F.N.B. Corporation Reports First Quarter 2017 Earnings

PRESS RELEASE

April 25, 2017 - PITTSBURGH, PA

F.N.B. CORPORATION REPORTS FIRST QUARTER 2017 EARNINGS
Total Assets Exceed $30 Billion

"We are very pleased with our first quarter financial results, which were achieved while successfully integrating our transformational merger with Yadkin," said Vincent J. Delie, Jr., President and Chief Executive Officer. "Our first quarter financial performance was highlighted by continued organic growth and solid contributions from our fee-based businesses.  We are also pleased with the outstanding execution of our conversion teams whose goal was a seamless transition for our new customers and employees.  The success of our past acquisitions demonstrates that we can generate positive operating leverage and bring our innovative products and services to new markets to win clients and gain market share.  The addition of Yadkin is a great opportunity for FNB to expand in attractive Southeast markets and grow revenue.  With our largest and most complex merger completed, we are well-positioned to deliver significant value to our shareholders."

Quarterly Results Summary	1Q17	4Q16	1Q16
Reported Results
Net income available to common stockholders (millions)	$21.0	$49.3	$24.1
Net income per diluted common share	$0.09	$0.23	$0.12
Book value per common share (period-end)	$13.16	$11.68	$11.50
Operating Results (Non-GAAP)
Operating net income available to common stockholders (millions)	$54.4	$50.6	$40.6
Operating net income per diluted common share	$0.23	$0.24	$0.21
Tangible common equity to tangible assets (period-end)	6.80%	6.64%	6.93%
Tangible book value per common share (period-end)	$5.86	$6.53	$6.36
Average Diluted Common Shares Outstanding (in 000’s)	239,255	212,748	194,878
Significant items influencing earnings1 (millions)
Pre-tax merger-related expenses	($52.7)	($1.6)	($24.9)
After-tax impact of merger-related expenses	($35.1)	($1.3)	($16.5)
Pre-tax merger-related net securities gains	($2.6)	($-)	($-)
After-tax impact of net merger-related securities gains	($1.7)	($-)	($-)
(1) Favorable (unfavorable) impact on earnings

Non-GAAP measures are used by management to measure performance in operating the business that management believes enhances investors’ ability to better understand the underlying business performance and trends related to core business activities. Reconciliations of GAAP to non-GAAP operating measures to the most directly comparable GAAP financial measures are included in the tables at the end of this release.  Organic growth refers to growth excluding the benefit of initial balances from acquisitions.  Purchase accounting related to net interest margin refers to the accretable yield and any cash recoveries associated with acquired loans.  

First Quarter 2017 Highlights
(All comparisons refer to the fourth quarter of 2016, except as noted)

• On March 11, 2017, we successfully closed and converted our acquisition of Yadkin Financial Corporation (Yadkin), which included 98 branches and over 100 ATMs. Additionally, total loans and deposits with preliminary estimated fair values of $5.0 billion and $5.2 billion, respectively, were added to our balance sheet. 
• Organic growth in total average loans was $194 million, or 5.3% annualized, with average consumer loan growth of $117 million, or 7.8% annualized (including residential mortgage, direct and indirect installment and home-equity related products), and average commercial loan growth of $89 million, or 4.2% annualized.
• On an organic basis, average total deposits decreased $41 million and were impacted by seasonal declines in business demand balances.
• The net interest margin (FTE) (non-GAAP) remained stable at 3.35% and the net interest margin excluding purchase accounting (FTE) (non-GAAP) expanded 2 basis points to 3.28%.
• The efficiency ratio on an operating basis (non-GAAP) was 57.2%, compared to 55.4% in the prior quarter and 56.4% in the year-ago quarter.
• Credit quality results were satisfactory. Annualized net originated net charge-offs were 0.25% of total average originated loans, compared to 0.38% annualized in the fourth quarter of 2016 and 0.21% annualized in the year-ago quarter.
• The tangible common equity to tangible assets ratio (non-GAAP) was 6.80% at March 31, 2017, compared to 6.64% at December 31, 2016. The tangible book value per common share (non-GAAP) was $5.86 at March 31, 2017, a decline of $0.67 from December 31, 2016, due to the impact of the Yadkin acquisition.

First Quarter 2017 Results – Comparison to Prior Quarter

Net Interest Income/Loans/Deposits
Net interest income totaled $172.8 million, increasing $13.5 million or 8.5%. The net interest margin (FTE) (non-GAAP) remained stable at 3.35% and included $3.0 million of purchase accounting accretion and $0.3 million of cash recoveries. Excluding the impact of purchase accounting, the net interest margin (FTE) (non-GAAP) expanded two basis points to 3.28%. Total average earning assets increased $2.0 billion or 10.2%, mostly due to the benefit of acquired Yadkin balances, as well as organic loan growth of $194 million and a $612 million increase in the securities portfolio in anticipation of the Yadkin closing and some planned growth.

