Welcome to the F.N.B. Corporation's First Quarter 2017 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. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Matt Lazzaro. 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 and non-GAAP financial measures. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, our reported results prepared in accordance with GAAP. Reconciliations of GAAP to non-GAAP operating measures to the most directly comparable GAAP financial measures are included in our presentation materials and in our earnings release. Please refer to these Non-GAAP and forward-looking statement disclosures 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 May 2nd and a transcript and the Webcast link will be posted to the About Us - Investor Relations and Shareholder Services section of our corporate website. I will now turn the call over to Vince Delie, President and Chief Executive Officer.

Welcome to our first quarter 2017 conference call. Today I would like to discuss the financial results for the quarter and provide an update on our recently completed merger with Yadkin. Joining me today are Vince Calabrese, our Chief Financial Officer, and Gary Guerrieri, our Chief Credit Officer. Our financial performance was highlighted by continued organic growth in loans and deposits, strong revenue growth and favorable asset quality. I’d like to start with our key message for the quarter beginning with the successful integration of Yadkin on March 11th, which resulted in F.N.B.’s total assets exceeding $30 billion. We remain on track to achieve acquisition related cost savings and finally we are well positioned to deliver on our long-term financial objectives. Before we get into our financial performance for the quarter, I’d like to talk about the successful integration of the largest acquisition in our history. I'm very proud of our team including the more than 1,000 new Yadkin team members who worked tirelessly throughout the entire integration process. As a highly experienced and preferred strategic partner, the conversion completed only nine months after announcement is a prove point that our acquisition strategy is a core competency. In May 2016, we began our comprehensive due diligence process, led by Gary Guerrieri and his credit team comprised of more than 40 bankers, who underwrote two-thirds of the Yadkin commercial portfolio to establish an appropriate loan market. The acquisition was announced in July and shortly afterwards our project management office kicked-off the conversion process by organizing multiple work streams, involving hundreds of F.N.B. employees across our company. Immediately following the announcement, our executive management team traveled throughout the Carolina markets interacting with Yadkin employees. These proactive interactions together with frequent communication resulted in one of the best employee retention rates among all…

Thank you, Vince, and good morning, everyone. We had a successful first quarter that was marked by the completion of the Yadkin acquisition and the continued satisfactory performance of both our originated and acquired credit portfolios. On a GAAP basis, we ended March with total delinquency of 1.39%, NPLs and OREO at 77 basis points and net charge-offs totaling 20 basis points annualized. We remain pleased with these levels and the solid execution of the Yadkin integration, which as Vince mentioned is our largest acquisition to-date. We are already seeing brisk pipeline activity from our banking teams in North Carolina and are pleased with the discussions taking place. With that, I will now cover the details of our quarterly results, which can be found on page six of the provided slide deck, followed by some brief additional remarks on the Yadkin portfolio. If I can direct your attention first to the originated portfolio, the level of delinquency ended the quarter down nearly $10 million or 10 basis points to end March at a very solid 94 basis points. NPLs and OREO increased by 21 basis points on a linked quarter basis at 1.12%, which is attributable largely to the addition of $10 million in OREO from the Yadkin and to a lesser degree an increase in non-accruals related to a commodity based borrower that migrated and has been adequately reserved for. As you’ll recall from prior acquisitions, these OREO properties are placed in our existing portfolio and therefore have a negative impact to the level of originated NPLs and OREO. Net charge-offs for the first quarter were satisfactory at $7.9 million or 25 basis points annualized. The originated provision at $11.3 million covered organic loan growth and charge-offs resulting in an originated reserve position that remained relatively flat for the…

