F.N.B. Corporation Reports Third Quarter 2012 Results

HERMITAGE, Pa., Oct. 22, 2012 /PRNewswire/ -- F.N.B. Corporation (NYSE: FNB) today reported third quarter 2012 financial results. Net income for the third quarter of 2012 was $30.7 million, or $0.22 per diluted share, compared with second quarter of 2012 net income of $29.1 million, or $0.21 per diluted share. Net income for the third quarter of 2011 was $23.8 million, or $0.19 per diluted share.

Vincent J. Delie, President and Chief Executive Officer, commented, "The third quarter was another very positive quarter highlighted by our ability to deliver consistent, strong operating results.  Our sustained momentum is apparent in the third quarter results, with top line revenue growth, loan and deposit growth, good credit quality and continued expense control."

Mr. Delie continued, "We are also extremely pleased to have announced the agreement to acquire Annapolis Bancorp, Inc. This acquisition provides FNB the opportunity to partner with a well-respected banking institution and expand our franchise to a market with attractive demographics and long-term growth potential. We expect to leverage our successful regional banking model to produce positive results in this expanded footprint."

Third Quarter 2012 Highlights

• Third quarter net income was $0.22 per diluted share
• The net interest margin was 3.70%
• Revenue growth was 4.8% annualized
• Average Pennsylvania commercial portfolio loans grew $91.5 million or 8.9% annualized. This represents the fourteenth consecutive linked quarter of organic growth for this portfolio.
• Average consumer loans grew $72.2 million or 12.0% annualized
• Average transaction deposits and customer repurchase agreements grew $153.8 million or 8.7% annualized
• The efficiency ratio was 56.8%
• Net charge-offs totaled $7.4 million or 0.42% annualized of average originated loans
• Non-performing loans and other real estate owned (OREO) declined $13.3 million, or 10.1%, and as a percentage of total originated loans and OREO was 1.69%

F.N.B. Corporation's performance ratios for the third quarter of 2012 were as follows: return on average tangible equity (non-GAAP measure) was 19.10%; return on average equity was 8.83%; return on average tangible assets (non-GAAP measure) was 1.15% and return on average assets was 1.03%. Reconciliations of non-GAAP measures used in this press release to their most directly comparable GAAP measures are included in the tables that accompany this press release.

Third Quarter 2012 Results
(All comparisons refer to the second quarter of 2012, except as noted)

Net Interest Income
Net interest income on a fully taxable equivalent basis totaled $95.4 million in the third quarter of 2012 compared to $96.3 million in the prior quarter. Both quarters included a benefit from accretable yield resulting from better than expected cash flows on acquired loans totaling $1.4 million in the third quarter of 2012 and $2.5 million in the second quarter of 2012.  When excluding the net accretable yield, net interest income increased slightly.  The third quarter net interest margin of 3.70% narrowed 10 basis points from 3.80%, with five basis points of the narrowing attributed to the lower accretable yield benefit in the third quarter. 

Average loans totaled $7.9 billion and grew $96.3 million or 4.9% annualized. Average loan growth, excluding reductions in the Florida portfolio, was $134.8 million or 6.9% annualized with strong growth in both the Pennsylvania commercial and consumer portfolios. Growth in the Pennsylvania commercial portfolio continued, with average balances increasing $91.5 million, or 8.9% annualized, reflecting our consistent ability to build market share as commercial line utilization rates remained consistent with the prior quarter. This represents the fourteenth consecutive quarter of organic growth for this portfolio with an average quarterly organic growth rate of 6.7% over this period. Average consumer loan growth (consisting of direct, consumer lines of credit and indirect loans) was also strong with these balances increasing $72.2 million or 12.0% annualized. Positive consumer loan results were driven by growth of $62.7 million or 13.7% annualized in home equity-related loans (direct loans and consumer lines of credit) through a targeted sales focus across our branch network to capitalize on consumer preferences for these products. Average loans for the Florida portfolio declined $38.4 million, or 33.1%, as we continue to execute our exit strategy for this portfolio.

"Growing total loans organically for thirteen consecutive quarters is an outstanding accomplishment given the current economic environment," remarked Mr. Delie. "We continue to see many benefits from the effective execution of our disciplined, enterprise-wide sales management process. Furthermore, our focused efforts to balance this growth while maintaining a lower risk profile and consistent high quality underwriting standards is demonstrated in our stable credit quality results."

Total average deposits and customer repurchase agreements totaled $9.8 billion and grew $83.3 million, or 3.4% annualized. Growth in lower cost transaction deposit accounts and customer repurchase agreements remained strong, increasing $153.8 million, or 8.7% annualized, through a combination of new account acquisition, customers maintaining higher average balances and transfers from time deposits. Growth in transaction accounts and customer repurchase agreements was partially offset by a continued planned decline in time deposits due to the lower offered rate environment.  As of September 30, 2012, FNB's total customer-based funding remained constant at 98% of total deposits and borrowings. Loans as a percentage of total deposits and customer repurchase agreements were 80%, compared to 81% at June 30, 2012.  Additionally, transaction-based deposits and customer repurchase agreements represent 74% of total deposits and customer repurchase agreements at September 30, 2012.

