UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to _______________________
Commission file number 0-8144
F.N.B. CORPORATION
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 25-1255406
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Hermitage Square, Hermitage, PA 16148
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(Address of principal executive offices) (Zip Code)
(412) 981-6000
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(Registrant's telephone number, including area code)
Not applicable
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at October 20, 1995
----- -------------------------------
Common Stock, $2 Par Value 8,603,952 Shares
- -------------------------- ----------------
<PAGE>
F.N.B. CORPORATION
FORM 10-Q
September 30, 1995
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheet 2
Consolidated Income Statement 3
Consolidated Statement of Cash Flows 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 30
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<PAGE>
F.N.B. CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
Dollars in thousands
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------ ------------
(Unaudited) (Note)
------------ ------------
ASSETS
Cash and due from banks $ 54,373 $ 60,451
Interest bearing deposits with banks 3,130 2,770
Federal funds sold 5,115 4,016
Securities available for sale 148,683 120,061
Investment securities (fair value of
$231,778 and $246,834) 233,776 257,956
Loans available for sale 9,785 5,904
Loans, net of unearned income of
$24,812 and $22,022 1,194,174 1,188,399
Allowance for loan losses (21,052) (20,295)
------------ ------------
NET LOANS 1,182,907 1,174,008
------------ ------------
Premises and equipment 22,471 22,982
Other assets 41,415 44,275
------------ ------------
$ 1,691,870 $ 1,686,519
============ ============
LIABILITIES
Deposits:
Non-interest bearing $ 167,541 $ 163,566
Interest bearing 1,263,572 1,261,839
------------ ------------
TOTAL DEPOSITS 1,431,113 1,425,405
Short-term borrowings 55,078 69,365
Other liabilities 25,751 26,142
Long-term debt 40,656 39,017
------------ ------------
TOTAL LIABILITIES 1,552,598 1,559,929
------------ ------------
MINORITY INTEREST 540
------------
STOCKHOLDERS' EQUITY
Preferred stock - $10 par value
Authorized - 20,000,000 shares
Outstanding - 455,838 and 456,288 shares
Aggregate liquidation value -
$11,396 and $11,407 4,558 4,563
Common stock - $2 par value
Authorized - 20,000,000 shares
Outstanding - 8,602,201 and 8,163,014 shares 17,252 16,364
Additional paid-in capital 58,564 51,686
Retained earnings 56,465 53,121
Net unrealized securities gains 2,886 625
Treasury stock - 23,750 and 18,974 shares at cost (453) (309)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 139,272 126,050
------------ ------------
$ 1,691,870 $ 1,686,519
============ ============
NOTE: The balance sheet at December 31, 1994 was derived from the audited
financial statements at that date.
See accompanying Notes to Consolidated Financial Statements
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<PAGE>
F.N.B. CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
Dollars in thousands, except per share data
Unaudited
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1995 1994 1995 1994
--------- --------- --------- ---------
INTEREST INCOME
Loans, including fees $ 28,897 $ 25,820 $ 84,916 $ 76,075
Securities:
Taxable 4,808 4,596 13,409 14,219
Tax exempt 357 381 1,102 1,170
Dividends 153 134 452 420
Other 357 400 1,162 902
--------- --------- --------- ---------
TOTAL INTEREST INCOME 34,572 31,331 101,041 92,786
--------- --------- --------- ---------
INTEREST EXPENSE
Deposits 13,350 11,043 38,360 32,761
Short-term borrowings 829 947 2,499 2,498
Long-term debt 809 691 2,331 2,073
--------- --------- --------- ---------
TOTAL INTEREST EXPENSE 14,988 12,681 43,190 37,332
--------- --------- --------- ---------
NET INTEREST INCOME 19,584 18,650 57,851 55,454
Provision for loan losses 1,366 1,854 4,300 6,685
--------- --------- --------- ---------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 18,218 16,796 53,551 48,769
--------- --------- --------- ---------
NON-INTEREST INCOME
Insurance commissions and fees 1,149 951 3,487 3,127
Service charges 1,624 1,412 5,037 4,487
Trust 260 448 1,015 1,247
Gain on sale of securities 62 126 423 902
Other 451 271 1,317 730
--------- --------- --------- ---------
TOTAL NON-INTEREST INCOME 3,546 3,208 11,279 10,493
--------- --------- --------- ---------
21,764 20,004 64,830 59,262
--------- --------- --------- ---------
NON-INTEREST EXPENSES
Salaries and employee benefits 7,373 6,636 22,185 20,761
Net occupancy 1,160 1,143 3,413 3,428
Amortization of intangibles 303 370 953 1,118
Equipment 732 901 2,653 2,918
Deposit insurance 253 923 2,121 2,797
Other 4,810 4,596 13,995 13,668
--------- --------- --------- ---------
TOTAL NON-INTEREST EXPENSES 14,631 14,569 45,320 44,690
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 7,133 5,435 19,510 14,572
Income taxes 2,277 1,915 6,325 4,832
--------- --------- --------- ---------
NET INCOME $ 4,856 $ 3,520 $ 13,185 $ 9,740
========= ========= ========= =========
NET INCOME PER COMMON SHARE:
Primary $ .54 $ .39 $ 1.45 $ 1.06
========= ========= ========= =========
Fully Diluted $ .51 $ .37 $ 1.39 $ 1.03
========= ========= ========= =========
CASH DIVIDENDS PER COMMON SHARE $ .10 $ .07 $ .24 $ .20
========= ========= ========= =========
AVERAGE COMMON SHARES OUTSTANDING 8,593,248 8,566,516 8,594,323 8,571,464
========= ========= ========= =========
See accompanying Notes to Consolidated Financial Statements
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<PAGE>
F.N.B. CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Dollars in thousands
Unaudited
Nine Months Ended September 30 1995 1994
--------- ---------
OPERATING ACTIVITIES
Net income $ 13,185 $ 9,740
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,544 4,591
Provision for loan losses 4,300 6,685
Deferred taxes 215 (2,155)
Gain on securities available for sale (423) (902)
Gain on loan sales (94) (83)
Proceeds from sale of loans 23,166 41,490
Loans originated for sale (26,953) (38,701)
Change in:
Interest receivable (365) 304
Interest payable 1,740 1,826
Other, net (1,293) 4,495
--------- ---------
Net cash flows from operating activities 17,022 27,290
--------- ---------
INVESTING ACTIVITIES
Net change in interest bearing deposits with banks (360) 1,629
Net change in federal funds sold (1,099) 16,408
Purchase of securities available for sale (61,384) (69,466)
Purchase of investment securities (35,082) (21,091)
Proceeds from sale of securities available for sale 1,036 11,818
Proceeds from maturity of securities available for sale 35,754 66,224
Proceeds from maturity of investment securities 58,628 49,011
Net change in loans (9,376) (58,151)
Increase in premises and equipment (1,514) (1,216)
--------- ---------
Net cash flows from investing activities (13,397) (4,834)
--------- ---------
FINANCING ACTIVITIES
Net change in non-interest bearing deposits 3,975 (1,756)
Net change in interest bearing deposits 1,733 (21,603)
Net change in short-term borrowings (14,287) 8,445
Increase in long-term debt 5,611 3,502
Decrease in long-term debt (3,972) (4,392)
Proceeds from sale of stock 1,031 762
Purchase of treasury stock (1,123) (934)
Cash dividends paid (2,671) (2,326)
--------- ---------
Net cash flows from financing activities (9,703) (18,302)
--------- ---------
NET (INCREASE) DECREASE IN CASH AND DUE FROM BANKS (6,078) 4,154
Cash and due from banks at beginning of period 60,451 59,978
--------- ---------
CASH AND DUE FROM BANKS AT END OF PERIOD $ 54,373 $ 64,132
========= =========
See accompanying Notes to Consolidated Financial Statements
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<PAGE>
F.N.B. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 1995
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the nine-month
period ended September 30, 1995 are not necessarily indicative of the results
that may be expected for the year ended December 31, 1995. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Corporation's annual report on Form 10-K for the year
ended December 31, 1994.