Thanks, Gary. Good morning everyone. Today I will discuss the results of the first quarter and comment on high level guidance for the full year 2017. Let’s start with the balance sheet for the first quarter on slide seven. Looking at organic loan growth momentum continued with average loans growing 5% annualized. We enjoyed positive contributions across both the consumer and commercial business lines with 4% annualized growth in the commercial portfolio, led primarily by close in the Pittsburg, Cleveland and Maryland markets. Consumer loan growth was 8% annualized led by strong indirect auto volume and residential mortgage activity across our Pennsylvania footprint. As Vince mentioned we had strong origination volume in both the consumer and commercial portfolio during the month of March with total spot loan organic growth of 7% annualized, which is in line with our guidance. On an organic basis average total deposits decreased slightly compared to the fourth quarter, while spot total deposits increased slightly at period end. Organic growth and personal non-interest bearing checking accounts was mostly offset by seasonal draw downs in interest checking and business demand account balances. From a total funding perspective transaction deposits made up 82% of total deposits and the relationship of loans to deposits was 95% at the end of the quarter in line with our expectations. Turning to revenue on slide eight, net interest income grew $13.5 million or 8.5% due to organic loan growth, the benefit of acquiring Yadkin balances for two-thirds of March and some pre-investing in the securities portfolio in anticipation of the Yadkin transaction to take advantage of higher interest rates. Our treasury team did an excellent job exceeding most of the Yadkin’s portfolio and repositioning it in accordance with our investment philosophy over the last couple of weeks of the quarter. Our net…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And the first question comes from Jason Ong with JPMorgan.

Hey, good morning, everybody. Apologies if this is already provided, and I know it’s only been a few weeks in the quarter. But how much did Yadkin contribute to both fee revenues as well as non-interest expense in the quarter?

It’s really all in the numbers. I mean Yadkin is been in the numbers for basically three weeks. So I mean it’s not significant to the total fee revenue. But on the positive side, we have already started see activity from the team down there, as far as generating some kind of early wins. So it’s -- I mean it’s small at this stage.

Okay. And now that the deal is closed, I know the message has been that the focus would be on integrating this and focusing on organic growth from here. But if you were back in the M&A market do you think there would be sometime towards the end of this year and if so, how do you view the strategy for the next deal if there is another one? Would it be more likely to be in legacy markets or maybe something more adjacent to Yadkin’s markets?

This is Vince Delie. Thank you for the question. I emphasized on the previous call and I guess in my prepared comments I alluded to the fact that we’re going to remain focused on the integration of this transaction, this was a very large complex transaction. We’re very pleased with the integration, we’re very pleased with the ability to retain the majority of the key employees, we’ve had very, very little employee attrition. So, we’re poised to deliver and I think it’s incumbent upon us as a management team to recognize that while we have been a prolific acquirer, it was done to position the company to drive organic growth, and to drive organic growth in a way, that lets us maintain the risk profile of the company without taking extreme risk in any particular geography or any asset class. I think we have accomplished that with our M&A strategy, I think we now have significant scale, we have a tremendous group of employees, many of which are from larger institutions, we have built out our capital markets platform, we have built out our fee based businesses. And it’s now time for us to deliver on the acquisitions that we have made and we positioned ourselves as I said in my prepared comments, with significant market share in some of the best markets in the country. We have added a high growth area to our franchise. So our growth overall from a population perspective prior to the Yadkin acquisition was flat, Maryland brought us to flat, it was negative. So we are now in positive territories accompany the economic statistics that prevail in the North Carolina market are terrific, extraordinarily promising. And as I sit today, our pipelines are growing tremendously. So we have had an over doubling of the pipeline in North Carolina, since the last quarter. Obviously a lot of that is attributable to getting the conversion completed and finalizing the transaction. But having all those bankers on the ground and having them trained and on our systems at this early stage in the game is going to be very, very -- it's going to help us tremendously, produce the results that we have been forecasting. So, I think that’s my answer, I really don’t want to focus on M&A at this point, I think I have made it pretty clear that we’re now going to focus on driving EPS accretion and maintaining the trajectory that we had from a revenue perspective and continue to cross sell those fee based businesses, which we’re having tremendous early success with. So sorry for the very long answer a bit, I think that I needed to clear the deck there in terms of M&A.

Okay, fair enough. If I could just squeeze just one more in, I was wondering if you guys can give an update on your indirect auto business. Any thoughts either on growth prospects there or credit risk given where we are in the cycle?

