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EXHIBIT 13
F.N.B.
CORPORATION
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1996 ANNUAL REPORT
16% Increase in Recurring Earnings
29% Increase in Dividend Rate
14% Increase in Value of Common Stock
$2.3 Billion in Total Assets
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TABLE OF CONTENTS
1 Financial Highlights
2 Message to Shareholders
4 Affiliate Highlights
5 Description of Corporation and Affiliates
13 Financial Review
18 Notes to Consolidated Financial Statements
38 Report of Independent Auditors
39 Selected Financial Data
40 Management's Discussion
51 Market for Common Stock and
Related Shareholders Matters
52 Shareholder Relations
53 Officers and Directors
60 Market Area
Annual meeting
The annual meeting of shareholders
will be held at 4:00 p.m.
on Wednesday, April 23, 1997 at the
F.N.B. Data and Accounting Center
Corner of East State Street and
South Keel Ridge Road
Hermitage, Pennsylvania 16148
A Symbol of Progress:
[LOGO]
The geometric symbol on the cover
of this annual report can be seen in
front of F.N.B. Corporation's head-
quarters in Hermitage, Pennsylvania.
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F.N.B. Corporation and Subsidiaries
Highlights of 1996
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Dollars in thousands, except per share data
Percentage
1996 1995 Change
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For The Year*
Excluding Non-Recurring Items
Net Income $ 21,018 $ 18,083 + 16%
Return on Average Assets 1.21% 1.07% + 13%
Return on Average Equity 14.07% 13.37% + 5%
Including Non-Recurring Items
Net Income $ 18,433
Return on Average Assets 1.06%
Return on Average Equity 12.34%
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Per Share Data*
Excluding Non-Recurring Items
Net Income
Primary $ 2.21 $ 1.90 + 16%
Fully Diluted 2.10 1.81 + 16%
Including Non-Recurring Items
Net Income
Primary $ 1.93
Fully Diluted 1.84
Book Value $ 15.86 $ 14.67 + 8%
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At Year-End
Assets $ 1,726,748 $ 1,706,993 + 1%
Deposits 1,429,708 1,442,109 - 1%
Net Loans 1,281,383 1,191,191 + 8%
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* Non-recurring items include a one-time assessment of $1.8 million legislated
by Congress to recapitalize the Savings Association Insurance Fund and
merger related costs of approximately $800,000, each on an after-tax basis.
[PHOTO OF F.N.B. CORPORATION'S HEADQUARTERS]
The new six-story headquarters building for F.N.B. Corporation is nearing
completion. The decision to invest in Hermitage, Pennsylvania supports our
tradition of community commitment and personal banking.
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F.N.B. Corporation and Subsidiaries
To Our Shareholders and Friends:
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This was a record year for F.N.B. Corporation in earnings and expansion. Net
income increased 16% to $2.10 per share on a fully diluted basis, excluding
one-time charges. The Corporation's common stock closed the year at $22.38 per
share, an increase of 14% during 1996 and the stock price has increased an
additional 15% in the first two months of 1997. For the 24th consecutive year a
5% stock dividend was declared and cash dividends on common stock increased 80%
from a year earlier.
Net interest income rose 4% and non-interest expenses declined 1%, excluding a
one-time $2.8 million assessment to recapitalize the Savings Association
Insurance Fund and merger related costs of approximately $800,000. Asset quality
showed continued improvement and compared favorably to other banks in F.N.B.'s
peer group.
Growth and Expansion
During 1996, F.N.B. announced plans to expand into Florida. On January 21, 1997
First National Bank of Naples and Cape Coral National Bank became the first two
Florida affiliates. In April the merger with First National Bank of Southwest
Florida with offices in Cape Coral and Fort Myers will be completed. These three
Florida banks with combined assets of $702 million will represent almost
one-third of the Corporation's total assets. The expansion to these affluent and
rapidly-growing areas of Florida represents exciting growth opportunities for
the company.
Additionally, the Corporation announced an agreement to exchange 100%
ownership of Bucktail Bank and Trust Company for a 13.8% interest in Sun
Bancorp, Inc. of Selinsgrove, Pennsylvania. The Corporation will receive Sun
common stock worth approximately $18.3 million and recognize a $5.8 million
after-tax gain on the sale when the transaction is concluded in the second
quarter of this year.
A Tradition of Customer Service
Exciting new markets and the tradition of superior, personal customer service
indicate a bright future for our community banks. Each affiliate shares a common
commitment to professionally and successfully serve individuals and small and
emerging businesses as a community bank.
Joining the F.N.B. Board from Florida are James S. Lindsay, Edward J. Mace,
Richard C. Myers and Gary L. Tice. Mr. Tice, a former officer of First National
Bank of Pennsylvania, is the founder and Chairman of First National Bank of
Naples and Southwest Banks, Inc. and has been elected an Executive Vice
President of F.N.B. Corporation. We look forward to sharing the experience and
advice of these new directors.
Construction and Expansion
Growth and expansion continued in Erie, where First National Bank of
Pennsylvania opened a downtown drive-thru facility and began construction of a
regional headquarters building on State Street. In nearby
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Girard, plans for a new replacement community office were announced. A site was
purchased in Summit Township for the construction of a full service facility. In
Hermitage, construction began on a new headquarters building. Upon completion
later this year, the facility will dramatically streamline operations which are
now located in seven separate leased locations and will result in considerable
savings.
Committed Leadership and Associates
Last year's achievements would have been impossible without the professionalism,
energy and commitment of each of our more than 1,200 associates who are
dedicated to providing superior customer service.
Moreover, I would especially like to acknowledge Gregory S. Pike, the new
President and Chief Executive Officer of First County Bank, and the presidents
and chief executive officers of our Florida affiliates, Garrett S. Richter in
Naples and David W. Gomer in Cape Coral.
On behalf of all the staff and Board members who strive for the continued
success of the Corporation, we thank you for your support.
[PHOTO OF PETER MORTENSEN]
Sincerely,
/s/ PETER MORTENSEN
Peter Mortensen
Chairman & President
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F.N.B. Corporation and Subsidiaries
Affiliate Highlights
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First National Bank of Pennsylvania
o Achieved record earnings of $11.9 million
o Awarded Certified Lender Status and Preferred Lender Status by the
Small Business Administration
o Commenced construction of three new banking offices
First National Bank of Naples
o Achieved record earnings of $3.1 million
o Attained impressive results as bank assets grew 30%
o Awarded an "Outstanding" rating under the Community Reinvestment Act
guidelines
[PHOTO OF GENEVA COLLEGE BANNER]
Geneva College in Beaver Falls, Pennsylvania represents one of the numerous
institutions of higher education which enhance the cultural strengths and
diversity found throughout our affiliate banks' communities.
Metropolitan Savings Bank of Ohio
o Achieved record earnings of $3.8 million
o Generated growth in loans and significantly improved loan quality
o Improved operating efficiency
Reeves Bank
o Served as a major sponsor for the Beaver County Initiative for Growth
o Introduced 3 innovative deposit services
o Expanded customer banking service hours in several locations
Cape Coral National Bank
o Exceeded $100.0 million in total assets
o Achieved positive earnings in the second year of operation
o Opened an additional office on Cape Coral Parkway
First County Bank
o Improved asset quality
o Named Gregory S. Pike, President and Chief Executive Officer
Regency Finance Company
o Opened a new office in Mentor, Ohio
o Continued focus on core business of direct consumer loans and retail
financing
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F.N.B. Corporation and Subsidiaries
Description of Corporation and Affiliates
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F.N.B. Corporation
Hermitage, PA
Founded--1974
F.N.B. Corporation is registered as a bank holding company under the Bank
Holding Company Act of 1956 with headquarters in Hermitage, Pennsylvania. It
provides financial and managerial resources and coordinates the activities of
its banking and non-banking affiliates through seven community banks and a
consumer finance company operating 102 offices in Florida, New York, Ohio and
Pennsylvania. The Corporation's consolidated assets currently total $2.3
billion and it has 1,229 employees.
Through its banking affiliates, the Corporation offers a full range of
financial services, primarily to individuals and small- to medium-sized
businesses. Its consumer finance affiliate offers personal loans, first and
second mortgages and automobile financing.
[PHOTO OF KIDD'S MILL BRIDGE]
F.N.B. Corporation is dedicated to protecting and preserving the landmarks of
our communities. Kidd's Mill Bridge, the oldest covered bridge in Mercer County,
Pennsylvania is one such landmark that has been restored through the leadership
of our affiliate banks.
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F.N.B. Corporation and Subsidiaries
Description of Corporation and Affiliates
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First National Bank of Pennsylvania
Hermitage, PA
Founded--1864
Assets as of December 31, 1996: $1.015 billion
In 1996, First National Bank of Pennsylvania earned a record $11.9 million,
excluding amortization of intangibles and a one-time assessment to recapitalize
the Savings Association Insurance Fund. All areas of lending reported growth and
the Bank achieved a 1.22% return on assets and a 16.12% return on equity.
The Bank continued its growth with the renovation of the West Middlesex office.
In Erie County, plans for construction of a relocated office in Girard were
finalized and a three-acre parcel in Summit Township was purchased for
construction of a community office. In late 1996, groundbreaking ceremonies were
held for the State Street headquarters building which will provide retail
banking, a drive-thru ATM, commercial lending and trust services in a downtown
location. Construction also began in Hermitage on the Bank's new headquarters
building. In May the merger of Dollar Savings was completed and its two Lawrence
County locations joined the Bank's community office system.
Thomas B. Hebble, formerly Senior Lending Officer at Metropolitan Bank, was
promoted to Senior Vice President with responsibility for commercial lending in
Lawrence and Mercer counties. Randy J. Price was promoted to Senior Vice
President and is responsible for commercial lending in Crawford and Venango
counties.
The Bank continued to maintain an active role in community activities. It
participated with another lender in the construction of a senior citizen housing
project in Farrell, Pennsylvania to meet the needs of the elderly in the
Shenango Valley. Delfin Gibert, President and Chief Executive Officer of EXAL
Corporation was nominated by the Bank for "Entrepreneur of the Year" and was
named a winner in the competition sponsored by Ernst & Young LLP. Stephen J.
Gurgovits, President and Chief Executive Officer, was honored as "Person of the
Year" by the Shenango Valley Chamber of Commerce. The strong commitment to the
Bank's communities continues and has been recognized in the past by
"Outstanding" ratings under the Community Reinvestment Act.
[PHOTO OF COMMODORE OLIVER HAZARD PERRY MONUMENT]
The Commodore Oliver Hazard Perry monument commemorates the American victory in
the Battle of Lake Erie during the War of 1812. First National Bank of
Pennsylvania is constructing a new regional headquarters building in downtown
Erie, Pennsylvania.
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First National Bank of Naples
Naples, FL
Founded--1989
Affiliated with F.N.B. Corporation: 1997
Assets as of December 31, 1996: $423 million
Impressive earnings and increased growth marked the year for First National
Bank of Naples. Net income for the year increased by 84% to $3.1 million before
non-recurring expenses.
An emphasis on superior customer service and growth in its market combined to
enable the Bank to be competitive in this fast-growing area. Assets grew to
$423.4 million in 1996. Total loans increased by $46.9 million and deposits
increased by $61.0 million.
The Bank originated $7.0 million in loans in its "Own-A-Home" program which
promotes home ownership for low- and moderate-income families and has committed
an additional $1.0 million to this endeavor. This success contributed to the
Bank earning an "Outstanding" Community Reinvestment Act rating.
A sixth Naples office in Pelican Bay will open later this year and the Bank
announced plans to open an office in Bonita Springs in 1998. The new locations
should generate significant opportunities to serve customers in these areas.
In 1996, Diana K. Helter, Branch Administrator, and Ronald L. Rucker, Commercial
Loan Officer, were elected senior vice presidents.
[PHOTO OF FIRST NATIONAL BANK OF NAPLES]
Naples, Florida is one of the fastest-growing communities in the United States.
Superior customer service is the hallmark of First National Bank of Naples.
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F.N.B. Corporation and Subsidiaries
Description of Corporation and Affiliates
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The Metropolitan Savings Bank of Ohio
Youngstown, OH
Founded--1922
Affiliated with F.N.B. Corporation: 1986
Assets as of December 31, 1996: $316 million
Metropolitan had record earnings in 1996 with net income of $3.8 million, a 28%
increase before amortization of intangibles and a one-time assessment to
recapitalize the Savings Association Insurance Fund. Return on assets was 1.16%
and return on equity was 15.02%.
The Bank continued its loan growth, especially in commercial lending which grew
10%. Metropolitan also made $29.9 million in new home mortgage loans and
approved $13.4 million in home equity and $14.5 million in installment loans.
Asset quality remained strong with loan losses decreasing by 17% and
non-performing assets decreasing to .70% of total assets at year-end.
The Bank improved its internal efficiencies and conducted an extensive quality
survey among its customers which produced very positive responses. Several
offices were enhanced with additional services and features. Three drive-thru
banking lanes and an ATM will be added to the Market Street office and new
drive-thru ATMs are planned for the Hubbard and Boardman locations. Plans were
announced for a new office to be located in Howland, with an opening expected in
late summer.
[PHOTO OF FEDERAL PLAZA IN DOWNTOWN YOUNGSTOWN]
Federal Plaza in downtown Youngstown, Ohio is the site of Metropolitan Savings
Bank's financial tower. Metropolitan, together with other government and
business leaders, supports many educational and cultural endeavors.
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Reeves Bank
Beaver Falls, PA
Founded--1868
Affiliated with F.N.B. Corporation: 1985
Assets as of December 31, 1996: $135 million
Deposits and assets increased in 1996, contributing to a return on equity of
14.17%, an 83 basis point increase, excluding amortization of intangibles and a
one-time assessment to recapitalize the Savings Association Insurance Fund.
The Bank expanded hours in several locations and introduced its "3 New Accounts"
program which includes the Star Account, Liberty Club Gold and an enhanced
Liberty Club Account. These accounts are designed to meet varying customer needs
and encourage relationship banking with individuals of all ages and incomes.
The Bank was active in economic development and community projects. It
participated in the Beaver Initiative for Growth (BIG) loan consortium which
provides small- and middle-market industrial and service entities with low-cost
financing. It also sponsored a grant through the Federal Home Loan Bank
Affordable Housing program to the local Habitat for Humanity chapter, which
provides assistance for homeowners in Beaver County.
The Bank opened a full-service depository and lending office in Beaver. The new
location, in a renovated historical site on Corporation Street, offers a
drive-thru facility and an ATM machine.
For the sixth consecutive year, Bank associates were active in the Beaver County
March of Dimes Walk America Campaign led by Reeves President Robert A. Rimbey,
who served as event chair. In raising $6,500, nearly double its 1995 amount,
Reeves surpassed all other corporate participants.
[PHOTO OF REEVES BANK IN BEAVER, PENNSYLVANIA]
Reeves Bank recently opened a new banking facility in Beaver, Pennsylvania. This
illustration depicts the historical building which has been renovated to
accommodate the bank's growth.
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F.N.B. Corporation and Subsidiaries
Description of Corporation and Affiliates
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Cape Coral National Bank
Cape Coral, FL
Founded--1994
Affiliated with F.N.B. Corporation: 1997
Assets as of December 31, 1996: $105 million
At the end of its second year of operation in this rapidly growing market, Cape
Coral National Bank's assets reached $104.7 million. Deposits grew by $41.9
million or 79% and loans grew by 136% or $33.0 million.
A new office on Cape Coral Parkway was opened in 1996 and by year-end it had
attracted deposits in excess of $19.0 million.
Robert J. Avery was promoted to Executive Vice President. Bob has 11 years
banking experience in Cape Coral and is responsible for the Bank's loan
portfolio.
After the merger with First National Bank of Southwest Florida, the Bank will be
the largest community bank in Cape Coral.
[PHOTO OF CAPE CORAL, FLORIDA]
Cape Coral, Florida has experienced phenomenal growth in the last three decades
and is one of the nation's fastest-growing cities.
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First County Bank
Chardon, OH
Founded--1988
Assets as of December 31, 1996: $44 million
Entrepreneur Magazine has named First County Bank as one of the "Best Banks for
Small Business Loans" in the United States. Commercial and consumer loans
increased 6% at First County Bank in 1996. The Bank's return on assets was 1.07%
and return on equity was 12.97%.
