This summary highlights selected information from this joint proxy statement/prospectus. While this summary describes the material aspects of the proposals to be voted upon by Omega shareholders and FNB shareholders at their respective special meetings that you should consider in your evaluation of the transactions described in this joint proxy statement/prospectus, the summary does not contain all of the information that is important to you. We encourage you to read carefully this entire joint proxy statement/prospectus and its appendices in order to understand fully the merger. See “Where You Can Find More Information” on page 92. In this summary, we have included page references to direct you to a more detailed description of the matters described in this summary.

 

Throughout this joint proxy statement/prospectus, “Omega” refers to Omega Financial Corporation, “Omega Bank” refers to Omega Bank, Omega’s bank subsidiary, “FNB” refers to F.N.B. Corporation, and “FNB Bank” refers to First National Bank of Pennsylvania, FNB’s bank subsidiary. Also, we refer to the merger between Omega and FNB as the “merger,” and the agreement and plan of merger dated as of November 8, 2007 between Omega and FNB as the “merger agreement.”

 

Omega provided the information contained in this joint proxy statement/prospectus with respect to Omega and FNB provided the information in this joint proxy statement/prospectus with respect to FNB.

 

The Parties

 

FNB and FNB Bank (Page 35)

 

FNB is a $6.1 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 FNB’s insurance agency, consumer finance, trust company and merchant banking subsidiaries. FNB Bank has 155 banking offices in Western Pennsylvania and Eastern Ohio, one loan production office in Pennsylvania, one loan production office in Ohio, one loan production office in Tennessee and five loan production offices in Florida and maintains six insurance agency locations. Regency Finance, FNB’s consumer finance subsidiary, has 22 offices in Pennsylvania, 16 offices in Ohio and 16 offices in Tennessee. Another FNB subsidiary, First National Trust Company, has approximately $1.8 billion of assets under management. FNB Capital Corporation offers financing options for small- to medium-sized businesses that need financial assistance beyond the parameters of typical commercial bank lending products.

 

The principal executive offices of FNB and FNB Bank are located at One F.N.B. Boulevard, Hermitage, Pennsylvania 16148. FNB’s telephone number is (724) 981-6000 and FNB’s website address is www.fnbcorporation.com. The information on FNB’s website is not a part of this joint proxy statement/prospectus.

 

Omega and Omega Bank (Page 35)

 

Omega is a $1.8 billion Pennsylvania business corporation that is registered as a bank holding company and has elected to be a financial holding company under the Bank Holding Company Act of 1956, as amended, or the BHCA. Omega’s principal subsidiary is Omega Bank, a Pennsylvania-chartered banking institution whose deposits are insured by the Federal Deposit Insurance Corporation, or FDIC, up to applicable limits.

 

Omega Bank currently provides retail and commercial banking services through 64 full service offices in Bedford, Blair, Cameron, Centre, Clinton, Huntingdon, Juniata, Luzerne, Lycoming, Mifflin, Northumberland, Snyder and Union counties in northeastern and central Pennsylvania.

 

The principal executive offices of Omega and Omega Bank are located at 366 Walker Drive, State College, Pennsylvania 16801. Omega’s telephone number is (814) 231-7680 and its website address is www.omegafinancial.com. The information on Omega’s website is not a part of this joint proxy statement/prospectus.

The Special Meetings

 

Date, Time, Place and Purpose of the FNB Special Meeting (Page 28)

 

The FNB special meeting will be held at the F.N.B. Technology Center Board Room, 4140 East State Street, Hermitage, Pennsylvania 16148, at 3:30 p.m., prevailing time, on Wednesday, March 19, 2008.

 

At the FNB special meeting, FNB’s shareholders will be asked to:

 

 

Date, Time, Place and Purpose of the Omega Special Meeting (Page 28)

 

The Omega special meeting will be held at the Ramada Inn, 1450 South Atherton Street, State College, Pennsylvania, at 3:00 p.m., prevailing time, on Wednesday, March 19, 2008.

 

At the Omega special meeting, Omega’s shareholders will be asked to:

 

 

Record Date; Quorum; Outstanding Common Stock Entitled to Vote (Page 29)

 

FNB and Omega have established the close of business on January 18, 2008 as the record date for determining holders of shares of FNB and Omega common stock entitled to notice of and to vote at the respective special meetings of the shareholders of FNB and Omega. FNB shareholders will not be entitled to vote at the FNB special meeting if they are not an FNB shareholder of record as of the close of business on January 18, 2008. Omega shareholders will not be entitled to vote at the Omega special meeting if they are not an Omega shareholder of record as of the close of business on January 18, 2008.

