<PAGE>
FORM 10-Q--QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT of 1934
For the quarterly period ended September 30, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 333-2524
FNB Corporation
(Exact name of registrant as specified in its charter)
Virginia 54-1791618
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer
Identification No.)
105 Arbor Drive, Christiansburg, Virginia 24068
(Address of principal executive offices) (Zip Code)
(540) 382-4951
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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. x Yes No
3,323,800 shares outstanding as of September 30, 1997
<PAGE>
FNB CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 20
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 24
Signatures 25
Index to Exhibits 26
<PAGE>
FNB CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item l. Financial Statements
The financial statements filed as a part of Item 1 of Part I are as follows:
1. Consolidated Balance Sheets as of December 31, 1996 and September 30,
1997 (unaudited);
2. Unaudited Consolidated Statements of Income for the quarter and nine-
month periods ended September 30, 1997 and 1996;
3. Unaudited Consolidated Statements of Cash Flows for the nine-month
periods ended September 30, 1997 and 1996; and,
4. Unaudited Consolidated Statements of Changes in Stockholders' Equity for
the nine-month periods ended September 30, 1997 and 1996.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
FNB Corporation and subsidiaries
September 30, 1997
In Thousands, Except Share and Per Share Data
(Unaudited)
<S> <C>
ASSETS
Cash and due from banks $ 12,496
Federal funds sold 6,500
Securities available-for-sale, at fair value 62,312
Securities held-to-maturity, at amortized cost
(market value $43,487) 42,665
Mortgage loans held for sale 1,023
Loans:
Commercial 57,587
Consumer 65,055
Real estate - commercial 58,083
Real estate - construction 6,722
Real estate - mortgage 96,209
Total loans 283,656
Less unearned income 18
Loans, net of unearned income 283,638
Less allowance for loan losses 4,319
Loans, net 279,319
Bank premises and equipment, net 12,423
Other real estate owned -
Other assets 4,872
Total assets $ 421,610
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand deposits 31,022
Interest-bearing demand deposits 53,666
Savings deposits 47,735
Time deposits 177,209
Certificates of deposit of $100,000 and over 33,666
Total deposits 343,298
Federal funds purchased and securities sold under
agreements to repurchase 6,341
Other borrowed funds 28,750
Other liabilities 2,792
ESOP debt 918
Total liabilities 382,099
Stockholders' equity:
Common stock, $5.00 par value, Authorized 5,000,000
Shares; issued and outstanding 3,323,800 shares 16,619
Surplus 10,782
Unearned ESOP shares (85,552 shares) (1,208)
Retained earnings 13,195
Net unrealized gains (losses) on securities
available-for-sale 123
Total stockholders' equity 39,511
Total liabilities and stockholders' equity $ 421,610
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
FNB Corporation and subsidiaries
December 31, 1996
In Thousands, Except Share and Per Share Data
<S> <C>
ASSETS
Cash and due from banks $ 10,277
Federal funds sold 2,500
Securities available-for-sale, at fair value 54,886
Securities held-to-maturity, at amortized cost
(market value $43,632) 43,089
Mortgage loans held for sale 330
Loans:
Commercial 56,461
Consumer 62,906
Real estate - commercial 52,232
Real estate - construction 4,926
Real estate - mortgage 96,856
Total loans 273,381
Less unearned income 57
Loans, net of unearned income 273,324
Less allowance for loan losses 4,179
Loans, net 269,145
Bank premises and equipment, net 10,283
Other real estate owned 185
Other assets 4,629
Total assets $ 395,324
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand deposits 30,798
Interest-bearing demand deposits 47,603
Savings deposits 47,998
Time deposits 171,003
Certificates of deposit of $100,000 and over 38,000
Total deposits 335,402
Securities sold under agreements to repurchase 4,795
Other borrowed funds 14,404
Other liabilities 3,643
ESOP debt 1,252
Total liabilities 359,496
Stockholders' equity:
Common stock, $5.00 par value. Authorized 5,000,000
shares; issued and outstanding 1,661,900 shares 8,310
Surplus 10,782
Unearned ESOP shares (53,470 shares) (1,511)
Retained earnings 18,285
Net unrealized gains (losses) on securities
available-for-sale (38)
Total stockholders' equity 35,828
Total liabilities and stockholders' equity $ 395,324
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
FNB Corporation and subsidiaries
Quarter and Nine Months Ended September 30, 1997 and 1996
In Thousands, Except Share and Per Share Data
(Unaudited)
Quarter Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 6,951 6,285 19,872 18,480
Interest on securities:
Taxable 990 721 2,641 2,150
Nontaxable 591 590 1,798 1,793
Interest on federal funds sold 86 73 228 126
Total interest income 8,618 7,669 24,539 22,549
Interest expense:
Interest on interest-bearing
demand deposits 352 326 995 952
Interest on savings deposits 371 346 1,115 1,038
Interest on time deposits 2,583 2,364 7,496 7,132
Interest on certificates of
deposit of $100,000 and over 530 454 1,560 1,370
Interest on federal funds purchased
and securities sold under
agreements to repurchase 67 60 181 162
Interest on other borrowed funds 460 180 962 386
Interest on subordinated capital notes 0 24 0 67
Interest on ESOP debt 22 28 66 93
Total interest expense 4,385 3,782 12,375 11,200
Net interest income 4,233 3,887 12,164 11,349
Provision for loan losses 125 135 400 345
Net interest income after
provision for loan losses 4,108 3,752 11,764 11,004
Noninterest income:
Service charges on deposit accounts 245 242 736 708
Loan origination fees 62 50 140 184
Other service charges and fees 106 75 305 233
Other income 149 129 570 412
Securities gains (losses), net 3 7 (20) 1
Total noninterst income 565 503 1,731 1,538
Noninterest expense:
Salaries and employee benefits 1,602 1,427 4,547 4,275
Occupancy and equipment expense, net 475 332 1,311 941
Credit card expense 173 178 421 422
Supplies expense 124 111 326 264
FDIC assessment expense 5 1 26 2
Other expenses 618 591 1,800 1,594
Total noninterest expense 2,997 2,640 8,431 7,498
Income before income tax expense 1,676 1,615 5,064 5,044
Income tax expense 304 358 1,045 1,152
Net income $ 1,372 1,257 4,019 3,892
Net income per share(as restated) 0.42 0.39 1.24 1.22
Dividends declared per share $ 0.15 - 0.25 0.25
(as restated)
Average number of shares
outstanding (as restated) 3,238,248 3,214,790 3,237,558 3,201,222
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FNB Corporation and subsidiaries
Nine Months Ended September 30, 1997 and 1996
In Thousands
(Unaudited)
Nine Months Ended
September 30,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,019 3,892
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 400 345
Depreciation and amortization of bank
premises and equipment 649 402
ESOP compensation 302 604
Amortization of premiums and accretion
of discounts, net 42 64
(Gain)Loss on sale of securities, net 20 (1)
Net gain on sale of fixed assets and
other real estate (27) (43)
Net (increase) decrease in mortgage
loans held for sale (693) 397
Increase in other assets (233) (1,007)
Decrease in other liabilities (851) (823)
Net cash provided by operating activities 3,628 3,830
Cash flows from investing activities:
Net increase in federal funds sold (4,000) (2,370)
Proceeds from sales of securities
available-for-sale 4,060 5,386
Proceeds from calls and maturities of
securities available-for-sale 5,969 9,483
Proceeds from calls and maturities of
securities held-to-maturity 2,239 2,362
Purchase of securities available-for-sale (17,461) (19,070)
Purchase of securities held-to-maturity (1,989) (5,308)
Net increase in loans (10,408) (4,115)
Proceeds from sale of other real estate owned 185 446
Recoveries on loans previously charged off 131 84
Bank premises and equipment expenditures (2,789) (3,873)
Net cash (used in) investing activities (24,063) (16,975)
Cash flows from financing activities:
Net increase in deposits 7,895 4,690
Net increase in federal funds
purchased and securities sold under agreements
to repurchase 1,546 1,219
Net increase in other borrowed funds 14,346 12,446
Principal payments on ESOP debt (302) (604)
Dividends paid (799) (799)
Dividends on unallocated ESOP shares (32) (32)
Principal payments on subordinated capital notes -- (80)
Net cash provided by financing activities 22,654 16,840
Net increase in cash and due from banks 2,219 3,695
Cash and due from banks at beginning of period 10,277 8,818
Cash and due from banks at end of period $ 12,496 12,513
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FNB Corporation and subsidiaries
Nine Months Ended September 30, 1997 and 1996
In Thousands
(Unaudited)
1997 1996
<S> <C> <C>
Balance, beginning of period $ 35,828 32,191
Net income for period 4,019 3,892
Cash dividends (799) (799)
ESOP shares allocated upon loan repayment 302 604
Change in net unrealized gains (losses) on securities
available-for-sale, net of income taxes 161 (625)
Balance, end of period $ 39,511 35,263
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FNB Corporation and subsidiaries
September 30, 1997 and 1996
In Thousands, Except Share Data
(Unaudited)
(1) General
Subsequent to December 31, 1995, the Board of Directors of First National Bank
(the "Bank") approved a reorganization whereby a bank holding company (FNB
Corporation) was incorporated under the laws of the Commonwealth of Virginia.
