F.N.B. Corporation Reports Continued Revenue Growth and Record Net Income

PRESS RELEASE

October 22, 2014 - PITTSBURGH, PA

F.N.B. Corporation (NYSE: FNB) today reported third quarter of 2014 results.  Net income available to common shareholders for the third quarter of 2014 totaled $33.4 million or $0.20 per diluted common share.  Comparatively, second quarter of 2014 net income totaled $32.8 million, or $0.20 per diluted common share, and third quarter of 2013 net income totaled $31.6 million or $0.22 per diluted common share.  Operating  results are presented in the table below, “Quarterly Results Summary”.

Vincent J. Delie, Jr., President and Chief Executive Officer, commented, “This was another very good quarter with record net income.  We remain focused on building long-term value for our shareholders as we continue to successfully manage through the current regulatory and economic environment.  Operating highlights include expanded revenue, loan and deposit growth, positive asset quality trends and increased capital levels.  We are also pleased to have completed the OBA Financial Services acquisition, another milestone in building our presence in the Maryland market.  Our expansion into the metropolitan markets of Baltimore, Maryland and Cleveland, Ohio continues to gain momentum and contribute to FNB’s results.”
 

*Non-GAAP measures, refer to Non-GAAP Disclosures and detail in the accompanying data tables.

Third Quarter 2014 Highlights
(All comparisons to the prior quarter, except as noted; Organic growth in loans and deposits refers to growth excluding the benefit of initial balances acquired via an acquisition.)

• Organic growth in total average loans was $400 million, or 15.7% annualized, led by organic average commercial loan growth of $221 million or 15.3% annualized.  Average consumer loans grew organically $153 million or 18.9% annualized. 

• On an organic basis, average total deposits and customer repurchase agreements grew $102 million or 3.4% annualized.  Average transaction deposits and customer repurchase agreements grew organically $195 million, or 8.6% annualized, primarily due to organic growth in average non-interest bearing deposits of $144 million or 24% annualized.
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• The net interest margin expanded to 3.63%, compared to 3.60% in the prior quarter, reflecting higher accretable yield adjustments.
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• The efficiency ratio improved to 56.7%, from 57.3% in the prior quarter and 59.7% in the year-ago quarter, reflecting continued revenue growth and expense control.
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• Credit quality results reflect improved non-performing loan and delinquency levels.  For the originated portfolio, non-performing loans and OREO to total loans and OREO improved 11 basis points to 1.25% and total originated delinquency improved 7 basis points to 1.06% at September 30, 2014.  Net charge-offs were 0.29% annualized of total average originated loans.
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• The tangible common equity to tangible assets ratio was 6.89% at September 30, 2014, an increase of 16 basis points from 6.73% at June 30, 2014 and 80 bps from 6.09% at September 30, 2013.  The tangible book value per share increased $0.18 to $5.91 at September 30, 2014.  The linked-quarter increases reflect the benefit of the completion of the OBA Financial Services Inc. (OBAF) acquisition on September 19, 2014.
   

Third Quarter 2014 Results – Comparison to Prior Quarter
(All comparisons refer to the second quarter of 2014, except as noted)

Net Interest Income/Loans/Deposits
Net interest income on a fully taxable equivalent basis totaled $122.4 million, increasing $6.5 million, or 5.6%, as a result of average earning asset growth of $489 million, or 3.8%, and the benefit of higher accretable yield adjustments of $4.1 million.  The net interest margin was 3.63% compared to 3.60% in the prior quarter, with the increase due to the higher accretable yield adjustments, partially offset by narrowed spreads on new loan volume reflective of the current competitive and interest rate environment.

Average loans totaled $10.5 billion and increased $436 million, or 17.1% annualized, and included average organic loan growth of $400 million or 15.7% annualized.  Organic growth in average commercial loans totaled $221 million, or 15.3% annualized, and organic growth in average consumer loans (consisting of direct, consumer lines of credit and indirect loans) was $153 million or 18.9% annualized.  The quarter’s loan growth is footprint wide with significant contributions from the metropolitan markets of Pittsburgh, PA, Baltimore, MD and Cleveland, OH.

