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Registration No. 333- |
SECURITIES AND EXCHANGE COMMISSION
UNDER
THE SECURITIES ACT OF 1933
Florida | 6711 | 25-1255406 | ||
(State or other jurisdiction of | (Primary Standard Industrial | (I.R.S. Employer | ||
incorporation or organization) | Classification Code Number) | Identification No.) |
Hermitage, Pennsylvania 16148
(724) 981-6000
President and Chief Executive Officer
F.N.B. Corporation
One F.N.B. Boulevard
Hermitage, Pennsylvania 16148
(724) 981-6000
Frederick W. Dreher, Esq. | David R. High, Esq. | |||
John W. Kauffman, Esq. | Rachel L. Allen, Esq. | |||
Duane Morris LLP | Jones Day | |||
30 South 17th Street | 500 Grant Street, Suite 3100 | |||
Philadelphia, PA 19103 | Pittsburgh, PA 15219 | |||
Telephone: 215-979-1234 | Telephone: 412-394-7934 | |||
Fax: 215-979-1213 | Fax: 412-394-7959 |
Large accelerated filerþ | Accelerated filero | Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting companyo |
Proposed | ||||||||||||||
maximum | Proposed | |||||||||||||
offering | maximum | Amount of | ||||||||||||
Title of each class of | Amount to be | price | aggregate | registration | ||||||||||
securities to be registered | registered(1) | per unit | offering price | fee | ||||||||||
Common Stock, $.01 par value | 5,600,000 shares | N/A | $81,900,000(2) | $3,218.67 | ||||||||||
(1) | Reflects the estimated maximum number of shares of the Registrant’s common stock that may be issued in connection with the proposed merger of Iron and Glass Bancorp, Inc. with and into the Registrant. | |
(2) | Computed, in accordance with Rules 457(c) and 457(f)(1), as the product of (x) the average of the bid and asked sale prices per share of the common stock of Iron and Glass Bancorp, Inc. as reported on the OTC Bulletin Board on May 15, 2008 multiplied by (y) the estimated maximum number of shares of Iron and Glass Bancorp, Inc. common stock to be received by the Registrant in exchange for the securities registered hereby. |
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• | five shares of FNB common stock; or | ||
• | $75.00 in cash. |
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Pro Forma Equivalent | ||||||||||||
FNB | IRGB | Value Per Share of | ||||||||||
Common Stock | Common Stock | IRGB Common Stock | ||||||||||
At February 14, 2008 | $ | 14.92 | $ | 53.00 | $ | 74.60 | ||||||
At , 2008 | $ | $ | $ |
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Sincerely, | ||
Michael J. Hagan | ||
President and Chief Executive Officer |
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Pittsburgh, Pennsylvania 15203
TO BE HELD , 2008
(1) | to consider and vote upon a proposal to approve and adopt the Agreement and Plan of Merger, dated as of February 14, 2008, between F.N.B. Corporation (“FNB”) and us, pursuant to which we will merge with and into FNB and each outstanding share of our common stock will be converted into cash or shares of FNB common stock, as described in greater detail in the accompanying proxy statement/prospectus; | ||
(2) | to consider and vote upon a proposal to approve the adjournment of our special meeting, if necessary, to permit the further solicitation of proxies if there are not sufficient votes at the time of our special meeting to approve and adopt the merger agreement; and | ||
(3) | to transact such other business as may be properly presented for action at our special meeting and any adjournment or postponement of our special meeting. |
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By order of our board of directors, | ||
Michael J. Hagan | ||
President and Chief Executive Officer |
, 2008
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One F.N.B. Boulevard
Hermitage, Pennsylvania 16148
Attention: David B. Mogle
Telephone: (724) 983-3431
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APPENDICES: | ||||
Appendix A — Agreement and Plan of Merger, dated as of February 14, 2008, between F.N.B. Corporation and Iron and Glass Bancorp, Inc. | A-1 | |||
Appendix B — Opinion of Keefe, Bruyette & Woods, Inc. | B-1 | |||
Appendix C — Subsection D and Section 1930 of the Pennsylvania Business Corporation Law | C-1 |
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• | five shares of FNB common stock; or | ||
• | $75.00 in cash. |
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• | FORthe approval and adoption of the merger agreement; and | ||
• | FORthe adjournment of our special meeting, if necessary. |
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• | submitting written notice of revocation to our corporate secretary prior to the voting of that proxy at our special meeting; | ||
• | submitting a properly executed, later dated proxy by mail; or | ||
• | voting in person at our special meeting. |
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• | Proposal 1 — A proposal to approve and adopt the merger agreement between FNB and us; | ||
• | Proposal 2 — A proposal to grant discretionary authority to adjourn our special meeting if necessary to permit further solicitation of proxies because we have not received sufficient votes at the time of our special meeting to approve the merger proposal; and | ||
• | such other business as may properly come before our special meeting and any adjournment or postponement of our special meeting. |
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• | submitting written notice of revocation to our corporate secretary prior to the voting of that proxy at our special meeting; | ||
• | submitting a properly executed proxy with a later date; or | ||
• | voting in person at our special meeting. |
1114 East Carson Street
Pittsburgh, Pennsylvania 15203
Attention: Mary Kay Rossi, Secretary
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• | Each share of our common stock will automatically be converted into the right to receive, at your election, subject to the provisions in the merger agreement: |
• | five shares of FNB common stock; or | ||
• | $75.00 in cash. |
• | You will have the right to elect to receive FNB common stock in exchange for some of your shares and to receive cash in exchange for the remainder of your shares. | ||
• | We will cease to exist as a separate legal entity and all of our operations will be conducted by FNB and FNB Bank. |
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• | the continued indemnification of our current directors and executive officers under the merger agreement and providing these individuals with directors’ and officers’ insurance; | ||
• | the potential receipt of salary continuation payments by certain of our executive officers pursuant to salary continuation agreements; | ||
• | the potential continuation of certain benefits to four of our executive officers, two of whom are on our board of directors; | ||
• | the conversion of our stock options into FNB stock options to acquire that number of shares of our common stock covered by the option times the option ratio at an exercise price equal to the exercise price of our stock option divided by the option ratio; | ||
• | one member of IRGB Bank’s board of directors will be appointed to FNB Bank’s board of directors and will receive director’s fees in connection therewith; and | ||
• | three members of IRGB Bank’s board of directors will be offered the opportunity to serve as members of FNB Bank’s Pittsburgh Region advisory board of directors and will receive certain fees for such services. |
• | approval of the merger proposal by the holders of a majority of the votes cast by all holders of shares of our common stock entitled to vote at our special meeting; |
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• | the receipt of all regulatory approvals needed to complete the merger, including the approval of the Office of the Comptroller of the Currency, or OCC, the approval of the Board of Governors of the Federal Reserve System, or Federal Reserve Board, the approval of the Pennsylvania Department of Banking, or the Department, and the approval of the listing of additional shares of FNB common stock on the NYSE; | ||
• | the absence of any law or injunction that would effectively prohibit the merger; | ||
• | the receipt by FNB of an environmental study from us with respect to all real property owned by us; and | ||
• | the receipt of legal opinions from FNB’s and our legal counsel as to the qualification of the merger as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, or the Code. |
• | failure to obtain the necessary regulatory approvals for the merger unless the failure is due to the terminating party’s failure to perform or observe its covenants in the merger agreement; | ||
• | failure to complete the merger by November 30, 2008, unless the reason the merger has not been consummated by that date is a failure by the terminating party to perform or observe its covenants and agreements in the merger agreement; | ||
• | the non-terminating party’s breach of a representation, warranty, covenant, agreement or other obligation contained in the merger agreement that would cause the failure of the closing conditions to be satisfied, provided the terminating party is not then in material breach of any of its representations, warranties, covenants, agreements or other obligations in the merger agreement; or |
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• | failure of the holders of the requisite percentage of our outstanding common stock to approve the merger proposal, provided we are not in material breach of our obligations to hold our special meeting and our board of directors is not in breach of its covenant to recommend such approval. |
• | breached our obligation not to initiate, solicit or encourage or take any action to facilitate another proposal to acquire us, participate in any discussions or negotiations relating to another proposal to acquire us or, except as permitted by and subject to certain terms of the merger agreement, approve, recommend or enter into any letter of intent, agreement or other commitment relating to another proposal to acquire us; | ||
• | failed to have our board of directors recommend approval of the merger proposal to our shareholders or our board of directors shall have changed its recommendation, except as permitted by the merger agreement with respect to a proposal to acquire us on terms and conditions superior to those in the merger agreement; | ||
• | recommended approval of another proposal to acquire us; or | ||
• | failed to call, give notice of, convene and hold our special meeting. |
• | in order to enter into an agreement relating to an acquisition proposal that has terms superior to those of the merger agreement from the perspective of our shareholders; or | ||
• | if the average closing price of FNB common stock during a specified period before receipt of the last regulatory approval of the merger is less than $11.94 and FNB common stock underperforms the Nasdaq Bank Index by 20% and FNB does not elect to increase the exchange ratio as provided in the merger agreement. |
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• | prior to the mailing of this proxy statement/prospectus, we terminate the merger agreement in order to enter into an agreement relating to an acquisition proposal that has terms superior to those of the merger agreement from the perspective of our shareholders; or | ||
• | FNB terminates the merger agreement prior to our special meeting because we have breached our obligation not to encourage or solicit acquisition proposals, we have failed to hold our special meeting or our board of directors has not recommended approval of the merger proposal or has changed its recommendation or has recommended approval of another proposal to acquire us or we fail to hold our special meeting; or | ||
• | a tender or exchange offer for 25% or more of our common stock is made and our board of directors fails to send a statement to our shareholders recommending rejection of that offer within 10 days after the offer has been made; or | ||
• | FNB or we terminate the merger agreement because: |
�� | Our shareholders did not approve the merger proposal; and | ||
• | a proposal to acquire us is made by a third party after February 14, 2008 and is not withdrawn prior to termination of the merger agreement; and | ||
• | within 18 months thereafter, we enter into an agreement to merge with or be acquired by that third party or that third party acquires substantially all of our assets or that third party acquires more than 50% of our common stock. |
• | by us because FNB breached its representations, warranties, covenants, agreements or other obligations in the merger agreement, which breach could reasonably be expected to result in a material adverse effect and which breach cannot be or is not cured, assuming we are also not in material breach of our obligations under the merger agreement, FNB will pay our out-of-pocket expenses in connection with the merger, including fees and expenses of legal counsel, financial advisors and accountants, up to a maximum of $500,000; and | ||
• | by FNB because our shareholders did not approve the merger proposal at our special meeting or because we breached our representations, warranties, |
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covenants, agreements or other obligations in the merger agreement which breach could reasonably be expected to result in a material adverse effect and which breach cannot be or is not cured, assuming FNB is also not in material breach of its obligations under the merger agreement, we will pay FNB’s out-of-pocket expenses in connection with the merger, including fees and expenses of legal counsel, financial advisors and accountants, up to a maximum of $500,000, provided, however, that we do not have to pay FNB’s expenses if we have paid the break-up fee to FNB. |
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Pro Forma Equivalent | ||||||||||||
FNB | IRGB | Value of One Share of | ||||||||||
Common Stock | Common Stock | IRGB Common Stock | ||||||||||
February 14, 2008 | $ | 14.92 | $ | 53.00 | $ | 74.60 | ||||||
, 2008 |
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(Dollars in thousands, except per share amounts)
Three Months | ||||||||||||||||||||||||||||
Ended March 31, | Year Ended December 31, | |||||||||||||||||||||||||||
2008 | 2007 | 2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||||||||
Summary of Earnings Data: | ||||||||||||||||||||||||||||
Total interest income | $ | 88,525 | $ | 90,487 | $ | 368,890 | $ | 342,422 | $ | 295,480 | $ | 253,568 | $ | 256,102 | ||||||||||||||
Total interest expense | 39,560 | 42,567 | 174,053 | 153,585 | 108,780 | 84,390 | 86,990 | |||||||||||||||||||||
Net interest income | 48,965 | 47,920 | 194,837 | 188,837 | 186,700 | 169,178 | 169,112 | |||||||||||||||||||||
Provision for loan losses | 3,583 | 1,847 | 12,693 | 10,412 | 12,176 | 16,280 | 17,155 | |||||||||||||||||||||
Net interest income after provision for loan losses | 45,382 | 46,073 | 182,144 | 178,425 | 174,524 | 152,898 | 151,957 | |||||||||||||||||||||
Total non-interest income | 22,168 | 20,916 | 81,609 | 79,275 | 57,807 | 77,326 | 67,319 | |||||||||||||||||||||
Total non-interest expense | 44,363 | 41,896 | 165,614 | 160,514 | 155,226 | 140,892 | 183,272 | |||||||||||||||||||||
Income before income taxes | 23,187 | 25,093 | 98,139 | 97,186 | 77,105 | 89,332 | 36,004 | |||||||||||||||||||||
Income taxes | 6,696 | 7,723 | 28,461 | 29,537 | 21,847 | 27,537 | 8,966 | |||||||||||||||||||||
Income from continuing operations | 16,491 | 17,370 | 69,678 | 67,649 | 55,258 | 61,795 | 27,038 | |||||||||||||||||||||
Earnings from discontinued operations, net of taxes | — | — | — | — | — | — | 31,751 | |||||||||||||||||||||
Net income | 16,491 | 17,370 | 69,678 | 67,649 | 55,258 | 61,795 | 58,789 | |||||||||||||||||||||
Per Share Data(1): | ||||||||||||||||||||||||||||
Basic earnings per share: | ||||||||||||||||||||||||||||
Continuing operations | $ | 0.27 | $ | 0.29 | $ | 1.16 | $ | 1.15 | $ | 0.99 | $ | 1.31 | $ | 0.58 | ||||||||||||||
Discontinued operations | — | — | — | — | — | — | 0.69 | |||||||||||||||||||||
Net income | 0.27 | 0.29 | 1.16 | 1.15 | 0.99 | 1.31 | 1.27 | |||||||||||||||||||||
Diluted earnings per share: | ||||||||||||||||||||||||||||
Continuing operations | 0.27 | 0.29 | 1.15 | 1.14 | 0.98 | 1.29 | 0.57 | |||||||||||||||||||||
Discontinued operations | — | — | — | — | — | — | 0.68 | |||||||||||||||||||||
Net income | 0.27 | 0.29 | 1.15 | 1.14 | 0.98 | 1.29 | 1.25 | |||||||||||||||||||||
Cash dividends paid | 0.24 | 0.235 | .95 | 0.94 | 0.925 | 0.92 | 0.93 | |||||||||||||||||||||
Book value(2) | 8.97 | 8.91 | 8.99 | 8.90 | 8.31 | 6.47 | 13.10 | |||||||||||||||||||||
Statement of Condition Data | ||||||||||||||||||||||||||||
(at end of period): | ||||||||||||||||||||||||||||
Total assets | $ | 6,164,590 | $ | 6,015,804 | $ | 6,088,021 | $ | 6,007,592 | $ | 5,590,326 | $ | 5,027,009 | $ | 8,308,310 | ||||||||||||||
Assets of discontinued operations | — | — | — | — | — | — | 3,751,136 | |||||||||||||||||||||
Net loans | 4,386,641 | 4,207,157 | 4,291,429 | 4,200,569 | 3,698,340 | 3,338,994 | 3,213,058 | |||||||||||||||||||||
Deposits | 4,436,654 | 4,395,029 | 4,397,684 | 4,372,842 | 4,011,943 | 3,598,087 | 3,439,510 | |||||||||||||||||||||
Short-term borrowings | 465,590 | 364,258 | 449,823 | 363,910 | 378,978 | 395,106 | 232,966 | |||||||||||||||||||||
Long-term and junior subordinated debt | 647,476 | 651,707 | 632,397 | 670,921 | 662,569 | 636,209 | 584,808 | |||||||||||||||||||||
Liabilities of discontinued operations | — | — | — | — | — | — | 3,386,021 | |||||||||||||||||||||
Total shareholders’ equity(2) | 543,622 | 538,292 | 544,357 | 537,372 | 477,202 | 324,102 | 606,909 | |||||||||||||||||||||
Significant Ratios(2): | ||||||||||||||||||||||||||||
Return on average assets | 1.09 | % | 1.17 | % | 1.15 | % | 1.15 | % | 0.99 | % | 1.29 | % | 0.74 | % | ||||||||||||||
Return on average tangible assets | 1.18 | 1.28 | 1.25 | 1.25 | 1.07 | 1.34 | 0.79 | |||||||||||||||||||||
Return on average equity | 12.14 | 13.06 | 12.89 | 13.15 | 12.44 | 23.54 | 9.66 | |||||||||||||||||||||
Return on average tangible equity | 24.24 | 26.79 | 26.23 | 26.30 | 23.62 | 30.42 | 16.81 | |||||||||||||||||||||
Dividend payout ratio | 88.44 | 81.71 | 82.45 | 81.84 | 94.71 | 72.56 | 72.90 | |||||||||||||||||||||
Average equity to average assets | 8.95 | 8.98 | 8.93 | 8.73 | 7.97 | 5.50 | 7.66 |
(1) | Per share amounts for 2003 have been restated for the common stock dividend declared on April 28, 2003. | |
(2) | Effective January 1, 2004, FNB spun-off its Florida operations into a separate, independent public company. As a result of the spin-off, the Florida operations’ earnings for prior years have been classified as discontinued operations on FNB’s consolidated income statements and the assets and liabilities related to the discontinued operations have been disclosed separately on FNB’s consolidated balance sheets for prior years. In addition, the book value at period end, stockholders’ equity, the return on average assets ratio, the return on average tangible assets ratio, the return on average equity ratio, the return on average tangible equity ratio and the dividend payout ratio for 2003 include the discontinued operations. |
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(Dollars in thousands, except per share amounts)
Three Months | ||||||||||||||||||||||||||||||||
Ended March 31, | Year Ended December 31, | |||||||||||||||||||||||||||||||
2008 | 2007 | 2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||||||||||||
Summary of Earnings Data: | ||||||||||||||||||||||||||||||||
Total interest income | $ | 4,408 | $ | 4,446 | $ | 17,798 | $ | 17,632 | $ | 16,562 | $ | 16,323 | $ | 16,786 | ||||||||||||||||||
Total interest expense | 1,917 | 1,883 | 7,666 | 6,844 | 5,127 | 4,873 | 5,784 | |||||||||||||||||||||||||
Net interest income | 2,491 | 2,563 | 10,133 | 10,788 | 11,435 | 11,450 | 11,002 | |||||||||||||||||||||||||
Provision for loan losses | 60 | 60 | 25 | 325 | 535 | 1,556 | 690 | |||||||||||||||||||||||||
Net interest income after provision for loan losses | 2,431 | 2,503 | 10,108 | 10,463 | 10,900 | 9,894 | 10,312 | |||||||||||||||||||||||||
Total non-interest income | 374 | 382 | 1,575 | 1,690 | 1,268 | 1,832 | 1,342 | |||||||||||||||||||||||||
Total non-interest expense | 1,989 | 1,739 | 6,828 | 7,002 | 6,911 | 6,647 | 6,687 | |||||||||||||||||||||||||
Income before income taxes | 816 | 1,146 | 4,854 | 5,151 | 5,257 | 5,080 | 4,967 | |||||||||||||||||||||||||
Income tax/expense | 223 | 320 | 1,336 | 1,392 | 1,510 | 1,476 | 1,454 | |||||||||||||||||||||||||
Net income from continuing operations | 593 | 826 | 3,518 | 3,759 | 3,747 | 3,604 | 3,514 | |||||||||||||||||||||||||
Earnings from discontinued operations, net of taxes | — | — | — | — | — | — | — | |||||||||||||||||||||||||
Net income | 593 | 826 | 3,518 | 3,759 | 3,747 | 3,604 | 3,514 | |||||||||||||||||||||||||
Per Share Data: | ||||||||||||||||||||||||||||||||
Basic earnings per share: | ||||||||||||||||||||||||||||||||
Net income | 0.53 | 0.74 | 3.15 | 3.37 | 3.37 | 3.24 | 3.18 | |||||||||||||||||||||||||
Diluted earnings per share: | ||||||||||||||||||||||||||||||||
Net income | 0.53 | 0.73 | 3.11 | 3.31 | 3.31 | 3.20 | 3.14 | |||||||||||||||||||||||||
Cash dividends — common | 0.30 | 0.28 | 1.21 | 1.13 | 1.05 | 0.97 | 0.89 | |||||||||||||||||||||||||
Book value — common | 35.46 | 33.15 | 35.35 | 32.56 | 30.15 | 28.33 | 26.68 | |||||||||||||||||||||||||
Statement of Condition Data | ||||||||||||||||||||||||||||||||
(at end of period): | ||||||||||||||||||||||||||||||||
Total assets | $ | 315,329 | $ | 299,562 | $ | 301,995 | $ | 301,619 | $ | 293,189 | $ | 291,706 | $ | 293,478 | ||||||||||||||||||
Net loans | 166,976 | 162,617 | 163,404 | 165,113 | 163,758 | 165,607 | 163,083 | |||||||||||||||||||||||||
Deposits | 263,785 | 251,053 | 251,272 | 253,103 | 239,451 | 249,927 | 252,569 | |||||||||||||||||||||||||
Short-term borrowings | 457 | 498 | 737 | 718 | 9,860 | 455 | 406 | |||||||||||||||||||||||||
Long-term debt | 8,000 | 8,000 | 8,000 | 8,000 | 8,000 | 8,000 | 9,000 | |||||||||||||||||||||||||
Accrued interest and other liabilities | 3,487 | 2,947 | 2,506 | 3,408 | 2,344 | 1,925 | 1,975 | |||||||||||||||||||||||||
Total shareholders’ equity | 39,599 | 37,065 | 39,479 | 36,389 | 33,535 | 31,400 | 29,528 | |||||||||||||||||||||||||
Significant Ratios: | ||||||||||||||||||||||||||||||||
Return on average assets | 0.78 | % | 1.10 | % | 1.18 | % | 1.26 | % | 1.30 | % | 1.23 | % | 1.18 | % | ||||||||||||||||||
Return on average common equity | 6.02 | 8.99 | 9.45 | 10.86 | 11.52 | 11.97 | 12.35 | |||||||||||||||||||||||||
Dividend payout — common | 56.60 | 37.84 | 38.41 | 33.53 | 31.16 | 29.94 | 27.99 | |||||||||||||||||||||||||
Average equity to average assets | 13.02 | 12.19 | 12.45 | 11.63 | 11.28 | 10.24 | 9.52 |
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As of March 31, 2008 | ||||||||||||||||||||||||||||
Pro Forma | Pro Forma | Pro Forma | Pro Forma | |||||||||||||||||||||||||
FNB | Omega | Adjustments | Combined | IRGB | Adjustments | Combined | ||||||||||||||||||||||
(Dollars in thousands, except per share amounts) | ||||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||
Cash and equivalents | $ | 109,783 | $ | 121,129 | $ | — | $ | 230,912 | $ | 26,001 | $ | — | $ | 256,913 | ||||||||||||||
Investment securities | 1,014,882 | 266,127 | 29 | 1,281,038 | 113,772 | — | 1,394,810 | |||||||||||||||||||||
Mortgage loans held for sale | 9,038 | — | — | 9,038 | 201 | — | 9,239 | |||||||||||||||||||||
Loans | 4,440,037 | 1,111,789 | (1,118 | ) | 5,550,708 | 168,379 | 717 | (A,B) | 5,719,804 | |||||||||||||||||||
Allowance for loan losses | (53,396 | ) | (13,937 | ) | 2,694 | (64,639 | ) | (1,604 | ) | 21 | (B) | (66,222 | ) | |||||||||||||||
Net loans | 4,386,641 | 1,097,852 | 1,576 | 5,486,069 | 166,775 | 738 | 5,653,582 | |||||||||||||||||||||
Premises and equipment, net | 80,922 | 28,705 | — | 109,627 | 1,238 | — | 110,865 | |||||||||||||||||||||
Goodwill | 242,120 | 159,264 | 61,652 | 463,036 | 691 | 47,228 | (D) | 510,955 | ||||||||||||||||||||
Other intangibles | 18,364 | 5,669 | 33,660 | 57,693 | — | 5,788 | (C) | 63,481 | ||||||||||||||||||||
Other assets | 302,840 | 101,981 | (3,775 | ) | 401,046 | 6,651 | 38 | (E) | 407,735 | |||||||||||||||||||
Total assets | $ | 6,164,590 | $ | 1,780,727 | $ | 93,142 | $ | 8,038,459 | $ | 315,329 | $ | 53,792 | $ | 8,407,580 | ||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||
Deposits | $ | 4,436,654 | $ | 1,276,617 | $ | 6,227 | $ | 5,719,498 | $ | 263,785 | $ | 2,617 | (F) | $ | 5,985,900 | |||||||||||||
Borrowings | 962,035 | 101,199 | 1,180 | 1,064,414 | 8,457 | 632 | (G) | 1,073,503 | ||||||||||||||||||||
Junior subordinated debt | 151,031 | 55,570 | (709 | ) | 205,892 | — | — | 205,892 | ||||||||||||||||||||
Other liabilities | 71,248 | 13,172 | 28,190 | 112,610 | 3,488 | 5,063 | (H) | 121,161 | ||||||||||||||||||||
Total liabilities | 5,620,968 | 1,446,558 | 34,888 | 7,102,414 | 275,730 | 8,312 | 7,386,456 | |||||||||||||||||||||
Stockholders’ equity | 543,622 | 334,169 | 58,254 | 936,045 | 39,599 | 45,480 | (I) | 1,021,124 | ||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 6,164,590 | $ | 1,780,727 | $ | 93,142 | $ | 8,038,459 | $ | 315,329 | $ | 53,792 | $ | 8,407,580 | ||||||||||||||
Book value per share | $ | 8.97 | $ | 26.37 | $ | 10.89 | $ | 35.46 | $ | 11.47 | ||||||||||||||||||
Shares outstanding | 60,613,702 | 12,673,064 | 12,689,461 | 85,976,227 | 1,116,608 | 1,918,633 | 89,011,468 | |||||||||||||||||||||
Capital ratios: | ||||||||||||||||||||||||||||
Tangible equity/tangible assets | 4.80 | % | 10.47 | % | 5.52 | % | 12.37 | % | 5.70 | % | ||||||||||||||||||
