U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
X Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of
1934 For the quarterly period ended June 30, 2000
___Transition report under Section 13 or 15(d) of the Exchange Act For the
transition period from _______________ to ________________
Commission File No. 333-1546
FNB Bancshares, Inc.
(Exact Name of Small Business Issuer as Specified in its Charter)
South Carolina 57-1033165
--------------- ----------
(State of Incorporation) (I.R.S. Employer Identification No.)
P.O.Box 1539, Gaffney, South Carolina 29342
-------------------------------------------
(Address of Principal Executive Offices)
(864) 488 - 2265
(Issuer's Telephone Number, Including Area Code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since
Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 616,338 shares of common
stock, par value $.01 per share, were issued and outstanding as of July 31,
2000.
Transitional Small Business Disclosure Format (check one): Yes No X
-- --
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
FNB Bancshares, Inc.
Consolidated Balance Sheets
Assets June 30, 2000 December 31, 1999
------ ------------- -----------------
(Unaudited) (Audited)
<S> <C> <C>
Cash and Cash Equivalents:
Cash and due from Banks $ 2,445,175 $ 1,512,403
Federal Funds Sold 3,080,000 400,000
------------- -------------
5,525,175 1,912,403
Securities:
Securities held to maturity (estimated market
value of $2,316,047 in 2000 and $2,318,372 in
1999) 2,349,464 2,349,326
Nonmarketable equity securities 100,000 83,700
Loans Receivable 33,102,823 27,830,158
Less Allowance for loan loss (424,105) (429,049)
-------------- --------------
Loans, net 32,678,718 27,401,109
Premises and equipment 2,381,547 2,213,812
Accrued Interest Receivable 252,066 207,676
Other Assets 412,390 1,027,530
------------- -------------
Total Assets $ 43,699,360 $ 35,195,556
============= =============
Liabilities
Deposits:
Non-interest bearing transaction accounts $ 7,764,148 $ 4,565,052
Interest bearing transaction accounts 5,302,174 4,362,742
Savings 4,712,014 4,136,103
Time deposits $100,000 and over 3,056,422 3,334,148
Other time deposits 13,816,820 10,836,919
------------- -------------
34,651,578 27,234,964
Advances from the Federal Home Loan Bank 2,000,000 1,000,000
Federal Funds Purchased 0 0
Securities sold under agreements to repurchase 702,270 746,181
Accrued Interest Payable 67,905 49,745
Other Liabilities 146,585 156,844
------------- -------------
Total Liabilities 37,568,338 29,187,734
------------- -------------
Stockholders' Equity
Preferred stock, $.01 par value; 10,000,000 shares authorized and unissued
Common Stock, $.01 par value; 10,000,000 shares
authorized; 616,338 shares issued 6,163 6,163
Capital surplus 6,112,318 6,112,318
Retained earnings (deficit) 12,541 (110,659)
------------- --------------
Total Stockholders' equity 6,131,022 6,007,822
------------- -------------
Total Liabilities and Stockholders' equity $ 43,699,360 $ 35,195,556
============= =============
</TABLE>
See Accompanying Notes to Financial Statements
2
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION (continued)
Item 1. Financial Statements (continued)
FNB Bancshares, Inc.
