F.N.B. Corporation Reports Fourth Quarter and Full Year 2009 Results

PRESS RELEASE

January 25, 2010 - HERMITAGE, PA

F.N.B. Corporation (NYSE: FNB) today reported financial results for the fourth quarter and full year ended December 31, 2009. Net income was $4.6 million, or $0.04 per diluted share, for the fourth quarter of 2009, compared to third quarter of 2009 net income available to common shareholders of $4.8 million, or $0.04 per diluted common share, and a net loss for the fourth quarter of 2008 of $18.9 million, or $0.21 per diluted share. Full year 2009 net income available to common shareholders totaled $32.8 million, or $0.32 per diluted common share, compared to $35.6 million, or $0.44 perdiluted share, for the full year ended December 31, 2008.

Results for the fourth quarter of 2009 included $2.4 million (after-tax) in non-cash other-thantemporary impairment charges primarily related to pooled trust preferred securities and $0.6 million (after-tax) in litigation settlement costs. Results for the fourth quarter of 2009 also included a $6.2 million (after-tax) increase in the provision for loan losses, compared to the third quarter of 2009, primarily related to the Florida portfolio. In total, these charges

“FNB continues to focus on its organic growth strategy and capitalizing on the opportunities created by the competitive disruption in our Pennsylvania markets,” said Stephen J.Gurgovits, President and Chief Executive Officer of F.N.B. Corporation. “We are pleased with the operating success we are achieving growing loans and deposits, generating revenue growth and maintaining expense control in a challenging credit environment.”

F.N.B. Corporation’s performance ratios this quarter were as follows: return on average tangible common equity (non-GAAP measure) was 4.66%; return on average equity was 1.72%; return on average tangible assets (non-GAAP measure) was 0.28% and return on average assets was 0.21%. A reconciliation of GAAP measures to non-GAAP measures is included in the tables that accompany this press release.

Net Interest Income

Net interest income on a fully taxable equivalent basis for the fourth quarter of 2009 totaled $71.2 million, representing an increase of $2.1 million, or 11.8% annualized, over the third quarter of 2009. The improvement of net interest income in the fourth quarter reflects a combination of a 7 basis point expansion of the net interest margin and a 4.8% annualized increase in average earning assets. The fourth quarter net interest margin of 3.85% marked the third consecutive quarter in which the margin has expanded. Total average loans for the fourth quarter of 2009 were $5.9 billion, representing an increase of $62.5 million, or 4.3% on an annualized basis, compared to the third quarter of 2009. 

Average commercial loans in the fourth quarter increased $54.6 million, or 6.8% annualized, compared to the third quarter of 2009, with the average Pennsylvania commercial loan portfolio growing $69.9 million, or 9.5% annualized, and the average Florida portfolio decreasing $15.3 million or 22.2% annualized. 

Average consumer loans in the fourth quarter of 2009 were essentially unchanged, with growth of $1.8 million compared to the third quarter of 2009. This total includes $11.2 million or 3.2% annualized growth in home equity lending (comprised of consumer lines of credit and direct installment loans) through a combination of customer preferences for these products and modest increases in line utilization. This growth was partially offset by an $8.1 million, or 5.9% annualized, decrease in the average indirect loan portfolio primarily related to seasonally lower auto sales in the fourth quarter of 2009 and the discontinuation of the federal government’s “Cash for Clunkers” program at the end of the third quarter of 2009.

“The growth in the Pennsylvania commercial loan portfolio demonstrates the strength of our commercial lending business as we capitalize on the significant opportunities created by competitor disruption in the marketplace,” noted Mr. Gurgovits. “We are pleased that our commercial team generated 115 significant new commercial relationships with over $400 million in new commitments during 2009.” 

“The momentum to generate strong growth in transaction deposits and treasury management balances also continued in the fourth quarter,” said Mr. Gurgovits. “We are pleased with these results as we are winning new customer relationships and gaining market share.” Average transaction deposits in the fourth quarter increased $48.7 million, or 4.8% annualized, compared to the third quarter of 2009.