Average loans totaled $16.2 billion and increased $1.4 billion, or 9.2%, reflecting the acquired Yadkin balances and the solid organic loan growth in the commercial and consumer portfolios. Average organic commercial loan growth totaled $89 million or 4.2% annualized, with much of the growth concentrated in the Pittsburgh, Maryland, and Cleveland markets. Average organic consumer loan growth was $117 million, or 7.8% annualized, led by strong demand and increased origination volume for indirect auto loans and continued growth in the residential mortgage portfolio. 

Average deposits totaled $17.1 billion and increased $1.2 billion, or 7.3%, primarily reflecting the acquired Yadkin deposits. Noninterest bearing deposits grew slightly, as growth in personal demand accounts were offset by seasonal declines in interest checking and business demand accounts. 

Non-Interest Income
Non-interest income totaled $55.1 million, increasing $4.1 million, or 7.9%, and included $2.6 million in net securities gains related to the sale of certain acquired Yadkin securities after the closing of the acquisition to align the portfolio with FNB’s investment profile. The increase in non-interest income was due to positive performance in capital markets, insurance, and wealth management, as well as a slight benefit from a partial quarter of Yadkin activities. Capital markets benefited from fees earned on increased interest rate swap activity with commercial customers across our existing and newly acquired markets. Wealth management showed positive organic growth results and was supported in-part by favorable stock market conditions.  

Non-Interest Expense
Non-interest expense totaled $187.6 million, increasing $63.7 million and included a $51.1 million increase in merger expense compared to the prior quarter. Excluding merger-related expenses, expenses would have increased $12.7 million. The efficiency ratio (non-GAAP) was 57.2%, compared to 55.4%. The increase was primarily due to infrastructure investments, pre-hiring in advance of the acquisition close, as well as seasonally higher expenses.

Credit Quality
The ratio of non-performing loans and OREO to total loans and OREO improved 2 basis points to 0.77%. For the originated portfolio, the ratio of non-performing loans and OREO to total loans and OREO increased 21 basis points to 1.12% and the increase was mostly driven by an estimated fair value of $19.4 million of acquired Yadkin OREO. The increase in total delinquency levels reflects the addition of the acquired Yadkin balances. Total originated delinquency, defined as total past due and non-accrual originated loans as a percentage of total originated loans, decreased 10 basis points to 0.94%, compared to 1.04% at December 31, 2016. 

Net charge-offs totaled $8.1 million, or 0.20% annualized of total average loans, compared to $11.5 million, or 0.31% annualized. For the originated portfolio, net charge-offs were $7.9 million, or 0.25% annualized of total average originated loans, compared to $11.8 million or 0.38% annualized. The ratio of the allowance for loan losses to total loans and leases decreased 26 basis points from December 31, 2016, to 0.80% at March 31, 2017, with the decrease primarily due to the preliminary estimated fair value of $5.0 billion in loans from the Yadkin acquisition without a corresponding allowance for loan losses in accordance with accounting for business combinations. For the originated portfolio, the allowance for loan losses to total originated loans was 1.19%, compared to 1.20% at December 31, 2016. The total provision for loan losses totaled $10.9 million, compared to $12.7 million in the prior quarter.

First Quarter 2017 Results – Comparison to Prior-Year Quarter

Net Interest Income/Loans/Deposits
Net interest income totaled $172.8 million, increasing $32.4 million, or 23.1%, reflecting average earning asset growth of $4.4 billion, or 25.9%. The net interest margin (FTE) (non-GAAP) narrowed 5 basis points to 3.35% and included $0.8 million of higher purchase accounting accretion and $0.2 million of lower cash recoveries. Excluding purchase accounting, the net interest margin (FTE) (non-GAAP) narrowed 5 basis points to 3.28%. 

Average loans totaled $16.2 billion, an increase of $2.9 billion, or 22.3%, due to the benefit from continued organic loan growth and previous acquired balances. Organic growth in total average loans equaled $786 million, or 5.6%. Total average organic consumer loan growth of $594 million, or 10.7%, was led by strong growth in residential mortgage and indirect auto loans. Organic growth in average commercial loans totaled $193 million, or 2.3%. Organic commercial loan growth compared to the year-ago quarter was somewhat offset by accelerated prepayment activity in the commercial acquired loan portfolio experienced in the second half of 2016. Average deposits totaled $17.1 billion and increased $2.9 billion, or 20.7% due to the benefit of previous acquired balances and average organic growth of $317 million or 2.1%. On an organic basis, average total transaction deposits increased $426 million or 3.4%. Total loans as a percentage of deposits was 94.6% at March 31, 2017.

Non-Interest Income
Non-interest income totaled $55.1 million, increasing $9.1 million or 19.7%. Non-interest income reflects the benefit of previous acquisitions and continued expansion of our fee-based businesses of capital markets, mortgage banking and insurance for our existing and acquired customer base.  

Non-Interest Expense
Non-interest expense totaled $187.6 million, increasing $50.9 million, or 37.3%. First quarter 2017 included merger-related expenses of $52.7 million, compared to $24.9 million. Excluding merger-related expenses, total adjusted non-interest expense increased $23.1 million, or 20.7%, with the increase primarily attributable to the expanded operations from previous acquisitions. The efficiency ratio (non-GAAP) was 57.2%, compared to 56.4% in the first quarter of 2016.

