1
Exhibit 13
[COVER]
[LOGO] F.N.B. CORPORATION
"FINDING NEW AND BETTER WAYS TO CREATE VALUE"
2000 ANNUAL REPORT
2
F.N.B. CORPORATION
AT A GLANCE
WHO WE ARE
F.N.B. Corporation (Nasdaq: FBAN) is a $3.9 billion diversified financial
services company serving banking, trust, consumer finance and insurance
customers through 10 community bank affiliates and other subsidiaries with a
total of 157 offices in Florida, Pennsylvania, Ohio, Kentucky and Tennessee. The
company has increased cash dividends for 28 consecutive years and has been
recognized as a Dividend Achiever by Mergent FIS, formerly known as Moody's
Investors Service.
OUR CORPORATE MISSION
F.N.B. Corporation is a growth company. We are an affiliation of successful
community banks and financial services companies seeking to provide high-quality
financial services to individuals and business customers in a manner that is
consistent with our philosophy of personal banking and our commitment to
maximizing shareholder value. To achieve this commitment, we will attract and
retain a professional staff that is dedicated to exceptional customer
satisfaction and superior financial performance.
OUR SHAREHOLDERS
F.N.B. Corporation is owned by approximately 6,800 registered shareholders,
ranging from individual investors who own several shares to institutional
investors who hold large positions in our company. Though our ownership is
divided among retail and institutional investors, our objective remains the same
- - to deliver long-term value.
CORE OPERATING EARNINGS
(Dollars in millions)
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
27.5 33.8 37.4 40.6 42.8
TOTAL ASSETS
(Dollars in billions)
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
2.8 3.1 3.4 3.7 3.9
3
CONTENTS
2 Letter to Shareholders
5 Line of Business Review
6 Market Areas
8 Affiliate Profiles
13 Year in Review
14 Directors & Officers
15 Affiliate Management
16 Shareholder Information
F.N.B. CORPORATION AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
Dollars in thousands, except per share data
- -------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31 2000 1999 PERCENTAGE CHANGE
FINANCIAL PERFORMANCE
Revenue
Net interest income $ 155,628 $ 148,449 + 5%
Non-interest income 55,645 46,928 +19%
Total Revenue 211,273 195,377 + 8%
Net Income 42,776 39,295 + 9%
- -------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE
Basic earnings $ 1.93 $ 1.78 + 8%
Diluted earnings 1.88 1.72 + 9%
Cash dividends declared 0.71 0.67 + 6%
Book value at year end 14.37 13.00 +11%
- -------------------------------------------------------------------------------------------------------------------
SELECTED RATIOS
Return on
Average common shareholders' equity 14.16% 13.74%
Average assets 1.13% 1.13%
Net interest margin 4.58% 4.76%
Yield on earning assets 8.51% 8.13%
Efficiency ratio 63.46% 63.76%
- -------------------------------------------------------------------------------------------------------------------
YEAR-END BALANCES
Assets $3,887,000 $3,706,000 + 5%
Net Loans 2,923,000 2,767,000 + 6%
Deposits 3,103,000 2,909,000 + 7%
Shareholders' Equity 321,000 290,000 +11%
- -------------------------------------------------------------------------------------------------------------------
-----
1
4
F.N.B. CORPORATION AND AFFILIATES
To Our Shareholders and Friends
The first year of the new millennium was characterized by a series of new and
exciting accomplishments for F.N.B. Corporation.
The Board of Directors elected a new Chief Executive Officer to take the helm of
the Company; the Company furthered its expansion into fast-growing lines of
business such as insurance, trust and investment services; and a strategic plan
was implemented to eliminate operational redundancies and significantly reduce
expenses.
TICE ELECTED COMPANY CEO
Perhaps the most exciting event of the past year was the Board's election of
Gary L. Tice as Chief Executive Officer. Gary succeeds Peter Mortensen, who
retired effective December 31, 2000. Pete, who had held the executive post for
26 of his 42 years in banking, continues to provide leadership to F.N.B. as
Chairman of the Board.
Gary has been involved in the day-to-day management of the Company for more than
four years and is well qualified to lead it forward. An industry veteran who has
organized several successful community banks, Gary has served as F.N.B.
President and Chief Operating Officer since 1998.
In his additional capacity as Chief Executive Officer, Gary will work closely
with Stephen J. Gurgovits, who will continue to serve as Vice Chairman of the
Corporation and President and Chief Executive Officer of our largest bank
affiliate, First National Bank of Pennsylvania.
One of the true strengths of F.N.B. is that the Company has people prepared to
assume positions of increased responsibility. This transition had been
anticipated for some time and will be a seamless one. Based on his extensive
experience, Gary is the ideal selection for the position.
[Photo]
PETER MORTENSEN
CHAIRMAN OF THE BOARD
EXPANSION
During the year, F.N.B. expanded its banking franchise in Southwest Florida with
the announced affiliation of Citizens Community Bank of Florida. Citizens
Community Bank will become the 10th affiliate in the Company's growing family of
traditional community banks and will extend F.N.B.'s financial products and
services to Marco Island, located just a few miles southwest of Naples.
When this affiliation is completed in early 2001, F.N.B. will become the
second-largest financial institution in Collier County, which ranks as one of
the nation's fastest-growing and most affluent communities.
- --------------------------------------------------------------------------------
"SIGNIFICANT RESOURCES ALSO WERE DEVOTED DURING THE PAST YEAR TO IMPROVING
F.N.B.'S OPERATING EFFICIENCIES THROUGH NEW TECHNOLOGY. TODAY, CUSTOMERS ARE
MUCH BETTER EQUIPPED TO MANAGE THEIR MONEY WHETHER AT HOME OR WORK, 24 HOURS A
DAY, SEVEN DAYS A WEEK. WITH THE RAPID PROLIFERATION OF THE INTERNET, DEMAND
FOR SERVICES SUCH AS ONLINE BANKING WILL ONLY CONTINUE TO INCREASE."
- --------------------------------------------------------------------------------
- -----
2
5
- --------------------------------------------------------------------------------
"IN THE NEXT YEAR WE WILL CONTINUE THE PROCESS OF TRANSFORMING F.N.B. INTO A
DIVERSIFIED FINANCIAL SERVICES COMPANY, WHILE MAINTAINING A STRICT FOCUS ON
DELIVERING SHAREHOLDER AND CUSTOMER VALUE."
- --------------------------------------------------------------------------------
The Company also continued to build the foundation for what it believes can
become a very significant business - insurance. By the end of the year, F.N.B.
had announced six insurance agency acquisitions in its key markets of
northwestern Pennsylvania and southwestern Florida.
At the same time, the Company expanded its trust and investment management
services, making products such as annuities and mutual funds more accessible to
new and existing customers.
These investments have been beneficial in reducing F.N.B.'s dependence on income
from interest spreads. Non-interest income generated from such things as the
sale of insurance and other fee-based products now accounts for 26 percent of
total revenue, which should provide the Company with a more stable and growing
source of income.
Significant resources also were devoted during the past year to improving
F.N.B.'s operating efficiencies through new technology. Today, customers are
much better equipped to manage their money whether at home or work, 24 hours a
day, seven days a week. With the rapid proliferation of the Internet, demand for
services such as online banking will only continue to increase.
FINANCIAL RESULTS REFLECT PERFORMANCE
All this added up to another very successful year for F.N.B., one in which the
Company's earnings and operations continued to reach new highs. The numbers
speak for themselves:
o 9% increase in net income to $42.8 million
o 9% increase in diluted earnings per share to $1.88
o 14.2% return on average common shareholders' equity
o 5% increase in total assets to $3.9 billion
o 1.13% return on average assets
This performance enabled the Company to continue to reward its shareholders with
generous dividends. In 2000 F.N.B. paid cash dividends of $0.71 per share in
addition to its traditional five percent stock dividend. It was the 28th
consecutive year in which F.N.B. has increased dividends.
[Photo]
GARY L. TICE
PRESIDENT & CEO
In recognition of this achievement, F.N.B. was honored by Mergent FIS, formerly
known as Moody's Investors Service, as a Dividend Achiever. Of the more than
10,000 U.S.-based companies tracked in Mergent's database, only 320 have
increased dividends for at least 10 years. F.N.B. currently ranks 40th overall
in Mergent's list of corporate dividend achievers.
LOOKING TO THE FUTURE
In the next year we will continue the process of transforming F.N.B. into a
diversified financial services company, while maintaining a strict focus on
delivering shareholder and customer value.
Management also will continue to pursue opportunities made possible through new
technologies to further improve the Company's operating efficiencies and to
enhance its overall profitability. Finally, we will hit the streets and get the
message out about the Company. In our opinion, F.N.B. is an undertold and
undercovered story. We believe that as more long-term investors recognize the
Company's valuable franchise and earnings prospects, the stock price will
inevitably rebound.
-----
3
6
[Photo]
PETER MORTENSEN, CHAIRMAN OF THE BOARD; (LEFT) AND
GARY L. TICE, PRESIDENT AND CHIEF EXECUTIVE OFFICER
F.N.B. IMPLEMENTS "MODEL FOR SUCCESS"
As the year 2000 ended, the Company embarked on what will likely be remembered
as one of the biggest events of the next year. We began the process of merging
our eight affiliate bank charters into just three under a consolidation program
that we refer to as the "Model for Success."
Under this program, each of F.N.B.'s community bank affiliates will be
consolidated under a single operating charter for each state. The Company's six
Florida banks will be merged under First National Bank of Florida and its two
Pennsylvania banks will be combined under First National Bank of Pennsylvania.
The Company's two banking affiliates in northeastern Ohio already have been
consolidated under a single charter, Metropolitan National Bank.
Despite this organizational change, each affiliate will retain its respective
name and local management structure. Because of this, the changes will be
transparent to most customers.
The main reason for this undertaking is to improve efficiency. By streamlining
certain "back room" functions, we anticipate cost savings in the first year of
about $2.8 million, or 8 cents per share. At the same time, customers will
benefit through greater convenience with expanded branch locations.
The theme of this year's annual report is F.N.B.- "Finding New and Better ways
to create value." We are deeply committed to this for our shareholders, our
customers and our employees.
In the following pages, you will learn more about our operations and how we are
positioning F.N.B. for the future and how our increasing diversity is driving
improved results.
As F.N.B. embarks on the next year, we wish to extend our deepest gratitude to
our more than 1,800 employees, managers and directors. We especially want to
thank two members of the Board who retired in 2000 - Richard C. Myers and George
A. Seeds. It was with their wisdom and guidance that we were able to begin this
process of shaping our organization for the future.
In closing, thank you, our shareholders, for your continued investment in F.N.B.
Corporation. We are proud of our progress and look forward to this year with a
great amount of confidence.
Sincerely,
/s/ Peter Mortensen
PETER MORTENSEN
Chairman of the Board
/s/ Gary L. Tice
GARY L. TICE
President & CEO
March 5, 2001
- -----
4
7
"WHAT WAS
-----------------------------
ONCE A REGIONAL BANK
-----------------------------
HOLDING COMPANY
-----------------------------
IS NOW A DIVERSIFIED
-----------------------------
FINANCIAL SERVICES COMPANY."
In addition to traditional community banking,
F.N.B. Corporation offers:
INSURANCE SERVICES
-----------------------------
CONSUMER FINANCE
-----------------------------
TRUST
-----------------------------
INVESTMENT SERVICES
-----
5
8
MARKET AREAS
[MAPS]
COMMUNITY BANKING:
- --------------------------------------------------------------------------------
FIRST NATIONAL BANK OF PENNSYLVANIA METROPOLITAN NATIONAL BANK
o Founded in 1864 o Founded in 1922
o Total assets of $1.3 billion o Total assets of $306 million
o 35 offices in six counties o Nine offices in northeastern Ohio
of northwestern Pennsylvania
FIRST NATIONAL BANK OF NAPLES REEVES BANK
o Founded in 1988 o Founded in 1868
o Total assets of $834 million o Total assets of $171 million
o Nine offices in Collier and o Eight offices in western
Lee counties, Florida Pennsylvania
CAPE CORAL NATIONAL BANK FIRST NATIONAL BANK OF FORT MYERS
o Founded in 1994 o Founded in 1989
o Total assets of $390 million o Total assets of $110 million
o Five offices in Lee County, Florida o Two offices in Lee County, Florida
FIRST NATIONAL BANK OF FLORIDA FIRST COUNTY BANK
o Founded in 1997 o Founded in 1987
o Total assets of $341 million o Three offices in northeastern Ohio
o 11 offices in the Clearwater area (A division of Metropolitan National Bank)
WEST COAST GUARANTY BANK CITIZENS COMMUNITY BANK OF FLORIDA
o Founded in 1999 o Founded in 1996
o Total assets of $274 million o Total assets of $170 million
o Seven offices in Sarasota o Four offices in Collier County, Florida
County, Florida (Merger pending as of March 5, 2001)
- -----
6
9
[MAP]
INSURANCE:
- ------------------------------------------
ROGER BOUCHARD INSURANCE INC.
Clearwater, Florida
GELVIN, JACKSON & STARR INC.
Meadville, Pennsylvania
L.J. KUDER INC.
Greenville, Pennsylvania
CONNELL & HERRIG INSURANCE
Sarasota and Englewood, Florida
ALTAMURA, MARSH & ASSOCIATES
Clearwater and Fort Myers, Florida
JAMES T. BLALOCK
Venice, Florida
DON OSTROWSKY & ASSOCIATES INC.
Cape Coral, Florida
ONESOURCE GROUP INC.
Clearwater and Jacksonville, Florida
TRUST AND INVESTMENT SERVICES:
- ------------------------------------------
FIRST NATIONAL TRUST COMPANY
Hermitage, Pennsylvania
Erie, Pennsylvania
Meadville, Pennsylvania
Naples, Florida
Clearwater, Florida
Sarasota, Florida
Venice, Florida
CONSUMER FINANCE:
- ------------------------------------------
REGENCY FINANCE COMPANY
o 50 financial service centers
in Pennsylvania, Ohio,
Tennessee and Kentucky
CUSTOMER SERVICE:
- ------------------------------------------
Customer Service Center of F.N.B. LLC
o Offices in Naples and Clearwater,
Florida and Hermitage, Pennsylvania
-----
7
10
COMMUNITY BANKING:
Our community banking franchise remains at the core of our organization,
contributing approximately 80 percent of total line of business revenue in 2000.
The franchise consists of 10 affiliate community banks, with more than 90
banking offices in Pennsylvania, Ohio and Florida.
Each affiliate offers a complete line of banking products for personal and
business customers, including traditional loans and lines of credit, asset-based
lending, cash management, electronic banking and private banking services. We
differentiate ourselves on the basis of superior customer service delivered by
local relationship managers who understand customers' needs.
In December, we announced plans to strengthen our community-based franchise by
acquiring Citizens Community Bank of Florida, a $170 million institution on
Marco Island. This strategic alliance will solidify our already strong presence
in fast-growing Southwest Florida. Two of the bank's branch offices will be
combined with F.N.B.'s local affiliate First National Bank of Naples, while the
main office on Marco Island will remain open under the Citizens Community Bank
banner.
More recently, we have taken important steps to improve the efficiency of our
banking franchise, reducing redundancies where necessary and combining
organizational layers. At the same time, we've worked hard to identify and
target high growth niches, such as small business banking.
Further improvements have been made to satisfy the growing needs of customers
seeking banking services 24 hours a day, seven days a week. Each of our
affiliates is connected to the Internet and we are investing in additional
technology and telecommunications that will further enable our employees to
effectively serve customers across a broader distribution channel.
While we continue to modernize, the one overriding emphasis of our community
banking franchise remains the same - delivering the highest level of personal
service to our customers.
- --------------------------------------------------------------------------------
[Photo]
F.N.B.'S EMPHASIS ON PROVIDING SUPERIOR CUSTOMER SERVICE IS EXEMPLIFIED BY
EMPLOYEES THROUGHOUT ITS COMMUNITY BANKING FRANCHISE, LIKE FIRST NATIONAL BANK
OF NAPLES TELLER KANDY TROTTA.
- --------------------------------------------------------------------------------
- -----
8
11
TRUST AND INVESTMENT SERVICES:
First National Trust Company provides a broad range of personal and corporate
fiduciary services, including the administration of traditional trusts,
customized investment management, financial and estate planning, and employee
benefit trust management.
With offices in both Florida and Pennsylvania, our team of experienced
investment professionals strives to deliver "community bank service with Wall
Street quality investment management."
Although trust services have been available through F.N.B. and its affiliates
since 1934, the trust company was formed in 1999 to focus on the importance of
these services and to establish a structure for future management and growth. In
2000 substantial commitments were made to upgrade technology, personnel and
service delivery resources, all of which will enable us to provide our clients
with integrated financial solutions tailored to their needs and objectives.
This investment already has paid considerable dividends. At year-end the market
value of corporate-wide trust assets under administration approached $1 billion,
a 33% jump over 1999.
The prospects for future growth look favorable as well with the development of
new recurring trust fees increasing 87% in year-over-year comparisons and
eclipsing the $1 million mark.
- --------------------------------------------------------------------------------
[Photo]
UNDER THE GUIDANCE OF PRESIDENT AND CHIEF EXECUTIVE OFFICER MICHAEL H. MORRIS,
RIGHT, THE TEAM OF PROFESSIONALS AT FIRST NATIONAL TRUST COMPANY PROVIDES AN
EXTENSIVE ARRAY OF TRUST AND INVESTMENT MANAGEMENT SERVICES TAILORED TO MEET
INDIVIDUAL NEEDS.
