F.N.B. Corporation's CEO Discusses Q2 2012 Results - Earnings Call Transcript

F.N.B. Corporation (FNB)
Q2 2012 Earnings Conference Call
July 24, 2012 10:00 AM ET


Cindy Christopher – Manager of Investor Relations

Vincent J. Delie, Jr. – President & Chief Executive Officer

Gary L. Guerrieri – Chief Credit Officer

Vincent J. Calabrese – Chief Financial Officer


Damon DelMonte – KBW

Frank Schiraldi – Sandler O'Neill

Mac Hodgson – SunTrust Robinson Humphrey

David Darst – Guggenheim Securities

Mike Shafir – Sterne Agee

Tom Frick – FBR Capital Markets

John Mooren – Macguire Capital



Good day and welcome to the F.N.B. Corporation’s Second Quarter 2012 Earnings Conference Call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time. As a reminder, today's conference is being recorded. And now, I would like to turn the conference over to Cindy Christopher, Manager of Investor Relations for F.N.B. Corporation. You may begin.

Cindy Christopher

Thank you and good morning everyone. Welcome to our second quarter of 2012 earnings call. This conference call of F.N.B. Corporation and the reports that are filed with the Securities and Exchange Commission often contain forward-looking statements. All forward-looking statements involve risks, uncertainties and contingencies that could cause F.N.B. Corporation's actual results to differ materially from historical or projected performance.

Please refer to the forward-looking statement disclosure contained in our second quarter of 2012 earnings release, related presentation materials and in our reports and registrations statements F.N.B. Corporation files with the Securities and Exchange Commission and available on our corporate Website. F.N.B. Corporation undertakes no obligation to revise these forward-looking statements to reflect events or circumstances after the date of this call.

It is now my pleasure to turn the call over to Mr. Vince Delie, President and Chief Executive Officer. Vince?

Vincent J. Delie, Jr.

Thank you, Cindy. Good morning everyone. Welcome to our second quarter earnings call. Joining me today on the call are Vince Calabrese, our Chief Financial Officer; and Gary Guerrieri, our Chief Credit Officer.

I will be highlighting our second quarter achievements and financial results as well as providing you with details on our recent efficiency initiative. Gary will then discuss our asset quality and Vince will provide a detailed review of our quarter’s operating results and an update on our outlook for the remainder of 2012.

The second quarter was another solid quarter for F.N.B. We delivered strong results with positive trends seen across all key drivers. Our earnings reflect consistent growth, with strong loan and transaction deposit growth. We continue to effectively manage risks and expenses. The team remains focused on positioning the company for growth. We finalized plans to accelerate a portion of our ongoing branch optimization program. We also continue to make excellent progress in the execution of our e-delivery strategy. I will expand on these topics in a moment.

First, let me share operating highlights with you. Beginning of Slide 4, net income on an operating basis was $29.3 million or $0.21 per diluted share, representing a 113 basis points return on average tangible assets. These results compare favorably to the prior and y ear-ago quarter. Revenue growth, excluding the benefit of accretable yield was also strong at 6% annualized. The net interest margin was 3.8%, an expansion from the first quarter. Vince will provide details on the margin in his remarks.

The efficiency ratio improved to 58%, as we continue to manage expenses and realized cost savings from the Parkvale acquisition. Our portfolio has expanded through strong organic growth in loans, transaction deposits and customer repurchase agreements. Total loan growth excluding reductions in the Florida portfolio was 4.4% annualized, largely driven by commercial loan growth in our Pennsylvania portfolio of over 7%.

Consumer loan growth was also strong at 8.3% annualized. We reported a healthy consumer pipeline at the end of last quarter and the benefits are apparent in this quarter’s results. Our ability to deliver quality, consistent loan growth uniquely differentiates F.N.B. and reflects the talent and depth of our team and the execution of our holistic sales management process.

Asset quality results were good, with stability evident in the results of our core portfolios. We achieved significant exposure reduction in the Florida portfolio, largely reflecting principal payoffs on performing and non-performing credits. Gary will go over these items in more detail with you.

We are very pleased with the quarter’s positive results. Slide 5 provides you with a longer-term perspective of our positive momentum. These graphs depict our operating return on tangible asset and tangible equity from 2010 through the first six months of 2012. In each period, our returns consistently far exceed peer results with top-quartile performance for ROTE.

In order for us to sustain our industry leading performance, we continuously look to proactively position F.N.B. for greater efficiency and profitability. One area that received significant focus is our physical delivery channel. Let me provide some background.

In 2010, we formalized the systemic process to evaluate our branch network. This ongoing evaluation has resulted in the number of market expansions, market entries and consolidations. Since 2010, we have expanded in strategic markets through de novo locations and consolidated a total of 25 locations, when including the 15 Parkvale-related consolidations.

Now, at this time, we have chosen to accelerate the process and consolidate 20 additional branches and also reduce service at 3. Overall, this represents a 7.5% reduction of our current retail branch network of 266 locations. The affected retail branch locations are widely dispersed across our geographic footprint, and we plan to complete this consolidation in the fourth quarter of this year.

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