Good morning and welcome to the F.N.B. Corporation Fourth Quarter 2014 Quarterly Earnings Conference Call. All participants will be in listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Matthew Lazzaro, Investor Relations. Mr. Lazzaro, please go ahead.

Thank you. Good morning, everyone, and welcome to our earnings call. This conference call of F.N.B. Corporation and the reports it files with the Securities and Exchange Commission often contain forward-looking statements. Please refer to the forward-looking statement disclosure contained in our earnings release, related presentation materials, in our reports and registration statements filed with the Securities and Exchange Commission and available on our corporate Web site. A replay of this call will be available until January 29th, and a transcript and the webcast link will be posted to the Shareholder and Investor Relations section of our corporate Web site. I will now turn the call over to Vince Delie, President and Chief Executive Officer.

Good morning, and welcome to our earnings call. Joining me today are Vince Calabrese, our Chief Financial Officer and Gary Guerrieri, our Chief Credit Officer. I will be highlighting our operating performance and providing a strategic overview. Gary will review asset quality and Vince will provide further detail on our financial results, provide guidance for 2015 and then open the call up for any questions. Let’s begin by looking at the quarter’s operating results. We are very pleased with the continued high quality earnings and positive trends that we have accomplished. Operating net income available to common shareholders reached another record high at $36 million and resulted in $0.21 per diluted share. This translates into a 106 basis point return on average tangible assets and over a 14% return on average tangible common equity. Operating leverage reflects the successful execution of our organic and acquisition growth strategy, with strong year-over-year revenue growth of 15% and operating expenses well controlled at an 11% increase. We continue to grow loans and deposits, manage the net interest margin and asset quality was once again excellent. Looking at loans, average organic loan growth was strong at an annualized rate of 10%, with positive results in the commercial and consumer portfolios. Our consistent ability to organically grow loans and drive market share differentiates FNB. Our earnings reflect proportionate provisioning for this new asset growth. In fact, we have consistently provided for growth, rather than relying on reserve release to enhance earnings. This will further highlight our higher earnings quality and superior performance as we enter a more normalized industry wide credit environment. Organic growth in average transaction deposits and customer repos was 12%, led by 15% annualized growth in non-interest bearing deposits. We remain pleased with our funding position with a loan to deposit ratio,…

Thank you Vince and good morning everyone. Our credit quality results for the fourth quarter were very positive as we finished out 2014 well positioned across all portfolios. We experienced continued good movement in our key asset quality metrics, with delinquency reaching the lowest level we have seen in the last several years and problem asset levels continuing to trend favorably. Our overall loss performance on a GAAP basis was strong for the quarter at 17 basis points annualized and 23 basis points for the year, both very low levels that further contributed to our positive results for 2014. I would like to now walk you through some of our performance results and our achievements, first on the originated book, followed by some commentary on the acquired portfolio. Looking first at our originated portfolio results for the quarter, we reduced our level of NPL's and OREO by nearly $6 million or by 12 basis points to 1.13%. Delinquency trended in a similar manner and was attributable to the reduced level of non-accrual credits. We ended December at 0.99%, marking our best performance over the last several years as we reached a level that we have not seen since before the economic downturn. Quarterly net charge-offs totaled $4.1 million or 17 basis points annualized, and with these solid results, we closed out 2014 with originated net charge-offs of $21 million for the year or 24 basis points, reflecting performance slightly better than our targeted levels. Originated provision at $7.5 million supported loan growth during the quarter, bringing the ending reserve position to 1.22%, which was down slightly on a linked-quarter basis due to the favorable credit quality trends that we have been experiencing. Shifting next to our acquired book, which now stands at $1.6 billion, we saw further positive movement in…

