UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
Amendment No. 1
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (Fee Required)
For the fiscal year ended DECEMBER 31, 2002
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)
For the transition period from ------------- to ----------------
Commission file number 0-8144
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F.N.B. CORPORATION
(Exact name of registrant as specified in its charter)
FLORIDA 25-1255406
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2150 GOODLETTE ROAD NORTH
NAPLES, FLORIDA 34102
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 800-262-7600
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.01 per share 7 1/2% Cumulative Convertible Preferred
Stock, Series B, par value $0.01 per share (Title of Class)
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the pre- ceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes X No
---
The registrant estimates that as of April 30, 2003, the aggregate market
value of the voting stock held by non-affiliates of the registrant, computed by
reference to the last sale price as reported by the Nasdaq National Market for
such date, was approximately $1,336,596,086.
APPLICABLE ONLY TO CORPORATE REGISTRANTS:
----------------------------------------
As of April 30, 2003, the registrant had outstanding 43,945,293 shares of
common stock having a par value of $0.01 per share.
F.N.B. Corporation's original Form 10-K, filed on March 18, 2003, is hereby
amended to incorporate new disclosure rules adopted by the Securities and
Exchange Commission (SEC), which were finalized on March 28, 2003. This
amendment addresses SEC comments on the original Form 10-K resulting from review
of an updated S-3 shelf registration statement. This amendment contains enhanced
disclosures and does not change the previously reported net income or financial
position of F.N.B. Corporation. In addition, earnings, cash dividends and book
value per share were adjusted to reflect the impact of the 5% stock dividend
declared April 28, 2003.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
PART OF FORM 10-K INTO
DOCUMENT WHICH DOCUMENT IS INCORPORATED
-------- ------------------------------
Annual Report to Stockholders for fiscal year
ended December 31, 2002 I & II
Definitive proxy statement for the 2003 Annual
Meeting of Stockholders to be held on April 28, 2003 III
FORM 10-K
For the year ended December 31, 2002 PAGE
INDEX
PART I
Item 1. Business. I-2
Item 2. Properties. I-10
Item 3. Legal Proceedings. I-10
Item 4. Submission of Matters to a Vote of Security Holders. I-11
Item 4A. Executive Officers of the Registrant I-11
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters. II-1
Item 6. Selected Financial Data. II-1
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. II-1
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. II-1
Item 8. Financial Statements and Supplementary Data. II-1
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. II-1
PART III
Item 10. Directors and Executive Officers of the Registrant. III-1
Item 11. Executive Compensation. III-1
Item 12. Security Ownership of Certain Beneficial Owners and Management. III-1
Item 13. Certain Relationships and Related Transactions. III-1
Item 14. Controls and Procedures III-1
PART IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K IV-1
Signatures IV-2
Index to Exhibits IV-3
I-1
PART I
ITEM 1. BUSINESS
F.N.B. Corporation (the Corporation) was formed in 1974 as a bank holding
company. The Corporation is a financial holding company under the
Gramm-Leach-Bliley Act of 1999. The Corporation has three reportable business
segments: community banking, insurance agencies and consumer finance. For
additional information regarding these segments, refer to the Business Segments
footnote in the Notes to Consolidated Financial Statements, which is
incorporated by reference to the Corporation's 2002 Annual Report to
Stockholders. As of December 31, 2002, the Corporation owned and operated two
regional community banks, a consumer finance company, an insurance agency and
First National Trust Company. The Corporation has full service banking offices
in Pennsylvania, Florida, and Ohio and consumer finance operations in
Pennsylvania, Ohio and Tennessee. The Corporation's insurance agency has
operations in Florida and Pennsylvania.
During 2002, the Corporation completed business combinations with two
community banks, Promistar Financial Corporation (Promistar), a bank holding
company headquartered in Johnstown, Pennsylvania, and Central Bank Shares, Inc.
(Central), a bank holding company headquartered in Orlando, Florida. Promistar's
banking affiliate, Promistar Bank, was merged into an existing subsidiary of the
Corporation, First National Bank of Pennsylvania (FNBPA). Central's banking
affiliate, Bank of Central Florida, was merged into an existing subsidiary of
the Corporation, First National Bank of Florida (FNBFL). Additionally, the
Corporation acquired Blackwood Insurance Agency (Blackwood), an independent
insurance agency in Chippewa Township, Pennsylvania. Blackwood was merged into
the Corporation's existing insurance agency, Roger Bouchard Insurance, Inc.
During 2002, the Corporation consolidated the operations of its
Pennsylvania insurance agency subsidiary, Gelvin, Jackson & Starr, Inc., into
its Florida insurance agency, Roger Bouchard Insurance, Inc. In addition, the
Corporation consolidated its Ohio banking subsidiary, Metropolitan National Bank
(Metropolitan), into its existing Pennsylvania banking subsidiary, FNBPA.
On March 31, 2003, the Corporation completed its business combination with
Charter Banking Corp. (Charter), the bank holding company for Southern Exchange
Bank headquartered in Tampa, Florida with assets of more than $795.6 million.
The $150.2 million cash transaction was funded through the issuance of $125.0
million in trust preferred securities and $25.2 million from the Corporation's
existing lines of credit with several major domestic banks. The transaction
resulted in the recognition of approximately $101.9 million of goodwill and $1.1
million in core deposit intangible. Charter's banking affiliate, Southern
Exchange Bank, will be merged into FNBFL during the fourth quarter of 2003.