Average treasury management balances grew $70.9 million, or 60.5% annualized in the fourth quarter of 2009, compared to the third quarter of 2009, due to a combination of new account acquisition and seasonality factors. Average time deposits decreased $16.6 million, or 3.0% annualized, in the fourth quarter of 2009, compared to the third quarter, as FNB continues to focus its strategy on building transaction accounts.

Non-Interest Income 

Non-interest income increased to $25.4 million in the fourth quarter of 2009, compared to $24.0 million in the third quarter of 2009, due to increases in securities commissions and fees and other non-interest income, which were partially offset by other-than-temporary impairment charges. 

In looking at the major components of the fourth quarter non-interest income, securities commissions and fees increased $0.8 million, or 52.5%, due to a successful fall sales campaign. Additionally, other non-interest income increased $1.1 million to $4.5 million for the fourth quarter of 2009, reflecting a $0.7 million increase in swap fees earned from commercial customers. Non-interest income, excluding other-than-temporary impairment charges, represented 29% of revenue for the fourth quarter of 2009, compared to 28% for the third quarter of 2009. 

The impairment losses recognized for the fourth quarter of 2009 totaled $3.7 million, compared to $3.3 million for the third quarter of 2009. The current quarter impairment charges were primarily related to three pooled trust preferred securities that experienced deterioration in collateral performance and higher levels of future projected defaults. The pooled trust preferred securities portfolio is comprised of 13 securities with an original cost of $41.3 million. To date, credit-related impairment charges of $16.1 million have been recognized on this portfolio, which have reduced the carrying value to $25.2 million as of December 31, 2009, with a remaining after-tax unrealized loss of $11.4 million included in accumulated other comprehensive income. 

Non-Interest Expense

Non-interest expense totaled $65.8 million in the fourth quarter of 2009, compared to $62.3 million in the third quarter of 2009. The increased expense is a result of a $2.6 million increase in other real estate owned (OREO) expense (Florida related) and net litigation settlement costs of $1.0 million. The $1.0 million in litigation costs is comprised of a $1.7 million settlement liability (previously reported in a Form 8-K dated December 29, 2009), net of $0.7 million covered under an insurance policy. 

Credit Quality

“We continue to be pleased with the performance of our Pennsylvania and Regency loan portfolios at this point in the economic cycle,” remarked Mr. Gurgovits. “The duration of the slow economic environment, including high unemployment rates, remains a challenge for businesses and consumers throughout the country. Regarding our Florida portfolio, we continue to make progress reducing our exposure in the more challenging Florida market.”

Changes in overall credit quality for the fourth quarter of 2009 were primarily due to the performance of the Florida portfolio. Non-performing loans and OREO as a percentage of total loans and OREO at December 31, 2009 increased 22 basis points to 2.84% compared to 2.62% at September 30, 2009. Annualized net charge-offs equaled 1.83% of average loans for the fourth quarter of 2009, primarily driven by increased net charge-offs related to Florida, compared to 0.68% of average loans for the third quarter of 2009.

At December 31, 2009, the ratio of the allowance for loan losses to total loans equaled 1.79%, compared to 1.81% at September 30, 2009. As a percentage of non-performing loans, the allowance for loan losses equaled 71.9% at December 31, 2009, compared to 79.1% at September 30, 2009. The provision for loan losses totaled $25.9 million for the fourth quarter of 2009, which was $9.5 million higher than the third quarter of 2009. 

The Pennsylvania loan portfolio totaled $5.4 billion at December 31, 2009 (93.0% of the total loan portfolio) and delivered credit quality metrics reflecting a slow economic environment characterized by a slightly increasing level of non-performing loans and net charge-offs. Pennsylvania non-performing loans and OREO totaled $76.0 million or 1.39% of total loans and OREO at December 31, 2009, compared to $69.5 million or 1.28% at September 30, 2009. Net loan charge-offs totaled $5.1 million or 0.37% annualized of average loans for the fourth quarter of 2009, up slightly compared to $4.5 million or 0.33% annualized of average loans for the third quarter of 2009. Total past dues and non-accrual loans were 2.07% of total loans at December 31, 2009, a slight increase compared to 2.02% at September 30, 2009. 