Yes Jason, this is Gary, I'll give you a quick update there. I mean our indirect portfolio has been a solid business line for us throughout the last 20 plus years. It is a core business and we've developed very deep relationships over a long period of time with the group of dealers that we do business with and we're very pleased with the position of that portfolio today. And we manage the business from a credit perspective that's how we run it. And based on our standards that's how we're going to continue to run it that portfolio has performed very well through many economic cycles. Average FICOs are north of 750 and today delinquency stands at 60 basis points with rolling 12 month charge-offs at 46 basis points. So it's a core business we like it, we run it from a credit perspective, and we feel very good about it.

Okay, thank you.

Thank you. And the next question comes from Bob Ramsey with FBR.

Hey, good morning guys. Obviously I heard you guys reiterate your guidance for high single-digit loan growth for the year. I guess some of it is probably seasonality and some of it is industry trends. But starting the year a little bit slower than that just kind of curious how the pipelines look and what gives you sort of confidence in accelerating growth through the year?

Well, obviously our pipelines are at record levels because of the Yadkin acquisition. But we're seeing very strong demand in the metro markets that we serve. So given our lower relative share we're able to grow at a faster pace than some of our larger competitors. But we're very optimistic about where we are right now with our pipeline; the pipeline actually all in is about $2.7 billion. So we are excited about that, that doesn't always necessarily translate into outstandings there is competitive elements and other factors, but that's a very optimistic signs. And I think over the last few years, we've seen a slow first quarter building throughout the year, and I don't anticipate this year being any different. I think that we're now starting to see opportunities emerge and demand is picking up and it's being reflected in those pipelines. I mentioned the North Carolina pipeline earlier, I am very pleased with where we are, I mean essentially several weeks into it and we're seeing tremendous increase in the number of opportunities available to those bankers, it's very positive. And we're very bullish on that. And I think that will ultimately translate into us fulfilling our guidance.

Okay, great. And then shifting gears talk a little bit about the margin trajectory. I guess help us sort of think about where things kick off from next quarter with the full quarter impact of Yadkin? I'm thinking you get a handful of basis points of expansion just by kind of blending the two balance sheets. And then I know previously you all had guided for 2 basis points of margin expansion for every additional rate hike. So I'm guessing the second quarter we get the benefits of the March hike in there.

Yes, I would say few things on the margin, I mean I think we feel good about the margin for the quarter, it came right in line with where we expected given the December Fed move plus the initial impact of Yadkin for few weeks. I think that the new disclosure that we're showing if you look at our kind of margin excluding purchase accounting, we did pickup a couple of basis points there. So that's the positive and that again was right in line with what we expected. When you look at the purchase accounting accretion you can see it's 6 basis points, there has been 6 basis points this quarter last quarter and even in the first quarter of last year. And then as we've talked about, the cash recovery piece is the lumpy piece. So this quarter was at 1 basis point kind of the low end of the range, it's been running 1 to 6 it was 3 last quarter. So that's kind of rolling through the total reported margin that you see unchanged at 3.35. But that kind of underneath picked up couple of basis points. So the Yadkin loan as we had said initially we were going to pick up a few basis points of margin by adding Yadkin that's in the mix of our overall guidance, I mean we're giving you guys very specific dollar amounts for guidance in that number. And I think we had talked about in the past that the margin probably bottom in the fourth quarter and then it would start to build a little bit from there. And that's still kind of consistent with our thinking. March obviously you pick up some benefit from that, June I guess remains to be seen whether June is going to happen or not I know the probabilities are about 50%, but that add inflows quite a bit from day-to-day really. So I would say that the guidance that we gave before is still intact and looks for margin to kind of build modestly from here as we go forward, which was consistent with the original path we expected.

Okay, great. Last question I’ll hub out, but just in terms of the tax benefit this quarter is it likely that that would sort of recur in the first quarter of ‘18 does it have to do with the grants that are made seasonally in the first quarter?