The Corporation regularly evaluates the potential acquisition of, and holds
discussions with, various acquisition candidates and as a general rule the
Corporation publicly announces such acquisitions only after a definitive
agreement has been reached.
The Corporation, through its subsidiaries, provides a full range of
financial services, principally to consumers and small- to medium-size
businesses in its market areas. The Corporation's business strategy has been to
focus primarily on providing quality, community-based financial services adapted
to the needs of each of the markets it serves. The Corporation has emphasized
its community orientation by preserving local advisory boards of directors and
by allowing local management certain autonomy in decision-making, enabling them
to respond to customer requests more quickly and concentrate on transactions
within their market areas. However, while the Corporation
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has sought to preserve some decision-making at a local level, it has established
centralized legal, loan review, accounting, investment, audit, loan operations
and data processing functions. The centralization of these processes has enabled
the Corporation to maintain consistent quality of these functions and to achieve
certain economies of scale.
The Corporation's lending philosophy is to minimize credit losses by
following strict credit approval standards (which include independent analysis
of realizable collateral value), diversifying its loan portfolio by industry and
borrower and conducting ongoing review and management of the loan portfolio. The
Corporation is an active residential mortgage lender, and its commercial loans
are generally to established businesses within its market areas. The Corporation
does not have any highly leveraged transaction loans and its construction loans
represent less than 6% of its total loans.
No material portion of the deposits of the Corporation's bank subsidiaries
has been obtained from a single or small group of customers, and the loss of any
customer's deposits or a small group of customers' deposits would not have a
material adverse effect on the business of the Corporation. The majority of the
deposits held by the Corporation's bank subsidiaries have been generated within
the respective subsidiary's market area.
Following is information as of December 31, 2002 for the Corporation's
principal subsidiaries (including the year established and location of
principal office for each). All subsidiaries are wholly-owned by the
Corporation (dollars in thousands).
TOTAL TOTAL NUMBER
ASSETS DEPOSITS OF OFFICES
------- --------- ----------
COMMUNITY BANK SUBSIDIARIES:
First National Bank of Pennsylvania
(Est. 1864) Hermitage, Pennsylvania......... $4,190,804 $3,313,570 130
First National Bank of Florida
(Est. 1988) Naples, Florida................. 2,710,598 2,121,232 43
---------- ---------- ---
$6,901,402 $5,434,802 173
========== ========== ===
CONSUMER FINANCE SUBSIDIARY:
Regency Finance Company
(Est.1927) Hermitage, Pennsylvania......... $ 148,400 47
========== ===
INSURANCE AGENCY SUBSIDIARY:
Roger Bouchard Insurance, Inc. (Est. 1948)
Clearwater, Florida...................... $ 32,921 15
========== ===
TRUST SUBSIDIARY:
First National Trust Company (Est. 1934)
Naples, Florida........................ $ 4,428 14
========== ===
The Corporation has four other subsidiaries, Penn-Ohio Life Insurance
Company (Penn-Ohio), First National Corporation (FNC), First National Management
Corporation (FNMC), and F.N.B. Building Corporation (F.N.B. Building). The
community bank subsidiaries and the consumer finance subsidiary own Customer
Service Center of F.N.B., L.L.C. (Customer Service). Penn-Ohio underwrites, as a
reinsurer, credit life and accident and health insurance sold by the
Corporation's subsidiaries. FNC and FNMC hold equity securities and other
assets for the holding company. F.N.B. Building owns real estate that is
leased to certain affiliates. Customer Service provides data processing and
other services to the affiliates of the Corporation.
OPERATIONS OF THE BANK SUBSIDIARIES
The Corporation's bank subsidiaries offer services traditionally offered by
full-service commercial banks, including commercial and individual demand and
time deposit
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accounts and commercial, mortgage and individual installment loans. The
Corporation's bank subsidiaries originate certain residential mortgage loans for
sale in the secondary mortgage loan market. These loans are originated in
accordance with prudent underwriting standards, collateralized by one-to-four
family residential real estate and typically sold with servicing rights
released. In addition to traditional banking products, the Corporation's bank
subsidiaries offer various alternative investment products, including mutual
funds and annuities.
In addition, First National Trust Company provides a broad range of
personal and corporate fiduciary services, including the administration of
decedent and trust estates. As of December 31, 2002, the market value of
corporate-wide trust assets under management totaled approximately $1.8 billion.
First National Trust Company was a subsidiary of First National Bank of
Pennsylvania until January 18, 2002, on which date it became a subsidiary of the
Corporation.
OPERATIONS OF THE INSURANCE AGENCIES
The Corporation's insurance agencies are full-service agencies offering all
lines of commercial and personal insurance through major carriers.
OPERATIONS OF THE CONSUMER FINANCE SUBSIDIARY
The Corporation's consumer finance subsidiary, Regency Finance Company
(Regency), is involved principally in making personal installment loans to
individuals and purchasing installment sales finance contracts from retail
merchants. Such activity is primarily funded through the sale of the
Corporation's subordinated notes at Regency's branch offices and internal
financing through bank subsidiaries.
MARKET AREA AND COMPETITION
The Corporation's Florida subsidiaries operate in an area represented by
high growth and high median family income levels. The industries served in this
market include a diversified mix of tourism, construction, services, light
manufacturing, distribution and agriculture. The market extends north to Tampa
and south through Naples to Marco Island and is served by Interstate 75 and U.S.
