Greetings, and welcome to the F.N.B. Corporation second quarter 2014 earnings call. (Operator Instructions) I would now like to turn the conference over to Cindy Christopher with Investor Relations. Thank you. You may begin.

Thank you. Good morning, everyone, and welcome to our earnings call. This conference call of F.N.B. Corporation and the reports it files with the Securities and Exchange Commission often contain forward-looking statements. Please refer to the forward-looking statement disclosure contained in our earnings release, related presentation materials 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 July 31 and a transcript and the webcast link will be posted to the Shareholder and Investor Relations section of our corporate website. I will now turn the call over to Vince Delie, President and Chief Executive Officer.

Good morning, and welcome to our earnings call. Joining me today are Vince Calabrese, our Chief Financial Officer; and Gary Guerrieri, our Chief Credit Officer. I will be highlighting our operating performance and providing a strategic overview. Gary will review asset quality, and Vince will provide further detail on our financial results, along with an update on our expectations for the second half of the year. Vince will then open the call for any questions. Let's begin by looking at the quarter. This quarter includes, continued high-quality earnings, with solid revenue growth; a stable net interest margin; stronger than expected loan and deposit growth; good asset quality; and an improved efficiency ratio. These are all positive proof points that the underlying fundamentals of our company are performing exceptionally well. Operating net income available to common shareholders was a record high $33 million and resulted in $0.20 per diluted share, a $0.01 increase from the prior quarter. This translates into a 107 basis point return on average tangible assets and nearly 15% return on tangible common equity. Average organic loan growth was strong at an annualized rate of 10%, led by 13% annualized growth in the commercial portfolio. Growth on a spot basis was higher at 16% annualized for total loans and 18.3% annualized for commercial. We experienced growth across all markets, with a heavier concentration from our metro markets of Pittsburgh, Baltimore and Cleveland. Our commercial success in FNB's new markets exceeds our expectations, and demonstrates that we are realizing meaningful benefits from our acquisition strategy. Our business model is generating results in the larger metro markets, and the teams we have assembled across our footprint, including our new markets, are performing very well. The consumer bank also delivered a solid quarter with 9% annualized loan growth and favorable results…

Thank you, Vince, and good morning, everyone. We ended the first half of the year well-positioned, as our loan portfolio demonstrated consistent credit quality results across both the originated and acquired books. I would like to cover the highlights for the quarter, as it relates to the originated portfolio, which as you'll recall is our primary book of business, followed by a few remarks on the acquired portfolio. Let's now look at the credit performance for the originated portfolio for the second quarter. Contributing to our favorable results, the level of originated NPLs and OREO further improved on a linked-quarter basis, down 10 basis points to end June at 1.36%, which was primarily attributable to commercial OREO sale activity during the quarter. Delinquency also trended positively during the second quarter to stand at 1.13%, a 4 basis point improvement over the March quarter. Net charge-offs totaled $4.8 million or 23 basis points annualized, which was slightly better on both a linked-quarter and year-over-year basis. When measured for the first half of 2014, our year-to-date net charge-offs totaled 25 basis points annualized, and were 3 basis points better than the similar period a year ago, demonstrating the continued consistency in our portfolio. The originated provision for loan losses increased in the second quarter, as expected, to $8.9 million in support of solid loan growth during the quarter, resulting in an ending reserve position of 1.26%. The reserve is down 2 basis points when compared to the prior quarter, remaining directionally consistent with the performance of the portfolio. I'd now like to turn your attention to our $1.6 billion acquired portfolio of loans carried at fair value. The acquired delinquency level improved $7 million during the second quarter, reflecting a 7% linked-quarter reduction to end June at $89 million. The improvement in…

