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F.N.B. Corporation Reports Full Year and Fourth Quarter 2013 Results

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PRESS RELEASE

- HERMITAGE, PA

F.N.B. Corporation (NYSE: FNB) today reported full year and fourth quarter of 2013 results. Net income available to common shareholders for the full year of 2013 totaled $117.8 million, or $0.80 per diluted common share, compared to net income of $110.4 million, or $0.79 per diluted common share in 2012. On an operating basis, net income available to common shareholders for the full year of 2013 totaled $123.5 million, or $0.84 per diluted common share, compared to full year 2012 net income of $117.8 million, or $0.84 per diluted common share.

Fourth quarter of 2013 net income available to common shareholders totaled $28.4 million, or $0.18 per diluted common share, compared to third quarter of 2013 net income of $31.6 million, or $0.22 per diluted common share and fourth quarter of 2012 net income of $29.0 million, or $0.21 per diluted common share. On an operating basis1, fourth quarter of 2013 operating net income available to common shareholders was $32.5 million, or $0.21 per diluted common share, compared to third quarter of 2013 operating net income of $32.2 million, or $0.22 per diluted common share, and fourth quarter of 2012 operating net income of $32.1 million or $0.23 per diluted common share.

Vincent J. Delie, President and Chief Executive Officer, commented, “FNB has completed another year highlighted by growth and success. We maintained a high-quality earnings stream, despite significant regulatory-related revenue impacts and expense burden, and achieved several strategic company milestones. These accomplishments will mark 2013 as a transformational year. As we enter 2014, we have an expanded footprint in Baltimore, Maryland and Cleveland, Ohio and we are excited about our future potential in these dynamic markets. We are also very optimistic about our prospects across our core markets. Our capital structure is strengthened following the actions undertaken during the year and we continue to attract some of the most talented bankers in our markets. We believe FNB is better positioned than ever for the future.”


Full Year Results Summary 2013 2012
Reported Results
Net income available to common shareholders ($ in millions) $117.8 $110.4
Net income per diluted common share $0.80 $0.79
Operating Results (Non-GAAP)1
Net income available to common shareholders ($ in millions) $123.5 $117.8
Net income per diluted common share $0.84 $0.84
Average Diluted Shares Outstanding (in 000’s) 147,810 140,640

Quarterly Results Summary 4Q13 3Q13 4Q12
Reported Results
Net income available to common shareholders ($ in millions) $28.4 $31.6 $29.0
Net income per diluted common share $0.18 $0.22 $0.21
Operating Results (Non-GAAP)1
Net income available to common shareholders ($ in millions) $32.5 $32.2 $32.1
Net income per diluted common share $0.21 $0.22 $0.23
Average Diluted Shares Outstanding (in 000’s) 157,858 146,446 140,923


Fourth Quarter 2013 Highlights
- Loan growth momentum continued, with annualized average organic loan growth on a linked-quarter basis of $129 million or 5.9% annualized.
- Average transaction deposits and customer repurchase agreements grew organically on a linked-quarter basis by $138 million or 6.8% annualized. Transaction deposits and customer
repurchase agreements improved to 76% of total deposits and customer repurchase agreements at December 31, 2013, up from 74% at December 31, 2012.
- The net interest margin expanded to 3.67% from 3.64% in the prior quarter.
- Credit quality metrics improved and reflect continued solid performance. For the originated portfolio, non-performing loans and OREO to total loans and OREO improved 5 basis points to 1.44%, reflecting a $6.7 million, or 10.2%, reduction in non-accrual loan levels. Net charge-offs were 0.30% annualized of total average originated loans, compared to 0.26% annualized in the prior quarter.
- The PVF Capital Corp. (PVFC) acquisition was completed on October 12, 2013.
- F.N.B. Corporation completed a capital offering, raising net proceeds of $161.3 million by issuing preferred and common equity through comprehensive capital action plan to proactively position F.N.B. for Basel III implementation, including the redemption of certain trust preferred securities, and to support future growth opportunities.

Fourth Quarter 2013 Results – Comparison to Prior Quarter
(All comparisons refer to the third quarter of 2013, except as noted)

Net Interest Income/Loans/Deposits
Net interest income on a fully taxable equivalent basis totaled $108.7 million, increasing $7.6 million or 7.5%. The net interest margin of 3.67% improved 3 basis points from the prior quarter and included a $1.7 million, or 6 basis point, benefit from additional accretable yield resulting from better than expected cash flows on acquired loans. The October 2013 capital raise resulted in a temporary increase in short-term interest bearing cash balances, narrowing the fourth quarter net interest margin by 3 basis points. The majority of these cash balances were deployed by December 31, 2013 for the redemption of $115 million in trust preferred securities.