Consolidated Statements of Income
For the three months ended June 30
(Unaudited)
2000 1999
---- ----
Interest Income
<S> <C> <C>
Loans, including fees $ 777,835 $ 575,072
Investment securities, taxable 33,564 32,472
Federal funds sold 18,287 34,556
----------- -----------
Total Interest Income 829,686 642,100
----------- -----------
Interest Expense
Time deposits $100,000 and over 42,374 44,517
Other deposits 248,126 178,714
Federal Funds Purchased 222 0
Advances from FHLB 19,231 0
Securities sold under agreement to repurchase 6,027 6,498
----------- -----------
Total Interest Expense 315,980 229,729
----------- -----------
Net Interest Income 513,706 412,371
Provision for loan loss 37,500 47,750
----------- -----------
Net interest income after provision for loan losses 476,206 364,621
----------- -----------
Other income
Service charges on deposit accounts 9,716 9,068
Sold Loan Fees 8,289 9,682
NSF/Overdraft Fees 51,483 33,932
Other service charges, commissions and fees 22,514 15,741
----------- -----------
92,002 68,423
----------- -----------
Other Expense
Salaries and employee benefits 227,824 192,675
Occupancy Expense 36,721 33,354
Furniture and equipment 39,452 35,656
Disposal of Assets 0 0
Office supplies 12,431 10,927
Data Processing 38,479 34,006
Other operating expense 112,058 89,788
----------- -----------
466,965 396,406
----------- -----------
Income before taxes 101,243 36,638
Income tax expense 36,464 12,650
----------- -----------
Net Income $ 64,779 $ 23,988
=========== ===========
Per Share
Average shares outstanding 616,338 616,338
Net income .11 .04
</TABLE>
See Accompanying Notes to Financial Statements
3
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION (continued)
Item 1. Financial Statements (continued)
FNB Bancshares, Inc.
Consolidated Statements of Income
For the six months ended June 30
(Unaudited)
2000 1999
---- ----
Interest Income
<S> <C> <C>
Loans, including fees $ 1,484,511 $ 1,089,840
Investment securities, taxable 67,537 63,980
Federal funds sold 32,847 61,148
------------ -----------
Total Interest Income 1,584,895 1,214,968
------------ -----------
Interest Expense
Time deposits $100,000 and over 83,679 84,144
Other deposits 457,012 337,319
Federal Funds Purchased
802 0
Advances from FHLB 31,259 0
Securities sold under agreement to repurchase 13,239 11,028
----------- -----------
Total Interest Expense 585,991 432,491
----------- -----------
Net Interest Income 998,904 782,477
Provision for loan loss 75,000 86,750
----------- -----------
Net interest income after provision for loan losses 923,904 695,727
----------- -----------
Other income
Service charges on deposit accounts 19,528 16,365
Sold Loan Fees 11,815 67,933
NSF/Overdraft Fees 90,535 63,134
Other service charges, commissions and fees 57,300 33,288
----------- -----------
179,178 180,720
----------- -----------
Other Expense
Salaries and employee benefits 442,643 386,186
Occupancy Expense 71,298 65,190
Furniture and equipment 77,856 71,187
Disposal of Assets 0 45,894
Office Supplies 26,565 23,587
Data Processing 77,749 67,552
Other operating expense 215,305 179,378
----------- -----------
911,416 838,974
----------- -----------
Income before taxes 191,666 37,473
Income tax expense 68,466 12,720
----------- -----------
Net Income $ 123,200 $ 24,753
========== ==========
Per Share
Average shares outstanding 616,338 616,338
Net income .20 .04
</TABLE>
See Accompanying Notes to Financial Statements
4
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION (continued)
Item 1. Financial Statements (continued)
FNB Bancshares, Inc.
Consolidated Statements of Comprehensive Income
For the three months ended June 30
(Unaudited)
2000 1999
---- ----
<S> <C> <C>
Net Income $ 64,779 $ 23,988
Other comprehensive income, net of tax 0 0
Total other comprehensive income 0 0
----------- -----------
Comprehensive income $ 64,779 $ 23,988
=========== ===========
</TABLE>
See Accompanying Notes to Financial Statements
5
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION (continued)
Item 1. Financial Statements (continued)
FNB Bancshares, Inc.
Consolidated Statements of Comprehensive Income
For the six months ended June 30
(Unaudited)
2000 1999
---- ----
<S> <C> <C>
Net Income $ 123,200 $ 24,753
Other comprehensive income, net of tax 0 0
Total other comprehensive income 0 0
----------- -----------
Comprehensive income $ 123,200 $ 24,753
=========== ===========
</TABLE>
See Accompanying Notes to Financial Statements
6
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION (continued)
Item 1. Financial Statements (continued)
FNB Bancshares, Inc.