Gregory S. Pike was named President and Chief Executive Officer of the Bank in
April. Charles E. Conklin and Daniel T. Jarold were elected to the positions of
Senior Lender and Small Business Specialist, respectively. New managers named
were Madelyn S. Kotrlik in Chesterland and Judy S. Niksick in Chardon. Kenneth
Burzanko was hired as mortgage loan originator in order to increase residential
real estate lending.
Director Anderson W. Allyn, Sr. who was instrumental in the formation of First
County Bank retired during 1996.
[PHOTO OF GEAUGA COUNTY COURTHOUSE]
The grace and elegance of Chardon, Ohio are reflected in the striking
architectural design of the Geauga County Courthouse and its clock tower.
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F.N.B. Corporation and Subsidiaries
Description of Corporation and Affiliates
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Regency Finance Company
Hermitage, PA
Founded--1927
Affiliated with F.N.B. Corporation: 1975
Assets as of December 31, 1996: $96 million
Regency Finance Company and its wholly-owned subsidiaries ended 1996 with assets
of $96.0 million.
Regency acts as agent in selling F.N.B. Corporation Subordinated Term Notes and
Subordinated Daily Notes at all office locations in Pennsylvania and Ohio.
Regency and its subsidiaries opened a new office during 1996 in Mentor, Ohio and
are licensed to conduct consumer finance business in the states of Pennsylvania,
Ohio and New York. Its 34 offices operate under the names of Citizens Budget
Co.--Youngstown; F.N.B. Consumer Discount Company; Regency Consumer Discount
Company; and Reliance Consumer Discount Company.
Regency plans to open three new offices during 1997 in strategic markets not
presently served by the Company.
Customer Service Center of F.N.B., L.L.C.
Naples, Florida
Founded--1997
Customer Service Center of F.N.B., L.L.C. is a Florida limited liability company
which provides data processing and other services to affiliates of F.N.B.
Corporation.
Mortgage Service Corporation
Hermitage, PA
Founded--1944
Affiliated with F.N.B. Corporation: 1987
Mortgage Service Corporation is a Pennsylvania corporation which services
mortgage loans for unaffiliated financial institutions.
Penn-Ohio Life Insurance Company
Phoenix, AZ
Founded--1982
Penn-Ohio Life Insurance Company is an Arizona based corporation qualified as a
reinsurer to underwrite credit life and accident and health insurance sold by
the Corporation's affiliates. Its assets as of December 31, 1996 were $11.6
million.
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1996 Financial Review
14 Consolidated Balance Sheet
15 Consolidated Income Statement
16 Consolidated Statement of Stockholders' Equity
17 Consolidated Statement of Cash Flows
18 Notes to Consolidated Financial Statements
38 Report of Independent Auditors
39 Selected Financial Data
40 Management's Discussion
51 Market for Common Stock and Related Shareholder Matters
52 Shareholder Relations
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F.N.B. Corporation and Subsidiaries
Consolidated Balance Sheet
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Dollars in thousands, except par values
December 31 1996 1995
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Assets
Cash and due from banks $ 70,338 $ 59,795
Interest bearing deposits with banks 1,334 2,603
Federal funds sold 4,475 22,335
Loans held for sale 9,610 10,154
Securities available for sale 152,776 223,479
Securities held to maturity (fair value of $142,544 and $136,801) 143,534 136,969
Loans, net of unearned income of $23,268 and $26,609 1,303,822 1,212,741
Allowance for loan losses (22,439) (21,550)
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Net Loans 1,281,383 1,191,191
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Premises and equipment 26,886 22,504
Other assets 36,412 37,963
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$ 1,726,748 $ 1,706,993
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Liabilities
Deposits:
Non-interest bearing $ 153,318 $ 167,700
Interest bearing 1,276,390 1,274,409
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Total Deposits 1,429,708 1,442,109
Other liabilities 29,409 25,988
Short-term borrowings 78,699 55,224
Long-term debt 34,179 39,755
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Total Liabilities 1,571,995 1,563,076
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Stockholders' Equity
Preferred stock - $10 par value
Authorized - 20,000,000 shares
Outstanding - 352,531 and 451,638 shares
Aggregate liquidation value - $8,813 and $11,291 3,525 4,516
Common stock - $2 par value
Authorized - 100,000,000 shares
Outstanding - 9,263,442 and 8,634,154 shares 18,527 17,268
Additional paid-in capital 68,372 58,631
Retained earnings 61,894 60,034
Net unrealized securities gains 3,922 3,932
Treasury stock - 62,723 and 22,340 shares at cost (1,487) (464)
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Total Stockholders' Equity 154,753 143,917
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$ 1,726,748 $ 1,706,993
===================================================================================================================================
See accompanying Notes to Consolidated Financial Statements
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17
F.N.B. Corporation and Subsidiaries
Consolidated Income Statement
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Dollars in thousands, except per share data
Year Ended December 31 1996 1995 1994
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Interest Income
Loans, including fees $ 118,375 $ 113,768 $ 103,210
Securities:
Taxable 17,394 18,150 18,592
Tax exempt 1,634 1,452 1,546
Dividends 696 612 559
Other 887 1,374 972
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Total Interest Income 138,986 135,356 124,879
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Interest Expense
Deposits 51,973 51,589 44,251
Short-term borrowings 2,816 3,209 3,108
Long-term debt 3,453 3,258 2,869
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Total Interest Expense 58,242 58,056 50,228
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Net Interest Income 80,744 77,300 74,651
Provision for loan losses 6,137 5,652 8,450
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Net Interest Income After Provision For Loan Losses 74,607 71,648 66,201
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Non-Interest Income
Insurance commissions and fees 4,116 4,284 4,195
Service charges 6,799 7,144 6,457
Trust 1,461 1,390 1,504
Net gain on sale of securities 829 514 1,281
Net gain (loss) on sale of loans 344 272 (331)
Other 1,769 1,404 1,276
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Total Non-Interest Income 15,318 15,008 14,382
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89,925 86,656 80,583
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Non-Interest Expenses
Salaries and employee benefits 30,442 29,108 27,688
Net occupancy 4,766 4,920 4,536
Amortization of intangibles 1,040 1,238 1,687
Equipment 3,431 3,338 3,838
Deposit insurance 970 2,527 3,719
Recapitalization of Savings Association Insurance Fund 2,752
Promotional 1,804 2,305 2,054
Insurance claims paid 1,707 1,738 1,820
Other 15,914 14,776 14,949
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Total Non-Interest Expenses 62,826 59,950 60,291
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Income Before Income Taxes 27,099 26,706 20,292
Income taxes 8,666 8,623 6,747
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Net Income $ 18,433 $ 18,083 $ 13,545
===================================================================================================================================
Net Income Per Common Share
Primary $ 1.93 $ 1.90 $ 1.40
===================================================================================================================================
Fully Diluted $ 1.84 $ 1.81 $ 1.36
===================================================================================================================================
Average Common Shares Outstanding 9,087,941 9,025,482 8,997,329
===================================================================================================================================
See accompanying Notes to Consolidated Financial Statements
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18
F.N.B. Corporation and Subsidiaries
Consolidated Statement of Stockholders' Equity
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Dollars in thousands, except per share data
Net
Additional Unrealized
Preferred Common Paid-In Retained Securities Treasury
Stock Stock Capital Earnings Gains Stock
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Balance at January 1, 1994 $ 4,582 $ 15,576 $ 46,541 $ 48,620 $ (227)
Cumulative effect of adoption of
FAS No. 115 $ 2,335
Net income 13,545
Cash dividends declared:
Preferred stock (853)
Common stock - $.25 per share (2,257)
Purchase of common stock
(70,690 shares) (1,143)
Issuance of common stock
(66,717 shares) (37) 3 1,061
5% stock dividend (389,309 shares) 779 5,158 (5,937)
Conversion of preferred stock
(1,900 preferred shares;
4,324 common shares) (19) 9 24
Change in net unrealized
securities gains (1,710)
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Balance at December 31, 1994 4,563 16,364 51,686 53,121 625 (309)
Net income 18,083
Cash dividends declared:
Preferred stock (849)
Common stock - $.35 per share (3,151)
Purchase of common stock
(78,851 shares) (1,447)
Issuance of common stock
(75,424 shares) 92 1,292
5% stock dividend (409,694 shares) 819 6,351 (7,170)
Conversion of preferred stock
(4,650 preferred shares;
42,472 common shares) (47) 85 502
Change in net unrealized
securities gains 3,307
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Balance at December 31, 1995 4,516 17,268 58,631 60,034 3,932 (464)
Net income 18,433
Cash dividends declared:
Preferred stock (766)
Common stock - $.63 per share (5,752)
Purchase of common stock
(146,249 shares) (3,421)
Issuance of common stock
(105,864 shares) (46) 2,398
5% stock dividend (430,160 shares) 860 9,195 (10,055)
Conversion of preferred stock
(99,107 preferred shares;
199,128 common shares) (991) 399 592
Change in net unrealized
securities gains (10)
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Balance at December 31, 1996 $ 3,525 $ 18,527 $ 68,372 $ 61,894 $ 3,922 $ (1,487)
==================================================================================================================================
See accompanying Notes to Consolidated Financial Statements
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F.N.B. Corporation and Subsidiaries
Consolidated Statement of Cash Flows
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Dollars in thousands
Year Ended December 31 1996 1995 1994
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Operating Activities
Net income $ 18,433 $ 18,083 $ 13,545
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 4,149 4,704 6,184
Provision for loan losses 6,137 5,652 8,450
Deferred taxes (523) (493) (1,325)
Net gain on sale of securities (829) (514) (1,281)
Net (gain) loss on sale of loans (344) (272) 331
Proceeds from sale of loans 27,667 21,085 47,020
Loans originated for sale (26,779) (25,063) (79,823)
Net change in:
Interest receivable 1,788 (397) (470)
Interest payable (122) 686 1,152
Other, net 4,425 3,343 7,663
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Net cash flows from operating activities 34,002 26,814 1,446
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Investing Activities
Net change in:
Interest bearing deposits with banks 1,269 167 3,322
Federal funds sold 17,860 (18,319) 19,643
Loans (97,894) (28,816) (46,148)
Purchase of securities available for sale (58,532) (66,031) (77,945)
Purchase of securities held to maturity (30,747) (38,617) (27,344)
Proceeds from sale of securities available for sale 36,457 2,726 12,404
Proceeds from maturity of securities available for sale 93,450 57,650 81,159
Proceeds from maturity of securities held to maturity 24,118 66,786 61,065
Increase in premises and equipment (7,351) (2,254) (2,167)
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Net cash flows from investing activities (21,370) (26,708) 23,989
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Financing Activities
Net change in:
Non-interest bearing deposits (14,382) 4,134 677
Interest bearing deposits 1,981 12,570 (34,011)
Short-term borrowings 23,475 (14,141) 3,864
Increase in long-term debt 8,899 8,274 18,812
Decrease in long-term debt (14,475) (7,536) (11,092)
Issuance of treasury stock 2,352 1,384 1,041
Purchase of treasury stock (3,421) (1,447) (1,143)
Cash dividends paid (6,518) (4,000) (3,110)
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash flows from financing activities (2,089) (762) (24,962)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) In Cash And Due From Banks 10,543 (656) 473
Cash and due from banks at beginning of year 59,795 60,451 59,978
- -----------------------------------------------------------------------------------------------------------------------------------
Cash And Due From Banks At End Of Year $ 70,338 $ 59,795 $ 60,451
===================================================================================================================================
See accompanying Notes to Consolidated Financial Statements
17
20
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
headquartered in Hermitage, Pennsylvania. It operates five banks through
61 offices and a consumer finance company through 34 offices in
Pennsylvania, eastern Ohio and southwestern New York.
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 generally
accepted accounting principles 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) reported separately as a component of stockholders' equity, net
of tax.
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.
Loans Held for Sale:
Loans held for sale are recorded at the lower of aggregate cost or market
value. Gain or loss on sale of loans is included in non-interest income.
The Corporation adopted Financial Accounting Standards Board Statement of
Financial Accounting Standards (FAS) No. 122, "Accounting for Mortgage
Servicing Rights," on a prospective basis in the first quarter of 1996.
This statement allows entities which originate mortgage loans for sale to
recognize as an asset rights to service these loans. The Corporation
periodically assesses its capitalized mortgage servicing rights for
impairment based on the estimated fair value of those rights.
Implementation of this Standard did not have a material impact on the
Corporation's results of operations or financial position.
Loans and the Allowance for Loan Losses:
Loans that management has the intent and ability to hold for the
foreseeable future, until maturity or pay-off are reported at their
outstanding principal adjusted for any charge-offs and any deferred fees
or costs on originated loans.
On January 1, 1995, the Corporation adopted FAS No. 114, "Accounting by
Creditors for Impairment of a Loan," as amended by FAS No. 118,
"Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosures." These standards require that impaired loans be 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 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 that
the Corporation will not be able to collect all amounts due according to
the contractual terms of the loan agreements. 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. The adoption of these accounting
standards had no material impact on the Corporation's financial position
or results of operations.
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
18
21
- -------------------------------------------------------------------------------
the process of collection. When a loan is placed on non-accrual status,
unpaid interest credited to income in the current year is reversed and
unpaid interest accrued in prior years is charged against the allowance
for loan losses. 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 loan 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 and estimated future economic conditions, known
and inherent risks in the loan portfolio, the estimated value of
underlying collateral and industry standards. Additions are made to the
allowance through periodic provisions charged to income and recovery of
principal of 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.
Premises and Equipment:
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed generally on the straight-line method.
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:
Core deposit intangibles are being amortized on accelerated methods over
various lives ranging from 10-17 years.
Accounting for Postretirement Benefits Other than Pensions:
The Corporation recognizes the projected future cost of providing
postretirement benefits, such as health care and life insurance, as an
expense as employees render service instead of when the benefits are paid.
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 common share have been adjusted for common
stock dividends.
Primary earnings per common share is calculated by dividing net income,
adjusted for preferred stock dividends declared, by the sum of the
weighted average number of shares of common stock outstanding and the
number of shares of common stock which would be issued assuming the
exercise of stock options during each period.
Fully diluted earnings per common share is calculated by dividing net
income, adjusted for minority interest, by the weighted average number of
shares of common stock outstanding, assuming conversion of outstanding
convertible preferred stock from the beginning of the year or date of
issuance and the exercise of stock options. 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.
19
22
F.N.B. Corporation and Subsidiaries
Notes to Consolidated Financial Statements
- -------------------------------------------------------------------------------
New Accounting Standards:
FAS No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishment of Liabilities," establishes new standards for
determining whether a transfer constitutes a sale and, if so, the
determination of the resulting gain or loss. These standards are based on
the consistent application of a financial components approach that focuses
on control. Under this approach, an entity recognizes the financial and
servicing assets it controls and the liabilities it has incurred,
derecognizes financial assets when control has been surrendered, and
derecognizes liabilities when extinguished. Provisions of this Statement
are effective for certain transactions entered into in 1997 and 1998. The
Corporation does not anticipate this Standard will have a material effect
on its financial position or results of operations.
Mergers, Acquisitions and Divestiture
The Corporation completed its merger with Southwest Banks, Inc.
(Southwest), a bank holding company headquartered in Naples, Florida,
effective January 21, 1997. Under the terms of the merger agreement, each
outstanding share of Southwest's common stock was converted into .819
share of the Corporation's common stock with cash being paid in lieu of
fractional shares. A total of 2,851,907 shares of the Corporation's common
stock were issued. At December 31, 1996, Southwest had total assets and
deposits of $528.8 million and $427.7 million, respectively. The
transaction was accounted for as a pooling of interests.
Following is a summary of pro forma information, which represents a combination
of the results of operations of the Corporation and Southwest (in thousands,
except per share data):
Year Ended December 31 1996 1995 1994
- --------------------------------------------------------------------------------------
Net interest income $98,727 $90,928 $83,760
Net income 19,238 19,790 14,195
Net income per common share 1.55 1.56 1.14
The 1996 pro forma results reflect the recognition of $1.9 million of
non-recurring merger related costs, which reduced earnings per share by
$.16.
On November 15, 1996, the Corporation signed a definitive merger agreement
with West Coast Bancorp, Inc. (West Coast), a bank holding company
headquartered in Cape Coral, Florida with assets of approximately $174
million. The merger agreement calls for an exchange of .794 share of the
Corporation's common stock for each share of West Coast common stock. In
conjunction with the merger, approximately 1.3 million shares of the
Corporation's common stock are expected to be registered.