The Florida loan portfolio totaled $243.9 million at December 31, 2009 (4.2% of the total loan portfolio) and delivered credit quality metrics reflecting the continued challenging economic environment and weakness in the Florida real estate market. Florida non-performing loans and OREO totaled $82.1 million or 32.28% of total loans and OREO at December 31, 2009, compared to $76.1 million or 27.22% at September 30, 2009. Net loan charge-offs totaled $20.3 million for the fourth quarter of 2009, compared to $4.1 million for the third quarter of 2009. The increased charge-offs were largely a result of declining property values in the Florida market.

The Regency loan portfolio totaled $162.0 million at December 31, 2009 (2.8% of the total loan portfolio) and continued to deliver good credit quality metrics for a consumer finance company. Regency non-performing loans and OREO totaled $8.8 million or 5.40% of total loans and OREO at December 31, 2009, compared to $8.0 million or 5.02% at September 30, 2009. Net loan charge-offs totaled $1.7 million or 4.30% annualized of average loans for the fourth quarter of 2009, compared to $1.5 million or 3.64% annualized of average loans for the third quarter of 2009. This increase reflects expected fourth quarter seasonality and the low level of charge-offs experienced in this portfolio during the third quarter of 2009. Total past dues and non-accrual loans were 4.57% of total loans at December 31, 2009, slightly lower than 4.58% at September 30, 2009. 

Capital Position  

The Corporation’s capital ratios continue to exceed federal bank regulatory agency “well capitalized” thresholds. As of December 31, 2009, the Corporation’s estimated total riskbased capital ratio was 12.7%, the estimated tier 1 risk-based capital ratio was 11.3% and the leverage capital ratio was 8.7%. These compare to the same ratios as of September 30, 2009 of 13.0%, 11.5% and 8.7% and as of December 31, 2008 of 11.1%, 9.7% and 7.3%, respectively.

At December 31, 2009, the tangible common equity to tangible assets ratio (non-GAAP measure) equaled 5.84%, compared to 6.02% at September 30, 2009 and 4.51% at December 31, 2008. The tangible book value per share (non-GAAP measure) equaled $4.17, compared to $4.24 at September 30, 2009 and $3.92 at December 31, 2008. 

Full Year 2009 Results

For the year ended December 31, 2009, F.N.B. Corporation’s net income available to common shareholders totaled $32.8 million, or $0.32 per diluted common share, compared to $35.6 million, or $0.44 per diluted share, for the year ended December 31, 2008. For 2009, F.N.B.’s return on average tangible common equity (non-GAAP measure) was 8.74%, return on average equity was 3.87%, return on average tangible assets (non-GAAP measure) was 0.57%, and return on average assets was 0.48%.

Net interest income on a fully taxable equivalent basis totaled $272.9 million for 2009, representing an increase of $15.1 million or 5.8% over 2008. The 2009 increased net interest income reflects growth in average earning assets partially offset by a lower net interest margin given the lower interest rate environment compared to 2008. Average earning assets increased 9.0% in 2009, with average loans increasing 7.8% compared to 2008. Loan growth occurred in all categories other than direct installments (3.9% decrease), led by 9.6% growth in commercial lending. Average deposits and treasury management balances increased 13.1%, with average treasury management balances increasing 26.6% and average transaction deposits growing 16.2% compared to 2008. These increases reflect organic growth and the benefit from acquisitions completed in 2008.