Actually it’s very simple, it’s really just the merger cost, when you think about coming up with your tax provision for the quarter when you have $52 million of merger cost it knocks your pre-tax income down very low. So your benefit of permanent items is the resulting tax rate is very low at 22%. If you take the merger cost and the related tax benefit out of the numbers on operating basis we’re right in 31.4%, 31.5%. So that’s really the run rate that you have going forward it’s just the anomaly of the significant merger cost in the quarter that’s it. So first quarter next year would be kind of at a normal run rate given where we’ve been kind of tracking. So really does…

Perfect…

The $0.23 I guess just to be clear, the $0.23 does not have any benefit from a lower tax rate. It’s right smack into middle of our 31% to 32%. So I think that’s important and people understand that.

I think it’s also important to note that those one-time expenses that are merger related are actually greater than what we had planned because we’ve recognized some of them earlier.

The timing.

Timing is off, so you’re going to see…

First quarter right?

Yes which explains the tangible book value level that should reverse out as you move through the rest of the forecast right because we’ve recognized those expenses in one period before the retained earnings can benefit tangible book value.

Yes proportionally there was more in the first quarter some will still come…

Which is why the effective tax rate appears to be what it is.

Got it. Okay, thank you.

Thank you. And the next question comes from Michael Young with SunTrust.

Hey, good morning.

Good morning.

A quick follow-up just on the one-time cost, since you guys did a single I guess timing conversion as oppose to two steps with new bridging Yadkin, do you expect that the one-time cost are going to be lower on an absolute basis compared to your initial expectations?

I would say they’ll be a little bit lower more because of some success negotiating contracts and bringing the number down some. So we had -- the number that we had originally disclosed encompass to having the two conversions into one over that period. So -- but in total we’re going to be -- we’ll be a little better on the one-times, we’re a little better on the mark in total and then the cost days will be right on the 25%. So as far as the key levers to booking the transaction that’s where it will be.

And what it would help with would be ongoing expenses because we didn’t delay that conversion so we are able to benefit from a lower cost per transaction by having all of our systems on one system. So there’s actually an impact to go forward expenses, but that was reflected in the guidance and in the model.

Okay, great. And just switching gears, if I look at your long-term targets the main ones stands out I guess is the improving efficiency were a little above that obviously because of some of the seasonal factors. But the deposits per branch item seems a little bit low compared to peers, is that where the remainder of sort of the cost saves are going to come from to get that level higher from here?

Well there’s we have a system -- we have a process that we call ready so we continuously evaluate our branch delivery channel. But I would caution you about looking at those deposit balances at this point in time, there’s quite a bit of seasonality that impacts the deposits on a per branch basis. And one of the biggest areas that would the impact would be on the municipal segment or looking at the commercial deposits in those branches, the first quarter typically sees declines because people pay their taxes and payout bonuses or incentive compensation. So you typically see lower deposit balances in that first quarter. So it’s probably a little tricky, but in terms of looking at the branch delivery channel we’ve been doing it for eight years, we have closed over 50 branches over that time we closed a half dozen last year. So we constantly review our delivery channel, we look at opportunities to optimize the channel, we have deployed technology, which is part of our clicks-to-bricks strategy to kind of offset branch consolidations, to accommodate customers with ITL deployment and advanced ATM deployment. So we -- I think we are very focused on that and that’s why our efficiency ratio has done well given that we have continuously added for infrastructure purposes and for regulatory purposes. I think if you look at the build in the -- if you see the slight uptick in the efficiency ratio, what that is related to more specifically would be building out the team in advance of the conversion or adding staff to accommodate volume and not waiting for the conversion to do that, so that you can benefit more fluently from the revenue expansion. That’s the strategy. Overtime, as we start to normalize our revenue growth and achieve the additional cost savings, you will see that come down and that’s our guidance alludes to that. So it should work that way.

Yeah, I would just add too. So to Vince’s point, the revenue impact for the quarter would be low given the late closing, but that will start to kick-in. The other levers we have branch optimization is definitely part of it, we also have an ongoing vendor management program, and particularly with our much larger size now, we’re going to be going back to vendors to really renegotiate contracts and there’s opportunities there to continue to drive the efficiency ratio. And then just the cross selling of products given the broader markets will be a significant benefit as we go forward. So the 57% reflects the items as Vince mentioned, we have been running in the 55% to 56% range and I expect just to return of those in these coming quarters here because of the seasonal items plus the pre hiring to make sure we are ready for Yadkin to come onboard.