Leverage capital ratio | 7.51 | % | 13.38 | % | 8.29 | % | 12.66 | % | 8.36 | % |
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For the Three Months Ended March 31, 2008 | ||||||||||||||||||||||||||||
Pro Forma | Pro Forma | Pro Forma | Pro Forma | |||||||||||||||||||||||||
FNB | Omega | Adjustments | Combined | IRGB | Adjustments | Combined | ||||||||||||||||||||||
(Dollars in thousands, except per share amounts) | ||||||||||||||||||||||||||||
Total interest income | $ | 88,525 | $ | 21,816 | $ | (696 | ) | $ | 109,645 | $ | 4,408 | $ | (151 | )(A) | $ | 113,902 | ||||||||||||
Total interest expense | 39,560 | 7,851 | (1,883 | ) | 45,528 | 1,917 | (570 | )(F,G) | 46,875 | |||||||||||||||||||
Net interest income | 48,965 | 13,965 | 1,187 | 64,117 | 2,491 | 419 | 67,027 | |||||||||||||||||||||
Provision for loan losses | 3,583 | 3,435 | — | 7,018 | 60 | — | 7,078 | |||||||||||||||||||||
Net interest income after provision for loan losses | 45,382 | 10,530 | 1,187 | 57,099 | 2,431 | 419 | 59,949 | |||||||||||||||||||||
Non-interest income | 22,168 | 6,872 | — | 29,040 | 374 | — | 29,414 | |||||||||||||||||||||
Non-interest expense | 44,363 | 16,390 | 1,561 | 62,314 | 1,989 | 259 | (C) | 64,562 | ||||||||||||||||||||
Income before income taxes | 23,187 | 1,012 | (374 | ) | 23,825 | 816 | 160 | 24,801 | ||||||||||||||||||||
Income taxes | 6,696 | (180 | ) | (131 | ) | 6,385 | 223 | 56 | (J) | 6,664 | ||||||||||||||||||
Net income | $ | 16,491 | $ | 1,192 | $ | (243 | ) | $ | 17,440 | $ | 593 | $ | 104 | $ | 18,137 | |||||||||||||
Earning per common share:(K) | ||||||||||||||||||||||||||||
Basic | $ | 0.27 | $ | 0.09 | $ | 0.20 | $ | 0.53 | $ | 0.20 | ||||||||||||||||||
Diluted | $ | 0.27 | $ | 0.09 | $ | 0.20 | $ | 0.53 | $ | 0.20 | ||||||||||||||||||
Ratios: | ||||||||||||||||||||||||||||
Return on average assets | 1.09 | % | 0.27 | % | 0.88 | % | 0.78 | % | 0.88 | % | ||||||||||||||||||
Return on average equity | 12.14 | % | 1.42 | % | 7.45 | % | 6.02 | % | 7.11 | % | ||||||||||||||||||
Dividend payout ratio | 88.44 | % | 329.51 | % | 118.53 | % | 56.60 | % | 117.99 | % |
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For the Year Ended December 31, 2007 | ||||||||||||||||||||||||||||
Pro Forma | Pro Forma | Pro Forma | Pro Forma | |||||||||||||||||||||||||
FNB | Omega | Adjustments | Combined | IRGB | Adjustments | Combined | ||||||||||||||||||||||
(Dollars in thousands, except per share amounts) | ||||||||||||||||||||||||||||
Total interest income | $ | 368,890 | $ | 93,978 | $ | (2,785 | ) | $ | 460,083 | $ | 17,798 | $ | (605 | )(A) | $ | 477,276 | ||||||||||||
Total interest expense | 174,053 | 34,153 | (7,532 | ) | 200,674 | 7,666 | (2,279 | )(F,G) | 206,061 | |||||||||||||||||||
Net interest income | 194,837 | 59,825 | 4,747 | 259,409 | 10,132 | 1,674 | 271,215 | |||||||||||||||||||||
Provision for loan losses | 12,693 | 2,155 | — | 14,848 | 25 | — | 14,873 | |||||||||||||||||||||
Net interest income after provision for loan losses | 182,144 | 57,670 | 4,747 | �� | 244,561 | 10,107 | 1,674 | 256,342 | ||||||||||||||||||||
Non-interest income | 81,609 | 28,082 | — | 109,691 | 1,575 | — | 111,266 | |||||||||||||||||||||
Non-interest expense | 165,614 | 58,095 | 6,244 | 229,953 | 6,828 | 1,036 | (C) | 237,817 | ||||||||||||||||||||
Income before income taxes | 98,139 | 27,657 | (1,497 | ) | 124,299 | 4,854 | 638 | 129,791 | ||||||||||||||||||||
Income taxes | 28,461 | 6,560 | (524 | ) | 34,497 | 1,336 | 223 | 36,056 | ||||||||||||||||||||
Net income | $ | 69,678 | $ | 21,097 | $ | (973 | ) | $ | 89,802 | $ | 3,518 | $ | 415 | $ | 93,735 | |||||||||||||
Earnings per common share | ||||||||||||||||||||||||||||
Basic | $ | 1.16 | $ | 1.67 | $ | 1.05 | $ | 3.15 | $ | 1.06 | ||||||||||||||||||
Diluted | $ | 1.15 | $ | 1.67 | $ | 1.04 | $ | 3.11 | $ | 1.05 | ||||||||||||||||||
Ratios: | ||||||||||||||||||||||||||||
Return on average assets | 1.15 | % | 1.17 | % | 1.13 | % | 1.18 | % | 1.13 | % | ||||||||||||||||||
Return on average equity | 12.89 | % | 6.36 | % | 9.65 | % | 9.45 | % | 9.25 | % | ||||||||||||||||||
Dividend payout ratio | 82.45 | % | 74.44 | % | 90.80 | % | 38.41 | % | 90.07 | % |
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Cash, assuming 45% of IRGB shares receive cash of $75.00 per share | $ | 37,251 | ||
Value of IRGB shares converted at an exchange ratio of 5 to 1 | 45,505 | |||
Incremental direct costs associated with the merger, net of tax benefit | 2,935 | |||
Fair value of outstanding employee and non-employee stock options | 2,323 | |||
Total cost of acquisition | 88,014 | |||
IRGB net assets acquired: | ||||
Stockholders’ equity | 39,599 | |||
Elimination of recorded goodwill and other intangibles, net of deferred taxes | (691 | ) | ||
IRGB’s tangible book value | 38,908 | |||
Estimated adjustments to reflect assets acquired and liabilities assumed at fair value: | ||||
Total fair value adjustments | 1,827 | |||
Associated deferred income taxes | (640 | ) | ||
Fair value of net assets acquired, net of tax | 40,095 | |||
Goodwill resulting from the merger | $ | 47,919 | ||
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(A) | Adjustment to record the current fair value of our loan portfolio based on current interest rates. The adjustment will be recognized over the estimated remaining life of the loan portfolio. The impact of the adjustment was to decrease interest income by approximately $0.2 million and $0.6 million for the three months ended March 31, 2008 and the year ended December 31, 2007, respectively. | |
(B) | Adjustment to fair value for loans deemed impaired in accordance with Statement of Position 03-3. | |
(C) | Adjustment to record core deposit intangible assets on estimated fair values. Management is studying the nature, amount and amortization method of various possible identified intangibles. The adjustments reflected herein are based on current assumptions and valuations, which are subject to change. For purposes of the pro forma adjustments shown here, the estimated fair value of the core deposit intangible is $5.8 million. FNB estimates that the core deposit intangibles will be amortized on an accelerated basis over ten years. Material changes to these estimated fair values and estimated useful lives are possible once FNB completes its analyses. The net impact of the adjustment was to increase non-interest expense by approximately $0.3 million and $1.0 million for the three months ended March 31, 2008 and the year ended December 31, 2007, respectively. | |
(D) | Adjustment to write-off historical goodwill and record goodwill created as a result of the merger. | |
(E) | Adjustment to record the deferred tax asset created as a result of the fair value adjustments using FNB’s statutory tax rate of 35%. | |
(F) | Adjustment to fair value of time deposit liabilities based on current interest rates for similar instruments. The adjustment will be recognized over the estimated remaining term of the related deposit liability. The impact of the adjustment was to decrease interest expense by approximately $0.5 million and $2.0 million for the three months ended March 31, 2008 and the year ended December 31, 2007, respectively. | |
(G) | Adjustment to fair value of outstanding long-term debt instruments. The adjustment will be recognized over the remaining life of the debt instruments. The impact of the adjustment was to decrease interest expense by $0.1 million and $0.3 million for the three months ended March 31, 2008 and the year ended December 31, 2007, respectively. | |
(H) | Adjustment to reflect the liability for incremental direct costs associated with the merger, net of the tax benefit. These costs include accountant and attorney fees, investment banker services, payout of vendor and employee contracts and severance |
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payments to our displaced personnel. These liabilities have been recorded pursuant to EITF 95-3, “Recognition of Liabilities in Connection with a Purchase Business Combination.” The tax benefits of accounting and attorneys fees and investment banker services have not yet been determined. | ||
(I) | Adjustment to eliminate our historical shareholders’ equity; the adjustment reflects the issuance of FNB common stock and the conversion of our stock options into FNB stock options. | |
(J) | Adjustment to record the tax effect of the pro forma adjustments using FNB’s statutory tax rate of 35%. | |
(K) | Weighted average shares were calculated using the historical weighted average shares outstanding of IRGB and FNB, adjusted using the exchange ratio, to the equivalent shares of FNB common stock, for the year ended December 31, 2007 and the three months ended March 31, 2008. Earnings per share data have been computed based on the combined historical income of IRGB and FNB and the impact of purchase accounting adjustments. |
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Quarter ended | ||||
March 31, 2008 | ||||
Average equity as a percentage of average assets | 13.02 | % | ||
Equity to total assets at end of period | 12.56 | |||
Return on average assets | .78 | |||
Return on average equity | 6.02 | |||
Non-interest expense to average assets | .65 | |||
Non-performing loans and other real estate owned to total assets at end of period | .56 |
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Payments due by Period | ||||||||||||||||||||
Less than | More than | |||||||||||||||||||
Total | One Year | 1-3 Years | 3-5 Years | 5 Years | ||||||||||||||||
Long-term debt obligations | $ | 8,000,000 | — | $ | 8,000,000 | — | — | |||||||||||||
Operating lease obligations | 780,707 | $ | 176,508 | 337,296 | $ | 176,903 | $ | 110,000 | ||||||||||||
Total contractual obligations | $ | 8,780,707 | $ | 176,508 | $ | 8,317,296 | $ | 176,903 | $ | 110,000 | ||||||||||
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Year ended | ||||
December 31, 2007 | ||||
Average equity as a percentage of average assets: | 12.45 | % | ||
Equity to total assets at end of period: | 13.07 | |||
Return on average assets: | 1.18 | |||
Return on average equity: | 9.45 | |||
Non-interest expense to average assets: | 2.30 | |||
Non-performing loans and other real estate owned to total assets at end of period: | .64 |
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Payment due by Period | ||||||||||||||||||||
Less than | More Than | |||||||||||||||||||
Total | One Year | 1-3 Years | 3-5 Years | 5 Years | ||||||||||||||||
Long-term debt obligations | $ | 8,000,000 | — | $ | 8,000,000 | — | — | |||||||||||||
Operating lease obligations | 824,384 | $ | 175,908 | 331,861 | $ | 190,115 | $ | 126,500 | ||||||||||||
Total contractual obligations | $ | 8,824,384 | $ | 175,908 | $ | 8,331,861 | $ | 190,115 | $ | 126,500 | ||||||||||
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Year ended | ||||
December 31, 2006 | ||||
Average equity as a percentage of average assets: | 11.63 | % | ||
Equity to total assets at end of period: | 12.06 | |||
Return on average assets: | 1.26 | |||
Return on average equity: | 10.86 | |||
Non-interest expense to average assets: | 2.35 | |||
Non-performing loans and other real estate owned to total assets at end of period: | .42 |
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Payment due by Period | ||||||||||||||||||||
Less than | More Than | |||||||||||||||||||
Total | One Year | 1-3 Years | 3-5 Years | 5 Years | ||||||||||||||||
Long-term debt obligations | $ | 8,000,000 | — | — | $ | 8,000,000 | — | |||||||||||||
Operating lease obligations | 896,476 | $ | 166,167 | $ | 312,698 | 225,111 | $ | 192,500 | ||||||||||||
Total contractual obligations | $ | 8,896,476 | $ | 166,167 | $ | 312,698 | $ | 8,225,111 | $ | 192,500 | ||||||||||
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• | the market value of FNB common stock on the merger date; | ||
• | the amount of cash or other non-FNB stock consideration, if any, paid to our shareholders who perfect dissenters rights; | ||
• | whether we or FNB or any related parties, prior to or in connection with the merger redeem, repurchase or otherwise acquire shares of our common stock or make distributions to our shareholders; and | ||
• | if FNB or any parties related to FNB were to repurchase FNB common stock to be issued in the merger. |
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• | credit risks of a particular borrower; | ||
• | changes in economic and industry conditions; | ||
• | the duration of the loan; and | ||
• | in the case of a collateralized loan, uncertainties as to the future value of the collateral. |
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• | a regular review of the quality, mix and size of the overall loan portfolio; | ||
• | historical loan loss experience; | ||
• | evaluation of non-performing loans; | ||
• | assessment of economic conditions and their effects on FNB’s existing portfolio; and | ||
• | the amount and quality of collateral, including guarantees, securing loans. |
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• | potential exposure to unknown or contingent liabilities of banks and non-bank entities the combined company acquires; | ||
• | exposure to potential asset quality issues of acquired banks and non-bank entities; | ||
• | potential disruption to the combined company’s business; | ||
• | potential diversion of the time and attention of FNB’s management; and | ||
• | the possible loss of key employees and customers of the banks and other businesses FNB acquires. |
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• | the payment of dividends; | ||
• | mergers with or acquisitions of other institutions; | ||
• | investments; | ||
• | loans and interest rates; | ||
• | the provision of securities, insurance or trust services; and | ||
• | the types of non-deposit activities in which the combined company’s financial institution subsidiaries may engage. |
• | changes in regulation; | ||
• | changes in technology and product delivery systems; and | ||
• | the accelerated pace of consolidation among financial services providers. |
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• | classify its board of directors into three classes, so that shareholders elect only one-third of its board of directors each year; | ||
• | permit shareholders to remove directors only for cause; |
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• | do not permit shareholders to take action except at an annual or special meeting of shareholders; | ||
• | require shareholders to give FNB advance notice to nominate candidates for election to its board of directors or to make shareholder proposals at a shareholders’ meeting; | ||
• | permit FNB’s board of directors to issue, without shareholder approval unless otherwise required by law, preferred stock with such terms as its board of directors may determine; and | ||
• | require the vote of the holders of at least 75% of FNB’s voting shares for shareholder amendments to its bylaws. |
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• | the businesses of FNB and us may not be integrated successfully or the integration may be more difficult, time-consuming or costly than currently anticipated; | ||
• | expected revenue synergies and cost savings from the merger may not be realized within the expected time frame or at all; | ||
• | revenues may be lower than expected following the merger; | ||
• | deposit attrition, operating costs, loss of customers and business disruption, including, without limitation, difficulties in maintaining relationships with our employees, customers or suppliers may be greater than anticipated following the merger; | ||
• | the regulatory approvals for the merger may not be obtained on acceptable terms, on the anticipated schedule or at all; | ||
• | the merger proposal may not be approved by the requisite vote of our shareholders; | ||
• | competitive pressure among financial services companies is intense; | ||
• | general economic conditions may be less favorable than expected; | ||
• | political conditions and related actions by the U.S. military abroad may adversely affect economic conditions as a whole; |
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• | changes in the interest rate environment may reduce interest margins and impact funding sources; | ||
• | changes in market rates and prices may adversely impact the value of financial products and assets; | ||
• | legislation or changes in the regulatory environment may adversely affect the businesses in which FNB and we engage; | ||
• | litigation liabilities, including costs, expenses, settlements and judgments, may adversely affect either company or their businesses; and | ||
• | a sufficient decline in the market value of FNB common stock thereby preventing tax counsel from issuing an opinion that the merger constitutes a reorganization within the meaning of Section 368(a) of the Code, which is a condition to closing the merger. |
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• | Proposal No. 1 – A proposal to approve and adopt the merger agreement between FNB and us; | ||
• | Proposal No. 2 – A proposal to grant discretionary authority to adjourn our special meeting if necessary to permit further solicitation of proxies because we have not received sufficient votes at the time of our special meeting to approve the merger proposal; and | ||
• | such other business as may properly come before our special meeting and any adjournment or postponement of our special meeting. |
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• | submitting written notice of revocation to our corporate secretary prior to the voting of that proxy at our special meeting; | ||
• | submitting a properly executed proxy with a later date; or | ||
• | voting in person at our special meeting. |
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1114 East Carson Street
Pittsburgh, Pennsylvania 15203
Attention: Mary Kay Rossi, Secretary
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One F.N.B. Boulevard
Hermitage, Pennsylvania 16148
(724) 981-6000
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1114 East Carson Street
Pittsburgh, Pennsylvania 15203
(412) 488-5200
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• | the development of internal policies, procedures, and controls; | ||
• | the designation of a compliance officer; | ||
• | an ongoing employee training program; and | ||
• | an independent audit function to test the programs. |
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Risk Category | Assessment Rate | |
I | 5 to 7 basis points | |
II | 10 basis points | |
III | 28 basis points | |
IV | 43 basis points |
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• | its understanding of FNB’s business, operations, financial condition, earnings and prospects and of our business, operations, financial condition, earnings and prospects, including our geographic position in the Greater Pittsburgh marketplace; | ||
• | its understanding of the current and prospective environment in which FNB and we operate, including regional and local economic conditions, the competitive environment for financial institutions generally and continuing consolidation in the financial services industry and the likely effect of these factors on FNB in light of, and in absence of, the proposed merger; | ||
• | the complementary nature of the respective customer bases, business products and skills of FNB and us could result in opportunities to obtain synergies as products are cross-marketed and distributed over broader customer bases and best practices are compared and applied across businesses; |
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• | the scale, scope, strength and diversity of operations, product lines and delivery systems that could be achieved by combining FNB and us; | ||
• | the proposed board and management arrangements which would position the combined company with strong leadership and experienced operating management; | ||
• | the historical and current market prices of FNB common stock and our common stock; | ||
• | the review by the FNB board of directors, with the assistance of FNB’s management, of the structure and terms of the merger, including the exchange ratio, the expectation of FNB’s legal advisors that the merger will qualify as a reorganization for U.S. federal income tax purposes and, based on the exchange ratio and assuming continuation of FNB’s current per share dividend rate of $0.24 per quarter, an anticipated annual dividend increase of $3.59 per share for holders of our common stock; and | ||
• | the likelihood that the regulatory approvals needed to complete the transaction will be obtained. |
• | intensified competition from domestic and foreign banks and from non-bank financial services organizations; | ||
• | increasing requirements for investment in technology in order to meet customer needs on an efficient and competitive basis; and |
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• | an increase in regulatory pressure on smaller banks in general and us in particular. |
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• | Our board of directors’ familiarity with and review of information concerning our business, results of operations, financial condition, historical operating results, competitive position and future prospects; | ||
• | The current and prospective environment in which we operate, including national, regional and local economic conditions, the competitive environment for banks and other financial institutions generally, the increased regulatory burdens on financial institutions and the trend toward consolidation in the banking and financial services industries; | ||
• | The results that might be obtained by us if we continued to operate independently and the likely benefits to our shareholders of such a course, compared with the value of the merger consideration offered by FNB; | ||
• | In comparison to FNB’s history of paying cash dividends on its common stock, our board of directors considered whether we, as an independent enterprise, could produce the earnings necessary to result in a value comparable to the value to be received in the merger; |
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• | The financial terms of the proposed merger. Our shareholders would receive shares of FNB common stock in exchange for shares of our common stock they had held according to the exchange ratio, subject to adjustment for antidilution; | ||
• | The financial presentation of KBW and the opinion of KBW that, as of February 14, 2008, the merger consideration was fair, from a financial point of view, to our shareholders (see “— Opinion of Our Financial Advisor,” beginning on page ); | ||
• | The financial attributes of our and FNB’s common stock, dividend yield, liquidity and corporate fundamentals; | ||
• | FNB trades on the NYSE under the symbol “FNB.” Our board of directors found the enhanced liquidity associated with FNB’s common stock, compared with the more limited trading market of our common stock, to be a favorable factor in its analysis; | ||
• | Our favorable opinion of the experience and expertise of the FNB management team; | ||
• | The expected qualification of the merger as a reorganization under Section 368 of the Code; | ||
• | Our board of directors and our management performed an extensive review of FNB. As a part of our due diligence review, we reviewed FNB’s business, operations, financial conditions, earnings and prospects. These factors were found to be favorable. Our board of directors emphasized FNB’s most recent operating history and performance; | ||
• | The effects of the merger on our depositors and customers and the communities served by us, which was deemed to be favorable given that they would be served by an organization with greater resources than we have; and | ||
• | The future business prospects of FNB. |
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• | the merger agreement, |
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• | our annual report to stockholders for the three years ended December 31, 2006 and the annual report to stockholders and annual report on Form 10-K for the three years ended December 31, 2006 of FNB, | ||
• | certain interim reports to our stockholders, certain interim reports to stockholders and quarterly reports on Form 10-Q of FNB and certain communications from FNB and us to our respective stockholders, and | ||
• | other financial information concerning the businesses and operations of FNB that we furnished to KBW for purposes of KBW’s analysis. |
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• | the merger will be completed substantially in accordance with the terms set forth in the merger agreement; | ||
• | the representations and warranties of each party in the merger agreement and in all related documents and instruments referred to in the merger agreement are true and correct; | ||
• | each party to the merger agreement and all related documents will perform all of the covenants and agreements required to be performed by such party under such documents; | ||
• | all conditions to the completion of the merger will be satisfied without any waivers; and | ||
• | in the course of obtaining the necessary regulatory, contractual, or other consents or approvals for the merger, no restrictions, including any divestiture requirements, termination or other payments or amendments or modifications, that may be imposed, will have a material adverse effect on the future results of operations or financial condition of the combined entity or the contemplated benefits of the merger, including the cost savings, revenue enhancements and related expenses expected to result from the merger. |