Highway 41. The Corporation's most recent acquisition, Central Bank Shares,
Inc., extends the Florida market across Interstate 4 through Orlando.
The Corporation's Pennsylvania subsidiaries operate in western Pennsylvania
and northeastern Ohio, an area which has a diversified mix of light
manufacturing, service and distribution industries. This area is served by
Interstate Routes 90, 76, 79 and 80, and is located at the approximate midpoint
between New York City and Chicago. The area is also close to the Great Lakes
shipping port of Erie, the Greater Pittsburgh International Airport and
Cleveland's Hopkins Airport.
The Corporation's subsidiaries compete with a large number of other
financial institutions, such as commercial banks, savings banks, savings and
loan associations, credit life insurance companies, mortgage banking companies,
consumer finance companies, credit unions and commercial finance and leasing
companies, many of which have greater resources than the Corporation, for
deposits, loans and service business. In providing wealth and asset management
services, the Corporation's subsidiaries compete with many other financial
services firms, brokerage firms, mutual fund complexes, investment management
firms, trust and fiduciary service providers and insurance agencies.
In the consumer finance subsidiary's market areas of Pennsylvania, Ohio and
Tennessee, the active competitors include banks, credit unions and national,
regional and local consumer finance companies, some of which have substantially
greater resources than that of the consumer finance subsidiary. The ready
availability of consumer credit through charge accounts and credit cards
constitutes additional
I-4
competition. The principal methods of competition include the rates of interest
charged for loans, the rates of interest paid to obtain funds and the
availability of customer services.
The ability to access and use technology is an increasingly important
competitive factor in the financial services industry. Technology is not only
important with respect to delivery of financial services, but in processing
information. Each of the Corporation's subsidiaries consistently must make
technological investments to remain competitive.
EMPLOYEES
As of February 18, 2003, the Corporation and its subsidiaries had 2,586
full-time and 599 part-time employees. Management of the Corporation considers
its relationship with its employees to be satisfactory.
MERGERS, ACQUISITIONS AND DIVESTITURE
See the Mergers, Acquisitions and Divestiture footnote in the Notes to
Consolidated Financial Statements, which is incorporated herein by reference to
the Corporation's 2002 Annual Report to Stockholders.
SUPERVISION AND REGULATION
SARBANES-OXLEY ACT
On July 30, 2002, the Senate and the House of Representatives of the United
States (Congress) enacted the Sarbanes-Oxley Act of 2002, a law designed to
address, among other issues, corporate governance, auditing and accounting,
executive compensation, and enhanced and timely disclosure of corporate
information. The NASDAQ Stock Exchange has also proposed corporate governance
rules that were presented to the Securities and Exchange Commission for review
and approval. The proposed changes are intended to allow stockholders to more
easily and efficiently monitor the performance of companies and the
qualifications and activities of "insiders".
Effective August 29, 2002, as directed by Section 302(a) of Sarbanes-Oxley,
the Corporation's chief executive officer and chief financial officer are each
required to certify that the Corporation's Quarterly and Annual Reports do not
contain any untrue statement of a material fact. The rules have several
requirements, including having these officers certify that: they are responsible
for establishing, maintaining and regularly evaluating the effectiveness of the
internal controls; they have made certain disclosures to auditors and the audit
committee of the Board of Directors about the Corporation's internal controls;
and they have included information in the Corporation's Quarterly and Annual
Reports about their evaluation and whether there have been significant changes
in the Corporation's internal controls or in other factors that could
significantly affect internal controls subsequent to the evaluation.
At the January 20, 2003 Board of Directors' meeting, the Board of Directors
approved a series of actions to strengthen and improve its already strong
corporate governance practices. These actions include the adoption of a new Code
of Conduct, and a revised Code of Ethics for Senior Executive Officers. Further,
the Corporation's Audit Committee and Board of Directors revised the
Corporation's Audit Charter to ensure consistency with the standards of the
Sarbannes-Oxley Act.
I-5
BANKING ACTIVITIES AND FINANCIAL HOLDING COMPANY REGULATION
The Corporation and its subsidiary national banks (the Banks) operate in a
highly regulated environment, and their business activities are governed by
statute, regulation and administrative policies. The business activities of the
Corporation and the Banks are closely supervised by a number of regulatory
agencies, including the Federal Reserve Board (FRB), the Office of the
Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation
(FDIC).
The Corporation is regulated by the FRB under the Federal Bank Holding
Company Act of 1956, as amended, which requires every bank holding company to
obtain the prior approval of the FRB before acquiring more than 5% of the voting
shares of any bank or all or substantially all of the assets of any bank, and
before merging or consolidating with another bank holding company. The Federal
Reserve Board (pursuant to regulation and published policy statements) has
maintained that a bank holding company must serve as a source of financial
strength to its subsidiary banks. In adhering to the FRB policy, the Corporation
may be required to provide financial support to a subsidiary bank at a time
when, absent such FRB policy, the Corporation may not deem it advisable to
provide such assistance.
Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994, the Corporation or any other bank holding company may acquire a bank
located in a state other than the state in which the company is located, subject
to certain deposit percentage and other restrictions. The legislation also
provides that, unless an individual state has elected to prohibit out-of-state
banks from operating interstate branches within its territory, adequately
capitalized and managed bank holding companies may consolidate their multistate
bank operations into a single bank subsidiary and branch interstate through
acquisitions.
