SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Date of Report: November 13, 1996
F.N.B. CORPORATION
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(Exact name of registrant as specified in its charter)
Pennsylvania 0-8144 25-1255406
- ------------------------ ----------- -------------------
(State of Incorporation) (Commission (IRS Employer
File Number) Identification No.)
Hermitage Square, Hermitage, Pennsylvania 16148
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(Address of principal executive offices) (Zip code)
(412) 981-6000
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(Registrant's telephone number, including area code)
INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 5. OTHER EVENTS
On February 2, 1996, F.N.B. Corporation (FNB) signed a definitive merger
agreement with Southwest Banks, Inc. (Southwest), a bank holding company
headquartered in Naples, Florida, with assets of approximately $425 million.
The merger agreement calls for an exchange of .819 share of FNB common stock
for each share of Southwest common stock, after giving effect to the 5% stock
dividend announced on April 24, 1996. FNB has reserved 3,276,700 shares to
be issued in conjunction with the merger.
In connection with the merger agreement, Southwest granted FNB an option
to purchase, under certain circumstances, up to 727,136 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 planned merger has been approved by both the Federal Reserve
Bank of Cleveland and the Shareholders of Southwest Banks, Inc. The
transaction will be accounted for as a pooling of interests, and is expected
to close in early 1997, following the state of Florida's required statutory
waiting period.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
The following unaudited pro forma condensed combined financial
statements combine the historical unaudited consolidated financial statements
of FNB and Southwest on the assumption that the merger had been effective as
of September 30, 1996 and as of the beginning of each of the nine month
periods ended September 30, 1996 and 1995. One time merger costs have not
been included in the pro forma adjustments. The merger of Southwest into FNB
will be accounted for as a pooling of interests in accordance with generally
accepted accounting principles. These statements should be read in
conjunction with the historical consolidated financial statements of FNB and
Southwest.
The pro forma statements are intended for informational purposes and may
not be indicative of the combined financial position or results of operations
that actually would have occurred had the transaction been consummated during
the period or as of the date indicated, or which will be attained in the
future. The pro forma statements do not reflect the impact of any pending
business combinations or dispositions, individually or in aggregate, which
are insignificant pursuant to Article 11 of Regulation S-X. The pro forma
statements should be read in conjunction with the Form 10-Q for the period
ended September 30, 1996 for FNB and Southwest.
The consolidated financial statements of Southwest presented after the
unaudited pro forma condensed combined financial statements were derived from
Southwest's Form 10-Q for the period ended September 30, 1996.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1996 - UNAUDITED
F.N.B. Southwest
Corporation Banks, Inc.
and and Pro Forma Pro Forma
Subsidiaries Subsidiaries Adjustments Combined
------------ ------------ ----------- ----------
(Dollars in thousands)
ASSETS
Cash and due from banks $ 66,246 $ 24,897 $ 91,143
Interest bearing deposits
with banks 1,893 1,893
Federal funds sold 9,508 4,100 13,608
Loans held for sale 6,594 6,594
Securities available for
sale 179,356 60,764 $ (3,150)(2) 236,970
Securities held to maturity
(pro forma combined fair
value $162,654) 148,594 16,163 164,757
Loans, net of unearned
income 1,292,411 299,523 1,591,934
Allowance for loan losses (21,996) (2,095) (24,091)
----------- ---------- --------- ----------
NET LOANS 1,270,415 297,428 1,567,843
----------- ---------- --------- ----------
Premises and equipment 24,912 14,179 39,091
