-----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, OEq59diAwMJ4M2CmPT90Xugut5Hf/zMo8sYSpfnl+x+dIdqfAQXGq6tXaqw/uGwE 6ZhDOX40CPHfh7mLp8Pwzw== 0000950128-97-000642.txt : 19970320 0000950128-97-000642.hdr.sgml : 19970320 ACCESSION NUMBER: 0000950128-97-000642 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970319 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-08144 FILM NUMBER: 97559048 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-K 1 F.N.B. CORPORATION 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Fee Required) For the fiscal year ended December 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (No Fee Required) For the transition period from to --------------------- --------------------- Commission file number 0-8144 F.N.B. CORPORATION - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Pennsylvania 25-1255406 - ------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) Hermitage Square Hermitage, Pennsylvania 16148 - ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 412-981-6000 --------------------------- Securities registered pursuant to Section 12(b) of the Act: NONE ------------------- Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $2 per share 7-1/2% Cumulative Convertible Preferred Stock, Series B, par value $10 per share - ------------------------------------------------------------------------------- (Title of Class) 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 --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The registrant estimates that as of February 28, 1997, the aggregate market value of the voting stock held by non-affiliates of the registrant, computed by reference to the last sale price as reported in the NASDAQ system for such date, was approximately $306,870,180. APPLICABLE ONLY TO CORPORATE REGISTRANTS: ----------------------------------------- As of February 28, 1997, the registrant had outstanding 12,129,920 shares of common stock having a par value of $2 per share. Continued 2 DOCUMENTS INCORPORATED BY REFERENCE
Part of Form 10-K into DOCUMENT which Document is Incorporated -------- ------------------------------ Annual Report to Stockholders for fiscal year ended December 31, 1996 I & II Definitive proxy statement for the 1997 Annual Meeting of Stockholders to be held on April 23, 1997 III
3 FORM 10-K 1996 INDEX
PART I PAGE Item 1. Business. General I-2 Statistical Disclosure I-10 Item 2. Properties. I-11 Item 3. Legal Proceedings. I-11 Item 4. Submission of Matters to a Vote of Security Holders. I-11 Executive Officers of the Registrant I-12 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. II-1 Item 6. Selected Financial Data. II-1 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. II-1 Item 8. Financial Statements and Supplementary Data. II-1 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. II-1 PART III Item 10. Directors and Executive Officers of the Registrant. III-1 Item 11. Executive Compensation. III-1 Item 12. Security Ownership of Certain Beneficial Owners and Management. III-1 Item 13. Certain Relationships and Related Transactions. III-1 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. IV-1 Signatures IV-2 Index to Exhibits IV-4
I-1 4 PART I ITEM 1. BUSINESS GENERAL F.N.B. Corporation (the Corporation) was formed in 1974 as the holding company of its then sole subsidiary, First National Bank of Mercer County. Since its formation, the Corporation has acquired and, at December 31, 1996, operated four other banks and one consumer finance company in Pennsylvania, eastern Ohio and western New York. During 1992, First National Bank of Mercer County completed an acquisition of ten offices of the former The First National Bank of Pennsylvania and three offices of Marine Bank. At the same time, First National Bank of Mercer County changed its name to First National Bank of Pennsylvania (First National). On January 21, 1997, the Corporation completed its merger with Southwest Banks, Inc. (Southwest). Southwest is a bank holding company which operates two banks in Naples and Cape Coral, Florida. The merger was accounted for as a pooling of interests. On November 15, 1996, the Corporation signed a definitive merger agreement with West Coast Bancorp, Inc. (West Coast), a single-bank holding company located in Cape Coral, Florida. The merger is expected to close during the second quarter of 1997. On November 6, 1996, the Corporation announced an agreement with Sun Bancorp, Inc. (Sun), a bank holding company headquartered in Selinsgrove, Pennsylvania, where Sun will receive 100% ownership of Bucktail Bank and Trust Company (Bucktail), a subsidiary of the Corporation, in exchange for a 13.8% ownership interest in the voting stock of Sun. The Corporation, through its subsidiaries, provides a full range of financial services, principally to consumers and small- to medium-size businesses in its market areas. The Corporation's business strategy has been to focus primarily on providing quality, community-based financial services adapted to the needs of each of the markets it serves. The Corporation has emphasized its community orientation by preserving the names and local boards of directors of its subsidiaries, by allowing its subsidiaries certain autonomy in decision-making and thus enabling them to respond to customer requests more quickly, and by concentrating on transactions within its market areas. However, while the Corporation has sought to preserve the identities and autonomy of its subsidiaries, it has established centralized credit analysis, loan review, accounting, investment, audit and data processing functions. The centralization of these processes has enabled the Corporation to maintain consistent quality of these functions and to achieve certain economies of scale. The Corporation's lending philosophy is to minimize credit losses by following strict credit approval standards (which include independent analysis of realizable collateral value), diversifying its loan portfolio by industry and borrower and conducting ongoing review and management of the loan portfolio. The Corporation is an active residential mortgage lender, and its commercial loans are generally to established local businesses. The Corporation does not have a significant amount of construction loans and has no highly leveraged transaction loans. No material portion of the deposits of the Corporation's bank subsidiaries has been obtained from a single or small group of customers, and the loss of any customer's deposits or a small group of customers' deposits would not have a material adverse effect on the business of the Corporation. The majority of the deposits held by the Corporation's bank subsidiaries have been generated within the respective subsidiary's market area. Following is information as of December 31, 1996 for the Corporation's bank and consumer finance subsidiaries, including Southwest and West Coast (including the year established and location of principal office for each). All subsidiaries are wholly-owned by the Corporation. I-2 5
TOTAL TOTAL NUMBER ASSETS (IN DEPOSITS (IN OF BANK SUBSIDIARIES: THOUSANDS) THOUSANDS) OFFICES ---------- ------------ ------- First National Bank of Pennsylvania (Est. 1864) Hermitage, Pennsylvania........................ $1,015,060 $ 886,688 32 The Metropolitan Savings Bank of Ohio (Est. 1922) Youngstown, Ohio................................ 315,899 287,536 11 Reeves Bank (Est. 1868) Beaver Falls, Pennsylvania...................... 134,642 121,437 9 Bucktail Bank and Trust Company (Est. 1928) Emporium, Pennsylvania.......................... 118,364 106,004 7 First County Bank (Est. 1987) Chardon, Ohio................................... 44,161 39,979 2 ---------- ---------- -- $1,628,126 $1,441,644 61 ========== ========== == CONSUMER FINANCE SUBSIDIARY: Regency Finance Company (Est. 1927) Hermitage, Pennsylvania......................... $ 95,806 34 ========== == CONSUMMATED MERGER: Southwest Bank Subsidiaries: First National Bank of Naples (Est. 1988) Naples, Florida............................... $ 423,366 $ 332,893 5 Cape Coral National Bank (Est. 1994) Cape Coral, Florida........................... 104,673 94,849 2 ---------- ---------- -- $ 528,039 $ 427,742 7 ========== ========== == PENDING MERGER: West Coast Bank Subsidiary: First National Bank of Southwest Florida (Est. 1989) Fort Myers, Florida............... $ 170,066 $ 156,943 5 ========== ========== ==
The Corporation has four other subsidiaries, Penn-Ohio Life Insurance Company, Est. 1981 (Penn-Ohio), Customer Service Center of F.N.B., L.L.C., Est. 1996 (Customer Service), Mortgage Service Corporation, Est. 1944 (Mortgage Service), and F.N.B. Building Corporation, Est. 1987 (F.N.B. Building). Penn-Ohio underwrites, as a reinsurer, credit life and accident and health insurance sold by the Corporation's subsidiaries. Customer Service provides data processing and other services to the affiliates of the Corporation. Mortgage Service services mortgage loans for unaffiliated financial institutions and F.N.B. Building owns real estate that is leased to certain affiliates. OPERATIONS OF THE BANK SUBSIDIARIES The Corporation's bank subsidiaries offer services traditionally offered by full-service commercial banks, including commercial and individual demand and time deposit accounts, commercial, mortgage and individual installment loans, credit card services through correspondent banks, night depository, automated teller services, computer services, safe deposit boxes, money order services, travelers checks, government savings bonds, food stamp sales and utility bill payments. In addition, First National and Bucktail operate trust departments which offer a broad range of personal and corporate fiduciary services, including the administration of decedent and trust estates. As of December 31, 1996, trust assets under management at First National and Bucktail totaled $275.4 million and $19.3 million, respectively. OPERATIONS OF THE CONSUMER FINANCE SUBSIDIARY The Corporation's consumer finance subsidiary is involved principally in making personal installment loans to individuals and purchasing installment sales finance contracts from retail merchants and automobile dealerships. Such activity is funded by advances from the Corporation which are available from the sale of the Corporation's subordinated notes. I-3 6 REGULATION AND SUPERVISION Bank holding companies, banks and consumer finance companies are extensively regulated under both federal and state law. The following summary information describes statutory or regulatory provisions, it is qualified by reference to the particular statutory and regulatory provisions. Any change in applicable law or regulation may have a material effect on the business and prospects of the Corporation and its subsidiaries. The regulation and examination of the Company and its subsidiaries are designed primarily for the protection of depositors and not the Corporation or its stockholders. BANK HOLDING COMPANIES The Corporation is registered as a bank holding company under the Bank Holding Company Act of 1956 (BHCA) and, as such, is subject to regulation by the Federal Reserve Board (FRB). As a bank holding company, the Corporation is required to file with the FRB an annual report and such additional information as the FRB may require pursuant to the BHCA. The FRB may also make examinations of the Corporation. The BHCA requires the prior approval of the FRB in any case where a bank holding company proposes to acquire direct or indirect ownership or control of more than 5% of the voting shares of any bank (unless it owns a majority of such bank's voting shares) or otherwise to control a bank or to merge or consolidate with any other bank holding company. Effective September 29, 1995, the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 authorizes the FRB to permit a bank holding company that meets all applicable capital requirements to acquire control, or substantially all of the assets, of a bank located in another state that is not the bank holding company's home state, regardless of whether the other state prohibits such transaction. The BHCA also prohibits a bank holding company, with certain exceptions, from acquiring more than 5% of the voting shares of any company that is not a bank and from engaging in any business other than banking or managing or controlling banks. Under the BHCA, the FRB is authorized to approve the ownership of shares by a bank holding company in any company, the activities of which the Federal Reserve has determined to be so closely related to banking or to managing or controlling banks as to be a proper incident thereto. The FRB has by regulation determined that certain activities are closely related to banking within the meaning of the BHCA. These activities, which are listed in Regulation Y of the FRB regulations, include: operating a mortgage company, finance company, credit card company or factoring company; performing certain data processing operations; providing investment and finance advice; and acting as an insurance agent for certain types of credit-related insurance. Activities which the FRB has approved by order in connection with specific applications by bank holding companies include the operation of a credit card bank or other non-bank banks, certain expanded student loan servicing activities, the buying and selling of gold and silver bullion and silver coin for the account of customers and for itself, the provision of certain financial office services, the printing and sale of checks and similar documents, underwriting and dealing in commercial paper, certain municipal revenue bonds and one to four family mortgage backed securities, subject to certain conditions, and underwriting and dealing in corporate debt or equity securities, subject to certain conditions. Bank holding companies also are permitted to acquire savings associations subject to the applicable requirements of the BHCA. In approving acquisitions by bank holding companies of banks and companies engaged in banking-related activities, the FRB considers a number of factors, including the expected benefits to the public, such as greater convenience, increased competition or gains in efficiency, as weighed against the risks of possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interest or unsound banking practices. The FRB is also empowered to differentiate between new activities and activities commenced through acquisition of a going concern. I-4 7 Bank holding companies and their subsidiary banks are also subject to the provisions of the Community Reinvestment Act of 1977 (CRA). Under the terms of the CRA, the FRB (or other appropriate bank regulatory agency) is required, in connection with its examination of a financial institution, to assess the financial institution's record in meeting the credit needs of the communities served by the financial institution, including low and moderate-income neighborhoods. Further, such assessment is also required of any financial institution which has applied to (i) obtain a federally-regulated financial institution charter; (ii) obtain deposit insurance coverage for a newly chartered institution; (iii) establish a new branch office that will accept deposits; (iv) relocate an office; or (v) merge or consolidate with, or acquire the assets or assume the liabilities of, a federally-regulated financial institution. In the case of a bank holding company applying for approval to acquire a bank, savings and loan, or other bank holding company, the FRB will assess the record of each subsidiary of the applicant bank holding company, and such records may be the basis for denying the application or imposing conditions in connection with approval of the application. BANKS The Corporation's bank subsidiaries are supervised and regularly examined by the Office of the Comptroller of Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), the Pennsylvania Department of Banking and the Ohio Division of Financial Institutions, which consists of the Ohio Division of Banks and the Ohio Division of Savings Banks. The various laws and regulations administered by the regulatory agencies affect corporate