As national banks, the Banks are subject to the supervision of the OCC and,
to a limited extent, the FDIC and the FRB. The Banks are also subject to state
banking and usury laws restricting the amount of interest which may be charged
in making loans or other extensions of credit. In addition, the Banks, as
subsidiaries of the Corporation, are subject to restrictions under federal law
when dealing with the Corporation and other affiliates. These restrictions apply
to extensions of credit to an affiliate, investments in the securities of an
affiliate and the purchase of assets from an affiliate.
GRAMM-LEACH-BLILEY
The Gramm-Leach-Bliley Act, also known as the Financial Services
Modernization Act of 1999 (GLBA), enacted in 1999, enables bank holding
companies to acquire insurance companies and securities firms and effectively
repeals depression-era laws that prohibited the affiliation of banks and these
other financial services entities under a single holding company. Bank holding
companies, and other types of financial services entities, may elect to become
financial holding companies under the new law allowing them to offer virtually
any type of financial service, or services incident to financial services,
including banking, securities underwriting, merchant banking and insurance (both
underwriting and agency services). The Corporation has elected financial holding
company status. The new financial services authorized by the GLBA also may be
engaged in by a "financial subsidiary" of a national or state bank, with the
exception of insurance or annuity underwriting, insurance company portfolio
investments, real estate investment and development, and merchant banking, all
of which must be conducted under the financial holding company.
I-6
The GLBA establishes a system of functional regulation, under which the FRB
regulates the banking activities of financial holding companies and other
federal banking regulators regulate banks' financial subsidiaries. The
Securities and Exchange Commission regulates securities activities of financial
holding companies and state insurance regulators regulate their insurance
activities. The GLBA also provides new protections against the transfer and use
by financial institutions of consumers' non-public, personal information.
The implementation of the GLBA increases competition in the financial
services sector by allowing many different entities, including banks and bank
holding companies, to affiliate and/or to merge with other financial services
entities and cross-sell their financial products in order to better serve their
current and prospective customers.
CAPITAL ADEQUACY REQUIREMENTS
Both the Corporation and the Banks are subject to regulatory capital
adequacy guidelines imposed by the FRB and the OCC. These guidelines define a
three-tier capital framework. Tier 1 capital includes common shareholders
equity, noncumulative perpetual preferred stock, minority interests in the
equity accounts of consolidated subsidiaries and trust preferred securities
(limited to 25% of total Tier 1 capital). Tier 2 capital consists of preferred
stock not qualifying as Tier 1 capital, mandatory convertible debt, limited
amounts of subordinated debt, other qualifying term debt and the allowance for
credit losses up to 1.25 percent of risk-weighted assets. Tier 3 capital
includes subordinated debt that is unsecured, fully paid, has an original
maturity of at least two years, is not redeemable before maturity without prior
approval by the Federal Reserve Board and includes a lock-in clause precluding
payment of either interest or principal if the payment would cause the issuing
bank's risk-based capital ratio to fall or remain below the required minimum.
The sum of Tier 1 and Tier 2 capital less investments in unconsolidated
subsidiaries represents the Corporation's qualifying total capital.
Risk-based capital ratios are calculated by dividing Tier 1 and total
capital by risk-weighted assets. Assets and off-balance sheet exposures are
assigned to one of four categories of risk-weights, based primarily on relative
credit risk. The minimum Tier 1 capital ratio is 4.0% and the minimum total
capital ratio is 8.0%. The Corporation's Tier 1 and total risk-based capital
ratios under these guidelines at December 31, 2002 were 8.8% and 10.1%,
respectively.
The FRB, FDIC and the OCC have also implemented minimum capital leverage
ratios to be used in tandem with the risk-based guidelines in assessing the
overall capital adequacy of banks and bank holding companies. These rules
provide for a minimum leverage ratio of at least 3.0% Tier 1 capital to total
average assets (net of goodwill, certain intangible assets, and certain deferred
tax assets) for institutions having the highest regulatory rating, while all
other institutions are generally required to maintain a ratio of at least 4.0%.
The Corporation's leverage ratio at December 31, 2002 was 6.9%.
For additional information regarding the Corporation's capital ratios, refer to
the Regulatory Matters footnote in the Notes to Consolidated Financial
Statements to the Corporation's 2002 Annual Report to Stockholders, which is
incorporated herein by reference.
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PROMPT CORRECTIVE ACTION
The Federal Deposit Insurance Corporation Improvement Act of 1991 (the
FDICIA), provided a number of reforms relating to the safety and soundness of
the deposit insurance system, supervision of domestic and foreign depository
institutions and improvement of accounting standards. One element of the FDICIA
provides for the development of a regulatory monitoring system requiring prompt
action on the part of banking regulators with regard to certain classes of
undercapitalized institutions. The FDICIA created five "capital categories"
("well capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized" and "critically undercapitalized") which are
defined in the FDICIA and are used to determine the severity of corrective
action the appropriate regulator may take in the event an institution reaches a
given level of undercapitalization. For example, an institution which becomes
"undercapitalized" must submit a capital restoration plan to the appropriate
regulator outlining the steps it will take to become adequately capitalized.