Other assets 40,935 7,186 663 (2) 48,784
----------- ---------- --------- ----------
$1,748,453 $ 424,717 $ (2,487) $2,170,683
=========== ========== ========= ==========
LIABILITIES
Deposits:
Non-interest bearing $ 159,441 $ 46,685 $ 206,126
Interest bearing 1,286,658 286,138 1,572,796
---------- ---------- --------- ----------
Total deposits 1,446,099 332,823 1,778,922
Short-term borrowings 86,440 56,521 142,961
Other liabilities 30,885 3,086 33,971
Long-term debt 33,956 33,956
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TOTAL LIABILITIES 1,597,380 392,430 1,989,810
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STOCKHOLDERS' EQUITY
Preferred stock 3,984 3,984
Common stock 18,339 365 $ (17)(2) 24,043
5,704 (3)
(348)(4)
Additional paid-in
capital 68,127 28,332 (1,238)(2) 89,865
61,672 (3)
(39,934)(3)
(27,094)(4)
Retained earnings 58,543 4,079 62,622
Net unrealized securities
gains (losses) 3,362 (489) (1,232)(2) 1,641
Treasury stock (1,282) (1,282)
---------- ---------- --------- ----------
TOTAL STOCKHOLDERS'
EQUITY 151,073 32,287 (2,487) 180,873
---------- ---------- --------- ----------
$1,748,453 $ 424,717 $ (2,487) $2,170,683
========== ========== ========= ==========
Common shares outstanding
at period end 9,116,091 3,654,803 (172,621)(1)11,967,998
========== ========== ========= ==========
(1) As of 9/30/96, FNB owned 172,621 shares of Southwest Common Stock.
(2) Adjust securities by Southwest Common Stock owned by FNB with a value of
$3,150,333; adjust net unrealized securities gains associated with the
stock and the related net deferred taxes.
(3) Issuance of 2,851,907 shares of FNB Common Stock in exchange for all the
outstanding shares of Southwest Common Stock net of the book value of
Southwest Common Stock owned by FNB. Market value of FNB Common Stock
at 9/30/96 of $23.625.
(4) Elimination of par value of $.10 per share of Southwest Common Stock.
PRO FORMA CONDENSED COMBINED INCOME STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 - UNAUDITED
F.N.B. Southwest
Corporation Banks, Inc.
and and Pro Forma Pro Forma
Subsidiaries Subsidiaries Adjustments Combined
------------ ------------ ----------- ---------
(Dollars in thousands)
INTEREST INCOME
Loans, including fees $ 88,123 $ 18,727 $ 106,850
Securities 15,281 3,611 18,892
Other 825 485 1,310
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TOTAL INTEREST INCOME 104,229 22,823 127,052
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INTEREST EXPENSE
Deposits 39,197 8,519 47,716
Short-term borrowings 2,799 1,168 3,967
Long-term debt 1,996 1,996
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TOTAL INTEREST EXPENSE 43,992 9,687 53,679
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NET INTEREST INCOME 60,237 13,136 73,373
Provision for loan losses 4,196 770 4,966
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NET INTEREST INCOME
AFTER PROVISION FOR
LOAN LOSSES 56,041 12,366 68,407
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NON-INTEREST INCOME
Insurance commissions
and fees 3,059 3,059
Service charges 4,979 2,615 7,594
Other 3,607 17 3,624
---------- ---------- --------- ---------
TOTAL NON-INTEREST
INCOME 11,645 2,632 14,277
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67,686 14,998 82,684
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NON-INTEREST EXPENSES
Salaries and employee
benefits 23,031 6,047 29,078
Net occupancy 3,613 931 4,544
Equipment 2,582 1,496 4,078
SAIF recapitalization
assessment 2,965 2,965
Other 16,118 2,528 18,646
---------- ---------- --------- ---------
TOTAL NON-INTEREST
EXPENSES 48,309 11,002 59,311
---------- ---------- --------- ---------
INCOME BEFORE TAXES 19,377 3,996 23,373
Income taxes 5,931 1,378 7,309
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NET INCOME $ 13,446 $ 2,618 $ 0 $ 16,064
========== ========== ========= =========
NET INCOME PER COMMON SHARE
PRIMARY $1.40 $0.66 $1.26
===== ===== =====
FULLY DILUTED $1.34 $0.66 $1.22
===== ===== =====
PRO FORMA CONDENSED COMBINED INCOME STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 - UNAUDITED
F.N.B. Southwest
Corporation Banks, Inc.