- --------------------------------------------------------------------------------
-----
9
12
INSURANCE SERVICES:
Our insurance agencies are full-service insurance companies offering all lines
of commercial and personal insurance through a number of major carriers. This
includes property and casualty, homeowners insurance, automobile, health, life,
workers' compensation and employee benefits.
During the past year, we moved aggressively to grow our insurance business,
particularly in our key market areas in northwestern Pennsylvania and along the
West Coast of Florida. In doing so, we have been better able to serve the
financial needs of existing customers as well as new ones.
In Florida, we added five well-regarded independent insurance agencies -
OneSource Group Inc. in Clearwater and Jacksonville; Don Ostrowsky & Associates
Inc. in Cape Coral; James T. Blalock in Venice; Altamura, Marsh & Associates in
Clearwater and Fort Myers; and Connell & Herrig Insurance in Sarasota. In March,
L.J. Kuder Inc., an independent insurance agency located in Greenville,
Pennsylvania joined F.N.B.'s growing family of financial services companies.
F.N.B. was one of the first banking companies to move into insurance after
passage of the Financial Modernization Act of 1999 and we continue to lead the
industry. To date, we have assembled eight agencies in Florida and Pennsylvania.
According to the industry consulting firm Marsh, Berry & Co., F.N.B. now has the
nation's sixth largest bank-affiliated insurance agency.
These insurance agencies provide a solid framework for the delivery of
alternative financial services and products through F.N.B.'s affiliated
community banks in each of its local markets.
- --------------------------------------------------------------------------------
[Photo]
THE COMPANY'S RECENT EXPANSION INTO THE INSURANCE AGENCY BUSINESS IN FLORIDA HAS
BEEN LED BY THE SENIOR MANAGEMENT TEAM AT ROGER BOUCHARD INSURANCE INC. SHOWN
LEFT TO RIGHT ARE VICE PRESIDENT TIM BOUCHARD,VICE PRESIDENT RAY BOUCHARD AND
PRESIDENT RICK BOUCHARD.
- --------------------------------------------------------------------------------
- -----
10
13
CONSUMER FINANCE:
Our consumer finance subsidiary, Regency Finance Company, provides traditional
direct consumer lending services such as home equity, installment and debt
consolidation loans.
The company also purchases retail installment contracts from local merchants.
Such activity is funded mainly through the sale of F.N.B. Corporation's
subordinated notes at Regency's branch offices.
Founded in 1927, Regency has been associated with F.N.B. since 1975. The company
has grown to nearly $187 million in loans with 50 offices in Pennsylvania, Ohio,
Tennessee and Kentucky.
Regency has consistently ranked as F.N.B.'s top performing affiliate, ending the
most recent year with a return on average assets (ROA) of 2.06 percent and
return on average equity (ROE) of more than 26 percent.
In 2000 Regency expanded its operations in middle and eastern Tennessee through
the acquisition of eight offices with $42 million in gross loans. This expansion
plays on the company's strength of serving the credit needs of customers in
small- and medium-sized towns.
- --------------------------------------------------------------------------------
[Photo]
REGENCY FINANCE COMPANY OPERATES IN FOUR STATES. THE COMPANY'S EXPANSION HAS
BEEN DIRECTED FROM ITS HERMITAGE, PENNSYLVANIA HEADQUARTERS BY, SEATED FROM LEFT
TO RIGHT, DOUGLAS J. SOLOCK, CHIEF FINANCIAL OFFICER; ROBERT T. RAWL, PRESIDENT
AND CHIEF EXECUTIVE OFFICER, AND ROBERT D. CARTER, SENIOR VICE PRESIDENT.
- --------------------------------------------------------------------------------
-----
11
14
CUSTOMER SERVICE CENTER:
The Customer Service Center of F.N.B. LLC was established in 1996 to provide
back office support to the Corporation's banks and affiliate companies.
Today, the company employs 285 people with locations in Hermitage, Pennsylvania;
Naples, Florida; and Clearwater, Florida.
Among the areas in which the CSC provides support are item processing and
imaging systems; loan servicing; computer operations; network services and
communications; deposit operations; statement rendering; call center operations;
and reconcilements.
The primary goals of the CSC are to provide a high level of customer service and
to attain efficiencies through system and product standardization. The
professionals at the CSC employ the latest technology to provide value-added
services and introduce new electronic products.
Technological investments in 2000 included the installment of a new check
imaging system, which stores customers' checks digitally on an optical disk.
Checks may then be reproduced at any time. This system is a vast improvement
over the traditional microfilm used to store records at the bank.
- --------------------------------------------------------------------------------
[Photo]
STEVEN C. POWELL, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF THE CUSTOMER SERVICE
CENTER OF F.N.B. LLC, OVERSEES ALL CUSTOMER SERVICE OPERATIONS AND TECHNOLOGY
ENHANCEMENTS THROUGHOUT THE CORPORATION.
- --------------------------------------------------------------------------------
- -----
12
15
YEAR IN REVIEW:
JAN. 3 F.N.B. Corporation common stock opens trading in 2000 at
$21.19 per share.
JAN. 18 F.N.B. Corporation reports record 1999 net income of
$39.3 million, or $1.80 per share, an increase of 19 percent
over the prior year. Core operating earnings also were a record
$40.6 million, or $1.86 per share.
FEB. 2 L.J. Kuder Inc., an independent insurance agency in Greenville,
Pennsylvania agrees to join F.N.B. Corporation. The agency
retains its name and becomes a subsidiary of F.N.B. affiliate
Gelvin, Jackson & Starr Inc.
MARCH 1 F.N.B. Corporation declares a regular quarterly cash dividend of
18 cents per share on its common stock and 47 cents per share on
its Series B Preferred Stock.
MARCH 20 Veteran banker Kevin C. Hale is appointed Executive Vice
President - Chief Operating Officer of F.N.B. Corporation's
Florida Division in Naples, Florida. He is responsible for all
Florida-based affiliates.
APRIL 10 Michael H. Morris is appointed President and Chief Executive
Officer of First National Trust Company in Naples, Florida. He is
responsible for marketing all trust, annuity and investment
services for the company.
APRIL 13 F.N.B. Corporation reports net income of $10.1 million, or 47
cents per share, for the first quarter of 2000, a 14 percent
increase over the same period a year earlier. Core operating
earnings per share rise 7 percent.
APRIL 17 F.N.B. Corporation declares a 5 percent common stock dividend
at its annual meeting in Naples, Florida. The move marks the 28th
consecutive year the company has provided a stock dividend to its
shareholders.
MAY 23 F.N.B. Corporation declares a regular quarterly cash dividend of
18 cents per share on its common stock and 47 cents per share on
its Series B Preferred Stock.
JUNE 5 F.N.B. Corporation agrees to purchase Connell & Herrig Insurance,
a Sarasota-based agency with offices in Sarasota and Englewood,
Florida. The agency now operates as a division of Roger Bouchard
Insurance Inc.
JUNE 15 Regency Finance Company, a consumer finance affiliate of F.N.B.
Corporation, agrees to purchase eight offices in Tennessee with
$42 million in gross loans from Southern Financial Inc., a
subsidiary of InSouth Bank.
JULY 17 F.N.B. Corporation reports net income of $10.4 million, or 46
cents per share, for the second quarter 2000. The results
represent increases of 6 percent and 7 percent, respectively, over
the same period a year earlier.
JULY 19 F.N.B. Corporation agrees to purchase Altamura, Marsh &
Associates, a full-line insurance agency with offices in
Clearwater, Florida. The agency now operates as a division of
Roger Bouchard Insurance Inc.
AUG. 21 F.N.B. Corporation declares a regular quarterly cash dividend of
18 cents per share on its common stock and 47 cents per share on
its Series B Preferred Stock.
SEPT. 8 Jack Motter joins F.N.B. Corporation as Senior Vice President -
Residential Loan Operations Manager for the company's Florida
banking affiliates. He is responsible for all residential loan
operations in the state.
SEPT. 27 F.N.B. Corporation is named a Dividend Achiever based on an
outstanding record of increased dividend performance. The
distinction is awarded by Mergent FIS, formerly known as Moody's
Investors Service.
OCT. 10 Myron Harvey joins F.N.B. Corporation as Senior Vice President
and Human Resources Director.
OCT. 17 F.N.B. Corporation reports net income of $10.9 million, or
48 cents per share, for the third quarter of 2000, up 7 percent
over the same period a year earlier. Core operating earnings per
share rise 7 percent.
OCT. 24 F.N.B. Corporation announces the retirement of Peter Mortensen
as Chief Executive Officer and the election of Gary L. Tice as
his successor, effective December 31, 2000. Mortensen remains
Chairman of the Board.
OCT. 30 Clay W. Cone is named Vice President-Corporate Affairs for
F.N.B. Corporation, based in Naples, Florida.
NOV. 21 F.N.B. Corporation declares a regular quarterly cash dividend of
18 cents per share on its common stock and 47 cents per share on
its Series B Preferred Stock.
NOV. 28 F.N.B. Corporation announces an agreement to acquire the Venice,
Florida, insurance office of James T. Blalock. The agency now
operates as a division of Roger Bouchard Insurance Inc.
DEC. 15 F.N.B. Corporation agrees to acquire Don Ostrowsky & Associates
Inc., an independent insurance agency located in Cape Coral,
Florida. The agency now operates as a division of Roger Bouchard
Insurance Inc.
DEC. 18 F.N.B. Corporation and Citizens Community Bancorp Inc. of
Marco Island, Florida, jointly announce the signing of a
definitive agreement to merge. When the transaction is completed
in early 2001, .N.B. will become the second-largest financial
institution in Collier County with nearly $700 million in total
deposits.
DEC. 21 F.N.B. Corporation announces an agreement to acquire OneSource
Group Inc., an independent insurance agency with offices in
Clearwater and Jacksonville, Florida. The agency now operates
as a division of Roger Bouchard Insurance Inc.
DEC. 29 F.N.B. Corporation common stock ends trading in 2000, closing
at $21.09 per share.
-----
13
16
BOARD OF DIRECTORS
W. RICHARD BLACKWOOD
President
Harry Blackwood Inc.
ALAN C. BOMSTEIN
President & CEO
Creative Contractors Inc.
WILLIAM B. CAMPBELL
Retired Business Executive
CHARLES T. CRICKS
Principal
Starboard Ventures
HENRY M. EKKER
Attorney at Law, Partner
Ekker, Kuster, McConnell
&Epstein, LLP.
STEPHEN J. GURGOVITS
Vice Chairman
F.N.B. Corporation
President & CEO
First National Bank
of Pennsylvania
JAMES S. LINDSAY
Licensed Real Estate Broker
The Lindsay Company
Managing Partner
Dor-J's Partnership
PAUL P. LYNCH
Attorney at Law
President & CEO
Lynch Brothers Investments Inc.
EDWARD J. MACE
Certified Public Accountant
Chief Operating Officer
Ribek Corporation
PETER MORTENSEN
Chairman
F.N.B. Corporation
Chairman
First National Bank of Pennsylvania
ROBERT S. MOSS
Chairman
Associated Contractors
of Conneaut Lake Inc.
WILLIAM A. QUINN
Retired Executive
Vice President & Cashier
First National Bank
of Pennsylvania
WILLIAM J. STRIMBU
President
Nick Strimbu Inc.
GARY L. TICE
President & CEO
F.N.B. Corporation
Chairman
First National Bank of Naples
ARCHIE O. WALLACE
Attorney at Law
Partner of Rowley, Wallace,
Keck, Karson & St. John
JAMES T. WELLER
Chairman
Liberty Steel Products Inc.
ERIC J. WERNER
Vice President,
General Counsel & Secretary
Werner Co.
R. BENJAMIN WILEY
Chief Executive Officer
Greater Erie Community
Action Committee
DONNA C. WINNER
Co-owner
The Radisson,
Tara-A Country Inn,
The Winner, Tiffany's
- --------------------------------------------------------------------------------
OFFICERS
PETER MORTENSEN
Chairman
GARY L. TICE
President & CEO
STEPHEN J. GURGOVITS
Vice Chairman
KEVIN C. HALE
Executive Vice President
WILLIAM J. RUNDORFF
Executive Vice President
JOHN D. WATERS
Vice President &
Chief Financial Officer
DAVID B. MOGLE
Secretary & Treasurer
- -----
14
17
AFFILIATE MANAGEMENT
F.N.B. AFFILIATE SERVICES
C.C. Coghill
Senior Vice President
James L. Goehler
Senior Vice President
Myron Harvey
Senior Vice President
Jack Motter
Senior Vice President
Clay W. Cone
Vice President-Corporate Affairs
George D. Hagi
Vice President-Risk Management
Philip L. Nemni
Corporate Budget & Information Director
James G. Orie
Vice President & Corporate Counsel
Robert T. Reichert
Vice President & Controller
Bernie G. Sponseller
Manager of Shareholder Services
Christine E. Tvaroch
General Auditor
REGENCY FINANCE COMPANY
Stephen J. Gurgovits
Chairman
Robert T. Rawl
President & CEO
CUSTOMER SERVICE CENTER
OF F.N.B. LLC
Steven C. Powell
President & CEO
FIRST NATIONAL TRUST COMPANY
Michael H. Morris
President & CEO
FIRST NATIONAL BANK
OF PENNSYLVANIA
Peter Mortensen
Chairman
Stephen J. Gurgovits
President & CEO
FIRST NATIONAL BANK
OF NAPLES
Gary L. Tice
Chairman
Garrett S. Richter
President & CEO
CAPE CORAL NATIONAL BANK
David W. Gomer
Chairman & CEO
Robert J. Avery
President
METROPOLITAN NATIONAL BANK
Gary J. Roberts
President & CEO
REEVES BANK
Robert A. Rimbey
President & CEO
FIRST NATIONAL BANK
OF FLORIDA
Robert C. George
Chairman
David P. Stone
President & CEO
WEST COAST GUARANTY BANK
Joseph D. Hudgins
President & CEO
FIRST NATIONAL BANK OF
FORT MYERS
Mark L. Morris
President & CEO
ROGER BOUCHARD INSURANCE
Richard Bouchard
President
Tim Bouchard
Vice President
Ray Bouchard
Vice President
GELVIN, JACKSON & STARR INC.
Stephen F. Hunter
President & CEO
CONNELL & HERRIG INSURANCE
William Connell
President & CEO
L.J. KUDER INC.
L. Jon Kuder
President & CEO
ALTAMURA, MARSH
AND ASSOCIATES
Leonard Altamura
President
JAMES T. BLALOCK
Barbara Moore
Office Manager
DON OSTROWSKY & ASSOCIATES INC.
Don Ostrowsky
President
ONESOURCE GROUP INC.
Earl Horton
Executive Officer
Michael A. McClain
Executive Officer
Terrell V. Hawkins
Executive Officer
[FNB LOGO]
-----
15
18
SHAREHOLDER INFORMATION
EXECUTIVE OFFICES
One F.N.B. Boulevard 2150 Goodlette Road North
Hermitage, PA 16148 Naples, FL 34102
(724)981-6000 (941)262-7600
SHAREHOLDER RELATIONS AND STOCK TRANSFER AGENT
F.N.B. Shareholder Services
P.O. Box 11929
Naples, FL 34101-1929
Phone: (888)441-4362
DIVIDEND REINVESTMENT AND DIRECT STOCK PURCHASE PLAN
Shareholders as well as non-shareholders may participate in the Dividend
Reinvestment and Direct Stock Purchase Plan. The Plan provides that additional
shares of common stock may be purchased with reinvested dividends and voluntary
cash payments without broker fees. A prospectus and an enrollment card may be
obtained upon request to Shareholder Services.
FORM 10-K AND 10-Q AVAILABILITY
Copies of F.N.B. Corporation's Annual Report on Form 10-K and Quarterly Reports
on 10-Q filed with the Securities and Exchange Commission will be furnished to
any shareholder, free of charge, upon request to Shareholder Services. Forms
also are available over the Internet at www.sec.gov/index.html.
INTERNET INFORMATION
Information on F.N.B. Corporation's financial results, acquisitions, and its
products and services is available on the Internet at www.fnbcorporation.com.
STOCK LISTING
F.N.B. Corporation common stock is traded on the Nasdaq Stock Market under the
symbol FBAN.
INSTITUTIONAL INVESTMENT AND ANALYST INQUIRIES
Institutional investors, analysts or individuals desiring financial information
or reports may contact: John D. Waters, Vice President and Chief Financial
Officer, F.N.B. Corporation, One F.N.B. Boulevard, Hermitage, PA 16148.
Telephone: (724)983-3440.
NEWS MEDIA INQUIRIES
Media representatives and others seeking public information may contact:
Clay W. Cone, Vice President-Corporate Affairs, F.N.B. Corporation,
2150 Goodlette Road North, Naples, FL 34102. Telephone: (941)436-1676.
QUARTERLY REPORTS
Quarterly earnings release dates during 2001 are January 17, April 17, July 17
and October 16. Results are released to the press and then posted on F.N.B.
Corporation's Web site. Quarterly reports also are mailed to shareholders upon
request. Shareholders may request reports at any time.
DIVIDEND PAYMENT DATES
F.N.B. Corporation pays regular cash dividends in March, June, September
and December.
ANNUAL MEETING
The annual meeting of shareholders will be held on Monday, April 23, 2001 at 4
p.m. at the Naples Beach Hotel & Golf Club, 851 Gulf Shore Boulevard North,
Naples, FL 34102. Formal notice with proxy card and proxy statement, was mailed
to shareholders of record as of February 9, 2001.
- -----
16
19
[LOGO]
- --------------------------------------------------------------------------------
ONE F.N.B. BOULEVARD
HERMITAGE, PA 16148
2150 GOODLETTE ROAD NORTH
NAPLES, FL 34102
www.fnbcorporation.com
20
[LOGO] F.N.B.
