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 June 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
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(412) 981-6000
- ------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not applicable
- ------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at July 31, 1995
----- -----------------------------
Common Stock, $2 Par Value 8,587,881 Shares
- -------------------------- ----------------
<PAGE>
F.N.B. CORPORATION
FORM 10-Q
June 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 18
-1-
<PAGE>
F.N.B. CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
Dollars in thousands
JUNE 30, DECEMBER 31,
1995 1994
------------ ------------
(Unaudited) (Note)
------------ ------------
ASSETS
Cash and due from banks $ 64,126 $ 60,451
Interest bearing deposits with banks 9,558 2,770
Federal funds sold 7,570 4,016
Securities available for sale 137,997 120,061
Investment securities (fair value of
$244,109 and $246,834) 245,983 257,956
Loans available for sale 4,364 5,904
Loans, net of unearned income of
$23,781 and $22,022 1,192,685 1,188,399
------------ ------------
Allowance for loan losses (21,173) (20,295)
------------ ------------
NET LOANS 1,175,876 1,174,008
------------ ------------
Premises and equipment 23,144 22,982
Other assets 41,929 44,275
------------ ------------
$ 1,706,183 $ 1,686,519
============ ============
LIABILITIES
Deposits:
Non-interest bearing $ 170,089 $ 163,566
Interest bearing 1,281,776 1,261,839
------------ ------------
TOTAL DEPOSITS 1,451,865 1,425,405
Short-term borrowings 55,021 69,365
Other liabilities 24,936 26,142
Long-term debt 39,274 39,017
------------ ------------
TOTAL LIABILITIES 1,571,096 1,559,929
------------ ------------
MINORITY INTEREST 540
------------
STOCKHOLDERS' EQUITY
Preferred stock - $10 par value
Authorized - 20,000,000 shares
Outstanding - 455,938 and 456,288 shares
Aggregate liquidation value -
$11,398 and $11,407 4,559 4,563
Common stock - $2 par value
Authorized - 20,000,000 shares
Outstanding - 8,595,974 and 8,163,014 shares 17,252 16,364
Additional paid-in capital 58,522 51,686
Retained earnings 52,681 53,121
Net unrealized securities gains 2,610 625
Treasury stock - 30,019 and 18,974 shares at cost (537) (309)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 135,087 126,050
------------ ------------
$ 1,706,183 $ 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
-2-
<PAGE>
F.N.B. CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
Dollars in thousands, except per share data
Unaudited
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
1995 1994 1995 1994
--------- --------- --------- ---------
INTEREST INCOME
Loans, including fees $ 28,383 $ 25,269 $ 56,019 $ 50,255
Securities:
Taxable 4,369 4,828 8,601 9,623
Tax exempt 439 392 745 789
Dividends 74 137 299 286
Other 569 262 805 502
--------- --------- --------- ---------
TOTAL INTEREST INCOME 33,834 30,888 66,469 61,455
--------- --------- --------- ---------
INTEREST EXPENSE
Deposits 13,113 10,790 25,010 21,718
Short-term borrowings 821 706 1,670 1,551
Long-term debt 741 758 1,522 1,382
--------- --------- --------- ---------
TOTAL INTEREST EXPENSE 14,675 12,254 28,202 24,651
--------- --------- --------- ---------
NET INTEREST INCOME 19,159 18,634 38,267 36,804
Provision for loan losses 1,393 2,145 2,934 4,831
--------- --------- --------- ---------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 17,766 16,489 35,333 31,973
--------- --------- --------- ---------
NON-INTEREST INCOME
Insurance commissions and fees 1,601 1,185 2,338 2,176
Service charges 1,682 1,258 3,413 3,075
Trust 349 410 755 799
Gain on sale of securities 194 352 361 776
Other 498 438 866 459
--------- --------- --------- ---------
TOTAL NON-INTEREST INCOME 4,324 3,643 7,733 7,285
--------- --------- --------- ---------
22,090 20,132 43,066 39,258
--------- --------- --------- ---------
NON-INTEREST EXPENSES
Salaries and employee benefits 7,348 7,031 14,812 14,125
Net occupancy 1,089 1,112 2,253 2,285
