Good morning and welcome to the F.N.B. Corporation Fourth Quarter 2015 Earnings Conference Call. [Operator Instructions] Please note this call is being recorded. I would now like to turn the conference over to Matthew Lazzaro, Manager of 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 reported 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 and in our reports and registration statements filed with the Securities and Exchange Commission and available on our corporate website. A replay of this call will be available until January 29 and a transcript and the webcast link will be posted to the About Us, Investor Relations and Shareholders Services section of our corporate website. I will now turn the call over to Vince Delie, President and Chief Executive Officer.

Good morning and welcome to our quarterly earnings call. Joining me today are Vince Calabrese, our Chief Financial Officer and Gary Guerrieri, our Chief Credit Officer. I will provide highlights for the fourth quarter and full year of 2015 and discuss some key strategic initiatives. Gary will review asset quality and Vince will provide further detail on our financial results, provide guidance for 2016 and then open the call up for any questions. We are very pleased with both the quarter’s results and our performance for the full year 2015. Full year operating EPS of $0.88 increased 9% year-over-year when adjusting for merger costs and the cost of capital raised proactively for upcoming acquisitions. For the fourth quarter, operating net income available to common shareholders was $0.22 per diluted share. The outstanding performance in 2015 was defined by record revenue as we continue to gain scale and generate positive operating leverage. On a full year basis, total operating revenue increased $50 million, or 8% and operating expenses were well controlled, increasing $20 million or 6%. The fourth quarter efficiency ratio of 56.3% marked the 15th consecutive quarter under 60%, a period of nearly 4 years. On a full year basis, our efficiency ratio improved 109 basis points to 56.1%. The significant drivers for the improvement included our ability to generate continued organic revenue growth, diligently manage expenses and successfully execute our acquisition strategy by gaining scale and achieving the modeled EPS accretion. We continue to generate positive operating leverage and our larger organization has enabled us to remain flexible and quickly adapt to changes in a challenging regulatory landscape. We strive to maintain our low risk profile and have consistently invested in overall enterprise-wide risk management infrastructure commensurate with our growth by investing in risk management, technology, operations and support.…

Thank you, Vince and good morning everyone. We closed out another successful year, with our loan portfolio favorably positioned as we look ahead to 2016. Our fourth quarter credit quality performance was highlighted by better than expected results in our acquired portfolio and overall favorable delinquency and NPL plus OREO position and net charge-off results that remained in line with historically good performance, totaling 23 basis points annualized on a GAAP basis for the quarter and 21 basis points on a GAAP basis for the full year. I will now walk you through our originated portfolio results, followed by some acquired portfolio performance highlights and finally, I will close out my commentary with an update on our energy and metals exposure. Looking first at the originated portfolio, delinquency was up 4 basis points on a linked quarter basis and continues to remain at exceptionally good levels, ending December at 93 basis points. The level of NPLs and OREO was up a few million during the quarter, remaining flat at 99 bps. Net charge-offs for the fourth quarter totaled $6.7 million or 25 basis points annualized. The originated provision was up from the prior quarter at $12.4 million, which covered net charge-offs, some limited credit migration and supported heavier organic loan growth during the quarter. The provision to support the loan growth was approximately $3 million. The ending originated reserve position ticked up 1 basis point to end December at 1.23%. As it relates to the acquired portfolio, we ended the quarter with $1.2 billion of loans outstanding purchased at fair value. Contractual delinquency improved $6.1 million quarter-over-quarter to end the period at just under $46 million and we continue to benefit from our strategy of exiting less desirable credits. The ending acquired reserve remained fairly flat at $6.7 million. Including…

Thanks Gary and good morning everyone. Now, I will discuss the fourth quarter’s operating performance and provide high level guidance for 2016. Looking at the balance sheet, organic average loan growth momentum continued with average loans growing 8.4% annualized, driven by strong growth in commercial and consumer loans. Commercial growth totaled $174 million or 10.5% annualized and as Vince mentioned, our commercial pipelines at quarter end remained healthy. As noted in today’s release, the fourth quarter’s commercial origination volume was driven by strong performance in the Metro markets of Pittsburgh, Baltimore and Cleveland. The organic growth in the consumer portfolio was due to footprint wide positive contributions across residential, indirect and home equity related products. Average total deposits and customer repos increased $284 million or 9% annualized, with organic growth in non-interest bearing deposits of $105 million or 14% annualized. Average transaction deposits and customer repos increased $360 million or 14% annualized, mainly due to organic growth in business demand and money market balances. This growth in low cost deposits further strengthened our funding mix as 81% of total deposits and customer repos were transaction based at the end of the fourth quarter. From a total funding perspective, our relationship of loans to deposits and customer repos was 95% at the end of December. On a pro forma basis, with the addition of Metro and the Fifth Third branch deposits, the loans to deposit ratio improves to 91%. Net interest income grew $2.3 million or 1.8% due to the quarter’s organic growth in loans and our ability to fund that growth with low cost deposits. Our net interest margin on both a reported and core basis equaled 3.38% as the net cost of sub-debt raised proactively on October 2 to support capital ratios post Metro, was offset by the benefit…

Thank you. [Operator Instructions] And the first question comes from Preeti Dixit with JPMorgan.