Thanks, Gary. Good morning, everyone. Today I will discuss the second quarter's operating performance and provide an update on guidance for the remainder of the year. Starting with balance sheet highlights on Page 10. The quarter included strong organic growth in average loans of 10.5% annualized, driven by commercial loan growth of $181 million or 13.1% annualized. As Vince mentioned, annualized growth on a spot basis of 16% in total loans was even stronger. Even with the significant level of activity during the second quarter, we entered the third quarter with pipelines at a record high. Organic growth in average consumer loans was also good at $71 million or 9.1% annualized. This was led by a combination of organic growth of $36 million in indirect auto loans and $35 million in home equity-related loans. Average total deposits and customer repos increased $184 million or 6.4% annualized on an organic basis, and average transaction deposit and repos increased $264 million or 12% annualized. We continue to benefit from new account acquisition, particularly on the business side. Non-interest bearing deposit growth remained very strong at $130 million or 23.2% annualized. The reported net interest margin was 3.60% and on a core basis was 3.59%, only a slight difference, as accretable yield adjustments during the quarter were minimal. On a core basis, the net interest margin narrowed modestly by 1 basis point, consistent with our prior guidance. We continue to execute a strategy of managing the net interest margin through pricing and balance sheet management. Consistently generating quality loan growth and low-cost deposits is a key element and we are pleased with the stability we've been able to achieve. Non-interest income, excluding securities gains, grew by $5.8 million or 17.8%, on a linked-quarter basis. Deposit service charges increased $2.2 million or 14.2%, given…

(Operator Instructions) And our first question comes from the line of Frank Schiraldi. Frank Schiraldi - Sandler O'Neill & Partners: One question on loan growth. Vince, I don't know if I missed or not, but in terms of the strong growth in the quarter, could you sort of characterize that in terms of market share gains or just an increase in overall demand that you're seeing in some of these urban centers?

Well, I would characterize it as directly in line with the strategy we laid out over the past year-and-a-half. I think demand is ticked up slightly, but I think it's more a function of being positioned in markets, where there are significant opportunities. And FNB has the opportunity to pursue new relationships, as we have talked about before. So you're seeing loan growth pick up. Other financial institutions are reporting a tickup in loan growth. So demand is picking up, but I think it's a testament to the strategy that we laid out. And the fact that we positioned the company to really benefit as the economy improves over time. That's the real story. Frank Schiraldi - Sandler O'Neill & Partners: I mean just given the -- I know the guidance has moved to the higher end of what was previously, I think, mid-to-high single-digit annualized growth. I mean do you think given what we saw in this quarter that could possibly even be conservative? I mean is there anything in this quarter that would lead you to believe that it was sort of bulky in 2Q versus what we can see for rest of the year?

No, I actually think that we're in a great position, because of the pipeline that we have post-conversion of these customers. So we're still experiencing a fairly strong pipeline. And as I've mentioned in my prepared remarks, when you breakdown the pipeline, you can see very clearly that the growth is coming from Cleveland and Baltimore and Pittsburg. So those major metro markets that we've continued to invest in are starting to pay dividend. So we've got the right people on the ground. Our credit process has been -- every one has been trained. And we have a web-based tool that Gary mentioned that provides consistency. And we've hired some very experienced bankers from larger institutions who are able to pursue opportunities in our business model. And I think again, it's a testament to what we've built. There is a pick up in demand, but I think being in the markets where there are numerous opportunities to choose from, it really puts us in a great place from a credit perspective as well, because we can afford to maintain our standards and still grow at a decent rate. Frank Schiraldi - Sandler O'Neill & Partners: And then just finally, I don't know how much you can say on it, but I know this is the first year of DFAST and then results are not made public this year, I understand. I'm just trying to get a handle on when companies hear back or when they plan on hearing back from the regulators, comments this year, and what we should expect in terms of analysts, investors in terms of any feedback or any release from those comments.

Frank, this is Vince Calabrese. I would think that companies generally are hearing from examiners now. They're doing a review. Some of them may still be in the midst of the reviews. And like you said, nothing is public this year. Next year will be really the first time that kind of everybody gets a grade. That's publicly announced to the world. But I would say that you may hear some companies who didn't do well with their exam. They're having to step up their spending, kind of getting ready for next year's exam. Lot of the examination process is really focused on your process itself and are you going to be ready for next year. They're really looking at it on a two-year basis. So I think you may hear folks do that, if they really haven't kind of fully put forth the effort for the first go-around. I mean that's about, as far as I could say, I mean we're in good shape with our process and feel good about what we did for the submission and we'll continue to move forward towards next year submission.

And we have frequent dialogue with the regulators on that topic and other. So we have a pretty good handle on where we need to be.

And our next question comes from the line of John Moran.

Vince, quick question. I think you mentioned in the prepared remarks that swap fees drove the other line on the fees. Is that expected to continue? And any sort of expectation there, I assume cooked into the guidance on the fee income?

