F.N.B. Corporation Reports Second Quarter 2012 Results

PRESS RELEASE

July 23, 2012 - HERMITAGE, PA

F.N.B. Corporation (NYSE: FNB) today reported second quarter 2012 financial results. Net income for the second quarter of 2012 was $29.1 million, or $0.21 per diluted share, compared with second quarter of 2011 net income of $22.4 million, or $0.18 per diluted share. Net income for the first quarter of 2012 was $21.6 million, or $0.15 per diluted share, including merger and severance costs of $4.8 million (after-tax), or $0.04 per diluted share.

“Our team delivered strong results with positive trends across all key business drivers,” said Vincent J. Delie, Jr., President and Chief Executive Officer. “We are very pleased with the execution of our business strategies through the first half of 2012 and we continue to focus on opportunities to improve operating efficiency and enhance revenue growth.” 

Second Quarter 2012 Highlights
· Second quarter net income was $0.21 per diluted share.
· The net interest margin was 3.80%.
· Loan growth was 7.8% annualized for the Pennsylvania commercial portfolio, representing the thirteenth consecutive linked quarter of growth for this portfolio.
· Growth in transaction deposits and customer repurchase agreements was 14.3% annualized.
· The efficiency ratio improved to 58%.
· Net charge-offs totaled $7.5 million or 0.38% annualized of average loans.
· Non-performing loans and OREO as a percentage of total loans and OREO was 1.67%.

F.N.B. Corporation’s performance ratios for the second quarter of 2012 were as follows: return on average tangible equity (non-GAAP measure) was 19.01%; return on average equity was 8.57%; return on average tangible assets (non-GAAP measure) was 1.12% and return on average assets was 1.00%. Reconciliations of non-GAAP measures used in this press release to their most directly comparable GAAP measures are included in the tables that accompany this press release.

Second Quarter 2012 Results
(All comparisons refer to the first quarter of 2012, except as noted)

Net Interest Income
Net interest income on a fully taxable equivalent basis totaled $96.3 million in the second quarter of 2012, increasing $3.5 million or 3.8% from $92.8 million in the prior quarter. The second quarter net interest margin of 3.80% expanded six basis points from 3.74%. During the second quarter, we recognized $2.5 million in net accretable yield as a result of improved cash flows on our acquired portfolios compared to original estimates for both Comm Bancorp and Parkvale Financial Corporation (Parkvale). The increases in net interest income and the margin reflect this benefit and growth in average earning assets of $193.3 million, or 7.8% annualized. Average loans totaled $7.8 billion and grew $54.1 million or 2.8% annualized. Average loans for the Florida portfolio declined $28.7 million, or 20%, primarily a result of principal payoffs as we continue to execute our exit strategy for this portfolio. Average loan growth, excluding the Florida portfolio reduction, was $82.8 million or 4.4% annualized, and continues to be largely driven by market share gains in the Pennsylvania commercial portfolio with these average balances growing $72.3 million, or 7.2% annualized. The second quarter of 2012 represents the thirteenth consecutive linked-quarter of organic growth for this portfolio demonstrating our consistent ability to build market share through new client acquisition. Consumer loan results were also strong, growing $48.4 million, or 8.3% annualized, reflecting seasonally higher demand and marketing initiatives targeting home-equity related products, as well as increased volume for indirect auto loans.

“Loan and deposit growth were strong,” remarked Mr. Delie. “Our ability to achieve consistent, quality loan growth over the past three years and gain transaction deposits and customer repurchase agreements reflect the experience of our bankers and the effectiveness of our holistic, proprietary sales management process. Our efforts to balance growth while maintaining a low risk profile is demonstrated in the stability of the net interest margin and stable credit quality results.”

Total average deposits and customer repurchase agreements totaled $9.8 billion and grew $150.6 million, or 6.3% annualized. Growth in lower cost transaction deposit accounts and customer repurchase agreements remained strong, increasing $241.3 million, or 14.3% annualized, through a combination of customers maintaining higher average balances, transfers from time deposits and new account acquisition. Growth in transaction accounts and customer repurchase agreements was partially offset by a continued expected decline in time deposits due to the lower offered rate environment. As of June 30, 2012, FNB’s total customer-based funding remained constant at 98% of total deposits and borrowings. Loans as a percentage of total deposits and customer repurchase agreements were 81%, compared to 80% at March 31, 2012.

Non-Interest Income
Non-interest income totaled $32.8 million in the second quarter of 2012, increasing $1.0 million or 3.3%, as we continue to benefit from diverse fee income sources. Increases were reflected in higher service charges on deposits primarily as a result of seasonally higher volume. Securities commissions and fees and trust income were consistent with the prior quarter’s results, while the lower insurance commission revenue reflects the seasonal decrease given contingent revenue that is normally received in the first quarter. The increase in other non-interest income reflects higher swap-related revenue generated through our commercial lending activities.

