FNB Beats on Rev, Earnings In Line - Analyst Blog


F.N.B. Corporation 's ( FNB ) second-quarter 2013 operating earnings came in at 21 cents per share, in line with the Zacks Consensus Estimate. This, however, compares favorably with the year-ago earnings of 20 cents.

On a year-over-year basis, the improvement was driven by top-line growth, partially offset by higher operating expenses. Further, growth in loans and deposit balances were the other highlights for the quarter. However, deteriorating capital and profitability ratios were the headwinds for the quarter while asset quality was a mixed bag.

Considering after-tax charges for merger-related costs and other non-operating items, net income in the second quarter stood at $29.2 million, up from $ 29.1 million in the year-ago quarter.

Performance in Detail

FNB's total revenue in the reported quarter rose 1.8% on a year-over-year basis to $144.6 million and surpassed the Zacks Consensus Estimate of $132.0 million.

Taxable-equivalent net interest income increased 2.4% year over year to $98.5 million. The rise was mainly attributable to higher interest income and a decline in interest expense. However, net interest margin dipped 17 basis points from the prior-year quarter to 3.63%, reflecting lower accretable yield and reduced yield on earnings assets, partially offset by solid growth in average loans and lower cost transaction deposit and customer repurchase agreements as well as lower cost of funds.

Non-interest income increased 12.1% from the prior-year quarter to $36.8 million. The increase was primarily due to higher service charge revenue, insurance commissions and fees, securities commissions and fees, trust income, gains on sale of loans as well as other income, partially offset by decline in gain on sale of securities.    

Non-interest expense was $84.2 million, up 7.3% from $78.5 million in the previous-year quarter. The jump was mainly a result of higher salary and employee benefits costs, occupancy and equipment costs as well as merger related cost and other expenses. These were partially offset by a fall in amortization of intangibles expenses and a drastic decline in other real estate owned (OREO) costs.

The efficiency ratio rose to 58.63% from 57.74% recorded in the prior-year quarter. The rise indicates deterioration in profitability.

Asset Quality

Asset quality was a mixed bag during the quarter with nonperforming assets rising 3.5% sequentially but dipping 9.0% on a year-over-year basis to $122.5 million.

Annualized net charge offs as a percentage of total average loans came in at 0.34% in the reported quarter, up from 0.21% in the previous quarter but down from 0.38% in the year-ago quarter.

Moreover, allowance for loan losses increased 0.5% sequentially and 6.5% year over year to $108.3 million. Likewise, provision for credit losses grew 4.8% from the prior quarter and 12.59% from the prior-year quarter to $7.9 million.  

Loans and Deposits

FNB's total loans as of Jun 30, 2013 were $8.6 billion, rising 9.9% from the previous year-quarter. All the loan portfolios performed well during the quarter.

As of Jun 30, 2013, total deposits advanced 7.3% year over year to $9.6 billion. The increase was primarily due to the higher level of non-interest-bearing demand deposits.

Capital Ratios

FNB's capital ratios witnessed deterioration in the quarter. As of Jun 30, 2013, the estimated total risk-based capital ratio was 11.9%, compared with 12.3% as of Mar 31, 2013.

Further, the estimated tier 1 risk-based capital ratio was 10.4%, down from 10.7% as of Mar 31, 2013. The leverage ratio was 8.3% compared with 8.4% in the prior quarter.

Profitability Ratios

FNB's profitability ratios deteriorated during the reported quarter. The return on average assets was 0.94% compared with 0.96% as of Mar 31, 2013 and 1.00% as of Jun 30, 2012.

As of Jun 30, 2013, return on average equity came in at 7.94%, down from 8.20% as of Mar 31, 2013 and from 8.57% as of Jun 30, 2012. Book value per common share was $10.12, up from $10.07 in the prior quarter and $9.82 in the year-ago period.


In Jun 2013, FNB announced a deal to acquire Baltimore-based BCSB Bancorp, Inc . ( BCSB ) and its subsidiary Baltimore County Savings Bank in an all-stock transaction valued at about $79 million. As per the terms of the agreement, shareholders of BCSB Bancorp will receive 2.08 shares of FNB for each share of BCSB Bancorp.

The transaction is expected to be complete in the first quarter of 2014. Moreover, the deal will be marginally accretive to the company's earnings (excluding one-time transaction cost of nearly $16.4 million) in the first full year, while having no significant impact on its tangible book value per share.

Further, in Apr 2013, the company closed an all-stock deal to buy Annapolis Bancorp Inc. for about $51 million.

Our Viewpoint

FNB's consistent organic growth, improving credit quality and strong balance sheet are quite impressive. However, mounting expenses, the prevailing low interest rate environment and stringent regulatory landscape remain major concerns for the company going forward.

FNB currently carries a Zacks Rank #4 (Sell). However, some better performing banks include Synovus Financial Corporation ( SNV ) and Pinnacle Financial Partners Inc . ( PNFP ). All these carry a Zacks Rank #1 (Strong Buy).

BCSB BANCORP (BCSB): Get Free Report

FNB CORP (FNB): Free Stock Analysis Report

PINNACLE FIN PT (PNFP): Free Stock Analysis Report

SYNOVUS FINL CP (SNV): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: BCSB , FNB , OREO , PNFP , SNV



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