In connection with the merger agreement, West Coast granted the
Corporation an option to purchase up to 19.9% of its common stock
exercisable only if certain conditions are met. The exchange ratio, number
of shares under option and the price of the options are all subject to
possible adjustment. The transaction will be accounted for as a pooling of
interests and is expected to close during the second quarter of 1997,
subject to approval by certain regulatory authorities and West Coast's
shareholders.
On November 6, 1996, the Corporation announced an arrangement with Sun
Bancorp, Inc. (Sun), a bank holding company headquartered in Selinsgrove,
Pennsylvania, with assets of approximately $355 million. Under the
agreement, Sun will receive 100% of the ownership of Bucktail Bank and
Trust Company, a subsidiary of the Corporation, having total assets of
approximately $118 million. The Corporation will receive Sun stock worth
approximately $18.3 million, which represents a 13.8% ownership of Sun.
20
23
- -------------------------------------------------------------------------------
Securities
Following is a summary of the maturity distribution and weighted average yield
for each range of maturities of securities available for sale (dollars in
thousands):
Fair Weighted
December 31, 1996 Value Average Yield
- ---------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury and other U.S. Government
Agencies and Corporations:
Maturing within one year $ 71,430 6.07%
Maturing after one year but within five years 58,834 5.84
- ---------------------------------------------------------------------------------------------------------------------------------
Total U.S. Treasury and Other U.S.
Government Agencies and Corporations $ 130,264 5.97
=================================================================================================================================
Mortgage-Backed Securities of U.S. Government Agencies $ 4,491 6.50%
=================================================================================================================================
Equity Securities $ 18,021 5.37%
=================================================================================================================================
Total Securities Available for Sale $ 152,776 5.91%
=================================================================================================================================
Following is a summary of the maturity distribution and weighted average yield
for each range of maturities of securities held to maturity (dollars in
thousands):
Amortized Weighted
December 31, 1996 Cost Average Yield
- ---------------------------------------------------------------------------------------------------------------------------------
States of the U.S. and Political Subdivisions:
Maturing within one year $ 2,885 5.08%
Maturing after one year but within five years 36,044 5.83
Maturing after five years but within ten years 2,489 6.27
- ---------------------------------------------------------------------------------------------------------------------------------
Total States of the U.S. and Political Subdivisions $ 41,418 5.78
=================================================================================================================================
Other Securities:
Maturing within one year $ 6 5.25%
Maturing after one year but within five years 17 5.64
Maturing after five years but within ten years 5 5.50
Maturing after ten years 15 3.71
- ---------------------------------------------------------------------------------------------------------------------------------
Total Other Securities $ 43 4.91
=================================================================================================================================
Mortgage-Backed Securities of U.S. Government Agencies $ 102,073 5.93%
=================================================================================================================================
Total Securities Held to Maturity $ 143,534 5.90%
=================================================================================================================================
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. Yields on tax exempt
securities have been adjusted to a taxable equivalent basis using a
federal income tax rate of 35 percent.
Proceeds from sales of securities available for sale during 1996, 1995 and 1994
were $36.5 million, $2.7 million and $12.4 million, respectively. Gross gains
and gross losses were realized on those sales as follows (in thousands):
Year Ended December 31 1996 1995 1994
- -----------------------------------------------------------------------------------
Gross gains $880 $515 $1,329
Gross losses 51 1 48
- -----------------------------------------------------------------------------------
$829 $514 $1,281
===================================================================================
21
24
F.N.B. Corporation and Subsidiaries
Notes to Consolidated Financial Statements
- -------------------------------------------------------------------------------
Securities (continued)
Following is a summary of securities available for sale (in thousands):
Gross Gross
Amortized Unrealized Unrealized Fair
December 31, 1996 Cost Gains Losses Value
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury and other U.S. Government
agencies and corporations $ 130,235 $ 361 $ (332) $ 130,264
Mortgage-backed securities of U.S. Government agencies 4,490 12 (11) 4,491
- -----------------------------------------------------------------------------------------------------------------------------------
Total Debt Securities 134,725 373 (343) 134,755
Equity securities 12,017 6,018 (14) 18,021
- -----------------------------------------------------------------------------------------------------------------------------------
$ 146,742 $ 6,391 $ (357) $ 152,776
===================================================================================================================================
December 31, 1995
U.S. Treasury and other U.S. Government
agencies and corporations $ 206,169 $ 1,552 $ (54) $ 207,667
Mortgage-backed securities of U.S. Government agencies 363 5 368
- -----------------------------------------------------------------------------------------------------------------------------------
Total Debt Securities 206,532 1,557 (54) 208,035
Equity securities 10,898 4,546 15,444
- -----------------------------------------------------------------------------------------------------------------------------------
$ 217,430 $ 6,103 $ (54) $ 223,479
===================================================================================================================================
December 31, 1994
U.S. Treasury and other U.S. Government
agencies and corporations $ 107,619 $ (1,825) $ 105,794
Mortgage-backed securities of U.S. Government agencies 459 (32) 427
- -----------------------------------------------------------------------------------------------------------------------------------
Total Debt Securities 108,078 (1,857) 106,221
Equity securities 11,021 $ 2,819 13,840
- -----------------------------------------------------------------------------------------------------------------------------------
$ 119,099 $ 2,819 $ (1,857) $ 120,061
===================================================================================================================================
Following is a summary of securities held to maturity (in thousands):
Gross Gross
Amortized Unrealized Unrealized Fair
December 31, 1996 Cost Gains Losses Value
- -----------------------------------------------------------------------------------------------------------------------------------
States of the U.S. and political subdivisions $ 41,418 $ 15 $ (375) $ 41,058
Mortgage-backed securities of U.S. Government agencies 102,073 83 (709) 101,447
Other debt securities 43 (4) 39
- -----------------------------------------------------------------------------------------------------------------------------------
$ 143,534 $ 98 $ (1,088) $ 142,544
===================================================================================================================================
December 31, 1995
States of the U.S. and political subdivisions $ 34,029 $ 70 $ (236) $ 33,863
Mortgage-backed securities of U.S. Government agencies 102,884 424 (421) 102,887
Other debt securities 56 (5) 51
- -----------------------------------------------------------------------------------------------------------------------------------
$ 136,969 $ 494 $ (662) $ 136,801
===================================================================================================================================
December 31, 1994
U.S. Treasury and other U.S. Government
agencies and corporations $ 141,097 $ (3,884) $ 137,213
States of the U.S. and political subdivisions 35,334 $ 63 (2,325) 33,072
Mortgage-backed securities of U.S. Government agencies 81,464 1 (4,969) 76,496
Other debt securities 61 (8) 53
- -----------------------------------------------------------------------------------------------------------------------------------
$ 257,956 $ 64 $ (11,186) $ 246,834
===================================================================================================================================
22
25
- -------------------------------------------------------------------------------
On December 21, 1995, the Corporation transferred $92.0 million of debt
securities from the held to maturity category to the available for sale
category in accordance with implementation guidance issued on FAS No. 115.
At the time of transfer, the market value of the securities totaled $92.3
million, and the unrealized gain, net of taxes, of $161,000 was recorded
as an increase to stockholders' equity.
At December 31, 1996 and 1995, respectively, securities with a carrying
value of $129.2 million and $109.1 million were pledged to secure public
deposits, trust deposits and for other purposes as required by law.
As of December 31, 1996, the Corporation had not entered into any
derivative transactions.
Loans
Following is a summary of loans (in thousands):
December 31 1996 1995
- ------------------------------------------------------------------------------------
Real estate:
Residential $ 559,695 $ 524,143
Commercial 266,826 260,349
Construction 10,807 7,993
Installment loans to individuals 321,990 321,735
Commercial, financial and agricultural 146,234 120,093
Lease financing 21,538 5,037
Unearned income (23,268) (26,609)
- ------------------------------------------------------------------------------------
$ 1,303,822 $ 1,212,741
====================================================================================
Certain directors and executive officers of the Corporation and its
significant subsidiaries, as well as associates of such persons, were loan
customers during 1996. 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, 1995 $ 24,043
New loans 42,630
Repayments (37,294)
Other (2,408)
----------------------------------------------------
Total loans at December 31, 1996 $ 26,971
====================================================
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 1996 1995 1994
- --------------------------------------------------------------------------------------------
Non-accrual loans $ 6,474 $ 5,605 $ 9,512
Restructured loans 2,146 3,075 3,157
- --------------------------------------------------------------------------------------------
Total Non-Performing Loans 8,620 8,680 12,669
Other real estate owned 3,535 2,742 3,675
- --------------------------------------------------------------------------------------------
Total Non-Performing Assets $ 12,155 $ 11,422 $ 16,344
============================================================================================
23
26
F.N.B. Corporation and Subsidiaries
Notes to Consolidated Financial Statements
- -------------------------------------------------------------------------------
Non-Performing Assets (continued)
For the years ended December 31, 1996, 1995 and 1994, income recognized on
non-accrual and restructured loans was $657,000, $540,000 and $621,000,
respectively. Income that would have been recognized during 1996, 1995 and
1994 on such loans if they were in accordance with their original terms
was $1.1 million, $1.0 million and $1.7 million, respectively. Loans past
due 90 days or more were $2.7 million, $3.8 million and $2.6 million at
December 31, 1996, 1995 and 1994, respectively.
Following is a summary of information pertaining to loans considered to be
impaired under FAS No. 114 (in thousands):
At or For the Year Ended December 31 1996 1995
- ---------------------------------------------------------------------------------------
Impaired loans with an allocated allowance $ 2,750 $ 6,682
Impaired loans without an allocated allowance 3,163 3,683
- ---------------------------------------------------------------------------------------
Total Impaired Loans $ 5,913 $ 10,365
=======================================================================================
Allocated allowance on impaired loans $ 766 $ 1,098
=======================================================================================
Portion of impaired loans on non-accrual $ 2,505 $ 2,518
=======================================================================================
Average impaired loans $ 8,139 $ 13,402
=======================================================================================
Income recognized on impaired loans $ 545 $ 867
=======================================================================================
Allowance for Loan Losses
Following is an analysis of changes in the allowance for loan losses (in
thousands):
Year Ended December 31 1996 1995 1994
- -------------------------------------------------------------------------------------------------
Balance at beginning of year $ 21,550 $ 20,295 $ 16,440
Charge-offs (6,606) (6,136) (6,311)
Recoveries 1,358 1,739 1,716
- -------------------------------------------------------------------------------------------------
Net Charge-Offs (5,248) (4,397) (4,595)
- -------------------------------------------------------------------------------------------------
Provision for loan losses 6,137 5,652 8,450
- -------------------------------------------------------------------------------------------------
Balance at end of year $ 22,439 $ 21,550 $ 20,295
=================================================================================================
Premises and Equipment
Following is a summary of premises and equipment (in thousands):
December 31 1996 1995
- ----------------------------------------------------------------------------
Land $ 2,552 $ 2,421
Premises 32,142 26,288
Equipment 21,874 21,051
- ----------------------------------------------------------------------------
56,568 49,760
Accumulated depreciation (29,682) (27,256)
- ----------------------------------------------------------------------------
$ 26,886 $ 22,504
============================================================================
Depreciation expense was $3.0 million for 1996, $2.7 million for 1995 and
$3.1 million for 1994.
The Corporation is constructing a new six-story building in Hermitage,
Pennsylvania, as well as three new offices in Erie County, Pennsylvania.
Estimated construction, equipment and furnishing costs are projected to be
approximately $11.7 million, of which $5.1 million has been funded as of
December 31, 1996.
The Corporation has operating leases extending to 2044 for certain land,
office locations and equipment. Leases that expire are generally expected
to be renewed or replaced by other leases. Rental expense was $2.1 million
for 1996, $2.2 million for 1995 and $1.7 million for 1994. Total minimum
rental commitments under such leases were $15.0 million at December 31,
1996.
24
27
- -------------------------------------------------------------------------------
Following is a summary of future minimum lease payments for each of the years
following December 31, 1996 (in thousands):
1997 $ 1,322
1998 1,098
1999 724
2000 626
2001 560
Later years 10,656
Deposits
Following is a summary of deposits (in thousands):
December 31 1996 1995 1994
- -------------------------------------------------------------------------------------------
Non-interest bearing $ 153,318 $ 167,700 $ 163,566
Savings and NOW 558,337 549,497 620,212
Certificates of deposit and
other time deposits 718,053 724,912 641,627
- -------------------------------------------------------------------------------------------
$ 1,429,708 $ 1,442,109 $ 1,425,405
===========================================================================================
Following is a summary of the scheduled maturities of time deposits for each of
the five years following December 31, 1996 (in thousands):
1997 $ 442,872
1998 147,488
1999 52,670
2000 59,627
2001 14,250
Later years 1,146
Time deposits of $100,000 or more were $129.9 million and $111.9 million at
December 31, 1996 and 1995, respectively. Following is a summary of these time
deposits by remaining maturity at December 31, 1996 (in thousands):
Certificates Other Time
of Deposit Deposits Total
- --------------------------------------------------------------------------------------------
Three months or less $ 41,005 $ 4,151 $ 45,156
Three to six months 22,831 2,496 25,327
Six to twelve months 19,417 4,986 24,403
Over twelve months 16,538 18,523 35,061
- --------------------------------------------------------------------------------------------
$ 99,791 $ 30,156 $ 129,947
============================================================================================
Short-Term Borrowings
Following is a summary of short-term borrowings (in thousands):
December 31 1996 1995
- -----------------------------------------------------------------------------------
Securities sold under repurchase agreements $ 3,992 $ 2,990
Federal funds purchased 18,000
Other short-term borrowings 1,506 4,872
Subordinated notes 55,201 47,362
- -----------------------------------------------------------------------------------
$ 78,699 $ 55,224
===================================================================================
25
28
F.N.B. Corporation and Subsidiaries
Notes to Consolidated Financial Statements
- -------------------------------------------------------------------------------
Short-Term Borrowings (continued)
Following is a summary of information relating to securities sold under
repurchase agreements (dollars in thousands):
December 31 1996 1995
- ----------------------------------------------------------------------------
Daily average balance during the year $ 3,070 $ 3,296
Average interest rate during the year 5.21% 5.59%
Maximum month-end balance during the year 4,261 3,908
Following is a summary of the available for sale securities, under the
Corporation's custody, underlying these agreements at year-end (in thousands):
December 31 1996 1995
- -----------------------------------------------------------------------------
Amortized cost $ 10,960 $ 9,058
Fair value 11,004 9,133
Credit facilities amounting to $25.0 million at December 31, 1996 and 1995
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. The
amount of these credit facilities which were unused amounted to $25.0
million at December 31, 1996 and $22.0 million at December 31, 1995.
In addition, certain subsidiaries have lines of credit with the Federal
Home Loan Bank, which if used would require collateralization. No amounts
were used as of December 31, 1996.
Long-Term Debt
Following is a summary of long-term debt (in thousands):
December 31 1996 1995
- ---------------------------------------------------------------------
Real estate mortgages payable $ 147 $ 284
Federal Home Loan Bank advances 42 2,077
Subordinated notes 33,990 37,394
- ---------------------------------------------------------------------
$ 34,179 $ 39,755
=====================================================================
Subordinated notes are unsecured and subordinated to other indebtedness of
the Corporation. The subordinated notes are scheduled to mature in various
amounts annually from 1997 through the year 2006. At December 31, 1996,
$24.0 million of long-term subordinated debt was redeemable prior to
maturity at a discount equal to three months of interest. The issuer 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 this long-term subordinated debt was 7.69% at
December 31, 1996 and 7.79% at December 31, 1995.
Scheduled annual maturities for all of the long-term debt for each of the
five years following December 31, 1996 are as follows (in thousands):
1997 $ 9,284
1998 4,607
1999 3,042
2000 1,932
2001 963
Later years 14,351
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
26
29
- -------------------------------------------------------------------------------
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 1996 1995
- -------------------------------------------------------------------------------------------------------
Credit Carrying Credit Carrying
Amount Amount Amount Amount
- -------------------------------------------------------------------------------------------------------
Commitments to extend credit $ 213,830 $ 243 $ 172,431 $ 215
Standby letters of credit 11,648 81 9,300 67
At December 31, 1996, funding of approximately 75 percent of the
commitments to extend credit was 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.