On June 11, 1996, the shareholders of the Bank approved a plan for the holding
company to exchange one share of its stock for each share of stock of the
Bank. A registration statement was filed with the Securities and Exchange
Commission (SEC) to register the stock of the holding company, and such
registration statement was subsequently declared effective by the SEC. On
July 11, 1996, the Office of the Comptroller of the Currency (OCC) approved
the plan, and the exchange was subsequently consummated. As a result, the
Bank became a wholly owned subsidiary of the holding company during the third
quarter of 1996, and the holding company began filing periodic reports under
the Securities Exchange Act of 1934. Prior to the consummation of the
exchange, the Bank filed periodic reports with the OCC.
The financial statements included herein reflect the balances and activity of
the Bank and its subsidiaries for periods ending prior to the consummation of
the reorganization and of the holding company and its subsidiaries for periods
ending subsequent to the reorganization. The exchange of stock was accounted
for using the pooling of interests method. That is, the bases of the assets
and liabilities of the Bank prior to the reorganization were carried forward
without adjustment. Because of this, and because the holding company's
revenues, expenses and changes in financial position subsequent to the
reorganization have not been significant, the consolidated financial
statements for periods subsequent to the reorganization are comparable to
those for periods prior to the reorganization.
The financial statements are unaudited, however, in the opinion of management,
all adjustments necessary for a fair presentation of the financial statements
have been included. All adjustments were of a normal recurring nature, except
as otherwise disclosed herein.
Material estimates that are particularly susceptible to significant changes in
the near-term relate to the determination of the allowance for loan losses and
the valuation of other real estate owned acquired in connection with
foreclosures or in satisfaction of loans. In connection with the
determination of the allowance for loan losses and the valuation of other real
estate owned, management obtains independent appraisals for significant
properties.
Management believes that the allowance for loan losses and the valuation of
other real estate owned are adequate. While management uses available
information to recognize loan losses and write-downs of other real estate
owned, future additions to the allowance and write-downs to other real estate
owned may be necessary based on changes in economic conditions. In addition,
various regulatory agencies, as an integral part of their examination process,
<PAGE>
periodically review the Bank's allowance for loan losses and valuation of
other real estate owned. Such agencies may require the Bank to recognize
additions to the allowance for loan losses and additional write-downs of other
real estate owned based on their judgments of information available to them at
the time of their examination.
The following is a description of the more significant accounting and
reporting policies which conform to general practice within the banking
industry.
(a) Consolidation
The consolidated financial statements include the accounts of FNB
Corporation (the "Registrant" or the "holding company") and its
wholly-owned subsidiaries (collectively, the "Corporation"). All
significant intercompany balances and transactions have been
eliminated.
(b) Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents
include those amounts in the balance sheet caption cash and due
from banks. Generally, cash and cash equivalents are considered
to have maturities of three months or less.
(c) Investment Securities
Debt securities that the Corporation has the positive intent and
ability to hold to maturity are classified as held-to-maturity
securities and reported at amortized cost. Debt and equity
securities that are bought and held principally for the purpose of
selling them in the near term are classified as trading securities
and reported at fair value, with unrealized gains and losses
included in earnings.
The Corporation had no trading securities at December 31, 1996, or
September 30, 1997. Debt and equity securities not classified as
either held-to-maturity securities or trading securities are
classified as available-for-sale securities and reported at fair
value, with unrealized gains and losses excluded from earnings and
reported as a separate component of stockholders' equity.
Amortization of premiums and accretion of discounts are computed
on the level yield method. Gains and losses on sales of
investment securities are computed on the basis of specific
identification of the adjusted cost of each security upon
disposition.
(d) Loans
Loans are stated at the amount of funds disbursed plus the
applicable amount, if any, of unearned interest and deferred fees
<PAGE>
and costs less payments received. Interest on commercial and real
estate mortgage loans is accrued based on the average loans
outstanding times the applicable interest rates. Interest on
installment loans is recognized on methods which approximate the
level yield method.
Loan origination and commitment fees and certain costs are being
deferred, and the net amount is amortized as an adjustment of the
related loan's yield over the contractual life of the related
loans.
Interest related to nonaccrual loans is recognized on the cash
basis. Loans are generally placed on nonaccrual status when the
collection of principal or interest is 90 days or more past due,
unless the obligation is both well secured and in the process of
collection.
(e) Bank Premises and Equipment, Net
Bank premises and equipment are stated at cost less accumulated
depreciation and amortization. Depreciation and amortization are
charged to expense over the estimated useful lives of the assets,
principally on the straight-line method. Costs of maintenance and
repairs are charged to expense as incurred and improvements are
capitalized.
(f) Other Real Estate Owned
Other real estate owned represents properties acquired through
foreclosure or deed taken in lieu of foreclosure. At the time of
acquisition, these properties are recorded at the lower of the
recorded investment in the loan or fair value minus estimated
costs to sell with any write-down being charged to the allowance
for loan losses. Expenses incurred in connection with operating
these properties and subsequent write-downs, if any, are charged
to expense. Gains and losses on the sales of these properties are
credited or charged to income in the year of the sale.
(g) Income Taxes
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date.
<PAGE>
(h) Net Income Per Share
Net income per share computations are based on the weighted
average number of shares outstanding during each year. The
weighted average shares outstanding do not include unearned shares
held by the Employee Stock Ownership Plan (ESOP). The shares held
by the ESOP are not considered outstanding for net income per
share calculations until the shares are released.
During the second quarter the Corporation declared a stock split
effected in the form of a 100% stock dividend. The split occurred
in June 1997. As a result, the total number of shares outstanding
doubled. Par value per share did not change. Earnings per share,
dividends per share and weighted average shares for periods prior
to the split have been restated to reflect the change in shares
outstanding as though the split had occurred at the beginning of
1996. In order to provide comparable earnings per share amounts,
the reported per share earnings and dividends for periods prior to
the formation of the holding company have also been restated.
(I) Trust Assets
Assets held by the Bank's trust department in a fiduciary or
agency capacity are not included in the consolidated financial
statements as they are not assets of the Corporation.
(2) Restrictions on Cash
Federal reserve regulations require the Bank to maintain certain average
balances as cash reserves. The reserve requirements approximated $4,025
and $3,328 at September 30, 1997 and December 31, 1996, respectively.
(3) Securities Available-for-Sale
The following sets forth the composition of securities available-for-
sale, which are reported at fair value, at September 30, 1997 and
December 31, 1996:
<TABLE>
<CAPTION>
Gross Gross Approx.
Amortized Unrealized Unrealized Fair
September 30, 1997 Costs Gains Losses Values
<S> <C> <C> <C> <C>
U.S. Treasury $ 8,121 34 -- 8,155
U.S. Government agencies
and corporations 46,764 192 (167) 46,789
States and political
subdivisions 2,790 92 -- 2,882
Other securities 4,450 36 -- 4,486
Totals $ 62,125 354 (167) 62,312
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Gross Gross Approx.