Amortization of intangibles 322 372 650 748
Equipment 976 1,025 1,921 2,017
Deposit insurance 934 935 1,868 1,874
Other 4,904 4,797 9,185 9,072
--------- --------- --------- ---------
TOTAL NON-INTEREST EXPENSES 15,573 15,272 30,689 30,121
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 6,517 4,860 12,377 9,137
Income taxes 2,172 1,573 4,048 2,917
--------- --------- --------- ---------
NET INCOME $ 4,345 $ 3,287 $ 8,329 $ 6,220
========= ========= ========= =========
NET INCOME PER COMMON SHARE:
Primary $ .48 $ .36 $ .92 $ .67
========= ========= ========= =========
Fully Diluted $ .46 $ .35 $ .88 $ .66
========= ========= ========= =========
CASH DIVIDENDS PER COMMON SHARE $ .07 $ .07 $ .14 $ .13
========= ========= ========= =========
AVERAGE COMMON SHARES OUTSTANDING 8,591,666 8,575,911 8,594,869 8,573,993
========= ========= ========= =========
See accompanying Notes to Consolidated Financial Statements
-3-
<PAGE>
F.N.B. CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Dollars in thousands
Unaudited
Six Months Ended June 30 1995 1994
---------- ----------
OPERATING ACTIVITIES
Net income $ 8,329 $ 6,220
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,394 3,239
Provision for loan losses 2,934 4,831
Deferred taxes 100 (1,610)
Gain on securities available for sale (357) (776)
(Gain) loss on loan sales (30) 360
Proceeds from sale of loans 16,180 36,130
Loans originated for sale (14,610) (28,639)
Change in:
Interest receivable 49 151
Interest payable 1 1,182
Other, net (731) 1,469
--------- ---------
Net cash flows from operating activities 14,259 22,557
--------- ---------
INVESTING ACTIVITIES
Net change in interest bearing deposits with banks (6,788) (3,541)
Net change in federal funds sold (3,554) 463
Purchase of securities available for sale (42,349) (59,175)
Purchase of investment securities (22,619) (17,599)
Proceeds from sale of securities available for sale 1,296 9,546
Proceeds from maturity of securities available for sale 26,500 49,661
Proceeds from maturity of investment securities 34,265 37,837
Net change in loans (6,350) (22,930)
Increase in premises and equipment (1,541) (818)
--------- ---------
Net cash flows from investing activities (21,140) (6,556)
--------- ---------
FINANCING ACTIVITIES
Net change in non-interest bearing deposits 6,523 (4,395)
Net change in interest bearing deposits 19,937 (9,129)
Net change in short-term borrowings (14,344) (1,649)
Increase in long-term debt 3,719 1,362
Decrease in long-term debt (3,462) (1,341)
Proceeds from sale of stock 695 496
Purchase of treasury stock (913) (398)
Cash dividends paid (1,599) (1,543)
--------- ---------
Net cash flows from financing activities 10,556 (16,597)
--------- ---------
NET (INCREASE) DECREASE IN CASH AND DUE FROM BANKS 3,675 (596)
Cash and due from banks at beginning of period 60,451 59,978
--------- ---------
CASH AND DUE FROM BANKS AT END OF PERIOD $ 64,126 $ 59,382
========= =========
See accompanying Notes to Consolidated Financial Statements
-4-
<PAGE>
F.N.B. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 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 six-month
period ended June 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 the fair
value of the collateral if the loan is collateral dependent. FAS No. 114 had
no material effect on the Corporation's financial position or results of
operations.
CASH FLOW INFORMATION
Following is a summary of supplemental cash flow information (in
thousands):
Six months ended June 30 1995 1994
------- --------
Cash paid for:
Interest $29,950 $ 23,439
Income taxes 3,090 4,689
Noncash Investing and Financing Activities:
Acquisition of real estate in settlement of loans 984 740
Loans granted in the sale of other real estate 133 596
Loans reclassified from available for sale 119,858
Conversion of minority interest 540
-5-
<PAGE>
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
$21.0 million was unused at June 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 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.
