F.N.B. Corporation Reports Record Third Quarter 2013 Net Income of $31.6 Million

Hermitage, Pa., Oct. 17, 2013 /PRNewswire/ -- F.N.B. Corporation (NYSE: FNB) today reported third quarter of 2013 net income of $31.6 million, or $0.22 per diluted share, compared to second quarter of 2013 net income of $29.2 million, or $0.20 per diluted share and third quarter of 2012 net income of $30.7 million, or $0.22 per diluted share.

On an operating¹ basis, third quarter of 2013 operating net income was $32.2 million, or $0.22 per diluted share, compared to second quarter of 2013 operating net income of $30.1 million, or $0.21 per diluted share, and third quarter of 2012 operating net income of $29.9 million or $0.21 per diluted share. Operating results are shown adjusted for merger-related costs and certain non-operating gains; refer to the accompanying data tables for details. 

Vincent J. Delie, President and Chief Executive Officer, commented on the results, "We continue to be pleased with the strong results achieved company wide. The balance sheet further expanded through annualized loan growth of 9% and we continued to attract new deposit relationships, with total transaction deposits growing 7% annualized. Our success growing loans and deposits supports the net interest margin, which expanded slightly during the quarter. Asset quality results remained very good and net charge-offs were at very low levels. Growth realized across our diverse business lines drives results and delivers solid profitability." 

Mr. Delie continued, "The Park View acquisition was completed on October 12, 2013. As a result of the merger, we have significantly expanded our presence to 29 total locations in eastern Ohio with 18 locations in the greater Cleveland area. The Cleveland market complements our existing footprint and presents favorable organic growth opportunities. This expansion further solidifies our strategy to establish a meaningful presence in the major metropolitan markets of Pittsburgh, Baltimore and Cleveland and we look forward to delivering future success."

¹ Non-GAAP measures, refer to Non-GAAP Disclosures and detail in the accompanying data tables.

Third Quarter 2013 Highlights

• Loan growth momentum continued with total average loan growth of $200.2 million, or 9.3% annualized, linked-quarter. 
• FNB's deposit mix further strengthened through continued growth in transaction deposits and customer repurchase agreements. Average transaction deposits and customer repurchase agreements grew $138.6 million or 7.0% annualized. Growth in non-interest bearing deposits was the primary contributor with average growth of $131.8 million or 27.5% annualized. Transaction deposits and customer repurchase agreements represent 78% of total deposits and customer repurchase agreements at September 30, 2013, improved from 74% at September 30, 2012.
• The net interest margin expanded 1 basis point to 3.64%. 
• Credit quality metrics were at very good levels and reflect consistent results. Net charge-offs were low at 0.26% annualized of total average originated loans, compared to 0.33% annualized in the prior quarter.

Third Quarter 2013 Results – Comparison to Prior Quarter
(All comparisons refer to the second quarter of 2013, except as noted)

Net Interest Income/Loans/Deposits
Net interest income on a fully taxable equivalent basis totaled $101.0 million, increasing $2.5 million or 2.6%. The net interest margin of 3.64% expanded 1 basis point compared to the prior quarter, primarily a result of the solid growth achieved in total average loans and lower cost transaction deposits, as well as a lowered cost of funds and a higher investment portfolio yield. Average earning assets increased $161.6 million, or 5.9% annualized, due to growth in total average loans of $200.2 million or 9.3% annualized.

Growth in average loans reflects continued solid growth momentum in the commercial and consumer portfolios. Average commercial loans grew $49.6 million, or 4.2% annualized, representing the eighteenth consecutive quarter of organic growth for the core commercial portfolio. Consumer loan growth (consisting of direct, consumer lines of credit and indirect loans) was strong and benefited from seasonally higher loan volumes and successful sales efforts to increase market share across the banking footprint. The primary contributor to the consumer loan growth was $137.3 million growth in home equity-related loans (direct and consumer lines of credit loans), of which 67% of the new loan volume represents a first lien position. Average indirect loans contributed growth of $34.2 million, or 23.1% annualized, given the higher volume achieved due to overall increased demand.