We also have some opportunities relative to occupancy expense that haven’t played out as well. So, there is a quite a bit real estate that’s owned across the company that we are pairing back.

Okay, thanks.

Thank you.

Thank you. And the next question comes from Casey Haire with Jefferies.

Thanks, good morning guys. Wanted to touch on the provision guidance, which holding at 72% to 82% it seems very conservative given starting with $11 million provision in the first quarter here. I know you guys got a lot of momentum on the loan front, but even with that I mean the guidance implies that provision is going to run it at $20 million for the remaining quarters. So just wondering are you just being conservative or is there some loss normalization embedded in that assumption?

Yes, just a couple comments Casey. It’s important to remember that good portion of our provision is used to fund the solid loan growth that we have in the first quarter and that we expect to accelerate going forward and it’s important distinction too is that we are funding the solid growth in originated loans, which is higher than what appears because we always have to fund acquired loan run-off that occurs every quarter. And that’s been running about $200 million per quarter, so the kind of gross originated loan growth that you have is what we need to provide for. So the provision for the first quarter clearly benefited from a good charge-off quarter and the provision again more than covered net charge-off. So the absolute level of the allowance has gone up. But the range is really reflective of the growth that we expect to have legacy F.N.B. plus Yadkin. It’s important too to remember that when we do our organic growth numbers that we disclosed, we exclude the day one balance sheet from Yadkin and then add incremental growth that you have going forward, plus the growth in the rest of the company becomes higher percentage when you think about it that way and we need to provide for that as we grow. So, first quarter’s good charge-offs and we kind of planned at normal levels but it’s really the main driver is really the growth that we expect to have in the rest of the year, which is baked into our guidance.

Okay, great. And then just switching gears to capital adequacy. One of the -- I know that capital efficiency has long been a theme for you guys, but adds $30 billion that 6.8% TCE ratio does standout, especially versus your peer group on slide 12. Can you just give us some updated thoughts and assurances on your ability to run at that relatively light capital level going forward?

Yes, I think we feel very comfortable with where we are from the capital perspective. I mean to really do a comparison an apples-to-apples comparisons Casey, you have to drill down into the portfolios and understand what the risk profile of the assets are and we’re a very conservative company. We don’t have large structured finance or leverage finance exposures, we’re very conservative in terms of CRE underwriting. So, that all comes into play and there are banks that are multiple times our size, I was just going through some of the or in our peer group as well that have a TCE ratio that’s only slightly higher than ours and they have those exposure. So, I would think that we’re very well positioned that we feel very comfortable with our capital ratios and I would expect given the success we’re going to have with our acquisition that those capital ratios will improve overtime.

Plus I would just add, as you would expect with the size of this deal as we do with every deal but this one was even larger there is all regulatory approval process and the capital ratios where we run is obviously a big part of that application. And one we are comfortable for all the reasons Vince just described and obviously the regulators are comfortable too. So, we are very happy with where we are managing the ratios they are still well within our ranges and that's the why we continue to manage.

Okay. So 6.5% to 7% is still the comfort zone?

Remember I am 7, Vince is 6.5. So…

Okay. And just last one housekeeping on the -- can you guys give how much seasonal expense pressure was there in the quarter between pro-forma inclusive of Yadkin like payroll tax specifically?

Yes, I mean we don’t disclose that level of detail, I mean, if you look at first quarter of last year without the pre hiring we had efficiency ratio was 56 and then it’s kind of drops drown from there. So, I don’t -- we don’t give that level of detail out Casey, but my comment earlier about us moving back down into that 55%, 56% gives you some feel for that plus the revenue contribution from Yadkin. So, it’s -- in the past it’s been about $0.01 a share I think the impact of the total resetting of expenses.

Okay, great. Thank you.

