FNB Corp (FNB) 2010 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to today's F.N.B. Corporation fourth-quarter 2010 earnings conference call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions.

As a reminder, today's conference is being recorded. And I would now like to turn the conference over to Cindy Christopher, Manager of Investor Relations for F.N.B. Corporation. Please go ahead.

Thank you, and good morning, everyone. Welcome to our fourth quarter of 2010 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 relating to present or future trends or factors affecting the banking industry, and specifically the financial operation markets and products of F.N.B. Corporation.

These forward-looking statements involve certain risks and uncertainties. There are a number of important factors that could cause F.N.B. Corporation's future results to differ materially from historical performance or projected performance. For more information about risks and uncertainties which may affect us, please refer to the forward-looking statement disclosure contained in our fourth-quarter and full-year 2010 earnings release and in our reports and registration statements filed with the Securities and Exchange Commission and available on our corporate website.

F.N.B. Corporation undertakes no obligation to revise these forward-looking statements or to reflect events or circumstances after the date of this call. A replay of this call will be available until midnight on Tuesday, February 1, 2011 by dialing 877-870-5176 or 858-384-5517. The confirmation number is 4628644. Additionally, a transcript of this call and the webcast link will be posted to the Shareholder and Investor Relations section of F.N.B. Corporation's website at www.FNBCorporation.com.

It is now my pleasure to turn the call over to Mr. Steve Gurgovits, CEO of F.N.B. Corporation. Steve?

Thank you, Cindy. Good morning, everyone. It is a pleasure to welcome you to our fourth-quarter earnings call. Joining me today on the call are Vince Calabrese, our CFO, and Gary Guerrieri, our Chief Credit Officer. Vince will highlight our fourth-quarter performance, and Gary will review our asset quality.

Also with me today for the question-and-answer session are Brian Lilly, our Vice Chairman and Chief Operating Officer, and Vince Delie, our Bank CEO and President of F.N.B. Corporation.

I would like to begin by congratulating Vince, Brian and John Williams. As you probably have heard by now, last week our Board promoted Vince Delie to President of F.N.B. Corporation, as well as naming him CEO of First National Bank of Pennsylvania. Brian Lilly was promoted to Vice Chairman of F.N.B. Corporation. And John Williams, who previously was responsible for First National's Pittsburgh region, was promoted to President of First National Bank of Pennsylvania. These promotions are well-deserved and consistent with the continuing work of our succession committee. I congratulate Vince, Brian and John. Now for the fourth quarter.

We are very pleased with our fourth-quarter and full-year results. Our earnings for the quarter were $0.21 per diluted share, representing a 115 basis point return on average tangible assets. The quarter included a $0.06 net benefit from amending the pension plan, as well as merger costs related to the CB&T acquisition. Absent these items, our core operating earnings were $0.15 per diluted share, consistent with our expectations.

For 2010, our earnings were $0.65 per diluted share, more than double our 2009 results. We are pleased to deliver these results for our shareholders, and believe that we are well-positioned to build on our success and continue the momentum we have established as we enter 2011.

Looking at the fourth quarter, we were again successful in growing both loans and deposits, maintaining a stable margin and we remain very pleased with the credit quality results of our Pennsylvania and Regency portfolios. Additionally, the reappraisal results discussed with you last quarter for the land-related portion of our Florida folio were slightly better than our expectations. Later in the presentation, Gary and Vince will elaborate more on the fourth-quarter results and provide guidance for 2011.

Now to discuss our continued success in growing both loans and deposits. On a linked-quarter annualized basis, the average loan growth was 3.1% and average deposit and treasury management growth was 4.5%.

Driving loan growth for the fourth quarter was the 10.8% annualized growth on our home equity portfolio. This represents the third consecutive quarter of successful growth in this portfolio through a continued focus on our branch network of new products and promotional pricing initiatives. Consistent with our home equity portfolio strategy, these loans are all branch-originated.

Additionally, we are pleased to report that our Pennsylvania commercial portfolio continued to grow for the seventh consecutive quarter. With line utilization rates remaining near historical lows, we are particularly pleased given these results primarily reflect market share gains.

For instance, in 2010, our commercial bankers were successful in gaining nearly 170 significant new middle-market client relationships. This represents a 30% increase over 2009 gains, a meaningful accomplishment, validating the effectiveness of our middle-market model. These relationships are large clients of our commercial banking unit and resulted in over $500 million in new commitments last year, with related outstandings at year-end of approximately $350 million.

We expect these relationships to produce future benefits from cross-sell opportunities and additional loan requests, assuming loan demand increases consistent with an improving economy.

We were also successful in attracting new deposit accounts and gaining market share. On a linked-quarter annualized basis, average deposit and treasury management balances grew 4.5%, with lower-cost transaction balances growing nearly 10%.

Finally, I would again like to welcome the Community Bank & Trust customers, shareholders and employees. We are very proud to have received all required regulatory approvals, without any stipulation, and are pleased to have completed the acquisition on January 1. Integration will be completed in mid-February, and we look forward to future success in our expanded footprint.