PER SHARE AMOUNTS
Per share amounts are 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 the conversion of outstanding
convertible preferred stock from the beginning of the year or date of issuance
and the exercise of stock options.
Cash dividends per common share are based on the actual cash dividends
declared adjusted for stock dividends. Book value per common share is based on
shares outstanding at each period end adjusted retroactively for stock
dividends.
LOANS
On January 1, 1995, the Corporation adopted Statement of Financial
Accounting Standards (FAS) No. 114, "Accounting by Creditors for Impairment of
a Loan," which requires 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, or at the loan's observable market price or at the
fair value of the collateral if the loan is collateral dependent. Impaired
loans consist of non-homogenous loans, which based on management's evaluation
of current information and events, 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 agreement. The Corporation evaluates all
commercial and commercial real estate loans which have been classified for
regulatory reporting purposes, including nonaccrual and restructured loans, in
determining impaired loans.
At September 30, 1995 the recorded investment in loans that are considered
to be impaired under Statement 114 was $9.6 million (of which $2.2 million were
on a nonaccrual basis). Included in this amount is $4.7 million of impaired
loans that as a result of write-downs do not have an allowance for credit
losses. The average recorded investment in impaired loans during the nine
months ended September 30, 1995 was approximately $12.8 million. For the nine
months ended September 30, 1995, the Corporation recognized interest income on
those impaired loans of $629,000 which does not include any interest income
recognized using the cash basis method of income recognition.
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<PAGE>
CASH FLOW INFORMATION
Following is a summary of supplemental cash flow information (in
thousands):
Nine months ended September 30 1995 1994
------- --------
Cash paid for:
Interest $41,449 $ 35,491
Income taxes 6,319 5,122
Noncash Investing and Financing Activities:
Acquisition of real estate in settlement of loans 1,567 995
Loans granted in the sale of other real estate 281 809
Loans reclassified from available for sale 119,858
Conversion of minority interest 540
EFFECT OF NEW ACCOUNTING STANDARDS
In May of 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (FAS) No. 122, "Accounting for Mortgage
Servicing Rights," an amendment of FAS No. 65. This Statement, which is
required to be adopted during the first quarter of 1996, allows enterprises
engaging in mortgage banking activities to recognize as separate assets rights
to service mortgage loans for loans originated for sale by the enterprise. As
the Corporation does not significantly engage in the sale of mortgage loans,
the impact of this Statement is not anticipated to have a material impact on
the Corporation's results of operations or financial position.
PART I
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Liquidity and Interest Rate Sensitivity
The Corporation monitors its liquidity position on an ongoing basis to
assure that it is able to meet the need for funds at all times. Given the
monetary nature of its assets and liabilities and the significant source of
liquidity provided by its investment portfolio, the Corporation generally has
sufficient sources of funds available as needed to meet its routine,
operational cash needs.
In addition to normal liquidity provided from operations, 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
$22.0 million was unused at September 30, 1995. To further meet its liquidity
needs, the Corporation also has access to the Federal Reserve System, the
Federal Home Loan Bank and other uncommitted funding sources.
Interest rate sensitivity measures the impact that future changes in
interest rates will have on net interest income. The cumulative gap reflects a
point-in-time net position of assets and liabilities repricing in specified
time periods. The gap is one measurement of risk inherent in a 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 a combination of asset and
liability amortizations, maturities and repricing opportunities. Non-maturity
deposit balances have been allocated to various repricing intervals to more
accurately depict their true behavior and characteristics. This allocation was
done in accordance with Section 305 of the Federal Deposit Insurance
Corporation Improvement Act. Based on the cumulative one year gap in this
table and assuming no restructuring or modifications to asset/liability
composition, a rise in interest rates would have a negative impact on net
interest income.
Gap analysis alone does not accurately measure the magnitude of changes in
net interest income since changes in interest rates do not affect all
categories of assets and liabilities equally or simultaneously. Recognizing
that traditional gap analyses do not measure dynamically the exposure to
interest rate changes, the Corporation also relies on computer simulation
modeling to measure the effect of upward and downward interest rate changes on
net interest income. Simulation has been in use at the Corporation's lead bank
(representing 53% of consolidated assets) and is currently being implemented at
its other subsidiaries. Through the review of gap analyses and simulation
modeling, management continually monitors the Corporation's exposure to
changing interest rates.
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<PAGE>
Following is the gap analysis as of September 30, 1995 (in thousands):
Within 4-12 1-5 Over
3 Months Months Years 5 years Total
-------- --------- -------- -------- ----------
Interest Earning Assets
Interest bearing deposits
with banks $ 3,130 $ 3,130
Federal funds sold 5,115 5,115
Securities:
Available for sale 14,866 $ 44,249 $ 74,779 $ 14,789 148,683
Held for investment 2,501 36,931 185,144 9,200 233,776
Loans, net of unearned 257,339 204,171 422,281 320,168 1,203,959
-------- --------- -------- -------- ----------
282,951 285,351 682,204 344,157 1,594,663
Other assets 97,207 97,207
-------- --------- -------- -------- ----------
$282,951 $ 285,351 $682,204 $441,364 $1,691,870
======== ========= ======== ======== ==========
Interest Bearing Liabilities
Deposits:
Interest checking $ 7,480 $ 22,439 $119,675 $ 149,594
Savings 40,135 120,406 240,812 401,353
Time deposits 144,404 271,734 295,313 $ 1,174 712,625
Short-term borrowings 22,267 20,948 11,863 55,078
Long-term debt 4,640 14,995 8,832 12,189 40,656
-------- --------- -------- -------- ----------
218,926 450,522 676,495 13,363 1,359,306
Other liabilities 193,292 193,292
Stockholders' equity 139,272 139,272
-------- --------- -------- -------- ----------
$218,926 $ 450,522 $676,495 $345,927 $1,691,870
======== ========= ======== ======== ==========
Period Gap $ 64,025 $(165,171) $ 5,709 $ 95,437
======== ========= ======== ========
Cumulative Gap $ 64,025 $(101,146) $(95,437)
======== ========= ========
Rate Sensitive Assets/Rate
Sensitive Liabilities
(Cumulative) 1.29 0.85 0.93 1.17
======== ========= ======== ========
Cumulative Gap as a Percent
of Total Assets 3.8% (6.0%) (5.6%)
======== ========= ========
Capital Resources
The assessment of capital adequacy depends on a number of factors such as
asset quality, liquidity, earnings performance and changing competitive
conditions and economic forces. The Corporation maintains 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 a continuous process. Central to this
process is internal equity generation accomplished mainly by earnings
retention. Since December 31, 1994, total retained earnings has increased
$11.0 million as a result of earnings retention. For the nine months ended
September 30, 1995, the return on average equity was 13.25%. Total cash
dividends declared represented 20.26% of net income. Book value per share was
$14.87 at September 30, 1995, compared to $13.38 at
December 31, 1994.