CORPORATION
..................................................
2000 FINANCIAL REVIEW
[LOGO]
TABLE OF CONTENTS
1 Consolidated Balance Sheet
2 Consolidated Income Statement
3 Consolidated Statement of Stockholders' Equity
4 Consolidated Statement of Cash Flows
5 Notes to Consolidated Financial Statements
27 Report of Independent Auditors
28 Selected Financial Data
29 Quarterly Earnings Summary
30 Management's Discussion
41 Market for Common Stock and Related Shareholder Matters
21
F.N.B. CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
Dollars in thousands,except par values
December 31 2000 1999
- ----------- ---- ----
ASSETS
Cash and due from banks $ 141,844 $ 171,183
Interest bearing deposits with banks 1,843 3,478
Federal funds sold 35,961 7,467
Mortgage loans held for sale 1,042 8,733
Securities available for sale 436,441 408,731
Securities held to maturity (fair value of $60,549 and $75,905) 60,522 77,359
Loans,net of unearned income of $62,744 and $61,976 2,962,073 2,803,774
Allowance for loan losses (38,737) (36,311)
----------- -----------
NET LOANS 2,923,336 2,767,463
----------- -----------
Premises and equipment 107,748 105,052
Other assets 177,811 156,718
----------- -----------
TOTAL ASSETS $ 3,886,548 $ 3,706,184
=========== ===========
LIABILITIES
Deposits:
Non-interest bearing $ 461,386 $ 424,352
Interest bearing 2,641,551 2,485,082
----------- -----------
TOTAL DEPOSITS 3,102,937 2,909,434
----------- -----------
Other liabilities 63,362 56,604
Short-term borrowings 282,865 332,197
Long-term debt 116,140 117,634
----------- -----------
TOTAL LIABILITIES 3,565,304 3,415,869
STOCKHOLDERS' EQUITY
Preferred stock - $10 par value
Authorized - 20,000,000 shares
Issued - 167,732 and 207,459 shares
Aggregate liquidation value - $4,193 and $5,186 1,678 2,075
Common stock - $2 par value
Authorized - 100,000,000 shares
Issued - 22,297,073 and 21,005,720 shares 44,594 42,011
Additional paid-in capital 202,348 182,834
Retained earnings 75,442 71,310
Accumulated other comprehensive income (loss) 2,170 (4,803)
Treasury stock - 233,741 and 121,132 shares at cost (4,988) (3,112)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 321,244 290,315
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 3,886,548 $ 3,706,184
=========== ===========
See accompanying Notes to Consolidated Financial Statements
F.N.B. CORPORATION 1
22
F.N.B. CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
Dollars in thousands,except per share data
Year Ended December 31 2000 1999 1998
- ---------------------- ---- ---- ----
INTEREST INCOME
Loans,including fees $260,160 $222,043 $205,071
Securities:
Taxable 25,759 27,655 32,458
Nontaxable 1,852 2,210 2,482
Dividends 1,758 1,482 1,682
Other 1,407 1,526 4,334
-------- -------- --------
TOTAL INTEREST INCOME 290,936 254,916 246,027
======== ======== ========
INTEREST EXPENSE
Deposits 110,325 90,326 96,657
Short-term borrowings 16,895 11,282 6,813
Long-term debt 8,088 4,859 4,682
-------- -------- --------
TOTAL INTEREST EXPENSE 135,308 106,467 108,152
-------- -------- --------
NET INTEREST INCOME 155,628 148,449 137,875
Provision for loan losses 10,877 9,240 7,572
-------- -------- --------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 144,751 139,209 130,303
======== ======== ========
NON-INTEREST INCOME
Insurance commissions and fees 18,658 10,589 9,935
Service charges 22,005 20,254 16,581
Trust 4,463 3,852 2,792
Gain on sale of securities 176 1,674 1,385
Gain on sale of loans 2,261 2,187 3,316
Other 8,082 8,372 5,296
-------- -------- --------
TOTAL NON-INTEREST INCOME 55,645 46,928 39,305
-------- -------- --------
200,396 186,137 169,608
======== ======== ========
NON-INTEREST EXPENSE
Salaries and employee benefits 76,610 70,246 62,740
Net occupancy 9,283 9,000 8,487
Amortization of intangibles 2,059 1,934 1,321
Equipment 12,449 10,840 9,133
Merger related 1,824 5,541
Promotional 2,512 2,818 2,561
Insurance claims 5,255 4,162 3,964
Other 29,333 28,855 26,422
-------- -------- --------
TOTAL NON-INTEREST EXPENSE 137,501 129,679 120,169
-------- -------- --------
INCOME BEFORE INCOME TAXES 62,895 56,458 49,439
Income taxes 20,119 17,163 16,418
-------- -------- --------
NET INCOME $ 42,776 $ 39,295 $ 33,021
======== ======== ========
EARNINGS PER COMMON SHARE
Basic $ 1.93 $ 1.78 $ 1.50
======== ======== ========
Diluted $ 1.88 $ 1.72 $ 1.43
======== ======== ========
See accompanying Notes to Consolidated Financial Statements
F.N.B. CORPORATION 2
23
F.N.B. CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Dollars in thousands,except per share data
Accumulated
Other
Compre- Additional Compre-
hensive Preferred Common Paid-In Retained hensive Treasury
Income Stock Stock Capital Earnings Income Stock
------ ----- ----- ------- -------- ------ -----
Balance at January 1,1998 $2,875 $38,098 $133,375 $ 93,990 $ 5,383 $ (3,628)
Net income $ 33,021 33,021
Change in accumulated other comprehensive income 973 973
--------
Comprehensive income $ 33,994
========
Cash dividends declared:
Preferred stock (492)
Common stock $.64 per share (13,615)
Purchase of common stock (16,989)
Issuance of common stock (17) (329) (8,040) 17,533
Stock dividend 1,528 27,909 (29,437)
Conversion of preferred stock (495) 218 277
------ ------- -------- --------- -------- --------
Balance at December 31,1998 2,380 39,827 161,232 75,427 6,356 (3,084)
Net income $ 39,295 39,295
Change in accumulated other comprehensive income (11,159) (11,159)
--------
Comprehensive income $ 28,136
========
Cash dividends declared:
Preferred stock (411)
Common stock $.67 per share (16,108)
Purchase of common stock (17,709)
Issuance (retirement) of common stock 129 299 (3,840) 17,681
Stock dividend 1,916 21,137 (23,053)
Conversion of preferred stock (305) 139 166
------ ------- -------- --------- -------- --------
Balance at December 31,1999 2,075 42,011 182,834 71,310 (4,803) (3,112)
Net income $ 42,776 42,776
Change in accumulated other comprehensive income 6,973 6,973
--------
Comprehensive income $ 49,749
========
Cash dividends declared:
Preferred stock (341)
Common stock $.71 per share (15,653)
Purchase of common stock (17,671)
Issuance (retirement) of common stock 307 1,976 (3,233) 15,795
Stock dividend 2,085 17,332 (19,417)
Conversion of preferred stock (397) 191 206
------ ------- -------- --------- -------- --------
Balance at December 31,2000 $1,678 $44,594 $202,348 $ 75,442 $ 2,170 $ (4,988)
====== ======= ======== ======== ======== ========
See accompanying Notes to Consolidated Financial Statements
F.N.B.CORPORATION 3
24
F.N.B. CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Dollars in thousands
Year Ended December 31 2000 1999 1998
- ---------------------- ---- ---- ----
OPERATING ACTIVITIES
Net income $ 42,776 $ 39,295 $ 33,021
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation and amortization 12,589 11,312 9,173
Provision for loan losses 10,877 9,240 7,572
Deferred taxes (1,034) (9,051) (4,220)
Gain on sale of securities (176) (1,674) (1,385)
Gain on sale of loans (2,261) (2,187) (3,316)
Proceeds from sale of loans 23,961 45,858 89,484
Loans originated for sale (14,009) (36,457) (95,579)
Net change in:
Interest receivable (3,385) 384 82
Interest payable 3,746 796 684
Other, net (17,722) 12,850 (55,909)
--------- --------- ---------
Net cash flows from operating activities 55,362 70,366 (20,393)
--------- --------- ---------
INVESTING ACTIVITIES
Net change in:
Interest bearing deposits with banks 1,635 714 1,389
Federal funds sold (28,494) 37,239 1,307
Loans (168,307) (389,843) (253,960)
Securities available for sale:
Purchases (104,232) (167,851) (218,465)
Sales 13,299 32,053 16,630
Maturities 74,486 166,946 219,863
Securities held to maturity:
Purchases (1,664) (1,021) (36,960)
Maturities 18,504 42,240 72,722
Increase in premises and equipment (13,444) (18,078) (25,161)
Net cash (paid) received for mergers, acquisitions
and divestiture (341) (3,941) 48,625
--------- --------- ---------
Net cash flows from investing activities (208,558) (301,542) (174,010)
--------- --------- ---------
FINANCING ACTIVITIES
Net change in:
Non-interest bearing deposits, savings and NOW 91,758 34,525 203,372
Time deposits 101,745 24,481 14,789
Short-term borrowings (49,332) 181,216 23,795
Increase in long-term debt 49,391 70,489 16,543
Decrease in long-term debt (50,885) (23,239) (19,592)
Net acquisition of treasury stock (2,826) (3,440) (7,842)
Cash dividends paid (15,994) (16,520) (14,107)
--------- --------- ---------
Net cash flows from financing activities 123,857 267,512 216,958
========= ========= =========
Net (Decrease) Increase In Cash And Cash Equivalents (29,339) 36,336 22,555
Cash and cash equivalents at beginning of year 171,183 134,847 112,292
--------- --------- ---------
Cash And Cash Equivalents At End Of Year $ 141,844 $ 171,183 $ 134,847
--------- --------- ---------
See accompanying Notes to Consolidated Financial Statements
F.N.B. CORPORATION 4
25
F.N.B. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS:
F.N.B. Corporation (the Corporation) is a bank holding company with executive
offices in Naples, Florida and Hermitage, Pennsylvania. It operates 8 community
banks with 89 offices and a consumer finance company with 51 offices in
Pennsylvania, Florida, Tennessee, Ohio and Kentucky. In addition, it operates
five insurance agencies with 11 offices in Pennsylvania and Florida.
BASIS OF PRESENTATION:
The consolidated financial statements include the accounts of the Corporation
and its subsidiaries. All significant intercompany balances and transactions
have been eliminated. Certain reclassifications have been made to the prior
years' financial statements to conform to the current year's presentation.
USE OF ESTIMATES:
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
SECURITIES:
Debt securities are classified as held to maturity when management has the
positive intent and ability to hold securities to maturity. Securities held to
maturity are carried at amortized cost.
Debt securities not classified as held to maturity and marketable equity
securities are classified as available for sale. Securities available for sale
are carried at fair value with net unrealized securities gains (losses), net of
income taxes, reported separately as a component of other comprehensive income.
Amortization of premiums and accretion of discounts are recorded as interest
income from securities. Realized gains and losses are recorded as net securities
gains (losses). The adjusted cost of specific securities sold is used to compute
gains or losses on sales.
Presently, the Corporation has no intention of establishing a trading
securities classification. Mortgage Loans Held for Sale:
MORTGAGE LOANS HELD FOR SALE:
Mortgage loans held for sale are recorded at the lower of aggregate cost or
market value. Gain or loss on the sale of loans is included in non-interest
income.
LOANS AND THE ALLOWANCE FOR LOAN LOSSES:
Loans are reported at their outstanding principal adjusted for any charge-offs
and any deferred fees or costs on originated loans.
Interest income on loans is accrued on the principal amount outstanding. 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, all unpaid interest is reversed. While on non-accrual,
contractual interest payments are applied against principal until the loan is
restored to accrual status. Non-accrual loans may not be restored to accrual
status until all delinquent principal and interest has been paid, or the loan
becomes both well secured and in the process of collection. Consumer installment
loans are generally charged off against the allowance for loan losses upon
reaching 90 to 180 days past due, depending on the installment loan type. Loan
origination fees and related costs are deferred and recognized over the life of
the loans as an adjustment of yield.
The allowance for loan losses is based on management's evaluation of potential
losses in the loan portfolio, which includes an assessment of past experience,
current economic conditions, known and inherent risks in the loan portfolio, the
estimated value of underlying collateral and changes in the composition of the
loan portfolio. Additions are made to the allowance through periodic provisions
charged to income and recovery of principal on loans previously charged off.
Losses of principal are charged to the allowance when the loss actually occurs
or when a determination is made that a loss is probable.
Impaired loans are identified and measured based on the present value of
expected future cash flows discounted at the loan's effective interest rate, at
the loan's observable market price or at the fair value of
F.N.B. CORPORATION 5
26
F.N.B. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the collateral if the loan is collateral dependent. If the recorded investment
in the loan exceeds the measure of fair value, a valuation allowance is
established as a component of the allowance for loan losses. Impaired loans
consist of non-homogeneous loans, which based on the evaluation of current
information and events, management has determined that it is probable the
Corporation will not be able to collect all amounts due according to the
contractual terms of the loan agreement. The Corporation evaluates all
commercial and commercial real estate loans which have been classified for
regulatory reporting purposes, including non-accrual and restructured loans, in
determining impaired loans.
PREMISES AND EQUIPMENT:
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed generally on the straight-line method over the asset's
estimated useful life. Useful lives are dependent upon the nature and condition
of the asset and range from 5 to 40 years.
OTHER REAL ESTATE OWNED:
Assets acquired in settlement of indebtedness are included in other assets at
the lower of fair value minus estimated costs to sell or at the carrying amount
of the indebtedness. Subsequent write-downs and net direct operating expenses
attributable to such assets are included in other expenses.
AMORTIZATION OF INTANGIBLES:
Goodwill is being amortized using the straight-line method over periods not
exceeding 20 years. Core deposit intangibles are being amortized using
accelerated methods over various lives ranging from 7-17 years. The Corporation
periodically evaluates its goodwill and core deposit intangibles for impairment.
INCOME TAXES:
Income taxes are computed utilizing the liability method. Under this method
deferred taxes are determined based on differences between financial reporting
and tax bases of assets and liabilities and are measured using the enacted tax
rates and laws that will be in effect when the differences are expected to
reverse.
PER SHARE AMOUNTS:
Earnings and cash dividends per share have been adjusted for common stock
dividends, including the 5 percent stock dividend declared on April 17, 2000.
Basic 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.
Diluted earnings per common share is calculated by dividing net income by the
weighted average number of shares of common stock outstanding, assuming
conversion of outstanding convertible preferred stock from the beginning of the
year or date of issuance and the exercise of stock options and warrants. Such
adjustments to net income and the weighted average number of shares of common
stock outstanding are made only when such adjustments dilute earnings per common
share.
CASH EQUIVALENTS:
The Corporation considers cash and due from banks as cash and cash
equivalents.
NEW ACCOUNTING STANDARDS:
Financial Accounting Standards Statement (FAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities," requires all derivatives to be
recorded on the balance sheet at fair value and establishes standard accounting
methodologies for hedging activities. The statement is effective for the
Corporation's fiscal year ending December 31, 2001. Because the Corporation has
not entered into any derivative transactions, the adoption of this statement
will not have a material impact on the financial statements.
MERGERS, ACQUISITIONS AND DIVESTITURES
On January 31, 2001 and January 5, 2001, the Corporation completed its
affiliations with Ostrowsky &Associates, Inc. (Ostrowsky) and James T. Blalock
(Blalock), independent insurance agencies in Cape Coral and Venice, Florida,
respectively. The transactions were
F.N.B. CORPORATION 6
27
F.N.B. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
accounted for as purchases. Both Ostrowsky and Blalock are operating as
divisions of Roger Bouchard Insurance, Inc. (Bouchard), a wholly-owned
subsidiary of the Corporation.
On January 26, 2001, the Corporation completed its affiliation with OneSource
Group, Inc. (OneSource), an independent insurance agency with offices in
Clearwater and Jacksonville, Florida. The transaction was accounted for as a
pooling-of-interests. OneSource is operating as a division of Bouchard.
In December 2000, the Corporation announced an affiliation with Citizens
Community Bank of Florida (Citizens), a community bank headquarted in Marco
Island, Florida, with assets of $170.0 million. Under the terms of the merger
agreement, each outstanding share of Citizens common stock will be converted
into shares of the Corporation's common stock. The final exchange ratio is
subject to changes in the market value of the Corporation's common stock prior
to consummation, the range of which is .500 to .579 shares. A total of 1,960,000
shares of the Corporation's common stock are anticipated to be issued. The
transaction will be accounted for as a pooling-of-interests. Citizens will
operate as a division of the Corporation's Florida banking affiliate, First
National Bank of Florida.
On August 16, 2000, the Corporation completed its affiliation with Altamura,
Marsh & Associates (Altamura), an independent insurance agency with offices
in Clearwater and Fort Myers, Florida. The transaction was accounted for as
a purchase. Altamura is operating as a division of Bouchard.
On July 31, 2000, the Corporation's wholly-owned consumer finance subsidiary,
Regency Finance Company (Regency), completed its acquisition of eight offices in
Tennessee having gross loans of $42.0 million. The transaction, which was
accounted for as a purchase, resulted in the recognition of $1.2 million of
goodwill.
On June 9, 2000, the Corporation completed its affiliation with Connell
& Herrig Insurance, Inc. (Connell), an independent insurance agency with offices
in Sarasota and Englewood, Florida. The transaction was accounted for as a
purchase. Connell is operating as a division of Bouchard.
