absence of last quarter’s FDIC special assessment. 

Credit Quality

“We continue to be pleased with the performance of our Pennsylvania and Regency loan portfolios at this point in the economic cycle,” remarked Mr. Gurgovits. “The duration of the slow economic environment continues to be challenging for businesses and consumers throughout the country.”

Non-performing loans and OREO as a percentage of total loans and OREO at September 30, 2009 increased 18 basis points to 2.62%, compared to 2.44% at June 30, 2009. Annualized net charge-offs equaled 0.68% of average loans for the third quarter of 2009, decreasing from 1.22% of average loans for the second quarter of 2009. At September 30, 2009, the ratio of the allowance for loan losses to total loans equaled 1.81%, compared to 1.72% at June 30, 2009, reflecting increased reserves for both the Florida and Pennsylvania loan portfolios. As a percentage of non-performing loans, the allowance for loan losses equaled 79.1% at September 30, 2009, compared to 81.0% at June 30, 2009. As a result of the above activity, the provision for loan losses totaled $16.5 million for the third quarter of 2009, which was $2.5 million higher than the second quarter of 2009.

The Pennsylvania loan portfolio totaled $5.4 billion at September 30, 2009 (92.6% of the total loan portfolio) and delivered credit quality metrics reflecting a slow economic environment characterized by an increasing level of non-performing loans. Pennsylvania non-performing loans and OREO totaled $69.5 million or 1.28% of total loans and OREO at September 30, 2009, compared to $60.2 million or 1.13% at June 30, 2009. Net loan charge-offs totaled $4.5 million or 0.33% annualized of average loans for the third quarter of 2009, slightly better than $4.9 million or 0.36% annualized of average loans for the second quarter of 2009.

The Florida loan portfolio totaled $271.6 million at September 30, 2009 (4.7% of the total loan portfolio) and delivered credit quality metrics reflecting a challenging economic environment and continued weakness in the Florida real estate market. Florida nonperforming loans and OREO totaled $76.1 million or 27.2% of total loans and OREO at September 30, 2009, compared to $73.6 million or 26.1% at June 30, 2009. Net loan charge-offs totaled $4.1 million or 5.90% annualized of average loans for the third quarter of 2009, compared to $11.2 million or 15.60% annualized of average loans for the second quarter of 2009.

The Regency loan portfolio totaled $158.6 million at September 30, 2009 (2.7% of the total loan portfolio) and continued to deliver credit quality metrics reflecting a slow economic environment. Regency non-performing loans and OREO totaled $8.0 million or 5.02% of total loans and OREO at September 30, 2009, compared to $7.1 million or 4.51% at June 30, 2009. Annualized net loan charge-offs as a percentage of average loans improved 35 basis points to 3.64% for the third quarter of 2009. 

Capital Position

The Corporation’s capital ratios continue to exceed federal bank regulatory agency “well capitalized” thresholds. As of September 30, 2009, the Corporation’s estimated total riskbased capital ratio was 13.1%, the estimated tier 1 risk-based capital ratio was 11.7% and the leverage capital ratio was 8.7%, which compares favorably to the same ratios as of December 31, 2008 of 11.1%, 9.7% and 7.3%, respectively.

In September 2009, F.N.B. fully redeemed all of the preferred stock it sold to the UST pursuant to the CPP. F.N.B. repaid the original $100.0 million investment without any conditions from regulators. The repayment of the CPP funds reduced the capital ratios compared to June 30, 2009, partially offsetting the benefit from the issuance of 24.15 million shares of common stock last quarter that raised $125.8 million in new common equity. At September 30, 2009, the tangible common equity to tangible assets ratio (non-GAAP measure) equaled 6.02%, up slightly from 5.95% at June 30, 2009, and the tangible book value per share (non-GAAP measure) equaled $4.24, compared to $4.25 at June 30, 2009.

Year-to-Date Results

For the nine months ended September 30, 2009, F.N.B. Corporation’s net income available to common shareholders totaled $28.2 million, or $0.29 per diluted common share, compared to $54.5 million, or $0.70 per diluted common share, for the nine months ended September 30, 2008. For the 2009 year-to-date period, F.N.B.’s return on average tangible common equity (non-GAAP measure) totaled 10.37%, its return on average equity was 4.58%, its return on average tangible assets (non-GAAP measure) was 0.67% and its return on average assets was 0.57%.

Net interest income on a fully taxable equivalent basis totaled $201.6 million for the first nine months of 2009, an increase of $13.8 million or 7.3% over the same nine-month period of 2008, despite a 16 basis point decline in the net interest margin to 3.72%, compared to 3.88% in the same nine-month period of 2008. The narrower margin reflects the lower interest rate environment compared to last year. On a year-to-date basis, average earning assets increased 11.4% and average deposits and treasury management balances increased 16.2% with treasury management accounts increasing 27.7% and low-cost core transaction deposits growing 19.0%, compared to the same nine-month period of 2008. These increases reflect the benefit from acquisitions completed in 2008. 

Non-interest income totaled $80.6 million for the first nine months of 2009, compared to $77.9 million for the same nine-month period of 2008, as service charges, insurance commissions, gain on sale of residential mortgage loans and other income increased 7.3%, 6.7%, 60.6% and 30.2%, respectively. Partially offsetting these increases were higher noncash other-than-temporary impairment charges on securities and declines in securities commissions and fees, trust income and gains on sales of securities during the first nine months of 2009 of 6.8%, 2.5% and 39.9%, respectively, compared to the same period in 2008.

Non-interest expense totaled $189.6 million for the first nine months of 2009, an increase of 15.4% compared to the same nine-month period of 2008. Higher non-interest income and expense reflect the acquisitions of Omega and Iron and Glass in 2008, combined with higher FDIC insurance premiums and pension costs. F.N.B. Corporation’s efficiency ratio was 65.3% for the first nine months of 2009, compared to 60.2% for the same nine-month period of 2008. 

Conference Call

F.N.B. Corporation will host its quarterly conference call to discuss its financial results for the third quarter of 2009 on Friday, October 23, 2009, at 11:00 AM Eastern Time. The call can be accessed by dialing (888) 778-9067 or (913) 312-0662 for international callers; the confirmation number is 2533549.

A replay of the call will be available from 2:00 PM Eastern Time on the day of the call until midnight Eastern Time on Thursday, October 29, 2009. The replay can be accessed by dialing (888) 203-1112 or (719) 457-0820 for international callers; the confirmation number is 2533549. 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 $8.6 billion as of September 30, 2009. 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, Tennessee and Florida. 

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