I would like now to turn the call over to Gary for his remarks on asset quality. Gary?

Thank you, Steve, and good morning, everyone. Looking at the fourth quarter, we continue to be very pleased with the overall performance of our Pennsylvania and Regency portfolios, while Florida performed slightly better than expected as we continue to work to reduce our land-related exposure. Let's now take a brief look at each portfolio, beginning with Pennsylvania.

At quarter-end, the $5.7 billion Pennsylvania portfolio represented 94% of F.N.B.'s total outstanding loans and reflected positively trending asset quality metrics, with linked-quarter improvements in delinquency and nonperforming asset levels that were driven by a $4 million decrease in nonperforming loans in the commercial portfolio.

The credit metric trends that we are experiencing reflect the stability of the individual segments that comprise the Pennsylvania portfolio. For instance, our mortgage portfolio's performance during the fourth quarter was marked by a slight improvement to delinquency and very good charge-off levels at only 9 basis points annualized, with losses for the year at 12 basis points. The remainder of the consumer portfolio continues to demonstrate solid results, as well.

Additionally, we are very pleased with the resilience of our non-owner-occupied CRE loan portfolio, which has held up well throughout the economic downturn, as losses for the year were only 38 basis points and delinquency levels stood at 2.15%.

The charge-off performance for the Pennsylvania portfolio was 36 basis points for the year and remains in line with our historically good results. During the fourth quarter, charge-offs were slightly elevated at 48 basis points annualized, and can be largely attributed to writedowns of $1.8 million on two credits that were obtained through prior acquisitions, both of which had adequate reserves held against them.

Turning to Regency Finance, this $163 million portfolio represents 2.7% of F.N.B.'s total loan portfolio and continues to demonstrate strong and consistent results, as credit quality metrics remained in line with the prior quarter's results. Charge-offs for the fourth quarter improved slightly on a linked-quarter basis to 3.78% annualized, bringing total charge-offs for the year to 3.83%. The portfolio remains well-reserved at 4.2%.

Moving to Florida, we continue to focus our efforts on reducing exposure in the land-related portfolio. At quarter-end, our exposure, including OREO, was down $16 million to stand at $78 million, comprised of $15 million in OREO and $63 million in loans, with the loan portion representing 1% of F.N.B.'s total portfolio.

The linked-quarter decline in the loan balance was driven primarily by charge-offs of $12.9 million that resulted from the reappraisal of the remaining land-related portfolio, as well as $2.3 million in paydowns, most of which were related to nonperforming loans.

You will recall that the majority of our Florida land-related appraisals were due in the fourth quarter. We are pleased to report that this process has concluded and the resulting values came in slightly better than planned.

Moving to the Company's reserve position, the total allowance was down 20 basis points on a linked-quarter basis to stand at 1.74% at year-end. The Pennsylvania and Regency portfolios both remain stable at good levels of 1.43% and 4.2%, respectively, with all movement in reserve levels attributed to the Florida portfolio.

Consistent with our plan, we utilized the previously established Florida reserves during the fourth quarter against the $12.9 million in writedowns mentioned earlier. We continue to maintain an 8.95% reserve for the total Florida portfolio, which includes both land and income-producing properties.

In summary, we are very pleased with the performance of our core portfolios, as Pennsylvania remains solid, with improving credit metrics that have been trending positively over the last several quarters, while the Regency portfolio continued to perform well.

Looking to 2011, we expect ongoing solid performance from our Pennsylvania and Regency portfolios, which will continue to benefit from our prudent risk management and underwriting standards, as well as further improvement in the economy. I would now like to turn the call over to Vince Calabrese, our Chief Financial Officer.

Thanks, Gary, and good morning, everyone. Given that we have addressed many of the fourth-quarter details between last night's earnings release and the comments provided by Steve and Gary, I will focus my remarks this morning on guidance for 2011 and some additional highlights of our operating results for the fourth quarter.

Looking ahead to 2011, we enter the year well-positioned. Last year's successes for F.N.B. included solid loan growth as a result of market share gain, an improved funding mix through strong growth in transaction deposits and treasury management balances, a stable margin, improved asset quality, healthy fee revenue, continued expense controls and an acquisition that enhances our footprint.

Looking ahead to our projected performance, I will discuss first a few primary economic assumptions for 2011. First, we assume that economic growth will continue its relatively slow recovery with a year-over-year increase in GDP in the range of 2.5% to 3%. Our forecast includes the expectation of a continued low interest rate environment, with no change in Fed funds and minor increases in the key two-year and five-year rates. Additionally, we assume that unemployment will continue its gradual and consistent improvement throughout 2011.

With these fundamental assumptions in mind, I will turn to our balance sheet. Looking at loans in the fourth quarter, we are very pleased to have delivered the seventh consecutive quarter of growth in our Pennsylvania commercial loan portfolio and our sixth consecutive quarter of growth in total loans.

