SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Date of Report: April 3, 1998
F.N.B. CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 0-8144 25-1255406
- --------------------------- ----------- -------------------
(State of Incorporation) (Commission (IRS Employer
File Number) Identification No.)
One F.N.B. Blvd., Hermitage, Pennsylvania 16148
----------------------------------------- ---------
(Address of principal executive offices) (Zip code)
(724) 981-6000
----------------------------------------------------
(Registrant's telephone number, including area code)
<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 5. OTHER EVENTS
On January 20, 1998, F.N.B. Corporation (the Corporation)
completed its acquisition of West Coast Bank. Accordingly, the
Corporation's Supplemental Consolidated Financial Statements
and Related Management's Discussion and Analysis of Financial
Condition and Results of Operations have been provided giving
retroactive effect to this merger using the pooling of
interests method of accounting. Such supplemental consolidated
financial statements will become the historical consolidated
financial statements when the Corporation reports first quarter
1998 results. The Corporation is hereby filing with the
Securities and Exchange Commission a copy of the Audited
Supplemental Consolidated Financial Statements for the years
ended December 31, 1997, 1996 and 1995 and Management's
Discussion and Analysis.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(C). Exhibits (all filed herewith)
Exhibit 23.1 Consent of Ernst & Young LLP
Exhibit 23.2 Consent of Hill, Barth & King, Inc.
Exhibit 23.3 Consent of Coopers & Lybrand L.L.P.
Exhibit 27.1 Financial Data Schedule for the years ended
December 31, 1997, 1996 and 1995
Exhibit 27.2 Financial Data Schedule for the quarterly
periods in the year ended December 31, 1997
Exhibit 27.3 Financial Data Schedule for the quarterly
periods in the year ended December 31, 1996
Exhibit 99.1 Supplemental Consolidated Financial
Statements for the years ended
December 31, 1997, 1996 and 1995 with
Report of Independent Auditors and
Management's Discussion and Analysis
Exhibit 99.2 Report of Independent Auditors Hill, Barth
& King, Inc. for the 1996 and 1995 Audits
of Southwest Banks, Inc.
Exhibit 99.3 Report of Independent Auditors Coopers &
Lybrand L.L.P. for the 1996 and 1995
Audits of West Coast Bancorp Inc.
<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 hereunto duly authorized.
F.N.B. CORPORATION
(Registrant)
By: /s/John D. Waters
--------------------------
Name: John D. Waters
Title: Vice President and
Chief Financial Officer
Dated: April 3, 1998
<PAGE>
EXHIBIT INDEX
23.1 Consent of Ernst & Young LLP
23.2 Consent of Hill, Barth & King, Inc.
23.3 Consent of Coopers & Lybrand L.L.P.
27.1 Financial Data Schedule for the years ended December 31, 1997,
1996 and 1995
27.2 Financial Data Schedule for the quarterly periods in the year
ended December 31, 1997
27.3 Financial Data Schedule for the quarterly periods in the year
ended December 31, 1996
99.1 Supplemental Consolidated Financial Statements for the
years ended December 31, 1997, 1996 and 1995 with Report of
Independent Auditors and Management's Discussion and Analysis
99.2 Report of Independent Auditors Hill, Barth & King, Inc. for the
1996 and 1995 Audits of Southwest Banks, Inc.
99.3 Report of Independent Auditors Coopers & Lybrand L.L.P. for the
1996 and 1995 Audits of West Coast Bancorp, Inc.
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Regarding:
1) Registration Statement on Form S-8 relating to the F.N.B. Corporation
Voluntary Dividend Reinvestment and Stock Purchase Plan (File
#333-00943).
2) Registration Statement on Form S-8 relating to F.N.B. Corporation
1990 Stock Option Plan (File #33-78114).
3) Registration Statement on Form S-8 relating to F.N.B. Corporation
Restricted Stock Bonus Plan (File #33-78134).
4) Registration Statement on Form S-8 relating to F.N.B. Corporation
1996 Stock Option Plan (File #333-03489).
5) Registration Statement on Form S-8 relating to F.N.B. Corporation
Restricted Stock and Incentive Bonus Plan (File #333-03493).
6) Registration Statement on Form S-8 relating to F.N.B. Corporation
Directors Compensation Plan (File #333-03495).
7) Registration Statement on Form S-8 relating to F.N.B. Corporation
401(k) Plan (File #333-03503).
8) Post-Effective Amendment No.1 on Form S-8 to Registration Statement
on Form S-4 (File #333-01997).
9) Post-Effective Amendment No.1 on Form S-8 to Registration Statement
on Form S-4 (File #333-22909).
10) Registration Statement on Form S-3 relating to the F.N.B. Corporation
Subordinated Notes and Daily Cash Accounts (File #333-31909).
11) Registration Statement on Form S-3 relating to the Voluntary Dividend
Reinvestment and Stock Purchase Plan (File #333-35637).
12) Registration Statement on Form S-8 relating to stock options assumed
in the acquisition of Mercantile Bank of Southwest Florida (File
#333-42333).
We consent to the incorporation by reference in the above listed
Registration Statements of our report dated March 31, 1998, with respect to
the supplemental consolidated financial statements of F.N.B. Corporation and
subsidiaries as of December 31, 1997 and 1996 and for each of the three years
in the period ended December 31, 1997 included in this Current Report on
Form 8-K.
/s/ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
March 31, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF HILL, BARTH & KING, INC., INDEPENDENT AUDITORS
We consent to incorporation by reference in the registration statements
of F.N.B. Corporation on Forms S-3 (Registration Nos. 333-31909 and
333-35637) and Forms S-8 (Registration Nos. 333-00943, 33-78114, 33-78134,
333-03489, 333-03493, 333-03495, 333-03503, 333-01997, 333-22909 and
333-42333) and to the use in this Current Report of F.N.B. Corporation
on Form 8-K of our report dated January 22, 1997 relating to the
consolidated financial statements of Southwest Banks, Inc. which have
been incorporated into the Audited Supplemental Consolidated Financial
Statements for the years ended December 31, 1996 and 1995, which report
is included as an exhibit in F.N.B. Corporation's Current Report on
Form 8-K.
/s/Hill, Barth & King, Inc.
Certified Public Accountants
Naples, Florida
April 2, 1998
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statement of F.N.B. Corporation on Forms S-3 (Registration Nos. 333-31909
and 333-35637) and Forms S-8 (Registration Nos. 333-00943, 33-78114,
33-78134, 333-03489, 333-03493, 333-03495, 333-03503, 333-01997,
333-22909 and 333-42333) of our reports dated January 24, 1997 on our
audits of the consolidated financial statements of West Coast Bancorp,
Inc. for the years ended December 31, 1996 and 1995, which report is
included as Exhibit 99.3 in F.N.B. Corporation's Current Report on Form 8-K.
/s/COOPERS & LYBRAND L.L.P.
Tampa, Florida
April 2, 1998
<PAGE>
EXHIBIT 99.1
Supplemental Consolidated Financial Statements
and Management's Discussion and Analysis
F.N.B. Corporation and Subsidiaries
Years ended December 31, 1997, 1996 and 1995
with Report of Independent Auditors
<PAGE>
F.N.B. CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
AND MANAGEMENT'S DISCUSSION AND ANALYSIS
Years ended December 31, 1997, 1996 and 1995
CONTENTS
Report of Independent Auditors.............................................. 1
Supplemental Consolidated Financial Statements
Supplemental Consolidated Balance Sheet......................... 2
Supplemental Consolidated Income Statement...................... 3
Supplemental Consolidated Statement of Stockholders' Equity..... 4
Supplemental Consolidated Statement of Cash Flows............... 5
Notes to Supplemental Consolidated Financial Statements......... 6
Supplemental Selected Financial Data........................................30
Supplemental Quarterly Earnings Summary.....................................31
Management's Discussion and Analysis of Financial Conditions and
Results of Operations...................................................32
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Stockholders and Board of Directors
F.N.B. Corporation
We have audited the supplemental consolidated balance sheets of F.N.B.
Corporation and subsidiaries (F.N.B. Corporation) as of December 31, 1997 and
1996 and the related supplemental consolidated statements of income,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1997. The supplemental consolidated financial statements
give retroactive effect to the merger of F.N.B. Corporation and West Coast Bank
on January 20, 1998, which has been accounted for using the pooling of interests
method as described in the notes to the supplemental consolidated financial
statements. These supplemental consolidated financial statements are the
responsibility of the management of F.N.B. Corporation. Our responsibility
is to express an opinion on these supplemental consolidated financial statements
based on our audits. We did not audit the financial statements of Southwest
Banks, Inc. and subsidiaries or West Coast Bancorp, Inc. and subsidiary which
statements reflect total assets constituting approximately 28% for 1996 and net
income constituting approximately 7% and 13% for 1996 and 1995, respectively,
of the related supplemental consolidated financial statement totals. Those
statements were audited by other auditors whose reports have been furnished
to us, and our opinion, insofar as it relates to data included for Southwest
Banks, Inc. and subsidiaries and West Coast Bancorp, Inc. and subsidiary, is
based solely on the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
supplemental consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of F.N.B.
Corporation at December 31, 1997 and 1996, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1997, after giving retroactive effect to the merger of
West Coast Bank, as described in the notes to the supplemental consolidated
financial statements, in conformity with generally accepted accounting
principles.
/s/ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
March 31, 1998
<PAGE>
F.N.B. CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED BALANCE SHEET
Dollars in thousands, except par values
December 31 1997 1996
---------- ----------
ASSETS
Cash and due from banks....................... $ 93,186 $ 111,542
Interest bearing deposits with banks.......... 3,244 1,334
Federal funds sold............................ 17,249 11,510
Mortgage loans held for sale.................. 6,163 10,088
Securities available for sale................. 437,115 327,658
Securities held to maturity (fair value of
$123,164 and $173,677)...................... 122,938 174,551
Loans, net of unearned
income of $20,425 and $23,846.............. 1,968,925 1,794,576
Allowance for loan losses..................... (28,296) (28,649)
---------- ---------
NET LOANS 1,940,629 1,765,927
Premises and equipment........................ 65,818 49,296
Other assets. ................................ 70,538 50,674
---------- ----------
$2,756,880 $2,502,580
========== ==========
LIABILITIES
Deposits:
Non-interest bearing....................... $ 272,974 $ 244,844
Interest bearing........................... 2,010,990 1,841,008
---------- ----------
TOTAL DEPOSITS........................... 2,283,964 2,085,852
Other liabilities............................ 37,423 35,229
Short-term borrowings........................ 123,752 116,126
Long-term debt............................... 72,246 58,179
---------- ----------
TOTAL LIABILITIES........................ 2,517,385 2,295,386
STOCKHOLDERS' EQUITY
Preferred stock - $10 par value
Authorized - 20,000,000 shares
Issued - 287,500 and 352,531 shares
Aggregate liquidation value
- $7,188 and $8,813......................... 2,875 3,525
Common Stock - $2 par value
Authorized - 100,000,000 shares
Issued - 15,332,488 and 13,879,872 shares...... 30,665 27,760
Additional paid-in capital....................... 121,296 103,467
Retained earnings................................ 83,051 71,353
Net unrealized securities gains. ................ 5,236 2,576
Treasury stock - 113,592 and 62,723
shares at cost................................ (3,628) (1,487)
---------- ---------
TOTAL STOCKHOLDERS' EQUITY................... 239,495 207,194
---------- ----------
$2,756,880 $2,502,580
========== ==========
See accompanying Notes to Supplemental Consolidated Financial Statements
<PAGE>
F.N.B. CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED INCOME STATEMENT
Dollars in thousands, except per share data
Year Ended December 31 1997 1996 1995
--------- -------- --------
INTEREST INCOME
Loans, including fees.................... $170,189 $160,315 $149,869
Securities:
Taxable................................ 25,384 23,364 22,993
Nontaxable............................. 2,228 2,261 1,939
Dividends.............................. 1,137 1,097 928
Other.................................... 3,605 2,766 2,885
-------- ------- --------
TOTAL INTEREST INCOME................ 202,543 189,803 178,614
INTEREST EXPENSE
Deposits................................. 77,479 71,747 68,412
Short-term borrowings.................... 6,275 3,915 5,457
Long-term debt........................... 3,746 4,384 3,258
-------- ------- --------
TOTAL INTEREST EXPENSE............... 87,500 80,046 77,127
NET INTEREST INCOME.................. 115,043 109,757 101,487
Provision for loan losses................ 10,916 9,876 7,235
-------- ------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES............ 104,127 99,881 94,252
NON-INTEREST INCOME
Insurance commissions and fees........... 3,983 4,116 4,284
Service charges.......................... 12,339 11,740 11,037
Trust.................................... 1,465 1,461 1,390
Gain on sale of securities............... 1,252 787 493
Gain on sale of loans.................... 1,530 772 585
Other.................................... 3,285 2,150 2,095
-------- -------- --------
TOTAL NON-INTEREST INCOME................ 23,854 21,026 19,884
-------- -------- --------
127,981 120,907 114,136
NON-INTEREST EXPENSES
Salaries and employee benefits........... 47,822 42,732 39,187
Net occupancy............................ 7,029 6,931 6,821
Amortization of intangibles.............. 1,584 1,047 1,246
Equipment................................ 6,889 6,436 5,768
Deposit insurance........................ 842 972 3,159
Recapitalization of Savings
Association Insurance Fund............. 2,752
Promotional.............................. 2,287 2,618 3,226
Insurance claims paid.................... 1,867 1,707 1,738
Other.................................... 22,878 24,166 19,999
-------- -------- --------
TOTAL NON-INTEREST EXPENSES.......... 91,198 89,361 81,144
-------- -------- --------
INCOME BEFORE INCOME TAXES........... 36,783 31,546 32,992
Income taxes............................. 11,590 10,549 10,870
-------- -------- --------
INCOME BEFORE EXTRAORDINARY ITEMS.... 25,193 20,997 22,122
Gain on sale of subsidiary and branches,
net of tax of $4,743................... 8,809
-------- -------- --------
NET INCOME........................... $ 34,002 $ 20,997 $ 22,122
======== ======== ========
Net Income Per Common Share
BASIC............................... $2.27 $1.38 $1.47
===== ===== ======
DILUTED............................. $2.15 $1.34 $1.42
===== ===== =====
See accompanying Notes to Supplemental Consolidated Financial Statements
<PAGE>
F.N.B. CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Dollars in thousands, except per share data
<TABLE>
<CAPTION>
NET EMPLOYEE
ADDITIONAL UNREALIZED STOCK
PREFERRED COMMON PAID-IN RETAINED SECURITIES OWNERSHIP TREASURY
STOCK STOCK CAPITAL EARNINGS GAINS/(LOSSES) PLAN STOCK
--------- ------- ---------- --------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT
JANUARY 1, 1995.. $4,563 $25,455 $ 86,095 $57,583 $ (695) $(141) $ (309)
Net income....... 22,122
Cash dividends
declared:
Preferred stock (849)
Common stock
$.33 per share
(F.N.B.) and
$.20 per share
(WCBI)......... (3,489)
Purchase of
common stock... (1,447)
Issuance of
Common stock.... 75 389 1,292
Stock dividend... 930 7,132 (8,067)
Conversion of
preferred stock. (47) 85 502
Obligation under
ESOP plan...... (248)
Change in net
unrealized
securities gains
(losses)....... 3,917
BALANCE AT
DECEMBER 31, ------- ------- -------- -------- ------- ------- ------
1995............ 4,516 26,545 94,118 67,300 3,222 (389) (464)
Net income...... 20,997
Cash dividends
declared:
Preferred stock (766)
Common stock
$.60 per share
(F.N.B.) and
$.23 per share
(WCBI)........ (6,123)
Purchase of
common stock... (3,421)
Issuance
(retirement) of
common stock... (44) (438) 2,398
Stock dividend.. 860 9,195 (10,055)
Conversion of
preferred
stock......... (991) 399 592
Obligation under
ESOP plan..... 389
Change in net
unrealized
securities
gains (losses) (646)
-------- -------- -------- ------- -------- ------- ---------
BALANCE AT
DECEMBER 31,
1996.......... 3,525 27,760 103,467 71,353 2,576 0 (1,487)
Net income.... 34,002
Cash dividends
declared:
Preferred stock (588)
Common stock
$.63 per share
(F.N.B.) and
$.12 per share