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Union National Financial Corporation | Northumberland Bancorp | |||
Norwood Financial Corp. | Hamlin Bank and Trust Company | |||
Somerset Trust Holding Company | CBT Financial Corporation | |||
Kish Bancorp, Inc. | Emclaire Financial Corp. | |||
1st Summit Bancorp of Johnstown, Inc. | First Community Financial Corporation | |||
Dimeco, Inc. | Mauch Chunk Trust Financial Corp. | |||
Juniata Valley Financial Corp. | Mars National Bank | |||
Peoples Financial Services Corp. | New Century Bank | |||
Honat Bancorp, Inc. | Mifflinburg Bank & Trust Company | |||
Allegheny Valley Bancorp, Inc. | Jonestown Bank and Trust | |||
CB Financial Services, Inc. | MNB Corporation | |||
Commercial National Financial Corporation | CCFNB Bancorp, Inc. |
Susquehanna Bancshares, Inc. | NBT Bancorp, Inc. | |||
FirstMerit Corporation | Community Bank System, Inc. | |||
National Penn Bancshares, Inc. | S&T Bancorp, Inc. | |||
United Bankshares, Inc. | Harleysville National Corporation | |||
Park National Corporation | First Financial Bancorp. | |||
First Commonwealth Financial Corporation | City Holding Company | |||
WesBanco, Inc. |
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FNB | IRGB | |||||||||||||||
Peer Group | Peer Group | |||||||||||||||
Financial Performance Measures: | FNB | Median | IRGB | Median | ||||||||||||
Net Interest Margin | 3.72 | % | 3.69 | % | 3.60 | % | 3.62 | % | ||||||||
Latest Twelve Months | 58 | % | 61 | % | 55 | % | 66 | % | ||||||||
Efficiency Ratio | ||||||||||||||||
Latest Twelve Months | 12.8 | % | 11.1 | % | 9.7 | % | 10.2 | % | ||||||||
Core Return on Average Equity (1) | ||||||||||||||||
Latest Twelve Months | 1.14 | % | 0.96 | % | 1.18 | % | 0.97 | % | ||||||||
Core Return on Average Assets (1) |
(1) | Core income is defined as net income before extraordinary items, less the after-tax portion of investment securities gains or losses and nonrecurring items. |
FNB | IRGB | |||||||||||||||
Peer Group | Peer Group | |||||||||||||||
Financial Condition Measures: | FNB | Median | IRGB | Median | ||||||||||||
Tangible Equity / Tangible Assets | 5.74 | % | 6.48 | % | 12.44 | % | 9.15 | % | ||||||||
Loans / Deposits | 96 | % | 95 | % | 69 | % | 82 | % | ||||||||
Loan Loss Reserves / Loans | 1.21 | % | 1.15 | % | 1.07 | % | 1.01 | % | ||||||||
Non Performing Assets / Loans + OREO | 1.17 | % | 0.67 | % | 0.77 | % | 0.69 | % | ||||||||
Latest Twelve Months | 0.37 | % | 0.28 | % | 0.21 | % | 0.07 | % | ||||||||
Net Charge-offs / Average Loans |
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FNB | IRGB | |||||||||||||||||
Peer Group | Peer Group | |||||||||||||||||
Market Performance Measures: | FNB | Median | IRGB | Median | ||||||||||||||
Price to Earnings Multiple, based on | 13.5 | x | 13.7 | x | NA | NA | ||||||||||||
2008 GAAP estimated earnings | ||||||||||||||||||
Price to Last Twelve Months earnings | 13.3 | x | 13.9 | x | 16.4 | x | 15.7 | x | ||||||||||
Price to Book Value Multiple | 142 | % | 159 | % | 156 | % | 137 | % | ||||||||||
Price to Tangible Book Value Multiple | 309 | % | 240 | % | 159 | % | 147 | % |
Acquiror | Acquiree | |
S&T Bancorp, Inc. | IBT Bancorp, Inc. | |
F.N.B. Corporation | Omega Financial Corporation | |
Harleysville National Corporation | East Penn Financial Corporation | |
First Keystone Corporation | Pocono Community Bank | |
Northwest Bancorp, Inc. (MHC) | Penn Laurel Financial Corp | |
Citizens & Northern Corporation | Citizens Bancorp, Inc. | |
Conestoga Bancorp, Inc. | PSB Bancorp, Inc. | |
Centra Financial Holdings, Inc. | Smithfield State Bank of Smithfield, PA | |
F.N.B. Corporation | Legacy Bank | |
Orrstown Financial Services, Inc. | First National Bank of Newport | |
Tower Bancorp Incorporated | FNB Financial Corporation | |
Willow Grove Bancorp, Inc. | Chester Valley Bancorp Inc. |
• | the earnings per share of the acquired company for the latest 12 months of results publicly available prior to the announcement of the acquisition; | ||
• | book value per share of the acquired company based on the latest publicly available financial statements of the company available prior to the announcement of the acquisition; |
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• | tangible book value per share of the acquired company based on the latest publicly available financial statements of the company available prior to the announcement of the acquisition; | ||
• | tangible equity premium to core deposits based on the latest publicly available financial statements of the company available prior to the announcement of the acquisition; and | ||
• | market premium based on the latest closing price 1-day prior to the announcement of the acquisition. |
Comparable | ||||||||
FNB / IRGB | Transactions | |||||||
Transaction Price to: | Merger | Median | ||||||
Last Twelve Months Earnings per Share | 23.4 | x | 22.4x | |||||
Book Value | 222 | % | 194 | % | ||||
Tangible Book Value | 227 | % | 235 | % | ||||
Core Deposit Premium | 21.8 | % | 19.0 | % | ||||
Market Premium(1) | 42.9 | % | 39.0 | % |
(1) | Based on our closing price of $53.00 on February 12, 2008. |
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• | five shares of FNB common stock; or | ||
• | $75.00 in cash. |
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• | all cash; | ||
• | all shares of FNB common stock; or | ||
• | a combination of cash and shares of FNB common stock. |
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For example, assuming you hold 100 shares of our common stock, if you made: |
• | an all stock election, you will receive 500 shares of FNB common stock; | ||
• | an all cash election, you will receive $7,500 in cash; or | ||
• | a combination election, you will receive: |
• | assuming an election of 75% cash and 25% stock, approximately $5,625 in cash and 125 shares of FNB common stock; | ||
• | assuming an election of 50% cash and 50% stock, approximately $3,750 in cash and 250 shares of FNB common stock; or | ||
• | assuming an election of 75% stock and 25% cash, approximately $1,875 in cash and 375 shares of FNB common stock. |
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• | five shares of FNB common stock for each share of our common stock you hold; | ||
• | $75.00 in cash for each share of our common stock you hold; or | ||
• | five shares of FNB common stock for each share of our common stock you hold for which you elect to receive FNB common stock and $75.00 in cash for each remaining share of our common stock you hold. |
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• | if you made an all cash election, you will receive $75.00 in cash for each share of our common stock you hold; | ||
• | if you made an all stock election, you will receive five shares of FNB common stock for each share of our common stock you hold; | ||
• | if you made a combination election, you will receive five shares of FNB common stock per share of our common stock you hold for which you elected to receive FNB common stock and $75.00 in cash for each remaining share of our common stock you hold; and | ||
• | if you hold undesignated shares, you will be deemed to have made an all cash election and will receive $75.00 in cash for each share of our common stock you hold, subject to the allocation provisions in the merger agreement. |
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• | if you made an all cash election, you will receive $75.00 in cash for each share of our common stock you hold; | ||
• | if you hold undesignated shares, you will be deemed to have made an all cash election and you will receive $75.00 in cash for each share of our common stock you hold; | ||
• | if you made a stock election or a combination election, you will receive the following consideration for the shares of our common stock you hold for which you elected to receive FNB common stock: |
• | a number of shares of FNB common stock equal to the product of: (i) five multiplied by (ii) the sum of the number of shares of our common stock as to which you made an all stock election or a combination election to the extent you elected to receive FNB common stock multiplied by (iii) the stock proration factor; and | ||
• | cash in an amount equal to the following: (i) $75.00 multiplied by (ii) the sum of the number of shares of our common stock with respect to which you made an all stock election or a combination election to the extent you elected to receive FNB common stock multiplied by (iii) one minus the stock proration factor; and |
• | if you made a combination election, you will receive $75.00 in cash for each of the remaining shares of our common stock you hold. |
• | if you made an all stock election, you will receive five shares of FNB common stock for each share of our common stock you hold; | ||
• | if you made a combination election, you will receive five shares of FNB common stock for each share of our common stock you hold for which you elected to receive FNB common stock; |
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• | R&T will then select by pro rata allocation according to the number of shares of our common stock held by the holders of the undesignated shares, other than shares for which dissenters rights have properly been perfected under the PBCL, a sufficient number of shares such that aggregate number of shares of FNB common stock that would be issued in the merger as nearly as possible equals 3,070,856 shares of FNB common stock, subject to adjustment pursuant to the merger agreement; | ||
• | if the sum of the undesignated shares plus the shares of our common stock as to which all stock elections were made plus the number of shares of our common stock for which FNB common stock was elected in connection with combination elections by our other shareholders multiplied by five is less than, and not approximately equal to, 3,070,856 shares of FNB common stock, then (i) each shareholder who made a combination election will receive the following consideration for each share of our common stock as to which such shareholder elected to receive cash and (ii) each shareholder who made an all cash election will receive the following consideration for each share of our common stock such shareholder held: |
• | cash in an amount equal to the following: (i) $75.00 multiplied by (ii) the number of shares of our common stock with respect to which you made | ||
an all cash election or a combination election to the extent you elected to receive cash multiplied by (iii) one minus the cash proration factor; and | |||
• | the number of shares of FNB common stock equal to the product of: (i) five multiplied by (ii) the number of shares of our common stock with respect to which you made an all cash election or a combination election to the extent you elected to receive cash multiplied by (iii) the cash proration factor; and |
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• | $3,750 in cash with respect to the 50 shares for which the holder made a cash election; and | ||
• | that number of shares of FNB common stock as equal 50 times the stock proration factor and $75.00 per share in cash with respect to that portion of the 50 shares for which such holder did not receive FNB common stock; |
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• | 250 shares of FNB common stock with respect to the 50 shares for which the holder made a stock election; and | ||
• | that amount of cash as equals $3,750 times one minus the cash proration factor and that five shares of FNB’s common stock for each of the 50 shares for which such holder did not receive cash times the cash proration factor. |
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These interests relate to or arise from, among other things: |
• | the continued indemnification of our current directors and executive officers under the merger agreement and providing these individuals with directors’ and officers’ insurance; | ||
• | the potential change of control payments pursuant to employment or change of control agreements with IRGB Bank; | ||
• | one member of our board of directors, who has not as yet been identified, will be appointed as a member of FNB Bank’s board of directors and will receive certain fees for such services; and | ||
• | three members of our board of directors, who have not as yet been identified, will be offered the opportunity to serve as members of FNB’s Pittsburgh Region advisory board of directors and will receive certain fees for such services. |
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• | principally a merger of banks subject to the review and approval of another federal bank supervisory agency; | ||
• | no company engaged in activities subject to approval under Section 4 of the BHCA; | ||
• | compliance with capital requirements both before and after the transaction; and | ||
• | certain other conditions specified in Regulation Y. In the event the Federal Reserve Board does not grant the requested waiver, the merger will be subject to an application and review and approval by the Federal Reserve Board. |
• | would result in a monopoly; | ||
• | would be in furtherance of any combination or conspiracy to monopolize or to attempt to monopolize the business of banking in any part of the United States; or | ||
• | may have the effect in any section of the United States of substantially lessening competition, tending to create a monopoly or resulting in a restraint of trade, unless the Federal Reserve Board finds that the anti-competitive effects of the transactions are clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the communities to be served. |
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• | that will result in a monopoly or be in furtherance of any combination or conspiracy to monopolize or to attempt to monopolize the business of banking in any part of the United States; | ||
• | if its effect in any section of the country may be substantially to lessen competition or tend to create a monopoly; or | ||
• | if it would in any other manner be a restraint of trade, |
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• | notify the Department of the proposed merger; | ||
• | provide such evidence of the adoption of plan of merger as the Department may request; | ||
• | notify the Department of any abandonment or disapproval of the plan of merger; and | ||
• | file with the Department and with the Pennsylvania Department of State a certificate of the approval of the merger by the OCC. |
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• | You must notify us in writing before the date of our special meeting of your intention to demand that you be paid the fair value of your IRGB shares if the merger is completed. Neither a no vote by proxy on the merger proposal nor a no vote by ballot at our special meeting will constitute the required notice; | ||
• | You must make no change in the beneficial ownership of your IRGB shares from the date you file a notice of intention to demand payment continuously through the effective time of the merger; and |
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• | You must refrain from voting your shares in favor of the merger. Neither an abstention from voting with respect to, nor a failure to vote in person or by proxy against approval of, the merger proposal will constitute a waiver of your dissenters rights. However, a signed proxy that is returned without any instruction as to how the proxy should be voted will be voted in favor of the merger proposal and will be deemed a waiver of your dissenters rights. |
• | our closing balance sheet and statement of income for our fiscal year ending not more than 16 months before the date of our remittance or our notice, together with our latest available interim financial statements; | ||
• | a statement of our estimate of the fair value of your shares; and |
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• | a notice of your right to demand payment or supplemental payment, as the case may be, accompanied by a copy of Subchapter D. |
• | completion of the merger; | ||
• | timely receipt of any demand for payment; or | ||
• | timely receipt of any estimate of shareholders of the fair value of their IRGB shares, |
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• | our shareholders approve and adopt the merger agreement and the merger by the necessary vote; | ||
• | FNB and we obtain all required governmental and regulatory consents and approvals; and | ||
• | all other conditions to the merger set forth in this proxy statement/prospectus and the merger agreement are either satisfied or waived. |
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• | corporate matters, including due organization, qualification and authority of both FNB and us and each of our respective subsidiaries; | ||
• | capitalization; | ||
• | authority relative to execution and delivery of the merger agreement and the absence of conflicts with, or violations of, such party’s organizational documents or other obligations as a result of the merger; | ||
• | required governmental filings and consents for approval of the merger and the absence of any defaults; | ||
• | the timely filing of reports with governmental entities, and the absence of investigations by or disputes with regulatory agencies; | ||
• | financial statements; | ||
• | broker’s fees payable in connection with the merger; | ||
• | the absence of certain material changes or events; | ||
• | legal proceedings; | ||
• | tax matters; | ||
• | employee benefit plans; | ||
• | compliance with applicable laws; | ||
• | material contracts and the absence of defaults thereunder; | ||
• | the absence of agreements with regulatory agencies; | ||
• | undisclosed liabilities; | ||
• | environmental liabilities; | ||
• | reorganization; | ||
• | loans and nonperforming and classified assets; | ||
• | fiduciary accounts; and | ||
• | allowances for loan losses. |
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• | the receipt of an opinion from our financial advisor; | ||
• | real property; | ||
• | insurance; | ||
• | the inapplicability of state anti-takeover laws; | ||
• | intellectual property; and | ||
• | investment securities. |
• | conduct FNB’s and our respective businesses and that of our respective subsidiaries in the ordinary course in all material respects; and | ||
• | use our reasonable best efforts to maintain and preserve intact our respective business organizations, employees and advantageous business relationships. |
• | declare, set aside or pay any dividends or make any other distributions on any shares of our capital stock, other than regular quarterly dividends not in excess of $0.30 per share, or split, combine, reclassify, redeem, purchase or otherwise acquire any shares of our common stock or any rights, warrants or options to acquire such shares; | ||
• | grant any stock options, restricted stock units or other equity-based awards with respect to shares of our common stock under any of our stock plans or grant any individual, corporation or other entity any right to acquire shares of our common stock or issue any additional shares of our common stock or other securities, other than the issuance of our common stock upon the exercise of our outstanding stock options; | ||
• | amend our articles of incorporation or bylaws; |
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• | acquire or agree to acquire by merging or consolidating with, or by purchasing any assets or equity securities of, any business or other person or entity or otherwise acquire or agree to acquire any assets, except inventory or other similar assets in the ordinary course of business consistent with past practice or open, acquire, sell or close any of our branches; | ||
• | sell, lease, license, mortgage or otherwise encumber any of our properties or assets other than securitizations and other transactions in the ordinary course of business consistent with past practice; | ||
• | except for borrowings having a maturity of not more than 30 days under existing credit facilities, or renewals or extensions thereof that do not increase the aggregate available borrowing amount and that do not provide for termination fees or penalties or prohibit pre-payment or provide for pre-payment penalties or contain less advantageous financial terms than existing credit facilities that are incurred in the ordinary course of business consistent with past practice or for borrowings under outstanding credit facilities, incur any indebtedness for borrowed money, issue any debt securities or assume, guarantee, endorse or otherwise become responsible for the obligation of any person, or, other than in the ordinary course of business consistent with past practice, make any investment in any person other than our subsidiaries; | ||
• | change in any material respect our accounting methods, principles or practices in effect as of the date of the merger agreement, except as required by changes in generally accepted accounting principles or regulatory accounting principles; | ||
• | change in any material respect our underwriting, operating, investment, risk management or other similar policies except as required by applicable law or regulatory policies; | ||
• | make, change or revoke any material tax election, file any material amended tax return, enter into any closing agreement with respect to a material amount of taxes, settle any material tax claim or surrender any right to a refund of a material amount of taxes; | ||
• | other than in the ordinary course of business consistent with past practice, terminate or waive any material provision of any material contract or enter into or renew any agreement containing restrictions on our business; | ||
• | incur any capital expenditure in excess of $20,000 individually or $50,000 in the aggregate; | ||
• | except as required by agreements in effect on the date of the merger agreement, alter in any material respect any material interest in any business entity in |
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which we had any ownership interest on the date of the merger agreement, other than by foreclosure or debt restructuring in the ordinary course of business; |
• | agree or consent to any material agreement or material modifications of an existing agreement with any regulatory authority or governmental entity; | ||
• | pay, discharge or settle any action, proceeding, order or investigation to which we are a party other than a monetary settlement that involves the payment of not more than $25,000 individually or $50,000 in the aggregate and that does not create a precedent for other pending or potential claims or litigation proceedings; | ||
• | issue any broadly distributed communication of a general nature to our employees or customers without the prior approval of FNB, except for communications in the ordinary course of business that do not relate to the merger or the transactions contemplated by the merger agreement; | ||
• | take any action or knowingly fail to take any action that would reasonably be expected to prevent the merger from qualifying as a reorganization for U.S. federal income tax purposes; | ||
• | take any action that would materially impede or delay the ability of FNB and us to obtain any regulatory approvals required for the transactions contemplated by the merger agreement; | ||
• | take any action that is interested or is reasonably likely to result in: |
• | any of our representations or warranties in the merger agreement being or becoming untrue in any material respect; | ||
• | any of the conditions precedent to FNB’s obligations under the merger agreement not being satisfied; or | ||
• | a violation of any provision of the merger agreement; |
• | make, renew or otherwise modify any loan, loan commitment or other extension of credit to any person or entity if the loan is classified substandard, doubtful or loss on our books or, if the loan is classified special mention and is in an amount in excess of $150,000 without FNB’s approval, or make, renew or modify any of the following loans if FNB shall object to such loan within three business days after receiving notice thereof from IRGB Bank: |
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• | an unsecured loan to any person if immediately after making such loan the person would be indebted to IRGB Bank in an aggregate amount in excess of $200,000 on an unsecured or undersecured basis; | ||
• | a secured loan to any person if immediately after making such loan the person would be indebted to IRGB Bank in an aggregate amount in excess of $1,500,000 except for a loan secured by a first mortgage on single-family owner-occupied real estate; | ||
• | a loan secured by an owner-occupied 1-4 single-family residence with a principal balance in excess of $500,000; or | ||
• | any loan that does not conform with IRGB Bank’s credit policy manual; |
• | enter into, amend or renew any employment, consulting, severance or similar agreements with any of our directors, officers or employees or grant any wage or salary increase or increase any employee benefit, including discretionary or other incentive or bonus payments, except in accordance with the terms of our benefit plans, or accelerate the vesting of any unvested stock options, except for: |
• | normal increases in the ordinary course of business consistent with past practice that, in the aggregate, do not exceed 3.5%, or, in the case of any one individual, 5%; | ||
• | changes required by applicable law; | ||
• | payments we disclosed to FNB in a disclosure schedule to the merger agreement; | ||