For 2011, we expect to continue this momentum and are forecasting total organic loan growth in the mid-single digits, driven by growth in both commercial and consumer portfolios. This forecasted loan growth excludes any impact from the continued exiting of Florida credit.

Turning to funding, we are pleased with the continued growth in total deposits and treasury management balances of 9.7% annualized in the fourth quarter. For 2011, we are forecasting organic growth and transaction deposits and treasury management balances to be in the mid-single digits, primarily attained through continued new account acquisitions.

We expect this growth will be partially offset by continued managed decline in time deposits this year, netting down to an expected growth in total deposits and treasury management balances in the low single digits. This will allow us to further enhance our funding mix, reduce our cost of funds and remain focused on relationship-based transaction deposits to fund the expected loan growth. The loan to deposit and treasury management ratio is projected to remain in the low to mid 80% range, providing ample capacity to lend.

During the fourth quarter, the margin was stable at 3.77%. This performance is consistent with our overall strategy of managing to a neutral interest rate risk position. We do not make bets on the direction of interest rate, and have a very active ALCO and pricing committee that focus on managing our margin results. For 2011, we look to continue our neutral interest rate risk position and to maintain our margins stable to slightly higher from current levels throughout the year.

Noninterest income remained strong in the fourth quarter, totaling $29.5 million, an increase of 6.3% compared to the prior quarter. Increases in trust income, mortgage-related gains and other fee income more than offset the Reg E impact on service charges. Through continued efforts to educate our customers on their available options, we continue to receive opt-ins, as expected. In total for 2010, the negative impact was in line with the $0.01 per share estimate previously provided.

The growth in other fee income reflected increased swap fee revenue from our commercial business, and the second successful harvesting this year at F.N.B. Capital Corporation, which, on a combined basis, added over $1 million to fourth-quarter results.

For 2011, given our diverse fee income sources, we are targeting a run rate increase in noninterest income in the low to mid single digits. Our targeted increase includes full-year projected Reg E impact, but excludes potential Durbin Amendment-related reductions due to the uncertainty regarding this amendment and the fact that we are under the $10 billion asset threshold.

That being said, we do expect to see higher Wealth Management revenue, assuming continued market improvements, combined with strategic initiatives in place for this line of business. We also expect higher insurance revenue due to planned revenue-generating initiatives and strong mortgage-gains, given the forecasted volume for 2011.

Turning to noninterest expense, the fourth quarter included a non-cash pension expense credit resulting from a plan amendment and $0.5 million in CB&T-related merger costs. Effective December 31 of 2010, we amended the retirement plan, freezing the accrual of future benefits. This strategic decision enables us to reallocate resources to an enhanced 401(k) plan offered to employees. While reducing future retirement cost volatility, these actions also provide more flexibility to our employees, consistent with industry trends.

For the full year of 2011, through a continued focus on expense control and benefits from cost-saving initiatives, we project an efficiency ratio, excluding one-time merger costs, in the low [60%] level. We expect the first-quarter ratio to be closer to the mid-60% level, as the beginning of the year involves resetting employee benefits, plus payroll taxes and seasonally higher occupancy costs.

Switching over to credit quality, we are pleased with the fourth quarter delivering solid results for our Pennsylvania and Regency portfolios. As we look ahead to 2011, we expect levels of nonperforming assets to continue to gradually decline, assuming continued improvement in the economy. We expect a meaningful reduction in provisioning in 2011, in the 20% to 25% range compared to the full-year 2010, given the actions taken in the Florida portfolio in 2010. We also expect a meaningful reduction in net charge-offs, driven by a 40% to 50% improvement in Florida-related charge-offs, with stability in the Pennsylvania and Regency portfolio.

Lastly, as you would expect, the [allowance to] loans ratio is projected to be down slightly from year-end 2010 levels as we utilize Florida reserves, as we continue to wind down the Florida portfolio.

Regarding our capital position, capital ratio is expected to continue to exceed well-capitalized thresholds.

Our effective tax rate for the fourth quarter is slightly elevated due to the higher levels of pretax income, given the pension credit. As we look ahead into 2011, we expect a 28% effective tax rate on a GAAP basis.

Now to update you on the CB&T acquisition, completed January 1. Let me first say that we are on track to achieve these planned accretion levels in 2011. Total assets of $620 million were added to the balance sheet, with approximately $445 million of loans and $560 million of deposits. These are prior to purchase accounting marks, which will be finalized during the current quarter.

Looking to 2011 impact, it is important to keep in mind the relative size of the acquisition. As a result, it will not have a material impact on key performance drivers for the overall Company. For example, it will only affect our net interest margin by about 1 basis point.

Regarding one-time merger-related costs, we expect approximately $5 million during the first quarter of 2011. As disclosed when the deal was announced, the capital ratios will be slightly lower as a result of the acquisition, with an expected return to current capital levels achieved over the next 12 to 18 months.

With the 5.9 million shares issued in conjunction with the acquisition, we expect average diluted shares of approximately 121.5 million for the full year of 2011. Steve, that completes my remarks.