Upon approving the plan, the regulator will monitor the institution's
compliance. Before a capital restoration plan will be approved, any entity
controlling a bank (i.e., a holding company) must guarantee compliance with the
plan until the institution has been adequately capitalized for four consecutive
calendar quarters. The liability of the holding company is limited to the lesser
of five percent of the institution's total assets or the amount which is
necessary to bring the institution into compliance with all capital standards.
In addition, "undercapitalized" institutions will be restricted from paying
management fees, dividends and other capital distributions, will be subject to
certain asset growth restrictions and will be required to obtain prior approval
from the appropriate regulator to open new branches or expand into new lines of
business.
As an institution's capital levels decline, the extent of action to be
taken by the appropriate regulator increases, restricting the types of
transactions in which the institution may engage and ultimately providing for
the appointment of a receiver for certain institutions deemed to be critically
undercapitalized.
In addition, the FRB, the OCC and the FDIC have adopted regulations,
pursuant to the FDICIA, defining operational and managerial standards relating
to internal controls, loan documentation, credit underwriting, interest rate
exposure, asset growth, and compensation, fees and benefits. Both the capital
standards and the safety and soundness standards which the FDICIA seeks to
implement are designed to bolster and protect the deposit insurance fund.
REPORTING REQUIREMENTS
The national bank affiliates and First National Trust Company are subject
to periodic on-site examination and continuous review activities under the
supervisory jurisdiction of the Office of the Comptroller of the Currency (OCC).
These continuous supervisory review activities are conducted within the OCC's
mid-size bank supervision program. Under the mid-size bank supervision program,
the OCC has assigned a permanent on-site examiner for the Corporation's national
bank affiliates. The OCC, at will, can access quarterly reports of condition, as
well as such additional reports as may be required by national banking laws and
regulations.
The holding company, the insurance agency subsidiary, and the finance company
are subject to periodic examinations by the FRB. The on-site Federal Reserve
holding company inspections are typically conducted on an annual basis. As a
financial holding company, the Corporation is required to file with the FRB an
annual report of its operations at the end of each fiscal year and such
additional information as the FRB may require pursuant to the Act.
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The scope of regulation and permissible activities of the Corporation and
the Banks are subject to change by future federal and state legislation. In
addition, regulators sometimes require higher capital levels on a case-by-case
basis based on such factors as the risk characteristics or management of a
particular institution. The Corporation and the Banks are not aware of any
attributes of their management or operating plans that would cause regulators to
impose higher requirements.
CONSUMER FINANCE SUBSIDIARY
The Corporation's consumer finance subsidiary is subject to regulation
under Pennsylvania, Tennessee, and Ohio state laws which require, among other
things, that it maintain licenses for consumer finance operations in effect for
each of its offices. Representatives of the Pennsylvania Department of Banking,
the Tennessee Department of Financial Institutions and the Ohio Division of
Consumer Finance periodically visit the offices of the consumer finance
subsidiary and conduct extensive examinations in order to determine compliance
with such laws and regulations. Such examinations include a review of loans and
the collateral thereof, as well as a check of the procedures employed for making
and collecting loans. Additionally, the consumer finance subsidiary is subject
to certain federal laws which require that certain information relating to
credit terms be disclosed to customers and afford customers in certain instances
the right to rescind transactions.
INSURANCE AGENCIES
The Corporation's insurance agencies are subject to licensing requirements
and extensive regulation under the laws of the United States and its various
states. These laws and regulations are primarily for the benefit of clients. In
all jurisdictions, the applicable laws and regulations are subject to amendment
or interpretation by regulatory authorities. Generally, such authorities are
vested with relatively broad discretion to grant, renew and revoke licenses and
approvals, and to implement regulations. Licenses may be denied or revoked for
various reasons, including the violation of such regulations, conviction of
crimes and the like. Possible sanctions which may be imposed for violation of
regulations include the suspension of individual employees, limitations on
engaging in a particular business for a specified period of time, revocation of
licenses, censures and fines.
LIFE INSURANCE SUBSIDIARY
Penn-Ohio is subject to examination on a triennial basis by the Arizona
Department of Insurance. Representatives of the Department of Insurance will
periodically determine whether Penn-Ohio has maintained required reserves,
established adequate deposits under a reinsurance agreement and complied with
reporting requirements under Arizona statutes.
GOVERNMENTAL POLICIES
The operations of the Corporation and its subsidiaries are affected not
only by general economic conditions, but also by the policies of various
regulatory authorities. In particular, the FRB regulates money and credit and
interest rates in order to influence general economic conditions. These policies
have a significant influence on overall growth and distribution of loans,
investments and deposits and
I-9
affect interest rates charged on loans or paid for time and savings deposits.
FRB monetary policies have had a significant effect on the operating results of
all financial institutions in the past and may continue to do so in the future.
AVAILABLE INFORMATION
The Corporation maintains a website at www.fnbcorporation.com. Beginning
with the filing of this Form 10-K, the Corporation will make available free of
charge its annual reports on Form 10-K, quarterly reports on Form 10-Q and
current reports on Form 8-K on its website as soon as practicable after such
reports are filed with the SEC. The Corporation's common stock is traded on the
Nasdaq National Market under the symbol "FBAN".