Non-interest income totaled $106.0 million for 2009, an increase of 23.1% compared to 2008. Service charges increased 5.6%, insurance commissions increased 7.1%, gain on sale of residential mortgage loans increased 67.8% and other non-interest income increased $6.4 million or 63.4%. The increase in other non-interest income was largely a result of higher impairment losses in 2008, a gain on the sale of a building in 2009 and higher recoveries on impaired loans acquired through acquisitions. Results for 2009, compared to 2008, included lower non-cash other-than-temporary impairment charges on securities of $9.3 million, lower securities commissions and fees of 8.2% and lower trust income of 2.3%. The lower securities commissions and fees and lower trust income are primarily due to the negative effect of the market conditions experienced during late 2008 and 2009. The higher noninterest income also reflects the benefit from acquisitions completed in 2008.

Non-interest expense totaled $255.3 million for 2009, an increase of 14.7% compared to 2008. Other non-interest expense increases for 2009 include higher FDIC insurance premiums of $13.0 million, higher OREO-related expenses of $4.0 million, and higher litigation costs of $1.0 million as compared to 2008, which were partially offset by $4.7 million in merger costs incurred in 2008. Higher non-interest expense also reflects the effect of the acquisitions in 2008. As a result of these increases, the efficiency ratio was 65.5% for 2009, compared to 62.9% for 2008.

The provision for loan losses for 2009 totaled $66.8 million compared to $72.4 million for 2008, a 7.7% decrease. The provision in each of 2009 and 2008 was substantially higher than historical levels primarily due to the performance of the Florida loan portfolio. 

Conference Call

F.N.B. Corporation will host its quarterly conference call to discuss its financial results for the fourth quarter of 2009 on Tuesday, January 26, 2010, at 8:00 AM Eastern Time. The call can be accessed by dialing (877) 591-4951 or (719) 325-4821 for international callers; the confirmation number is 5204528. A replay of the call will be available from 11:00 AM Eastern Time on the day of the call until midnight Eastern Time on Tuesday, February 2, 2010. The replay can be accessed by dialing (888) 203-1112 or (719) 457-0820 for international callers; the confirmation number is 5204528. A transcript of the call 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, headquartered in Hermitage, PA, is a diversified financial services company with total assets of $8.7 billion as of December 31, 2009. F.N.B. Corporation is a leading provider of commercial and retail banking, leasing, wealth management, insurance, merchant banking and consumer finance services in Pennsylvania and Ohio, where it owns and operates First National Bank of Pennsylvania, First National Trust Company, First National Investment Services Company, LLC, F.N.B. Investment Advisors, Inc., First National Insurance Agency, LLC, F.N.B. Capital Corporation, LLC, Regency Finance Company and Bank Capital Services. It also operates consumer finance offices in Tennessee and loan production offices in Pennsylvania and Florida. 

Forward-looking Statements

This press release of F.N.B. Corporation and the reports F.N.B. Corporation files with the Securities and Exchange Commission often contain “forward-looking statements” relating to present or future trends or factors affecting the banking industry and, specifically, the financial operations, markets and products of F.N.B. Corporation. These forward-looking statements involve certain risks and uncertainties. There are a number of important factors that could cause F.N.B. Corporation’s future results to differ materially from historical performance or projected performance. These factors include, but are not limited to: (1) a significant increase in competitive pressures among financial institutions; (2) changes in the interest rate environment that may reduce net interest margins; (3) changes in prepayment speeds, loan sale volumes, charge-offs and loan loss provisions; (4) general economic conditions; (5) legislative or regulatory changes that may adversely affect the businesses in which F.N.B. Corporation is engaged; (6) technological issues which may adversely affect F.N.B. Corporation’s financial operations or customers; (7) changes in the securities markets (8) risk factors mentioned in the reports and registration statements F.N.B. Corporation files with the Securities and Exchange Commission; (9) housing prices; (10) job market; (11) consumer confidence and spending habits; (12) estimates of fair value of certain F.N.B. Corporation assets and liabilities or (13) various monetary and fiscal policies and regulations of the U.S. Government. F.N.B. Corporation undertakes no obligation to revise these forward-looking statements or to reflect events or circumstances after the date of this press release. 

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