Consolidated Statements of Changes in Stockholders' Equity
for the period ended June 30, 2000
(Unaudited)
Retained
Common Stock Capital Earnings
Shares Amount Surplus (Deficit) Total
------ ------ ------- --------- -----
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1999 616,338 $ 6,163 $ 6,112,318 $ (110,659) $6,007,822
Net income 0 0 0 123,200 123,200
--------- --------- ------------ ------------ ----------
Balance, June 30, 2000 616,338 $ 6,163 $ 6,112,318 $ 12,541 $6,131,022
========= ========= ============ ============ ==========
</TABLE>
See Accompanying Notes to Financial Statements
7
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION (continued)
Item 1. Financial Statements (continued)
FNB Bancshares, Inc.
Unaudited Statements of Cash Flows
From December 31 to June 30
2000 1999
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income $ 123,200 $ 24,753
Adjustments to reconcile net income to net cash provided by
operating activities
Provision for loan losses 75,000 86,750
Depreciation 87,448 85,912
Accretion and premium amortization (138) 502
Increase in interest receivable (44,390) (50,681)
Increase (decrease) in interest payable 18,160 (9,759)
(Increase) decrease in other assets 615,140 28,414
Increase (decrease) in other liabilities (10,259) (50,600)
------------ ------------
Net cash provided by operating activities 864,161 115,291
Cash flows from investing activities:
Purchase securities held to maturity (16,300) (1,562,602)
Maturity of securities held to maturity 0 1,150,000
Maturity of Time Deposits 0 500,000
Net increase in loans made to customers (5,352,608) (5,804,885)
Net increase in premises and equipment (255,184) (460,240)
------------ ------------
Net cash used by investing activities (5,624,092) (6,177,727)
Cash flows from financing activities:
Net increase in demand deposits, interest bearing
transaction accounts and savings accounts 4,714,439 5,067,449
Net increase in time deposits 2,702,175 1,206,025
Increase in FHLB Advances 1,000,000 0
Net increase (decrease) in Repurchase Agreements
(43,911) (669,543)
------------ ------------
Net cash provided by financing activities 8,372,703 5,603,931
------------ ------------
Net Increase (decrease) in cash and cash equivalents 3,612,772 (458,505)
------------ ------------
Cash and cash equivalents, beginning of period 1,912,403 3,367,765
------------ ------------
Cash and cash equivalents, end of period $ 5,525,175 $ 2,909,260
============ ============
</TABLE>
See Accompanying Notes to Financial Statements
8
<PAGE>
PART I - FINANCIAL INFORMATION (continued)
Item 1. Financial Statements (continued)
FNB Bancshares, Inc.
Notes to Financial Statements
(Unaudited)
Note 1 - Organization and Basis of Presentation
Organization and Consolidation - FNB Bancshares, Inc. a bank holding company
(the "Company") and its subsidiary, First National Bank of the Carolinas (the
"Bank"), provide banking services to domestic markets principally in Cherokee
County, South Carolina. The Bank commenced operations on October 18, 1996. The
consolidated financial statements include the accounts of the parent company and
its wholly-owned subsidiary after elimination of all significant intercompany
balances and transactions.
Basis of Presentation. The accompanying consolidated financial statements have
been prepared in accordance with the requirements for interim financial
statements and, accordingly, they are condensed and omit disclosures which would
substantially duplicate those contained in the most recent annual report to
shareholders. The financial statements for the interim periods are unaudited
and, in the opinion of management, include all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation. The financial
information as of December 31, 1999 has been derived from audited financial
statements as of that date. For further information, refer to the financial
statements and the notes included in FNB Bancshares, Inc.'s 1999 Annual report.
Item 2. Management's Discussion and Analysis of Financial Condition
The following is a discussion of the Company's financial condition as of June
30, 2000 compared to December 31, 1999, and the results of operations for the
three months ended June 30, 2000 compared to the three months ended June 30,
1999 as well as the six months ended June 30, 2000 compared to the six months
ended June 30, 1999. These comments should be read in conjunction with the
Company's condensed consolidated financial statements and accompanying footnotes
appearing in this report.
