As filed with the Securities and Exchange Commission on October 13, 2010

Registration No. 333-      

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form S-4

 

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

F.N.B. CORPORATION

(Exact name of registrant as specified in its charter)

 

 

One F.N.B. Boulevard

Hermitage, Pennsylvania 16148

(724) 981-6000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

Stephen J. Gurgovits

President and Chief Executive Officer

F.N.B. Corporation

One F.N.B. Boulevard

Hermitage, Pennsylvania 16148

(724) 981-6000

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

Copies to:

 

 

Approximate date of commencement of proposed sale of the securities to the public:  upon the effective date of the merger of Comm Bancorp, Inc. with and into the Registrant.

 

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  o

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

(Do not check if a smaller reporting company)

 

CALCULATION OF REGISTRATION FEE

 

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

Subject to completion, dated October 13, 2010

 

 

MERGER PROPOSAL — YOUR VOTE IS VERY IMPORTANT

 

 

 

 

Our board of directors has unanimously approved an agreement pursuant to which Comm Bancorp Inc. (“CBI”) will merge with and into F.N.B. Corporation (“FNB”). Our board of directors believes the merger will enhance the competitive position of the combined company in the Pennsylvania counties of Lackawanna, Luzerne, Monroe, Susquehanna, Wayne and Wyoming where CBI conducts business. FNB will be the surviving company in the merger. After completion of the merger, we expect that current FNB shareholders will, as a group, own approximately 95.1% of the combined company and our shareholders will, as a group, own approximately 4.9% of the combined company.

 

Upon completion of the contemplated merger, our shareholders will have the right to receive 3.4545 shares of FNB common stock and $10.00 in cash for each share of CBI common stock held immediately prior to the merger.

 

The following table shows the closing sales price of FNB common stock as reported by the New York Stock Exchange, or NYSE, and the closing sales price of CBI common stock as reported by NASDAQ on August 6, 2010, the last trading day before FNB and we announced the merger, and on                    , 2010, the last practicable trading day before FNB and we printed and mailed this proxy statement/prospectus. This table also shows the pro forma equivalent value of the proposed merger consideration for each share of our common stock, which we calculated by multiplying the closing price of FNB common stock on those dates by 3.4545, the exchange ratio in the merger, and adding $10.00, which is the cash portion of the merger consideration, to that amount.

 

 

The market price of FNB common stock may fluctuate up or down prior to the closing of the merger, which will result in corresponding fluctuations in the pro forma equivalent value per share of our common stock. The exchange ratio of 3.4545 shares of FNB common stock and $10.00 per share in cash for each share of our common stock is fixed. The exchange ratio will not change if our stock price or the stock price of FNB changes. Consequently, the value of the merger consideration you will receive from FNB upon the closing of the merger may be significantly higher or lower than the value of the merger consideration as of the date of this proxy statement/prospectus. You should obtain current market quotations for the shares of both companies.

 

We expect that the merger will generally be tax-free to our shareholders, except for taxes on the cash portion of the merger consideration our shareholders will receive upon consummation of the merger.

 

We cannot complete the merger unless the holders of not less than 75% of our outstanding common stock vote to adopt the merger agreement. We will hold a special meeting of our shareholders to vote on the merger agreement. Your vote is important. Whether or not you plan to attend our special meeting of shareholders, please take the time to vote your shares in accordance with the instructions contained in this proxy statement/prospectus. Only holders of record of our common stock as of the close of business on          , 2010 are entitled to attend and vote at our special meeting and any adjournment or postponement of our special meeting. We will hold our special meeting on          ,          , 2010 at   a.m., prevailing time, at Elk Mountain Ski Resort, Route 374, Union Dale, Pennsylvania.

 

Our board of directors unanimously recommends that you vote FOR adoption of the merger agreement.

 

The accompanying proxy statement/prospectus describes our special meeting, the merger agreement, the transactions the merger agreement contemplates, certain documents related to the merger and related matters. We recommend that you carefully read this proxy statement/prospectus, including the considerations discussed under “Risk Factors Relating to the Merger” beginning on page 14, and the appendices to this proxy statement/prospectus, which include the merger agreement. You can also obtain information about FNB and us from documents that FNB and we have filed with the Securities and Exchange Commission, or the SEC.

 

Sincerely,

 

 

President and Chief Executive Officer

 

 

 

 

FNB common stock is quoted on the NYSE under the symbol “FNB.” Our common stock is quoted on NASDAQ Stock Market under the symbol “CCBP”

 

 

 

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the FNB common stock to be issued pursuant to this proxy statement/prospectus or determined if this proxy statement/prospectus is accurate or adequate. Any representation to the contrary is a criminal offense.

 

 

 

 

Shares of FNB common stock are not savings or deposit accounts or other obligations of any bank or savings association, and the shares of FNB common stock are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

 

 

 

 

The date of this proxy statement/prospectus is          , 2010, and we are first mailing or otherwise delivering it to our shareholders on or about          , 2010.

 

125 North State Street

Clarks Summit, Pennsylvania 18411

 

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

TO BE HELD          , 2010

 

WE HEREBY GIVE NOTICE that we will hold a special meeting of our shareholders at   a.m., prevailing time, on          , 2010 at Elk Mountain Ski Resort, Route 374, Union Dale, Pennsylvania, for the following purposes, all of which we describe in greater detail in the subsequent pages of this proxy statement/prospectus, to:

 

(1) consider and vote upon a proposal to adopt the Agreement and Plan of Merger, dated as of August 9, 2010, between F.N.B. Corporation, or FNB, and us, pursuant to which we will merge with and into FNB and each outstanding share of our common stock will be converted into cash and shares of FNB common stock, as described in greater detail in this proxy statement/prospectus;

 

(2) consider and vote upon a proposal to approve the adjournment of our special meeting, if necessary, to permit the further solicitation of proxies from our shareholders if there are not sufficient votes at the time of our special meeting to adopt the merger agreement; and

 

(3) transact such other business as is properly presented for action at our special meeting and any adjournment or postponement of our special meeting.

 

We have fixed the close of business on          , 2010 as the record date for the determination of our shareholders entitled to notice of, and to vote at, our special meeting and any adjournment or postponement of our special meeting. We cannot complete the merger unless the holders of 75% of our outstanding shares of common stock vote to adopt the merger agreement. Our directors and Joseph P. Moore, Jr., who collectively hold approximately 23.5% of our outstanding common stock, have entered into voting agreements with FNB and have agreed to vote FOR adoption of the merger agreement and FOR approval of the adjournment proposal.

 

Our board of directors has unanimously approved the merger agreement and the adjournment proposal and recommends that you vote FOR adoption of the merger agreement and FOR approval of the adjournment proposal.

 

Whether or not you expect to attend our special meeting in person, we urge you to vote. Please sign, date and promptly return the enclosed proxy card. We enclose a self-addressed envelope for your convenience; no postage is required if mailed in the United States. If you submit a signed proxy card but do not indicate how you want to vote your shares, the persons named as proxies in the enclosed proxy card will vote your shares FOR adoption of the merger agreement and FOR approval of the adjournment proposal. If you attend our special meeting and wish to vote in person, you may withdraw your proxy and vote in person.

 

Please do not send any stock certificates at this time. Thank you for your cooperation.

 

By order of our board of directors,

 

 

President and Chief Executive Officer

 

Clarks Summit, Pennsylvania

          , 2010

 

 

 

 

We have retained the proxy soliciting firm of Georgeson, Inc.
Its telephone number is (866) 628-6079.

 

 

 

 

REFERENCE TO ADDITIONAL INFORMATION

 

This proxy statement/prospectus incorporates important business and financial information about FNB and CBI from documents that are not included in or delivered with this proxy statement/prospectus. We will send you the documents incorporated by reference in this proxy statement/prospectus, without charge, other than certain exhibits to those documents, if you request them in writing or by telephone from us or FNB at the following addresses:

 

F.N.B. Corporation One F.N.B. Boulevard Hermitage, Pennsylvania 16148 Attention: David B. Mogle,                     Corporate Secretary Telephone: (724) 983-3431		Comm Bancorp, Inc. 125 North State Street Clarks Summit, Pennsylvania 18411 Attention: Scott A. Seasock,                     Executive Vice President                     and Chief Financial Officer Telephone: (570) 586-0377

 

In order to ensure timely delivery of the documents, any requests should be made by          , 2010.

 

See “Where You Can Find More Information” on page 77.

 

TABLE OF CONTENTS

 

 

 

 

 

SUMMARY

	•	Proposal 1 — A proposal to adopt the merger agreement between FNB and us;
	•	Proposal 2 — A proposal to grant discretionary authority to our board of directors to adjourn our special meeting if necessary to permit us to solicit additional proxies from our shareholders because we have not received sufficient votes at the time of our special meeting to adopt the merger agreement; and
	•	Such other business as may properly come before our special meeting and any adjournment or postponement of our special meeting.

	•	submitting written notice of revocation to our corporate secretary prior to the voting of that proxy at our special meeting;
	•	submitting a properly executed proxy with a later date; or
	•	voting in person at our special meeting.

	Attention:	Scott A. Seasock, Executive Vice President and Chief Financial Officer

	•	Each share of our common stock will automatically convert into and become the right to receive, subject to the provisions in the merger agreement, 3.4545 shares of FNB common stock and $10.00 in cash.
	•	We will cease to exist as a separate legal entity and FNB and FNB Bank will conduct all of our operations.

	•	the continued indemnification of our current and former directors and executive officers under the merger agreement and providing these individuals with directors’ and officers’ insurance for six years after the merger;
	•	the potential receipt of payments by certain of our executive officers pursuant to employment agreements with us; and
	•	the continuation of certain benefits for our executive officers and directors.