During the first quarter of 1995, the minority interest of First County
Bank, a subsidiary of the Corporation, was exchanged for the Corporation's
common stock. As a result of this exchange, the Corporation now owns 100% of
First County Bank.
Series A - Cumulative Convertible Preferred Stock was created for the
purpose of acquiring Reeves Bank. The Corporation has the right to require the
conversion of the balance of all outstanding shares at the conversion rate at
any time after 50% of the 49,512 shares issued are no longer outstanding.
There are currently 25,038 shares outstanding.
Series B - Cumulative Convertible Preferred Stock (Series B Preferred) was
issued during 1992, 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 $12.84 per share. Currently this is an exchange ratio of
1.95 common for each share of preferred. The Corporation has the right to
redeem the Series B Preferred Stock for cash on or after May 15, 1996 as set
forth in the prospectus dated May 8, 1992.
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<PAGE>
The Corporation's capital position continues to exceed regulatory
minimums. The primary indicators relied on by the Federal Reserve Board in
measuring strength of capital position are the Core Capital, Total Risk-Based
Capital and Leverage ratios. Following is a table summarizing these ratios and
the related regulatory minimums as of September 30, 1995 and December 31, 1994,
respectively (in thousands):
SEPTEMBER 30, DECEMBER 31, REGULATORY
1995 1994 MINIMUMS
------------ ----------- ----------
Capital Ratios:
Core Capital 11.53% 10.58% 4.00%
Total Risk-Based Capital 13.65 12.71 8.00
Leverage 7.90 7.25 5.00
Core Capital consists of common and qualifying preferred stockholders'
equity less non-qualifying intangibles and Total Risk-Based Capital consists of
Core Capital, qualifying subordinated debt and a portion of the allowance for
loan losses both calculated with reference to risk-weighted assets consisting
of both on- and off- balance sheet risks. The Leverage ratio consists of Core
Capital divided by quarterly average assets less non-qualifying intangibles.
Under Federal Reserve Board 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 Federal Reserve Board'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 Federal Reserve Board to be an unsafe and unsound banking practice, a
violation of Federal Reserve Board regulations, or both.
NON-PERFORMING ASSETS AND ALLOWANCE FOR LOAN LOSSES
Non-performing assets include non-performing loans and other real estate
owned. Non-performing loans include non-accrual loans, loans 90 days or more
past due, and restructured loans. Non-accrual loans represent loans on which
interest accruals have been discontinued. 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. Interest received on non-accrual loans is either applied against
principal or reported as interest income, according to management's judgment as
to the collectibility of principal. Loans which reach non-accrual status may
not be restored to accrual status until all delinquent principal and interest
has been paid, or the loan becomes both secured and in the process of
collection. Restructured loans are loans with respect to which a borrower has
been granted a concession on the interest rate or the original repayment terms
because of financial difficulties.
Following is a summary of non-performing assets (in thousands):
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------ -----------
Non-performing assets:
Non-accrual loans $ 5,701 $ 9,512
Loans past due 90 days or more 3,070 2,621
Restructured loans 3,110 3,157
Total non-performing loans 11,881 15,290
Other real estate owned 2,973 3,675
------- -------
Total non-performing assets $14,854 $18,965
======= =======
Asset quality ratios:
Non-performing loans as percent of total loans .99% 1.28%
Non-performing assets as percent of total assets .88% 1.12%
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<PAGE>
Non-accrual loans totaled $5.7 million at September 30, 1995, representing
a decrease of $3.8 million from $9.5 million at December 31, 1994. The ratio
of non-accrual loans to total loans decreased from .80% at December 31, 1994 to
.47% at September 30, 1995. The decrease was the result of management's
continued focus on improved asset quality.
Non-performing loans are closely monitored on an ongoing basis as part of
the Corporation's loan review process. The potential risk of loss on these
loans is evaluated by comparing the loan balance to the present value of
projected future cash flows or the value of any underlying collateral,
recognizing losses where appropriate.
Management's analysis of the allowance for loan losses includes the
evaluation of the loan portfolio based on internally generated loan review
reports and the historical loss experience of the remaining balances of the
various homogeneous loan pools which comprise the loan portfolio. Specific
factors which are evaluated include the previous loan loss experience with the
customer, the status of past due interest and principal payments on the loan,
the collateral position of the loan, the quality of financial information
supplied by the borrower and the general financial condition of the borrower.
Historical loss experience on the remaining portfolio segments is considered in
conjunction with current status of economic conditions, loan loss trends,
delinquency and non-accrual trends, credit administration, concentrations of
credit and off-balance sheet risk.
Following is a summary of changes in the allowance for loan losses and
selected ratios (dollars in thousands):
At or for the At or for the
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1995 1994 1995 1994
------- ------- ------- -------
Balance at beginning of period $21,173 $19,152 $20,295 $16,440
Charge-offs (1,702) (1,302) (4,588) (4,230)
Recoveries 215 255 1,045 1,064
------- ------- ------- -------
Net charge-offs (1,487) (1,047) (3,543) (3,166)
Provision for loan losses 1,366 1,854 4,300 6,685
------- ------- ------- -------
Balance at end of period $21,052 $19,959 $21,052 $19,959
======= ======= ======= =======
Net charge-offs as percent of average loans,
net of unearned (annualized) .40% .37%
Allowance for loan losses to:
Total loans, net of unearned income 1.75% 1.70%
Non-performing assets 141.73% 108.25%
Net charge-offs increased in the third quarter of this year due to a
change in the charge-off policy at the Corporation's consumer finance
subsidiary.
FINANCIAL INFORMATION SUMMARY
Net income for the first nine months of 1995 was $13.2 million compared to
$9.7 million for the first nine months of 1994. Primary earnings per share for
those periods were $1.45 and $1.06, respectively, and $1.39 and $1.03 on a
fully diluted basis. Highlights for the first nine months of 1995 include:
* A 13.25% return on average equity and a 1.04% return on average
assets.
* A net interest margin on a fully taxable equivalent basis of 4.99%.
* The provision for loan losses for the first nine months of 1995 at
$4.3 million was 35.68% lower than the provision recorded for the
first nine months of 1994.