practices, such as payment of dividends, incurring debt and acquisition of financial institutions and other companies, and affect business practices, such as payment of interest on deposits, the charging of interest on loans, types of business conducted and location of offices. CONSUMER FINANCE SUBSIDIARY The Corporation's consumer finance subsidiary is subject to regulation under Pennsylvania, Ohio and New York state laws which require, among other things, that it maintain licenses for consumer finance operations in effect for each of its offices. Representatives of the Pennsylvania Department of Banking, the Ohio Division of Consumer Finance and the State of New York Banking Department periodically visit the offices of the consumer finance subsidiary and conduct extensive examinations in order to determine compliance with such laws and regulations. Such examinations include a review of loans and the collateral thereof, as well as a check of the procedures employed for making and collecting loans. Additionally, the consumer finance subsidiary is subject to certain federal laws which require that certain information relating to credit terms be disclosed to customers and afford customers in certain instances the right to rescind transactions. LIFE INSURANCE SUBSIDIARY Penn-Ohio is subject to examination on a triennial basis by the Arizona Department of Insurance. Representatives of the Department of Insurance will periodically determine whether Penn-Ohio has maintained required reserves, established adequate deposits under a reinsurance agreement and complied with reporting requirements under Arizona statutes. GOVERNMENTAL POLICIES The operations of the Corporation and its subsidiaries are affected not only by general economic conditions, but also by the policies of various regulatory authorities. In particular, the FRB regulates money and credit and interest rates in order to influence general economic conditions. These policies have a significant influence on overall growth and distribution of loans, investments and deposits and affect interest rates charged on loans or paid for time and savings deposits. FRB monetary policies have had a significant effect on the operating results of all financial institutions in the past and may continue to do so in the future. I-5 8 FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT (FDICIA) FDICIA was designed to bolster the deposit insurance fund, tighten bank regulation and trim the scope of federal deposit insurance as summarized below. FDIC Funding - FDICIA bolstered the bank deposit insurance fund with $70.0 billion in borrowing authority and increased to $30.0 billion from $5.0 billion the amount the FDIC can borrow from the U.S. Treasury to cover the costs of potential bank failures. Bank Regulation - Under FDICIA, regulatory supervision is linked to bank capital. Regulators have set five capital levels at which insured depository institutions will be "well capitalized," "adequately capitalized," "undercapitalized," "significantly undercapitalized," or "critically undercapitalized." FDICIA established a framework for supervisory actions regarding insured institutions and their holding companies that are not well or adequately capitalized. FDICIA requires increased supervision for banks not rated in one of the two highest categories under the "CAMELS" composite bank rating system. The FDIC is authorized to charge banks for regular and special examinations. Further, FDICIA mandates certain limits on real estate lending by banks and tightens bank auditing requirements. The federal bank regulatory agencies are required by FDICIA to adopt uniform capital and accounting rules. The accounting rules require supplemental disclosure in reports to the banking agencies of all assets and liabilities, including contingent assets and liabilities and, to the extent feasible, of the estimated fair market valuation of assets and liabilities. As mandated by Section 132 of FDICIA, the federal bank regulatory agencies issued regulations which prescribe minimum safety and soundness standards with respect to internal control, internal audit, loan documentation, credit underwriting, interest rate exposure, asset growth and quality, earnings, compensation arrangements and stock valuation. Institutions failing to meet these safety and soundness standards will be required to submit corrective plans and will be subject to sanctions for failure to submit or comply with a plan. The Community Development and Regulatory Improvement Act of 1994 amended section 132 of FDICIA to permit the regulatory agencies to implement the safety and soundness standards relative to asset quality, earnings and stock valuation by regulation or guidelines. The agencies will now be permitted to decide whether or not to compel institutions that fail to meet these standards to submit a compliance plan. Finally, depository institution holding companies are no longer covered under Section 132 of FDICIA. FDICIA also provided for certain consumer and low and moderate income lending and deposit programs. Deposit Insurance - The legislation also reduced the scope of federal deposit insurance. The FDIC's ability to reimburse uninsured deposits (those over $100,000 and foreign deposits) was sharply limited beginning January 1995. The FRB's ability to finance banks with extended loans from its discount window was restricted, beginning December 1993. In addition, only the best capitalized banks will be able to offer insured broker deposits or to insure accounts established under employee pension plans. I-6 9 LIMITS ON DIVIDENDS AND OTHER PAYMENTS The parent company is a legal entity separate and distinct from its subsidiaries. Most of the parent company's revenues result from dividends paid to the parent company by the subsidiaries. The right of the parent company, and consequently the right of creditors and stockholders of the Corporation, to participate in any distribution of the assets or earnings of any subsidiary through the payment of such dividends or otherwise is necessarily subject to the prior claims of creditors of the subsidiary, except to the extent that claims of the parent company in its capacity as a creditor may be recognized. Moreover, there are various legal limitations applicable to the payment of dividends by the subsidiaries as well as by the Corporation to its stockholders. Under federal law, the subsidiaries may not, subject to certain limited exceptions, make loans or extensions of credit to, or investments in the securities of, the Corporation or take securities of the Corporation as collateral for loans to any borrower. The subsidiaries are also subject to collateral security requirements for any loans or extensions of credit permitted by such exceptions. The subsidiaries are subject to various statutory and regulatory restrictions on their ability to pay dividends to the parent company. Under applicable federal and state statutes and regulations, the dividends that may be paid to the parent company by its subsidiaries without prior regulatory approval are subject to limitations. In the case of First National, a national bank, prior approval of the OCC is required if the total of all dividends declared in any calendar year will exceed net profits (as defined and interpreted by the OCC) for that year combined with retained net profits (as defined) for the two preceding calendar years. As Pennsylvania state-chartered institutions, Bucktail and Reeves may pay dividends only if they are solvent and would not be rendered insolvent by the dividend payments, and only from unrestricted and unreserved earned surplus and, under certain circumstances, capital surplus. Each must also maintain a leverage ratio of 6.00% after paying dividends. First County and Metropolitan, both Ohio state-chartered institutions, may not pay dividends without approval of the superintendent of banks if the total of all dividends declared in any year will exceed net profits (as defined by statute) for that year combined with retained net profits (as defined) for the two preceding years. In addition, after payment of any dividend, First County's surplus must be at least 20 percent of its capital. All subsidiaries are subject to the capital requirements described below. Dividends may not be paid by these subsidiaries if the payment of the dividend would cause the subsidiary to fall below these minimum capital requirements. In addition, the OCC, in the case of First National, and the FDIC, in the case of the Corporation's other bank subsidiaries, have authority to prohibit banks from engaging in unsafe and unsound banking practices. The payment of a dividend by a bank could, depending on the financial condition of such bank and other factors, be considered an unsafe and unsound banking practice. The OCC has indicated its view that it generally would be an unsafe and unsound practice to pay dividends except out of current operating earnings. The ability of the subsidiaries to pay dividends is, and is expected to continue to be, influenced by regulatory policies and capital guidelines. (See also "Stockholders' Equity" footnote in the Notes to Consolidated Financial Statements, which is incorporated by reference to the Corporation's Annual Report to Stockholders). CAPITAL REQUIREMENTS The FRB has adopted risk-based capital guidelines applicable to bank holding companies. The primary indicators relied on by the FRB and other bank regulators in measuring strength of capital position are the core capital, total risk-based capital and leverage ratios. I-7 10 Core capital consists of common and qualifying preferred stockholders' equity less non-qualifying intangibles. Total capital consists of core capital, qualifying subordinated debt and a portion of the allowance for loan losses. Risk-based capital ratios are calculated with reference to risk-weighted assets which consist of both on- and off- balance sheet risks. The regulatory minimums are 4.00% for the core capital ratio and 8.00% for the total risk-based capital ratio. The Corporation's core capital and total risk-based capital to risk-weighted assets ratios as of December 31, 1996 were 11.99% and 14.06%, respectively. (See also "Regulatory Matters" footnote in the Notes to Consolidated Financial Statements, which is incorporated by reference to the Corporation's Annual Report to Stockholders). In addition, the FRB has established minimum leverage ratio (core capital to quarterly average assets less non-qualifying intangibles) guidelines for bank holding companies. These guidelines provide for a minimum ratio of 3.00% for bank holding companies that meet certain specified criteria, including that they have the highest regulatory rating. All other bank holding companies are required to maintain a leverage ratio of 3.00% plus an additional cushion of at least 100 to 200 basis points. The Corporation's leverage ratio as of December 31, 1996 was 8.58%. The guidelines also provide that banking organizations experiencing internal growth or making acquisitions will be expected to maintain strong capital positions substantially above the minimum supervisory levels, without significant reliance on intangible assets. Each bank subsidiary is subject to similar capital requirements adopted by its primary federal regulator. Bank regulators continue to indicate their desire to raise capital requirements applicable to banking organizations beyond their current levels. However, management is unable to predict whether higher capital ratios would be imposed and, if so, at what levels and on what schedule. Under FRB policy, a bank holding company is required to serve as a source of financial and managerial strength to its subsidiary banks and may not conduct its operations in an unsafe or unsound manner. In addition, it is the FRB's policy that, in serving as a source of strength to its subsidiary banks, a bank holding company should stand ready to use available resources to provide adequate capital funds to its subsidiary banks during periods of financial stress or adversity, in circumstances where it might not do so absent such policy, and should maintain the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary banks. The failure of a bank holding company to serve as a source of strength to its subsidiary banks would generally be considered by the FRB to be an unsafe and unsound banking practice, a violation of FRB regulations, or both. FDIC INSURANCE ASSESSMENTS The Corporation's banking subsidiaries are subject to FDIC deposit insurance assessments for the Bank Insurance Fund (BIF) and Savings Association Insurance Fund (SAIF). Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) authorized the FDIC to set the annual premium for banks and savings associations as high as determined to be necessary to assure stability of the insurance funds. FDIC deposit insurance premium rates have been determined through a risk-based assessment which takes into consideration the capital rating (i.e. "undercapitalized", "adequately capitalized" or "well capitalized") assigned to the institution by the federal regulators. Each of the banking affiliates have been assigned a capital rating of "well capitalized." During 1996, Congress mandated a one-time assessment to recapitalize the SAIF. The legislation, passed by Congress during the third quarter of 1996, included a one-time assessment for all deposits insured by the SAIF, including those held by chartered commercial banks as a result of previous acquisitions. The legislation also included provisions that will result in a modest reduction in future annual deposit insurance for the Corporation. I-8 11 FIRREA As a result of the enactment of the FIRREA on August 9, 1989, a depository institution insured by the FDIC can be held liable for any loss incurred, or reasonably expected to be incurred, by the FDIC after August 9, 1989 in connection with (i) the default of a commonly controlled FDIC-insured depository institution or (ii) any assistance provided by the FDIC to a commonly controlled FDIC-insured depository institution in danger of default. "Default" is defined generally as the appointment of a conservator or receiver and "in danger of default" is defined generally as the existence of certain conditions indicating that a "default" is likely to occur in the absence of regulatory assistance. Liability of any subsidiary under this "cross-guarantee" provision could have a material adverse effect on the financial condition of any assessed subsidiary and the Corporation. OMNIBUS CONSOLIDATED APPROPRIATIONS ACT, FOR FISCAL YEAR 1997 (OMNIBUS ACT) The Omnibus Act became effective on September 30, 1996. In addition to requiring commercial banks to make contributions to the SAIF, the Omnibus Act amended the Bank Holding Company Act to simplify certain nonbank application procedures for "well capitalized" banking organizations. Additionally, the Omnibus Act amended certain banking laws governing the operations of insured depository institutions to provide relief to commercial banks with respect to lender liability, environmental liability, loans to executive officers, officer and director interlocks and composition of bank audit committees. MARKET AREA AND COMPETITION The Corporation, through its subsidiaries, operated 95 offices in 33 counties in Pennsylvania, eastern Ohio and western New York at December 31, 1996. The economies of the primary market areas in which the Corporation and its subsidiaries operate have evolved during the past decade from ones dominated by heavy industry to ones which have a more diversified mix of light manufacturing, service and distribution industries. This area is served by Interstate Routes 90, 76, 79 and 80, and is located at the approximate midpoint between New York City and Chicago. The area is also close to the Great Lakes shipping port of Erie and the Greater Pittsburgh International Airport. The Corporation's recent merger with Southwest Banks, Inc. provides a meaningful presence in two attractive Gulf Coast counties (Lee and Collier). These counties represent two of the highest growth and median family income levels in the state of Florida. The Corporation's