Thanks, Gary, good morning, everyone. Today I will discuss the fourth quarter’s operating performance and provide high level guidance for 2015. Looking at the balance sheet organic average loan growth momentum continued, with average loans growing 10.3% annualized, driven by continued solid results in commercial lending and better than expected growth in consumer lending. Commercial growth totaled a solid $94 million or 6% annualized and our commercial pipelines at quarter end remained healthy and were near prior quarter levels. A strong organic growth in the consumer portfolio was attributable to a combination of organic growth in consumer home equity loans of $93 million, reflecting better market penetration and organic growth in indirect order auto loans of $82 million reflecting increased consumer demand throughout our footprint for auto loans. As Vince mentioned earlier the fourth quarter loan volume is a reflection of continued great success in the Pittsburgh metro market, and the significantly increased number of prospects and attractive demographics in our two new metro markets of Baltimore and Cleveland. These new opportunities have enabled us to add meaningful banking relationships and strengthen our ability to achieve long term sustainable organic growth. Average total deposits in customer repos increased $197 million or 6.4% annualized, with organic growth in non-interest bearing deposits of $94 million or 14.6% annualized. In total average transaction deposits in customer repos increased $286 million or 12% annualized, reflecting solid growth in noninterest bearing commercial balances and seasonally higher customer repos. This growth in low cost deposits further strengthened our funding mix as 79% of total deposits and customer repos were transaction based deposits at the end of the fourth quarter. And as Vince mentioned from a total funding perspective, our relationship of loans to deposits and customer repost was 92% at year end. Net interest income grew…

Yes, thank you. At this time, we will begin the question-and-answer session. [Operator Instructions] At this time, we will pause momentarily to assemble our roster. And the first question comes from Frank Schiraldi with Sandler O’Neill.

Vince, I just want to make sure I heard correctly on the aspect of the guidance. You said the core NIM will narrow slightly. Is that the guidance for 2015?

Yes.

Okay. I’m just curious -- it doesn’t seem to me, and of course you haven’t given ‘15 guidance before, but it doesn’t seem to me that the thinking has really changed on the margin from late last year despite the fact that the longer end of the curve has moved down a bit. I would think that would make it more challenging to hold NIMs in. Could you just maybe talk a little bit about that?

Sure. The guidance itself, we do have in our expectations some modest increase in rates as I mentioned in the second half of the year. Nothing significant, fed funds still under 1%, but we do have some movement kind of starting in the July-August timeframe that’s in there. So the margin being relatively stable includes that happening in the second half of the year. As we said, that doesn’t happen. One of the scenarios we always run is kind of to keep rates flat from where we are. That would put pressure on the margin. So if we stay in the kind of environment we’ve been in, we would have a little bit more pressure on the margin, but that’s our job to manage that. So as we have been, we’d actively manage the balance sheet and the margin to mitigate that. Remember that one of the key things for us too Frank is our very strong DDA [ph] growth that we consistently bring in. This quarter I think was another I want to say 15% or so annualized. So we continue to bring in those non-interest bearing deposits as we bring in new customer relationships and the new markets are clearly helping that quite a bit and that in turn helps the margin and supports the margin. So if rates just stay where they are, we’ll continue to have more pressure there. But I think we can manage through it.

Okay. And then the assumption that you have, again shorter-term rates moving higher, does that assume that the longer end moves in sync in that June-July timeframe?

There’s some movement in the longer end. Again not significant movement, but there is -- it’s not one-for-one obviously, but there’s some movement in the longer end.

And then just finally on the margin, just looking back at interest rate risk, shock scenarios from the third quarter Q; is there any reason to think that that has changed at all from the 1.5% NII growth in an up 100 basis point environment?

Yes, it’s a little bit less sensitive. Frank I would say it’s -- that plus 100 is probably like a 1112 now. So it's just a little bit less asset sensitive. A lot of that is just rates are lower at the end of the year compared to September. So that has an impact on mortgage related assets, but the 1231 will be very close to the 930; just a little bit less asset sensitive.

And then just on -- well I guess just one more on the margin. If -- again, that's based on the curve I guess moving across the board, 100 basis points. If the longer end is say anchored where it is now and you get the shorter ending and shorter curve, end of the curve moving up 100 basis points, does that cut into that growth in NII significantly?

I wouldn’t say significantly. It will put pressure on it, but not significantly.