Hi, good morning, everyone.

Hey, Preeti.

Good morning, Preeti.

Vince, just to clarify, did you say that organic high single-digit revenue growth guidance contemplates fall rate increases? And could you give us a sense of the sensitivity, assuming we see fewer rate hikes and what your fee revenue expectations are embedded in there?

Sure. Well, the margins – just to comment on the margin overall, we felt very good about the stability we had in the quarter. The core margin being unchanged from the third quarter at 3.38% was even a little better than what we projected last quarter, so that was a good outcome. The guidance for ‘16 when we put our plan together was based on five moves, including a move in December, which as we all know we have at this point. And depending on who you ask, the responses range from we are not going to have any Fed moves next year to we are still going to have four. So, our guidance is predicated on four. And if you look at the impact of that, it’s not as significant of an impact as it would have been last year. If we have flat rates from here, if we don’t get any of the four moves, it’s around $0.02 to $0.03 to earnings just unmanaged. So obviously, our job is to manage through that if that happens. The sensitivity last year was larger than that and part of what’s helping that is the gap between loans that are rolling off and new loans that are coming on as well as the investment securities are actually contributing. Our investment yield’s portfolio has gone up a basis point the last couple of quarters, so that helps to mitigate the impact of that. But that’s what’s baked into the guidance. And the fee revenue is, as I said, the guidance there that we gave was mid single-digits on the fee income, high single-digit revenue growth overall. So, that encompasses the high single-digit loan growth as well as the growth in the fee side.

Okay. Okay, that’s helpful. And just to clarify on the fees, I know this is a very strong quarter for capital markets. As we look at that other income line, what’s a good run-rate to think about there?

Well, it’s all baked in. I mean, if you look at what’s in other income for the quarter, there is a variety of items that happened in the fourth quarter. Definitely, as you mentioned, the strong capital markets is a key part of that. We had very nice swap fee income during the quarter. We had higher BOLI income. During ‘15, we renegotiated our policies to get some additional income for the company going forward, which is run-rate. We had higher recoveries on acquired loans and there is just a variety of other items. So really, it’s all what I would focus you on is the guidance that we gave. So that’s all baked into the guidance.

Okay, that’s helpful. And then Gary, what were the dollars of provision expense this quarter tied to the energy and metals portfolios? And could you break out for us what percentage of these loans are now sort of in criticized and classified?

Well, in terms of the provision expense, just high level, of the $12.4 million charge-offs covered, about $6.8 million of it and loan growth required about $3 million of that. So, the difference, a couple $2.5 million relatively small, which would have supported any credit migration. And around the credit migration, we didn’t have much at all during the quarter, on a – from a criticized asset standpoint, only $13 million in the migration. So, it was very nominal during the quarter. And what was the second part of your question again, Preeti?

Yes. I had asked about the criticized and classified. So, was this really more of a general reserve build on that portfolio as opposed to specific reserves?

It was just general.

Okay. Okay, that’s helpful. And then sort of shift quickly to the loan yields, I know they were up about 2 basis points in the quarter. Just want to get a sense if there is any fees impacting that and how we should think about the direction of loan yields here given where you are putting on new originations?

Well, I would say that the loan yields overall – hang on a second, there is nothing unusual in there. If you look at our margin slide, where we call out the accretable yield, accretable yield benefits we had this quarter, which is on Slide 16, was 3 basis points of benefit from accretable yield adjustments. In the past, that number varied quite a bit from quarter-to-quarter. As we have said in the past, it’s kind of lumpy. So in total, we had about $1.2 million worth of benefit during the quarter and that’s ranged from anywhere as low as $300,000 to almost $4 million over the last two years per quarter. So, it’s – the figure this quarter was higher than last quarter, but lower than the first two quarters. So, in dollar terms, it’s $1.2 million worth of additional equitable yields benefits that we had during the quarter, so the 3 basis points. And then we had the cost of the sub-debt that we raised proactively which I think turned out to be a smart decision instead of trying to raise that this quarter with everything going on in the market. And that affected margin by 3 basis points. So those two really offset to leave the core margin unchanged from where we were in the third quarter. But nothing unusual fee wise other than just normal stuff growing through there, but accretable yield adjustment did go up this quarter, which was good. We were able to resolve some additional credits and at higher than where they were marked.