ITEM 2. PROPERTIES
The Corporation owns an eight-story building in Naples, Florida, which
serves as its executive and administrative offices and shares this facility with
First National Bank of Florida. The Corporation owns a six-story building in
Hermitage, Pennsylvania which serves as its northern executive offices and
shares this facility with First National Bank of Pennsylvania. The Corporation
also owns operations centers in Naples, Florida and Hermitage, Pennsylvania. In
addition, the Corporation has purchased 11.6 acres of land in Naples, Florida
for the construction of the Florida information technology center. Construction
of the center is expected to be completed in the second quarter of 2004.
The banking, consumer finance and insurance company offices are located in
8 counties in southwestern Florida, 31 counties in Pennsylvania, 17 counties in
northern and central Tennessee and 6 counties in eastern Ohio. At December 31,
2002, the Corporation's subsidiaries owned 133 of the Corporation's 249 offices
and leased the remaining 116 offices under operating leases expiring at various
dates through the year 2087. For additional information regarding the lease
commitments, see the Premises and Equipment footnote in the Notes to
Consolidated Financial Statements, which is incorporated herein by reference to
the Corporation's 2002 Annual Report to Stockholders.
ITEM 3. LEGAL PROCEEDINGS
During the first quarter of 2001, the Corporation established a legal
reserve of approximately $4.0 million associated with individual retirement
accounts at one of its banking subsidiaries. Various cases have been filed in
the 20th Judicial Circuit and for Lee County, Florida, naming the subsidiary of
the Corporation as a co-defendent. The plaintiffs alleged that a third-party
independent administrator misappropriated funds from their individual retirement
accounts held with the banking subsidiary. As of December 31, 2002, the
Corporation has settled all of these asserted claims, at an aggregate cost to
the corporation of $3.5 million. The Corporation believes the remaining reserve
will be sufficient for all remaining costs associated with the litigation,
including legal costs, unasserted claims, settlements and adverse judgments.
The Corporation and persons to whom the Corporation may have indemnification
obligations, in the normal course of business are subject to various pending and
threatened lawsuits in which claims for monetary damages are asserted. Other
real estate owned includes a property which is subject to litigation. Should the
outcome be adverse, the value of the property will be impaired and other costs
may be incurred. Management, after consultation with outside legal counsel, does
not at the present time anticipate that the ultimate liability arising out of
such pending and threatened lawsuits will have a material adverse effect on the
Corporation's financial position. At the present time, management is not in a
position to determine whether any pending or threatened litigation will have a
material adverse effect on the Corporation's results of operations in any future
reporting period.
I-10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to this item for Mr. Tice, Mr. Gurgovits, Mr. Hale, Mr.
Bettinger and Mr. Richter is provided in the Corporation's definitive proxy
statement filed with the Securities and Exchange Commission in connection with
its annual meeting of stockholders to be held April 28, 2003. The name, age (as
of February 18, 2003), present position with the Corporation, and principal
occupation for the last five years of each of the remaining executive officers
is set forth below:
PRESENT POSITION AND PRIOR OCCUPATIONS IN
NAME AGE PREVIOUS FIVE YEARS
---- --- --------------------------------------------
C.C. Coghill 59 Executive Vice President and Chief Credit Officer of the Corporation
since 2002; Executive Vice President and Chief Credit Officer of FNBFL
from January 2002 to December 2002; Executive Vice President and Senior
Credit Officer of First National Bank of Naples from 1997 to January 2002.
Thomas E. Fahey 60 Executive Vice President and Chief Financial Officer of the Corporation
since July 2002; Partner, Ernst & Young LLP, New York, from 1996 to June
2002.
William J. Rundorff 54 Chief Legal Officer of the Corporation since 2001; Executive Vice
President of the Corporation since 1995.
John D. Waters 56 Senior Vice President and Director of Investor Relations since July
2002; Chief Financial Officer from 1994 to June 2002.
Robert T. Reichert 40 Vice President and Corporate Controller of the Corporation since 1996;
Executive Vice President and Chief Financial Officer of FNBFL from 2001
to 2002.
David Mogle 53 Corporate Secretary since 1994 and Treasurer since 1986; Vice President,
Secretary and Treasurer of FNBPA since 1986, 1994 and 1999, respectively.
Charlie Grau 58 Vice President and Chief Technology Officer since 2002; Executive Vice
President and Chief Operating Officer of CSC since 1998.
There are no family relationships among any of the above executive officers, and
there is no arrangement or understanding between any of the above executive
officers and any other person pursuant to which he was selected as an officer.
The executive officers are elected by and serve at the pleasure of the
Corporation's Board of Directors.
I-11
PART II
Information relating to Items 5, 6, 7 and 8 is provided in the
Corporation's 2002 Annual Report to Stockholders under the captions and on the
pages indicated below. The Annual Report is filed as an exhibit to this report
and is incorporated herein by reference.
PAGES IN 2002
ANNUAL REPORT
CAPTION IN 2002 ANNUAL REPORT TO STOCKHOLDERS TO STOCKHOLDERS
--------------------------------------------- ---------------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED SHAREHOLDER MATTERS 68
ITEM 6. SELECTED FINANCIAL DATA 55
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 57-68
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK 61-63
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 26-54,56
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
II-1
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
With the exception of information regarding certain executive officers of
the Corporation, which is set forth in Item 4A. of this report, the information
relating to this item is provided in the Corporation's definitive proxy
statement filed with the Securities and Exchange Commission in connection with
its annual meeting of stockholders to be held April 28, 2003 and is incorporated
herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information relating to this item is provided in the Corporation's
definitive proxy statement filed with the Securities and Exchange Commission in
connection with its annual meeting of stockholders to be held April 28, 2003.