The amounts under "carrying amount" represent accruals or deferred fee
income arising from these unrecognized financial instruments.
Stockholders' Equity
Series A - Cumulative Convertible Preferred Stock (Series A Preferred) was
created for the purpose of acquiring Reeves Bank. Holders of Series A
Preferred are entitled to 5.1 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 the time of conversion. The Corporation has the right to
require the conversion of the balance of all outstanding shares at the
conversion rate. During 1996, 1,250 shares of Series A Preferred were
converted to 1,336 shares of common stock. At December 31, 1996, 25,810
shares of common stock were reserved by the Corporation for the conversion
of the remaining 23,588 outstanding shares.
Series B - Cumulative Convertible Preferred Stock (Series B Preferred) was
issued during 1992 for the purpose of raising capital for the Erie
acquisition. 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 at any time into
shares of the Corporation's common stock at a price of $12.22 per share.
The Corporation has the right to require the redemption of the balance of
all outstanding shares at the conversion rate. During 1996, 97,857 shares
of Series B Preferred were converted to 197,792 shares of common stock. At
December 31, 1996, 672,787 shares of common stock were reserved by the
Corporation for the conversion of the remaining 328,943 outstanding
shares.
Stock Incentive Plans
The Corporation has available up to 870,440 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, 1996,
2,002 shares were vested under these plans. Participants have full voting
27
30
F.N.B. Corporation and Subsidiaries
Notes to Consolidated Financial Statements
- -------------------------------------------------------------------------------
Stock Incentive Plans (continued)
rights on all shares regardless of vesting unless forfeited. The shares of
stock awarded under the plan are held in the participant's name and are
enrolled in the Voluntary Dividend Reinvestment and Stock Purchase Plan.
During 1996, the Corporation awarded 1,400 shares, 20% of which became
vested in January 1997.
The Corporation has available up to 1,450,271 shares of common stock to be
issued under the 1990 and 1996 stock option plans to key employees of the
Corporation. The options vest in equal installments over a five-year
period. 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. The Corporation has elected to follow Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB No. 25), and related interpretations in accounting for its
employee stock options. Under APB No. 25, 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.
Pro forma information regarding net income and earnings per share is
required by FAS No. 123, "Accounting for Stock-Based Compensation." FAS
No. 123 also requires that the pro forma information be determined using
the fair value method as if the Corporation had accounted for its employee
stock options granted subsequent to December 31, 1994. The fair value for
these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted average assumptions for
1996 and 1995: risk-free interest rates of 5.63% and 7.65%, respectively;
dividend yield of 3.00%; volatility factor of the expected market price of
the Corporation's common stock of .19%; and a weighted average expected
life of the option of 7.5 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.
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. Because FAS No. 123 is applicable only to options granted
subsequent to December 31, 1994, its pro forma effect will not be fully
reflected until 1997.
Following is the pro forma information (in thousands, except per share data):
Year Ended December 31 1996 1995
- -----------------------------------------------------------------------------
Pro forma net income $ 18,298 $ 18,041
=============================================================================
Pro forma net income per common share:
Primary $ 1.91 $ 1.90
=============================================================================
Fully diluted $ 1.83 $ 1.81
=============================================================================
28
31
- -------------------------------------------------------------------------------
Following is a summary of the Corporation's stock option activity and related
information. At December 31, 1996, options for 130,643 shares of common stock
were exercisable at prices ranging from $8.23 to $13.38 per share.
December 31 1996 1995 1994
- -----------------------------------------------------------------------------------------------------
Outstanding, beginning of year 278,960 204,777 148,740
Granted during the year 166,950 86,761 65,709
Exercised during the year (at prices ranging
from $8.23 to $13.38 per share) (5,845) (1,819) (1,837)
Forfeited during the year (1,160) (10,759) (7,835)
- -----------------------------------------------------------------------------------------------------
Ending Balance 438,905 278,960 204,777
=====================================================================================================
Retirement Plans
The Corporation's subsidiaries have retirement plans covering
substantially all of their employees. The expense associated with these
plans was $2.0 million in 1996, $1.7 million in 1995 and $1.6 million in
1994.
The defined benefit plans provide benefits based on years of credited
service and compensation (as defined), subject to ERISA limitations.
Contributions to the tax-qualified plans are made in amounts not less
than the minimum-required contribution under ERISA nor more than the
maximum-deductible contribution under the Internal Revenue Code.
Following is the estimated funded status (in thousands):
December 31 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
Plans Whose Plans Whose Plans Whose Plans Whose
Assets Exceed Accumulated Assets Exceed Accumulated
Accumulated Benefits Accumulated Benefits
Benefits Exceed Assets Benefits Exceed Assets
- --------------------------------------------------------------------------------------------------------------------------------
Actuarial present value of:
Vested benefit obligation $ 13,841 $ 2,770 $ 13,406 $ 2,439
================================================================================================================================
Accumulated benefit obligation $ 14,150 $ 3,635 $ 13,625 $ 3,169
================================================================================================================================
Projected benefit obligation for services
rendered to date $ (17,472) $ (4,160) $ (17,114) $ (3,720)
Plan assets at fair value, primarily U.S. Government
securities and common stocks 20,238 17,881
- --------------------------------------------------------------------------------------------------------------------------------
Plan assets in excess of or (less than) projected
benefit obligation 2,766 (4,160) 767 (3,720)
Unrecognized net (gain) loss (1,832) (63) 21 (33)
Unrecognized net obligation 52 58
Unrecognized prior service cost 146 1,911 162 2,185
- --------------------------------------------------------------------------------------------------------------------------------
Prepaid (accrued) pension costs $ 1,132 $ (2,312) $ 1,008 $ (1,568)
================================================================================================================================
29
32
F.N.B. Corporation and Subsidiaries
Notes to Consolidated Financial Statements
- -------------------------------------------------------------------------------
Retirement Plans (continued)
The pension expense for the defined benefit plans included the following
components (in thousands):
Year Ended December 31 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
Service costs - benefits earned during the period $ 1,244 $ 854 $ 1,072
Interest cost on projected benefit obligation 1,525 1,375 1,237
Actual return on plan assets (2,026) (3,014) 330
Net amortization 894 2,115 (1,293)
- ------------------------------------------------------------------------------------------------------------
Net pension expense $ 1,637 $ 1,330 $ 1,346
============================================================================================================
Assumptions as of December 31 1996 1995 1994
- --------------------------------------------------------------------------------------------------------
Weighted average discount rate 7.5% 7.0% 8.5%
Rates of increase in compensation levels 4.0% 4.0% 4.0%
Expected long-term rate of return on assets 8.0% 8.0% 8.0%
At December 31, 1996 and 1995, respectively, plan assets include $965,000
and $745,000 of the Corporation's common stock and $184,000 and $193,000
of the Corporation's subordinated debt.
The Corporation's subsidiaries also have a qualified 401(k) deferred
compensation, defined contribution plan for full-time employees. A
percentage of employees' contributions to the plan are matched by the
Corporation up to a maximum of 6% of the employee's salary. The
Corporation's contribution expense amounted to $362,000 in 1996, $340,000
in 1995 and $297,000 in 1994.
Postretirement Plans
In addition to the Corporation's retirement plans, the Corporation has
various unfunded postretirement plans which provide medical benefits and
life insurance benefits to its retirees. The postretirement health care
plans vary, the most stringent of which are contributory and contain other
cost-sharing features such as deductibles and co-insurance. The life
insurance plans are non-contributory.
The amounts recognized in the Corporation's consolidated financial statements
are as follows (in thousands):
December 31 1996 1995
- --------------------------------------------------------------------------------------
Accumulated postretirement benefit obligation:
Current retirees $ 79 $ 186
Fully eligible actives 49 50
Other actives 688 594
- --------------------------------------------------------------------------------------
Total accumulated postretirement
benefit obligation 816 830
Unrecognized net transition obligation (612) (760)
Unrecognized net gain 233 255
Unrecognized prior service cost (7) (9)
- --------------------------------------------------------------------------------------
Accrued postretirement benefit liability $ 430 $ 316
======================================================================================
Net periodic postretirement benefit cost included the following components (in
thousands):
Year Ended December 31 1996 1995 1994
- ---------------------------------------------------------------------------------------------------
Service cost $ 66 $ 60 $ 75
Interest cost 54 68 73
Amortization and deferral 30 38 49
- ---------------------------------------------------------------------------------------------------
Net periodic postretirement benefit cost $ 150 $ 166 $ 197
===================================================================================================
30
33
- -------------------------------------------------------------------------------
A 6.50% annual rate of increase in the per capita costs of covered health
care benefits is assumed for 1997, gradually decreasing to 5.25% by the
year 2001. Increasing the assumed health care cost trend rates by one
percentage point in each year would increase the accumulated
postretirement benefit obligation as of December 31, 1996 by $77,000 and
increase the aggregate of the service and interest cost component of net
periodic postretirement benefit cost for 1996 by $14,000. A discount rate
of 7.50% was used to determine the accumulated postretirement benefit
obligation.
Recapitalization of Savings Association Insurance Fund
On September 30, 1996, the Deposit Insurance Funds Act of 1996 was signed
into law and included a provision to recapitalize the Savings Association
Insurance Fund (SAIF). The legislation required a one-time assessment on
all deposits insured by the SAIF, including those held by chartered
commercial banks as a result of previous acquisitions. The one-time
assessment paid by the Corporation totaled $2.8 million, or $.20 per
share. The legislation also included provisions that will result in a
reduction in future annual deposit insurance costs.
Income Taxes
Income tax expense consists of the following (in thousands):
Year Ended December 31 1996 1995 1994
- ------------------------------------------------------------------------------------
Current income taxes:
Federal taxes $ 9,076 $ 8,892 $ 7,852
State taxes 113 224 220
- ------------------------------------------------------------------------------------
9,189 9,116 8,072
Deferred income taxes:
Federal taxes (523) (493) (1,325)
- ------------------------------------------------------------------------------------
$ 8,666 $ 8,623 $ 6,747
====================================================================================
The tax effects of temporary differences that give rise to deferred tax assets
and liabilities are presented below (in thousands):
December 31 1996 1995
- -----------------------------------------------------------------------------------------
Deferred tax assets:
Allowance for loan losses $ 6,982 $ 6,760
Deferred benefits 634 386
Deferred compensation 936 860
Loan fees 244 145
Other 475 444
- -----------------------------------------------------------------------------------------
Total Gross Deferred Tax Assets 9,271 8,595
- -----------------------------------------------------------------------------------------
Deferred tax liabilities:
Depreciation (752) (897)
Dealer reserve participation (957)
Unrealized gains on securities available for sale (2,112) (2,117)
Leasing (1,915) (285)
Other (719) (1,094)
- -----------------------------------------------------------------------------------------
Total Gross Deferred Tax Liabilities (5,498) (5,350)
- -----------------------------------------------------------------------------------------
Net Deferred Tax Assets $ 3,773 $ 3,245
=========================================================================================
31
34
F.N.B. Corporation and Subsidiaries
Notes to Consolidated Financial Statements
- -------------------------------------------------------------------------------
Income Taxes (continued)
Following is a reconciliation between federal statutory tax and actual effective
tax:
Year Ended December 31 1996 1995 1994
- ------------------------------------------------------------------------------------------------------
Federal statutory tax 35.0% 35.0% 35.0%
Effect of non-taxable interest and dividend income (4.3) (4.5) (6.2)
State taxes .4 .5 .7
Goodwill .3 .5 .7
Other items .6 .8 3.1
- ------------------------------------------------------------------------------------------------------
Actual taxes 32.0% 32.3% 33.3%
======================================================================================================
Included in loan income is interest on tax-free loans of $2.1 million,
$2.4 million and $2.5 million for 1996, 1995 and 1994, respectively. The
related income tax expense on securities gains amounting to $290,000,
$189,000 and $449,000 for 1996, 1995 and 1994, respectively, is included
in income taxes.
Quarterly Earnings Summary, Unaudited (Dollars in thousands, except per share
data)
Quarter Ended 1996 Mar. 31 June 30 Sept. 30 Dec. 31
- -----------------------------------------------------------------------------------------------------------
Total interest income $ 34,710 $ 34,848 $ 34,671 $ 34,757
Total interest expense 14,853 14,594 14,545 14,250
Net interest income 19,857 20,254 20,126 20,507
Provision for loan losses 1,368 1,438 1,390 1,941
Total non-interest income 3,676 3,775 4,194 3,673
Total non-interest expense 15,189 15,179 17,941 14,517
Net income 4,867 5,076 3,503 4,987
Net income, excluding non-recurring items 5,430 5,645
Per Common Share
Net income
Primary $ .51 $ .53 $ .36 $ .53
Fully diluted .48 .51 .35 .50
Net income, excluding non-recurring items
Primary .57 .60
Fully diluted .54 .57
Cash dividends - common .15 .16 .16 .16
Quarter Ended 1995 Mar. 31 June 30 Sept. 30 Dec. 31
- -----------------------------------------------------------------------------------------------------------
Total interest income $ 32,635 $ 33,834 $ 34,572 $ 34,315
Total interest expense 13,527 14,675 14,988 14,866
Net interest income 19,108 19,159 19,584 19,449
Provision for loan losses 1,541 1,393 1,366 1,352
Total non-interest income 3,409 4,324 3,546 3,729
Total non-interest expense 15,116 15,573 14,631 14,630
Net income 3,984 4,345 4,856 4,898
Per Common Share
Net income
Primary $ .42 $ .46 $ .51 $ .51
Fully diluted .40 .44 .49 .48
Cash dividends - common .06 .07 .10 .12
32
35
- -------------------------------------------------------------------------------
Cash Flow Information
Following is a summary of supplemental cash flow information (in thousands):
Year Ended December 31 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------
Cash paid during year for:
Interest $ 58,364 $ 57,370 $ 51,270
Income taxes 6,876 8,948 7,318
Non-cash Investing and Financing Activities:
Acquisition of real estate in settlement of loans $ 1,949 $ 1,855 $ 3,210
Loans granted in the sale of other real estate 319 321 1,267
Transfers and reclassifications of securities held
to maturity to securities available for sale 91,982 6,227
Loans reclassified from held for sale 119,858
Regulatory Matters
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.
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, 1996,
that the Corporation and each of its banking subsidiaries meet all capital
adequacy requirements to which they are subject.
Following are capital ratios as of December 31, 1996 for the Corporation and its
significant subsidiary, First National Bank of Pennsylvania (dollars in
thousands):
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
- -----------------------------------------------------------------------------------------------------------------------------
Amount Ratio Amount Ratio Amount Ratio
- -----------------------------------------------------------------------------------------------------------------------------
F.N.B. Corporation:
Total capital (to risk-weighted assets) $ 174,536 14.1% $ 99,335 8.0% $ 124,169 10.0%
Tier 1 capital (to risk-weighted assets) 148,888 12.0 49,668 4.0 74,502 6.0
Tier 1 capital (to average assets) 148,888 8.6 69,386 4.0 86,732 5.0
First National Bank of Pennsylvania:
Total capital (to risk-weighted assets) $ 88,259 12.0% $ 58,668 8.0% $ 73,335 10.0%
Tier 1 capital (to risk-weighted assets) 79,059 10.8 29,334 4.0 44,001 6.0
Tier 1 capital (to average assets) 79,059 7.8 50,904 4.0 50,904 5.0
33
36
F.N.B. Corporation and Subsidiaries
Notes to Consolidated Financial Statements
- -------------------------------------------------------------------------------
Regulatory Matters (continued)
As of September 30, 1996, 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.
Management is not aware of any conditions or events at December 31, 1996
which would change this categorization.
The Corporation's banking subsidiaries were required to maintain aggregate
reserves amounting to $18.2 million at December 31, 1996 to satisfy
federal regulatory requirements. 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, 1996, the subsidiaries had $20.4 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 non-bank affiliates under
these provisions approximated $25.2 million at December 31, 1996.
Parent Company Financial Statements
Following 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.