 

Each share of FNB common stock and Omega common stock is entitled to one vote. On the record date, 60,532,086 shares of FNB common stock were entitled to vote at the FNB special meeting. On the record date, 12,668,451 shares of Omega common stock were entitled to vote at the Omega special meeting.

 

In the case of both the FNB and the Omega special meetings, the presence, in person or by proxy, of the holders entitled to cast at least a majority of the votes that the holders of their respective common stock issued and outstanding on the record date are entitled to cast is necessary to constitute a quorum at their respective special meetings.

 

All shares of common stock present in person or represented by proxy and entitled to vote at each respective special meeting, no matter how they are voted or whether they abstain from voting, will be counted in determining the presence of a quorum.

If the Omega special meeting is adjourned for one or more periods aggregating at least 15 days because of the absence of a quorum, those shareholders entitled to vote who attend the reconvened meeting, if less than a quorum as determined under applicable law, shall nevertheless constitute a quorum for the purpose of acting upon any matter set forth in Omega’s notice of special meeting.

 

Recommendation of Omega’s and FNB’s Boards of Directors (Page 33)

 

FNB

 

FNB’s board of directors has unanimously determined that the terms of the merger agreement and the merger are fair to and in the best interests of FNB’s shareholders. FNB’s board of directors unanimously recommends that FNB shareholders vote FOR the FNB merger proposal and FOR the FNB adjournment proposal.

 

Omega

 

Omega’s board of directors has unanimously determined that the terms of the merger agreement and the merger are fair to and in the best interests of Omega’s shareholders. Omega’s board of directors unanimously recommends that Omega shareholders vote FOR the Omega merger proposal and FOR the Omega adjournment proposal.

 

Required Vote (Page 30)

 

FNB

 

Under Florida law, FNB’s articles of incorporation and the regulations of the NYSE, the affirmative vote of a majority of the votes cast by all holders of shares of FNB common stock entitled to vote at the FNB special meeting is required to approve the FNB merger proposal. In addition, NYSE regulations require that the total votes cast on the FNB merger proposal must represent over 50% in interest of all FNB shares entitled to vote on such proposal. For NYSE purposes, an abstention will count as a vote cast for purposes of meeting the 50% requirement. Therefore, abstentions will have the legal effect of a vote against the FNB merger proposal.

 

If a holder of FNB common stock fails to vote or fails to direct the holder’s broker how to vote on the FNB merger proposal, then the holder’s shares will not be deemed cast for voting purposes and it will be more difficult for FNB to satisfy the NYSE requirement that the total votes cast on the FNB merger proposal represent over 50% of all shares of FNB common stock entitled to vote on the FNB merger proposal.

 

Under Florida law and FNB’s articles of incorporation, the affirmative vote of the holders of a majority of the votes cast by all holders of shares of FNB common stock entitled to vote at the FNB special meeting is required to approve the FNB adjournment proposal. Abstentions will have no effect on the vote to approve the FNB adjournment proposal.

 

If your FNB shares are held in “street name” by your broker, bank or other nominee, you should instruct your broker how to vote your FNB shares using the instructions provided by your broker. Your broker will not vote your shares on the FNB merger proposal or the FNB adjournment proposal without instructions from you. These “non-voted” shares are not considered votes cast.

 

As of the record date, FNB’s directors and executive officers and their affiliates beneficially owned 966,941 shares of FNB common stock, or approximately 1.6% of the FNB shares entitled to vote at the FNB special meeting.

 

FNB’s board of directors unanimously believes that the merger with Omega is in the best interests of FNB’s shareholders and unanimously recommends that FNB shareholders vote FOR the FNB merger proposal and FOR the FNB adjournment proposal.

Omega

 

Under Pennsylvania law and Omega’s articles of incorporation, the affirmative vote of a majority of the votes cast by all holders of shares of Omega common stock entitled to vote at the Omega special meeting is required to approve the Omega merger proposal and the Omega adjournment proposal.

 

If your Omega shares are held in “street name” by your broker, bank or other nominee, you should instruct your broker how to vote your shares using the instructions provided by your broker. Your broker will not vote your shares on the Omega merger proposal or the Omega adjournment proposal without instructions from you. Under the PBCL, abstentions and broker non-votes are not considered votes cast and therefore will have no effect on the vote and will not be considered in determining whether the Omega merger proposal or the Omega adjournment proposal has received the requisite shareholder vote.