Total average deposits and customer repurchase agreements totaled $10.4 billion and increased $68.9 million or 2.6% annualized. Through a consistent strategy focused on relationship-based banking and attracting lower cost deposits as a primary funding source, FNB's deposit mix further strengthened through growth in transaction deposit accounts and customer repurchase agreements of $138.6 million or 7.0% annualized. Growth in non-interest bearing deposits was the primary contributor, as these average balances grew $131.8 million or 27.5% annualized. Partially offsetting the transaction deposit growth was a continued planned decline in time deposits due to the lower offered rate environment. Transaction deposits and customer repurchase agreements totaled 78% of total deposits and customer repurchase agreements, improved from 77% at June 30, 2013 and 74% at September 30, 2012. In addition, FNB's funding remains predominantly customer-based, with total customer-based funding representing 96% of total deposits and borrowings. Loans as a percentage of total deposits and customer repurchase agreements was 84%.

Non-Interest Income
Non-interest income totaled $32.9 million, decreasing $3.9 million, or 10.6%, as the prior quarter included a $1.6 million gain on extinguishment of debt and the current quarter was impacted by the loss of $2.6 million in customer interchange fee revenue due to restrictions imposed by Federal banking regulations (the Durbin Amendment included within the Dodd-Frank Act). Absent these items, non-interest income increased slightly.

Non-Interest Expense
Non-interest expense totaled $83.2 million, decreasing $1.0 million or 1.1%. Merger-related costs of $0.9 million and $2.9 million were included in the third quarter and second quarter of 2013, respectively. Other components included in non-interest expense include a decrease in other real estate owned (OREO) of $0.5 million and lower occupancy and equipment of $0.4 million. These decreases were offset by a $2.0 million increase in salaries and benefits primarily due to incentive and performance-related compensation. Additionally, FDIC insurance expense increased $0.5 million, or 18.3%, primarily due to revised assessment methodologies.

Credit Quality
Credit quality metrics remained at very good levels, reflecting consistent solid performance. The provision for loan losses totaled $7.3 million, compared to $7.9 million, as provision levels continue to support the solid loan growth. Net charge-offs were good, totaling $5.5 million, or 0.25% annualized, improved from $7.3 million or 0.34% annualized. For the originated portfolio, net charge-offs improved 7 basis points to 0.26% annualized of average originated loans. The ratio of the allowance for loan losses to total originated loans was 1.34%, consistent with 1.35% at June 30, 2013. The ratio of the allowance for loan losses to total non-performing loans was 127.37% compared to 121.68%.

The ratio of non-performing loans and OREO to total loans and OREO improved 7 basis points to 1.33%. For the originated portfolio, the ratio of non-performing loans and OREO to total loans and OREO was 1.49% at September 30, 2013, a 10 basis point improvement. Total delinquency (total past due and non-accrual loans) to total originated loans remained unchanged at 1.44%.

Third Quarter 2013 Results – Comparison to Prior-Year Quarter
(All comparisons refer to the third quarter of 2012, except as noted)

Net Interest Income/Loans/Deposits
Net interest income on a fully taxable equivalent basis totaled $101.0 million, increasing $5.7 million or 5.9%. The net interest margin of 3.64% compares to 3.70%, with 5 basis points of the 6 basis point narrowing due to the benefit of higher accretable yield in the prior-year quarter. Average earning assets grew $780.3 million, or 7.6%, reflecting strong organic loan growth and the addition of Annapolis Bancorp, Inc. (ANNB) on April 6, 2013.

Average loans totaled $8.7 billion and increased $821.3 million, or 10.4%, reflecting organic loan growth of $562 million, or 7.1%, and loans added in the ANNB acquisition ($259 million). Strong organic growth in the commercial portfolio continued, with these average balances increasing organically $312.0 million or 7.3%. Average organic consumer loan growth (consisting of direct, consumer lines of credit and indirect loans) was also strong with these balances increasing organically $357.8 million, or 14.6%, driven by growth in home equity-related loans originated across FNB's branch network.

Total average deposits and customer repurchase agreements totaled $10.4 billion and increased $568.8 million, or 5.8%, reflecting balances added in the ANNB acquisition ($358 million) and organic growth. Organic growth in lower cost transaction deposit accounts and customer repurchase agreements was strong, with growth of $538.4 million, or 7.5%, through new account acquisition and customers maintaining higher average balances. Growth in non-interest bearing deposits was strong, with average organic growth of $283.4 million or 16.9%.