During 1999, the Corporation affiliated with Roger Bouchard Insurance, Inc.,
Clearwater, Florida and Guaranty Bank & Trust Company, Venice, Florida. These
affiliations added assets and deposits of $157.2 million and $142.5 million,
respectively, and were accounted for as poolings-of-interests. The Corporation
also affiliated with Gelvin, Jackson & Starr, Inc., Meadville, Pennsylvania.
This transaction was accounted for as a purchase. Also during 1999, Regency
expanded its size and geographic scope through the purchase of 11 consumer
finance offices in Tennessee and Kentucky. This transaction was also accounted
for as a purchase.
The following table sets forth separate company financial information for the
year ended December 31, 1998. The F.N.B. Corporation results exclude the effects
of any mergers which occurred subsequent to December 31, 1998 (in thousands):
NET
INTEREST NET
Year Ended December 31, 1998 INCOME INCOME
------ ------
F.N.B ........................... $132,600 $31,872
Bouchard ........................ (39) 823
Guaranty ........................ 5,314 326
During 1998, the Corporation affiliated with West Coast Bank, Sarasota,
Florida; Seminole Bank, Seminole Florida and Citizens Bank and Trust Company,
Clearwater, Florida.These affiliations added assets and deposits of
$334.6 million and $285.7 million, respectively, and were accounted for as
poolings-of-interests. Also during 1998, First National Bank of Pennsylvania
(FNBPA) purchased three Lawrence County branches, which added $48.7 million
in deposits. As a result of the transaction, FNBPA recorded $5.1 million and
$1.8 million in goodwill and core deposit intangibles, respectively.
The Corporation regularly evaluates the potential acquisition of, and holds
discussions with, various acquisition candidates and as a general rule the
Corporation publicly announces such acquisitions only after a definitive merger
agreement has been reached.
F.N.B. CORPORATION 7
28
F.N.B. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUBSEQUENT EVENT
On January 9, 2001, the Corporation announced a charter consolidation plan
which would reduce the number of bank charters from eight to three. Under the
program the Corporation's five Florida banks will be merged under First National
Bank of Florida and its two Pennsylvania banks will be combined under First
National Bank of Pennsylvania. The Corporation previously consolidated its Ohio
banks under a single charter, Metropolitan National Bank. In connection with
these charter consolidations, the trust operations of First National Bank of
Florida will be consolidated into the Corporation's national trust company,
First National Trust Company. It is expected that the Corporation will incur
charges arising from this consolidation such as, but not limited to legal and
accounting fees, consulting fees, data processing conversion charges, early
retirement and involuntary separation and related benefit costs, and similar
costs which normally arise from the consolidation of operational activities.
The charter consolidation is expected to be substantially completed by the end
of the first quarter of 2001. The Corporation anticipates incurring a pre-tax
consolidation charge of $3.0 million to $3.2 million to cover the expenses
previously discussed. The estimate of anticipated charges to be incurred in
connection with the charter consolidation is a preliminary estimate of the
significant charges which may, in the aggregate, be required and should be
viewed accordingly. The actual charges incurred may be higher or lower than what
is currently contemplated, once the charter consolidation is assimilated from an
operational perspective and various contingencies are either satisfied or
eliminated.
SECURITIES
The amortized cost and fair value of securities are as follows (in thousands):
Securities available for sale:
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
December 31, 2000 COST GAINS LOSSES VALUE
- ----------------- ---- ----- ------ -----
U.S. Treasury and other U.S. Government
agencies and corporations $194,468 $1,835 $ (334) $195,969
Mortgage-backed securities of
U.S. Government agencies 209,406 883 (1,297) 208,992
States of the U.S. and political subdivisions 2,951 32 (111) 2,872
-------- ------ ------- --------
TOTAL DEBT SECURITIES 406,825 2,750 (1,742) 407,833
Equity securities 26,231 2,714 (337) 28,608
-------- ------ ------- --------
$433,056 $5,464 $(2,079) $436,441
======== ====== ======= ========
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
December 31, 1999 COST GAINS LOSSES VALUE
- ----------------- ---- ----- ------ -----
U.S. Treasury and other U.S. Government
agencies and corporations $208,693 $ 73 $ (6,377) $202,389
Mortgage-backed securities of
U.S. Government agencies 181,685 275 (4,518) 177,442
States of the U.S. and political subdivisions 3,091 3 (289) 2,805
Other debt securities 358 45 403
-------- -------- --------- --------
TOTAL DEBT SECURITIES 393,827 396 (11,184) 383,039
Equity securities 22,306 3,601 (215) 25,692
-------- -------- --------- --------
$416,133 $ 3,997 $ (11,399) $408,731
======== ======== ========= ========
F.N.B. CORPORATION 8
29
F.N.B. CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
December 31, 1998 COST GAINS LOSSES VALUE
----------------- --------- ---------- ---------- -----
U.S. Treasury and other U.S. Government
agencies and corporations $256,740 $ 2,004 $ (168) $258,576
Mortgage-backed securities of
U.S. Government agencies 163,351 1,218 (99) 164,470
States of the U.S. and political subdivisions 3,202 38 (101) 3,139
Other debt securities 1,305 48 1,353
-------- -------- --------- --------
Total Debt Securities 424,598 3,308 (368) 427,538
Equity securities 21,053 6,949 (105) 27,897
-------- -------- --------- --------
$445,651 $ 10,257 $ (473) $455,435
======== ======== ========= ========
Securities held to maturity:
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
December 31, 2000 COST GAINS LOSSES VALUE
- ----------------- --------- ---------- ---------- -----
December 31, 2000
U.S. Treasury and other U.S. Government
agencies and corporations $ 17,887 $ 12 $ (129) $ 17,770
Mortgage-backed securities of
U.S. Government agencies 7,091 23 (18) 7,096
States of the U.S. and political subdivisions 35,442 221 (79) 35,584
Other debt securities 102 (3) 99
-------- -------- --------- --------
$ 60,522 $ 256 $ (229) $ 60,549
======== ======== ========= ========
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
December 31, 1999 COST GAINS LOSSES VALUE
- ----------------- --------- ---------- ---------- -----
U.S. Treasury and other U.S. Government
agencies and corporations $ 17,887 $ (723) $ 17,164
Mortgage-backed securities of
U.S. Government agencies 15,147 $ 10 (157) 15,000
States of the U.S. and political subdivisions 44,037 76 (656) 43,457
Other debt securities 288 (4) 284
-------- -------- --------- --------
$ 77,359 $ 86 $ (1,540) $ 75,905
======== ======== ========= ========
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
December 31, 1998 COST GAINS LOSSES VALUE
- ----------------- --------- ---------- ---------- -----
U.S. Treasury and other U.S. Government
agencies and corporations $ 29,882 $ 117 $ (43) $ 29,956
Mortgage-backed securities of
U.S. Government agencies 33,909 118 (28) 33,999
States of the U.S. and political subdivisions 54,237 795 (18) 55,014
Other debt securities 547 9 (3) 553
-------- -------- --------- --------
$118,575 $ 1,039 $ (92) $119,522
======== ======== ========= ========
F.N.B. Corporation 9
30
F.N.B. CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
At December 31, 2000 and 1999, respectively, securities with a carrying value
of $197.3 million and $157.3 million were pledged to secure public deposits,
trust deposits and for other purposes as required by law. Securities with a
carrying value of $232.3 million and $213.3 million at December 31, 2000 and
1999, respectively, were sold as collateral for other borrowings.
As of December 31, 2000, the Corporation had not entered into any off-balance
sheet derivative transactions.
As of December 31, 2000, the amortized cost and fair value of securities, by
contractual maturities, were as follows (in thousands):
HELD TO MATURITY AVAILABLE FOR SALE
------------------------ -------------------------
AMORTIZED FAIR AMORTIZED FAIR
December 31, 2000 COST VALUE COST VALUE
- ----------------- --------- ----- --------- -----
Due in one year or less $ 7,515 $ 7,517 $ 39,105 $ 39,177
Due from one to five years 35,650 35,618 151,386 152,843
Due from five to ten years 9,396 9,456 4,836 4,816
Due after ten years 870 862 2,092 2,005
------- ------- -------- --------
53,431 53,453 197,419 198,841
Mortgage-backed securities of
U.S. Government agencies 7,091 7,096 209,406 208,992
Equity securities 26,231 28,608
------- ------- -------- --------
$60,522 $60,549 $433,056 $436,441
======= ======= ======== ========
Maturities may differ from contractual terms because borrowers may have the
right to call or prepay obligations with or without penalties. Periodic payments
are received on mortgage-backed securities based on the payment patterns of the
underlying collateral.
Proceeds from sales of securities available for sale during 2000, 1999 and
1998 were $13.3 million, $32.1 million and $16.6 million, respectively. Gross
gains and gross losses were realized on those sales as follows (in thousands):
Year Ended December 31 2000 1999 1998
- ---------------------- ---- ---- ----
Gross gains $206 $1,734 $1,405
Gross losses (30) (60) (20)
---- ------ ------
$176 $1,674 $1,385
==== ====== ======
LOANS
Following is a summary of loans (in thousands):
December 31 2000 1999
- ----------- ---- ----
Real estate:
Residential $1,096,311 $1,059,432
Commercial 812,023 747,835
Construction 180,387 119,398
Installment loans to individuals 339,126 334,810
Commercial, financial and agricultural 392,783 350,023
Lease financing 204,187 254,252
Unearned income (62,744) (61,976)
---------- ----------
$2,962,073 $2,803,774
========== ==========
F.N.B. CORPORATION 10
31
F.N.B. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The loan portfolio consists principally of loans to individuals and small- and
medium-sized businesses within the Corporation's primary market area of western
Pennsylvania, southwestern Florida, northern and central Tennessee, eastern Ohio
and southwestern Kentucky.
As of December 31, 2000, no concentrations of loans exceeding 10% of total
loans existed which were not disclosed as a separate category of loans.
Certain directors and executive officers of the Corporation and its
significant subsidiaries, as well as associates of such persons, were loan
customers during 2000. Such loans were made in the ordinary course of business
under normal credit terms and do not represent more than a normal risk of
collection. Following is a summary of the amount of loans in which the aggregate
of the loans to any such persons exceeded $60,000 during the year (in
thousands):
Total loans at December 31, 1999 . . . . . . . . . . . . . $54,634
New loans. . . . . . . . . . . . . . . . . . . . . . . . . 27,539
Repayments . . . . . . . . . . . . . . . . . . . . . . . . (30,942)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 3,282
-------
Total loans at December 31, 2000 . . . . . . . . . . . . . $54,513
=======
Other represents the net change in loan balances resulting from changes in
related parties during the year.
NON-PERFORMING ASSETS
Following is a summary of non-performing assets (in thousands):
December 31 2000 1999
- ----------- ---- ----
Non-accrual loans $ 9,946 $ 9,321
Restructured loans 2,810 3,560
------- -------
TOTAL NON-PERFORMING LOANS 12,756 12,881
Other real estate owned 4,786 4,801
------- -------
TOTAL NON-PERFORMING ASSETS $17,542 $17,682
======= =======
For the years ended December 31, 2000, 1999 and 1998, income recognized on
non-accrual and restructured loans was $514,000, $503,000 and $863,000,
respectively. Income that would have been recognized during 2000, 1999 and 1998
on such loans if they were in accordance with their original terms was $1.6
million, $1.4 million and $1.6 million, respectively. Loans past due 90 days or
more were $4.5 million, $4.9 million and $2.9 million at December 31, 2000, 1999
and 1998, respectively.
Following is a summary of information pertaining to loans considered to be
impaired (in thousands):
At or For the Year Ended December 31 2000 1999 1998
- ------------------------------------ ---- ---- ----
Impaired loans with an allocated allowance $ 969 $ 2,069 $3,366
Impaired loans without an allocated allowance 1,027 1,762 4,998
------ ------- ------
TOTAL IMPAIRED LOANS $1,996 $ 3,831 $8,364
====== ======= ======
Allocated allowance on impaired loans 375 891 1,099
====== ======= ======
Portion of impaired loans on non-accrual 1,339 1,272 5,413
====== ======= ======
Average impaired loans 2,682 5,268 4,945
====== ======= ======
Income recognized on impaired loans 162 302 492
====== ======= ======
F.N.B. CORPORATION 11
32
F.N.B. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ALLOWANCE FOR LOAN LOSSES
Following is an analysis of changes in the allowance for loan losses (in
thousands):
Year Ended December 31 2000 1999 1998
- ---------------------- ---- ---- ----
Balance at beginning of year $36,311 $32,308 $31,055
Addition from acquisitions 767 2,813
Charge-offs (10,955) (9,622) (7,634)
Recoveries 1,737 1,572 1,315
------- ------- -------
NET CHARGE-OFFS (9,218) (8,050) (6,319)
Provision for loan losses 10,877 9,240 7,572
------- ------- -------
Balance at end of year $38,737 $36,311 $32,308
======= ======= =======
PREMISES AND EQUIPMENT
Following is a summary of premises and equipment (in thousands):
December 31 2000 1999
- ----------- ---- ----
Land $ 20,614 $ 19,660
Premises 88,168 83,487
Equipment 68,476 62,024
-------- --------
177,258 165,171
Accumulated depreciation (69,510) (60,119)
-------- --------
$107,748 $105,052
======== ========
Depreciation expense was $10.7 million for 2000, $9.5 million for 1999 and
$8.2 million for 1998.
The Corporation has operating leases extending to 2087 for certain land,
office locations and equipment. Leases that expire are generally expected to be
renewed or replaced by other leases. Rental expense was $4.2 million for 2000,
$3.7 million for 1999 and $3.6 million for 1998. Total minimum rental
commitments under such leases were $24.8 million at December 31, 2000. Following
is a summary of future minimum lease payments for years following December 31,
2000 (in thousands):
2001 ................. $ 2,382
2002 ................. 1,977
2003 ................. 1,662
2004 ................. 1,371
2005 ................. 1,028
Later years .......... 16,372
F.N.B. CORPORATION 12
33
F.N.B. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DEPOSITS
Following is a summary of deposits (in thousands):
December 31 2000 1999
- ----------- ---- ----
Non-interest bearing $ 461,386 $ 424,352
Savings and NOW 1,330,334 1,275,610
Certificates of deposit and other time deposits 1,311,217 1,209,472
---------- ----------
$3,102,937 $2,909,434
========== ==========
Following is a summary of the scheduled maturities of certificates of deposit
and other time deposits for each of the five years following December 31, 2000
(in thousands):
2001 .................... $934,617
2002 .................... 259,061
2003 .................... 54,569
2004 .................... 21,879
2005 .................... 40,144
Later years ............. 947
Time deposits of $100,000 or more were $327.3 million and $263.7 million at
December 31, 2000 and 1999, respectively. Following is a summary of these time
deposits by remaining maturity at December 31, 2000 (in thousands):
CERTIFICATES OTHER TIME
OF DEPOSIT DEPOSITS TOTAL
------------ ---------- --------
Three months or less $104,467 $ 4,533 $109,000
Three to six months 60,258 3,765 64,023
Six to twelve months 84,636 2,303 86,939
Over twelve months 50,834 16,552 67,386
-------- -------- --------
$300,195 $ 27,153 $327,348
======== ======== ========
SHORT-TERM BORROWINGS
Following is a summary of short-term borrowings (in thousands):
December 31 2000 1999
- ----------- ---- ----
Securities sold under repurchase agreements $146,996 $134,808
Federal funds purchased 865 49,691
Federal Home Loan Bank advances 39,400 77,000
Other short-term borrowings 25,296 19,205
Subordinated notes 70,308 51,493
-------- --------
$282,865 $332,197
======== ========
Credit facilities amounting to $70.0 million at December 31, 2000 were
maintained with various banks with rates which are at or below prime rate. The
facilities and their terms are periodically reviewed by the banks and are
generally subject to withdrawal at their discretion. Credit facilities amounting
to $45.0 million were unused at December 31, 2000.
F.N.B. CORPORATION 13
34
F.N.B. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
LONG-TERM DEBT
Following is a summary of long-term debt (in thousands):
December 31 2000 1999
- ----------- ---- ----
Federal Home Loan Bank advances ........ $ 70,829 $ 75,911
Other long-term debt ................... 822 783
Subordinated notes ..................... 44,489 40,940
-------- --------
$116,140 $117,634
======== ========
The Corporation has available credit with the Federal Home Loan Bank of $622.2
million, of which $110.2 million was used as of December 31, 2000. These
advances are secured by residential real estate loans and Federal Home Loan Bank
Stock and are scheduled to mature in various amounts periodically through the
year 2010. Interest rates paid on these advances range from 5.46% to 6.40% in
2000 and 5.45% to 6.32% in 1999.
Subordinated notes are unsecured and subordinated to other indebtedness of the
Corporation. The subordinated notes are scheduled to mature in various amounts
periodically through the year 2010. At December 31, 2000, $34.5 million of
long-term subordinated debt is redeemable prior to maturity at a discount equal
to three months of interest. The Corporation may require the holder to give 30
days prior written notice. No sinking fund is required and none has been
established to retire the debt. The weighted average interest rate on long-term
subordinated debt was 6.73% at December 31, 2000 and 7.31% at December 31, 1999.
Scheduled annual maturities for all of the long-term debt for each of the five
years following December 31, 2000 are as follows (in thousands):
2001 ..................... $25,518
2002 ..................... 17,051
2003 ..................... 1,688
2004 ..................... 931
2005 ..................... 31,494
Later years .............. 39,458
COMMITMENTS AND CREDIT RISK
The Corporation has commitments to extend credit and standby letters of credit
which involve certain elements of credit risk in excess of the amount stated in
the consolidated balance sheet. The Corporation's exposure to credit loss in the
event of non-performance by the customer is represented by the contractual
amount of those instruments. Consistent credit policies are used by the
Corporation for both on- and off-balance sheet items.
