F.N.B. Corporation Reports Record Revenue and Operating Net Income

PRESS RELEASE

July 23, 2015 - PITTSBURGH, PA

F.N.B. CORPORATION REPORTS RECORD REVENUE AND OPERATING NET INCOME
INCLUDES 10% INCREASE IN EARNINGS PER SHARE 

F.N.B. Corporation (NYSE: FNB) today reported second quarter 2015 results.  Net income available to common shareholders for the second quarter of 2015 totaled $38.1 million, or $0.22 per diluted common share.  Comparatively, second quarter of 2014 net income totaled $32.8 million, or $0.20 per diluted common share, and first quarter of 2015 net income totaled $38.3 million, or $0.22 per diluted common share.  Operating results are presented in the table below.

Vincent J. Delie, Jr., President and Chief Executive Officer, commented, “The quarter’s high-quality results include another double-digit increase in operating earnings per share.  The earnings growth was highlighted by record total revenue of $165 million and further improvement in our efficiency ratio to 56%.  The second quarter reflects our ability to generate positive operating leverage, continued strong organic growth in loans and deposits and positive asset quality results.”

Quarterly Results Summary	2Q15	1Q15	2Q14
Reported Results
Net income available to common shareholders ($ in millions)	$38.1	$38.3	$32.8
Net income per diluted common share	$0.22	$0.22	$0.20
Operating Results (Non-GAAP)
Operating net income available to common shareholders ($ in millions)	$38.4	$38.3	$33.4
Operating net income per diluted common share	$0.22	$0.22	$0.20
Average Diluted Shares Outstanding (in 000’s)	176,362	175,826	167,868

Second 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 revenue was $165.3 million, an increase of $3.4 million, or 2.1%.
• Organic growth in total average loans and leases was $249 million, or 8.8% annualized, with average commercial loan and lease growth of $151 million, or 9.6% annualized, and average consumer loan growth of $93 million, or 7.6% annualized.
• Organic growth in total average deposits and customer repurchase agreements was $217 million, or 7.0% annualized, with average non-interest demand deposit growth of $140 million, or 21.2% annualized.
• The net interest margin was 3.43%, compared to 3.48%.
• The efficiency ratio was 56.0%, improved from both 56.6% in the prior quarter and 57.3% in the second 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 improved 3 basis points to 1.05% and total originated delinquency was stable at 0.86% at June 30, 2015.  Net originated charge-offs were 0.23% annualized of total average originated loans and leases, compared to 0.24% annualized in the first quarter of 2015 and 0.23% annualized in the second quarter of 2014.
• The tangible common equity to tangible assets ratio was 6.93% at June 30, 2015.  The tangible book value per share (non-GAAP measure) increased $0.04 to $6.22 at June 30, 2015.       

Second Quarter 2015 Results – Comparison to Prior Quarter
(All comparisons refer to the first quarter of 2015, except as noted)

Net Interest Income/Loans/Deposits

Net interest income on a fully taxable equivalent basis totaled $125.6 million, increasing $1.9 million, or 1.5%, reflecting strong organic loan growth and one more day in the second quarter.  The net interest margin was 3.43%, compared to 3.48% in the prior quarter.  Excluding accretable yield adjustments, the second quarter core net interest margin was 3.39%, compared to 3.43%.  The net interest margin narrowing reflects lower yields on new loans attributable to the extended low interest rate and competitive environment.  

Average loans and leases totaled $11.5 billion, and total average organic loan and lease growth totaled $249 million, or 8.8% annualized.  Organic growth in average commercial loans and leases totaled $151 million, or 9.6% annualized, and organic growth in average consumer loans was $93 million, or 7.6% annualized.  Commercial and consumer loan growth continued to benefit from an expanded footprint, with solid contributions from both the metropolitan markets of Pittsburgh, Baltimore and Cleveland and the Pennsylvania community markets. 

Average deposits and customer repurchase agreements totaled $12.6 billion.  On an organic basis, average total deposits and customer repurchase agreements increased $217 million, or 7.0% annualized, led by $140 million of growth in organic average non-interest bearing demand deposits.  Average customer repurchase agreements were impacted by a planned migration to a new premium sweep deposit product launched in June, with balances shifting from customer repurchase agreements to premium sweep interest-bearing deposits.  On an organic basis, average total transaction deposits and customer repurchase agreements increased $229 million, or 9.4% annualized, reflecting seasonally higher average balances for business deposits and growth in total average savings balances.  Total loans as a percentage of deposits and customer repurchase agreements was 92% at June 30, 2015.

Non-Interest Income

Non-interest income totaled $39.8 million, increasing $1.6 million, or 4.1%.  The second quarter included continued positive results from mortgage banking, wealth management and higher service charges, which were partially offset by seasonally lower insurance revenue.  Mortgage banking results reflect record origination volume, stronger purchase activity and successful cross-selling efforts.  Wealth management revenues (trust income and securities commissions) increased $0.8 million, reflecting incremental lift from the Cleveland and Baltimore markets and continued organic growth across the footprint.  Non-interest income represents 24% of total revenue, consistent with the prior quarter.

Non-Interest Expense

Non-interest expense totaled $96.5 million, increasing $1.8 million, or 1.9%, reflecting a $1.2 million increase in salaries and benefits due to higher accruals for variable performance-based incentive compensation, $0.7 million higher OREO expense, and higher expense levels for marketing and outside professional services.  These items were partially offset by lower FDIC insurance expense and seasonally lower occupancy expense.  The efficiency ratio was 56.0%, compared to 56.6%.