Got it, okay. Thank you. I will step out for now. Thanks.

Thank you.

Thank you. [Operator Instructions] And the next question comes from Rob Ramsey with FBR.

Hey, good morning. Just curious if you could kind of comment on what all you are seeing in your core Western PA markets, given the pullback in natural gas prices, just what you are hearing from customers, what you are seeing in terms of activity, what the sentiment is like?

Yes. I think the sector is a portion of the overall economy here today because of the expansion that occurred over the last 8 years or so. But I mean in truth, I think the companies that are directly in the supply line are being impacted, but most other businesses here are not being impacted by natural gas prices. To be quite frank, it’s actually a positive for many manufacturers here because of the cost of production has gone down with lower energy costs. So it’s a mix bag, but as Gary indicated that supply chain portfolio for us is very small. So we have not noticed an impact, to be truthful.

Okay. Outside of energy broadly, are there any areas where you have any calls for concern or sensing any softness or maybe giving greater attention today than a year ago?

Look, I think Gary called out the metals portfolio, I think many of the banks across the region particularly in the Rust Belt have exposure to companies that utilize metal, either in the production process or outright wholesalers of the material. So with the situation in China and pressure on commodity prices, there is migration in those portfolios which we have seen many, many times over many cycles here and the other banks have witnessed that as well. So I would say, that’s a weak spot and that’s why he called it out. I think it’s an area we are watching. We are not under particular stress there, but it’s an area that clearly could be impacted by sustained lower commodity prices. And as you move through the cycle once that inventory clears, things go back to normal. But you do have volatility in commodity prices today and given the global situation. So that’s an area that we stay focused on. I don’t know if you want to add anything, Gary…

No, I mean that portfolio, as mentioned I mean has continued to perform very nicely. Our wholesale segment is very, very small, in the mid-$30 million range and some of those wholesalers are seeing some pressure there due to the inventory pricing. So – but other than that, we are very pleased with how our portfolio has performed at this point.

And our strategy has been which has been repeated call after call is to grow through a very granular strategy. So Gary is methodical about managing exposures in a variety of segments in the commercial portfolio, so we are not reliant on one particular asset class in an industry to drive growth for the company. Our geographic expansion and the expansion into Baltimore and Cleveland provides us with the ability as I have said in the past to be more selective in a more competitive environment, particularly as we move into this portion of the cycle. So having that for us is a huge advantage over other regional banks that are embedded in a tranche of lending that might be experiencing adverse economic conditions. So our strategy from the very start was to enable us to continue to sustain growth as we – and maintain credit quality throughout cycles without variation as we move through a variety of economic cycles.

Okay, great. Shifting gears, one other question, just in terms of M&A, you guys have obviously been an active acquirer over time, are you sensing any shift in sentiment on the part of potential sellers, either given the lower for longer sort of rate outlook or some of the other macro uncertainty, just kind of curious what the appetite is from sellers?

I am not – I think sellers are confused at this point given where things are going. So I am not sure anybody is really focused at this stage in the game on long-term thinking. I think they are trying to survive a variety of forces in the economy. So it – to me, it seems kind of quiet because of the volatility in the market. I think there is kind of a wait and see attitude. Having said that, we just announced a huge investment in technology, we have been investing in technology all along. So the impact to us in rolling out these initiatives, essentially it’s a rebranding exercise and trying to engage customers in utilization of our website in our branches and get them to our branches through the website. So we have spent money, but it’s less than $0.05 in investment for us and if we generate modest increases in the number of accounts sold, it’s a 30% return, cash return on that investment. So we have already laid the groundwork. So it’s already embedded in the run rate for us. I think others that have to catch up in the technology space and that being smaller than F.N.B. it’s going to be a challenge. So you have that coupled with the regulatory environment, you have the interest rate environment with uncertainty about where rates are going to go. I think all those pressures eventually will mount and result in more consolidation. Having said that, we are very selective, we have been selective and we are feeling very good about the acquisitions that we have on the table and we are going to continue to be very, very selective moving forward.

Okay, great. Thank you, Vince.

Thank you. [Operator Instructions] We have a question from Brian Martin with FIG Partners.

Hi guys.

Hi Brian.

Vince, could you just comment on just kind of the organic, I mean you talked about the strength in fee income this quarter, may be just in particular as you look to ‘16, I mean I guess do you expect that momentum to continue both on the capital market and the mortgage side or would you actually see organic growth, I mean is that kind of baked into that number you talked about on the organic growth outlook or I guess given the strength in these last couple of quarters, maybe it’s more of a smaller growth for those segments in ‘16?