Following is a summary of off-balance sheet credit risk information (in
thousands):
December 31 2000 1999
- ----------- ---- ----
Commitments to extend credit ............ $566,355 $529,901
Standby letters of credit ............... 35,776 33,258
At December 31, 2000, funding of approximately 85% of the commitments to
extend credit is dependent on the financial condition of the customer. The
Corporation has the ability to withdraw such commitments at its discretion.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. Based on management's credit evaluation of
the customer, collateral may be deemed necessary. Collateral requirements vary
and may include accounts receivable, inventory, property, plant and equipment
and income-producing commercial properties.
Standby letters of credit are conditional commitments issued by the
Corporation which may require payment at a future date. The credit risk involved
in issuing letters of credit is essentially the same as that involved in
extending loans to customers.
F.N.B. CORPORATION 14
35
F.N.B. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
STOCKHOLDERS' EQUITY
Series A - Cumulative Convertible Preferred Stock (Series A Preferred) was
issued in 1985. Holders of Series A Preferred are entitled to 6.2 votes for each
share held. The holders do not have cumulative voting rights in the election of
directors. Dividends are cumulative from the date of issue and are payable at
$.42 per share each quarter. Series A Preferred is convertible at the option of
the holder into shares of the Corporation's common stock having a market value
of $25.00 at time of conversion. The Corporation has the right to require the
conversion of the balance of all outstanding shares at the conversion rate.
During 2000, 654 shares of Series A Preferred were converted to 771 shares of
common stock. At December 31, 2000, 23,548 shares of common stock were reserved
by the Corporation for the conversion of the remaining 19,194 outstanding
shares.
Series B - Cumulative Convertible Preferred Stock (Series B Preferred) was
issued in 1992. Holders of Series B Preferred have no voting rights. Dividends
are cumulative from the date of issue and are payable at $.46875 per share each
quarter. Series B Preferred has a stated value of $25.00 per share and is
convertible at the option of the holder into shares of the Corporation's common
stock at a price of $10.05 per share. The Corporation has the right to require
the conversion of the balance of all outstanding shares at the conversion rate.
During 2000, 39,073 shares of Series B Preferred were converted to 94,709 shares
of common stock. At December 31, 2000, 369,275 shares of common stock were
reserved by the Corporation for the conversion of the remaining 148,538
outstanding shares.
COMPREHENSIVE INCOME
The components of comprehensive income, net of related tax, are as follows (in
thousands):
Year Ended December 31 2000 1999 1998
- ---------------------- ---- ---- ----
Net income $42,776 $ 39,295 $33,021
Other comprehensive income:
Unrealized gains (losses) on securities:
Arising during the period, net of tax expense (benefit)
of $3,854, $(5,449) and $960 7,127 (10,121) 1,783
Less: reclassification adjustment for gains included in
net income, net of tax benefit of $99, $559 and $436 (184) (1,038) (810)
Minimum pension liability adjustment 30
------- -------- -------
Other comprehensive income (loss) 6,973 (11,159) 973
------- -------- -------
Comprehensive income $49,749 $ 28,136 $33,994
======= ======== =======
STOCK INCENTIVE PLANS
The Corporation has available up to 1,058,025 shares of common stock to be
issued under the restricted stock and incentive bonus and restricted stock bonus
plans to key employees of the Corporation. All shares of stock awarded under
these plans vest in equal installments over a five year period on each
anniversary of the date of grant. At December 31, 2000, 44,783 shares out of a
total of 84,009 shares were vested under these plans. The weighted average grant
date fair value of the restricted shares issued through December 31, 2000 was
$26.25.
The Corporation has available up to 2,729,063 shares of common stock to be
issued under both incentive and non-qualified stock option plans to key
employees of the Corporation. The options vest in equal installments over
periods ranging from three to ten years. The options are granted at a price
equal to the fair market value at the date of the grant and are exercisable
within ten years from the date of the grant. Because the exercise price of the
Corporation's stock options equals the market price of the underlying stock on
the date of grant, no compensation expense is recognized.
F.N.B. CORPORATION 15
36
F.N.B. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In accordance with FAS No. 123, the following table shows pro forma net income
and earnings per share along with the significant assumptions used in the
Black-Scholes option pricing model (in thousands, except per share data):
Year Ended December 31 2000 1999 1998
- ---------------------- ---- ---- ----
Pro forma net income $41,494 $38,376 $32,383
Pro forma earnings per share:
Basic $1.87 $1.74 $1.47
------- ------- -------
Diluted $1.82 $1.68 $1.41
------- ------- -------
Assumptions:
Risk-free interest rate 6.79% 4.72% 5.54%
Dividend yield 3.37% 3.20% 2.52%
Expected stock price volitility .26% .23% .23%
Expected life (years) 5.00 5.00 5.00
------- ------- -------
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period of five years.
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferrable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Corporation's employee stock options have characteristics
significantly different from those of traded options, and changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
Activity in the Option Plan during the past three years was as follows:
Weighted
Average Price
2000 per Share 1999 1998
---- --------- ---- ----
Outstanding, beginning of year 1,517,574 $ 17.74 1,365,620 1,390,417
Granted during the year 549,140 21.71 384,586 295,314
Exercised during the year (101,560) 8.41 (207,636) (294,165)
Forfeited during the year (33,463) 20.14 (24,996) (25,946)
--------- --------- ---------
Ending balance 1,931,691 19.32 1,517,574 1,365,620
========= ========= =========
The following table summarizes information about the stock options outstanding
at December 31, 2000:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------- ------------------------------------
RANGE OF WEIGHTED AVERAGE WEIGHTED WEIGHTED
EXERCISE OPTIONS REMAINING AVERAGE OPTIONS AVERAGE
PRICES OUTSTANDING CONTRACTUAL YEARS EXERCISE PRICE EXERCISABLE EXERCISE PRICE
------ ----------- ----------------- -------------- ----------- --------------
$ 5.49 -$ 8.24 157,747 3.42 $ 6.74 157,747 $ 6.75
8.25 - 12.38 355,415 3.32 10.38 302,764 10.40
12.39 - 18.59 167,950 5.04 16.25 137,619 16.36
18.60 - 27.90 1,003,716 8.29 22.33 219,622 21.76
27.91 - 30.07 246,863 7.05 30.07 107,541 30.07
--------- -------
1,931,691 925,293
========= =======
F.N.B. CORPORATION 16
37
F.N.B. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Corporation has granted warrants to purchase common stock (at exercise
prices of $5.64 and $9.44 per share). Such warrants are exercisable and will
expire on June 19, 2001 and December 17, 2003. The Corporation has reserved
27,349 shares of common stock for issuance in connection with these warrants.
RETIREMENT AND OTHER POSTRETIREMENT BENEFIT PLANS
RETIREMENT PLANS
Following are reconciliations of the change in benefit obligation, change in
plan assets and funded status (in thousands):
December 31 2000 1999
- ----------- ---- ----
Benefit obligation at beginning of year $ 27,976 $ 30,893
Service cost 1,416 1,604
Interest cost 2,336 2,097
Plan amendments 254
Actuarial loss (gain) 2,573 (5,357)
Benefits paid (965) (1,261)
-------- --------
Benefit obligation at end of year $ 33,590 $ 27,976
======== ========
December 31 2000 1999
- ----------- ---- ----
Fair value of plan assets at beginning of year $ 29,510 $ 28,340
Actual return on plan assets (97) 2,382
Company contribution 1,004 49
Benefits paid (965) (1,261)
-------- --------
Fair value of plan assets at end of year $ 29,452 $ 29,510
======== ========
December 31 2000 1999
- ----------- ---- ----
Funded status of plan $ (4,137) $ 1,534
Unrecognized actuarial gain (2,766) (8,063)
Unrecognized prior service cost 1,641 1,715
Unrecognized net transition obligation 32 37
-------- --------
Accrued pension cost $ (5,230) $ (4,777)
======== ========
Included in the above reconciliation is the benefit obligation and fair value
of plan assets for the Basic Retirement Plan which were $8.0 million and $0,
respectively, as of December 31, 2000, and $6.0 million and $0, respectively, as
of December 31, 1999.
The amounts recognized in the Corporation's consolidated financial statements
include the following (in thousands):
December 31 2000 1999
- ----------- ---- ----
Prepaid pension cost $ 1,177 $ 433
Accrued pension cost (6,407) (5,210)
Additional minimum liability (1,592) (809)
Accumulated other comprehensive income 30
Intangible asset 1,562 809
------- -------
Net amount recognized on balance sheet $(5,230) $(4,777)
======= =======
F.N.B. CORPORATION 17
38
F.N.B. CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The pension expense for the defined benefit plans included the following
components (in thousands):
Year Ended December 31 2000 1999 1998
- ---------------------- ---- ---- ----
Service costs $ 1,416 $ 1,604 $ 1,310
Interest cost 2,336 2,097 1,839
Expected return on plan assets (2,327) (2,234) (1,989)
Net amortization 32 319 233
------- ------- -------
Net pension expense $ 1,457 $ 1,786 $ 1,393
======= ======= =======
Assumptions as of December 31 2000 1999 1998
- ----------------------------- ---- ---- ----
Weighted average discount rate 7.5% 7.8% 6.5%
Rates of increase in compensation levels 4.0% 4.0% 4.0%
Expected long-term rate of return on plan assets 8.0% 8.0% 8.0%
At December 31, 2000, plan assets include 258,164 shares of the Corporation's
common stock, having a market value of $5.4 million. Dividends received on these
shares totaled $186,000 for 2000.
Certain subsidiaries of the Corporation participate in a qualified 401(k)
defined contribution plan for the full-time employees of the subsidiary. A
percentage of employees' contributions to the plan are matched by the
Corporation. The Corporation's contribution expense amounted to $1.0 million in
2000, $844,000 in 1999 and $734,000 in 1998.
Certain subsidiaries of the Corporation participate in a Salary Savings ESOP
Plan, under which eligible employees may contribute a percentage of their
salary. The Corporation matches 50 percent of an eligible employee's
contribution on the first 6 percent that the employee defers, and may make a
discretionary contribution payable either in cash or the Corporation's common
stock based upon the Corporation's profitability. Employees are generally
eligible to participate upon completing one year of service and having attained
age 21. Employer contributions become 20 percent vested when an employee has
completed two years of service, and vest at a rate of 20 percent per year
thereafter. The Corporation recognized expense of $910,000 in 2000, $1.0 million
in 1999 and $705,000 in 1998 related to the Salary Savings ESOP Plan.
OTHER POSTRETIREMENT BENEFIT PLANS
Following are reconciliations of the change in benefit obligation, change in
plan assets and funded status (in thousands):
December 31 2000 1999
- ----------- ---- ----
Benefit obligation at beginning of year $ 1,205 $ 965
Service cost 85 101
Interest cost 78 74
Plan participants' contributions 2 4
Plan amendments 13 60
Actuarial (gain) loss (246) 112
Benefits paid (108) (111)
Curtailment and settlement (8)
------- -------
Benefit obligation at end of year $ 1,021 $ 1,205
======= =======
F.N.B. CORPORATION 18
39
F.N.B. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31 2000 1999
- ----------- ---- ----
Fair value of plan assets at beginning of year $ 0 $ 0
Company contribution 106 107
Plan participants' contributions 2 4
Benefits paid (108) (111)
------- -------
Fair value of plan assets at end of year $ 0 $ 0
======= =======
December 31 2000 1999
- ----------- ---- ----
Funded status of plan $(1,021) $(1,205)
Unrecognized actuarial gain (272) (60)
Unrecognized prior service cost 72 63
Unrecognized net transition obligation 418 481
------- -------
Accrued postretirement benefit cost $ (803) $ (721)
======= =======
Net periodic postretirement benefit cost included the following components
(in thousands):
Year Ended December 31 2000 1999 1998
- ---------------------- ---- ---- ----
Service cost $ 85 $101 $ 77
Interest cost 78 74 65
Net amortization 25 38 34
---- ---- ----
Net periodic postretirement benefit cost $188 $213 $176
==== ==== ====
Discount rates of 7.5%, 7.8% and 6.5% for 2000, 1999 and 1998, respectively,
were used to determine the accumulated postretirement benefit obligation.
The assumed health care cost trend rate has a significant effect on the
amounts reported. A 6.8% annual rate of increase in the per capita costs of
covered health care benefits is assumed for 2001, gradually decreasing to 5.0%
by the year 2003. A one percentage point change in the assumed health care cost
trend rate would have had the following effects on 2000 service and interest
cost and the accumulated postretirement benefit obligation at December 31, 2000
(in thousands):
1% 1%
Increase Decrease
-------- --------
Effect on service and interest components of net periodic cost $20 $(17)
Effect on accumulated postretirement benefit obligation 99 (86)
F.N.B. Corporation 19
40
F.N.B. CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Income Taxes
Income tax expense consists of the following (in thousands):
Year Ended December 31 2000 1999 1998
- ---------------------- ---- ---- ----
Current income taxes:
Federal taxes $17,473 $25,269 $19,723
State taxes 1,612 945 915
------- ------- -------
19,085 26,214 20,638
Deferred income taxes:
Federal taxes 1,705 (9,051) (4,220)
State taxes (671)
------- ------- -------
$20,119 $17,163 $16,418
======= ======= =======
The tax effects of temporary differences giving rise to deferred tax assets and
liabilities are presented below (in thousands):
December 31 2000 1999
- ----------- ---- ----
Deferred tax assets:
Allowance for loan losses $ 13,558 $ 12,709
Deferred compensation 3,042 2,927
Deferred benefits 2,612 2,346
Other 636 1,012
-------- --------
Total Gross Deferred Tax Assets 19,848 18,994
-------- --------
Deferred tax liabilities:
Depreciation (1,728) (577)
Deferred gain on sale of subsidiary (3,555) (3,555)
Unrealized (gains) losses on securities available for sale (1,185) 2,607
Leasing (20,506) (20,945)
Other (1,452) (2,344)
-------- --------
Total Gross Deferred Tax Liabilities (28,426) (24,814)
-------- --------
Net Deferred Tax Liabilities $ (8,578) $ (5,820)
======== ========
Following is a reconciliation between tax expense using federal statutory tax
and actual effective tax:
Year Ended December 31 2000 1999 1998
- ---------------------- ---- ---- ----
Federal statutory tax rate 35.0% 35.0% 35.0%
Effect of nontaxable interest and dividend income (4.1) (4.7) (3.2)
State taxes 1.0 1.1 1.2
Goodwill .5 .5 .5
Merger related costs .3 1.1
Other items (.4) (1.8) (1.4)
---- ---- ----
Effective tax rate 32.0% 30.4% 33.2%
==== ==== ====
Income tax expense related to gains on the sale of securities was $62,000,
$586,000 and $485,000 for the years ended December 31, 2000, 1999 and 1998,
respectively.
F.N.B. Corporation 20
41
F.N.B. CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Earnings per Share
The following tables set forth the computation of basic and diluted earnings
per share (in thousands, except per share data):
Year Ended December 31 2000 1999 1998
- ---------------------- ---- ---- ----
BASIC
Net income $ 42,776 $ 39,295 $ 33,021
Less: Preferred stock dividends declared (341) (411) (492)
------------ ------------ ------------
Net income applicable to basic common shares $ 42,435 $ 38,884 $ 32,529
------------ ------------ ------------
Average common shares outstanding 22,014,104 21,854,055 21,725,715
------------ ------------ ------------
Earnings per share $ 1.93 $ 1.78 $ 1.50
------------ ------------ ------------
DILUTED
Net income applicable to diluted common shares $ 42,776 $ 39,295 $ 33,021
------------ ------------ ------------
Average common shares outstanding 22,014,104 21,854,055 21,725,715
Convertible preferred stock 427,664 547,542 625,669
Net effect of dilutive stock options based on the
treasury stock method using the average market price 355,330 462,524 671,195
------------ ------------ ------------
Diluted average common shares outstanding 22,797,098 22,864,121 23,022,579
============ ============ ============
Earnings per share $ 1.88 $ 1.72 $ 1.43
============ ============ ============
REGULATORY MATTERS
Quantitative measures established by regulators to ensure capital adequacy
require the Corporation and its banking subsidiaries to maintain minimum amounts
and ratios of total and tier 1 capital (as defined in the regulations) to
risk-weighted assets (as defined) and of tier 1 capital to average assets (as
defined). Management believes, as of December 31, 2000, that the Corporation and
each of its banking subsidiaries meet all capital adequacy requirements to which
they are subject.
As of December 31, 2000, the Corporation and each of its banking subsidiaries
have been categorized by the various regulators as "well capitalized" under the
regulatory framework for prompt corrective action.
The Corporation and its banking subsidiaries are subject to various regulatory
capital requirements administered by the federal banking agencies. Failure to
meet minimum capital requirements can initiate certain mandatory, and possibly
additional discretionary actions by regulators that, if undertaken, could have a
direct material effect on the Corporation's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Corporation and its banking subsidiaries must meet specific capital
guidelines that involve quantitative measures of assets, liabilities and certain
off-balance sheet items as calculated under regulatory accounting practices. The
Corporation's and banking subsidiaries' capital amounts and classifications are
also subject to qualitative judgments by the regulators about components, risk
weightings and other factors.