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<PAGE>
First Nine Months of 1995 as Compared to First Nine Months of 1994:
The following table provides information regarding the average balances and
yields and rates on interest earning assets and interest bearing liabilities
(dollars in thousands):
<TABLE>
<CAPTION>
Nine Months Ended September 30 1995 1994
-------------------------- -------------------------
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
---------- -------- ------ ---------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest earning assets:
Interest bearing deposits
with banks $ 4,611 $ 213 6.17% $ 6,707 $ 158 3.14%
Federal funds sold 21,136 949 5.98 20,072 743 4.94
Securities:
U.S. Treasury and other
U.S. Government agencies
and corporations 321,237 13,408 5.58 366,654 14,218 5.18
States of the U.S. and
political subdivisions (1) 34,900 1,674 6.40 36,074 1,764 6.52
Other securities (1) 14,195 510 4.79 13,602 537 5.26
Loans (1) (2) 1,195,735 85,869 9.60 1,141,874 77,049 9.02
---------- -------- ---------- --------
Total interest
earning assets 1,591,814 102,623 8.62 1,584,983 94,469 7.97
---------- -------- ---------- --------
Cash and due from banks 53,042 53,610
Allowance for loan losses (21,163) (18,936)
Premises and equipment 22,998 23,496
Other assets 44,732 46,455
---------- ----------
$1,691,423 $1,689,608
========== ==========
Liabilities
Interest bearing liabilities:
Deposits:
Interest bearing demand $ 153,776 $ 2,011 1.75 $ 168,923 $ 2,374 1.88
Savings 425,510 7,961 2.50 503,126 9,395 2.50
Other time 694,440 28,388 5.47 614,449 20,992 4.57
Short-term borrowings 55,949 2,499 5.97 64,805 2,498 5.15
Long-term debt 39,594 2,331 7.85 31,289 2,073 8.83
---------- -------- ---------- --------
Total interest
bearing liabilities 1,369,269 43,190 4.22 1,382,592 37,332 3.61
---------- -------- ---------- --------
Non-interest bearing
demand deposits 159,687 158,568
Other liabilities 29,388 27,377
---------- ----------
1,558,344 1,568,537
---------- ----------
Minority Interest 525
----------
Stockholders' Equity
Preferred stock 4,561 4,577
Common stock 16,791 15,916
Additional paid-in capital 54,951 48,779
Retained earnings 55,356 49,935
Net unrealized securities
gains 1,895 1,581
Treasury stock (475) (242)
---------- ----------
Total stockholders' equity 133,079 120,546
---------- ----------
$1,691,423 $1,689,608
========== ==========
Excess of interest earning
assets over interest
bearing liabilities $ 222,545 $ 202,391
========== ==========
Net interest income $ 59,433 $ 57,137
======== ========
Net interest spread 4.40% 4.36%
===== =====
Net interest margin (3) 4.99% 4.82%
===== =====
<FN>
(1) The amounts are reflected on a fully taxable equivalent basis using
the federal statutory tax rate of 35% adjusted for certain federal tax
preferences.
(2) Average 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.
</TABLE>
-10-
<PAGE>
Net interest income, the Corporation's primary source of earnings, is the
amount by which interest and fees generated by interest earning assets,
primarily loans and securities, exceed interest expense on deposits and
borrowed funds. During the first nine months of 1995, net interest income, on
a fully taxable equivalent basis, totaled $59.4 million, representing a 4.02%
increase over the first nine months of 1994. Net interest income as a
percentage of average earning assets (commonly referred to as the margin) rose
to 4.99% at September 30, 1995 from 4.82% at September 30, 1994.
Net interest income can be analyzed in terms of the impact of changing
volumes of interest earning assets and interest bearing liabilities. The
following table sets forth certain information regarding changes in net
interest income attributable to changes in the volumes of interest earning
assets and interest bearing liabilities and changes in the rates for the nine
months ending September 30, 1995 as compared to the nine months ending
September 30, 1994 (in thousands):
Volume Rate Net
------- ------- -------
Interest Income
Interest bearing deposits with banks $ (81) $ 136 $ 55
Federal funds sold 55 151 206
Securities:
U.S. Treasury and other U.S.
Government agencies and corporations (2,465) 1,655 (810)
States of the U.S. and political subdivisions (76) (14) (90)
Other securities 30 (57) (27)
Loans 4,991 3,829 8,820
------- ------- -------
2,454 5,700 8,154
------- ------- -------
Interest Expense
Deposits:
Interest bearing demand (273) (90) (363)
Savings (1,942) 508 (1,434)
Other time 3,940 3,456 7,396
Short-term borrowings (509) 510 1
Long-term debt 676 (418) 258
------- ------- -------
1,892 3,966 5,858
------- ------- -------
Net Change $ 562 $ 1,734 $ 2,296
======= ======= =======
Total interest income on a fully taxable equivalent basis increased $8.2
million or 8.63% for the first nine months of 1995, compared to the first nine
months of 1994. Interest income on taxable securities decreased $810,000 or
5.70% over these same periods primarily as a result of maturities of taxable
securities being used to fund loan demand. The greater loan demand resulted in
an increase of $8.8 million in interest income on loans, including fees, on a
fully taxable equivalent basis.
Total interest expense increased $5.9 million or 15.69% for the nine
months ended September 30, 1995, compared to the nine months ended September
30, 1994. Interest expense on deposits accounted for the majority of this
increase, $5.6 million, as a result of the increasing interest rate environment
and the change in the deposit mix from savings accounts to higher paying
certificate accounts.
The provision for loan losses totaled $4.3 million for the first nine
months of 1995, representing a decrease of $2.4 million or 35.68% from the
first nine months of 1994, a direct result of the improvement in asset quality
at the Corporation. 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 all factors relevant to the
collectibility of the existing portfolio.
Total non-interest income increased $786,000 during the first nine months
of 1995, compared to the same period of 1994 due to an increase in service
charges on deposit accounts and higher insurance premium revenues.
-11-
<PAGE>
Total non-interest expenses increased slightly during the first nine
months of 1995, compared to the first nine months of 1994. During the third
quarter of 1995, the Federal Deposit Insurance Corporation (FDIC) voted to
lower the deposit insurance premiums for banks, now that the Bank Insurance
Fund (BIF) has been funded to the required level. The deposit premiums for
well capitalized banks have been reduced from $.23 to $.04 per $100 of
deposits. This recent action had a beneficial effect on the Corporation since
more than half of the Corporation's deposits are in the BIF. This decrease in
deposit insurance is offset by higher employee benefit costs during 1995.
Conversely, based on Financial Institutions Reform, Recovery and
Enforcement Act of 1988 requirements, the Savings Association Insurance Fund
(SAIF) is still under-funded and therefore deposit premiums do not change. As
a result, it is argued that thrifts are at a competition disadvantage;
therefore, Congress is currently considering legislation to impose a one time
deposit premium charge to recapitalize the SAIF. It is uncertain as to the
amount of this premium, however, indications have been in a range of $.80 to
$.90 per $100 of deposits. At September 30, 1995, the Corporation had
approximately $454.5 million in SAIF insured deposits.
Income before taxes was $19.5 million for the first nine months of 1995,
representing an increase of $4.9 million or 33.89% over the first nine months
of 1994. Income taxes increased $1.5 million or 30.90% over the same periods
due to more taxable income being generated by the Corporation.
Consolidated net income was $13.2 million for the first nine months of
1995, representing a $3.4 million or 35.37% increase over the first nine months
of 1994. The Corporation's return on average assets was 1.04% and .77% for the
first nine months of 1995 and 1994, respectively, while the return on average
equity was 13.25% and 10.80% for those same periods.
Third Quarter of 1995 as Compared to Third Quarter of 1994
During the third quarter of 1995, net interest income increased $934,000
or 5.01% over the third quarter of 1994. Total interest income increased $3.2
million or 10.34% over these same periods, primarily the result of an increase
of $3.1 million in interest income on loans, including fees. This increase is
the result of greater loan demand.
Total interest expense increased $2.3 million or 18.19% during the third
quarter of 1995, compared to the same period of 1994. Interest expense on
deposits accounted for the majority of this increase as a result of the
increasing interest rate environment and the change in the deposit mix from
savings accounts to higher paying certificate accounts.
The provision for loan losses totaled $1.4 million for the third quarter
of 1995, compared to $1.9 million for the third quarter of 1994. This is the
result of the continuing improvement in asset quality at the Corporation.