Non-Interest Income
Non-interest income totaled $34.8 million in the third quarter of 2012, increasing $2.0 million or 6.2%. Excluding a $1.4 million gain on the sale of a building in the third quarter and the net gain or loss on the sale of securities and net impairment losses on securities, non-interest income increased $1.0 million or 3.2%. Increases were seen in several fee income categories including insurance commissions and fees, securities commissions and fees and gain on the sale of loans.

Non-Interest Expense
Non-interest expense totaled $77.1 million in the third quarter of 2012, declining $1.4 million, or 1.8%.  Primary contributors to the decline include lower other real estate owned expense and other non-interest expense.  Continued expense control efforts are reflected in the efficiency ratio of 56.8%.

Credit Quality
Credit quality results for the third quarter of 2012 reflect consistent, solid performance. The provision for loan losses equaled $8.4 million for the third quarter of 2012 compared to $7.0 million in the prior quarter, with the increase primarily reflecting provision for loan losses of $2.2 million for the acquired portfolio following a re-estimation of cash flows and some downward migrations in certain homogeneous small business loan pools. As it relates to the acquired portfolio, larger, specifically marked credits have performed better than expected.  These upward migrations will be reflected as positive yield adjustments over the remaining life of the respective loans.

Charge-off performance continued to be good with net charge-offs for the third quarter totaling $7.4 million or 0.37% annualized. Additionally, year-to-date net charge-offs of 0.34% annualized compare favorably to the prior year-to-date period of 0.46% annualized. When measured against the originated portfolio, year-to-date originated net charge-offs improved 10 basis points to 0.39% of average originated loans compared to the prior year-to-date period. Non-performing loans and OREO declined $13.3 million, or 10.1%, primarily as a result of the successful resolution of a Florida-related non-performing credit. The ratio of non-performing loans and OREO to total loans and OREO improved 19 basis points over the prior quarter to 1.48% at September 30, 2012. For the originated portfolio, the ratio of non-performing loans and OREO to total loans and OREO improved 24 basis points to 1.69% at September 30, 2012. Total delinquency (total past due and non-accrual loans) to total originated loans improved 12 basis points to 1.66%. The ratio of the allowance for loan losses to total originated loans was 1.43%, compared to 1.49% at June 30, 2012.

Capital Position
The Corporation's capital levels at September 30, 2012 continue to exceed federal bank regulatory agency "well capitalized" thresholds. Regulatory capital ratios at September 30, 2012 (estimated) increased from June 30, 2012 ratios. At September 30, 2012, the estimated total risk-based capital ratio was 12.3%, compared to 12.0%, the estimated tier 1 risk-based capital ratio was 10.7% compared to 10.5%, and the leverage ratio was 8.24% compared to 8.07%.

At September 30, 2012, the tangible equity to tangible assets ratio (non-GAAP measure) increased to 6.01% from 5.95% and the tangible book value per share (non-GAAP measure) increased to $4.85 from $4.70.

The dividend payout ratio for the third quarter of 2012 was 55%.

Year-to-Date Results 
(All comparisons refer to the prior year-to-date period, except as noted)

Year-to-date results for the nine months ended September 30, 2012 include the impact from the Parkvale acquisition completed on January 1, 2012.

For the nine months ended September 30, 2012, F.N.B. Corporation's net income totaled $81.5 million, or $0.58 per diluted share, improved from $63.3 million, or $0.51 per diluted share. Return on average tangible equity (non-GAAP measure) equaled 17.63% compared to 15.70%, return on average equity was 7.95% compared to 7.24%, return on average tangible assets (non-GAAP measure) was 1.04% compared to 0.97%, and return on average assets was 0.93% compared to 0.86%.

Net interest income on a fully taxable equivalent basis totaled $284.5 million for the first nine months of 2012, an increase of $42.2 million or 17.4%, reflecting 18.6% growth in average earning assets and the benefit of $3.3 million in accretable yield, partially offset by a 4 basis point narrowing of the net interest margin. The growth in earning assets reflects a combination of organic growth and the Parkvale acquisition. For the first nine months of 2012, average total loans grew 18.2%, with organic total loan growth of 4.4% reflecting strong organic growth of 7.7% in the Pennsylvania commercial portfolio, as well as organic consumer loan growth of 6.8%. Average deposits and customer repurchase agreements grew 21.5%, with organic growth of 2.2% for the first nine months of 2012. Transaction deposits and customer repurchase agreements grew 22.7%, with organic growth of 7.9% representing successful new customer acquisition and higher average balances.