F.N.B. CORPORATION 21
42
F.N.B. CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Following are the capital ratios as of December 31, 2000 for the Corporation
and its significant subsidiaries, First National Bank of Pennsylvania, First
National Bank of Naples and Cape Coral National Bank (dollars in thousands):
Well Capitalized Minimum Capital
Actual Requirements Requirements
---------------------- ---------------------- ---------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
Total Capital (to risk-weighted assets):
F.N.B. Corporation $333,027 11.3% $294,201 10.0% $235,361 8.0%
First National Bank of Pennsylvania 105,464 10.4 101,113 10.0 80,891 8.0
First National Bank of Naples 67,993 10.5 64,953 10.0 51,962 8.0
Cape Coral National Bank 29,048 11.2 26,041 10.0 20,833 8.0
Tier 1 Capital (to risk-weighted assets):
F.N.B. Corporation $293,159 10.0% $176,521 6.0% $117,680 4.0%
First National Bank of Pennsylvania 93,101 9.2 60,668 6.0 40,445 4.0
First National Bank of Naples 61,870 9.5 38,972 6.0 25,981 4.0
Cape Coral National Bank 26,513 10.2 15,625 6.0 10,416 4.0
Tier 1 Capital (to average assets):
F.N.B. Corporation $293,159 7.7% $191,592 5.0% $153,274 4.0%
First National Bank of Pennsylvania 93,101 7.1 65,889 5.0 52,771 4.0
First National Bank of Naples 61,870 7.6 40,895 5.0 32,716 4.0
Cape Coral National Bank 26,513 7.0 18,944 5.0 15,155 4.0
The Corporation's banking subsidiaries were required to maintain aggregate
cash reserves with the Federal Reserve Bank amounting to $31.2 million at
December 31, 2000. The Corporation also maintains deposits for various services
such as check clearing.
Certain limitations exist under applicable law and regulations by regulatory
agencies regarding dividend payments to a parent by its subsidiaries. As of
December 31, 2000, the subsidiaries had $63.5 million of retained earnings
available for distribution as dividends without prior regulatory approval.
Under current Federal Reserve regulations, the Corporation's banking
subsidiaries are limited in the amount they may lend to non-bank affiliates,
including the Corporation. Such loans must be secured by specified collateral.
In addition, any such loans to a single non-bank affiliate may not exceed 10% of
any banking subsidiary's capital and surplus, and the aggregate of loans to all
such affiliates may not exceed 20%. The maximum amount that may be borrowed by
the parent company under these provisions approximated $41.3 million at December
31, 2000.
F.N.B. CORPORATION 22
43
F.N.B. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BUSINESS SEGMENTS
The Corporation operates in two reportable segments: community banks and
insurance agencies. The Corporation's community bank subsidiaries offer services
traditionally offered by full-service commercial banks, including commercial and
individual demand and time deposit accounts and commercial, mortgage and
individual installment loans. In addition to traditional banking products, the
Corporation's bank subsidiaries offer trust services as well as various
alternative investment products, including mutual funds and annuities. The
Corporation's insurance agencies are full-service insurance companies offering
all lines of commercial and personal insurance through major carriers. The
following tables provide financial information for these segments of the
Corporation (in thousands). Other items shown in the table below represent the
parent company, other non-bank subsidiaries and eliminations, which are
necessary for purposes of reconciling to the consolidated amounts.
Community Insurance All
At or for the Year Ended December 31, 2000 Banks Agencies Other Consolidated
- ------------------------------------------ ----- -------- ----- ------------
Interest income $ 270,276 $ 89 $ 20,571 $ 290,936
Interest expense 130,491 152 4,665 135,308
Non-interest income 37,774 13,880 3,991 55,645
Non-interest expense 111,922 10,589 12,931 135,442
Intangible amortization 1,571 400 88 2,059
Income tax expense 18,386 1,214 519 20,119
Core operating income 38,969 1,614 2,193 42,776
Net income 38,969 1,614 2,193 42,776
Total assets 3,752,031 21,902 112,615 3,886,548
Community Insurance All
At or for the Year Ended December 31, 1999 Banks Agencies Other Consolidated
- ------------------------------------------ ----- -------- ----- ------------
Interest income $ 239,501 $ 61 $ 15,354 $ 254,916
Interest expense 103,221 110 3,136 106,467
Non-interest income 32,461 7,978 6,489 46,928
Non-interest expense 107,789 6,436 13,520 127,745
Intangible amortization 1,891 43 1,934
Income tax expense (credit) 16,746 (359) 776 17,163
Core operating income 36,202 1,852 2,509 40,563
Non-recurring items, net of tax* (428) (840) (1,268)
Net income 35,774 1,852 1,669 39,295
Total assets 3,600,090 6,453 99,641 3,706,184
COMMUNITY INSURANCE ALL
At or for the Year Ended December 31, 1998 BANKS AGENCIES OTHER CONSOLIDATED
- ------------------------------------------ ----- -------- ----- ------------
Interest income $ 228,780 $ 53 $ 17,194 $ 246,027
Interest expense 104,414 92 3,646 108,152
Non-interest income 28,366 5,895 5,044 39,305
Non-interest expense 97,770 5,033 16,045 118,848
Intangible amortization 1,277 44 1,321
Income tax expense (credit) 16,607 (189) 16,418
Core operating income* 35,298 823 1,243 37,364
Non-recurring items, net of tax* (3,225) (1,118) (4,343)
Net income 32,073 823 125 33,021
Total assets 3,319,678 3,751 83,248 3,406,677
F.N.B. CORPORATION 23
44
F.N.B. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CASH FLOW INFORMATION
Following is a summary of supplemental cash flow information (in thousands):
Year Ended December 31 2000 1999 1998
- ---------------------- ---- ---- ----
Cash paid during year for:
Interest $131,562 $105,671 $107,292
Income taxes 18,895 7,773 9,642
Non-cash investing and financing activities:
Acquisition of real estate in settlement of loans $ 2,022 $ 3,929 $ 3,037
Loans granted in the sale of other real estate 465 176 2,396
PARENT COMPANY FINANCIAL STATEMENTS
Below is condensed financial information of F.N.B. Corporation (parent company
only). In this information, the parent's investments in subsidiaries are stated
at cost plus equity in undistributed earnings of subsidiaries since acquisition.
This information should be read in conjunction with the consolidated financial
statements.
BALANCE SHEET (in thousands)
December 31 2000 1999
- ----------- ---- ----
ASSETS
Cash $ 48 $ 740
Short-term investments 9,168 3,827
Premises and equipment 1,078 1,192
Other assets 5,735 14,468
Investment in bank subsidiaries 283,169 262,019
Investment in non-bank subsidiaries 174,569 135,070
-------- --------
TOTAL ASSETS $473,767 $417,316
======== ========
LIABILITIES
Other liabilities $ 10,402 $ 15,568
Short-term borrowings 97,632 70,493
Long-term debt 44,489 40,940
-------- --------
TOTAL LIABILITIES 152,523 127,001
STOCKHOLDERS' EQUITY 321,244 290,315
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $473,767 $417,316
======== ========
F.N.B. CORPORATION 24
45
F.N.B. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INCOME STATEMENT (in thousands)
Year Ended December 31 2000 1999 1998
- ---------------------- ---- ---- ----
INCOME
Dividend income from subsidiaries:
Bank $22,801 $22,875 $29,401
Non-bank 2,570 1,565 2,148
------- ------- -------
25,371 24,440 31,549
------- ------- -------
Interest income 511 667 452
Service fee income 9,575 8,663 7,776
Other income 15 21 98
------- ------- -------
TOTAL INCOME 35,472 33,791 39,875
------- ------- -------
EXPENSES
Interest expense 8,847 5,846 6,136
Salaries and personnel expense 8,527 8,278 8,264
Service fees 598 319 985
Other expenses 2,639 4,730 4,090
------- ------- -------
TOTAL EXPENSES 20,611 19,173 19,475
------- ------- -------
INCOME BEFORE TAXES AND EQUITY IN
UNDISTRIBUTED INCOME OF SUBSIDIARIES 14,861 14,618 20,400
Income tax benefit 3,941 3,248 3,880
------- ------- -------
18,802 17,866 24,280
------- ------- -------
Equity in undistributed income of subsidiaries:
Bank 16,168 14,752 3,337
Non-bank 7,806 6,677 5,404
------- ------- -------
23,974 21,429 8,741
------- ------- -------
NET INCOME $42,776 $39,295 $33,021
======= ======= =======
F.N.B. CORPORATION 25
46
F.N.B. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
STATEMENT OF CASH FLOWS (in thousands)
- --------------------------------------
Year Ended December 31 2000 1999 1998
- ---------------------- ---- ---- ----
OPERATING ACTIVITIES
Net income $ 42,776 $ 39,295 $ 33,021
Adjustments to reconcile net income to net
cash flows from operating activities:
Undistributed earnings of subsidiaries (23,974) (21,429) (8,741)
Other, net 3,651 2,598 (3,386)
-------- -------- --------
Net cash flows from operating activities 22,453 20,464 20,894
-------- -------- --------
INVESTING ACTIVITIES
Net change in short-term investments (5,341) 11,118 (12,493)
Advances from subsidiaries 1,621 1,501
Investment in subsidiaries (29,673) (26,607) 6,845
-------- -------- --------
Net cash flows from investing activities (35,014) (13,868) (4,147)
-------- -------- --------
FINANCING ACTIVITIES
Net increase (decrease) in short-term borrowings 27,139 20,884 (322)
Decrease in long-term debt (15,686) (17,736) (6,510)
Increase in long-term debt 19,236 10,489 10,837
Net acquisition of treasury stock (2,826) (3,440) (7,572)
Cash dividends paid (15,994) (16,520) (12,719)
-------- -------- --------
Net cash flows from financing activities 11,869 (6,323) (16,286)
-------- -------- --------
NET (DECREASE) INCREASE IN CASH (692) 273 461
Cash at beginning of year 740 467 6
-------- -------- --------
CASH AT END OF YEAR $ 48 $ 740 $ 467
======== ======== ========
CASH PAID
Interest $ 8,022 $ 5,933 $ 6,049
======== ======== ========
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each financial instrument:
CASH AND DUE FROM BANKS:
For these short-term instruments, the carrying amount is a reasonable estimate
of fair value.
SECURITIES:
For both securities available for sale and securities held to maturity, fair
value equals quoted market price, if available. If a quoted market price is not
available, fair value is estimated using quoted market prices for similar
securities.
LOANS:
The fair value of fixed rate loans is estimated by discounting the future cash
flows using the current rates at which similar loans would be made to borrowers
with similar credit ratings and for the same remaining maturities. The fair
value of adjustable rate loans approximate the carrying amount.
DEPOSITS:
The fair value of demand deposits, savings accounts and certain money market
deposits is the amount payable on demand at the reporting date. The fair value
of fixed-maturity deposits is estimated by discounting future cash flows using
rates currently offered for deposits of similar remaining maturities.
F.N.B. CORPORATION 26
47
F.N.B. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SHORT-TERM BORROWINGS:
The carrying amounts for short-term borrowings approximate fair value for
amounts that mature in 90 days or less. The fair value of subordinated notes is
estimated by discounting future cash flows using rates currently offered.
LONG-TERM DEBT:
The fair value of long-term debt is estimated by discounting future cash flows
based on the market prices for the same or similar issues or on the current
rates offered to the Corporation for debt of the same remaining maturities.
The estimated fair values of the Corporation's financial instruments are as
follows (in thousands):
2000 1999
-------------------------------- ------------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ----- -------- -----
FINANCIAL ASSETS
Cash and short-term investments $ 179,648 $ 179,648 $ 182,128 $ 182,128
Securities available for sale 436,441 436,441 408,731 408,731
Securities held to maturity 60,522 60,549 77,359 75,905
Net loans, including loans held for sale 2,924,378 2,953,737 2,776,196 2,765,002
FINANCIAL LIABILITIES
Deposits $3,102,937 $3,112,607 $2,909,434 $2,907,673
Short-term borrowings 282,865 282,865 332,197 332,197
Long-term debt 116,140 120,321 117,634 117,368
REPORT OF INDEPENDENT AUDITORS
Stockholders and Board of Directors
F.N.B. Corporation
We have audited the accompanying consolidated balance sheet of F.N.B.
Corporation and Subsidiaries (F.N.B. Corporation) as of December 31, 2000 and
1999, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended December 31,
2000. These consolidated financial statements are the responsibility of
management of F.N.B. Corporation. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits. We did not audit
the financial statements of Guaranty Bank and Trust Company, which statements
reflect net income constituting approximately 1% for 1998 of the related
consolidated financial statement totals. Those statements were audited by other
auditors whose report has been furnished to us, and our opinion, insofar as it
relates to data included for Guaranty Bank and Trust Company, is based solely on
the report of the other auditors.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the reports of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of F.N.B. Corporation at
December 31, 2000 and 1999, and the consolidated results of their operations and
their cash flows for each of the three years in the period ended December 31,
2000 in conformity with accounting principles generally accepted in the United
States.
/s/ Ernst & Young LLP
Pittsburgh, Pennsylvania
February 5, 2001
F.N.B. CORPORATION 27
48
F.N.B. CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA
F.N.B. CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA (Dollars in thousands, except per share data)
YEAR ENDED DECEMBER 31 2000 1999 1998 1997 1996
- ---------------------- ---- ---- ---- ---- ----
Total interest income $ 290,936 $ 254,916 $ 246,027 $ 225,126 $ 209,761
Total interest expense 135,308 106,467 108,152 96,728 88,063
Net interest income 155,628 148,449 137,875 128,398 121,698
Provision for loan losses 10,877 9,240 7,572 11,503 10,063
Total non-interest income 55,645 46,928 39,305 33,278 28,626
Total non-interest expenses 137,501 129,679 120,169 107,932 105,727
Net income before extraordinary items 42,776 39,295 33,021 29,228 23,327
Extraordinary items, net of tax 8,809
Net income 42,776 39,295 33,021 38,037 23,327
Core operating earnings * 42,776 40,563 37,364 33,793 27,470
---------- ---------- ---------- ---------- ----------
AT YEAR-END
Total assets $3,886,548 $3,706,184 $3,406,677 $3,098,453 $2,796,926
Net loans 2,923,336 2,767,463 2,390,576 2,144,734 1,939,818
Deposits 3,102,937 2,909,434 2,850,428 2,583,586 2,344,312
Long-term debt 116,140 117,634 70,384 73,434 59,448
Preferred stock 1,678 2,075 2,380 2,875 3,525
Total stockholders' equity 321,244 290,315 282,138 270,440 235,025
---------- ---------- ---------- ---------- ----------
PER COMMON SHARE
Core operating earnings *
Basic $ 1.93 $ 1.84 $ 1.70 $ 1.58 $ 1.27
Diluted 1.88 1.77 1.62 1.50 1.23
Net income
Basic 1.93 1.78 1.50 1.78 1.08
Diluted 1.88 1.72 1.43 1.69 1.05
Cash dividends .71 .67 .64 .55 .52
Book value 14.37 13.00 12.65 12.05 10.68
---------- ---------- ---------- ---------- ----------
RATIOS
Return on average assets, based
on core operating earnings * 1.13% 1.16% 1.16% 1.18% 1.03%
Return on average assets 1.13 1.13 1.02 1.32 .88
Return on average equity, based
on core operating earnings * 14.16 14.18 13.50 13.64 11.97
Return on average equity 14.16 13.74 11.93 15.36 10.16
Dividend payout ratio 36.89 41.43 41.85 28.11 29.26
Average equity to average assets 7.96 8.19 8.57 8.62 8.62
========== ========== ========== ========== ==========
* Core operating earnings exclude merger related and other non-recurring costs
of $1.3 million in 1999, merger related and other non-recurring costs of $4.3
million in 1998, extraordinary gains on the sale of a subsidiary and branches
of $8.8 million and merger related and other non-recurring costs of $4.6
million in 1997, and a one-time assessment of $2.1 million legislated by
Congress to recapitalize the Savings Association Insurance Fund and merger
related and other non-recurring costs of $2.1 million in 1996, all on an
after-tax basis. Such presentation is provided in order to eliminate all
items deemed by management to be of a non-recurring nature.
F.N.B. CORPORATION 28
49
F.N.B. CORPORATION AND SUBSIDIARIES
QUARTERLY EARNINGS SUMMARY
F.N.B. CORPORATION AND SUBSIDIARIES
QUARTERLY EARNINGS SUMMARY (Dollars in thousands, except per share data)
QUARTER ENDED 2000 MAR. 31 JUNE 30 SEPT. 30 DEC. 31
- ------------------ ------- ------- -------- -------
Total interest income $69,154 $71,557 $74,702 $75,523
Total interest expense 30,285 32,241 35,922 36,860
Net interest income 38,869 39,316 38,780 38,663
Provision for loan losses 2,973 2,901 2,439 2,564
Total non-interest income 12,710 12,612 14,656 15,667
Total non-interest expenses 33,801 33,694 34,996 35,010
Net income 10,109 10,419 10,934 11,314
Core operating earnings 10,109 10,419 10,934 11,314
PER COMMON SHARE
Core operating earnings
Basic $.46 $.47 $.49 $.51
Diluted .44 .46 .48 .50
Net income
Basic .46 .47 .49 .51
Diluted .44 .46 .48 .50
Cash dividends .17 .18 .18 .18
QUARTER ENDED 1999 MAR. 31 JUNE 30 SEPT. 30 DEC. 31
- ------------------ ------- ------- -------- -------
Total interest income $61,262 $62,422 $64,185 $67,047
Total interest expense 25,615 25,548 26,664 28,640
Net interest income 35,647 36,874 37,521 38,407
Provision for loan losses 2,051 2,540 2,105 2,544
Total non-interest income 11,265 11,431 12,284 11,948
Total non-interest expenses 32,342 31,747 32,677 32,913
Net income 8,841 9,796 10,345 10,313
Core operating earnings * 9,660 9,796 10,320 10,787
PER COMMON SHARE
Core operating earnings *
Basic $.44 $.44 $.47 $.49
Diluted .42 .43 .45 .47
Net income
Basic .40 .44 .47 .47
Diluted .39 .43 .45 .45
Cash dividends .16 .17 .17 .17
* Core operating earnings exclude merger related costs of $819,000 recognized
during the first quarter of 1999, gain on the sale of a branch of $392,000
and non-recurring costs of $367,000 recognized during the third quarter of
1999 and merger related costs of $474,000 recognized during the fourth
quarter of 1999, all on an after- tax basis.
