F.N.B. Corporation Reports Second Quarter 2014 Results

PRESS RELEASE

July 22, 2014 - PITTSBURGH, PA

F.N.B. Corporation (NYSE: FNB) today reported second quarter of 2014 results.  Net income available to common shareholders for the second quarter of 2014 totaled $32.8 million, or $0.20 per diluted common share.  Comparatively, first quarter of 2014 net income totaled $32.2 million, or $0.20 per diluted common share, and second quarter of 2013 net income totaled $29.2 million or $0.20 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, “FNB reported another quarter of record net income and quality earnings highlighted by revenue growth, strong loan and deposit growth, a stable core net interest margin, consistent asset quality and diligent expense control.  We grew total revenue by 8.5% compared to last quarter and improved our efficiency ratio to 57%.”

Mr. Delie added, “We are realizing meaningful benefits from our expansion strategy as the Baltimore, Maryland and Cleveland, Ohio markets are fully staffed and completely integrated.  Loan production in these markets has exceeded our initial expectations. Additionally, our presence in Maryland will be expanded with the completion of the OBA Financial acquisition expected to close in September. ”

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

Second 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.)

• Total revenue (excluding securities gains) was $154.3 million, increasing $12.1 million or 8.5%.
• Loan growth momentum continued, with average organic loan growth on a linked-quarter basis of $257 million or 10.5% annualized, led by organic growth in average commercial loans of $181 million or 13.1% annualized.  Organic growth in total loans on a period-end basis was $391 million or 15.8% annualized.
• On an organic basis, average transaction deposits and customer repurchase agreements grew $264 million, or 12.0% annualized, and included continued solid growth in average non-interest bearing deposits of $130 million or 23.2% annualized. Transaction deposits and customer repurchase agreements represent 77% of total deposits and customer repurchase agreements at June 30, 2014.
• The net interest margin was 3.60% compared to 3.62% in the prior quarter.
• The efficiency ratio improved to 57% from 59% in the prior quarter and the year ago quarter.
• Credit quality metrics reflect continued solid performance.  For the originated portfolio, non-performing loans and OREO to total loans and OREO were 1.36% at June 30, 2014, compared to 1.46% at March 31, 2014, and net charge-offs were 0.23% annualized of total average originated loans, compared to 0.28% annualized in the prior quarter.
• The tangible common equity to tangible assets ratio was 6.73% at June 30, 2014, compared to 6.81% at March 31, 2014 and increased from 6.11% at June 30, 2013, reflecting the October 2013 capital raise.  The tangible book value per share increased to $5.73 at June 30, 2014, compared to $5.58 at March 31, 2014 and $4.97 at June 30, 2013.

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

Net Interest Income/Loans/Deposits
Net interest income on a fully taxable equivalent basis totaled $115.9 million, increasing $6.3 million, or 5.8%, primarily as a result of continued organic growth and partially due to the benefit related to the addition of BCSB Bancorp, Inc. (BCSB) in the first quarter of 2014.  The net interest margin of 3.60% compares to 3.62% in the prior quarter, with 1 basis point of the narrowing reflecting slightly lower accretable yield adjustments.  The growth in loans and lower-cost transaction deposits and customer repurchase agreements continues to support stability in the net interest margin.

Average loans totaled $10.1 billion and increased $413 million, or 17.1% annualized, and included annualized average organic loan growth of $257 million or 10.5%.  Organic growth in average commercial loans totaled $181 million, or 13.1% annualized, and organic growth in average consumer loans (consisting of direct, consumer lines of credit and indirect loans) was $71 million or 9.1% annualized.  Organic growth was strong on a period-end basis with total loans growing 15.8% annualized.  The growth reflects positive results across the footprint, with the metropolitan markets contributing significantly.         

Average deposits and customer repurchase agreements totaled $11.8 billion and increased $447 million, or 15.8% annualized, and included annualized average organic growth of $184 million or 6.4% annualized, reflecting growth in transaction deposits and customer repurchase agreements, partially offset by a decline in time deposits.  On an organic basis, average total transaction deposits and customer repurchase agreements increased $264 million or 12.0% annualized.  Organic growth in average non-interest bearing deposits was $130 million or 23.2% annualized.  Total loans as a percentage of deposits and customer repurchase agreements was 88% at June 30, 2014.

Non-Interest Income
Non-interest income totaled $39.2 million, decreasing $2.9 million, or 6.8%, as a result of the prior quarter gains on the sale of securities of $9.5 million.  Excluding gains on the sale of securities, non-interest income increased $5.8 million, or 17.8%, reflecting revenue from higher service charges, mortgage banking, wealth management (trust income and securities commissions) and other income.  Service charges increased $2.2 million, or 14.2%, and reflects seasonally higher volume and the benefit of the BCSB acquisition.  Swap fee revenue related to commercial clients totaled a record-high $2.6 million and increased $1.8 million, benefitting from the strong commercial activity during the quarter.  While mortgage banking increased $0.7 million from $0.2 million in the prior quarter, overall volume remained low.

Non-Interest Expense
Non-interest expense totaled $92.6 million, decreasing $1.6 million, or 1.7%, and included $6.4 million lower merger and severance costs.  Excluding merger and severance costs, non-interest expense increased $4.8 million, or 5.6%, and includes additional operating costs related to the BCSB acquisition.  Salaries and benefits increased $1.4 million, or 3.1%, reflecting the addition of BCSB and higher performance-based compensation tied to improved production volumes and revenue trends during the second quarter.  The efficiency ratio improved to 57.3%, compared to 59.0% in the first quarter of 2014.