Actually you’re saying that the yield curve flattens out and potentially inverts, which it sounds like that’s what you’re saying. The 10 years stays where it is and the short-end of the curve moves up. Is that what you were?

Yes, under that scenario, it wouldn’t necessarily invert, but just the short-end moving up 100 bps.

Short-end moving up would help us, given how our portfolios are structured. We’ve got a lot of credit structured off of one month LIBOR. Initially we would get a little bit of help from that. If it inverts and is sustained inverted, obviously that would add pressure, but if the short-end of the curve moves up, we get benefit.

And then just on loan growth assumption, on guidance for 2015. Just curious, about how much of that would be commercial loan growth?

Yes, the breakdown between consumer and commercial is probably 60-40 really when you look at it. I don’t have the numbers precisely in front of me, but roughly that’s the breakdown. And I would tell you when you look at the loan growth forecast, 60% being commercial, the moves into -- the strategic moves and to the additional MSAs should really start to benefit the Company. So as we sit today, our pipeline is up 30%, 27% to 30% over the prior fourth quarter period, and when you look at it, 60% of that pipeline is sitting in those metro markets. So we really -- and we’ve had some really good solid performance out of Baltimore and Cleveland. So our thought is that momentum will continue to go, given the pipeline.

Okay and then just finally modeling. I believe I heard core fee income growth of mid to high single digits for 2015?

Yes.

I think in the past, you've given off of stated. Can you just give us the number of -- the fee income total that that's off of? I assume you're pulling out securities gains in that non-recurring piece in this quarter. Not sure what else you may be pulling out of that number to get to that growth rate.

Actually if look at the slides Frank, there is slide that would show the kind of non-interest income on what we call an operating basis.

I'll take a look at that.

There was the one thing I will tell you Frank is we’ve had some great success cross selling wealth. And we would expect that the new markets that we’ve entered into as we continue to gain relationships with cross sell of those fee income categories has accelerated. So we’re – last year we had a 10% increase in our wealth management business topline, and we’re looking at some pretty good success early on here in the wealth space. So we’re very optimistic about that.

And the next question comes from Collyn Gilbert with KBW.

How are you guys seeing the competitive landscapes differ between your legacy markets at Pittsburgh and then Cleveland and Baltimore?

I would say that Pittsburgh, we tend to perform a little better in Pittsburgh because we’re established and we’ve been here for a while. The team was fully build out. Baltimore, as of February of last year, we weren’t fully established in Baltimore. Once we closed the BCSB deal and integrated the bankers that we hired, we were up and running. So we’re very optimistic about our ability to perform at the same level that we’re performing in Pittsburgh in Baltimore and Cleveland. And the competitive landscape is fairly similar. We sit here in Pittsburgh with some very, very large competitors. I won’t name them, but one headquartered here, who is a very, very solid bank and good competitor and we’ve done well. So we view it as a game centered around hiring the best people, about making sure that we have a product set that we can competitively sell against much larger institutions, and rigorously managing the sales process as you know. So that’s what leads to our success, and I believe that models – it can be transplanted anywhere.

So I guess just in terms of the types of competitors, so you've got the larger banks in the similar markets, but is the rationality among the small banks sort of the same that you're seeing in Pittsburgh as you are in Cleveland and Baltimore? It sounds like what you're saying is there's not a large difference among the three markets.

No I don’t see a material difference among the three markets to be quite frank. I think Gary might be able to add some additional color. But to be honest, we’re in an environment where it is competitive, and our success is predicated upon our ability to execute better than others. And we’ve towed the line on credit. So it becomes a game of numbers. As I've mentioned to you before, you really have to have a broad array of opportunities to select the best credit opportunity for the Company from a risk for work standpoint. So expanding into the markets that we expanded into -- and by the way, we made a considerable investment in conducting those M&A transactions and adding the personnel. So while our efficiency ratio is in line with our expectations, and I think very good relative to peers, we’ve already made those investments that are necessary to position us to grow revenue. And we did it with the thought in mind that it would become more competitive and we need to have plenty of opportunities to go after to fulfill our investment pieces. And I think we’ve done that very successfully, and I think this past quarter is an indication of how well we’ve executed and the credit metrics are seasoned and we’re performing very well. Gary I don’t know if you want to add anything.

