F.N.B. Corp Restructures Balance Sheet - Analyst Blog

As part of its capital action plan to be well positioned for Basel III capital rule implementation, F.N.B. Corporation FNB announced the sale of its entire trust preferred securities (TruPS) portfolio. The company had announced its balance sheet restructuring plan in Oct 2013.

F.N.B. Corp. sold TruPS portfolio comprising 23 pooled securities for a net gain of $13.8 million on the present amortized value of $37.8 million. Of the total pooled securities sold, one did not comply with the recently finalized Volcker Rule.

Apart from the above-mentioned gain, the redemption of TruPS will not have any impact on F.N.B. Corp.'s operating earnings. However, the company's capital ratios will marginally benefit from the transaction, similar to what was seen in 2013.

During 2013, F.N.B. Corp. redeemed $130 million worth of TruPS, which led to an improvement in capital ratios.  As of Dec 31, 2013, Tier 1 capital ratio was 11.1%, up from 10.8% as of Dec 31, 2012. Further, leverage ratio grew from 8.3% at the end of 2012 to 8.8% in 2013.

Additionally, F.N.B. Corp. plans to utilize part of the gain from the aforesaid restructuring to redeem low-yielding securities so as to further increase net interest income (NII). The company's NII has been growing at a 3-year CAGR of 7.8% (2011-2013), driven by opportunistic acquisitions.

In the past three years, F.N.B. Corp. has grown significantly through acquisitions. Since 2011, the company completed the acquisition of Comm Bancorp, Inc., Parkvale Financial Corporation, Annapolis Bancorp, Inc. and PVF Capital Corp.

We believe that given its strong balance sheet and capital position, F.N.B. Corp. will continue to grow inorganically. Further, the company aims to consolidate branches and rationalize expenses.

Currently, F.N.B. Corp. carries a Zacks Rank #3 (Hold). Some better-ranked banks in the same region include Access National Corporation ANCX, Pinnacle Financial Partners Inc. PNFP and SY Bancorp Inc. SYBT. All these stocks sport a Zacks Rank #1 (Strong Buy).