Amortized Unrealized Unrealized Fair
December 31, 1996 Costs Gains Losses Values
<S> <C> <C> <C> <C>
U.S. Treasury $ 5,634 29 (16) 5,647
U.S. Government agencies
and corporations 38,165 130 (306) 37,989
States and political
subdivisions 3,981 79 (13) 4,047
Other securities 7,164 63 (24) 7,203
Totals $ 54,944 301 (359) 54,886
</TABLE>
The amortized costs and approximate fair values of securities available-
for-sale by contractual maturity are shown below. Expected maturities
may differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
Approx.
Amortized Fair
September 30, 1997 Costs Values
<S> <C> <C>
Due in one year or less $ 7,179 7,156
Due after one year through five years 15,761 15,809
Due after five years through ten years 34,424 34,594
Due after ten years 4,761 4,753
Totals $ 62,125 62,312
</TABLE>
Gross gains of $12 and $48 and gross losses of $33 and $47 were realized
on sales and calls of securities available-for-sale through September
30, 1997, and September 30, 1996, respectively.
The carrying value of securities available-for-sale pledged to secure
public and trust deposits and securities sold under agreements to
repurchase, and for other purposes as required or permitted by law, was
$16,369 at September 30, 1997 and $17,650 at December 31, 1996.
(4) Securities Held-To-Maturity
The amortized costs, gross unrealized gains and losses, and approximate
fair values of securities held-to-maturity at September 30, 1997 and
December 31, 1996 are as follows:
<PAGE>
<TABLE>
<CAPTION>
Gross Gross Approx.
Amortized Unrealized Unrealized Fair
September 30, 1997 Costs Gains Losses Values
<S> <C> <C> <C> <C>
States and political
subdivisions $ 42,495 893 (71) 43,317
Other Securities 170 - - 170
Totals $ 42,665 893 (71) 43,487
</TABLE>
<TABLE>
<CAPTION>
Gross Gross Approx.
Amortized Unrealized Unrealized Fair
December 31, 1996 Costs Gains Losses Values
<S> <C> <C> <C> <C>
U.S. Government agencies
and corporations $ 500 1 - 501
States and political
subdivisions 42,394 830 (288) 42,936
Other securities 195 - - 195
Totals $ 43,089 831 (288) 43,632
</TABLE>
The amortized costs and approximate fair values of securities held-to-
maturity, by contractual maturity, are shown below. Expected maturities
may differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
Approx.
Amortized Fair
September 30, 1997 Costs Values
<S> <C> <C>
Due in one year or less $ 2,319 2,325
Due after one year through five years 18,235 18,570
Due after five years through ten years 21,462 21,937
Due after ten years 649 655
Totals $ 42,665 43,487
</TABLE>
Realized gains and losses on securities held-to-maturity were not
material in 1997 and 1996.
The carrying value of securities held-to-maturity pledged to secure
public and trust deposits and securities sold under agreements to
repurchase, and for other purposes as required or permitted by law, was
$16,385 at September 30, 1997 and $14,690 at December 31, 1996.
(5) Loans
At September 30, 1997 and December 31, 1996, there were direct loans to
executive officers and directors of $3,498 and $4,121, respectively. In
addition, there were loans of $8,084 and $7,184 at September 30, 1997
and December 31, 1996, respectively, which directors endorsed or had
been made to companies in which directors had an equity interest.
<PAGE>
At September 30, 1997 and December 31, 1996, the Corporation had sold
without recourse, participations in various loans to financial
institutions and other customers of the Corporation in the amount of
$28,581 and $29,200, respectively.
(6) Allowance for Loan Losses and Impaired Loans
A loan is considered impaired when, based on management's judgment, the
Corporation will probably not be able to collect all amounts due
according to the contractual terms of the loan. In making such
assessment, management considers the individual strength of borrowers,
the strength of particular industries, the payment history of individual
loans, the value and marketability of collateral and general economic
conditions. The Corporation's methodology for evaluating the
collectibility of a loan after it is deemed to be impaired does not
differ from the methodology used for nonimpaired loans.
A summary of the changes in the allowance for loan losses (including
allowances for impaired loans) follows:
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Balance at beginning of period $ 4,363 4,128 4,179 3,988
Provisions for loan losses 125 135 400 345
Loan recoveries 50 29 131 84
Loan charge-offs (219) (144) (391) (269)
Balance at end of period $ 4,319 4,148 4,319 4,148
</TABLE>
Nonperforming assets consist of the following:
<TABLE>
<CAPTION>
September 30 December 31,
1997 l996
<S> <C> <C>
Nonaccrual loans $ 1,044 573
Other real estate owned -- 185
Total nonperforming assets $ 1,044 758
</TABLE>
The following tables show the pro forma interest that would have been
earned on nonaccrual loans if they had been current in accordance with
their original terms and the recorded interest included in income on
these investments:
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1997 1996
<S> <C> <C>
Proforma interest - nonaccrual loans $ 79 100
Recorded interest - nonaccrual loans -- --
</TABLE>
<PAGE>
There were no material commitments to lend additional funds to customers
whose loans were classified as nonperforming at September 30, 1997.
(7) Bank Premises and Equipment, Net
Bank premises and equipment are stated at cost less accumulated
depreciation and amortization as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
<S> <C> <C>
Land $ 2,102 1,174
Buildings 9,065 2,763
Furniture and equipment 6,153 4,936
Leasehold improvements 380 379
Construction in progress -- 5,736
17,700 14,988
Less accumulated depreciation
and amortization 5,277 4,705
Totals $ 12,423 10,283
</TABLE>
(8) Other Borrowed Funds
Other borrowed funds include advances from the Federal Home Loan Bank of
Atlanta totaling $22,634 and $12,779 on September 30, 1997 and December
31, 1996, respectively. The interest rates on the advances range from
5.38 to 7.15 percent and have maturity dates through June 5, 2010. The
advances are collateralized under a blanket floating lien agreement
whereby the Corporation gives a blanket pledge of residential first
mortgage loans for 1-4 units.
(9) Employee Benefit Plans
The Employee Stock Ownership Plan (ESOP) invests primarily in the
Registrant's stock. The ESOP covers substantially all employees. In
May 1994, the Bank sold 106,940 shares of Bank stock to the ESOP for
$28.25 per share. In 1996, the ESOP tendered the stock in exchange for
the stock issued by the Registrant pursuant to the reorganization
discussed in Note 1. The ESOP borrowed $3,021 to purchase the shares.
The ESOP's obligation to repay this borrowing is guaranteed by the Bank;
therefore, the unpaid balance of the borrowing has been reflected in the
accompanying balance sheet as a liability and the amount representing
unearned employee benefits has been recorded as a reduction in
stockholders' equity. These amounts will be reduced as the ESOP debt is
curtailed. The ESOP is repaying the loan (plus interest) using employer
contributions and dividends received on the shares of common stock held
by the ESOP.
<PAGE>
(10) Income Taxes
The primary reason for the difference between the effective tax rates
and the statutory tax rate is a substantial amount of tax-exempt
interest income.
(11) Restrictions on Payment of Dividends
Under applicable federal laws, the Comptroller of the Currency
restricts, without prior approval, the total dividend payments of the
Bank in any calendar year to the net profits of that year, as defined,
combined with the retained net profits for the two preceding years. At
September 30, 1997, retained net profits which were free of such
restriction approximated $9,016.
(12) Supplemental Cash Flow Information
The Corporation paid $12,066 and $11,100 for interest and it paid $931
and $1,013 for income taxes for the nine month periods ended September
30, 1997 and 1996, respectively.
(13) Commitments and Contingencies
The Corporation is involved from time to time in litigation arising in
the normal course of business. Management believes that any resulting
settlements and disposition of these matters will not materially affect
consolidated results of operations or financial position.
(14) Financial Instruments with Off-Balance-Sheet Risk
The Corporation is a party to financial instruments with off-balance-
sheet risk in the normal course of business to meet the financing needs
of its customers. These financial instruments include commitments to
extend credit and standby letters of credit. Those instruments involve,
to varying degrees, elements of credit risk more than the amount
recognized in the balance sheet. The contract amounts of those
instruments reflect the extent of involvement the Corporation has in
particular classes of financial instruments.