34
37
- -------------------------------------------------------------------------------
Balance Sheet (in thousands)
December 31 1996 1995
- ------------------------------------------------------------------------------------------------------------
Assets
Cash $ 19 $ 16
Short-term investments 4,457 2,928
Advances to subsidiaries 81,099 76,849
Other assets 5,162 4,761
Securities available for sale 10,984 9,180
Investment in bank subsidiaries 132,434 121,584
Investment in non-bank subsidiaries 14,715 20,869
- ------------------------------------------------------------------------------------------------------------
$ 248,870 $ 236,187
============================================================================================================
Liabilities
Other liabilities $ 4,926 $ 4,514
Short-term borrowings 55,201 50,362
Long-term debt 33,990 37,394
- ------------------------------------------------------------------------------------------------------------
Total Liabilities 94,117 92,270
- ------------------------------------------------------------------------------------------------------------
Stockholders' Equity 154,753 143,917
- ------------------------------------------------------------------------------------------------------------
$ 248,870 $ 236,187
============================================================================================================
Income Statement (in thousands)
Year Ended December 31 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
Income
Dividend income from subsidiaries:
Bank $ 11,778 $ 8,942 $ 6,849
Non-bank 2,501 3,706 3,596
- ------------------------------------------------------------------------------------------------------------
14,279 12,648 10,445
Gain on sale of securities 850 512 1,287
Interest 5,394 4,924 4,062
Other 254 206 190
- ------------------------------------------------------------------------------------------------------------
Total Income 20,777 18,290 15,984
- ------------------------------------------------------------------------------------------------------------
Expenses
Interest 5,920 5,972 5,465
Service fees 617 609 559
Other 2,076 1,297 1,239
- ------------------------------------------------------------------------------------------------------------
Total Expenses 8,613 7,878 7,263
- ------------------------------------------------------------------------------------------------------------
Income Before Taxes and Equity in
Undistributed Income of Subsidiaries 12,164 10,412 8,721
Income tax benefit 618 700 430
- ------------------------------------------------------------------------------------------------------------
12,782 11,112 9,151
- ------------------------------------------------------------------------------------------------------------
Equity in undistributed income of subsidiaries:
Bank 4,618 5,972 4,226
Non-bank 1,033 999 168
- ------------------------------------------------------------------------------------------------------------
5,651 6,971 4,394
- ------------------------------------------------------------------------------------------------------------
Net Income $ 18,433 $ 18,083 $ 13,545
============================================================================================================
35
38
F.N.B. Corporation and Subsidiaries
Notes to Consolidated Financial Statements
- -------------------------------------------------------------------------------
Parent Company Financial Statements (continued)
Statement of Cash Flows (in thousands)
Year Ended December 31 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------
Operating Activities
Net income $ 18,433 $ 18,083 $ 13,545
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of securities (850) (512) (1,287)
Undistributed earnings of subsidiaries (5,651) (6,971) (4,394)
Other, net (2,031) (882) (1,417)
- ----------------------------------------------------------------------------------------------------------------
Net cash flows from operating activities 9,901 9,718 6,447
- ----------------------------------------------------------------------------------------------------------------
Investing Activities
Purchase of securities (740) (383) (1,151)
Proceeds from sale of securities 1,244 1,006 2,346
Advances to subsidiaries (4,250) (6,107) (4,779)
Investment in subsidiaries (1,996)
- ----------------------------------------------------------------------------------------------------------------
Net cash flows from investing activities (3,746) (5,484) (5,580)
- ----------------------------------------------------------------------------------------------------------------
Financing Activities
Net decrease in due to non-bank subsidiary (4,295)
Net increase (decrease) in short-term borrowings 4,839 (1,723) (1,210)
Decrease in long-term debt (12,303) (5,334) (7,400)
Increase in long-term debt 8,899 6,274 15,275
Purchase of common stock (3,421) (1,447) (1,143)
Sale of common stock 2,352 1,999 1,027
Cash dividends paid (6,518) (4,000) (3,110)
- ----------------------------------------------------------------------------------------------------------------
Net cash flows from financing activities (6,152) (4,231) (856)
- ----------------------------------------------------------------------------------------------------------------
Net Increase In Cash 3 3 11
Cash at beginning of year 16 13 2
- ----------------------------------------------------------------------------------------------------------------
Cash At End Of Year $ 19 $ 16 $ 13
================================================================================================================
Cash Paid
Interest $ 6,251 $ 5,009 $ 4,433
Income taxes 39
Subordinated notes included in short-term borrowings and long-term debt
are unsecured and subordinated to other indebtedness of the Corporation.
At December 31, 1996, $79.1 million principal amount of such notes was
redeemable prior to maturity by the holder at a discount equal to one
month of interest on short-term notes or three months of interest on
long-term notes. The issuer may require the holder to give 30 days prior
written notice. No sinking fund has been established to retire the notes.
The weighted average interest rate was 6.25% at December 31, 1996 and
6.63% at December 31, 1995. The subordinated notes are scheduled to mature
in various amounts annually from 1997 through the year 2006.
Following is a summary of the combined aggregate scheduled annual
maturities for each year following December 31, 1996 (in thousands):
1997 $ 64,387
1998 4,583
1999 3,018
2000 1,917
2001 948
Later years 14,338
36
39
- -------------------------------------------------------------------------------
Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to
estimate that value.
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 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.
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. The fair value estimates do not include the benefits that
result from low-cost funding provided by the deposit liabilities compared
to the cost of alternate sources of funds.
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 the debt of the same
remaining maturities.
Off-Balance Sheet Credit Risk:
The fair value of commitments is estimated using the fees currently
charged to enter into similar agreements, taking into account the
remaining terms of the agreements and the present creditworthiness of the
customer. For fixed-rate loan commitments, fair value also considers the
difference between current levels of interest rates and the committed
rates. The fair value of letters of credit is based on fees currently
charged for similar agreements or on the estimated cost to terminate them
or otherwise settle the obligations with the counterparties at the
reporting date.
The estimated fair values of the Corporation's financial instruments are as
follows (in thousands):
December 31 1996 1995
- --------------------------------------------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
- --------------------------------------------------------------------------------------------------------------------
Financial Assets
Cash and short-term investments $ 76,147 $ 76,147 $ 84,733 $ 84,733
Securities available for sale 152,776 152,776 223,479 223,479
Securities held to maturity 143,534 142,544 136,969 136,801
Net loans, including loans held for sale 1,290,993 1,291,867 1,201,345 1,203,131
Financial Liabilities
Deposits $ 1,429,708 $ 1,436,381 $ 1,442,109 $ 1,446,678
Short-term borrowings 78,699 78,699 55,224 55,224
Long-term debt 34,179 34,901 39,755 40,504
Off-Balance Sheet Credit Risk
Commitments to extend credit $ 243 $ 244 $ 215 $ 215
Standby letters of credit 81 82 67 68
====================================================================================================================
37
40
F.N.B. Corporation and Subsidiaries
Report of Independent Auditors
- -------------------------------------------------------------------------------
ERNST & YOUNG LLP - One Oxford Centre - Phone: 412 644 7800
Pittsburgh, Pennsylvania 15219
Report of Independent Auditors
The Stockholders and Board of Directors
F.N.B. Corporation
We have audited the accompanying consolidated balance sheet of F.N.B.
Corporation and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of F.N.B. Corporation's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of F.N.B. Corporation
and subsidiaries at December 31, 1996 and 1995, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
January 31, 1997
Ernst & Young LLP is a member of Ernst & Young International, Ltd.
38
41
F.N.B. Corporation and Subsidiaries
Selected Financial Data
- -------------------------------------------------------------------------------
Selected Financial Data (Dollars in thousands, except per share data)
Year Ended December 31 1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------------
Total interest income $ 138,986 $ 135,356 $ 124,879 $ 125,512 $ 125,825
Total interest expense 58,242 58,056 50,228 55,339 62,533
Net interest income 80,744 77,300 74,651 70,173 63,292
Provision for loan losses 6,137 5,652 8,450 9,498 15,107
Total non-interest income 15,318 15,008 14,382 16,025 13,439
Total non-interest expenses 62,826 59,950 60,291 61,729 51,867
Net income 18,433 18,083 13,545 10,472 6,770
Net income, excluding non-recurring items 21,018
At Year-End
Total assets $ 1,726,748 $ 1,706,993 $ 1,686,519 $ 1,690,150 $ 1,698,608
Deposits 1,429,708 1,442,109 1,425,405 1,458,739 1,479,947
Net loans 1,281,383 1,191,191 1,168,104 1,009,898 1,002,852
Long-term debt 34,179 39,755 39,017 31,297 32,823
Preferred stock 3,525 4,516 4,563 4,582 4,605
Total stockholders' equity 154,753 143,917 126,050 115,092 107,679
Per Common Share
Net income
Primary $ 1.93 $ 1.90 $ 1.40 $ 1.06 $ .69
Fully diluted 1.84 1.81 1.36 1.05 .69
Net income, excluding non-recurring items
Primary 2.21
Fully diluted 2.10
Cash dividends - common .63 .35 .25 .24 .22
Book value 15.86 14.67 12.74 11.52 10.68
Ratios
Return on average assets 1.06% 1.07% .80% .62% .45%
Return on average assets,
excluding non-recurring items 1.21
Return on average equity 12.34 13.37 11.12 9.38 6.59
Return on average equity,
excluding non-recurring items 14.07
Dividend payout ratio 32.54 18.50 17.57 22.32 32.88
Average equity to average assets 8.60 8.00 7.20 6.61 6.76
39
42
F.N.B. Corporation and Subsidiaries
Management's Discussion
- -------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This financial review summarizes the Corporation's financial condition and
results of operations and is intended to be read in conjunction with the
Consolidated Financial Statements and accompanying Notes to those statements.
Results of Operations
Net income increased 1.9% from $18.1 million in 1995 to $18.4 million in
1996. Primary earnings per share were $1.93 and $1.90 for 1996 and 1995,
while fully diluted earnings per share were $1.84 and $1.81, respectively,
for those same periods. These results were achieved in light of a special
one-time assessment to recapitalize the Savings Association Insurance Fund
(SAIF) of $2.8 million and merger related costs of $799,000. Excluding
these items, net income would have been $21.0 million and primary and
fully diluted earnings per share would have been $2.21 and $2.10,
respectively. An increase of 4.5% in net interest income provided the
impetus for the enhanced results of operations. 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 1.06% for 1996 compared to 1.07% for 1995, while the
Corporation's return on average equity was 12.34% for 1996 compared to
13.37% for 1995. Excluding the SAIF assessment and merger related costs,
the Corporation had a return on average assets of 1.21% and a return on
average equity of 14.07%.
Recurring Net Income
(Dollars in millions)
1992 6.8
1993 10.5
1994 13.5
1995 18.1
1996 21.0
40
43
- -------------------------------------------------------------------------------
Net Interest Income
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 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
Average Yield/ Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate Balance Interest Rate
- -----------------------------------------------------------------------------------------------------------------------------------
Assets
Interest earning assets:
Interest bearing deposits with banks $ 2,566 $ 151 5.88% $ 3,973 $ 252 6.33% $ 6,267 $ 221 3.53%
Federal funds sold 13,727 736 5.36 18,844 1,122 5.95 19,587 751 3.83
Securities:
U.S. Treasury and other U.S.
Government agencies and
corporations 292,024 17,394 5.96 321,792 18,150 5.64 357,874 18,592 5.20
States of the U.S. and political
subdivisions (1) 40,331 2,336 5.79 34,675 2,217 6.39 35,889 2,304 6.42
Other securities (1) 17,063 833 4.88 14,400 691 4.81 13,750 714 5.19
Loans (1) (2) 1,270,466 119,356 9.39 1,202,036 115,018 9.57 1,153,087 104,529 9.07
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest earning assets 1,636,177 140,806 8.61 1,595,720 137,450 8.61 1,586,454 127,111 8.01
- -----------------------------------------------------------------------------------------------------------------------------------
Cash and due from banks 54,130 53,161 54,013
Allowance for loan losses (22,074) (21,187) (19,327)
Premises and equipment 24,327 22,920 23,336
Other assets 43,587 40,968 46,712
- -----------------------------------------------------------------------------------------------------------------------------------
$ 1,736,147 $ 1,691,582 $ 1,691,188
===================================================================================================================================
Liabilities
Interest bearing liabilities:
Deposits:
Interest bearing demand $ 168,251 $ 2,397 1.42% $ 155,170 $ 2,648 1.71% $ 167,324 $ 3,110 1.86%
Savings 394,469 9,690 2.46 417,291 10,418 2.50 495,455 12,173 2.46
Other time 730,798 39,886 5.46 699,497 38,523 5.51 620,562 28,968 4.67
Short-term borrowings 64,210 2,816 4.39 55,772 3,209 5.75 65,171 3,108 4.77
Long-term debt 34,901 3,453 9.89 39,856 3,258 8.18 33,000 2,869 8.69
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest bearing
liabilities 1,392,629 58,242 4.18 1,367,586 58,056 4.25 1,381,512 50,228 3.64
- -----------------------------------------------------------------------------------------------------------------------------------
Non-interest bearing demand deposits 157,615 159,610 159,034
Other liabilities 36,515 29,135 28,297
- -----------------------------------------------------------------------------------------------------------------------------------
1,586,759 1,556,331 1,568,843
Minority Interest 528
- -----------------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity 149,388 135,251 121,817
- -----------------------------------------------------------------------------------------------------------------------------------
$ 1,736,147 $ 1,691,582 $ 1,691,188
===================================================================================================================================
Excess of interest earning assets
over interest bearing liabilities $ 243,548 $ 228,134 $ 204,942
===================================================================================================================================
Net interest income $ 82,564 $ 79,394 $ 76,883
===================================================================================================================================
Net interest spread 4.43% 4.36% 4.37%
===================================================================================================================================
Net interest margin (3) 5.05% 4.98% 4.85%
===================================================================================================================================
(1) Interest and yields/rates are reflected on a fully taxable equivalent
basis using the federal statutory tax rate of 35%, adjusted for certain
federal tax preferences.
(2) Average outstanding includes non-accrual loans. Loans consist of average
total loans less average unearned income. The amount of loan fees included
in interest income on loans is immaterial.
(3) Net interest margin is calculated by dividing the difference between
total interest earned and total interest paid by total interest earning
assets.
41
44
F.N.B. Corporation and Subsidiaries
Management's Discussion
- -------------------------------------------------------------------------------
Net Interest Income (continued)
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
$82.6 million in 1996 versus $79.4 million in 1995. Net interest income
consisted of interest income of $140.8 million and interest expense of
$58.2 million in 1996, compared to $137.5 million and $58.1 million for
each, respectively, in 1995. Net interest margin rose to 5.05% in 1996
compared to 4.98% in 1995.
Net Interest Margin
1992 4.47
1993 4.54
1994 4.85
1995 4.98
1996 5.05
The following table sets forth certain information regarding changes in net
interest income attributable to changes in the volumes and rates of interest
earning assets and interest bearing liabilities for the periods indicated (in
thousands):
Year Ended December 31 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
Volume Rate Net Volume Rate Net
- ------------------------------------------------------------------------------------------------------------------------------
Interest Income
Interest bearing deposits with banks $ (84) $ (17) $ (101) $ (101) $ 132 $ 31
Federal funds sold (283) (103) (386) (29) 400 371
Securities:
U.S. Treasury and other
U.S. Government agencies
and corporations (1,955) 1,199 (756) (1,959) 1,517 (442)
States of the U.S. and
political subdivisions 280 (161) 119 (77) (10) (87)
Other securities 130 12 142 (56) 33 (23)
Loans 6,478 (2,140) 4,338 4,544 5,945 10,489
- ------------------------------------------------------------------------------------------------------------------------------
4,566 (1,210) 3,356 2,322 8,017 10,339
- ------------------------------------------------------------------------------------------------------------------------------
Interest Expense
Deposits:
Interest bearing demand 248 (499) (251) (217) (245) (462)
Savings (563) (165) (728) (1,949) 194 (1,755)
Other time 1,710 (347) 1,363 3,959 5,596 9,555
Short-term borrowings 698 (1,091) (393) (486) 587 101
Long-term debt (286) 481 195 568 (179) 389
- ------------------------------------------------------------------------------------------------------------------------------
1,807 (1,621) 186 1,875 5,953 7,828
- ------------------------------------------------------------------------------------------------------------------------------
Net Change $ 2,759 $ 411 $ 3,170 $ 447 $ 2,064 $ 2,511
==============================================================================================================================
The amount of change not solely due to rate or volume changes was allocated
between the change due to rate and the change due to volume based on the
absolute relative size of the rate and volume changes.