F.N.B. CORPORATION 29
50
F.N.B. CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CHARTER CONSOLIDATION
The Corporation announced on January 9, 2001, that it had initiated a charter
consolidation plan as part of an effort to improve long-term shareholder value.
Under this plan, the Corporation's five Florida banking affiliates will be
merged under First National Bank of Florida and its two Pennsylvania banks will
be combined under First National Bank of Pennsylvania. During 2000, the
Corporation previously consolidated its two Ohio banking affiliates into a
single charter, Metropolitan National Bank. The Corporation's nine banking
affiliates will continue to do business under their original names and will
continue to be managed by a local President and Chief Executive Officer.
The integration project is scheduled to be completed during the first quarter
of 2001, and will enable the Corporation to realize cost savings through the
elimination of operational redundancies, integration of common deposit, lending
and fiduciary programs, elimination of certain layers of management and through
the deployment of enhanced information technologies. The Corporation estimates
that the annual cost savings will be in the range of $3.8 million to $4.1
million. The Corporation anticipates taking a pre-tax consolidation charge of
$3.0 million to $3.2 million during the first quarter of 2001. The charge will
cover such items as early retirement and involuntary separation, data processing
conversion costs, legal costs and third party consulting fees arising from the
consolidation. These preliminary estimates are based on several assumptions, and
actual costs savings and consolidation charges incurred may be higher or lower
than what is currently contemplated, and should be viewed accordingly.
RESULTS OF OPERATIONS YEAR ENDED DECEMBER 31, 2000
Net income increased 8.9% to $42.8 million in 2000 from $39.3 million in 1999.
Basic earnings per share were $1.93 and $1.78 for 2000 and 1999, while diluted
earnings per share were $1.88 and $1.72, respectively, for those same periods.
The results for 1999 include merger related and other non-recurring costs of
$1.3 million, net of tax. Excluding these items, core operating earnings were
$40.6 million in 1999.
Net interest income, on a fully taxable equivalent basis, increased by 4.8% as
net average interest earning assets increased by $282.0 million. These factors
are further detailed in the discussion which follows.
Common comparative ratios for results of operations include the return on
average assets and the return on average equity. The Corporation's return on
average assets was 1.13% for both 2000 and 1999, while the Corporation's return
on average equity was 14.16% for 2000 and 13.74%for 1999. Excluding the
non-recurring items in 1999, the Corporation had a return on average assets of
1.16% and a return on average equity of 14.18%.
NET INTEREST INCOME
Net interest income, the Corporation's primary source of earnings, is the
amount by which interest and fees generated by earning assets, primarily loans
and securities, exceed interest expense on deposits and borrowed funds. Net
interest income, on a fully taxable equivalent basis, totaled $157.8 million in
2000 versus $150.6 million in 1999. Net interest income consisted of interest
income of $293.1 million and interest expense of $135.3 million in 2000,
compared to $257.0 million and $106.5 million for each, respectively, in 1999.
The Corporation's net interest margin was 4.58% for 2000.
DILUTED CORE OPERATING EARNINGS PER SHARE
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
$1.23 $1.50 $1.62 $1.77 $1.88
51
F.N.B. CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION
The following table provides information regarding the average balances and
yields and rates on interest earning assets and interest bearing liabilities
(dollars in thousands):
Year Ended December 31, 2000 1999 1998
-------------------------- -------------------------- --------------------------
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
------- -------- ---- ------- -------- ---- ------- -------- ----
ASSETS
Interest earning assets:
Interest bearing deposits with banks $ 3,078 $ 194 6.30% $ 5,077 $ 307 6.05% $ 3,765 $ 181 4.81%
Federal funds sold 18,896 1,213 6.42 24,653 1,219 4.94 76,247 4,153 5.45
Taxable investment securities (1) 408,028 25,759 6.31 451,367 27,655 6.13 525,905 32,458 6.17
Non-taxable investment securities (2) 69,565 4,556 6.55 78,206 4,808 6.15 87,312 5,362 6.14
Loans (2)(3) 2,945,080 261,369 8.87 2,603,347 223,033 8.57 2,294,506 205,933 8.98
---------- -------- ---------- -------- ---------- --------
TOTAL INTEREST EARNING ASSETS 3,444,647 293,091 8.51 3,162,650 257,022 8.13 2,987,735 248,087 8.30
---------- -------- ---------- -------- ---------- --------
Cash and due from banks 118,893 114,865 99,758
Allowance for loan losses (38,676) (34,330) (32,193)
Premises and equipment 107,445 100,797 88,443
Other assets 162,714 148,000 86,627
---------- ---------- ----------
$3,795,023 $3,491,982 $3,230,370
========== ========== ==========
LIABILITIES
Interest bearing liabilities:
Deposits:
Interest bearing demand $ 491,397 10,900 2.22 $ 469,429 9,185 1.96 $ 490,169 10,034 2.05
Savings 780,516 24,227 3.10 798,718 21,528 2.70 658,351 21,113 3.21
Other time 1,306,879 75,198 5.75 1,169,679 59,613 5.10 1,201,560 65,510 5.45
Short-term borrowings 289,361 16,895 5.84 237,919 11,282 4.74 134,789 6,813 5.05
Long-term debt 121,970 8,088 6.63 73,968 4,859 6.57 74,451 4,682 6.29
---------- -------- ---------- -------- ---------- --------
TOTAL INTEREST BEARING
LIABILITIES 2,990,123 135,308 4.53 2,749,713 106,467 3.87 2,559,320 108,152 4.23
---------- -------- ---------- -------- ---------- --------
Non-interest bearing demand deposits 438,919 400,047 346,479
Other liabilities 63,980 56,158 47,716
---------- ---------- ----------
3,493,022 3,205,918 2,953,515
---------- ---------- ----------
STOCKHOLDERS' EQUITY 302,001 286,064 276,855
---------- ---------- ----------
$3,795,023 $3,491,982 $3,230,370
========== ========== ==========
Excess of interest earning assets
over interest bearing liabilities $ 454,524 $ 412,937 $ 428,415
========== ========== ==========
Net interest income $157,783 $150,555 $139,935
======== ======== ========
Net interest spread 3.98% 4.26% 4.07%
==== ==== ====
Net interest margin (4) 4.58% 4.76% 4.68%
==== ==== ====
(1) The average balances and yields earned on securities are based on
historical cost.
(2) The amounts are reflected on a fully taxable equivalent basis using the
federal statutory tax rate of 35%, adjusted for certain federal tax
preferences.
(3) Average balances include 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.
(4) Net interest margin is calculated by dividing the difference between total
interest earned and total interest paid by total interest earning assets.
F.N.B. CORPORATION 31
52
F.N.B. CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION
The yield on total interest earning assets increased by 38 basis points and
the rate paid on interest bearing liabilities increased by 66 basis points.
Although the Corporation has experienced some margin compression since 1999, net
interest income has risen as earning assets have increased by 8.9%. There is a
possibility that the compression could continue, as further discussed within the
"Liquidity and Interest Rate Sensitivity" section of this report.
Interest income on loans, on a fully taxable equivalent basis, increased 17.2%
from $223.0 million in 1999 to $261.4 million in 2000. This increase was the
result of an increase in average loans of 13.1% as well as an increase in the
average yield by 30 basis points.
Interest expense on deposits increased $20.0 million or 22.1% in 2000 while
average deposits increased 5.8%. The average balance in time deposits and
interest bearing demand deposits increased $137.2 million and $22.0 million,
respectively, while the average balance in savings deposits decreased by $18.2
million. The average balance in non-interest bearing demand deposits increased
by $38.9 million. Interest expense on short-term borrowings increased $5.6
million or 49.8% in 2000 due to a $51.4 million increase in average short-term
borrowings. Interest expense on long-term debt increased $3.2 million or 66.5%
in 2000 due to a $48.0 million increase in average long-term debt.
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 periods
indicated (in thousands):
Year Ended December 31,
2000 1999
----------------------------------- -----------------------------------
VOLUME RATE NET VOLUME RATE NET
INTEREST INCOME
Interest bearing deposits with banks $ (126) $ 13 $ (113) $ 72 $ 54 $ 126
Federal funds sold (325) 319 (6) (2,578) (356) (2,934)
Securities (3,344) 1,196 (2,148) (5,156) (201) (5,357)
Loans 30,265 8,071 38,336 25,878 (8,778) 17,100
------- ------- ------- ------- ------- -------
26,470 9,599 36,069 18,216 (9,281) 8,935
------- ------- ------- ------- ------- -------
INTEREST EXPENSE
Deposits:
Interest bearing 447 1,268 1,715 (417) (432) (849)
Savings (491) 3,190 2,699 1,629 (1,214) 415
Other time 7,469 8,116 15,585 (1,724) (4,173) (5,897)
Short-term borrowings 2,707 2,906 5,613 4,859 (390) 4,469
Long-term debt 3,184 45 3,229 (30) 207 177
------- ------- ------- ------- ------- -------
13,316 15,525 28,841 4,317 (6,002) (1,685)
------- ------- ------- ------- ------- -------
NET CHANGE $13,154 $(5,926) $ 7,228 $13,899 $(3,279) $10,620
======= ======= ======= ======= ======= =======
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 net
size of the rate and volume changes.
PROVISION FOR LOAN LOSSES
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 factors, including qualitative factors, relevant to the
collectibility of the existing portfolio. The provision for loan losses
increased 17.7% to $10.9 million in 2000. This increase is consistent with the
Corporation's continued strong loan growth. (See "Non-Performing Loans and
Allowance for Loan Losses" section of this report).
F.N.B. CORPORATION 32
53
F.N.B. CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION
NON-INTEREST INCOME
Total non-interest income increased 18.6% from $46.9 million in 1999 to $55.6
million in 2000. Exclusive of gains on sale of securities, non-interest income
increased by 22.6%. This increase was primarily attributable to the
Corporation's transformation to a financial services company focusing resources
dedicated to generating insurance commissions and fees, investment service
charges and trust fees.
Insurance commissions and fees, service charges and trust fees increased 30.1%
from $34.7 million in 1999 to $45.1 million in 2000. These higher levels of fee
income are attributable to growth in insurance, increases in deposits and the
Corporation's continued expansion into annuity and mutual fund sales and trust
services. This increase was partially offset by a decrease of $1.5 million in
gains on the sale of securities.
NON-INTEREST EXPENSE
Total non-interest expense increased from $129.7 million in 1999 to $137.5
million in 2000. The increase was primarily attributable to an increase of $6.4
million in salaries and employee benefits. This increase was due primarily from
the Corporation's continued expansion into non-interest revenue lines of
business along with normal annual salary adjustments and continued escalation of
certain benefit costs.
The Corporation recognized $1.8 million in 1999 in merger related costs. These
expenses were primarily data processing termination and conversion costs and
change in control provisions. Also during 1999, the Corporation recorded a net
insurance recovery of $883,000.
INCOME TAXES
The Corporation's income tax expense was $20.1 million for 2000 compared to
$17.2 million for 1999. The 2000 effective tax rate of 32.0% was lower than the
35.0% federal statutory tax rate due to the tax benefits resulting from
tax-exempt instruments and excludable dividend income. Additional information
relating to income taxes is furnished in the Notes to Consolidated Financial
Statements.
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 significant source of liquidity
provided by the available for sale securities portfolio, the Corporation
generally has sufficient sources of funds available as needed to meet its
routine, operational cash needs. Excluding mortgage-backed securities, debt
securities due to mature within one year, which will provide a source of
short-term liquidity, amounted to $46.7 million or 9.4% of the securities
portfolio.
Additionally, 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 $45.0 million was unused at the end of 2000. 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.
The financial performance of the Corporation is at risk from interest rate
fluctuations. This interest rate risk arises due to differences between the
amount of interest-earning assets and interest-bearing liabilities subject to
pricing over a period of time, the difference between the change in various
interest rates and the embedded options in certain financial instruments. The
Board of Directors has established an Asset/Liability Policy in order to achieve
and maintain earnings performance consistent with long-term goals while
maintaining acceptable levels of interest rate risk, a "well-capitalized"balance
sheet and adequate levels of liquidity. This policy designates the
Asset/Liability Committee (ALCO) as the body responsible for meeting this
objective. The Corporation utilizes an asset/liability model to support its
balance sheet strategies. The Corporation uses gap analysis, net interest income
simulations and the economic value of equity to measure its interest rate risk.
The gap analysis below measures the interest rate risk of the Corporation by
comparing the difference between the amount of interest-earning assets and
interest-bearing liabilities subject to repricing over a period of time. The
cumulative one-year gap ratio was .90 at December 31, 2000 as compared to .85 at
December 31, 1999. A ratio
F.N.B. CORPORATION 33
54
F.N.B. CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION
of less than one indicates an excess of repricing liabilities over repricing
assets. Based on the cumulative one-year gap and assuming no change in
asset/liability composition, an increase in interest rates is expected to result
in a reduction in net interest income over the next twelve months, whereas a
decrease in interest rates should provide for an increase in net interest income
over the same period.
Following is the gap analysis as of December 31, 2000 (dollars in thousands):
WITHIN 4-12 1-5 OVER
3 MONTHS MONTHS YEARS 5 YEARS TOTAL
-------- ------ ----- ------- -----
INTEREST EARNING ASSETS
Interest bearing deposits with banks $ 1,843 $ 1,843
Federal funds sold 35,961 35,961
Securities 37,290 $ 80,343 $ 297,770 $ 81,560 496,963
Loans, net of unearned income 741,578 571,304 1,401,701 248,532 2,963,115
--------- --------- ---------- ----------- ----------
816,672 651,647 1,699,471 330,092 3,497,882
Other assets 388,666 388,666
--------- --------- ---------- ----------- ----------
$ 816,672 $ 651,647 $1,699,471 $ 718,758 $3,886,548
========= ========= ========== =========== ==========
INTEREST BEARING LIABILITIES
Deposits:
Interest checking $ 72,571 $ 459,992 $ 532,563
Savings 312,288 485,483 797,771
Time deposits 286,144 $ 654,332 $ 370,741 1,311,217
Borrowings 261,126 47,229 51,109 39,541 399,005
--------- --------- ---------- ----------- ----------
932,129 701,561 421,850 985,016 3,040,556
Other liabilities 524,748 524,748
Stockholders' equity 321,244 321,244
--------- --------- ---------- ----------- ----------
$ 932,129 $ 701,561 $ 421,850 $ 1,831,008 $3,886,548
--------- --------- ---------- ----------- ----------
PERIOD GAP $(115,457) $ (49,914) $1,277,621 $(1,112,250)
--------- --------- ---------- -----------
CUMULATIVE GAP $(115,457) $(165,371) $1,112,250
--------- --------- ----------
CUMULATIVE GAP AS A PERCENT
OF TOTAL ASSETS (2.97)% (4.26)% 28.62%
--------- --------- ----------
RATE SENSITIVE ASSETS/
RATE SENSITIVE LIABILITIES (CUMULATIVE) .88 .90 1.54 1.15
========= ========= ========== ===========
Net interest income simulations measure the exposure to short-term earnings
from changes in market rates of interest in a more rigorous and explicit
fashion. The Corporation's current financial position is combined with
assumptions regarding future business to calculate net interest income under
varying hypothetical rate scenarios. The economic value of equity (EVE) measures
the Corporation's long-term earnings exposure from changes in market rates of
interest. EVE is defined as the present value of assets minus the present value
of liabilities at a point in time. A decrease in EVE due to a specified rate
change indicates a decline in the long-term earnings capacity of the balance
sheet assuming that the rate change remains in effect over the life of the
balance sheet. The following table presents an analysis of the potential
sensitivity of the Corporation's annual net interest income and EVE to sudden
and sustained 200 basis point changes in market rates:
December 31 2000 1999
- ----------- ---- ----
Net interest income change
(12 months):
- 200 basis points. . . . . . . . . . . . .3% 1.7%
+ 200 basis points. . . . . . . . . . . . (3.0)% (5.2)%
Economic value of equity:
- 200 basis points. . . . . . . . . . . . . (4.0)% .4%
+200 basis points. . . . . . . . . . . . . (2.0)% (4.9)%
F.N.B. CORPORATION 34
55
F.N.B. CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION
The preceding measures reflect actions the ALCO enacted during 2000 to reduce
the sensitivity of its net interest income. However, the measures do not
necessarily reflect the actions the ALCO may undertake in response to changes in
interest rates. Thus, the measurements assumed no change in asset/liability
composition.
The disclosed measures are within the limits set forth in the Corporation's
Asset/Liability Policy.