Thank you, Vince. While there will be continued regulatory challenges facing the banking industry in 2011, none is currently greater than the Durbin Amendment. It is our view that the proposed regulatory changes will not benefit the consumer in any way, but rather potentially harm them through banks' diminished ability to provide low-cost banking services.

While the Fed's current proposal would certainly have negative effects on revenue for the banking industry, F.N.B. currently remains under the $10 billion asset level exemption, which VISA recently announced that they will implement a two-tiered pricing system to accommodate. With the proposal comment period ending February 22 from the Fed, the divided Congress and the significant controversy surrounding these regulations, we will of course be closely monitoring the development.

In 2010, we were successful in gaining market share, leading to solid loan and deposit growth. We expanded the net interest margin, continued to focus on generating fee revenue, while maintaining expense control and improved asset quality results. We are very pleased to deliver these results to our shareholders. These efforts, along with a dividend of $0.48, delivered total shareholder return for 2010 of 53%.

Now looking ahead to 2011, we believe that F.N.B. is positioned to improve upon solid 2010 results. We intend to build on the successes of the past year and continue to gain market share through our focus calling efforts. We have an experienced team of talented bankers who have generated substantial momentum that will benefit us in our existing footprint, as well as our recently expanded footprint.

Additionally, we expect to continue to pursue opportunities related to the Marcellus Shale and our expanded footprint will further enhance our exposure here.

That concludes our formal remarks. I would like now to turn the program over to our operator to poll the audience for any questions.

(Operator Instructions) Bob Ramsey, FBR Capital Markets.

I know you all mentioned in the release that the expenses this quarter included some degree of impact from sort of year-end incentive-based comp true-up. Could you tell me how much of an impact that had in the fourth quarter?

Sure. For the year as a whole, as we got to the end of the year, we looked at our overall performance on all of our business drivers, and they had a very good year relative to the prior year and also relative to what we were planning to do. So went through a process with all of our incentive compensation, and kind of the total increase is about $2.5 million, third quarter to the fourth quarter.

Through a combination of things, about half of that is related to additional contributions to our 401(k), since we exceeded our business goals, and also performance-related compensation, given our strong close of the year on the commercial loan side and for our other businesses. So about half of it is related to that; another half of it is related to kind of normal incentive accruals.

Okay, great. And then in terms of the Florida book, obviously, it is great to hear that with the reappraisal process, things look a little better than you all anticipated. Nonperforming loans, I guess, still look big relative to the allowance. Could you maybe remind me how much -- as of the end of the fourth quarter how much those NPLs have already been marked down?

And at the end of the quarter, the NPLs in that land-related portfolio are being carried at $0.28 on the original appraised value, Bob.

Okay, great. I think that is what I've got. Thank you very much.

Frank Schiraldi, Sandler O'Neill.

Just a couple of questions here. I wondered first, Vince, on your comments on Durbin as it applies to 2011, have you guys done any modeling, or can you give us any sort of guidance or disclosure on how big an impact it would be, let's say, if they just stayed with a -- let's say the Fed proposed pricing applied to everyone, even though that may not be the case.

Well, Frank, let me set the stage for you. We are under the $10 billion threshold, so we do get an exemption. Now, having said that, that may not serve us well long-term, but I think it will near-term. And in the meantime, we are actively -- and this actually started with Reg E last summer -- we are actively looking at our products, different arrangements for packaging them, different pricing opportunities that we have.

And frankly, what I like about our position is in the near term, we don't plan to change anything relative to the Durbin Amendment interchange fees. We still can do what we have been doing, while we see and monitor some of our competitors and some of the changes they intend to make. So I think it gives us a chance to look at the clear playing field before we actually move and do anything to mitigate any lost revenue.

As far as the interchange fees themselves, they are about $1 million a month. But keep in mind that the entire $1 million a month is not being suggested to be eliminated.

So $1 million a month, okay. And then I think I might have missed one of your comments, Vince, on loan growth in 2011. I believe you said mid-single digits. And then I'm not sure if that included Florida runoff or excluded it.

Excluding Florida runoff.

Okay, got it. And then just finally, I wanted to ask about Regency. And I know you have growth plans there, and if you could just remind us how those are being implemented over what sort of time period.

Sure, Frank. This is Brian. We've -- as you saw in our announcement, we announced the addition of seven branches. We have all of them open except one. The last one will be open here in February. And they are off to a great start, December and January. And as you recall, we were able to get some good talent that was into the market because of some of the competitors' moves in the past. So we are starting with experienced people and markets that we know, and we are very hopeful for 2011 here.

Is that something, Brian, you could ramp up quicker? I mean, could we see potentially another release somewhere in 2011 where you are adding more stores to reach (multiple speakers)?

Sure. Our plan is to incrementally add stores as we go forward. But I would say the size of this addition was a unique opportunity with the number of bankers that were let go by some of our competitors that were able to jump on it. If those occasions happen in the future, we will take advantage of those also, but probably a little bit more of a paced opening as we go forward.

