F.N.B. Corporation Reports Record Revenue and Ten Percent Increase in Earnings Per Common Share

PRESS RELEASE

October 22, 2015 - PITTSBURGH, PA

F.N.B. Corporation (NYSE: FNB) today reported third quarter 2015 results.  Net income available to common shareholders for the third quarter of 2015 totaled $38.0 million, or $0.22 per diluted common share.  Comparatively, third quarter of 2014 net income totaled $33.4 million, or $0.20 per diluted common share, and second quarter of 2015 net income totaled $38.1 million, or $0.22 per diluted common share.  Operating results (non-GAAP measure) are presented in the table below.

Vincent J. Delie, Jr., President and Chief Executive Officer, commented, “The high-quality results reflect record total revenue, 10% growth in operating earnings per share and the continued execution of our corporate strategy. Our team accomplished a number of strategic initiatives during the quarter, most notably the announced acquisitions of Metro Bancorp, Inc. and the Fifth Third Pittsburgh branches, the successful conversion of the Bank of America branches, and the completion of a $100 million subordinated debt issuance.  We are excited about these strategic accomplishments as they will better position FNB for long-term sustainable growth and will add significant scale to our existing franchise.”

Third Quarter 2015 Highlights

(All comparisons are to the prior quarter, except as noted; Organic growth in loans and leases and deposits refers to growth excluding the benefit of initial balances obtained via acquisitions.)

• Total operating revenue was $168.2 million, an increase of $2.9 million, or 1.7%.
• Organic growth in total average loans and leases was $231 million, or 8.0% annualized, with average commercial loan and lease growth of $112 million, or 6.9% annualized, and average consumer loan growth of $117 million, or 9.3% annualized.
• Organic growth in total average deposits and customer repurchase agreements was $57 million, or 1.8% annualized, with average non-interest demand deposit growth of $104 million, or 14.9% annualized.
• The net interest margin was 3.39%, compared to 3.43%.  The core net interest margin was 3.38%, compared to 3.39%. 
• The efficiency ratio was 55.6%, improved from 56.0% in the prior quarter and 56.7% in the third quarter of 2014.
• Credit quality results reflect favorable non-performing loan and delinquency levels.  For the originated portfolio, non-performing loans and other real estate owned (OREO) to total loans and leases and OREO was 0.99% at September 30, 2015, compared to 1.05% at June 30, 2015, and total originated delinquency to total loans and leases was 0.89% at September 30, 2015, compared to 0.86% at June 30, 2015.  Net originated charge-offs were 0.22% annualized of total average originated loans and leases, compared to 0.23% annualized in the second quarter of 2015 and 0.29% annualized in the third quarter of 2014.
• The tangible common equity to tangible assets ratio was 6.98% at September 30, 2015, an increase of 5 basis points from 6.93% at June 30, 3015.  The tangible book value per share increased $0.14 to $6.36 at September 30, 2015.       

Third Quarter 2015 Results – Comparison to Prior Quarter

(All comparisons refer to the second quarter of 2015, except as noted)

Results include the impact from the acquisition of five Bank of America branches (BofA) on September 18, 2015.

Net Interest Income/Loans/Deposits

Net interest income on a fully taxable equivalent basis totaled $127.2 million, increasing $1.6 million, or 1.3%, reflecting solid organic loan growth and one more day in the third quarter.  The net interest margin was 3.39%, compared to 3.43% in the prior quarter.  Excluding accretable yield adjustments, the third quarter core net interest margin narrowed by one basis point to 3.38%.  The net interest margin narrowing continues to reflect origination yields lower than the portfolio yield due to the extended low interest rate and competitive environment. 

Average loans and leases totaled $11.8 billion, and total average organic loan and lease growth totaled $231 million, or 8.0% annualized.  Organic growth in average commercial loans and leases totaled $112 million, or 6.9% annualized, and organic growth in average consumer loans was $117 million, or 9.3% annualized.  Commercial and consumer loan growth reflects market share gains in both metro and community markets through successful sales management and the increased number of prospects in an expanded footprint. 

Average deposits and customer repurchase agreements totaled $12.7 billion.  On an organic basis, average total deposits and customer repurchase agreements increased $57 million, or 1.8% annualized, led by $104 million of organic growth in average non-interest bearing demand deposits, partially offset by a decline in time deposits.  On an organic basis, average total transaction deposits and customer repurchase agreements increased $84 million, or 3.3% annualized, reflecting seasonally higher average balances for business deposits.  Total loans as a percentage of deposits and customer repurchase agreements were 91% at September 30, 2015.