This report contains "forward-looking statements" relating to, without
limitation, future economic performance, plans and objectives of management for
future operations, and projections of revenues and other financial items that
are based on the beliefs of the Company's management, as well as assumptions
made by and information currently available to the Company's management. The
words "expect," "anticipate," and "believe," as well as similar expressions, are
intended to identify forward-looking statements. The Company's actual results
may differ materially from the results discussed in the forward-looking
statements, and the Company's operating performance each quarter is subject to
various risks and uncertainties that are discussed in detail in the Company's
filings with the Securities and Exchange Commission, including the "Risk
Factors" section in the Company's Registration Statement on Form S-1
(Registration Number 333-1546) as filed with and declared effective by the
Securities and Exchange Commission.
9
<PAGE>
PART I - FINANCIAL INFORMATION (continued)
Item 2. Management's Discussion and Analysis of Financial Condition (continued)
Results of Operations for the quarter ended June 30, 2000 compared to the
quarter ended June 30, 1999:
Net Interest Income
Net interest income for the three month period ended June 30, 2000 was $513,706,
compared to $412,371 for the three month period ended June 30, 1999. Net
interest income for the six month period ended June 30, 2000 was $998,904,
compared to $782,477 for the six month period ended June 30, 1999. The interest
rate spread was 4.31% at June 30, 2000 and 4.30% at June 30, 1999. The increased
income is primarily attributed to growth in the loan portfolio, as the amount of
total loans increased to $33.1 million at June 30, 2000 as compared to $26.1
million at June 30, 1999. The largest component of interest income was interest
on loans, which increased to $777,835 for the three months ended June 30, 2000
as compared to $575,072 for the three months ended June 30, 1999, and $1,484,511
for the six months ended June 30, 2000 as compared to $1,089,840 for the six
months ended June 30, 1999. These increases were primarily attributable to
growth in the Bank's loan portfolio. Interest on investment securities increased
to $33,564 for the three months ended June 30, 2000 as compared to $32,472 for
the three months ended June 30, 1999, and to $67,537 for the six months ended
June 30, 2000 as compared to $63,980 for the six months ended June 30, 1999.
This increase is due primarily to growth in the investment portfolio from
$2,199,291 at June 30, 1999 to $2,349,464 at June 30, 2000. The increases in
interest income were partially offset by increases in interest expense to
$315,980 for the three months ended June 30, 2000 as compared to $229,729 for
the three months ended June 30, 1999, and to $585,991 for the six months ended
June 30, 2000 as compared to $432,491 for the six months ended June 30, 1999.
Provision and Allowance for Loan Losses
The provision for loan losses is the charge to operating earnings that
management feels is necessary to maintain the allowance for possible loan losses
at an adequate level. For the three months ended June 30, 2000, the provision
charged to expense was $37,500 compared to $47,750 charged to expense for the
three months ended June 30, 1999. For the six months ended June 30, 2000, the
provision charged to expense was $75,000 compared to $86,750 charged to expense
for the six months ended June 30, 1999. The loan loss reserve was $424,105 as of
June 30, 2000, or 1.28% of gross loans as compared to $429,049 as of December
31, 1999, or 1.54% of gross loans. The loan portfolio is periodically reviewed
to evaluate the outstanding loans and to measure both the performance of the
portfolio and the adequacy of the allowance for loan losses. This analysis
includes a review of delinquency trends, actual losses, and internal credit
ratings. Management's judgment as to the adequacy of the allowance is based upon
a number of assumptions about future events which it believes to be reasonable,
but which may or may not be accurate. Because of the inherent uncertainty of
assumptions made during the evaluation process, there can be no assurance that
loan losses in future periods will not exceed the allowance for loan losses or
that additional allocations will not be required.