The Corporation's exposure to credit loss in case of nonperformance by
the other party to the financial instrument for commitments to extend
credit and standby letters of credit is represented by the contractual
amount of those instruments. The Corporation uses the same credit
policies in making commitments and conditional obligations as it does
for on-balance-sheet instruments.
Except for home equity lines totaling $11,259 at September 30, 1997, and
$12,732 at December 31, 1996, the Corporation may not require collateral
or other security to support the following financial instruments with
credit risk:
<PAGE>
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
Contract Amount
<S> <C> <C>
Financial instruments whose contract amounts
represent credit risk:
Commitments to extend credit $ 65,113 50,209
Standby letters of credit and
financial guarantees written 4,428 3,479
</TABLE>
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many
commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash
requirements. The Corporation evaluates each customer's credit
worthiness on a case-by-case basis. The amount of collateral obtained,
if deemed necessary upon extension of credit, is based on management's
credit evaluation of the customer. Collateral held varies but may
include securities, accounts receivable, inventory, property, plant and
equipment, and income-producing commercial properties.
Standby letters of credit are conditional commitments issued to
guarantee the performance of a customer to a third party. Those
guarantees are primarily issued to support public and private borrowing
arrangements, including commercial paper, bond financing, and similar
transactions. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to
customers. Collateral held varies but may include securities, accounts
receivable, inventory, property, plant and equipment and income-
producing commercial properties.
Commitments to extend credit, standby letters of credit and financial
guarantees written are not reflected in the financial statements except
to the extent of fees collected, which are generally reflected in
income. The fulfillment of these commitments would normally result in
the recording of a loan at the time the funds are disbursed.
The Corporation sells portions of mortgage and commercial loans to other
investors in the normal course of business ("participations"). In
certain cases the Corporation has agreed to repurchase the loan from the
investor in the event the debtor defaults. The Corporation's total
exposure at September 30, 1997 under such agreements approximates
$4,087.
(15) Concentrations of Credit Risk
The Corporation does a general banking business, serving the commercial,
agricultural and personal banking needs of its customers in its trade
territory, commonly referred to as the New River Valley, which consists
of Montgomery County, Virginia and portions of adjacent counties.
Operating results are closely correlated with the economic trends within
<PAGE>
this area which are, in turn, influenced by the area's three largest
employers--Virginia Polytechnic Institute and State University, Radford
University and the Radford Arsenal. Other industries include a wide
variety of manufacturing concerns and agriculture-related enterprises.
The ultimate collectibility of the loan portfolios and the recovery of
the carrying amounts of repossessed property are susceptible to changes
in the market conditions of this area. The commercial portfolio is
diversified with no significant concentrations of credit within a single
industry. The consumer loan portfolio includes approximately $48
million of the loans to individuals for household, family and other
personal expenditures. The real estate-mortgage portfolio consists
primarily of loans secured by l-4 family residential properties.
(16) New Accounting Standard
The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standards (SFAS) No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities."
This Statement provides standards for distinguishing between transfers
of financial assets that should be accounted for as sales and those that
should be accounted for as collateralized borrowings. In essence,
transactions in which the transferor has surrendered control of the
financial asset must be recorded as sales, and those in which control
has not been surrendered should be recorded as borrowings. The
Statement specifies various circumstances that would indicate whether
control has been effectively surrendered or not. Transactions engaged
in by the Corporation which are covered by the Statement include sales
of loans with retainage of servicing rights, securities sold under
agreement to repurchase (repurchase agreements), participations sold or
purchased, and borrowings secured by loans. The Statement as issued was
required to be adopted prospectively to transfers and servicing of
financial assets and extinguishment of liabilities occurring after
December 31, 1996. No restatement of previously issued financial
statements is permitted. However, the FASB has since issued SFAS No.
127, which defers the adoption date for certain portions of SFAS No. 125
for one year. The primary types of transactions engaged in by the
Corporation for which the delay is applicable are collateralized
borrowings and repurchase agreements. Management does not expect SFAS
No. 125 to have a significant impact on financial position or results of
operations.
The portion of SFAS 125 which was adopted in the first half of 1997
resulted in the classification of certain participations sold with
recourse as secured borrowings. Previously these types of transactions
were recorded as sales of loans. The new standard resulted in a similar
change in the classification of the related interest on the portion of
the loan sold. There was no impact on net income.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of factors that significantly affected the
financial condition and results of operations of FNB Corporation and
subsidiaries. This discussion should be read in connection with the
consolidated financial statements, statistical disclosures and other financial
information presented herein. All amounts presented are denoted in thousands
except per share and percentage data.
See Note 1 to the consolidated financial statements for a discussion of a
reorganization in 1996 resulting in the creation of FNB Corporation (the
"Registrant" or the "Holding Company"). As a result, First National Bank (the
"Bank") is a wholly-owned subsidiary of the Registrant. Because of factors
discussed in Note 1, the consolidated financial statements for periods
subsequent to the reorganization are comparable to those for periods prior to
the reorganization.
1997 Compared to 1996
Net Interest Income
The principal source of earnings for the Corporation is net interest income.
Net interest income is the net amount of interest earned on interest bearing
assets, less the amount of interest paid on deposits and other interest-
bearing liabilities. Net interest income before provision for loan losses was
$12,164 for the nine months ended September 30, 1997, an increase of $815 from
the same period in 1996. Net interest income before provision for loan losses
was $4,233 for the quarter ended September 30, 1997, an increase of $346 from
the same period in 1996. The increases in net interest income in both the
third quarter and first nine months were primarily the result of growth in
average earning assets, partially offset by growth in interest bearing
liabilities. Average earning asset growth totaled $38,610 (10.86%) and
$31,928 (9.12%), respectively, for the third quarter and first nine months of
1997 over the respective prior year periods. The largest component of the
increase in earning assets was average loans, reflecting increases of $24,230
(9.40%) and $20,155 (7.90%), respectively, for the third quarter and first
nine months of 1997. Growth in the loan portfolio was concentrated primarily
in real estate loans reflecting increases of $14,429 and $14,423,
respectively, for the third quarter and first nine months of 1997. Average
securities increased $14,412 (15.66%) and $9,406 (10.27%), respectively, for
the third quarter and first nine months of 1997. Securities were used as an
alternative investment for funds in excess of loan demand.
Average interest-bearing liabilities increased $38,585 (12.64%) and $29,948
(9.93%), respectively, for the third quarter and first nine months of 1997
over the respective prior year periods. The largest component of interest-
bearing liabilities was average deposits, reflecting an increase of $23,735
and $18,617, respectively for the third quarter and first nine months of 1997.
Growth in the deposit portfolio was concentrated in certificates of deposit of
$100 and over with an increase of $4,613 and $3,922 for the third quarter and
first nine months of 1997 and in time deposits with an increase of $12,962 and
<PAGE>
$9,384, respectively, for the third quarter and first nine months of 1997.
Successful deposit promotions and more aggressive bidding for deposits
accounted for the increase. Average other borrowed funds increased $15,613
and $12,331, respectively, for the third quarter and first nine months of
1997. The primary reason for the change was an increase in advances from the
Federal Home Loan Bank of Atlanta, as the Corporation increasingly utilized
this source of funds.
Net interest yield decreased to 4.66% from 4.77% for the third quarter and to
4.63% from 4.74% for the first nine months of 1997 from the comparable prior
year periods. The yield on average earning assets increased 7 basis points,
to 9.10% from 9.03% for the third quarter and decreased 5 basis points, to
8.95% from 9.00% for the first nine months of 1997 from the comparable prior
year periods. The cost of interest-bearing liabilities increased 15 basis
points, to 5.10% from 4.95% for the third quarter and 3 basis points to 4.98%
from 4.95% for the first nine months of 1997. Overall, 80.9% and 94.6% of the
net interest income increase, respectively, for the third quarter and first
nine months of 1997 was attributable to changes in the volume of net interest-
earning assets and interest-bearing liabilities. The remaining portions of
the change in net interest income for the third quarter and first nine months
of 1997 was due to a change in average rates.