Credit Quality
Credit quality results remained at satisfactory levels. For the originated portfolio, non-performing loans and OREO to total loans and OREO was 1.12%, compared to 1.18%. Total originated delinquency was 0.94% at March 31, 2017, a 1 basis point increase from March 31, 2016.  

Net charge-offs for the first quarter of 2017 totaled $8.1 million, or 0.20% annualized of total average loans, compared to 0.18% annualized. Net originated charge-offs were 0.25% annualized of total average originated loans, compared to 0.21% annualized. For the originated portfolio, the allowance for loan losses to total originated loans was 1.19%, compared to 1.26% at March 31, 2016. The ratio of the allowance for loan losses to total loans decreased 24 basis points to 0.80%, with the movement due to additional loan balances from acquisitions which were initially recorded at fair value without a corresponding allowance for loan losses in accordance with accounting for business combinations. The total provision for loan losses was $10.9 million, compared to $11.8 million in the prior year.

Capital Position
The tangible common equity to tangible assets ratio (non-GAAP) was 6.80%, compared to 6.93% at March 31, 2016.  Book value per common share increased to $13.16, from $11.50 at March 31, 2016. Tangible book value per common share (non-GAAP) was $5.86, compared to $6.36 at March 31, 2016.  

Non-GAAP Financial Measures and Key Performance Indicators 
We use non-GAAP financial measures, such as operating net income available to common stockholders, operating net income per diluted common share, return on average tangible common equity, return on average tangible assets, tangible book value per common share, the ratio of tangible common equity to tangible assets, efficiency ratio, and net interest margin to provide information useful to investors in understanding our operating performance and trends, and to facilitate comparisons with the performance of our peers. Management uses these measures internally to assess and better understand our underlying business performance and trends related to core business activities. The non-GAAP financial measures and key performance indicators we use may differ from the non-GAAP financial measures and key performance indicators other financial institutions use to measure their performance and trends.  Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, our reported results prepared in accordance with GAAP. Reconciliations of GAAP to non-GAAP operating measures to the most directly comparable GAAP financial measures are included in the tables at the end of this release.   

We believe merger expenses are not organic costs to run our operations and facilities. These charges represent expenses to satisfy contractual obligations of acquired entities without any useful benefit to us and to convert and consolidate the entity’s records onto our platforms. These costs are specific to each individual transaction and may vary significantly based on the size and complexity of the transaction.

For the calculation of net interest margin and the efficiency ratio, net interest income amounts are reflected on a fully taxable equivalent (FTE) basis which adjusts for the tax benefit of income on certain tax-exempt loans and investments using the federal statutory tax rate of 35.0% for each period presented. We use these measures to provide an economic view believed to be the preferred industry measurement for these items and provides relevant comparison between taxable and non-taxable amounts.

Conference Call
The Company’s President and Chief Executive Officer, Vincent J. Delie, Jr., Chief Financial Officer, Vincent J. Calabrese, Jr., and Chief Credit Officer, Gary L. Guerrieri, will host a conference call to discuss the Company’s financial results on Tuesday, April 25, 2017, at 10:30 AM ET.

Participants are encouraged to pre-register for the conference call at http://dpregister.com/10101511. Callers who pre-register will be provided a conference passcode and unique PIN to gain immediate access to the call and bypass the live operator. Participants may pre-register at any time, including up to and after the call start time.  

Dial-in Access: The conference call may be accessed by dialing (844) 802-2440 or (412) 317-5133 for international callers. Participants should ask to be joined into the F.N.B. Corporation call.

Webcast Access: The audio-only call and related presentation materials may be accessed via webcast through the “Shareholder and Investor Relations” section of the Corporation’s website at www.fnbcorporation.com. Access to the live webcast will begin approximately 30 minutes prior to the start of the call.  

Presentation Materials: Presentation slides and the earnings release will also be available on the Corporation’s website on the “About Us” section of our corporate website at www.fnbcorporation.com. 

A replay of the call will be available shortly after the completion of the call until midnight ET on Tuesday, May 2, 2017. The replay can be accessed by dialing (877) 344-7529 or (412) 317-0088 for international callers; the conference replay access code is 10101511. Following the call, a transcript and the related presentation materials will be posted to the “Shareholder and Investor Relations” section of F.N.B. Corporation’s website 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 eight states. FNB holds a significant retail deposit market share in attractive markets including: Pittsburgh, Pennsylvania; Baltimore, Maryland; Cleveland, Ohio; and Charlotte, Raleigh, Durham and the Piedmont Triad (Winston-Salem, Greensboro and High Point) in North Carolina. The Company has total assets of $30 billion, and more than 400 banking offices throughout Pennsylvania, Ohio, Maryland, West Virginia, North Carolina and South Carolina. 

FNB 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. FNB’s wealth management services include asset management, private banking and insurance. The Company also operates Regency Finance Company, which has more than 75 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 MidCap 400 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 website at www.fnbcorporation.com.

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