Thank you. And your next question comes from Russell Gunther with DA Davidson.

Hey, good morning guys.

Good morning.

Just wanted to circle up on loan growth, I hear you loud and clear on the organic target for this year in the high single-digits, but as you mentioned you guys have effectively used M&A to transform the organic growth profile of the company. And so kind of moving into the Carolinas, trying to get the sense for can that high single-digit move to low double-digit overtime or as you overlay this new acquisition on your underwriting standards are we kind of looked at high single-digits going forward?

So, I would say that we are sticking to our guidance I think if you look as Vince mentioned in his prepared comments the last few weeks of March were strong. So on a spot basis we came in at 7%. We don’t typically quote spot, but we thought it’s important to note. And if you look at the pipelines that I have mentioned clearly we have an opportunity to maintain that higher growth trajectory. Our strategy here has been to manage risk. It’s not just about growth, it’s about managing risk and asset classes having diversification in terms of how we grow the portfolio and having geographic diversification that helps us continue with our growth trajectory and positioning the company in those larger markets that have more opportunities. As I mentioned in my prepared comments the number of commercial prospects that exists within our footprint today provide us with the ability to sustain that mid to upper single-digit range that Vince spoke about. So, we still feel that that’s achievable. Obviously that's impacted by a number of factors including economic factors, economic outlook, competitive pressures. But as we sit today, we’re very successful at gaining share in those markets particularly when we move into the top 10 deposit share there seems to be a correlation between having that delivery channel in place and having that deposit share and winning in the commercial space particularly for us. So I would say we’re in a good spot.

Okay, great. Thank you. And then just a follow-up on the margin I think I heard you say you’re all else equal isolating for a Fed impact roughly 2 to 3 basis points on the core margin. Are there any tailwinds there that may exists for example some loan floors that eventually burn off where that about 2 to 3 could move higher or is this sort of the range we should expect until we start to see a more meaningful pick up in deposit cost?

Yeah we really don’t have much in the way of course overall, one thing I do want to clarify because I think there was a little bit of confusion. So we’ve changed our nomenclature a little bit with the margins. So I think some folks were taking a core margin last quarter, which was really just the reported margin minus the excess cash recoveries, which takes 3.35 to 3.32 and then comparing that to a 3.28 number that excludes purchase accounting. So kind of apples-to-apples it’s actually up 2 basis points excluding the purchasing accounting accretion. So I just kind of wanted to clarify that. But within the portfolio, I mean the guidance that we have I mean our asset sensitivity position is very similar to where it was at the end of the year Yadkin changed it a little bit, but not significantly. Yadkin brings in a little bit more fixed rate loans than we had. So that’s in there, but it moves our total percentage by a couple percentage points that are kind of fixed versus variable. So it’s not a significant move. So I think that that the couple of basis points still feels right for the Fed moves going forward.

Okay, great. Thanks very much.

Thank you.

Thank you. And the next question comes from Collyn Gilbert with KBW.

Thanks, good morning guys. Just wanted to check in on some of the guidance that you guys gave, so Vince the 2.70 to 2.90 that you guys are sticking to on the NII goals for this year can you just remind us do you have rate hikes in there and if so how many?

Two rate hikes were in there.

Okay, very good. And then on the fee side, so the $60 million to $70 million increase this year what does that assume kind of for your outlook on mortgage banking?

I mean there was an increase in activity obviously because it would include bringing Yadkin over Collyn. So they had a mortgage banking operation that would be consolidated to ours. We also as I stated from the very beginning our primary objective was to pursue purchase money opportunities and we’ve done a very good job with our mix, our mix has always been north of 70%, 70% or higher in the recent quarters, so that continues. And we do not have the representative share of the mortgage banking originations in the purchase money space relative to our positioning in the market from a deposit share perspective. So we obviously have a budgeted increase, while others may see contractions in that business I think it’s a pure size issue. So we’re still small and growing and others may have a higher proportionate share. So they’re going to see some of that roll back. But as long as the housing market remains intact we should do well.

Okay.