Yes just, I would concur along with Vince’s comments The markets have very similar competitors on the large scale, on the smaller scale. Some of them act a little different in terms of how they handle business, but the key is our banking teams in the market are consistent approach to how we handle the credit business and the underwriting and lending activities. And we roll that out very nicely across the footprint when we enter these new markets. So we’re real pleased with the early results of the investments in Baltimore and Cleveland, and we think they’re going to do nothing but provide continued growth opportunities and give us the ability to select the highest quality credit opportunities as we move forward.

And then Gary, you had mentioned that every quarter you kind of do the re-estimation of where you stand with your reserve. Was there anything specific that led to the build this quarter that you saw?

Well, specifically around the acquired book column, as mentioned, we do go through that re-estimation every quarter. We go through each of the portfolios, analyze their performance, where they're trending, what the last performance is, and in terms of the economy we look at the external factors. Early in the quarter, we downgraded a couple of credits in the acquired book and we took a pretty conservative view with them. I can tell you that we’re a quarter past that now and I'm real pleased with where we stand with those couple of opportunities and the potential outcome. So I feel real good about that. But nothing other than those couple of credits.

Okay. That's helpful. And then just one final question. Vince, would you put $1 million in the lower accretable benefit that you saw this quarter, what was that in terms of the NIM? Basis points impact to the NIM? do you have that?

Yes, I’ll give you the figure. There is a slide in the slide deck two -- I’ll give it to you. The impact in the third quarter -- remember was third quarter was very big. It was 11 basis points. So we went from 363 recorded to 352 in the third quarter. And then the fourth quarter was 5 basis points. So, 354 to 349 on a core basis. So you get the kind of 3 basis points of compression if you look at the core margin from the 352 to 349.

Thank you. And the next question comes from Preeti Dixit from JPMorgan.

This is Preeti. Can you talk about what new loan yields are coming on at that? And then, excluding any impact from higher rates, are you assuming any pick up in funding cost this year to keep up with the loan growth, I know so for you've been able to hold funding cost fairly flat here?

You've got a two pronged question here. So we’ll start with the loan margin, the spread. It's been very competitive throughout the year. Margins have come in. I think everybody pretty much has said that on their earnings calls. In the last quarter so it seems like it stabilized somewhat, but I would say it still came in slightly 3 to 5 basis points. And the portfolios, we’re seeing -- we’re not seeing margin significantly off of what we had forecasted from the beginning of the year. So we expected the acceleration in competition. The name of the game is to try to cross sell treasury management services, wealth services to garner non-interest bearing deposits. So this kind of ties into the second half of your question. So many of our bankers are incented heavily not just to originate loans, but to cross sell and bring in deposit balances. So that’s been working very well for us. As Vince mentioned, we had a nice quarter growth in non-interest bearing deposits, 15% off of a 24% annualized linked quarter growth rate in the third quarter. So we’ve been able to drive those DDA balances along with the growth. Actually it kind of lags the commercial growth because we end up picking up the treasury management accounts and activating them after we’ve originated the credit. So you don’t get the full effect of the benefit until later. But it's gone very well for us. It's part of our strategy and I would anticipate that activity to continue into ’15 and continue to assist us from a funding cost standpoint.

Okay, that’s really helpful. And then just on the loan growth, given your comments on pipeline being very strong and the expansion markets now ramped, could that high single-digit guidance prove to be a bit conservative, given the pace that you've been running at? Just trying to get a sense of maybe how production is shaping up in the newer expansion markets and if you're seeing hiring opportunities there?