Great. Thank you.

Jason O'Donnell, Boenning & Scattergood.

Could you just give us a little more color on how much you expect your compensation and benefits expense to increase in the first quarter, if at all, given the impact of the additional Regency offices, and the impact of payroll taxes, et cetera?

I think it -- if you look at my overall guidance, to kind of back into the math, we are looking for low 60s overall first quarter. First quarter typically is probably around $0.01 a share in costs that reset between the seasonal costs and resetting of payroll taxes. So kind of give you a frame of reference about the impact fourth quarter to first quarter.

Jason, if I could add on the Regency branches, just to clarify. These branches are not like branch banks from a cost structure standpoint. We have typically two, three people in these branches, and so their breakeven point is much lower. We have leases typically within strip malls, so we are not building large facilities to support them.

So the context of expense impact, certainly we enjoy the 3% plus ROA, which is why we are going after this, and a 30% ROE, but the incremental impact to F.N.B. Corporation that we are today, it won't be significant.

Okay. Great. That's helpful. Can you tell us how much the OREO expense was for the fourth quarter, and was that about $2.5 million?

Yes, it was about $2.5 million, which was $1.5 million higher than the third quarter.

Okay. And then how should we be thinking about that expense level in the first quarter, given the impact of property taxes and accounting for possibly lower property value adjustments in Florida land?

I would say in the context of the full-year expense for OREO, as you would expect, as loans are moving through the lifecycle in Florida from loans into OREO, we will have an increased level of OREO to work through in Florida in 2011.

So the total OREO expense full year of 2010 is about $4.5 million. We are looking for that to go up by about -- I would say about 40% in 2011, as we work through those properties. So you will see that kind of scattered through the year.

Part of that is related to additional potential valuation adjustments and then just the carrying costs, probably about 50-50 of -- expected to break down.

I think, Jason, the concept of -- I'll use a technical term here -- lumpy, as it relates to the Florida costs, as it comes through both on charge-offs and the OREO writedowns, as due to the reappraisals, is what we've seen in the past couple of years, and we would expect that to flow through on a quarterly basis as we go forward. So it is tough to pick the exact order that things are going to happen, but we tried to give you the guidance for the full year.

Most of the lumpiness still is third, fourth quarter, kind of back half of the year loaded.

Okay. Great. Thanks a lot, guys.

Damon DelMonte, KBW.

I was wondering if you could update us on your thoughts regarding M&A. Now that the Comm Bank deal is closed, do you foresee an integration time period before you could start to look at other deals, or do you think you guys would be ready to continue to be on the hunt?

Well, I would say it this way, Damon. First of all, for looking at the landscape, I do expect that Pennsylvania being largely an unconsolidated banking state, and given the world and the environment for banking between increased compliance and perhaps increased capital succession issues and so forth, I would expect to see a number of banks look for partners.

Having said that, this deal with CB&T, as Vince said earlier, $600 million or so in assets, we've been working diligently on the integration since September. We expect that to go smoothly, as all our past integrations have done. And so I don't think the CB&T acquisition takes us out of the game. I think if we were to have an opportunity, we would pursue it, if it made sense to us strategically it made sense to us financially.

We are active in terms of continuing to keep our contacts and relationships with other bankers, especially in markets that we would like to enter.

Okay. That's helpful. Thank you. And what was the amount of delinquent loans that you guys brought over from Comm?

In terms of the portfolio that we brought over, it mirrored what our due diligence reflected, Damon, so it came over as anticipated.

Do you have that dollar figure at your hands or no?

It would be in the 9/30 results that Comm published. During the first quarter, as you know, all of the accounting changes for a lot of those credits, and we will get that worked through our numbers here.

Okay. That's great. And I guess just lastly, as you guys look out into 2011 for your loan growth expectations, are you -- I know you have, like everyone else, a subdued outlook for the economic recovery. Are you expecting this just to be from taking market share from some of your larger competitors, or are you guys seeing certain pockets where there is strong demand from new customers?

We pursue strategy where we focused on certain niche markets that provided better growth. And I will give you an example -- the asset-based landing area; we beefed up private banking; we enhanced our leasing capabilities. So all of that contributed to the growth.

But we are seeing a continuation of opportunities in the market to improve our share. And our expectation for additional CapEx spend and elevated inventory levels moving into '11 are better than they were in '10, but we are still very guarded.

But overall, the economic climate appears to be stable to improving in our market, so we may get some wind in our sails towards the latter half of the year.

Okay. That's helpful. Thank you very much.

Mac Hodgson, SunTrust.

Vince, on that kind of loan growth topic, was there any -- maybe geographically was there more growth in certain regions? Can you comment on that?

This is Vince Delie again. The growth occurred across the footprint. So although we had slightly elevated growth in Pittsburgh, we had fairly robust growth in the rest of our regions. And I attribute that to the sales management process that we've been working on and building on over the last few years, and the implementation of our CRM system across the entire company.