subsidiaries compete with a large number of other financial institutions, such as commercial banks, savings banks, savings and loan associations, insurance companies, mortgage banking companies, consumer finance companies, credit unions and commercial finance and leasing companies, many of which have greater resources than the Corporation, for deposits, loans and service business. Money market mutual funds, brokerage houses and similar institutions currently provide many of the financial services offered by the Corporation's subsidiaries. In the consumer finance subsidiary's market areas, the active competitors include banks, credit unions and national, regional and local consumer finance companies, some of which have substantially greater resources than that of the consumer finance subsidiary. The ready availability of consumer credit through charge accounts and credit cards constitutes additional competition. The principal methods of competition include the rates of interest charged for loans, the rates of interest paid to obtain funds and the availability of customer services. With reciprocal interstate banking, the Corporation also faces the prospect of additional competitors entering its markets as well as additional competition in its efforts to acquire other subsidiaries and branches throughout Pennsylvania and in neighboring states. (See "Regulation and Supervision.") I-9 12 EMPLOYEES As of February 28, 1997, the Corporation and its subsidiaries, including Southwest, had 985 full-time and 244 part-time employees. Management of the Corporation considers its relationship with its employees to be satisfactory. MERGERS, ACQUISITIONS AND DIVESTITURE See "Mergers, Acquisitions and Divestiture" footnote in the Notes to Consolidated Financial Statements, which is incorporated by reference to the Corporation's Annual Report to Stockholders. STATISTICAL DISCLOSURE Statistical disclosure information regarding the Corporation is included in the Management's Discussion and Analysis, which is incorporated by reference to the Corporation's Annual Report to Stockholders (see Part II, Item 7 below). The following information is contained therein: I. Distribution of Assets, Liabilities and Stockholders' Equity; Interest Rates and Interest Differential II. Investment Portfolio III. Loan Portfolio IV. Summary of Loan Loss Experience V. Deposits VI. Return on Equity and Assets VII. Short-Term Borrowings I-10 13 ITEM 2. PROPERTIES The Corporation is constructing a new six-story building in Hermitage, Pennsylvania to serve as its corporate headquarters and share with its lead banking affiliate, First National. The operations of the Corporation and First National are currently conducted at two primary locations owned by First National: Hermitage Square and a data processing facility, both located in Hermitage, Pennsylvania. Operations for Metropolitan are conducted at a 17-story facility owned by Metropolitan at One Federal Plaza West, Youngstown, Ohio. At December 31, 1996, Metropolitan occupied approximately 44% of the rentable space, with the remaining rentable space being subleased to third parties. The banking and consumer finance subsidiaries' branch offices are located in 26 counties in Pennsylvania, 6 counties in eastern Ohio and 1 county in western New York. At December 31, 1996, the Corporation's subsidiaries owned 43 of the Corporation's 95 branch locations and leased the remaining 52 branch locations under operating leases expiring at various dates through the year 2010. For additional information regarding the lease commitments and locations of the 95 offices of the Corporation, see the Premises and Equipment footnote and the Market Area map in the Annual Report to Shareholders. ITEM 3. LEGAL PROCEEDINGS There are no material pending legal proceedings 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders through the solicitation of proxies or otherwise during the fourth quarter of 1996. I-11 14 EXECUTIVE OFFICERS OF THE REGISTRANT The names, ages and positions of the executive officers of the Corporation, as of February 28, 1997, are as follows:
NAME AGE POSITION HELD Peter Mortensen 61 Chairman, President and Director Stephen J. Gurgovits 53 Executive Vice President and Director John W. Rose 47 Executive Vice President William J. Rundorff 48 Executive Vice President Gary L. Tice 49 Executive Vice President and Director Samuel K. Sollenberger 59 Vice President and Director John D. Waters 50 Vice President and Chief Financial Officer
Officers are elected annually by the Board of Directors immediately following the annual meeting of stockholders. The term of office for all of the above executive officers is for the period ending with the next annual meeting. PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE OF EXECUTIVE OFFICERS Mr. Peter Mortensen is Chairman of the Corporation (1987 to the present), President of the Corporation (1974 to the present) and Chairman of the Board of First National (1987 to the present). Since 1959, Mr. Mortensen has held various other executive positions with First National including President (1972 to 1988) and Chief Executive Officer (1979 to 1988). Mr. Stephen J. Gurgovits is Executive Vice President of the Corporation (1995 to the present), Senior Vice President of the Corporation (1986 to 1995) and President and Chief Executive Officer of First National (1988 to the present). Mr. Gurgovits has served in various positions with First National since 1961 and with the Corporation since 1974 including Executive Vice President and Senior Loan Officer of First National (1979 to 1988). Mr. John W. Rose is Executive Vice President of the Corporation (1995 to the present). He previously served as President of McAllen Capital Partners, Inc. (1992 to 1995) and President of Livingston Financial Group (1988 to 1992). Mr. William J. Rundorff is Executive Vice President of the Corporation (1995 to the present), Vice President of the Corporation (1991 to 1995) and Vice President of First National (1991 to the present). Mr. Gary L. Tice is Executive Vice President of the Corporation (1997 to the present), Chairman of the Board, President and Chief Executive Officer of Southwest Banks, Inc. (1988 to the present) and Chairman of the Board of First National Bank of Naples (1988 to the present). Mr. Samuel K. Sollenberger is Vice President of the Corporation (1989 to the present), Chairman of Metropolitan (1996 to the present), President of Metropolitan (1989 to 1996) and Chief Executive Officer of Metropolitan (1990 to the present). Mr. John D. Waters is Vice President and Chief Financial Officer of the Corporation (1994 to the present) and Senior Vice President and Chief Financial Officer of First National (1994 to the present). He previously served as Executive Vice President and Chief Financial Officer of WSFS Financial Corporation (1988 to 1993). I-12 15 PART II Information relating to Items 5, 6, 7 and 8 is provided in the Corporation's 1996 Annual Report to Stockholders under the captions and on the pages indicated below, and is incorporated herein by reference:
PAGES IN 1996 ANNUAL REPORT CAPTION IN 1996 ANNUAL REPORT TO STOCKHOLDERS TO STOCKHOLDERS ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 51 ITEM 6. SELECTED FINANCIAL DATA 39 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 40 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 13 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None
II-1 16 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information relating to directors of the Corporation is provided in the Corporation's definitive proxy statement filed with the Securities and Exchange Commission in connection with its annual meeting of stockholders to be held April 23, 1997. Such information is incorporated herein by reference. Information relating to executive officers of the Corporation is provided in Part I. ITEM 11. EXECUTIVE COMPENSATION Information relating to this item is provided in the Corporation's definitive proxy statement filed with the Securities and Exchange Commission in connection with its annual meeting of stockholders to be held April 23, 1997. Such information is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information relating to this item is provided in the Corporation's definitive proxy statement filed with the Securities and Exchange Commission in connection with its annual meeting of stockholders to be held April 23, 1997. Such information is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None. III-1 17 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (A) 1. FINANCIAL STATEMENTS The following consolidated financial statements and report of independent auditors of F.N.B. Corporation and subsidiaries, included in the Corporation's 1996 Annual Report to Stockholders, are incorporated herein by reference to Item 8:
PAGES IN 1996 ANNUAL REPORT TO STOCKHOLDERS Consolidated Balance Sheet 14 Consolidated Income Statement 15 Consolidated Statement of Stockholders' Equity 16 Consolidated Statement of Cash Flows 17 Notes to Consolidated Financial Statements 18 Report of Independent Auditors 38 Quarterly Earnings Summary 32
(A) 2. FINANCIAL STATEMENT SCHEDULES All Schedules are omitted because they are not applicable. (A) 3. EXHIBITS The exhibits filed or incorporated by reference as a part of this report are listed in the Index to Exhibits which appears at page IV-4 and are incorporated by reference. (B) REPORTS ON FORM 8-K A report on Form 8-K , dated November 13, 1996, was filed by the Corporation. The Form 8-K disclosed pro forma financial information for the period ended September 30, 1996, relating to the merger agreement between F.N.B. Corporation and Southwest Banks, Inc. and consolidated financial information for Southwest Banks, Inc. A report on Form 8-K, dated November 15, 1996, was filed by the Corporation. The Form 8-K disclosed information relating to the definitive merger agreement between F.N.B. Corporation and West Coast Bancorp, Inc. A report on Form 8-K, dated January 24, 1997, was filed by the Corporation. The Form 8-K disclosed information relating to the consummation of the merger with Southwest Banks, Inc. A report on Form 8-K, dated March 5, 1997, was filed by the Corporation. The Form 8-K included Audited Supplemental Consolidated Financial Statements for the years ended December 31, 1995, 1994 and 1993 with Report of Independent Auditors and Management's Discussion and Analysis. IV-1 18 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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 By /s/ Peter Mortensen --------------------------------------- Peter Mortensen, Chairman and President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ Peter Mortensen Chairman, President and February 25, 1997 - --------------------------- Director (Principal Peter Mortensen Executive Officer) /s/ Stephen J. Gurgovits Executive Vice President February 25, 1997 - --------------------------- and Director Stephen J. Gurgovits Executive Vice President - --------------------------- and Director Gary L. Tice Vice President and Director - --------------------------- Samuel K. Sollenberger /s/ John D. Waters Vice President and Chief February 25, 1997 - --------------------------- Financial Officer (Principal John D. Waters Accounting Officer) Director - --------------------------- W. Richard Blackwood /s/ William B. Campbell Director February 25, 1997 - --------------------------- William B. Campbell /s/ Charles T. Cricks Director February 25, 1997 - --------------------------- Charles T. Cricks /s/ Henry M. Ekker Director February 25, 1997 - --------------------------- Henry M. Ekker Director - --------------------------- Thomas C. Elliott /s/ Thomas W. Hodge Director February 25, 1997 - --------------------------- Thomas W. Hodge
IV-2 19 Director - --------------------------- James S. Lindsay /s/ George E. Lowe Director February 25, 1997 - --------------------------- George E. Lowe /s/ Paul P. Lynch Director February 25, 1997 - --------------------------- Paul P. Lynch Director - --------------------------- Edward J. Mace Director - --------------------------- Robert S. Moss Director - --------------------------- Richard C. Myers Director - --------------------------- John R. Perkins /s/ William A. Quinn Director February 25, 1997 - --------------------------- William A. Quinn Director - --------------------------- George A. Seeds /s/ William J. Strimbu Director February 25, 1997 - --------------------------- William J. Strimbu /s/ Archie O. Wallace Director February 25, 1997 - --------------------------- Archie O. Wallace /s/ Joseph M. Walton Director February 25, 1997 - --------------------------- Joseph M. Walton /s/ James T. Weller Director February 25, 1997 - --------------------------- James T. Weller Director - --------------------------- Eric J. Werner Director - --------------------------- Donna C. Winner
IV-3 20 INDEX TO EXHIBITS The following exhibits are filed or incorporated by reference as part of this report: 3.1. Restated Articles of Incorporation of the Corporation as currently in effect and any amendments thereto. (filed herewith). 3.2. By-laws of the Corporation as currently in effect. (incorporated by reference to Exhibit 4 of the Corporation's Form 10-Q for the quarter ended June 30, 1994). 4 The rights of holders of equity securities are defined in portions of the Restated Articles of Incorporation and By-laws. The Restated Articles of Incorporation are incorporated by reference to Exhibit 3.1. of the registrant's Form 10-K for the year ended December 31, 1996. The By-laws are incorporated by reference to Exhibit 4 of the registrant's Form 10-Q for the quarter ended June 30, 1994. A designation statement defining the rights of F.N.B. Corporation Series A - Cumulative Convertible Preferred Stock is incorporated by reference to Form S-14, Registration Statement of F.N.B. Corporation, File No. 2-96404. A designation statement defining the rights of F.N.B. Corporation Series B - Cumulative Convertible Preferred Stock is incorporated by reference to Exhibit 4 of the registrant's Form 10- Q for the quarter ended June 30, 1992. The Corporation agrees to furnish to the Commission upon request copies of all instruments not filed herewith defining the rights of holders of long-term debt of the Corporation and its subsidiaries. 10.1. Form of agreement regarding deferred payment of directors' fees by First National Bank of Pennsylvania. (incorporated by reference to Exhibit 10.1. of the Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1993). 10.2. Form of agreement regarding deferred payment of directors' fees by F.N.B. Corporation. (incorporated by reference to Exhibit 10.2. of the Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1993). 10.3. Form of Deferred Compensation Agreement by and between First National Bank of Pennsylvania and four of its executive officers. (incorporated by reference to Exhibit 10.3. of the Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1993). 10.4. Employment Agreement between The Metropolitan Savings Bank of Youngstown and Samuel K. Sollenberger. (incorporated by reference to Exhibit 10.4. of the Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1993). 10.5. Revised and Restated Amendment No. 2 to Employment Agreement between F.N.B. Corporation and Peter Mortensen. (incorporated by reference to Exhibit 10.5. of the Corporation's Form 10-Q for the quarter ended September 30, 1996). 10.6. Employment Agreement between F.N.B. Corporation and Stephen J. Gurgovits. (incorporated by reference to exhibit 10.6 of the Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1990). 10.7. Employment Agreement between F.N.B. Corporation and Samuel K. Sollenberger. (incorporated by reference to exhibit 10.7 of the Corporation's Form 10-Q for the quarter ended March 31, 1994). 10.8. Employment Agreement between F.N.B. Corporation and William J. Rundorff. (incorporated by reference to exhibit 10.9 of the Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1991). Amendment No. 2 to Employment Agreement. (incorporated by reference to Exhibit 10.8. of the Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1995).