Yes. That was a record quarter for us as far as swap fee revenue. So it's hard to say if that's going to continue at that level every quarter. But clearly we're seeing, with Vince comments earlier, with the opportunities that we have in the new markets, and kind of with where our interest rates are and noise from the fed, I think customers are maybe starting to think, all right, rising rates aren't maybe that far off in the distance and are deciding to lock in the fixed rates before they move. And I do think those new markets people are more inclined to take advantage of the program. And we have some level of swap fee in the guidance, but if we could hit that number every quarter that would be great. But I can't guarantee that, that's for sure. That's a big number.

And then just a quick question on -- I mean, obviously pretty robust loan growth. Loan yields held in pretty well. Could you help us kind of understand the dynamics there and sort of what new origination might be coming on at versus what it's coming off at? And was there any change in utilization on the quarter that drove some of this growth, or was it really getting back to Vince's point, really just that the market expansion had better looks in some metro markets?

I would say that the utilization rate ticked up slightly, not dramatically, so to answer that question. So we had a slight uptick. It's still low relative to historical levels as companies continue to work through their high cash positions in the middle market and upper-middle market. Consumer in small business from a spread, I'm talking spread perspective, so the spread that we charge over our cost of funds, whether it's variable or fixed, consumer in small business was relatively flat year-over-year. So we didn't see a significant change in margin. Middle market banking has come in. It is intensely competitive as others have indicated and margin has come in a bit. So we've seen about a 50 basis point shift in spreads in the middle market from last year to this year. And then in our indirect portfolio, the spreads have come in 25 bps to 30 bps year-over-year. But we've been able to offset that with a continued focus on growing DDA balances in the consumer bank and in the commercial bank, with the heavier emphasis on the commercial side. As I've mentioned before, as we bring new relationships we cross-sell treasury management and other services, we set for balances, and the companies apply their earnings credits. So we're able to pick up fairly significant DDA balances. So that's helped us manage the overall yield in the portfolio.

And then if I could speak one last one in just, Vince, on the tax rate guided. I think up 30% to 31%, I assume that's just more income [Technical Difficulty] sources. Is that fair?

Yes. You got it.

Our next question comes from the line of Collyn Gilbert. Collyn Gilbert - Keefe, Bruyette & Woods: My question is on the expense side. Vince, just wondering if you could give a little color or maybe breakdown on, and I know you guys have kind of suggested what the all-in expense costs have been overtime, getting yourself in this set for the new regulatory environment. But just thinking about kind of expenses going forward, the run rate, and then what you've currently spent to date kind of on BSA type of issues, as we're seeing some banks, especially acquisitive banks, kind of trip up on that item, and I was just wondered if you guys could offer some color as to where you stand?

Sure. I would just say, if you step back and look at the quarter overall, I mean it was a very good quarter on an operating leverage basis. 57% efficiency ratio, something we feel good about, coming off of 59% last quarter. As far as the spending on compliance and the risk management type matters, as we've talked about in the past, we've been investing all along. So there isn't any outsize investment or expenses that we're having to step up to stay in compliance. We've always done that. We did have some stress testing that we've talked about between the second half of last year and the first quarter of this year, costs for consultants to kind of support the process and help us kind of put our submission together. But during the second quarter, kind of the remaining effect of that is more some of the few staff that we added to be kind of dedicated to that process. But really nothing significant to that I would point to on that.

I would add, BSA/AML, we've added significant resources over the last eight to 10 years in that area. While other banks probably should have been building out those compliance staffs, they didn't. We focused on it. We mentioned it before. As we continue to grow, we monitor transaction accounts and staffing levels relative to the size of the company and we make sure that we include all compliance credit and audit adds to staff in our modeling from a M&A perspective. So as we build out the company, we're building out those areas. And we just concluded -- some of our exams have been recently concluded and we don't have any issues to speak of. So I can't speak for other institutions, but I think that our institution culturally has always been focused on compliance and ensuring that we have adequate staffing levels to deal with whatever is coming at us.

I would just add. We do continue to add, Collyn, but since you're coming off of a very strong base or infrastructure that's already in place, it's very manageable. We are adding one person here, one person there, as we're growing. So it's not anything significant. Collyn Gilbert - Keefe, Bruyette & Woods: And then just on the expense line. I know some of it was inflated because of the full effects of BCSB. I'm just trying to understand, Vince, so that the kind of the run rate on expenses that we should see, what is that, the growth rate on OpEx that we should be seeing, exclusive of deals? I mean, I know obviously the change in OBA coming in, but just thinking about kind of that expense line. Or should we think about, I think your comments that you guys made introductorily is targeting that efficiency ratios to stay below 60%. Is that the best way to think about it?