Non-Interest Income
Non-interest income for the three months ended June 30, 2000 was $92,002 as
compared to $68,423 for the three months ended June 30, 1999. Non-interest
income for the six months ended June 30, 2000 was $179,178 as compared to
$180,720 for the six months ended June 30, 1999. Of the amount for three months
ended June 30, 2000; $9,716 was a result of deposit account service charges, and
account maintenance fees; $51,483 was a result of NSF and overdraft fees;
$22,514 was other miscellaneous service charges, and $8,289 was due to sold loan
fees. Of the amount for six months ended June 30, 2000; $19,528 was a result of
deposit account service charges, and account maintenance fees; $90,535 was a
result of NSF and overdraft fees; $57,300 was other miscellaneous service
charges, and $11,815 was due to sold loan fees. Of the sold loan fees in 1999,
$44,250 was due to the sale of one large commercial loan. With the exception of
the large commercial loan sale in 1999, the increase in the other fees is
attributed to overall growth of the deposit portfolio.
10
<PAGE>
PART I - FINANCIAL INFORMATION (continued)
Item 2. Management's Discussion and Analysis of Financial Condition (continued)
Non-Interest Expense
Non-Interest Expense for the three month period ended June 30, 2000 was $466,965
as compared to $396,406 for the three month period ended June 30, 1999. Salaries
and employee benefits comprise $227,824 and $192,675 respectively of this
amount. Depreciation of buildings, furniture and equipment accounted for $43,952
and $44,235 for the three month periods ended June 30, 2000 and June 30, 1999,
respectively. The decrease in depreciation is due to a fluctuating level of the
depreciable asset base which is a result of additions as well as the removal of
some original bank equipment that has reached the end of its depreciable life
during the period. Office Supplies accounted for $12,431 and $10,927 for the
three month periods ended June 30, 2000 and June 30, 1999, respectively. Data
Processing accounted for $38,479 and $34,006 for the three month periods ended
June 30, 2000 and June 30, 1999, respectively. The increases in payroll, office
supplies and data processing expenses are attributed to the growth in the number
of Bank customers and customer accounts.
Non-Interest Expense for the six month period ended June 30, 2000 was $911,416
as compared to $838,974 for the six month period ended June 30, 1999. Salaries
and employee benefits comprise $442,643 and $386,186 respectively of this
amount. Depreciation of buildings, furniture and equipment accounted for $87,448
and $85,912 for the six month periods ended June 30, 2000 and June 30, 1999,
respectively. The slight increase in depreciation is due to a fluctuating level
of the depreciable asset base which is a result of additions as well as the
removal of some original bank equipment that has reached the end of its
depreciable life during the period. Office Supplies accounted for $26,565 and
$23,587 for the six month periods ended June 30, 2000 and June 30, 1999,
respectively. Data Processing accounted for $77,749 and $67,552 for the six
month periods ended June 30, 2000 and June 30, 1999, respectively. The increases
in payroll, office supplies and data processing expenses are attributed to the
growth in the number of Bank customers and customer accounts. Other operating
expenses in 1999 included a one time charge of $45,894 for asset disposal
related to moving from the old main office facility to the new facility in
January 1999.
Income Taxes
The income tax provision for the six months ended June 30, 2000 was $68,466 as
compared to $12,720 for the same period in 1999. The effective tax rate was 36%
at June 30, 2000 and 34% at June 30, 1999. The effective tax rate was 36% for
the quarter ended June 30, 2000 and 35% June 30, 1999.
Assets and Liabilities
During the first six months of 2000, total assets increased $8,503,804 or 24.2%
when compared to December 31, 1999. The primary growth in assets was in loans
with an increase of $5,272,665 or 18.9% since December 31, 1999. Total
liabilities increased $8,380,604 or 28.7% when compared to December 31, 1999.
Within the deposit area, savings accounts, which include money market accounts,
increased 13.9%, interest bearing transaction accounts increased 21.5%,
non-interest bearing transaction accounts increased 70.1%, and time deposits
increased 19.1%. However, this significant growth rate is a reflection of the
fact that the Bank is relatively young, it opened for business on October 18,
1996, and the Company does not expect to maintain or duplicate this growth rate.