and and Pro Forma Pro Forma
Subsidiaries Subsidiaries Adjustments Combined
------------ ------------ ----------- ---------
(Dollars in thousands)
INTEREST INCOME
Loans, including fees $ 84,916 $ 14,998 $ 99,914
Securities 14,963 2,654 17,617
Other 1,162 692 1,854
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TOTAL INTEREST INCOME 101,041 18,344 119,385
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INTEREST EXPENSE
Deposits 38,360 6,944 45,304
Short-term borrowings 2,499 1,749 4,248
Long-term debt 2,331 2,331
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TOTAL INTEREST EXPENSE 43,190 8,693 51,883
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NET INTEREST INCOME 57,851 9,651 67,502
Provision for loan losses 4,300 510 4,810
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NET INTEREST INCOME
AFTER PROVISION FOR
LOAN LOSSES 53,551 9,141 62,692
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NON-INTEREST INCOME
Insurance commissions
and fees 3,487 3,487
Service charges 5,037 1,836 6,873
Other 2,755 2,755
---------- ---------- --------- ---------
TOTAL NON-INTEREST
INCOME 11,279 1,836 13,115
---------- ---------- --------- ---------
64,830 10,977 75,807
---------- ---------- --------- ---------
NON-INTEREST EXPENSES
Salaries and employee
benefits 22,185 4,972 27,157
Net occupancy 3,413 762 4,175
Equipment 2,653 1,172 3,825
Deposit insurance 2,121 214 2,335
Other 14,948 2,416 17,364
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TOTAL NON-INTEREST
EXPENSES 45,320 9,536 54,856
---------- ---------- --------- --------
INCOME BEFORE TAXES 19,510 1,441 20,951
Income taxes 6,325 467 6,792
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NET INCOME $ 13,185 $ 974 $ 0 $ 14,159
========== ========== ========= ========
NET INCOME PER COMMON SHARE
PRIMARY $1.38 $0.25 $1.12
===== ===== =====
FULLY DILUTED $1.33 $0.25 $1.09
===== ===== =====
SOUTHWEST BANKS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, DECEMBER 31,
1996 1995
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(Unaudited)
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ASSETS
Cash and Demand Balances Due from Banks $ 24,897,073 $ 25,135,628
Federal Funds Sold 4,100,000 31,724,000
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TOTAL CASH AND CASH EQUIVALENTS 28,997,073 56,859,628
Securities Available for Sale at Fair Value
(Cost of $61,771,953 and $50,109,434) 60,764,051 50,401,563
Securities Held to Maturity at Cost
(Fair Value of $15,936,308 and $23,946,120) 16,163,273 23,834,164
Loans 299,712,504 238,509,066
Less: Allowance for loan losses (2,095,197) (1,585,285)
Unearned income & deferred loan fees (188,975) (257,550)
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NET LOANS 297,428,332 236,666,231
Premises and Equipment 14,178,467 14,413,940
Accrued Interest Receivable 2,712,224 2,594,888
Other Assets 4,473,440 1,691,377
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TOTAL $ 424,716,860 $ 386,461,791
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 332,822,906 $ 324,830,614
Federal Funds Purchased and Securities
Sold Under Agreements to Repurchase 30,270,902 18,276,769
Other Short Term Borrowings 26,250,000 10,000,000
Accrued Interest Payable 1,860,293 1,714,022
Accrued Expenses and Other Liabilities 1,225,881 1,696,483
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TOTAL LIABILITIES 392,429,982 356,517,888
Stockholders' Equity:
Common Stock, Par Value $.10, 25,000,000
Shares Authorized, 3,654,803 and
3,654,089 Shares Issued and Outstanding 365,480 365,409
Capital Surplus 28,331,392 28,322,888
Retained Earnings 4,078,565 1,462,295
Unrealized (Loss) Gain on Securities
Available for Sale (488,559) 182,201
Employee Stock Ownership Plan Obligation (388,890)
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TOTAL STOCKHOLDERS' EQUITY 32,286,878 29,943,903
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TOTAL $ 424,716,860 $ 386,461,791
============= =============
See notes to consolidated financial statements.