(WCBI)........ (8,990)
Purchase of
common stock.. (7,688)
Issuance of
common stock.. 47 131 (497) 5,547
Issuance of
common stock
for acquisition 1,260 2,240 4,177
Stock dividend 1,332 15,074 (16,406)
Conversion of
preferred stock.. (650) 266 384
Change in net
unrealized
securities
gains (losses) 2,660
--------- -------- -------- -------- --------- ------- --------
BALANCE AT
DECEMBER 31,
1997.......... $2,875 $30,665 $121,296 $83,051 $5,236 $ 0 $(3,628)
========= ======== ========= ======== ========== ====== ========
</TABLE>
See accompanying Notes to Supplemental Consolidated Financial Statements
<PAGE>
F.N.B. CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENT OF CASH FLOWS
Dollars in thousands
Year Ended December 31 1997 1996 1995
--------- --------- ---------
OPERATING ACTIVITIES
Net income................................ $ 34,002 $ 20,997 $ 22,122
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization.......... 7,143 6,256 6,540
Provision for loan losses.............. 10,916 9,876 7,235
Provision for valuation allowance
on other real estate owned............. 540 664 100
Deferred taxes......................... (1,370) (1,783) (704)
Gain on securities available for sale.. (1,252) (787) (493)
Gain on sale of loans.................. (1,530) (772) (585)
Extraordinary gains on sales of
subsidiary and branches, net of tax.. (8,809)
Proceeds from sale of loans............ 108,336 59,802 60,067
Loans originated for sale.............. (103,322) (52,535) (64,373)
Net change in:
Interest receivable.................. (2,516) 1,318 (1,718)
Interest payable..................... 1,763 611 1,983
Other, net............................. 3,826 5,669 5,185
--------- --------- ---------
Net cash flows from
operating activities............... 47,727 49,316 35,359
INVESTING ACTIVITIES
Net change in:
Interest bearing deposits with banks..... (1,932) 3,365 (334)
Federal funds sold....................... 4,361 54,629 (48,133)
Loans.................................... (179,324) (198,649) (106,709)
Securities available for sale:
Purchases................................ (256,447) (189,009) (130,943)
Sales.................................... 38,213 42,171 7,555
Maturities............................... 143,350 109,242 90,974
Securities held to maturity:
Purchases................................ (7,120) (41,862) (45,264)
Maturities............................... 55,858 41,678 76,474
Increase in premises and equipment......... (18,576) (11,645) (7,277)
Net cash paid for mergers,
acquisitions and divestiture.............. (50,362)
--------- --------- ---------
Net cash flows from
investing activities................ (271,979) (190,080) (163,657)
FINANCING ACTIVITIES
Net change in:
Non-interest bearing deposits,
savings and NOW........................ 112,058 94,385 10,658
Time deposits.......................... 95,118 21,271 153,689
Short-term borrowings.................... (3,390) 40,409 (14,065)
Increase in long-term debt............... 44,010 32,899 9,274
Decrease in long-term debt............... (29,862) (25,504) (15,104)
Net acquisition of treasury stock........ (2,460) (1,504) 309
Cash dividends paid...................... (9,578) (6,889) (4,343)
--------- --------- ----------
Net cash flows from
financing activities............... 205,896 155,067 140,418
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS................... (18,356) 14,303 12,120
Cash and cash equivalents at
beginning of year...................... 111,542 97,239 85,119
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR. $ 93,186 $ 111,542 $ 97,239
========= ========= =========
See accompanying Notes to Supplemental Consolidated Financial Statements
<PAGE>
F.N.B. CORPORATION AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
The supplemental consolidated financial statements give retroactive effect to
the merger of West Coast Bank (West Coast) with and into F.N.B. Corporation
(F.N.B. or the Corporation). The merger, which was consummated on January 20,
1998, resulted in the Corporation issuing a total of 585,263 shares of common
stock. The transaction has been accounted for on a pooling-of-interests basis,
and the financial statements are presented as if the merger had been consummated
for all the periods presented. As required by generally accepted accounting
principles, the supplemental consolidated financial statements will become
the historical consolidated financial statements upon issuance of the
Corporation's consolidated financial statements for the quarter ended March 31,
1998.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS:
The Corporation is a bank holding company headquartered in Hermitage,
Pennsylvania. As of January 31, 1998, it operated 9 banks through 73 offices
and a consumer finance company through 35 offices in Pennsylvania, Florida, Ohio
and New York.
BASIS OF PRESENTATION:
The consolidated financial statements include the accounts of the Corporation
and its subsidiaries. All significant intercompany balances and transactions
have been eliminated. Certain reclassifications have been made to the prior
years' financial statements to conform to the current year's presentation.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
SECURITIES:
Debt securities are classified as held to maturity when management has the
positive intent and ability to hold securities to maturity. Securities held
to maturity are carried at amortized cost.
Debt securities not classified as held to maturity and marketable equity
securities are classified as available for sale. Securities available for
sale are carried at fair value with net unrealized securities gains (losses)
reported separately as a component of stockholders' equity, net of tax.
Amortization of premiums and accretion of discounts are recorded as interest
income from securities. Realized gains and losses are recorded as net
securities gains (losses). The adjusted cost of specific securities sold is
used to compute gains or losses on sales.
Presently, the Corporation has no intention of establishing a trading
securities classification.
<PAGE>
MORTGAGE LOANS HELD FOR SALE:
Mortgage loans held for sale are recorded at the lower of aggregate cost or
market value. Gain or loss on the sale of loans is included in non-interest
income.
LOANS AND THE ALLOWANCE FOR LOAN LOSSES:
Loans are reported at their outstanding principal adjusted for any charge-offs
and any deferred fees or costs on originated loans.
Interest income on loans is accrued on the principal amount outstanding. It
is the Corporation's policy to discontinue interest accruals when principal or
interest is due and has remained unpaid for 90 days or more unless the loan is
both well secured and in the process of collection. When a loan is placed on
non-accrual status, unpaid interest credited to income in the current year is
reversed, and unpaid interest accrued in prior years is charged against the
allowance for loan losses. While on non-accrual, contractual interest payments
are applied against principal until the loan is restored to accrual status.
Non-accrual loans may not be restored to accrual status until all delinquent
principal and interest has been paid, or the loan becomes both well secured and
in the process of collection. Consumer installment loans are generally charged
off against the allowance for loan losses upon reaching 90 to 180 days past due,
depending on the installment loan type. Loan origination fees and related costs
are deferred and recognized over the life of the loans as an adjustment of
yield. The allowance for loan losses is based on management's evaluation of
potential losses in the loan portfolio, which includes an assessment of past
experience, current and estimated future economic conditions, known and inherent
risks in the loan portfolio, the estimated value of underlying collateral and
industry standards. Additions are made to the allowance through periodic
provisions charged to income and recovery of principal on loans previously
charged off. Losses of principal are charged to the allowance when the loss
actually occurs or when a determination is made that a loss is probable.
Impaired loans are 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. If the recorded investment in the loan
exceeds the measure of fair value, a valuation allowance is established as a
component of the allowance for loan losses. Impaired loans consist of
non-homogeneous loans, which based on the evaluation of current information and
events, management has determined that it is probable that the Corporation will
not be able to collect all amounts due according to the contractual terms of the
loan agreement. The Corporation evaluates all commercial and commercial real
estate loans which have been classified for regulatory reporting purposes,
including non-accrual and restructured loans, in determining impaired loans.
PREMISES AND EQUIPMENT:
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed generally on the straight-line method.
OTHER REAL ESTATE OWNED:
Assets acquired in settlement of indebtedness are included in other assets
at the lower of fair value minus estimated costs to sell or at the carrying
amount of the indebtedness. Subsequent write-downs and net direct operating
expenses attributable to such assets are included in other expenses.
<PAGE>
AMORTIZATION OF INTANGIBLES:
Goodwill is being amortized over 15 years on the straight-line method and core
deposit intangibles are being amortized on accelerated methods over various
lives ranging from 7-17 years. The Corporation periodically evaluates its
goodwill and core deposit intangibles for impairment.
INCOME TAXES:
Income taxes are computed utilizing the liability method. Under this method
deferred taxes are determined based on differences between financial reporting
and tax bases of assets and liabilities and are measured using the enacted tax
rates and laws that will be in effect when the differences are expected to
reverse.
PER SHARE AMOUNTS:
Earnings and cash dividends per share have been adjusted for common stock
dividends.
In 1997, the Financial Accounting Standards Board issued Statement No. 128
(FAS No. 128), "Earnings per Share." FAS No. 128 replaced the calculation of
primary and fully diluted earnings per share with basic and diluted earnings
per share. All earnings per share amounts have been restated to conform to the
FAS No. 128 requirements. Basic 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.
Diluted earnings per common share is calculated by dividing net income by the
weighted average number of shares of common stock outstanding, assuming
conversion of outstanding convertible preferred stock from the beginning of the
year or date of issuance and the exercise of stock options and warrants. Such
adjustments to net income and the weighted average number of shares of common
stock outstanding are made only when such adjustments dilute earnings per
common share.
CASH EQUIVALENTS:
The Corporation considers cash and due from banks as cash and cash
equivalents.
NEW ACCOUNTING STANDARDS:
FAS No. 130, "Reporting Comprehensive Income," establishes new standards for
reporting and display of comprehensive income and its components in a full set
of general purpose financial statements. Comprehensive income is defined as
the change in equity during a period from transactions and other events and
circumstances from non shareholder sources, such as changes in net unrealized
securities gains. It includes all changes in equity during a period except
those resulting from investments by shareholders and distributions to
shareholders. This statement is effective for the Corporation's fiscal year
ending December 31, 1998. Application of this statement will not impact amounts
previously reported for net income or affect the comparability of previously
issued financial statements.
<PAGE>
FAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," establishes standards for the reporting of financial information
from operating segments in annual and interim financial statements. It
requires that financial information be reported on the basis that it is
reported internally for evaluating segment performance and deciding how to
allocate resources to segments. Because this statement addresses how
supplemental financial information is disclosed in annual and interim reports,
the adoption will have no material impact on the financial statements. This
statement is effective for the Corporation's fiscal year ending December 31,
1998.
MERGERS, ACQUISITIONS AND DIVESTITURES
On February 2, 1998, the Corporation signed a definitive merger agreement with
Seminole Bank (Seminole), a community bank headquartered in Seminole, Florida
with assets of $93.7 million. The merger agreement calls for an exchange of
1.457 shares of the Corporation's common stock for each share of Seminole common
stock. The Corporation anticipates issuing approximately 814,500 shares of its
common stock. Seminole will be merged into an existing subsidiary of the
Corporation, First National Bank of Florida (FNB Florida), formerly Indian
Rocks National Bank, in Largo, Florida. The transaction, which is expected
to close during the second quarter of 1998 pending regulatory and shareholder
approval, is expected to be accounted for as a pooling-of-interests.
On January 20, 1998, the Corporation completed its affiliation with West
Coast, headquartered in Sarasota, Florida, with assets totaling $107.4 million.
Under the terms of the merger agreement, each outstanding share of West Coast's
common stock was converted into 1.0 share of the Corporation's common stock.
A total of 585,263 shares of the Corporation's common stock were issued.
Results from prior years are restated to reflect this acquisition as a pooling-
of-interests. The following table sets forth separate company financial
information for the period immediately prior to the merger (in thousands):
YEAR ENDED DECEMBER 31, 1997 F.N.B. WEST COAST
---------- ----------
Net interest income $111,030 $4,013
Net income 33,123 879
On November 21, 1997, the Corporation completed the sale of three Belmont
County, Ohio branches of its subsidiary, Metropolitan National Bank, to Citizens
Bancshares, Inc., a bank holding company headquartered in Salineville, Ohio.
The sale resulted in the Corporation recognizing a $3.6 million after-tax
extraordinary gain.
On November 20, 1997, the Corporation purchased all of the assets and
liabilities of Mercantile Bank of Southwest Florida (Mercantile), a bank
located in Naples, Florida. The Corporation paid $17.72 per share for each of
the 766,681 outstanding shares of Mercantile's common stock. Mercantile was
merged into another affiliate of the Corporation, First National Bank of
Naples, headquartered in Naples, Florida. The transaction was accounted for
as a purchase. As a result of the purchase, the Corporation acquired assets
of $121.7 million, including goodwill to $7.1 million and core deposit
intangibles amounting to $595,000, and assumed liabilities of $108.2 million.
Unaudited pro forma results of operations for the Corporation as if Mercantile
was acquired on January 1, 1995 are as follows (in thousands, except per share
data):
YEAR ENDED DECEMBER 31 1997 1996 1995
-------- -------- --------
Net interest income.................... $117,761 $112,471 $103,765
Net income............................. 32,884 20,864 21,837
Net income per common share (Basic).... 2.20 1.37 1.45
<PAGE>
On October 17, 1997, the Corporation completed its affiliation with FNB
Florida, a community bank headquartered in Largo, Florida with assets of $80.9
million. Under the terms of the merger agreement, each outstanding share of
FNB Florida's common stock was converted into 1.8 shares of the Corporation's
common stock with cash being paid in lieu of fractional shares. A total of
630,000 shares of the Corporation's common stock were issued. The merger has
been accounted for as a pooling-of-interests, except that financial statements
were not restated due to immateriality. FNB Florida's results of operations
since October 17, 1997 are included in the Corporation's consolidated assets.
On June 30, 1997, the Corporation completed the sale of its subsidiary,
Bucktail Bank and Trust Company (Bucktail), to Sun Bancorp, Inc. (Sun), a bank
holding company headquartered in Selinsgrove, Pennsylvania. Under the sales
agreement, Sun issued 565,384 shares of Sun's common stock, having an estimated
value of $17.6 million, in exchange for 100% ownership of Bucktail. At
consummation, Bucktail had assets of $124.6 million and liabilities of $115.3
million. The sale resulted in the Corporation recognizing a $5.2 million
after-tax extraordinary gain. The Corporation has reflected its original
ownership interest as well as subsequent purchases of Sun common stock as an
equity investment included in other assets. At December 31, 1997, the
Corporation's investment in Sun is accounted for using the equity method and
had a market value totaling $33.3 million and a carrying value totaling $20.2
million. The Corporation recognized equity earnings from Sun totaling $621,000
for the year ended December 31, 1997.