 

As of the record date, Omega directors and executive officers and their affiliates beneficially owned 481,008 shares of Omega common stock, excluding stock options, or approximately 3.8% of the Omega shares entitled to vote at the Omega special meeting. The directors of Omega, who collectively hold approximately 3.3% of Omega’s common stock, excluding stock options, have entered into voting agreements with FNB and agreed to vote FOR the Omega merger proposal. In addition, as of the record date, FNB owned 128,914 shares of Omega common stock, excluding stock options, or approximately 1.0% of the shares entitled to vote at the Omega special meeting, and FNB’s directors and executive officers and their affiliates owned an aggregate of 92 shares of Omega common stock.

 

The Omega board of directors unanimously believes that the merger is in the best interests of Omega’s shareholders and unanimously recommends that Omega shareholders vote FOR the Omega merger proposal and FOR the Omega adjournment proposal.

 

Appraisal Rights (Page 31)

 

Appraisal rights are statutory rights that under certain circumstances enable a shareholder to dissent from an extraordinary corporate transaction, such as a merger, and to demand that the corporation pay the fair value of the shareholder’s shares as determined by a court in a judicial proceeding instead of receiving the consideration offered to shareholders in connection with the extraordinary transaction.

 

FNB

 

Under Florida law, holders of FNB common stock are not entitled to a judicial appraisal of the fair value of their shares of FNB common stock in connection with the FNB merger proposal to be voted upon at the FNB special meeting.

 

Omega

 

Under Pennsylvania law, holders of Omega common stock are not entitled to a judicial appraisal of the fair value of their shares of Omega common stock in connection with the Omega merger proposal to be voted upon at the Omega special meeting.

 

Solicitation (Page 33)

 

FNB and Omega will each pay for the costs of their respective special meetings and for the mailing of this joint proxy statement/prospectus to their respective shareholders. Omega and FNB will share equally the costs of printing this joint proxy statement/prospectus and the filing fee paid to the Securities and Exchange Commission, or SEC. Upon request, FNB or Omega, as applicable, will pay the reasonable expenses incurred by record holders of their respective common stock who are brokers, dealers, banks or voting trustees, or their nominees, for mailing proxy materials to the beneficial owners of the shares they hold of record.

 

In addition to soliciting proxies by mail, the directors, officers and employees of FNB, Omega and their respective subsidiaries may also solicit proxies from their respective shareholders of record in person or by telephone or e-mail, but will not be specially compensated for doing so. FNB has retained the firm of Regan &

Associates, Inc. to assist it in the solicitation of proxies and has agreed to pay Regan & Associates, Inc. $17,500 for its services. Omega has retained the firm of Regan & Associates, Inc. to assist it in the solicitation of proxies and has agreed to pay Regan & Associates, Inc. $12,500 for its services.

 

The Merger

 

Certain Effects of the Merger (Page 65)

 

Upon consummation of the merger:

 

 

Stock Options and Restricted Stock Units (Page 65)

 

The merger agreement provides that, at the effective time of the merger, each outstanding option to purchase Omega common stock will cease to represent a right to acquire Omega common stock and will be converted automatically into a right to acquire that number of shares of FNB common stock equal to the number of shares of Omega common stock subject to the option times 2.022 (the exchange ratio in the merger) at a price equal to the pre-merger exercise price of the option divided by 2.022 (the exchange ratio in the merger).

 

The merger agreement further provides that immediately prior to the effective time of the merger, each unvested outstanding Omega restricted stock unit will vest and, at the effective time of the merger, each holder of an outstanding Omega restricted stock unit will receive 2.022 shares of FNB common stock for each share of Omega common stock subject to such unit.

 

Opinion of FNB’s Financial Advisor in Connection with the Merger (Pages 38 to 44)

 

In connection with the merger, FNB’s board of directors received a written opinion, dated November 8, 2007, from FNB’s financial advisor, UBS Securities LLC, referred to as UBS, as to the fairness, from a financial point of view and as of the date of such opinion, to FNB of the exchange ratio provided for in the merger. The full text of UBS’ written opinion, dated November 8, 2007, is included in this joint proxy statement/prospectus as Appendix B and describes the assumptions made, procedures followed, matters considered and limitations on the review undertaken. UBS’ opinion was provided for the benefit of FNB’s board of directors in connection with, and for the purpose of, its evaluation of the exchange ratio from a financial point of view, does not address any other aspect of the merger and does not constitute a recommendation to any shareholder as to how to vote or act with respect to the merger.