IV-4 21 10.9. Basic Retirement Plan (formerly the Supplemental Executive Retirement Plan) of F.N.B. Corporation effective January 1, 1992. (incorporated by reference to Exhibit 10.9. of the Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1993). 10.10. F.N.B. Corporation 1990 Stock Option Plan as amended effective February 2, 1996. (incorporated by reference to Exhibit 10.10. of the Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1995). 10.11. F.N.B. Corporation Restricted Stock Bonus Plan dated January 1, 1994. (incorporated by reference to Exhibit 10.11. of the Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1993). 10.12. Employment Agreement between F.N.B. Corporation and John W. Rose (incorporated by reference to Exhibit 10.12. of the Corporation's Form 10-Q for the quarter ended September 30, 1995). Amendment No. 1 to Employment Agreement. (incorporated by reference to Exhibit 10.12. of the Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1995). 10.13. Employment Agreement between F.N.B. Corporation and John D. Waters. (incorporated by reference to Exhibit 10.13. of the Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1995). 10.14. F.N.B. Corporation Restricted Stock and Incentive Bonus Plan. (incorporated by reference to Exhibit 10.13. of the Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1995). 10.15. F.N.B. Corporation 1996 Stock Option Plan. (incorporated by reference to Exhibit 10.13. of the Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1995). 10.16. F.N.B. Corporation Director's Compensation Plan. (incorporated by reference to Exhibit 10.13. of the Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1995). 11 Statement re computation of per share earnings. (filed herewith). 13 Annual Report to Stockholders. (filed herewith). 21 Subsidiaries of the Registrant. (filed herewith). 23 Consent of Ernst & Young LLP, Independent Auditors. (filed herewith). 27 Financial Data Schedule. (filed herewith).
IV-5 EX-3.1 2 F.N.B. CORPORATION 1 EXHIBIT 3.1 Microfilm Number Filed with the Department of State on Feb. 4, 1997 ---------- ------------ Entity Number 115863 ------------------------------- ------ Secretary of the Commonwealth ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION DSCB:15-1915 (Rev 89) In compliance with the requirements of 15 Pa.C.S. Section 1915 (relating to articles of amendment), the undersigned business corporation, desiring to amend its Articles, hereby states that: 1. The name of the corporation is: F.N.B. Corporation ------------------ 2. The address of this corporation's current (a) registered office in this Commonwealth or (b) commercial registered office provider and the county of venue is (the Department is hereby authorized to correct the following address to conform to the records of the Department): (a) Hermitage Square Hermitage PA 16148 Mercer ---------------------------------------------------------------------- Number and Street City State Zip County (b) ---------------------------------------------------------------------- Name of Commercial Registered Office Provider County For a corporation represented by a commercial registered office provider, the county in (b) shall be deemed the county in which the corporation is located for venue and official publication purposes. 3. The statute by or under which it was incorporated is: PA BCL ----------------- 4. The original date of its incorporation is: June 18, 1974 ---------------------------- 5. (CHECK, AND IF APPROPRIATE COMPLETE, ONE OF THE FOLLOWING): X The amendment shall be effective upon filing these Articles of - Amendment in the Department of State. The amendment shall be effective on: _______________________________ - 6. (CHECK ONE OF THE FOLLOWING): The amendment was adopted by the shareholders pursuant to 15 Pa.C.S. - Section 1914(a) and (b). X The amendment was adopted by the board of directors pursuant to - 15 Pa.C.S. Section 1914 (c). 7. (CHECK, AND IF APPROPRIATE COMPLETE, ONE OF THE FOLLOWING): The amendment adopted by the corporation, set forth in full, is as - follows: X The amendment adopted by the corporation as set forth in full in - Exhibit A, attached hereto and made a part hereof. 2 DSCB:15-1915 (Rev 89)-2 8. (Check if the amendment restates the Articles): X The restated Articles of Incorporation supersede the original Articles - and all amendments thereto. IN TESTIMONY WHEREOF, the undersigned corporation has caused these Articles of Amendment to be signed by a duly authorized officer thereof this 29th day of January, 1997. F.N.B. CORPORATION ----------------------------- (Name of Corporation) BY: JAMES G. ORIE ----------------------------- Name: James G. Orie Title: Corporate Counsel 3 EXHIBIT A F.N.B. CORPORATION Restated Articles of Incorporation ---------------------------------- 1. The name of the Corporation is F.N.B. Corporation. 2. The location and post office address of its registered office in this Commonwealth is Hermitage Square, Hermitage, Pennsylvania 16148. 3. The purpose or purposes of the Corporation are: The Corporation is organized under the provisions of the Business Corporation Law, and shall have unlimited power to engage in and to do any lawful act concerning any or all lawful business for which corporations may be incorporated under the Business Corporation Law. 4. The term of its existence is perpetual. 5. The aggregate number of shares which the Corporation shall have authority to issue is One Hundred and Twenty Million Shares (120,000,000) of which twenty Million (20,000,000) shall be preferred stock, par value $10.00 per share, issuable in one or more series, and One Hundred Million (100,000,000) shall be common stock, par value $2.00 per share. A description of each such class of shares and a statement of the authority hereby vested in the Board of Directors of the Corporation to fix and determine the designations, preferences, qualifications, limitations, restrictions and special or relative rights and preferences granted to or imposed upon the shares of each class and series are as follows: Section I: PREFERRED STOCK The Preferred Stock may be divided into and issued in series. The Board of Directors is hereby expressly authorized, at any time or from time to time, to divide any or all of the shares of the Preferred Stock into series, and in the resolution or resolutions establishing a particular series, before issuance of any of the shares thereof, to fix and determine the designation and the relative rights and preferences of the series so established, to the fullest extent now or hereafter permitted by the laws of the Commonwealth of Pennsylvania, including, but not limited to, the variations between different series in the following respects: a. The distinctive serial designation of such series; 4 b. The annual dividend rate for such series, and the date or dates from which dividends shall commence to accrue; c. The redemption price or prices, if any, for shares of such series and the terms and conditions on which such shares may be redeemed; d. The sinking fund provisions, if any, for the redemption or purchase of shares of such series; e. The preferential amount or amounts payable upon shares of such series in the event of the voluntary or involuntary liquidation of the Corporation; f. The voting rights of shares of such series; g. The terms and conditions, if any, upon which shares of such series may be converted and the class or classes or series of shares of the Corporation into which such shares may be converted; and h. Such other terms, limitations and relative rights and preferences, if any, of shares of such series as the Board of Directors may, at the time of such resolutions, lawfully fix and determine under the laws of the Commonwealth of Pennsylvania. All shares of the Preferred Stock shall be of equal rank with each other, regardless of series. Resolution of Board of Directors Establishing Series A - Cumulative Convertible Preferred Stock RESOLVED, That pursuant to authority expressly granted to it by the Articles of Incorporation, as amended, of the Corporation, the Board of Directors does hereby create and establish within the class of the Corporation's Preferred Stock, par value $10.00 per share, and authorize the issue of a series of Preferred Stock having the following designation, relative rights and preferences: 1. Designation and number of shares of series. A series of Preferred Stock comprised of 60,000 shares is created, established and designated "Series A-Cumulative Convertible Preferred Stock" (hereinafter called "Series A Preferred Stock"). -2- 5 2. Dividend rights. 2.1 The holders of the Series A Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors, preferential cumulative dividends in cash at the annual rate of $1.68 per share and no more, payable in equal quarterly installments on the 15th days of March, June, September and December of each year. In the case of the issuance of shares of Series A Preferred Stock on or prior to June 30, 1985, such dividends shall be cumulative from and after June 30, 1985. In the case of the issuance of shares of other Series A Preferred Stock issued after such date, such dividends with respect to each of such other shares shall be cumulative from the quarterly dividend payment date next preceding the date of issuance of such shares to which dividends have been paid on Series A Preferred Stock (or from June 30, 1985 if such other shares are issued on or prior to the record date for the first dividend declared on Series A Preferred Stock), unless the date of issuance of such shares is a dividend payment date to which dividends have been paid on Series A Preferred Stock or a date between the record date for the determination of holders of Series A Preferred Stock entitled to receive a dividend which has been declared and the date for payment thereof, in either of which events such dividends shall be cumulative from such dividend payment date, so that all holders of record of Series A Preferred Stock outstanding on any record date for the determination of holders of Series A Preferred Stock entitled to receive any dividend thereon shall have the same dividend rights per share. 2.2 So long as any shares of the Series A Preferred Stock are outstanding, no dividends, other than (i) dividends on common stock payable in common stock, (ii) dividends payable in stock which is junior to the Series A Preferred Stock (both as to dividends and upon liquidation) and (iii) cash in lieu of fractional shares in connection with any such dividend, shall be paid or declared in cash or otherwise, nor shall any other distribution be made, on the common stock or on any other stock junior to the Series A Preferred Stock as to dividends, unless there shall be no arrearages in dividends on the Series A Preferred Stock for any past quarterly dividend period, and all cumulative dividends shall have been paid or declared in full on the Series A Preferred Stock for the current quarterly dividend period. 2.3 Subject to the foregoing provisions, such dividends and other distributions (payable in cash, property or stock junior to the Series A Preferred Stock) as may be determined by the Board of Directors may be declared and paid from time to time on the common stock or on any other stock junior to the Series A Preferred Stock, without any right of participation therein by the holders of Series A Preferred Stock. 2.4 So long as any shares of the Series A Preferred Stock are outstanding, no shares of any stock junior to the Series A Preferred Stock shall be purchased, redeemed or otherwise acquired by the Corporation or by any subsidiary, except in connection with (i) a reclassification or exchange of any stock junior to the -3- 6 Series A Preferred Stock through the issuance of other stock junior to the Series A Preferred Stock (both as to dividends and upon liquidation), or (ii) the purchase, redemption or other acquisition of any stock junior to the Series A Preferred Stock with proceeds of a reasonably contemporaneous sale of other stock junior to the Series A Preferred Stock (both as to dividends and upon liquidation), nor shall any funds be set aside or made available for any purchase, redemption or sinking fund for the purchase or redemption of any stock junior to the Series A Preferred Stock, unless there shall be no arrearages in dividends on the Series A Preferred Stock for any past quarterly dividend period. 2.5 If there are any arrearages in dividends for any past quarterly dividend period on any series of Preferred Stock ranking on a parity with the Series A Preferred Stock as to dividends, or if dividends shall not have been paid or declared in full for the current quarterly period on all series of Preferred Stock ranking on a parity with the Series A Preferred Stock as to dividends to the extent that dividends on such other series of Preferred Stock are cumulative, any dividends paid or declared on the Series A Preferred Stock or on any other series of Preferred Stock ranking on a parity with the Series A Preferred Stock as to dividends shall be shared ratably by the holders of the Series A Preferred Stock and the holders of all such other series of Preferred Stock ranking on a parity with the Series A Preferred Stock as to dividends in proportion to such respective arrearages and unpaid and undeclared current quarterly cumulative dividends. 3. Liquidation preference. 3.1 In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary (hereinafter sometimes called "liquidation"), the holders of the Series A Preferred Stock shall be entitled to receive a preferential liquidation payment in an amount equal to $25.00 per share plus all arrearages in dividends thereon to the date fixed for the liquidation payment (computed without interest), before any distribution shall be made to the holders of the common stock or any other stock junior to the Series A Preferred Stock as to distribution upon liquidation. 3.2 If the assets of the Corporation are insufficient to permit payment of the full preferential amount payable to the holders of the Series A Preferred Stock and of any other series of Preferred Stock ranking on a parity with the Series A Preferred Stock as to distribution upon liquidation, then the assets available for distribution to holders of the Series A Preferred Stock and the holders of such other series of Preferred Stock ranking on a parity with the Series A Preferred Stock as to distribution upon liquidation shall be distributed ratably to the holders of the Series A Preferred Stock and the holders of all such other series of Preferred Stock in proportion to the full preferential amounts payable on their respective shares upon liquidation. -4- 7 3.3 If the preferential liquidation payment shall have been made in full as provided herein, the remaining assets of the Corporation shall be distributed among the holders of common stock and other junior stock, according to their respective rights and preferences and in accordance with their respective holdings. 3.4 For the purposes of this section 3, a consolidation or merger of the Corporation with any other corporation shall not be deemed, as such, to constitute a liquidation, dissolution or winding up of the Corporation, but any reorganization of the Corporation required by any court or administrative body in order to comply with any provision of law shall be deemed to be a liquidation, dissolution or winding up of the Corporation unless the preferences, qualifications, limitations, restrictions and special or relative rights granted to or imposed upon the Series A Preferred Stock are not adversely affected by such reorganization. 4. Redemption. The Series A Preferred Stock shall not be subject to call for redemption by the Corporation, nor shall any holder thereof have the right to require redemption of the Series A Preferred Stock. 5. Status of Series A Preferred Stock repurchased or declassified. Shares of Series A Preferred Stock repurchased or declassified as such by future resolution of the Board of Directors shall be deemed to be authorized but unissued shares of Preferred Stock undesignated as to series. Shares of Series A Preferred Stock exchanged for shares of any other class or series shall thereby be deemed to be cancelled and the number of shares of Preferred Stock which the Corporation is authorized to issue shall be correspondingly reduced. 6. Restrictions on certain action affecting Series A Preferred Stock. 6.1 The Corporation will not (i) establish any other series of Preferred Stock ranking prior to, or authorize any other class of stock ranking prior to (or issuable in series which may, by resolutions of the Board of Directors providing for the issue of such series, rank prior to), the Series A Preferred Stock, either as to dividends or upon liquidation, or increase the authorized number of shares of any such other class or series of stock, or (ii) amend, alter or repeal any of the provisions of the Articles of Incorporation or of this resolution so as to affect adversely the preferences, special rights or powers of the holders of the Series A Preferred Stock, or (iii) effect a merger or consolidation which would affect adversely the preferences, special rights or powers of the holders of the Series A Preferred Stock, without the consent given in writing without a meeting or affirmative vote given in person or by proxy at a meeting called for the purpose, by the holders of at least 66-2/3 per cent of the shares of the Series A Preferred Stock then outstanding. -5- 8 6.2 The Corporation may, without the consent or affirmative vote of any holders of the Series A Preferred Stock then outstanding, establish any other series of Preferred Stock ranking on a parity with, or authorize any other class of stock ranking on a parity with (or issuable in series which may, by resolutions of the Board of Directors providing for the issue of such series, rank on a parity with), the Series A Preferred Stock, either as to dividends or upon liquidation or both, or increase the authorized number of shares of any such other class or series. 