-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TNw8MjOwWjs2ysJMaHNM/zdTxTRtObTSfvwLJ3O82iRM0HbrLZOrEPsM1gMzGqmZ yC1REuxT1tV+KVOnvscCRA== 0000037808-97-000060.txt : 19971117 0000037808-97-000060.hdr.sgml : 19971117 ACCESSION NUMBER: 0000037808-97-000060 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FNB CORP/PA CENTRAL INDEX KEY: 0000037808 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 251255406 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-08144 FILM NUMBER: 97718531 BUSINESS ADDRESS: STREET 1: HERMITAGE SQUARE CITY: HERMITAGE STATE: PA ZIP: 16148 BUSINESS PHONE: 4129816000 MAIL ADDRESS: STREET 1: HERMITAGE SQUARE CITY: HERMITAGE STATE: PA ZIP: 16148 FORMER COMPANY: FORMER CONFORMED NAME: CITIZENS BUDGET CO DATE OF NAME CHANGE: 19750909 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1997 --------------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to -------------- -------------- Commission file number 0-8144 ------- F.N.B. CORPORATION - --------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Pennsylvania 25-1255406 - ------------------------------------- ----------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One F.N.B. Boulevard, Hermitage, PA 16148 - --------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (412) 981-6000 - --------------------------------------------------------------------------- (Registrant's telephone number, including area code) Not applicable - --------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---- ---- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No ---- ----- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at October 31, 1997 ----- ------------------------------- Common Stock, $2 Par Value 14,025,570 Shares - -------------------------- ----------------- F.N.B. CORPORATION FORM 10-Q September 30, 1997 INDEX PART I - FINANCIAL INFORMATION PAGE Item 1. Financial Statements Consolidated Balance Sheet 2 Consolidated Income Statement 3 Consolidated Statement of Cash Flows 4 Notes to Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II - OTHER INFORMATION Item 1. Legal Proceedings 15 Item 2. Changes in Securities 15 Item 3. Defaults Upon Senior Securities 15 Item 4. Submission of Matters to a Vote of Security Holders 15 Item 5. Other Information 15 Item 6. Exhibits and Reports on Form 8-K 15 Signatures 18 F.N.B. CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET Dollars in thousands, except par values SEPTEMBER 30, DECEMBER 31, 1997 1996 ------------- ------------ UNAUDITED ------------- ASSETS Cash and due from banks $ 76,154 $ 107,476 Interest bearing deposits with banks 2,645 1,334 Federal funds sold 48,581 6,425 Loans held for sale 1,469 9,610 Securities available for sale 337,367 322,068 Securities held to maturity (fair value of $130,087 and $173,677) 130,010 174,551 Loans, net of unearned income of $18,151 and $23,763 1,739,278 1,728,132 Allowance for loan losses (25,764) (27,800) ------------- ------------ NET LOANS 1,713,514 1,700,332 ------------- ------------ Premises and equipment 55,847 46,714 Other assets 63,459 49,897 ------------- ------------ $ 2,429,046 $ 2,418,407 ============= ============ LIABILITIES Deposits: Non-interest bearing $ 227,263 $ 231,264 Interest bearing 1,764,949 1,782,624 ------------- ------------ TOTAL DEPOSITS 1,992,212 2,013,888 Other liabilities 34,069 34,825 Short-term borrowings 131,795 112,230 Long-term debt 56,131 58,179 ------------- ------------ TOTAL LIABILITIES 2,214,207 2,219,122 ------------- ------------ STOCKHOLDERS' EQUITY Preferred stock - $10 par value Authorized - 20,000,000 shares Issued - 290,000 and 352,531 shares Aggregate liquidation value - $7,250 and $8,813 2,900 3,525 Common stock - $2 par value Authorized - 100,000,000 shares Issued - 14,113,056 and 13,305,369 shares 28,226 26,611 Additional paid-in capital 116,858 101,445 Retained earnings 65,475 66,625 Net unrealized securities gains 4,145 2,566 Treasury stock - 89,379 and 62,723 shares at cost (2,765) (1,487) ------------- ------------ TOTAL STOCKHOLDERS' EQUITY 214,839 199,285 ------------- ------------ $ 2,429,046 $ 2,418,407 ============= ============ See accompanying Notes to Consolidated Financial Statements F.N.B. CORPORATION AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENT Dollars in thousands, except per share data Unaudited THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, --------------------- -------------------- 1997 1996 1997 1996 ---------- ---------- ---------- --------- INTEREST INCOME Loans, including fees $ 40,369 $ 39,039 $ 121,829 $ 114,763 Securities: Taxable 6,200 5,651 18,702 17,848 Tax exempt 529 579 1,699 1,687 Dividends 271 176 814 525 Other 739 344 2,105 1,586 ---------- ---------- ---------- ---------- TOTAL INTEREST INCOME 48,108 45,789 145,149 136,409 ---------- ---------- ---------- ---------- INTEREST EXPENSE Deposits 18,406 17,214 55,223 51,566 Short-term borrowings 1,477 1,475 4,345 4,008 Long-term debt 1,023 609 2,630 1,996 ---------- ---------- ---------- ---------- TOTAL INTEREST EXPENSE 