• | retention bonuses to such persons and in such amounts as FNB and we mutually agree, provided, however, that FNB shall provide a retention bonus in the aggregate amount of $150,000, which will be allocated to our employees and employees of IRGB Bank at the discretion of our executive vice president, after consultation with FNB; and | ||
• | severance payments pursuant to severance agreements or employment agreements we disclosed to FNB in a disclosure schedule to the merger agreement; |
• | hire or promote any employee, except to satisfy existing contractual obligations, to fill vacancies on the date of the merger agreement as disclosed by us to FNB in a schedule to the merger agreement or to fill vacancies arising after the date of the merger agreement at a comparable level of compensation with employees |
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whose employment is terminable at will, provided that the total annual compensation for any one such employee shall not exceed $40,000; or |
• | agree to take, make any commitment to take or adopt any resolutions of our board of directors in support of any of the foregoing prohibited actions. |
• | amend or repeal the FNB certificate of incorporation or FNB bylaws other than amendments that are not adverse to us or our shareholders or that would not impede FNB’s ability to complete the transactions contemplated by the merger agreement; | ||
• | take any action, or knowingly fail to take any action, that would reasonably be expected to prevent the merger from qualifying as a reorganization for U.S. federal income tax purposes; | ||
• | take any action that is intended, or is reasonably likely, to result in: |
• | any of FNB’s representations or warranties in the merger agreement being or becoming untrue in any material respect; | ||
• | any of the conditions precedent to our obligations under the merger agreement not being satisfied; or | ||
• | a violation of the merger agreement; |
• | make any material investment by purchase of stock or assets, among other things, that would be reasonably expected to prevent or materially impede or delay the consummation of the transactions contemplated by the merger agreement; | ||
• | take any action that would materially impede or delay the ability of FNB or us in obtaining any necessary governmental or regulatory approvals required for the transactions contemplated by the merger agreement; or | ||
• | agree to take or make any commitment to take or adopt any resolutions of FNB’s board of directors in support of any of the foregoing prohibited actions. |
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• | initiate, solicit, encourage or take any action to facilitate any inquiries or proposals for any Acquisition Proposal, as defined below; or | ||
• | enter into or participate in any discussions or negotiations with, furnish any information to or cooperate with, any person or entity seeking to make, or who has made, an Acquisition Proposal; or | ||
• | approve, recommend or enter into any letter of intent, agreement or other commitment regarding any Acquisition Proposal. |
• | we have first entered into a confidentiality agreement with the party proposing the Superior Proposal with confidentiality terms no less favorable to us than those contained in our confidentiality agreement with FNB; and | ||
• | our board of directors concludes in good faith, after consultation with its outside legal counsel, that failure to take these actions could reasonably be expected to cause our board of directors to violate its fiduciary duties under applicable law. |
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• | to notify FNB promptly, and in any event within 24 hours, after we receive any Acquisition Proposal, or any information related thereto, which notification shall describe the Acquisition Proposal and the third party making it; and | ||
• | to cease any discussions or negotiations existing on the date of the merger agreement with any persons with respect to any Acquisition Proposal. |
• | direct or indirect acquisition of a substantial (i.e., 20% or more) portion of the net revenues, net income or net assets of us and our subsidiaries taken as a whole; | ||
• | direct or indirect acquisition of 10% or more of our common stock after February 14, 2008 by a person who on February 14, 2008 did not own 10% or more of our common stock; | ||
• | direct or indirect acquisition of 5% or more of our common stock after February 14, 2008 by a person who owned 10% or more of our common stock on February 14, 2008; | ||
• | tender offer or exchange offer that if consummated would result in any person beneficially owning 10% or more of our common stock; or | ||
• | merger, consolidation, business combination, recapitalization, liquidation or dissolution involving us, other than our proposed merger with FNB. |
• | is on terms that in the good faith judgment of our board of directors are more favorable to us than the terms of the proposed merger with FNB; |
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• | has financing, to the extent required, that is fully committed or reasonably determined by our board of directors to be available to the party making the offer; and | ||
• | is reasonably capable of being completed. |
• | the approval and adoption of the merger agreement and the approval of the merger by the requisite vote of the holders of our outstanding shares of common stock as well as the approval of the listing on the NYSE of the FNB common stock to be issued in the merger, subject to official notice of issuance; | ||
• | the receipt and effectiveness of all governmental and other approvals, registrations and consents and the expiration of all related waiting periods required to complete the merger and, in the case of FNB, none of the regulatory approvals shall have resulted in a materially burdensome regulatory condition; | ||
• | the absence of any law, statute, regulation, judgment, decree, injunction or other order in effect by any court or other governmental entity that prevents, prohibits or makes illegal completion of the transactions contemplated by the merger agreement; | ||
• | the registration statement with respect to the FNB common stock to be issued in the merger shall have become effective under the Securities Act and no stop order or proceedings for that purpose will have been initiated or threatened by the SEC; | ||
• | the truth and correctness of the representations and warranties of FNB and us in the merger agreement and the performance by each of FNB and us in all material respects of our respective obligations under the merger agreement and the receipt by each of FNB and us of certificates from the other to that effect; and | ||
• | the receipt by each of FNB and us of a legal opinion from our respective outside counsel that the merger will be treated as a reorganization within the meaning of Section 368(a) of the Code. |
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• | if any of the required regulatory approvals for the merger are denied and the denial is final and nonappealable unless the denial is due to the terminating party’s breach of its covenants in the merger agreement; | ||
• | if the merger has not been completed by November 30, 2008, unless the failure to complete the merger by that date is due to the terminating party’s actions; | ||
• | provided the terminating party is not then in material breach, if there is a breach of the merger agreement by the other party that would cause the failure of the closing conditions described above, unless the breach is capable of being, and is, cured within 30 days of notice of the breach; or | ||
• | if our shareholders do not approve and adopt the merger agreement and approve the merger by the requisite vote, provided that we are not in material breach of our covenants to hold our special meeting and our board of directors is not in breach of its covenant to recommend such approval. |
• | if we have breached in any material respect our obligations with respect to Acquisition Proposals and Superior Proposals as described on pages through ; | ||
• | if we have failed to have our board of directors recommend that our shareholders approve and adopt the merger agreement and approve the merger, or if our |
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board of directors has withdrawn or modified its recommendation in a manner adverse to FNB; |
• | if our board of directors shall have recommended the approval of an Acquisition Proposal; or | ||
• | if we have breached in any material respect our obligation to hold our special meeting. |
• | termination will not relieve a breaching party from liability for its willful breach giving rise to the termination; and | ||
• | the confidentiality agreement between the parties will survive termination. |
• | if FNB terminates the merger agreement prior to our special meeting because we have breached our obligation not to initiate, solicit or encourage any third parties to make an Acquisition Proposal or otherwise breached our obligations with respect to Acquisition Proposals or Superior Proposals in a manner adverse to FNB, our board of directors fails to make or withdraws its recommendation of the merger proposal or we fail to hold our special meeting; | ||
• | if we terminate the merger agreement and accept an Acquisition Proposal that is a Superior Proposal prior to the mailing of this proxy statement/prospectus and, after giving FNB an opportunity to adjust the terms of the merger agreement |
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such that the Acquisition Proposal no longer remains a Superior Proposal, the Acquisition Proposal remains a Superior Proposal; |
• | the termination of the merger agreement following the commencement of a tender offer or exchange offer for 25% or more of our common stock and we have not sent to our shareholders, within 10 days after the commencement of such offer, a statement that our board of directors recommends the rejection of such tender offer or exchange offer; or | ||
• | if FNB or we terminate the merger agreement because: |
• | our shareholders did not approve the merger proposal and an Acquisition Proposal has been made by a third party after February 14, 2008 and prior to the termination of the agreement; | ||
• | such Acquisition Proposal has not been withdrawn prior to such termination; and | ||
• | within 18 months following such termination, we enter into an agreement to merge with or be acquired by that third party or that third party acquires substantially all of our assets or that third party acquires more than 50% of our common stock. |
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• | any pre-existing condition limitation to the extent such conditions are covered under the applicable medical, healthcare and dental plans of FNB; and | ||
• | any waiting period limitation or evidence of insurability requirement under FNB’s welfare benefit plans in which our employees are eligible to participate following the merger to the extent that the applicable employee had satisfied any similar limitation or requirement under the corresponding IRGB plan in which such employee participated prior to the merger. |
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• | dealers in securities or foreign currencies; | ||
• | tax-exempt organizations; | ||
• | foreign persons; | ||
• | financial institutions or insurance companies; | ||
• | holders who have a “functional currency” other than the U.S. dollar; | ||
• | holders who own their shares indirectly through partnerships, trusts, or other entities that may be subject to special treatment; | ||
• | holders all or part of whose FNB stock received in the merger will be subject to forfeiture provisions; | ||
• | holders who acquired their shares in connection with stock options or stock purchase plans or other compensatory transactions; and | ||
• | holders who hold their shares as a hedge or as part of a straddle, constructive sale, conversion transaction, or other risk management transaction. |
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• | the amount of gain realized (that is, the excess, if any, of the sum of the cash (excluding any cash received in lieu of fractional FNB common stock) and the fair market value of the FNB common stock received over such holder’s tax basis in our shares surrendered in the merger); and |
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• | the amount of cash (excluding any cash received in lieu of fractional FNB common stock) received in the merger. |
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• | the amount, if any, to be paid to our shareholders who perfect dissenters rights; | ||
• | whether prior to or in connection with the merger IRGB or FNB or parties related to either redeems or acquires IRGB shares or makes distributions; and | ||
• | whether there will be any repurchases by FNB or parties related to FNB of the FNB common stock to be issued in the merger. |
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• | furnishes a correct taxpayer identification number and certifies that such holder is not subject to backup withholding on the substitute Form W-9 or successor form included in the election form/letter of transmittal received; or | ||
• | is otherwise exempt from backup withholding. |
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Pennsylvania law provides that our board of directors may remove a director from office if he (i) is adjudicated an incompetent by a court or is convicted of a felony; (ii) if within 60 days after notice of election, the director does not accept office either in writing or by attending a meeting of our board of directors. Our entire board of directors or any individual director may be removed from office without assigning any cause by the vote of our shareholders entitled to cast at least a majority of the vote which all shareholders would be entitled to cast at an annual election of directors. Upon application of any shareholder or director, a court may remove from office any director in case of fraudulent or dishonest acts, or gross abuse of authority or discretion, or for any other proper cause, and may bar from office any director so removed for a period prescribed by the court. Vacancies on our | Under Florida law, unless the articles of incorporation of a corporation provide otherwise, directors may be removed by the corporation’s shareholders with or without cause; provided that, if a director is elected by a voting group, only the shareholders of that voting group may participate in the vote to remove him or her. Article 6 of FNB’s articles of incorporation, however, provides that, subject to the rights of holders of any preferred stock, any director or the entire board of directors may be removed without cause by the affirmative vote of the holders of at least 75% of the then outstanding shares of FNB common stock. Florida law and FNB’s bylaws provide that vacancies on the FNB board of directors, including vacancies resulting from an increase in the number of directors or resulting from a removal from office, may be filled by a majority vote of the remaining directors, though less than a |
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board of directors, including vacancies resulting from an increase in the number of directors, may be filled by a majority vote of the remaining members of our board of directors, though less than a quorum, or by a sole remaining director, to serve until his successor is elected by the shareholders. | �� | quorum. |
IRGB | FNB | |
Pennsylvania law provides that the holders of a majority of votes entitled to be cast on a matter to be considered, represented in person or by proxy, constitute a quorum of that voting group for action on the matter. Pennsylvania law further provides that, if a meeting called for the election of directors is adjourned, the shareholders who attend the resumption of the adjourned meeting, although less than a quorum, shall nevertheless constitute a quorum for the purpose of electing directors. | FNB’s bylaws and Florida law provide that the holders of a majority of votes entitled to be cast on a matter to be considered, represented in person or by proxy, constitute a quorum of that voting group for action on the matter. FNB’s bylaws further provide that whenever the holders of any class or series of shares are entitled to vote separately on a specified item of business, the holders of a majority of the votes of that class or series entitled to be cast, represented in person or by proxy, shall constitute a quorum of such class or series. |
IRGB | FNB | |
Pennsylvania law provides that any regular or special meeting of shareholders may be adjourned for such periods as may be directed by the shareholders present in person or by proxy at the meeting who are entitled to vote at that meeting. Nevertheless, adjournments of any meeting at which directors are to be elected may be adjourned only from day to day, or for such longer periods not exceeding 15 days each. | FNB’s bylaws and Florida law provide that, if a quorum is not present or represented at a shareholders meeting, the shareholders present and entitled to vote at the meeting may adjourn such meeting from time to time. |
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Our by-laws provide that special meetings of our shareholders may be called at any time by the President, Board of Directors or shareholders entitled to cast two-fifths of the votes at the meeting, by delivering a written request to our Secretary. | FNB’s bylaws provide that special meetings of shareholders may be called only by the chairman of the board, the president or the secretary of FNB pursuant to a resolution or written direction of at least 75% of the members of the FNB board of directors or by the holders of not less than 10% of the outstanding shares of FNB. |
IRGB | FNB | |
Pennsylvania law provides that any action that may be taken at a meeting of the shareholders may be taken without a meeting, if a consent or consents in writing setting forth the action so taken shall be signed by all of the shareholders who would be entitled to vote at a meeting for such purpose and shall be filed with our Secretary. | Florida law permits any action that may be taken at a meeting of the shareholders of FNB to be taken without a meeting, if, prior or subsequent to the action, one or more written consents signed by a majority the shareholders who would be entitled to vote at a meeting for such purpose are delivered to FNB. |
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Under Pennsylvania law, dissenters’ rights are generally afforded to shareholders in the event of corporate actions involving certain mergers, share exchanges, transfers of all or substantially all of the assets of the corporation, as well as certain other fundamental transactions in which the corporation is not the acquiring corporation. Under Pennsylvania law, dissenters’ rights generally are denied to holders of shares that | Under Florida law, dissenters’ rights are available in connection with corporate actions involving certain mergers, share exchanges, sales or other dispositions of all or substantially all of the property of the corporation other than in the ordinary course of business, the approval of certain control-share acquisitions and amendments of the articles of incorporation that would materially and adversely affect the rights or preferences of shares held by the dissenting |
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shareholders. | ||
are listed on a national securities exchange, quoted on the Nasdaq National Market or held beneficially or of record by more than 2,000 shareholders when a plan of merger converts the shares into shares of the acquiring, surviving, new or other corporation, whether or not the shares of the acquiring, surviving, new or other corporation are listed on the exchange or privately held. | Under Florida law, dissenters’ rights generally are denied to holders of shares listed on a national securities exchange or the OTC Bulletin Board or when the corporation’s shares are held of record by at least 2,000 persons and such outstanding shares have a market value of at least $10 million, not counting the value of certain insider shares. |
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Under Pennsylvania law, derivative actions may be brought by a shareholder, even if the shareholder was not a shareholder at the time of the alleged wrongdoing, if a court determines that there is a strong prima facie case in favor of the claim and a serious injustice will result without such action. | Under Florida law, a derivative action may be brought only by a person who was a shareholder of FNB at the time of the alleged wrongdoing unless the person became a shareholder through transfer by operation of law from one who was a shareholder at the time of the alleged wrongdoing. |
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Subject to any restrictions in a corporation’s articles of incorporation or by-laws, Pennsylvania law generally provides that a corporation may make distributions to its shareholders unless after giving effect thereto (i) the corporation would not be able to pay its debts as they become due in the usual course of business, or (ii) the corporation’s total assets would be less than the sum of its total liabilities plus the amount that would be needed upon the dissolution of the corporation to satisfy the preferential rights | Subject to any restrictions in a corporation’s articles of incorporation, Florida law generally provides that a corporation may make distributions to its shareholders unless after giving effect thereto: • the corporation would not be able to pay its debts as they become due in the usual course of business; or • the corporation’s total assets would be less than the sum of its total liabilities |
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of shareholders having superior preferential rights to those shareholders receiving the distribution. Neither our articles of incorporation nor our by-laws contain any restrictions on the payment of dividends or the making of distributions to shareholders. | plus the amount that would be needed upon the dissolution of the corporation to satisfy the preferential rights of shareholders having superior preferential rights to those shareholders receiving the distribution. FNB’s articles of incorporation do not contain any restrictions on the payment of dividends or the making of distributions to shareholders. |
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We only have one authorized class of stock, common stock, which has no preferential rights. | The articles of incorporation of FNB authorize it to issue multiple classes and series of stock that may have rights preferential to the FNB common stock to be received by our shareholders as a result of the merger. No such stock is currently outstanding. Such preferential rights include rights to preferential dividend rates compared to such rates for FNB common stock, rights to prevent dividends from being paid on the common stock until dividends have been paid on the preferred stock, rights to preferential payments upon any liquidation of FNB, independent class voting rights with respect to certain fundamental transactions and rights to convert shares of FNB preferred stock into FNB common stock at a conversion ratio that protects such preferred shareholders against a decline in the price of FNB common stock by further diluting the common stock. |
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Our by-laws provide that our board of directors shall consist not less than five nor more than 12 members divided into three classes, as equal in number as possible, with each director serving a staggered three-year term. Under Pennsylvania law, a director must be at least 18 years of age, but a director need not be a resident of Pennsylvania or a shareholder. | FNB’s bylaws provide that the board of directors of FNB shall consist of such number of directors as may be determined by the board of directors of FNB, which number shall be not less than five nor more than 25. FNB’s bylaws further provide that FNB’s board of directors shall be divided into three classes as equal in number as possible, with each director having a staggered three-year term. Under Florida law and FNB’s bylaws, a director need not be a resident of Florida or a shareholder of FNB to qualify to serve as a director. FNB’s bylaws further provide that the directors must be at least 21 years of age. |
IRGB | FNB | |
Our by-laws do not provide for any procedures regarding the nomination of directors. | FNB’s bylaws provide that directors may be nominated for election to FNB’s board of directors by either a resolution of the board of directors or by a shareholder of FNB. FNB’s bylaws provide that a shareholder may make nominations for director by providing FNB with written notice of the shareholder’s intention to nominate a director, which written notice generally must be received not less than 14 days prior to the meeting of shareholders called for the election of directors. The notice of a shareholder’s intention to nominate a director must include the information required by FNB’s bylaws. |
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In an election of directors under cumulative voting, each share of stock normally having one vote for each director to be elected is entitled to a number of votes equal to the number of directors to be elected times the number of shares held with the right to distribute that number of votes among one or more candidates. Under Pennsylvania law, cumulative voting in the election of directors is available unless otherwise provided for in the articles of incorporation of the corporation. Our articles of incorporation are silent on this issue. | Under Florida law, cumulative voting in the election of directors is not available unless provided for in the articles of incorporation of the corporation. FNB has not provided for cumulative voting in its articles of incorporation. |