	•	adoption of the merger agreement by the holders of 75% of the outstanding shares of our common stock entitled to vote at our special meeting;
	•	the receipt of all regulatory approvals FNB and we need to complete the merger, including approval of the Office of the Comptroller of the Currency, or the OCC, approval of the Board of Governors of the Federal Reserve System, or the Federal Reserve Board, approval of the Pennsylvania Department of Banking, or the Department, and approval of the listing on the NYSE of the shares of FNB common stock to be issued upon the merger to our shareholders as part of the merger consideration;
	•	the absence of any law or injunction that would effectively prohibit the merger;
	•	the receipt by FNB, if FNB so requests, of an environmental study from us that is commercially acceptable to FNB with respect to all real property we own;
	•	the receipt of legal opinions from FNB’s and our legal counsel as to the qualification of the merger as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, or the Code.

	•	the failure to obtain the necessary regulatory approvals for the merger unless the failure is due to the terminating party’s failure to perform or observe its covenants and agreements in the merger agreement;
	•	the failure to complete the merger by 5:00 p.m. Eastern Daylight Time on June 30, 2011, unless the failure to consummate the merger by that date is due to the terminating party’s failure to perform or observe its covenants and agreements in the merger agreement;
	•	the non-terminating party’s breach of a representation, warranty, covenant, agreement or other obligation contained in the merger agreement that would cause a failure to satisfy the closing conditions, provided the terminating party is not then in material breach of any of its representations, warranties, covenants, agreements or other obligations in the merger agreement; or
	•	the failure of the holders of the requisite percentage of our outstanding common stock to adopt the merger agreement, provided we are not in material breach of our obligations to hold our special meeting and our board of directors is not in breach of its covenant to recommend such approval.

	•	breached our obligation not to initiate, solicit or encourage or take any action to facilitate another proposal to acquire us, participate in any discussions or negotiations relating to another proposal to acquire us or, except as permitted by and subject to certain terms of the merger agreement, approve, recommend or enter into any letter of intent, agreement or other commitment relating to another proposal to acquire us;
	•	failed to have our board of directors recommend adoption of the merger agreement to our shareholders or our board of directors shall have changed its recommendations, except as permitted by the merger

		agreement with respect to a proposal to acquire us on terms and conditions superior to the terms and conditions on which FNB and we have agreed to merge in the merger agreement;

	•	delinquent loans in excess of $65.0 million as of any month end prior to the merger closing. The merger agreement defines delinquent loans as all loans:

	•	with principal or interest 30 to 89 days past due;
	•	with principal or interest at least 90 days past due and still accruing;
	•	with principal or interest that is nonaccruing;
	•	restructured and impaired loans;
	•	other real estate owned; and
	•	the net loans we charge off between June 30, 2010 and the closing of the merger.

	•	recommended approval of another proposal to acquire us; or
	•	failed to call, give notice of, convene and hold our special meeting.

	•	prior to the mailing of this proxy statement/prospectus, we terminate the merger agreement in order to enter into an agreement relating to an acquisition proposal that has terms and conditions superior to those of the merger agreement from the perspective of our shareholders; or
	•	FNB terminates the merger agreement prior to our special meeting because we have breached our obligation not to encourage or solicit acquisition proposals, we have failed to hold our special meeting or our board of directors has not recommended that our shareholders vote to adopt the merger agreement and approve the adjournment proposal, has changed its recommendations or has recommended approval of another proposal to acquire us; or
	•	a third party makes a tender or exchange offer for 25% or more of our common stock and our board of directors fails to send a statement to our shareholders recommending rejection of that offer within 10 days after the third party made the offer; or
	•	the occurrence of any of the following events within 18 months after the termination of the merger agreement, provided that a third party makes a proposal to acquire us after August 9, 2010 and does not withdraw its proposal prior to termination of the merger agreement:

	•	we enter into an agreement to merge with or be acquired by that third party;
	•	that third party acquires substantially all of our assets; or
	•	that third party acquires more than 50% of our common stock.

	•	by us because FNB breached its representations, warranties, covenants, agreements or other obligations in the merger agreement, which breach could reasonably be expected to result in a material adverse effect and which breach cannot be or is not cured, assuming we are also not in material breach of our obligations under the merger agreement, FNB will pay our out-of-pocket expenses in connection with the merger, including fees and expenses of legal counsel, financial advisors and accountants, up to a maximum of $500,000; and
	•	by FNB because we breached our representations, warranties, covenants, agreements or other obligations in the merger agreement which breach could reasonably be expected to result in a material adverse effect and which breach cannot be or is not cured, assuming FNB is also not in material breach of its obligations under the merger agreement, we will pay FNB’s out-of-pocket expenses in connection with the merger, including fees and expenses of legal counsel, financial advisors and accountants, up to a maximum of $500,000, provided, however, that we do not have to pay FNB’s expenses if we have paid the break-up fee to FNB.

	•	the amount of cash such holder receives upon the merger; or
	•	the amount, if any, by which the sum of the cash the holder receives and the fair market value as of the effective time of the merger of the FNB common stock the holder receives as of the effective time of the merger exceeds the holder’s adjusted tax basis of our shares the merger converts into FNB shares. See, “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 57 of this proxy statement/prospectus.

										Pro Forma Equivalent
		FNB				CBI				Value of One Share of
		Common Stock				Common Stock				CBI Common Stock
August 6, 2010		$	8.50			$	23.99			$	39.36
, 2010

 

SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF FNB

		Six Months
		Ended June 30,								Year Ended December 31,
		2010				2009				2009				2008				2007				2006				2005
		(Dollars in thousands, except per share amounts)
Summary of Earnings:
Total interest income		$	186,907			$	195,136			$	387,722			$	409,781			$	368,890			$	342,422			$	295,480
Total interest expense			47,021				65,722				121,179				157,989				174,053				153,585				108,780
Net interest income			139,886				129,414				266,543				251,792				194,837				188,837				186,700
Provision for loan losses			24,203				24,423				66,802				72,371				12,693				10,412				12,176
Net interest income after provision for loan losses			115,683				104,991				199,741				179,421				182,144				178,425				174,524
Total non-interest income			58,718				56,629				105,978				86,115				81,609				79,275				57,807
Total non-interest expense			128,527				127,237				255,339				222,704				165,614				160,514				155,226
Income before income taxes			45,874				34,383				50,380				42,832				98,139				97,186				77,105
Income taxes			11,972				8,134				9,269				7,237				28,461				29,537				21,847
Net income			33,902				26,249				41,111				35,595				69,678				67,649				55,258
Net income available to common stockholders			33,902				23,437				32,803				35,595				69,678				67,649				55,258
Per Common Share:
Basic earnings per share		$	0.30			$	0.26			$	0.32			$	0.44			$	1.16			$	1.15			$	0.99
Diluted earnings per share			0.30				0.26				0.32				0.44				1.15				1.14				0.98
Cash dividends paid			0.24				0.24				0.48				0.96				0.95				0.94				0.93
Book value			9.24				9.26				9.14				10.32				8.99				8.90				8.31
Statement of Condition (at period end):
Total assets		$	8,833,060			$	8,710,320			$	8,709,077			$	8,364,811			$	6,088,021			$	6,007,592			$	5,590,326
Loans, net			5,853,530				5,667,694				5,744,706				5,715,650				4,291,429				4,200,569				3,698,340
Deposits			6,534,658				6,288,693				6,380,223				6,054,623				4,397,684				4,372,842				4,011,943
Short-term borrowings			735,442				540,573				669,167				596,263				449,823				363,910				378,978
Long-term and junior subordinated debt			410,207				641,644				529,588				695,636				632,397				670,921				662,569
Total stockholders’ equity			1,058,004				1,151,147				1,043,302				925,984				544,357				537,372				477,202

		Six Months
		Ended June 30,								Year Ended December 31,
		2010				2009				2009				2008				2007				2006				2005
		(Dollars in thousands, except per share amounts)
Significant Ratios:
Return on average assets			0.78	%			0.62	%			0.48	%			0.46	%			1.15	%			1.15	%			0.99	%
Return on average tangible assets			0.88				0.73				0.57				0.55				1.25				1.25				1.07
Return on average equity			6.51				5.11				3.87				4.20				12.89				13.15				12.44
Return on average tangible common equity			15.05				14.04				8.74				10.63				26.23				26.30				23.62
Dividend payout ratio			81.37				92.14				149.50				219.91				82.45				81.84				94.71
Capital Ratios:
Average equity to average assets			11.92	%			12.15	%			12.35	%			11.01	%			8.93	%			8.73	%			7.97	%
Leverage ratio			8.63				10.11				8.68				7.34				7.47				7.28				6.93
Tangible equity/tangible assets (period end)			5.97				7.12				5.84				4.51				4.85				4.72				4.79
Tangible common equity/tangible assets (period end)			5.97				5.95				5.84				4.51				4.85				4.72				4.79
Asset Quality Ratios:
Non-performing loans/total loans			2.51	%			2.13	%			2.49	%			2.47	%			0.75	%			0.66	%			0.88	%
Non-performing loans + OREO/total loans + OREO			2.88				2.44				2.84				2.62				0.93				0.80				1.04
Non-performing assets/total assets			2.01				1.71				1.97				1.95				0.67				0.56				0.70
Allowance for loan losses/total loans			1.91				1.72				1.79				1.80				1.22				1.24				1.35
Allowance for loan losses/non- performing loans			76.19				80.99				71.92				72.99				162.48				188.10				154.12
Net loan charge-offs (annualized)/average loans			0.51				1.03				1.15				0.60				0.29				0.29				0.46

 

SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF CBI

		Six Months
		Ended June 30,								Year Ended December 31,
		2010				2009				2009(1)				2008				2007				2006				2005
		(Dollars in thousands, except per share amounts)
Summary of Earnings:
Total interest income		$	14,336			$	15,864			$	30,490			$	32,901			$	35,654			$	33,040			$	28,359
Total interest expense			5,068				5,151				10,100				12,467				14,449				12,505				10,103
Net interest income			9,268				10,713				20,390				20,434				21,205				20,535				18,256
Provision for loan losses			1,300				1,090				17,430				1,760				525				890				782
Net interest income after provision for loan losses			7,968				9,623				2,960				18,674				20,680				19,645				17,474
Total non-interest income			2,327				2,896				6,517				3,961				3,543				3,408				3,884
Total non-interest expense			8,720				9,355				18,968				16,317				15,420				14,829				14,897
Income (loss) before income taxes			1,575				3,164				(9,491	)			6,318				8,803				8,224				6,461
Income tax expense (benefit)			(765	)			174				(4,921	)			618				1,903				1,874				1,251
Net income (loss)			2,340				2,990				(4,570	)			5,700				6,900				6,350				5,210
Per Common Share:
Basic earnings per share		$	1.36			$	1.73			$	(2.65	)		$	3.26			$	3.87			$	3.43			$	2.80
Diluted earnings per share			1.36				1.73				(2.65	)			3.26				3.87				3.43				2.80
Cash dividends paid			0.00				0.56				0.98				1.08				1.04				1.00				0.92
Book value			30.60				34.64				29.25				33.41				31.01				29.27				26.86
Statement of Condition (at period end):
Total assets		$	641,765			$	610,813			$	652,153			$	604,041			$	548,987			$	540,404			$	543,577
Loans, net			450,215				504,851				459,482				480,627				466,720				403,639				384,475
Deposits			576,718				538,797				590,783				542,291				491,357				483,442				491,365
Short-term borrowings			—				—				—				—				—				—				—
Long-term and junior subordinated debt			8,000				—				8,000				—				—				—				—
Total stockholders’ equity			53,639				59,458				50,334				57,798				54,373				54,118				49,689
Significant Ratios:
Return on average assets			0.73	%			0.97	%			(0.73	)%			0.98	%			1.24	%			1.17	%			0.97	%
Return on average tangible assets			0.73				0.97				(0.73	)			0.98				1.24				1.17				0.97
Return on average equity			9.19				10.21				(7.84	)			10.10				12.94				12.18				10.68
Return on average tangible common equity			9.19				10.21				(7.84	)			10.10				12.94				12.18				10.68
Dividend payout ratio			—				32.27				n/m				33.09				26.81				29.18				32.84

		Six Months
		Ended June 30,								Year Ended December 31,
		2010				2009				2009(1)				2008				2007				2006				2005
		(Dollars in thousands, except per share amounts)
Capital Ratios:
Average equity to average assets			7.97	%			9.55	%			9.37	%			9.73	%			9.62	%			9.62	%			9.13	%
Leverage ratio			8.02				9.32				7.90				9.62				9.54				9.74				9.04
Tangible equity/tangible assets (period end)			8.17				9.56				7.54				9.43				9.75				9.84				8.96
Tangible common equity/tangible assets (period end)			8.17				9.56				7.54				9.43				9.75				9.84				8.96
Asset Quality Ratios:
Non-performing loans/total loans			4.13	%			4.17	%			5.23	%			4.92	%			1.61	%			0.56	%			1.01	%
Non-performing loans + OREO/total loans + OREO			5.41				4.49				5.86				4.99				1.63				0.65				1.10
Non-performing assets/total assets			3.98				3.77				4.32				4.01				1.40				0.49				0.79
Allowance for loan losses/total loans			3.21				0.18				3.65				1.08				0.98				1.09				1.06
Allowance for loan losses/non-performing loans			77.73				28.25				69.99				21.98				61.11				192.66				104.98
Net loan charge-offs (annualized)/average loans			1.64				0.13				1.02				0.23				0.07				0.14				0.13

 

In addition to the other information contained in this proxy statement/prospectus, or that we incorporate by reference in this proxy statement/prospectus, you should carefully consider the following risk factors in deciding whether to vote in favor of the merger proposal and the adjournment proposal.

 

Risks Specifically Related to the Merger

 

Because the market price of FNB common stock may fluctuate, our shareholders cannot be certain of the market value of the FNB common stock that they will receive upon the merger.

 

Upon completion of the merger, each share of our common stock will become the right to receive 3.4545 shares of FNB common stock and $10.00 in cash. Any change in the price of FNB common stock prior to the merger will affect the market value of the FNB common stock that you will receive upon the merger. Stock price changes may result from a variety of factors, including general market and economic conditions, changes in FNB’s businesses, operations and prospects and regulatory considerations.

 

The prices of FNB common stock and our common stock at the closing of the merger may vary from their respective prices on the date the merger agreement was executed, on the date of this proxy statement/prospectus and on the date of our special meeting. As a result, the value represented by the exchange ratio will also vary. For example, based on the range of closing prices of FNB common stock during the period from August 6, 2010, the last full trading day before public announcement of the merger, through          , 2010, the last practicable full trading day prior to the date we printed and mailed this proxy statement/prospectus, the exchange ratio represented a value ranging from a high of $      on          , 2010 to a low of $      on          , 2010 for each share of our common stock. Because the date FNB and we expect to complete the merger will be later than the date of our special meeting, at the time of our special meeting our shareholders will not know what the market value of FNB’s common stock will be upon completion of the merger.

 

FNB may encounter integration difficulties or may fail to realize the anticipated benefits of the merger.

 

In determining that the merger was in the best interests of FNB and CBI, our respective boards of directors considered that enhanced earnings may result from the consummation of the merger, including the reduction of duplicate costs, improved efficiency and cross-marketing opportunities. The success of the merger will depend, in part, on the ability of the combined company to realize the anticipated benefits of the merger. The combined companies may not realize the anticipated benefits at all and such benefits may take longer to realize than FNB anticipates. Failure to achieve the anticipated benefits of the merger as anticipated could result in increased costs and decreases in the revenues of the combined company.

 

FNB and we may not be able to integrate our respective operations without encountering difficulties, including, without limitation, the loss of key employees and customers, the disruption of our respective ongoing businesses or possible inconsistencies in standards, controls, procedures and policies.

 

If FNB and we do not complete the merger, FNB and we will have incurred substantial expenses without realizing the expected benefits of the merger.

 

FNB and we have incurred substantial expenses in connection with the merger described in this proxy statement/prospectus. The completion of the merger depends on the satisfaction of specified conditions and the receipt of regulatory approvals. If FNB and we do not complete the merger, each of us would have to recognize these expenses currently while FNB and we would not have realized the expected benefits of the merger.

 

The merger agreement limits our ability to pursue alternatives to the merger.

 

The merger agreement contains provisions that, subject to limited exceptions, limit our ability to discuss, facilitate or enter into agreements with third parties to acquire us. If we avail ourselves of those limited exceptions, we will be obligated to pay FNB a break-up fee of $2,800,000 if FNB or we terminate the merger agreement in specified circumstances. From our perspective, these provisions could discourage a potential competing acquiror that might have an interest in acquiring us from proposing or considering an acquisition of

us even if that potential acquiror were prepared to pay a higher price to our shareholders than the merger consideration our shareholders will receive pursuant to the merger agreement.

 

Some of our directors and executive officers have interests in the merger that may differ from the interests of our shareholders including, if the merger is completed, the receipt of financial and other benefits.

 

The executive officers of CBI and FNB negotiated the terms of the merger agreement, the CBI and FNB boards of directors approved the merger agreement and our board of directors recommends that you vote to adopt the merger agreement and approve the adjournment proposal. In considering these facts and the other information we have included in this proxy statement/prospectus or incorporated by reference in this proxy statement/prospectus, you should be aware that certain of our directors and executive officers have economic interests in the merger other than their interests as shareholders. For example, some of our executive officers, one of whom is also a director, are parties to employment agreements with us that provide, among other things, cash payments following a change of control, coupled with a termination of employment without cause after we and FNB complete the merger.

 

Certain events could occur that would prevent counsel from issuing the tax opinions that are conditions precedent to the completion of the merger.

 

The issuance of tax opinions that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Code are conditions precedent to the completion of the merger. These opinions can only be issued if, among other things, the FNB common stock received in the merger by our shareholders has a value in the aggregate as measured based on the $8.50 per share closing price of FNB common stock on the NYSE on August 6, 2010, the last business day before the business day on which FNB and we signed the merger agreement, that is at least 40% of the total consideration paid for all of our shares in the merger. Various factors will impact a determination that the FNB common stock issued in the merger to our shareholders has a value in the aggregate equal to at least 40% of the total consideration delivered upon the merger in exchange for shares of our common stock, including:

 

 

Risks Related to Owning FNB Common Stock

 

The combined company’s status as a holding company makes it dependent on dividends from its subsidiaries to meet its obligations.

 

The combined company will be a holding company and will conduct almost all of its operations through its subsidiaries. The combined company will not have any significant assets other than the stock of its subsidiaries and approximately $73 million in cash as of June 30, 2010. Accordingly, the combined company will depend on dividends from its subsidiaries to meet its obligations. The combined company’s right to participate in any distribution of earnings or assets of its subsidiaries is subject to the prior claims of creditors of such subsidiaries. Under federal law, FNB Bank is limited in the amount of dividends it may pay to FNB without prior regulatory approval. Also, bank regulators have the authority to prohibit FNB Bank from paying dividends if the bank regulators determine that FNB Bank is in an unsound or unsafe condition or that the payment would be an unsafe and unsound banking practice.

 

Interest rate volatility could significantly harm the combined company’s business.

 

The combined company’s results of operations will be affected by the monetary and fiscal policies of the federal government. A significant component of the combined company’s earnings will consist of its net

interest income, which is the difference between the income from interest-earning assets, such as loans, and the expense of interest-bearing liabilities, such as deposits. A change in market interest rates could adversely affect the combined company’s earnings if market interest rates change such that the interest the combined company pays on deposits and borrowings increases faster than the interest it collects on loans and investments. Consequently, the combined company, along with other financial institutions generally, will be sensitive to interest rate fluctuations.

 

Recently enacted legislative reforms and future regulatory reforms required by such legislation could have a significant adverse impact on FNB’s business, financial condition and results of operations.