Non-Interest Expense
Non-interest expense totaled $78.5 million in the second quarter of 2012, declining $8.2 million, or 9.5%, largely reflecting $7.3 million lower merger and severance costs and lower personnel costs due to the benefit of realizing cost savings related to the Parkvale acquisition. The efficiency ratio for the second quarter improved to 57.7%, compared to 60.4%.

Credit Quality

Credit quality results for the second quarter of 2012 reflect solid performance, with delinquency and non-performing loans and OREO metrics demonstrating significant improvement, primarily as a result of reductions in the Florida portfolio and continued solid performance for the Pennsylvania and Regency portfolios. The provision for loan losses equaled $7.0 million for the second quarter of 2012, a slight increase from $6.6 million in the prior quarter. Charge-off performance continued to be good with net charge-offs for the second quarter totaling $7.5 million or 0.38% annualized. Year-to-date net charge-offs of 0.33% annualized compare favorably to the prior year-to-date period of 0.42% annualized. When measured against the originated portfolio, year-to-date originated net charge-offs improved 7 basis points to 0.38% of average originated loans compared to the prior year-to-date period. The ratio of non-performing loans and OREO to total loans and OREO improved 20 basis points over the prior quarter to 1.67% at June 30, 2012. For the originated portfolio, the ratio of non-performing loans and OREO to total loans and OREO improved 29 basis points to 1.93% at June 30, 2012. Total delinquency (total past due and non-accrual loans) to total originated loans improved 25 basis points to 1.78%. The ratio of the allowance for loan losses to total originated loans was 1.49%, compared to 1.55% at March 31, 2012.

The Pennsylvania loan portfolio totaled $7.6 billion at June 30, 2012, representing 97% of the total loan portfolio. Overall credit quality performance for this portfolio reflects consistent, solid performance. Net charge-offs for the second quarter totaled $5.2 million or 0.28% annualized of average loans, increased from seasonally low first quarter results. Year-to-date net charge-offs improved 6 basis points to 0.24% annualized of average loans compared to the prior year-to-date period.

The Florida loan portfolio totaled $84.6 million, decreasing $50.9 million, or 37.6%, as a result of principal payoffs on performing and non-performing loans. Total Florida exposure (loans and OREO) totaled $103.7 million and decreased $49.9 million or 32.5%. Florida non-performing loans and OREO declined $14.4 million, or 25.2%, and totaled $42.8 million at June 30, 2012.

Income Taxes
The effective tax rate was 30.2% for the second quarter of 2012, compared to 26.6% for the first quarter of 2012, reflecting the impact of higher pre-tax income and a $0.4 million effective rate adjustment due to lower projected tax benefits of certain items. The effective tax rate for the six months ended June 30, 2012 was 28.8%, which approximates the rate expected for the remainder of 2012.

Capital Position
The Corporation’s capital levels at June 30, 2012 continue to exceed federal bank regulatory agency “well capitalized” thresholds. Regulatory capital ratios at June 30, 2012 (estimated) are consistent with March 31, 2012 ratios. At June 30, 2012, the estimated total risk-based capital ratio was 12.1%, compared to 12.0% at March 31, 2012. The estimated tier 1 risk-based capital ratio and the leverage ratio remained unchanged at 10.5% and 8.1%, respectively.

At June 30, 2012, the tangible equity to tangible assets ratio (non-GAAP measure) increased to 5.95% from 5.82% and the tangible book value per share (non-GAAP measure) increased to $4.70 from $4.59.

The dividend payout ratio for the second quarter of 2012 was 58%.

Year-to-Date Results
(All comparisons refer to the prior year-to-date period, except as noted)

Year-to-date results for the six months ended June 30, 2012 include the impact from the Parkvale acquisition completed on January 1, 2012.

For the six months ended June 30, 2012, F.N.B. Corporation’s net income totaled $50.7 million, or $0.36 per diluted share, improved from $39.5 million, or $0.32 per diluted share. For the 2012 year-to-date period, return on average tangible equity (non-GAAP measure) equaled 16.86% compared to 15.40%, return on average equity was 7.50% compared to 6.94%, return on average tangible assets (non-GAAP measure) was 0.99% compared to 0.92%, and return on average assets was 0.88% compared to 0.82%.

Net interest income on a fully taxable equivalent basis totaled $189.1 million for the first six months of 2012, an increase of $29.2 million or 18.3%, reflecting 18.7% growth in average earning assets partially offset by a modest 2 basis point narrowing of the net interest margin. The growth in earning assets reflects a combination of organic growth and the Parkvale acquisition. For the first six months of 2012, average loans grew 18.6%, with organic growth of 4.6% reflecting strong market share gains in the Pennsylvania commercial portfolio as well as organic consumer loan growth over and above the Parkvale portfolio. Average deposits and customer repurchase agreements grew 21.3%, with organic growth of 2.2% for the first six months of 2012. Transaction deposits and customer repurchase agreements grew 22.2%, with organic growth of 7.9% representing successful new customer acquisition and higher average balances.