On April 18, 1997, the Corporation completed its affiliation with West Coast
Bancorp, Inc. (West Coast), a bank holding company headquartered in Cape Coral,
Florida, with assets totaling approximately $181.0 million. Under the terms of
the merger agreement, each outstanding share of West Coast's common stock was
converted into .794 share of the Corporation's common stock with cash being paid
in lieu of fractional shares. A total of 1,197,128 shares of the Corporation's
common stock were issued. Results for prior years are restated to reflect this
acquisition as a pooling-of-interests. The following table sets forth separate
company financial information for the period immediately prior to the merger
(in thousands):
QUARTER ENDED MARCH 31, 1997 F.N.B. WCBI
-------- ------
Net interest income..................... $25,800 $1,779
Net income.............................. 6,653 135
On January 21, 1997, the Corporation completed its affiliation with Southwest
Banks, Inc. (Southwest), a bank holding company headquartered in Naples,
Florida, with assets totaling $528.8 million. Under the terms of the merger
agreement, each outstanding share of Southwest's common stock was converted into
.819 share of the Corporation's common stock with cash being paid in lieu of
fractional shares. A total of 2,851,907 shares of the Corporation's common
stock were issued. Results for prior years are restated to reflect this
acquisition as a pooling-of-interests. The following table sets forth
separate company financial information for the period immediately prior to the
merger (in thousands):
YEAR ENDED DECEMBER 31, 1996 F.N.B. SOUTHWEST
-------- ---------
Net interest income...................... $80,744 $17,953
Net income............................... 18,433 805
<PAGE>
SECURITIES
The amortized cost of securities and their approximate fair values are as
follows (in thousands):
Securities available for sale:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
December 31, 1997 COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury and other U.S. Government
agencies and corporations........... $ 288,543 $ 880 $ (249) $ 289,174
Mortgage-backed securities of
U.S. Government agencies............. 117,723 485 (146) 118,062
Other debt securities................. 5,031 107 5,138
--------- --------- --------- ---------
TOTAL DEBT SECURITIES............. 411,297 1,472 (395) 412,374
Equity securities..................... 17,753 7,002 (14) 24,741
--------- --------- --------- ---------
$ 429,050 $ 8,474 $ (409) $ 437,115
========= ========= ========= =========
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
December 31, 1996 COST GAINS LOSSES VALUE
--------- --------- --------- ---------
U.S. Treasury and other U.S. Government
agencies and corporations........... $ 262,719 $ 409 $ (806) $ 262,322
Mortgage-backed securities of
U.S. Government agencies............. 44,334 632 (176) 44,790
Other debt securities................. 2,000 (16) 1,984
--------- --------- --------- ---------
TOTAL DEBT SECURITIES............. 309,053 1,041 (998) 309,096
Equity securities..................... 14,634 3,942 (14) 18,562
--------- --------- --------- ---------
$ 323,687 $ 4,983 $ (1,012) $ 327,658
========= ========= ========= =========
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
December 31, 1995 COST GAINS LOSSES VALUE
--------- ---------- --------- ---------
U.S. Treasury and other U.S. Government
agencies and corporations............ $ 243,161 $ 1,754 $ (137) $ 244,778
Mortgage-backed securities of
U.S. Government agencies.............. 26,679 184 (130) 26,733
Other debt securities.................. 2,000 (5) 1,995
--------- --------- --------- ---------
TOTAL DEBT SECURITIES.............. 271,840 1,938 (272) 273,506
Equity securities...................... 13,504 3,304 16,808
--------- --------- --------- ---------
$ 285,344 $ 5,242 $ (272) $ 290,314
========= ========= ========= =========
</TABLE>
<PAGE>
Securities held to maturity:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
December 31, 1997 COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury and other U.S. Government
agencies and corporations............ $ 16,312 $ 63 $ (17) $ 16,358
States of the U.S. and political
subdivisions........................ 50,238 362 (40) 50,560
Mortgage-backed securities of
U.S. Government agencies............. 56,356 81 (219) 56,218
Other debt securities................. 32 (4) 28
--------- ---------- ---------- ---------
$ 122,938 $ 506 $ (280) $ 123,164
========= ========== ========== =========
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
December 31, 1996 COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
U.S. Treasury and other U.S. Government
agencies and corporations............ $ 15,388 $ 57 $ (22) $15,423
States of the U.S. and political
subdivisions........................ 55,569 147 (438) 55,278
Mortgage-backed securities of
U.S. Government agencies............. 103,551 98 (712) 102,937
Other debt securities................. 43 (4) 39
--------- --------- --------- ---------
$ 174,551 $ 302 $ (1,176) $ 173,677
========= ========= ========= =========
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
December 31, 1995 COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
U.S. Treasury and other U.S. Government
agencies and corporations........... $ 22,367 $ 170 $ (37) $ 22,500
States of the U.S. and political
subdivisions........................ 47,505 197 (288) 47,414
Mortgage-backed securities of
U.S. Government agencies............. 104,555 447 (421) 104,581
Other debt securities................. 56 (5) 51
--------- --------- --------- ---------
$ 174,483 $ 814 $ (751) $ 174,546
========= ========= ========= =========
</TABLE>
In December of 1995, the Corporation transferred $97.5 million of debt
securities from the held to maturity category to the available for sale category
in accordance with the implementation guidance issued on FAS No. 115. At the
time of transfer, the market value of the securities totaled $97.8 million,
and the unrealized gain, net of taxes, of $118,000 was recorded as an
increase to stockholders' equity.
At December 31, 1997 and 1996, respectively, securities with a carrying value
of $148.5 million and $136.5 million were pledged to secure public deposits,
trust deposits and for other purposes as required by law. Securities with a
carrying value of $136.5 million and $68.8 million at December 31, 1997 and
1996, respectively, were pledged as collateral for other borrowings.
As of December 31, 1997, the Corporation had not entered into any off-balance
sheet derivative transactions.
<PAGE>
As of December 31, 1997, the amortized cost and fair value of securities, by
contractual maturities, were as follows (in thousands):
<TABLE>
<CAPTION>
HELD TO MATURITY AVAILABLE FOR SALE
--------------------- ---------------------
AMORTIZED FAIR AMORTIZED FAIR
December 31, 1997 COST VALUE COST VALUE
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Due in one year or less.............. $ 13,619 $ 13,621 $ 78,459 $ 78,496
Due from one to five years........... 44,434 44,584 185,042 185,576
Due from five to ten years........... 7,896 8,093 27,152 27,251
Due after ten years.................. 633 648 2,921 2,990
--------- --------- --------- ---------
66,582 66,946 293,574 294,313
Mortgage-backed securities of
U.S. Government Agencies............ 56,356 56,218 117,711 118,038
Equity Securities.................... 17,765 24,764
--------- --------- --------- ---------
$ 122,938 $ 123,164 $ 429,050 $ 437,115
========= ========= ========= =========
</TABLE>
Maturities may differ from contractual terms because borrowers may have the
right to call or prepay obligations with or without penalties. Periodic
payments are received on mortgage-backed securities based on the payment
patterns of the underlying collateral.
Proceeds from sales of securities available for sale during 1997, 1996 and
1995 were $38.2 million, $42.2 million and $7.6 million, respectively. Gross
gains and gross losses were realized on those sales as follows (in thousands):
1997 1996 1995
------ ------ ------
Gross gains............................. $1,364 $ 880 $ 530
Gross losses............................ 112 93 37
------ ------ ------
$1,252 $ 787 $ 493
====== ====== ======
LOANS
Following is a summary of loans (in thousands):
December 31 1997 1996
---------- ----------
Real estate:
Residential............................. $ 867,611 $ 716,672
Commercial.............................. 476,295 441,767
Construction............................ 64,511 44,296
Installment loans to individuals......... 282,678 397,600
Commercial, financial and agricultural... 238,403 196,549
Lease financing.......................... 59,852 21,538
Unearned income.......................... (20,425) (23,846)
---------- ----------
$1,968,925 $1,794,576
========== ==========
The loan portfolio consists principally of loans to small- and medium-sized
businesses within the Corporation's primary market area of western Pennsylvania,
southwest Florida and eastern Ohio.
As of December 31, 1997, no concentrations of loans exceeding 10% of total
loans existed which were not disclosed as a separate category of loans.
<PAGE>
Certain directors and executive officers of the Corporation and its
significant subsidiaries, as well as associates of such persons, were loan
customers during 1997. Such loans were made in the ordinary course of business
under normal credit terms and do not represent more than a normal risk of
collection. Following is a summary of the amount of loans in which the
aggregate of the loans to any such persons exceeded $60,000 during the year
(in thousands):
Total loans at December 31, 1996 $ 30,940
New loans....................... 40,232
Repayments...................... (41,255)
Other........................... 2,641
---------
Total loans at December 31, 1997 $ 32,558
=========
Other represents the net change in loan balances resulting from changes in
related parties during the year.
NON-PERFORMING ASSETS
Following is a summary of non-performing assets (in thousands):
December 31 1997 1996
-------- --------
Non-accrual loans..................... $ 8,103 $ 9,644
Restructured loans.................... 1,314 2,146
-------- --------
TOTAL NON-PERFORMING LOANS 9,417 11,790
Other real estate owned............... 4,027 7,070
-------- --------
TOTAL NON-PERFORMING ASSETS $ 13,444 $ 18,860
======== ========
For the years ended December 31, 1997, 1996 and 1995, income recognized on
non-accrual and restructured loans was $467,000, $763,000 and $685,000,
respectively. Income that would have been recognized during 1997, 1996 and
1995 on such loans if they were in accordance with their original terms was
$1.0 million, $1.4 million and $1.3 million, respectively. Loans past due 90
days or more were $3.2 million, $3.0 million and $3.9 million at December 31,
1997, 1996 and 1995, respectively.
Following is a summary of information pertaining to loans considered to be
impaired under FAS 114 (in thousands):
At of For the Year Ended December 31 1997 1996
------- -------
Impaired loans with an allocated allowance..... $ 889 $ 4,735
Impaired loans without an allocated allowance.. 5,298
------- -------
Total impaired loans........................ $ 889 $10,033
======= =======
Allocated allowance on impaired loans.......... 436 1,475
======= =======
Portion of impaired loans on non-accrual....... 860 4,818
======= =======
Average impaired loans......................... 5,341 12,909
======= =======
Income recognized on impaired loans............ 71 752
======= =======
<PAGE>
ALLOWANCE FOR LOAN LOSSES
Following is an analysis of changes in the allowance for loan losses
(in thousands):
Year Ended December 31 1997 1996 1995
-------- -------- --------
Balance at beginning of year............. $ 28,649 $ 24,967 $ 23,018
Reduction due to the sale of a subsidiary
and loans............................... (3,828)
Addition due to acquisitions............. 1,167
Charge-offs.............................. (9,860) (7,811) (7,237)
Recoveries............................... 1,252 1,617 1,951
-------- -------- --------
NET CHARGE-OFFS...................... (8,608) (6,194) (5,286)
Provision for loan losses................ 10,916 9,876 7,235
-------- -------- --------
Balance at end of year................... $ 28,296 $ 28,649 $ 24,967
======== ======== ========
PREMISES AND EQUIPMENT
Following is a summary of premises and equipment (in thousands):
December 31 1997 1996
-------- --------
Land.................................. $ 12,235 $ 9,976
Premises.............................. 57,635 44,372
Equipment............................. 38,314 32,593
-------- --------
108,184 86,941
Accumulated depreciation.............. (42,366) (37,645)
-------- --------
$ 65,818 $ 49,296
======== ========
Depreciation expense was $5.9 million for 1997, $5.5 million for 1996 and
$4.7 million for 1995.
The Corporation has operating leases extending to 2044 for certain land,
office locations and equipment. Leases that expire are generally expected to
be renewed or replaced by other leases. Rental expense was $3.5 million for
1997, $2.6 million for 1996 and $2.7 million for 1995. Total minimum rental
commitments under such leases were $26.2 million at December 31, 1997.
Following is a summary of future minimum lease payments for years following
December 31, 1997 (in thousands):
1998 . . . . . . . . . . . . . . . $1,922
1999 . . . . . . . . . . . . . . . 1,349
2000 . . . . . . . . . . . . . . . 996
2001 . . . . . . . . . . . . . . . 906
2002 . . . . . . . . . . . . . . . 824
Later years. . . . . . . . . . . . 20,177
<PAGE>
DEPOSITS
Following is a summary of deposits (in thousands):
December 31 1997 1996
---------- ----------
Non-interest bearing................... $ 272,974 $ 244,844
Savings and NOW........................ 987,607 891,084
Certificates of deposit and
other time deposits.................. 1,023,383 949,924
---------- ----------
$2,283,964 $2,085,852
========== ==========
Following is a summary of the scheduled maturities of certificates of deposits
and other time deposits for each of the five years following December 31,
1997 (in thousands):
1998 . . . . . . . . . . . . . . . $676,693
1999 . . . . . . . . . . . . . . . 223,275
2000 . . . . . . . . . . . . . . . 75,339
2001 . . . . . . . . . . . . . . . 29,139
2002 . . . . . . . . . . . . . . . 18,621
Later years. . . . . . . . . . . . 316
Time deposits of $100,000 or more were $202.8 million and $180.2 million at
December 31, 1997 and 1996, respectively. Following is a summary of these time
deposits by remaining maturity at December 31, 1997 (in thousands):
CERTIFICATES OTHER TIME
December 31, 1997 OF DEPOSIT DEPOSITS TOTAL
------------ ---------- ---------
Three months or less............. $ 65,222 $ 4,410 $ 69,632
Three to six months.............. 31,745 3,167 34,912
Six to twelve months............. 36,848 3,489 40,337
Over twelve months............... 40,153 17,791 57,944
-------- ------- --------
$173,968 $28,857 $202,825
======== ======= ========
SHORT-TERM BORROWINGS
Following is a summary of short-term borrowings (in thousands):
December 31 1997 1996
-------- --------
Securities sold under repurchase agreements... $ 55,702 $ 38,367
Federal funds purchased....................... 16,862 21,052
Other short-term borrowings................... 4,257 1,506
Subordinated notes............................ 46,931 55,201
-------- --------
$123,752 $116,126
======== ========
Credit facilities amounting to $35.0 million at December 31, 1997 were
maintained with various banks with rates which are at or below prime rate.
The facilities and their terms are periodically reviewed by the banks and are
generally subject to withdrawal at their discretion. The amount of these credit
facilities which were unused amounted to $32.0 million at December 31, 1997.
<PAGE>
In addition, certain subsidiaries have lines of credit with the Federal Home
Loan Bank, which if used would require collateralization. These lines totaled
$120.8 million, of which no amounts were used as of December 31, 1997.
LONG-TERM DEBT
Following is a summary of long-term debt (in thousands):
December 31 1997 1996
-------- --------
Real estate mortgages payable................... $ 147
Federal Home Loan Bank advances................. $ 28,386 24,042
Subordinated notes.............................. 43,860 33,990
-------- --------
$ 72,246 $ 58,179
======== ========
The Federal Home Loan Bank advances are secured by residential real estate
loans and Federal Home Loan Bank Stock and are scheduled to mature in various
amounts annually from 1998 through 2002. Interest rates paid on these advances
range from 5.66% to 6.32% in 1997 and 5.10% to 5.38% in 1996.
Subordinated notes are unsecured and subordinated to other indebtedness of the
Corporation. The subordinated notes are scheduled to mature in various amounts
annually from 1998 through the year 2007. At December 31, 1997, $33.8 million
of long-term subordinated debt is redeemable prior to maturity at a discount
equal to three months of interest. The issuer may require the holder to give
30 days prior written notice. No sinking fund is required and none has been
established to retire the debt. The weighted average interest rate on
long-term subordinated debt was 7.58% at December 31, 1997 and 7.69% at
December 31, 1996.
Scheduled annual maturities for all of the long-term debt for each of the
five years following December 31, 1997 are as follows (in thousands):
1998..................... $22,239
1999..................... 19,487
2000..................... 2,727
2001..................... 6,159
2002..................... 17,185
Later years.............. 4,449
COMMITMENTS AND CREDIT RISK
The Corporation has commitments to extend credit and standby letters of
credit which involve certain elements of credit risk in excess of the amount
stated in the consolidated balance sheet. The Corporation's exposure to credit
loss in the event of non-performance by the customer is represented by the
contractual amount of those instruments. Consistent credit policies are
used by the Corporation for both on- and off-balance sheet items.
