F.N.B. Corporation Reports Fourth Quarter and Full Year 2016 Earnings

PITTSBURGH, Jan. 18, 2017

Vincent J. Delie, Jr., President and Chief Executive Officer, commented, "We are pleased with the quarter's results and another outstanding year at FNB. Fourth quarter operating net income per diluted common share was $0.24 per share and increased 10% from the year-ago quarter. Full-year operating net income per diluted common share increased to $0.90 and we successfully integrated Metro Bancorp, Inc. and 17 Fifth Third branches during 2016. Our financial performance was highlighted by high-single digit organic loan and deposit growth, solid asset quality and continued growth in our fee-based businesses. These ongoing trends led to an outstanding year, as the full-year efficiency ratio improved 76 basis points to 55.4% compared to 2015."

Quarterly Results Summary	4Q16	3Q16	4Q15
ARIVA.DE Börsen-Geflüster Kurse FNB 13,94 $ 0,00% Reported Results
Net income available to common stockholders ($ in millions)	$49.3	$50.2	$37.1
Net income per diluted common share	$0.23	$0.24	$0.21
Common equity to total assets (period-end)	11.28%	11.41%	11.33%
Book value per common share (period-end)	$11.68	$11.72	$11.34
Operating Results (non-GAAP)
Operating net income available to common stockholders ($ in millions)	$50.6	$50.4	$38.1
Operating net income per diluted common share	$0.24	$0.24	$0.22
Tangible common equity to tangible assets (period-end)	6.64%	6.69%	6.71%
Tangible book value per common share (period-end)	$6.53	$6.53	$6.38
Average Diluted Common Shares Outstanding (in 000's)	212,748	211,791	176,907

Operating net income is a non-GAAP measure 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. See the Data Sheets included with the release for "Non-GAAP Financial Measures and Key Performance Indicators" and additional information.

Fourth Quarter 2016 Highlights
(All comparisons refer to the third quarter of 2016, except as noted; Organic growth in loans and deposits refers to growth excluding the benefit of initial balances from acquisitions.)

• Organic growth in total average loans was $179 million, or 4.9% annualized, with average consumer loan growth of $154 million, or 10.3% annualized (including residential mortgage, direct and indirect installment and home-equity related products), and average commercial loan growth of $26 million, or 1.2% annualized
• On an organic basis, average total deposits increased $296 million, or 7.5% annualized, with organic growth in average non-interest bearing deposits of $103 million, or 10.1% annualized.
• The reported net interest margin (FTE) (non-GAAP) narrowed 1 basis point to 3.35%, compared to 3.36% in the prior quarter. The core net interest margin (FTE) (non-GAAP) was stable at 3.32% due to $1.5 million of accretable yield benefit, compared to 3.32% and $1.9 million of benefit in the prior quarter.
• The efficiency ratio on an operating basis (non-GAAP) was 55.4%, compared to 54.4% in the prior quarter and 56.3% in the year-ago quarter.
• Credit quality results reflect improved non-performing asset levels and slightly increased total delinquency levels. Net originated charge-offs were 0.38% annualized of total average originated loans, compared to 0.41% annualized in the third quarter of 2016 and 0.25% annualized in the year-ago quarter.
• The tangible common equity to tangible assets ratio (non-GAAP) was 6.64% at December 31, 2016, compared to 6.69% at September 30, 2016. The tangible book value per common share (non-GAAP) was $6.53 at December 31, 2016, which was the same at September 30, 2016.

Fourth Quarter 2016 Results – Comparison to Prior Quarter
(All comparisons refer to the third quarter of 2016, except as noted; Organic growth in loans and deposits refers to growth excluding the benefit of initial balances from acquisitions.)

Net Interest Income/Loans/Deposits
Net interest income totaled $159.3 million, increasing $1.8 million or 1.1%. The reported net interest margin (FTE) (non-GAAP) narrowed one basis point to 3.35%, compared to 3.36%. The core net interest margin (FTE) (non-GAAP) remained stable at 3.32%, as asset yields and cost of funds remained at the same levels as the prior quarter. Total average earning assets increased $254 million or 1.3%, due to continued loan growth of $179 million and $123 million of growth in the securities portfolio.