Total non-interest income increased slightly during the third quarter of
1995, compared to the third quarter of 1994, primarily a result of higher
account service charges and insurance premium revenue. Total non-interest
expenses remained unchanged at $14.6 million for the quarters ended September
30, 1995 and 1994. Higher employee benefit costs in 1995 were offset by
savings recognized as a result of a reduction in premiums charged to banks for
BIF deposit insurance.
Income before taxes increased to $7.1 million in the third quarter of 1995
from $5.4 million in the same period of 1994. Income tax expense increased to
$2.3 million from $1.9 million over these same periods. Net income totaled
$4.9 million for the third quarter of 1995, compared to $3.5 million for the
third quarter of 1994.
-12-
<PAGE>
PART II
Item 1. Legal Proceedings
No material pending legal proceedings exist to which the Corporation or
any of its subsidiaries is a party, or of which any of their property is the
subject, except ordinary routine proceedings which are incidental to the
ordinary conduct of business. In the opinion of management, pending legal
proceedings will not have a material adverse effect on the consolidated
financial position of the Corporation and its subsidiaries.
Item 2. Changes in Securities
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
On July 28, 1995, the Corporation filed a Registration Statement
on Form S-3 to register an additional $125,000,000 in debt securities.
Amendments were filed on September 19, 1995 and October 11, 1995. The
Registration Statement became effective on October 18, 1995.
Regulatory Matters Update
The Corporation and two of its subsidiaries had entered into
supervisory agreements with certain federal and state bank regulatory
agencies. As of September 30, 1995, these agreements have been
terminated.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3.1. Articles of Incorporation as currently in effect and any
amendments thereto. (Incorporated by reference to Exhibit 3.1.
of the Corporation's Form 10-K for the year ended December 31,
1992).
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 Articles of Incorporation and By-laws. The Articles of
Incorporation are incorporated by reference to Exhibit 3.1. of the
registrant's Form 10-K for the year ended December 31, 1992. 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.
-13-
<PAGE>
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. Employment Agreement between F.N.B. Corporation and Peter
Mortensen. (Incorporated by reference to Exhibit 10.5. of the
Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1990). Amendment No. 2 to Employment Agreement
(incorporated by reference to Exhibit 10.5. of the Corporation's
Form 10-Q for the quarter ended June 30, 1995). Rescinding of
Amendment No. 2 to Employment Agreement (filed herewith).
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 10.8. of the
Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1991).
10.9. 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. (Incorporated by
reference to Exhibit 10.10. of the Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993).
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.
(Filed herewith).
-14-
<PAGE>
Exhibit 10.5.
AGREEMENT
ENTERED INTO on and as of October 13, 1995 by and between PETER
MORTENSEN (the "Executive") and F.N.B. CORPORATION (the "Company").
WHEREAS, the Executive and the Company are parties to an Employment
Agreement dated as of January 1, 1990, as amended by an Amendment to Employment
Agreement dated June 2, 1994 and Amendment No. 2 to Employment Agreement dated
June 26, 1995 (the "Employment Agreement"), and
WHEREAS, the Executive and the Company are parties to a Consulting
Agreement dated as of June 26, 1995 (the "Consulting Agreement"), and
WHEREAS, the Consulting Agreement and Amendment No. 2 to Employment
Agreement were entered into simultaneously by the Executive and the Company,
and
WHEREAS, examiners of the Federal Reserve Bank of Cleveland have
reviewed the agreements between the Executive and the Company and have reached
a conclusion that the Consulting Agreement constitutes an unsafe or unsound
practice under the Federal Reserve regulations, and
WHEREAS, Paragraph 13 of the Consulting Agreement provides in the
event of any conflict between that Agreement and any statute, law, ordinance,
order or regulation, the consulting Agreement shall be curtailed and limited to
the extent necessary to bring it within applicable legal requirements, and
WHEREAS, the Executive and the Company are committed to complying
with all statutes, laws, ordinances, orders and regulations and to operating
the Company in a safe and sound manner, and
WHEREAS, the Company is reviewing the Consulting Agreement with
outside experts taking into account the Federal Reserve regulations and the
findings of the Federal Reserve examiners, and
NOW, THEREFORE, intending to be legally bound, the Executive and the
Company covenant and agree that:
-15-
<PAGE>
1. In consideration of the sum of one dollar ($1.00) from the
Company to the Executive and for other good and valuable consideration, the
parties agree that the operation of the Consulting Agreement and Amendment No.
2 to Employment Agreement will be suspended and curtailed in accordance with
Paragraph 13 of the Consulting Agreement.
2. The Executive and the Company will retain additional outside
experts to obtain their advice and guidance and will negotiate in good faith
any changes to the Consulting Agreement and Amendment No. 2 to Employment
Agreement as necessary to reach an agreement that is mutually satisfactory to
both the Executive and the Company and to ensure that the Company is not
engaging in an unsafe or unsound practice.
3. The Executive and the Company will not reinstate the
Consulting Agreement in its form prior to the execution of this Agreement or as
modified by mutual agreement of the Executive and the Company unless and until
the Company has (i) obtained an opinion in writing from Paul S. Pilecki, Esq.
of Shaw, Pittman, Potts & Trowbridge that the Consulting Agreement, as modified
if necessary, does not constitute an unsafe or unsound practice, (ii) provided
30 days' prior notice to the Federal Reserve Bank of Cleveland that the
Consulting Agreement will be reinstated and providing notice of any
modifications, if necessary, and (iii) taken into account any comments of the
Federal Reserve Bank of Cleveland.
4. Except as specifically provided herein, the Employment
Agreement, as amended by an Amendment to Employment Agreement dated June 2,
1994, shall remain in full force and effect in accordance with its terms.
5. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania. The language of
all parts of this Agreement shall in all cases be construed as a whole,
according to its fair meaning, and not strictly for or against any of the
parties.
6. This Agreement sets forth the entire understanding of the
parties in respect of the subject matter contained herein and supersedes all
prior agreements, arrangements and understandings relating to the subject
matter and may only be amended by a written agreement signed by both parties
hereto or their duly authorized representatives.
-16-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
WITNESS: EXECUTIVE
/s/John D. Waters /s/Peter Mortensen
John D. Waters Peter Mortensen
ATTEST: F.N.B. CORPORATION
/s/William J. Rundorff By /s/James T. Weller
William J. Rundorff, Asst. Secretary Chairman of the Compensation
Committee of the Board of
Directors
-17-
<PAGE>
Exhibit 10.12.
EMPLOYMENT AGREEMENT
THIS AGREEMENT, entered into as of the 27th day of July, 1995, by and
between JOHN W. ROSE, an individual residing in Glen Ellyn, Illinois (the
"Executive"), and F.N.B. CORPORATION, a Pennsylvania bank holding company (the
"Company").
WITNESSETH:
WHEREAS, the Company desires to obtain the benefit of the Executive's
services and experience and the Executive desires to enter the employ of the
Company upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and covenants herein
contained, and intending to be legally bound, the parties hereto agree as
follows:
Section 1. Term of Employment.
(a) Initial Term. The term of employment of the Executive
under this Agreement (the "Term") shall be initially for a period of three (3)
years commencing on March 22, 1995 and ending on March 21, 1998.