Following is a summary of off-balance sheet credit risk information (in
thousands):
December 31 1997 1996
-------- --------
Commitments to extend credit . . . . . . . . $353,488 $290,824
Standby letters of credit. . . . . . . . . . 19,755 16,014
<PAGE>
At December 31, 1997, funding of approximately 80% of the commitments to
extend credit is dependent on the financial condition of the customer. The
Corporation has the ability to withdraw such commitments at its discretion.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. Based on management's
credit evaluation of the customer, collateral may be deemed necessary.
Collateral requirements vary and may include accounts receivable, inventory,
property, plant and equipment and income-producing commercial properties.
Standby letters of credit are conditional commitments issued by the
Corporation which may require payment at a future date. The credit risk
involved in issuing letters of credit is essentially the same as that
involved in extending loans to customers.
STOCKHOLDERS' EQUITY
Series A - Cumulative Convertible Preferred Stock (Series A Preferred) was
issued in 1985 for the purpose of acquiring Reeves Bank. Holders of Series A
Preferred are entitled to 5.4 votes for each share held. The holders do not
have cumulative voting rights in the election of directors. Dividends are
cumulative from the date of issue and are payable at $.42 per share each
quarter. Series A Preferred is convertible at the option of the holder into
shares of the Corporation's common stock having a market value of $25.00 at
time of conversion. The Corporation has the right to require the conversion of
the balance of all outstanding shares at the conversion rate. During 1997,
2,270 shares of Series A Preferred were converted to 1,903 shares of common
stock. At December 31, 1997, 15,182 shares of common stock were reserved by
the Corporation for the conversion of the remaining 21,318 outstanding shares.
Series B - Cumulative Convertible Preferred Stock (Series B Preferred) was
issued during 1992 for the purpose of raising capital for the Erie
acquisition. Holders of Series B Preferred have no voting rights. Dividends
are cumulative from the date of issue and are payable at $.46875 per share
each quarter. Series B Preferred has a stated value of $25.00 per share and
is convertible at the option of the holder at any time into shares of the
Corporation's common stock at a price of $11.64 per share. The Corporation has
the right to require the redemption of the balance of all outstanding shares at
the conversion rate. During 1997, 62,761 shares of Series B Preferred were
converted to 131,197 shares of common stock. At December 31, 1997, 571,641
shares of common stock were reserved by the Corporation for the conversion of
the remaining 266,182 outstanding shares.
STOCK INCENTIVE PLANS
The Corporation has available up to 913,962 shares of common stock to be
issued under the restricted stock and incentive bonus and restricted stock bonus
plans to key employees of the Corporation. All shares of stock awarded under
these plans vest in equal installments over a five year period on each
anniversary of the date of grant. At December 31, 1997, 3,630 shares out of a
total of 52,133 shares were vested under these plans. The weighted average
grant date fair value of the restricted shares issued through December 31, 1997
was $22.63.
<PAGE>
The Corporation has available up to 2,070,908 shares of common stock to be
issued under both incentive and non-qualified stock option plans to key
employees of the Corporation. The options vest in equal installments over
periods ranging from three to ten years. The options are granted at a price
equal to the fair market value at the date of the grant and are exercisable
within ten years from the date of the grant. Because the exercise price
of the Corporation's stock options equals the market price of the underlying
stock on the date of grant, no compensation expense is recognized.
Pro forma information regarding net income and earnings per share using the
Black-Scholes option pricing model is as follows (in thousands, except per
share data):
Year Ended December 31 1997 1996 1995
------- ------- --------
Pro forma net income before
extraordinary items. . .. . . . . . . . $24,282 $20,824 $22,054
Extraordinary items, net of tax . . . . . 8,809
------- ------- -------
Pro forma net income . . . . . . . . . . $33,091 $20,824 $22,054
======= ======= =======
Pro forma earnings per share:
Basic:
Before extraordinary items . . . . . $1.65 $1.37 $1.46
Extraordinary items, net of tax. . . .60
----- ----- -----
Net income . . . . . . . . . . . . . $2.25 $1.37 $1.46
===== ===== =====
Diluted:
Before extraordinary items . . . . . $1.57 $1.33 $1.42
Extraordinary items, net of tax . . . .56
----- ----- -----
Net income. . . . . . . . . . . . . . $2.12 $1.33 $1.42
===== ===== =====
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period of five years.
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferrable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Corporation's employee stock options have characteristics
significantly different from those of traded options, and changes in the
subjective input assumptions can materially affect the fair value estimate,
in management's opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its employee stock options.
The following input assumptions were utilized:
1997 1996 1995
---------- ---------- ----------
Risk-free interest rate. . . . . . . . . . 6.53% 5.63% 7.65%
Dividend yield . . . . . . . . . . . . . . 1.66% 3.00% 3.00%
Volatility factor of the expected market
price of the Corporation's common stoc. . .22% .19% .19%
Weighted average expected life of the
options (years). . . . . . . . . . .. . . 5.00 5.00 5.00
<PAGE>
Activity in the Option Plan during the past three years was as follows:
WEIGHTED
AVERAGE
PRICE PER
1997 SHARE 1996 1995
--------- ------ ------- -------
Outstanding, beginning of year. . 975,459 $12.22 806,127 700,074
Granted during the year . . . . 147,971 23.24 188,247 136,826
Exercised during the year . . . (61,179) 8.99 (12,315) (15,240)
Forfeited during the year . . . (48,658) 16.73 (6,600) (15,533)
--------- ------- -------
Ending balance. . . . . . . . . . 1,013,593 13.16 975,459 806,127
========= ======= =======
At December 31, 1997, options for 513,229 of common stock were exercisable at
prices ranging from $6.00 to $22.62 per share. The weighted average remaining
contractual life of outstanding options was 6 years at December 31, 1997.
The Corporation has granted warrants to purchase one share of common stock
(at an exercise price of $6.55 or $10.91 per share). Such warrants are
exercisable and will expire on June 19, 2001 or December 17, 2003. The
Corporation has reserved 145,577 shares of common stock for issuance in
connection with these warrants.
RETIREMENT PLANS
Certain of the Corporation's subsidiaries have defined benefit retirement
plans covering substantially all of their employees. The expense associated
with these plans was $1.6 million in 1997, $1.6 million in 1996 and $1.3
million in 1995.
The defined benefit plans provide benefits based on years of credited service
and compensation (as defined), subject to ERISA limitations. Contributions to
the tax-qualified plans are made in amounts not less than the minimum-required
contribution under ERISA nor more than the maximum-deductible contribution under
the Internal Revenue Code.
Following is the estimated funded status (in thousands):
<TABLE>
<CAPTION>
December 31 1997 1996
---------------------------- ----------------------------
PLANS WHOSE PLANS WHOSE PLANS WHOSE PLANS WHOSE
ASSETS EXCEED ACCUMULATED ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS ACCUMULATED BENEFITS
BENEFITS EXCEED ASSETS BENEFITS EXCEED ASSETS
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
Actuarial present value of:
Vested benefit obligation...... $ 16,232 $ 2,910 $ 13,841 $ 2,770
======== ======== ======== =======
Accumulated benefit obligation. $ 16,672 $ 4,112 $ 14,150 $ 3,635
======== ======== ======== =======
Projected benefit obligation
for services rendered to date.. $(20,625) $ (4,776) $(17,472) $(4,160)
Plan assets at fair value,
primarily U.S. Government
securities and common stocks... 25,229 20,238
-------- -------- -------- -------
Plan assets in excess of or
(less than) projected
benefit obligation............. 4,604 (4,776) 2,766 (4,160)
Unrecognized net (gain) loss..... (3,274) (50) (1,832) (63)
Unrecognized net obligation...... 47 52
Unrecognized prior service cost.. 129 1,642 146 1,911
-------- -------- -------- -------
Prepaid (accrued) pension costs.. $ 1,506 $ (3,184) $ 1,132 $(2,312)
======== ======== ======== =======
</TABLE>
<PAGE>
The pension expense for the defined benefit plans included the following
components (in thousands):
Year Ended December 31 1997 1996 1995
------- ------- -------
Service costs - benefits earned
during the period..................... $ 1,196 $ 1,244 $ 854
Interest cost on projected benefit
obligation............................ 1,726 1,525 1,375
Actual return on plan assets............ (4,614) (2,026) (3,014)
Net amortization........................ 3,304 894 2,115
------- ------- ------
Net pension expense..................... $ 1,612 $ 1,637 $1,330
======= ======= ======
Assumptions as of December 31 1997 1996 1995
------- ------- -------
Weighted average discount rate............... 7.0% 7.5% 7.0%
Rates of increase in compensation levels..... 4.0% 4.0% 4.0%
Expected long-term rate of return on assets.. 8.0% 8.0% 8.0%
At December 31, 1997 and 1996, respectively, plan assets include $1.6 million
and $965,000 the Corporation's common stock. At December 31, 1996, plan assets
also include $193,000 of the Corporation's subordinated debt.
Certain subsidiaries of the Corporation participate in a qualified 401(k)
defined contribution plan for the full-time employees of the subsidiary. A
percentage of employees' contributions to the plan are matched by the
Corporation. The Corporation's contribution expense amounted to $466,000 in
1997, $448,000 in 1996 and $422,000 in 1995.
The remaining subsidiaries of the Corporation participate in a Salary Savings
ESOP Plan, under which eligible employees may contribute a percentage of their
salary. The Corporation matches 50 percent of an eligible employee's
contribution on the first 6 percent that the employee defers, and may make a
discretionary contribution payable either in cash or the Corporation's common
stock based upon the Corporation's profitability. Employees are generally
eligible to participate upon completing one year of service and having
attained age 21. Employer contributions become 20 percent vested when an
employee has completed two years of service, and vest at a rate of 20 percent
per year thereafter. The Corporation recognized expense of $468,000 in 1997,
$384,000 in 1996 and $298,000 in 1995 related to the Salary Savings ESOP Plan.
POSTRETIREMENT PLANS
In addition to the Corporation's retirement plans, the Corporation has
various unfunded postretirement plans which provide medical benefits and life
insurance benefits to its retirees. The postretirement health care plans vary,
the most stringent of which are contributory and contain other cost-sharing
features such as deductibles and co-insurance. The life insurance plans are
noncontributory.
<PAGE>
The amounts recognized in the Corporation's consolidated financial statements
are as follows (in thousands):
Year Ended December 31 1997 1996
-------- --------
Accumulated postretirement benefit obligation:
Current retirees................................. $ 77 $ 79
Fully eligible actives........................... 28 49
Other actives.................................... 674 688
------- -------
Total Accumulated Postretirement
Benefit Obligation............................... 779 816
Unrecognized net transition obligation............. (563) (612)
Unrecognized net gain.............................. 311 233
Unrecognized prior service cost.................... (7) (7)
------- -------
Accrued postretirement benefit liability $ 520 $ 430
======= =======
Net periodic postretirement benefit cost included the following components (in
thousands):
Year Ended December 31 1997 1996 1995
-------- -------- --------
Service cost............................. $ 60 $ 66 $ 60
Interest cost............................ 56 54 68
Amortization of transition obligation.... 25 30 38
------- ------- -------
Net periodic postretirement benefit cost $ 141 $ 150 $ 166
======= ======= =======
A 6.0% annual rate of increase in the per capita costs of covered health care
benefits is assumed for 1998, gradually decreasing to 5.25% by the year 2001.
Increasing the assumed health care cost trend rates by one percentage point in
each year would increase the accumulated postretirement benefit obligation as of
December 31, 1997 by $73,000 and increase the aggregate of the service and
interest cost component of net periodic postretirement benefit cost for 1997 by
$14,000. A discount rate of 7.0% was used to determine the accumulated
postretirement benefit obligation.
RECAPITALIZATION OF SAVINGS ASSOCIATION INSURANCE FUND
On September 30, 1996, the Deposit Insurance Funds Act of 1996 was signed
into law and included a provision to recapitalize the Savings Association
Insurance Fund (SAIF). The legislation required a one-time assessment on all
deposits insured by the SAIF, including those held be chartered commercial
banks as a result of previous acquisitions. The one-time assessment paid by
the Corporation totaled $2.8 million, or $.19 per share. The legislation
also included provisions that resulted in a reduction in annual deposit
insurance costs.
<PAGE>
INCOME TAXES
Income tax expense consists of the following (in thousands):
Year Ended December 31 1997 1996 1995
-------- -------- --------
Current income taxes:
Federal taxes.................... $12,728 $11,946 $11,058
State taxes...................... 232 388 489
------- ------- -------
12,960 12,334 11,547
Deferred income taxes:
Federal taxes.................... (1,370) (1,785) (677)
------- ------- -------
$11,590 $10,549 $10,870
======= ======= =======
The tax effects of temporary differences that give rise to deferred tax assets
and liabilities are presented below (in thousands):
December 31 1997 1996
-------- --------
Deferred tax assets:
Allowance for loan losses.......... $ 9,847 $ 8,842
Deferred compensation.............. 1,522 936
Deferred benefits.................. 913 634
Loan fees.......................... 716 247
Other.............................. 467 1,112
------- -------
TOTAL GROSS DEFERRED TAX ASSETS 13,465 11,771
------- -------
Deferred tax liabilities:
Depreciation....................... (123) (785)
Unrealized gains on securities
available for sale............... (2,829) (2,118)
Leasing............................ (4,997) (1,915)
Other.............................. (1,265) (719)
------- -------
TOTAL GROSS DEFERRED TAX LIABILITIES (9,214) (5,537)
------- -------
NET DEFERRED TAX ASSETS......... $ 4,251 $ 6,234
======= =======
Following is a reconciliation between tax expense using federal statutory tax
and actual effective tax:
Year Ended December 31 1997 1996 1995
-------- -------- --------
Federal statutory tax.................. 35.0% 35.0% 35.0%
Effect of nontaxable interest and
dividend income...................... (3.7) (4.2) (4.1)
State taxes............................ .4 .6 .9
Goodwill............................... .3 .3 .4
Merger related costs................... .6 2.3
Other items............................ (1.1) (.6) .7
------ ------ ------
Actual effective taxes................. 31.5% 33.4% 32.9%
====== ====== ======
<PAGE>
EARNINGS PER SHARE
The following tables set forth the computation of basic and diluted earnings
per share (in thousands, except per share data):
<TABLE>
<CAPTION>
Year Ended December 31 1997 1996 1995
--------- --------- --------
<S> <C> <C> <C>
BASIC
Income before extraordinary items........... $25,193 $20,997 $22,122
Less: Preferred stock dividends declared... (588) (766) (849)
Income before extraordinary items
applicable to common stock................ 24,605 20,231 21,273
Extraordinary items, net of tax............. 8,809
------- ------- -------
Net income applicable to common stock....... $33,414 $20,231 $21,273
======= ======= =======
Average common shares outstanding 14,697,715 14,630,386 14,509,993
========== ========== ==========
Income before extraordinary items........... $1.67 $1.38 $1.47
Extraordinary items, net of tax............. .60
----- ----- -----
Earnings per share......................... $2.27 $1.38 $1.47
===== ===== =====
DILUTED
Income before extraordinary items . . . . . . $25,193 $20,997 $22,122
Extraordinary items, net of tax . . . . . . . 8,809
------- ------- -------
Net income applicable to common stock . . . . $34,002 $20,997 $22,122
======= ======= =======
Average common shares outstanding . . . . . . 14,697,715 14,630,386 14,509,993
Convertible preferred stock . . . . . . . . . 631,129 902,114 1,004,432
Net effect of dilutive stock options
based on the treasury stock method
using the average market price. . . . . . . 486,767 155,821 89,282
---------- ---------- ----------
15,815,611 15,688,321 15,603,707
========== ========== ==========
Income before extraordinary items . . . . . . $1.59 $1.34 $1.42
Extraordinary items, net of tax . . . . . . . .56
----- ----- -----
Earnings per share . . . . . . . . . . . . . $2.15 $1.34 $1.42
===== ===== =====
</TABLE>
CASH FLOW INFORMATION
Following is a summary of supplemental cash flow information (in thousands):
Year Ended December 31 1997 1996 1995
-------- -------- --------
Cash paid during year for:
Interest............................... $85,377 $79,435 $75,144
Income taxes........................... 10,098 10,135 11,393
Non-cash Investing and
Financing Activities:
Acquisition of real estate in
settlement of loans..................... $3,063 $6,460 $ 3,304
Loans granted in the sale of other
real estate............................. 1,332 319 321
Transfers and reclassifications
of investment securities to
securities available for sale........... 97,483
<PAGE>
REGULATORY MATTERS
Quantitative measures established by regulators to ensure capital adequacy
require the Corporation and its banking subsidiaries to maintain minimum amounts
and ratios of total and tier 1 capital (as defined in the regulations) to
risk-weighted assets (as defined) and of tier 1 capital to average assets (as
defined). Management believes, as of December 31, 1997, that the Corporation
and each of its banking subsidiaries meet all capital adequacy requirements
to which they are subject.