SOUTHWEST BANKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Unaudited
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ----------------------
1996 1995 1996 1995
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INTEREST INCOME
Interest and Fees on Loans $6,707,034 $5,551,471 $18,726,932 $14,997,505
Interest on Federal Funds
Sold 71,295 287,679 485,368 692,347
Interest on Investment
Securities and Other 1,202,407 1,038,226 3,610,559 2,654,125
---------- ---------- ---------- ----------
TOTAL INTEREST INCOME 7,980,736 6,877,376 22,822,859 18,343,977
INTEREST EXPENSE
Interest Expense on
Deposits 2,923,645 2,662,938 8,519,313 6,944,024
Interest on Short-Term
Borrowings 507,700 628,937 1,168,097 1,749,234
---------- ---------- ---------- ----------
TOTAL INTEREST EXPENSE 3,431,345 3,291,875 9,687,410 8,693,258
---------- ---------- ---------- ----------
NET INTEREST INCOME 4,549,391 3,585,501 13,135,449 9,650,719
Provision for Loan Losses 290,000 195,000 770,000 510,000
---------- ---------- ---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 4,259,391 3,390,501 12,365,449 9,140,719
OTHER INCOME
Service Charges,
Commissions and Fees 877,275 688,642 2,615,230 1,836,248
Gain on Sale of
Investment Securities 16,649
---------- ---------- ---------- ----------
TOTAL OTHER INCOME 877,275 688,642 2,631,879 1,836,248
OTHER EXPENSE
Salaries and Benefits 2,094,569 1,762,272 6,047,100 4,972,241
Occupancy 313,013 284,745 930,563 761,625
Equipment Rental,
Depreciation and
Maintenance 517,341 410,860 1,496,216 1,171,551
General Operating 810,043 864,827 2,528,303 2,630,603
---------- ---------- ---------- ----------
TOTAL OTHER EXPENSES 3,734,966 3,322,704 11,002,182 9,536,020
---------- ---------- ---------- ----------
INCOME BEFORE TAXES 1,401,700 756,439 3,995,146 1,440,947
Provision for Income Taxes 485,413 255,921 1,378,877 467,416
---------- ---------- ---------- ----------
NET INCOME $ 916,287 $ 500,518 $2,616,269 $ 973,531
========== ========== ========== ==========
EARNINGS PER SHARE $0.23 $0.13 $0.66 $0.25
===== ===== ===== =====
Weighted average shares
outstanding 3,973,901 3,877,961 3,973,541 3,870,598
========= ========= ========= =========
See notes to consolidated financial statements.