42
45
- -------------------------------------------------------------------------------
Interest income on loans, on a fully taxable equivalent basis, increased
3.8% from $115.0 million in 1995 to $119.4 million in 1996. This increase
was the result of loan growth. Average loans increased 5.7% from 1995.
Interest expense on deposits increased slightly to $52.0 million in 1996.
The shift in the deposit mix from transaction and savings accounts into
higher paying time deposits was offset by a modest decline in rates paid
on deposits.
The Corporation monitors interest rate sensitivity by measuring the impact
that future changes in interest rates will have on net interest income.
Through its asset/liability management and pricing policies, management
strives to optimize net interest income while reducing the effects of
changes in interest rates. (See "Liquidity and Interest Rate
Sensitivity").
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 8.6% to $6.1 million in 1996. (See
"Non-Performing Loans and Allowance for Loan Losses").
Non-Interest Income
Total non-interest income increased 2.1% from $15.0 million in 1995 to
$15.3 million in 1996. This increase was primarily attributable to an
increase in gains on the sale of securities.
Net gain on the sale of securities increased 61.3% due to a higher level
of equity security sales in 1996.
Non-Interest Expenses
Total non-interest expenses increased from $60.0 million in 1995 to $62.8
million in 1996. The increase was primarily attributable to a one-time
assessment for deposit insurance and merger-related expenses of $799,000.
In addition, salaries and employee benefits increased by $1.3 million.
Salaries and personnel expense increased 4.6% in 1996. This increase was
primarily due to increases for incentive compensation, as well as normal
annual salary adjustments. The Corporation's incentive compensation plans
allow for additional compensation to be paid to employees based on the
Corporation achieving various financial and productivity goals.
On September 30, 1996, the President of the United States signed into law
the Deposit Insurance Funds Act of 1996 to recapitalize the SAIF. The
legislation included a one-time assessment on all deposits insured by the
SAIF, including those held by chartered commercial banks as a result of
previous acquisitions. The Corporation was required to pay a one-time
assessment of $2.8 million. The legislation also included provisions that
will result in a reduction in future annual deposit insurance.
Other non-interest expenses increased to $15.9 million in 1996. Included
in this total was $799,000 of expenses related to the affiliation with
Southwest Banks, Inc. These expenses were primarily legal and investment
banking costs associated with the structuring and completion of the
transaction. Further information is provided in "Mergers, Acquisitions and
Divestiture" in the Notes to Consolidated Financial Statements.
Income Taxes
The Corporation recognized income tax expense of $8.7 million for 1996
compared to $8.6 million for 1995. The 1996 effective tax rate of 32% was
lower than the 35% federal statutory tax rate due to the tax benefits
resulting from tax-exempt instruments and excludable dividend income.
Further information regarding 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 its available for sale securities portfolio, the
Corporation has sufficient sources of funds available to meet its cash
needs. Securities due to mature within one year, which will provide a
source of short-term liquidity, amounted to $99.9 million or 33.7% of the
securities portfolio.
43
46
F.N.B. Corporation and Subsidiaries
Management's Discussion
- -------------------------------------------------------------------------------
Liquidity and Interest Rate Sensitivity (continued)
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 $25.0 million was unused at the end
of 1996. To further meet its liquidity needs, the Corporation also has
access to the Federal Home Loan Bank and the Federal Reserve Bank, as well
as other uncommitted funding sources.
Through the review of the gap analysis and net interest income simulation
modeling, management continually monitors the Corporation's exposure to
changing interest rates. Management attempts to mitigate repricing
mismatches through asset and liability pricing and matched maturity
funding.
Interest rate sensitivity estimates the impact that future changes in
interest rates will have on net interest income. The gap is one
measurement of risk inherent in the balance sheet as it relates to changes
in interest rates and their effect on net interest income.
The gap analysis which follows is based on the amortizations, maturities
and repricing of assets and liabilities. Non-maturity deposit balances
have been allocated to various repricing intervals to estimate their true
behavior and characteristics. The cumulative gap reflects the net position
of assets and liabilities repricing in specified time periods. Based on
the cumulative one year gap and assuming no restructuring or modifications
to asset/liability composition, a rise in interest rates would result in a
minimal reduction in net interest income.
Following is the gap analysis as of December 31, 1996 (dollars in thousands):
Within 4-12 1-5 Over
3 Months Months Years 5 Years Total
- ----------------------------------------------------------------------------------------------------------------------------
Interest Earning Assets
Interest bearing deposits with banks $ 1,234 $ 100 $ 1,334
Federal funds sold 4,475 4,475
Loans held for sale 9,610 9,610
Securities:
Available for sale 25,858 45,572 $ 62,211 $ 19,135 152,776
Held to maturity 2,726 25,765 112,534 2,509 143,534
Loans, net of unearned income 271,647 248,627 518,202 265,346 1,303,822
- ----------------------------------------------------------------------------------------------------------------------------
Total Interest Earning Assets 315,550 320,064 692,947 286,990 1,615,551
Other assets 111,197 111,197
- ----------------------------------------------------------------------------------------------------------------------------
Total Assets $ 315,550 $ 320,064 $ 692,947 $ 398,187 $ 1,726,748
============================================================================================================================
Interest Bearing Liabilities
Deposits:
Interest checking $ 8,660 $ 25,976 $ 138,455 $ 173,091
Savings 32,489 97,467 255,290 385,246
Time deposits 151,999 290,873 274,035 $ 1,146 718,053
Short-term borrowings 38,464 16,767 23,468 78,699
Long-term debt 1,227 8,028 10,559 14,365 34,179
- ----------------------------------------------------------------------------------------------------------------------------
Total Interest Bearing Liabilities 232,839 439,111 701,807 15,511 1,389,268
Other liabilities 182,727 182,727
Stockholders' equity 154,753 154,753
- ----------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 232,839 $ 439,111 $ 701,807 $ 352,991 $ 1,726,748
============================================================================================================================
Period Gap $ 82,711 $ (119,047) $ (8,860) $ 45,196
============================================================================================================================
Cumulative Gap $ 82,711 $ (36,336) $ (45,196)
============================================================================================================================
Cumulative Gap as a Percent of Total Assets 4.8% (2.1)% (2.6)%
============================================================================================================================
Rate Sensitive Assets/Rate
Sensitive Liabilities (Cumulative) 1.36 .95 .97 1.16
============================================================================================================================
44
47
- -------------------------------------------------------------------------------
Financial Condition
Loan Portfolio
Following is a summary of loans (in thousands):
December 31 1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------
Real estate:
Residential $ 559,695 $ 524,143 $ 468,538 $ 424,813 $ 350,711
Commercial 266,826 260,349 239,275 191,900 249,494
Construction 10,807 7,993 28,193 21,120 20,146
Installment loans to individuals 321,990 321,735 317,567 241,281 241,574
Commercial, financial and agricultural 146,234 120,093 156,848 169,403 177,513
Lease financing 21,538 5,037
Unearned income (23,268) (26,609) (22,022) (22,179) (21,849)
- -----------------------------------------------------------------------------------------------------------------------------
$ 1,303,822 $ 1,212,741 $ 1,188,399 $ 1,026,338 $ 1,017,589
=============================================================================================================================
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.
The ratio of loans to deposits at the end of 1996 was 91.2%, up from a
ratio of 84.8% at the end of 1995. The increase in the ratio was a result
of loan growth of 6.6% in conjunction with a slight decrease in deposits.
During 1996 and 1995, the Corporation sold $19.0 million and $16.1
million, respectively, in fixed rate residential mortgages to the Federal
National Mortgage Association (FNMA). 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 market it
serves. The majority of the mortgages were sold with the servicing
retained by the Corporation.
In 1996, total installment loans to individuals and lease financing
increased 5.1% to $343.5 million. The installment loan portfolio was
comprised of $176.2 million in direct loans, $114.1 million in indirect
loans and $31.7 million in sub-prime motor vehicle loans. The overall
growth reflects a continuation of strong demand for indirect automobile
loans and leases.
The commercial loan portfolio consists principally of loans to small- and
medium-sized businesses within the Corporation's primary market area of
western Pennsylvania and eastern Ohio. The Corporation generally avoids
making significant loans to any single borrower in order to minimize
credit risk.
As of December 31, 1996, 1995 and 1994, 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 as of December 31, 1996 (in
thousands):
Within 1-5 Over
1 Year Years 5 Years Total
- -----------------------------------------------------------------------------------------------------------------------------
Commercial, financial and agricultural $ 86,648 $ 51,396 $ 8,190 $ 146,234
Real estate - construction 7,947 2,660 200 10,807
- -----------------------------------------------------------------------------------------------------------------------------
Total loans (excluding Real estate - residential,
Real estate - commercial and
Installment loans to individuals) $ 94,595 $ 54,056 $ 8,390 $ 157,041
=============================================================================================================================
The total amount of loans listed above due after one year includes $15.7 million
with floating or adjustable rates of interest and $46.7 million with fixed rates
of interest.
45
48
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 1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------
Non-accrual loans $ 6,474 $ 5,605 $ 9,512 $ 10,262 $ 8,658
Restructured loans 2,146 3,075 3,157 3,236 1,388
- ---------------------------------------------------------------------------------------------------------------------
$ 8,620 $ 8,680 $ 12,669 $ 13,498 $ 10,046
=====================================================================================================================
Non-performing loans as a
percentage of total loans .66% .72% 1.07% 1.32% .99%
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 1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------------------
Gross interest income that would have been
recorded if the loans had been current
and in accordance with their original terms $ 1,101 $ 1,038 $ 1,659 $ 1,738 $ 1,555
Interest income included in
income on the loans 657 540 621 671 883
Following is a summary of loans 90 days or more past due, on which interest
accruals continue (dollars in thousands):
December 31 1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------------------
Loans 90 days or more past due $ 2,674 $ 3,785 $ 2,621 $ 3,422 $ 4,254
Loans 90 days or more past due
as a percentage of total loans .21% .31% .22% .33% .42%
Allowance for Loan Losses
Management's analysis of the allowance for loan losses includes the
evaluation of the loan portfolio based on internally generated loan
review reports and the historical loss experience of the remaining
balances of the various homogeneous loan pools which comprise the loan
portfolio. Specific factors which are evaluated include the previous loan
loss experience with the customer, the status of past due interest and
principal payments on the loan, the collateral position of the loan, the
quality of financial information supplied by the borrower and the general
financial condition of the borrower. Historical loss experience on the
remaining portfolio segments is considered in conjunction with the current
status of economic conditions, loan loss trends, delinquency and
non-accrual trends, credit administration and concentrations of credit
risk.
Allowance for Loan Losses as a Percent of Total Loans
1992 1.45
1993 1.60
1994 1.71
1995 1.78
1996 1.72
46
49
- -------------------------------------------------------------------------------
Following is a summary of changes in the allowance for loan losses
(dollars in thousands):
Year Ended December 31 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------
Balance at beginning of year $ 21,550 $ 20,295 $ 16,440 $ 14,737 $ 11,930
Addition arising in purchase transactions 376
Loss reserves transferred on loans sold (893) (685)
Charge-offs:
Real estate - mortgage (342) (539) (1,454) (549) (2,170)
Installment loans to individuals (5,487) (4,949) (3,604) (3,857) (3,937)
Commercial, financial and agricultural (777) (648) (1,253) (3,869) (6,828)
- ------------------------------------------------------------------------------------------------------------------------------
(6,606) (6,136) (6,311) (8,275) (12,935)
- ------------------------------------------------------------------------------------------------------------------------------
Recoveries:
Real estate - mortgage 110 189 98 173 208
Installment loans to individuals 970 1,009 929 769 694
Commercial, financial and agricultural 278 541 689 431 42
- ------------------------------------------------------------------------------------------------------------------------------
1,358 1,739 1,716 1,373 944
- ------------------------------------------------------------------------------------------------------------------------------
Net charge-offs (5,248) (4,397) (4,595) (6,902) (11,991)
Provision for loan losses 6,137 5,652 8,450 9,498 15,107
- ------------------------------------------------------------------------------------------------------------------------------
Balance at end of year $ 22,439 $ 21,550 $ 20,295 $ 16,440 $ 14,737
==============================================================================================================================
Net charge-offs as a percent of average
loans, net of unearned income .41% .37% .40% .63% 1.17%
Allowance for loan losses as a percent of
total loans, net of unearned income 1.72 1.78 1.71 1.60 1.45
Allowance for loan losses as a percent
of non-performing loans 260.31 248.27 160.19 121.80 146.70
Consistent with the growth in installment loans to individuals, the
Corporation has experienced an increase in charge-offs. Installment loans
are generally charged off no later than a predetermined number of days
past due on a contractual basis or earlier in the event of bankruptcy.
During 1996, charge-offs increased from $4.9 million to $5.5 million while
delinquencies decreased from 3.5% to 2.9% of total installment loans.
These trends resulted in an increase in the provision for loan losses from
$5.7 million in 1995 to $6.1 million in 1996, and a higher allocation of
the allowance for loan losses to installment loans, as the allowance for
loan losses represented 2.1% of total installment loans at December 31,
1996, as compared to 1.8% at December 31, 1995.
Allowance for Loan Losses
(Dollars in millions)
1992 14.7
1993 16.4
1994 20.3
1995 21.6
1996 22.4
47
50
F.N.B. Corporation and Subsidiaries
Management's Discussion
- -------------------------------------------------------------------------------
Allowance for Loan Losses (continued)
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 below.
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.
Following shows the allocation of the allowance for loan losses (dollars in
thousands):
December 31 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------------
Percent Percent Percent Percent Percent
of Loans of Loans of Loans of Loans of 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
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
- ----------------------------------------------------------------------------------------------------------------------------------
Real estate - mortgage $ 2,891 63% $ 3,035 65% $ 3,358 60% $ 2,440 60% $ 2,261 59%
Real estate - construction 105 1 55 1 178 2 458 2 455 2
Installment loans to
individuals 6,629 25 5,728 24 4,523 25 4,106 22 3,981 22
Commercial, financial and
agricultural 4,065 11 4,540 10 6,926 13 6,420 16 5,632 17
Unallocated portion 8,749 8,192 5,310 3,016 2,408
- ----------------------------------------------------------------------------------------------------------------------------------
$ 22,439 100% $ 21,550 100% $ 20,295 100% $ 16,440 100% $ 14,737 100%
==================================================================================================================================
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 are marked to market.
Under the guidelines of FAS No. 115, institutions that sell securities out
of the securities held to maturity portfolio risk being forced to mark to
market the remaining securities in the portfolio since they have not
demonstrated their intent to hold these securities to maturity. In 1995,
the Financial Accounting Standards Board approved an amnesty period during
which institutions had the opportunity to redesignate securities under FAS
No. 115. The Corporation took advantage of this amnesty period in 1995,
during which it reclassified $92.0 million of securities held to maturity
to securities available for sale. This movement allowed the Corporation
greater flexibility in managing its portfolio to take advantage of market
conditions and provided an opportunity to better manage interest rate
risk.
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 1996, securities available for sale decreased 31.6% while
securities held to maturity increased 4.8%. This was the result of
maturing securities being used to fund loan demand.
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
subsidiary banks and savings institution.
48
51
- -------------------------------------------------------------------------------
At December 31, 1996 and 1995, total deposits remained relatively stable
and totaled $1.4 billion. However, during 1996, the composition of
deposits shifted as non-interest bearing deposits decreased $14.4 million
or 8.6% while savings and NOW increased $8.8 million or 1.6%.
Short-term borrowings, made up of repurchase agreements, federal funds
purchased, notes payable and subordinated notes, increased 42.5% in 1996
to $78.7 million. The primary reason for this increase was higher levels
of both federal funds purchased and subordinated notes in 1996.
Subordinated notes are the largest component of short-term borrowings,
representing 70.1% of total short-term borrowings at December 31, 1996.
Following is a summary of selected financial information on short-term
subordinated notes (dollars in thousands):
December 31 1996 1995 1994
- ---------------------------------------------------------------------------------------------
Balance at end of year $ 55,201 $ 47,362 $ 48,085
Maximum month end balance 57,073 47,675 56,126
Average balance during the year 54,252 45,912 52,830
Weighted average interest rates:
At end of year 5.35% 5.69% 5.21%
During the year 5.57 5.54 5.06
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.
The capital management function is an ongoing process. Central to this
process is internal equity generation accomplished by earnings retention.
