F.N.B. Corporation (NYSE: FNB) reported earnings for the second quarter of 2018 with net income available to common stockholders of $83.2 million, or $0.26per diluted common share. Comparatively, second quarter of 2017 net income available to common stockholders totaled $72.4 million, or $0.22 per diluted common share, and first quarter of 2018 net income available to common stockholders totaled $84.8 million, or $0.26 per diluted common share.

On an operating basis, second quarter of 2018 earnings per diluted common share (non-GAAP) was $0.27, excluding the after-tax impact of $5.2 million of costs related to branch consolidations as well as the after-tax impact of a $0.7 million discretionary 401(k) contribution made following tax reform. Of the branch consolidation costs, $2.3 million (after-tax) were included in non-interest expense and $2.9 million (after-tax) were booked as a loss on fixed assets reducing non-interest income. Second quarter of 2017 operating earnings per diluted common share (non-GAAP) was $0.23, excluding the after-tax impact of $0.9 million of merger-related expenses.

"During the second quarter of 2018, FNB produced record results with operating earnings per share of $0.27, increasing 17% compared to prior year, and total revenue surpassed $300 million for the first time in our history," said Vince J. Delie Jr., Chairman, President and Chief Executive Officer. "Operating net income increased 22% compared to the prior year, led by solid loan and deposit growth and excellent results in nearly all of our fee-based businesses. Capital markets, mortgage banking, insurance, brokerage and wealth management all benefited from increased contributions from our Carolina markets, which have experienced significant growth compared to the prior year. Additionally, the quarter reflects the successful completion of several strategic initiatives that better position our balance sheet and enhance our long-term growth prospects, while maintaining our risk profile."

Second Quarter 2018 Highlights (All comparisons refer to the second quarter of 2017, except as noted)

• Growth in total average loans was $1.1 billion, or 5.3%, with average commercial loan growth of $570 million, or 4.4%, and average consumer loan growth of $514 million, or 6.9%.
• Total average deposits increased $1.3 billion, or 6.3%, which included an increase in average non-interest bearing deposits of $298 million, or 5.4%, and an increase in average time deposits of $1.0 billion, or 26.7%.
• The loan to deposit ratio was 96.1% at June 30, 2018, compared to 97.5%.
• The net interest margin (FTE) (non-GAAP) expanded 9 basis points to 3.51% from 3.42%.
• Total revenue increased 6.9% to $304 million, reflecting a 9.6% increase in net interest income, partially offset by a 1.8% decrease in non-interest income.
• Non-interest income decreased $1.2 million or 1.8%. Excluding the loss on fixed assets related to branch consolidations, non-interest income increased $2.5 million or 3.8%, with continued growth in wealth management, capital markets, and mortgage banking.
• The efficiency ratio totaled 55.6%, compared to 54.3%.
• The annualized net charge-offs to total average loans ratio increased to 0.34% from 0.23%.
• The ratio of the allowance for loan losses to total loans and leases increased 1 basis point to 0.82%.

Non-GAAP measures referenced in this release 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 non-GAAP operating measures to the most directly comparable GAAP financial measures are included in the tables at the end of this release. "Incremental purchase accounting accretion" refers to the difference between total accretion and the estimated coupon interest income on acquired loans. "Organic growth" refers to growth excluding the benefit of initial balances from acquisitions.

Second Quarter 2018 Results – Comparison to Prior-Year Quarter

Net interest income totaled $239.4 million, increasing $20.9 million or 9.6%. The net interest margin (FTE) (non-GAAP) expanded 9 basis points to 3.51% and included $5.8 million of incremental purchase accounting accretion and $10.2 million of cash recoveries, compared to $0.5 million and $1.1 million, respectively, in the second quarter of 2017. The tax equivalent adjustment to net interest income totaled $3.3 million, compared to $4.5 million, primarily due to the lower federal statutory tax rate. The impact of the tax equivalent adjustment to net interest margin was 0.05%, compared to 0.07% in the same quarter last year. Total average earning assets increased $1.6 billion, or 6.1%, due to average loan growth of $1.1 billion and a $0.6 billion increase in average securities.

Average loans totaled $21.4 billion and increased 5.3%, due to strong growth in the commercial and consumer portfolios. Average commercial loan growth totaled $570 million, or 4.4%, led by strong commercial origination activity in the Cleveland and Mid-Atlantic (Greater Baltimore-Washington D.C.markets) regions and continued growth in the equipment finance and asset-based lending businesses. Average consumer loan growth was $514 million, or 6.9%, as growth in residential mortgage loans of $401 million or 16.6% and indirect auto loans of $315 million or 24.0% was partially offset by declines in direct installment and consumer line of credit average balances.