As of September 30, 1997, the Corporation and each of its banking subsidiaries
have been categorized by the various regulators as "well capitalized" under
the regulatory framework for prompt corrective action.
Following are the capital ratios as of December 31, 1997 for the Corporation
and its significant subsidiaries, First National Bank of Pennsylvania and First
National Bank of Naples (dollars in thousands):
<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED UNDER
FOR CAPITAL PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS
---------------- ----------------- -----------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
-------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
F.N.B. CORPORATION:
Total Capital . . . . . . . . $258,663 13.8% $149,742 8.0% $187,177 10.0%
(to risk-weighted assets)
Tier 1 Capital . . . . . . . 225,189 12.0 74,871 4.0 112,306 6.0
(to risk-weighted assets)
Tier 1 Capital . . . . . . . 225,189 8.5 106,291 4.0 132,864 5.0
(to average assets)
FIRST NATIONAL BANK OF
PENNSYLVANIA:
Total Capital. . . . . . . . $ 88,384 11.5% $ 61,709 8.0% $ 77,136 10.0%
(to risk-weighted assets)
Tier 1 Capital . . . . . . . 78,714 10.2 30,854 4.0 46,282 6.0
(to risk-weighted assets)
Tier 1 Capital . . . . . . . 78,714 7.1 44,089 4.0 55,111 5.0
(to average assets)
FIRST NATIONAL BANK OF NAPLES:
Total Capital. . . . . . . . $ 46,770 11.7% $ 31,886 8.0% $ 39,858 10.0%
(to risk-weighted assets)
Tier 1 Capital . . . . . . . 42,208 10.6 15,943 4.0 23,915 6.0
(to risk-weighted assets)
Tier 1 Capital . . . . . . . 42,208 8.3 20,372 4.0 25,465 5.0
(to average assets)
</TABLE>
<PAGE>
The Corporation and its banking subsidiaries are subject to various regulatory
capital requirements administered by the federal banking agencies. Failure to
meet minimum capital requirements can initiate certain mandatory, and possibly
additional discretionary actions by regulators that, if undertaken, could have
a direct material effect on the Corporation's financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Corporation and its banking subsidiaries must meet
specific capital guidelines that involve quantitative measures of assets,
liabilities and certain off-balance sheet items as calculated under regulatory
accounting practices. The Corporation's and banking subsidiaries' capital
amounts and classifications are also subject to qualitative judgments by the
regulators about components, risk weightings and other factors.
The Corporation's banking subsidiaries were required to maintain aggregate
reserves amounting to $11.6 million at December 31, 1997 to satisfy federal
regulatory requirements. The Corporation also maintains deposits for various
services such as check clearing.
Certain limitations exist under applicable law and regulations by regulatory
agencies regarding dividend payments to a parent by its subsidiaries. As of
December 31, 1997, the subsidiaries had $35.2 million of retained earnings
available for distribution as dividends without prior regulatory approval.
Under current Federal Reserve regulations, the Corporation's banking
subsidiaries are limited in the amount they may lend to non-bank affiliates,
including the Corporation. Such loans must be secured by specified collateral.
In addition, any such loans to a single non-bank affiliate may not exceed 10%
of any banking subsidiary's capital and surplus and the aggregate of loans to
all such affiliates may not exceed 20%. The maximum amount that may be
borrowed by the parent company under these provisions approximated $39.6
million at December 31, 1997.
PARENT COMPANY FINANCIAL STATEMENTS
Below is condensed financial information of F.N.B. Corporation (parent company
only). In this information, the parent's investments in subsidiaries are
stated at cost plus equity in undistributed earnings of subsidiaries since
acquisition. This information should be read in conjunction with the
supplemental consolidated financial statements.
BALANCE SHEET (IN THOUSANDS):
December 31 1997 1996
---------- ----------
ASSETS
Cash....................................... $ 6 $ 19
Short-term investments..................... 2,095 4,457
Advances to subsidiaries................... 12,122 81,099
Other assets............................... 5,414 5,162
Securities available for sale.............. 7,191
Investment in bank subsidiaries............ 209,264 187,957
Investment in non-bank subsidiaries........ 110,940 14,715
-------- --------
$339,841 $300,600
======== ========
LIABILITIES
Other liabilities.......................... $ 6,555 $ 4,215
Short-term borrowings...................... 49,931 55,201
Long-term debt............................. 43,860 33,990
-------- --------
TOTAL LIABILITIES........................ 100,346 93,406
STOCKHOLDERS' EQUITY....................... 239,495 207,194
-------- --------
TOTAL.................................... $339,841 $300,600
======== ========
<PAGE>
Subordinated notes, included within short-term borrowings and long-term debt
are unsecured and subordinated to other indebtedness of the Corporation. At
December 31, 1997, $80.7 million principal amount of such notes was redeemable
prior to maturity by the holder at a discount equal to one month of interest on
short-term notes or three months of interest on long-term notes. The
Corporation has the right to require the holder to give 30 days prior written
notice. The weighted average interest rate was 6.33% at December 31, 1997
and 6.25% at December 31, 1996. The subordinated notes are scheduled to mature
in various amounts annually from 1998 through the year 2007.
Following is a summary of the combined aggregate scheduled annual maturities
of subordinated notes for each year following December 31, 1997 (in thousands):
1998..................... $56,100
1999..................... 14,171
2000..................... 2,727
2001..................... 1,159
2002..................... 12,185
Later years.............. 4,449
INCOME STATEMENT (IN THOUSANDS)
Year Ended December 31 1997 1996 1995
-------- -------- --------
INCOME
Dividend income from subsidiaries:
Bank................................ $31,373 $11,778 $ 8,942
Non-bank ........................... 4,660 2,501 3,706
------- ------- -------
36,033 14,279 12,648
Gain on sale of securities............. 1,296 850 512
Interest income........................ 5,423 5,394 4,924
Income from equity investment.......... 621
Other income........................... 95 254 206
------- ------- -------
TOTAL INCOME........................ 43,468 20,777 18,290
======= ======= =======
EXPENSES
Interest expense........................ 6,280 5,920 5,972
Service fees............................ 970 617 609
Other expenses.......................... 3,248 2,076 1,297
------ ------ ------
TOTAL EXPENSES........................ 10,498 8,613 7,878
------ ------ ------
INCOME BEFORE TAXES AND
EQUITY IN UNDISTRIBUTED INCOME
OF SUBSIDIARIES....................... 32,970 12,164 10,412
Income tax benefit...................... 1,156 618 700
------- ------- -------
34,126 12,782 11,112
------- ------- -------
Equity in undistributed income
of subsidiaries:
Bank.............................. (3,233) 7,182 10,011
Non-bank.......................... (2,118) 1,033 999
------- ------- -------
(5,351) 8,215 11,010
------- ------- -------
INCOME BEFORE EXTRAORDINARY ITEM........ 28,775 20,997 22,122
Gain on sale of subsidiary, net of tax.. 5,227
------- ------- -------
NET INCOME.............................. $34,002 $20,997 $22,122
======= ======= =======
<PAGE>
STATEMENT OF CASH FLOWS (IN THOUSANDS)
Year Ended December 31 1997 1996 1995
-------- -------- --------
OPERATING ACTIVITIES
Net income.................................. $ 34,002 $ 20,997 $ 22,122
Adjustments to reconcile net
income to net cash provided by
operating activities:
Gain on sale of securities.............. (1,296) (850) (512)
Undistributed earnings of subsidiaries.. 5,351 (8,215) (11,010)
Extraordinary gain on sale of
subsidiaries........................... (5,227)
Other, net ............................ (383) (2,030) (882)
-------- -------- --------
Net cash flows from operating
activities........................... 32,447 9,902 9,718
INVESTING ACTIVITIES
Purchase of securities...................... (1,704) (235) (383)
Proceeds from sale of securities............ 1,828 1,244 922
Advances from (to) subsidiaries............. (2,735) (4,250) (6,107)
Cash paid upon acquisition of subsidiaries.. (13,586)
Investment in subsidiaries.................. (11,700) 356 737
-------- ------- -------
Net cash flows from investing
activities............................. (27,897) (2,885) (4,831)
FINANCING ACTIVITIES
Net increase in due to non-bank subsidiary.. 2,950
Net decrease in short-term borrowings....... (5,270) 4,839 (1,723)
Decrease in long-term debt.................. (6,680) (12,303) (5,334)
Increase in long-term debt.................. 16,550 8,899 6,274
Net acquisition of treasury stock........... (2,535) (1,560) 242
Cash dividends paid......................... (9,578) (6,889) (4,343)
-------- -------- --------
Net cash flows from financing activities (4,563) (7,014) (4,884)
-------- -------- --------
NET INCREASE IN CASH........................ (13) 3 3
Cash at beginning of year................... 19 16 13
-------- -------- --------
CASH AT END OF YEAR ........................ $ 6 $ 19 $ 16
======== ======== ========
CASH PAID
Interest.................................... $ 6,181 $ 6,251 $ 5,009
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each financial instrument:
Cash and Due from Banks:
For these short-term instruments, the carrying amount is a reasonable estimate
of fair value.
Securities:
For both securities available for sale and securities held to maturity, fair
value equals quoted market price, if available. If a quoted market price is
not available, fair value is estimated using quoted market prices for similar
securities.
Loans:
The fair value of fixed rate loans is estimated by discounting the future
cash flows using the current rates at which similar loans would be made to
borrowers with similar credit ratings and for the same remaining maturities.
The fair value of adjustable rate loans approximate the carrying amount.
<PAGE>
Deposits:
The fair value of demand deposits, savings accounts and certain money market
deposits is the amount payable on demand at the reporting date. The fair value
of fixed-maturity deposits is estimated by discounting future cash flows using
rates currently offered for deposits of similar remaining maturities.
Short-Term Borrowings:
The carrying amounts for short-term borrowings approximate fair value for
amounts that mature in 90 days or less. The fair value of subordinated notes
is estimated by discounting future cash flows using rates currently offered.
Long-Term Debt:
The fair value of long-term debt is estimated by discounting future cash flows
based on the market prices for the same or similar issues or on the current
rates offered to the Corporation for debt of the same remaining maturities.
The estimated fair values of the Corporation's financial instruments are as
follows (in thousands):
1997 1996
------------------- ----------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- --------- ---------- ----------
FINANCIAL ASSETS
Cash and short-term investments. $ 113,679 $ 113,679 $ 124,386 $ 124,386
Securities available for sale... 437,115 437,115 327,259 327,259
Securities held to maturity..... 122,938 123,164 174,551 173,677
Net loans, including loans held
for sale...................... 1,946,792 1,957,420 1,776,015 1,802,194
FINANCIAL LIABILITIES
Deposits........................ $2,283,964 $2,289,026 $2,085,852 $2,092,333
Short-term borrowings........... 123,752 123,752 112,230 112,230
Long-term debt.................. 72,246 73,837 58,179 58,901
<PAGE>
F.N.B. CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The mergers between F.N.B. Corporation and Southwest Banks, Inc., West Coast
Bancorp, Inc. and West Coast Bank were completed on January 21, 1997, April 18,
1997 and January 20, 1998, respectively, and accounted for as poolings-of-
interests. Accordingly, all financial information has been restated as if the
companies were combined for all periods presented.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Total interest income... $ 202,543 $ 189,803 $ 178,614 $ 153,983 $ 147,959
Total interest expense.. 87,500 80,046 77,127 61,444 64,325
Net interest income..... 115,043 109,757 101,487 92,539 83,634
Provision for loan losses 10,916 9,876 7,235 9,241 9,986
Total non-interest income 23,854 21,026 19,884 17,774 19,252
Total non-interest expenses 91,198 89,361 81,144 76,887 72,823
Net income before
extraordinary items....... 25,193 20,997 22,122 16,095 12,905
Extraordinary items, net of
tax....................... 8,809
Net income................. 34,002 20,997 22,122 16,095 12,905
Recurring net income *..... 29,758 24,864 22,122 16,095 12,905
AT YEAR-END
Total assets.............. $2,756,880 $2,502,580 $2,321,779 $2,153,380 $2,042,383
Net loans................. 1,940,629 1,765,927 1,582,815 1,486,701 1,250,036
Deposits.................. 2,283,964 2,085,852 1,970,196 1,805,849 1,765,599
Long-term debt............ 72,246 58,179 50,784 56,614 32,528
Preferred stock........... 2,875 3,525 4,516 4,563 4,582
Total stockholders' equity 239,495 207,193 194,848 172,418 146,989
PER COMMON SHARE
Earnings
Basic.......... $ 2.27 $ 1.38 $ 1.47 $ 1.08 $ .94
Diluted.................. 2.15 1.34 1.42 1.06 .93
Recurring earnings *
Basic.................... 1.98 1.63 1.47 1.08 .94
Diluted.................. 1.88 1.58 1.42 1.06 .93
Cash dividends ............ .63 .60 .33 .24 .23
Book value................. 15.26 13.70 12.80 11.29 10.44
RATIOS
Return on average assets... 1.33% .88% .99% .77% .65%
Return on average assets,
based on recurring net
income *.................. 1.16 1.04 .99 .77 .65
Return on average equity... 15.57 10.37 12.02 9.79 9.16
Return on average equity,
based on recurring net
income *.................. 13.63 12.28 12.02 9.79 9.16
Dividend payout ratio...... 30.27 16.40 16.82 20.39
Average equity to
average assets............ 8.53 8.49 8.24 7.83 7.10
* Recurring net income excludes extraordinary gains on the sale of a subsidiary
and branches of $8.8 million and merger related and other non-recurring costs
of $4.6 million in 1997 and a one-time assessment of $1.8 million legislated
by Congress to recapitalize the Savings Association Insurance Fund and merger
related and other non-recurring costs of $2.1 million in 1996, all on an
after-tax basis. Such presentation is provided in order to eliminate all
items deemed by management to be of a non-recurring nature.
<PAGE>
F.N.B. CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL QUARTERLY EARNINGS SUMMARY
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The mergers between F.N.B. Corporation and Southwest Banks, Inc., West Coast
Bancorp, Inc. and West Coast Bank were completed on January 21, 1997,
April 18, 1997 and January 20, 1998, respectively, and accounted for as
poolings-of-interests. Accordingly, the unaudited quarterly financial data
has been restated as if the companies were combined for all periods presented.