During 1996, stockholders' equity increased $10.8 million as a result of
earnings retention versus $14.6 million in 1995. Total cash dividends
declared represented 35.4% of net income for 1996 compared to 22.1% for
1995. Book value per share was $15.86 at December 31, 1996, compared to
$14.67 at December 31, 1995.
Total Stockholders' Equity
(Dollars in millions)
1992 108
1993 115
1994 126
1995 144
1996 155
Book Value per Share
1992 10.68
1993 11.52
1994 12.74
1995 14.67
1996 15.86
49
52
F.N.B. Corporation and Subsidiaries
Management's Discussion
- -------------------------------------------------------------------------------
1995 versus 1994
The Corporation's net income was $18.1 million for 1995 versus $13.5
million for 1994.
Primary earnings per share were $1.90 and $1.40 for 1995 and 1994, while
fully diluted earnings were $1.81 and $1.36, respectively, for those same
periods. The key factors attributing to the increase were increased credit
quality, which allowed for lower loan loss provisions, an increase in
higher yielding assets and continued efforts to reduce non-interest
expense. The Corporation's asset quality improved steadily from 1994 to
1995, as indicated by several key credit ratios. At December 31, 1995,
non-performing assets decreased to .67% of total assets compared to .97%
at December 31, 1994. The allowance for loan losses increased to 1.78% of
total loans compared to 1.71% a year earlier. The ratio of net charge-offs
to average loans outstanding decreased to .37% in 1995 from a ratio of
.40% in 1994. Increases in both the return on average equity from 11.12%
in 1994 to 13.37% in 1995 and the return on average assets from .80% in
1994 to 1.07% in 1995 reflect the improved performance of the Corporation.
Net interest income, on a fully taxable equivalent basis, increased from
$76.9 million in 1994 to $79.4 million in 1995, an increase of 3.3%. Net
margin rose to 4.98% from 4.85% in 1994. Average loans increased 4.2% and
interest on federal funds sold increased 49.4% from 1994, both
contributing to the improvement in net interest income.
The provision for loan losses was $5.7 million and represented a decrease
of 33.1% from 1994, when a provision of $8.5 million was charged to
operations. The decrease in the provision was a direct result of
improvement in asset quality.
Non-interest income increased 4.4% from $14.4 million in 1994 to $15.0
million in 1995. This increase was attributable to increases in service
charges and gains on the sale of loans, offset by a decrease in gains on
the sale of securities. Service charges increased 10.6% from $6.5 million
in 1994 to $7.1 million in 1995. Revenue was recognized as a result of
certain increases in retail fees charged to customers, as well as
increases in both total loans and total deposits. Net gain on the sale of
loans increased $603,000 in 1995. Net gain on the sale of securities
decreased $767,000 due to fewer security sales during 1995.
Total non-interest expenses decreased slightly from $60.3 million in 1994
to $60.0 million in 1995. The decrease was attributable to expense control
throughout the Corporation and a reduction in premiums charged for deposit
insurance. Salaries and personnel expense increased 5.1% in 1995. This
increase was primarily due to an increase of $1.0 million for incentive
compensation, which is based on achieving certain financial goals. Deposit
insurance decreased $1.2 million in 1995. This was the result of the FDIC
lowering the insurance premiums for banks, since the Bank Insurance Fund
has been funded to the required level. Conversely, the SAIF was still
under-funded and those premiums were not reduced.
Income tax expense increased 27.8% to $8.6 million for 1995 as a result of
the Corporation generating more taxable income. The 1995 effective tax
rate of 32% was below the 35% statutory tax rate due to the tax benefits
resulting from income on tax-exempt instruments and excludable dividend
income.
50
53
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 SmallCap Market tier
of 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 on April 24,
1996 and April 26, 1995. As of January 31, 1997, there were 5,004 holders
of record of common stock, including former Southwest Banks, Inc.
shareholders.
Quarter Ended 1996 Low High Dividends
- --------------------------------------------------------------------------------------
March 31 $ 19 $ 22 5/8 $ .15
June 30 21 5/8 25 .16
September 30 23 1/4 25 1/4 .16
December 31 22 3/4 24 1/8 .16
Quarter Ended 1995 Low High Dividends
- --------------------------------------------------------------------------------------
March 31 $ 13 3/8 $ 15 1/2 $ .06
June 30 14 1/2 18 1/8 .07
September 30 17 1/8 20 1/4 .10
December 31 18 7/8 20 3/4 .12
The Corporation has historically paid cash dividends on a quarterly basis
at the discretion of the Board of Directors. During 1996, the Board
increased cash dividends to $.63 per share from $.35 per share in 1995.
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.
Cash Dividends Paid per Common Share
1992 .22
1993 .25
1994 .25
1995 .35
1996 .63
51
54
F.N.B. Corporation and Subsidiaries
Shareholder Relations
- -------------------------------------------------------------------------------
Stock Transfer Agent
ChaseMellon Shareholder Services
Recordkeeping Services
P.O. Box 590
Ridgefield Park, New Jersey 07660
Phone: 800-756-3353
Shareholder Relations
F.N.B. Corporation
Hermitage Square
Hermitage, Pennsylvania 16148
Phone: 800-490-3951
or
800-262-7600 (ext. 7629)
Voluntary Dividend Reinvestment
and Stock Purchase Plan
Shareholders may participate in the Voluntary Dividend Reinvestment and
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 Relations.
Form 10-K and 10-Q Availability
Copies of the Corporation's Annual Report on Form 10-K and Quarterly
Reports on Form 10-Q filed with the Securities and Exchange Commission
will be furnished to any shareholder, free of charge, upon request to
Shareholder Relations.
52
55
F.N.B. Corporation and Subsidiaries
Officers and Directors
- -------------------------------------------------------------------------------
F.N.B. CORPORATION
Officers
Peter Mortensen
Chairman & President
Stephen J. Gurgovits
Executive Vice President
John W. Rose
Executive Vice President
William J. Rundorff
Executive Vice President
Gary L. Tice
Executive Vice President
John D. Waters
Vice President &
Chief Financial Officer
Samuel K. Sollenberger
Vice President
David B. Mogle
Secretary & Treasurer
James G. Orie
Corporate Counsel
James R. Farmer
Auditor
Directors
W. Richard Blackwood
President,
Harry Blackwood, Inc.
William B. Campbell
Retired Business Executive
Charles T. Cricks
Executive Vice President & Chief
Operating Officer, Health Care
Solutions, Inc.
Henry M. Ekker
Attorney at Law,
Partner of Ekker, Kuster & McConnell
Thomas C. Elliott
President & Treasurer,
Elliott Brothers Steel Co.
Stephen J. Gurgovits
Executive Vice President of F.N.B.
Corporation; President & Chief
Executive Officer of First National
Bank of Pennsylvania
Thomas W. Hodge
Retired Business Executive
James S. Lindsay
Managing Partner, Dor-J's Partnership;
Licensed Real Estate Broker, The
Lindsay Company
George E. Lowe, D.D.S.
Dentist
Paul P. Lynch
Attorney at Law,
President & Chief Executive Officer,
Lynch Brothers Investments, Inc.
Edward J. Mace
Edward J. Mace, Certified Public
Accountant; Chief Operating Officer,
Ribek Corporation
Peter Mortensen
Chairman & President of F.N.B.
Corporation; Chairman of
First National Bank of Pennsylvania
Robert S. Moss
President,
Associated Contractors of
Conneaut Lake, Inc.
Richard C. Myers
Director, Naples Dodge, Inc.;
Retired President,
Naples Dodge, Inc.
John R. Perkins
Retired Vice President of F.N.B.
Corporation; Chairman Emeritus
of the Board of The Metropolitan
Savings Bank of Ohio
William A. Quinn
Retired Vice President of F.N.B.
Corporation; Retired Executive
Vice President & Cashier of First
National Bank of Pennsylvania
George A. Seeds
Retired President,
Findley Welding Supply, Inc.
Samuel K. Sollenberger
Vice President of F.N.B. Corporation;
Chairman, President & Chief
Executive Officer of The Metropolitan
Savings Bank of Ohio
William J. Strimbu
President,
Nick Strimbu, Inc.
Gary L. Tice
Executive Vice President of F.N.B.
Corporation; Chairman, President &
Chief Executive Officer of Southwest
Banks, Inc.; Chairman of First
National Bank of Naples
Archie O. Wallace
Attorney at Law,
Partner of Rowley, Wallace, Keck,
Karson & St. John
Joseph M. Walton
Chairman of the Board, Chief
Executive Officer & Treasurer,
Jamestown Paint Co.
James T. Weller
Chairman of the Board & Chief
Executive Officer, Liberty Steel
Products, Inc.
Eric J. Werner
Chief Administrative Officer,
General Counsel & Secretary,
Werner Co.
Donna C. Winner
Co-owner,
The Radisson Shenango,
Tara--A Country Inn,
The Winner
Director Emeritus
Charles C. Hamilton
General Counsel
Cohen & Grigsby, P.C.
2900 CNG Tower
625 Liberty Avenue
Pittsburgh, PA
53
56
F.N.B. Corporation and Subsidiaries
Officers and Directors
- -------------------------------------------------------------------------------
Cape Coral National Bank
Officers
James L. Cottrell
Chairman
David W. Gomer
President &
Chief Executive Officer
Robert J. Avery
Senior Vice President
Douglas W. Buchanan
Assistant Vice President &
Credit Officer
J. Patrick Cottrell
Assistant Vice President,
Mortgage Loans
Deborah J. Frost
Administrative Assistant
Officer
Daniel C. Grahl
Vice President,
Mortgage Loans
Michael J. Kozak
Vice President,
Installment Loans
Richard E. Rufi
Vice President & Cashier
Joan M. Walter-Salustro
Assistant Vice President,
Branch Manager
Laurence L. Wilson
Assistant Vice President
Roger Windey
Assistant Vice President,
Mortgage Loans
Directors
Robert J. Avery
Andrew A. Barnette
Richard D. Barton, Sr.
Jo Ellen Beauvois
C.C. Coghill
James L. Cottrell
David W. Gomer
Paul W. Sanborn
Gary L. Tice
- -------------------------------------------------------------------------------
CUSTOMER SERVICE CENTER
of F.N.B., LLC
Officers
Gary L. Tice
President & Chief
Executive Officer
Lewis S. Albert
Vice President &
Chief Financial Officer
J. Paul Ballew
Vice President,
Data Processing Manager
Sondra R. Combs
Vice President,
Cashier
Carolyn Crivello
Sold Asset Accounting
Manager
Barbara A. Delario
Assistant Vice President,
Operations Officer
Mark D. Gill
Assistant Vice President
Melissa A. Gilliland
Manager, Loan Operations
Barbara J. Glista
Manager, Customer Service
Andrew J. Lellio, Jr.
Manager, User Automation
Nancy J. Livingston
Assistant Vice President
Louise C. Lowrey
Vice President
Kathleen Meli
Vice President,
Personnel Manager
Barbara A. Reid
Assistant Vice President
Rosemarie Sabol
Systems Administrator
David A. Tullis
Vice President,
Information Services
David E. Yakubovic
Vice President
- -------------------------------------------------------------------------------
FIRST COUNTY BANK
Officers
Gregory S. Pike
President &
Chief Executive Officer
Connie E. Cole
Administrative Officer &
Secretary
Charles E. Conklin
Vice President,
Senior Lender
Janice M. Frank
Compliance Officer
Daniel T. Jarold
Assistant Vice President,
Small Business Specialist
Madelyn S. Kotrlik
Manager, Chesterland
Judy S. Niksick
Manager, Chardon
Directors
John A. Bond
David J. Eardley
Howard E. Ernst
D. James Hendley
David B. Mogle
Gregory S. Pike
William G. Rimes
John W. Rose
William J. Skidmore
Director Emeritus
Anderson A. Allyn, Sr.
- -------------------------------------------------------------------------------
FIRST NATIONAL BANK
OF NAPLES
Officers
Gary L. Tice
Chairman
Garrett S. Richter
President & Chief
Executive Officer
C.C. Coghill
Executive Vice President,
Loans
Donald J. Agnew
Senior Vice President,
Consumer Loan
Michelle K. Balon
Marketing Officer
Karen M. Brazelton
Loan Operations Officer
Karen D. Brooks
Mortgage Loan
Origination Officer
William D. Caldwell
Vice President,
Consumer Loans
Penny Calloway
Vice President,
Personnel Officer
John M. Campbell
Mortgage Loan Originator
Mary A. Cone
Credit Officer
Anne E. Crowley
Training Officer
54
57
- -------------------------------------------------------------------------------
FIRST NATIONAL BANK
OF NAPLES
Christopher P. Dudley
Mortgage Solicitor
Kristin K. Greenberg
Customer Service Officer
Carol L. Grenlie
Customer Service Officer
Susan M. Grinvalsky
Branch Operations Officer
Brian V. Hafenbrack
Vice President,
Personnel Officer
Dan A. Hartwein
Vice President,
Branch Manager
Diana K. Helter
Senior Vice President,
Branch Coordinator
Nancye P. Hire
Vice President,
Loan Operations Manager
Gabriel Irizarry
Assistant Vice President,
Branch Manager
John A. Irons
Mortgage Solicitor
Sidney T. Jackson
Vice President
Jeffrey J. Kukuda
Consumer Loan Officer
Paul E. Manley
Business Development Officer
Peter Martinez
Assistant Vice President,
Branch Manager
Nancy B. Ortega
Branch Operations Officer
Aliette T. Pettay
Branch Operations Officer
Robert T. Pollak
Business Development Officer
Lisa M. Prokop
Vice President,
Mortgage Loan Processing
Frank Rodriguez
Business Development Officer
C. William Root
Senior Vice President,
Commercial Loan Officer
Ronald L. Rucker
Senior Vice President,
Commercial Loans
Charles E. Sammons
Vice President,
Business Manager Programmer
Elizabeth O. Saucier
Mortgage Loan Originator
David H. Schaeffer
Senior Vice President,
Loans
Linda M. Schnell
Vice President,
Credit Card Manager
Scott Schomburg
Assistant Vice President,
Branch Operations Manager
Mark A. Smith
Assistant Vice President,
Credit Officer
Terry Read Walston
Senior Vice President &
Chief Financial Officer
Darrell E. Ward
Vice President,
Private Banking
Barbara J. Wartberg
Vice President,
Consumer Loan Officer
Kenneth P. Werner
Assistant Vice President,
Finance
Ann E. Wright
Assistant Vice President,
Merchant Services
Directors
William B. Campbell
C.C. Coghill
Richard L. Jaeger
James S. Lindsay
Edward J. Mace
Donald W. Major
Peter Mortensen
Richard C. Myers
Arlene M. Nichols
Joseph R. Pelletier
Anita M. Pittman
James R. Rehak, D.D.S.
Garrett S. Richter
David H. Schaeffer
Gary L. Tice
Michael E. Watkins
Larry A. Wynn
- -------------------------------------------------------------------------------
FIRST NATIONAL BANK
of Pennsylvania
Officers
Peter Mortensen
Chairman
Stephen J. Gurgovits
President &
Chief Executive Officer
Allan R. Dennison
Executive Vice President &
Chief Administrative Officer
Robert J. Alex
Vice President
Colin C. Appleton
Senior Vice President &
Trust Officer
Jeffrey T. Baker
Vice President
Kevin W. Bennett
Personnel Officer
Richard A. Blatt
Manager, Grandview
Leslie J. Bush
Banking Officer
James M. Cardamon
Senior Vice President
David L. Carll
Assistant Vice President &
Manager, West Erie Plaza
Robert A. Chamberlain
Vice President
Barbara Chroscielewski
Vice President &
Manager, West Ridge and
Airport
Donald J. Ciha
Vice President & Audit Manager
Peter A. Costar
Vice President &
Manager, Farrell
Ronald W. Crawford
Sales Finance Credit Manager
Kevin W. Davis
Senior Vice President
Philip J. DeCaria
Assistant Vice President
James C. Dicks
Vice President & Manager,
Grove City
Dorothy L. Echard
Vice President,
Senior Compliance Officer
Christopher A. Ecola
Assistant Vice President
Sharon L. Eisenhuth
Human Resources Assistant
John C. Evans
Vice President
Linda J. Evans
Vice President
James R. Farmer
Vice President & Auditor
Theodore A. Fauceglia
Vice President
Patricia Fejes
Manager, Cochranton
and Sheakleyville
Joni S. Fertig
Assistant Vice President &
Manager, Meadville
55
58
F.N.B. Corporation and Subsidiaries
Officers and Directors
- -------------------------------------------------------------------------------
First National Bank
of Pennsylvania
Patricia L. Fluegel
Manager, Millcreek Mall
Denise M. Gargano
Banking Officer
Debra L. Garon
Assistant Vice President
Kenneth J. George
Sales Finance Officer
Barry L. Gray
Banking Officer
Patricia K. Gunesch
Assistant Manager, Airport
David M. Hall
Assistant Vice President
Patricia A. Hanna
Vice President
M. Scott Hartle
Vice President
Thomas B. Hebble
Senior Vice President
Carol D. Henegan
Trust Officer
Brian M. Hills
Vice President
Cheryl S. Holly
Assistant Manager,
West Ridge
Daniel R. Holquist
Senior Vice President
Ronald A. Hornstein
Vice President &
Trust Officer
Ronald B. Houston
Sales Finance Officer
Denise M. Jarrett
Banking Officer
William B. Johnson
Vice President
William D. Joseph
Vice President
Richard A. Kelley
Vice President
Cynthia A.H. Kilmartin
Vice President
Joanne C. Knapp
Assistant Vice President &
Assistant Controller
Rex W. Knisley
Vice President
Thomas W. Kuester
Manager, Tax Accounting
Stanley F. Kukla, Jr.