Average loans totaled $9.3 billion and increased $593 million, or 6.8%, reflecting loans acquired from the PVFC acquisition ($463 million) and annualized organic loan growth of $129 million or 5.9%. The fourth quarter marks the eighteenth consecutive linked-quarter of organic growth in total loans. Organic growth in average loans reflects continued positive results in both the commercial and consumer portfolios, with organic growth in the commercial portfolio of $52.6 million, or 4.4% annualized, and consumer loan organic growth (consisting of direct, consumer lines of credit and indirect loans) of $99.6 million or 13.8% annualized. The primary contributor to the organic consumer loan growth was $74.4 million of growth in home equity-related loans (direct and consumer lines of credit loans), of which 69% of the new loan volume represents a first lien position.

Average deposits and customer repurchase agreements totaled $11.1 billion and increased $710 million, or 6.8%, due to deposits acquired from the PVFC acquisition ($639 million) and annualized organic growth of $71.3 million or 2.7%. Organic growth in lower-cost transaction deposit accounts and customer repurchase agreements continued as these average balances grew $137.7 million or 6.8% annualized. Partially offsetting the transaction deposit growth was a continuation of the planned decline in time deposits due to FNB’s liquidity position. In addition, FNB’s funding remains predominantly customer-based, with total customer-based funding representing 97% of total deposits and borrowings. Loans as a percentage of total deposits and customer repurchase agreements were 86%.

Non-Interest Income
Non-interest income totaled $32.7 million, decreasing $0.2 million, or 0.5%, reflecting consistent results across most fee income categories which was offset by lower mortgage banking income. Wealth management revenues increased $0.5 million, or 7.3%, due to continued organic growth given heightened cross-selling efforts and improved market conditions. Non-interest income was 23% of total revenue.

Non-Interest Expense
Non-interest expense totaled $92.1 million, and included merger-related costs of $4.0 million and a loss on the early extinguishment of debt with trust preferred securities redemption costs of $2.2 million. When excluding these non-operating costs and the $0.9 million in merger costs in the prior quarter, non-interest expense increased $3.6 million or 4.4%. The increase primarily reflects the additional operating costs of PVFC during the fourth quarter. In addition, salaries and employee benefits included higher employee medical insurance of $1.1 million due to elevated claims experienced during the quarter, other real estate owned (OREO) expense was elevated by $1.7 million primarily due to the write-down of one property and amortization of intangibles increased following the addition of PVFC. The efficiency ratio was improved to 57.8% from 59.7%.

Credit Quality
Overall credit quality metrics improved and reflect continued solid performance. The ratio of non-performing loans and OREO to total loans and OREO improved 9 basis points to 1.24%. For the originated portfolio, the ratio of non-performing loans and OREO to total loans and OREO was 1.44%, a 5 basis point improvement reflecting a $6.7 million, or 10.2%, reduction of non-accrual loans. The positive movement in non-accrual levels contributed to a $9.6 million, or 16 basis point, improvement in total originated delinquency (total past due and non-accrual loans) to total originated loans, which was 1.28% at December 31, 2013.

The provision for loan losses totaled $8.4 million, compared to $7.3 million in the prior quarter. The increase reflects lower provision for loan losses for the originated portfolio given the continued improvement in credit quality offset by an increased provision in the acquired portfolio related to certain small business pools and the exit of lower-quality credits. Net charge-offs for the fourth quarter totaled $7.6 million, or 0.32% annualized, compared to $5.5 million or 0.25% annualized. For the originated portfolio, net charge-offs were 0.30% annualized compared to 0.26% annualized of average originated loans. Full year 2013 net charges-offs improved 7 basis points to 0.28% of total average loans for the full year of 2012. The ratio of the allowance for loan losses to total originated loans was 1.29% at December 31, 2013, compared to 1.34% at September 30, 2013, with the change directionally consistent with the improved performance of the originated portfolio. The ratio of the allowance for loan losses to total non-performing loans was 135.42%, compared to 127.37%.