Non-interest income totaled $99.3 million for the first nine months of 2012, increasing $12.0 million, or 13.8%, reflecting the benefit of the Parkvale acquisition and organic revenue growth. Service charges increased $6.4 million, or 13.8%, reflecting higher volume, organic growth and the expanded customer base due to the Parkvale acquisition. Insurance commissions and fees increased $0.8 million, or 6.9%.  Included in other non-interest income is a $1.4 million gain on the sale of a building.

Non-interest expense totaled $242.2 million for the first nine months of 2012, an increase of $30.1 million, or 14.2%, principally due to adding Parkvale-related operating costs and a net increase of $3.4 million in merger and severance costs. F.N.B. Corporation's 2012 year-to-date efficiency ratio improved to 58.3% compared to 59.9%.

Credit quality results continued to trend positively during the first nine months of 2012 and compare favorably to prior year-to-date results, reflecting continued solid performance for the Pennsylvania and Regency portfolios and improvement in the Florida portfolio. Provision was $22.0 million for the first nine months of 2012, improving $3.3 million primarily due to lower provision in the Florida portfolio. Net charge-off results for the first nine months of 2012 improved 12 basis points to 0.34% annualized of total average loans. The ratio of the allowance for loan losses to total originated loans equaled 1.43% at September 30, 2012, compared to 1.69% at September 30, 2011. Total Florida loans and OREO decreased $105 million, or 54% on a year-over-year basis and the loan portion of the Florida portfolio represents less than 1% of total loans at September 30, 2012.

Subsequent Event
On October 22, 2012, FNB Corporation filed a Joint Motion for Stay Pending Settlement Approval in Ord v. F.N.B. Corporation, et al., No. 2:12 cv.-00766 (W.D. Pa.) and Clarey v. First National Bank of Pennsylvania, No. 2:12-cv-001305 (W.D. Pa.) requesting the court to stay all pre-trial proceedings due to the parties having reached an agreement in principle to completely settle all claims with FNB creating a settlement fund of $3.0 million for distribution to class members after court approved deductions, including attorneys fees and costs.  The agreement is subject to regulatory processes and court approval.

Conference Call
F.N.B. Corporation will host its quarterly conference call to discuss third quarter 2012 financial results on Tuesday, October 23, 2012 at 10:00 a.m. Eastern Time. Participating callers may access the call by dialing (888) 427-9411 or (719) 457-2689 for international callers; the confirmation number is 3528147. 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 Tuesday, October 30, 2012. The replay is accessible by dialing (877) 870-5176 or (858) 384-5517 for international callers; the confirmation number is 3528147. 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.

About F.N.B. Corporation
F.N.B. Corporation, headquartered in Hermitage, PA, is a diversified financial services company with total assets of $12.0 billion.  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, Ohio and West Virginia, 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 F.N.B. Commercial Leasing. It also operates consumer finance offices in Kentucky and Tennessee.

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.
  • 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 failure 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.
  • Changes to regulations governing bank capital and liquidity standards, including due to the Dodd-Frank Act and to 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 Parkvale and Annapolis Bancorp, Inc. 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 and extent of deposit attrition; and the potential dilutive effect to our current shareholders. In addition, with respect to the pending acquisition of Annapolis 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. and its subsidiary BankAnnapolis.
• 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 2011 Form 10-K and 2012 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.

Additional Information About the Pending Merger with Annapolis Bancorp, Inc. 
F.N.B. Corporation and Annapolis Bancorp, Inc. will file a proxy statement/prospectus and other relevant documents with the SEC in connection with the merger. 

SHAREHOLDERS OF ANNAPOLIS BANCORP, INC. ARE ADVISED TO READ THE PROXY STATEMENT/PROSPECTUS WHEN IT BECOMES AVAILABLE AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. 

The proxy statement/prospectus and other relevant materials (when they become available), and any other documents F.N.B. Corporation and Annapolis Bancorp, Inc. have filed with the SEC, may be obtained free of charge at the SEC's website at www.sec.gov. In addition, investors and security holders may obtain free copies of the documents F.N.B. Corporation has filed with the SEC by contacting James Orie, Chief Legal Officer, F.N.B. Corporation, One F.N.B. Boulevard, Hermitage, PA 16148, telephone: (724) 983-3317, and free copies of the documents Annapolis Bancorp, Inc. has filed with the SEC by contacting Edward Schneider, Treasurer and Chief Financial Officer, Annapolis Bancorp, 1000 Bestgate Road, Suite 400, Annapolis, MD 21401, telephone: (410) 224-4455. 

F.N.B. Corporation and Annapolis Bancorp, Inc. and certain of their directors and executive officers may be deemed to be participants in the solicitation of proxies from Annapolis Bancorp, Inc. shareholders in connection with the proposed merger. Information concerning such participants' ownership of Annapolis Bancorp, Inc. common stock will be set forth in the proxy statement/prospectus relating to the merger when it becomes available. This communication does not constitute an offer of any securities for sale.

DATA SHEETS FOLLOW

SOURCE F.N.B. Corporation