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Pennsylvania law permits a corporation to indemnify its directors and officers against expenses, judgments, fines and amounts paid in settlement incurred by them in connection with any pending, threatened or completed action or proceeding, and permits such indemnification against expenses incurred in connection with any pending, threatened or completed derivative action, if the director or officer has acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal proceeding, had no reasonable cause to believe his conduct was unlawful. Pennsylvania law further provides that expenses incurred in defending any action or proceeding may be paid by the corporation in advance of the final disposition upon receipt of an undertaking by or on behalf of | Florida law permits a corporation to indemnify a director or officer who was or is a party to any threatened, pending or completed action, suit or other type of proceeding, other than an action by or in the right of the corporation, by reason of the fact that he is or was a director or officer or is currently serving at the request of the corporation as a director or officer of another entity against expenses, including attorneys’ fees, judgments, fines, penalties and amounts paid in settlement actually and reasonably incurred by the director or officer in connection with such action, suit or proceeding. These indemnification rights apply if the director or officer acted in good faith and in a manner in which the director or officer reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to a criminal |
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the director or officer to repay the amount if it is ultimately determined that the director or officer is not entitled to be indemnified by the corporation. Under Pennsylvania law, the statutory provisions for indemnification and advancement of expenses are non-exclusive with respect to any other rights, such as contractual rights or rights granted pursuant to a by-law or by vote of shareholders or disinterested directors, to which a person seeking indemnification or advancement of expenses may be entitled. Such rights may, for example, provide for indemnification against judgments, fines and amounts paid in settlement incurred by the indemnified person in connection with derivative actions. Pennsylvania law and our articles of incorporation permit such derivative action indemnification in any case except where the act or failure to act giving rise to the claim for indemnification is determined by a court to have constituted willful misconduct or recklessness. Pennsylvania law and our articles of incorporation permit us to purchase and maintain insurance on behalf of our directors and officers against any liability asserted against the director or officer and incurred in such capacity, whether or not we would have the power to indemnify a director or officer against such liability. | action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. In addition, under Florida law, FNB may indemnify and hold harmless an officer or director who is a party to an action by or in the right of the corporation against expenses, including attorneys’ fees, and certain amounts paid in settlement, actually and reasonably incurred in connection with the defense or settlement of such proceeding, including any appeal thereof. Such indemnification shall be authorized if the director or officer has acted in good faith and in a manner in which the director or officer reasonably believed to be in or not opposed to the best interests of the corporation, except indemnification is not authorized where there is an adjudication of liability, unless a court determines, in view of all the circumstances, that such person is fairly and reasonably entitled to indemnity for such expenses. Florida law further provides that indemnification against the costs and expenses of defending any action is required to be made to any officer or director who is successful in defending a derivative action. Except with regard to the costs and expenses of successfully defending a derivative action as may be ordered by a court, indemnification is only required to be made to a director or officer if a determination is made that indemnification is proper under the circumstances. Such determination shall be made in accordance with the provisions of Florida law. | |
Florida law further provides that expenses incurred in defending any action or |
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proceeding may be paid by the corporation in advance of the final disposition of such action or proceeding upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it is ultimately determined that the director or officer is not entitled to be indemnified by the corporation. Under Florida law, the provisions for indemnification and advancement of expenses are not exclusive. A Florida corporation may make any other or further indemnification or advancement of expenses to any of its officers or directors, both as to action in their official capacity and as to action in another capacity while holding such office. Under Florida law, indemnification or advancement of expenses, however, shall generally not be made to or on behalf of any officer or director if a judgment or other final adjudication establishes that the director’s or officer’s actions or omissions were material to the cause of action so adjudicated and constitute: • a violation of the criminal law; | ||
• a transaction from which the officer or director derived an improper personal benefit; | ||
• an unlawful distribution; or | ||
• willful misconduct or a conscious disregard for the best interests of the corporation. Florida law and FNB’s articles of incorporation permit FNB to purchase and maintain insurance on behalf of any director or officer of FNB against any liability asserted against the director or officer and |
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incurred in such capacity, whether or not FNB would have the power to indemnify the director or officer against such liability. FNB’s articles of incorporation further provide that its directors, officers and any other person designated by the board of directors of FNB are entitled to be indemnified to the fullest extent permitted by law. |
IRGB | FNB | |
Pennsylvania law and our articles of incorporation include a provision limiting the personal liability of directors for monetary damages for actions taken as a director, other than as would constitute criminal conduct or with respect to liability for nonpayment of taxes, and except to the extent that the director has breached or failed to perform his duties to the corporation and the breach or failure to perform constitutes self-dealing, willful misconduct or recklessness. | Under Florida law, a director is not liable for monetary damages for any statement, vote, decision or failure to act regarding corporate management or policy, unless the director breached or failed to perform his or her duties as a director and the director’s breach of, or failure to perform, those duties constitutes a violation of criminal law, self-dealing, an unlawful distribution, willful misconduct or recklessness. FNB’s bylaws contain a provision limiting the liability of its directors to the fullest extent permitted by law. |
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Pennsylvania law requires the affirmative vote of a majority of the votes cast by all shareholders entitled to vote thereon to amend a corporation’s articles of incorporation, provided that shareholder approval is not required for certain non-material amendments. | In order to amend the articles of incorporation of a Florida corporation, Florida law generally requires that, unless the articles of incorporation provide for a greater vote, the votes cast in favor of such an amendment must exceed the votes cast against such an amendment at a meeting at which a quorum is present; provided, |
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Under Pennsylvania law, the power to adopt, amend or repeal by-laws may generally be vested, pursuant to the by-laws, in the directors, with certain statutory exceptions and subject to the power of the shareholders to change such action. | however, that a majority of the outstanding votes entitled to be cast on the amendment is required with respect to amendments that would create dissenters’ rights under Florida law. Further, under Florida law, shareholder approval is not required for certain non-material amendments. | |
Pennsylvania law further provides that, unless the articles of incorporation provide otherwise, the board of directors does not have the authority to adopt or change a bylaw on any subject that is committed expressly to the shareholders by statute, other than on the subject shareholder quorum rules if the corporation is a registered corporation such as us. Our by-laws provide that our by-laws may be amended, altered and repealed, and new by-laws may be adopted, by the shareholders or the board of directors at a regular or special meeting. | Under Florida law, a corporation’s bylaws may be amended or repealed by the board of directors or shareholders; provided, however, that the board of directors may not amend or repeal the corporation’s bylaws if the articles of incorporation reserve such power to the shareholders, or the shareholders, in amending or repealing the bylaws, expressly provide that the board of directors may not amend or repeal the bylaws or a particular bylaw provision. FNB’s bylaws provide that they may be altered or amended and new bylaws adopted by the affirmative vote of at least 75% of the members of FNB’s board of directors or by the affirmative vote of the holders of at least 75% of the outstanding shares entitled to vote thereon. |
IRGB | FNB | |
Under Pennsylvania law, a merger, consolidation, share exchange, dissolution or sale of substantially all of a corporation’s assets other than in the ordinary course of business must be approved by the affirmative vote of a majority of the votes cast by all shareholders entitled to vote thereon. Except as otherwise provided by the by-laws of a corporation, the | Under Florida law, generally, a merger, consolidation, share exchange, dissolution or sale of all or substantially all of a corporation’s assets other than in the ordinary course of business must be approved by the board of directors and by the affirmative vote of the holders of a majority of the shares entitled to vote thereon unless the corporation’s articles of |
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shareholders of a corporation do not have to approve a board of directors-approved plan of merger if, among other situations, immediately prior to the transaction, another corporation that is a party to the transaction directly or indirectly owns 80% or more of the outstanding shares of each class of the constituent corporation, or if • the surviving or new corporation is a business corporation incorporated in Pennsylvania with articles of incorporation that are identical to the articles of incorporation of the merged corporation, except for changes permitted by a board of directors without shareholder approval under Pennsylvania law; • each share of the merged corporation outstanding immediately prior to the effective date of the merger is to continue to be outstanding or will be converted into an identical share of the surviving or new corporation after the effective date of the merger; and • the shareholders of the merged corporation are to hold, in the aggregate, shares of the surviving or new corporation to be outstanding immediately after effectiveness of the plan of merger at least a majority of the votes entitled to be cast generally for the election of directors. | incorporation require a higher vote. Florida law further provides that, unless required by its articles of incorporation, shareholder approval of a plan of merger is not required if: • the articles of incorporation of the surviving corporation will not differ, except for certain minor amendments approved by the board of directors as provided by Florida law, from its articles before the merger; and • each shareholder of the surviving corporation whose shares were outstanding immediately prior to the effective date of the merger will hold the same number of shares, with identical designations, preferences, limitations and relative rights, immediately after the merger. FNB’s articles of incorporation require the affirmative vote of the holders of at least 75% of the outstanding shares of FNB common stock entitled to vote to approve a merger, consolidation or sale, lease, exchange or other disposition, in a single transaction or series of related transactions, of all or substantially all or a substantial part of the properties or assets of FNB, unless the board of directors of FNB has approved and recommended the transaction prior to the consummation thereof. |
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We are not a registered company and thus Pennsylvania’s interested shareholder law (Section 2538 of Subchapter D and Subchapter F of Chapter 25 of the PBCL) does not apply to us. | Florida law contains a number of provisions that require supermajority approval for certain transactions with affiliates. Under Florida law, if any person who together with such person’s affiliates and associates beneficially owns 10% or more of any voting stock of the corporation, or an Interested Person, is a party to any merger, consolidation, disposition of all or a substantial part of the assets of the corporation or a subsidiary of the corporation, or exchange of securities requiring shareholder approval, or a Business Combination, such transaction requires approval by the affirmative vote of the holders of two-thirds of the voting shares other than the shares beneficially owned by the Interested Person; provided, that such approval is not required if: | |
• the Interested Person transaction has been approved by a majority of the disinterested directors; | ||
• the corporation has not had more than 300 shareholders of record at any time during the three years preceding the date of the transaction’s announcement; | ||
• the Interested Person has been the beneficial owner of at least 80% of the corporation’s outstanding voting shares for at least five years preceding the date of the transaction’s announcement; | ||
• the Interested Person is the beneficial owner of at least 90% of the outstanding voting shares of the corporation, exclusive of shares acquired directly from the corporation in a transaction not approved by a majority of the disinterested directors; |
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• the corporation is an investment company registered under the Investment Company Act of 1940; or | ||
• the consideration to be received by holders of the stock of the corporation meets certain minimum levels determined by a formula under Section 607.0901(4)(f) of the Florida Business Corporations Act. |
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Under Pennsylvania law, a director shall perform his duties as a director in good faith, in a manner he reasonably believes to be in the best interests of the corporation and with such care, including reasonable inquiry, skill and diligence, as a person of ordinary prudence would use under similar circumstances, and shall be entitled in performing his duties to rely in good faith on information, opinions, reports or statements, including financial statements and other financial data, prepared or presented by: • one or more officers or employees of the corporation whom the director reasonably believes to be reliable and competent in the matters presented; • counsel, public accountants or other persons as to matters which the director reasonably believes to be within the professional or expert competence of such person; or • a committee of the board upon which he does not serve, as to matters within its designated authority, which committee the director reasonably believes to merit | Under Florida law, a director is required to discharge his or her duties in good faith, with the care an ordinarily prudent person in a like position would exercise under similar circumstances and in a manner reasonably believed to be in the best interests of the corporation. In discharging his or her duties, a director is entitled to rely on: • information, opinions, reports, or statements, including financial statements and other financial data, if presented or prepared by officers or employees of the corporation whom the director reasonably believes to be reliable and competent in the matters presented; • legal counsel, public accountants or other persons as to matters the director reasonably believes are within the person’s professional or expert competence; or • a committee of the Board of which the director is not a member if the director reasonably believes the committee merits confidence. |
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confidence. | ||
Pennsylvania law further provides that a director may, in considering the best interests of a corporation, consider (1) the effects of any action on shareholders, employees, suppliers, customers and creditors of the corporation, and upon communities in which offices or other facilities of the corporation are located, (2) the short-term and long-term interests of the corporation, including the possibility that the best interests of the corporation may be served by the continued independence of the corporation, (3) the resources, intent and conduct of any person seeking to acquire control of the corporation and (4) all other pertinent factors. | FNB’s articles of incorporation provide that the board of directors of FNB, in evaluating a proposal for an extraordinary corporate transaction, shall consider all relevant factors, including, without limitation, the long-term prospects and interests of the corporation and its shareholders, the social, economic, legal or other effects of any action on the employees, suppliers and customers of the corporation and its subsidiaries, the communities and societies in which FNB and its subsidiaries operate, and the economy of the state and the nation. FNB’s articles of incorporation further provide that, if the board of directors of FNB determines that such a proposal should be rejected, it may take any lawful action to accomplish its purpose. |
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Pennsylvania law permits an amendment to the corporation’s articles of incorporation or other corporate action, if approved by shareholders, to provide mandatory special treatment for specified groups of nonconsenting shareholders of the same class. Pennsylvania law also provides that directors may, in discharging their duties, consider the interests of a number of different constituencies, including shareholders, employees, suppliers, customers, creditors and the communities in which the corporation is located. Directors are not required to consider the interests of shareholders to a greater degree than other | FNB is subject to statutory “anti-takeover” provisions under Florida law. The FBCA restricts the voting rights of certain shares of a corporation’s stock when those shares are acquired by a party who, by such acquisition, would control at least 20% of all voting rights of the corporation’s issued and outstanding stock. The statute provides that the acquired shares, or the control shares, will, upon such acquisition, cease to have any voting rights. The acquiring party may, however, petition the corporation to have voting rights re-assigned to the control shares by way of an “acquiring person’s statement” submitted to the corporation in compliance with the |
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constituencies’ interests. Pennsylvania law expressly provides that directors do not violate their fiduciary duties solely by relying on poison pills or the anti-takeover provisions of Pennsylvania law. We are not a registered corporation and thus the anti-takeover provisions of Chapter 25 of the PBCL do not apply to us. | requirements of the statute. Upon receipt of such request, the corporation must submit such request for shareholder approval. Voting rights may be reassigned to the control shares by a resolution of a majority of the corporation’s shareholders for each class and series of stock, with the control shares not voting. In addition, there are various provisions in FNB’s articles of incorporation and bylaws that may serve as anti-takeover protections that include: | |
• the ability of FNB’s board of directors to fill vacancies resulting from an increase in the number of directors; | ||
• the supermajority voting requirements for certain corporate transactions; | ||
• the broad range of factors that FNB’s board of directors may consider in evaluating an unsolicited offer including a tender offer proposal; and | ||
• provisions in FNB’s articles of incorporation which authorize FNB’s board of directors, without further shareholder action, to issue from time to time, up to 20,000,000 shares of FNB preferred stock. The board of directors of FNB is empowered to divide any and all of the shares of FNB preferred stock into series and to fix and determine the relative rights and preferences of the shares of any series so established. |
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• | the high and low trading prices of shares of FNB common stock as reported on the NYSE; | ||
• | the high and low trading prices of shares of our common stock as reported on the OTC Bulletin Board; and | ||
• | quarterly cash dividends paid per share by FNB and IRGB. |
FNB Common Stock | IRGB Common Stock | |||||||||||||||||||||||
High | Low | Dividend | High | Low | Dividend | |||||||||||||||||||
2006: | ||||||||||||||||||||||||
First quarter | 17.70 | 15.74 | 0.235 | 62.00 | 52.05 | 0.26 | ||||||||||||||||||
Second quarter | 17.24 | 15.19 | 0.235 | 56.50 | 53.00 | 0.28 | ||||||||||||||||||
Third quarter | 17.00 | 15.15 | 0.235 | 64.00 | 52.50 | 0.28 | ||||||||||||||||||
Fourth quarter | 18.85 | 16.31 | 0.235 | 62.00 | 56.00 | 0.31 | ||||||||||||||||||
2007: | ||||||||||||||||||||||||
First quarter | 18.79 | 16.21 | 0.235 | 59.00 | 51.00 | 0.28 | ||||||||||||||||||
Second quarter | 17.91 | 16.41 | 0.235 | 52.50 | 49.50 | 0.30 | ||||||||||||||||||
Third quarter | 18.24 | 14.05 | 0.24 | 55.50 | 49.00 | 0.30 | ||||||||||||||||||
Fourth quarter | 17.92 | 13.85 | 0.24 | 55.50 | 48.00 | 0.33 | ||||||||||||||||||
2008: | ||||||||||||||||||||||||
First quarter | 16.50 | 12.52 | 0.24 | 75.95 | 47.00 | 0.30 | ||||||||||||||||||
Second quarter (through May 13) | 16.99 | 14.74 | — | 76.99 | 71.00 | 0.30 |
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Amount and Nature of | ||||||||
Name of Individual or Identify of Group | Beneficial Ownership (1)(2) | Percent of Shares (3) | ||||||
5% or Greater Holders: | ||||||||
Richard P. Anton | 102,949 | 9.22 | % | |||||
FRG Management L.P. | 71,834 | 6.43 | % | |||||
Directors and Executive Officers: | ||||||||
Richard L. Anderson | 1,000 | — | ||||||
Joanne Marie Andiorio, Dr. P.H. | 0 | — | ||||||
Amy Bitz | 1,195 | — | ||||||
Thomas M. Colella | 7,800 | — | ||||||
William M. Densmore | 10,400 | — | ||||||
Paul F. Fagan | 66 | — | ||||||
Daniel A. Goetz | 20,100 | 1.80 | % | |||||
Michael J. Hagan | 942 | — | ||||||
Karen Joyce | 3,504 | — | ||||||
Gregory M. Melvin | 0 | — | ||||||
Joseph J. Plichta | 1,705 | — | ||||||
Edward V. Randall, Jr. | 1,000 | — | ||||||
Duane W. Swager | 4,200 | — | ||||||
All officers and directors as a group (13 persons) | 51,912 | 4.65 | % |
(1) | Information furnished by our directors and officers. | |
(2) | The securities “beneficially owned” by an individual are determined in accordance with the definition of “beneficial ownership” set forth in the General Rules and Regulations of the SEC and may include securities owned by or for the individual’s spouse and minor children and any other relative who has the same home, as well as securities to which the individual has or shares voting or investment power. Beneficial ownership may be disclaimed as to certain of the securities. Except as otherwise indicated, the address for each of the following persons is our principal corporate address. | |
(3) | Less than 1% unless otherwise indicated. |
-143-
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ADJOURNMENT PROPOSAL
-144-
Table of Contents
-145-
Table of Contents
-146-
Table of Contents
-147-
Audited: | ||||
F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-7 | ||||
F-27 | ||||
F-28 | ||||
F-29 | ||||
F-30 | ||||
F-31 | ||||
F-32 | ||||
Unaudited: | ||||
F-54 | ||||
F-55 |
F-1
Table of Contents
F-2
Table of Contents
December 31, | ||||||||
2007 | 2006 | |||||||
ASSETS | ||||||||
Cash and due from banks | $ | 6,559,383 | $ | 5,435,804 | ||||
Interest-bearing deposits with other banks | 80,767 | 101,002 | ||||||
Federal funds sold | 4,522,573 | 7,893,460 | ||||||
Total cash and cash equivalents | 11,162,723 | 13,430,266 | ||||||
Loans held for sale | 755,000 | 363,900 | ||||||
Investment securities available for sale | 37,436,015 | 36,703,282 | ||||||
Investment securities held to maturity (fair value of $80,599,308 and $76,073,069) | 81,341,310 | 77,473,723 | ||||||
Loans (net of unearned income of $479,843 and $635,190) | 165,253,784 | 166,878,330 | ||||||
Less allowance for loan losses | 1,850,183 | 1,765,486 | ||||||