Average deposits totaled $22.5 billion and increased $1.3 billion, or 6.3%, reflecting growth in noninterest bearing deposits of $298 million and growth in time deposits of $1.0 billion. The loan-to-deposit ratio was 96.1% at June 30, 2018, compared to 97.5% at June 30, 2017.

Non-interest income totaled $64.9 million, decreasing $1.2 million, or 1.8%, from the prior-year quarter, primarily due to a $3.7 million loss on fixed assets related to branch consolidations. Trust income increased $0.8 million, or 13.2%, and securities commissions increased $0.6 million, or 16.4%, reflecting organic growth and increased brokerage activity. Capital markets increased $0.9 million, or 17.0%, from the prior-year quarter, reflecting increased syndication fees and international banking activity, and continued solid contributions from swap fees. Mortgage banking income increased $0.8 millionor 14.8% from the prior-year quarter, largely due to increased contributions from the Mid-Atlantic (Baltimore-Washington D.C.) and Carolina markets.

Non-interest expense totaled $183.0 million, which included $2.9 million of expenses related to branch consolidations and a $0.9 million discretionary 401(k) contribution made following tax reform. Non-interest expense increased 11.8% compared to the prior-year quarter, which included $1.4 million of merger-related expenses. The primary driver of the increase in non-interest expense was a 16.2% increase in salaries and employee benefits, which included items such as a large medical insurance claim of $2.6 million, normal employee merit raises and restricted stock awards at the start of the quarter, a $1.0 million payroll tax rate adjustment, and $1.4 million in additional wage increases for hourly employees instituted following tax reform. Occupancy and equipment expense increased $2.9 million from the prior-year quarter. The efficiency ratio (non-GAAP) increased to 55.6% from 54.3%.

The ratio of non-performing loans and other real estate owned (OREO) to total loans and OREO decreased 17 basis points to 0.61% due to continued favorable trends in asset quality, as well as the sale of $16 million of non-performing loans in June 2018. For the originated portfolio, the ratio of non-performing loans and OREO to total loans and OREO decreased 37 basis points to 0.71%. Total delinquency remains at satisfactory levels, and total originated delinquency, defined as total past due and non-accrual originated loans as a percentage of total originated loans, improved 31 basis points to 0.68%, compared to 0.99% at June 30, 2017.

The provision for loan losses totaled $15.6 million, compared to $16.8 million in the prior-year quarter. Net charge-offs totaled $18.2 million, or 0.34% annualized of total average loans, compared to $11.8 million, or 0.23% annualized in the prior-year quarter, primarily due to the loan sale. For the originated portfolio, net charge-offs were $14.8 million, or 0.36% annualized of total average originated loans, compared to $12.7 million or 0.38% annualized of total average originated loans. The ratio of the allowance for loan losses to total loans and leases was 0.82% and 0.81% at June 30, 2018 and June 30, 2017, respectively. For the originated portfolio, the allowance for loan losses to total originated loans was 1.02%, compared to 1.15% at June 30, 2017, with the decline primarily attributable to the utilization of previously-established reserves related to the loan sale.

The effective tax rate was 19.4%, compared to 28.5%, reflecting the passage of the Tax Cuts and Jobs Act (TCJA), which lowered the U.S. corporate income tax rate from 35% to 21% as of January 1, 2018.

The tangible common equity to tangible assets ratio (non-GAAP) decreased 4 basis points to 6.79% at June 30, 2018, compared to 6.83% at June 30, 2017. The decline was primarily due to a $54 millionreduction in the valuation of net deferred tax assets related to the enactment of the TCJA during the fourth quarter of 2017. The tangible book value per common share (non-GAAP) was $6.26 at June 30, 2018, an increase of $0.26 from June 30, 2017.

Second Quarter 2018 Results – Comparison to Prior Quarter

Net interest income totaled $239.4 million, increasing $13.3 million or 5.9%. The net interest margin (FTE) (non-GAAP) expanded 12 basis points to 3.51% and included $5.8 million of incremental purchase accounting accretion and $10.2 million of cash recoveries, compared to $4.8 million and $1.1 million, respectively, in the first quarter. The tax equivalent adjustment to net interest income totaled $3.3 million, compared to $3.1 million, and the impact of the tax equivalent adjustment to net interest margin was 0.05% for both quarters. Total average earning assets increased $431 million, or 6.3% annualized, due to average loan growth of $289 million and a $217 million increase in average securities.

Average loans totaled $21.4 billion and increased 5.5% annualized, primarily due to strong growth in the consumer portfolio. Average commercial loan growth totaled $100 million, or 3.0% annualized, led by strong commercial origination activity in the Cleveland, Mid-Atlantic (Greater Baltimore-Washington D.C.) and Pennsylvania community markets. Average consumer loan growth was $190 million, or 9.7% annualized, as continued growth in residential mortgage loans of $91 million, or 13.3% annualized, and indirect auto loans of $151 million, or 41.2% annualized, was partially offset by declines in direct installment and consumer line of credit average balances.

