UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
--------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to _______________________
Commission file number 0-8144
F.N.B. CORPORATION
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 25-1255406
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Hermitage Square, Hermitage, PA 16148
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(412) 981-6000
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(Registrant's telephone number, including area code)
Not applicable
- ------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 25, 1996
----- -----------------------------
Common Stock, $2 Par Value 8,622,800 Shares
- -------------------------- ----------------
F.N.B. CORPORATION
FORM 10-Q
March 31, 1996
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheet 2
Consolidated Income Statement 3
Consolidated Statement of Cash Flows 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 16
-1-
F.N.B. CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
Dollars in thousands
MARCH 31, DECEMBER 31,
1996 1995
------------ ------------
(Unaudited) (Note)
------------ ------------
ASSETS
Cash and due from banks $ 60,689 $ 59,795
Interest bearing deposits with banks 4,886 2,603
Federal funds sold 13,235 22,335
Securities available for sale 221,740 223,479
Securities held to maturity (fair value of
$156,307 and $136,801) 158,191 136,969
Loans available for sale 9,704 10,154
Loans, net of unearned income of
$23,915 and $26,609 1,229,598 1,212,741
Allowance for loan losses (21,696) (21,550)
------------ ------------
NET LOANS 1,217,606 1,201,345
------------ ------------
Premises and equipment 24,237 22,504
Other assets 37,397 37,963
------------ ------------
$ 1,737,981 $ 1,706,993
============ ============
LIABILITIES
Deposits:
Non-interest bearing $ 159,374 $ 167,700
Interest bearing 1,304,591 1,274,409
------------ ------------
TOTAL DEPOSITS 1,463,965 1,442,109
Short-term borrowings 57,382 55,224
Other liabilities 29,405 25,988
Long-term debt 40,565 39,755
------------ ------------
TOTAL LIABILITIES 1,591,317 1,563,076
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock - $10 par value
Authorized - 20,000,000 shares
Outstanding - 451,638 shares
Aggregate liquidation value - $11,291 4,516 4,516
Common stock - $2 par value
Authorized - 20,000,000 shares
Outstanding - 8,615,767 and 8,611,814 shares 17,268 17,268
Additional paid-in capital 58,633 58,631
Retained earnings 63,314 60,034
Net unrealized securities gains 3,328 3,932
Treasury stock - 18,389 and 22,340 shares at cost (395) (464)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 146,664 143,917
------------ ------------
$ 1,737,981 $ 1,706,993
============ ============
NOTE: The balance sheet at December 31, 1995 was derived from the audited
financial statements at that date.
See accompanying Notes to Consolidated Financial Statements
-2-
F.N.B. CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
Dollars in thousands, except per share data
Unaudited
Three Months Ended March 31 1996 1995
--------- ---------
INTEREST INCOME
Loans, including fees $ 29,084 $ 27,636
Securities:
Taxable 4,634 4,232
Tax exempt 373 375
Dividends 166 156
Other 453 236
--------- ---------
TOTAL INTEREST INCOME 34,710 32,635
--------- ---------
INTEREST EXPENSE
Deposits 13,249 11,897
Short-term borrowings 862 849
Long-term debt 742 781
--------- ---------
TOTAL INTEREST EXPENSE 14,853 13,527
--------- ---------
NET INTEREST INCOME 19,857 19,108
Provision for loan losses 1,368 1,541
--------- ---------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 18,489 17,567
--------- ---------
NON-INTEREST INCOME
Insurance commissions and fees 921 737
Service charges 1,595 1,731
Trust 384 406
Gain on sale of securities 288 167
Other 488 368
--------- ---------
TOTAL NON-INTEREST INCOME 3,676 3,409
--------- ---------
22,165 20,976
--------- ---------
NON-INTEREST EXPENSES
Salaries and employee benefits 7,764 7,464
Net occupancy 1,197 1,164
Amortization of intangibles 270 328
Equipment 850 945
Deposit insurance 309 934
Other 4,799 4,281
--------- ---------
TOTAL NON-INTEREST EXPENSES 15,189 15,116
--------- ---------
INCOME BEFORE INCOME TAXES 6,976 5,860
Income taxes 2,109 1,876
--------- ---------
NET INCOME $ 4,867 $ 3,984
========= =========
NET INCOME PER COMMON SHARE:
Primary $ .51 $ .42
========= =========
Fully diluted $ .49 $ .40
========= =========
CASH DIVIDENDS PER COMMON SHARE $ .15 $ .06
========= =========
AVERAGE COMMON SHARES OUTSTANDING 9,038,276 9,028,072