(b) Extension. The Term of employment of the Executive under
this Agreement shall be automatically extended for successive one (1) year
periods unless either party, not less than ninety (90) days prior to the
expiration of the Term as then in effect, shall give written notice to the
other party that the Term shall not be extended at the expiration of the Term
as then in effect. In no event shall the Term continue after March 21, 2013.
(c) Early Termination. Notwithstanding the provisions of
Sections 1(a) and (b), the Term shall terminate upon any of the following
events:
(i) dismissal of the Executive from his employment
by and at the election of the Company pursuant
to resolution of the Board of Directors of the
Company, or the failure or refusal of the Board
of Directors to elect Executive to the position
of Vice President of the Company by
______________, 1995 and to re-elect him to that
office thereafter (any termination of employment
pursuant to this paragraph shall be deemed
without "proper cause");
(ii) determination of disability of the Executive
pursuant to Section 4 hereof; or
(iii) death of the Executive.
-18-
<PAGE>
In the event of termination pursuant to paragraph (ii) above, the provisions of
Section 4 hereof shall apply. In the event of death of the Executive, the
Company shall be obligated to pay the Executive's estate or designated
beneficiary the compensation specified in Section 3(e) hereof.
Section 2. Services to be Rendered.
The Company hereby employs the Executive as Vice President of the Company
to serve at its headquarters office located in the Hermitage, Pennsylvania
area, subject to the terms, conditions and provisions of this Agreement, and
shall promptly take all necessary action to elect Executive as its Senior Vice
President. The Executive hereby accepts such employment and, subject to the
provisions of this Section 2, agrees to serve without additional compensation,
if elected, as an officer and/or director of any subsidiary of the Company in
accordance with Section 10 hereof. Subject to the last sentence of this
paragraph, the Executive shall devote his full-time to such employment. In
connection therewith, the Executive shall report to and be subject to the
direction of the Board of Directors, the Chairman of the Board and the
President of the Company, provided, however, that Executive's duties and
responsibilities shall be of an executive nature and shall be consistent with
the terms of that certain letter dated February 2, 1995, which is attached
hereto as Exhibit A. Notwithstanding the foregoing, the Executive may devote a
reasonable amount of his time to his personal investments and business affairs
(including service as a director of unaffiliated companies) and to civic and
charitable activities; provided, however, Executive shall not accept or remain
in any position with any unaffiliated for-profit business organization without
advance approval of the Company's Chairman of the Board or President, except
that Executive may hold the positions described in that certain letter attached
hereto as Exhibit B.
Section 3. Compensation
The Company shall pay and provide to the Executive the following
compensation and benefits during the Term:
(a) Salary. The Company shall pay the Executive a minimum base
salary at the rate of $140,000.00 per year. Such minimum base salary (i) may
be increased from time to time to reflect such merit increases as the Board of
Directors of the Company may determine are appropriate and (ii) shall be
increased from time to time to reflect annual cost of living increases
commensurate with those given other key executive officers of The First
National Bank of Pennsylvania ("First National"). The stated minimum base
salary, as the same may be increased, shall be and remain in effect during the
Term and shall be paid in accordance with the Company's normal payroll
practice.
(b) Bonuses. The Company shall pay bonuses to Executive
customary for his office. If Executive is employed for only a portion of a
calendar year (for example, such as 1995, or if the Term expires prior to
December 31 in any year), Executive shall be paid a fraction of his bonus based
on the number of days of the Term during the year divided by 365, unless his
employment is terminated for "proper cause" (as defined in Section 5).
-19-
<PAGE>
(c) Fringe Benefits. The Executive shall be entitled to (i)
vacations, retirement benefits, disability and other fringe benefits, including
but not limited to group life and health insurance coverages, automobile
allowances and country club dues and expenses, pursuant to the compensation
policies and practices of First National from time to time prevailing (now and
in the future) with respect to persons who are key executive officers of First
National and (ii) participate in any and all benefits provided for under the
January 1, 1986 Deferred Compensation Plan of First National pursuant to the
terms thereof, so long as said Plan shall remain in effect.
(d) Termination Payments. In the event of termination of the
Executive's employment during the Term by the Company for "proper cause" (as
defined in Section 5), the Company shall thereupon be relieved of its
obligations to pay any compensation and benefits under this Section 3 (except
for accrued and unpaid items). In the event of termination of the Executive's
employment during the Term by the Company without "proper cause," the Company
shall be obligated, for a period of twenty-four (24) months following
termination, to continue to pay to the Executive his base salary (as then in
effect under paragraph (a) above) and bonuses, and to provide the group life
and health insurance coverages he would have received (under paragraph (c)
above), had his employment not been so terminated.
(e) Death Benefit. In the event of termination of the
Executive's employment by reason of his death, the Company shall continue to
pay to the Executive's estate or his designated beneficiary the Executive's
base salary (as then in effect under paragraph (a) above) for a period of
twelve (12) months next following his death or, if earlier, until expiration of
the Term.
Section 4. Disability.
The Term may be terminated at the election of the Company upon a
determination by the Board of Directors of the Company, acting reasonably, that
the Executive will be unable, by reason of physical or mental incapacity, to
perform the reasonably expected duties assigned to him pursuant to this
Agreement for a period longer than six consecutive months or more than nine
months in any consecutive twelve-month period. In the exercise of its
discretion, the Board of Directors shall give due consideration to the opinion
of the Executive's personal physician or physicians and the opinion of any
physician or physicians selected by the Board of Directors for this purpose.
The Executive shall submit to examination by any physician or physicians so
selected by the Board of Directors, and shall otherwise cooperate with the
Board of Directors in making the determination contemplated hereunder (such
cooperation to include, without limitation, consenting to the release of
information by any such physician(s) to the Board of Directors). In the event
of such termination, the Company shall thereupon be relieved of its obligations
to pay compensation and benefits under Section 3 hereof (except for accrued and
unpaid items) but shall be obligated to pay or provide to the Executive (or, in
the event of his death, his estate or designated beneficiary) the following:
-20-
<PAGE>
(a) For the period of twenty-four (24) full calendar months
next following the date (the "Disability Date") at which the Executive was
determined by the Board of Directors of the Company to be unable, by reason of
physical or mental incapacity, to perform his duties as provided above, a
monthly disability income benefit in an amount equal to 100% of Executive's
monthly base salary in effect under Section 3(a) hereof on the Disability Date;
and thereafter a monthly disability income benefit in an amount equal to 60% of
Executive's monthly base salary in effect under Section 3(a) hereof on the
Disability Date. The Company shall be entitled to credit against its
obligation to pay such disability benefits for (i) amounts received from time
to time by the Executive pursuant to any disability income insurance policy
maintained by the Company and (ii) amounts received from time to time by the
Executive as retirement benefits pursuant to Section 3(c) hereof.
(b) At the Company's cost, health insurance coverage comparable
to the coverage provided from time to time for key executive officers of First
National, unless and until the Executive shall have accepted other employment
in which health insurance coverage is available to him at the cost (in whole or
in part) of his new employer.