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED 1997 MAR. 31 JUNE 30 SEPT 30 DEC. 31
------- ------- ------- -------
<S> <C> <C> <C> <C>
Total interest income............ $49,553 $50,771 $49,905 $52,314
Total interest expense........... 21,030 21,631 21,670 23,169
Net interest income.............. 28,523 29,140 28,235 29,145
Provision for loan losses........ 2,273 3,575 2,459 2,609
Total non-interest income........ 6,030 5,295 6,239 6,290
Total non-interest expenses...... 21,835 26,374 20,035 22,954
Net income before
extraordinary items............ 7,050 3,127 8,264 6,752
Extraordinary items, net of tax.. 5,227 3,582
Net income....................... 7,050 8,354 8,264 10,334
Recurring net income *........... 7,050 7,389 8,264 7,055
PER COMMON SHARE
Earnings
Basic.......................... $.48 $.56 $.56 $.67
Diluted........................ .45 .53 .53 .64
Recurring earnings *
Basic.......................... .48 .49 .56 .45
Diluted........................ .45 .47 .53 .43
Cash dividends .................. .15 .16 .16 .16
QUARTER ENDED 1996 MAR. 31 JUNE 30 SEPT 30 DEC. 31
------- ------- ------- -------
Total interest income........... $46,709 $47,028 $47,323 $48,743
Total interest expense.......... 19,954 19,563 19,900 20,629
Net interest income............. 26,755 27,465 27,423 28,114
Provision for loan losses....... 1,757 1,985 1,860 4,274
Total non-interest income....... 5,278 5,161 5,596 4,991
Total non-interest expenses..... 21,083 21,142 23,939 23,197
Net income...................... 6,313 6,453 4,958 3,273
Recurring net income **......... 6,313 6,453 6,885 5,213
PER COMMON SHARE
Earnings
Basic.......................... $.43 $.44 $.33 $.18
Diluted........................ .41 .41 .32 .20
Recurring earnings **
Basic ......................... .43 .44 .46 .30
Diluted........................ .41 .41 .44 .32
Cash dividends .................. .15 .15 .15 .15
* Non-recurring items include merger related costs and other non-recurring
costs of approximately $4.2 million recognized during the second quarter
and merger related costs of approximately $357,000 recognized during the
fourth quarter, each on an after-tax basis.
** Non-recurring items include a one-time third quarter assessment of $1.8
million legislated by Congress to recapitalize the Savings Association
Insurance Fund and merger related costs of approximately $2.1 million
recognized during the fourth quarter, each on an after-tax basis.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This financial review summarizes the combined financial condition and results
of operations giving retroactive effect to the merger of West Coast Bank (West
Coast) with and into F.N.B. Corporation (the Corporation), and is intended to be
read in conjunction with the Supplemental Consolidated Financial Statements and
accompanying Notes to those statements. The merger of the Corporation and West
Coast was consummated on January 20, 1998, and has been accounted for on a
pooling-of-interests basis. The Corporation issued 585,263 shares of common
stock in exchange for all of the outstanding common stock of West Coast.
This financial review is presented as if the merger had been consummated for
all periods presented.
RESULTS OF OPERATIONS
Net income increased 61.9% to $34.0 million in 1997 from $21.0 million in
1996. Basic earnings per share was $2.27 and $1.38 for 1997 and 1996, while
diluted earnings per share were $2.15 and $1.34, respectively, for those same
periods. The results for 1997 include $8.8 million in gains relating to the
sales of a subsidiary and branches and merger related and other non-recurring
costs of $4.6 million, both net of tax. The results for 1996 include a
special one-time assessment to recapitalize the Savings Association Insurance
Fund (SAIF) of $1.8 million and merger related costs of $2.1 million, both
net of tax. Excluding these items, net income would have been $29.8 million
in 1997 versus $24.9 million in 1996 and basic and diluted earnings per share
would have been $1.98 and $1.88 in 1997 and $1.63 and $1.58 in 1996,
respectively. Net interest income increased by 4.8% as net average interest
earning assets increased by $24.9 million. These factors are further
detailed in the discussion which follows.
Common comparative ratios for results of operations include the return on
average assets and the return on average equity. The Corporation's return
on average assets was 1.33% for 1997 compared to .88% for 1996, while the
Corporation's return on average equity was 15.57% for 1997 compared to 10.37%
for 1996. Excluding the extraordinary and non-recurring items, the
Corporation had a return on average assets of 1.16% and 1.04% for 1997 and
1996, respectively, and a return on average equity of 13.63% and 12.28% for
those same periods.
<PAGE>
NET INTEREST INCOME
The following table provides information regarding the average balances and
yields and rates on interest earning assets and interest bearing liabilities
(dollars in thousands):
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1997 1996 1995
-------------------------- ---------------------------- -----------------------------
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
---------- -------- ------ ---------- -------- ------ ---------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest earning assets:
Interest bearing deposits
with banks............... $ 2,355 $ 140 5.94% $ 5,379 $ 294 5.47% $ 4,971 $ 313 6.30%
Federal funds sold........ 65,334 3,465 5.30 47,214 2,472 5.24 44,260 2,572 5.81
Taxable investment
securities (1)........... 408,648 25,384 6.21 393,662 23,363 5.93 404,604 22,993 5.68
Non-taxable investment
securities............... 75,329 4,407 5.85 68,068 4,198 6.17 57,806 3,710 6.42
Loans (2)(3).............. 1,846,181 171,150 9.27 1,709,595 161,618 9.45 1,573,892 151,271 9.61
---------- -------- ---------- -------- ---------- --------
Total interest
earning assets........... 2,397,847 204,546 8.53 2,223,918 191,945 8.63 2,085,533 180,859 8.67
--------- ------- --------- ------- --------- -------
Cash and due from banks... 76,874 83,733 78,290
Allowance for loan losses. (29,203) (26,022) (24,202)
Premises and equipment.... 54,968 45,932 41,851
Other assets.............. 58,602 57,722 52,046
---------- ---------- ----------
$2,559,088 $2,385,283 $2,233,518
========== ========== ==========
LIABILITIES
Interest bearing liabilities:
Deposits:
Interest bearing demand. $ 338,617 8,561 2.53 $ 332,787 6,295 1.89 $ 288,273 6,905 2.40
Savings................. 551,887 14,688 2.66 508,433 14,556 2.86 495,634 13,046 2.63
Other time.............. 987,838 54,230 5.49 931,811 50,896 5.46 875,623 48,461 5.53
Short-term borrowings..... 131,975 6,275 4.75 89,458 3,915 4.38 95,941 5,457 5.69
Long-term debt............ 51,145 3,746 7.32 49,977 4,384 8.77 39,856 3,258 8.17
---------- -------- ---------- ------- ---------- --------
Total interest
bearing liabilities...... 2,061,462 87,500 4.24 1,912,466 80,046 4.19 1,795,327 77,127 4.30
-------- -------- --------
Non-interest bearing
demand deposits.......... 244,664 229,164 221,530
Other liabilities......... 34,567 41,218 32,580
--------- ---------- ----------
2,340,693 2,182,848 2,049,437
STOCKHOLDERS' EQUITY...... 218,395 202,435 184,081
---------- ---------- ----------
$2,559,088 $2,385,283 $2,233,518
========== ========== ==========
Excess of interest earning
assets over interest
bearing liabilities...... $ 336,298 $ 311,452 $ 290,206
========== ========== ==========
Net interest income....... $117,046 $111,899 $103,732
======== ======== ========
Net interest spread....... 4.29% 4.44% 4.37%
==== ==== ====
Net interest margin (4)... 4.88% 5.03% 4.97%
==== ==== ====
</TABLE>
(1) The average balances and yields earned on securities are based on
historical cost.
(2) The amounts are reflected on a fully taxable equivalent basis using the
federal statutory tax rate of 35%, adjusted for certain federal tax
preferences.
(3) Average balances include 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.
(4) Net interest margin is calculated by dividing the difference between
total interest earned and total interest paid by total interest earning
assets.
<PAGE>
Net interest income, the Corporation's primary source of earnings, is the
amount by which interest and fees generated by earning assets, primarily loans
and securities, exceed interest expense on deposits and borrowed funds. Net
interest income, on a fully taxable equivalent basis, totaled $117.0 million
in 1997 versus $111.9 million in 1996. Net interest income consisted of
interest income of $204.5 million and interest expense of $87.5 million in
1997, compared to $191.9 million and $80.0 million for each, respectively,
in 1996. Net interest income as a percentage of average earning assets
(commonly referred to as the margin) fell to 4.88% in 1997 compared to 5.03%
in 1996.
Interest income on loans increased 5.9% from $161.6 million in 1996 to $171.2
million in 1997. This increase is the result loan growth. Average loans
increased 8.0% from 1996.
Interest expense on deposits increased to $77.5 million in 1997. This
increase was attributable to increases in savings and other time deposits.
The Corporation monitors interest rate sensitivity by measuring the impact
that future changes in interest rates will have on net interest income.
Through its asset/liability management and pricing policies, management has
strived to optimize net interest income while reducing the effects of changes
in interest rates. (See "Liquidity and Interest Rate Sensitivity" discussion).
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
periods indicated (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31, 1997 1996
---------------------------- ----------------------------
VOLUME RATE NET VOLUME RATE NET
------- ------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Interest bearing deposits
with banks.............. $ (182) $ 28 $ (154) $ 33 $ (52) $ (19)
Federal funds sold........ 964 29 993 213 (313) (100)
Securities................ 1,309 921 2,230 33 825 858
Loans..................... 12,516 (2,984) 9,532 12,823 (2,476) 10,347
------- ------- ------- ------- ------- -------
14,607 (2,006) 12,601 13,102 (2,016) 11,086
------- ------- ------- ------- ------- -------
INTEREST EXPENSE
Deposits:
Interest bearing ....... 111 2,155 2,266 1,622 (2,232) (610)
Savings................. 726 (594) 132 344 1,166 1,510
Other time.............. 3,055 279 3,334 3,033 (598) 2,435
Short-term borrowings..... 2,004 356 2,360 (350) (1,192) (1,542)
Long-term debt............ 105 (743) (638) 873 253 1,126
6,001 1,453 7,454 5,522 (2,603) 2,919
------- ------- ------- ------- -------- -------
NET CHANGE $ 8,606 $(3,459) $ 5,147 $ 7,580 $ 587 $ 8,167
======= ======= ======= ======= ======== =======
</TABLE>
The amount of change not solely due to rate or volume changes was allocated
between the change due to rate and the change due to volume based on the net
size of the rate and volume changes.
<PAGE>
PROVISION FOR LOAN LOSSES
The provision for loan losses charged to operations is a direct result of
management's analysis of the adequacy of the allowance for loan losses which
takes into consideration factors, including qualitative factors, relevant to
the collectibility of the existing portfolio. The provision for loan losses
increased 10.5% to $10.9 million in 1997. This increase resulted from applying
a consistent allowance for loan loss policy and methodology for evaluating the
adequacy of the allowance to all affiliates in 1997, including those affiliates
acquired in 1997. (See "Non-Performing Loans and Allowance for Loan Losses"
and "Mergers, Acquisitions and Divestitures" discussions).
NON-INTEREST INCOME
Total non-interest income increased 13.5% from $21.0 million in 1996 to $23.9
million in 1997. This increase was attributable to increases in service charges
and gains on the sale securities, as well as income from the Corporation's
equity investment.
Service charges increased 5.1% from $11.7 million in 1996 to $12.3 million
in 1997. Revenue was recognized as a result of increases in the level of
deposits.
Net gains on the sale of securities increased 59.1% due to a higher level of
equity security sales in 1997.
The Corporation recognized $621,000 in income from its equity investment since
June 30, 1997.
NON-INTEREST EXPENSES
Total non-interest expense increased from $89.4 million in 1996 to $91.2
million in 1997. The increase is primarily attributable to an increase of
$5.1 million in salaries and employee benefits and an increase in merger-related
expenses from $2.1 million in 1996 to $2.3 million in 1997. Additionally,
the 1996 total reflects a one-time assessment of $2.8 million to recapitalize
the SAIF.
Salaries and personnel expense increased 11.9% in 1997. This increase was
due to increases for incentive compensation, as well as normal annual salary
adjustments. The Corporation's incentive compensation plans allow for
additional compensation to be paid to employees based on the Corporation
achieving various financial and productivity goals.
On September 30, 1996, the President of the United States signed into law the
Deposit Insurance Funds Act of 1996 to recapitalize the SAIF. The legislation
included a one-time assessment on all deposits insured by the SAIF, including
those held by chartered commercial banks as a result of previous acquisitions.
The Corporation was required to pay a one-time assessment of $2.8 million.
Other non-interest expenses decreased $1.3 million to $22.9 million.
Included in other non-interest expenses were $2.3 million in 1997 and $2.1
million in 1996 for expenses related to the affiliations with Southwest,
WCBI and FNB Florida. The expenses were primarily legal and investment
banking costs associated with the structuring and completion of mergers.
<PAGE>
INCOME TAXES
The Corporation recognized income tax expense of $11.6 million for 1997
compared to $10.5 million for 1996. The 1997 effective tax rate of 31.5% was
lower than the 35.0% federal statutory tax rate due to the tax benefits
resulting from tax-exempt instruments and excludable dividend income.
Additional information relating to income taxes is furnished in the Notes to
Supplemental Financial Statements.
LIQUIDITY AND INTEREST RATE SENSITIVITY
The Corporation monitors its liquidity position on an ongoing basis to assure
that it is able to meet the need for funds at all times. Given the monetary
nature of its assets and liabilities and the significant source of liquidity
provided by its securities portfolio, the Corporation generally has sufficient
sources of funds available as needed to meet its routine, operational cash
needs. Excluding mortgage-backed securities, debt securities due to mature
within one year, which will provide a source of short-term liquidity, amounted
to $92.1 million or 25.5% of the securities portfolio.
Additionally, the Corporation has external sources of funds available should
it desire to use them. These include approved lines of credit with several
major domestic banks, of which $32.0 million was unused at the end of 1997.
To further meet its liquidity needs, the Corporation also has access to the
Federal Home Loan Bank and the Federal Reserve Bank, as well as other
uncommitted funding sources.
The financial performance of the Corporation is subject to risk from interest
rate fluctuations. This interest rate risk arises due to differences between
the amount of interest-earning assets and the amount of interest-bearing
liabilities subject to pricing over a specified period, the amount of change in
individual interest rates and the embedded options in all financial instruments.
The principal objective of the Corporation's asset/liability management
activities is to maximize net interest income while maintaining acceptable
levels of interest rate and liquidity risk and facilitating the funding needs
of the Corporation. The Corporation's Asset/Liability Committee (ALCO) is
responsible for achieving this objective. The Corporation uses an
asset/liability model to quantify its balance sheet strategies and their
associated risks. Net interest income simulation is the principal tool utilized
for these purposes. Gap analysis is employed as a secondary diagnostic
measurement. The Corporation attempts to mitigate interest rate risk through
asset and liability pricing and matched maturity funding.
A gradual 300 basis point decrease in interest rates is estimated to cause a
decline in net interest income of .9% or $1.1 million for 1998 as compared to
net interest income if interest rates were unchanged during 1998. This low
level of variation is within the Corporation's policy limits. This simulation
analysis assumed that savings and checking interest rates had a low correlation
to changes in market rates of interest and that asset prepayments changed as
refinancing incentives evolved. Further, in the event of a change of such a
magnitude in interest rates, the ALCO would likely take actions to further
mitigate its exposure to the change. However, due to the greater uncertainty
of other specific actions that would be taken, the analysis assumed no change
in the Corporation's asset/liability composition.