 

On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, became effective. The Dodd-Frank Act will have a broad impact on the financial services industry, including significant regulatory and compliance changes. Many of the requirements the Dodd-Frank Act establishes are dependent upon implementing regulations over the course of several years. Given the uncertainty associated with the manner in which the federal banking agencies may implement the provisions of the Dodd-Frank Act, the full extent of the impact such requirements will have on FNB’s operations is unclear at the date of this proxy statement/prospectus. The changes resulting from the Dodd-Frank Act may impact the profitability of business activities, require changes to certain business practices, impose more stringent capital, liquidity and leverage requirements or otherwise adversely affect the business of FNB. In particular, the potential impact of the Dodd-Frank Act on FNB’s operations and activities, both currently and prospectively, include, among other potential effects, the following matters:

 

 

Further, FNB will have to invest significant management attention and resources to evaluate and make any changes necessary to comply with new statutory and regulatory requirements under the Dodd-Frank Act. Failure to comply with the new requirements may negatively impact FNB’s results of operations and financial condition. While FNB cannot predict what effect any presently contemplated or future changes in the laws or regulations or their interpretations would have, these changes could be materially adverse to FNB’s shareholders.

 

FNB’s expenses have increased and may continue to increase as a result of increases in FDIC insurance premiums.

 

Under the Federal Deposit Insurance Act, as amended by the Dodd-Frank Act, absent extraordinary circumstances, the FDIC must establish and implement a plan to restore the deposit insurance reserve ratio, or the reserve ratio, to 1.15% of insured deposits at any time that the reserve ratio falls below 1.15%. If additional bank failures continue to occur, it will result in continued charges against the deposit insurance fund. The FDIC has implemented a restoration plan that changes both its risk-based assessment system and its base assessment rates. As part of this plan, the FDIC imposed a special assessment in 2009. The recently enacted Dodd-Frank Act provides for a new minimum reserve ratio of not less than 1.35% of estimated insured deposits and requires that the FDIC take steps necessary to attain this 1.35% ratio by September 30, 2020. We expect that assessment rates may continue to increase in the near term due to the significant cost of

bank failures, the relatively large number of troubled banks and the requirement that the FDIC increase the reserve ratio. Any increase in assessments could adversely impact FNB’s future earnings.

 

The combined company’s results of operations will be significantly affected by the ability of its borrowers to repay their loans.

 

Lending money is an essential part of the banking business. However, borrowers do not always repay their loans. The risk of non-payment is affected by:

 

 

Generally, commercial/industrial, construction and commercial real estate loans present a greater risk of non-payment by a borrower than other types of loans. In addition, consumer loans typically have shorter terms and lower balances with higher yields compared to real estate mortgage loans, but generally carry higher risks of default. Consumer loan collections depend on the borrower’s continuing financial stability, and thus are more likely to be affected by adverse personal circumstances. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount that can be recovered on these loans.

 

The combined company’s financial condition and results of operations would be adversely affected if its allowance for loan losses were not sufficient to absorb actual losses.

 

There is no precise method of estimating loan losses. The combined company can give no assurance that its allowance for loan losses is or will be sufficient to absorb actual loan losses. Excess loan losses could have a material adverse effect on the combined company’s financial condition and results of operations. FNB seeks to maintain an appropriate allowance for loan losses to provide for estimated losses in its loan portfolio. FNB periodically determines the amount of its allowance for loan losses based upon consideration of several factors, including:

 

 

The combined company’s financial condition may be adversely affected if it is unable to attract sufficient deposits to fund its anticipated loan growth.

 

The combined company will fund its loan growth primarily through deposits. To the extent that the combined company is unable to attract and maintain sufficient levels of deposits to fund its loan growth, it would be required to raise additional funds through public or private financings. FNB can give no assurance that it would be able to obtain these funds on terms that are attractive to it.

 

The combined company could experience significant difficulties and complications in connection with its growth and acquisition strategy.

 

FNB has grown significantly over the last few years and intends to seek to continue to grow by acquiring financial institutions and branches as well as non-depository entities engaged in permissible activities for its

financial institution subsidiaries. However, the market for acquisitions is highly competitive. The combined company may not be as successful in identifying financial institutions and branch acquisition candidates, integrating acquired institutions or preventing deposit erosion at acquired institutions or branches as it currently anticipates.

 

As part of this acquisition strategy, the combined company may acquire additional banks and non-bank entities that it believes provide a strategic fit with its business. To the extent that the combined company is successful with this strategy, it cannot assure you that it will be able to manage this growth adequately and profitably. For example, acquiring any bank or non-bank entity will involve risks commonly associated with acquisitions, including:

 

 

In addition to acquisitions, the combined company may expand into additional communities or attempt to strengthen its position in its current markets by undertaking additional de novo branch openings. Based on its experience, FNB believes that it generally takes up to three years for new banking facilities to achieve operational profitability due to the impact of organizational and overhead expenses and the start-up phase of generating loans and deposits. To the extent that the combined company undertakes additional de novo branch openings, it is likely to continue to experience the effects of higher operating expenses relative to operating income from the new banking facilities, which may have an adverse effect on its net income, earnings per share, return on average shareholders’ equity and return on average assets.

 

The combined company may encounter unforeseen expenses, as well as difficulties and complications in integrating expanded operations and new employees without disruption to its overall operations. Following each acquisition, the combined company must expend substantial resources to integrate the entities. The integration of non-banking entities often involves combining different industry cultures and business methodologies. The failure to integrate successfully the entities the combined company acquires with its existing operations may adversely affect its results of operations and financial condition.

 

The combined company could be adversely affected by changes in the law, especially changes in the regulation of the banking industry.

 

The combined company and its subsidiaries will operate in a highly regulated environment and are subject to supervision and regulation by several governmental regulatory agencies, including the Federal Reserve Board, the OCC and the FDIC. Regulations are generally intended to provide protection for depositors, borrowers and other customers rather than for investors. FNB is subject to changes in federal and state law, regulations, governmental policies, tax laws and accounting principles. Changes in regulations or the regulatory environment could adversely affect the banking industry as a whole and could limit FNB’s growth and the return to investors by restricting such activities as:

 

 

 

Future legislation may change present capital requirements, which could restrict the combined company’s activities and require the combined company to maintain additional capital.

 

In addition, on September 12, 2010, the Group of Governors and Heads of Supervisors of the Basel Committee on Banking Supervision, the oversight body of the Basel Committee, published its “calibrated” capital standards for major banking institutions, or Basel III. When fully phased-in by January 1, 2019, banking institutions will need to maintain heightened Tier 1 common equity, Tier 1 capital and total capital ratios, as well as maintain a “capital conservation buffer.” The Tier 1 common equity and Tier 1 capital ratio requirements will phase-in incrementally between January 1, 2013 and January 1, 2015. The deductions from common equity made in calculating Tier 1 common equity, in the case of, for example, mortgage servicing assets, deferred tax assets and investments in unconsolidated financial institutions, will phase-in incrementally over a four-year period commencing on January 1, 2014. The capital conservation buffer will phase-in incrementally between January 1, 2016 and January 1, 2019.

 

The Basel Committee also announced that a “countercyclical buffer” of 0% to 2.5% of common equity or other fully loss-absorbing capital will be implemented according to national circumstances as an “extension” of the conservation buffer. The publication did not address the Basel Committee’s two liquidity measures initially proposed in December 2009 and amended in July 2010 — the Liquidity Coverage Ratio and Net Stable Funding Ratio — other than to state that the Liquidity Coverage Ratio will be introduced on January 1, 2015 and the Net Stable Funding Ratio will be significantly revised and become a minimum standard by January 1, 2018. The G20 leaders will consider the final package of Basel III reforms in November 2010, subject to adoption by individual member nations, including the United States. The ultimate impact on FNB of the new capital and liquidity standards will depend on a number of factors, including the treatment and implementation by the federal banking regulators.

 

The combined company’s results of operations could be adversely affected due to significant competition.

 

The combined company may not be able to compete effectively in its markets, which could adversely affect the combined company’s results of operations. The banking and financial services industry in each of the combined company’s market areas is highly competitive. The competitive environment is a result of:

 

 

The combined company will compete for loans, deposits and customers with various bank and non-bank financial service providers, many of which are larger in terms of total assets and capitalization, have greater access to the capital markets and offer a broader array of financial services than the combined company will have. Competition with such institutions may cause the combined company to increase its deposit rates or decrease its interest rate spread on loans it originates.

 

The combined company’s anticipated future growth may require it to raise additional capital in the future, but that capital may not be available when needed.

 

Federal and state regulatory authorities will require the combined company to maintain adequate levels of capital to support the combined company’s operations. The combined company will be “well capitalized” under applicable regulations. FNB and we anticipate that the combined company’s current capital resources will satisfy applicable capital requirements for the foreseeable future. The combined company may at some point, however, need to raise additional capital to support continued growth, both internally and through acquisitions.

The combined company’s ability to raise additional capital, if needed, will depend on conditions in the capital markets at that time, which are outside the combined company’s control, and on the combined company’s financial performance. Accordingly, the combined company cannot assure you that its ability to expand its operations through internal growth and acquisitions will not be materially impaired.

 

Adverse economic conditions in FNB’s market area may adversely impact its results of operations and financial condition.

 

FNB has conducted a substantial portion of its historical business in central and western Pennsylvania and eastern Ohio, which are slower growth markets than other areas of the United States. As a result, FNB Bank’s loan portfolio and results of operations may be adversely affected by factors that have a significant impact on the economic conditions in this market area. The local economies of this market area are less robust than the economy of the nation as a whole and may not be subject to the same fluctuations as the national economy. Adverse economic conditions in FNB’s market area, including the loss of certain significant employers, could reduce its growth rate, affect its borrowers’ ability to repay their loans and generally affect FNB’s financial condition and results of operations. Furthermore, a downturn in real estate values in FNB Bank’s market area could cause many of its loans to become inadequately collateralized.

 

Certain provisions of FNB’s articles of incorporation and bylaws and the FBCA may discourage takeovers.