Non-Interest Income

Non-interest income totaled $41.4 million, increasing $1.6 million, or 4.0%.  The third quarter included positive results from mortgage banking, commercial swap fee revenues, service charges and insurance revenues, which were somewhat offset by slightly lower wealth management revenues.  Mortgage banking results primarily reflect increased production volume in FNB’s metro markets of Pittsburgh, Maryland and Cleveland and successful sales efforts from originators footprint wide.  Wealth management revenues (trust income and securities commissions) decreased $0.5 million, reflecting seasonally lower securities commissions activity.  Non-interest income represents 24% of total operating revenue.

Non-Interest Expense

Non-interest expense totaled $98.1 million, increasing $1.7 million, or 1.7%, reflecting a $1.4 million increase in salaries and benefits due to higher accruals for performance-based incentives and FDIC insurance expense.  These items were mostly offset by lower outside professional services from successful vendor management initiatives, including a continued focus on negotiating contractual arrangements.  The efficiency ratio continued to improve to 55.6%, compared to 56.0%.

Credit Quality

Credit quality metrics reflect a slight improvement in the ratio of non-performing loans and OREO to total loans and leases and OREO of 3 basis points to 0.90% at September 30, 2015, and 6 basis points for the originated portfolio to 0.99%.  Originated delinquency was 0.89% at September 30, 2015, compared to 0.86% at June 30, 2015.

Net charge-offs for the third quarter totaled $5.7 million, or 0.19% annualized of total average loans and leases, compared to $6.2 million, or 0.22% annualized.  For the originated portfolio, net charge-offs as a percentage of average originated loans and leases were 0.22% annualized, compared to 0.23% annualized.  The ratio of the allowance for credit losses to total loans and leases increased slightly by 2 basis points to 1.15%.  The provision for credit losses increased $1.9 million to $10.8 million, reflecting higher levels of originated loan growth in the quarter. For the originated portfolio, the allowance for credit losses to total originated loans and leases was 1.22%, compared to 1.21%.    The ratio of the allowance for credit losses to originated total non-performing loans for the originated portfolio increased to 194.5%, compared to 181.8%.

Year-to-Date 2015 Results – Comparison to Prior Year-to-Date Period

(All comparisons refer to the first nine months of 2014, except as noted)

Results include the impact from the acquisition of five Bank of America branches (BofA) on September 18, 2015, the OBA Financial Services, Inc. (OBAF) acquisition on September 19, 2014, and the BCSB Bancorp, Inc. (BCSB) acquisition on February 15, 2014.

Net Interest Income/Loans/Deposits

Net interest income on a fully taxable equivalent basis totaled $376.4 million, increasing $28.6 million, or 8.2%, primarily due to solid organic growth and the benefit from a full period of acquired balances.  The net interest margin was 3.43%, compared to 3.62%.  Excluding accretable yield adjustments, the core net interest margin was 3.40%, compared to 3.57%.  The net interest margin narrowing reflects origination yields lower than the portfolio yield due to the extended low interest rate and competitive environment.  Average earning assets grew $1.8 billion, or 14.0%, through consistent organic loan growth and the addition of OBAF and BCSB.

Average loans and leases totaled $11.5 billion, representing an increase of $1.4 billion, or 13.9%, reflecting strong organic average loan and lease growth of $1.1 billion, or 10.2%, and the full benefit of loans added with OBAF and BCSB.  Average organic commercial loans and leases increased $519 million, or 8.7%, and average organic consumer loans increased $554 million, or 12.4%. 

Average deposits and customer repurchase agreements totaled $12.5 billion, an increase of $0.8 billion, or 7.3%, including average organic growth of $463 million, or 3.8%.  Organic growth in low-cost transaction deposit accounts and customer repurchase agreements was $694 million, or 7.5%, led by strong organic growth in average non-interest bearing demand deposits of $332 million, or 13.6%.

Non-Interest Income

Non-interest income totaled $119.3 million, increasing $0.5 million, or 0.4%, with the first nine months of 2014 including higher gains on the sale of securities of $11.1 million.  Excluding net securities gains, non-interest income increased $11.6 million, or 10.8%, due to organic growth across several fee-based businesses.  Mortgage banking revenues increased $4.5 million due to higher origination volume in 2015, commensurate with previous investments made to enhance the mortgage banking business.  Wealth management revenues (trust income and securities commissions) increased $2.7 million, or 11.9%, driven by market share gains from an expanded footprint.  Customer swap fee revenue reflected higher volume from commercial clients and the increased number of opportunities in Cleveland and Maryland. 