Such information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
With the exception of the equity compensation plan information provided
below, the information relating to this item is provided in the Corporation's
definitive proxy statement filed with the Securities and Exchange Commission in
connection with its annual meeting of stockholders to be held April 28, 2003.
Such information is incorporated herein by reference.
---------------------------------------------------------------------------------------------------------------------------------
Number of Securities to be Weighted-average Number of securities remaining
issued upon exercise of exercise price of for future issuance under
Plan Category outstanding options outstanding options equity compensation plans
=================================================================================================================================
Equity compensation plans approved 3,259,450 (1)(2) $21.03 1,361,655 (3)
by security holders
---------------------------------------------------------------------------------------------------------------------------------
Equity compensation plans not
approved by security holders 20,261 (4) N/A (4) 0 (4)
---------------------------------------------------------------------------------------------------------------------------------
(1) Excludes 502,445 shares of the Corporation's Common Stock issuable upon
exercise of outstanding options assumed in connection with acquisition
transactions; these options have a weighted-average exercise price of $18.00.
(2) Excludes 33,513 shares of restricted common stock awards subject to
forfeiture. The shares of restricted stock vest in five equal annual
installments beginning on the date of grant.
(3) Represents shares of Common Stock eligible for issuance pursuant to stock
option or restricted stock awards granted under the Corporation's 2001 Incentive
Plan.
(4) In 2002, the Corporation amended its Basic Retirement Plan to provide that
any future amounts contributed by the Corporation as a result of IRS
restrictions placed on employee contributions to its 401(k) plans will be made
in cash rather than the Corporation's Common Stock. Shares to be issued
represent phantom stock credited to participants in the Basic Retirement Plan.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information relating to this item is provided in the Corporation's
definitive proxy statement filed with the Securities and Exchange Commission in
connection with its annual meeting of stockholders to be held April 28, 2003.
Such information is incorporated herein by reference.
ITEM 14. CONTROLS AND PROCEDURES
An evaluation was performed under the supervision and with the
participation of the Corporation's management, including the Chief Executive
Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the
design and operation of the Corporation's disclosure controls and procedures.
Based on that evaluation, the Corporation's management, including the CEO and
CFO, concluded that the Corporation's disclosure controls and procedures were
effective as of December 31, 2002. There have been no significant changes in the
Corporation's internal controls over financial reporting since December 31,
2002.
III-1
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of F.N.B. Corporation
and subsidiaries and report of independent auditors, included in the
Corporation's 2002 Annual Report to Stockholders, are incorporated
herein by reference:
Pages in 2002
Annual Report
to Stockholders
----------------
Consolidated Balance Sheets 26
Consolidated Income Statements 27
Consolidated Statements of Stockholders' Equity 28
Consolidated Statements of Cash Flows 29
Notes to Consolidated Financial Statement 30 - 54
Report of Independent Auditors 25
Quarterly Earnings Summary 56
(a) 2. FINANCIAL STATEMENT SCHEDULES
All Schedules are omitted because they are not applicable.
(a) 3. EXHIBITS
The exhibits filed or incorporated by reference as a part of this
report are listed in the Index to Exhibits which appears at page IV-3
and is incorporated herein by reference.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the fourth quarter of 2002.
IV-1
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this amendment to be signed
on its behalf by the undersigned, thereunto duly authorized.
F.N.B. CORPORATION
Dated May 23, 2003 By /s/ Gary L. Tice
-------------------------------------
Gary L. Tice,
President and Chief Executive Officer
Dated May 23, 2003 By /s/ Thomas E. Fahey
--------------------------------------
Thomas E. Fahey,
Executive Vice President and
Chief Financial Officer
IV-2
INDEX TO EXHIBITS
The following exhibits are filed or incorporated by reference as part of this
report:
3.1. Articles of Incorporation of the Corporation as currently in effect.
(incorporated by reference to Exhibit 4.1. of the Corporation's Form 8-K
filed on June 1, 2001).
3.2. By-laws of the Corporation as currently in effect.(incorporated by
reference to Exhibit 4.2. of the Corporation's Form 8-K filed on June 1,
2001).
4 The rights of holders of equity securities are defined in portions
of the Articles of Incorporation and By-laws. The Articles of
Incorporation are incorporated by reference to Exhibit 4.1. of the
registrant's Form 8-K filed on June 1, 2001. The By-laws are
incorporated by reference to Exhibit 4.2. of the registrant's Form
8-K filed on June 1, 2001. A designation statement defining the
rights of F.N.B. Corporation Series A - Cumulative Convertible
Preferred Stock is incorporated by reference to Form S-14,
Registration Statement of F.N.B. Corporation, File No. 2-96404. A
designation statement defining the rights of F.N.B. Corporation
Series B - Cumulative Convertible Preferred Stock is incorporated by
reference to Exhibit 4 of the registrant's Form 10-Q for the quarter
ended June 30, 1992. The Corporation agrees to furnish to the
Commission upon request copies of all instruments not filed herewith
defining the rights of holders of long-term debt of the Corporation
and its subsidiaries.
10.1. Form of agreement regarding deferred payment of directors' fees by
First National Bank of Pennsylvania. (incorporated by reference to
Exhibit 10.1. of the Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993).