The Company's management closely monitors and seeks to maintain appropriate
levels of interest earning assets and interest bearing liabilities so that
maturities of assets are such that adequate funds are provided to meet customer
withdrawals and demand. Management expects asset and liability growth to
continue during the coming months, with the growth tapering off to a slower,
more deliberate and controllable pace over the longer term, and believes capital
should continue to be adequate for the next 12 months.
11
<PAGE>
PART I - FINANCIAL INFORMATION (continued)
Item 2. Management's Discussion and Analysis of Financial Condition (continued)
<TABLE>
<CAPTION>
Loans
Balances within the major loan categories as of June 30, 2000 and December 31,
1999 are as follows:
June 30, 2000 December 31, 1999
------------- -----------------
<S> <C> <C>
Commercial and Industrial $ 6,540,665 $ 5,830,787
Real Estate - Construction 1,041,126 404,305
Real Estate - Other 19,126,524 15,971,529
Installment and consumer credit lines 6,394,508 5,623,537
--------- ---------
$ 33,102,823 $ 27,830,158
============== ===========
Allowance for loan loss, December 31, 1999 $ 429,049
Provision 75,000
Recoveries 3,931
Charge-offs 83,875
Allowance for loan loss, June 30, 2000 $ 424,105
--------------
Gross loans outstanding, December 31, 1999 $27,830,158
--------------
Gross loans outstanding, June 30, 2000 $33,102,823
Nonaccrual Loans, June 30, 2000 $134,794
Allowance for loan losses to loans outstanding, December 31, 1999 1.54%
-----
Allowance for loan losses to loans outstanding, June 30, 2000
1.28%
----
</TABLE>
12
<PAGE>
PART I - FINANCIAL INFORMATION (continued)
Item 2. Management's Discussion and Analysis of Financial Condition (continued)
Deposits
Balances within the major deposit categories as of June 30, 2000 and December
31, 1999 are as follows:
June 30, 2000 December 31, 1999
------------- -----------------
Non-interest bearing demand deposits $ 7,764,148 $ 4,565,052
Interest bearing demand deposits 5,302,174 4,362,742
Savings deposits 4,712,014 4,136,103
Time deposit $100,000 and over 3,056,422 3,334,148
Other Time Deposits 13,816,820 10,836,919
---------- ----------
$34,651,578 $27,234,964
========== ==========
Liquidity
Liquidity needs are met by the Company through scheduled maturities of loans and
investments on the asset side and through pricing policies on the liabilities
side for interest-bearing deposit accounts. The level of liquidity is measured
by the loan-to-total borrowed funds ratio which was 89% at June 30, 2000 and 96%
at December 31, 1999.
Capital Resources
Total shareholders' equity increased $123,200 to $6,131,022 at June 30, 2000.
The increase is attributable to income for the period.
Bank holding companies and their banking subsidiaries are required by banking
regulators to meet certain minimum levels of capital adequacy which are
expressed in the form of certain ratios. Capital is separated into Tier 1
capital (essentially common shareholders' equity less intangible assets) and
Tier 2 capital (essentially the allowance for loan losses limited to 1.25% of
risk weighted assets). The first two ratios, which are based on the degree of
credit risk in the Company's assets, require the weighting of assets based on
assigned risk factors and include off-balance sheet items such as loan
commitments and stand-by letters of credit. The ratio of Tier 1 capital to
risk-weighted assets must be at least 4% and the ratio of total capital (Tier 1
capital plus Tier 2) to risk-weighted assets must be at least 8%. The capital
leverage ratio supplements the risk-based capital guidelines. The leverage ratio
is Tier 1 capital divided by the adjusted quarterly average total assets. Banks
and bank holding companies are required to maintain a minimum leverage ratio of
3.0%.