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

Fourth quarter of 2013 results include the impact from the Annapolis Bancorp, Inc. (ANNB) and PVFC acquisitions completed on April 6, 2013 and October 12, 2013, respectively.

Net Interest Income/Loans/Deposits
Net interest income on a fully taxable equivalent basis totaled $108.7 million, increasing $12.9 million or 13.5%. The net interest margin expanded 1 basis point to 3.67%, reflecting solid loan and lower-cost transaction deposit growth. Average earning assets grew $1.4 billion, or 13.0%, through solid organic loan growth and the addition of ANNB and PVFC.

Average loans totaled $9.3 billion and increased $1.3 billion, or 16.1%, reflecting organic loan growth of $572 million, or 7.1%, and loans added in the ANNB and PVFC acquisitions. Growth in the commercial portfolio continued, with these average balances increasing organically $282.7 million or 6.5%. Average organic consumer loan growth (consisting of direct, consumer lines of credit and indirect loans) was also strong with these balances increasing $384.8 million, or 15.2%, driven by growth in home equity-related loans originated across FNB’s footprint.

Total average deposits and customer repurchase agreements totaled $11.1 billion and increased $1.1 billion, or 11.4%, reflecting organic growth of $141.3, or 1.4%, and balances added in the ANNB and PVFC acquisitions. Organic growth in lower cost transaction deposit accounts and customer repurchase agreements was strong, growing $461.1 million, or 6.2%, through new account acquisition and customers maintaining higher average balances. Average non-interest bearing deposits grew organically $259.5 million or 14.9%.

Non-Interest Income
Non-interest income totaled $32.7 million, increasing $0.6 million, or 1.8%, reflecting the benefit of the ANNB and PVFC acquisitions and solid organic growth in fee-based business units. Securities commissions and fees increased $0.7 million, or 29.7%, and trust income increased $0.4 million or 11.4%. The fourth quarter of 2013 was negatively impacted by $2.7 million in lower customer-related interchange service charges due to the Durbin Amendment restrictions. The prior-year quarter included a $1.7 million non-recurring accrual for expected losses on asset disposals related to branch consolidations.

Non-Interest Expense
Non-interest expense totaled $92.1 million, increasing $15.5 million or 20.3%. The fourth quarter of 2013 included merger-related costs of $4.0 million and trust preferred securities redemption costs of $2.2 million. The fourth quarter of 2012 included $3.0 million in litigation costs to establish a settlement fund. Absent these items, the year-over-year increase in non-interest expense primarily reflects the additional operating costs related to the ANNB and PVFC acquisitions.

Credit Quality
Credit quality results reflect improvement over the prior-year quarter. The ratio of non-performing loans and OREO to total loans and OREO improved 18 basis points to 1.24%. For the originated portfolio, the ratio of non-performing loans and OREO to total loans and OREO was 1.44%, a 16 basis point improvement, reflecting the 11.0% reduction in non-accrual loans. Total delinquency (total past due and non-accrual loans) improved $14.8 million or 36 basis points to 1.28% at December 31, 2013.

The provision for loan losses totaled $8.4 million, compared to $9.3 million in the prior-year quarter. Net charge-offs for the fourth quarter totaled $7.6 million, or 0.32% annualized of total average loans, compared to $7.6 million or 0.38% annualized. For the originated portfolio, net charge-offs of $6.1 million improved by $1.6 million, or 15 basis points, to 0.30% annualized of total average originated loans. The ratio of the allowance for loan losses to total originated loans was 1.29% at December 31, 2013, compared to 1.38% at December 31, 2012, with the change directionally consistent with the improved performance of the portfolio.

Full Year 2013 Results
(All comparisons refer to the prior full year, except as noted)

Full year 2013 results include the impact from the ANNB and PVFC acquisitions completed on April 6, 2013 and October 12, 2013, respectively

Net interest income on a fully taxable equivalent basis totaled $403.0 million and grew $22.8 million or 6.0%. The net interest margin of 3.65% compares to 3.73%, with 3 basis points of the narrowing due to $2.6 million higher additional accretable yield on acquired loans in the prior year. The remaining narrowing primarily reflects lower yields on earning assets in response to the extended low interest rate environment. This is partially offset by the benefits to the net interest margin from strong growth in average loans, as well as lower cost transaction deposits and customer repurchase agreements and a lower cost of funds. Average earning assets grew $842.5 million, or 8.3%, reflecting strong organic loan growth and the ANNB and PVFC acquisitions.