Average loans totaled $14.8 billion and increased $179 million, or 4.9% annualized, due to growth in the consumer and commercial portfolios. Average consumer loan growth was $154 million, or 10.3% annualized, led by strong demand and increased origination volume in residential mortgage and indirect auto loans. Average commercial loan growth totaled $26 million or 1.2% annualized, as growth in originated commercial loans was offset by pre-payment activity in the acquired portfolio.

Average deposits totaled $16.0 billion and increased $296 million, or 7.5% annualized. The deposit growth was led by growth in total interest checking and money market accounts and growth in low-cost non-interest bearing deposit accounts of $103 million, or 10.1% annualized, due to seasonally higher balances.

Non-Interest Income
Non-interest income totaled $51.1 million, decreasing $2.2 million, or 4.1%. The decrease in non-interest income was due mainly to lower bank-owned life insurance income of $1.1 million and $0.4 million lower insurance commissions as the third quarter had higher seasonal revenues related to the timing of renewals. This was partially offset by solid performance in mortgage banking and capital markets (defined as swap income, international banking income and syndications income). The increase in mortgage banking income was attributable to the increased production volume. Capital Markets' solid performance was due to deepening relationships with commercial customers across the entire footprint. Non-interest income equaled 24% of total revenue.

Non-Interest Expense
Non-interest expense totaled $123.8 million, increasing $2.8 million, or 2.3%, and included a $1.4 million increase in merger expense compared to $0.3 million in the prior quarter, and a $1.2 million increase in other real estate owned expense due to higher write-downs. Excluding merger expenses, adjusted non-interest expense would have increased $1.4 million, or 1.2%. The $3.0 million increase in other expense was attributable to seasonally higher marketing costs and higher outside service expense, which was partially offset by a $2.0 million decrease in amortization of intangibles. The efficiency ratio (non-GAAP) was 55.4%, compared to 54.4% in the prior quarter.

Credit Quality
Credit quality results remain satisfactory with improved non-performing asset levels. The ratio of non-performing loans and OREO to total loans and OREO improved 13 basis points to 0.79% and, for the originated portfolio, the ratio of non-performing loans and OREO to total loans and OREO improved 17 basis points to 0.91%. Total delinquency levels increased slightly, and total originated delinquency, defined as total past due and non-accrual originated loans as a percentage of total originated loans, increased 4 basis points to 1.04%, compared to 1.00% at September 30, 2016.

Net charge-offs totaled $11.5 million, or 0.31% annualized of total average loans compared to $12.1 million, or 0.33% annualized. For the originated portfolio, net charge-offs were $11.8 million, or 0.38% annualized of total average originated loans, compared to $12.3 million or 0.41% annualized. The ratio of the allowance for loan losses to total originated loans decreased 3 basis points from September 30, 2016 to 1.20% at December 31, 2016, reflecting utilization of previously-established reserves. The total provision for loan losses totaled $12.7 million, compared to $14.6 million in the prior quarter.

Full Year 2016 Results – Comparison to Prior Year
(All comparisons refer to the full year of 2015, except as noted; Organic growth in loans and deposits refers to growth excluding the benefit of initial balances from acquisitions.)

Results include the impact from the acquisition of 17 Fifth Third Bank branches (Fifth Third) on April 22, 2016, Metro Bancorp, Inc. (METR) on February 13, 2016, and five Bank of America branches (BofA) on September 19, 2015.

Net Interest Income/Loans/Deposits
Net interest income totaled $611.5 million, increasing $113.3 million, or 22.7%, reflecting average earning asset growth of $3.6 billion, or 24.6%. The net interest margin (FTE) (non-GAAP) was 3.38%, compared to 3.42%. The core net interest margin (FTE) (non-GAAP) narrowed 5 basis points to 3.34%, reflecting $1.7 million of greater accretable yield benefit. The core net interest margin (FTE) (non-GAAP) narrowing reflects the lower interest rate environment for the full year of 2016 and competitive landscape for earning assets.