Yes, I would say that. And my comments were that we would expect to remain relatively consistent with second quarter level. So we're going to be right around that level. I mean that's the right way to characterize it.

With OBA being additive. Collyn Gilbert - Keefe, Bruyette & Woods: And then, just one final question. Vince, as you talk about kind of the growth outlook and obviously to the success you guys have had in your new markets, and now guiding to a little bit of the upper end of the loan growth range. How do you think about capital as you kind of perhaps set your sights to be a much larger organization?

I think it's a great question. And as we continue to look forward and experience good success growing, I think it really validates the strategy of pursuing OBA. I mean, when you really look at it to get that 30 basis point lift really positions us, in TCE ratio, positions us to continue to sustain the growth trajectory that we're experiencing. So we feel very comfortable about capital. We've always stated that we're an efficient utilizer of capital, that our philosophy relative to capital is extremely shareholder-friendly. If we can't get the EPS accretion through growth, we're going to return capital to the shareholders in the form of dividend, and we stand by that. So we're good stewards of capital. We plan on managing capital very efficiently. I am very comfortable with our capital levels as they sit today, and I think its put us in a great position with our loan-to-deposit ratio and our capital levels, and the markets we've been positioned in that this company is in tremendous place. So we're very pleased with where we are. Collyn Gilbert - Keefe, Bruyette & Woods: And then just the comment you made looking at OBA, as we look at potential acquisitions for you guys in the future, so capital accretion, is that going to be kind of an important component then of deals?

Yes. That was an added benefit with OBA. I think OBA also positioned us in an area in Maryland that has high density of commercial prospect. So as we have stated before, we are looking to do acquisitions that position the company to achieve significant organic growth target. So that one worked both from a capital accretion standpoint and positioned us for growth. So that remains our focus.

And I would say, if you go back to the key parameters we used, Collyn, too, is we wanted to have accretion in the first full year, internal rate of return well above our cost of capital, high-teens or higher, and then if there is any diminision of capital to recoup that in kind of 18 to 24 months we've talked about. So those are still kind of key standards that we use when we look at transactions.

Yes. We have been very, very selective from an M&A perspective. So we've turned down quite a few opportunities, because they didn't fit strategically. So we are not bent on growing assets through acquisition. We have an organic growth machine that works very effectively and provides the best accretion for our shareholders. If we can supplement that, with an acquisition that's what we'll do.

And our next question comes from the line of Matthew Breese.

I had one quick question on the security portfolio, you increased somewhat this quarter and I wanted to get a sense of where that will shakeout as a percentage of the overall balance sheet looking over the next six to 12 months?

I would say as far as the investment portfolio, we continue to manage it to about 18% to 19% of total assets. Just a couple of other comments about the portfolio too. The overall duration is still on the short side, 3.4% at the end of June, it was 3.6% at the end of March. So from a size perspective, we're comfortable with that kind of 18 % to 19%. As far as where we're reinvesting today, our reinvesting is slightly lower than kind of where we're rolling off, at least about 10 basis points to 20 basis points on that, but we're staying short. So we're not going to go long in the securities portfolio. But we're very mindful of extension risk and really manage the duration to be short and not to be subject to significant extension risk. So it's really a very conservative portfolio and helps generate some net interest income. But current levels, that 18% to 19% is really the way we operate.

And then kind of a follow-up to Collyn's M&A question. How overall levels of conversations with other banks been over the past six months? Meaning, have more sellers come to you looking to partner or less?

I wouldn't say that it's extraordinarily more, I think because of our success in integrating companies, and our currency, and the dividend yield, we're obviously a preferred buyer. I mean people come to us and they want to become a part of the organization. They want to roll their equity over in the FNB's equity, because of the performance we've had. So we've had quite a few looks over the years. And I would say that that pace has been fairly steady and has probably picked up a little bit. But I think we get our share of looks, and as I've said we're very selective. So we've made some good choices.

Has there been similarities among the banks that are looking to partner with you, especially in light of what you said, it's picked up a little?

Similarities in terms of --

Size, balance of the compositions, type of bank looking to sell?

I would say it's fairly consistent with what we've seen historically. I don't think it varies widely. If you go back over time and examine what we've acquired, I think most of the banks that fall in that range of $0.5 billion to $2 billion, if they've been sold in the last 18 months, we've probably talked to them or have had conversations with bankers.