Non-Interest Income
Non-interest income totaled $32.9 million, decreasing $2.0 million, or 5.6%, reflecting $2.6 million in lower customer-related service charges due to the Durbin Amendment restrictions effective for FNB on July 1, 2013, and a $1.4 million gain on the sale of a building in the prior-year quarter. Revenue growth was seen in several other fee income sources, including securities commissions and fees which increased $0.5 million, or 22.5%, and trust income which increased $0.4 million or 10.4%.

Non-Interest Expense
Non-interest expense totaled $83.2 million, increasing $6.1 million or 8.0%. The third quarter of 2013 and the third quarter of 2012 included merger-related costs of $0.9 million and $0.1 million, respectively. Excluding merger-related costs, non-interest expense increased $5.3 million, or 6.9%, and primarily reflects the additional operating costs related to the ANNB acquisition and higher FDIC insurance expense as a result of FNB exceeding $10 billion in total assets.

Credit Quality
Credit quality results reflect good, consistent results, with slight improvement over the prior-year quarter. The provision for loan losses was $7.3 million, compared to $8.4 million, with the decline due to lower provision for the acquired portfolios as provision levels for the originated portfolio support the loan growth. Charge-off performance continued to be good, with net charge-offs totaling $5.5 million, or 0.25% annualized, improving from $7.4 million or 0.37% annualized. The ratio of the allowance for loan losses to total originated loans was 1.34%, compared to 1.43% at September 30, 2012, with the change directionally consistent with the performance of the portfolio. The ratio of the allowance for loan losses to total non-performing loans increased to 127.37% compared to 120.23%.

The ratio of non-performing loans and OREO to total loans and OREO improved 15 basis points to 1.33% at September 30, 2013. For the originated portfolio, the ratio of non-performing loans and OREO to total loans and OREO improved 20 basis points to 1.49% at September 30, 2013. Total delinquency (total past due and non-accrual loans) to total originated loans improved 22 basis points to 1.44% at September 30, 2013.

Third Quarter 2013 Year-to-Date Results – Comparison to Prior Year-to-Date
(All comparisons refer to the third quarter 2012 year-to-date, except as noted)

Net income for the first nine months of 2013 was $89.4 million, or $0.62 per diluted share, compared to $81.5 million or $0.58 per diluted share for the first nine months of 2012.

Net interest income on a fully taxable equivalent basis totaled $294.4 million, increasing $9.8 million or 3.5%. The net interest margin of 3.64% compares to 3.75%, with 2 basis points of the narrowing due to $1.7 million higher accretable yield in the prior-year period. The remaining narrowing primarily reflected lower yields on earning assets in response to the extended low interest rate environment partially offset by the benefits to the net interest margin from strong growth in average loans and lower cost transaction deposits and customer repurchase agreements and a lower cost of funds. Average earning assets grew $669.0 million or 6.6%, reflecting strong organic loan growth and the addition of ANNB.

Average loans totaled $8.5 billion and increased $643.8 million, or 8.2%, reflecting organic loan growth of $476.8 million or 6.1% and loans added in the ANNB acquisition. Total average deposits and customer repurchase agreements totaled $10.2 billion and increased $498.0 million, or 5.1%, reflecting organic growth and balances added in the ANNB acquisition. Organic growth in lower cost transaction deposit accounts and customer repurchase agreements was strong, growing $591.2 million or 8.4%. Growth in non-interest bearing deposits was strong, with average organic growth of $274.7 million or 17.5%.

Non-interest income totaled $103.3 million, increasing $3.9 million or 4.0%. The increase reflects improved revenue across several business lines, including wealth management and mortgage banking, due to the benefit of revenue-enhancing strategies and initiatives. Wealth management revenue increased $3.3 million, or 18.8%, and gain on sale of loans increased $0.2 million or 9.1%.  The first nine months of 2013 was impacted by the $2.6 million lower customer-related service charges due to the Durbin Amendment restrictions effective for FNB on July 1, 2013.  In addition, the first nine months of 2013 included a $1.6 million gain on extinguishment of debt, while the first nine months of 2012 included a $1.4 million gain on the sale of a building.

Non-interest expense totaled $246.3 million, increasing $4.0 million, or 1.7%. Merger-related and severance costs of $4.2 million and $7.9 million were included in the first nine months of 2013 and 2012, respectively. The first nine months of 2013 included the operating costs related to the ANNB acquisition and higher FDIC insurance expense of $2.0 million, or 32.8%, which were partially offset by the benefit of lower OREO expense of $2.6 million or 66.9%.