========= =========
See accompanying Notes to Consolidated Financial Statements
-3-
F.N.B. CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Dollars in thousands
Unaudited
Three Months Ended March 31 1996 1995
--------- ---------
OPERATING ACTIVITIES
Net income $ 4,867 $ 3,984
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,128 1,287
Provision for loan losses 1,368 1,541
Deferred taxes 448 406
Gain on securities available for sale (288) (167)
Gain on loan sales (73) (4)
Proceeds from sale of loans 2,841 5,468
Loans originated for sale (2,318) (4,615)
Change in:
Interest receivable (429) 709
Interest payable 1,100 40
Other, net 2,917 (3,539)
--------- ---------
Net cash flows from operating activities 11,561 5,110
--------- ---------
INVESTING ACTIVITIES
Net change in interest bearing deposits with banks (2,283) (3,452)
Net change in federal funds sold 9,100 (25,530)
Purchase of securities available for sale (38,165) (3,437)
Purchase of securities held to maturity (25,837) (527)
Proceeds from sale of securities available for sale 13,420 478
Proceeds from maturity of securities available for sale 25,773 16,393
Proceeds from maturity of securities held to maturity 4,594 20,693
Net change in loans (18,096) (5,081)
Increase in premises and equipment (2,481) (655)
--------- ---------
Net cash flows from investing activities (33,975) (1,118)
--------- ---------
FINANCING ACTIVITIES
Net change in non-interest bearing deposits (8,326) (685)
Net change in interest bearing deposits 30,182 8,915
Net change in short-term borrowings 2,158 (17,806)
Increase in long-term debt 1,710 1,117
Decrease in long-term debt (900) (503)
Proceeds from sale of stock 545 356
Purchase of treasury stock (473) (345)
Cash dividends paid (1,588) (787)
--------- ---------
Net cash flows from financing activities 23,308 (9,738)
--------- ---------
NET INCREASE/(DECREASE) IN CASH AND DUE FROM BANKS 894 (5,746)
Cash and due from banks at beginning of period 59,795 60,451
--------- ---------
CASH AND DUE FROM BANKS AT END OF PERIOD $ 60,689 $ 54,705
========= =========
See accompanying Notes to Consolidated Financial Statements
-4-
F.N.B. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 1996
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the three-month
period ended March 31, 1996 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1996. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Corporation's annual report on Form 10-K for the year
ended December 31, 1995.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements.
Actual results could differ from those estimates.
PER SHARE AMOUNTS
Per share amounts are adjusted for common stock dividends, including the
5% stock dividend approved on April 24, 1996.
Primary earnings per common share is calculated by dividing net income,
adjusted for preferred stock dividends declared, by the sum of the weighted
average number of shares of common stock outstanding and the number of shares
of common stock which would be issued assuming the exercise of stock options
during each period.
Fully diluted earnings per common share is calculated by dividing net
income, adjusted for minority interest, by the weighted average number of
shares of common stock outstanding, assuming the conversion of outstanding
convertible preferred stock from the beginning of the year or date of issuance
and the exercise of stock options.
Cash dividends per common share are based on the actual cash dividends
declared adjusted for stock dividends. Book value per common share is based
on shares outstanding at each period end adjusted retroactively for stock
dividends.
CASH FLOW INFORMATION
Following is a summary of supplemental cash flow information (in
thousands):
Three months ended March 31 1996 1995
------- -------
Cash paid for:
Interest $13,753 $14,211
Income taxes 560
Noncash Investing and Financing Activities:
Acquisition of real estate in settlement of loans 33 595
Loans granted in the sale of other real estate 139 46
MERGERS AND ACQUISITIONS
On February 2, 1996, the Corporation signed a definitive merger agreement
with Southwest Banks, Inc. (Southwest), a bank holding company headquartered in
Naples, Florida with assets of approximately $386 million. The merger
agreement calls for an exchange of .819 shares of F.N.B. Corporation common
stock for each share of Southwest common stock after giving effect to the 5%
stock dividend announced on April 24, 1996.
-5-
The Corporation has reserved 3,276,700 shares to be issued in conjunction with
the merger.