 

Opinion of Omega’s Financial Advisor in Connection with the Merger (Pages 49 to 55)

 

Keefe, Bruyette & Woods, Inc., or KBW, Omega’s financial advisor in connection with the merger, delivered a written fairness opinion to Omega’s board of directors on November 8, 2007, the date the merger agreement was executed, that, as of November 8, 2007, and based upon and subject to the factors and assumptions set forth in its opinion, the exchange ratio in the merger is fair, from a financial point of view, to holders of shares of Omega common stock.

 

Appendix C to this joint proxy statement/prospectus sets forth the full text of the KBW opinion, which sets forth the assumptions KBW considered, the procedures KBW followed, the matters KBW considered and the limitations on the review undertaken by KBW in connection with its opinion. KBW provided its opinion for the information and assistance of Omega’s board of directors in connection with its consideration of the merger. The KBW opinion is not a recommendation as to how an Omega shareholder should vote with respect to the merger or any related matter. Omega encourages its shareholders to read the KBW opinion in its entirety.

 

Interests of Omega’s Directors and Executive Officers in the Merger (Page 58)

 

In considering the recommendation of Omega’s board of directors that Omega shareholders vote FOR the Omega merger proposal and FOR the Omega adjournment proposal, Omega shareholders should be aware that certain executive officers and directors of Omega have interests in the merger that are different from, or in addition to, your interests as an Omega shareholder. These interests relate to or arise from, among other things:

 

 

 

 

 

Conditions to the Merger (Page 71)

 

Currently, FNB and Omega expect to complete the merger early in the second quarter of 2008. However, as more fully described in this joint proxy statement/prospectus and in the merger agreement, the completion of the merger depends on the satisfaction of a number of conditions or, where legally permissible, the waiver of those conditions. These conditions include, among others:

 

 

Neither FNB nor Omega can be certain when, or if, the conditions to the merger will be satisfied or waived, or that the merger will be completed.

 

Termination of the Merger Agreement (Page 72)

 

FNB and Omega may agree to terminate the merger agreement before completing the merger, even after FNB’s and Omega’s shareholders approve the FNB merger proposal and the Omega merger proposal, respectively, if the termination is approved by the board of directors of Omega and the board of directors of FNB.

 

Either FNB or Omega may terminate the merger agreement, even after their respective shareholders approve the respective merger proposals, if certain conditions have not been met, such as:

 

 

FNB may terminate the merger agreement at any time prior to the Omega special meeting if Omega has:

 

 

Omega may terminate the agreement at any time prior to the FNB special meeting if FNB has:

 

 

Except as provided below with respect to termination fees and expenses and the parties’ respective confidentiality obligations in the event the merger agreement is terminated by FNB or Omega, none of the parties will have any liability or obligation other than liabilities or damages incurred by any of them as a result of their willful breach of any of their respective representations, warranties, covenants or agreements contained in the merger agreement.

 

Expenses; Termination Fee (Pages 73 to 74)

 

The merger agreement provides that Omega will pay FNB a break-up fee of $15,000,000 if:

 

 

 

 

The merger agreement also provides that upon termination:

 

 

Material U.S. Federal Income Tax Consequences of the Merger (Page 76)

 

FNB and Omega expect the merger to qualify as a tax-free reorganization for United States federal income tax purposes. In general, a tax-free reorganization means that Omega shareholders will not recognize any gain or loss on the exchange of their common stock for FNB common stock in the merger, except to the extent they receive cash instead of fractional shares.

 

Dividends (Page 64)

 

FNB paid cash dividends on its common stock totaling $0.95 per share for 2007. Based on the share exchange ratio and FNB’s current annual dividend rate of $0.96 per share, holders of Omega common stock would experience an anticipated dividend at an annual rate of $1.94 per Omega share, an increase of $0.70 per Omega share per year. Although FNB has no current plan or intention to change its dividend rate, FNB’s board of directors may, subject to applicable law, change its dividend rate in the future. FNB’s ability to pay dividends on its common stock is subject to various legal and regulatory limitations.