Credit quality results for the first nine months of 2013 demonstrated stability with slight improvements compared to the year-ago period. The provision for loan losses equaled $22.7 million, increased slightly from $22.0 million, reflecting provision required to support the strong loan growth. Charge-off performance continued to be good, with net charge-offs totaling $17.0 million, or 0.27% annualized, improved from $20.0 million or 0.34% annualized.

Income Taxes
Income taxes for the third quarter of 2013 include the benefit of tax credits realized on the 2012 income tax return, resulting in a lower effective income tax rate.

Capital Position
The Corporation's capital levels at September 30, 2013 continue to exceed federal bank regulatory agency "well capitalized" thresholds. At September 30, 2013, estimated regulatory ratios remained consistent with June 30, 2013 levels. The estimated total risk-based capital ratio was 12.2%, the estimated tier 1 risk-based capital ratio was 10.7% and the estimated leverage ratio was 8.4%.

At September 30, 2013, the tangible equity to tangible assets ratio (non-GAAP measure) was 6.09% compared to 6.11% at June 30, 2013, reflecting the strong asset growth during the third quarter of 2013. The tangible book value per share (non-GAAP measure) increased to $5.04 from $4.97 over this same period. The dividend payout ratio for the third quarter of 2013 was 56%.

Conference Call
F.N.B. Corporation will host its quarterly conference call to discuss third quarter 2013 financial results on Friday, October 18, 2013 at 10:00 a.m. Eastern Time. Participating callers may access the call by dialing (888) 539-3612 or (719) 457-2085 for international callers; the confirmation number is 3397005. 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 from 1:00 p.m. Eastern Time the day of the call until midnight Eastern Time on Friday, October 25, 2013. The replay is accessible by dialing (877) 870-5176 or (858) 384-5517 for international callers; the confirmation number is 3397005. 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.

Additional Corporate Developments
On October 3, 2013, Moody's Investor Services assigned first-time ratings to F.N.B. Corporation, with an issuer rating at Baa3, and to its banking subsidiary, First National Bank of Pennsylvania, with a long-term deposits and other senior obligations rating of Baa2.

On October 12, 2013, F.N.B. Corporation completed the acquisition of PVF Capital Corp. As a result of the merger, First National Bank now operates a total of 29 banking offices in Ohio, including 18 in the greater Cleveland area.

About F.N.B. Corporation
F.N.B. Corporation (NYSE: FNB), headquartered in Hermitage, Pennsylvania, is a regional diversified financial services company operating in six states and three major metropolitan areas including Pittsburgh, PA, where it holds the number three retail deposit market share, Baltimore, MD and Cleveland, OH. The Company has total assets of $12.8 billion and more than 250 banking offices throughout Pennsylvania, Ohio, West Virginia and Maryland. 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. Commercial banking solutions include corporate banking, small business banking, investment real estate financing, asset based lending, 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.

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 anticipated impact of the current shutdown of U.S. Government operations on levels of economic activity in the markets in which F.N.B. Corporation operates, and 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 of the current moderate economic recovery and persistence or worsening levels of unemployment.
  • 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. 
  • The impact on fee income opportunities resulting from the limit imposed under the Durbin Amendment of the Dodd-Frank Act on the maximum permissible interchange fee that banks may collect from merchants for debit card transactions.
  • Changes to regulations governing bank capital and liquidity standards, including due to the Dodd-Frank Act 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 Annapolis Bancorp, Inc. and PVF Capital Corp. acquisitions and the pending acquisition of BCSB Bancorp, 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.  In addition, with respect to the acquisition of Annapolis Bancorp, Inc., PVF Capital Corp. and the pending acquisition of and BCSB Bancorp, Inc., F.N.B. Corporation may experience difficulties in expanding into a new market area, including retention of customers and key personnel of Annapolis Bancorp, Inc., PVF Capital Corp., Inc. and BCSB Bancorp, Inc.
• 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 or international hostilities through their impacts on the economy and financial markets.

We provide greater detail regarding some of these factors in our 2012 Form 10-K and 2013 Form 10-Qs, 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.

DATA SHEETS FOLLOW

SOURCE F.N.B. Corporation