 

FNB’s articles of incorporation and bylaws contain certain anti-takeover provisions that may discourage or may make more difficult or expensive a tender offer, change in control or takeover attempt that is opposed by FNB’s board of directors. In particular, FNB’s articles of incorporation and bylaws:

 

 

Under the FBCA, approval of a business combination with another corporation whose shareholders own 10% or more of the voting shares of that corporation requires the affirmative vote of holders of at least two-thirds of the voting shares not owned by such shareholders, unless a majority of the corporation’s disinterested directors approves the merger. In addition, the FBCA generally provides that shares of a corporation acquired in excess of certain specified thresholds will not possess any voting rights unless a majority vote of the corporation’s disinterested shareholders approves the voting rights.

 

These provisions of FNB’s articles of incorporation and bylaws and under the FBCA could discourage potential acquisition proposals and could delay or prevent a change in control, even though a majority of FNB’s shareholders may consider such proposals desirable. Such provisions could also make it more difficult for third parties to remove and replace the members of FNB’s board of directors. Moreover, these provisions could diminish the opportunities for shareholders to participate in certain tender offers, including tender offers at prices above the then-current market price of FNB’s common stock, and may also inhibit increases in the trading price of FNB’s common stock that could result from takeover attempts.

 

This proxy statement/prospectus contains a number of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding the financial condition, results of operations, earnings outlook, business and prospects of FNB and us, and the potential combined company, as well as statements applicable to the period following the completion of the merger. You can find many of these statements by looking for words such as “plan,” “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” “potential,” “possible” or other similar expressions.

 

These forward-looking statements involve certain risks and uncertainties. The ability of either FNB or us to predict results or the actual effects of our plans and strategies, particularly after the merger, is inherently uncertain. Accordingly, actual results may differ materially from anticipated results. Some of the factors that may cause actual results or earnings to differ materially from those contemplated by the forward-looking statements include, but are not limited to, those discussed under “Risk Factors Relating to the Merger” beginning on page 14, as well as the following factors:

 

 

Because these forward-looking statements are subject to assumptions and uncertainties, actual results may differ materially from those expressed in or implied by these forward-looking statements. We caution you not to place undue reliance on these statements, which speak only as of the date of this proxy statement/prospectus or as of the date of any document incorporated by reference in this proxy statement/prospectus.

 

We expressly qualify in their entirety all forward-looking statements concerning the merger or other matters addressed in this proxy statement/prospectus and attributable to FNB or us or any person acting on their or our behalf by the cautionary statements contained or that we refer to in this section. Unless required by applicable law or regulation, FNB and we undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this proxy statement/prospectus or to reflect the occurrence of unanticipated events.

 

We also make reference to the “Risk Factors Relating to the Merger” portion of this proxy statement/prospectus. We recommend that you read this information carefully for potential risks that relate to the merger FNB and we propose.

 

This section contains information for our shareholders about the special meeting of shareholders we have called to consider adoption of the merger agreement and approval of the adjournment proposal.

 

We are furnishing this proxy statement/prospectus to the holders of our common stock as of the record date for use at our special meeting and any adjournment or postponement of our special meeting.

 

We will hold our special meeting on          , 2010, at   a.m., prevailing time, at Elk Mountain Ski Resort, Route 374, Union Dale, Pennsylvania, subject to any adjournment or postponement of our special meeting.

 

The purpose of our special meeting is to consider and vote upon:

 

 

Our shareholders must adopt Proposal No. 1 for the merger to occur. If our shareholders do not approve this proposal, our merger with FNB will not occur.

 

As of the date of this proxy statement/prospectus, our board of directors is unaware of any other matter, other than as set forth above, which a shareholder may present for action at our special meeting. If a shareholder properly presents another matter, the proxies will vote in accordance with their judgment with respect to any such other matter.

 

Our board of directors has fixed the close of business on          , 2010 as the record date for the determination of holders of our common stock entitled to notice of, and to vote at, our special meeting and any adjournment or postponement of our special meeting.

 

On the record date, we had 1,722,923 issued and outstanding shares of common stock that were entitled to vote at our special meeting, held by approximately 730 holders of record. Each share of our common stock is entitled to cast one vote on all matters that are properly submitted to our shareholders at our special meeting.

 

The presence, in person or by properly executed proxy, of the holders of at least a majority of our outstanding shares of common stock on the record date is necessary to constitute a quorum at our special meeting. We will count abstentions for the purpose of determining whether a quorum is present. A quorum must be present in order for the votes on the merger proposal and the adjournment proposal to occur.

 

Based on the number of shares of our common stock issued and outstanding as of the record date,           shares of our common stock must be present in person or represented by proxy at our special meeting to constitute a quorum, although adoption of the merger agreement requires the affirmative vote of not less than           of our outstanding shares of common stock.

 

Adopt the Merger Agreement.  Adoption of the merger agreement requires the affirmative vote of the holders of 75% of our outstanding shares of common stock entitled to vote on adoption of the merger agreement. Accordingly, we urge you to complete, date and sign the accompanying proxy card and return it promptly in the enclosed postage-paid envelope.

 

When considering our board of directors’ recommendation that you vote in favor of adoption of the merger agreement, you should be aware that certain of our executive officers and directors have interests in the merger that may be different from, or in addition to, your and their interests as shareholders. See “The Merger — Interests of Our Directors and Executive Officers in the Merger” beginning on page 44.

 

Discretionary Authority to Adjourn Our Special Meeting.  The affirmative vote of the holders of a majority of the votes cast by the holders of our common stock entitled to vote on the adjournment proposal is required to approve the proposal to grant discretionary authority to adjourn our special meeting if necessary to solicit additional proxies from our shareholders for the merger proposal.

 

As of the record date, our directors and executive officers and their affiliates beneficially owned 235,589 shares of our common stock, or approximately 13.7% of our issued and outstanding common stock entitled to vote at our special meeting. In addition, Joseph P. Moore, Jr. owns 167,830 shares, or approximately 9.8%, of our outstanding common stock entitled to vote at our special meeting. Our officers and directors, together with Mr. Moore, who in the aggregate own 23.5% of our outstanding common stock, have advised us that they will vote FOR adoption of the merger agreement and FOR approval of the adjournment proposal. All of our directors and officers and Joseph P. Moore, Jr. have entered into voting agreements with FNB whereby they agree to vote FOR adoption of the merger agreement.

 

Voting.  You should complete and return the proxy card accompanying this proxy statement/prospectus in order to ensure that we can count your vote at our special meeting and at any adjournment or postponement of our special meeting, regardless of whether you plan to attend our special meeting. If you sign and return your proxy card and do not indicate how you want to vote, we will count your proxy card as a vote in favor of adoption of the merger agreement and in favor of approval of the adjournment proposal.

 

If you hold your shares of our common stock in the name of a bank, broker, nominee or other holder of record, you will receive instructions from the bank, broker, nominee or other holder of record that you must follow in order to vote your shares of our common stock.

 

Revocability.  You may revoke your proxy at any time before we conduct the vote at our special meeting. If you have not voted through a bank, broker, nominee or other holder of record, you may revoke your proxy by:

 

 

However, simply attending our special meeting without voting will not revoke an earlier proxy.

You should address any written notices of revocation and other communications regarding the revocation of your proxy to:

 

Comm Bancorp, Inc.
125 North State Street
Clarks Summit, Pennsylvania 18411
Attention: Scott A. Seasock, Executive Vice President
                    and Chief Financial Officer

 

If you hold your shares of our common stock in the name of a bank, broker, nominee or other holder of record, you should follow the instructions of the bank, broker, nominee or other holder of record regarding the revocation of proxies.

 

The death or incapacity of a shareholder who has executed and returned a proxy card will not revoke that shareholder’s proxy votes unless our corporate secretary receives notice of the death or incapacity of such shareholder before the voting commences at our special meeting.

 

How We Count Proxy Votes.  The proxies will vote all shares of our common stock represented by properly executed proxy cards we receive before the voting commences at our special meeting, and not revoked, in accordance with the instructions indicated on the proxy card.

 

We will count the shares represented by a properly executed proxy card marked “ABSTAIN” as present for purposes of determining the presence of a quorum.

 

Brokers may not vote shares of our common stock that they hold of record for a beneficial owner either for or against adoption of the merger or approval of the adjournment proposal without specific instructions from the beneficial owner of such shares. Therefore, if a broker holds your shares, you must give your broker instructions on how to vote your shares. Abstentions and broker non-votes will have the effect of votes against the merger proposal because such votes will not count for purposes of satisfying the 75% affirmative vote requirement for adoption of the merger agreement.

 

Solicitation.  We will pay for the costs of our special meeting and for the mailing of this proxy statement/prospectus to our shareholders, as well as all other costs we incur in connection with the solicitation of proxies from our shareholders. FNB and we will share equally the cost of printing this proxy statement/prospectus and the filing fees paid to the SEC.

 

In addition to soliciting proxies by mail, our directors, officers and employees may solicit proxies by telephone or in person. We will not specially compensate our directors, officers and employees for these activities. We also intend to request that brokers, banks, nominees and other holders of record solicit proxies from their principals, and we will reimburse the brokers, banks, nominees and other holders of record for certain expenses they incur for those activities.

 

We have retained the firm of Georgeson, Inc. to assist us in the solicitation of proxies. We have agreed to pay Georgeson, Inc. an engagement fee of $6,500 for its services plus $5.00 for each proxy solicitation it makes by a direct telephone call to one of our shareholders.

 

Our board of directors unanimously approved the merger agreement and the transactions the merger agreement contemplates. Based on our reasons for the merger we describe in this proxy statement/prospectus, our board of directors believes that the merger is in our and your best interests. Accordingly, our board of directors unanimously recommends that you vote FOR adoption of the merger agreement and FOR approval

of the adjournment proposal. See “The Merger — Our Reasons for the Merger” beginning on page 32, for a more detailed discussion of our board of directors’ recommendations.

 

If you hold your shares in street name and you want to attend our special meeting, you must bring an account statement or letter from your holder of record showing that you were the beneficial owner of the shares on          , 2010, the record date for our special meeting.