-6-
<PAGE>
Following is the gap analysis as of June 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 $ 9,458 $ 100 $ 9,558
Federal funds sold 7,570 7,570
Securities:
Available for sale 9,622 42,073 $ 72,148 $ 14,154 137,997
Held for investment 19,999 29,908 182,898 13,178 245,983
Loans, net of unearned 259,598 200,573 414,884 321,994 1,197,049
--------- --------- --------- --------- ----------
306,247 272,654 669,930 349,326 1,598,157
Other assets 108,026 108,026
--------- --------- --------- --------- ----------
$ 306,247 $ 272,654 $ 669,930 $ 457,352 $1,706,183
========= ========= ========= ========= ==========
Interest Bearing Liabilities
Deposits:
Interest checking $ 7,674 $ 23,021 $ 122,777 $ 153,472
Savings 41,714 125,143 250,284 417,141
Time deposits 144,249 263,777 301,645 $ 1,492 711,163
Short-term borrowings 21,831 17,042 16,148 55,021
Long-term debt 318 18,753 7,485 12,718 39,274
--------- --------- --------- --------- ----------
215,786 447,736 698,339 14,210 1,376,071
Other liabilities 195,025 195,025
Stockholders' equity 135,087 135,087
--------- --------- --------- --------- ----------
$ 215,786 $ 447,736 $ 698,339 $ 344,322 $1,706,183
========= ========= ========= ========= ==========
Period Gap $ 90,461 $(175,082) $ (28,409) $ 113,030
========= ========= ========= =========
Cumulative Gap $ 90,461 $ (84,621) $(113,030)
========= ========= =========
Rate Sensitive Assets/Rate
Sensitive Liabilities
(Cumulative) 1.42 0.87 0.92 1.16
========= ========= ========= =========
Cumulative Gap as a Percent
of Total Assets 5.3% (5.0%) (6.6%)
========= ========= =========
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 $7.1
million as a result of earnings retention. For the six months ended June 30,
1995, the return on average equity was 12.83%. Total cash dividends declared
represented 19.21% of net income. Book value per share was $14.39 at June 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.
-7-
<PAGE>
The Corporation's capital position continues to exceed regulatory
minimums. The primary indicators relied on by the Federal Reserve Board and
other bank and thrift regulators 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
June 30, 1995 and December 31, 1994, respectively (in thousands):
JUNE 30, DECEMBER 31, REGULATORY
1995 1994 MINIMUMS
------------ ------------ ----------
Capital Ratios:
Core Capital 11.23% 10.58% 4.00%
Total Risk-Based Capital 13.36 12.71 8.00
Leverage 7.68 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):
JUNE 30, DECEMBER 31,
1995 1994
------------ ------------
Non-performing assets:
Non-accrual loans $ 6,418 $ 9,512
Loans past due 90 days or more 2,708 2,621
Restructured loans 3,121 3,157
------- -------
Total non-performing loans 12,247 15,290
Other real estate owned 3,173 3,675
------- -------
Total non-performing assets $15,420 $18,965
======= =======
Asset quality ratios:
Non-performing loans as percent of total loans 1.01% 1.28%
Non-performing assets as percent of total assets .90% 1.12%
-8-
<PAGE>
Non-accrual loans totaled $6.4 million at June 30, 1995, representing a
decrease of $3.1 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
.54% at June 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 Six Months Ended
June 30, June 30,
------------------ ------------------
1995 1994 1995 1994
------- ------- ------- -------
Balance at beginning of period $20,922 $18,719 $20,295 $16,440
Charge-offs (1,544) (1,995) (2,886) (2,928)
Recoveries 402 283 830 809
------- ------- ------- -------
Net charge-offs (1,142) (1,712) (2,056) (2,119)
Provision for loan losses 1,393 2,145 2,934 4,831
------- ------- ------- -------
Balance at end of period $21,173 $19,152 $21,173 $19,152
======= ======= ======= =======
Net charge-offs as percent of
average loans, net of
unearned (annualized) .34% .37%
Allowance for loan losses to:
Total loans, net of unearned income 1.77% 1.69%
Non-performing assets 137.31% 101.35%
The allowance for loan losses totaled $21.2 million at June 30, 1995,
representing an increase of $2.0 million or 10.55% compared to June 30, 1994.
The ratio of allowance for loan losses to total loans has increased from 1.69%
at June 30, 1994 to 1.77% at June 30, 1995. The ratio of allowance for loan
losses to non-performing assets increased to 137.31% at June 30, 1995, compared
to 101.35% at June 30, 1994. The ratio of net charge-offs to average loans,
net of unearned income, outstanding (annualized) decreased from .37% at
June 30, 1994 to .34% at June 30, 1995.
FINANCIAL INFORMATION SUMMARY
Net income for the first six months of 1995 was $8.3 million compared to
$6.2 million for the first six months of 1994. Primary earnings per share for
those periods were $.92 and $.67, respectively, and $.88 and $.66 on a fully
diluted basis. Highlights for the first six months of 1995 include:
* A 12.83% return on average equity and a 1.00% return on
average assets.