20,906 19,298 62,198 57,570 ---------- ---------- ---------- ---------- NET INTEREST INCOME 27,202 26,491 82,951 78,839 Provision for loan losses 2,382 1,850 8,140 5,517 ---------- ---------- ---------- ---------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 24,820 24,641 74,811 73,322 ---------- ---------- ---------- ---------- NON-INTEREST INCOME Insurance commissions and fees 1,045 1,264 2,938 3,155 Service charges 2,997 2,168 8,751 7,557 Trust 360 384 1,216 1,150 Gain on sale of securities 420 205 859 788 Other 1,231 1,409 3,295 2,909 ---------- ---------- ---------- ---------- TOTAL NON-INTEREST INCOME 6,053 5,430 17,059 15,559 ---------- ---------- ---------- ---------- 30,873 30,071 91,870 88,881 ---------- ---------- ---------- ---------- NON-INTEREST EXPENSES Salaries and employee benefits 10,660 10,296 34,698 31,136 Net occupancy 1,661 1,769 5,153 5,133 Equipment 1,603 1,417 4,863 4,441 Recapitalization of Savings Association Insurance Fund 2,965 2,965 Other 5,451 6,866 21,579 20,577 ---------- ---------- ---------- ---------- TOTAL NON-INTEREST EXPENSES 19,375 23,313 66,293 64,252 ---------- ---------- ---------- ---------- INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM 11,498 6,758 25,577 24,629 Income taxes 3,537 2,083 7,971 7,720 ---------- ---------- ---------- ---------- INCOME BEFORE EXTRAORDINARY ITEM 7,961 4,675 17,606 16,909 Gain on sale of subsidiary, net of tax 5,227 ---------- ---------- ---------- ---------- NET INCOME $ 7,961 $ 4,675 $ 22,833 $ 16,909 ========== ========== ========== ========== INCOME PER COMMON SHARE BEFORE EXTRAORDINARY ITEM: Primary $ 1.19 ========== Fully Diluted $ 1.17 ========== NET INCOME PER COMMON SHARE: Primary $ .54 $ .32 $ 1.56 $ 1.16 ========== ========== ========== ========== Fully Diluted $ .53 $ .31 $ 1.52 $ 1.12 ========== ========== ========== ========== CASH DIVIDENDS PER COMMON SHARE $ .16 $ .15 $ .47 $ .45 ========== ========== ========== ========== AVERAGE COMMON SHARES OUTSTANDING 14,018,037 13,865,367 13,981,369 13,819,924 ========== ========== ========== ========== See accompanying Notes to Consolidated Financial Statements F.N.B. CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS Dollars in thousands Unaudited Nine Months Ended September 30 1997 1996 ---------- ---------- OPERATING ACTIVITIES Net income $ 22,833 $ 16,909 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 5,319 5,000 Provision for loan losses 8,140 5,517 Deferred taxes 1,307 (637) Net gain on sale of securities (859) (788) Net (gain) loss on sale of loans (1,069) 52 Extraordinary gain on sale of subsidiary, net of tax (5,227) Proceeds from sale of loans 21,440 21,621 Loans originated for sale (12,671) (17,816) Net change in: Interest receivable (1,888) 1,046 Interest payable 1,270 772 Other, net (1,793) 5,822 ---------- ---------- Net cash flows from operating activities 36,802 37,498 ---------- ---------- INVESTING ACTIVITIES Net change in: Interest bearing deposits with banks (1,333) 1,960 Federal funds sold (42,156) 38,716 Loans (122,504) (157,858) Securities available for sale: Purchases (157,866) (79,859) Sales 27,238 45,144 Maturities 114,298 67,614 Securities held to maturity: Purchases (6,325) (40,645) Maturities 39,461 33,261 Increase in premises and equipment (14,617) (6,627) Net cash paid for divestitures (5,976) ---------- ---------- Net cash flows from investing activities (169,780) (98,294) ---------- ---------- FINANCING ACTIVITIES Net change in: Non-interest bearing deposits 9,631 (6,980) Interest bearing deposits 82,175 27,307 Short-term borrowings 20,675 69,460 Increase in long-term debt 24,234 8,016 Decrease in long-term debt (26,201) (24,844) Net acquisition of treasury stock (1,819) (785) Cash dividends paid (7,039) (5,160) ---------- ---------- Net cash flows from financing activities 101,656 67,014 ---------- ---------- NET INCREASE (DECREASE) IN CASH AND DUE FROM BANKS (31,322) 6,218 Cash and due from banks at beginning of period 107,476 90,656 ---------- ---------- CASH AND DUE FROM BANKS AT END OF PERIOD $ 76,154 $ 96,874 ========== ========== See accompanying Notes to Consolidated Financial Statements F.N.B. CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) SEPTEMBER 30, 1997 BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements give retroactive effect to the mergers of Southwest Banks, Inc. (Southwest) and West Coast Bancorp, Inc. (WCBI) with and into F.N.B. Corporation (the Corporation). The mergers which were consummated on January 21, 1997 and April 18, 1997, resulted in the Corporation issuing 2,851,907 and 1,197,128 shares of common stock, respectively. These transactions have been accounted for as poolings-of-interests, and such financial statements are presented as if the mergers had been consummated for all the periods presented. The financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to the consolidated financial statements for the year ended December 31, 1996 and footnotes thereto included in the Corporation's Current Report on Form 8-K filed with the Securities and Exchange Commission on July 22, 1997. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates. PER SHARE AMOUNTS Per share amounts are adjusted for the common stock dividends, including the 5% stock dividend issued on May 31, 1997. 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 vested stock options during each period. Fully diluted earnings per common share is calculated by dividing net income by the weighted average number of shares of common stock outstanding, assuming the conversion of outstanding convertible preferred stock from the beginning of the year or date of issuance and the exercise of vested stock options. In February 1997, the Financial Accounting Standards Board issued Statement No. 128 (FAS No. 128), "Earnings per Share," which is required to be adopted on December 31, 1997. At that time, the Corporation will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements primary earnings per share is replaced with basic earnings per share. Basic earnings per share will be calculated by dividing income available to common stockholders by the weighted average shares outstanding for the period, without the dilutive effect of stock options. Diluted earnings per share will replace fully diluted earnings per share, and will reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that would share in net earnings. The impact of FAS No. 128 on the calculations of primary and fully diluted earnings per share is immaterial for the three month and nine month periods ended September 30, 1997 and 1996. NEW ACCOUNTING STANDARDS FAS No. 130, "Reporting Comprehensive Income," establishes new standards for reporting and display of comprehensive income and its components in a full set of general purpose financial statements. Comprehensive income is defined as the change in equity during a period from transactions and other events and circumstances from non shareholder sources, such as changes in net unrealized securities gains. It includes all changes in equity during a period except those resulting from investments by shareholders and distributions to shareholders. This statement is effective for the Corporation's fiscal year ending December 31, 1998. FAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," establishes standards for the reporting of financial information from operating segments in annual and interim financial statements. It requires that financial information be reported on the basis that it is reported internally for evaluating segment performance and deciding how to allocate resources to segments. Because this statement addresses how supplemental financial information is disclosed in annual and interim reports, the adoption will have no material impact on the financial statements. This statement is effective for the Corporation's fiscal year ending December 31, 1998. CASH FLOW INFORMATION Following is a summary of supplemental cash flow information (in thousands): Nine months ended September 30 1997 1996 -------- -------- Cash paid for: Interest $ 60,928 $ 56,779 Income taxes 6,287 7,895 Noncash Investing and Financing Activities: Acquisition of real estate in settlement of loans 2,603 1,672 Loans granted in the sale of other real estate 1,188 319 MERGERS AND DIVESTITURE The Corporation completed its merger with Southwest, a multi-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. Results for 1996 are restated to reflect this acquisition as a pooling-of- interests. The Corporation completed its merger with WCBI, a bank holding company headquartered in Cape Coral, Florida, effective April 18, 1997. Under the terms of the merger agreement, each outstanding share of WCBI's common stock was converted into .794 share of the Corporation's common stock with cash being paid in lieu of fractional shares. A total of 1,197,128 shares of the Corporation's common stock were issued. Results for 1996 are restated to reflect this acquisition as a pooling-of- interests. Operating results of the Corporation, Southwest and WCBI for the nine months ended September 30, 1996, prior to restatement are (in thousands): F.N.B. Corporation Southwest WCBI Combined ----------- --------- --------- ----------- Net interest income $ 60,237 $13,136 $ 5,466 $78,839 Net income 13,446 2,616 847 16,909 The Corporation completed the sale of its subsidiary, Bucktail Bank and Trust Company (Bucktail), to Sun Bancorp, Inc. (Sun), a bank holding company headquartered in Selinsgrove, Pennsylvania. Under the sales agreement, Sun issued 565,384 shares of common stock, having an estimated value of $17.6 million, in exchange for 100% ownership of Bucktail. At consummation, Bucktail had assets of $124.9 million and liabilities of $115.3 million. The sale resulted in the Corporation recognizing a $5.2 million after-tax extraordinary gain. The Corporation has reflected its original ownership interest as well as subsequent purchases of Sun common stock as an equity investment included in other assets. At September 30, 1997, the Corporation's investment in Sun had a market