7. Voting rights. Holders of the Series A Preferred Stock shall be entitled to one vote for each share upon all matters upon which holders of common stock have the right to vote, and such votes shall be counted together with those of the common stock and not separately as a class or group; provided, however, that if from time to time the outstanding shares of common stock shall be increased by any subdivision of shares, or decreased by combination of shares, and the Series A Preferred Stock shall not simultaneously be so increased or decreased in the same proportion, the number of votes of each share of Series A Preferred Stock shall be adjusted so that the proportionate voting power of the Series A Preferred Stock and of the common stock shall be the same immediately after such increase or decrease as immediately before it to the nearest 1/lOth of a vote per share. 8. Conversion rights. 8.1 The holders of Series A Preferred Stock shall be entitled, at any time or from time to time after June 30,1989, to surrender shares of the Series A Preferred Stock for conversion into shares of common stock of the Corporation. Subject to the provisions set forth in this section 8, each share of Series A Preferred Stock surrendered hereunder shall be converted, as of the close of business on the date of such surrender, into that number of shares of common stock having at that time an aggregate value equal to $25.00 (the "Conversion Price"). 8.2 In order to convert shares of Series A Preferred Stock into common stock, the holder shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Transfer Agent for the common stock, and shall give written notice to the Corporation at said office that he elects to convert the same or part thereof. The Corporation as soon as practicable thereafter will issue and deliver at said office to such holder a certificate for the number of full shares of common stock to which he shall be entitled hereunder; however, such holder shall be treated for all purposes as the record holder of such common stock at the time as of which such conversion takes place as aforesaid. 8.3 No fractional shares of common stock shall be issued upon conversion of the Series A Preferred Stock. Instead of any fraction of a share which would otherwise be issuable, the Corporation shall pay a cash adjustment, concurrently -6- 9 with issuance of the certificate for the full number of shares to which the holder is entitled, in an amount equal to the same fraction of the Stabilized Market Value (hereinafter defined) used to determine the holder's entitlement to common stock. 8.4 In determining the number of shares of common stock to which the Series A Preferred Stock may be converted, the following provisions shall be applied, to wit: (a) The Conversion Price shall be divided by the then Stabilized Market Value (hereinafter defined) per share, and the quotient shall determine the number of shares (calculated to ten-thousandths) of common stock issuable upon conversion, except in cases to which paragraph (b) applies. (b) If (and for so long as) the Stabilized Market Value should be less than 80% of the Corporation's last reported book value per share of common stock, the number of shares (calculated to ten-thousandths) of common stock issuable upon conversion of the Series A Preferred Stock shall be determined by the quotient obtained in dividing (x) the Conversion Price by (y) 80% of the Corporation's last reported book value per share of common stock. This paragraph (b) shall not apply to conversions effected under Section 9 hereof. (c) Adjustment shall be made for any dividends accrued on the Series A Preferred Stock during the current quarterly period in which shares thereof are surrendered for conversion, by increasing the Conversion Price by an amount equal to the quarterly dividend yield, prorated to the date on which conversion is effective, on the shares so surrendered. No adjustment shall be made on account of any prior dividends on the common stock issuable upon conversion; nor shall the Corporation be obligated to make any cash payment in respect of any such dividends in connection with the surrender and conversion of Series A Preferred Stock. 8.5 (a) In case of any capital reorganization or any reclassification of the common stock of the Corporation or in case of the consolidation or merger of the Corporation with or into another corporation or the conveyance of all or substantially all of the assets of the Corporation to another corporation, each share of the Series A Preferred Stock shall thereafter be convertible into the kind(s) of stock or other securities or property to which a holder of the number of shares of common stock of the Corporation that might have been issued (disregarding the time limitation set forth in section 8.1) upon conversion of such share of the Series A Preferred Stock shall be entitled upon such reorganization, reclassification, consolidation, merger or conveyance; and, in any such case, appropriate adjustment (as determined by the Board of Directors) shall be made by the Corporation or the corporation formed by such -7- 10 consolidation or the corporation into which the Corporation shall have merged or the transferee of the Corporation's assets, as the case may be, in the application of the provisions herein set forth with respect to the rights and interests thereafter of the holders of the Series A Preferred Stock, to the end that the provisions set forth herein (including provisions with respect to changes in and other adjustments of the Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any shares of stock or other securities or property thereafter deliverable upon the conversion of the shares of the Series A Preferred Stock. (b) If, after giving effect to any such consolidation, merger or conveyance of all or substantially all of the assets of the Corporation, the holders of the Corporation's common stock (as a group) would own less than 50% of all the issued and outstanding voting stock of the corporation formed by such consolidation or the corporation surviving such merger or the transferee of the Corporation's assets, as the case may be, then, notwithstanding the date set forth in section 8.1, the conversion rights of the holders of the Series A Preferred Stock shall be advanced to the close of business on the date on which the shareholders of the Corporation shall have approved the subject transaction. 8.6 In case: (a) the Corporation shall authorize the granting to the holders of its common stock of rights to subscribe for or purchase any shares of stock of any class or to receive any other rights; or (b) of any capital reorganization of the Corporation, reclassification of the capital stock of the Corporation, consolidation or merger of the Corporation with or into another corporation, or conveyance of all or substantially all of the assets of the Corporation to another corporation; or (c) of the voluntary or involuntary dissolution, liquidation or winding up of the Corporation; then, and in any such case, the Corporation shall cause to be mailed to the holders of record of the outstanding shares of the Series A Preferred Stock, at least ten (10) days prior to the date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution or rights, or, if a record is not to be taken, the date as of which the holders of common stock of record to be entitled to such dividend, distribution or rights are to be determined, or (y) the date on which such reclassification, reorganization, consolidation, merger, conveyance, dissolution, liquidation or winding up is to take place, and the date, if any, to be fixed as of which holders of common stock of record shall be entitled to exchange their shares of common stock for securities or other property deliverable upon such reclassification, -8- 11 reorganization, consolidation, merger, conveyance, dissolution, liquidation or winding up. 8.7 The Corporation shall at all times reserve and keep available, out of its authorized but unissued common stock or out of shares of common stock held in its Treasury, solely for the purpose of effecting the conversion of the shares of the Series A Preferred Stock, the full number of shares of common stock deliverable upon the conversion of all shares of the Series A Preferred Stock from time to time outstanding. The Corporation shall from time to time, in accordance with the laws of the Commonwealth of Pennsylvania, increase the authorized amount of its common stock if at any time the authorized number of shares of common stock remaining unissued or available from Treasury shall not be sufficient to permit the conversion of all of the shares of the Series A Preferred Stock at the time outstanding. 8.8 The Corporation will pay any and all issue taxes that may be payable in respect of any issue or delivery of shares of common stock on conversion of shares of the Series A Preferred Stock pursuant to this section 8 or section 9 hereof. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of common stock in a name other than that in which the shares of the Series A Preferred Stock so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such change in registration has paid to the Corporation the amount of any such tax, or has established to the satisfaction of the Corporation, that such tax has been paid. 8.9 If any shares of common stock issuable upon conversion of the Series A Preferred Stock require registration with or approval of any governmental authority under any federal or state law before such shares may be lawfully issued upon conversion, then the Corporation shall, in good faith and as expeditiously as possible, endeavor to obtain such registration or approval, as the case may be, but shall not be required to issue such shares until the requisite registration or approval has been obtained. 9. Required Conversion to Common Stock. 9.1 At the option of the Corporation, the Series A Preferred Stock shall be converted into common stock of the Corporation after one-half or more of the shares comprising the Series A Preferred Stock (disregarding shares declassified before issue) shall no longer be outstanding (whether by reason of conversion pursuant to section 8 hereof or repurchase or otherwise). Subject to the provisions of this section 9, such option may be exercised at any time by resolution of the Board of Directors, but only with respect to all the then outstanding Series A Preferred Stock. 9.2 Conversion of the Series A Preferred Stock pursuant to the option reserved in section 9.1 hereof may be required as of any quarterly dividend -9- 12 payment date (specified in section 2.1 hereof) to which all dividends have been declared and paid in full, as may be determined by the Board of Directors and fixed in the resolution directing such conversion. Notice of the required conversion of the Series A Preferred Stock shall be published once in two newspapers printed in the English language and customarily published on each business day and of general circulation, one in the City of Pittsburgh, Pennsylvania and one in Beaver Falls, Pennsylvania (or if no such newspaper is published in Beaver Falls, then publication in lieu thereof may be made in any other newspaper selected as appropriate for this purpose by the Treasurer of the Corporation), such publications to be at least 30 days prior to the date fixed by the Board of Directors for such conversion. Notice of such election shall also be mailed not less than 60 days nor more than 120 days prior to the date fixed for conversion to each holder of record of shares of the Series A Preferred Stock to be converted hereunder, at his address as the same may appear on the books of the Corporation. 9.3 Effective upon the date fixed for conversion, as specified in the resolution directing conversion hereunder, all shares of the Series A Preferred Stock with respect to the conversion of which such notices shall have been given (and which remain outstanding on the date so fixed) shall automatically be deemed to be no longer outstanding for any purpose, whether or not the certificates for such shares shall have been surrendered for conversion. All rights with respect to such shares shall thereupon cease and terminate except for the right of the respective holders of the certificates for such shares to receive, upon surrender thereof, duly endorsed, to the transfer agent for the common stock, certificates for the common stock issuable in respect to the conversion of their Series A Preferred Stock as of the date fixed for conversion. 9.4 The number of shares of common stock issuable upon required conversion shall be determined in accordance with the applicable provisions in section 8 hereof. 10. Miscellaneous. 10.1 The term "Stabilized Market Value" in this Resolution means the price per share of the Corporation's common stock paid in secondary trading transactions during the 45-day period next preceding the date as of which Stabilized Market Value is to be determined hereunder, computed on a weighted average basis with respect to the numbers of shares involved in such transactions. Prices paid shall be ascertained in good faith by the Treasurer of the Corporation by reference to all reasonably available data deemed reliable by him for such purpose. If fewer than five secondary trading transactions are found to have occurred during such 45-day period, "Stabilized Market Value" shall be determined by reference to the median between the average bid and ask prices quoted during said period by any two market-makers selected for this purpose in good faith by the Treasurer of the Corporation. - 10 - 13 10.2 The last reported book value of the Corporation's common stock, for purposes of this Resolution, shall be determined by reference to the shareholder's equity, calculated on a fully-diluted basis, of the Corporation as set forth in the most recent balance sheet of the Corporation filed with the Securities and Exchange Commission. 10.3 The shares of Series A Preferred Stock shall not have any relative or special rights and powers other than as set forth in this Resolution and in the Articles of Incorporation, as amended, of the Corporation. Resolution of the Pricing Committee of the Board of Directors Establishing 7-1/2 Cumulative Convertible Preferred Stock, Series B RESOLVED, that pursuant to authority expressly granted to it by the Articles of Incorporation, as amended, of the Corporation, the Board of Directors, through its duly established Pricing Committee does hereby create and establish within the class of the Corporation's Preferred Stock, par value $10.00 per share, and authorize the issue of a series of Preferred Stock having the following designation, relative rights and preferences: 1. Designation and number of shares of series. A series of Preferred Stock comprised of 460,000 shares is created, established and designated "7-1/2% Cumulative Convertible Preferred Stock, Series B" (hereinafter called "Series B Preferred Stock"). 2. Dividend rights. 2.1 The holders of the Series B Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors, preferential cumulative dividends in cash at the annual rate of $1.875 per share and no more, payable quarterly on March 15, June 15, September 15 and December 15 of each year commencing June 15, 1992. In the case of the issuance of shares of Series B Preferred Stock on or prior to May 15, 1992, such dividends shall be cumulative from and after May 15, 1992, and the initial dividend for the period commencing on May 15, 1992 to but not including June 15, 1992 shall be payable on June 15, 1992. Such initial dividend and all other dividends payable for a period less than a full quarterly period shall be computed on the basis of a 360-day year consisting of twelve 30-day months. In the case of the issuance of other shares of Series B Preferred Stock issued after May 15, 1992 such dividends with respect to each of such other shares shall be cumulative from the quarterly dividend payment date next preceding the date of issuance of such shares to which dividends have been paid on Series B Preferred Stock (or from May 15, 1992 if such shares are issued on or prior to the record date for the first dividend declared on Series B Preferred Stock), unless the date of issuance of such shares is a dividend -11- 14 payment date to which dividends have been paid on Series B Preferred Stock or a date between the record date for the determination of holders of Series B Preferred Stock entitled to receive a dividend which has been declared and the date of payment thereof, in either of which events such dividend shall be cumulative from such dividend payment date, so that all holders of record of Series B Preferred Stock outstanding on any record date for the determination of holders of Series B Preferred Stock entitled to receive any dividend thereon shall have the same dividend rights per share. 