Average deposits and customer repurchase agreements totaled $11.9 billion and increased $139 million, or 4.7% annualized, and included average organic growth of $102 million or 3.4% annualized.  Consistent with prior quarters, growth in transaction deposits and customer repurchase agreements was partially offset by a decline in time deposits.  On an organic basis, average total transaction deposits and customer repurchase agreements increased $195 million or 8.6% annualized.  Organic growth in average non-interest bearing deposits was $144 million or 24% annualized, primarily reflecting growth in non-interest bearing business accounts and the benefit of seasonally higher balances.  Total loans as a percentage of deposits and customer repurchase agreements was 89% at September 30, 2014.

Non-Interest Income
Non-interest income totaled $37.6 million, decreasing $1.6 million or 4.2%.  Results for the quarter reflect consistent results from service charges and the fee-based business units of wealth management and insurance, offset by lower other non-interest income primarily due to the higher swap fee revenues in the prior quarter.

Non-Interest Expense
Non-interest expense totaled $95.8 million, increasing $3.3 million, or 3.5%, and included $1.7 million higher merger and severance costs.  Excluding merger and severance costs, non-interest expense increased $1.6 million, or 1.7%, as a result of increased accruals for performance-based compensation and seasonally higher marketing expense.  The efficiency ratio improved to 56.7%, compared to 57.3% in the second quarter of 2014.

Credit Quality
Credit quality metrics reflect an improvement in the ratio of non-performing loans and OREO to total loans and OREO of 11 basis points to 1.05% at September 30, 2014 and 11 basis points for the originated portfolio to 1.25%.  Delinquency, defined as total originated past due and non-accrual loans as a percentage of total originated loans, improved 7 basis points to 1.06% at September 30, 2014.

Net charge-offs for the third quarter totaled $7.3 million, or 0.28% annualized of total average loans, compared to $5.9 million or 0.23% annualized in the prior quarter.  For the originated portfolio, net charge-offs as a percentage of average originated loans were 0.29% annualized, compared to 0.23% annualized in the prior quarter.  The ratio of the allowance for loan losses to total loans was 1.10%, compared to 1.13%, with the slight decrease primarily reflecting the addition of OBAF.  For the originated portfolio, the allowance for loan losses to total originated loans was 1.24%, compared to 1.26% at June 30, 2014, with the slight decline directionally consistent with the quarter’s credit quality performance.  The provision for loan losses increased $0.8 million to $11.2 million primarily due to the organic loan growth during the third quarter of 2014.  The ratio of the allowance for loan losses to total non-performing loans increased to 149.0%, compared to 138.9%. 

Year-to-Date 2014 Results – Comparison to Prior Year-to-Date
(All comparisons refer to the third quarter 2013 year-to-date, except as noted)

Results include the impact from the completion of the OBAF acquisition completed on September 19, 2014, BCSB Bancorp, Inc. (BCSB) acquisition completed on February 15, 2014, PVF Capital Corp. (PVFC) on October 12, 2013 and Annapolis Bancorp, Inc. (ANNB) on April 6, 2013. 

Net Interest Income/Loans/Deposits

Net interest income on a fully taxable equivalent basis totaled $347.8 million, increasing $53.5 million or 18.2%. The net interest margin was 3.62% compared to 3.64% in the prior year-to-date period. Average earning assets grew $2.1 billion, or 19.0%, through consistent organic loan growth and the benefit of acquisition-related growth.

Average loans totaled $10.1 billion and increased $1.6 billion, or 19.4%, reflecting strong organic average loan growth of $850 million, or 10.2%, and loans added in the acquisitions.  Growth in the commercial portfolio continued during the first nine months of 2014, with average balances growing organically $495 million or 10.9%.  Average organic consumer loan growth (consisting of direct, consumer lines of credit and indirect loans) was $393 million or 14.7%.  Organic growth results reflect the benefit of the expanded banking footprint and successful sales management.

Total average deposits and customer repurchase agreements totaled $11.7 billion and increased $1.5 billion or 14.3%, including average organic growth of $348 million or 3.5%. Organic growth in lower-cost transaction deposit accounts and customer repurchase agreements was $576 million, or 7.6%, and was primarily driven by organic growth in average non-interest bearing deposits of $333 million or 18.0%.