value totaling $20.7 million and a cost basis totaling $19.4 million. The Corporation recognized equity earnings from Sun totaling $325,000 for the three months ended September 30, 1997. The Corporation completed its merger with Indian Rocks State Bank (Indian Rocks), a community bank headquartered in Largo, Florida, effective October 17, 1997. Under the terms of the merger agreement, each outstanding share of Indian Rocks common stock was converted into 1.8 shares of the Corporation's common stock with cash being paid in lieu of fractional shares. A total of 630,000 shares of the Corporation's common stock were issued. The merger has been accounted for as a pooling-of- interests, except that financial statements will not be restated due to immateriality. On July 29, 1997, the Corporation signed a definitive merger agreement with Mercantile Bank of Southwest Florida (Mercantile), a $120 million bank located in Naples, Florida. Under the terms of the agreement, the Corporation will pay $17.72 per share for each of the 847,006 outstanding shares of Mercantile's common stock. The Corporation has received all of the necessary approvals and Mercantile will be merged into the Corporation's existing affiliate, First National Bank of Naples. The transaction will be accounted for as a purchase and is expected to close during November of 1997. On August 13, 1997, the Corporation signed a definitive merger agreement with West Coast Bank (West Coast), a $100 million state chartered bank with two offices in Sarasota County, Florida. Under the terms of the agreement, the Corporation will exchange the Corporation's common stock for all of the outstanding common stock of West Coast. The exchange ratio, which is based upon the average price of the Corporation's common stock prior to closing, ranges from 1 to 1.1 shares of the Corporation's common stock for each share of West Coast common stock. At September 30, 1997, West Coast had 579,063 shares of common stock outstanding. The transaction, which will be accounted for as a pooling-of-interests, is expected to close during the first quarter of 1998. PART I ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. LIQUIDITY AND INTEREST RATE SENSITIVITY The Corporation monitors its liquidity position on an ongoing basis to assure that it is able to meet the need for funds at all times. Given the monetary nature of its assets and liabilities and the 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. 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 $28.0 million was unused at September 30, 1997. To further meet its liquidity needs, the Corporation also has access to the Federal Home Loan Bank and the Federal Reserve System, as well as other 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, caused from differences in the dollar amount of interest earning assets and interest bearing liabilities repricing within a given period of time, 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 amortization, maturity and repricing of assets and liabilities. Non-maturity deposit balances have been allocated to various repricing intervals to estimate their characteristics. The cumulative gap reflects the net position of assets and liabilities repricing in specified time periods. The cumulative one year gap is positive. Assuming no restructuring or modifications to asset/liability composition, an increase in interest rates would result in an increase in net interest income, over a one year period. Likewise, a decrease in interest rates would result in a decrease in net interest income over a one year period. Fluctuations in net interest income are dependent on asset/liability composition, which is influenced by competitive factors. Following is the gap analysis as of September 30, 1997 (in thousands): Within 4-12 1-5 Over 3 Months Months Years 5 years Total ---------- --------- --------- -------- ---------- INTEREST EARNING ASSETS Interest bearing deposits with banks $ 2,645 $ 2,645 Federal funds sold 48,581 48,581 Loans held for sale 1,469 1,469 Securities: Available for sale 23,956 $ 54,069 $ 209,932 $ 49,410 337,367 Held to maturity 14,188 30,245 76,364 9,213 130,010 Loans, net of unearned 527,178 432,799 630,921 148,380 1,739,278 --------- --------- --------- ---------- ---------- 618,017 517,113 917,217 207,003 2,259,350 Other assets 169,696 169,696 --------- --------- --------- ---------- ---------- $ 618,017 $ 517,113 $ 917,217 $ 376,699 $2,429,046 ========= ========= ========= ========== ========== INTEREST BEARING LIABILITIES Deposits: Interest checking $ 90,308 $ 187,976 $ 278,284 Savings 184,613 331,951 516,564 Time deposits 270,319 $ 369,421 $ 327,366 2,995 970,101 Short-term borrowings 91,613 10,276 29,906 131,795 Long-term debt 6,547 4,245 25,279 20,060 56,131 --------- --------- --------- ---------- ---------- 643,400 383,942 352,645 572,888 1,952,875 Other liabilities 261,332 261,332 Stockholders' equity 214,839 214,839 --------- --------- --------- ---------- ---------- $ 643,400 $ 383,942 $ 352,645 $1,049,059 $2,429,046 ========= ========= ========= ========== ========== PERIOD GAP $ (25,383)$ 133,171 $ 564,572 $ (672,360) ========= ========= ========= ========== CUMULATIVE GAP $ (25,383)$ 107,788 $ 672,360 ========= ========= ========= CUMULATIVE GAP AS A PERCENT OF TOTAL ASSETS (1.0%) 4.4% 27.7% ========= ========= ========= RATE SENSITIVE ASSETS/RATE SENSITIVE LIABILITIES (CUMULATIVE) 0.96 1.10 1.49 1.16 ========= ========= ========= ========== CAPITAL RESOURCES The assessment of capital adequacy depends on a number of factors such as asset quality, liquidity, earnings performance, changing competitive conditions and economic forces. The Corporation seeks to maintain a strong capital base to support its growth and expansion activities, to provide stability to current operations and to promote public confidence. Capital management is a continuous process. Since December 31, 1996, stockholders' equity has increased $15.8 million as a result of earnings retention. For the nine months ended September 30, 1997, the return on average equity was 14.86%. Total cash dividends declared represented 30.83% of net income. Book value per common share was $14.80 at September 30, 1997, compared to $13.70 at December 31, 1996. LOANS Following is a summary of loans (dollars in thousands): SEPTEMBER 30, DECEMBER 31, 1997 1996 ------------ ----------- Real estate: Residential $ 726,838 $ 682,600 Commercial 391,883 421,057 Construction 55,508 41,661 Installment loans to individuals 325,355 395,628 Commercial, financial and agricultural 215,936 189,411 Lease financing 41,909 21,538 Unearned income (18,151) (23,763) ---------- ---------- $1,739,278 $1,728,132 ========== ========== During the third quarter, the Corporation significantly reduced its exposure to sub-prime motor vehicle loans as approximately $16.3 million of such loans were sold to a third party. The sale resulted in the Corporation recognizing an after-tax loss of $250,000, after reducing the allowance for loan losses by $2.5 million. NON-PERFORMING ASSETS Non-performing assets include non-performing loans and other real estate owned. Non-performing loans include non-accrual loans and restructured loans. Non-accrual loans represent loans on which interest accruals have been discontinued. It is the Corporation's policy to discontinue interest accruals when principal or interest is due and has remained unpaid for 90 days or more unless the loan is both well secured and in the process of collection. When a loan is placed on non-accrual status, unpaid interest credited to income in the current year is reversed and unpaid interest accrued in prior years is charged against the allowance for loan losses. 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. Restructured loans are loans in which the borrower has been granted a concession on the interest rate or the original repayment terms due to financial distress. Following is a summary of non-performing assets (dollars in thousands): SEPTEMBER 30, DECEMBER 31, 1997 1996 ------------- ------------ Non-performing assets: Non-accrual loans $ 7,256 $ 9,571 Restructured loans 1,842 2,146 ------- ------- Total non-performing loans 9,098 11,717 Other real estate owned 4,060 7,039 ------- ------- Total non-performing assets $13,158 $18,756 ======= ======= Asset quality ratios: Non-performing loans as percent of total loans .53% .68% Non-performing assets as percent of total assets .54% .78% Non-performing loans are closely monitored on an ongoing basis as part of the Corporation's loan review process. The potential risk of loss on these loans is evaluated by comparing the loan balance to the present value of projected future cash flows or the value of any underlying collateral. Losses are recognized where appropriate. 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 current status of economic conditions, loan loss trends, delinquency and non-accrual trends, credit administration and concentrations of credit risk. Following is a summary of changes in the allowance for loan losses and selected ratios (dollars in thousands): Three Months Ended Nine Months Ended September 30, September 30, ------------------ ------------------ 1997 1996 1997 1996 -------- -------- -------- -------- Balance at beginning of period $ 28,075 $ 25,343 $ 27,800 $ 24,250 Reduction arising from the sale of a subsidiary (1,443) Reduction arising from the sale of loans (2,479) (2,479) Charge-offs (2,497) (2,076) (7,261) (5,548) Recoveries 283 346 1,007 1,244 -------- -------- -------- -------- Net charge-offs (2,214) (1,730) (6,254) (4,304) Provision for loan losses 2,382 1,850 8,140 5,517 -------- -------- -------- -------- Balance at end of period $ 25,764 $ 25,463 $ 25,764 $ 25,463 ======== ======== ======== ======== Allowance for loan losses to: Total loans, net of unearned income 1.49% 1.50% Non-performing loans 283.18% 233.99% The increase in the level of charge-offs and the provision for loan losses during 1997 resulted primarily from the consistent application of the Corporation's charge-off policy and methodology