2.2 So long as any shares of the Series B Preferred Stock are outstanding, no dividends, other than (i) dividends on common stock payable in common stock, (ii) dividends payable in stock which is junior to the Series B Preferred Stock (both as to dividends and upon liquidation), (iii) options, warrants or other rights to subscribe for or purchase common stock or other stock which is junior to the Series B Preferred Stock and (iv) cash in lieu of fractional shares in connection with any such dividend, shall be paid or declared in cash or otherwise, nor shall any other distribution be made, on the common stock or on any other stock junior to the Series B Preferred Stock as to dividends, unless there shall be no arrearages in dividends on the Series B Preferred Stock for any past quarterly dividend period, and all cumulative dividends shall have been paid or declared in full on the Series B Preferred Stock for the current quarterly dividend period. 2.3 Subject to the foregoing provisions, such dividends and other distributions (payable in cash, property or stock junior to the Series B Preferred Stock) as may be determined by the Board of Directors may be declared and paid from time to time on the common stock or on any other stock junior to the Series B Preferred Stock, without any right of participation therein by the holders of Series B Preferred Stock. 2.4 So long as any shares of the Series B Preferred Stock are outstanding, no shares of any stock junior to the Series B Preferred Stock shall be purchased, redeemed or otherwise acquired by the Corporation or by any subsidiary, except in connection with (i) a reclassification or exchange of any stock junior to the Series B Preferred Stock through the issuance of other stock junior to the Series B Preferred Stock (both as to dividends and upon liquidation), or (ii) the purchase, redemption or other acquisition of any stock junior to the Series B Preferred Stock with proceeds of a reasonably contemporaneous sale of other stock junior to the Series B Preferred Stock (both as to dividends and upon liquidation), nor shall any funds be set aside or made available for any purchase, redemption or sinking fund for the purchase or redemption of any stock junior to the Series B Preferred Stock, unless there shall be no arrearages in dividends on the Series B Preferred Stock for any past quarterly dividend period. 2.5 If there are any arrearages in dividends for any past quarterly dividend period on any series of Preferred Stock ranking on a parity with the Series B Preferred Stock as to dividends, or if dividends shall not have been paid or -12- 15 declared in full for the current quarterly period on all series of Preferred Stock ranking on a parity with the Series B Preferred Stock as to dividends to the extent that dividends on such other series of Preferred Stock are cumulative, any dividends paid or declared on the Series B Preferred Stock or on any other series of Preferred Stock ranking on a parity with the Series B Preferred Stock as to dividends shall be shared ratably by the holders of the Series B Preferred Stock and the holders of all such other series of Preferred Stock ranking on a parity with the Series B Preferred Stock as to dividends in proportion to such respective arrearages and unpaid and undeclared current quarterly cumulative dividends. 3. Liquidation preference. 3.1 In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary (hereinafter sometimes called "liquidation"), the holders of the Series B Preferred Stock shall be entitled to receive a preferential liquidation payment in an amount equal to $25.00 per share plus all arrearages in dividends thereon to, but not including, the date fixed for the liquidation payment (computed without interest) and no more, before any distribution shall be made to the holders of the common stock or any other stock junior to the Series B Preferred Stock as to distribution upon liquidation. The holders of the shares of the Series B Preferred Stock will not be entitled to receive the liquidation payment in respect of such shares until the liquidation preference of any other shares of the Corporation's stock ranking senior to the Series B Preferred Stock with respect to the rights upon liquidation shall have been paid (or a sum set aside therefor sufficient to provide for payment) in full. 3.2 If upon any liquidation the assets of the Corporation are insufficient to permit payment of the full preferential amount payable to the holders of the Series B Preferred Stock and of any other series of Preferred Stock ranking on a parity with the Series B Preferred Stock as to distribution upon liquidation, then the assets available for distribution to holders of the Series B Preferred Stock and the holders of such other series of Preferred Stock ranking on a parity with the Series B Preferred Stock as to distribution upon liquidation shall be distributed ratably to the holders of the Series B Preferred Stock and the holders of all such other series of Preferred Stock in proportion to the full preferential amounts payable on their respective shares upon liquidation. 3.3 If the preferential liquidation payment shall have been made in full as provided herein, the remaining assets of the Corporation shall be distributed among the holders of common stock and other junior stock, according to their respective rights and preferences and in accordance with their respective holdings, and the holders of the Series B Preferred Stock shall not be entitled to any further participation in any distribution of assets by the Corporation. -13- 16 3.4 For the purposes of this section 3, a consolidation or merger of the Corporation with any other corporation or a sale, lease or conveyance of all or any part of the Corporation's property or business shall not be deemed, as such, to constitute a liquidation, dissolution or winding up of the Corporation, but any reorganization of the Corporation required by any court or administrative body in order to comply with any provision of law shall be deemed to be a liquidation, dissolution or winding up of the Corporation unless the preferences, qualifications, limitations, restrictions and special or relative rights granted to or imposed upon the Series B Preferred Stock are not adversely affected by such reorganization. 4. Redemption. 4.1 The Series B Preferred Stock shall not be subject to call for mandatory redemption by the Corporation, nor shall any holder thereof have the right to require redemption of the Series B Preferred Stock. 4.2 The Series B Preferred Stock shall be subject to redemption at the option of the Corporation for cash on at least 30 but not more than 60 days' notice at any time or from time to time as a whole or in part, except that the Series B Preferred Stock may not be redeemed prior to May 15, 1996. With respect to any such redemption, the Series B Preferred Stock shall be redeemable at the following redemption prices per share, together in each case with accrued but unpaid dividends to but excluding the date fixed for redemption, if redeemed during the 12-month period beginning on:
Redemption Price Per Share Year of Convertible Preferred Stock ---- ------------------------------ May 15, 1996 $26.125 May 15, 1997 25.938 May 15, 1998 25.750 May 15, 1999 25.563 May 15, 2000 25.375 May 15, 2001 25.188 May 15, 2002 and thereafter 25.00
4.3 Notice of any redemption shall be given by first class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the date fixed for redemption to the holders of record of the shares of Series B Preferred Stock to be redeemed, at their respective addresses appearing on the books of the Corporation. Notice so mailed shall be conclusively presumed to have been duly given whether or not actually received. Such notice shall state: (i) the date fixed for redemption; (ii) the redemption price; (iii) that the holder has the right to convert such shares into Common Stock until the close of business on the redemption date; (iv) the then-effective conversion rate and the place where certificates for such shares may be surrendered for -14- 17 conversion; (v) if less than all the shares held by such holder are to be redeemed, the number of shares to be redeemed from such holder; (vi) the place where certificates for such shares are to be surrendered for payment of the redemption price; and (vii) that after such date fixed for redemption the shares to be redeemed shall not accrue dividends. At the option of the Corporation, if notice of redemption is mailed as aforesaid, and if prior to the date fixed for redemption funds sufficient to pay in full the redemption price are deposited in trust, for the account of the holders of the shares to be redeemed, with a bank or trust company named in such notice doing business in the Borough of Manhattan, the City of New York, State of New York or the Commonwealth of Pennsylvania and having capital surplus and undivided profits of at least $50 million (which bank or trust company also may be the transfer agent and/or paying agent for the Series B Preferred Stock) notwithstanding the fact that any certificate(s) for shares called for redemption shall not have been surrendered for cancellation, on and after such date of deposit the shares represented thereby so called for redemption shall be deemed to be no longer outstanding, and all rights of the holders of such shares as shareholders of the Corporation shall cease, except the right of the holders thereof to convert such shares in accordance with the provisions of Paragraph 8 at any time prior to the close of business on the redemption date and the right of the holders thereof to receive out of the funds so deposited in trust the redemption price, without interest, upon such surrender of the certificate(s) representing such shares. Any funds so deposited with such bank or trust company in respect of shares of Series B Preferred Stock converted before the close of business on the redemption date shall be returned to the Corporation upon such conversion. Any funds so deposited with such bank or trust company which shall remain unclaimed by the holders of shares called for redemption at the end of two years after the redemption date shall be repaid to the Corporation, on demand, and thereafter the holder of any such shares shall look only to the Corporation for the payment, without interest, of the redemption price. 4.4 Any provision of this Section 4 to the contrary notwithstanding, in the event that any quarterly dividend payable on the Series B Preferred Stock shall be in arrears and until all such dividends in arrears shall have been paid or declared and set apart for payment, the Corporation shall not redeem any shares of Series B Preferred Stock unless all outstanding shares of Series B Preferred Stock are simultaneously redeemed and shall not purchase or otherwise acquire any shares of Series B Preferred Stock except in accordance with a purchase offer made by the Corporation on the same terms to all holders of record of Series B Preferred Stock. 4.5 If fewer than all the outstanding shares of the Series B Preferred Stock are to be redeemed, the Corporation shall select those to be redeemed by lot or on a pro rata basis or by any other method deemed by the Corporation to be equitable (with adjustments to avoid fractional shares). -15- 18 4.6 Any shares of the Series B Preferred Stock for which a notice of redemption has been given may be converted into shares of Common Stock at any time before the close of business on the date fixed for the redemption as set forth in Section 8 below. 5. Status of Series B Preferred Stock repurchased or declassified. Shares of Series B Preferred Stock repurchased or declassified as such by future resolution of the Board of Directors shall be deemed to be authorized but unissued shares of Preferred Stock undesignated as to series. Shares of Series B Preferred Stock exchanged for shares of any other class or series shall thereby be deemed to be cancelled and the number of shares of Preferred Stock which the Corporation is authorized to issue shall be correspondingly reduced. 6. Restrictions on certain action affecting Series B Preferred Stock. 6.1 So long as any shares of Series B Preferred Stock remain outstanding, the Corporation will not, without the consent given in writing without a meeting or affirmative vote given in person or by proxy at a meeting called for the purpose, by the holders of at least 66-2/3 per cent of the shares of the Series B Preferred Stock then outstanding, (i) authorize, create or issue, or increase the authorized or issued amount of, any other series of Preferred Stock or any other class of stock ranking prior to (or issuable in series which may, by resolutions of the Board of Directors providing for the issue of such series, rank prior to), the Series B Preferred Stock, either as to dividends or upon liquidation, dissolution or winding up, or (ii) amend, alter or repeal any of the provisions of the Articles of Incorporation or of this resolution so as to materially and adversely affect the preferences, special rights, privileges or voting powers of the holders of the Series B Preferred Stock, or (iii) effect a merger or consolidation which would affect materially and adversely the preferences, special rights, privileges or voting powers of the holders of the Series B Preferred Stock; provided, however, that any increase in the amount of the authorized preferred stock or any outstanding series of preferred stock or any other capital of the Corporation, or the creation and issuance of other series of preferred stock including the Series B Preferred Stock, or of any other capital stock of the Corporation, in each case ranking on a parity with or junior to the Series B Preferred Stock with respect to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up shall not be deemed to materially and adversely affect such rights, preferences, special rights, privileges or voting powers. 6.2 The Corporation may not, without the consent or affirmative vote of holders of the Series B Preferred Stock then outstanding as described in Section 6.1, establish any other series of Preferred Stock ranking on a parity with, or authorize any other class of stock ranking on a parity with (or issuable in series which may, by resolutions of the Board of Directors providing for the issue of such series, rank on a parity with) the Series B Preferred Stock, either as to dividends or upon liquidation, -16- 19 dissolution or winding up, or both ("Parity Stock"), or increase the authorized number of shares of any such other class or series, unless the Articles of Incorporation or Designation Statement creating or authorizing such class or series provide that if in any case the stated dividends or amounts payable upon liquidation, dissolution or winding up are not paid in full on the Series B Preferred Stock and all outstanding shares of Parity Stock, the shares of all Parity Stock shall share ratably in the payment of dividends, including accumulations (if any) in accordance with the sums which would be payable on all Parity Stock if all dividends in respect of all shares of Parity Stock were paid in full, and on any distribution of assets upon liquidation, dissolution or winding up ratably in accordance with the sums which would be payable in respect of all shares of Parity Stock if all sums payable were discharged in full. 7. Voting rights. Except as set forth in section 6 or as otherwise from time to time expressly required by law, holders of the Series B Preferred Stock shall not be entitled to vote. 8. Conversion rights. 8.1 The holders of Series B Preferred Stock shall be entitled, at any time, to surrender shares of the Series B Preferred Stock for conversion into shares of common stock of the Corporation. Subject to the provisions set forth in this section 8, each share of Series B Preferred Stock surrendered hereunder shall be converted, as of the close of business on the date of such surrender, into 1.6026 shares of common stock subject to adjustment as described in Section 8.4 (the "Conversion Rate"). 8.2 In order to convert shares of Series B Preferred Stock into common stock, the holder shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Transfer Agent for the common stock, and shall give written notice to the Corporation at said office that he elects to convert the same or part thereof. The Corporation as soon as practicable thereafter will issue and deliver at said office to such holder a certificate for the number of full shares of common stock to which he shall be entitled hereunder; however, such holder shall be treated for all purposes as the record holder of such common stock at the time as of which such conversion takes place as aforesaid. 