 

If you have questions about the merger or how to submit your proxy card, or if you would like additional copies of this proxy statement/prospectus or the proxy card we have enclosed with this proxy statement/prospectus, please call William F. Farber, Sr., our President and Chief Executive Officer, at (570) 586-0377.

 

FNB

 

F.N.B. Corporation

One F.N.B. Boulevard

Hermitage, Pennsylvania 16148

(724) 981-6000

 

FNB is an $8.8 billion diversified financial services holding company headquartered in Hermitage, Pennsylvania. FNB provides a broad range of financial services to its customers through FNB Bank and its insurance agency, consumer finance, trust company and merchant banking subsidiaries.

 

FNB has 223 banking offices in Pennsylvania and eastern Ohio, a leasing company and maintains eight insurance agency locations. FNB Bank offers the services traditionally offered by full-service commercial banks, including commercial and individual demand and time deposit accounts and commercial, mortgage and individual installment loans. FNB Bank also offers various alternative investment products, including mutual funds and annuities. As of June 30, 2010, FNB Bank had total assets, total liabilities and total shareholders’ equity of approximately $8.8 billion, $7.8 billion and $1.1 million, respectively.

 

Regency Finance, FNB’s consumer finance subsidiary, has 22 offices in Pennsylvania, 16 offices in Ohio and 18 offices in Tennessee. Regency Finance principally makes personal installment loans to individuals and purchases installment sales finance contracts from retail merchants.

 

Another FNB subsidiary, First National Trust Company, a registered investment advisor, provides a broad range of personal and corporate fiduciary services, including the administration of decedent and trust estates. First National Trust Company had approximately $2.2 billion of assets under management as of June 30, 2010.

 

First National Investment Services Company, LLC offers a broad array of investment products and services for wealth management customers through a networking relationship with a brokerage firm. F.N.B. Investment Advisors, Inc., an investment advisor registered with the SEC, offers wealth management customers objective investment programs featuring mutual funds, annuities, stocks and bonds.

 

FNB’s insurance segment operates principally through First National Insurance Agency, LLC, or FNIA. FNIA is a full-service insurance agency offering a broad line of commercial and personal insurance through major carriers to businesses and individuals primarily within FNB’s geographic markets.

 

FNB’s insurance segment also includes a reinsurance subsidiary, Penn-Ohio Life Insurance Company, that underwrites, as a reinsurer, credit life and accident and health insurance sold by FNB’s lending subsidiaries. In addition, FNB Bank owns a direct subsidiary, First National Corporation, a Pennsylvania corporation, that offers title insurance products.

 

F.N.B. Capital Corporation offers subordinated debt and other types of financing options for small- to medium-sized commercial enterprises that need financial assistance beyond the parameters of typical commercial bank lending products.

 

For additional information about FNB, see “Where You Can Find More Information,” beginning on page 77.

CBI

Comm Bancorp, Inc.

125 North State Street

Clarks Summit, Pennsylvania 18411

(570) 586-0377

 

We are a registered bank holding company incorporated in 1983 as a Pennsylvania business corporation and maintain our headquarters in Clarks Summit, Pennsylvania. We have two wholly owned subsidiaries, CBI Bank and Comm Realty Corporation, or Comm Realty. Our business consists primarily of the management and supervision of CBI Bank. Comm Realty holds, manages and sells foreclosed or distressed assets on behalf of CBI Bank. Our principal source of income is dividends paid by CBI Bank. At June 30, 2010, we had approximately:

 

 

CBI Bank is a Pennsylvania banking institution and a member of the Federal Reserve System. The deposits of CBI Bank are insured by the FDIC, subject to applicable limits. CBI Bank is a full-service commercial bank and provides a wide range of products and services, including time and demand deposit accounts, consumer, commercial and mortgage loans and commercial leases to individuals and small- to medium-sized businesses. CBI Bank’s principal market area comprises Lackawanna, Luzerne, Monroe, Susquehanna, Wayne and Wyoming counties which are located in the Northeast corner of Pennsylvania. At June 30, 2010, Community Bank had 15 community banking offices.

 

For additional information about CBI, see “Where You Can Find More Information,” beginning on page 77 of this proxy statement/prospectus.

 

On July 21, 2010, the Dodd-Frank Act became law. The Dodd-Frank Act will have a broad impact on the financial services industry, including significant regulatory and compliance changes including, among other things,

 

 

In addition, the Dodd-Frank Act establishes a new framework for systemic risk oversight within the financial system that will be enforced by new and existing federal regulatory agencies, including the Financial Stability Oversight Council, the Federal Reserve Board, the OCC and the FDIC. The following description briefly summarizes the impact of the Dodd-Frank Act on the operations and activities, both currently and prospectively, of FNB and its subsidiaries.

 

Deposit Insurance.  The Dodd-Frank Act makes permanent the $250,000 deposit insurance limit for insured deposits. Amendments to the Federal Deposit Insurance Act also revise the assessment base against which an insured depository institution’s deposit insurance premiums paid to the FDIC’s Deposit Insurance

Fund, or the DIF, will be calculated. Under the amendments, the FDIC assessment base will no longer be the institution’s deposit base, but rather its average consolidated total assets less its average equity. The Dodd-Frank Act also changes the minimum designated reserve ratio of the DIF, increasing the minimum from 1.15% to 1.35% of the estimated amount of total insured deposits, and eliminating the requirement that the FDIC pay dividends to depository institutions when the reserve ratio exceeds certain thresholds by September 30, 2020. Several of these provisions could increase the FDIC deposit insurance premiums FNB Bank pays. The Dodd-Frank Act also provides that, effective one year after the date of its enactment, depository institutions may pay interest on demand deposits.

 

Trust Preferred Securities.  The Dodd-Frank Act prohibits bank holding companies from including in their regulatory Tier 1 capital hybrid debt and equity securities issued on or after May 19, 2010. Among the hybrid debt and equity securities included in this prohibition are trust preferred securities, which FNB has issued in the past in order to raise additional Tier 1 capital and otherwise improve its regulatory capital ratios. Although FNB may continue to include its existing trust preferred securities as Tier 1 capital, the prohibition on the use of these securities as Tier 1 capital may limit FNB’s ability to raise capital in the future.

 

The Consumer Financial Protection Bureau.  The Dodd-Frank Act creates a new, independent Consumer Financial Protection Bureau, or the Bureau, within the Federal Reserve Board. The Bureau’s responsibility is to establish and implement rules and regulations under certain federal consumer protection laws with respect to the conduct of providers of certain consumer financial products and services. The Bureau has rulemaking authority over many of the statutes that govern products and services banks offer to consumers. In addition, the Dodd-Frank Act permits states to adopt consumer protection laws and regulations that are more stringent than those regulations the Bureau will promulgate and state attorneys general will have the authority to enforce consumer protection rules the Bureau adopts against certain state-chartered institutions. The Dodd-Frank Act and the rules that the federal bank regulatory agencies are required to adopt by the Dodd-Frank Act will restrict, among other things, the amount of interchange fees payable in connection with debit card transactions. Compliance with any such new regulations could increase FNB’s cost of operations and, as a result, could limit FNB’s ability to expand into certain products and services.

 

Increased Capital Standards and Enhanced Supervision.  The Dodd-Frank Act requires the federal banking agencies to establish minimum leverage and risk-based capital requirements for banks and bank holding companies. These new standards will be no less strict than existing regulatory capital and leverage standards applicable to insured depository institutions and may, in fact, become higher once the agencies promulgate the new standards. Compliance with heightened capital standards may reduce FNB’s ability to generate or originate revenue-producing assets and thereby restrict revenue generation from banking and non-banking operations.

 

Transactions with Affiliates.  The Dodd-Frank Act enhances the requirements for certain transactions with affiliates under Section 23A and 23B of the Federal Reserve Act, including an expansion of the definition of “covered transactions,” and an increase in the amount of time for which collateral requirements regarding covered transactions must be maintained.

 

Transactions with Insiders.  The Dodd-Frank Act expands insider transaction limitations through the strengthening of loan restrictions to insiders and the expansion of the types of transactions subject to the various limits, including derivative transactions, repurchase agreements, reverse repurchase agreements and securities lending and borrowing transactions. The Dodd-Frank Act also places restrictions on certain asset sales to and from an insider of an institution, including requirements that such sales be on market terms and, in certain circumstances, receive the approval of the institution’s board of directors.

 

Enhanced Lending Limits.  The Dodd-Frank Act strengthens the existing limits on a depository institution’s credit exposure to one borrower. Federal banking law currently limits a national bank’s ability to extend credit to one person or group of related persons to an amount that does not exceed certain thresholds. The Dodd-Frank Act expands the scope of these restrictions to include credit exposure arising from derivative transactions, repurchase agreements and securities lending and borrowing transactions. It also will eventually prohibit state-chartered banks from engaging in derivative transactions unless the state lending limit laws take into account credit exposure to such transactions.

Corporate Governance.  The Dodd-Frank Act addresses many corporate governance and executive compensation matters that will affect most U.S. publicly traded companies, including FNB and us. The Dodd-Frank Act:

 

 

Many of the requirements the Dodd-Frank Act authorizes will be implemented over time and most will be subject to implementing regulations over the course of several years. While FNB’s current assessment is that the Dodd-Frank Act will not have a material effect on FNB, given the uncertainty associated with the manner in which the federal banking agencies may implement the provisions of the Dodd-Frank Act, the full extent of the impact such requirements may have on FNB’s operations is unclear as of the date of this proxy statement/prospectus. The changes resulting from the Dodd-Frank Act may impact FNB’s profitability, require changes to certain of FNB’s business practices, impose more stringent capital, liquidity and leverage requirements upon FNB or otherwise adversely affect FNB’s business. These changes may also require FNB to invest significant management attention and resources to evaluate and make any changes necessary to comply with new statutory and regulatory requirements. While FNB cannot predict what effect any presently contemplated or future changes in the laws or regulations or their interpretations would have on FNB, FNB does not believe that these changes will have a material adverse effect on FNB.