for determining the adequacy of the allowance for loan losses to WCBI. REGULATORY MATTERS Quantitative measures established by regulators to ensure capital adequacy require the Corporation and its banking subsidiaries to maintain minimum amounts and ratios of total and tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of tier 1 capital to average assets (as defined). Management believes, as of September 30, 1997, that the Corporation and each of its banking subsidiaries meet all capital adequacy requirements to which they are subject. As of June 30, 1997, the Corporation and each of its banking subsidiaries have been categorized as "well capitalized" under the regulatory framework for prompt corrective action. Following are capital ratios as of September 30, 1997 for the Corporation (dollars in thousands): To Be Well Capitalized Under For Capital Prompt Corrective Actual Adequacy Purpose Action Provisions ----------------- ---------------- ----------------- Amount Ratio Amount Ratio Amount Ratio --------- ------- -------- ------- --------- ------- Total Capital $240,175 14.3% $ 134,700 8.0% $ 168,375 10.0% (to risk- weighted assets) Tier 1 Capital 209,069 12.4% 67,350 4.0% 101,025 6.0% (to risk- weighted assets) Tier 1 Capital 209,069 8.7% 95,658 4.0% 119,573 5.0% (to average assets) The Corporation and its banking subsidiaries are subject to various regulatory capital requirements administered by the state and federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and 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. FINANCIAL INFORMATION SUMMARY Net income for the first nine months of 1997 was $22.8 million compared to $16.9 million for the first nine months of 1996. Primary earnings per share for those periods were $1.56 and $1.16, respectively, and $1.52 and $1.12 on a fully diluted basis. Highlights for the first nine months of 1997 include: o Recognition of a $5.2 million after tax extraordinary gain on the sale of the Corporation's former wholly-owned subsidiary, Bucktail Bank and Trust Company. o Recognition of $4.7 million in merger costs, severance payments and other non-recurring charges. o Recurring net income, which excludes all merger costs and other non-recurring charges and the extraordinary gain on the sale of Bucktail in 1997 and the one-time charge of $1.9 million, net of tax, to recapitalize the Savings Association Insurance Fund in 1996, totaled $21.9 million and $18.8 million for the first nine months of 1997 and 1996, respectively, providing a return on average assets of 1.20% in 1997 and 1.10% in 1996 and a return on average equity of 14.24% in 1997 and 13.06% in 1996. o Net interest margin on a fully taxable equivalent basis of 4.95%, as compared to 5.06% during the first nine months of 1996. o A 7.68% increase in net interest earning assets. o A 9.12% increase in commissions, fees and service charges. FIRST NINE MONTHS OF 1997 AS COMPARED TO FIRST NINE MONTHS OF 1996: The following table provides information regarding the average balances and yields and rates on interest earning assets and interest bearing liabilities (dollars in thousands): Nine Months Ended September 30 1997 1996 --------------------------- --------------------------- Average Yield/ Average Yield/ Balance Interest Rate Balance Interest Rate --------- ---------- ------ ---------- ---------- ------ ASSETS Interest earning assets: Interest bearing deposits with banks $ 2,281 $ 104 6.08% $ 3,664 $ 156 5.68% Federal funds sold 48,376 2,001 5.52 34,477 1,430 5.53 Securities: U.S. Treasury and other U.S. Government agencies and corporations 398,878 18,702 6.27 389,208 17,848 6.13 States of the U.S. and political sub- divisions (1) 54,568 2,405 5.88 53,872 2,357 5.83 Other securities (1) 21,308 885 5.54 18,758 634 4.51 Loans (1) (2) 1,755,336 122,569 9.34 1,625,684 115,608 9.50 ---------- -------- ---------- -------- Total interest earning assets 2,280,747 146,666 8.60 2,125,663 138,033 8.67 ---------- -------- ---------- -------- Cash and due from banks 73,342 83,389 Allowance for loan losses (28,698) (25,055) Premises and equipment 49,836 42,714 Other assets 55,668 51,731 ---------- ---------- $2,430,895 $2,278,442 ========== ========== LIABILITIES Interest bearing liabilities: Deposits: Interest bearing demand $ 303,279 $ 5,454 2.40 $ 324,215 $ 4,455 1.84 Savings 542,253 10,737 2.65 462,937 9,841 2.84 Other time 953,767 39,032 5.47 912,998 37,270 5.45 Short-term borrowings 119,816 4,345 4.85 96,851 4,008 5.53 Long-term debt 45,913 2,630 7.64 35,183 1,996 7.56 ---------- -------- ---------- -------- Total interest bearing liabilities 1,965,028 62,198 4.23 1,832,184 57,570 4.20 ---------- -------- ---------- -------- Non-interest bearing demand deposits 226,682 217,448 Other liabilities 33,814 36,112 ---------- ---------- 2,225,524 2,085,744 ========== ========== STOCKHOLDERS' EQUITY 205,371 192,698 ---------- ---------- $2,430,895 $2,278,442 ========== ========== Net interest earning assets $ 315,719 $ 293,479 ========== ========== Net interest income $ 84,468 $ 