* A net interest margin on a fully taxable equivalent basis of 5.00%.
* The provision for loan losses for the first six months of 1995 at
$2.9 million was 39.27% lower than the provision recorded for the
first six months of 1994.
-9-
<PAGE>
First Six Months of 1995 as Compared to First Six 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>
Six Months Ended June 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 $ 4,646 $ 141 6.09% $ 7,028 $ 105 2.99%
Federal funds sold 22,014 663 6.03 22,434 398 3.55
Securities:
U.S. Treasury and other
U.S. Government agencies
and corporations 314,647 8,600 5.51 372,907 9,622 5.20
States of the U.S. and
political subdivisions (1) 35,135 1,121 6.38 36,342 1,191 6.55
Other securities (1) 14,064 338 4.81 13,529 365 5.40
Loans (1) (2) 1,196,115 56,671 9.55 1,135,263 50,900 9.04
---------- -------- ---------- --------
Total interest
earning assets 1,586,621 67,534 8.58 1,587,503 62,581 7.95
Cash and due from banks 52,900 53,625
Allowance for loan losses (21,047) (18,478)
Premises and equipment 23,009 23,719
Other assets 45,319 46,231
---------- ----------
$1,686,802 $1,692,600
========== ==========
Liabilities
Interest bearing liabilities:
Deposits:
Interest bearing demand $ 154,542 $ 1,364 1.78 $ 169,610 $ 1,601 1.90
Savings 433,760 5,404 2.51 508,950 6,329 2.51
Other time 685,271 18,242 5.37 612,233 13,788 4.54
Short-term borrowings 55,978 1,670 6.01 65,320 1,551 4.78
Long-term debt 39,524 1,522 7.70 31,411 1,382 8.80
---------- -------- ---------- --------
Total interest
bearing liabilities 1,369,075 28,202 4.15 1,387,524 24,651 3.58
---------- -------- ---------- --------
Non-interest bearing
demand deposits 158,228 158,235
Other liabilities 28,601 26,825
---------- ----------
1,555,904 1,572,584
---------- ----------
Minority Interest 522
----------
Stockholders' Equity
Preferred stock 4,562 4,578
Common stock 16,557 15,692
Additional paid-in capital 53,130 47,292
Retained earnings 55,566 50,339
Net unrealized securities
gains 1,492 1,776
Treasury stock (409) (183)
---------- ----------
Total stockholders' equity 130,898 119,494
---------- ----------
$1,686,802 $1,692,600
========== ==========
Excess of interest earning
assets over interest
bearing liabilities $ 217,546 $ 199,979
========== ==========
Net interest income $ 39,332 $ 37,930
======== ========
Net interest spread 4.43% 4.37%
====== ======
Net interest margin (3) 5.00% 4.81%
====== ======
<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 six months of 1995, net interest income, on a
fully taxable equivalent basis, totaled $39.3 million, representing a 3.70%
increase over the first six months of 1994. Net interest income as a
percentage of average earning assets (commonly referred to as the margin) rose
to 5.00% at June 30, 1995 from 4.81% at June 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 six
months ending June 30, 1995 as compared to the six months ending June 30, 1994
(in thousands):
Volume Rate Net
-------- -------- --------
Interest Income
Interest bearing deposits with banks $ (168) $ 204 $ 36
Federal funds sold 142 123 265
Securities:
U.S. Treasury and other U.S.
Government agencies and corporations (3,162) 2,140 (1,022)
States of the U.S. and political subdivisions (78) 8 (70)
Other securities 28 (55) (27)
Loans 5,654 117 5,771
------- ------- -------
2,416 2,537 4,953
------- ------- -------
Interest Expense
Deposits:
Interest bearing demand (276) 39 (237)
Savings (1,889) 964 (925)
Other time 3,556 898 4,454
Short-term borrowings (555) 674 119
Long-term debt 654 (514) 140
------- ------- -------
1,490 2,061 3,551
------- ------- -------
Net Change $ 926 $ 476 $ 1,402
======= ======= =======
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 relative size of the rate and volume changes.
Total interest income on a fully taxable equivalent basis increased $5.0
million or 7.91% for the first six months of 1995, compared to the first six
months of 1994. Interest income on taxable securities decreased by $1.0
million or 10.62% 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 $5.8 million in interest income on loans, including
fees, on a fully taxable equivalent basis.