Non-Interest Income
Non-interest income totaled $118.8 million, increasing $15.7 million, or 15.2%, with the first nine months of 2014 including a $9.5 million (pre-tax) net gain from the sale of certain securities, including the entire pooled trust preferred securities portfolio.  Organic and acquisition-related growth in service charges was offset by $5.1 million in lower customer-related interchange service charges due to the Durbin Amendment.  Additionally, the first nine months of 2014 included positive results in the fee-based units, with wealth management revenue (trust income and securities commissions) increasing $2.2 million, or 10.7%, while mortgage banking revenue declined consistent with industry trends.  Included in other non-interest income was increased swap fee revenue of $2.8 million. 

Non-Interest Expense
Non-interest expense totaled $282.6 million, increasing $36.5 million or 14.8%.  The first nine months of 2014 included merger and severance costs of $10.6 million, compared to $4.2 million in the prior year-to-date period.  Absent these items, non-interest expense increased $30.1 million or 12.4%, and primarily reflects the additional operating costs related to the expanded operations from acquisitions.  The efficiency ratio improved to 57.6% from 59.4%.

Credit Quality
Credit quality results reflect improvement over the prior-year period.  The ratio of non-performing loans and OREO to total loans and OREO improved 28 basis points to 1.05%, and for the originated portfolio, the ratio of non-performing loans and OREO to total loans and OREO improved 24 basis points to 1.25%.  Total originated delinquency, defined as total past due and non-accrual originated loans as a percentage of total originated loans, improved 38 basis points to 1.06% at September 30, 2014, reflecting a $15.6 million, or 13.7%, reduction in total delinquency.

Net charge-offs totaled $18.8 million, or 0.25% annualized of total average loans, compared to $17.0 million or 0.27% annualized.  For the originated portfolio, net charge-offs were $16.9 million or 0.27% annualized of total average originated loans, compared to $15.4 million or 0.27% annualized.  The ratio of the allowance for loan losses to total originated loans was 1.24% at September 30, 2014, compared to 1.34% at September 30, 2013, with the change directionally consistent with the performance of the portfolio.  The provision for loan losses totaled $28.6 million, compared to $22.7 million in the prior-year period primarily due to the strong organic loan growth. 

Capital Position

September 30, 2014 capital ratios reflect the benefit from the completion of the OBAF acquisition.  The tangible common equity to tangible assets ratio (non-GAAP measure) was 6.89%, compared to 6.73% and 6.09% at June 30, 2014 and September 30, 2013, respectively.  The tangible common book value per share (non-GAAP measure) increased to $5.91 from $5.73 and $5.04 at June 30, 2014 and September 30, 2013, respectively.  The common dividend payout ratio for the third quarter of 2014 was 60.25%.

The Corporation’s capital levels at September 30, 2014 continue to exceed federal bank regulatory agency “well capitalized” thresholds as the estimated total risk-based capital ratio was 12.4%, the estimated tier 1 risk-based capital ratio was 11.0% and the estimated leverage ratio was 8.7%. 

Conference Call

F.N.B. Corporation will host a conference call to discuss third quarter 2014 financial results on Wednesday, October 22, 2014 at 10:00 a.m. Eastern Time. Participating callers may access the call by dialing (877) 407-0613 or (201) 689-8051 for international callers.  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 until Thursday, October 30, 2014 and may be accessed by dialing (877) 660-6853 or (201) 612-7415 for international callers; the conference identification number is 13592444. 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 Pittsburgh, Pennsylvania, is a diversified financial services company operating in six states and three major metropolitan areas. It holds a top retail deposit market share in Pittsburgh, PA, Baltimore, MD, and Cleveland, OH. The Company has total assets of $15.8 billion and more than 280 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. 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.
• The impact of federal regulated agencies that have oversight or review of F.N.B. Corporation’s business and securities activities.
• 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 reversal of the current moderate economic recovery.
• 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, Volcker rule 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 rapid technological developments and changes.

-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. 
 
-As demonstrated by our 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

-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, cyber-attacks or international hostilities through their impacts on the economy and financial markets.

We provide greater detail regarding some of these factors in our 2013 Form 10-K and 2014 Form 10-Q’s, 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 LOCATED IN PDF