Section 5. Termination for Proper Cause. Solely for purposes of this
Agreement, the occurrence of any of the following events or circumstances shall
constitute "proper cause", at the election of the Board of Directors of the
Company, for termination of the employment of the Executive under this
Agreement:
(a) the Executive shall voluntarily resign as a director,
officer or employee of the Company without approval of the Board of Directors
of the Company for reasons other than a breach of this Agreement in any
material respect by the Company which has not been cured within 30 calendar
days after the Company's receipt of written notice of such breach from the
Executive;
(b) the perpetration of defalcations by the Executive involving
the Company or any of its affiliates, as established by certified public
accountants employed by the Company, or willful or reckless conduct of the
Executive entailing a substantial violation of any material provision of the
laws, rules, regulations or orders of any governmental agency applicable to the
Company or any of its subsidiaries;
(c) the repeated and deliberate failure by the Executive, after
prior written notice to him specifying the nature of such failure, to comply
with reasonable policies or directives of the Board of Directors; or
(d) the Executive shall breach this Agreement in any other
material respect and failure to cure such breach within 30 calendar days after
the Executive receives from the Company written notice specifying the nature of
such breach.
-21-
<PAGE>
Section 6. Non-Competition.
During the Term and for the Restricted Period (hereinafter defined) after
his employment hereunder terminates or is terminated, Executive will not in any
way, directly or indirectly, manage, operate, control, accept employment or a
consulting position with or otherwise advise or assist or be connected with, or
own or have any other interest in, or right with respect to the revenues,
receipts, profits or losses of any Competitive Enterprise (hereinafter defined)
(other than through ownership of no more than 4.9% of the outstanding shares of
a corporation's stock which is listed on a national securities exchange or in
the NASDAQ system). For purposes of this
Section 6:
(a) "Restricted Period" means the greater of (i) the period of
two years next following the termination of the Executive's employment for
proper cause, or (ii) the period of time during which the Executive is
receiving payments from the Company pursuant to Section 3(d) or 4 hereof (as
the case may be);
(b) "Competitive Enterprise" means any person, firm or
corporation that directly or indirectly (i) is engaged in lending and deposit
services or commercial banking of the kinds generally offered by the Company or
any of the Company's present or future subsidiaries and (ii) conducts such
business or activities in any county in which any of the Company's present or
future subsidiaries then operates or in any county (within or without the
Commonwealth of Pennsylvania) contiguous thereto.
The foregoing to the contrary notwithstanding, the provisions of this
Section 6 shall not prohibit the Executive, during the Restricted Period, from
rendering services to a Competitive Enterprise if such services are rendered
during his physical presence at a place of business located within the Counties
of Allegheny or Dauphin, Pennsylvania or Cuyahoga, Ohio.
Without limitation of the Company's rights and remedies under this
Agreement or as otherwise provided by law or in equity, it is understood and
agreed between the parties that the right of the Executive to receive and
retain any payments otherwise due to him under this Agreement shall be
suspended and cancelled if and for so long as he shall be in violation of the
foregoing covenant not to compete. If and when the Executive shall have cured
such violation, such right shall be automatically reinstated for the remainder
of the period during which such payments are due him.
If the employment of the Executive hereunder shall have been terminated
without proper cause or because of disability, and if the Executive shall have
duly complied with an observed the covenants of this Section 6, the Executive
may, at his election, be discharged from the covenants of this Section 6 at any
time during the Restricted Period by filing with the Company a duly executed
statement (in form and content reasonably satisfactory to the Board of
Directors of the Company) releasing the Company (and, if applicable, its
insurance carriers) from any and all obligations it (or they) may have (under
Sections 3(d) and 4 or otherwise) by reason of such termination (except for
accrued and unpaid items).
-22-
<PAGE>
Section 7. Confidentiality
For purposes of this Agreement, "proprietary information" shall mean any
information relating to the business of the Company or its subsidiaries that
has not previously been publicly released by duly authorized representatives of
the Company and shall include (but shall not be limited to) information
encompassed in all marketing and business plans, financial information, costs,
pricing information, and all methods, concepts, or ideas in or reasonably
related to the business of the Company of its subsidiaries which is treated by
the Company as confidential information.
The Executive agrees to regard and preserve as confidential all
proprietary information that has been or may be developed or obtained by the
Executive in the course of his employment with the Company and its
subsidiaries, whether he has such information in his memory or in writing or
other physical form. The Executive shall not, without written authorization
from the Company to do so, use for his benefit or purposes, nor disclose to
others, either during the Term or thereafter, except as required by the
conditions of his employment hereunder, any proprietary information connected
with the business of the Company or its subsidiaries. This prohibition shall
not apply to proprietary information which has been voluntarily disclosed to
the public by the Company, independently developed and disclosed by others, or
otherwise enters the public domain through lawful means.
Section 8. Removal of Documents or Objects.
The Executive agrees not to remove from the premises of the Company,
except as an employee of the Company in pursuance of the business of the
Company or any of its subsidiaries or affiliates, or except as specifically
permitted in writing by the Company, any document or object containing or
reflecting any proprietary information. The Executive recognizes that all such
documents and objects, whether developed by him or by someone else, are the
exclusive property of the Company.
Section 9. Injunctive Relief.
It is understood and agreed by and between the parties hereto that the
services to be rendered by the Executive hereunder are of a special, unique and
extraordinary character, which gives them a peculiar value, the loss of which
may not be reasonably or adequately compensated in damages, and additionally
that a breach by the Executive of the covenants set out in Sections 6, 7 and 8
of this Agreement will cause the Company irreparable injury and damage. The
Executive hereby expressly agrees that the Company shall be entitled to the
remedies of injunction, specific performance and other equitable relief to
prevent a breach of Sections 6, 7 and 8 of this Agreement by the Executive.
This provision shall not, however, be construed as a waiver of any of the
remedies which the Company may have for damages or otherwise.
-23-
<PAGE>
Section 10. Subsidiaries.
At the election and direction of the Company's Board of Directors and
without modification of the terms and provisions hereof, the Executive shall
also serve as an executive officer of any one or more subsidiaries of the
Company.
Section 11. Successors, Assigns, Etc.
This Agreement shall be binding upon, and shall inure to the benefit of
the Executive and the Company and their respective successors, assigns, heirs,
legal representatives and beneficiaries. Nothing in this Agreement shall
preclude the Company from consolidating or merging into or with, or
transferring all or substantially all of its assets to, another corporation
which assumes this Agreement and all obligations and undertakings of the
Company hereunder. Upon such a consolidation, merger, or transfer of assets
and assumption, the term "Company" as used herein shall mean such other
corporation, and this Agreement shall continue in full force and effect.
Section 12. Notices.
All notices and other communications which are required or may be given
under this Agreement shall be in writing and shall be deemed to have been given
when received if delivered personally or sent by registered or certified mail,
return receipt requested, postage prepaid, and addressed as follows:
(a) To the Company: F.N.B. Corporation Hermitage Square
Hermitage, Pennsylvania 16148
Attention: Secretary
(b) To the Employee: John W. Rose
21 W 330 Crescent Boulevard
Glen Ellyn, Illinois 60137
or to such other place as either party shall have specified by notice in
writing to the other.
Section 13. Governmental Regulation.
Nothing contained in this Agreement shall be interpreted, construed or
applied to require the commission of any act contrary to law and whenever there
is any conflict between any provision of this Agreement and any statue, law
ordinance, order or regulation, the latter shall prevail; but in such event any
such provision of this Agreement shall be curtailed and limited only to the
extent necessary to bring it within applicable legal requirements.
-24-
<PAGE>
Section 14. Arbitration.