In connection with the merger agreement, Southwest granted the Corporation
an option to purchase, under certain circumstances, up to 727,163 shares of
Southwest common stock at a price of $15.00 per share. The exchange ratio,
number of shares under option and the price of the options are all subject to
possible adjustment. The transaction will be accounted for as a pooling of
interests, and is expected to close in early 1997, subject to approval by
certain regulatory authorities and Southwest's shareholders.
In December 1995, two of the Corporation's subsidiaries, First National
Bank of Pennsylvania (First National) and Dollar Savings Association, agreed
to merge, with First National being the survivor. The relevant applications
with federal and state regulatory authorities have been approved and the merger
is expected to be consummated by May 14, 1996.
EFFECT OF NEW ACCOUNTING STANDARDS
The following Statements of Financial Accounting Standards (FAS) became
effective for the Corporation in 1996.
FAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," requires impairment losses to be recorded
on long-lived assets used in operations when indicators of impairment are
present. The undiscounted cash flows estimated to be generated by those assets
are less than the assets' carrying amount. Adoption of this Statement did not
have a material effect on the Corporation's financial position or results of
operations.
FAS No. 122, "Accounting for Mortgage Servicing Rights," an amendment of
FAS No. 65, allows enterprises engaging in mortgage banking activities to
recognize as separate assets rights to service mortgage loans originated for
sale. Additionally, the enterprise must periodically assess its capitalized
mortgage servicing rights for impairment based on the fair value of those
rights. Adoption of this Statement did not have a material effect on the
Corporation's financial position or results of operations, as the Corporation
does not significantly engage in the sale of mortgage loans.
PART I
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Liquidity and Interest Rate Sensitivity
The Corporation monitors its liquidity position on an ongoing basis to
assure that it is able to meet the need for funds at all times. Given the
monetary nature of its assets and liabilities and the level of liquidity
provided by its available for sale securities portfolio, the Corporation
generally has sufficient sources of funds available as needed to meet its
routine, operational cash needs.
In addition to normal liquidity provided from operations, the Corporation
has external sources of funds available should it desire to use them. These
include approved lines of credit with several major domestic banks, of which
$22.0 million was unused at March 31, 1996. To further meet its liquidity
needs, the Corporation also has access to the Federal Home Loan Bank and the
Federal Reserve Bank, as well as other uncommitted funding sources.
Interest rate sensitivity measures the impact that future changes in
interest rates will have on net interest income. The cumulative gap reflects
the net position of assets and liabilities repricing in specified time periods.
The gap is one measurement of risk inherent in a balance sheet as it relates to
changes in interest rates and their effect on net interest income.
-6-
The gap analysis which follows is based on a combination of asset and
liability amortizations, maturities and repricing opportunities. Non-maturity
deposit balances have been allocated to various repricing intervals to more
accurately depict their true behavior and characteristics. This allocation
was done in accordance with FDIC guidance. Based on the cumulative one year
gap in this table and assuming no repositioning or modifications to
asset/liability composition, a rise in interest rates over the next year would
have a slight negative impact on net interest income.
Gap analyses alone do not accurately measure the magnitude of changes in
net interest income since changes in interest rates do not affect all
categories of assets and liabilities equally or simultaneously. Recognizing
that traditional gap analyses do not measure dynamically the exposure to
interest rate changes, the Corporation also relies on computer simulation
modeling to measure the effect of upward and downward interest rate changes on
net interest income. Simulation is currently in use at all of the
Corporation's banking affiliates.
Through the review of gap analyses and simulation modeling, management
continually monitors the Corporation's exposure to changing interest rates.
Management attempts to mitigate repricing mismatches through asset and
liability pricing and through matched maturity funding.