So we are getting much, much better execution in all of the markets. And there continues to be increased opportunities in markets like Youngstown and Erie that probably wouldn't have existed before. But because of a more robust calling effort and changes that have gone on in the industry, we've been able to continue to drive our market share growth in those markets. So we are fairly pleased with how we've performed in all of the regions, truthfully.

Okay, great. Maybe for the other Vince, appreciate all the detailed guidance you all gave. And I might have missed this. I think you did make a comment about Comm Bank Corp toward the end of the guidance commentary. But does the -- does it include Comm Bank Corp at all in the guidance you gave?

The comments that I made at the very end was when you look at Comm Bank in total, it is not material to the overall numbers. So what I stated is we expect we are on track to hit the accretion that we originally announced, which was around 2%. And when you look at it overall, it is less than 1/10 of our size. The example I gave was to margin; it is only a basis point impact. So it's a nice add-on acquisition, but it doesn't really move the number significantly for the overall Company.

Okay. And the fee income guidance you gave, low- to mid-single-digit run rate increase, that is off of the base of about $116 million for the year -- is that right? Or did you (multiple speakers)?

Yes.

Okay, got you. Could you give any detail on F.N.B. Capital Corp? I know a nice gain in the quarter. Maybe the size of the portfolio and things like that.

Sure. Give us one second to get those numbers for you.

The portfolio at the end of the year, we finished with about a $20 million portfolio, with 10 investments in that portfolio. This year, we had some really nice success. that business is designed to generate harvest for us as part of the annual operating model. And we had two harvests this year and we've added a couple of new transactions in the fourth quarter, so bringing us kind of back up to that $20 million level. So that is a business as we go forward we expect to continue to have some nice contributions.

Okay.

The Capital Corp, Mac, has really, I think, helped the reputation and the brand of F.N.B. Corporation. We are an active C&I lender. That's what we like. We like the relationship that comes with that and the cross-sell opportunities.

This is just another service that previously we didn't offer, and we have now for about five or six years. And the gentlemen we have involved in that -- we have three younger people who have done a great job, I think, of building that and building their own reputation in the Capital Corp, but as well as that of F.N.B. and First National Bank.

We continue to have opportunities to look at deals. We are selective, and so far, so good with that line of business (multiple speakers).

Yes, if I could add a couple of comments. First of all, the opportunities that we've had for harvesting events have occurred -- one was an outright sale of the company, and the other was a (inaudible) on a recapitalization. And the turns on EBITDA that we pursue are relatively conservative.

So I would expect as the market continues to improve, we have other opportunities to recap or restructure the balance sheets of those companies, and we should benefit from that as we move forward. So I just wanted you to understand that the product actually provides an opportunity for our commercial clients as we move through economic cycles that really benefits us as the cycle improves.

Is it all end market exposure there, or do you do some -- follow some customers out of market?

We will follow clients out of market, but only to the extent that there is a connection to our core market. We are not looking for opportunities outside of our core market, unless there is an equity investor or a company that has a significant interest in the enterprise that is outside of our immediate footprint.

Okay, great. Maybe just one last one for Gary. On the reappraisals in Florida, you commented that they came in a little better than expected. Could you provide any detail maybe on how they are better than expected. Was it just down X percent versus expectations for a higher decline?

Sure, Mac. On average, the experience that we saw in Q4 and really throughout the year reflected the valuation declines in that mid-20% range. You will recall, we reappraised approximately three-quarters of the land portfolio in Q4.

Okay. And the expectation going into the quarter had been that maybe the declines would be more than that?

Yes, we were planning for approximately high 20%s to the 30% range, and they came in in that mid-20% range, as I mentioned.

Okay, great. Thanks for the help.

Gerard Cassidy, RBC Capital Markets.

Hearing no response, we will move on to Mike Shafir, Sterne, Agee.

Thank you very much for all that guidance. Honestly, all my questions have been answered as well, but I appreciate all the help.

Andy Stapp, B. Riley & Company.

All my questions have been answered, except for one, and that is how many employees do you have in Florida?

Andy, at this point, we are down to three employees in Florida. So we are down to a very minimal staff there, as we continue to wind that portfolio down.

Okay, great.

Andy, we are not entertaining any loan opportunities down there and haven't for (multiple speakers).

It's probably three to four years.

Yes, I understand that. Great. Thank you.

David Darst, Guggenheim Partners.

Based on your guidance for the Florida net charge-off, do you feel like that the reserve building is essentially complete for Florida, or will we continue to see something similar to this quarter of just a couple million dollars?

I would say as you look ahead, given the projection of the 40% to 50% reduction in charge-off, we do have some reappraisals that will happen later in the year, so I would expect a minor level of provisioning to occur throughout the year, kind of consistent with -- it's all built in to that 20% to 25% reduction in provision guidance that I gave, 2010 to 2011. So it would still be some level, but I would characterize it as a minor level as we go through 2011.