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 1 basis point to 0.93% at June 30, 2015, and 3 basis points for the originated portfolio to 1.05%.  Delinquency remained stable at 0.86% at June 30, 2015.

Net charge-offs for the second quarter totaled $6.2 million, or 0.22% annualized of total average loans and leases, compared to $5.6 million, or 0.20% annualized.  For the originated portfolio, net charge-offs as a percentage of average originated loans and leases were 0.23% annualized, compared to 0.24% annualized.  For the originated portfolio, the allowance for credit losses to total originated loans and leases was 1.21%, compared to 1.22%.  The ratio of the allowance for credit losses to total loans and leases remained flat at 1.13%.  The provision for credit losses increased $0.7 million to $8.9 million, due to the difference in provision related to acquired loans.  The ratio of the allowance for credit losses to total non-performing loans increased to 182.0%, compared to 180.8%.

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

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

Results include the impact from 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 $249.3 million, increasing $23.8 million, or 10.6%, primarily due to strong organic growth and the benefit from OBAF and BSCB acquired balances.  The net interest margin was 3.46%, compared to 3.61%.  Excluding accretable yield adjustments, the core net interest margin was 3.41%, compared to 3.59%.  The net interest margin narrowing reflects lower yields on new loans attributable to the extended low interest rate and competitive environment.  Average earning assets grew $1.9 billion, or 15.3%, through consistent organic loan growth and the addition of OBAF and BCSB.

Average loans and leases totaled $11.4 billion, representing an increase of $1.5 billion, or 15.2%, reflecting strong organic average loan and lease growth of $1.1 billion, or 11.3%, and the full benefit of loans added with OBAF and BCSB.  Average organic commercial loans and leases increased $560 million, or 10.0%, and average organic consumer loans increased $568 million, or 13.2%. 

Average deposits and customer repurchase agreements totaled $12.5 billion, an increase of $0.9 billion, or 7.9%, including average organic growth of $471 million, or 4.0%.  Organic growth in low-cost transaction deposit accounts and customer repurchase agreements was $738 million, or 8.3%, led by strong organic growth in average non-interest bearing demand deposits of $344 million, or 14.9%.

Non-Interest Income

Non-interest income totaled $77.9 million, decreasing $3.3 million, or 4.1%, with the first half of 2014 including higher gains on the sale of securities of $10.2 million.  Excluding securities gains, non-interest income increased $6.9 million, or 9.7%, due to organic growth across several fee-based businesses.  Mortgage banking revenues increased $3.2 million due to record high origination volume in 2015 and enhanced business development efforts.  Wealth management revenues (trust income and securities commissions) increased $2.2 million, or 14.8%, reflecting organic sales growth and incremental lift from the two metro markets of Baltimore and Cleveland.  Customer swap fee revenue increased by $0.7 million, reflecting higher volume due to the increased number of opportunities from the expanded presence in the metro markets. 

Non-Interest Expense

Non-interest expense totaled $191.2 million, increasing $4.4 million, or 2.4%.  Excluding merger, acquisition and severance costs, non-interest expense increased $12.1 million, or 6.8%, due to the addition of the full operating costs of BCSB and OBAF.  The efficiency ratio improved to 56.3% from 58.1%.

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 23 basis points to 0.93%, and for the originated portfolio, the ratio of non-performing loans and OREO to total loans and leases and OREO improved 31 basis points to 1.05%.  Total originated delinquency, defined as total past due and non-accrual originated loans as a percentage of total originated loans and leases, improved 27 basis points to 0.86% at June 30, 2015, reflecting an $11.8 million, or 11.9%, reduction in total originated delinquency.

Net charge-offs totaled $11.8 million, or 0.21% annualized of total average loans and leases, compared to $11.4 million, or 0.23% annualized.  For the originated portfolio, net charge-offs were $11.6 million, or 0.24% annualized of total average originated loans and leases, compared to $10.5 million, or 0.25% annualized.  The ratio of the allowance for credit losses to total originated loans and leases was 1.21% at June 30, 2015, compared to 1.26%, with the change directionally consistent with the performance of the portfolio.  The provision for credit losses totaled $17.0 million, compared to $17.4 million in the prior-year period.

Capital Position

The tangible common equity to tangible assets ratio (non-GAAP measure) was 6.93%, compared to 7.01% and 6.73% at March 31, 2015, and June 30, 2014, respectively.  The tangible book value per common share (non-GAAP measure) increased to $6.22, from $6.18 and $5.73 at March 31, 2015, and June 30, 2014, respectively.  The common dividend payout ratio for the second quarter of 2015 was 55.5%.

Conference Call

F.N.B. Corporation will host a conference call to discuss second quarter 2015 financial results on Thursday, July 23, 2015, at 10:00 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, July 30, 2015. The replay can be accessed by dialing (877) 344-7529 or (412) 317-0088 for international callers; the conference replay access code is 10067258. 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 assets of $16.6 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. 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 (FTE), tangible book value per common share, and the ratio of tangible common equity to tangible assets, in addition to capital ratios defined by banking regulators, to provide information useful to investors in understanding F.N.B. Corporation’s operating performance and trends, and 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.
• 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 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, 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.

We provide greater detail regarding these and other factors in our 2014 Form 10-K, including the Risk Factors section of that report, 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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