10.2. Form of agreement regarding deferred payment of directors' fees by F.N.B.
Corporation. (incorporated by reference to Exhibit 10.2. of the
Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993).
10.3. Form of Deferred Compensation Agreement by and between First National
Bank of Pennsylvania and four of its executive officers. (incorporated by
reference to Exhibit 10.3. of the Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993).
10.4. Employment Agreement between F.N.B. Corporation and Stephen J. Gurgovits.
(incorporated by reference to Exhibit 10.5. of the Corporation's Annual
Report on Form 10-K for the year ended December 31, 1998).
10.5. Employment Agreement between F.N.B. Corporation and William J. Rundorff.
(incorporated by reference to exhibit 10.9 of the Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31, 1991).
Amendment No. 2 to Employment Agreement. (incorporated by reference to
Exhibit 10.8. of the Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995).
IV-3
10.6. Basic Retirement Plan (formerly the Supplemental Executive
Retirement Plan) of F.N.B. Corporation effective January 1, 1992.
(incorporated by reference to Exhibit 10.9. of the Corporation's
Annual Report on Form 10-K for the fiscal year ended December 31, 1993).
10.7. F.N.B. Corporation 1990 Stock Option Plan as amended effective
February 2, 1996. (incorporated by reference to Exhibit 10.10. of the
Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995).
10.8. F.N.B. Corporation Restricted Stock Bonus Plan dated January 1, 1994.
(incorporated by reference to Exhibit 10.11. of the Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993).
10.9. Employment Agreement between F.N.B. Corporation and John D. Waters.
(incorporated by reference to Exhibit 10.13 of the Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995).
10.10. F.N.B. Corporation Restricted Stock and Incentive Bonus Plan.
(incorporated by reference to Exhibit 10.14. of the Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995).
10.11. F.N.B. Corporation 1996 Stock Option Plan. (incorporated by reference to
Exhibit 10.15. of the Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995).
10.12. F.N.B. Corporation Director's Compensation Plan. (incorporated by
reference to Exhibit 10.16. of the Corporation's Form 10-Q for the
quarter ended March 31, 1996).
10.13. F.N.B. Corporation 1998 Director's Stock Option Plan. (incorporated by
reference to Exhibit 10.14. of the Corporation's Annual Report on
Form 10-K for the year ended December 31, 1998).
10.14. Employment Agreement between F.N.B. Corporation and Gary L. Tice.
(incorporated by reference to Exhibit 10.1. of the Corporation's
Form 10-Q for the quarter ended June 30, 1999). Amendment No.1 to
Employment Agreement (incorporated by reference to Exhibit 10.1.
of the Corporation's Form 10-Q for the quarter ended March 31, 2002).
10.15. Employment Agreement between F.N.B. Corporation and Kevin C. Hale.
(incorporated by reference to Exhibit 10.16. of the Corporation's
Form 10-Q for the quarter ended June 30, 2000).
10.16. F.N.B. Corporation 2001 Incentive Plan. (incorporated by reference to
Exhibit 10.1. of the Corporation's Form S-8 filed on June 14, 2001).
10.17. Termination of Continuation of Employment Agreement between F.N.B.
Corporation Peter Mortensen. (incorporated by reference to exhibit 10.17
of the Corporation's Form 10-K for the year ended December 31, 2001).
10.18. Employment Agreement between F.N.B. Corporation and Cass Bettinger.
(incorporated by reference to Exhibit 10.2. of the Corporation's
Form 10-Q for the quarter ended March 31, 2002).
10.19. Employment Agreement between F.N.B. Corporation and Thomas E. Fahey.
(incorporated by reference to Exhibit 10.1. of the Corporation's
Form 10-Q for the quarter ended June 30, 2002).
10.20. Employment Agreement between F.N.B. Corporation and Garrett S. Richter.
(incorporated by reference to Exhibit 10.20 of the Corporation's Form
10-K filed March 18, 2003 amended hereby).
12.1 Statement regarding computation of ratios. (incorporated by reference to
Exhibit 12.1 of the Corporation's Form 10-K filed March 18, 2003 amended
hereby).
13 Annual Report to Stockholders. (filed herewith).
21 Subsidiaries of the Registrant. (incorporated by reference to Exhibit 21
of the Corporation's Form 10-K filed March 18, 2003 amended hereby).
IV-4
23.1. Consent of Ernst & Young LLP, Independent Auditors. (filed herewith).
23.2. Consent of PricewaterhouseCoopers LLP, Independent Accountants.
(filed herewith).
99.1 Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 906 of the Sarbannes Oxley Act of 2002. (filed herewith).
99.2 Report of Independent Auditors, PricewaterhouseCoopers LLP, for the 2000
Audit of Promistar Financial Corporation. (incorporated by reference to
Exhibit 99.2 of the Corporation's Form 10-K filed March 18, 2003 amended
hereby).
99.3 Code of Ethics. (incorporated by reference to Exhibit 99.3 of the
Corporation's Form 10-K filed March 18, 2003 amended hereby).
99.4 Code of Conduct for Senior Executives and Financial Managers.
(incorporated by reference to Exhibit 99.4 of the Corporation's Form 10-K
filed March 18, 2003 amended hereby).
99.5 Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(filed herewith)
Copies of any exhibits will be furnished to shareholders upon request.
Requests should be directed to F.N.B. Shareholder Services, P.O. Box 11929,
Naples, Florida 34108.
IV-5