Following is the gap analysis as of March 31, 1996 (in thousands):
Within 4-12 1-5 Over
3 Months Months Years 5 years Total
--------- --------- --------- --------- ----------
Interest Earning Assets
Interest bearing deposits
with banks $ 4,786 $ 100 $ 4,886
Federal funds sold 13,235 13,235
Securities:
Available for sale 29,063 79,530 $ 96,331 $ 16,816 221,740
Held to maturity 4,834 11,152 135,055 7,150 158,191
Loans, net of unearned 273,982 255,843 466,417 243,060 1,239,302
--------- --------- --------- --------- ----------
325,900 346,625 697,803 267,026 1,637,354
Other assets 100,627 100,627
--------- --------- --------- --------- ----------
$ 325,900 $ 346,625 $ 697,803 $ 367,653 $1,737,981
========= ========= ========= ========= ==========
Interest Bearing Liabilities
Deposits:
Interest checking $ 8,300 $ 24,900 $ 132,798 $ 165,998
Savings 39,795 119,386 238,772 397,953
Time deposits 181,122 293,495 264,862 $ 1,161 740,640
Short-term borrowings 19,842 19,658 17,882 57,382
Long-term debt 15,553 2,898 9,527 12,587 40,565
--------- --------- --------- --------- ----------
264,612 460,337 663,841 13,748 1,402,538
Other liabilities 188,779 188,779
Stockholders' equity 146,664 146,664
--------- --------- --------- --------- ----------
$ 264,612 $ 460,337 $ 663,841 $ 349,191 $1,737,981
========= ========= ========= ========= ==========
Period Gap $ 61,288 $(113,712)$ 33,962 $ 18,462
========= ========= ========= =========
Cumulative Gap $ 61,288 $ (52,424)$ (18,462)
========= ========= =========
Rate Sensitive Assets/Rate
Sensitive Liabilities
(Cumulative) 1.23 0.93 0.99 1.17
========= ========= ========= =========
Cumulative Gap as a Percent
of Total Assets 3.5% (3.0%) (1.1%)
========= ========= =========
Capital Resources
The assessment of capital adequacy depends on a number of factors such as
asset quality, liquidity, earnings performance and changing competitive
conditions and economic forces. The Corporation maintains a strong capital
base to support its growth and expansion activities, to provide stability to
current operations and to promote public confidence.
-7-
The capital management function is a continuous process. Central to this
process is internal equity generation accomplished mainly through earnings
retention. Since December 31, 1995, total retained earnings has increased
$3.4 million as a result of earnings retention. For the three months ended
March 31, 1996, the return on average equity was 13.46%. Total cash dividends
declared represented 32.63% of net income. Book value per share was $15.71 at
March 31, 1996, compared to $15.40 at December 31, 1995.
The Corporation's capital position continues to exceed regulatory
minimums. The primary indicators relied on by the Federal Reserve Board and
other regulators in measuring strength of capital position are the Core
Capital, Total Risk-Based Capital and Leverage ratios. Following is
a table summarizing these ratios and the related regulatory minimums as of
March 31, 1996 and December 31, 1995, respectively (in thousands):
MARCH 31, DECEMBER 31, REGULATORY
1996 1995 MINIMUMS
------------ ------------ ----------
Capital Ratios:
Core Capital 11.86% 11.74% 4.00%
Total Risk-Based Capital 13.96 13.86 8.00
Leverage 8.21 8.16 5.00
Core Capital consists of common and qualifying preferred stockholders'
equity less non-qualifying intangibles and Total Risk-Based Capital consists
of Core Capital, qualifying subordinated debt and a portion of the allowance
for loan losses. Both are calculated with reference to risk-weighted assets
consisting of both on- and off- balance sheet risks. The Leverage ratio
consists of Core Capital divided by quarterly average assets less non-
qualifying intangibles.
NON-PERFORMING ASSETS AND ALLOWANCE FOR LOAN LOSSES
Non-performing assets include non-performing loans and other real estate
owned. Non-performing loans include non-accrual loans and restructured loans.
Non-accrual loans represent loans on which interest accruals have been
discontinued. Generally, it is the Corporation's policy to discontinue
interest accruals when principal or interest is due and has remained unpaid for
90 days or more unless the loan is both well secured and in the process of
collection. When a loan is placed on non-accrual status, unpaid interest
credited to income in the current year is reversed and unpaid interest accrued
in prior years is charged against the allowance for loan losses. Interest
received on non-accrual loans is either applied against principal or reported
as interest income, according to management's judgment as to the collectibility
of principal. Loans which reach non-accrual status may not be restored to
accrual status until all delinquent principal and interest has been paid, or
the loan becomes both secured and in the process of collection. Restructured
loans are loans in which the borrower has been granted a concession
on the interest rate or the original repayment terms due to financial distress.