Average deposits totaled $22.5 billion and increased $314 million, or 5.7% annualized, as growth in average time deposits and average noninterest bearing deposits of $175 million and $157 million, respectively, was partially offset by slightly lower interest-bearing transaction deposits. The loan-to-deposit ratio was 96.1% at June 30, 2018, compared to 94.5% at March 31, 2018.

Non-interest income totaled $64.9 million, decreasing $2.6 million, or 3.9%, from the prior quarter. Excluding the previously mentioned loss on fixed assets, non-interest income increased $1.1 million. Securities commissions increased $0.2 million, or 4.8%, from the prior quarter, reflecting organic growth and increased brokerage activity. Capital markets increased $0.6 million, or 12.3%. Mortgage banking income increased 7.4% to $5.9 million and reflects higher seasonal volume.

Non-interest expense totaled $183.0 million, an increase of 7.0% compared to the prior quarter, and included branch consolidation expenses of $2.9 million and a $0.9 million discretionary 401(k) contribution made following tax reform. On an operating basis, non-interest expense totaled $179.2 million, an increase of $8.1 million or 4.7%. The primary driver of the linked-quarter increase in non-interest expense was a 10.5% increase in salaries and employee benefits related to items such as a large medical insurance claim of $2.6 million, annual employee merit raises and restricted stock awards which came into effect at the start of the quarter, a $1.0 million payroll tax rate adjustment and $1.4 million in wage increases for hourly employees instituted following tax reform. The efficiency ratio (non-GAAP) decreased to 55.6% from 55.8%.

The ratio of non-performing loans and OREO to total loans and OREO decreased 6 basis points to 0.61%, primarily due to a sale of $16 million of non-performing loans. For the originated portfolio, the ratio of non-performing loans and OREO to total loans and OREO decreased 10 basis points to 0.71%. Total delinquency remains at satisfactory levels, and total originated delinquency, defined as total past due and non-accrual originated loans as a percentage of total originated loans, improved 11 basis points to 0.68%, compared to 0.79% at March 31, 2018.

The provision for loan losses totaled $15.6 million, compared to $14.5 million in the prior quarter. Net charge-offs totaled $18.2 million, or 0.34% annualized of total average loans, compared to $10.6 million, or 0.20% annualized in the prior quarter, primarily due to the loan sale. For the originated portfolio, net charge-offs were $14.8 million, or 0.36% annualized of total average originated loans, compared to $11.0 million or 0.29% annualized of total average originated loans. The ratio of the allowance for loan losses to total loans and leases was 0.82% and 0.84% at June 30, 2018 and March 31, 2018, respectively. For the originated portfolio, the allowance for loan losses to total originated loans declined to 1.02% from to 1.08% at March 31, 2018, with the decline primarily attributable to the utilization of previously-established reserves related to the loan sale.

The effective tax rate was 19.4%, compared to 19.7% in the prior quarter. The tangible common equity to tangible assets ratio (non-GAAP) increased 1 basis point to 6.79% at June 30, 2018, compared to 6.78% at March 31, 2018. The tangible book value per common share (non-GAAP) was $6.26 at June 30, 2018, an increase of $0.12 from March 31, 2018.

June 30, 2018 Year-To-Date Results - Comparison to Prior Year-To-Date Period

Net interest income totaled $465.5 million, increasing $74.3 million, or 19.0%, reflecting average earning asset growth of $3.8 billion, or 16.1%, due to the benefit of balances acquired on March 11, 2017and organic growth. The net interest margin (FTE) (non-GAAP) expanded 6 basis points to 3.45% and included $7.1 million of higher incremental purchase accounting accretion and $9.8 million of higher cash recoveries, compared to the first six months of 2017. The tax-equivalent adjustment to net interest income totaled $6.4 million, compared to $8.0 million, primarily due to the lower federal statutory tax rate.

Average loans totaled $21.3 billion, an increase of $3.0 billion, or 16.5%, due to the benefit from acquired balances and continued organic growth. Organic growth in total average loans equaled $1.0 billion, or 4.9%. Total average organic consumer loan growth of $506 million, or 6.8%, was led by strong growth in residential mortgage loans of $400 million and indirect auto loans of $281 million, partially offset by declines in consumer credit lines and direct installment balances. Organic growth in average commercial loans totaled $494 million, or 3.8%. Average deposits totaled $22.3 billion and increased $3.2 billion, or 16.6%, due to the benefit of acquired balances and average organic growth of $1.2 billion or 5.7%.