Average loans totaled $14.3 billion, an increase of $2.6 billion, or 22.4%, due to the benefit from continued organic loan growth and the previously mentioned acquired balances. Organic growth in total average loans equaled $929 million, or 8.0%. Organic growth in average commercial loans totaled $485 million, or 7.4%, and organic growth in average consumer loans was $437 million, or 8.6%. Total organic commercial loan growth was led by the Pittsburgh, Baltimore and Cleveland markets. The increased number of opportunities concentrated in Baltimore and Cleveland led to market share gains within these regions. Total average consumer loan growth was led by strong growth in residential mortgage and indirect auto loans, as well as solid growth in home-equity related loans. Average deposits totaled $15.4 billion and increased $3.2 billion, or 26.5%, due to average organic growth of $887 million or 7.2%, and the benefit from acquired balances. On an organic basis, average total transaction deposits increased $1.0 billion or 10.5%. Total loans as a percentage of deposits was 92.7% at December 31, 2016.

Non-Interest Income
Non-interest income totaled $201.8 million, increasing $39.4 million or 24.2%. Non-interest income reflects the benefit of the previously mentioned acquisitions and continued organic growth from capital markets, mortgage banking and insurance. 

Non-Interest Expense
Non-interest expense totaled $511.1 million, increasing $120.6 million, or 30.9%. Full year 2016 included merger expenses of $37.4 million and a $2.6 million impairment charge on acquired other assets. Absent these items and merger expenses of $3.0 million in 2015, total adjusted non-interest expense increased $83.6 million, or 21.6%, compared to 2015, with the increase primarily attributable to the expanded operations from the previously mentioned acquisitions. The efficiency ratio (non-GAAP) was 55.4%, improved from 56.1% in 2015.

Credit Quality
Credit quality results continued to reflect solid performance with improvement in total non-performing loan trends. For the originated portfolio, non-performing loans and OREO to total loans and OREO was 0.91%, compared to 0.99%. Total originated delinquency increased 11 basis points to 1.04% at December 31, 2016. 

Net charge-offs for the full year of 2016 totaled $39.7 million, or 0.28% of total average loans, compared to 0.21% in the prior year. Net originated charge-offs were 0.34% of total average originated loans, compared to 0.24%. For the originated portfolio, the allowance for loan losses to total originated loans was 1.20%, compared to 1.23% at December 31, 2015. The ratio of the allowance for loan losses to total loans decreased 10 basis points to 1.06%, with the movement due to additional loan balances from acquisitions without a corresponding allowance for loan losses in accordance with accounting for business combinations. The total provision for loan losses was $55.8 million, compared to $40.4 million in the prior year, reflecting the increase in net charge-offs and strong originated loan growth.

Capital Position
The tangible common equity to tangible assets ratio (non-GAAP) was 6.64%, compared to 6.69% at September 30, 2016.  Book value per common share decreased to $11.68, from $11.72 at September 30, 2016.  Tangible book value per common share (non-GAAP) was $6.53, the same as September 30, 2016, and increased $0.15 from $6.38 at December 31, 2015.  The common dividend payout ratio for the full year of 2016 was 62.4%.

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, net interest margin and core 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. The Data Sheets appended to this release contain the Non-GAAP measures under the sub-heading, "Non-GAAP Financial Measures and Key Performance Indicators." 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 under the caption "Non-GAAP Financial Measures and Key Performance Indicators."

Operating net income available to common stockholders is a non-GAAP measure 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. See the Data Sheets that follow for additional information.

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 Thursday, January 19, 2017, at 10:30 AM ET.

Participants are encouraged to pre-register for the conference call at http://dpregister.com/10098259. 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. 

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