Routine F.N.B. Annual Meeting Until Q&A Period

HERMITAGE, Pa. -- As annual meetings go, that of F.N.B. Corp. Wednesday at the Avalon at Buhl Park was routine.

F.N.B. is the holding company of First National Bank of Pennsylvania, which through acquisitions over the past three years, has grown to become the 46th-largest bank in the United States.

During the business portion, which lasted 15 minutes, shareholders re-elected 14 directors and elected a 15th to one-year terms – none facing opposition – adopted an advisory, or nonbinding, resolution to approve the 2013 compensation of the executive officers of the corporation, and ratified the appointment of Ernst & Young LLP as the independent registered public accounting firm for this year.

The executive officers are Vincent J. Delie Jr., president and CEO, Vincent J. Calabrese Jr., chief financial officer, Gary L. Guerrieri, chief credit officer, Timothy G. Rubritz, controller and senior vice president, and John C. Williams Jr., president of First National Bank.

A 10-minute question-and-answer period followed with a disgruntled shareholder, Michael J. Corless, expressing unhappiness at the compensation, especially the bonuses awarded the executive officers last year. He also accused the corporation of tolerating nepotism because of the compensation awarded the son of the non-executive chairman, Stephen J. Gurgovits -- Stephen J. Gurgovits Jr. – who headed F.N.B.’s merchant banking efforts until the corporation closed F.N.B. Capital last July 31 because of the expense foreseen in complying with the Dodd-Frank Act.

Corless, who identified himself after the meeting as a certified public accountant in Pittsburgh with shares in F.N.B. worth between $800,000 and $1 million, declined to elaborate on the details of what prompted his questions or the allegations behind them.

Delie, also president and CEO of the bank, gave a brief overview on the success, profitability and growth of First National Bank, noting it has grown to have 283 offices and 1.2 million customers in Maryland, Pennsylvania, West Virginia and Ohio.

The bank will celebrate the 150th anniversary of its founding in 1864 in Greenville, Delie remarked, noting it was one of the first national banks to be chartered when the Lincoln Administration began issuing national charters. It opened with $60,000 in capital.

Today the assets of F.N.B. Corp. approach $14 billion and through its subsidiaries the company has a presence in Tennessee, Kentucky and Florida as well.

Its efficiency ratio in 2013 was 59%, placing it in the 79th percentile among all banks in the United States and it has the eighth-highest dividend yield of the 100 largest banks in the county, 4% to the average of 2% in that group.

After the annual meeting concluded, the directors meet briefly to reorganize and declare a cash dividend of 12 cents per common share payable June 15 to shareholders of record June 2.

Fourteen of the 15 directors received anywhere from 96% to 98% of the votes cast, corporate Secretary David B. Mogle said, and the advisory vote on executive compensation and ratification of the outside accounting firm received similar overwhelming percentages.

Only Arthur J. Rooney II received somewhere in the low 80s of the vote because a consulting firm, ISS, noted Rooney is a co-owner and executive officer of PSSI, an affiliate of PSSI Stadium Corp., to whom First National Bank paid $123,526 in 2013 in connection with a suite licensing agreement at Heinz Field where the bank entertains clients. The Rooney family owns the Pittsburgh Steelers.

In addition, Rooney is “of counsel” at Buchanan Ingersoll & Rooney, a major Pittsburgh law firm, to which affiliates of the corporation paid $23,369 for legal services last year. This is fully disclosed in the proxy statement.

Corless criticized the executive compensation, saying it was excessive “based on [F.N.B.] stock performance over the past five years. … How can you justify stock awards to senior management?” he asked.

Delie and Calabrese pointed out the compensation, determined by an independent outside consulting firm, is not based on how well F.N.B. common shares perform but profitability. Moreover, the measures he used were “apples and oranges,” as Delie put it, and a better measure is the peer group of the corporation, which consists of 27 providers of financial services with assets of similar size.

As the proxy notes, “Our total shareholder return for the four-year period 2010-2013 was 62.55% and placed us in the 75th percentile of regional banks having assets between $8 billion and is at the 72nd percentile of the top 100 banks and thrifts by market capitalization.

“From 2009 through 2013, our market capitalization has increased 155%, ranking us in the 71st percentile in our regional peer group, 86th percentile of Pennsylvania-based banks and 89th percentile of the top 100 banks and thrifts by market capitalization.

“Our return on tangible common equity was 16.58%, which was at the 93rd percentile in our regional peer group.”

As far as performance bonuses paid executive officers in its peer group, F.N.B. ranked in the bottom quartile, Delie responded.

Regarding the closing of the merchant bank, the corporation turned a profit – “Total return exceeded 20%,” Delie noted -- and was fully reimbursed the $183,493 in expenses incurred in selling off the investments in the F.N.B. Capital portfolio, the CEO said.

Gurgovits Jr. and his fellow principals have since established Tecum Capital Management Inc., and formed F.N.B. Capital Partners LP, a small-business investment company licensed by the U.S. Small Business Administration.

The payments and agreements reached with Tecum, the proxy statement says, “were agreed to pursuant to an arms-length negotiation between F.N.B. and Tecum.”

Copyright 2014 The Business Journal, Youngstown, Ohio.
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