And then with some of that transitioning to OREO expense, as you indicated?

Yes.

Okay. And then you commented on your loan growth. What was the growth in the Other category this quarter?

That is mainly out of our leasing subsidiaries that we have, F.N.B. Capital.

I can give you a little bit of color. We actually beefed up -- after we did the Omega acquisition, we acquired a leasing company that was part of that acquisition that was primarily vendor-focused. We shifted the focus to internally support our commercial clients, and we added to staff in that area, and we had really good success in driving lease volume.

Okay. And then any comments on home equity and kind of underwriting LT -- line usage that you're seeing with that growth?

It is mainly new clients being brought on board. We did run a campaign where we had some special pricing for a short period of time; then it kicked back into normal pricing.

But overall, that growth has come from a more significant focus in our retail delivery channel on touching our existing customers. So that growth is purely organic and driven off of our existing customer base.

The FICO experience there, David, is consistent with our portfolio. We've been in the mid-700s in that portfolio forever and continue to be.

And I think our conservative underwriting standards actually have -- it has enabled us to go after additional business with those clients, because we have a fairly -- we have a very good credit quality condition in our customer base. So we are able to pursue opportunities with them to expand additional borrowings.

One thing I can add to that, David, at the time of underwriting, we underwrite those at shock rates of a minimum of 300 basis points. So we are underwriting them rather conservatively at this time.

David, as far as utilization, we are running in the mid-50% range, which it is usually pretty stable right around that level, 50% to 55%.

Okay. And does that -- I guess there is also positive reflection on your market and residential home value that a lot of the homeowners were able to refinance and actually change banks.

Actually, David, in our footprint, our residential home prices are pretty stable. We never had the runup that some of the rest of the country had a couple of years ago. And in contrast, we never had the bubble burst either. So this type of lending in the footprint we are in is pretty stable, because we don't have a lot of volatility in home prices.

Okay. Thank you.

Frank Schiraldi, Sandler O'Neill.

Just one follow-up. Just trying to get a sense for -- just one more question on reappraisals in Florida. Gary, I think you said 28% of the loan book is being held at --

Yes.

Is that basically flat with the previous quarter?

It is slightly down. We were running in the $0.30 on a $1.00 range, Frank, so it is down slightly.

Okay. That was all I had. Thank you.

Gerard Cassidy, RBC Capital Markets.

I apologize for the phone problem, guys. The question I had was regarding mergers and acquisitions. It seems to us that the market has shifted from a true buyers' market, where the big advantages went to the buyers, to now a more traditional M&A market, where the sellers seem to be getting the better pricing. Are you guys seeing that at all in Pennsylvania or sensing that in possibly the discussions you might have had with banks over the last 60 or 90 days?

Well, I'll answer that two ways, because I think there are a couple of ways to approach it. One is I really do believe, Gerard, in Pennsylvania, with all the charters that exist and the other issues I mentioned earlier -- compliance capital, succession and so forth -- I think you are going to have a certain type of bank in a certain type of market, perhaps in Pennsylvania, that is going to be more of a zombie bank, where they are probably looking for partners or feel they need more scale, but they may not attract a lot of interest. I think that is out there.

Having said that, I do think there is a scarcity issue that is being introduced, and I think you've seen it in other parts of the country, where there is sort of the last significant soldier standing in a particular market. In that case, I think the buyer has -- or I mean the seller has a lot more advantage, and I think you are going to -- you may see some pricing that is higher than what we've seen in the recent past. That is sort of what we are feeling from the conversations we are having.

Okay. In regards -- I should say -- to pricing, are there any kind of guidelines that you guys have when you look at a transaction, whether you want it to be accretive within a certain period of time? Or is there tangible book value dilution that you are willing to take to get the right deal done? Is there any guidance you can give us on that, as you look out over -- into the future?

Typically, what we are looking for is we are looking for a deal that makes sense strategically, makes sense financially, and one obviously that we think we can manage and integrate.

Having said that, what we are interested in, what our Board is interested in, is we want this to be accretive to EPS hopefully within the first 12 months and not dilutive to capital requirements. To the extent it is dilutive, with like recovering that dilution in probably a 12- to 18-month period. That happens to be the case with CB&T on the capital part of it.

Sure.

And on the EPS, that is accretive to us in the first 12 months.

Great. And then regarding size, with being around $9 billion-ish or so, as you pointed out, in the $10 billion, things change on the Durbin Amendment, as you identified and such. Is there any size limitation -- I mean, I guess there is, of course. But what are you comfortable with in terms of the biggest you could handle with the folks you have employed with you, as well as your systems and stuff?

As far as our staff goes, I think it is important to note that since '04, I think we've done seven or eight of these, including CB&T. And what gives us the confidence to go out and talk to some of these targets or prospects is the fact that we have demonstrated that we can very smoothly integrate these systems within our own core system and convert customers to our product and train staff and so forth. That works really well.

As far as size, I would say, first of all, it is very difficult to do real small deals, $100 million, $200 million, $300 million in asset size. It would have to be a unique opportunity because it is just as much work to do that as a larger one.