8.3 No fractional shares of common stock shall be issued upon conversion of the Series B Preferred Stock. Instead of any fraction of a share which would otherwise be issuable, the Corporation shall pay a cash adjustment, concurrently with issuance of the certificate for the full number of shares to which the holder is entitled, in an amount equal to the product of (i) the fraction of a share which would otherwise be issuable, and (ii) the current market price of the Corporation's common stock on the date of conversion. -17- 20 8.4 The Conversion Rate shall be subject to adjustment from time to time as follows: (a) In the event the Corporation should at any time or from time to time fix a record date for the effectuation of a subdivision of the outstanding shares of common stock or the determination of holders of common stock entitled to receive a dividend or other distribution payable in additional shares of common stock (or payable in certain rights or warrants entitling them to subscribe for common stock) at less than the current market price, then, as of such record date (or the date of such dividend distribution or subdivision if no record date is fixed) the Conversion Rate of the Series B Preferred Stock shall be appropriately increased so that the number of shares of common stock issuable on conversion of each share of Series B Preferred Stock shall be increased in proportion to such increase of outstanding shares of common stock. (b) If the number of shares of common stock outstanding at any time is decreased by a combination of the outstanding shares of common stock, then, following the record date of such combination, the Conversion Rate for the Series B Preferred Stock shall be appropriately decreased so that the number of shares of common stock issuable on conversion of each share of Series B Preferred Stock shall be decreased in proportion to such decrease in outstanding shares of common stock. (c) In the event the Corporation shall declare a distribution payable in the Corporation's capital stock (other than common stock), evidences of indebtedness issued by the Corporation, assets (excluding cash dividends or distributions from retained earnings) or warrants or rights not referred to in section 8.4(a), then, in each such case for the purpose of this section, the holders of the Series B Preferred Stock shall be entitled to a proportionate share of any such distribution as though they were the holders of the number of shares of common stock of the Corporation into which their shares of Series B Preferred Stock are convertible as of the record date fixed for the determination of the holders of common stock of the Corporation entitled to receive such distribution. 8.5 No adjustment in the Conversion Rate will be required unless such adjustment would require a change of at least .01 in the Conversion Rate then in effect; provided, however, that any adjustment that would otherwise be required to be made shall be carried forward and taken into account in any subsequent adjustment. 8.6 In the case of any consolidation or merger to which the Corporation is a party and as a result of which holders of common stock shall be entitled to receive securities, cash or other property with respect to or in exchange for such common stock, or in case of any sale or conveyance to another corporation of the property of the Corporation as an entirety or substantially as an entirety, or in case of -18- 21 any reclassification or change in outstanding shares of common stock (other than a change in par value, or from par value to no par value or from no par value to par value, or as a result of a subdivision or combination of the common stock) there will be no adjustment of the Conversion Rate but the holder of each share of Series B Preferred Stock then outstanding will have the right thereafter to convert such share into the kind and amount of securities, cash or other property which such holder would have owned or have been entitled to receive immediately after such consolidation or merger, sale or conveyance or reclassification or change had such share been converted immediately prior to the effective date of such consolidation or sale or conveyance or reclassification or change. If, in the case of any such consolidation, merger, sale or conveyance, the stock or other securities and property receivable thereupon by a holder of shares of common stock includes shares of stock, securities or other property or assets (including cash) of an entity other than the successor or acquiring entity, as the case may be, in such consolidation, merger, sale or conveyance, then the Corporation shall enter into an agreement with such other entity for the benefit of the holders of Series B Preferred Stock that shall contain such provisions to protect the interests of such holders as the Board of Directors shall reasonably consider necessary by reason of the foregoing. 8.7 The Corporation shall at all times reserve and keep available, out of its authorized but unissued common stock or out of shares of common stock held in its Treasury, solely for the purpose of effecting the conversion of the shares of the Series B Preferred Stock, the full number of shares of common stock deliverable upon the conversion of all shares of the Series B Preferred Stock from time to time outstanding. The Corporation shall from time to time, in accordance with the laws of the Commonwealth of Pennsylvania, increase the authorized amount of its common stock if at any time the authorized number of shares of common stock remaining unissued or available from Treasury shall not be sufficient to permit the conversion of all of the shares of the Series B Preferred Stock at the time outstanding. 8.8 The Corporation will pay any and all issue taxes that may be payable in respect of any issue or delivery of shares of common stock on conversion of shares of the Series B Preferred Stock pursuant to this section 8. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of common stock in a name other than that in which the shares of the Series B Preferred Stock so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such change in registration has paid to the Corporation the amount of any such tax, or has established to the satisfaction of the Corporation, that such tax has been paid. 8.9 If any shares of common stock issuable upon conversion of the Series B Preferred Stock require registration with or approval of any governmental authority under any federal or state law before such shares may be lawfully issued upon conversion, then the Corporation shall, in good faith and as expeditiously as possible, endeavor to obtain such registration or approval, as the case may be, but shall -19- 22 not be required to issue such shares until the requisite registration or approval has been obtained. 8.10 The Corporation reserves the right to make any adjustment in the Conversion Rate in addition to those required in the foregoing provisions as the Corporation in its discretion shall determine to be advisable in order that certain stock-related distributions hereafter made by the Corporation to its stockholders shall not be taxable. Except as stated above, the Conversion Rate will not be adjusted for the issuance of common stock or any securities convertible into or exchangeable for common stock or carrying the right to purchase any of the foregoing. Upon conversion no adjustments will be made for accrued dividends and, therefore, shares of the Series B Preferred Stock surrendered for conversion during the period between the close of business on any dividend payment record date and the opening of business on the corresponding dividend payment date (except shares called for redemption on a date during such period) must be accompanied by payment of an amount equal to the dividend payable on such shares on such dividend payment date. 8.11 In the case of any share of Series B Preferred Stock that is converted after any record date with respect to the payment of a dividend on the Series B Preferred Stock and on or prior to the date on which such dividend is payable by the Corporation (the "Dividend Due Date") the dividend due on such Dividend Due Date shall be payable on such Dividend Due Date to the holder of record of such shares as of such preceding record date notwithstanding such conversion. Shares of Series B Preferred Stock surrendered for conversion during the period from the close of business on any record date with respect to the payment of a dividend on the Series B Preferred Stock next preceding any Dividend Due Date to the opening of business on such Dividend Due Date shall (except in the case of shares of Series B Preferred Stock which have been called for redemption on a redemption date within such period) be accompanied by payment in next-day funds or other funds acceptable to the Corporation of an amount equal to the dividend payable on such Dividend Due Date on the share of Series B Preferred Stock being surrendered for conversion. The dividend with respect to a share of Series B Preferred Stock called for redemption on a redemption date during the period from the close of business on any record date with respect to the payment of a dividend on the Series B Preferred Stock next preceding any Dividend Due Date to the opening of business on such Dividend Due Date shall be payable on such Dividend Due Date to the holder of record of such share on such dividend record date notwithstanding the conversion of such share of Series B Preferred Stock after such record date and prior to such Dividend Due Date, and the holder converting such share of Series B Preferred Stock need not include a payment of such dividend amount upon surrender of such share of Series B Preferred Stock for conversion. Except as provided in this paragraph, no payment or adjustment shall be made upon any conversion on account of any dividends accrued on shares of Series B Preferred Stock surrendered for conversion or on any dividends on the shares of Common Stock issued upon conversion. -20- 23 9. Miscellaneous 9.1 The "current market price" of the Corporation's common stock, for purposes of this Resolution, shall mean the average, for the ten trading days immediately preceding the date as of which "current market price" is to be determined, of (A) the median of the highest bid price and lowest ask price per share of the Corporation's common stock as reported by the National Association of Securities Dealers Automated Quotation System, or any similar system of automated dissemination of quotations of securities prices then in common use, if so quoted, or (B) if the Corporation's common stock is listed or admitted for trading on any national securities exchange, the last sale price, or the closing bid price if no sale occurred, of the Corporation's common stock on the principal securities exchange on which the Corporation's common stock is listed. If the Corporation's common stock is quoted on a national securities or central market system, in lieu of a market or quotation system described above, "current market price" shall be determined in the manner set forth in clause (A) of the preceding sentence if bid and asked quotations are reported but actual transactions are not, and in the manner set forth in clause (B) of the preceding sentence if actual transactions are reported. If none of the conditions set forth above is met, the "current market price" shall be the average of actual sale prices of the Corporation's common stock during the ten business days immediately preceding the date as of which "current market price" is to be determined. 9.2 The shares of Series B Preferred Stock shall not have any relative or special rights and powers other than as set forth in this Resolution and in the Articles of Incorporation, as amended, of the Corporation. Section II: COMMON STOCK Except for and subject to those rights expressly granted to holders of the Preferred Stock by resolution or resolutions adopted by the Board of Directors pursuant to Section I of this Article 5 and except as may be provided by the laws of the Commonwealth of Pennsylvania, holders of the Common Stock shall have exclusively all other rights of shareholders. Section III: PREEMPTIVE RIGHTS; CUMULATIVE VOTING a. The Corporation may issue shares, option rights, securities having conversion or option rights and any other securities of any class without first offering them to shareholders of any class or classes. b. The shareholders shall not have any right of cumulative voting. -21- 24 Section IV: SPECIAL VOTING REQUIREMENTS a. Except as provided in paragraph c below, no corporate action of a character described in paragraph b below, and no agreement, plan or resolution providing therefor, shall be valid or binding upon the Corporation unless such corporate action shall have been approved in compliance with all applicable provisions of the Business Corporation Law and these Articles and shall have been authorized by the affirmative vote of at least seventy-five percent of the outstanding shares of Common Stock entitled to vote, given in person or by proxy, at a meeting called for such purpose. b. Corporate actions subject to the voting requirements of this Section IV shall be: (i) any merger or consolidation, or any sale, lease, exchange or other disposition, in a single transaction or series of related transactions, of all or substantially all or a substantial part of the properties or assets of the Corporation; or (ii) removal of the entire Board of Directors, a class of Directors or any member of the Board of Directors during his term without cause. c. The voting requirements of this Section shall not apply to any transaction of a character described in clause (i) of paragraph b above if the Board of Directors shall have approved and recommended the transaction prior to the consummation thereof. d. Except if otherwise specifically provided in the By-Laws of the Corporation such By-Laws may be altered or repealed and new By-Laws may be adopted by the Board or by the affirmative vote of the holders of at least seventy-five percent of the outstanding Common Stock entitled to vote. e. For purposes of this Section IV, the following definitions shall apply: (i) "Person" shall mean an individual, a corporation, a partnership, an association, a joint-stock company, a trust, any unincorporated organization, a government or political subdivision thereof and any other entity. (ii) "Substantial Part" shall mean more than twenty percent of the total consolidated assets of the Corporation, as shown on its consolidated balance sheet as of the end of the most recent fiscal year. f. The affirmative vote of the holders of at least seventy-five percent of the outstanding shares of Common Stock entitled to vote shall be required to amend or repeal this Section IV or Section V hereof. -22- 25 Section V: CONSIDERATIONS AND ACTIONS OF THE BOARD OF DIRECTORS IN CONNECTION WITH CERTAIN PROPOSALS a. The Board of Directors of the Corporation. when evaluating any proposal (i) involving a tender or exchange offer for any security of the Corporation, (ii) to merge or consolidate the Corporation with another corporation or other person, or (iii) to purchase or otherwise acquire all or substantially all or a substantial part of the properties or assets of the Corporation, shall, in connection with the exercise of its judgment in determining what is in the best interests of the Corporation and its shareholders, give due consideration to all relevant factors, including without limitation, the economic effect, both immediate and long-term, upon the Corporation's shareholders, including shareholders, if any, not to participate in the transaction, the social and economic effect on the employees, depositors and customers of, and others dealing with, the Corporation and its subsidiaries and on the communities in which the Corporation and its subsidiaries operate or are located, whether the proposal is acceptable based on the historical and current operating results or financial condition of the Corporation, whether a more favorable price could be obtained for the Corporation's securities in the future, the reputation and business practices of the offeror and its management and affiliates as they would affect the employees, depositors and customers of the Corporation and its subsidiaries and the future value of the Corporation's stock, and any antitrust or other legal and regulatory issues that are raised by the proposal. The definitions set forth in paragraph e of Section IV shall apply to this Section V. b. If the Board of Directors determines that a proposal of a character described in clause (i) or (ii) or (iii) of paragraph a above should be rejected, it may take any lawful action to accomplish its purpose, including, but not limited to, any or all of the following: advising shareholders not to accept the proposal; instituting litigation against the party making the proposal; filing complaints with governmental and regulatory authorities; acquiring the Corporation's securities; selling or otherwise issuing authorized but unissued securities or treasury stock or granting options with respect thereto; acquiring a company to create an antitrust or other regulatory problem for the party making the proposal; and obtaining a more favorable offer from another individual or entity. -23- 26 6. The following are provisions for the regulation of the internal affairs and business of the Corporation: a. BY-LAWS The Board of Directors of the Corporation shall have the power to make, alter, amend and repeal such By-Laws as it may deem necessary and convenient for the regulation and management of the Corporation not inconsistent with law or the Articles. b. INDEMNIFICATION Directors and Officers of the Corporation shall be indemnified as of right to the fullest extent now or hereafter permitted by law in connection with any actual or threatened action, suit or proceedings, civil, criminal, administrative, investigative or other (whether brought by or in the right of the Corporation or otherwise) arising out of their service to the Corporation or to another organization at the request of the Corporation, or because of their positions with the Corporation. Persons who are not Directors or Officers of the Corporation may be similarly indemnified in respect of such service to the extent authorized at any time by the Board of Directors of the Corporation. The Corporation may purchase and maintain insurance to protect itself and any such Director, Officer or other person against any liability, cost or expense asserted against or incurred by him in respect of such service, whether or not the Corporation would have the power to indemnify him against such liability by law or under the provisions of this paragraph. The provisions of this paragraph shall be applicable to persons who have ceased to be Directors or Officers, and shall inure to the benefit of the heirs, executors and administrators of persons entitled to indemnity hereunder. c. RESERVED POWER The Corporation shall be deemed for all purposes to have reserved the right to alter, change, or repeal any provision contained in its Articles or By-Laws to the extent now or hereafter permitted or prescribed by law, and all rights herein conferred upon shareholders and others are granted subject to such reservation. 7. Any or all classes and series of shares or any part thereof, may be uncertificated shares to the extent now or hereafter permitted or prescribed by law. 8. To the fullest extent permitted by law, no director of the Corporation shall be personally liable for monetary damages for any action taken, or any failure to take any action. -24- EX-11 3 F.N.B. CORPORATION 1 F.N.B. CORPORATION STATEMENT RE COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11 Dollars in thousands