The following table summarizes the Company's risk-based capital at June 30, 2000
(in thousands):
Shareholders' equity $ 6,131
Less: intangibles 19
--
Tier 1 capital $ 6,112
Plus: allowance for loan losses (1) 411
---
Total Capital $ 6,523
Risk-Weighted assets $ 32,903
Risk based capital ratios
Tier 1 18.58
Total capital 19.83
Leverage ratio 15.43
(1) limited to 1.25% of risk-weighted assets
13
<PAGE>
PART I - FINANCIAL INFORMATION (continued)
Item 2. Management's Discussion and Analysis of Financial Condition (continued)
THE YEAR 2000
Like many financial institutions, we rely upon computers for conducting our
business and for information systems processing. Industry experts were concerned
that on January 1, 2000, some computers would not be able to interpret the new
year properly, causing computer malfunctions. While we have not experienced any
material computer malfunctions to date, there remains a risk that our computers
will be unable to read or interpret data on Year 2000-sensitive dates, including
October 10, 2000. Our regulators have issued guidelines to require compliance
with Year 2000 issues. In accordance with these guidelines, we have developed
and executed a plan to ensure that our computer and telecommunication systems do
not have these Year 2000 problems. We generally rely on software and hardware
developed by independent third parties for our information systems. We believe
that our internal systems and software, including our network connections, are
programmed to comply with Year 2000 requirements, although there is a risk they
may not be. We incurred approximately $40,000 in expenses in 1999 to implement
our Year 2000 plan. Under our plan, we are continuing to monitor the situation
throughout 2000. Based on information currently available, we believe that we
will not incur significant additional expenses in connection with the Year 2000
issue.
The Year 2000 issue may also negatively affect the business of our customers,
but to date we are not aware of any material Year 2000 issues affecting them. We
include Year 2000 readiness in our lending criteria to minimize risk. However,
this will not eliminate the issue, and any financial difficulties that our
customers experience caused by Year 2000 issues could impair their ability to
repay loans to us.
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
-------------------------
Not Applicable
Item 2. Changes in Securities
-----------------------------
Not Applicable
Item 3. Defaults Upon Senior Securities
---------------------------------------
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
-----------------------------------------------------------
The annual meeting of shareholders was held on April 25, 2000 for which there
was only one matter submitted to a vote of security holders.
1. The Company's Bylaws provides that the Board of Directors shall be
divided into three classes with each class to be as nearly equal in
number as possible. The Bylaws also provide that the three classes of
directors are to have staggered terms, so that the terms of only
approximately one-third of the Board members will expire at each annual
meeting of shareholders. The current Class I directors are Barry L.
Hamrick and Harold D. Pennington Jr. The current Class II directors are
Richard D. Gardner, Harold D. Pennington, Sr., and Heyward W. Porter.
The current Class III directors are Haskell D. Mallory, Bill H. Mason,
and V. Stephen Moss. The current terms of the Class II directors
expired at this year's annual meeting held April 25, 2000 therefore
leaving the Class II directors up for reelection. There were 330,676
votes for the reelection of Richard D. Gardner, 0 votes withheld, and
1,000 votes against Mr. Gardner's reelection. There were 330,676 votes
for the reelection of Harold D. Pennington, Sr., 0 votes withheld, and
1,000 votes against Mr. Pennington, Sr.'s reelection. There were
330,676 votes for the reelection of Heyward W. Porter, 0 votes
withheld, and 1,000 votes against Mr. Porter's reelection. The terms of
the Class III directors will expire at the 2001 Annual Shareholders
Meeting, and the terms of the Class I directors will expire at the 2002
Annual Shareholders Meeting.
Item 5. Other Information
-------------------------
None.
Item 6. Exhibits and Report on Form 8-K
---------------------------------------
(a) Exhibits - None.
(b) Reports on Form 8-K - No reports on Form 8-K were filed during the
quarter ended June 30, 2000.
14
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
FNB BANCSHARES, INC.
(Registrant)
Date: July 25, 2000 By: /s/ V. Stephen Moss
------------------------------------------
V. Stephen Moss
President and Chief Executive Officer
By: /s/ John W. Hobbs
------------------------------------------
John W. Hobbs
Principal Accounting and Chief
Financial Officer
15