Total interest expense increased $3.6 million or 14.41% for the six months
ended June 30, 1995, compared to the six months ended June 30, 1994. Interest
expense on deposits accounted for the majority of this increase, $3.3 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.
On August 8, 1995, the 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. On the other hand, the Savings
Association Insurance Fund is still under reserved. As a result, there will be
no reduction in the insurance premiums for savings and loans. This recent
action will have a beneficial effect on the Corporation since more than half of
our deposits are in the BIF.
-11-
<PAGE>
The provision for loan losses totaled $2.9 million for the first six
months of 1995, representing a decrease of $1.9 million or 39.27% from the
first six 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 slightly during the first six months
of 1995, compared to the same period of 1994 due to an increase in service
charges.
Total non-interest expenses increased $568,000 or 1.89% during the first
six months of 1995, compared to the first six months of 1994. Salaries and
employee benefits accounted for the majority of this increase.
Income before taxes was $12.4 million for the first six months of 1995,
representing an increase of $3.2 million or 35.46% over the same period of
1994. Income taxes increased $1.1 million or 38.77% over the same periods due
to more taxable income being generated by the Corporation.
Consolidated net income was $8.3 million for the first six months of
1995, representing a $2.1 million or 33.91% increase over the first six months
of 1994. The Corporation's return on average assets was 1.00% and .74% for the
first six months of 1995 and 1994, respectively, while the return on average
equity was 12.83% and 10.66% for those same periods.
Second Quarter of 1995 as Compared to Second Quarter of 1994
During the second quarter of 1995, net interest income increased $525,000
or 2.82% over the second quarter of 1994. Total interest income increased $2.9
million or 9.54% over these same periods, primarily the result of an increase
of $3.1 million in loans, including fees. This increase is the result of
greater loan demand.
Total interest expense increased $2.4 million or 19.76% during the second
quarter of 1995, compared to the same period of 1994. Interest expense on
deposits accounted for the majority of this increase, $2.3 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 $1.4 million for the second quarter
of 1995, compared to $2.1 million for the second quarter of 1994. This is a
result of the continuing improvement in asset quality at the Corporation.
Total non-interest income increased $681,000 or 18.69% during the second
quarter of 1995, compared to the second quarter of 1994, largely as a result of
increases in premiums and commissions at the Corporation's insurance
subsidiary. Total non-interest expenses increased slightly to $15.6 million
from $15.3 million for the second quarter of 1995 and 1994, respectively.
Expense levels in 1995 were affected by increases in the cost of certain
employee benefits.
Income before taxes increased to $6.5 million in the second quarter of
1995 from $4.9 million in the same period of 1994. Income tax expense
increased to $2.2 million from $1.6 million over these same periods. Net
income totaled $4.3 million for the second quarter of 1995, compared to $3.3
million for the second 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
The Annual Meeting of Shareholders of F.N.B. Corporation was
held on April 26, 1995. Proxies for the meeting were solicited
pursuant to Section 14(a) of the Securities Exchange Act of 1994
and there was no solicitation in opposition to the Corporation's
solicitations.
All of the Corporation's nominees for directors as listed in
the proxy statement were elected with the following vote:
Shares Voted Shares
"For" "Withheld"
------------ ----------
William J. Strimbu 5,925,947 46,602
Archie O. Wallace 5,915,805 51,144
Joseph M. Walton 5,900,807 75,842
James T. Weller 5,927,236 45,313
Eric J. Werner 5,904,690 68,419
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 securities. This filing is currently under review.
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).
-13-
<PAGE>
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.
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 (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).
-14-
<PAGE>
Exhibit 10.5.
AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT
ENTERED INTO on and as of June 26, 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 thereto dated
June 2, 1994 (the "Employment Agreement"), and
WHEREAS, the Executive and the Company have agreed to enter into a
Consulting Agreement, in substantially the form attached hereto, pursuant to
which (inter alia), upon cessation of the Executive's full-time employment
under the Employment Agreement, the Executive shall be entitled to a fixed
amount of compensation per annum for a period of seven years and shall be
required to make himself available to serve the Company and its subsidiaries,
as an independent consultant, with respect to various aspects of their business
and affairs (as described therein); and
WHEREAS, the Executive and the Company have agreed, in connection
with the establishment of the said Consulting Agreement, and in consideration
therefor, (i) to eliminate from the Employment Agreement the Executive's
entitlement to severance compensation upon occurrence of the events described
in Section 11 thereof, (ii) to amend and supplement the provisions of Section
1(b) thereof, and (iii) to eliminate Section 20 thereof in its entirety; and
WHEREAS, the parties desire to reaffirm all the other terms and
provisions of the Employment Agreement,
NOW, THEREFORE, intending to be legally bound, the Executive and the
Company covenant and agree that:
1. Section 1(b) of the Employment Agreement is hereby amended and
supplemented as follows:
1st. From the last sentence, the words", except by operation
of Section 20 hereof" are hereby deleted.