Credit Quality
Credit quality metrics reflect continued solid performance.  The ratio of non-performing loans and OREO to total loans and OREO improved 7 basis points to 1.16%, and for the originated portfolio, the improvement was 10 basis points to 1.36%.  Delinquency (total past due and non-accrual loans as a percentage of total originated loans) improved 4 basis points to 1.13%.

Net charge-offs for the second quarter totaled $5.9 million, or 0.23% annualized, consistent with $5.6 million or 0.23% annualized in the prior quarter.  For the originated portfolio, net charge-offs were also 0.23% annualized, improved from 0.28% annualized of average originated loans.  The ratio of the allowance for loan losses to total loans remained stable at 1.13%, and for the originated portfolio, the allowance for loan losses to total originated loans was 1.26%, compared to 1.28% at March 31, 2014.  The provision for loan losses totaled $10.4 million, compared to $7.0 million in the prior quarter, with the increase primarily related to the strong organic loan growth during the second quarter of 2014 in the originated portfolio and an increase in the acquired portfolio primarily related to the exit of lower-quality credit.  The ratio of the allowance for loan losses to total non-performing loans was 138.9%, compared to 134.9%. 

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

Results include the impact from the completion of the 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 $225.4 million, increasing $32.1 million or 16.6%. The net interest margin was 3.61%, compared to 3.64%, with 2 basis points of the 3 basis point narrowing attributable to lower accretable yield benefit on acquired loans.  Average earning assets grew $1.9 billion, or 17.8%, through consistent organic loan growth and the benefit of acquisition-related growth.

Average loans totaled $9.9 billion and increased $1.6 billion, or 18.7%, reflecting strong organic average loan growth of $653 million, or 7.7%, and loans added in the acquisitions.  Growth in the commercial portfolio continued, with average balances growing organically $345 million or 7.3%.  Average organic consumer loan growth (consisting of direct, consumer lines of credit and indirect loans) was also solid at $387 million or 14.6%, reflecting successful sales management and the benefit of the expanded banking footprint.

Total average deposits and customer repurchase agreements totaled $11.6 billion and increased $1.4 billion or 14.1%.  Organic growth in lower-cost transaction deposit accounts and customer repurchase agreements was strong, growing $438 million, or 5.6%, with growth in average non-interest bearing deposits of $307 million or 16.5%.

Non-Interest Income
Non-interest income totaled $81.3 million, increasing $11.0 million, or 15.6%, with the first six months of 2014 including a $9.5 million (pre-tax) net gain related to the sale of certain securities, including the 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 six months of 2014 included solid growth in the fee-based units, increased swap fee revenue and lower net mortgage banking revenue consistent with industry trends. 

Non-Interest Expense
Non-interest expense totaled $186.8 million, increasing $23.8 million or 14.6%.  The first six months of 2014 included merger and severance costs of $8.1 million, compared to $3.3 million in the prior year-to-date period.  Absent these items, non-interest expense increased $19.0 million or 11.9%, and primarily reflects the additional operating costs related to the expanded operations from acquisitions.  The efficiency ratio was 58.1%, compared to 59.2%.

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 24 basis points to 1.16%.  For the originated portfolio, the ratio of non-performing loans and OREO to total loans and OREO improved 23 basis points to 1.36%.  Total delinquency (total past due and non-accrual loans as a percentage of total originated loans) was 1.13% at June 30, 2014, a 31 basis point improvement reflecting a $10.2 million, or 9.3%, reduction in total delinquency.

Net charge-offs totaled $11.4 million, or 0.23% annualized of total average loans, compared to $11.5 million or 0.28% annualized.  For the originated portfolio, net charge-offs were $10.5 million or 0.25% annualized of total average originated loans, compared to $10.4 million or 0.28% annualized.  The ratio of the allowance for loan losses to total originated loans was 1.26% at June 30, 2014, compared to 1.35% at June 30, 2013, with the change directionally consistent with the performance of the portfolio.  The provision for loan losses totaled $17.4 million, compared to $15.4 million in the prior-year period. 

Capital Position
At June 30, 2014, the tangible common equity to tangible assets ratio (non-GAAP measure) was 6.73%, compared to 6.81% and 6.11% at March 31, 2014 and June 30, 2013, respectively.  The tangible common book value per share (non-GAAP measure) increased to $5.73 from $5.58 and $4.97 at March 31, 2014 and June 30, 2013, respectively.  The common dividend payout ratio for the second quarter of 2014 was 61.3%.

The Corporation’s capital levels at June 30, 2014 continue to exceed federal bank regulatory agency “well capitalized” thresholds and the estimated total risk-based capital ratio was 12.2%, the estimated tier 1 risk-based capital ratio was 10.9% and the estimated leverage ratio was 8.4%. 

Conference Call
F.N.B. Corporation will host a conference call to discuss second quarter 2014 financial results on Wednesday, July 23, 2014 at 10:00 a.m. Eastern Time. Participating callers may access the call by dialing (877) 485-3103 or (201) 689-8890 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, July 31, 2014 by dialing (877) 660-6853 or (201) 612-7415 for international callers; the confirmation number is 13586798. 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, Baltimore, MD, and Cleveland, OH. The Company has total assets of $15.0 billion and more than 280 banking offices throughout Pennsylvania, Ohio, West Virginia and Maryland and 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. 

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.  
• 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. 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 acquisitions and the pending acquisition of OBA Financial Services 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.

- 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 March 31, 2014 Form 10-Q, 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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