Well, I don’t know about hiring opportunities. I think we’ve hired just about everybody we need and we’ve hired some very talented people. So, we’re pretty good in that space. I would say that as you look at the growth opportunities in those particular portfolios in Cleveland and Baltimore, there is significant upside for us. We haven’t hit our stride yet. Having said that, it's kind of tough to call at this stage in the game because things change. We’re not going to give on structure. The climate is competitive. We’ve already talked about that. But we win because we’ve hired great people who are well connected in the marketplace. We make local decisions. The borrowers know we’re consistent provider of capital, and that’s what sells. So we’re good at grabbing market-share and we’re good at structuring credit and making sure that we cross sell. So good execution is going to matter in ’15, just like it mattered in ’14.

And then Vince, just some color on the M&A landscape. It looks like deal activity for the industry is picking up. Are you still looking maybe at any fill in opportunities in Cleveland, Baltimore or is this a year of focusing on the organic picture?

Well, every year is a year of focusing on the organic picture. I think if you go back and read my comments, I made $1.5 billion in organic growth. That does not count what we acquired. That’s fairly significant for this company. So anything we do from an acquisition standpoint is done to enhance shareholder value and to position us to continue to drive organic growth. We don’t acquire just to grow. We acquire to position the company. I mentioned on the last call we're going to be very, very selective. There have been a number of transactions that were done in our footprint. You didn’t see our name on the other side of the announcement. We are conservative and continuing to deploy what we consider to be our strategy relative to M&A which includes achieving certain financial metrics in the modeling. So it’s hard to say. We are opportunistic buyers but I would say we're very well positioned as we sit today and we want to deliver for the shareholders.

I would just add too, Preeti that being very disciplined in how we allocate our capital is just part of how we run the company forever really. Its part of our underwriting strategy in having the new markets where we can be even more selective, and what we put on the books is important. Similarly with acquisitions, we have a lot of good momentum here and we want to be careful about not diluting that and being disciplined in what we're willing to pay for an acquisition. So I think it all holds together well for us.

Thank you. And the next question comes from Matthew Breese from Sterne, Agee.

I was thinking about your margin assumptions and then your prediction that maybe rates will increase in the back half of 2015. Within those assumptions, what are you guys assuming for deposit betas on interest-bearing accounts?

Well, I would say couple of things Matt. First of all we're not predicting. We really -- we don’t go off and do our own interest rate forecast. We look at the Bloomberg consensus that's put out every month. And we might make some tweaks to it but really we largely will go along with that, and it makes sense to us. So what’s ultimately going to happen with the rates, no one really knows for sure. Our job is to manage it in the all the different environments. The betas, we don’t really disclose the betas. I do have that. I'm just looking for a piece of paper that I have. But our general approach to managing when rates do start to move up, that’s baked into my guidance. There is some ability that you always have to kind of lag the movement in rates on the deposit side, because Vince was commenting earlier on the loan side, we do have significant portion of our loans that are tied to LIBOR and Prime. About 40% of our loans are tied to that. So those move pretty quickly once rates move. And then on the deposit side, we will manage it. There is definitely some increases baked in. Our total cost to funds within my margin forecast goes up probably about 10 basis points over the course of the year. So that does include some movement on the liability side. But it’s just -- I don’t disclose the specific betas but it’s baked into our forecast.

The total cost of funds going up 10 basis points, is that from fourth quarter 2014 to fourth quarter 2015? Is that kind of?

That’s full year to full year.

Okay. And then going back to your M&A commentary; obviously you guys have not been involved in many transactions. Is that indicative of how you feel about M&A valuations and prices recently versus where they were 12, 18 months ago?

If you go back and look at -- I'm going to do a commercial amount. So please excuse me. But if you go back and look at the strategy in Baltimore, as we have said in the past, we assembled series of banks, and when you look at the price that we paid as a multiple of tangible book, we were at one point four times tangible book. We're $1.5 billion financial institution essentially once you put the pieces together. So we were able to move into that market in what I consider to be very, very attractive pricing. And we built out the team and we assembled the components that we needed to drive organic growth and plugged it into our delivery channel. So we made some I thought very smart acquisitions that were priced well. On a deal-by-deal basis, we look at every transaction separately and we look to get EPS accretion in the first full year. It has to be a good strategic fit for us. So if we're buying something even in market, it has to provide us with the ability to achieve the growth objectives that are built into the modeling. There have been a number of transactions that have come about and for one reason or another we felt they are either overpriced or unattractive markets or we just hit our limit on pricing. So valuation comes into play in some instances. In the others it maybe the underlying book of business that sits within the bank. So it varies from deal-to-deal. So valuations are relative and really they change overtime and the industry changes. So currencies, the values of currencies change. So really we have to drill down into the financial modeling and it has to be accretive for the shareholders.

