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Mergers and Acquisitions
3 Months Ended
Mar. 31, 2016
Business Combinations [Abstract]  
Mergers and Acquisitions

3. MERGERS AND ACQUISITIONS

Branch Purchase – Fifth Third Bank

On April 22, 2016, the Corporation completed its purchase of 17 branch-banking locations and related consumer loans in the Pittsburgh, Pennsylvania metropolitan area from Fifth Third Bank, in which the Corporation acquired approximately $99,500 in loans and $302,000 in deposits. The assets and liabilities relating to the branches purchased were recorded on the Corporation’s consolidated balance sheet at their preliminary fair values as of April 22, 2016, and the related results of operation for these branches have been included in the Corporation’s consolidated statement of comprehensive income since that date. Based on the preliminary purchase price allocation, the Corporation recorded $10,798 in goodwill and $5,200 in core deposit intangibles. These fair value estimates are provisional amounts based on third party valuations that are currently under review. The goodwill for this transaction is expected to be deductible for income tax purposes.

Metro Bancorp, Inc.

On February 13, 2016, the Corporation completed its acquisition of Metro Bancorp, Inc. (METR), a bank holding company based in Harrisburg, Pennsylvania. The acquisition will enhance the Corporation’s distribution and scale across Central Pennsylvania, strengthen its position as the largest Pennsylvania-based regional bank and allow the Corporation to leverage the significant infrastructure investments made in connection with the expansion of its product offerings and risk management systems. On the acquisition date, the estimated fair values of METR included $2,797,199 in assets, $1,869,046 in loans and $2,327,219 in deposits. The acquisition was valued at $404,020 and resulted in the Corporation issuing 34,041,181 shares of its common stock in exchange for 14,345,319 shares of METR common stock. The Corporation also acquired the fully vested outstanding stock options of METR. The assets and liabilities of METR were recorded on the Corporation’s consolidated balance sheet at their preliminary estimated fair values as of February 13, 2016, the acquisition date, and METR’s results of operations have been included in the Corporation’s consolidated statement of comprehensive income since that date. METR’s banking affiliate, Metro Bank, was merged into FNBPA on February 13, 2016. Based on the preliminary purchase price allocation, the Corporation recorded $173,848 in goodwill and $36,801 in core deposit intangibles as a result of the acquisition. These fair value estimates are provisional amounts based on third party valuations that are currently under review. None of the goodwill is deductible for income tax purposes.

 

The following pro forma financial information for the three months ended March 31, 2015 reflects the Corporation’s estimated consolidated pro forma results of operations as if the METR acquisition occurred on January 1, 2015, unadjusted for potential cost savings and other business synergies the Corporation expects to receive as a result of the acquisition:

 

     F.N.B.
Corporation
     METR      Pro Forma
Adjustments
     Pro Forma
Combined
 

Revenue (net interest income and non-interest income)

   $ 160,103       $ 33,626       $ (1,061    $ 192,668   

Net income

     40,343         5,722         (2,003      44,062   

Net income available to common stockholders

     38,333         5,702         (1,983      42,052   

Earnings per common share – basic

     0.22         0.40         —           0.20   

Earnings per common share – diluted

     0.22         0.39         —           0.20   

The pro forma adjustments reflect amortization and associated taxes related to the purchase accounting adjustments made to record various acquired items at fair value.

In connection with the METR acquisition, the Corporation incurred expenses related to systems conversions and other costs of integrating and conforming acquired operations with and into the Corporation. These merger-related charges amounted to $24,577 and were expensed as incurred. Severance costs comprised 50.9% of the merger-related expenses, with the remainder consisting of other non-interest expenses, including professional services, marketing and advertising, technology and communications, occupancy and equipment, and charitable contributions. The Corporation also incurred issuance costs of $743 which were charged to additional paid-in capital.

Branch Purchase – Bank of America

On September 18, 2015, the Corporation completed its purchase of five branch-banking locations in southeastern Pennsylvania from Bank of America (BofA). The fair value of the acquired assets totaled $154,619, including $148,159 in cash, $4,485 in goodwill and intangible assets, and $1,975 in fixed and other assets. The Corporation also assumed $154,619 in deposits associated with these branches. The Corporation paid a deposit premium of 1.94% and acquired an immaterial amount of loans as part of the transaction. The Corporation’s operating results for 2015 include the impact of branch activity subsequent to the September 18, 2015 closing date. Goodwill of $1,485 for this transaction is deductible for income tax purposes.

The following table summarizes the amounts recorded on the consolidated balance sheet as of each of the acquisition dates in conjunction with the METR acquisition and the BofA branch acquisition discussed above:

 

     METR      BofA
Branches
 

Fair value of consideration paid

   $ 404,020       $ —     

Fair value of identifiable assets acquired:

     

Cash and cash equivalents

     46,854         148,159   

Securities

     722,980         —     

Loans

     1,869,046         842   

Other intangible assets

     36,801         3,000   

Other assets

     121,518         1,133   
  

 

 

    

 

 

 

Total identifiable assets acquired

     2,797,199         153,134   

Fair value of liabilities assumed:

     

Deposits

     2,327,219         154,619   

Borrowings

     227,539         —     

Other liabilities

     12,269         —     
  

 

 

    

 

 

 

Total liabilities assumed

     2,567,027         154,619   

Fair value of net identifiable assets acquired

     230,172         (1,485
  

 

 

    

 

 

 

Goodwill recognized (1)

   $ 173,848       $ 1,485   
  

 

 

    

 

 

 

 

  (1) All of the goodwill for both of these transactions has been recorded by FNBPA.