FNB Earnings in Line, Revs Up - Analyst Blog

F.N.B. Corp.'s (FNB) fourth-quarter operating earnings came in at 21 cents per share, which was in line with the Zacks Consensus Estimate. However, this was down 8.7% from 23 cents earned in the year-ago quarter.

Rise in revenues, growth in loans and deposit balances, strong capital ratios and an improved asset quality were the positives. However, higher operating expenses and deteriorating profitability ratios were headwinds.

Considering certain non-recurring items, net income in the quarter was $28.4 million, down 1.8% year over over.

For full-year 2013, net income available to common shareholders totaled $123.5 million or $0.84 per share, compared with $117.8 million or $0.84 per share in 2012. Earnings per share beat the Zacks Consensus Estimate by a penny.

Performance in Detail

FNB's total revenue in the said quarter came in at $150.296 million, up 7.6% from the prior-year quarter. Further, it surpassed the Zacks Consensus Estimate of $143.0 million.

In 2013, total revenue grew 2.3% year over year to $576.2 million. Moreover, it was ahead of the Zacks Consensus Estimate of $534.0 million.

Taxable-equivalent net interest income rose 13.5% year over year to $108.7 million. The rise was mainly attributable to higher interest income and a decline in interest expense. Similarly, non-interest income increased 1.8% from the prior-year quarter to $32.7 million, mainly driven by rise in securities commissions and fees as well as trust income.
 
Non-interest expense increased 20.3% year over year to $92.1 million. A significant rise in merger related costs as well as salaries and employee benefits expenses were the primary reasons for higher non-interest expense.

The efficiency ratio rose to 57.77% from 55.43% recorded in the prior-year quarter. The rise indicates deterioration in profitability.

Total loans as of Dec 31, 2013 were $9.5 billion, rising 16.8% from Dec 31, 2012. Moreover, total deposits advanced 12.3% year over year to $10.2 billion.

Asset Quality

Asset quality was a mixed bag during the reported quarter, with provision for loan losses decreasing 9.8% from the prior-year quarter to $8.4 million. Moreover, annualized net charge-offs as a percentage of total average loans came in at 0.32%, down from 0.28% in the year-ago period.

Further, nonperforming assets remained stable on a year-over-year basis at $118.9 million. However, allowance for loan losses increased 6.1% year over year to $110.7 million.

Capital and Profitability Ratios

During 2013, capital ratios remained strong while profitability ratios deteriorated. As of Dec 31, 2013, the leverage ratio rose to 8.80% from 8.29% in the year-ago quarter. Ratio of tangible equity to tangible assets was 7.55%, up from 6.09% on a year-over-year basis.

The return on average assets was 0.99% compared with 0.96% as of Dec 31, 2012. As of Dec 31, 2013, return on average equity came in at 6.66%, down from 8.23% as of Dec 31, 2012.

Our Viewpoint

FNB's consistent organic growth, improving credit quality and strong balance sheet are impressive. However, mounting expenses, the prevalent low interest rate environment and stringent regulations remain major near-term concerns.

FNB currently carries a Zacks Rank #4 (Sell).  

Among other Southeast banks, Hancock Holding Co. (HBHC), Simmons First National Corp. (SFNC) and United Community Banks, Inc. (UCBI) are scheduled to announce their fourth-quarter and 2013 results on Jan 23.