Well, I think that the guidance that Vince Calabrese gave includes our thoughts on how we are going to perform in those areas in ’16, so it’s all inclusive. And I think we factored into our forecast the competitive environment, a variety of factors, the global economy at the time that we were forecasting. So I think it captures what we believe we can do and is reflected in that guidance.

But I would add too that those areas that we called out are areas we have invested quite a bit in over the last few years and to strengthen our team, strengthen the infrastructure and on the wealth side, the insurance area, we mentioned that we did a lift out from First Niagara, brought a team in. We think that’s going to be a positive for us going forward. The wealth, both trust and the brokerage sides, we are encouraged by the results we have been generating there. And similarly, mortgage banking has been taken to a new level as a company and the contribution overall. So I think those – the momentum that we have there should continue to serve us well and based on the investments we have made in the coming years.

And I should mention, I mean when you look back, this company has had 6 years of organic loan growth, particularly in the commercial segment. So we have not missed a quarter. And when you look back over that time period, we have added hundreds of clients. And what happens over time, if you are an effective cross seller and you have deep product set, you are able to enhance your share of wallet over time. And that has clearly been the strategy here and its working. So we are seeing double-digit growth in wealth management while others are flat. I know the market is a factor there, but that’s built into the guidance. We have good solid growth in the insurance cap business. Capital markets, is ballooning because of a larger balance sheet. Our international business is taking off. So we have got a lot of opportunity within our own customer base. So we are very excited about those areas. And I think we chose the right areas to move into strategically to help offset downward pressure in the consumer bank on a number of fronts from a fee income standpoint. So, the strategy has worked and to offset a reliance on spread. So it’s worked very, very well for us and I am very enthusiastic and optimistic about the future.

And several of those investments are really in the infancy, very early on, it’s year old to new. So, I think those will continue to pay off for us going forward.

And I will remind you, on the mortgage business, historically the level of production is anemic, so we can only go up from where we were.

Got it, okay and that’s helpful. Thanks. And then just two other things here, just on the margin, you said if you didn’t get the four rate increases as kind of laid out, did you say it was $0.02 to $0.03 for the year, was it 2 basis points to 3 basis points, I mean I just want to make sure – clarify I heard that?

It’s $0.02 to $0.03 if we didn’t get any additional Fed moves from here. So that’s the total impact which are – I think we are going to get more than zero. How many we get, I guess we will see, but it’s $0.02 to $0.03 to clarify.

Okay, got it. And then just one other item, the earning asset add you are expecting as a result of the M&A, was that – can you just repeat that number, I guess…?

Sure. And this is a combination of Metro and the Fifth Third branches moving. So total loans $2.2 billion, earnings assets is $3.2 billion and then deposits and repos is $2.8 billion.

Okay, got it. And then just…

[indiscernible] for Metro because that’s the most current publicly available, so…

Got it. Okay. Yes. And then just maybe the last thing, just if you didn’t comment on it, but kind of your – you said on the organic I think that the operating leverage should continue to improve, just wondering what the all-in if you made that same comment or maybe I missed it, but just kind of your outlook all-in as far as operating leverage goes, kind of year-over-year from ‘15 to ‘16, how you are thinking about that?

Yes. No, there is still positive operating leverage I mean that’s the key focus for us every year when we put together our plans and our goals for the coming year. So we expect to continue to generate positive operating leverage, which translates into some improvement in the efficiency ratio too.

Got it, okay. Thanks very much.

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

Well first of all, I would like to congratulate our team on another very, very successful year in a challenging environment. So I think everybody did an outstanding job carrying out our plan. We are very excited about 2016. I know there are some economic headwinds here with the market volatility, but we are excited. The team is charged up about the investments in technology and how we are positioning the branches with the merchandising strategy that we are rolling out with our clicks to bricks strategy is very exciting. The Metro acquisition is moving as planned. We have been tracking one-time expenses. The expense takeout and the credit mark and we are right on top of our forecast, so our model that we discussed with you when we did the acquisition, so we are excited about that. We have got our team in place and we are ready to capitalize on the market disruption in the central part of the state and we feel very good about that. The other piece I will mention and then we can close out the call, when we look at the Metro model, they did have extended hours. One of the benefits of the roll out of our technology plan is actually the addition of 10 service hours per week per branch because of the deployment of technology at 14 of those locations. So we are actually extending the hours while cutting back the actual hours of the branch and adding the technology. We are actually extending the hours of that a client can do face-to-face transactions by 10 hours. So we are excited about that move as well. With that again, thank you for participating in our call and we look forward to discussing the first quarter results shortly. Thank you.

Thank you. The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.