Following is a summary of non-performing assets (in thousands):
MARCH 31, DECEMBER 31,
1996 1995
------------ ------------
Non-performing assets:
Non-accrual loans $ 7,099 $ 5,605
Restructured loans 1,750 3,075
------- -------
Total non-performing loans 8,849 8,680
Other real estate owned 2,413 2,742
------- -------
Total non-performing assets $11,262 $11,422
======= =======
Asset quality ratios:
Non-performing loans as percent of total loans .71% .71%
Non-performing assets as percent of total assets .65% .67%
-8-
Non-accrual loans totaled $7.1 million at March 31, 1996, representing an
increase of $1.5 million from $5.6 million at December 31, 1995. The ratio of
non-accrual loans to total loans increased from .46% at December 31, 1995 to
.57% at March 31, 1996. This increase was offset by a decrease of $1.3 million
in restructured loans.
Non-performing loans are closely monitored on an ongoing basis as part of
the Corporation's loan review process. The potential risk of loss on these
loans is evaluated by comparing the loan balance to the present value of
projected future cash flows or the value of any underlying collateral,
recognizing losses where appropriate.
Management's analysis of the allowance for loan losses includes the
evaluation of the loan portfolio based on internally generated loan review
reports and the historical loss experience of the remaining balances of the
various homogeneous loan pools which comprise the loan portfolio. Specific
factors which are evaluated include the previous loan loss experience with the
customer, the status of past due interest and principal payments on the loan,
the collateral position of the loan, the quality of financial information
supplied by the borrower and the general financial condition of the borrower.
Historical loss experience on the remaining portfolio segments is considered
in conjunction with current status of economic conditions, loan loss trends,
delinquency and non-accrual trends, credit administration, concentrations of
credit and off-balance sheet risk.
Following is a summary of changes in the allowance for loan losses and
selected ratios (dollars in thousands):
At or for the
Three Months Ended
March 31,
-------------------
1996 1995
------- -------
Balance at beginning of period $21,550 $20,295
Charge-offs (1,592) (1,342)
Recoveries 370 428
------- -------
Net charge-offs (1,222) (914)
Provision for loan losses 1,368 1,541
------- -------
Balance at end of period $21,696 $20,922
======= =======
Net charge-offs as percent of average loans,
net of unearned (annualized) .40% .31%
Allowance for loan losses to:
Total loans, net of unearned income 1.75% 1.75%
Non-performing assets 245.18% 173.94%
Net charge-offs increased in 1996 due to a change in the charge-off policy
at the Corporation's consumer finance subsidiary during 1995.
FINANCIAL INFORMATION SUMMARY
Net income for the first quarter of 1996 was $4.9 million compared to
$4.0 million for the first quarter of 1995. Primary earnings per share for
those periods were $.51 and $.42, respectively, and $.49 and $.40 on a fully
diluted basis. Highlights for the first quarter of 1996 include:
* A 13.46% return on average equity and a 1.14% return on
average assets.
* A net interest margin on a fully taxable equivalent basis
of 5.03%.
* The provision for loan losses for the first quarter of
1996 at $1.4 million was 11.23% lower than the provision
recorded for the first quarter of 1995.