SOUTHWEST BANKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
Nine Months Ended September 30 1996 1995
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,616,269 $ 973,531
Adjustments to reconcile net income to cash
provided by (used in) operating activities:
Depreciation and Amortization 1,314,018 1,003,775
Accretion of discounts and deferred
loan fees, net (229,970) (330,336)
Provision for loan losses 770,000 510,000
(Increase) decrease in other assets (2,782,063) 318,754
Increase (decrease) in accrued expenses
and other liabilities (81,712) 449,489
(Increase) decrease in accrued interest
receivable (117,336) (863,612)
Increase (decrease) in accrued interest
payable 146,271 781,644
------------ ------------
CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 1,635,477 2,843,245
NET CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in loans (60,669,362) (45,728,254)
Gross loan participations sold 448,845
Loan participations purchased (610,573) (3,125,828)
Purchase of held-to-maturity-securities (2,208,179)
Proceeds from maturing held-to-maturity
securities 7,648,695 6,357,843
Purchases of available-for-sale securities
(24,987,534) (34,399,123)
Proceeds from available-for-sale securities
13,954,286 10,559,090
Purchases of premises and equipment (1,078,545) (4,201,371)
------------ ------------
CASH USED IN INVESTING ACTIVITIES (65,743,033) (72,296,977)
NET CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 7,992,292 79,942,071
Net increase (decrease) in securities
sold under agreement to repurchase 8,372,133 7,934,562
Net increase (decrease) in federal funds
purchased and other short-term borrowings
19,872,000 (3,287,000)
Net proceeds from sale of common stock 8,576 243,414
----------- ------------
CASH PROVIDED BY FINANCING ACTIVITIES 36,245,001 84,833,047
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(27,862,555) 15,379,315
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
56,859,628 14,934,854
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $28,997,073 $30,314,169
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION - Cash paid during period for:
Interest $ 9,541,139 $ 7,911,614
============ ============
Taxes $ 1,552,000 $ 515,500
============ ============
See notes to consolidated financial statements.
SOUTHWEST BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
- ------------------------------------------------------
Note 1: Basis of Presentation
- ------------------------------
The Consolidated Balance Sheets for Southwest Banks, Inc. and Subsidiaries
(the Company) as of September 30, 1996 and December 31, 1995, the
Consolidated Statements of Income for the three month and nine month periods
ended September 30, 1996 and 1995, and the Consolidated Statements of Cash
Flows for the nine month periods ended September 30, 1996 and 1995 included
in this form 10-Q have been prepared by the Company which is responsible for
their integrity and objectivity pursuant to the rules and regulations of the
Securities and Exchange Commission. The statements are unaudited except for
the Balance Sheet as of December 31, 1995 and have not been compiled,
reviewed or audited by outside accountants.
The accounting policies followed for interim financial reporting are set
forth in Note A of the Company's latest Annual Report to Shareholders, which
is incorporated by reference in the Company's Annual Report on Form 10-K
filed with the Securities and Exchange Commission.
The Company maintains a system of internal accounting control designed to
provide reasonable assurance that assets are safeguarded and the transactions
are properly executed, recorded and summarized to produce reliable records
and reports.
To the best of management's knowledge and belief, the statements and related
information were prepared in conformity with generally accepted accounting
principles and are based on recorded transactions and management's best
estimates and judgments. The interim results of operations are not
necessarily indicative of the results which may be expected for the full
year.
The consolidated financial statements included herein include, in the opinion
of management, all adjustments (which include only normal recurring
adjustments) necessary for a fair presentation of the financial condition and
results of operations of the Company for the periods indicated.
Note 2: Pending Merger Transaction
- -----------------------------------
In February, 1996, the Company entered into an Agreement and Plan of Merger
with F.N.B. Corporation ("FNB"), Hermitage, Pennsylvania, which provides for
the merger of the Company into FNB. Upon effectiveness of the merger, the
Company's shareholders will become entitled to receive, 0.819 shares of FNB
common stock in exchange for each share of common stock of the Company then
held by them. In connection with this agreement, the Company has granted FNB
an option to purchase 727,163 shares of the Company's common stock for $15
per share, which becomes exercisable upon the occurrence of certain events,
as defined.
The proposed merger is expected to be treated as a tax-free reorganization
under Section 368(a) of the Internal Revenue Code and shall be treated as a
pooling-of-interests for accounting purposes.
In this connection, the Company is deferring expenses associated with the
merger until such time as all conditions precedent to the merger are met or
the merger agreement is otherwise terminated. Costs incurred in connection
with the merger aggregate approximately $235,295. The merger is expected to
be completed in January, 1997.
Signatures
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Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereto duly authorized.
F.N.B. CORPORATION
(Registrant)
By: /s/John D. Waters
--------------------------
Name: John D. Waters
Title: Vice President and
Chief Financial Officer
Dated: November 13, 1996