Yes. And all of that is reflected in Vince’s guidance in addition to derivative fee income and wealth opportunities and so there is a tremendous amount of activity and I think I should point out as well that we are fully staffed from a wealth perspective in the Carolinas. So that’s part of that expense build we were able to hire people earlier than we anticipated, so we got them in the seat. So unlike other acquisitions we’re in a very good position with personnel in those markets.

Okay, that’s great. That’s helpful. And then Vince you may have said it and I may not have heard it or you were leaning to it but so obviously you guys took more merger charges this quarter. What is left to take do you anticipate and are those kind of coming in the second quarter or is there anything that will trickle in, in the third quarter?

Yes there’s some left, I mean the original number that we had disclosed it was about $100 million and will be a little bit better than that. So there is still some to come through our total number was $53 million that we had in the first quarter. So there’s not that much left, I mean if you take 100 and haircut it a little bit for where we’re going to be a little bit better, but the rest of that piece I would see come through in the second quarter.

And then there is a little tiny bit that which -- that come in, in the third.

Yes there is some related to existing the non-branch facilities that they have a lot of properties that we're not going to be using. So yes, there is a little bit of...

It will trickle but it will be small, it should be small.

Okay. And then just on the expense guidance, I know I certainly appreciate the color, but I just want to make sure I understand kind of how you're running the business. So the comp expense was up because I assume as you guys indicated to kind of some of the pre hiring you did ahead of Yadkin. But then does that -- that wouldn't necessarily trend down though would it or I just trying to understand kind of the dynamic there because that was a big jump I guess in the first quarter.

It would trade-off, you're trading it off from it impacting F.N.B. core versus it being a reduction in expense in the model for Yadkin.

Okay, got it.

We didn't have the revenue, we have the expense and we pre-hired so it's going to impact you and then overtime it reverses out essentially if you fulfill the forecast right because you're generating the revenue and you're not adding the incremental expense that.

Okay, got it. Okay. And then just finally I think when you guys announced Yadkin I think consensus was kind of anticipating given your accretion target of 5.5%, EPS accretion targets but anticipating about $1.06 of earnings in 2018. It sounds like given your positive messaging and the momentum that you guys anticipate that you could be able to recapture that level. I mean that still should be within the target, is that safe to say or do you have any thoughts on that number based on where you guys were when you announced the deal?

Collyn I would just say we haven’t given guidance for '18, as you know. So it's really kind of hard to comment on that. I think what's important is that you picked up on the positive messages here about our expectation with Yadkin, as well as in our legacy markets and we're very optimistic about what that would do for '18. But I mean, I really I can't give you guidance on '18 at this point.

Okay. But you're still I mean, I guess if you're still assuming that 5.5% EPS accretion right like that part of it hasn't changed or has it changed I guess that's the question.

That part hasn't changed, but you do the math using the consensus estimates at the time, because that's the way you kind of need to do it. So -- but no the 5.5% accretion is still what we expect and that's what we're targeting and then that number obviously moves up it go forward into '19 and beyond, but that's still where we're targeting.

The one thing we did say in prior calls Collyn is that we did not model Yadkin with rate increases. So that when you look at the consensus estimates at the time, there were rate increases baked into it, we modeled it without it. So the 5.5% accretion is reflective of a flat rate environment not escalating rate environment, not a flat yield.

Okay, yes got it that's helpful. Okay, thank you very much guys.

Alright.

Thank you. And the next question comes from [indiscernible] with Sandler O’Neill.

Good morning. Just one question I had left actually was on the efficiency ratio. So, pretty sure in your slide deck that you guys target less than 53% efficiency ratio sort of longer term. Just checking my math from your guidance. Because it seems to me like you could get there or should get there really in the back half of this year. Is that -- so I'm just kind wondering on the timing on that 53% or lower and could you get there in the back half of 2017?

Yeah I would say I mean a few things there Frank, I mean where we've been running, if you look at the fourth quarter right we were running 55% and change. I think clearly the addition of Yadkin and the scale from Yadkin helps to drive that number down. You do get benefit in the efficiency ratio there. And as we've talked in the past we when we model the transactions we model it well south of kind of where we're running once you take out the cost save. So I mean there is opportunity for that number to continue to move down meaningfully, the timing of getting there I guess the question is how quickly do you get there I think 53% is attainable, and it’s just a matter of the timing to get there and probably pause there.