Non-interest income totaled $132.4 million, increasing $11.2 million or 9.2%. Excluding the $3.7 millionloss on fixed assets related to branch consolidations, non-interest income for the first six months of 2018 increased $14.9 million, or 12.3%, and benefited from the expanded operations in North and South Carolina and continued expansion of our fee-based businesses of wealth management, capital markets, mortgage banking and insurance.

Non-interest expense totaled $354.1 million, increasing $2.8 million, or 0.8%. The first six months of 2018 included $2.9 million of branch consolidation expenses and a $0.9 million discretionary 401(k) contribution made following tax reform, and the first six months of 2017 included $54.1 million of merger-related expenses. Excluding these expenses, total non-interest expense increased $53.1 million, or 17.9%, with the increase primarily attributable to the expanded operations in North and South Carolina. The efficiency ratio (non-GAAP) was 55.7%, compared to 55.5% in the first six months of 2017.

The provision for loan losses was $30.0 million for the first six months of 2018, compared to $27.6 million for the first six months of 2017. Net charge-offs totaled $28.9 million, or 0.27% annualized of total average loans, compared to $20.0 million or 0.22% in the first six months of 2017, partially due to the loan sale in the second quarter of 2018. Originated net charge-offs were 0.33% annualized of total average originated loans, compared to 0.31% annualized of total average originated loans.

The effective tax rate was 19.5%, compared to 27.0%, reflecting the passage of the TCJA, which lowered the U.S. corporate income tax rate from 35% to 21% as of January 1, 2018. The effective tax rate for the first six months of 2017 was affected by merger-related items.

Use of Non-GAAP Financial Measures and Key Performance Indicators

To supplement our Consolidated Financial Statements presented in accordance with GAAP, we use certain non-GAAP financial measures, such as operating net income available to common stockholders, operating earnings per diluted common share, return on average tangible equity, return on average tangible common equity, return on average tangible assets, tangible book value per common share, the ratio of tangible equity to tangible assets, the ratio of tangible common equity to tangible assets, efficiency ratio, and net interest margin (FTE) 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 assess their performance and trends.

These non-GAAP financial measures should be viewed as supplemental in nature, and not as a substitute for or superior to, our reported results prepared in accordance with GAAP. In the event of such a disclosure or release of non-GAAP financial measures, the Securities and Exchange Commission's (SEC) Regulation G requires: (i) the presentation of the most directly comparable financial measure calculated and presented in accordance with GAAP and (ii) a reconciliation of the differences between the non-GAAP financial measure presented and the most directly comparable financial measure calculated and presented in accordance with GAAP (included in the tables at the end of this release).

Management believes charges such as merger expenses, branch consolidation costs and special employee 401(k) contributions related to tax reform are not organic costs to run our operations and facilities. These charges principally represent expenses to satisfy contractual obligations of the acquired entity or closed branch without any useful ongoing benefit to us. These costs are specific to each individual transaction and may vary significantly based on the size and complexity of the transaction.

The second quarter 2018 results continued to reflect the change in the statutory federal income tax rate from 35% to 21% effective as of January 1, 2018 as a result of the enactment of the TCJA. The fourth quarter 2017 results were unfavorably impacted by income tax expense from the new federal tax legislation primarily attributed to revaluation of net deferred tax assets at the lower statutory tax rate. Our business segment results for the fourth quarter of 2017 reflect the allocation of the impact of the new tax legislation to our business segments, primarily the revaluation of the net deferred tax positions allocated to these segments where certain income tax effects could be reasonably estimated. These were included as provisional amounts as of December 31, 2017. As a result, these provisional amounts could be adjusted during the measurement period, which will end on December 22, 2018, one year after the TCJA enactment date. No changes have been made to these provisional amounts in the first half of 2018 as we continue to finalize our analysis.

To provide more meaningful comparisons of net interest margin and efficiency ratio, we use net interest income on a taxable-equivalent basis in calculating net interest margin by increasing the interest income earned on tax-exempt assets (loans and investments) to make it fully equivalent to interest income earned on taxable investments (this adjustment is not permitted under GAAP). Taxable equivalent amounts for the 2018 period were calculated using a federal income tax rate of 21% provided under the TCJA (effective January 1, 2018). Amounts for the 2017 periods were calculated using the previously applicable statutory federal income tax rate of 35%.

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 $32 billion, and more than 400 banking offices throughout Pennsylvania, Ohio, Maryland, West Virginia, North Carolina and South Carolina. The Company also operates Regency Finance Company, which has more than 75 consumer finance offices in Pennsylvania, Ohio, Kentucky and Tennessee. On June 7, 2018, FNB announced that it has entered into an agreement to sell Regency Finance Company, with a closing expected prior to the end of 2018.

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, 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 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.