And then Outside of Cleveland, Pittsburgh and the Maryland markets, what new markets do you view as attractive that could potentially be new places that FNB goes?

Well, we have some pretty good opportunities in the markets we recently expanded into. Remember we did I think five acquisitions in the last three years. So our teams are working really hard to integrate those acquisitions, and we have done that successfully and we’re starting to get really good momentum. So we don’t want to do something that would harm our ability to grow EPS, even in the short run. We have often mentioned Virginia. That’s one area. It’s adjacent to where we are in Maryland because we’re down to 270 corridors in Gaithersburg and Bethesda. So I’d say nothing's changed. I think it’s still the same the answer that we gave before. But I will say that we’ve been very, very selective and we will continue to be selective and we're very cognizant of producing EPS growth. So that’s what we’re focused on.

My last question regarding your comments around energy price volatility and how that could present some challenges. I was just hoping you could provide a little bit more detail around that, and what kind of challenges? Do you mean from a growth trajectory standpoint or from more like a credit quality standpoint?

Yes actually we didn’t say -- I think the opposite is at what Gary said. I can let Gary answer, but quite frankly we don’t have much exposure at all to the energy segment. We’re certainly not in developed side. We’ve said that repeatedly to people as we’ve been on the road and over the years, because of the hype around Marcellus Shale. The portfolio is -- we have -- less than 2% of our portfolio has any exposure at all to the oil and gas industry. So from a credit perspective we’re not concerned about the impact of the current situation on our customer base, as much as other could be. Having said that, what Gary said in his comments were when you look at the inverse, you look at what low energy cost due to rust belt areas that have a heavy manufacturing component, it actually helps those companies achieve greater profitability, because it brings their cost to manufacture down. So I don’t know Gary, if you wanted to comment but that’s.

No, I would just reiterate that we've always taken a conservative approach to this space. Historically there has not been an enormous amount of activity around it. But we’ve got some very strong core customers that we’ve had for a number of years that touch this space. And as I mentioned earlier, the book of businesses is very small, it’s very granular and it is heavily tied into to the supply chain of supporting the energy areas here of Marcellus Shale that we’ve seen across our footprint. That supply chain is focused around service industries, manufacturing, transportation and those companies are -- they added the energy business to their portfolio of business opportunities. So that core group of customers which is where we’re doing some business has many other industries that they've served historically and they’ve added the energy space to it. So it’s kind of a reverse relationship there. We’re really not focused directly into the energy.

We don’t have the expertise here or the credit appetite play in that space. That requires special expertise. So as Gary said, we are on the periphery. We finance companies that may have received some benefit because they’ve added to the revenue base because of the activity for the infrastructure build. But that’s pretty much the extent of it. So very conservative in relation to that sector.

And Matt, if I can go back to your -- I found the piece of paper I was looking for, just to give you a little color on the betas. On average we’re about 50%-ish as far as the movement, and I would say as you would expect on the kind of consumer side savings now, those types of accounts are probably at the lower end, 15% - 20% type and then the commercial side and sweeps and those of things are more in the 75% to 85%, 90% kind of range; just to give you a little bit of color of kind of what’s baked into our model.

And the next question comes from Brian Martin with FIG Partners.

Can you talk a little bit about, I know you don't tend to give breakdown of loan balances by market, but can you talk about your growth outlook for 2015? Maybe just as you talk about the momentum picking up in these newer markets, maybe just how much of the growth you'd expect to come from the newer markets, in particular Cleveland and Baltimore relative to Pittsburgh?