-9-
First Three Months of 1996 as Compared to First Three Months of 1995:
The following table provides information regarding the average balances
and yields and rates on interest earning assets and interest bearing
liabilities (dollars in thousands):
Three Months Ended March 31 1996 1995
-----------------------------------------------------
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
-------- -------- ------ ----------- -------- ------
Assets
Interest earning assets:
Interest bearing deposits
with banks $ 2,981 $ 46 6.23% $ 3,996 $ 48 4.79%
Federal funds sold 30,163 407 5.39 12,601 188 5.97
Securities:
U.S. Treasury and other
U.S. Government agencies
and corporations 313,168 4,634 5.95 315,417 4,232 5.44
States of the U.S. and
political subdivisions (1) 36,408 573 6.30 35,246 548 6.22
Other securities (1) 15,903 190 4.77 14,043 179 5.09
Loans (1) (2) 1,230,495 29,383 9.60 1,195,994 27,951 9.48
---------- -------- ---------- --------
Total interest
earning assets 1,629,118 35,233 8.70 1,577,297 33,146 8.52
---------- -------- ---------- --------
Cash and due from banks 53,104 52,309
Allowance for loan losses (21,739) (20,779)
Premises and equipment 22,724 22,987
Other assets 40,400 45,672
---------- ----------
$1,723,607 $1,677,486
========== ==========
Liabilities
Interest bearing liabilities:
Deposits:
Interest bearing demand $ 155,126 605 1.57 $ 156,380 686 1.78
Savings 394,235 2,435 2.48 444,599 2,730 2.49
Other time 740,194 10,209 5.55 665,163 8,481 5.17
Short-term borrowings 55,502 862 6.24 59,698 849 5.75
Long-term debt 40,138 742 7.40 39,053 781 8.00
---------- -------- ---------- --------
Total interest
bearing liabilities 1,385,195 14,853 4.31 1,364,893 13,527 4.02
---------- -------- ---------- --------
Non-interest bearing
demand deposits 159,463 155,292
Other liabilities 33,554 28,658
--------- ----------
1,578,212 1,548,843
--------- ----------
Stockholders' Equity 145,395 128,643
---------- ----------
$1,723,607 $1,677,486
========== ==========
Excess of interest earning
assets over interest
bearing liabilities $ 243,923 $ 212,404
========== ==========
Net interest income $ 20,380 $ 19,619
======== ========
Net interest spread 4.39% 4.50%
===== =====
Net interest margin (3) 5.03% 5.04%
===== =====
(1) The amounts are reflected on a fully taxable equivalent basis using
the federal statutory tax rate of 35% adjusted for certain federal tax
preferences.
(2) Average outstanding includes non-accrual loans. Loans consist of
average total loans less average unearned income. The amount of loan
fees included in interest income on loans is immaterial.
(3) Net interest margin is calculated by dividing the difference between
total interest earned and total interest paid by total interest
earning assets.
-10-
Net interest income, the Corporation's primary source of earnings, is the
amount by which interest and fees generated by interest earning assets,
primarily loans and securities, exceed interest expense on deposits and
borrowed funds. During the first three months of 1996, net interest income,
on a fully taxable equivalent basis, totaled $20.4 million, representing a
3.87% increase over the first three months of 1995. Net interest income as a
percentage of average earning assets (commonly referred to as the margin)
remained constant at 5.03% at March 31, 1996 compared to 5.04% at March 31,
1995.
Net interest income can be analyzed in terms of the impact of changing
volumes of interest earning assets and interest bearing liabilities. The
following table sets forth certain information regarding changes in net
interest income attributable to changes in the volumes of interest earning
assets and interest bearing liabilities and changes in the rates for the three
months ending March 31, 1996 as compared to the three months ending March 31,
1995 (in thousands):
Volume Rate Net
------- ------- -------
Interest Income
Interest bearing deposits with banks $ (56) $ 54 $ (2)
Federal funds sold 954 (735) 219
Securities:
U.S. Treasury and other U.S.
Government agencies and corporations (123) 525 402
States of the U.S. and political subdivisions 73 (48) 25
Other securities 91 (80) 11
Loans 3,300 (1,868) 1,432
------- ------- -------
4,239 (2,152) 2,087
------- ------- -------
Interest Expense
Deposits:
Interest bearing demand (22) (59) (81)
Savings (1,251) 956 (295)
Other time 4,051 (2,323) 1,728
Short-term borrowings (374) 387 13
Long-term debt 85 (124) (39)
------- ------- -------
2,489 (1,163) 1,326
------- ------- -------
Net Change $ 1,750 $ (989) $ 761
======= ======= =======
The amount of change not solely due to rate or volume changes was
allocated between the change due to rate and the change due to volume based on
the absolute relative size of the rate and volume changes.
Total interest income on a fully taxable equivalent basis increased $2.1
million or 6.30% for the first three months of 1996, compared to the first
three months of 1995. Interest income on loans increased 5.13%
from $28.0 million for the first three months of 1995 to $29.4 million for the
first three months of 1996, a result of greater loan demand. Average loans
increased 2.9% over these same periods. Interest on federal funds sold
increased 116.0% to $406,000 for the first three months of 1996 compared to the
first three months of 1995. This increase was the result of a higher volume of
federal funds being sold.
Total interest expense increased $1.3 million or 9.80% for the three
months ended March 31, 1996, compared to the three months ended March 31,
1995. Interest expense on deposits increased 11.37% to $13.3 million over
these periods, due to an increase of 20.39% in interest expense on time
deposits. This was primarily the result of increased market rates of interest
and the continuing shift in the deposit mix from transaction and savings
accounts into higher paying certificate accounts.