Non-Interest Expense

Non-interest expense totaled $289.3 million, increasing $6.7 million, or 2.4%.  Excluding merger and acquisition costs, non-interest expense increased $15.6 million, or 5.7%, due to the addition of the full operating costs of BCSB and OBAF.  The efficiency ratio improved to 56.1% from 57.6%.

Credit Quality

Credit quality results reflect overall improvement from the prior-year period.  The ratio of non-performing loans and OREO to total loans and leases and OREO improved 15 basis points to 0.90%, and for the originated portfolio, improved 26 basis points to 0.99%.  Total originated delinquency, defined as total past due and non-accrual originated loans as a percentage of total originated loans and leases, improved 17 basis points to 0.89% at September 30, 2015, reflecting a $3.3 million, or 3.4%, reduction in total originated delinquency.

Net charge-offs totaled $17.5 million, or 0.20% annualized of total average loans and leases, compared to $18.8 million, or 0.25% annualized.  For the originated portfolio, net charge-offs were $17.4 million, or 0.23% annualized of total average originated loans and leases, compared to $16.9 million, or 0.26% annualized.  The ratio of the allowance for credit losses to total originated loans and leases was 1.22% at September 30, 2015, compared to 1.24%, with the change directionally consistent with the performance of the portfolio.  The provision for credit losses for the originated portfolio totaled $29.1 million, compared to $ 26.6 million in the prior-year period, with the increase reflecting additional loan growth during the period.

Capital Position

The tangible common equity to tangible assets ratio was 6.98%, compared to 6.93% and 6.89% at June 30, 2015 and September 30, 2014, respectively.  The tangible book value per common share increased to $6.36, from $6.22 and $5.91 at June 30, 2015 and September 30, 2014, respectively.  The common dividend payout ratio for the third quarter of 2015 was 55.7%.

Conference Call

F.N.B. Corporation will host a conference call to discuss third quarter 2015 financial results on Thursday, October 22, 2015, at 11:30 a.m. Eastern Time. Participating callers may access the call by dialing (866) 652-5200 or (412) 317-6060 for international callers. Participants should ask to be joined into the F.N.B. Corporation call. 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 shortly after the completion of the call on the day of the call until midnight ET on Thursday, October 29, 2015. The replay can be accessed by dialing (877) 344-7529 or (412) 317-0088 for international callers; the conference call replay access code is 10073213. Following the call, a transcript of the call and the related presentation materials will be posted to 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, including three major metropolitan areas. It holds a top retail deposit market share in Pittsburgh, PA, Baltimore, MD, and Cleveland, OH. F.N.B. has total pro-forma assets (with the proposed merger of Metro Bancorp, Inc.) of $19.8 billion and more than 300 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. F.N.B. 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.

Non-GAAP Financial Measures

F.N.B. Corporation uses certain non-GAAP financial measures, such as operating net income available to common shareholders, operating net income per diluted common share, net interest income on a fully taxable equivalent basis (FTE), core net interest margin, tangible book value per common share and ratio of tangible common equity to tangible assets, to provide information useful to investors in understanding F.N.B. Corporation’s operating performance and trends, and to facilitate comparisons with the performance of F.N.B. Corporation’s peers. The non-GAAP financial measures used by F.N.B. Corporation may differ from the non-GAAP financial measures other financial institutions use to measure their results of operations.  Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, F.N.B. Corporation’s reported results prepared in accordance with U.S. GAAP.  Reconciliations of these non-GAAP financial measures to the most directly comparable U.S. GAAP financial measures are included in the tables at the end of this release under the caption “Non-GAAP Financial Measures.”

Cautionary Statement Regarding Forward-looking Information

We make statements in this press release and the 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 regulatory 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.
• Slowing or reversal of the rate of growth in the economy and employment levels and other economic factors that affect our liquidity and the performance of our loan portfolio, particularly in the markets in which we operate.
• 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. 
• Results of the regulatory examination and supervisory process.
• Changes to regulations governing bank capital and liquidity standards, including due to the Dodd-Frank Act, Volcker rule, Dodd-Frank stress testing rules, DFAST 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 our operational or security systems or infrastructure, or those of third-party vendors or other service providers, and rapid technological developments and changes.
  

-- Business and operating results are affected by judgments and assumptions in our analytical and forecasting models, our reliance on the advice of experienced outside advisors and 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; the 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.

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