Provision for Loan Losses
The provision for loan losses was $125 and $400, respectively, for the quarter
and nine months ended September 30, 1997, and $135 and $345, respectively, for
the quarter and nine months ended September 30, 1996. Net charge-offs amounted
to $169 and $260, respectively, for the quarter and nine months ended
September 30, 1997 and $115 and $185, respectively, for the quarter and nine
months ended September 30, 1996. The allowance for loan losses was $4,319,
1.52% of outstanding loans, at September 30, 1997, and $4,179, 1.53% of
outstanding loans, at December 31, 1996. With the increase in net charge-offs
in the first nine months of 1997, the provision for loan losses was also
increased and the allowance for loan losses reflected a corresponding
increase. Management believes the allowance for loan losses as a percentage
of outstanding loans remains at a prudent level.
Noninterest Income
Noninterest income, including service charges on deposit accounts, loan
origination fees, other service charges, other income and net securities gains
(losses), was $565 and $1,731, respectively, for the quarter and nine months
ended September 30, 1997, and $503 and $1,538, respectively, for the quarter
and nine months ended September 30, 1996. The increase in noninterest income
resulted primarily from an increase in fees on loans sold, trust fees, and ATM
fees. These increases were partially offset by reductions in other areas,
most notably in loan origination fees.
Noninterest Expense
Noninterest expense, consisting of salaries and employee benefits, occupancy
costs, credit cards, supplies, FDIC assessment and other expenses was $2,997
and $8,431, respectively, for the quarter and nine months ended September 30,
1997, and $2,640 and $7,498, respectively, for the quarter and nine months
ended September 30, 1996. The net increase in noninterest expense resulted
<PAGE>
from increases in several categories, primarily personnel costs, occupancy and
equipment expense and other expenses. Personnel costs increased primarily as
the result of merit increases, and additional personnel to staff three new
branches. The increases in occupancy and equipment expense and other expenses
were directly related to the new branches and the new corporate office
building which opened in February, 1997.
Income Taxes
Income tax expense as a percentage of pre-tax income was 18.1% and 20.6%,
respectively, for the quarter and nine months ended September 30, 1997 and
22.2% and 22.8%, respectively, for the quarter and nine months ended September
30, 1996. Substantially all of the decline in the third quarter tax rate and
approximately half of the decline for the nine-month period was due to
anticipated income tax refunds related to amendments of prior years tax
returns.
Balance Sheet
Total assets of the Corporation at September 30, 1997, were $421,610, compared
to $395,324 at December 31, 1996. Total loans were $283,656 at September 30,
1997, an increase of $10,275 from December 31, 1996. Loan growth was
concentrated in the real estate-commercial and construction portfolios and
amounted to $7,647. All other loan portfolios experienced increases of
varying amounts, except the real estate-mortgage portfolio which decreased
$647. The increase in bank premises and equipment of $2,140 resulted
primarily from the construction of the new corporate headquarters building.
Federal Funds sold increased $4,000 reflecting additional borrowing from the
Federal Home Loan Bank of Atlanta and a successful deposit promotion. Deposit
growth provided for an increase in securities of $7,002.
Total deposits at September 30, 1997, were $343,298, an increase of $7,896
from December 31, 1996. Time deposits increased $6,206 and interest-bearing
demand deposits increased $6,063 since year end. These increases were
partially offset by a decrease of $4,334 in certificates of deposit of $100
and over since year end 1996. Depositors continue to shift funds among the
various types of deposit instruments seeking the most advantageous return
while maintaining an acceptable level of liquidity. Competition for deposits
among local financial institutions continues to be strong.
Other borrowed funds at September 30, 1997, were $28,750, an increase of
$14,346 from December 31, 1996. Other borrowed funds is composed primarily of
advances from the Federal Home Loan Bank of Atlanta and is used to provide
partial funding for earning asset growth.
Stockholders' Equity
Stockholders' equity was $39,511 at September 30, 1997, compared to $35,828 at
December 31, 1996. This increase of $3,683 was the net result of earnings
retention, an increase of $161 in net unrealized gains (net of tax) on
securities available-for-sale, a decrease of $302 in unearned ESOP shares
resulting from principal repayments on ESOP debt, and dividends paid to
shareholders.
<PAGE>
All financial institutions are required to maintain minimum levels of
regulatory capital. The Federal Reserve and the Office of Comptroller of the
Currency (OCC) have established substantially similar risk-based and leveraged
capital standards for financial institutions they regulate. Under the risk-
based capital requirements of these regulatory agencies, the Corporation is
required to maintain a minimum ratio of total capital to risk-weighted assets
of at least 8%. At least half of the total capital is required to be "Tier 1
capital," which consists principally of common and certain qualifying
preferred shareholders' equity, less certain intangibles and other
adjustments. The remainder, "Tier 2 capital," consists of a limited amount of
subordinated and other qualifying debt and a limited amount of the general
loan loss reserve.
In addition, the federal regulatory agencies have established a minimum
leveraged capital ratio (Tier 1 capital to tangible assets). These guidelines
provide for a minimum leveraged capital ratio of 3% for banks and their
respective holding companies that meet certain specified criteria, including
that they have the highest regulatory examination rating and are not
contemplating significant growth or expansion. All other institutions are
expected to maintain a leverage ratio of at least 100 to 200 basis points
above that minimum. The guidelines also provide that banking organizations
experiencing internal growth or making acquisitions will be expected to
maintain strong capital positions substantially above the minimum supervisory
levels, without significant reliance on intangible assets.
At September 30, 1997, the Bank's Tier 1 ratio, total capital ratio, and
leverage ratio, exceeded the minimum ratios required by the regulations.
Past Due Loans and Nonperforming Assets
Loans past due 90 days and over at September 30, 1997, totaled $55 compared to
$595 at December 31, 1996. In addition, nonaccrual loans and other real
estate owned totaled $1,044 at September 30, 1997, compared to $758 at
December 31, 1996. The New River Valley economy continues to improve, and
such improvement has been reflected in a declining trend of nonperforming
assets in recent years.
Liquidity
Liquidity is the ability to provide sufficient cash flow to meet financial
commitments and to fund additional loan demand or withdrawal of existing
deposits. Liquidity remains sufficient, as assets are maintained on a short-
term basis to meet the liquidity demands anticipated by management. Funding
sources primarily include customer-based core deposits and cash generated by
operations. Another source of liquidity is additional borrowings from the
Federal Home Loan bank of Atlanta; in excess of $10 million of the
Corporation's borrowing capacity under an existing agreement with the FHLB
remains unused as of September 30, 1997, based on the level of qualifying
portfolio mortgage loans available for securitization. Secondary sources of
liquidity are available should the need arise, including approximately $34,000
in unused Federal Funds lines of credit and the ability to liquidate assets
held for sale, especially investment securities.
<PAGE>
The only significant source of cash for the holding company is transfers from
its bank subsidiary in the form of dividends, loans, or advances. The most
restrictive regulatory limitation placed on the amount of funds that may be
transferred from the Bank to the holding company is that placed on dividends.
Specifically, the maximum amount of dividends that may be paid by the Bank in
any calendar year without prior regulatory approval is the net profits of that
year, as defined, combined with the retained net profits for the two preceding
years. In effect, this limits 1997 dividends of the bank (unless prior
regulatory approval is obtained) to $6,212 plus year-to-date 1997 net profits
as of the declaration date. This limitation is not expected to have any
material impact on the liquidity of the holding company in 1997. During the
first nine months of 1997 the bank paid $1,246 in dividends to the holding
company.
Recent Developments
The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per Share," which
supersedes existing standards for calculating and disclosing earnings per
share (EPS). The new standard requires the disclosure of Basic EPS and, where
potential dilution exists, Diluted EPS. Basic EPS is calculated using only
the actual weighted average number of common shares outstanding and the income
available to common stockholders. Diluted EPS adjusts the income and number
of shares to reflect the potential effects of stock options, warrants,
convertible debt, and other potentially dilutive securities. The Statement is
effective for financial statements issued for periods ending after December
15, 1997, including interim periods; earlier application is not permitted.
However, once adopted, the Statement requires restatement of all prior-period
EPS data presented. Based on the current capital structure of the
Corporation, management does not expect SFAS No. 128 to materially impact
earnings per share.
The FASB has also issued SFAS No. 130, "Reporting Comprehensive Income." The
Statement requires enterprises to display "comprehensive income" and its
components in a financial statement that is displayed with the same prominence
as other financial statements in a full set of financial statements.