 

The following discussion contains material information pertaining to the merger. This discussion is subject, and qualified in its entirety by reference, to the merger agreement included as Appendix A to this proxy statement/prospectus. We encourage you to read the merger agreement carefully as well as the discussion in this proxy statement/prospectus.

 

FNB is committed to pursuing several key strategies, including the realization of organic growth and the supplementation of that growth through strategic acquisitions.

 

In approving the merger agreement, FNB’s board of directors and its executive committee considered the following factors as generally supporting its decision to enter into the merger agreement:

 

 

 

The FNB board of directors also considered the fact that the merger will result in a combined entity with assets of approximately $9.6 billion. FNB expects the future growth prospects of our market area to provide sustained business development opportunities in the Pennsylvania counties of Lackawanna, Luzerne, Monroe, Susquehanna, Wayne and Wyoming.

 

The foregoing discussion of the factors considered by the FNB board in evaluating the merger agreement is not intended to be exhaustive, but, rather, includes all material factors the FNB board considered. In reaching its decision to approve the merger agreement and the merger, the FNB board did not quantify or assign relative weights to the factors considered, and individual directors may have given different weights to different factors. The FNB board considered all of the above factors as a whole, and on an overall basis considered them to be favorable to, and support, FNB’s determination to enter into the merger agreement.

 

From time to time, our directors have held discussions to review our business plan, the developing market in which we compete and our strategic alternatives. Over the past three years, our directors have specifically reviewed:

 

 

As a result of all of the above factors, in April 2010, William F. Farber, Sr. suggested to our directors that we engage Sandler O’Neill, investment bankers, to assist our directors in identifying potential banking institutions that might be interested in a business combination with us.

On April 29, 2010, we and Sandler O’Neill entered into an engagement letter for Sandler O’Neill to act as our exclusive financial advisor in connection with our possible sale, merger or other combination with another financial institution. As part of this engagement, Sandler O’Neill recommended the preparation of a confidential memorandum describing our history, business, operations and financial results, for delivery to interested financial institutions.

 

From April 29, 2010 through June 1, 2010, our management, including William F. Farber, Sr., President and Chief Executive Officer, and Scott A. Seasock, Executive Vice President and Chief Financial Officer, compiled preliminary due diligence materials and transmitted those materials to Sandler O’Neill. Messrs. Farber and Seasock then assisted Sandler O’Neill in the preparation of the confidential memorandum to be delivered to potential interested parties.

 

From June 1, 2010 through June 4, 2010, a Sandler O’Neill representative contacted six financial institutions regarding the interest of each institution in a potential business combination with us. During this time period we executed nondisclosure agreements with each of these six financial institutions. On June 4, 2010, Sandler O’Neill sent the confidential information memorandum about us to the six financial institutions that executed the non-disclosure agreements.

 

From June 4, 2010 through June 21, 2010, a Sandler O’Neill representative pursued discussions with the representatives of all six financial institutions and their advisors, where applicable, and Sandler O’Neill provided supplemental due diligence information that we furnished to these financial institutions as each of them requested. On June 21, 2010, we received non-binding indication of interest letters from four of these financial institutions.

 

On June 28, 2010, William F. Farber, Sr. and Scott A. Seasock met with management representatives of the other banking institution to discuss its interest in continued discussions with us.

 

On June 23, 2010, William F. Farber, Sr. and Scott A. Seasock met with management representatives of the other banking institution potentially interested in a business combination with us to discuss their respective interest in continuing discussions with us.

 

On June 24, 2010, our board of directors held a special meeting to review Sandler O’Neill’s presentation of the process, and to review the four indications of interest. At this meeting, the Sandler O’Neill representatives described the process that led to the receipt of indications of interest from the four financial institutions. Sandler O’Neill presented our board of directors with an analysis of each of these institutions and the terms and conditions associated with each indication of interest to acquire us. Moreover, Sandler O’Neill reviewed comparable bank deals and indicated to our board of directors that the potential merger consideration contained in at least two of these indications of interest was financially attractive to our shareholders. Furthermore, Sandler O’Neill suggested that our board of directors select at least two of the four institutions and to continue discussions with those selected institutions that could lead to a definitive written offer for a merger between such institution and us. After a discussion concerning the merits and disadvantages of each indication of interest, our board of directors selected FNB and one other banking institution with which to conduct continued discussions. Furthermore, Mr. Farber indicated that he had received an informal indication of possible interest from a representative of a large super-regional financial institution. Our directors requested that Sandler O’Neill inquire about this possible interest. Sandler O’Neill subsequently reported that this institution had no such interest.

 

On July 6, 2010, William F. Farber, Sr. and Joseph P. Moore, Jr., one of our significant shareholders and a former director, met with management representatives of FNB to discuss FNB’s offer. In addition, beginning on June 29, 2010 through July 1, 2010, FNB representatives performed on-site due diligence at our corporate headquarters. FNB performed additional due diligence both on- and off-site in the period between July 8 and July 25, 2010.

 

From July 13, 2010 through July 15, 2010, and on July 22 and July 23, 2010, the representatives of the other banking institutions performed on-site due diligence at our corporate headquarters.

On July 26, 2010, FNB and the other banking institution submitted revised indications of interest to Sandler O’Neill.

 

On July 28, 2010, William F. Farber, Sr. and Joseph P. Moore, Jr. met again with management representatives of FNB to discuss its interest.

 

On July 30, 2010, our board of directors held an informational meeting to review the offers we received from these two institutions, one of which was from FNB, both of which had completed their respective due diligence investigation of us. The Sandler O’Neill representatives described both of these offers in detail. Our board of directors inquired about the federal income tax consequences of each offer with respect to shareholders; the impact on our employees and customers if one of these institutions acquired us; the dividend payout history of those two offerors; the market for the offerors’ stock; the development of our market with respect to the entry of competing financial institution; the historical financial performance of those two offerors and the potential to offer our customers a wider array of banking products and services, trust services and investment products.

 

After extensive discussion of these factors, our board of directors directed Sandler O’Neill and our legal counsel to negotiate with FNB regarding a definitive merger agreement based upon the terms and conditions contained in FNB’s offer.

 

On August 3, 2010, our management and Sandler O’Neill representatives conducted an on-site due diligence investigation of FNB and FNBPA.

 

On August 9, 2010, our board of directors held a special meeting with Sandler O’Neill and our legal counsel present to review the merger agreement in the form of Appendix A to this proxy statement/prospectus. Legal counsel reviewed the terms and conditions of the merger agreement, copies of which were delivered to the members of our board of directors prior to the special meeting.

 

At this August 9, 2010 special meeting, our board of directors approved the merger agreement with FNB and directed our management to take such steps as it deemed necessary, including holding a special meeting of our shareholders, to consummate the merger. On August 9, 2010, we and FNB publicly announced the merger after the markets closed on that day.

 

At its August 9, 2010 meeting, our board of directors determined that the terms of the merger agreement and the merger with FNB were in our best interests and in the best interests of our shareholders. In making this determination, our board of directors concluded that a merger with FNB was superior to the other alternatives available to us, and our prospects for continuing to operate as an independent, community-focused bank.

 

In the course of reaching its decision to approve the merger agreement, our board of directors consulted with Sandler O’Neill, its financial advisor, and with its legal advisors. Our board of directors considered, among other things, the factors described above and the following other matters:

 

 

 

After deliberating with respect to the proposed merger with FNB, considering, among other things, the matters discussed above and the opinion of Sandler O’Neill referred to above, our board of directors approved the merger agreement and the merger with FNB and recommend unanimously that you vote to adopt the merger agreement.

 

The foregoing discussion of the information and factors our board of directors considered is not intended to be exhaustive but we believe it includes all material factors our board of directors considered. In reaching its determination to approve and recommend adoption of the merger agreement to our shareholders, our board of directors did not assign any relative or specific weights to the foregoing or other factors. Rather, our directors based their recommendation on the totality of the information presented to them. In addition, individual directors may have given differing weights to different factors.

 

There can be no certainty that the benefits of the merger our board of directors anticipates will occur. Actual results may vary materially from those anticipated. For more information on the factors that could

affect actual results, see “Cautionary Statement Regarding Forward-Looking Statements,” at page 21 of this proxy statement/prospectus and “Risk Factors Relating to the Merger,” at page 14 of this proxy statement/prospectus.

 

Opinion of Sandler O’Neill & Partners, L.P..  By letter dated April 29, 2010, we retained Sandler O’Neill to act as our financial advisor in connection with a merger or other acquisition of us. Sandler O’Neill is a nationally recognized investment banking firm whose principal business specialty is financial institutions. In the ordinary course of its investment banking business, Sandler O’Neill is regularly engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions.

 

Sandler O’Neill acted as our financial advisor in connection with the proposed merger and participated in certain of the negotiations leading to the execution of the merger agreement. At the August 9, 2010 meeting at which our board of directors considered and approved the merger agreement, Sandler O’Neill delivered its oral and written opinion to our board of directors, that, as of such date, the merger consideration was fair to the holders of CBI common stock from a financial point of view. We have included the full text of Sandler O’Neill’s opinion as Appendix B to this proxy statement/prospectus. The opinion outlines the procedures Sandler O’Neill followed, the assumptions Sandler O’Neill made, the matters considered Sandler O’Neill and the qualifications and limitations on the review Sandler O’Neill undertook in rendering its opinion. The description of the opinion set forth below is qualified in its entirety by reference to the opinion. We urge our shareholders to read the entire opinion carefully in connection with their consideration of the proposed merger.

 

Sandler O’Neill’s opinion speaks only as of the date of its opinion. Sandler O’Neill directed its opinion to our board of directors and only to the fairness from a financial point of view of the merger consideration our shareholders would receive upon the closing of the merger. It does not address our underlying business decision to engage in the merger or any other aspect of the merger and is not a recommendation to our shareholders as to how our shareholders should vote at the special meeting with respect to the merger or any other matter.