Any dispute or controversy as to the validity, interpretation,
construction, application or enforcement of, or otherwise arising under or in
connection with this Agreement, shall be submitted at the request of either
party hereto for resolution and settlement through arbitration in Pittsburgh,
Pennsylvania in accordance with the rules then prevailing of the American
Arbitration Association. Any award rendered therein shall be final and binding
on each of the parties hereto and their heirs, executors, administrators,
successors and assigns, and judgment may be entered thereon in any court having
jurisdiction. The foregoing provisions of this Section 14 shall not be deemed
to limit the rights and remedies reserved to the Company under and pursuant to
Section 9 hereof.
Section 15. Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Pennsylvania.
Section 16. Divisability.
Should a court or arbitrator declare any provision hereof to be invalid,
such declaration shall not affect the validity of the balance of this
Agreement.
Section 17. Headings.
The headings to the Sections and paragraphs hereof are placed herein for
convenience of reference only, and in case of any conflicts the text of this
Agreement, rather than the headings, shall control.
Section 18. Entire Agreement Amendment.
This Agreement sets forth the entire understanding of the parties in
respect of the subject matter contained herein and supersedes all prior
agreements, arrangements and understandings relating to the subject matter and
may only be amended by a written agreement signed by both parties hereto or
their duly authorized representatives. In the event of any consistency between
this Agreement and any of the Exhibits hereto, the terms of this Agreement
shall control.
-25-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
effective as of the date first above written.
WITNESS: EXECUTIVE
/s/William J. Rundorff /s/John W. Rose
William J. Rundorff John W. Rose
ATTEST: F.N.B. CORPORATION
/s/William J. Rundorff By /s/Peter Mortensen
William J. Rundorff, Asst. Secretary Peter Mortensen
Chairman of the Board
-26-
<PAGE>
Exhibit A
February 2, 1995
Mr. N. Peter Mortensen Jr.
Chairman and Chief Executive Officer
F.N.B. Corporation
Hermitage Square
Hermitage, Pennsylvania 16148
Dear Pete:
As a follow up to our telephone conversation I think it useful for me to
outline what I understand my job responsibilities to be.
Initially, I will take responsibility for two main areas: Community Banking
and Investor Relations. In Community Banking I will have as direct reports the
CEO's of First County, Reeves, Bucktail Bank & Trust and Metropolitan Savings.
I also will have responsibility for recommending mergers and acquisitions of
other community banking organizations which would then become part of the
Community Banking Group unless the Executive Committee determines that they
would better fit as part of First National Bank of Pennsylvania.
As head of Investor Relations it will be my responsibility to establish a
formalized method of dealing with investor inquiries and to establish contacts
with institutional investors and market makers.
In addition, I will make myself available to direct or participate in any
special projects assigned by you or by the Executive Committee.
My title will be Senior Vice President and my initial compensation will be
$140,000 per year plus incentives and perqs common to my peers.
Pete, if you have any modifications to this letter please let me know and I
will make the changes.
I sincerely look forward to the opportunity to join the F.N.B. team.
Sincerely,
/s/John W. Rose
John W. Rose
-27-
<PAGE>
Exhibit B
Mr. N. Peter Mortensen Jr.
Chairman and Chief Executive Officer
F.N.B. Corporation
Hermitage Square
Hermitage, Pennsylvania 16148
Dear Pete:
I am currently a Director of three banking or thrift companies and have
committed to take a seat on a fourth. They are (1) Lafayette American Bank &
Trust in Bridgeport, Connecticut; (2) River Valley Bank, fsb in McAllen, Texas;
(3) Equitable Bancshares in Denver, Colorado; and, prospectively, (4) First
Pacific Bancorp in Escondido, California.
Lafayette American is the largest small business lending bank in Connecticut
and an excellent example of what we should strive for in community banking. I
would like to continue that relationship as a Director, member of the Executive
Committee and Chairman of the Audit Committee. It will require only one travel
day a month and an occasional telephone conversation.
River Valley Bank is for sale. My hope is that in the next few months a
transaction will occur that will end my involvement in this thrift. However,
until then the Board meets every other month in person which will involve a
day.
Equitable Bancshares is the owner of two small community banks in the Denver
market. The Board meets quarterly. Unless you wish that I remain involved, I
will resign from that Board.
Finally, to my surprise the major investors in our California project
threatened to pull their commitments unless I remained involved with the banks
(four banks to be merged under the First Pacific holding company). I am
morally obligated to those investors and to my partner, John Eggemeyer, to see
this project through to completion and to remain on the Board of First Pacific
until everyone is comfortable with its new direction and progress. Because of
the distance this may require two days a month.
In summary, Lafayette, River Valley and First Pacific will involve a total of 3
1/2 days per month until River Valley is sold and then 3 days per month for
some indefinite period. However, the benefit to F.N.B. will be additional
insight into successful community banks in other parts of the country, and the
opportunity to cooperate to our mutual benefit.
Sincerely,
/s/John W. Rose
John W. Rose
-28-
<PAGE>
11 F.N.B. Corporation
Statement re Computation of Per Share Earnings
Dollars in thousands
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
1995 1994 1995 1994
--------- --------- --------- ---------
Primary
Net Income $ 4,856 $ 3,520 $ 13,185 $ 9,740
Less: Preferred Stock
Dividends Declared (212) (213) (638) (640)
--------- --------- --------- ---------
Net Income Applicable
to Common Stock $ 4,644 $ 3,307 $ 12,547 $ 9,100
========= ========= ========= =========
Average Common Shares
Outstanding 8,593,248 8,566,516 8,594,323 8,571,464
Net Effect of Dilutive Stock
Options - Based on the Treasury
Stock Method Using Average
Market Price 43,256 18,537 38,027 15,861
--------- --------- --------- ---------
8,636,504 8,585,053 8,632,350 8,587,325
========= ========= ========= =========
Net Income per Common Share $.54 $.39 $1.45 $1.06
==== ==== ===== =====
Fully Diluted
Net Income $ 4,856 $ 3,520 $ 13,185 $ 9,740
Plus: Minority Interest 19 44
--------- --------- --------- ---------
Net Income Applicable
to Common Stock $ 4,856 $ 3,539 $ 13,185 $ 9,784
========= ========= ========= =========
Average Common Shares
Outstanding 8,593,248 8,566,516 8,594,323 8,571,464
Series A Convertible
Preferred Stock 32,578 39,903 32,578 39,903
Series B Convertible
Preferred Stock 839,154 801,420 839,370 801,420
Minority Interest Convertible
Preferred Stock 30,771 30,771
Net Effect of Dilutive Stock
Options - Based on the Treasury
Stock Method Using the Period-End
Market Price, If Higher than
Average Market Price 45,678 18,537 45,678 17,711
--------- --------- --------- ---------
9,510,658 9,457,147 9,511,949 9,461,269
========= ========= ========= =========
Net Income per Common Share $.51 $.37 $1.39 $1.03
==== ==== ===== =====
(b)Reports on Form 8-K
No reports on Form 8-K were filed for the three months ended September 30,
1995.
-29-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
F.N.B. Corporation
------------------------------------------
(Registrant)
Dated: November 13, 1995 Peter Mortensen
---------------------------- ------------------------------------------
Peter Mortensen
Chairman and President
(Principal Executive Officer)
Dated: November 13, 1995 John D. Waters
---------------------------- ------------------------------------------
John D. Waters
Vice President and Chief Financial Officer
(Principal Financial Officer)
-30-
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<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 54373
<INT-BEARING-DEPOSITS> 3130
<FED-FUNDS-SOLD> 5115
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<DEPOSITS> 1431113
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