The computation of the prospective effects of hypothetical interest changes
requires numerous assumptions regarding characteristics of new business and the
behavior of existing positions. These business assumptions are based upon the
Corporation's experience, business plans and published industry experience. Key
assumptions employed in the model include asset prepayment speeds, the relative
price sensitivity of certain assets and liabilities and the expected life of
nonmaturity deposits. Because these assumptions are inherently uncertain, actual
results will differ from simulated results.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
The Corporation's core operating earnings increased 8.6% to $40.6 million in
1999 from $37.4 million in 1998. Basic core operating earnings per share were
$1.84 and $1.70 for 1999 and 1998, while diluted core operating earnings per
share were $1.77 and $1.62, respectively, for those same periods. The results
for 1999 exclude merger related and other non-recurring costs of $1.3 million
while the results for 1998 exclude merger related and other non-recurring costs
of $4.3 million, both net of tax. Including these items, net income was $39.3
million in 1999 versus $33.0 million in 1998. Based upon core operating
earnings, the Corporation's return on average assets was 1.16% for both 1999 and
1998, while the Corporation's return on average equity was 14.18% for 1999
compared to 13.50% for1998.
Net interest income, on a fully taxable equivalent basis, increased from
$139.9 million in 1998 to $150.6 million in 1999. Net interest income consisted
of interest income of $257.0 million and interest expense of $106.5 million in
1999, compared to $248.1 million and $108.2 million for each, respectively, in
1998. Net margin increased to 4.76% from 4.68% in 1998. Interest income on
loans, on a fully taxable equivalent basis, increased 8.3% from $205.9 million
in 1998 to $223.0 million in 1999. This increase is the result of an increase in
average loans of 13.5% as the average yield declined by 41 basis points.
Interest expense on deposits decreased 6.5% while average deposits increased
3.7%. The average balance in savings deposits increased $140.4 million, while
the average balance in interest bearing demand deposits and time deposits
decreased by $20.7 million and $31.9 million, respectively. The average balance
in non-interest bearing demand deposits increased by $53.6 million. Interest
expense on short-term borrowings increased $4.5 million in 1999 due to a $103.1
million increase in average short-term borrowings which was partially offset by
a decline in the rate paid of 31 basis points.
The provision for loan losses was $9.2 million and represented an increase of
22.0% from 1998, a reflection of the Corporation's continued strong loan growth.
Total non-interest income increased 19.4% from $39.3 million in 1998 to $46.9
million in 1999. This increase was attributable to increases in service charges,
income from bank owned life insurance, trust fees and other non-interest income.
Service charges and trust fees increased 24.4% from $19.4 million in 1998 to
$24.1 million in 1999. Revenue was recognized as a result of increases in the
level of deposits. In addition, the Corporation's December of 1998 investment in
bank owned life insurance provided $3.1 million of other income. Also during
1999, the Corporation recognized a gain of $603,000 resulting from the sale of a
branch.
Total non-interest expense increased from $120.2 million in 1998 to $129.7
million in 1999. The increase was primarily attributable to an increase of $7.5
million in salaries and employee benefits. This increase was due to normal
annual salary adjustments and continued escalation of certain benefit costs. In
addition, salaries and benefits have increased as the Corporation supports the
expansion into fee based services and insurance. The Corporation recognized $1.8
million in 1999 and $5.5 million in 1998 in merger related costs. The 1999
expenses were primarily data processing termination and conversion costs and
F.N.B. CORPORATION 35
56
F.N.B. CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION
change in control provisions, while the 1998 expenses were principally legal and
investment banking costs associated with the completion of various mergers. Also
during 1999, the Corporation recorded a net insurance recovery of $883,000.
Income tax expense was $17.2 million for 1999 compared to $16.4 million for
1998. The 1999 effective tax rate of 30.4% was below the 35% statutory tax rate
due to the tax benefits resulting from tax-exempt instruments and excludable
dividend income.
FINANCIAL CONDITION
LENDING ACTIVITY
Following is a summary of loans (in thousands):
December 31 2000 1999 1998 1997 1996
- ----------- ---- ---- ---- ---- ----
Real estate:
Residential $1,096,311 $1,059,432 $ 994,157 $ 949,716 $ 788,874
Commercial 812,023 747,835 632,304 542,251 493,990
Construction 180,387 119,398 103,672 70,093 48,070
Installment loans to individuals 339,126 334,810 292,418 301,911 417,300
Commercial, financial and agricultural 392,783 350,023 299,081 272,609 225,447
Lease financing 204,187 254,252 132,266 59,852 21,538
Unearned income (62,744) (61,976) (31,014) (20,643) (24,202)
---------- ---------- ---------- ---------- ----------
$2,962,073 $2,803,774 $2,422,884 $2,175,789 $1,971,017
========== ========== =========== =========== ===========
The Corporation strives to minimize credit losses by utilizing credit approval
standards, diversifying its loan portfolio by industry and borrower and
conducting ongoing review and management of the loan portfolio.
During 2000, 1999 and 1998, the Corporation sold $23.5 million, $49.8 million
and $50.8 million, respectively, in fixed rate residential mortgages. These
sales allowed the Corporation to avoid the potential interest rate risk of those
fixed rate loans in a rising rate environment. Additionally, it created
liquidity for the Corporation to continue to offer credit availability to the
markets it serves.
The loan portfolio consists principally of loans to individuals and small- and
medium-sized businesses within the Corporation's primary market area of western
Pennsylvania, southwestern Florida, northern and central Tennessee, eastern Ohio
and southwestern Kentucky.
As of December 31, 2000, no concentrations of loans exceeding 10% of total
loans existed which were not disclosed as a separate category of loans.
Following is a summary of the maturity distribution of certain loan categories
based on remaining scheduled repayments of principal (in thousands):
WITHIN ONE TO AFTER
DECEMBER 31, 2000 ONE YEAR FIVE YEARS FIVE YEARS TOTAL
- ----------------- -------- ---------- ---------- -----
Commercial, financial and agricultural $184,803 $164,204 $43,776 $392,783
Real estate - construction 108,417 45,094 26,876 180,387
-------- -------- ------- --------
Total $293,220 $209,298 $70,652 $573,170
======== ======== ======= ========
The total amount of loans due after one year includes $144.6 million with
floating or adjustable rates of interest and $135.4 million with fixed rates of
interest.
F.N.B. CORPORATION 36
57
F.N.B. CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION
NON-PERFORMING LOANS
Non-performing loans include non-accrual loans and restructured loans.
Non-accrual loans represent loans on which interest accruals have been
discontinued. 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 loans (dollars in thousands):
December 31 2000 1999 1998 1997 1996
- ----------- ---- ---- ---- ---- ----
Non-accrual loans $ 9,946 $ 9,321 $12,250 $8,365 $10,363
Restructured loans 2,810 3,560 1,770 1,345 2,709
------- ------- ------- ------ -------
$12,756 $12,881 $14,020 $9,710 $13,072
======= ======= ======= ====== =======
Non-performing loans as a
percentage of total loans .43% .46% .58% .45% .66%
------- ------- ------- ------ -------
Following is a table showing the amounts of contractual interest income and
actual interest income recorded on non-accrual and restructured loans (in
thousands):
Year Ended December 31 2000 1999 1998 1997 1996
- ---------------------- ---- ---- ---- ---- ----
Gross interest income that would have been
recorded if the loans had been current and in
accordance with their original terms $1,602 $1,445 $1,563 $1,068 $1,473
Interest income recorded during the year 514 503 863 477 798
------ ------ ------ ------ ------
Following is a summary of loans 90 days or more past due, on which interest
accruals continue (dollars in thousands):
December 31 2000 1999 1998 1997 1996
- ----------- ---- ---- ---- ---- ----
Loans 90 days or more past due $4,533 $4,863 $2,943 $3,220 $3,092
Loans 90 days or more past due as a
percentage of total loans 15% .17% .12% .15% .16%
------ ------ ------ ------ ------
ALLOWANCE FOR LOAN LOSSES
Management's analysis of the allocated portion 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.
The unallocated portion of the allowance is determined based on management's
assessment of historical loss on the remaining portfolio segments in conjunction
with the current status of economic conditions, loan loss trends, delinquency
and non-accrual trends, credit administration, portfolio growth, concentrations
of credit risk and other factors, including regulatory guidance. This
determination inherently involves a higher degree of uncertainty and considers
current risk factors that may not have yet manifested themselves in the
Corporation's historical loss factors used to determine the allocated component
of the allowance, and it recognizes that knowledge of the portfolio may be
incomplete.
F.N.B. CORPORATION 37
58
F.N.B. CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION
Following is a summary of changes in the allowance for loan losses (dollars
in thousands):
Year Ended December 31 2000 1999 1998 1997 1996
- ---------------------- ---- ---- ---- ---- ----
Balance at beginning of year $ 36,311 $32,308 $31,055 $ 31,199 $27,771
Addition from acquisitions 767 2,813 1,167
Reduction due to the sale of a subsidiary and loans (3,828)
Charge-offs:
Real estate - mortgage (589) (964) (322) (888) (482)
Installment loans to individuals (6,916) (5,509) (5,893) (6,978) (6,190)
Lease financing (1,867) (632) (300) (106) (12)
Commercial, financial and agricultural (1,583) (2,517) (1,119) (2,309) (1,621)
-------- ------- ------- -------- -------
(10,955) (9,622) (7,634) (10,281) (8,305)
-------- ------- ------- -------- -------
Recoveries:
Real estate - mortgage 112 50 43 100 136
Installment loans to individuals 1,089 1,108 914 804 1,057
Lease financing 220 80 38 32 6
Commercial, financial and agricultural 316 334 320 359 471
-------- ------- ------- -------- -------
1,737 1,572 1,315 1,295 1,670
-------- ------- ------- -------- -------
Net charge-offs (9,218) (8,050) (6,319) (8,986) (6,635)
Provision for loan losses 10,877 9,240 7,572 11,503 10,063
-------- ------- ------- -------- -------
Balance at end of year $ 38,737 $36,311 $32,308 $ 31,055 $31,199
======== ======= ======= ======== =======
Net charge-offs as a percent of
average loans, net of unearned income .31% .31% .28% .44% .35%
Allowance for loan losses as a percent of
total loans, net of unearned income 1.31 1.30 1.33 1.43 1.58
Allowance for loan losses as a
percent of non-performing loans 303.68 281.90 230.44 319.82 238.67
-------- ------- ------- -------- -------
Following is a summary of the allocation of the allowance for loan losses
(dollars in thousands):
% OF % OF % OF % OF % OF
LOANS LOANS LOANS LOANS LOANS
IN EACH IN EACH IN EACH IN EACH IN EACH
CATEGORY CATEGORY CATEGORY CATEGORY CATEGORY
TO TOTAL TO TOTAL TO TOTAL TO TOTAL TO TOTAL
Year Ended December 31 2000 LOANS 1999 LOANS 1998 LOANS 1997 LOANS 1996 LOANS
- ---------------------- ---- ----- ---- ----- ---- ----- ---- ----- ---- -----
Commercial, financial and
agricultural $ 6,358 41% $ 6,969 39% $ 6,018 38% $ 5,617 37% $ 7,725 37%
Real estate - construction 437 6 475 4 271 4 284 3 132 2
Real estate - mortgage 10,211 37 8,662 38 6,534 41 6,263 44 4,749 40
Installment loans to
individuals 8,997 16 8,635 19 8,384 17 5,597 16 7,771 21
Unallocated portion 12,734 11,570 11,101 13,294 10,822
------- --- ------- --- ------- --- ------- --- ------- ---
$38,737 100% $36,311 100% $32,308 100% $31,055 100% $31,199 100%
======= === ======= === ======= === ======= === ======= ===
F.N.B. CORPORATION 38
59
F.N.B. CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION
The Corporation has allocated the allowance according to the amount deemed to
be reasonably necessary to provide for the possibility of losses being incurred
within each of the categories of loans shown in the table above. Management's
allocation considers amounts necessary for concentrations and changes in
portfolio mix and volume. The allocation of the allowance should not be
interpreted as an indication that loan losses in future years will occur in the
same proportions or that the allocation indicates future loan loss trends.
Furthermore, the portion allocated to each loan category is not the sole amount
available for future losses within such categories since the total allowance is
a general allowance applicable to the entire portfolio.
INVESTMENT ACTIVITY
Investment activities serve to enhance overall yield on earning assets while
supporting interest rate sensitivity and liquidity positions. Securities
purchased with the intent and ability to retain until maturity are categorized
as securities held to maturity and carried at amortized cost. All other
securities are categorized as securities available for sale and must be marked
to market. The relatively short average maturity of all securities provides a
source of liquidity to the Corporation and reduces the overall market risk of
the portfolio.
During 2000, securities available for sale increased by $27.7 million and
securities held to maturity decreased by $16.8 million from December 31, 1999.
The following table indicates the respective maturities and weighted average
yields of securities as of December 31, 2000 (dollars in thousands):
WEIGHTED
AMOUNT AVERAGE YIELD
------ -------------
U.S. Treasury and other U.S. Government agencies and corporations:
Maturing within one year $ 40,877 6.20%
Maturing after one year within five years 168,531 6.16%
Maturing after five years within ten years 4,449 5.93%
States of the U.S. and political subdivisions:
Maturing within one year 5,733 6.16%
Maturing after one year within five years 19,952 6.46%
Maturing after five years within ten years 9,753 6.60%
Maturing after ten years 2,875 6.73%
Other debt securities:
Maturing within one year 82 6.62%
Maturing after one year within five years 10 5.50%
Maturing after five within ten years 10 2.80%
Mortgage-backed securities of U.S. Government agencies 216,083 6.34%
Equity securities 28,608 7.56%
--------- -----
TOTAL $ 496,963 6.35%
========= =====
The weighted average yields for tax exempt securities are computed on a tax
equivalent basis.
F.N.B. CORPORATION 39
60
F.N.B. CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION
DEPOSITS AND SHORT-TERM BORROWINGS
As a commercial bank holding company, the Corporation's primary source of
funds is its deposits. Those deposits are provided by businesses and individuals
located within the markets served by the Corporation's subsidiaries.
Total deposits increased 6.7% to $3.1 billion in 2000. This increase was due
to a $101.7 million or 8.4% increase in time deposits and a $54.7 million or
4.3% increase in savings and interest checking accounts.
Short-term borrowings, made up of repurchase agreements, federal funds
purchased, Federal Home Loan Bank advances, subordinated notes and other
short-term borrowings, decreased by $49.3 million in 2000 to $282.9 million. The
primary reason for the lower level of borrowings was the Corporation's ability
to attract deposits at a slightly faster pace than loan growth.
Repurchase agreements are the largest component of short-term borrowings. At
December 31, 2000, repurchase agreements represented 52.0% of total short-term
borrowings. Following is a summary of selected information on repurchase
agreements (dollars in thousands):
December 31 2000 1999 1998
----------- ---- ---- ----
Balance at end of year $146,996 $134,808 $99,590
Maximum month-end balance 166,672 134,808 99,590
Average balance during the year 153,510 120,698 79,593
Weighted average interest rates:
At end of year 5.41% 4.16% 4.24%
During the year 5.24% 4.17% 4.27%
-------- -------- -------
CAPITAL RESOURCES
The assessment of capital adequacy depends on a number of factors such as
asset quality, liquidity, earnings performance, changing competitive conditions
and economic forces. The Corporation seeks to maintain a strong capital base to
support its growth and expansion activities, to provide stability to current
operations and to promote public confidence.
Capital management is a continuous process. Since December 31, 1999,
stockholders' equity has increased $26.8 million as a result of earnings
retention. Total cash dividends declared represented 37.4% of net income for
2000 compared to 42.0% for 1999. Book value per share was $14.37 at December 31,
2000, compared to $13.00 at December 31, 1999.
RETURN ON AVERAGE EQUITY
(based on core operating earnings)
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
12.0% 13.6% 13.5% 14.2% 14.2%
61
F.N.B. CORPORATION AND SUBSIDIARIES
MARKET FOR COMMON STOCK AND RELATED SHAREHOLDER MATTERS
INFORMATION AS TO STOCK PRICES AND DIVIDENDS
The Corporation's common stock trades on The Nasdaq Stock Market under the
symbol "FBAN." The accompanying table shows the range of the high and low bid
prices per share of the common stock as reported by Nasdaq. Also included in the
table are dividends per share paid on the outstanding common stock.
Stock prices and dividend figures have been adjusted to reflect the 5% stock
dividends declared on April 17, 2000 and April 26 1999. As of January 31, 2001,
there were 6,756 holders of record of common stock.
Quarter Ended 2000 LOW HIGH DIVIDENDS
- ------------------ --- ---- ---------
March 31 . . . . . . . . . . . . $ 17 3/8 $22 1/2 $ .17
June 30 . . . . . . . . . . . . 17 1/2 20 5/8 .18
September 30 . . . . . . . . . 19 1/4 22 3/4 .18
December 31 . . . . . . . . . 19 1/8 22 .18
Quarter Ended 1999 LOW HIGH DIVIDENDS
- ------------------ --- ---- ---------
March 31 . . . . . . . . . . . . $20 $26 3/8 $.16
June 30. . . . . . . . . . . . . 21 7/8 26 .17
September 30 . . . . . . . . 23 25 7/8 .17
December 31 . . . . . . . . 21 26 5/8 .17
CASH DIVIDENDS PAID PER COMMON SHARE
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
$.52 $.55 $.64 $.67 $.71
The Corporation has paid cash dividends every quarter since it was
incorporated in 1974. The payment and amount of future dividends on the common
stock will be determined by the Board of Directors and will depend on, among
other things, earnings, financial condition and cash requirements of the
Corporation at the time such payment is considered, and on the ability of the
Corporation to receive dividends from its subsidiaries, the amount of which is
subject to regulatory limitations.
F.N.B. CORPORATION 41
62
[LOGO] F.N.B. CORPORATION
----------------------------------------
ONE F.N.B. BOULEVARD
HERMITAGE, PA 16148
2150 GOODLETTE ROAD NORTH
NAPLES, FL 34102
www.fnbcorporation.com