Average loans totaled $8.7 billion and increased $807.8 million, or 10.3%, reflecting solid organic loan growth of $498.9 million, or 6.3%, and loans added in the ANNB and PVFC acquisitions. Total average deposits and customer repurchase agreements totaled $10.5 billion and increased $659.7 million, or 6.7%, reflecting organic growth and balances added in the ANNB and PVFC acquisitions. Organic growth in lower cost transaction deposit accounts and customer repurchase agreements was strong, growing $562.2 million or 7.9%. Growth in non-interest bearing deposits was a significant contributor, with average organic growth of $273.2 million or 16.9%.

Non-interest income totaled $135.8 million, increasing $4.5 million or 3.4%. Full-year 2013 non-interest income was negatively impacted by the $5.3 million in lower customer-related service charges attributable to the Durbin Amendment restrictions that became effective for FNB on July 1, 2013. Non-interest income benefited from the acquisitions and positive results from improved organic revenue growth results across several business lines, including wealth management and insurance, due to the implementation of revenue-enhancing strategies and initiatives. Wealth management revenue increased $4.4 million, or 18.6%, driven by cross-selling efforts with internal business partners, added sales professionals and improved market conditions. The 2013 fiscal year also included a $1.6 million gain on the extinguishment of debt, while the 2012 fiscal year included a $1.4 million gain on the sale of a building.

Non-interest expense totaled $338.2 million, an increase of $19.6 million, or 6.1%, primarily due to adding ANNB and PVFC operating costs and higher FDIC insurance expense of $2.1 million or 26.2%.

Credit quality results for full year of 2013 continued to trend positively resulting in year-over-year improvements. Full year net charge-offs totaled $24.7 million, or 0.28% annualized, improved from $27.6 million or 0.35% annualized. The full year provision for loan losses of $31.1 million was consistent with the prior-year level.

Income Taxes
The effective tax rate for the full year 2013 reflects the benefit of $1.4 million of tax credits realized on the prior-year income tax return.

Capital Position
Capital levels at December 31, 2013 are strengthened following the capital actions during the fourth quarter of 2013. During the fourth quarter, the Corporation raised $161.3 million in capital, through the issuance of 4.7 million shares of common stock ($54.4 million in net proceeds) and 4.4 million depository shares of non-cumulative perpetual preferred stock ($106.9 million in net proceeds). A portion of the proceeds were deployed during the quarter to redeem $115.0 million in trust preferred securities, with an additional $16.5 million expected to be redeemed in the first quarter of 2014.

The Corporation’s capital levels at December 31, 2013 continue to exceed federal bank regulatory agency “well capitalized” thresholds. At December 31, 2013, the estimated total risk-based capital ratio was 12.2%, the estimated tier 1 risk-based capital ratio was 10.8% and the estimated leverage ratio was 8.8%.

At December 31, 2013, the tangible common equity to tangible assets ratio (non-GAAP measure) increased to 6.71% compared to 6.09% at September 30, 2013 and the tangible common book value per share (non-GAAP measure) increased to $5.38 from $5.04 at September 30, 2013. The dividend payout ratios for the fourth quarter of 2013 and full year of 2013 were 68% and 60%, respectively.

Conference Call
F.N.B. Corporation will host its quarterly conference call to discuss fourth quarter and full year 2013 financial results on Wednesday, January 22, 2014 at 10:00 a.m. Eastern Time. Participating callers may access the call by dialing (888) 500-6950 or (719) 325-2491 for international callers; the confirmation number is 3658778. 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, January 29, 2014. The replay is accessible by dialing (877) 870-5176 or (858) 384-5517 for international callers; the confirmation number is 3658778. 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 $13.6 billion and more than 265 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.
- The impact on 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 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.
- The impact on fee income opportunities resulting from the limit imposed under the Durbin Amendment of the Dodd-Frank Act on the maximum permissible interchange fee that banks may collect from merchants for debit card transactions and federal court determinations that may impose further restrictions on interchange fee opportunities.
- 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. 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 and the pending acquisition of BCSB Bancorp, Inc., 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. and PVF Capital Corp., and the pending acquisition of and BCSB 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., PVF Capital Corp., Inc. and BCSB Bancorp, Inc.

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 2012 Form 10-K and 2013 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

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

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