 

Certain Differences in Rights of Shareholders (Page 78)

 

When the merger is completed, the rights of Omega’s shareholders will be governed by Florida law and FNB’s articles of incorporation and bylaws rather than Pennsylvania law and Omega’s articles of incorporation and bylaws.

 

Comparative Market Prices and Dividends (Page 90)

 

FNB common stock is listed on the NYSE under the symbol “FNB”. Prices for Omega common stock are quoted on the Nasdaq Global Select Market under the symbol “OMEF”. The table on page 90 lists the quarterly price range of FNB common stock and Omega common stock since January 1, 2006 as well as the quarterly cash dividends Omega and FNB have paid. The following table shows the closing price of FNB common stock and Omega common stock as reported on November 8, 2007, the last trading day before FNB and Omega announced the merger, and on January 28, 2008, the last practicable trading day before the date of mailing of this joint proxy statement/prospectus. This table also shows the pro forma equivalent value of the merger consideration proposed for each share of Omega common stock, which we calculated by multiplying the closing price of FNB common stock on those dates by 2.022 (the exchange ratio in the merger).

 

 

The market price of FNB common stock may change at any time. Consequently, the total dollar value of the FNB common stock that you will be entitled to receive as a result of the merger may be significantly higher or lower. Omega shareholders are urged to obtain a current market quotation for FNB common stock. No assurance can be given as to the future price of FNB common stock.

 

Recent Developments

 

FNB

 

On January 17, 2008, FNB announced its unaudited results of operations for the year ended December 31, 2007. Summary data is as follows:

 

 

Effective in January 2008, Robert V. New, Jr. took office as a director and president and chief executive officer-elect of FNB. Stephen J. Gurgovits continues as FNB’s chairman of the board and chief executive officer. On April 1, 2008, Mr. New will succeed Mr. Gurgovits as FNB’s chief executive officer, and Mr. Gurgovits will continue as FNB’s chairman of the board.

 

Omega

 

On January 25, 2008, Omega announced its unaudited results of operations for the year ended December 31, 2007. Summary data is as follows:

 

 

Set forth below are highlights from FNB’s consolidated financial data as of and for the years ended December 31, 2002 through 2006 and FNB’s unaudited consolidated financial data as of and for the nine months ended September 30, 2006 and 2007. The results of operations for the nine months ended September 30, 2007 are not necessarily indicative of the results of operations for the full year of 2007. FNB management prepared the unaudited information on the same basis as it prepared FNB’s audited consolidated financial statements. In the opinion of FNB’s management, this information reflects all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of this data for these periods. You should read this information in conjunction with FNB’s consolidated financial statements and related notes included in FNB’s Annual Report on Form 10-K for the year ended December 31, 2006 and FNB’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2007 which are incorporated by reference in this joint proxy statement/prospectus and from which this information is derived. See “Where You Can Find More Information” on page 92.

 

Selected Consolidated Historical Financial Data of FNB

 

 

 

 

Set forth below are highlights from Omega’s consolidated financial data as of and for the years ended December 31, 2002 through 2006 and Omega’s unaudited consolidated financial data as of and for the nine months ended September 30, 2006 and 2007. The results of operations for the nine months ended September 30, 2007 are not necessarily indicative of the results of operations of Omega for the full year of 2007. Omega management prepared the unaudited information on the same basis as it prepared Omega’s audited consolidated financial statements. In the opinion of Omega’s management, this information reflects all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of this data for these periods. You should read this information in conjunction with Omega’s consolidated financial statements and related notes included in Omega’s Annual Report on Form 10-K for the year ended December 31, 2006, and Omega’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2007 that are incorporated by reference in this joint proxy statement/prospectus and from which this information is derived. See “Where You Can Find More Information” on page 92.

 

Selected Consolidated Historical Financial Data of Omega

 

 

The following table sets forth information about FNB’s financial condition and results of operations, including per share data and financial ratios, after giving effect to the merger of Omega with and into FNB. This information is called pro forma financial information in this joint proxy statement/prospectus. The table shows the information as if the Omega merger had become effective on September 30, 2007, in the case of balance sheet data, and on January 1, 2006, in the case of income statement data. This pro forma information assumes that the merger with Omega is accounted for using the purchase method of accounting and represents a current estimate based on available information about FNB’s and Omega’s results of operations. See “Accounting Treatment” on page 74.