Okay. Alright, thank you.

Sure, thank you.

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

Hey, guys.

Hey, Brian.

Hey, just one question just back on expenses there. I guess the first clean quarter from an expense standpoint, now that you’ve gotten the conversion done, I mean is it second quarter or will it be third quarter by the time you guys kind of get everything in where you wanted to be. Sounds like it’s more of a third quarter?

Yes it would be the third quarter, by the time you have folks that obviously stayed on past conversion to help with the transition and then we mentioned the properties earlier. So I would expect similar to metro by the third quarter you had a clean quarter within the third quarter. So you have the vast, vast majority of the cost savings out by June 30th, and then you have a clean run rate in the third quarter.

Okay, that’s perfect. And then just going back to the guidance, I think when you announced the Yadkin deal you kind of gave guidance last quarter. You talked about kind of the average earning assets I think giving you $8 billion, is that stay intact versus from what you guys said or I didn’t hear if you mentioned that maybe I missed it earlier.

Well I think the loan been in the high single-digits and then our securities portfolio we typically manage at around 19% to 20% of the total. So I didn’t on earning assets but the loans being the biggest driver obviously being in the high single-digit, is what’s in the guidance.

Okay. But no change from the $8 billion that you talked about last quarter, sounds like all that guidance was the same.

The guidance what I would say -- if I said $8 million last time the guidance is still intact.

Yes, okay I got you, fair enough. And then just on the NII guidance and I think with the change in the nomenclature I guess on the accretion. The add that you are picking up for the net interest income, does that include, what accretion does it include or doesn’t include any at all?

No, it does include $15 million to $20 million of total purchase accounting, which is largely going to be kind of the normal scheduled accretion. Given the size of Yadkin, we thought it was important to start to break this stuff out. So put that in perspective I guess Brian, so for last year in total the total purchase accounting, the combination of the normal accretion plus the cash recoveries was $13.1 million in ‘16, baked into our guidance is $15 million to $20 million of total purchase accounting again the combination of the two items for 2017.

Okay.

And it’s early to predict with certainty obviously, but we feel that’s a pretty reasonable range and that’s within our guidance.

Okay, that’s helpful, thanks. And then just the last thing, just going back to the mortgage, just for a minute I guess my assumption is with Yadkin being not in the numbers really for this quarter minimum on the mortgage side, but we should maybe think about obviously with the numbers getting better going forward or maybe just the first quarter being below water mark maybe for the year if seasonality kind of plays out as it usually would?

I think that’s a fair statement and as I mentioned earlier, Vince Calabrese included that in his guidance though that’s reflected in the overall numbers.

Okay. And then the last thing from me was just on the margin. Have you guys seen any pricing pressure on the funding side at all, with the rate increases thus far, I guess do you think that’s a lays off, just trying to get a…

It’s been minimal at this point. So we have not seen a lot of pressure now obviously that could change, but as we sit today it’s been minimal.

Okay. Alright, that’s all I had guys. I appreciate it. Thank you.

Thanks, Brian.

Thank you.

Thank you. And as there are no more questions, I'd like to return the call to Vince Delie for any closing comments.

Yes, I would like to make a brief closing comment. So first of all I’d like to thank everybody for the great questions and for joining us on the call. I know this was a very complicated quarter in terms of reporting, but it was a very, very strong quarter. And I can’t emphasize enough how pleased we are with the conversion, with the fact that we were able to convert two systems over a short weekend and have very, very little disruption for our customers. The team did an exception job and there were a lot of people hundreds of employees working late and being repositioned across our company. So for us to deliver such a solid quarter from a performance standpoint speaks volumes about the character of the people that we do have. So I just wanted to say one more time thank you to our employees and we are looking forward to delivering that shareholder value creation that we have modeled. So thanks for joining the call. Have a great day.

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