 

In connection with rendering its August 9, 2010 opinion, Sandler O’Neill reviewed and considered, among other things:

 

(i) the merger agreement;

 

(ii) certain publicly available financial statements and other historical financial information of CBI that Sandler O’Neill deemed relevant;

 

(iii) certain publicly available financial statements and other historical financial information of FNB and its subsidiaries that Sandler O’Neill deemed relevant;

 

(iv) internal financial projections for CBI for the years ending December 31, 2010 through 2011 and an estimated long-term growth rate for the years ending December 31, 2012 through December 2014, in each case as provided by senior management of CBI;

 

(v) publicly available consensus earnings estimates for FNB for the years ending December 31, 2010 and 2011 and publicly available median long-term growth rate for the years ending December 31, 2012 through 2014;

 

(vi) the pro forma financial impact of the merger on FNB, based on assumptions relating to merger expenses, purchase accounting adjustments and cost savings as provided by the management of FNB;

 

(vii) the publicly reported historical price and trading activity for CBI’s and FNB’s common stock, including a comparison of certain financial and stock market information for CBI and FNB and similar publicly available information for certain other companies the securities of which are publicly traded;

(viii) the financial terms of certain recent business combinations in the commercial banking industry in the mid-Atlantic states, to the extent publicly available;

 

(ix) the current market environment generally and the commercial banking environment in particular; and

 

(x) such other information, financial studies, analyses and investigations and financial, economic and market criteria as Sandler O’Neill considered relevant. Sandler O’Neill also discussed with certain members of senior management of CBI the business, financial condition, results of operations and prospects for CBI and held similar discussions with certain members of senior management of FNB regarding the business, financial condition, results of operations and prospects of FNB.

 

In performing its review, Sandler O’Neill relied upon the accuracy and completeness of all of the financial and other information that was available to Sandler O’Neill from public sources, that was provided to Sandler O’Neill by CBI and FNB or their respective representatives or that was otherwise reviewed by Sandler O’Neill and Sandler O’Neill has assumed such accuracy and completeness for purposes of rendering its opinion. Sandler O’Neill has further relied on the assurances of management of CBI and FNB that they are not aware of any facts or circumstances that would make any of such information inaccurate or misleading. Sandler O’Neill has not been asked to and has not undertaken an independent verification of any of such information and Sandler O’Neill does not assume any responsibility or liability for the accuracy or completeness thereof. Sandler O’Neill did not make an independent evaluation or appraisal of the specific assets, the collateral securing assets or the liabilities, contingent or otherwise, of CBI and FNB or any of their subsidiaries, or the collectability of any such assets, nor has Sandler O’Neill been furnished with any such evaluations or appraisals. Sandler O’Neill did not make an independent evaluation of the adequacy of the allowance for loan losses of CBI and FNB nor has Sandler O’Neill reviewed any individual credit files relating to loans made by CBI or FNB. Sandler O’Neill assumed, with CBI’s consent, that the respective allowances for loan losses for CBI and FNB are adequate to cover such losses and will be adequate on a pro forma basis for the combined entity.

 

With respect to the internal financial projections provided by senior management of CBI and FNB and the estimated earnings and growth rates discussed with senior management that Sandler O’Neill used in its analyses, CBI and FNB’s management confirmed to Sandler O’Neill that the estimated earnings and growth reflected the best currently available estimates and judgments of management of the future financial performance of CBI and FNB and Sandler O’Neill assumed that such performances would be achieved. Sandler O’Neill expresses no opinion as to such financial projections or the assumptions on which they are based. Sandler O’Neill has also assumed that there has been no material change in CBI’s and FNB’s assets, financial condition, results of operations, business or prospects since the date of the most recent financial statements made available to Sandler O’Neill. Sandler O’Neill has assumed in all respects material to Sandler O’Neill’s analysis that CBI and FNB would remain as going concerns for all periods relevant to Sandler O’Neill’s analyses, that all of the representations and warranties contained in the merger agreement and all related agreements are true and correct, that each party to the merger agreement will perform all of the covenants required to be performed by such party under the merger agreement, that the conditions precedent in the agreements are not waived and that the merger will qualify as a tax-free reorganization for federal income tax purposes with respect to the stock portion of the merger consideration. Finally, with CBI’s consent, Sandler O’Neill has relied upon the advice CBI has received from its legal, accounting and tax advisors as to all legal, accounting and tax matters relating to the merger and the other transactions the merger agreement contemplates.

 

Sandler O’Neill’s opinion is necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to Sandler O’Neill as of, the date of the merger agreement. Events occurring after the date of the merger agreement could materially affect its opinion. Sandler O’Neill has not undertaken to update, revise, reaffirm or withdraw its opinion or otherwise comment upon events occurring after the date of the merger agreement.

 

Sandler O’Neill’s opinion is directed to the board of directors of CBI in connection with its consideration of the merger and does not constitute a recommendation to any shareholder of CBI as to how such shareholder

should vote at any meeting of shareholders called to consider and adopt the merger agreement. Sandler O’Neill’s opinion is directed only to the fairness, from a financial point of view, of the merger consideration receivable upon the merger by the holders of CBI’s common stock and does not address the underlying business decision of CBI to engage in the merger, the relative merits of the merger compared to any other alternative business strategies available to CBI or the effect of any other transaction in which CBI might engage. Sandler O’Neill’s opinion has been approved by Sandler O’Neill’s fairness opinion committee and does not address the amount of compensation to be received in the merger by any CBI officer, director or employee.

 

Summary of Proposal.  Sandler O’Neill reviewed the financial terms of the proposed merger. Using $10.00 per share in cash and an exchange ratio of 3.4545x, Sandler O’Neill calculated an aggregate merger value of $67.8 million and a per share merger value of $39.36. Based upon financial information as of June 30, 2010 or for the twelve-month period ended June 30, 2010, Sandler O’Neill calculated the following merger ratios:

 

Merger Ratios

 

 

 

 

The aggregate merger value of approximately $67.8 million is based upon the offer price per share of $10.00 cash and an exchange ratio of 3.4545x and 1,722,923 CBI common shares outstanding and zero options outstanding.

 

Comparable Company Analysis.  Sandler O’Neill used publicly available information to perform a comparison of selected financial and market trading information for CBI and FNB.

 

Sandler O’Neill also used publicly available information to compare selected financial and market trading information for CBI and a group of financial institutions Sandler O’Neill selected. The CBI peer group consisted of publicly-traded Pennsylvania banks with assets between $500 million and $800 million:

 

 

CBI Comparable Companies

 

 

The analysis compared publicly available financial information for CBI and the mean and median financial and market trading data for the CBI peer group as of and for the last twelve months ended June 30, 2010, except for the financial data and market trading data which is as of August 4, 2010. The table below sets forth the data for CBI and the median data for the CBI peer group as of and for the twelve-month period ended June 30, 2010, with pricing data as of August 6, 2010 for the peer group.

CBI Comparable Company Analysis

 

 

Sandler O’Neill also used publicly available information to compare selected financial and market trading information for FNB and a group of financial institutions Sandler O’Neill selected. The FNB peer group consisted of selected New Jersey, Pennsylvania, Delaware, New York, West Virginia and Ohio banks and thrift institutions that are publicly held with assets between $5 billion and $15 billion with NPAs/Assets less than 3.0%:

 

FNB Comparable Companies

 

 

The analysis compared publicly available financial information for FNB and the mean and median financial and market trading data for the FNB peer group as of and for the twelve months ended June 30, 2010, except for the financial data and market trading data which is as of August 6, 2010. The table below sets forth the data for FNB and the median data for the FNB peer group as of and for the twelve-month period ended June 30, 2010, with pricing data as of August 6, 2010 for the peer group.

FNB’s Comparable Company Analysis

 

 

 

 

Stock Trading History.  Sandler O’Neill reviewed the history of the publicly reported trading prices of CBI’s common stock for the three-year period ended August 6, 2010. Sandler O’Neill also reviewed the history of the reported trading prices of FNB’s common stock for the three-year period ended August 6, 2010. Sandler O’Neill then compared the relationship between the movements in the price of CBI’s common stock against the movements in the prices of the NASDAQ Bank Index, and CBI’s peer group, listed in the “CBI Comparable Companies” above. Sandler O’Neill also compared the relationship between the movements in the prices of FNB’s common stock to movements in the prices of the NASDAQ Bank Index and FNB’s peer group listed in the “FNB Comparable Companies” above.

 

During the three-year period ended August 6, 2010, CBI’s common stock underperformed all of the various indices to which Sandler O’Neill compared it.

 

CBI’s Three-Year Stock Performance

 

 

FNB’s Three-Year Stock Performance

 

 

CBI Net Present Value Analysis.  Sandler O’Neill performed an analysis that estimated the present value per common share of CBI through December 31, 2014, assuming that CBI performed in accordance with the financial projections for 2010 provided by management, and with the financial projections for 2011 through 2014 as discussed with management. To approximate the terminal value of CBI’s common stock at

December 31, 2014, Sandler O’Neill applied price to last twelve months earnings multiples ranging from 10.0x to 15.0x and multiples of tangible book value ranging from 80.0% to 130.0%. The dividend income streams and terminal values were then discounted to present values using different discount rates ranging from 13.0% to 17.0% chosen to reflect different assumptions regarding required rates of return of holders of CBI common stock. In addition, Sandler O’Neill calculated the terminal value of CBI’s common stock at December 31, 2014 using the same range of price to last twelve months earnings multiples (10.0x — 15.0x) applied it to a range of discounts and premiums to management’s budget projections. The range applied to the budgeted net income was 25% under budget to 25% over budget, using a discount rate of 15.0% for the tabular analysis. As illustrated in the following tables, this analysis indicated an imputed range of values per share for CBI’s common stock of $23.25 to $39.36 when applying the price/earnings multiples to the matched budget, $19.40 to $44.89 when applying the price/earnings multiples to the -25% / +25% budget range and $19.44 to $35.18 when applying price/tangible book value 80.0% to 130.0% budget range to the matched budget.

 

Earnings Per Share Multiples of Variable Discount Rates

 

 

Earnings Per Share Multiples/ Variable Budgets