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F.N.B. Corporation Reports First Quarter 2013 Net Income of $28.5 Million or $0.20 Per Share

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PRESS RELEASE

- HERMITAGE, PA

F.N.B. Corporation (NYSE: FNB) today reported first quarter 2013 results. Net income for the first quarter of 2013 was $28.5 million, or $0.20 per diluted share, compared with first quarter of 2012 net income of $21.6 million, or $0.15 per diluted share, and fourth quarter of 2012 net income of $29.0 million, or $0.21 per diluted share.

Vincent J. Delie, Jr., President and Chief Executive Officer, commented on the results, “FNB had a very productive quarter and a great start to the new year. Favorable first quarter operating trends include continued growth in loans and low-cost transaction deposits, a stable net interest margin and very good credit quality results. Average loan growth of 7% annualized reflects contributions from both the commercial and consumer portfolios, with overall results driven by C&I lending. We have a talented team and have made significant investments in our sales management system, leading to another quarter of organic growth.”

Mr. Delie added, “In addition to delivering solid performance, our team is engaged in a variety of initiatives that strengthen FNB’s positioning for the future. Our focus on executing an electronic delivery strategy has enabled us to provide our clients with leading-edge mobile and online banking capabilities. The most recent enhancements to our suite of electronic banking options include mobile remote deposit capture and comprehensive online budgeting tools, both of which have been met with very positive feedback from our clients. Over 40,000 customers currently use the FNB mobile app and we expect continued growth throughout the year.”

Mr. Delie continued, “On April 6, 2013, the integration of Annapolis Bancorp, Inc. was completed and we welcomed their shareholders, employees and clients to FNB. With experienced regional leadership in place and a highly dedicated team of bankers joining us, we are well-positioned to benefit from the opportunities that exist in the Maryland market.”

First Quarter 2013 Highlights

  • Net income of $28.5 million or $0.20 per diluted share, represents a record high first quarter net income and a 5% increase in adjusted earnings per diluted share compared to the prior-year quarter.
  • The net interest margin of 3.66% was the same as the prior quarter.
  • Loan growth momentum continued, with average loans growing $140.8 million, or 7.1% annualized, on a linked-quarter basis, and $410.9 million, or 5.3%, on a year-over-year basis.

 

    • Linked-quarter average loan growth:
      • Average commercial loans grew $115.9 million, or 10.8% annualized, driven by growth in the average commercial and industrial (C&I) portfolio of $89.2 million
      • Average consumer loans grew $37.9 million, or 6.1% annualized
    • Year-over-year average loan growth:
      • Average commercial loans grew $294.6 million, or 7.1%, driven by growth in the average C&I portfolio of $249.1 million
      • Average consumer loans grew $231.2 million, or 9.9%

 

  • Growth in relationship-based deposit accounts continued. Average transaction deposits and customer repurchase agreements grew $48.1 million, or 2.6% annualized, on a linked-quarter basis, and $658.3 million, or 9.7%, compared to the prior-year quarter.
  • The efficiency ratio was 59.8%, seasonally higher on a linked-quarter basis and slightly improved from the prior-year quarter.
  • Credit quality metrics reflect consistent, stable results. Non-performing loans and other real estate owned (OREO) as a percentage of total originated loans and OREO decreased slightly to 1.59%. Net charge-offs were 0.22% annualized of total average originated loans compared to 0.45% annualized in the linked quarter.

Non-operating items included in each respective quarter were as follows: The first quarter of 2013 and the first quarter of 2012 included after-tax merger and severance costs of $0.2 million, or less than $0.01 per diluted share, and $4.9 million or $0.04 per diluted share, respectively. Fourth quarter 2012 net income included litigation settlement costs of $2.0 million (after-tax) and branch consolidation costs of $1.2 million (after-tax), which on a combined basis reduced earnings by $0.02 per diluted share.

F.N.B. Corporation’s performance ratios for the first quarter of 2013 were as follows: return on average tangible equity (non-GAAP measure) was 17.32%; return on average equity was 8.20%; return on average tangible assets (non-GAAP measure) was 1.07% and return on average assets was 0.96%. Reconciliations of non-GAAP measures used in this press release to their most directly comparable GAAP measures are included in the accompanying tables.