Ideally, I think our sweet spot is probably $1 billion to $3 billion. That wouldn't preclude us from doing something larger than that, if it was the right opportunity in the right market.

Great. Finally, shifting down to Florida. There seems to be some stability now coming into Florida, and over the next two or three years, probably things start to get better for everybody down there. What is your long-term strategy for the Florida operation?

Right now -- I know you asked long-term -- in the near-term, our total focus has been to reduce our exposure, especially on the land-related loans in Florida.

Just for history, Gerard, we went to Florida -- let me go back to our investment thesis, if I could take you back there. We want to provide a 9% to 12% total return, half dividend, half EPS growth. To get the EPS growth, we have to grow the balance sheet modestly.

Before we had executed our Pittsburgh strategy and moving the Company east in Pennsylvania, which is what our plan was, we went to Florida and opened these LPOs as a way of getting earning assets in the markets we were in, with customers we used to do business with down there. It was our own employees -- or at least previously employed people at F.N.B. So we thought that was the right thing to do to get to some earning assets.

Having said that, we have now executed our Pittsburgh strategy. We would still like some opportunities to go in that market, but we have a substantial presence there. And we have moved east in Pennsylvania into some pretty good markets.

Florida doesn't -- we don't need Florida today like we probably did back in 2004 and 2005 in terms of trying to get some earning assets. I think we have all the opportunities yet to come in our existing footprint and to push our footprint out, whether it is western Ohio or further east in Pennsylvania or south in Maryland, Delaware that type of thing.

Just as a follow-up to that, do you -- with the Marcellus Shale being a very big economic driver for western Pennsylvania, when you look at the state of Pennsylvania, do you see better economic growth prospects now in western Pennsylvania versus other parts of the state, possibly?

Well, as you know, Pennsylvania, our desire to go east was because of the further east you go in Pennsylvania, the stronger the demographics get. And you could almost at one point have cut Pennsylvania north and south in half, and you would have two different states.

Now that the Marcellus Shale has come about, and the technology is there to efficiently extract that natural gas repository, I think it gives western Pennsylvania in particular, but also the Eastern -- northeastern part -- but especially the western part -- an economic boost that we haven't enjoyed in the past.

And we are beginning to see it -- we look at it three ways. The interior of a circle, if you will, would be the drillers themselves, and we are not actively pursuing that. But then the next circle out are the vendors to the drillers, and many of those people are customers of ours, and they are seeing a boost in their business activity from that.

And then the third circle out would be the consumers, the employees of the drilling companies, the employees of the vendors. That is where you get into housing and checking accounts and car financing and so forth.

I don't think there is any question but that it is going to have a very positive impact on Pennsylvania generally, particularly in the western part of the state and the northeastern part of the state.

Thank you very much.

Mike Shafir, Sterne, Agee.

I just wanted to follow up a little bit. And I know you addressed some of the Marcellus Shale question. But just thinking about it maybe anecdotally, and as you think about the bifurcation process you described, with the vendors, consumers and so forth, I mean, is there any way to potentially quantify what you can kind of garner from this or the region can garner from this?

It is all in the guidance that Vince gave you. We've baked this into our 2011 plan. But this is the very front end of it. We are seeing it -- just to the repetitive for a second -- we are seeing with some of our consumers, who are landowners, who have been -- who have cut deals for drilling rights on their land, they are getting front-end checks.

And then obviously, these same consumers, during production, will enjoy revenue from that production. The state has a minimum 12.5% share that they are required to get. We understand that some of the handshakes that have been done have been more in the 15% to 20% range. So on the consumer side, you are getting consumers who are generating wealth. And so our wealth management group is targeting specific products and having educational sessions and calling efforts with those customers to make them aware of what their opportunities might be in terms of managing that wealth, which we understand the revenue could flow for decades and decades. So that is the consumer side.

On the business side, we are enjoying relationships with trucking companies who are very busy, warehousers who are busier. We've had several companies that I know of have moved from Texas to Western Pennsylvania to be closer to the action. One company makes tubing that is used in the drilling process. And again, making it locally and threading it locally saves a lot of transportation costs from Texas, which is where they were producing it formerly.

Another company from Houston moved to town because they see this as a long-term play. And what they find is the wells are producing a better volume of gas than the shallow wells did, and it is also producing a cleaner gas, better quality of gas. It takes less work to refine it for delivery to its end user.

So we haven't quantified it in terms of specific loans to deposits to this particular activity, but it is incorporated and baked into our overall 2011 budget. I would think that would grow over time.

Thank you very much, guys. I really appreciate all that detail.

There are no further questions. I would like to turn the conference back over to our speaker for any additional or closing remarks.

Thank you, operator. I would like to thank everybody for joining us on our call today and for your continued interest in F.N.B. It was a pleasure having you on the call and hope you have a great day. Thanks so much.

And that concludes today's teleconference. Thank you for your participation.