"Comprehensive income" reflects net income as reported under current
accounting standards as well as certain items and events that are currently
reflected only in stockholders' equity without impacting the Statement of
Income. The new standard requires such information to be presented as an
additional financial statement, but the primary financial statements as
currently reported will not be affected. SFAS No. 130 is effective starting
in the first quarter of 1998.
Part II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits:
See index to exhibits
(B) Reports on Form 8-K:
None
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FNB Corporation
Date November 6, 1997 By: s/Samuel H. Tollison
Samuel H. Tollison
President & CEO
Date November 6, 1997 By: s/Perry D. Taylor
Perry D. Taylor
Chief Financial Officer
<PAGE>
INDEX TO EXHIBITS
Exhibit #
(2) Plan of Reorganization
(A) Agreement and Plan of Reorganization dated as of February 1,
1996, between the Registrant, First National Bank, and FNB
Bank, filed as Exhibit 2 to the Registration Statement on
Form S-4 filed by FNB Corporation with the Securities and
Exchange Commission May 3, 1996, (Registration number 333-
2524) is incorporated herein by reference.
(3)(i) Articles of Incorporation
Registrant's Articles of Incorporation, filed with the
Commission as exhibit 3.1 to the Annual Report on Form 10-K
for the year ended December 31, 1996, is incorporated herein
by reference.
(3)(ii) Bylaws
Registrant's Bylaws, filed with the Commission as exhibit
3.2 to the Annual Report on Form 10-K for the year ended
December 31, 1996, is incorporated herein by reference.
(10) Material Contracts
(10)A Employment agreement dated September 11, 1997 between Samuel H.
Tollison, First National Bank, and Registrant
(10)B Employment agreement dated September 11, 1997 between Julian D.
Hardy, Jr., First National Bank, and Registrant
(10)C Change in control agreements with seven senior officers of First
National Bank. All agreements have identical terms and, as such,
only a sample copy of the agreements is filed. The officers
covered by the agreements are as follows:
(1) Darlene S. Lancaster, Senior Vice President, Manager,
Mortgage Loan Department, dated August 25, 1997
(2) R. Bruce Munro, Senior Vice President, Chief Credit
Administration Officer, dated August 25, 1997
(3) Woody B. Nester, Senior Vice President, Cashier, dated
August 25, 1997
(4) Fred L. Newhouse, Jr., Senior Vice President, Branch
Administrator, dated August 25, 1997
(5) Peter A. Seitz, Senior Vice President, General Counsel,
Dated August 25, 1997
(6) Perry D. Taylor, Senior Vice President, Chief Financial
Officer, dated August 25, 1997
(7) Litz H. Van Dyke, Senior Vice President, Manager, Commercial
Banking Department, dated August 25, 1997
(27) Financial Data Schedule
<PAGE>
Exhibit # (10)A
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into this 11th day of September, 1997,
by and between FIRST NATIONAL BANK, a national banking association, with
principal offices in Christiansburg, Virginia and FNB CORPORATION, a one-bank
holding company organized and existing under the laws of the Commonwealth of
Virginia which owns all of the outstanding stock of First National Bank
(collectively "First National Bank" and "FNB Corporation" hereinafter referred
to as "Employer" or "FNB"), and SAMUEL H. TOLLISON, residing at 3180 Fairview
Church Road, Riner, Virginia 24149 (sometimes hereinafter referred to as
"Employee").
WITNESSETH:
WHEREAS, Employee has been a principal executive of Employer for a number
of years, and in such capacity has developed an intimate and thorough
knowledge of Employer's business methods, trade secrets, and operations, as
well as personal relationships with key individual employees of Employer and
other banks and companies with which Employer does business;
WHEREAS, the retention of Employee's services for and on behalf of
Employer and/or its subsidiaries, is of material importance to the
preservation and enhancement of the value of Employer's business;
WHEREAS, Employer recognizes that, as is the case with many publicly held
corporations, the possibility of a change of control may arise and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of Employer and its shareholders;
WHEREAS, the Board of Directors of Employer (the "Board") has determined
that appropriate steps should be taken to reinforce and encourage the
continued attention and dedication of members of Employer's management to
their assigned duties without distraction by the possibility of a change of
control; and
WHEREAS, the Board believes it important, should Employer or its
shareholders receive a proposal for transfer of control of Employer, that
Employee be able to assess such proposal and advise the Board thereon, without
being influenced by the uncertainties of Employee's own employment status.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants herein set forth, Employer and Employee do hereby agree as follows:
I. Active Term
1.1 Employer hereby employs Employee as President and Chief Executive
Officer of FNB Corporation to perform executive services as hereinafter
provided, and Employee hereby accepts said employment and agrees to render
such services to the Employer on the terms and conditions set forth in this
Agreement. This Agreement shall be for a term of three years beginning on the
date of execution of this Agreement and shall automatically renew on the
anniversary date of the Agreement for an additional period of one year on each
renewal date until there is a change in control (as hereinafter defined) or
the Employee retires; and consequently, upon the anniversary date each year,
the Agreement will be automatically extended and have a remaining term of
three years.
<PAGE>
1.2 During the term of this Agreement, Employee agrees to perform such
duties as are customarily performed by one holding the position of President
and Chief Executive Officer of a bank holding company, including but not
limited to those duties as set forth in a written job description. In
addition, the Employee shall perform such executive services for Employer as
may from time to time be assigned to Employee by Employer, the Board of First
National Bank or the Corporation or any Committee of the either Board.
1.3 During the term of this Agreement, Employee shall devote his best
efforts, including such portion of his time and effort as he has customarily
provided in recent years, to the affairs and business of the Employer and its
subsidiaries.
1.4 In the event Employer completes an affiliation with any other
institution in which there is no change in control (as hereinafter defined)
and, as a result of the affiliation, the Employee occupies a position of less
authority than the current position held under the terms of this Agreement and
job responsibilities less than Chief Executive Officer or President of FNB
Corporation, the Employee may elect to terminate employment under Section 7.2
of this Agreement and receive the compensation as provided therein.
1.5 Employee's services shall be rendered principally in Christiansburg,
Virginia but Employee shall travel on behalf of Employer, its subsidiaries or
affiliates, as may reasonably be required.
II. Competitive Activities
2.1 During the term of this Agreement, Employee shall not, directly or
indirectly engage or participate in, become a director of, or render advisory
or other services for, or in connection with, or make any financial investment
in, any entity primarily engaging in financial or investment services which
competes with FNB in the Employer's trading area (as constituted at any time
during Employee's employment with FNB). Notwithstanding the foregoing, the
Employee may invest in any such financial or investment firm, corporation,
business entity or enterprise so long as the investment is "passive" (as such
term is defined in the Internal Revenue Code or its implementing regulations).
Notwithstanding anything to the contrary contained in this Agreement, while
Employee is employed by Employer during the term of this Agreement, Employee
shall have no employment contract or other written or oral agreement
concerning his employment as an officer of the Employer with any entity or
person other than the Employer.
2.2 Employee acknowledges that by virtue of his employment with FNB,
Employee shall be privy to confidential information concerning the activities
and affairs of the Employer, its subsidiaries and affiliates, if any,
including trade secrets and other confidential matters. During the term of
employment, should Employee render services to someone else in violation of
Section 2.1 hereof, other than as expressly authorized by the Board, Employer
shall be entitled to immediate equitable relief to restrain such conduct.
Such equitable relief shall be in addition to any other remedies to which
Employer may be entitled under law. Except for the purpose of carrying out
Employee's duties hereunder, Employee shall not remove or retain, or make
copies or reproductions of any inquiries, calculations, letters, papers, or
information of any type or description relating to the business of Employer,
its subsidiaries or affiliates, if any, and Employee shall not divulge to
others any information or data acquired by him while in Employer's employ
relating to methods, processes, or other trade secrets or confidential
information owned or utilized by FNB. Employer shall acquire the sole and
exclusive rights to any innovations, ideas, and concepts, whether or not
subject to patent or trademark protection, and all copyrightable materials
<PAGE>
which are conceived by Employee during his employment, which relate to the
business of Employer or any of its subsidiaries or affiliates, which are
confidential, and which are not readily ascertainable from persons or other
sources outside Employer and its subsidiaries and affiliates.