First Quarter 2013 Results – Comparison to Prior-Year Quarter
(All comparisons refer to the first quarter of 2012, except as noted)

Net Interest Income/Loans/Deposits
Net interest income on a fully taxable equivalent basis totaled $94.8 million, increasing $2.0 million or 2.2%. The net interest margin narrowed 8 basis points to 3.66%. The benefits to the net interest margin from strong growth in average loans and lower cost transaction deposit and customer repurchase agreements, as well as a lowered cost of funds, were offset by lower yields on earning assets in response to the extended low interest rate environment. Average earning assets grew $502.3 million, or 5.0%, and primarily reflect strong loan growth results.

Average loans grew $410.9 million, or 5.3%, with growth in both the commercial and consumer portfolios. The commercial portfolio grew $294.6 million, or 7.1%, driven by C&I growth of $249.1 million. Commercial leases also contributed $17.2 million in average growth. Average consumer loans (consisting of direct, consumer lines of credit and indirect loans) grew $231.2 million, or 9.9%.

Total average deposits and customer repurchase agreements grew $338.1 million, or 3.5%, with strong growth in relationship-based transaction deposits and customer repurchase agreements partially offset by the continued planned decline in time deposits. Lower cost, relationship-based transaction deposits and customer repurchase agreements grew $658.3 million or 9.7%, while time deposits declined $320.2 million or 11.4%. Loans as a percentage of total deposits and customer repurchase agreements increased to 82% at March 31, 2013, compared to 80% at March 31, 2012.

Non-Interest Income
Non-interest income totaled $33.7 million, increasing $1.9 million or 6.1%. The first quarter of 2013 results reflect positive trends in the wealth management and insurance business lines, increased mortgage-related revenue and lower service charge revenue. Wealth management revenue totaled $7.0 million, increasing $1.3 million, or 22.0%, benefiting from additions to the sales team, enhanced sales management processes and scorecard implementation and improved market conditions. Insurance commissions and fees totaled $4.4 million, increasing $0.3 million or 6.2%, reflecting early-stage benefits of revenue-enhancing initiatives. Gain on sale of loans totaled $1.0 million, increasing $0.2 million due to increased origination volume. Service charges totaled $16.5 million and declined $0.6 million, or 3.7%, primarily reflecting lower volume due to changes in customer behavior.

Non-Interest Expense
Non-interest expense totaled $78.9 million, declining $7.8 million, or 9.0%. The decrease in non-interest expense reflects $6.6 million of lower merger-related costs, $1.4 million of lower OREO costs and $0.7 million of lower personnel costs partially offset by increased other costs, including higher FDIC insurance. The efficiency ratio improved slightly to 59.8% from 60.4%.

Credit Quality
Credit quality for the first three months of 2013 reflects overall positive trends compared to the first three months of 2012. Charge-off performance continued to be good, with net charge-offs for the first quarter of 2013 totaling $4.2 million, or 0.21% annualized, improving from $5.1 million, or 0.27% annualized, reflecting overall favorable credit performance. Net charge-offs for the originated portfolio totaled $4.0 million, or 0.22% annualized compared to $5.1 million, or 0.32% annualized.

The ratio of the allowance for loan losses to total loans was 1.31% at March 31, 2013, consistent with 1.31% at March 31, 2012. The ratio of the allowance for loan losses to total originated loans was 1.39%, compared to 1.55% at March 31, 2012, with the decrease directionally consistent with the overall positive credit performance as well as reserves to support the solid loan growth. The ratio of the allowance for loan losses to total non-performing loans improved to 125% compared to 93% at March 31, 2012. The provision for loan losses equaled $7.5 million, compared to $6.6 million, with the increase primarily reflecting $1.2 million in provision for loan losses for the acquired portfolio.

The ratio of non-performing loans and OREO to total loans and OREO improved 44 basis points to 1.43%. For the originated portfolio, the ratio of non-performing loans and OREO to total originated loans and OREO improved 63 basis points to 1.59%. Total delinquency (total past due and non-accrual loans) to total originated loans improved 58 basis points to 1.45% at March 31, 2013.