Yes I'd say historically Pittsburgh has generated about half -- before the new markets generated about half, a little more than half maybe of the growth. So the other markets that we're in -- we have relatively high market share and those markets tend -- they're not large markets. So they don’t tend to grow very rapidly either. So the move into Pittsburgh was to help diversify our growth prospects and give us enough opportunities to move as I said into a market that provides us opportunities to go after higher quality borrowers, where we're not hitting up against the saturation point from a market share standpoint. Moving into Baltimore and Cleveland, we would expect production levels and we have achieved production levels commensurate with our initial modeling for those deals and actually exceeding what our initial expectations are. So I would expect today when you look back, the pipeline for Pittsburgh, Baltimore and Cleveland represents about 60% to 75% of the total pipeline, and that was the case throughout the latter half of the year, particularly in the last three months of the year. So that’s probably going to continue. I would suspect it would continue given where the pipeline sits today. So those new markets, while they will contribute to the overall growth of the Company and their growth will be significant on a percentage basis, the portfolio balances are relatively small. Pittsburgh sits at about $2 billion in outstandings and those are much, much smaller. The hope is that we -- and when I started here 10 years ago, the balance in Pittsburgh was $300 million. So the hope is that we can gain the same type of success that we have gained here in those markets over a sustained period of time. And given the early indications, I would suspect that’s achievable.

I would just add one comment. If we look at the production in ’14 for the full year, Pittsburgh is probably about 40% to 45% of the production, Maryland is 10%, Cleveland is 10%, and then other markets are the rest. And then we look for those two new markets [indiscernible] contributions going forward.

And back to M&A, just for minute. The likelihood of -- I assume you guys are looking at deals. Would you expect the likelihood of an in market deal versus entering a new market is greater or is that kind of incorrect?

I don’t even want to handicap that. I don’t know. I will be honest with you. I don’t know. If the right opportunity comes up in market, certainly if we can take cost out and gain scale and the model works, we would consider it. If the right opportunity comes up in an adjacent market and its additive from an EPS perspective, we would be interested. So it’s kind of hard to handicap the different scenario.

And lastly, it sounds like there's still room for operating leverage and the efficiency improvement in ’15. Just wondering on your expense outlook, if there's any inclusion of maybe a branch rationalization, anything on that front included in that? Are you thinking about that at all?

Well, I'll let Vince answer that, but in terms of branch rationalization I think if you go back and look at the old earnings calls from several, maybe three years four years ago, we were out saying we had a branch rationalization program going on that was continuous, and it continues to this day. So we call that Project Ready, when we are looking at repositioning and realigning the delivery channel. And we've consolidated over the years a number of branches, some through acquisitions, some just because it made financial sense to consolidate, given the changes in client preferences and the advances in technology. So we've done that and we continue to do it. And I'll give you an example. We just opened a brand new facility in Johnstown. Johnstown doesn't seem like a dynamic market, but we went three branches into one, and improved the customer experience because some of those facilities had limitations. So we went into a brand new state of the art facility with the drive up capability and new ATMs in a market that we've been in for many years, and we were able to gain significant efficiency. So that just happened. So those are the types of things that we have our retail banking team focused on continuously. So that’s not something that we start and stop. And I think over the years you can see, we've consolidated over 50 branches since we started talking about this. So it’s something that we're very aware of and I think that’s why we're -- if you look at the peer group, we lead, and we're in the upper quartile in the peer group from an efficiency ratio standpoint, because we've been able to do that very effectively with limited attrition. So it’s an ongoing strategy within the organization. Vince I don’t know if you want to comment on any…

Yes, I would just, I guess cite a couple of points. Part of that Ready program is also investing the savings from those consolidations into de novo markets as well as doing the two-into-ones and three-into-one. So it's part of how we continue to generate operating leverage as well. We will reinvest some of that in those new locations that take two years to three years to get to breakeven and that's served us well, and we have continuously done that. So we'll keep looking at that. As Vince mentioned, vendor management. We continue to work very aggressively and working over the vendors to achieve whatever savings that we can there. We'll continue to be looking at just our operations overall. We've commented the last couple of calls that looking at operating efficiency throughout the Company, and it’s something we always do and we’ll continue to do that. The key for us in that operating leverage is us growing revenue, our ability to grow revenue in the core footprint, enhanced by the new markets is really a key part of that. So there is still positive to that operating leverage. Our focus is to continue to be top quartile or better on the efficiency ratio and kind of manage the overall relationship.