 

The pro forma financial information includes adjustments to record the assets and liabilities of Omega at their estimated fair values and are subject to further adjustment as additional information becomes available and as further analyses are completed. This table should be read in conjunction with, and is qualified in its entirety by, the historical financial statements, including the notes thereto, of Omega and FNB incorporated by reference in this joint proxy statement/prospectus. See “Where You Can Find More Information” on page 92.

 

The pro forma financial information, while helpful in illustrating the combined financial condition and results of operations of Omega and FNB once the merger with Omega is completed under a particular set of assumptions, does not reflect the impact of possible revenue enhancements, expense efficiencies and asset dispositions, among other possibilities, and post-merger integration costs that may occur as a result of the merger and, accordingly, does not attempt to predict future results. The pro forma financial information also does not necessarily reflect what the combined historical results of operations of Omega and FNB would have been had they been merged during these periods.

SELECTED CONSOLIDATED UNAUDITED PRO FORMA FINANCIAL INFORMATION

 

 

See Notes to Selected Consolidated Unaudited Pro Forma Financial Information

 

 

See Notes to Selected Consolidated Unaudited Pro Forma Financial Information

 

 

See Notes to Selected Consolidated Unaudited Pro Forma Financial Information

NOTES TO THE SELECTED CONSOLIDATED UNAUDITED PRO FORMA FINANCIAL INFORMATION

 

 

The preceding tables set forth information about FNB’s financial condition and results of operations, including per share data and financial ratios, after giving effect to the merger of Omega with and into FNB. This information is called pro forma financial information in this joint proxy statement/prospectus. The table shows the information as if the merger had become effective on September 30, 2007, in the case of balance sheet data, and on January 1, 2006, in the case of income statement data.

 

The estimated purchase price of $390.8 million for Omega as of the date of the merger agreement is based on the conversion of Omega shares into FNB stock using an exchange ratio of 2.022 to 1.0. The per share price value for FNB common stock was $15.46, which was the average of the closing prices of FNB common stock for the period commencing four trading days before, and ending four trading days after November 8, 2007, the date of the merger agreement.

 

The merger will be accounted for using the purchase method of accounting; accordingly, FNB’s cost to acquire Omega will be allocated to the assets acquired (including identifiable intangible assets) and liabilities assumed from Omega at their respective fair values on the date the merger is completed. This table should be read in conjunction with, and is qualified in its entirety by, the historical financial statements, including the notes thereto, of Omega and FNB incorporated by reference in this joint proxy statement/prospectus. See “Where You Can Find More Information” on page 92.

 

The selected consolidated unaudited pro forma financial information includes estimated adjustments to record the assets and liabilities of Omega at their respective fair values and represents management’s estimates based on available information. The pro forma adjustments included herein may be revised as additional information becomes available and as additional analyses are performed. The final allocation of the purchase price will be determined after the merger is completed and after completion of a final analysis to determine the fair values of Omega’s tangible, and identifiable intangible, assets and liabilities as of the closing date. Accordingly, the final purchase accounting adjustments and integration charges may be materially different from the pro forma adjustments presented in this joint proxy statement/prospectus. Increases or decreases in the fair value of the net assets, commitments, contracts and other items of Omega compared to the information shown in this joint proxy statement/prospectus may change the amount of the purchase price allocated to goodwill and other assets and liabilities and may impact the statement of income due to adjustments in yield and/or amortization of the adjusted assets or liabilities.

 

The selected consolidated unaudited pro forma financial information presented in this joint proxy statement/prospectus does not necessarily indicate the results of operations or the combined financial position that would have resulted had the merger been completed at the beginning of the applicable period presented, does not reflect the impact of possible revenue enhancements, expense efficiencies or asset dispositions, and is not indicative of the results of operations in future periods or the future financial position of the combined company.

 

 

The selected consolidated unaudited pro forma financial information for the merger includes the pro forma balance sheet as of September 30, 2007 assuming the merger was completed on September 30, 2007. The pro forma income statements for the nine months ended September 30, 2007 and the year ended December 31, 2006 were prepared assuming the merger was completed on January 1, 2006.

 

The selected consolidated unaudited pro forma financial information reflects the issuance of 25,282,508 shares of FNB common stock with an aggregate value of $390.8 million and the conversion of approximately 500,794 shares underlying Omega stock options and restricted stock units with a value of approximately $0.5 million at September 30, 2007. All of the Omega stock options are vested and will be converted into FNB stock options and all unvested restricted stock units will vest at the time of the merger. Common stock used in the exchange was valued as discussed in Note 1 above.