First Quarter 2013 Results – Comparison to Prior Quarter
(All comparisons refer to the fourth quarter of 2012, except as noted)

Net Interest Income/Loans/Deposits
Net interest income on a fully taxable equivalent basis totaled $94.8 million in the first quarter of 2013, compared to $95.7 million in the prior quarter. The net interest margin was stable, equaling 3.66% for both the first quarter of 2013 and the fourth quarter of 2012. The stable net interest margin primarily reflects the benefits of continued strong loan growth and an improved cost of funds resulting from a combination of deposit pricing actions and continued favorable movement in deposit mix. These benefits were partially offset by fewer days in the quarter, lower accretable yield related to acquired loans and lower earning asset yields given the current interest rate environment. Accretable yield totaled $1.3 million in the first quarter of 2013, compared to $2.6 million in the fourth quarter of 2012. Average earning assets grew $52.7 million, or 2.1% annualized, reflecting strong loan growth, a stable investment portfolio and a decline in average balances invested on an overnight basis.

Average loans totaled $8.2 billion and grew $140.8 million, or 7.1% annualized, representing the fifteenth consecutive quarter of total organic loan growth. Both the commercial and consumer portfolios achieved growth, with the most significant contributor being growth in the C&I portfolio. The commercial portfolio grew $115.9 million, or 10.8% annualized, with strong growth of $89.2 million in the C&I portfolio. Average consumer loans (consisting of direct, consumer lines of credit and indirect loans) grew $37.9 million, or 6.1% annualized. The positive consumer loan results reflect growth in home equity-related loans (direct loans and consumer lines of credit) through a continued focus across FNB’s branch network to strengthen market share and capitalize on consumer preferences for these products

Total average deposits and customer repurchase agreements totaled $9.9 billion and declined $36.4 million, or 1.5% annualized, as solid growth in lower cost, relationship-based accounts was offset by a continued planned decline in time deposits. Average transaction deposits and customer repurchase agreements grew $48.1 million, or 2.6% annualized, and represent 75% of total deposits and customer repurchase agreements at March 31, 2013. First quarter growth levels for transaction deposits and customer repurchase agreements are typically impacted by seasonal fluctuations in business and municipal balances. Time deposits declined $84.5 million, or 13.3% annualized, reflecting the lower offered rate environment. Loans as a percentage of total deposits and customer repurchase agreements remained consistent at 82% at March 31, 2013.

Non-Interest Income
Non-interest income totaled $33.7 million, increasing $1.5 million or 4.8%. The first quarter results reflect positive trends in the wealth management and insurance business lines, consistent mortgage-related revenue and seasonally lower service charge revenue. Wealth management revenue totaled $7.0 million, increasing $0.9 million, or 14.3%, benefiting from additions to the sales team, enhanced scorecards and sales management processes, and improved market conditions. Insurance commissions and fees totaled $4.4 million, increasing $0.6 million, or 16.8%, as a result of annual contingent fee revenues received in the first quarter. Service charges totaled $16.5 million and declined $1.1 million, or 6.3%, reflecting seasonally lower volume compared to fourth quarter levels and changes in customer behavior. Other non-interest income in the fourth quarter of 2012 included $1.7 million accrued for expected losses on asset disposals related to the completed consolidation of twenty branch locations and $0.9 million in recoveries on previously-impaired acquired loans.

Non-Interest Expense
Non-interest expense totaled $78.9 million, increasing $2.3 million, or 3.0%. The increase in non-interest expense primarily reflects expected seasonal effects normally experienced during the initial quarter of the calendar year. In addition, the quarter includes higher marketing costs, FDIC insurance and the comparative impact of the OREO net gain included in the prior quarter. Seasonal influences include personnel costs, which increased $2.9 million, or 7.2%, primarily reflecting normal first quarter increases in employee taxes, and occupancy and equipment expense, which increased $0.5 million, or 4.4%, due to weather-related effects. OREO expense was $0.2 million, compared to a credit of $0.6 million in the fourth quarter of 2012 due to a $1.5 million recovery on a property sale in the fourth quarter. Marketing expenses increased $0.7 million primarily due to first quarter promotional campaigns for online and mobile banking enhancements. The first quarter of 2013 also included $0.4 million in merger-related costs and the fourth quarter of 2012 included $3.0 million in litigation settlement costs. The efficiency ratio was 59.8%.