And the reasons are probably the same really, but all the extra compliance burden and scrutiny from the regulators, if there is not successors that are in place, that's often a common reason. So I would say the reasons are the same.

And our next question comes from the line of Brian Martin.

Vince, can you just talk about, you mentioned, I caught the end of it, but on the fee income you talked about certain areas that weren't tracking kind of what your expectations were, and just kind of maybe just elaborate a little bit more on that front? And I guess what your expectations are to kind of correct that and get attracting more, so what you guys are expecting it to be?

Sure. I would say a couple of things. The mortgage business clearly as far as the fee income that that generates, it's still running very low relative to kind of what we were hoping to have this year from that business. So that's a key part of it. And I would say, deposit service charge, you still see changes in customer behavior that affect some of the levels of fees, as people in some ways are managing their money maybe a little bit tighter, so you're not collecting as much fee as maybe use to. And those are kind of the key areas and you can't just change that. I mean we're looking to manage the overall profitability and what are the levers that we have to kind of hit our target. So that's something that you basically have to overcome, but it has an impact on the rest of the year. So those are really, probably, the two categories I'd comment on.

And just from the margin perspective, you gave some color. I mean the accretion income going forward, I mean the differential between the core and the baseline should not be all that material from accretion standpoint. And just, secondly, the same thing on the margins just the, it sounds like there is pickup in loan growth, if the guidance is kind of for flat margin, and I guess the expectation is we're starting to see some flattening in the loan yields or some stabilization in the loan yields in newer business?

Well, I would say, as far as the margin overall, obviously, we're very pleased with the stability there and there is a lot of effort behind that, and a lot of new business generation that supports it. So the way we manage it overall is to be slightly asset sensitive. The accretable yield as I talked about in the past is lumpy. I mean I referred to a range of 500 to 750 per quarter is being kind of normalized and we were a little below that, but I'm still comfortable with that as being kind of normalized range. Some quarters it maybe higher than that depending on what the activity is that runs through the acquired book. But the strong loan growth that we have, obviously, generates some nice net interest income. The margin guidance was to have it come down modestly for the rest of the year, so nothing significant, but some slight decline from kind of current quarter level. So you do have some kind of rolling down still of yields in the investment portfolio, I already commented on, and some in the loan portfolio, but it's manageable. And with the strong DDA growth that Vince talked about earlier, that obviously funds a good portion of loan growth and supports the margin.

I would also add that we've commented before about the duration of the commercial portfolio in particular. I mean it is very short in duration. So we're not benefiting from bringing on longer-term fixed rate assets with higher yield. So that's been the case for some time. As evidenced by the derivative fee income, I mean we tend to keep -- our portfolio reprices typically monthly off of LIBOR or as prime based. So we're not really coming off of yields moving down, because we're a term lender. So that's something to keep in mind. So that's played into the stability of the margin here for us.

Now, that's a good point, because 60% of our loans are adjustable or variable, and 40% of the loans are tied to LIBOR or prime, to Vince's point. So that's a key fact too.

And just maybe one last housekeeping thing, the swap income this quarter. You talked about this quarter, when you look at full year '13, how much revenue did you have in 2013 per se on swap volume versus kind of where you're at year-to-date?

2013, I don't have handy in front of me.

I would say that the swap fee income, I mean we can't really, we don't have the information here in handy. I'm not sure that we have disclosed that to people for whole year. But I would say it attracts the commercial lending activity. So if we have more robust quarters, we tend to have more robust derivative fee income, because we swap the client into a fixed rate and keep the variable. So that's typically what's happening. So you'll see it, it will track what's happening in the commercial book. If you go back and forth that's where we've been.

Thank you. And it seems that we have no further questions. At this time, I would like to turn the floor back to Vince Delie for closing remarks.

Well, I'd like to thank everybody for participating in our call. I think we had an exceptional quarter. In the quarter obviously, solid loan growth, solid deposit growth, top quartile efficiency ratio, consistent asset quality and a stable net interest margin. We're very proud of the performance we've been able to deliver. Keeping in mind that FNB demonstrated the ability to perform, despite the fact that we're one of the few banks that navigated past $10 billion late in the game here, so facing considerable headwinds. And I do believe that we're very well-positioned relative to Basel III and the rules that have been pushed down from a regulatory standpoint, and we will continue to focus on maintaining our high standards in terms of complying with the regulatory environment. So thank you very much. I appreciate everyone participating and look forward to next quarter's call.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. And thank you for your participation.