Non-interest income totaled $64.5 million for the first half of 2012, increasing $6.8 million, or 11.8%, primarily due to higher service charge revenue and other non-interest income. Service charges increased $4.8 million, or 15.8%, reflecting higher volume, organic growth and the expanded customer base due to the Parkvale acquisition. Insurance commissions and fees increased 3.1%. Non-interest income for the first half of 2012 also reflects continued strong swap-related revenues of $2.1 million, up 36.6% from $1.6 million in the prior year-to-date period, given the successful commercial loan growth results and continued low interest rate environment.

Non-interest expense totaled $165.2 million for the first half of 2012, an increase of $22.2 million, or 15.6%, principally due to adding Parkvale-related operating costs and a net increase of $3.6 million in merger and severance costs. F.N.B. Corporation’s 2012 year-to-date efficiency ratio improved to 59.1% compared to 60.3%.

Credit quality results continued to trend positively during the first half of 2012 and compare favorably to prior year-to-date results, reflecting continued solid performance for the Pennsylvania and Regency portfolios and improvement in the Florida portfolio. Provision was $13.6 million for the first half of 2012, improving $3.2 million primarily due to lower provision in the Florida portfolio. Net charge-off results for the first six months of 2012 improved 9 basis points to 0.33% annualized of total average loans. The ratio of the allowance for loan losses to total originated loans equaled 1.49% at June 30, 2012, compared to 1.73% at June 30, 2011, primarily reflecting improvements in the Florida portfolio and the utilization of previously established Florida portfolio reserves. Total Florida loans and OREO decreased 49% on a year-over-year basis and the loan portion of the Florida portfolio represents only 1.1% of total loans at June 30, 2012.

Conference Call
F.N.B. Corporation will host its quarterly conference call to discuss second quarter 2012 financial results on Tuesday, July 24, 2012 at 10:00 a.m. Eastern Time. Participating callers may access the call by dialing (877) 741-4242 or (719) 325-4761 for international callers; the confirmation number is 3445923. The Webcast and presentation materials may be accessed through the “Shareholder and Investor Relations” section of the Corporation’s Web site at www.fnbcorporation.com.
A replay of the call will be available from 1:00 p.m. Eastern Time the day of the call until midnight Eastern Time on Wednesday, August 1, 2012. The replay is accessible by dialing (877) 870-5176 or (858) 384-5517 for international callers; the confirmation number is 3445923. The call transcript and Webcast will be available on 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 $11.8 billion. 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, Ohio and West Virginia, 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 F.N.B. Commercial Leasing. It also operates consumer finance offices in Kentucky and Tennessee.

Cautionary Statement Regarding Forward-looking Information
We make statements in this press release and 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. 

   - Actions by the Federal Reserve, U.S. Treasury and other government agencies, including those that impact money supply and market interest rates.

   - Changes in customers’, suppliers’ and other counterparties’ performance and creditworthiness which adversely affect loan utilization rates, delinquencies, defaults and counterparty ability to meet credit and other obligations. 

   - Slowing or failure of the current moderate economic recovery and persistence or worsening levels of unemployment.

   - 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 management. 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.

   - Changes to regulations governing bank capital and liquidity standards, including due to the Dodd-Frank Act and to 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 rapid technological developments and changes. Our ability to anticipate and respond to technological changes can also impact our ability to respond to customer needs and meet competitive demands. 

*  Business and operating results are affected by 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. 

* Increased competition, whether due to consolidation among financial institutions; realignments or consolidation of branch offices, legal and regulatory developments, industry restructuring or other causes, can have an impact on customer acquisition, growth and retention and on credit spreads and product pricing, which can affect market share, deposits and revenues. 

* As demonstrated by our Parkvale acquisition, we grow our business in part by acquiring from time to time other financial services companies, financial services assets and related deposits. These acquisitions often present risks and uncertainties, including, the possibility that the transaction cannot be consummated; regulatory issues; cost, or difficulties, involved in integration and conversion of the acquired businesses after closing; inability to realize expected cost savings, efficiencies and strategic advantages; the extent of credit losses in acquired loan portfolios and extent of deposit attrition; and the potential dilutive effect to our current shareholders.

* Competition can have an impact on customer acquisition, growth and retention and on credit spreads and product pricing, which can affect market share, deposits and revenues. Industry restructuring in the current environment could also impact our business and financial performance through changes in counterparty creditworthiness and performance and the competitive and regulatory landscape. Our ability to anticipate and respond to technological changes can also impact our ability to respond to customer needs and meet competitive demands.

* Business and operating results can also be affected by widespread disasters, dislocations, terrorist activities or international hostilities through their impacts on the economy and financial markets.

We provide greater detail regarding some of these factors in our 2011 Form 10-K and 2012 Form 10-Qs, including the Risk Factors section of those reports, and our subsequent SEC filings. Our forward-looking statements may also be subject to other risks and uncertainties, including those we may discuss elsewhere in this news release or in SEC filings, accessible on the SEC’s website at www.sec.gov and on our corporate website at www.fnbcorporation.com. We have included these web addresses as inactive textual references only. Information on these websites is not part of this document.

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