Vice President
Judith A. Lamb
Assistant Vice President &
Manager, Girard
Joseph Lambo
Regional President
David J. Lapikas
Banking Officer
Joseph P. Lombardi
Banking Officer
Dennis P. Lyden
Vice President
Jean Macom
Compliance Auditor
Mario N. Marini
Assistant Trust Officer
William H. Mays
Vice President
Lynda K. McBride
Banking Officer
Eleanor J. McIntyre
Manager, Corry
Oscar C. Mehler
Assistant Vice President &
Manager, Hermitage
James R. Miale
Vice President
Pamela J. Mickley
Vice President
Joseph A. Mielecki
Assistant Vice President &
Trust Officer
William J. Moder III
Corporate Counsel
David B. Mogle
Senior Vice President
Thomas E. Morkin
Senior Vice President &
Trust Officer
James M. Mramor
Assistant Vice President &
Security Officer
Jill A. Murrin
Manager, Jamestown
Glenda Naas
Manager, Conneautville
James F. Nellis
Senior Vice President
Diane D. Nelson
Assistant Manager,
Loan Administration & Policy
Brian D. Nespor
Manager, Slippery Rock
James G. Orie
Corporate Counsel
Jerome K. Osborne
Senior Vice President
Joseph F. Pahl
Vice President
Robert J. Paris
Vice President
Phyllis J. Parkany
Assistant Vice President
Janet M. Parke
Assistant Vice President &
Manager, East Erie Plaza
Amy Perell
Vice President &
Manager, Hadley Road
Randy J. Price
Senior Vice President
Paul D. Puleo
Vice President
Gary C. Rauschenberger
Vice President &
Trust Officer
Robert T. Reichert
Vice President
Timothy J. Richardson
Assistant Manager, Hermitage
William J. Rundorff
Vice President
Paul E. Sallade
Vice President
Elizabeth Sant
Assistant Vice President
Ronald R. Scarton
Banking Officer
Barry J. Sharp
Vice President
Candace D. Sizer
Vice President & Manager,
Sharpsville
Yukona J. Slattery
Assistant Manager,
West Erie Plaza
Raymond T. Slovesko
Vice President
Michael A. Soukenik
Assistant Vice President
Sandra L. Stallard
Assistant Vice President &
Manager, Conneaut Lake
Matthew W. Stever
Assistant Vice President &
Trust Officer
John J. Stolar, Jr.
Vice President
Craig D. Stover
Banking Officer
Margaret A. Stroia
Banking Officer
Jenifer A. Studer
Banking Officer
Raymond J. Swacha
Assistant Vice President &
Manager, Franklin
Foster S. Swan
Vice President
Thomas H. Sweesy
Assistant Vice President &
Manager, West Middlesex
Cheryl L. Thomas
Assistant Vice President
Robert N. Timmerman
Vice President & Manager,
Sharon and Penn-Ohio
Leslie A. Tuk
Manager, Financial Systems
56
59
- -------------------------------------------------------------------------------
First National Bank
of Pennsylvania
Kenneth J. Turcic
Vice President &
Manager, Greenville
Christine E. Tvaroch
Audit Manager
Tracey L. Verroco
Banking Officer
Jeff W. Wagner
Vice President &
Trust Officer
Jeffrey A. Wallace
Vice President
Robert M. Wallace
Senior Vice President
John D. Waters
Senior Vice President &
Chief Financial Officer
William W. Wehr, Jr.
Vice President
Linda R. Wiley
Senior Vice President
Cheryl L. Wolfe
Assistant Manager, Farrell
Gale E. Wurster
Senior Vice President
Deborah L. Yuran
Banking Officer
Lisa R. Zigo
Banking Officer
Directors
William B. Campbell
Charles T. Cricks
Henry M. Ekker
Stephen J. Gurgovits
Thomas W. Hodge
Kenneth R. James
George E. Lowe, D.D.S.
Paul P. Lynch
Peter Mortensen
Robert S. Moss
William A. Quinn
William J. Strimbu
Archie O. Wallace
Joseph M. Walton
James T. Weller
Eric J. Werner
Donna C. Winner
Director Emeritus
Charles C. Hamilton
Advisory Boards
Farrell Area
L. DeWitt Boosel
William R. Hyatt
Herman P. Magnotto
Louis Mastrian, Ph.D.
Joseph R. Mirizio
John G. Sava
Thomas R. Stanton
Rev. Anderson Tatum, Jr.
Michael L. Wright
Charles Zeigler, M.D.
Franklin Area
Richard T. Beith
Tedd B. Bodimer
Richard A. Castonguay, Jr.
John E. Egan
William R. Lutz
Andrew B. Maitland
John F. Malarky
Michael L. Reichfield
John W. Shonnard, M.D.
William R. Steiner
Carl D. Wible
Peter M. Winkler
Greenville Area
James E. Adzima
Lyle E. Anderson
Daniel J. Brown
Cheryl C. Burns
Richard H. Dykes
Frank L. Fenton, Jr.
William J. Ferguson
Robert E. Fischer
Quentin M. Gosser
C. Carlyle Haaland
Gerald B. Hodge
William E. Johnston
Gary W. Kidd
James J. Kolenich, M.D.
L. John Kuder
Stephen E. Lojacono
Richard M. Orendi
John J. Povanda
Robert A. Reimold
James A. Speir
Joseph P. Walton
Grove City Area
Timothy R. Bonner
Robert Gilkey, Sr.
Lewis D. McEwen
Garth E. Runion, Ph.D.
F. Alan Snyder
Melinda C. Steigerwald
Richard R. Stevenson
Eric K. Thomas
Frank J. Zingone
Hermitage Area
Leon S. Bolotin
Charles W. Foltz
Brian Generalovich, D.M.D.
Joseph A. George
Robert C. Jazwinski
George A. Kraynak
Michael A. Magnotto
Samuel L. Ragusa
James E. Riley
Michael Ristvey, Jr.
Francis J. Sarvas
Frank A. Scoccia
Mark L. Stabile, D.O.
Jacob C. Young
Lawrence Area
Richard S. Cunningham
Bill F. DeCarbo
Joseph Giordanno
Bhattarahally Linganna, M.D.
Charles J. Long, Jr.
Lisa McCaskey
Donald Melonio
John A. Orlando
Ronald J. Patrick
Richard Ross
Thomas A. Shumaker
Sister Donna Zwigart
Sharpsville Area
Edwin Bortner
James Cattron, Sr.
Luann Franklin
M. Bruce Hofius
Daniel J. Lapikas
Ralph W. Mehler
Alfred A. Perfett, M.D.
Kenneth P. Robertson
Stephen J. Sherman
Edmond Susi
Slippery Rock Area
Gerald A. Heller, M.D.
Henry Lenz, Ph.D.
Abbas G. Mamoozadah
George J. Mihalik, Ph.D.
Timothy P.V. Papley
West Middlesex Area
T. Scott Campbell
William B. Campbell
W. Wayne Cunningham
Robert D. Devlin
Frank Draskovic
Charles C. Hamilton
Albert J. Jones
David A. Jones
Donald J. Lark, Jr.
Larry A. Mattson
Rev. Richard Mayer
Howard F. Mitchell
William A. Quinn
Richard H. Schuller
Edwin H. Sowers
Jack L. Thompson
Joseph R. Walsh
Rev. R. Donald Wilson
57
60
F.N.B. Corporation and Subsidiaries
Officers and Directors
- -------------------------------------------------------------------------------
METROPOLITAN
SAVINGS BANK
Officers
Samuel K. Sollenberger
Chairman, President &
Chief Executive Officer
Peter Mortensen
Vice Chairman
Peter J. Asimakopoulos
Vice President,
Commercial Banking
Edward J. Brant
Vice President,
Mortgage Banking,
Assistant Secretary,
Assistant Treasurer
Samuel Buzzacco
Vice President,
Branch Administration,
Assistant Secretary &
Assistant Treasurer
Brett J. Carnahan
Assistant Vice President,
Commercial Banking
Margaret J. Chambers
Community Banking Officer
Christopher J. Colella
Assistant Vice President,
Commercial Banking
Paula S. Farkas
Community Banking
Alberta L. Fusselman
Vice President,
Community Banking
Lloyd H. Lamm
Senior Vice President,
Chief Operations Officer &
Secretary
Vito A. Machi
Senior Vice President,
Senior Loan
Administration Officer,
Assistant Secretary &
Assistant Treasurer
Thomas G. Maley
Controller
Dale L. Mauch
Vice President,
Loan Administration,
Compliance &
CRA Officer
G. Robert Mohr
Vice President,
Commercial Banking
Nancy Nagel
Banking Officer,
Loan Administration
William J. Nagel
Assistant Vice President,
Business Development
Linda J. Nevel
Vice President,
Human Resources,
Assistant Secretary &
Assistant Treasurer
John M. Newman
Elected General Counsel
Madlyn J. Palma
Assistant Vice President,
Community Banking
Gregory W. Patrick
Assistant Vice President,
Community Banking
Carol J. Varverys
Assistant Vice President,
Community Banking
Directors
Ryerson W. Dalton
Suzanne M. Fleming
C. Clark Hammitt
James R. Harpster
Lawrence J. Heselov
Peter Mortensen
John M. Newman
John R. Perkins
Chairman Emeritus
George A. Seeds
Samuel K. Sollenberger
Director Emeritus
David R. Jones
Brookfield Advisory Board
David L. D'Amore, M.D.
Theresa Rice Daugherty
Joseph J. Fonagy, D.D.S.
Joseph Kerola
Larry R. Madasz
James A. O'Brien
Michael J. O'Brien
John R. Schuster
- -------------------------------------------------------------------------------
REEVES BANK
Officers
Robert A. Rimbey
President & Chief
Executive Officer
Sandra L. Coates
Vice President,
Operations
Leslie Jerome Dallas
Assistant Vice President,
Consumer Loan Manager
Cynthia L. Davidson
Assistant Vice President,
Retail Bank Manager
David A. Ellis
Vice President,
Commercial Lending
Shelly L. Fitzgerald
Assistant Vice President,
Retail Bank Manager
Gary R. Flasco
Vice President,
Branch Manager
Donna J. Harden
Assistant Vice President,
Retail Bank Manager
Ross "Toby" Jeffers
Vice President,
Commercial Lending
Sue E. Lambert
Assistant Vice President,
Retail Bank Manager
Kathy L. Lefever
Assistant Vice President,
Retail Bank Manager
David B. Mogle
Vice President & Treasurer
Sue A. Plassmeyer
Assistant Vice President,
Human Resources
Robert L. Ritter
Vice President,
Commercial Lending
Josephine M. Super
Vice President,
Loan Administration
Karen A. Teams
Assistant Vice President,
Assistant Controller
David E. Williams, Jr.
Vice President,
Commercial Lending
Dale B. Wissner
Vice President,
Branch Manager
Directors
W. Richard Blackwood
Joan H. Klein
John J. Knobloch
Harold C. Kornman
Ralph Linarelli, Sr.
Edward J. McClain
Chairman
Robert A. Rimbey
William J. Rundorff
Allen F. Sobol
Donald W. Zahn
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61
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REGENCY FINANCE COMPANY
and Subsidiaries
Officers
Peter Mortensen
Chairman
Thomas M. Tuggle
President
Roger D. Harrison
Executive Vice President
Robert D. Carter
Senior Vice President &
Assistant Secretary
Douglas J. Solock
Vice President,
Secretary & Treasurer
Joseph J. Busocker
Vice President,
Regional Manager
Paul T. Greany
Vice President
Dex E. Hetrick
Vice President,
Regional Manager
Raymond J. Pavelko
Vice President,
Manager
Ronald J. Perry
Vice President,
Manager
Philip J. Simpson
Vice President,
Regional Manager
Directors
Stephen J. Gurgovits
Roger D. Harrison
Raymond J. Heath
Russell B. Klasen
Victor C. Leap
Peter Mortensen
John M. Newman
Gary Sobotka
Douglas J. Solock
Thomas M. Tuggle
Citizens Budget Co. -- Youngstown
Branch Managers
James D. Bennett
Vice President,
Warren
Charles V. Dense
Assistant Secretary,
Mentor
Samuel G. Hazen
Assistant Secretary,
Salem
Timothy J. Packer
Assistant Secretary,
Liberty
John C. Harris
Assistant Secretary,
Boardman
Michael D. Yocolano
Assistant Secretary,
Austintown
Citizens Financial Services of New York, Inc.
Dennis H. Rock
Assistant Vice President,
Jamestown
F.N.B. Consumer
Discount Company
Branch Managers
Frank A. Armanini
Assistant Secretary,
Warren
Keith T. Caughey
Assistant Secretary,
Erie
Eric W. Crawford
Assistant Secretary,
New Castle
James M. Dezack
Assistant Secretary,
St. Marys
Lois A. Halsaver
Assistant Secretary,
Meadville
Donald W. Jackson
Assistant Secretary,
Uniontown
Sharon F. Juris
Assistant Secretary,
Butler
John L. Patterson
Assistant Secretary,
Corry
John A. Peyronel
Assistant Secretary,
Somerset
Carl E. Sakony
Assistant Secretary,
Grove City
Gary D. Salada
Assistant Secretary,
Bradford
Robert G. Seib
Assistant Secretary,
Titusville
Stephen D. Welsh
Assistant Secretary,
DuBois
George G. Yarzab
Assistant Secretary,
Greenville
Regency Consumer Discount Company
Branch Managers
Joseph E. Bartley
Assistant Secretary,
Bloomsburg
Floyd J. Celli
Assistant Secretary,
West Pittston
Thomas K. Condran
Assistant Secretary,
Stroudsburg
Matthew D. Kirkner
Assistant Secretary,
Danville
Joseph P. Novitski
Assistant Secretary,
Scranton
Christopher L. Scheetz
Assistant Secretary,
Bethlehem
Joseph E. Skursky
Assistant Secretary,
Wilkes-Barre
David P. Talacka
Assistant Secretary,
Eynon
Brian M. Wiktor
Assistant Secretary,
Selinsgrove
Bruce A. Wolf
Assistant Secretary,
State College
Gerard R. Zoltowski
Assistant Secretary,
Lewisburg
Reliance Consumer Discount Company
Branch Manager
Lee Pandoli
Assistant Secretary,
Hanover
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F.N.B. Corporation and Subsidiaries
Market Area
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[MAPS OF GEOGRAPHIC AREAS]
The maps define the geographic areas served by the affiliates of F.N.B.
Corporation. The shaded areas are the counties in Florida, New York, Ohio and
Pennsylvania where our banking or customer loan offices are located.
First National Bank of Southwest Florida located in Fort Myers and Cape Coral,
Florida will join F.N.B. Corporation in mid-1997 in accordance with a strategic
affiliation and merger agreement announced on November 15, 1996.
60
63
F.N.B. Corporation
Hermitage Square
Hermitage, PA 16148
Phone: (412) 981-6000