YEAR ENDED DECEMBER 31 1996 1995 1994 --------- --------- ---------- PRIMARY Net Income $ 18,433 $ 18,083 $ 13,545 Less: Preferred Stock Dividends Declared (766) (849) (853) --------- --------- ---------- Net Income Applicable to Common Stock $ 17,667 $ 17,234 $ 12,692 ========= ========= ========== Average Common Shares Outstanding 9,087,941 9,025,482 8,997,329 Net Effect of Dilutive Stock Options Based on the Treasury Stock Method Using Average Market Price 85,373 42,338 46,332 --------- --------- ---------- 9,173,314 9,067,820 9,043,661 ========= ========= ========== Net Income per Common Share $1.93 $1.90 $1.40 ===== ===== ===== FULLY DILUTED Net Income $ 18,433 $ 18,083 $ 13,545 Plus: Minority Interest 64 --------- --------- ---------- Net Income Applicable to Common Stock $ 18,433 $ 18,083 $ 13,609 ========= ========= ========== Average Common Shares Outstanding 9,087,941 9,025,482 8,997,329 Series A Convertible Preferred Stock 27,178 32,705 41,704 Series B Convertible Preferred Stock 792,360 879,902 883,454 Minority Interest Convertible Preferred Stock 33,620 Net Effect of Dilutive Stock Options Based on the Treasury Stock Method Using the Year-End Market Price, If Higher than Average Market Price 87,402 50,258 49,122 --------- --------- ---------- 9,994,881 9,988,348 10,005,229 ========= ========= ========== Net Income per Common Share $1.84 $1.81 $1.36 ===== ===== =====
EX-13 4 F.N.B. CORPORATION 1 EXHIBIT 13 F.N.B. CORPORATION - ------------------------------------------------------------------------------- 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 2 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. 3 F.N.B. Corporation and Subsidiaries Highlights of 1996 - --------------------------------------------------------------------------------
Dollars in thousands, except per share data Percentage 1996 1995 Change - ----------------------------------------------------------------------------------------------------------------------------------- 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% =================================================================================================================================== 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% =================================================================================================================================== 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% ===================================================================================================================================
* 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. 1 4 F.N.B. Corporation and Subsidiaries To Our Shareholders and Friends: - ------------------------------------------------------------------------------- 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 2 5 - ------------------------------------------------------------------------------- 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 3 6 F.N.B. Corporation and Subsidiaries Affiliate Highlights - ------------------------------------------------------------------------------- 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 4 7 F.N.B. Corporation and Subsidiaries Description of Corporation and Affiliates - ------------------------------------------------------------------------------- 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. 5 8 F.N.B. Corporation and Subsidiaries Description of Corporation and Affiliates - ------------------------------------------------------------------------------- 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. 6 9 - ------------------------------------------------------------------------------- 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. 7 10 F.N.B. Corporation and Subsidiaries Description of Corporation and Affiliates - ------------------------------------------------------------------------------- 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. 8 11 - ------------------------------------------------------------------------------- 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. 9 12 F.N.B. Corporation and Subsidiaries Description of Corporation and Affiliates - ------------------------------------------------------------------------------- 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. 10 13 - ------------------------------------------------------------------------------- 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. 11 14 F.N.B. Corporation and Subsidiaries Description of Corporation and Affiliates - ------------------------------------------------------------------------------- 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. 12 15 - ------------------------------------------------------------------------------- 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 13 16 F.N.B. Corporation and Subsidiaries Consolidated Balance Sheet - -------------------------------------------------------------------------------
Dollars in thousands, except par values December 31 1996 1995 - ----------------------------------------------------------------------------------------------------------------------------------- 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) - ----------------------------------------------------------------------------------------------------------------------------------- Net Loans 1,281,383 1,191,191 - ----------------------------------------------------------------------------------------------------------------------------------- Premises and equipment 26,886 22,504 Other assets 36,412 37,963 - ----------------------------------------------------------------------------------------------------------------------------------- $ 1,726,748 $ 1,706,993 =================================================================================================================================== Liabilities Deposits: Non-interest bearing $ 153,318 $ 167,700 Interest bearing 1,276,390 1,274,409 - ----------------------------------------------------------------------------------------------------------------------------------- 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 - ----------------------------------------------------------------------------------------------------------------------------------- Total Liabilities 1,571,995 1,563,076 - ----------------------------------------------------------------------------------------------------------------------------------- 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) - ----------------------------------------------------------------------------------------------------------------------------------- Total Stockholders' Equity 154,753 143,917 - ----------------------------------------------------------------------------------------------------------------------------------- $ 1,726,748 $ 1,706,993 ===================================================================================================================================
See accompanying Notes to Consolidated Financial Statements 14 17 F.N.B. Corporation and Subsidiaries Consolidated Income Statement - -------------------------------------------------------------------------------
Dollars in thousands, except per share data Year Ended December 31 1996 1995 1994 - ----------------------------------------------------------------------------------------------------------------------------------- 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 - ----------------------------------------------------------------------------------------------------------------------------------- Total Interest Income 138,986 135,356 124,879 - ----------------------------------------------------------------------------------------------------------------------------------- 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 - ----------------------------------------------------------------------------------------------------------------------------------- Total Interest Expense 58,242 58,056 50,228 - ----------------------------------------------------------------------------------------------------------------------------------- Net Interest Income 80,744 77,300 74,651 Provision for loan losses 6,137 5,652 8,450 - ----------------------------------------------------------------------------------------------------------------------------------- Net Interest Income After Provision For Loan Losses 74,607 71,648 66,201 - ----------------------------------------------------------------------------------------------------------------------------------- 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 - ----------------------------------------------------------------------------------------------------------------------------------- Total Non-Interest Income 15,318 15,008 14,382 - ----------------------------------------------------------------------------------------------------------------------------------- 89,925 86,656 80,583 - ----------------------------------------------------------------------------------------------------------------------------------- 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 - ----------------------------------------------------------------------------------------------------------------------------------- Total Non-Interest Expenses 62,826 59,950 60,291 - ----------------------------------------------------------------------------------------------------------------------------------- Income Before Income Taxes 27,099 26,706 20,292 Income taxes 8,666 8,623 6,747 - ----------------------------------------------------------------------------------------------------------------------------------- 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 15 18 F.N.B. Corporation and Subsidiaries Consolidated Statement of Stockholders' Equity - ------------------------------------------------------------------------------- Dollars in thousands, except per share data
Net Additional Unrealized Preferred Common Paid-In Retained Securities Treasury Stock Stock Capital Earnings Gains Stock - ---------------------------------------------------------------------------------------------------------------------------------- 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) - ---------------------------------------------------------------------------------------------------------------------------------- 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 - ---------------------------------------------------------------------------------------------------------------------------------- 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) - ---------------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1996 $ 3,525 $ 18,527 $ 68,372 $ 61,894 $ 3,922 $ (1,487) ==================================================================================================================================
See accompanying Notes to Consolidated Financial Statements 16 19 F.N.B. Corporation and Subsidiaries Consolidated Statement of Cash Flows - -------------------------------------------------------------------------------
Dollars 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: 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 - ----------------------------------------------------------------------------------------------------------------------------------- Net cash flows from operating activities 34,002 26,814 1,446 - ----------------------------------------------------------------------------------------------------------------------------------- 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) - ----------------------------------------------------------------------------------------------------------------------------------- Net cash flows from investing activities (21,370) (26,708) 23,989 - ----------------------------------------------------------------------------------------------------------------------------------- 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 58 61 - ------------------------------------------------------------------------------- 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 59 62 F.N.B. Corporation and Subsidiaries Market Area - ------------------------------------------------------------------------------- [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 EX-21 5 F.N.B. CORPORATION 1 LIST OF SUBSIDIARIES EXHIBIT 21 Following lists the significant subsidiaries of the registrant together with their wholly-owned subsidiaries and the state or jurisdiction of incorporation of each:
NAME INCORPORATED 1) First National Bank of Pennsylvania United States 2) Bucktail Bank and Trust Company Pennsylvania 3) Reeves Bank Pennsylvania 4) First County Bank Ohio 5) The Metropolitan Savings Bank of Ohio Ohio 6) Regency Finance Company Pennsylvania
Regency Finance Company conducts business under four names. Business is conducted at the fifteen offices in Butler, Clearfield, Crawford, Elk, Erie, Fayette, Lawrence, McKean, Mercer, Somerset and Warren counties in Pennsylvania and Chatauqua county in New York under the name of F.N.B. Consumer Discount Company. Business is conducted in the six offices in Columbiana, Mahoning, Lake and Trumbull counties in Ohio under the name of Citizens Budget Company. Business is conducted in the twelve offices in Centre, Columbia, Lackawanna, Lehigh, Monroe, Montour, Northampton, Snyder, and Union counties in Pennsylvania under the name of Regency Consumer Discount Company. Business is conducted at the office in Hanover County, Pennsylvania under the name of Reliance Consumer Discount Company. The other subsidiaries conduct business under the names as shown above. EX-23 6 F.N.B. CORPORATION 1 Exhibit 23 CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS Regarding: 1. Registration Statement on Form S-3 relating to the F.N.B. Corporation Subordinated Notes and Daily Cash Accounts (File #33-61367). 2. Registration Statement on Form S-3 relating to the Dividend Reinvestment Plan (File #33-72532). 3. Registration Statement on Form S-8 relating to the F.N.B. Corporation Voluntary Dividend Reinvestment and Stock Purchase Plan (File #333-00943). 4. Registration Statement on Form S-8 relating to the F.N.B. Corporation 401(K) Plan (File #33-50780). 5. Registration Statement on Form S-8 relating to F.N.B. Corporation 1990 Stock Option Plan (File #33-78114). 6. Registration Statement on Form S-8 relating to F.N.B. Corporation Restricted Stock Bonus Plan (File #33-78134). 7. Post-Effective Amendment No. 1 to the Registration Statement on Form S-3 relating to the F.N.B. Corporation Voluntary Dividend Reinvestment and Stock Purchase Plan (File #33-72532). 8. Registration Statement on Form S-8 relating to F.N.B. Corporation 1996 Stock Option Plan (File #333-03489). 9. Registration Statement on Form S-8 relating to F.N.B. Corporation Restricted Stock and Incentive Bonus Plan (File #333-03493). 10. Registration Statement on Form S-8 relating to F.N.B. Corporation Directors Plan (File #333-03495). 11. Registration Statement on Form S-8 relating to the F.N.B. Corporation 401(K) Plan (File #333-03503). 12. Post-Effective Amendment No. 1 to the Registration Statement on Form S-8 to Registration Statement on Form S-4 (File #333-01997). We consent to the incorporation by reference in the above listed Registration Statements of our report dated January 31, 1997, with respect to the consolidated financial statements of F.N.B. Corporation and subsidiaries incorporated by reference in this Annual Report (Form 10-K) for the year ended December 31, 1996. ERNST & YOUNG LLP Pittsburgh, Pennsylvania March 18, 1997 EX-27 7 F.N.B. CORPORATION
9 12-MOS DEC-31-1996 DEC-31-1996 70,338 1,334 4,475 0 152,776 143,534 142,544 1,303,822 22,439 1,726,748 1,429,708 78,699 29,409 34,179 0 3,525 18,527 132,701 1,726,748 118,375 19,724 887 138,986 51,973 58,242 80,744 6,137 829 62,826 27,099 27,099 0 0 18,433 1.93 1.84 8.61 6,474 2,674 2,146 0 21,550 6,606 1,358 22,439 22,439 0 0
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