Net loans | 163,403,601 | 165,112,844 | ||||||
Premises and equipment | 1,216,804 | 1,391,767 | ||||||
Bank-owned life insurance | 3,025,403 | 2,925,403 | ||||||
Goodwill | 647,143 | 647,143 | ||||||
Other real estate owned | 613,122 | 313,122 | ||||||
Accrued interest and other assets | 2,393,936 | 3,257,945 | ||||||
TOTAL ASSETS | $ | 301,995,057 | $ | 301,619,395 | ||||
LIABILITIES | ||||||||
Deposits: | ||||||||
Non-interest-bearing demand | $ | 37,247,004 | $ | 36,045,774 | ||||
Interest-bearing demand | 22,598,210 | 23,709,531 | ||||||
Money market | 28,624,457 | 31,140,422 | ||||||
Savings | 28,545,580 | 30,375,309 | ||||||
Time | 134,257,057 | 131,832,078 | ||||||
Total deposits | 251,272,308 | 253,103,114 | ||||||
U.S. treasury demand note | 737,300 | 718,490 | ||||||
Other borrowed funds | 8,000,000 | 8,000,000 | ||||||
Accrued interest and other liabilities | 2,506,449 | 3,408,388 | ||||||
TOTAL LIABILITIES | 262,516,057 | 265,229,992 | ||||||
STOCKHOLDERS’ EQUITY | ||||||||
Preferred stock, no par value; 1,000,000 shares authorized, none issued | — | — | ||||||
Common stock, no par value; 5,000,000 shares authorized, 1,200,000 shares issued | 600,000 | 600,000 | ||||||
Surplus | 3,159,757 | 2,902,714 | ||||||
Retained earnings | 37,850,137 | 35,680,830 | ||||||
Accumulated other comprehensive income (loss) | 547,326 | (425,468 | ) | |||||
42,157,220 | 38,758,076 | |||||||
Treasury stock (83,325 and 82,491 shares) | (2,678,220 | ) | (2,368,673 | ) | ||||
TOTAL STOCKHOLDERS’ EQUITY | 39,479,000 | 36,389,403 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 301,995,057 | $ | 301,619,395 | ||||
F-3
Table of Contents
Year Ended December 31, | ||||||||
2007 | 2006 | |||||||
INTEREST INCOME | ||||||||
Interest and fees on loans | $ | 11,085,941 | $ | 11,222,037 | ||||
Interest-bearing deposits with other banks | 5,563 | 3,082 | ||||||
Federal funds sold | 223,591 | 174,927 | ||||||
Investment securities: | ||||||||
Taxable interest | 5,536,424 | 5,350,795 | ||||||
Tax-exempt interest | 946,565 | 881,456 | ||||||
Total interest income | 17,798,084 | 17,632,297 | ||||||
INTEREST EXPENSE | ||||||||
Deposits | 7,028,821 | 6,301,855 | ||||||
U.S. treasury demand note | 22,697 | 16,526 | ||||||
Short-term borrowings | 122,661 | 36,059 | ||||||
Other borrowed funds | 491,333 | 489,600 | ||||||
Total interest expense | 7,665,512 | 6,844,040 | ||||||
NET INTEREST INCOME | 10,132,572 | 10,788,257 | ||||||
Provision for loan losses | 25,000 | 325,000 | ||||||
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES | 10,107,572 | 10,463,257 | ||||||
NONINTEREST INCOME | ||||||||
Service charges on deposit accounts | 1,103,801 | 1,095,880 | ||||||
Investment securities gains, net | — | 136,126 | ||||||
Bank-owned life insurance earnings | 100,000 | 92,400 | ||||||
Gain on sale of loans | 160,746 | 132,049 | ||||||
Other income | 210,252 | 233,046 | ||||||
Total noninterest income | 1,574,799 | 1,689,501 | ||||||
NONINTEREST EXPENSE | ||||||||
Salaries and employee benefits | 3,408,641 | 3,558,573 | ||||||
Occupancy expense | 598,168 | 583,564 | ||||||
Equipment expense | 369,249 | 382,998 | ||||||
Data processing expense | 184,791 | 169,147 | ||||||
Pennsylvania shares tax | 326,953 | 295,012 | ||||||
Other expense | 1,940,650 | 2,012,892 | ||||||
Total noninterest expense | 6,828,452 | 7,002,186 | ||||||
Income before income taxes | 4,853,919 | 5,150,572 | ||||||
Income taxes | 1,335,564 | 1,391,901 | ||||||
NET INCOME | $ | 3,518,355 | $ | 3,758,671 | ||||
EARNINGS PER SHARE | ||||||||
Basic | $ | 3.15 | $ | 3.37 | ||||
Diluted | 3.11 | 3.31 |
F-4
Table of Contents
Accumulated | ||||||||||||||||||||||||||||
Other | Total | |||||||||||||||||||||||||||
Common | Retained | Comprehensive | Treasury | Stockholders’ | Comprehensive | |||||||||||||||||||||||
Stock | Surplus | Earnings | Income (Loss) | Stock | Equity | Income | ||||||||||||||||||||||
Balance, December 31, 2005 | $ | 600,000 | $ | 2,704,740 | $ | 33,154,595 | $ | (578,506 | ) | $ | (2,346,146 | ) | $ | 33,534,683 | ||||||||||||||
Net income | 3,758,671 | 3,758,671 | $ | 3,758,671 | ||||||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||||||
Unrealized gain on available-for-sale securities, net of reclassification adjustment, net of taxes of $56,351 | 109,388 | 109,388 | 109,388 | |||||||||||||||||||||||||
Comprehensive income | $ | 3,868,059 | ||||||||||||||||||||||||||
Dividends declared ($1.13 per share) | (1,260,043 | ) | (1,260,043 | ) | ||||||||||||||||||||||||
Cumulative effect of change in accounting for pension obligations, net of taxes of $22,488 | 43,650 | 43,650 | ||||||||||||||||||||||||||
Stock-based compensation expense | 101,522 | 101,522 | ||||||||||||||||||||||||||
Treasury stock repurchased (4,766 shares repurchased) | (291,259 | ) | (291,259 | ) | ||||||||||||||||||||||||
Stock options exercised (9,905 shares exercised) | 96,452 | 27,607 | 268,732 | 392,791 | ||||||||||||||||||||||||
Balance, December 31, 2006 | 600,000 | 2,902,714 | 35,680,830 | (425,468 | ) | (2,368,673 | ) | 36,389,403 | ||||||||||||||||||||
Net income | 3,518,355 | 3,518,355 | $ | 3,518,355 | ||||||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||||||
Change in unrecognized pension cost, net of taxes of $245,451 | 476,463 | 476,463 | 476,463 | |||||||||||||||||||||||||
Unrealized gain on available-for-sale securities, net of taxes of $255,686 | 496,331 | 496,331 | 496,331 | |||||||||||||||||||||||||
Comprehensive income | $ | 4,491,149 | ||||||||||||||||||||||||||
Dividends declared ($1.21 per share) | (1,351,798 | ) | (1,351,798 | ) | ||||||||||||||||||||||||
Stock-based compensation expense | 138,279 | 138,279 | ||||||||||||||||||||||||||
Treasury stock repurchased (4,682 shares repurchased) | (198,006 | ) | (198,006 | ) | ||||||||||||||||||||||||
Stock options exercised (3,848 shares exercised) | 118,764 | 2,750 | (111,541 | ) | 9,973 | |||||||||||||||||||||||
Balance, December 31, 2007 | $ | 600,000 | $ | 3,159,757 | $ | 37,850,137 | $ | 547,326 | $ | (2,678,220 | ) | $ | 39,479,000 | |||||||||||||||
2007 | 2006 | |||||||||||||||||||||||||||
Reconciliation of unrealized gain on available-for-sale securities: | ||||||||||||||||||||||||||||
Unrealized gain on available-for-sale securities | $ | 496,331 | $ | 199,231 | ||||||||||||||||||||||||
Realized gain included in net income, net of taxes of $46,283 for 2006 | — | (89,843 | ) | |||||||||||||||||||||||||
Total | $ | 496,331 | $ | 109,388 | ||||||||||||||||||||||||
F-5
Table of Contents
Year Ended December 31, | ||||||||
2007 | 2006 | |||||||
OPERATING ACTIVITIES | ||||||||
Net income | $ | 3,518,355 | $ | 3,758,671 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation, amortization, and accretion, net | (3,143,481 | ) | (2,794,741 | ) | ||||
Provision for loan losses | 25,000 | 325,000 | ||||||
Investment securities gains, net | — | (136,126 | ) | |||||
Loans originated for sale | (12,502,300 | ) | (9,952,580 | ) | ||||
Proceeds from sale of loans | 11,950,454 | 10,062,729 | ||||||
Gain on sale of loans | 160,746 | (132,049 | ) | |||||
Earnings on bank-owned life insurance | (100,000 | ) | (92,400 | ) | ||||
Deferred income taxes | (17,655 | ) | (32,639 | ) | ||||
Decrease (increase) in accrued interest receivable | 42,067 | (85,270 | ) | |||||
(Decrease) increase in accrued interest payable | (12,895 | ) | 1,002,023 | |||||
Other, net | 245,021 | 108,370 | ||||||
Net cash provided by operating activities | 165,312 | 2,030,988 | ||||||
INVESTING ACTIVITIES | ||||||||
Investment securities available for sale: | ||||||||
Proceeds from maturities and principal repayments | 22,062 | 75,169 | ||||||
Proceeds from sales | — | 2,754,716 | ||||||
Investment securities held to maturity: | ||||||||
Proceeds from maturities and principal repayments | 620,505 | 1,125,808 | ||||||
Purchases | (1,104,143 | ) | (4,443,709 | ) | ||||
Net decrease (increase) in loans | 1,464,724 | (1,828,242 | ) | |||||
Net purchases of premises and equipment | (94,676 | ) | (102,715 | ) | ||||
Redemption of regulatory stock | 1,645,800 | 1,811,000 | ||||||
Purchase of regulatory stock | (1,635,300 | ) | (898,500 | ) | ||||
Proceeds from the sale of other real estate owned | — | 775,052 | ||||||
Net cash provided by (used for) investing activities | 918,972 | (731,421 | ) | |||||
FINANCING ACTIVITIES | ||||||||
Net increase (decrease) in deposits | (1,830,806 | ) | 13,652,022 | |||||
Net increase in U.S. treasury demand note | 18,810 | 102,872 | ||||||
Increase (decrease) in short-term borrowings | — | (9,243,900 | ) | |||||
Cash dividends paid | (1,351,798 | ) | (1,260,043 | ) | ||||
Stock options exercised | 9,973 | 392,791 | ||||||
Treasury stock purchases | (198,006 | ) | (291,259 | ) | ||||
Net cash provided by (used for) financing activities | (3,351,827 | ) | 3,352,483 | |||||
Increase (decrease) in cash and cash equivalents | (2,267,543 | ) | 4,652,050 | |||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR | 13,430,266 | 8,778,216 | ||||||
CASH AND CASH EQUIVALENTS AT END OF YEAR | $ | 11,162,723 | $ | 13,430,266 | ||||
SUPPLEMENTAL CASH FLOW INFORMATION | ||||||||
Cash paid during the year for: | ||||||||
Interest on deposits and other borrowed funds | $ | 7,678,407 | $ | 5,824,017 | ||||
Income taxes | 1,222,000 | 1,371,000 |
F-6
Table of Contents
1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
F-7
Table of Contents
F-8
Table of Contents
F-9
Table of Contents
Expected | Remaining | |||||||||||||||
Dividend | Risk-Free | Expected | Expected | |||||||||||||
Grant Year | Yield | Interest Rate | Volatility | Life (in years) | ||||||||||||
2005 | 1.88 | % | 4.17 | % | 15.69 | % | 7.10 | |||||||||
2006 | 2.00 | % | 4.49 | % | 11.95 | % | 8.10 | |||||||||
2006 | 2.00 | % | 4.57 | % | 11.95 | % | 8.10 |
F-10
Table of Contents
2. | EARNINGS PER SHARE |
2007 | 2006 | |||||||
Weighted-average common shares outstanding | 1,200,000 | 1,200,000 | ||||||
Average treasury stock shares | (83,608 | ) | (85,250 | ) | ||||
Weighted-average common shares and common stock equivalents used to calculate basic earnings per share | 1,116,392 | 1,114,750 | ||||||
Additional common stock equivalents (stock options) used to calculate diluted earnings per share | 14,260 | 20,246 | ||||||
Weighted-average common shares and common stock equivalents used to calculate diluted earnings per share | 1,130,652 | 1,134,996 | ||||||
3. | INVESTMENT SECURITIES |
2007 | ||||||||||||||||
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
Available for sale | ||||||||||||||||
U.S. government agency securities | $ | 37,274,654 | $ | 46,541 | $ | (7,931 | ) | $ | 37,313,264 | |||||||
Mortgage-backed securities | 120,130 | 2,692 | (71 | ) | 122,751 | |||||||||||
Total | $ | 37,394,784 | $ | 49,233 | $ | (8,002 | ) | $ | 37,436,015 | |||||||
Held to maturity | ||||||||||||||||
U.S. government agency securities | $ | 57,402,407 | $ | 65,135 | $ | (966,980 | ) | $ | 56,500,562 | |||||||
Obligations of states and political subdivisions | 23,830,691 | 238,093 | (79,872 | ) | 23,988,912 | |||||||||||
Mortgage-backed securities | 108,212 | 1,622 | — | 109,834 | ||||||||||||
Total | $ | 81,341,310 | $ | 304,850 | $ | (1,046,852 | ) | $ | 80,599,308 | |||||||
F-11
Table of Contents
2006 | ||||||||||||||||
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
Available for sale | ||||||||||||||||
U.S. government agency securities | $ | 37,271,704 | $ | — | $ | (713,062 | ) | $ | 36,558,642 | |||||||
Mortgage-backed securities | 142,364 | 2,478 | (202 | ) | 144,640 | |||||||||||
Total | $ | 37,414,068 | $ | 2,478 | $ | (713,264 | ) | $ | 36,703,282 | |||||||
Held to maturity | ||||||||||||||||
U.S. government agency securities | $ | 54,147,716 | $ | 8,072 | $ | (1,544,651 | ) | $ | 52,611,137 | |||||||
Obligations of states and political subdivisions | 23,197,220 | 237,055 | (103,070 | ) | 23,331,205 | |||||||||||
Mortgage-backed securities | 128,787 | 1,940 | — | 130,727 | ||||||||||||
Total | $ | 77,473,723 | $ | 247,067 | $ | (1,647,721 | ) | $ | 76,073,069 | |||||||
2007 | ||||||||||||||||||||||||
Less Than Twelve Months | Twelve Months or Greater | Total | ||||||||||||||||||||||
Gross | Gross | Gross | ||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
Value | Losses | Value | Losses | Value | Losses | |||||||||||||||||||
U.S. government agency securities | $ | 25,843,944 | $ | (353,860 | ) | $ | 19,297,672 | $ | (621,051 | ) | $ | 45,141,616 | $ | (974,911 | ) | |||||||||
Obligations of states and political subdivisions | 2,996,441 | (12,629 | ) | 5,412,794 | (67,243 | ) | 8,409,235 | (79,872 | ) | |||||||||||||||
Mortgage-backed securities | 13,018 | (71 | ) | — | — | 13,018 | (71 | ) | ||||||||||||||||
Total | $ | 28,853,403 | $ | (366,560 | ) | $ | 24,710,466 | $ | (688,294 | ) | $ | 53,563,869 | $ | (1,054,854 | ) | |||||||||
2006 | ||||||||||||||||||||||||
Less Than Twelve Months | Twelve Months or Greater | Total | ||||||||||||||||||||||
Gross | Gross | Gross | ||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
Value | Losses | Value | Losses | Value | Losses | |||||||||||||||||||
U.S. government agency securities | $ | 22,935,357 | $ | (483,496 | ) | $ | 65,489,182 | $ | (1,774,217 | ) | $ | 88,424,539 | $ | (2,257,713 | ) | |||||||||
Obligations of states and political subdivisions | 1,372,574 | (31,963 | ) | 7,294,124 | (71,107 | ) | 8,666,698 | (103,070 | ) | |||||||||||||||
Mortgage-backed securities | — | — | 16,604 | (202 | ) | 16,604 | (202 | ) | ||||||||||||||||
Total | $ | 24,307,931 | $ | (515,459 | ) | $ | 72,799,910 | $ | (1,845,526 | ) | $ | 97,107,841 | $ | (2,360,985 | ) | |||||||||
F-12
Table of Contents
Available for Sale | Held to Maturity | |||||||||||||||
Amortized | Fair | Amortized | Fair | |||||||||||||
Cost | Value | Cost | Value | |||||||||||||
Due in one year or less | $ | — | $ | — | $ | 524,892 | $ | 526,928 | ||||||||
Due after one year through five years | — | — | 3,127,493 | 3,152,184 | ||||||||||||
Due after five years through ten years | 3,391,662 | 3,399,946 | 8,573,042 | 8,619,685 | ||||||||||||
Due after ten years | 34,003,122 | 34,036,069 | 69,115,883 | 68,300,511 | ||||||||||||
Total | $ | 37,394,784 | $ | 37,436,015 | $ | 81,341,310 | $ | 80,599,308 | ||||||||
4. | LOANS |
2007 | 2006 | |||||||
Real estate: | ||||||||
1 — 4 family | $ | 17,554,872 | $ | 20,032,585 | ||||
Commercial | 104,178,122 | 93,589,033 | ||||||
Commercial | 35,095,600 | 43,891,987 | ||||||
Consumer | 2,240,755 | 2,561,544 | ||||||
Lease financing | 4,578,464 | 5,211,303 | ||||||
Tax-exempt | 2,101,323 | 2,227,068 | ||||||
165,749,136 | 167,513,520 | |||||||
Less unearned income | 495,352 | 635,190 | ||||||
165,253,784 | 166,878,330 | |||||||
Less allowance for loan losses | 1,850,183 | 1,765,486 | ||||||
Net loans | $ | 163,403,601 | $ | 165,112,844 | ||||
F-13
Table of Contents
2007 | 2006 | |||||||
Impaired loans: | ||||||||
With a related allowance for loan losses | $ | 584,567 | $ | 273,426 | ||||
Without a related allowance for loan losses | — | — | ||||||
Total | $ | 584,567 | $ | 273,426 | ||||
Allowance for loan losses | $ | 303,000 | $ | 41,014 | ||||
Average recorded investment in impaired loans | 582,762 | 470,527 | ||||||
Interest income recognized | 12,160 | 3,321 | ||||||
Impaired loans charged off | — | 233,417 |
Amounts | ||||||||||||||
2006 | Additions | Collected | 2007 | |||||||||||
$ | 380,000 | $ | 1,103,814 | $ | 910,952 | $ | 572,862 |
5. | ALLOWANCE FOR LOAN LOSSES |
2007 | 2006 | |||||||
Balance, January 1 | $ | 1,765,486 | $ | 1,784,896 | ||||
Add: | ||||||||
Provision charged to operations | 25,000 | 325,000 | ||||||
Recoveries | 175,761 | 41,050 | ||||||
Less loans charged off | 116,064 | 385,460 | ||||||
Balance, December 31 | $ | 1,850,183 | $ | 1,765,486 | ||||
F-14
Table of Contents
6. | PREMISES AND EQUIPMENT |
2007 | 2006 | |||||||
Land and land improvements | $ | 290,164 | $ | 290,164 | ||||
Buildings and building improvements | 2,531,359 | 2,484,354 | ||||||
Furniture, fixtures, and equipment | 4,135,444 | 4,093,397 | ||||||
6,956,967 | 6,867,915 | |||||||
Less accumulated depreciation | 5,740,163 | 5,476,148 | ||||||
Total | $ | 1,216,804 | $ | 1,391,767 | ||||
7. | GOODWILL |
8. | INTANGIBLE ASSETS |
Gross | Net | |||||||||||
Carrying | Accumulated | Carrying | ||||||||||
Amount | Amortization | Amount | ||||||||||
Balance at December 31, 2005 | 437,913 | (272,532 | ) | 165,381 | ||||||||
Amortization Expense | — | (54,088 | ) | (54,088 | ) | |||||||
Balance at December 31, 2006 | $ | 437,913 | $ | (326,620 | ) | $ | 111,293 | |||||
Amortization Expense | — | (54,088 | ) | (54,088 | ) | |||||||
Balance at December 31, 2007 | $ | 437,913 | $ | (380,708 | ) | $ | 57,205 | |||||
9. | DEPOSITS |
F-15
Table of Contents
Three months or less | $ | 12,980,425 | ||
Over three months to six months | 3,616,608 | |||
Over six months to twelve months | 16,360,878 | |||
Over one year | 7,829,548 | |||
Total | $ | 40,787,459 | ||
10. | SHORT-TERM BORROWINGS |
2007 | 2006 | |||||||
Maximum amount outstanding at any month-end | 7,786,500 | 5,463,000 | ||||||
Average balance outstanding during the year | 2,306,167 | 767,870 | ||||||
Weighted-average interest rate paid during the year | 5.32 | % | 4.70 | % |
11. | OTHER BORROWED FUNDS |
2007 | 2006 | |||||||
Variable rate advances from the FHLB of Pittsburgh | $ | 8,000,000 | $ | 8,000,000 |
12. | INCOME TAXES |
2007 | 2006 | |||||||
Current | $ | 1,353,219 | $ | 1,424,540 | ||||
Deferred | (17,655 | ) | (32,639 | ) | ||||
Total | $ | 1,335,564 | $ | 1,391,901 | ||||
F-16
Table of Contents
2007 | 2006 | |||||||
Deferred tax assets: | ||||||||
Allowance for loan losses | $ | 384,587 | $ | 376,502 | ||||
Deferred origination fees, net | 20,478 | 19,758 | ||||||
Accrued pension cost | 321,269 | 330,010 | ||||||
Interest on nonaccrual loans | 16,231 | 18,199 | ||||||
Net unrealized loss on securities | — | 241,667 | ||||||
Stock options | 73,779 | 29,579 | ||||||
Other | 1,377 | 1,470 | ||||||
Total deferred tax assets | 817,721 | 1,017,185 | ||||||
Deferred tax liabilities: | ||||||||
Investment securities discount accretion | (118,265 | ) | (87,057 | ) | ||||
Premises and equipment | (33,566 | ) | (26,589 | ) | ||||
Net unrealized gain on securities | (14,018 | ) | — | |||||
Intangible assets | (12,069 | ) | (25,706 | ) | ||||
Total deferred tax liabilities | (177,918 | ) | (139,352 | ) | ||||
Net deferred tax assets | $ | 639,803 | $ | 877,833 | ||||
2007 | 2006 | |||||||||||||||
% of | % of | |||||||||||||||
Pretax | Pretax | |||||||||||||||
Amount | Income | Amount | Income | |||||||||||||
Provision at statutory rate | $ | 1,650,333 | 34.0 | % | $ | 1,751,194 | 34.0 | % | ||||||||
Effect of tax-free income | (348,914 | ) | (7.2 | ) | (346,300 | ) | (6.7 | ) | ||||||||
Other | 34,145 | 0.7 | (12,993 | ) | (0.3 | ) | ||||||||||
Actual tax expense and effective rate | $ | 1,335,564 | 27.5 | % | $ | 1,391,901 | 27.0 | % | ||||||||
F-17
Table of Contents
13. | EMPLOYEE BENEFITS |
2007 | 2006 | |||||||
Change in Benefit Obligation | ||||||||
Benefit obligation, beginning of year | $ | 3,055,082 | $ | 2,887,735 | ||||
Service cost | 196,724 | 199,567 | ||||||
Interest cost | 181,953 | 171,877 | ||||||
Actuarial adjustment | (301,626 | ) | (110,982 | ) | ||||
Benefits paid | (138,951 | ) | (93,115 | ) | ||||
Effects of curtailment | (720,346 | ) | — | |||||
Benefit obligation, end of year | 2,272,836 | 3,055,082 | ||||||
Change in Plan Assets | ||||||||
Fair value of plan assets, beginning of year | 2,149,288 | 1,907,672 | ||||||
Actual gain on plan assets | 86,005 | 195,223 | ||||||
Employer contribution | 19,636 | 139,508 | ||||||
Benefits paid | (138,951 | ) | (93,115 | ) | ||||
Fair value of plan assets, end of year | 2,115,978 | 2,149,288 | ||||||
Funded status | $ | 156,858 | $ | (905,794 | ) | |||
2007 | 2006 | |||||||
Amounts recognized in accumulated other comprehensive income consist of: | ||||||||
Net gain | $ | (780,324 | ) | $ | (50,680 | ) | ||
Transaction adjustment | (7,727 | ) | (15,458 | ) | ||||
Total | $ | (788,051 | ) | $ | (66,138 | ) | ||
F-18
Table of Contents
2007 | 2006 | |||||||
Projected benefit obligation | $ | 2,272,836 | $ | 3,055,082 | ||||
Accumulated benefit obligation | 2,272,836 | 2,984,010 | ||||||
Fair value of plan assets | 2,115,978 | 2,149,288 |
2007 | 2006 | |||||||
Net periodic benefit cost recognized for year | ||||||||
Service cost | $ | 196,724 | $ | 199,567 | ||||
Interest cost | 181,953 | 171,877 | ||||||
Expected return on plan assets | 181,609 | (160,187 | ) | |||||
Net amortization | (7,731 | ) | (7,731 | ) | ||||
Net periodic benefit cost | $ | 552,555 | $ | 203,526 | ||||
2007 | 2006 | |||||||
Discount rate | 6.00 | % | 6.00 | % | ||||
Rate of compensation increase | 3.25 | % | 3.25 | % |
2007 | 2006 | |||||||
Discount rate | 6.00 | % | 6.00 | % | ||||
Expected return on plan assets | 8.50 | % | 8.50 | % | ||||
Rate of compensation increase | 3.25 | % | 3.25 | % |
Asset Category | ||||||||
Equities | 63 | % | 65 | % | ||||
Debt securities | 36 | 34 | ||||||
Other | 1 | 1 | ||||||
Total | 100 | % | 100 | % | ||||
F-19
Table of Contents
Pension | ||||
Year Ended | Benefits | |||
2008 | 48,020 | |||
2009 | 49,807 | |||
2010 | 48,689 | |||
2011 | 69,241 | |||
2012 | 100,898 | |||
2013 through 2017 | 578,485 |
14. | STOCK OPTION PLAN |
Weighted- | Weighted- | |||||||||||||||
Average | Average | |||||||||||||||
Exercise | Exercise | |||||||||||||||
2007 | Price | 2006 | Price | |||||||||||||
Outstanding, January 1 | 74,545 | $ | 29.70 | 74,200 | $ | 26.61 | ||||||||||
Granted | — | $ | — | 12,750 | $ | 42.50 | ||||||||||
Exercised | (12,741 | ) | $ | 32.30 | (12,130 | ) | $ | 25.45 | ||||||||
Forfeited | — | $ | — | (275 | ) | $ | 31.89 | |||||||||
Outstanding, December 31 | 61,804 | $ | 37.37 | 74,545 | $ | 29.70 | ||||||||||
Exercisable, December 31 | 55,504 | $ | 35.04 | 56,395 | $ | 25.37 | ||||||||||
F-20
Table of Contents
Outstanding | Exercisable | |||||||||||||||||||
Average | Average | |||||||||||||||||||
Average | Exercise | Exercise | ||||||||||||||||||
Exercise Price | Shares | Life | Price | Shares | Price | |||||||||||||||
$30.00 | 1,594 | 0.6 | $ | 30.00 | 1,594 | $ | 30.00 | |||||||||||||
$22.50 | 3,900 | 1.3 | $ | 22.50 | 3,900 | $ | 22.50 | |||||||||||||
$22.00 | 5,350 | 1.3 | $ | 22.50 | 5,350 | $ | 22.50 | |||||||||||||
$19.62 | 7,400 | 3.1 | $ | 19.62 | 7,400 | $ | 19.62 | |||||||||||||
$20.50 | 100 | 3.2 | $ | 20.50 | 100 | $ | 20.50 | |||||||||||||
$27.20 | 7,265 | 4.1 | $ | 27.20 | 7,265 | $ | 27.20 | |||||||||||||
$35.68 | 8,315 | 5.1 | $ | 35.68 | 8,315 | $ | 35.68 | |||||||||||||
$42.50 | 7,355 | 6.1 | $ | 42.50 | 7,355 | $ | 42.50 | |||||||||||||
$47.00 | 7,925 | 7.1 | $ | 47.00 | 7,925 | $ | 47.00 | |||||||||||||
$58.00 | 12,300 | 8.1 | $ | 58.00 | 6,150 | $ | 58.00 | |||||||||||||
$53.50 | 300 | 8.1 | $ | 53.50 | 150 | $ | 53.50 | |||||||||||||
Total | 61,804 | 55,504 | ||||||||||||||||||
15. | COMMITMENTS AND CONTINGENT LIABILITIES |
2007 | 2006 | |||||||
Commitments to extend credit | $ | 33,140,786 | $ | 14,767,408 | ||||
Standby letters of credit | 2,649,691 | 235,074 | ||||||
Total | $ | 35,790,477 | $ | 15,002,482 | ||||
F-21
Table of Contents
2008 | $ | 175,908 | ||
2009 | 177,108 | |||
2010 | 154,753 | |||
2011 | 110,676 | |||
2012 | 79,439 | |||
2013 thereafter | 126,500 | |||
Total | $ | 824,384 | ||
16. | REGULATORY RESTRICTIONS |
17. | REGULATORY CAPITAL REQUIREMENTS |
F-22
Table of Contents
2007 | 2006 | |||||||||||||||
Amount | Ratio | Amount | Ratio | |||||||||||||
Total Capital (to Risk-Weighted Assets) | ||||||||||||||||
Actual | $ | 40,077,857 | 18.74 | % | $ | 37,821,921 | 17.58 | % | ||||||||
For Capital Adequacy Purposes | 17,113,541 | 8.00 | 17,210,449 | 8.00 | ||||||||||||
To Be Well Capitalized | 21,391,927 | 10.00 | 21,513,061 | 10.00 | ||||||||||||
Tier I Capital (to Risk-Weighted Assets) | ||||||||||||||||
Actual | $ | 38,227,674 | 17.87 | % | $ | 36,056,435 | 16.76 | % | ||||||||
For Capital Adequacy Purposes | 8,556,771 | 4.00 | 8,605,224 | 4.00 | ||||||||||||
To Be Well Capitalized | 12,835,156 | 6.00 | 12,907,834 | 6.00 | ||||||||||||
Tier I Capital (to Average Assets) | ||||||||||||||||
Actual | $ | 38,227,674 | 12.79 | % | $ | 36,056,435 | 11.89 | % | ||||||||
For Capital Adequacy Purposes | 11,952,600 | 4.00 | 12,130,440 | 4.00 | ||||||||||||
To Be Well Capitalized | 14,940,750 | 5.00 | 15,163,050 | 5.00 |
18. | FAIR VALUE OF FINANCIAL INSTRUMENTS |
2007 | 2006 | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
Value | Value | Value | Value | |||||||||||||
Financial assets | ||||||||||||||||
Cash and cash equivalents | $ | 11,162,723 | $ | 11,162,723 | $ | 13,430,266 | $ | 13,430,266 | ||||||||
Loans held for sale | 755,000 | 755,000 | 363,900 | 363,900 | ||||||||||||
Investment securities: | ||||||||||||||||
Available for sale | 37,436,015 | 37,436,015 | 36,703,282 | 36,703,282 | ||||||||||||
Held to maturity | 81,341,310 | 80,599,308 | 77,473,723 | 76,073,069 | ||||||||||||
Net loans | 158,825,137 | 154,283,018 | 162,302,330 | 153,484,000 | ||||||||||||
Bank-owned life insurance contracts | 3,025,403 | 3,025,403 | 2,925,403 | 2,925,403 | ||||||||||||
Regulatory stock | 573,300 | 573,300 | 583,800 | 583,800 | ||||||||||||
Accrued interest receivable | 1,333,105 | 1,333,105 | 1,375,172 | 1,375,172 | ||||||||||||
Financial liabilities | ||||||||||||||||
Deposits | $ | 251,272,308 | $ | 252,524,513 | $ | 253,103,114 | $ | 251,637,079 | ||||||||
U.S. treasury demand note | 737,300 | 737,300 | 718,490 | 718,490 | ||||||||||||
Other borrowed funds | 8,000,000 | 8,000,025 | 8,000,000 | 8,190,000 | ||||||||||||
Accrued interest payable | 2,309,656 | 2,309,656 | 2,322,551 | 2,322,551 |
F-23
Table of Contents
F-24
Table of Contents
19. | PARENT COMPANY |
December 31, | ||||||||
2007 | 2006 | |||||||
ASSETS | ||||||||
Cash | $ | 83,414 | $ | 12,945 | ||||