<PAGE>
Following is the gap analysis as of December 31, 1997 (dollars in thousands):
<TABLE>
<CAPTION>
WITHIN 4-12 1-5 OVER
3 MONTHS MONTHS YEARS 5 YEARS TOTAL
--------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS
Interest bearing
deposits with banks. $ 3,144 $ 100 $ 3,244
Federal funds sold.... 17,249 17,249
Securities:
Available for sale.. 40,686 38,484 $ 231,743 $ 126,202 437,115
Held to maturity.... 3,690 22,048 87,489 9,711 122,938
Loans, net of
unearned income..... 552,683 507,000 748,792 166,613 1,975,088
--------- --------- ---------- ---------- -----------
617,452 567,632 1,068,024 302,526 2,555,634
Other assets.......... 201,246 201,246
--------- --------- ---------- ---------- -----------
$ 617,452 $ 567,632 $1,068,024 $ 503,772 $ 2,756,880
========= ========= ========== ========== ===========
INTEREST BEARING LIABILITIES
Deposits:
Interest checking....... $ 93,633 $ 245,295 $ 338,928
Savings................. 230,117 418,562 648,679
Time deposits........... 225,301 $ 451,392 $ 346,374 316 1,023,383
Short-term borrowings..... 81,092 9,784 528 32,348 123,752
Long-term debt............ 12,729 10,510 44,558 4,449 72,246
--------- --------- ---------- ---------- -----------
642,872 471,686 391,460 700,970 2,206,988
Other liabilities......... 310,397 310,397
Stockholders' equity...... 239,495 239,495
--------- --------- ---------- ---------- -----------
$ 642,872 $ 471,686 $ 391,460 $1,250,862 $ 2,756,880
========= ========= ========== ========== ===========
PERIOD GAP.............. $ (25,420) $ 95,946 $ 676,564 $ (747,090)
========= ========= ========== ==========
CUMULATIVE GAP.......... $ (25,420) $ 70,526 $ 747,090
========= ========= ==========
CUMULATIVE GAP AS
A PERCENT OF
TOTAL ASSETS.......... (.92)% 2.56% 27.10%
========= ========= ==========
RATE SENSITIVE ASSETS/
RATE SENSITIVE
LIABILITIES
(CUMULATIVE).......... .96 1.06 1.50 1.16
========= ========= ========== ==========
</TABLE>
The preceding gap analysis is based on the amortization, maturity or repricing
of the Corporation's interest-bearing assets and interest-bearing liabilities.
Non-maturity deposits have been allocated to represent their lower sensitivity
to changes in market interest rates than other variable-rate instruments. The
cumulative gap represents the difference between these assets and liabilities
over a specified time period. Based on the cumulative one year gap and assuming
no change in asset/liability composition, a decrease in interest rates would be
expected to result in slightly lower net interest income. This gap position
is within the Corporation's policy limits.
<PAGE>
FINANCIAL CONDITION
LOAN PORTFOLIO
Following is a summary of loans (dollars in thousands):
<TABLE>
<CAPTION>
December 31 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Real estate:
Residential........... $ 867,611 $ 716,672 $ 634,335 $ 572,332 $ 498,554
Commercial............ 476,295 441,767 401,030 316,992 254,154
Construction.......... 64,511 44,296 37,043 50,715 30,288
Installment loans to
individuals.......... 282,678 397,600 385,506 372,394 280,514
Commercial, financial
and agricultural..... 238,403 196,549 172,208 219,424 225,215
Lease financing........ 59,852 21,538 5,037
Unearned income........ (20,425) (23,846) (27,377) (22,812) (22,821)
---------- ---------- ---------- ---------- ----------
$1,968,925 $1,794,576 $1,607,782 $1,509,045 $1,265,904
========== ========== ========== ========== ==========
</TABLE>
The Corporation strives to minimize credit losses by utilizing credit approval
standards, diversifying its loan portfolio by industry and borrower conducting
ongoing review and management of the loan portfolio.
The ratio of loans to deposits at the end of 1997 was 86.2%, up slightly from
a ratio of 86.0% at the end of 1996. The increase in the ratio was a result of
loan growth of 9.7%.
During 1997 and 1996 the Corporation sold $23.9 million and $38.5 million,
respectively, in fixed rate residential mortgages to the Federal National
Mortgage Association (FNMA). These sales allowed the Corporation to avoid the
potential interest rate risk of those fixed rate loans in a rising rate
environment. Additionally, it created liquidity for the Corporation to
continue to offer credit availability to the markets it serves. All of the
mortgages were sold with the servicing retained by the Corporation.
In 1997, total installment loans to individuals and lease financing decreased
to $342.5 million. The Corporation significantly reduced its exposure to
non-prime motor vehicle loans by selling approximately $20.7 million of such
loans to a third party. The sale resulted in the Corporation recognizing an
after-tax loss of $249,000, after reducing the allowance for loan losses by
$2.4 million.
The commercial loan portfolio consists principally of loans to small- and
medium-sized businesses within the Corporation's primary market area of western
Pennsylvania, eastern Ohio and southwest Florida.
As of December 31, 1997, no concentrations of loans exceeding 10% of total
loans existed which were not disclosed as a separate category of loans.
<PAGE>
Following is a summary of the maturity distribution of certain loan categories
based on remaining scheduled repayments of principal (in thousands):
<TABLE>
<CAPTION>
WITHIN ONE TO AFTER
ONE YEAR FIVE YEARS FIVE YEARS TOTAL
-------- ---------- ---------- --------
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
Commercial, financial and agricultural $124,853 $103,389 $ 10,161 $238,403
Real Estate - construction......... 23,030 35,681 5,800 64,511
-------- -------- -------- --------
Total $147,883 $139,070 $ 15,961 $302,914
======== ======== ======== ========
</TABLE>
The total amount of loans due after one year includes $76.3 million with
floating or adjustable rates of interest and $78.7 million with fixed rates
of interest.
NON-PERFORMING LOANS
Non-performing loans include non-accrual loans and restructured loans.
Non-accrual loans represent loans on which interest accruals have been
discontinued. Restructured loans are loans in which the borrower has been
granted a concession on the interest rate or the original repayment terms
due to financial distress.
Following is a summary of non-performing loans (dollars in thousands):
December 31 1997 1996 1995 1994 1993
------- ------- ------- ------- -------
Non-accrual loans ......... $ 8,103 $ 9,644 $ 9,567 $11,244 $11,055
Restructured loans......... 1,314 2,146 3,075 3,157 3,236
------- ------- ------- ------- -------
$ 9,417 $11,790 $12,642 $14,401 $14,291
======= ======= ======= ======= =======
Non-performing loans as a
percentage of total loans .48% .66% .79% .95% 1.16%
Following is a table showing the amounts of contractual interest income and
actual interest income recorded on non-accrual and restructured loans (in
thousands):
Year Ended December 31 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------
Gross interest income that
would have been recorded
if the loans had been
current and in accordance
with their original terms. $1,028 $1,414 $1,298 $1,791 $1,827
Interest income recorded
during the year........... 467 763 685 676 708
Following is a summary of loans 90 days or more past due, on which interest
accruals continue (dollars in thousands):
December 31 1997 1996 1995 1994 1993
------- ------ ------ -------- -------
Loans 90 days or more
past due................ $3,218 $3,003 $3,872 $ 2,753 $3,659
Loans 90 days or more past
due as a percentage of
total loans............. .16% .17% .25% .19% .29%
<PAGE>
ALLOWANCE FOR LOAN LOSSES
Management's analysis of the allowance for loan losses includes the
evaluation of the loan portfolio based on internally generated loan review
reports and the historical loss experience of the remaining balances of the
various homogeneous loan pools which comprise the loan portfolio. Specific
factors which are evaluated include the previous loan loss experience with
the customer, the status of past due interest and principal payments on the
loan, the collateral position of the loan, the quality of financial information
supplied by the borrower and the general financial condition of the borrower.
Historical loss experience on the remaining portfolio segments is considered
in conjunction with the current status of economic conditions, loan loss
trends, delinquency and non-accrual trends, credit administration and
concentrations of credit risk.
Following is a summary of changes in the allowance for loan losses (dollars in
thousands):
<TABLE>
<CAPTION>
Year Ended December 31 1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Balance at beginning of year..... $28,649 $24,967 $23,018 $18,622 $16,802
Reduction due to the sale of a
subsidiary and loans.......... (3,828) (893)
Addition due to acquisitions..... 1,167
Charge-offs:
Real estate - mortgage.......... (864) (421) (604) (1,454) (591)
Installment loans to individuals (6,929) (5,939) (5,407) (3,821) (3,980)
Commercial, financial and
agricultural.................. (2,067) (1,451) (1,226) (1,564) (4,159)
------ ------- ------- ------- --------
(9,860) (7,811) (7,237) (6,839) (8,730)
------ ------- ------- ------- --------
Recoveries:
Real estate - mortgage.......... 86 128 189 98 173
Installment loans to individuals 811 1,047 1,124 968 783
Commercial, financial and
agricultural................ 355 442 638 928 501
1,252 1,617 1,951 1,994 1,457
Net charge-offs................. (8,608) (6,194) (5,268) (4,845) (7,273)
Provision for loan losses....... 10,916 9,876 7,235 9,241 9,986
------- ------- ------- ------- -------
Balance at end of year.......... $28,296 $28,649 $24,967 $23,018 $18,622
======= ======= ======= ======= =======
Net charge-offs as a percent of
average loans, net of unearned
income........................ .47% .36% .34% .34% .56%
Allowance for loan losses as a
percent of total loans, net
of unearned income............ 1.44 1.60 1.55 1.53 1.47
Allowance for loan losses as a
percent of non-performing loans 300.48 242.99 197.49 159.84 130.31
</TABLE>
The increase in the level of charge-offs and the provision for loan losses
in 1997 and 1996 resulted primarily from the consistent application of the
Corporation's charge-off policy and methodology for determining the adequacy
of the allowance for loan losses.
<PAGE>
The Corporation has allocated the allowance according to the amount deemed
to be reasonably necessary to provide for the possibility of losses being
incurred within each of the categories of loans shown in the table below.
The allocation of the allowance should not be interpreted as an indication
that loan losses in future years will occur in the same proportions or that
the allocation indicates future loan loss trends. Furthermore, the portion
allocated to each loan category is not the sole amount available for future
losses within such categories since the total allowance is a general allowance
applicable to the entire portfolio.
Following shows the allocation of the allowance for loan losses (in
thousands):
<TABLE>
<CAPTION>
% OF % OF % OF % OF % OF
LOANS LOANS LOANS LOANS LOANS
IN EACH IN EACH IN EACH IN EACH IN EACH
CATEGORY CATEGORY CATEGORY CATEGORY CATEGORY
TO TOTAL TO TOTAL TO TOTAL TO TOTAL TO TOTAL
Year Ended December 31 1997 LOANS 1996 LOANS 1995 LOANS 1994 LOANS 1993 LOANS
------ ------- ---- ------- ------ ------- ---- ------ ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, financial
and agricultural.... $ 4,960 36% $7,116 35% $ 6,239 35% $ 8,321 35% $ 7,281 37%
Real estate -
construction........ 264 3 121 2 88 2 216 3 520 2
Real estate -
mortgage............ 4,806 44 3,395 40 3,506 39 3,817 38 3,068 40
Installment loans to
individuals......... 5,291 17 7,407 23 6,414 24 5,067 24 4,552 21
Unallocated portion.. 12,975 10,610 8,720 5,597 3,201
------- --- ------- --- ------- --- ------- --- ------- ---
$28,296 100% $28,649 100% $24,967 100% $23,018 100% $18,622 100%
======= ======= ======= ======= =======
</TABLE>
INVESTMENT ACTIVITY
Investment activities serve to enhance overall yield on earning assets while
supporting interest rate sensitivity and liquidity positions. Securities
purchased with the intent and ability to retain until maturity are categorized
as securities held to maturity and carried at amortized cost. All other
securities are categorized as securities available for sale and must be marked
to market.
The relatively short average maturity of all securities provides a source of
liquidity to the Corporation and reduces the overall market risk of the
portfolio.
During 1997, securities available for sale increased 33.4% while securities
held to maturity decreased 29.6% from December 31, 1996.
<PAGE>
The following table indicates the respective maturities and weighted-average
yields of securities as of December 31, 1997 (in thousands):
Weighted
Average
Amount Yield
---------- ---------
Obligations of U.S. Treasury and
Other U.S. Government agencies:
Maturing within one year......................... $ 86,852 5.75%
Maturing after one year within five years........ 191,557 6.25%
Maturing after five years within ten years....... 27,078 6.73%
State & political subdivisions:
Maturing within one year......................... 5,261 5.11%
Maturing after one year within five years........ 37,442 6.29%
Maturing after five years within ten years....... 6,912 6.56%
Maturing after ten years......................... 623 6.57%
Other securities:
Maturing within one year......................... 2 5.40%
Maturing after one year within five years........ 1,011 5.92%
Maturing after five years within ten years....... 1,157 6.62%
Maturing after ten years......................... 3,000 6.68%
Mortgage-backed securities............................ 174,417 6.31%
No stated maturity.................................... 24,741 4.63%
--------- ----
TOTAL....................................... $ 560,053 6.14%
========= ====
The weighted average yields for tax exempt securities are computed on a tax
equivalent basis.
DEPOSITS AND SHORT-TERM BORROWINGS
As a commercial bank holding company, the Corporation's primary source of
funds is its deposits. Those deposits are provided by businesses and
individuals located within the markets served by the Corporation's subsidiaries.
Total deposits increased 9.5% to $2.3 billion in 1997. The majority of this
increase was due to a 10.8% increase in savings and NOW accounts. Additionally,
time deposits increased 7.7% to $1.0 billion.
Short-term borrowings, made up of repurchase agreements, federal funds
purchased, notes payable and subordinated notes increased 6.6% in 1997 to
$123.8 million. The primary reasons for this increase was an increase in
securities sold under repurchase agreements. Securities sold under repurchase
agreements increased $17.3 million in 1997.
<PAGE>
CAPITAL RESOURCES
The assessment of capital adequacy depends on a number of factors such as
asset quality, liquidity, earnings performance, changing competitive conditions
and economic forces. The Corporation seeks to maintain a strong capital base to
support its growth and expansion activities, to provide stability to current
operations and to promote public confidence.
Capital management is a continuous process. Since December 31, 1996,
stockholders' equity has increased $24.4 million as a result of earnings
retention. Total cash dividends declared represented 28.2% of net income for
1997 compared to 32.8% for 1996. Book value per share was $15.26 at December
31, 1997, compared to $13.70 at December 31, 1996.
1996 VERSUS 1995
The Corporation's net income decreased 5.1% from $22.1 million in 1995 to
$21.0 million in 1996. Basic earnings per share were $1.38 and $1.47 for 1996
and 1995, while diluted earnings per share were $1.34 and $1.42, respectively,
for those same periods. The results for 1996 include a special one-time
assessment to recapitalize the SAIF of $2.8 million and merger related costs of
$2.1 million. Excluding these items, net income would have been $24.9 million,
a 12.4% increase over 1995, and basic and diluted earnings per share would
have been $1.63 and $1.58, respectively. The Corporation's return on average
assets was .88% for 1996 compared to .99% for 1995, while the Corporation's
return on average equity was 10.37% for 1996 compared to 12.02% for 1995.