2nd. At the end thereof is hereby added a new sentence, to
read in its entirety: "Notwithstanding the foregoing, the Executive
shall have the right, exercisable by six months' written notice to
the Company, to fix the expiration of the term as of any date on or
after March 31, 1996, and thereby initiate the term of the Consulting
Agreement dated as of June 26, 1995 between the Executive and the
Company.
2. Section 11 of the Employment Agreement is hereby deleted in
its entirety.
3. Section 20 of the Employment Agreement is hereby deleted in
its entirety.
-15-
<PAGE>
4. The parties hereby reaffirm all the other terms and provisions
of the Employment Agreement, which shall remain in full force and effect as
amended hereby.
5. In consideration of the foregoing, the parties shall,
concurrently herewith, enter into the Consulting Agreement in substantially the
form attached hereto.
WITNESS the due execution and delivery hereof as of the date first
above written.
WITNESS: EXECUTIVE
William J. Rundorff Peter Mortensen
- ------------------------------------ ----------------------------------
William J. Rundorff Peter Mortensen
ATTEST: F.N.B. CORPORATION
William J. Rundorff By James T. Weller
- ------------------------------------ -------------------------------
William J. Rundorff, Asst. Secretary Chairman of the Compensation
Committee of the Board of
Directors
-16-
<PAGE>
11 F.N.B. Corporation
Statement re Computation of Per Share Earnings
Dollars in thousands
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
1995 1994 1995 1994
--------- --------- --------- ---------
Primary
Net Income $ 4,345 $ 3,287 $ 8,329 $ 6,220
Less: Preferred Stock
Dividends Declared (213) (213) (425) (427)
--------- --------- --------- ---------
Net Income Applicable
to Common Stock $ 4,132 $ 3,074 $ 7,904 $ 5,793
========= ========= ========= =========
Average Common Shares
Outstanding 8,591,666 8,575,910 8,594,869 8,573,992
Net Effect of Dilutive Stock
Options - Based on the Treasury
Stock Method Using Average
Market Price 37,935 14,807 34,862 14,260
--------- --------- --------- ---------
8,629,601 8,590,717 8,629,731 8,588,252
========= ========= ========= =========
Net Income per Common Share $.48 $.36 $.92 $.67
==== ==== ==== ====
Fully Diluted
Net Income $ 4,345 $ 3,287 $ 8,329 $ 6,220
Plus: Minority Interest 13 25
--------- --------- --------- ---------
Net Income Applicable
to Common Stock $ 4,345 $ 3,300 $ 8,329 $ 6,245
========= ========= ========= =========
Average Common Shares
Outstanding 8,591,666 8,575,910 8,594,869 8,573,992
Series A Convertible
Preferred Stock 35,036 43,219 35,036 43,219
Series B Convertible
Preferred Stock 839,415 801,420 839,479 801,420
Minority Interest Convertible
Preferred Stock 31,332 31,332
Net Effect of Dilutive Stock
Options - Based on the Treasury
Stock Method Using the Year-End
Market Price, If Higher than
Average Market Price 40,485 16,481 40,485 16,481
--------- --------- --------- ---------
9,506,602 9,468,362 9,509,869 9,466,444
========= ========= ========= =========
Net Income per Common Share $.46 $.35 $.88 $.66
==== ==== ==== ====
(b) Reports on Form 8-K
No reports on Form 8-K were filed for the three months ended
June 30, 1995.
-17-
<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: August 11, 1995 Peter Mortensen
---------------------------- ------------------------------------------
Peter Mortensen
Chairman and President
(Principal Executive Officer)
Dated: August 11, 1995 John D. Waters
---------------------------- ------------------------------------------
John D. Waters
Vice President and Chief Financial Officer
(Principal Financial Officer)
-18-
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<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 64126
<INT-BEARING-DEPOSITS> 9558
<FED-FUNDS-SOLD> 7570
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 137997
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<DEPOSITS> 1451865
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0
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<OTHER-SE> 113276
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