III. Compensation
3.1 Employer shall compensate and pay Employee for his services as
follows:
a. Employee shall be paid a salary at an annual rate set by the
Board from time to time. At a minimum, the base salary shall equal or exceed
the base salary paid Employee at the time of the execution of this agreement.
b. Employee shall be reimbursed, in a manner consistent with
policies of Employer presently or later established for executive personnel,
for all reasonable expenses directly incurred by the Employee in the discharge
of any duties hereunder;
c. Employee shall receive all fringe benefits that Employee has
received immediately prior to the execution of this Agreement, including, but
not limited to, the use of an Employer's car and memberships at country clubs,
health and civic clubs; provided, however, that expenses for meetings and
conferences shall not exceed $15,000 annually(excluding VBA) and memberships
and club charges shall not exceed $12,000. Fringe benefits shall not be
considered to include health, life, disability and dental insurance provided
to the Employee through group welfare benefit plans sponsored by FNB nor to
retirement benefits provided to Employee through retirement plans sponsored by
FNB. Fringe benefits in excess of the amount specified herein shall be
subject to Board approval.
d. Employee shall receive all FNB sponsored welfare and
retirement plan benefits as shall be made generally and proportionally
available to other executive employees of Employer. Employer shall receive an
annual complete physical examination to be performed by a physician of
Employee's choice with a report of the results provided to Employer.
e. Employee shall receive the number of paid vacation days in
each calendar year determined by Employer from time to time for its executive
officers, but not less than four weeks in any calendar year (prorated in any
calendar year during which the Employee is employed hereunder for less than
the entire year in accordance with the number of days in such calendar year
during which he is employed).
All payments made payable to Employee under this Agreement shall be
subject to withholding for applicable taxes, social security or other
governmental levies and to any other deductions authorized by or for
Employee's benefit, under any welfare or retirement plan established for or
made generally available to employees of Employer.
3.2 Nothing in this Agreement shall prevent the Board from, at any time,
increasing the compensation and fringe benefits to be paid to Employee in the
event the Board, in its sole discretion, shall deem it advisable so to do in
order to compensate Employee for his services.
3.3 The Employer shall not reduce or eliminate any fringe benefit
available to the Employee immediately prior to the execution of this Agreement
unless the Employer pays the Employee a cash allowance in an amount equal to
the value to the Employee of such reduced or eliminated fringe benefit.
<PAGE>
IV. Termination Prior to Change, Including
Termination for Cause, and Related Provisions
4.1 Employer shall have the right, at any time prior to a change of
control of Employer(as hereinafter defined) upon written notice of not less
than thirty (30) days, to terminate the Employee's employment hereunder.
4.2 In the event that, prior to a change of control of Employer (as
hereinafter defined), employment is terminated for cause (as hereinafter
defined), Employee shall have no right to compensation or other benefits for
any period after such termination. For purpose of this subsection, the term
"cause" shall mean personal dishonesty, incompetence, willful misconduct,
willful breach of fiduciary duty, willful violation of any law, rule or
regulation (other than traffic violations or similar offenses), willful
violation of a final cease and desist order, willful or intentional breach or
neglect of Employee's duties hereunder, persistent negligence, or misconduct
in the performance of Employee's duties.
V. Change in Control
5.1 For purposes of this Agreement, a "change in control" of Employer
shall have occurred at such time as (a) the closing of a corporate
reorganization in which the Bank becomes a subsidiary of a holding company,
the majority of the common stock of which is owned, in aggregate, by persons
who did not own the majority of the common stock of FNB Corporation (or its
successor) immediately prior to the reorganization; (b) individuals who
constitute the Board of FNB Corporation on the date hereof (the "Incumbent
Board") cease for any reason to constitute at least a majority thereof;
provided that any person becoming a director subsequent to the date hereof
whose nomination for election was approved by a vote of at least three-quarters
(3/4) of the directors comprising the Incumbent Board shall be
considered as though such person were a member of the Incumbent Board for
purposes of this subsection; (c) the closing of the merger of First National
Bank with or into another person; or (d) the closing of the sale, conveyance
or other transfer of substantially all of the assets of First National Bank to
another person.
5.2 For purposes of this Agreement, the term "person" shall include any
individual, corporation, partnership, group, association or other "person", as
such term is used in section 14(d) of the Exchange Act, other than Employer,
any entity in which the Employer owns a majority of the voting interest or any
employee benefit plan(s) sponsored by Employer.
VI. Termination Following Change in Control
6.1 Employer recognizes that a change in control as defined in Section V
may directly affect the direction and philosophy of FNB. A change in control
may also affect Employee's responsibilities and position with the Employer.
Should a change in control occur, Employee shall be entitled to a lump sum
payment of $100,000 due and payable within thirty (30) days after the change
in control. Employee will be entitled also to the compensation provided in
subsection 7.2 of Section VII hereof, upon Employee's determination to
terminate his employment with Employer or upon termination by Employer or upon
termination by Employer of Employee's employment with Employer.
6.2 Any termination by Employer or by Employee following a change in
control shall be communicated by written notice of termination ("Notice of
Termination") to the other party hereto. Such Notice of Termination shall
specify the date as of which employment shall terminate ("Date of
Termination"), which Date of Termination shall not be more than sixty (60)
days from the date of the Notice of Termination.
<PAGE>
VII. Compensation Upon Termination; Other Agreements
7.1 During any period following a change in control that Employee fails
to perform his duties as a result of incapacity due to physical or mental
illness, Employee shall continue to receive a salary which, when added to
insurance benefits received as compensation and social security benefits, will
equal the Employee's rate of compensation immediately prior to the illness.
Any benefits or awards under any plans shall continue to accrue during such
period of illness, to the extent not inconsistent with such Plans, until
Employee's employment is terminated pursuant to and in accordance with Section
VI hereof. Thereafter, Employee's compensation and benefits shall be
determined in accordance with subsection 7.2 hereof and the plans then in
effect.
7.2 Subject to Section X hereof, if within thirty-six (36) months of the
date after which a change in control of the Employer shall have occurred, as
defined in Section V above, Employee's employment with Employer shall be
terminated by the Employer or by Employee, then Employee shall be entitled,
without regard to any contrary provisions of any Plan, to the following
benefits:
(A) For the period which the greater of (i) the remaining term of
employment provided in this Agreement or (ii) thirty-six (36) months,
commencing on the Date of Termination, Employer shall continue to provide
Employee with membership in a country club (the payment of dues and
assessments to be paid by Employer and all other charges such as for food or
special member events to be paid by Employee), and shall make provisions so
that Employee's medical insurance benefits, life insurance and accident
insurance plan coverage and all other welfare and retirement plan and fringe
benefits associated with Employee's employment will continue to be on terms
and at levels substantially the same as those existing on the day prior to the
Date of Termination;
(B) Employer shall transfer to Employee title to the automobile
which has been furnished to Employee for his use immediately prior to
Termination. The transfer of ownership of the vehicle shall be at no expense
(excluding any income tax consequences) to Employee.
(C) For the period which is the greater of (i) the remaining term
of employment provided for in this Agreement or (ii) thirty-six (36) months,
commencing on the Date of Termination, Employee shall receive the Annual
Compensation theretofore received by Employee from Employer. Payment shall be
made each month when the Employer's payroll is customarily paid unless
Employee irrevocably elects to receive all salary compensation due hereunder
in a lump sum which shall be paid within thirty (30) days of the Employee's
election. Should Employee elect to receive a lump sum settlement instead of
monthly payments, the amount payable shall be reduced to the present value of
monthly payments by using the one year certificate of deposit rate then in
effect at FNB. For purposes of this Agreement, "Annual Compensation" shall
mean Employee's current annual base salary immediately preceding the change in
control in accordance with Section 3.1(a) hereof.
(D) The Employee shall be fully vested under the Bank's ESOP Plan
and retain all of his rights under the ESOP Plan as of the date when the last
compensation under this Agreement is due to be paid to Employee.