The provision for loan losses totaled $1.4 million for the first three
months of 1996, representing a decrease of 11.23% from the first three months
of 1995, a direct result of the continuing improvement in asset quality at the
Corporation. The provision for loan losses charged to operations is a direct
result of management's analysis of the adequacy of the allowance for loan
losses which takes into consideration all factors relevant to the
collectibility of the existing portfolio.
-11-
Total non-interest income increased 7.83% during the first three months of
1996, compared to the same period of 1995. This increase was attributable to
slight increases in insurance commissions and fees and gains on sale of
securities, offset by a slight decrease in service charges.
Total non-interest expenses increased slightly during the first three
months of 1996, compared to the first three months of 1995. Salaries
and employee benefits accounted for the majority of this increase.
Income before taxes was $7.0 million for the quarter ended March 31, 1996,
representing an increase of 19.04% over the same period of 1995. Income taxes
increased 12.42% over these same periods due to more taxable income being
generated by the Corporation.
Consolidated net income was $4.9 million for the first three months of
1996, representing an increase of 22.16% over the first three months of 1995.
The Corporation's return on average assets was 1.14% and .96% for the first
three months of 1996 and 1995, respectively, while the return on
average equity was 13.46% and 12.56% for those same periods.
PART II
Item 1. Legal Proceedings
No material pending legal proceedings exist to which the Corporation or
any of its subsidiaries is a party, or of which any of their property is the
subject, except ordinary routine proceedings which are incidental to the
ordinary conduct of business. In the opinion of management, pending legal
proceedings will not have a material adverse effect on the consolidated
financial position of the Corporation and its subsidiaries.
Item 2. Changes in Securities
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3.1. Articles of Incorporation as currently in effect and any amendments
thereto. (Incorporated by reference to Exhibit 3.1. of the
Corporation's Form 10-K for the year ended December 31, 1992).
3.2. By-laws of the Corporation as currently in effect (incorporated by
reference to Exhibit 4 of the Corporation's Form 10-Q for the
quarter ended June 30, 1994).
-12-
4 The rights of holders of equity securities are defined in portions
of the Articles of Incorporation and By-laws. The Articles of
Incorporation are incorporated by reference to Exhibit 3.1. of the
registrant's Form 10-K for the year ended December 31, 1992. The
By-laws are incorporated by reference to Exhibit 4 of the
registrant's Form 10-Q for the quarter ended June 30, 1994. A
designation statement defining the rights of F.N.B. Corporation
Series A - Cumulative Convertible Preferred Stock is incorporated
by reference to Form S-14, Registration Statement of F.N.B.
Corporation, File No. 2-96404. A designation statement defining
the rights of F.N.B. Corporation Series B - Cumulative Convertible
Preferred Stock is incorporated by reference to Exhibit 4 of the
registrant's Form 10-Q for the quarter ended June 30, 1992. The
Corporation agrees to furnish to the Commission upon request
copies of all instruments not filed herewith defining the rights
of holders of long-term debt of the Corporation and its
subsidiaries.
10.1. Form of agreement regarding deferred payment of directors' fees by
First National Bank of Pennsylvania. (Incorporated by reference
to Exhibit 10.1. of the Corporation's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993).
10.2. Form of agreement regarding deferred payment of directors' fees by
F.N.B. Corporation. (Incorporated by reference to Exhibit 10.2.
of the Corporation's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993).
10.3. Form of Deferred Compensation Agreement by and between First
National Bank of Pennsylvania and four of its executive officers.
(Incorporated by reference to Exhibit 10.3. of the Corporation's
Annual Report on Form 10-K for the fiscal year ended December 31,
1993).
10.4. Employment Agreement between The Metropolitan Savings Bank of
Youngstown and Samuel K. Sollenberger. (Incorporated by reference
to Exhibit 10.4. of the Corporation's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993).
10.5. Employment Agreement between F.N.B. Corporation and Peter
Mortensen. (Incorporated by reference to Exhibit 10.5. of the
Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1990). Amendment No. 2 to Employment Agreement
(Incorporated by reference to Exhibit 10.5. of the Corporation's
Form 10-Q for the quarter ended June 30, 1995). Rescinding of
Amendment No. 2 to Employment Agreement (Incorporated by reference
to Exhibit 10.5. of the Corporation's Form 10-Q for the quarter
ended September 30, 1995).