Excluding the SAIF assessment and merger related costs, the Corporation had a
return on average assets of 1.04% and a return on average equity of 12.28%.
Net interest income, on a fully taxable equivalent basis, increased from
$103.7 million in 1995 to $111.9 million in 1996. Net margin rose to 5.03%
from 4.97% in 1995. Average loans increased 8.6% from 1995, contributing to
the improvement in net interest income.
The provision for loan losses was $9.9 million and represented an increase of
36.5% from 1995, when a provision of $7.2 was charged to operations. This
increase resulted from applying a consistent allowance for loan loss policy
and methodology for evaluating the adequacy of the adequacy of the allowance
across all affiliates.
Total non-interest income increased 5.7% from $19.9 million in 1995 to
$21.0 million in 1996. This increase was attributable to increases in service
charges and gains on the sale of securities. Service charges increased 6.4%
from $11.0 million in 1995 to $11.7 million in 1996. Revenue was recognized
as a result of increases in the level of deposits. Net gains on the sale of
securities increased by $294,000 due to a higher level of equity security
sales in 1996.
Total non-interest expense increased from $81.1 million in 1995 to $89.4
million in 1996. Salaries and employee benefits increased 9.0% in 1996. This
increase was due to expansion in the Corporation's retail network and increases
for incentive compensation, as well as normal annual salary adjustments. As a
result of legislation passed in 1996, the Corporation was required to pay a
one-time assessment of $2.8 million to recapitalize the SAIF. Other
non-interest expenses increased $4.2 million in 1996. Included in this total
was $2.1 million of merger-related expenses.
Income tax expense was $10.5 million for 1996 compared to $10.9 million for
1995. The 1996 effective tax rate of 33% was below the 35% statutory tax rate
due to the tax benefits resulting from tax-exempt instruments and excludable
dividend income.
<PAGE>
YEAR 2000
The much publicized Year 2000 Issue is the result of computer programs being
written using two digits rather than four to define an applicable year. Any of
the Corporation's computer programs that have time-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions or engage in similar normal business activities. In addition,
the Year 2000 Issue increases transaction risk with third parties including
customers, service providers and vendors.
During 1997, the Corporation established the Customer Service Center of
F.N.B., L.L.C. (Customer Service), a subsidiary of the Corporation comprised
of two data processing service centers. These facilities support each of the
Corporation's bank and non-bank subsidiaries. As part of its primary functions,
Customer Service has been commissioned to identify and select a single mainframe
and data processing system. Conversion is anticipated to occur in 1999 and
will coincide with the expiration of the Corporation's current primary data
processing contracts. A mandatory requirement of selection will be that the
mainframe and data processing system selected is Year 2000 compliant.
In the event that the Corporation does not convert to a single corporate wide
mainframe and data processing system in 1999, the Corporation has developed a
Year 2000 Bank Strategy and Project Plan (Year 2000 Plan). An integral part of
the Year 2000 Plan is the review and testing of all core data systems and
technology, including hardware, software, applications, mainframes, PC/desktop
applications, system interdependencies and networks. It is anticipated that such
testing will be completed by December 31, 1998. Based on a recent assessment,
the Corporation anticipates expending approximately $220,000 for systems
testing, reprogramming and other upgrades in order to remediate its current
systems. However, if such modifications and conversions are not made, or are
not completed in a timely manner, the Year 2000 Issue may have a material
impact on the operations of the Corporation.
The Corporation has initiated communications with significant bank customers,
vendors and others with material relationships in an attempt to evaluate the
extent of their exposure to the Year 2000 Issue. As part of this evaluation,
the Corporation is actively pursuing the receipt of Year 2000 certifications
from these parties. The Corporation could possibly be affected to the extent
other entities not affiliated with the Corporation are unsuccessful in
addressing the Year 2000 Issue.
The costs of completing the Corporation's Year 2000 Plan and the date on
which the Corporation believes it will complete all modifications are based on
management's best estimates. These estimates were derived utilizing numerous
assumptions of future events, including the continued availability of certain
resources, third party modification plans and other significant factors.
However, there can be no guarantee that these estimates will be achieved and
actual results could differ materially from those anticipated. Such
material differences may involve a myriad of factors, including but not
limited to, the availability and cost of personnel trained in this area, the
ability to locate and correct all relevant programming codes and other similar
uncertainties.
<PAGE>
EXHIBIT 99.2
INDEPENDENT AUDITORS' REPORT
January 22, 1997
Board of Directors and Stockholders
of Southwest Banks, Inc.
Naples, Florida
We have audited the accompanying consolidated balance sheets of Southwest
Banks, Inc. and its subsidiaries, First National Bank of Naples and Cape Coral
National Bank (collectively, the Company), as of December 31, 1996 and 1995
and the related consolidated statements of operations, stockholders' equity
and cash flows for each of the three years in the period ended December 31, 1
996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Southwest Banks, Inc. and its subsidiaries as of December 31, 1996 and 1995
and the consolidated results of their operations and their consolidated cash
flows for each of the three years in the period ended December 31, 1996 in
conformity with generally accepted accounting principles.
/s/HILL, BARTH & KING, INC.
NAPLES, FLORIDA
<PAGE>
EXHIBIT 99.3
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
West Coast Bancorp, Inc. and Subsidiary
Cape Coral, Florida
We have audited the accompanying consolidated balance sheets of West Coast
Bancorp, Inc. and Subsidiary at December 31, 1996 and 1995, and the related
consolidated statements of income, changes in shareholders' equity and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of West Coast
Bancorp, Inc. and Subsidiary at December 31, 1996 and 1995, and the
consolidated statements of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting principles.
/s/COOPERS & LYBRAND L.L.P.
FORT MYERS, FLORIDA
January 24, 1997
<TABLE> <S> <C>
<ARTICLE> 9
<RESTATED>
<MULTIPLIER> 1000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996 DEC-31-1995
<PERIOD-END> DEC-31-1997 DEC-31-1996 DEC-31-1995
<CASH> 93,186 111,542 97,239
<INT-BEARING-DEPOSITS> 3,244 1,334 4,699
<FED-FUNDS-SOLD> 17,249 11,510 66,139
<TRADING-ASSETS> 0 0 0
<INVESTMENTS-HELD-FOR-SALE> 437,115 327,658 290,314
<INVESTMENTS-CARRYING> 122,938 174,551 174,483
<INVESTMENTS-MARKET> 123,164 173,677 174,546
<LOANS> 1,968,925 1,794,576 1,607,782
<ALLOWANCE> 28,296 28,649 24,967
<TOTAL-ASSETS> 2,756,880 2,502,580 2,321,779
<DEPOSITS> 2,283,964 2,085,852 1,970,196
<SHORT-TERM> 123,752 116,126 75,716
<LIABILITIES-OTHER> 37,423 35,229 30,235
<LONG-TERM> 72,246 58,179 50,784
<COMMON> 30,665 27,760 26,545
0 0 0
2,875 3,525 4,516
<OTHER-SE> 205,955 175,909 163,787
<TOTAL-LIABILITIES-AND-EQUITY> 2,756,880 2,502,580 2,321,779
<INTEREST-LOAN> 170,189 160,315 149,869
<INTEREST-INVEST> 28,749 26,722 25,860
<INTEREST-OTHER> 3,605 2,766 2,885
<INTEREST-TOTAL> 202,543 189,803 178,614
<INTEREST-DEPOSIT> 77,479 71,747 68,412
<INTEREST-EXPENSE> 87,500 80,046 77,127
<INTEREST-INCOME-NET> 115,043 109,757 101,487
<LOAN-LOSSES> 10,916 9,876 7,235
<SECURITIES-GAINS> 1,252 787 493
<EXPENSE-OTHER> 91,198 89,361 81,144
<INCOME-PRETAX> 36,783 31,546 32,992
<INCOME-PRE-EXTRAORDINARY> 25,193 20,997 22,122
<EXTRAORDINARY> 8,809 0 0
<CHANGES> 0 0 0
<NET-INCOME> 34,002 20,997 22,122
<EPS-PRIMARY> 2.27 1.38 1.47
<EPS-DILUTED> 2.15 1.34 1.42
<YIELD-ACTUAL> 4.88 5.03 4.97
<LOANS-NON> 8,103 9,644 9,567
<LOANS-PAST> 3,218 3,003 3,872
<LOANS-TROUBLED> 1,314 2,146 3,075
<LOANS-PROBLEM> 0 0 0
<ALLOWANCE-OPEN> 28,649 24,967 23,018
<CHARGE-OFFS> 9,860 7,811 7,237
<RECOVERIES> 1,252 1,617 1,951
<ALLOWANCE-CLOSE> 28,296 28,649 24,967
<ALLOWANCE-DOMESTIC> 28,296 28,649 24,967
<ALLOWANCE-FOREIGN> 0 0 0
<ALLOWANCE-UNALLOCATED> 0 0 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<RESTATED>
<MULTIPLIER> 1000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-END> MAR-31-1997 JUN-30-1997 SEP-30-1997 DEC-31-1997
<CASH> 90,714 98,268 83,261 93,186
<INT-BEARING-DEPOSITS> 3,094 1,417 2,645 3,244
<FED-FUNDS-SOLD> 49,849 19,350 53,640 17,249
<TRADING-ASSETS> 0 0 0 0
<INVESTMENTS-HELD-FOR-SALE> 320,072 315,176 342,031 437,115
<INVESTMENTS-CARRYING> 170,675 150,689 130,010 122,938
<INVESTMENTS-MARKET> 169,214 150,047 130,087 123,164
<LOANS> 1,825,091 1,783,341 1,819,837 1,968,925
<ALLOWANCE> 29,142 28,948 26,690 28,296
<TOTAL-ASSETS> 2,539,646 2,468,458 2,528,987 2,756,880
<DEPOSITS> 2,134,309 2,032,738 2,074,902 2,283,964
<SHORT-TERM> 119,716 133,152 134,793 123,752
<LIABILITIES-OTHER> 29,774 35,935 34,541 37,423
<LONG-TERM> 45,735 48,859 61,131 72,246
<COMMON> 27,903 29,321 29,384 30,665
0 0 0 0
3,233 3,061 2,900 2,875
<OTHER-SE> 178,976 185,395 191,336 205,955
<TOTAL-LIABILITIES-AND-EQUITY> 2,539,646 2,468,458 2,528,987 2,756,880
<INTEREST-LOAN> 41,644 42,777 42,028 43,740
<INTEREST-INVEST> 7,036 7,315 7,072 7,326
<INTEREST-OTHER> 873 679 805 1,248
<INTEREST-TOTAL> 49,553 50,771 49,905 52,314
<INTEREST-DEPOSIT> 18,817 19,294 19,109 20,259
<INTEREST-EXPENSE> 21,030 21,631 21,670 23,169
<INTEREST-INCOME-NET> 28,523 29,140 28,235 29,145
<LOAN-LOSSES> 2,273 3,575 2,459 2,609
<SECURITIES-GAINS> 493 (54) 426 387
<EXPENSE-OTHER> 21,835 26,374 20,035 22,954
<INCOME-PRETAX> 10,445 4,486 11,980 9,872
<INCOME-PRE-EXTRAORDINARY> 7,050 3,127 8,264 6,752
<EXTRAORDINARY> 0 5,227 0 3,582
<CHANGES> 0 0 0 0
<NET-INCOME> 7,050 8,354 8,264 10,334
<EPS-PRIMARY> .48 .56 .56 .67
<EPS-DILUTED> .45 .53 .53 .64
<YIELD-ACTUAL> 4.98 4.92 5.03 4.70
<LOANS-NON> 9,845 7,806 7,256 8,103
<LOANS-PAST> 3,310 2,861 3,827 3,218
<LOANS-TROUBLED> 2,071 1,896 1,842 1,314
<LOANS-PROBLEM> 0 0 0 0
<ALLOWANCE-OPEN> 28,649 29,142 28,948 26,690
<CHARGE-OFFS> 2,041 2,814 2,497 2,508
<RECOVERIES> 260 489 287 216
<ALLOWANCE-CLOSE> 29,142 28,948 26,690 28,296
<ALLOWANCE-DOMESTIC> 29,142 28,948 26,690 28,296
<ALLOWANCE-FOREIGN> 0 0 0 0
<ALLOWANCE-UNALLOCATED> 0 0 0 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<RESTATED>
<MULTIPLIER> 1000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996 DEC-31-1996 DEC-31-1996
<PERIOD-END> MAR-31-1996 JUN-30-1996 SEP-30-1996 DEC-31-1996
<CASH> 97,858 101,742 101,213 111,542
<INT-BEARING-DEPOSITS> 6,542 3,560 2,188 1,334
<FED-FUNDS-SOLD> 50,009 34,227 22,866 11,510
<TRADING-ASSETS> 0 0 0 0
<INVESTMENTS-HELD-FOR-SALE> 296,984 277,166 253,986 327,658
<INVESTMENTS-CARRYING> 194,066 189,981 182,410 174,551
<INVESTMENTS-MARKET> 192,820 185,863 180,383 173,677
<LOANS> 1,635,408 1,701,087 1,761,181 1,794,576
<ALLOWANCE> 25,307 26,132 26,259 28,649
<TOTAL-ASSETS> 2,364,925 2,387,636 2,404,108 2,502,580
<DEPOSITS> 2,006,804 1,996,811 1,984,989 2,085,852
<SHORT-TERM> 84,444 125,354 145,744 116,126
<LIABILITIES-OTHER> 33,786 30,744 34,766 35,229
<LONG-TERM> 41,565 33,916 33,956 58,179
<COMMON> 26,276 27,452 27,568 27,760
0 0 0 0
4,516 4,263 3,984 3,525
<OTHER-SE> 167,534 169,096 173,101 175,909
<TOTAL-LIABILITIES-AND-EQUITY> 2,364,925 2,387,636 2,404,108 2,502,580
<INTEREST-LOAN> 38,923 39,419 40,364 41,609
<INTEREST-INVEST> 6,789 7,058 6,493 6,382
<INTEREST-OTHER> 997 551 466 752
<INTEREST-TOTAL> 46,709 47,028 47,323 48,743
<INTEREST-DEPOSIT> 17,966 17,584 17,772 18,425
<INTEREST-EXPENSE> 19,954 19,563 19,900 20,629
<INTEREST-INCOME-NET> 26,755 27,465 27,423 28,114
<LOAN-LOSSES> 1,757 1,985 1,860 4,274
<SECURITIES-GAINS> 250 295 205 37
<EXPENSE-OTHER> 21,083 21,142 23,939 23,197
<INCOME-PRETAX> 9,193 9,499 7,220 5,634
<INCOME-PRE-EXTRAORDINARY> 6,313 6,453 4,958 3,273
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 6,313 6,453 4,958 3,273
<EPS-PRIMARY> .43 .44 .33 .18
<EPS-DILUTED> .41 .41 .32 .20
<YIELD-ACTUAL> 5.04 5.05 4.99 4.86
<LOANS-NON> 9,983 11,720 8,826 9,644
<LOANS-PAST> 4,536 4,383 3,730 3,003
<LOANS-TROUBLED> 1,750 1,586 2,123 2,146
<LOANS-PROBLEM> 0 0 0 0
<ALLOWANCE-OPEN> 24,967 25,307 26,132 26,259
<CHARGE-OFFS> 1,884 1,612 2,103 2,212
<RECOVERIES> 445 475 369 328
<ALLOWANCE-CLOSE> 25,307 26,132 26,259 28,649
<ALLOWANCE-DOMESTIC> 25,307 26,132 26,259 28,649
<ALLOWANCE-FOREIGN> 0 0 0 0
<ALLOWANCE-UNALLOCATED> 0 0 0 0
</TABLE>