Investment in subsidiary | 39,251,014 | 36,202,099 | ||||||
Other assets | 144,572 | 174,359 | ||||||
TOTAL ASSETS | $ | 39,479,000 | $ | 36,389,403 | ||||
LIABILITIES | $ | — | $ | — | ||||
STOCKHOLDERS’ EQUITY | 39,479,000 | 36,389,403 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 39,479,000 | $ | 36,389,403 | ||||
F-25
Table of Contents
Year Ended December 31, | ||||||||
2007 | 2006 | |||||||
INCOME | ||||||||
Dividends from subsidiary bank | $ | 1,351,798 | $ | 1,135,043 | ||||
Other income | 5,328 | — | ||||||
EXPENSES | ||||||||
Other | 96,239 | 195,519 | ||||||
Income before equity in undistributed net income of subsidiary | 1,260,887 | 939,524 | ||||||
Equity in undistributed net income of subsidiary | 2,257,468 | 2,819,147 | ||||||
NET INCOME | $ | 3,518,355 | $ | 3,758,671 | ||||
Year Ended December 31, | ||||||||
2007 | 2006 | |||||||
OPERATING ACTIVITIES | ||||||||
Net income | $ | 3,518,355 | $ | 3,758,671 | ||||
Undistributed net income of subsidiary | (2,033,794 | ) | (2,819,147 | ) | ||||
Other | 125,739 | 209,639 | ||||||
Net cash provided by operating activities | 1,610,300 | 1,149,163 | ||||||
INVESTING ACTIVITIES | ||||||||
FINANCING ACTIVITIES | ||||||||
Cash dividends | (1,351,798 | ) | (1,260,043 | ) | ||||
Stock options exercised | 9,973 | 370,264 | ||||||
Purchase of treasury stock | (198,006 | ) | (291,259 | ) | ||||
Net cash used for financing activities | (1,539,831 | ) | (1,181,038 | ) | ||||
Increase (decrease) in cash | 70,469 | (31,875 | ) | |||||
CASH AT BEGINNING OF YEAR | 12,945 | 44,820 | ||||||
CASH AT END OF YEAR | $ | 83,414 | $ | 12,945 | ||||
20. | MERGER AGREEMENT WITH FNB CORPORATION |
F-26
Table of Contents
F-27
Table of Contents
December 31, | ||||||||
2006 | 2005 | |||||||
ASSETS | ||||||||
Cash and due from banks | $ | 5,435,804 | $ | 8,696,487 | ||||
Interest-bearing deposits with other banks | 101,002 | 81,729 | ||||||
Federal funds sold | 7,893,460 | — | ||||||
Total cash and cash equivalents | 13,430,266 | 8,778,216 | ||||||
Loans held for sale | 363,900 | 342,000 | ||||||
Investment securities available for sale | 36,703,282 | 39,348,280 | ||||||
Investment securities held to maturity (fair value | 77,473,723 | 70,967,513 | ||||||
of $76,073,069 and $70,624,647) | ||||||||
Loans (net of unearned income of $635,190 and $857,241) | 166,878,330 | 165,543,095 | ||||||
Less allowance for loan losses | 1,765,486 | 1,784,896 | ||||||
Net loans | 165,112,844 | 163,758,199 | ||||||
Premises and equipment | 1,391,767 | 1,556,736 | ||||||
Bank-owned life insurance | 2,925,403 | 2,833,033 | ||||||
Goodwill | 647,143 | 647,143 | ||||||
Other real estate owned | 313,122 | 839,300 | ||||||
Accrued interest and other assets | 3,257,945 | 4,118,988 | ||||||
TOTAL ASSETS | $ | 301,619,395 | $ | 293,189,408 | ||||
LIABILITIES | ||||||||
Deposits: | ||||||||
Non-interest-bearing demand | $ | 36,045,774 | $ | 38,142,389 | ||||
Interest-bearing demand | 23,709,531 | 26,041,569 | ||||||
Money market | 31,140,422 | 38,407,660 | ||||||
Savings | 30,375,309 | 33,389,087 | ||||||
Time | 131,832,078 | 103,470,387 | ||||||
Total deposits | 253,103,114 | 239,451,092 | ||||||
U.S. treasury demand note | 718,490 | 615,618 | ||||||
Short-term borrowings | — | 9,243,900 | ||||||
Other borrowed funds | 8,000,000 | 8,000,000 | ||||||
Accrued interest and other liabilities | 3,408,388 | 2,344,115 | ||||||
TOTAL LIABILITIES | 265,229,992 | 259,654,725 | ||||||
STOCKHOLDERS’ EQUITY | ||||||||
Preferred stock, no par value; 1,000,000 shares authorized, none issued | — | — | ||||||
Common stock, no par value; 5,000,000 shares authorized, 1,200,000 shares issued | 600,000 | 600,000 | ||||||
Surplus | 2,902,714 | 2,704,740 | ||||||
Retained earnings | 35,680,830 | 33,154,595 | ||||||
Accumulated other comprehensive loss | (425,468 | ) | (578,506 | ) | ||||
38,758,076 | 35,880,829 | |||||||
Treasury stock (82,491 and 87,630 shares) | (2,368,673 | ) | (2,346,146 | ) | ||||
TOTAL STOCKHOLDERS’ EQUITY | 36,389,403 | 33,534,683 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 301,619,395 | $ | 293,189,408 | ||||
F-28
Table of Contents
Year Ended December 31, | ||||||||
2006 | 2005 | |||||||
INTEREST INCOME | ||||||||
Interest and fees on loans | $ | 11,222,037 | $ | 10,533,132 | ||||
Interest-bearing deposits with other banks | 3,082 | 4,089 | ||||||
Federal funds sold | 174,927 | 61,634 | ||||||
Investment securities: | ||||||||
Taxable interest | 5,350,795 | 5,215,097 | ||||||
Tax-exempt interest | 881,456 | 747,851 | ||||||
Total interest income | 17,632,297 | 16,561,803 | ||||||
INTEREST EXPENSE | ||||||||
Deposits | 6,301,855 | 4,588,160 | ||||||
U.S. treasury demand note | 16,526 | 9,736 | ||||||
Short-term borrowings | 36,059 | 39,576 | ||||||
Other borrowed funds | 489,600 | 489,600 | ||||||
Total interest expense | 6,844,040 | 5,127,072 | ||||||
NET INTEREST INCOME | 10,788,257 | 11,434,731 | ||||||
Provision for loan losses | 325,000 | 535,000 | ||||||
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES | 10,463,257 | 10,899,731 | ||||||
NONINTEREST INCOME | ||||||||
Service charges on deposit accounts | 1,095,880 | 857,626 | ||||||
Investment securities gains, net | 136,126 | — | ||||||
Bank-owned life insurance earnings | 92,400 | 80,831 | ||||||
Gain on sale of loans | 132,049 | 152,146 | ||||||
Other income | 233,046 | 176,993 | ||||||
Total noninterest income | 1,689,501 | 1,267,596 | ||||||
NONINTEREST EXPENSE | ||||||||
Salaries and employee benefits | 3,558,573 | 3,522,204 | ||||||
Occupancy expense | 583,564 | 544,047 | ||||||
Equipment expense | 382,998 | 393,316 | ||||||
Data processing expense | 169,147 | 203,029 | ||||||
Pennsylvania shares tax | 295,012 | 272,376 | ||||||
Other expense | 2,012,892 | 1,975,671 | ||||||
Total noninterest expense | 7,002,186 | 6,910,643 | ||||||
Income before income taxes | 5,150,572 | 5,256,684 | ||||||
Income taxes | 1,391,901 | 1,509,978 | ||||||
NET INCOME | $ | 3,758,671 | $ | 3,746,706 | ||||
EARNINGS PER SHARE | ||||||||
Basic | $ | 3.37 | $ | 3.37 | ||||
Diluted | 3.31 | 3.31 |
F-29
Table of Contents
Accumulated | ||||||||||||||||||||||||||||
Other | Total | |||||||||||||||||||||||||||
Common | Retained | Comprehensive | Treasury | Stockholders’ | Comprehensive | |||||||||||||||||||||||
Stock | Surplus | Earnings | Income (Loss) | Stock | Equity | Income (Loss) | ||||||||||||||||||||||
Balance, December 31, 2004 | $ | 600,000 | $ | 2,678,858 | $ | 30,546,072 | $ | 33,323 | $ | (2,458,580 | ) | $ | 31,399,673 | |||||||||||||||
Net income | 3,746,706 | 3,746,706 | $ | 3,746,706 | ||||||||||||||||||||||||
Dividends declared ($1.05 per share) | (1,167,122 | ) | (1,167,122 | ) | ||||||||||||||||||||||||
Other comprehensive loss: | ||||||||||||||||||||||||||||
Unrealized loss onavailable-for-sale securities, net of reclassification adjustment, net of tax benefit of $315,185 | (611,829 | ) | (611,829 | ) | (611,829 | ) | ||||||||||||||||||||||
Comprehensive income | $ | 3,134,877 | ||||||||||||||||||||||||||
Stock options exercised (4,200 shares exercised) | 25,882 | 28,939 | 112,434 | 167,255 | ||||||||||||||||||||||||
Balance, December 31, 2005 | 600,000 | 2,704,740 | 33,154,595 | (578,506 | ) | (2,346,146 | ) | 33,534,683 | ||||||||||||||||||||
Net income | 3,758,671 | 3,758,671 | $ | 3,758,671 | ||||||||||||||||||||||||
Dividends declared ($1.13 per share) | (1,260,043 | ) | (1,260,043 | ) | ||||||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||||||
Unrealized gain on available-for-sale securities, net of reclassification adjustment, net of taxes of $56,351 | 109,388 | 109,388 | 109,388 | |||||||||||||||||||||||||
Comprehensive income | $ | 3,868,059 | ||||||||||||||||||||||||||
Cumulative effect of change in accounting for pension obligations, net of tax benefit of $22,488 | 43,650 | 43,650 | ||||||||||||||||||||||||||
Stock-based compensation expense | 101,522 | 101,522 | ||||||||||||||||||||||||||
Treasury stock repurchased (4,766 shares repurchased) | (291,259 | ) | (291,259 | ) | ||||||||||||||||||||||||
Stock options exercised (9,905 shares exercised) | 96,452 | 27,607 | 268,732 | 392,791 | ||||||||||||||||||||||||
Balance, December 31, 2006 | $ | 600,000 | $ | 2,902,714 | $ | 35,680,830 | $ | (425,468 | ) | $ | (2,368,673 | ) | $ | 36,389,403 | ||||||||||||||
2006 | 2005 | |||||||
Components of comprehensive loss: | ||||||||
Change in net unrealized loss on investment securities available for sale | $ | 199,231 | $ | (611,829 | ) | |||
Realized gains included in net income, net of taxes of $46,283 for 2006 | (89,843 | ) | — | |||||
Total | $ | 109,388 | $ | (611,829 | ) | |||
F-30
Table of Contents
Year Ended December 31, | ||||||||
2006 | 2005 | |||||||
OPERATING ACTIVITIES | ||||||||
Net income | $ | 3,758,671 | $ | 3,746,706 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation, amortization, and accretion, net | (2,794,741 | ) | (3,188,540 | ) | ||||
Provision for loan losses | 325,000 | 535,000 | ||||||
Investment securities gains, net | (136,126 | ) | — | |||||
Loans originated for sale | (9,952,580 | ) | (10,757,396 | ) | ||||
Proceeds from sale of loans | 10,062,729 | 11,054,342 | ||||||
Gain on sale of loans | (132,049 | ) | (152,146 | ) | ||||
Earnings on bank-owned life insurance | (92,400 | ) | (80,831 | ) | ||||
Deferred income taxes | (32,639 | ) | (19,503 | ) | ||||
Increase in accrued interest receivable | (85,270 | ) | (246,820 | ) | ||||
Increase in accrued interest payable | 1,002,023 | 352,181 | ||||||
Other, net | 108,370 | 422,313 | ||||||
Net cash provided by operating activities | 2,030,988 | 1,665,306 | ||||||
INVESTING ACTIVITIES | ||||||||
Investment securities available for sale: | ||||||||
Proceeds from maturities and principal repayments | 75,169 | 16,524,629 | ||||||
Proceeds from sales | 2,754,716 | 646,783 | ||||||
Purchases | — | (32,302,830 | ) | |||||
Investment securities held to maturity: | ||||||||
Proceeds from maturities and principal repayments | 1,125,808 | 25,636,526 | ||||||
Purchases | (4,443,709 | ) | (15,341,325 | ) | ||||
Net decrease (increase) in loans | (1,828,242 | ) | 1,246,811 | |||||
Net purchases of premises and equipment | (102,715 | ) | (167,076 | ) | ||||
Redemption of regulatory stock | 1,811,000 | — | ||||||
Purchase of regulatory stock | (898,500 | ) | (838,500 | ) | ||||
Proceeds from the sale of other real estate owned | 775,052 | 1,756,222 | ||||||
Net cash used for investing activities | (731,421 | ) | (2,838,760 | ) | ||||
FINANCING ACTIVITIES | ||||||||
Net increase (decrease) in deposits | 13,652,022 | (10,475,481 | ) | |||||
Net increase in U.S. treasury demand note | 102,872 | 160,136 | ||||||
Increase (decrease) in short-term borrowings | (9,243,900 | ) | 9,243,900 | |||||
Cash dividends paid | (1,260,043 | ) | (1,167,122 | ) | ||||
Stock options exercised | 392,791 | 167,255 | ||||||
Treasury stock purchases | (291,259 | ) | — | |||||
Net cash provided by (used for) financing activities | 3,352,483 | (2,071,312 | ) | |||||
Increase (decrease) in cash and cash equivalents | 4,652,050 | (3,244,766 | ) | |||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR | 8,778,216 | 12,022,982 | ||||||
CASH AND CASH EQUIVALENTS AT END OF YEAR | $ | 13,430,266 | $ | 8,778,216 | ||||
SUPPLEMENTAL CASH FLOW INFORMATION | ||||||||
Cash paid during the year for: | ||||||||
Interest on deposits and other borrowed funds | $ | 5,842,017 | $ | 4,774,891 | ||||
Income taxes | 1,371,000 | 1,155,000 |
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Table of Contents
1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
F-32
Table of Contents
F-33
Table of Contents
F-34
Table of Contents
2005 | ||||
Net income applicable to common stock: | ||||
As reported | $ | 3,746,706 | ||
Less pro forma expense related to option | 59,060 | |||
Pro forma | $ | 3,687,646 | ||
Basic net income per common share: | ||||
As reported | $ | 3.37 | ||
Pro forma | 3.32 | |||
Diluted net income per common share: | ||||
As reported | $ | 3.31 | ||
Pro forma | 3.26 |
Expected | Remaining | |||||||||||||||
Dividend | Risk-Free | Expected | Expected | |||||||||||||
Grant Year | Yield | Interest Rate | Volatility | Life (in years) | ||||||||||||
2003 | 2.37 | % | 4.29 | % | 6.60 | % | 6.10 | |||||||||
2004 | 2.25 | % | 4.22 | % | 12.97 | % | 7.10 | |||||||||
2005 | 1.88 | % | 4.17 | % | 15.69 | % | 8.10 | |||||||||
2006 | 2.00 | % | 4.49 | % | 11.95 | % | 9.10 | |||||||||
2006 | 2.00 | % | 4.57 | % | 11.95 | % | 9.10 |
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Table of Contents
2. | EARNINGS PER SHARE |
2006 | 2005 | |||||||
Weighted-average common shares outstanding | 1,200,000 | 1,200,000 | ||||||
Average treasury stock shares | (85,250 | ) | (88,946 | ) | ||||
Weighted-average common shares and common stock equivalents used to calculate basic earnings per share | 1,114,750 | 1,111,054 | ||||||
Additional common stock equivalents (stock options) used to calculate diluted earnings per share | 20,246 | 20,734 | ||||||
Weighted-average common shares and common stock equivalents used to calculate diluted earnings per share | 1,134,996 | 1,131,788 | ||||||
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Table of Contents
3. | INVESTMENT SECURITIES |
2006 | ||||||||||||||||
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
Available for sale | ||||||||||||||||
U.S. government agency securities | $ | 37,271,704 | $ | — | $ | (713,062 | ) | $ | 36,558,642 | |||||||
Mortgage-backed securities | 142,364 | 2,478 | (202 | ) | 144,640 | |||||||||||
Total | $ | 37,414,068 | $ | 2,478 | $ | (713,264 | ) | $ | 36,703,282 | |||||||
Held to maturity | ||||||||||||||||
U.S. government agency securities | $ | 54,147,716 | $ | 8,072 | $ | (1,544,651 | ) | $ | 52,611,137 | |||||||
Obligations of states and political subdivisions | 23,197,220 | 237,055 | (103,070 | ) | 23,331,205 | |||||||||||
Mortgage-backed securities | 128,787 | 1,940 | — | 130,727 | ||||||||||||
Total | $ | 77,473,723 | $ | 247,067 | $ | (1,647,721 | ) | $ | 76,073,069 | |||||||
2005 | ||||||||||||||||
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
Available for sale | ||||||||||||||||
U.S. government agency securities | $ | 37,268,728 | $ | — | $ | (958,282 | ) | $ | 36,310,446 | |||||||
Obligations of states and political subdivisions | 2,776,823 | 85,265 | (5,942 | ) | 2,856,146 | |||||||||||
Mortgage-backed securities | 179,254 | 2,747 | (313 | ) | 181,688 | |||||||||||
Total | $ | 40,224,805 | $ | 88,012 | $ | (964,537 | ) | $ | 39,348,280 | |||||||
Held to maturity | ||||||||||||||||
U.S. government agency securities | $ | 49,087,002 | $ | 217,236 | $ | (325,537 | ) | $ | 48,978,701 | |||||||
Obligations of states and political subdivisions | 21,720,829 | 133,132 | (370,430 | ) | 21,483,531 | |||||||||||
Mortgage-backed securities | 159,682 | 2,733 | — | 162,415 | ||||||||||||
Total | $ | 70,967,513 | $ | 353,101 | $ | (695,967 | ) | $ | 70,624,647 | |||||||
F-37
Table of Contents
2006 | ||||||||||||||||||||||||
Less Than Twelve Months | Twelve Months or Greater | Total | ||||||||||||||||||||||
Gross | Gross | Gross | ||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
Value | Losses | Value | Losses | Value | Losses | |||||||||||||||||||
U.S. government agency securities | $ | 22,935,357 | $ | 483,496 | $ | 65,489,182 | $ | 1,774,217 | $ | 88,424,539 | $ | 2,257,713 | ||||||||||||
Obligations of states and political subdivisions | 1,372,574 | 31,963 | 7,294,124 | 71,107 | 8,666,698 | 103,070 | ||||||||||||||||||
Mortgage-backed securities | — | — | 16,604 | 202 | 16,604 | 202 | ||||||||||||||||||
Total | $ | 24,307,931 | $ | 515,459 | $ | 72,799,910 | $ | 1,845,526 | $ | 97,107,841 | $ | 2,360,985 | ||||||||||||
2005 | ||||||||||||||||||||||||
Less Than Twelve Months | Twelve Months or Greater | Total | ||||||||||||||||||||||
Gross | Gross | Gross | ||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
Value | Losses | Value | Losses | Value | Losses | |||||||||||||||||||
U.S. government agency securities | $ | 49,191,518 | $ | 1,034,987 | $ | 15,039,390 | $ | 248,832 | $ | 64,230,908 | $ | 1,283,819 | ||||||||||||
Obligations of states and political subdivisions | 11,915,274 | 244,989 | 3,269,160 | 131,383 | 15,184,434 | 376,372 | ||||||||||||||||||
Mortgage-backed securities | 54,560 | 313 | — | — | 54,560 | 313 | ||||||||||||||||||
Total | $ | 61,161,352 | $ | 1,280,289 | $ | 18,308,550 | $ | 380,215 | $ | 79,469,902 | $ | 1,660,504 | ||||||||||||
F-38
Table of Contents
Available for Sale | Held to Maturity | |||||||||||||||
Amortized | Fair | Amortized | Fair | |||||||||||||
Cost | Value | Cost | Value | |||||||||||||
Due in one year or less | $ | — | $ | — | $ | — | $ | — | ||||||||
Due after one year through five years | — | — | 1,952,472 | 1,963,563 | ||||||||||||
Due after five years through ten years | 1,898,881 | 1,884,245 | 8,889,441 | 8,882,790 | ||||||||||||
Due after ten years | 35,515,187 | 34,819,037 | 66,631,810 | 65,226,716 | ||||||||||||
Total | $ | 37,414,068 | $ | 36,703,282 | $ | 77,473,723 | $ | 76,073,069 | ||||||||
2006 | 2005 | |||||||
Proceeds | $ | 2,754,716 | $ | 646,783 | ||||
Gross gains | 136,126 | — | ||||||
Gross losses | — | — |
4. | LOANS |
2006 | 2005 | |||||||
Real estate: | ||||||||
1 — 4 family | $ | 20,032,585 | $ | 20,090,553 | ||||
Commercial | 93,589,033 | 97,119,848 | ||||||
Commercial | 43,891,987 | 37,566,924 | ||||||
Consumer | 2,561,544 | 2,589,618 | ||||||
Lease financing | 5,211,303 | 6,739,012 | ||||||
Tax-exempt | 2,227,068 | 2,294,381 | ||||||
167,513,520 | 166,400,336 | |||||||
Less unearned income | 635,190 | 857,241 | ||||||
166,878,330 | 165,543,095 | |||||||
Less allowance for loan losses | 1,765,486 | 1,784,896 | ||||||
Net loans | $ | 165,112,844 | $ | 163,758,199 | ||||
F-39
Table of Contents
2006 | 2005 | |||||||
Impaired loans: | ||||||||
With a related allowance for loan losses | $ | 273,426 | $ | 233,417 | ||||
Without a related allowance for loan losses | — | — | ||||||
Total | $ | 273,426 | $ | 233,417 | ||||
Allowance for loan losses | $ | 41,014 | $ | 113,000 | ||||
Average recorded investment in impaired loans | 470,527 | 440,931 | ||||||
Interest income recognized | 3,321 | 2,740 | ||||||
Impaired loans charged off | 233,417 | 68,534 |
Amounts | ||||||||||||
2005 | Additions | Collected | 2006 | |||||||||
$3,141,641 | $ | 534,936 | $ | 3,296,577 | $ | 380,000 |
5. | ALLOWANCE FOR LOAN LOSSES |
2006 | 2005 | |||||||
Balance, January 1 | $ | 1,784,896 | $ | 1,611,405 | ||||
Add: | ||||||||
Provision charged to operations | 325,000 | 535,000 | ||||||
Recoveries | 41,050 | 28,338 | ||||||
Less loans charged off | 385,460 | 389,847 | ||||||
Balance, December 31 | $ | 1,765,486 | $ | 1,784,896 | ||||
6. | PREMISES AND EQUIPMENT |
2006 | 2005 | |||||||
Land and land improvements | $ | 290,164 | $ | 290,164 | ||||
Buildings and building improvements | 2,484,354 | 2,432,532 | ||||||
Furniture, fixtures, and equipment | 4,093,397 | 4,094,194 | ||||||
6,867,915 | 6,816,890 | |||||||
Less accumulated depreciation | 5,476,148 | 5,260,154 | ||||||
Total | $ | 1,391,767 | $ | 1,556,736 | ||||
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Table of Contents
7. | GOODWILL |
8. | INTANGIBLE ASSETS |
Gross | Net | |||||||||||
Carrying | Accumulated | Carrying | ||||||||||
Amount | Amortization | Amount | ||||||||||
Balance at December 31, 2004 | $ | 437,913 | $ | (218,444 | ) | $ | 219,469 | |||||
Amortization Expense | — | (54,088 | ) | (54,088 | ) | |||||||
Balance at December 31, 2005 | 437,913 | (272,532 | ) | 165,381 | ||||||||
Amortization Expense | — | (54,088 | ) | (54,088 | ) | |||||||
Balance at December 31, 2006 | $ | 437,913 | $ | (326,620 | ) | $ | 111,293 | |||||
9. | DEPOSITS |
Three months or less | $ | 5,778,710 | ||
Over three months to six months | 8,056,978 | |||
Over six months to twelve months | 15,180,418 | |||
Over one year | 16,325,977 | |||
Total | $ | 45,342,083 | ||
10. | SHORT-TERM BORROWINGS |
F-41
Table of Contents
2006 | 2005 | |||||||
Balance at year-end | — | 9,243,900 | ||||||
Maximum amount outstanding at any month-end | 5,463,000 | 9,243,900 | ||||||
Average balance outstanding during the year | 767,870 | 1,038,600 | ||||||
Weighted-average interest rate: | ||||||||
As of year-end | — | 4.23 | % | |||||
Paid during the year | 4.70 | % | 3.81 | % |
11. | OTHER BORROWED FUNDS |
2006 | 2005 | |||||||
Variable rate advances from the FHLB of Pittsburgh | $ | 8,000,000 | $ | 8,000,000 |
12. | INCOME TAXES |
2006 | 2005 | |||||||
Current | $ | 1,424,540 | $ | 1,529,481 | ||||
Deferred | (32,639 | ) | (19,503 | ) | ||||
Total | $ | 1,391,901 | $ | 1,509,978 | ||||
F-42
Table of Contents
2006 | 2005 | |||||||
Deferred tax assets: | ||||||||
Allowance for loan losses | $ | 376,502 | $ | 395,659 | ||||
Deferred origination fees, net | 19,758 | 18,096 | ||||||
Accrued pension cost | 330,010 | 314,506 | ||||||
Interest on nonaccrual loans | 18,199 | 15,988 | ||||||
Allowance for other real estate owned | — | 20,400 | ||||||
Net unrealized loss on securities | 241,667 | 298,019 | ||||||
Stock options | 29,579 | — | ||||||
Other | 1,470 | 1,676 | ||||||
Total deferred tax assets | 1,017,185 | 1,064,344 | ||||||
Deferred tax liabilities: | ||||||||
Investment securities discount accretion | (87,057 | ) | (90,774 | ) | ||||
Premises and equipment | (26,589 | ) | (52,411 | ) | ||||
Intangible assets | (25,706 | ) | (19,613 | ) | ||||
Total deferred tax liabilities | (139,352 | ) | (162,798 | ) | ||||
Net deferred tax assets | $ | 877,833 | $ | 901,546 | ||||
2006 | 2005 | |||||||||||||||
% of | % of | |||||||||||||||
Pretax | Pretax | |||||||||||||||
Amount | Income | Amount | Income | |||||||||||||
Provision at statutory rate | $ | 1,751,194 | 34.0 | % | $ | 1,787,273 | 34.0 | % | ||||||||
Effect of tax-free income | (346,300 | ) | (6.7 | ) | (327,716 | ) | (6.2 | ) | ||||||||
Other | (12,993 | ) | (0.3 | ) | 50,421 | 0.9 | ||||||||||
Actual tax expense and effective rate | $ | 1,391,901 | 27.0 | % | $ | 1,509,978 | 28.7 | % | ||||||||
13. | EMPLOYEE BENEFITS |
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Table of Contents
Before | After | |||||||||||
Application of | Application of | |||||||||||
FASB No. 158 | Adjustments | FAS No. 158 | ||||||||||
Other assets | 3,280,433 | (22,488 | ) | 3,257,945 | ||||||||
Total assets | 301,641,883 | (22,488 | ) | 301,619,395 | ||||||||
Accrued interest and other liabilities | 3,342,250 | (66,138 | ) | 3,408,388 | ||||||||
Total liabilities | 265,163,854 | (66,138 | ) | 265,229,992 | ||||||||
Accumulated other comprehensive income | (469,118 | ) | 43,650 | (425,468 | ) | |||||||
Total shareholder’s equity | 36,433,053 | (43,650 | ) | 36,389,403 | ||||||||
Total liabilities and shareholders’ equity | 301,641,883 | (22,488 | ) | 301,619,395 |
2006 | 2005 | |||||||
Change in Benefit Obligation | ||||||||
Benefit obligation, beginning of year | $ | 2,887,735 | $ | 2,839,980 | ||||
Service cost | 199,567 | 196,166 | ||||||
Interest cost | 171,877 | 168,867 | ||||||
Actuarial adjustment | (110,982 | ) | 8,147 | |||||
Benefits paid | (93,115 | ) | (325,425 | ) | ||||
Benefit obligation, end of year | 3,055,082 | 2,887,735 | ||||||
Change in Plan Assets | ||||||||
Fair value of plan assets, beginning of year | 1,907,672 | 2,019,364 | ||||||
Actual gain on plan assets | 195,223 | 91,731 | ||||||
Employer contribution | 139,508 | 122,002 | ||||||
Benefits paid | (93,115 | ) | (325,425 | ) | ||||
Fair value of plan assets, end of year | 2,149,288 | 1,907,672 | ||||||
Funded status | $ | (905,794 | ) | $ | (980,063 | ) | ||
F-44
Table of Contents
2006 | 2005 | |||||||
Amounts not yet recognized as a component of net periodic pension cost: | ||||||||
Amounts recognized in accumulated other comprehensive income consist of: | ||||||||
Net gain | $ | (50,680 | ) | $ | — | |||
Transaction adjustment | (15,458 | ) | — | |||||
Amounts not recognized in accumlated other comprehensive loss consist of: | ||||||||
Net gain | — | (23,189 | ) | |||||
Prior service cost | — | 95,338 | ||||||
Total | $ | (66,138 | ) | $ | 72,149 | |||
2006 | 2005 | |||||||
Projected benefit obligation | $ | 2,887,735 | $ | 3,055,082 | ||||
Accumulated benefit obligation | 2,984,010 | 2,780,386 | ||||||
Fair value of plan assets | 1,907,672 | 2,019,364 |
2006 | 2005 | |||||||
Net periodic benefit cost recognized for year | ||||||||
Service cost | $ | 199,567 | $ | 196,166 | ||||
Interest cost | 171,877 | 168,867 | ||||||
Expected return on plan assets | (160,187 | ) | (169,476 | ) | ||||
Net amortization | (7,731 | ) | (7,731 | ) | ||||
Net periodic benefit cost | $ | 203,526 | $ | 187,826 | ||||
2006 | 2005 | |||||||
Discount rate | 6.00 | % | 6.00 | % | ||||
Rate of compensation increase | 3.25 | % | 3.25 | % |
2006 | 2005 | |||||||
Discount rate | 6.00 | % | 6.00 | % | ||||
Expected return on plan assets | 8.50 | % | 8.50 | % | ||||
Rate of compensation increase | 3.25 | % | 3.25 | % |
F-45
Table of Contents
2006 | 2005 | |||||||
Asset Category | ||||||||
Equities | 63 | % | 64 | % | ||||
Fixed Income | 34 | 35 | ||||||
Foreign Equity | 2 | — | ||||||
Money Market/Cash | 1 | 1 | ||||||
Total | 100 | % | 100 | % | ||||
Pension | ||||
Year Ended | Benefits | |||
2007 | 55,693 | |||
2008 | 54,930 | |||
2009 | 56,106 | |||
2010 | 56,060 | |||
2011 | 76,089 | |||
2012 through 2016 | 567,389 |
14. | STOCK OPTION PLAN |
Weighted- | Weighted- | |||||||||||||||
Average | Average | |||||||||||||||
Exercise | Exercise | |||||||||||||||
2006 | Price | 2005 | Price | |||||||||||||
Outstanding, January 1 | 74,200 | $ | 32.13 | 67,000 | $ | 26.61 | ||||||||||
Granted | 12,750 | $ | 57.89 | 11,500 | $ | 42.50 | ||||||||||
Exercised | (12,130 | ) | $ | 31.90 | (4,200 | ) | $ | 25.45 | ||||||||
Forfeited | (275 | ) | $ | 53.00 | (100 | ) | $ | 31.89 | ||||||||
Outstanding, December 31 | 74,545 | $ | 36.50 | 74,200 | $ | 29.70 | ||||||||||