And we’ve invested. We’ve reinvested in the Company. I give our team credit. To achieve that efficiency ratio, given the level of investment in online banking, bill pay, we upgraded both. We have budgeting tools online. We have mobile remote deposit capture, that we came out with shortly after the larger banks. We offer pop money instant payment. We just announced we’re participating in the Apple Pay program on the payment side. So we’ve made some significant investments in technology, and that has been funded partially through the consolidation effort that has taken place. So shifting client preferences, we were on top of it. Our team actually reacted appropriately, and that’s really helped us maintain our customer base, where you otherwise would have seen greater attrition. The deployment of smart ATM machines in markets where we consolidated also helped. So I give them a lot of credit. We’ve been investing. We’ve been very smart about where we cut cost and how we invest in the future and that’s paid dividends for us.

And the only other thing I'd comment on is I mentioned in my remarks that we had an increase in OREO expense and it’s really related to some properties that we got through acquisitions and took some small hit on some properties to exit and that helps the run rate as we go forward. So managing the properties that we have, and as acquisitive as we’ve been, we have properties that we’ll continue to try to move out so we improve the run rate expenses. So that gives us some operating leverage benefit too.

That’s helpful. And just to clarify, someone with a earlier question, the expense growth, you're talking -- the guidance you give is based on full year 2014 core numbers and looking at that relative to 2015, correct?

Correct.

And we have a follow up question next from Collyn Gilbert from KBW.

Very quickly, Vince, you had indicated I think in your guidance comments that the NII net interest income would increase. I think you said that the dollar amount would increase. Could you give any more specifics around that?

No I didn’t give a specific. But the loan growth that we talk about is the key driver. So high single digit there, slight compression in the margin. You could kind of do the math from there.

Thank you. And we also have follow up question from Frank Schiraldi with Sandler O'Neill & Partners.

Just quickly, I'm not sure if I missed it, but on the accretable yield, 5 bps in the quarter, I think that's something like $1.5 million. Is that scheduled -- assuming you get the same amount of accretable yield next quarter, is that sort of basically it for accretion going forward from the purchased books.

When you say is that it, Frank, what do you mean? Is there?

Yes. Is there -- how -- I guess how long does this accretable yield run for, given the expectation of 5 basis points a quarter?

No, I would say that the five basis points this quarter and similarly the 11 in the third quarter were kind of the extra benefit from the proactive movement of problem assets, acquired loans off the book. So you get that kind of extra juice. We’ve said it's going to be lumpy and it will be lumpy and it’s really tied to our ability to continue to move assets off the books. We have added two more banks in ’14 after adding two in ’13. So there is accretion -- kind of contractual accretions that’s still underneath. And then adjustment that I quote, and it was $1.8 million this quarter, it was 39 last quarter, is really tied to those activities, moving assets out at an economic benefit to the Company. So there will continue to be accretable yield and the absolute level is going to just continue to fluctuate.

Okay, so when we think about margin guidance, the slight narrowing on the core, we can just add back in any sort of creatable yield assumptions we have?

Yes we just have some kind of core creatable yields in there, not counting on any exits at that point.

Thank you. And at the present time there are no more questions. So I would like to turn the call back to management for any closing comments.

Well, first of all I’d like to thank everybody for their interest in FNB and their support of FNB. I think we had a terrific year and I look forward to delivering another good year in ’15, and I know there are number of economic variables out there. We’ve covered a lot of them on the call here today. But I'm very confident in the management team that we have here and our ability to deliver consistent results quarter after quarter despite what’s out there beyond our control, and I’m confident that our team can continue to deliver. So again thank you and look forward to the next call.

Thank you. That conclude today's teleconference. Thank you for attending today’s presentation. You may now disconnect your lines. Have a nice day.