The allocation of the purchase price follows (in thousands):

 

 

The pro forma adjustments included in the selected consolidated unaudited pro forma financial information are as follows:

 

(A) Adjustment to write-off historical Omega fair value adjustments.

 

(B) Adjustment to write-off the historical fair value adjustments and record the current fair value of the loan portfolio based on current interest rates. The adjustment will be recognized over the estimated remaining life of the loan portfolio. The impact of the adjustment was to decrease interest income by approximately $0.5 million and $0.6 million for the nine months ended September 30, 2007 and the year ended December 31, 2006, respectively. Adjustment to fair value for loans deemed impaired in accordance with Statement of Position 03-3 has not yet been determined and has not been included in the pro forma adjustments.

 

(C) Adjustment to write off historical Omega intangibles and to record intangible assets (other than goodwill) resulting from the merger based on estimated fair values. Management is studying the nature, amount and amortization method of various possible identified intangibles. The adjustments reflected herein are based on current assumptions and valuations, which are subject to change. For purposes of the pro forma adjustments shown here, the estimated fair value of the intangibles is approximately $39.7 million and consists of a core deposit intangible of $36.1 million, an insurance customer list of $0.8 million and a trust customer list of $2.8 million. FNB estimates that the core deposit intangibles will be amortized on an accelerated basis over ten years and the trust and insurance company lists will be amortized on an accelerated basis over 17 years and 13 years, respectively. Material changes to these estimated fair values and estimated useful lives are possible once FNB’s analyses are completed. The net impact of the adjustment was to increase non-interest expense by approximately $4.7 million and $6.2 million for the nine months ended September 30, 2007 and the year ended December 31, 2006, respectively.

 

(D) Adjustment to write off historical Omega goodwill and record goodwill created as a result of the merger.

 

(E) Adjustment to record the deferred tax liability created as a result of the fair value adjustments using FNB’s statutory tax rate of 35%.

 

(F) Adjustment to fair value of time deposit liabilities based on current interest rates for similar instruments. The adjustment will be recognized over the estimated remaining term of the related deposit liability. The impact of the adjustment was to decrease interest expense by approximately $2.4 million

and $3.3 million for the nine months ended September 30, 2007 and the year ended December 31, 2006, respectively.

 

(G) Adjustment to fair value of outstanding long-term debt instruments. The adjustment will be recognized over the remaining life of the debt instruments. The impact of the adjustment was to decrease interest expense by less than $0.1 million for the nine months ended September 30, 2007 and the year ended December 31, 2006.

 

(H) Adjustment to write-off historical fair value adjustments and record the current fair value of outstanding junior subordinated debt based on current interest rates. The current adjustment will be recognized over the remaining life of the long-term debt instruments. The impact of the adjustment was to decrease interest expense by less than $0.1 million for the nine months ended September 30, 2007 and the year ended December 31, 2006, respectively.

 

(I) Adjustment to reflect the liability for incremental direct costs associated with the merger, net of the tax benefit. These costs include accountant and attorney fees, investment banker services, payout of vendor and employee contracts and severance payments to displaced Omega personnel. These liabilities have been recorded pursuant to EITF 95-3, “Recognition of Liabilities in Connection with a Purchase Business Combination”. The tax benefit of accounting and attorneys fees and investment banker services have not yet been determined.

 

(J) Adjustment to eliminate Omega’s historical shareholders’ equity; the adjustment reflects the issuance of FNB common stock and the conversion of Omega’s stock options into FNB stock options.

 

(K) Adjustment to record the tax effect of the pro forma adjustments using FNB’s statutory tax rate of 35%.

 

(L) Weighted average shares were calculated using the historical weighted average shares outstanding of Omega and FNB, adjusted using the exchange ratio, to the equivalent shares of FNB common stock, for the year ended December 31, 2006 and the nine months ended September 30, 2007. Earnings per share data have been computed based on the combined historical income of Omega and FNB and the impact of purchase accounting adjustments.

 

 

In connection with the merger, a plan is being developed to integrate FNB’s and Omega’s operations. The total integration costs have not yet been determined and have not been included in the pro forma adjustments. The specific details of these plans will continue to be refined over the next several months. Currently, FNB’s merger integration team is assessing the two companies’ operations, including information systems, premises, branch offices, equipment, benefit plans, service contracts, product offerings and personnel to determine optimum strategies to realize additional cost savings.