80,463 ======== ======== Net interest spread 4.37% 4.47% ====== ====== Net interest margin (3) 4.95% 5.06% ====== ====== (1) The amounts are reflected on a fully taxable equivalent basis using the federal statutory tax rate of 35% adjusted for certain federal tax preferences. (2) Average balance 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. Net interest income, the Corporation's primary source of earnings, is the amount by which interest and fees generated by interest earning assets, primarily loans and securities, exceed interest expense on deposits and borrowed funds. During the first nine months of 1997, net interest income, on a fully taxable equivalent basis, totaled $84.5 million, representing a 4.98% increase over the first nine months of 1996. Net interest income consisted of interest income of $146.7 million and interest expense of $62.2 million for the first nine months of 1997 compared to $138.0 million and $57.6 million for each, respectively, for the first nine months of 1996. Net interest margin fell to 4.95% at September 30, 1997 from 5.06% at September 30, 1996, as the yield on total interest earning assets declined by 7 basis points as compared to a 3 basis point increase in cost of funds. Strong competitive factors resulted in a 16 basis point decrease in the average yield on loans. Changes in deposit and borrowing mix were the primary factor in the increase in cost of funds. 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 nine months ending September 30, 1997 as compared to the nine months ending September 30, 1996 (in thousands): Volume Rate Net ------- ------- ------- INTEREST INCOME Interest bearing deposits with banks $ (66) $ 14 $ (52) Federal funds sold 574 (3) 571 Securities: U.S. Treasury and other U.S. Government agencies and corporations 445 409 854 States of the U.S. and political subdivisions 31 17 48 Other securities 94 157 251 Loans 8,825 (1,864) 6,961 ------- ------- ------- 9,903 (1,270) 8,633 ------- ------- ------- INTEREST EXPENSE Deposits: Interest bearing demand (263) 1,262 999 Savings 1,470 (574) 896 Other time 1,628 134 1,762 Short-term borrowings 700 (363) 337 Long-term debt 613 21 634 ------- ------- ------- 4,148 480 4,628 ------- ------- ------- NET CHANGE $ 5,755 $(1,750) $ 4,005 ======= ======== ======= The amount of change not solely due to rate or volume changes was allocated between the change due to rate and the change due to volume based on the net size of the rate and volume changes. Interest income on loans, on a fully taxable equivalent basis, increased 6.02% from $115.6 million for the nine months ended September 30, 1996 to $122.6 million for the nine months ended September 30, 1997. This increase was the result of an increase in average loans of 7.98% over this same period last year. Interest expense on deposits increased $3.7 million or 7.09% for the nine months ended September 30, 1997, compared to the nine months ended September 30, 1996. This increase was the result of an increase in average deposits of 5.83% over this same nine month period. The average balance in savings and time deposits increased $120.1 million as the average balance in interest bearing demand deposits decreased by $20.9 million. Interest expense on short-term borrowings increased $337,000 or 8.41% for these same periods due to an increase in average short-term borrowings of 23.71%, which was partially offset by a decline in rate paid of 68 basis points. The provision for loan losses totaled $8.1 million for the first nine months of 1997, as compared to $5.5 million for the first nine months of 1996. In connection with the Corporation's acquisition of WCBI, the Corporation recognized an additional provision for loan losses of $1.7 million after applying the Corporation's allowance for loan loss policy and methodology for evaluating the adequacy of the allowance to WCBI. Non-interest income increased by 9.64% during the first nine months of 1997 as compared to the first nine months of 1996, primarily due to an increase of 9.12% in service charges and other fees. Total non-interest expenses increased 3.18% during the first nine months of 1997, compared to the first nine months of 1996. The majority of this increase resulted from recognition of various non-recurring items including $2.2 million in merger related costs and $2.5 million in severance payments. During the nine month period ended September 30, 1996, the Corporation was assessed a one-time non-recurring charge of $3.0 million in order to recapitalize the SAIF. Excluding these non-recurring items from both the nine month periods ended September 30, 1997 and 1996 resulted in non-interest expense remaining relatively flat. Income tax expense for the nine months ended September 30, 1997 totaled $8.0 million, providing an effective tax rate of 31.16% compared to 31.35% for the nine months ended September 30, 1996. Consolidated net income before extraordinary items was $17.6 million for the first nine months of 1997, representing a $697,000 or 4.12% increase over