Exercisable, December 31 | 56,395 | $ | 30.69 | 56,550 | $ | 25.37 | ||||||||||
F-46
Table of Contents
Outstanding | Exercisable | |||||||||||||||||||
Average | Average | |||||||||||||||||||
Average | Exercise | Exercise | ||||||||||||||||||
Exercise Price | Shares | Life | Price | Shares | Price | |||||||||||||||
$30.00 | 3,353 | 1.6 | $ | 30.00 | 3,353 | $ | 30.00 | |||||||||||||
$24.25 | 100 | 2.0 | $ | 24.25 | 100 | $ | 24.25 | |||||||||||||
$22.50 | 5,450 | 2.3 | $ | 22.50 | 5,450 | $ | 22.50 | |||||||||||||
$22.00 | 6,150 | 2.3 | $ | 22.50 | 6,150 | $ | 22.50 | |||||||||||||
$19.62 | 9,121 | 4.1 | $ | 19.62 | 9,121 | $ | 19.62 | |||||||||||||
$20.50 | 100 | 4.2 | $ | 20.50 | 100 | $ | 20.50 | |||||||||||||
$27.20 | 8,018 | 5.1 | $ | 27.20 | 8,018 | $ | 27.20 | |||||||||||||
$35.00 | 100 | 6.0 | $ | 35.00 | 100 | $ | 35.00 | |||||||||||||
$35.68 | 10,494 | 6.1 | $ | 35.68 | 10,494 | $ | 35.68 | |||||||||||||
$42.50 | 9,399 | 7.1 | $ | 42.50 | 9,399 | $ | 42.50 | |||||||||||||
$47.00 | 9,660 | 8.1 | $ | 47.00 | 4,110 | $ | 47.00 | |||||||||||||
$58.00 | 12,300 | 9.1 | $ | 58.00 | — | $ | 58.00 | |||||||||||||
$53.50 | 300 | 9.1 | $ | 53.50 | — | $ | 53.50 | |||||||||||||
Total | 74,545 | 56,395 | ||||||||||||||||||
15. | COMMITMENTS AND CONTINGENT LIABILITIES |
2006 | 2005 | |||||||
Commitments to extend credit | $ | 14,767,408 | $ | 21,980,597 | ||||
Standby letters of credit | 235,074 | 348,000 | ||||||
Total | $ | 15,002,482 | $ | 22,328,597 | ||||
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Table of Contents
2006 | $ | 166,167 | ||
2007 | 155,749 | |||
2008 | 156,949 | |||
2009 | 134,594 | |||
2010 | 90,517 | |||
2011 thereafter | 192,500 | |||
Total | $ | 896,476 | ||
16. | REGULATORY RESTRICTIONS |
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Table of Contents
17. | REGULATORY CAPITAL REQUIREMENTS |
2006 | 2005 | |||||||||||||||
Amount | Ratio | Amount | Ratio | |||||||||||||
Total Capital | ||||||||||||||||
(to Risk-Weighted Assets) | ||||||||||||||||
Actual | $ | 37,821,921 | 17.58 | % | $ | 35,085,562 | 16.56 | % | ||||||||
For Capital Adequacy Purposes | 17,210,449 | 8.00 | 16,951,736 | 8.00 | ||||||||||||
To Be Well Capitalized | 21,513,061 | 10.00 | 21,189,671 | 10.00 | ||||||||||||
Tier I Capital | ||||||||||||||||
(to Risk-Weighted Assets) | ||||||||||||||||
Actual | $ | 36,056,435 | 16.76 | % | $ | 33,300,666 | 15.72 | % | ||||||||
For Capital Adequacy Purposes | 8,605,224 | 4.00 | 8,475,868 | 4.00 | ||||||||||||
To Be Well Capitalized | 12,907,834 | 6.00 | 12,713,802 | 6.00 | ||||||||||||
Tier I Capital | ||||||||||||||||
(to Average Assets) | ||||||||||||||||
Actual | $ | 36,056,435 | 11.89 | % | $ | 33,300,666 | 11.41 | % | ||||||||
For Capital Adequacy Purposes | 12,130,440 | 4.00 | 11,676,339 | 4.00 | ||||||||||||
To Be Well Capitalized | 15,163,050 | 5.00 | 14,595,424 | 5.00 |
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Table of Contents
18. | FAIR VALUE OF FINANCIAL INSTRUMENTS |
2006 | 2005 | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
Value | Value | Value | Value | |||||||||||||
Financial assets | ||||||||||||||||
Cash and cash equivalents | $ | 13,430,266 | $ | 13,430,266 | $ | 8,778,216 | $ | 8,778,216 | ||||||||
Loans held for sale | 363,900 | 363,900 | 342,000 | 342,000 | ||||||||||||
Investment securities: | ||||||||||||||||
Available for sale | 36,703,282 | 36,703,282 | 39,348,280 | 39,348,280 | ||||||||||||
Held to maturity | 77,473,723 | 76,073,069 | 70,967,513 | 70,624,647 | ||||||||||||
Net loans | 162,302,330 | 153,484,000 | 157,876,428 | 151,930,031 | ||||||||||||
Bank-owned life insurance contracts | 2,925,403 | 2,925,403 | 2,833,033 | 2,833,033 | ||||||||||||
Regulatory stock | 583,800 | 583,800 | 1,496,300 | 1,496,300 | ||||||||||||
Accrued interest receivable | 1,375,172 | 1,375,172 | 1,289,902 | 1,289,902 | ||||||||||||
Financial liabilities | ||||||||||||||||
Deposits | $ | 253,103,114 | $ | 251,637,079 | $ | 239,451,092 | $ | 237,857,391 | ||||||||
U.S. treasury demand note | 718,490 | 718,490 | 615,618 | 615,618 | ||||||||||||
Short-term borrowings | — | — | 9,243,900 | 9,243,900 | ||||||||||||
Other borrowed funds | 8,000,000 | 8,190,000 | 8,000,000 | 8,015,000 | ||||||||||||
Accrued interest payable | 2,322,551 | 2,322,551 | 1,320,528 | 1,320,528 |
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Table of Contents
F-51
Table of Contents
19. | PARENT COMPANY |
December 31, | ||||||||
2006 | 2005 | |||||||
ASSETS | ||||||||
Cash | $ | 12,945 | $ | 44,820 | ||||
Investment in subsidiary | 36,202,099 | 33,636,398 | ||||||
Other assets | 174,359 | — | ||||||
TOTAL ASSETS | $ | 36,389,403 | $ | 33,681,218 | ||||
LIABILITIES | $ | — | $ | 146,535 | ||||
STOCKHOLDERS’ EQUITY | 36,389,403 | 33,534,683 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 36,389,403 | $ | 33,681,218 | ||||
Year Ended December 31, | ||||||||
2006 | 2005 | |||||||
INCOME | ||||||||
Dividends from subsidiary bank | $ | 1,135,043 | $ | 410,587 | ||||
EXPENSES | ||||||||
Other | 195,519 | 157,150 | ||||||
Income before equity in undistributed net income of subsidiary | 939,524 | 253,437 | ||||||
Equity in undistributed net income of subsidiary | 2,819,147 | 3,493,269 | ||||||
NET INCOME | $ | 3,758,671 | $ | 3,746,706 | ||||
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Year Ended December 31, | ||||||||
2006 | 2005 | |||||||
OPERATING ACTIVITIES | ||||||||
Net income | $ | 3,758,671 | $ | 3,746,706 | ||||
Undistributed net income of subsidiary | (2,819,147 | ) | (3,493,269 | ) | ||||
Other | 209,639 | 90,566 | ||||||
Net cash provided by operating activities | 1,149,163 | 344,003 | ||||||
INVESTING ACTIVITIES | ||||||||
Proceeds from investments receivable | — | 646,783 | ||||||
FINANCING ACTIVITIES | ||||||||
Cash dividends | (1,260,043 | ) | (1,167,122 | ) | ||||
Stock options exercised | 370,264 | 167,255 | ||||||
Purchase of treasury stock | (291,259 | ) | — | |||||
Net cash used for financing activities | (1,181,038 | ) | (999,867 | ) | ||||
Increase (decrease) in cash | (31,875 | ) | (9,081 | ) | ||||
CASH AT BEGINNING OF YEAR | 44,820 | 53,901 | ||||||
CASH AT END OF YEAR | $ | 12,945 | $ | 44,820 | ||||
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March 31, | March 31, | |||||||
2008 | 2007 | |||||||
ASSETS | ||||||||
Cash and Due from Banks | $ | 7,014,583 | $ | 4,744,339 | ||||
Interest-bearing Deposits in Other Banks | 209,775 | 65,920 | ||||||
Federal Funds Sold | 18,777,206 | 7,462,272 | ||||||
Investment Securities Available for Sale | 44,162,442 | 37,454,689 | ||||||
Investment Securities Held To Maturity | 70,145,154 | 78,950,238 | ||||||
Loans(net of unearned income of $568,296 and $596,758 respectively) | 168,579,725 | 164,380,295 | ||||||
Less: Allowance for Loan & Lease Losses | (1,603,821 | ) | (1,763,561 | ) | ||||
Net Loans | 166,975,904 | 162,616,734 | ||||||
Premises and Equipment | 1,237,780 | 1,448,885 | ||||||
Other Real Estate Owned | 665,367 | 313,122 | ||||||
Accrued Interest and Other Assets | 6,140,528 | 6,505,964 | ||||||
TOTAL ASSETS | $ | 315,328,739 | $ | 299,562,163 | ||||
LIABILITIES | ||||||||
Deposits: | ||||||||
Non-Interest Bearing Demand | $ | 41,029,401 | $ | 35,969,012 | ||||
Interest-Bearing Demand | 22,936,608 | 23,592,900 | ||||||
Money Market | 34,965,091 | 31,383,507 | ||||||
Savings | 29,527,395 | 30,607,270 | ||||||
Time | 135,326,787 | 129,500,011 | ||||||
Total Deposits | 263,785,282 | 251,052,700 | ||||||
U.S. Treasury Demand Note | 457,469 | 497,626 | ||||||
Other Borrowed Funds | 8,000,000 | 8,000,000 | ||||||
Accrued Interest and Other Liabilities | 3,487,338 | 2,946,630 | ||||||
TOTAL LIABILITIES | 275,730,089 | 262,496,956 | ||||||
STOCKHOLDERS’ EQUITY | ||||||||
Preferred Stock, no par value, 1,000,000 shares authorized, none issued | — | — | ||||||
Common Stock, no par value, 5,000,000 shares authorized, 1,200,000 shares issued | 600,000 | 600,000 | ||||||
Treasury Stock, at cost, (83,325 shares and 81,907 shares respectively) | (2,678,220 | ) | (2,370,609 | ) | ||||
Surplus | 3,178,923 | 2,948,528 | ||||||
Retained Earnings | 37,806,865 | 36,196,397 | ||||||
Net Unrealized Gain(Loss) on Securities Available for Sale | 170,968 | (352,760 | ) | |||||
Net Unrealized Gain(Loss) on Pension | 520,114 | 43,651 | ||||||
TOTAL STOCKHOLDERS’ EQUITY | 39,598,650 | 37,065,207 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 315,328,739 | $ | 299,562,163 | ||||
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3 Months Ending | 3 Months Ending | |||||||
March 31, 2008 | March 31, 2007 | |||||||
INTEREST INCOME | ||||||||
Interest and Fees on Loans | $ | 2,763,708 | $ | 2,707,653 | ||||
Interest on Interest-bearing Deposits in other Banks | $ | 3,083 | $ | 1,043 | ||||
Federal Funds Sold | $ | 67,593 | $ | 123,734 | ||||
Investment Securities: | ||||||||
Taxable Interest | $ | 1,327,691 | $ | 1,365,159 | ||||
Tax Exempt Interest | $ | 236,594 | $ | 236,463 | ||||
Dividend Income | $ | 9,656 | $ | 11,716 | ||||
Total Interest Income | $ | 4,408,325 | $ | 4,445,768 | ||||
INTEREST EXPENSE | ||||||||
Deposits | $ | 1,791,750 | $ | 1,753,546 | ||||
Other Borrowed Funds | $ | 125,667 | $ | 129,198 | ||||
Total Interest Expense | $ | 1,917,417 | $ | 1,882,744 | ||||
NET INTEREST INCOME | $ | 2,490,908 | $ | 2,563,024 | ||||
Provision for Loan & Lease Losses | $ | 60,000 | $ | 60,000 | ||||
NET INTEREST INCOME AFTER PROVISION FOR LOAN & LEASE LOSSES | $ | 2,430,908 | $ | 2,503,024 | ||||
NON-INTEREST INCOME | ||||||||
Service Charges and Fees | $ | 332,790 | $ | 341,930 | ||||
Gain/Loss on Sale of Other Real Estate Owned | $ | — | $ | — | ||||
Gain/Loss — Other | $ | — | $ | (2,173 | ) | |||
Other Income | $ | 41,228 | $ | 42,431 | ||||
Total Non Interest Income | $ | 374,018 | $ | 382,188 | ||||
NON-INTEREST EXPENSE | ||||||||
Salaries and Employee Benefits | $ | 910,973 | $ | 915,046 | ||||
Occupancy Expense | $ | 227,918 | $ | 228,764 | ||||
Equipment Expense | $ | 57,903 | $ | 42,054 | ||||
Data Processing Expense | $ | 74,442 | $ | 65,637 | ||||
FDIC & Other Insurance | $ | 30,476 | $ | 32,042 | ||||
Other Expense | $ | 687,232 | $ | 455,786 | ||||
Total Non-Interest Expense | $ | 1,988,944 | $ | 1,739,329 | ||||
Income before Income Taxes | $ | 815,982 | $ | 1,145,883 | ||||
Income Tax Provision | $ | 223,000 | $ | 320,000 | ||||
NET INCOME | $ | 592,982 | $ | 825,883 | ||||
EARNINGS PER SHARE (based on average shares outstanding) | $ | 0.53 | $ | 0.74 | ||||
BOOK VALUE PER SHARE (based on actual shares outstanding) | $ | 35.46 | $ | 33.15 | ||||
AVERAGE SHARES OUTSTANDING | 1,116,675 | 1,117,805 | ||||||
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Page | ||||||||
ARTICLE I THE MERGER | A-8 | |||||||
1.1 | The Merger | A-8 | ||||||
1.2 | Effective Time | A-8 | ||||||
1.3 | Effects of the Merger | A-9 | ||||||
1.4 | Conversion of IRGB Capital Stock | A-9 | ||||||
1.5 | FNB Capital Stock | A-10 | ||||||
1.6 | IRGB Equity and Equity-Based Awards | A-10 | ||||||
1.7 | Articles of Incorporation and Bylaws of the Surviving Company | A-11 | ||||||
1.8 | Tax Consequences | A-11 | ||||||
1.9 | Dissenting Shares | A-11 | ||||||
1.10 | The Bank Merger | A-11 | ||||||
ARTICLE II EXCHANGE OF SHARES | A-11 | |||||||
2.1 | Election and Proration Procedures | A-11 | ||||||
2.2 | FNB to Make Merger Consideration Available | A-14 | ||||||
2.3 | Exchange of Shares | A-14 | ||||||
2.4 | Adjustments for Dilution and Other Matters | A-15 | ||||||
2.5 | Withholding Rights | A-15 | ||||||
ARTICLE III REPRESENTATIONS AND WARRANTIES OF IRGB | A-15 | |||||||
3.1 | Corporate Organization | A-15 | ||||||
3.2 | Capitalization | A-17 | ||||||
3.3 | Authority; No Violation | A-17 | ||||||
3.4 | Consents and Approvals | A-18 | ||||||
3.5 | Reports | A-18 | ||||||
3.6 | Financial Statements | A-19 | ||||||
3.7 | Broker’s Fees | A-19 | ||||||
3.8 | Absence of Certain Changes or Events | A-19 | ||||||
3.9 | Legal Proceedings | A-19 | ||||||
3.10 | Taxes and Tax Returns | A-20 | ||||||
3.11 | Employee Benefits | A-21 | ||||||
3.12 | Compliance with Applicable Law | A-23 | ||||||
3.13 | Contracts | A-24 | ||||||
3.14 | Agreements with Regulatory Agencies | A-24 | ||||||
3.15 | Undisclosed Liabilities | A-24 | ||||||
3.16 | Environmental Liability | A-24 | ||||||
3.17 | Real Property | A-25 | ||||||
3.18 | State Takeover Laws | A-25 | ||||||
3.19 | Reorganization | A-26 | ||||||
3.20 | Opinion | A-26 | ||||||
3.21 | Insurance | A-26 | ||||||
3.22 | Investment Securities | A-26 | ||||||
3.23 | Intellectual Property | A-26 | ||||||
3.24 | Loans; Nonperforming and Classified Assets | A-26 | ||||||
3.25 | Fiduciary Accounts | A-27 | ||||||
3.26 | Allowance for Loan Losses | A-27 |
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF FNB | A-27 | |||||||
4.1 | Corporate Organization | A-27 | ||||||
4.2 | Capitalization | A-27 | ||||||
4.3 | Authority; No Violation | A-28 | ||||||
4.4 | Consents and Approvals | A-28 | ||||||
4.5 | Reports | A-29 | ||||||
4.6 | Financial Statements | A-29 | ||||||
4.7 | Broker’s Fees | A-30 | ||||||
4.8 | Absence of Certain Changes or Events | A-30 | ||||||
4.9 | Legal Proceedings | A-30 | ||||||
4.10 | Taxes and Tax Returns | A-30 | ||||||
4.11 | Employee Benefits | A-31 | ||||||
4.12 | SEC Reports | A-33 | ||||||
4.13 | Compliance with Applicable Law | A-33 | ||||||
4.14 | Contracts | A-33 | ||||||
4.15 | Agreements with Regulatory Agencies | A-34 | ||||||
4.16 | Undisclosed Liabilities | A-34 | ||||||
4.17 | Environmental Liability | A-34 | ||||||
4.18 | Reorganization | A-35 | ||||||
4.19 | Loans; Nonperforming and Classified Assets | A-35 | ||||||
4.20 | Fiduciary Accounts | A-35 | ||||||
4.21 | Allowance for Loan Losses | A-35 | ||||||
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS | A-35 | |||||||
5.1 | Conduct of Businesses Prior to the Effective Time | A-35 | ||||||
5.2 | IRGB Forbearances | A-36 | ||||||
5.3 | FNB Forbearances | A-39 | ||||||
5.4 | Voting Agreements | A-39 | ||||||
ARTICLE VI ADDITIONAL AGREEMENTS | A-39 | |||||||
6.1 | Regulatory Matters | A-39 | ||||||
6.2 | Access to Information | A-41 | ||||||
6.3 | IRGB Shareholder Approval | A-41 | ||||||
6.4 | Commercially Reasonable Efforts; Cooperation | A-42 | ||||||
6.5 | NYSE Approval | A-42 | ||||||
6.6 | Benefit Plans | A-42 | ||||||
6.7 | Indemnification; Directors’ and Officers’ Insurance | A-42 | ||||||
6.8 | Additional Agreements | A-43 | ||||||
6.9 | Advice of Changes | A-44 | ||||||
6.10 | Dividends | A-44 | ||||||
6.11 | Certain Actions | A-44 | ||||||
6.12 | Transition | A-46 | ||||||
6.13 | Certain Post-Closing Matters | A-46 | ||||||
6.14 | Tax Representation Letters | A-46 | ||||||
ARTICLE VII CONDITIONS PRECEDENT | A-47 | |||||||
7.1 | Conditions to Each Party’s Obligation to Effect the Merger | A-47 | ||||||
7.2 | Conditions to Obligation of FNB to Effect the Merger | A-47 | ||||||
7.3 | Conditions to Obligation of IRGB to Effect the Merger | A-48 |
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ARTICLE VIII TERMINATION AND AMENDMENT | A-48 | |||||||
8.1 | Termination | A-48 | ||||||
8.2 | Effect of Termination | A-51 | ||||||
8.3 | Amendment | A-51 | ||||||
8.4 | Extension; Waiver | A-51 | ||||||
ARTICLE IX GENERAL PROVISIONS | A-51 | |||||||
9.1 | Closing | A-51 | ||||||
9.2 | Nonsurvival of Representations, Warranties and Agreements | A-52 | ||||||
9.3 | Expenses | A-52 | ||||||
9.4 | Notices | A-52 | ||||||
9.5 | Interpretation | A-53 | ||||||
9.6 | Counterparts | A-53 | ||||||
9.7 | Entire Agreement | A-53 | ||||||
9.8 | Governing Law; Jurisdiction | A-53 | ||||||
9.9 | Severability | A-54 | ||||||
9.10 | Assignment; Third Party Beneficiaries | A-54 | ||||||
EXHIBITS: | ||||||||
Exhibit A Form of Bank Merger Agreement | A-55 | |||||||
Exhibit B Form of Voting Agreement | A-58 |
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Section | ||
Acquisition Proposal | 6.11(e) | |
Adjusted Buyer Ratio | 8.1(h) | |
Agreement | Preamble | |
Articles of Merger | 1.2 | |
Assumed Stock Options | 1.6(a) | |
Average Closing Price | 8.1(h) | |
Bank Merger | 1.10 | |
Bank Merger Agreement | 1.10 | |
BHC Act | 3.1(b) | |
Break-up Fee | 6.11(f) | |
Cash Election | 2.1(a) | |
Cash Proration Factor | 2.1(b) | |
Certificates | 1.4(c) | |
Change in IRGB Recommendation | 6.11(b) | |
Claim | 6.7(a) | |
Closing | 9.1 | |
Closing Date | 9.1 | |
Code | Preamble | |
Combination Cash Election | 2.1(a) | |
Combination Stock Election | 2.1(a) | |
Confidentiality Agreement | 6.2(b) | |
Contracts | 5.2(j) | |
Controlled Group Liability | 3.10 | |
Credit Facilities | 5.2(f) | |
Determination Date | 8.1(g) | |
DRSP Plan | 1.4(d) | |
Effective Date | 1.2 | |
Effective Time | 1.2 | |
Election Deadline | 2.1(b) | |
Election Form | 2.1(a) | |
Environmental Laws | 3.15(b) | |
ERISA | 3.11 | |
ERISA Affiliate | 3.11 | |
Exchange Act | 2.1(a) | |
Exchange Agent | 2.1 | |
Exchange Fund | 2.2 | |
Exchange Ratio | 1.4(a) | |
FBCA | 1.1(a) | |
FDIC | 3.4 | |
Federal Reserve Board | 3.4 | |
FNB | Preamble | |
FNB 200610-K | 4.6 | |
FNB10-Q | 4.16 | |
FNB Bank | 1.10 | |
FNB Bank Board | 1.10 |
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Section | ||
FNB Benefit Plan | 4.11 | |
FNB Bylaws | 4.1(b) | |
FNB Charter | 4.1(b) | |
FNB Closing Price | 1.6(a) | |
FNB Common Stock | 1.4(a) | |
FNB Disclosure Schedule | Art. IV Preamble | |
FNB Employment Agreement | 4.11 | |
FNB Loan Property | 4.17 | |
FNB Plans | 6.7(a) | |
FNB Preferred Stock | 4.2(a) | |
FNB Qualified Plans | 4.11(d) | |
FNB Regulatory Agreement | 4.15 | |
FNB Reports | 4.12 | |
FNB Stock Plans | 4.2(a) | |
GAAP | 3.1(c) | |
Governmental Entity | 3.4 | |
Hazardous Substance | 3.16(b) | |
HSR Act | 3.4 | |
Indemnified Parties | 6.7(a) | |
Index Price | 8.1(h) | |
Injunction | 7.1(e) | |
Insurance Amount | 6.7(c) | |
Intellectual Property | 3.23 | |
IRGB | Preamble | |
IRGB Articles | 3.1(b) | |
IRGB Bank | 1.10 | |
IRGB Bank Designees | 1.10 | |
IRGB Benefit Plan | 3.11 | |
IRGB Bylaws | 3.1(b) | |
IRGB Closing Price | 1.6(a) | |
IRGB Common Stock | 1.4(a) | |
IRGB Disclosure Schedule | Art. III Preamble | |
IRGB Employment Agreement | 3.11 | |
IRGB’s Knowledge | 3.16(b) | |
IRGB Loan Property | 3.16(a) | |
IRGB Plan | 3.11 | |
IRGB Qualified Plans | 3.11(d) | |
IRGB Recommendation | 6.3(e) | |
IRGB Regulatory Agreement | 3.14 | |
IRGB Representatives | 6.13(a) | |
IRGB RSU | 1.6(b) | |
IRGB Shareholder Meeting | 6.3 | |
IRGB Stock Option | 1.6(a) | |
IRGB Stock Plans | 1.6(a) | |
IRGB Subsidiary | 3.1(c) | |
IRS | 3.10(a) |
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Section | ||
Proxy Statement | 3.4 | |
Leased Properties | 3.17(c) | |
Leases | 3.17(b) | |
Liens | 3.2(b) | |
Loan(s) | 5.2(s) | |
Material Adverse Effect | 3.1(c) | |
Materially Burdensome Regulatory Condition | 6.1(d) | |
Merger | Preamble | |
Merger Consideration | 1.4(a) | |
Multiemployer Plan | 3.11 | |
Multiple Employer Plan | 3.11 | |
NASDAQ | 3.1(c) | |
NYSE | 3.1(c) | |
OCC | 3.4 | |
OREO | 3.24(b) | |
Option Ratio | 1.6(a) | |
Other Regulatory Approvals | 3.4 | |
Owned Properties | 3.17(a) | |
PA DOB | 3.4 | |
Payment Event | 6.11(g) | |
PBCL | 1.1(a) | |
PBGC | 3.11(e) | |
Per Share Consideration | 8.1(h) | |
Person | 3.9(a) | |
Registration Statement | 3.4 | |
Regulatory Agencies | 3.5 | |
Requisite Regulatory Approvals | 7.1(c) | |
SEC | 3.4 | |
Securities Act | 1.6(d) | |
SRO | 3.4 | |
Starting Date | 8.1(h) | |
Starting Price | 8.1(h) | |
Stock Amount | 2.1(c)(v) | |
Stock Election | 2.1(a) | |
Stock Proration Factor | 2.1(b) | |
Subsidiary | 3.1(c) | |
Superior Proposal | 6.11(e) | |
Surviving Company | Preamble | |
Undesignated Shares | 2.1(c) | |
Tax Returns | 3.10(c) | |
Tax(es) | 3.10(b) | |
Third Party | 3.17(d) | |
Third Party Leases | 3.17(d) | |
Treasury Shares | 1.4(b) | |
Voting Agreement | Preamble | |
Withdrawal Liability | 3.11 |
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• | the Exchange Ratioand/or the Cash Consideration is increased so that the Per Share Consideration (calculated by using the Average Closing Price, as provided in the definition of “Per Share Consideration”) after such increase is not less than 89% of the Per Share Consideration calculated by using the Starting Price in lieu of the Average Closing Price. |
• | the Exchange Ratioand/or the Cash Consideration is increased so that the Adjusted Buyer Ratio is not less than the Index Ratio. |
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By: | /s/ Stephen J. Gurgovits |
By: | /s/ Michael J. Hagan |
By: | /s/ Daniel A. Goetz |
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By: |
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Date: | ||
Very truly yours, | ||
[Name] | ||
Address: | ||
Facsimile: | ||
Acknowledged and Agreed: | ||
F.N.B. CORPORATION | ||
By: | ||
Stephen J. Gurgovits | ||
Chairman of the Board and Chief Executive Officer |
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Shares: |
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212.887.7777 • Toll Free: 800.966.1559 • www.kbw.com
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SHAREHOLDERS OF IRON AND GLASS BANCORP, INC.
SUBCHAPTER D. — DISSENTERS RIGHTS
AND SECTION 1930. — DISSENTERS RIGHTS
Section 1906(c) | (relating to dissenters rights upon special treatment). | |
Section 1930 | (relating to dissenters rights). | |
Section 1931(d) | (relating to dissenters rights in share exchanges). | |
Section 1932(c) | (relating to dissenters rights in asset transfers). | |
Section 1952(d) | (relating to dissenters rights in division). | |
Section 1962(c) | (relating to dissenters rights in conversion). | |
Section 2104(b) | (relating to procedure). | |
Section 2324 | (relating to corporation option where a restriction on transfer of a security is held invalid). | |
Section 2325(b) | (relating to minimum vote requirement). |
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Section 2704(c) | (relating to dissenters rights upon election). | |
Section 2705(d) | (relating to dissenters rights upon renewal of election). | |
Section 2904(b) | (relating to procedure). | |
Section 2907(a) | (relating to proceedings to terminate breach of qualifying conditions). | |
Section 7104(b)(3) | (relating to procedure). |
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Exhibit No. | Description of Exhibit | |
2.1 | Agreement and Plan of Merger dated as of February 14, 2008 between F.N.B. Corporation and Iron and Glass Bancorp, Inc. (included as Appendix A to this proxy statement/prospectus) | |
5.1 | Opinion of Duane Morris LLP | |
8.1 | Tax Opinion of Duane Morris LLP | |
8.2 | Tax Opinion of Jones Day | |
15.1 | Acknowledgement of Ernst & Young LLP dated May 7, 2008 to the Board of Directors and Shareholders of F.N.B. Corporation | |
23.1 | Consent of Ernst & Young LLP as to F.N.B. Corporation | |
23.2 | Consent of S.R. Snodgrass A.C. as to Iron and Glass Bancorp, Inc. | |
23.3 | Consent of Duane Morris LLP (included in Exhibits 5.1 and 8.1) | |
23.4 | Consent of Jones Day (included in Exhibit 8.2) | |
24.1 | Power of Attorney (included on signature page) | |
99.1 | Proxy for Special Meeting of Shareholders of Iron and Glass Bancorp, Inc. | |
99.2 | Consent of Keefe Bruyette & Woods, Inc. | |
99.3 | Form of Letter of Transmittal |
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F.N.B. CORPORATION | ||||
By: | /s/ Robert V. New, Jr. | |||
Robert V. New, Jr. | ||||
President and Chief Executive Officer | ||||
Signature | Title | Date | ||
/s/ Robert V. New, Jr. | President, Chief Executive Officer and a Director (principal executive officer) | May 16, 2008 | ||
/s/ Stephen J. Gurgovits | Chairman of the Board of Directors and a Director | May 16, 2008 |
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Signature | Title | Date | ||
/s/ Brian F. Lilly | Chief Financial Officer (principal financial officer) | May 16, 2008 | ||
/s/ Vincent J. Calabrese | Corporate Controller (principal accounting officer) | May 16, 2008 | ||
/s/ William B. Campbell | Director | May 16, 2008 | ||
/s/ Henry M. Ekker | Director | May 16, 2008 | ||
/s/ Philip E. Gingerich | Director | May 16, 2008 | ||
/s/ Robert B. Goldstein | Director | May 16, 2008 | ||
/s/ Dawne S. Hickton | Director | May 16, 2008 | ||
/s/ David J. Malone | Director | May 16, 2008 | ||
Director | May , 2008 | |||
/s/ Peter Mortensen | Director | May 16, 2008 |
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Table of Contents
Signature | Title | Date | ||
/s/ Harry F. Radcliffe | Director | May 16, 2008 | ||
/s/ Arthur J. Rooney, II | Director | May 16, 2008 | ||
/s/ John W. Rose | Director | May 16, 2008 | ||
Director | May , 2008 | |||
/s/ William J. Strimbu | Director | May 16, 2008 | ||
/s/ Earl K. Wahl, Jr. | Director | May 16, 2008 |
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Table of Contents
Exhibit No. | Description of Exhibit | |
2.1 | Agreement and Plan of Merger dated as of February 14, 2008 between F.N.B. Corporation and Iron and Glass Bancorp, Inc. (included as Appendix A to this proxy statement/prospectus) | |
5.1 | Opinion of Duane Morris LLP | |
8.1 | Tax Opinion of Duane Morris LLP | |
8.2 | Tax Opinion of Jones Day | |
15.1 | Acknowledgement of Ernst & Young LLP dated May 7, 2008 to the Board of Directors and Shareholders of F.N.B. Corporation | |
23.1 | Consent of Ernst & Young LLP as to F.N.B. Corporation | |
23.2 | Consent of S.R. Snodgrass A.C. as to Iron and Glass Bancorp, Inc. | |
23.3 | Consent of Duane Morris LLP (included in Exhibits 5.1 and 8.1) | |
23.4 | Consent of Jones Day (included in Exhibit 8.2) | |
24.1 | Power of Attorney (included on signature page) | |
99.1 | Proxy for Special Meeting of Shareholders of Iron and Glass Bancorp, Inc. | |
99.2 | Consent of Keefe Bruyette & Woods, Inc. | |
99.3 | Form of Letter of Transmittal |
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