Credit Quality
Credit quality for the first quarter of 2013 reflects consistent, stable results and continued solid performance. The provision for loan losses equaled $7.5 million, compared to $9.3 million. Charge-off performance continued to be good, with net charge-offs for the first quarter totaling $4.2 million, or 0.21% annualized, improving from $7.6 million, or 0.38% annualized. Net charge-offs for the originated portfolio totaled $4.0 million, or 0.22% annualized, compared to $7.7 million, or 0.45% annualized. The improved net charge-off results reflect good overall credit performance and slightly higher recoveries.

The ratio of the allowance for loan losses to total loans was 1.31% at March 31, 2013, a slight increase of 3 basis points primarily reflecting provision for loan losses of $1.2 million for the acquired portfolio. The ratio of the allowance for loan losses to total originated loans increased by 1 basis point to 1.39%. The ratio of the allowance for loan losses to total non-performing loans was 125%, compared to 124% at December 31, 2012.

The ratio of non-performing loans and OREO to total loans and OREO was 1.43%, increasing by 1 basis point over the prior quarter. For he originated portfolio, the ratio of non-performing loans and OREO to total originated loans and OREO improved slightly to 1.59%. Total delinquency (total past due and non-accrual loans) to total originated loans improved 19 basis points to 1.45% at March 31, 2013.

Capital Position

The Corporation’s capital levels at March 31, 2013 continue to exceed federal bank regulatory agency “well capitalized” thresholds. Estimated regulatory capital ratios at March 31, 2013 were stable or improved compared to December 31, 2012 ratios. At March 31, 2013, the estimated total risk-based capital ratio remained at 12.2%, the estimated tier 1 risk-based capital ratio remained at 10.7%, and the leverage ratio increased to 8.40% from 8.29%.

At March 31, 2013, the tangible equity to tangible assets ratio (non-GAAP measure) increased 13 basis points to 6.22% and the tangible book value per share (non-GAAP measure) increased to $5.00 from $4.92.

The dividend payout ratio for the first quarter of 2013 was 59%, consistent with the prior quarter.

Other Notable Items
On April 6, 2013, FNB completed its merger with Annapolis Bancorp, Inc. The acquisition of Annapolis Bancorp, Inc. provided FNB with an additional $435 million in total assets, $270 million in loans, $360 million in deposits and 8 banking offices in Anne Arundel and Queen Anne’s Counties, Maryland.

On February 19, 2013, FNB announced the signing of a definitive merger agreement pursuant to which F.N.B. Corporation will acquire PVF Capital Corp. As of December 31, 2012, PVF Capital Corp. had assets of approximately $782 million and 16 banking offices in the Greater Cleveland, Ohio area. As a result of the transaction, F.N.B. Corporation will expand its Cleveland presence and have a pro-forma top fifteen deposit market share in the Cleveland, Ohio metropolitan statistical area.

Conference Call
F.N.B. Corporation will host its quarterly conference call to discuss first quarter 2013 financial results on Wednesday, April 24, 2013 at 10:00 a.m. Eastern Time. Participating callers may access the call by dialing (888) 452 4023 or (719) 325-2495 for international callers; the confirmation number is 4511889. 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, May 1, 2013. The replay is accessible by dialing (877) 870-5176 or (858) 384-5517 for international callers; the confirmation number is 4511889. 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 (NYSE: FNB), headquartered in Hermitage, Pennsylvania, is a regional diversified financial services company operating in six states and three major metropolitan areas including Pittsburgh, PA, where it holds the number three retail deposit market share, Baltimore, MD and Cleveland, OH. The Company has total assets of $12.4 billion (including the recently completed acquisition of Annapolis Bancorp, Inc.) and more than 250 banking offices throughout Pennsylvania, Ohio, West Virginia and Maryland. 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. Commercial banking solutions include corporate banking, small business banking, investment real estate financing, asset based lending, 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. The Company 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 SmallCap 600 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.

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 Annapolis Bancorp, Inc. and PVF Capital Corp. acquisitions, 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. In addition, with respect to the acquisition of Annapolis Bancorp, Inc., F.N.B. Corporation may experience difficulties in expanding into a new market area, including retention of customers and key personnel of Annapolis Bancorp, Inc. and its subsidiary BankAnnapolis.
- 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 2012 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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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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