10.6. Employment Agreement between F.N.B. Corporation and Stephen J.
Gurgovits. (Incorporated by reference to Exhibit 10.6. of the
Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1990).
10.7. Employment Agreement between F.N.B. Corporation and Samuel K.
Sollenberger. (Incorporated by reference to Exhibit 10.7. of the
Corporation's Form 10-Q for the quarter ended March 31, 1994).
10.8. Employment Agreement between F.N.B. Corporation and William J.
Rundorff. (Incorporated by reference to Exhibit 10.8. of the
Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1991). Amendment No. 2 Employment Agreement
Incorporated by reference to Exhibit 10.8. of the Corporation's
Annual Report on Form 10-K for the fiscal year ended December 31,
1995).
-13-
10.9. Basic Retirement Plan (formerly the Supplemental Executive
Retirement Plan) of F.N.B. Corporation effective January 1, 1992.
(Incorporated by reference to Exhibit 10.9. of the Corporation's
Annual Report on Form 10-K for the fiscal year ended December 31,
1993).
10.10. F.N.B. Corporation 1990 Stock Option Plan as amended February 2,
1996. (Incorporated by reference to Exhibit 10.10. of the
Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995).
10.11. F.N.B. Corporation Restricted Stock Bonus Plan dated January 1,
1994. (Incorporated by reference to Exhibit 10.11. of the
Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993).
10.12. Employment Agreement between F.N.B. Corporation and John W. Rose
(Incorporated by reference to Exhibit 10.12. of the Corporation's
Form 10-Q for the quarter ended September 30, 1995). Amendment
No. 1 to Employment Agreement (Incorporated by reference to Exhibit
10.12. of the Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995).
10.13. Employment Agreement between F.N.B. Corporation and John D. Waters
(Incorporated by reference to Exhibit 10.13. of the Corporation's
Annual Report on Form 10-K for the fiscal year ended December 31,
1995).
10.14. F.N.B. Corporation Restricted Stock and Incentive Bonus Plan
(Incorporated by reference to Exhibit 10.14. of the Corporation's
Annual Report on Form 10-K for the fiscal year ended December 31,
1995).
10.15. F.N.B. Corporation 1996 Stock Option Plan (Incorporated by
reference to Exhibit 10.15. of the Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995).
10.16. F.N.B. Corporation Director's Compensation Plan (filed herewith).
-14-
11. F.N.B. Corporation
Statement re Computation of Per Share Earnings
Dollars in thousands
Three Months Ended March 31 1996 1995
--------- ---------
Primary
Net Income $ 4,867 $ 3,984
Less: Preferred Stock Dividends Declared (210) (213)
--------- ---------
Net Income Applicable to Common Stock $ 4,657 $ 3,771
========= =========
Average Common Shares Outstanding 9,038,276 9,028,072
Net Effect of Dilutive Stock Options -
Based on the Treasury Stock Method Using
Average Market Price 77,814 32,905
--------- ---------
9,116,090 9,060,977
========= =========
Net Income per Common Share $0.51 $0.42
===== =====
Fully Diluted
Net Income Applicable to Common Stock $ 4,867 $ 3,984
========= =========
Average Common Shares Outstanding 9,038,276 9,028,072
Series A Convertible Preferred Stock 30,812 35,370
Series B Convertible Preferred Stock 872,931 881,521
Net Effect of Dilutive Stock Options -
Based on the Treasury Stock Method
Using the Period-End Market Price, If
Higher than Average Market Price 84,101 42,250
--------- ---------
10,026,120 9,987,213
========== =========
Net Income per Common Share $0.49 $0.40
===== =====
27. Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K
A report on Form 8-K, dated February 2, 1996, was filed by the
Corporation. The Form 8-K disclosed information relating to the
definitive merger agreement between F.N.B. Corporation and
Southwest Banks, Inc.
-15-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
F.N.B. Corporation
_____________________________________
(Registrant)
Dated: May 14, 1996 /s/Peter Mortensen
_________________________ _____________________________________
Peter Mortensen
Chairman and President
(Principal Executive Officer)
Dated: May 14, 1996 /s/John D. Waters
________________________ _____________________________________
John D. Waters
Vice President and Chief Financial
Officer
(Principal Financial Officer)