the first nine months of 1996. THIRD QUARTER OF 1997 AS COMPARED TO THIRD QUARTER OF 1996: During the third quarter of 1997, net interest income increased $711,000 or 2.68% over the third quarter of 1996. Total interest income increased $2.3 million or 5.06%, primarily the result of an increase in loan volume. Total interest expense increased $1.6 million or 8.33% during the third quarter of 1997, compared to the same period of 1996. Interest expense on deposits accounted for the majority of this increase, $1.2 million, due to an increase in average deposits. The provision for loan losses totaled $2.4 million for the third quarter of 1997, as compared to $1.9 million for the third quarter of 1996. The increase in the provision corresponds to the increase in lending activity coupled with the Corporation's exit from sub-prime motor vehicle lending. Non-interest income increased 11.47% during the third quarter of 1997 compared to the same period of 1996. Total non-interest expenses decreased 4.78% during the third quarter of 1997, compared to the third quarter of 1996, after excluding the one-time assessment of $3.0 million in 1996 to recapitalize the SAIF. This decrease in recurring non-interest expenses was attributable to expenses in 1996 relating to the Corporation's wholly- owned subsidiary, Bucktail which was sold in June of 1997. Income tax expense totaled $3.5 million during the quarter providing an effective tax rate of 30.76% compared to 30.82% in 1996. Net income totaled $8.0 million for the third quarter of 1997, compared to $4.7 million for the third quarter of 1996. Excluding the impact of the non- recurring items, net income totaled $6.6 million for the third quarter of 1996. PART II ITEM 1. LEGAL PROCEEDINGS No material pending legal proceedings exist to which the Corporation or any of its subsidiaries is a party, or of which any of their property is the subject, except ordinary routine proceedings which are incidental to the ordinary conduct of business. In the opinion of management, pending legal proceedings will not have a material adverse effect on the consolidated financial position of the Corporation and its subsidiaries. ITEM 2. CHANGES IN SECURITIES Not applicable ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable ITEM 5. OTHER INFORMATION Not applicable ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 11. F.N.B. Corporation STATEMENT RE COMPUTATION OF PER SHARE EARNINGS Dollars in thousands Three Months Ended Nine Months Ended September 30, September 30, -------------------- -------------------- 1997 1996 1997 1996 --------- -------- --------- --------- PRIMARY Net Income $ 7,961 $ 4,675 $ 22,833 $ 16,909 Less: Preferred Stock Dividends Declared (139) (186) (454) (595) ---------- ---------- ---------- ---------- Net Income Applicable to Common Stock $ 7,822 $ 4,489 $ 22,379 $ 16,314 ========== ========== ========== ========== Average Common Shares Outstanding 14,018,037 13,865,367 13,981,369 13,819,924 Net Effect of Dilutive Stock Options and Stock Warrants - Based on the Treasury Stock Method Using Average Market Price 400,924 309,581 372,528 303,780 ---------- ---------- ---------- ---------- 14,418,961 14,174,948 14,353,897 14,123,704 ========== ========== ========== ========== Net Income per Common Share $.54 $.32 $1.56 $1.16 ==== ==== ===== ===== FULLY DILUTED Net Income Applicable to Common Stock $ 7,961 $ 4,675 $ 22,833 $ 16,909 ========== ========== ========== ========== Average Common Shares Outstanding 14,018,037 13,865,367 13,981,369 13,819,924 Series A Convertible Preferred Stock 17,391 27,581 17,391 27,581 Series B Convertible Preferred Stock 593,700 804,861 630,638 881,339 Net Effect of Dilutive Stock Options and Stock Warrants - Based on the Treasury Stock Method Using the Period-End Market Price, If Higher than Average Market Price 407,249 309,899 407,061 303,780 ---------- --------- --------- --------- 15,036,377 15,007,708 15,036,459 15,032,624 ========== ========== ========== ========== Net Income per Common Share $.53 $.31 $1.52 $1.12 ==== ==== ===== ===== 27. Financial Data Schedule (filed herewith) (b) Reports on Form 8-K There were no reports on Form 8-K filed by the Corporation during the three months ended September 30, 1997. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. F.N.B. Corporation --------------------------- (Registrant) Dated: 11/4/97 /s/ Peter Mortensen ------------------------------ ----------------------------- Peter Mortensen Chairman and President (Principal Executive Officer) Dated: 11/4/97 /s/ John D. Waters ------------------------------ ----------------------------- John D. Waters Vice President and Chief Financial Officer (Principal Financial Officer) EX-27 2
9 1000 3-MOS DEC-31-1997 SEP-30-1997 76154 2645 48581 0 337367 130010 130087 1739278 25764 2429046 1992212 131795 34069 56131 0 2900 28226 183713 2429046 40369 7000 739 48108 18406 20906 27202 2382 420 19375 11498 7961 0 0 7961 .54 .53 8.60 7256 3827 1842 0 28075 2497 283 25764 25764 0 0
-----END PRIVACY-ENHANCED MESSAGE-----