7.3 The amount of any payment provided for in this Section VII shall not
be reduced, offset or subject to recovery by the Employer by reason of any
compensation earned by Employee as a result of subsequent employment by
another employer, other than compensation from employment with a banking
institution located in any county in Virginia whose county seat lies within
<PAGE>
fifty (50) miles by highway from Christiansburg, Virginia earned within
thirty-six (36) months after a change in control.
7.4 Notwithstanding the other provisions of this Section VII, should
Employer terminate Employee for cause as defined in subsection 4.2, no further
compensation shall be paid to Employee after the Date of Termination.
Otherwise, Employee shall be entitled to the full compensation provided for
herein after his Termination, whether such Termination is initiated by
Employee or Employer.
VIII. Successors; Binding Agreement
8.1 This Agreement shall inure to the benefit of and be binding upon any
corporate or other successor of Employer which shall result from a change in
control of Employer as defined in Section V hereof. Employer shall require
any such successor, by an agreement in form and substance satisfactory to
Employee, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent as Employer would be required to perform if no
such succession had taken place.
8.2 This Agreement shall inure to the benefit and be enforceable by
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Employee should
die while any amount would still be payable to Employee hereunder at the time
of death of Employee, such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to Employee's devisee,
legatee or the devisee's or legatee's designee; or if there be no such
devisee, legatee or designee, to Employee's estate.
IX. Fees and Expenses
9.1 Both Employer and the Employee covenant and agree that in the event
of a breach or default of either party of any of the terms of this agreement,
then the defaulting party shall reimburse the non-defaulting party for any and
all legal expenses incurred to enforce the contract, including reasonable
attorney's fees.
X. Taxes
10.1 All payments to be made to Employee under this Agreement will be
subject to required withholding of federal, state and local income and
employment taxes.
10.2 Notwithstanding anything to the contrary in this Agreement, in the
event that mutually satisfactory independent auditors (the "Auditors") shall
determine that any payment or distribution by Employer to or for Employee's
benefit (whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise) (a "Payment") would be a "parachute
payment" as defined in Section 280G of the Code, then the aggregate present
value of amounts payable or distributable to or for Employee's benefit
pursuant to this Agreement (such payments or distributions pursuant to this
Agreement are hereinafter referred to as "Agreement Payments") shall be
reduced (but not below zero) to the Reduced Amount. For purposes of this
subsection 10.2 of this Section X, the "Reduced Amount" shall be an amount
expressed in present value which maximizes the aggregate present value of
Agreement Payments such that the aggregate present value of Payments does not
constitute a parachute payment.
<PAGE>
10.3 If the Auditors determine that any Payment would be a "parachute
payment" as defined in Section 280G of the Code, Employer shall promptly give
Employee notice to that effect and a copy of the detailed calculation thereof
and of the Reduced Amount. Employee may then elect, in his sole discretion,
which and how much of Agreement Payments shall be eliminated or reduced (as
long as after such election the aggregate present value of the Agreement
Payments equals the Reduced Amount), and the Employee shall advise Employer in
writing of Employee's election within ten (10) days of Employee's receipt of
notice. If no such election is made by Employee, Employer may elect which and
how much of the Agreement Payments shall be eliminated or reduced (as long as
after such election the aggregate present value of the Agreement Payments
equals the Reduced Amount) and shall notify Employee promptly of such
election. For purposes of this subsection 10.3 of this Section X, present
value shall be determined in accordance with Section 280G(D)(4) of the Code.
All determinations made by the Auditors under this paragraph shall be made
within sixty (60) days of the Notice of Termination. In accordance with
Section VII hereof and as promptly as practicable following such determination
and the elections hereunder, Employer shall pay or distribute to or for the
Employee's benefit in the future such amounts as become due to Employee under
this Agreement.
10.4 As a result of the uncertainty in the application of Section 280G
of the Code, it is possible the Agreement Payments will have been made by
Employer which should not have been made ("Overpayment") or that additional
Agreement Payments which will have not been made by Employer should have been
made ("Underpayment"), in each case consistent with the calculation of the
Reduced Amount hereunder. In the event that the Auditors, based upon the
assertion of a deficiency by the Internal Revenue Service against Employer or
Employee which the Auditor believes has a high probability of success,
determines that an Overpayment has been made and such Overpayment shall be
treated for all purposes as a loan to Employee which Employee shall repay to
Employer together with interest at the applicable federal rate for short-term
obligations provided for in Section 7872(f)(2) of the Code; provided, however,
that no amount shall be payable by Employee to Employer if and to the extent
such payment would not be considered for federal income tax purposes to reduce
the amount of Payments which are considered to be "parachute payments" within
the meaning of Section 280G of the Code. In the event that the Auditors,
based upon controlling precedent, determine that an Underpayment has occurred,
any such underpayment shall be promptly paid by Employer to or for Employee's
benefit together with interest at the applicable federal rate for short-term
obligations provided for in Section 7872(f)(2) of the Code.
10.5 All determinations made by the Auditors pursuant to Section X shall
be binding upon Employer and Employee.
XI. Survival
11.1 The respective obligations of, and benefits accorded, Employer and
Employee as provided in Sections III, VII, VIII, IX ,X ,XI, XII, XIII, XIV,
XV, XVI, XVII of this Agreement shall survive termination of this Agreement.
XII. Notices
12.1 For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid and addressed to
the addresses set forth on the first page of this Agreement, provided that all
notices to Employer shall be directed to the attention of the Chairman of the
<PAGE>
Board, or to such other addresses either party may have furnished to the other
in writing in accordance herewith; except that notice of change of address
shall be in effect only upon receipt.
XIII. Miscellaneous
13.1 No provision of this Agreement may be modified, waived or
discharged unless such modification, waiver or discharge is agreed to in
writing signed by Employee and the Chairman of the Board or President of
Employer (or highest ranking executive officer of FNB other than Employee, if
applicable). No waiver by either party hereto at any time of any breach by
the other party hereto of, or of compliance with, any condition or provision
of this Agreement to be performed by such other party shall be deemed a waiver
of similar or dissimilar provisions or conditions at the same or at any prior
or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made
by either party which are not expressly set forth in this Agreement. The
validity, interpretation, construction and performance of this Agreement shall
be governed by the laws of the Commonwealth of Virginia.
XIV. Validity
14.1 The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
XV. Related Agreements
15.1 To the extent that any provision of any other agreement between
Employer or any of its subsidiaries and Employee shall limit, qualify or be
inconsistent with any provision of this Agreement, then for purposes of this
Agreement, while the same shall remain in force, the provision of this
Agreement shall control and such provision of such other agreement shall be
deemed to have been superseded, and to be of no force or effect, as if such
other agreement had been formally amended to the extent necessary to
accomplish such purpose.
XVI. Counterparts
16.1 This Agreement may be executed in one or more counterparts which
shall be construed together as one constituted agreement.
XVII. Governing Law
17.1 This Agreement shall be governed according to the laws of the
Commonwealth of Virginia. Should either party bring suit to enforce the
provisions hereof, Employer and Employee expressly consent to the exclusive
jurisdiction and venue of the Circuit Court of Montgomery County, Virginia to
resolve such dispute.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first written above.
Employer:
First National Bank
s/W. Nelson Ridinger
W. Nelson Ridinger, Chairman
FNB Corporation
s/W. Nelson Ridinger
W. Nelson Ridinger, Chairman
Employee:
s/Samuel H. Tollison
Samuel H. Tollison
<PAGE>
Exhibit # (10)B
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into this 11th day of September, 1997,
by and between FIRST NATIONAL BANK, a national banking association, with
principal offices in Christiansburg, Virginia and FNB CORPORATION, a one-bank
holding company organized and existing under the laws of the Commonwealth of
Virginia which owns all of the outstanding stock of First National Bank
(collectively "First National Bank" and "FNB Corporation" hereinafter referred
to as "Employer" or "FNB"), and JULIAN D. HARDY, JR., residing at 1236
Arrington Road, Blacksburg, Virginia 24060 (sometimes hereinafter referred to
as "Employee").
WITNESSETH:
WHEREAS, Employee has been a principal executive of Employer for a
number of years, and in such capacity has developed an intimate and thorough
knowledge of Employer's business methods, trade secrets, and operations, as
well as personal relationships with key individual employees of Employer and
other banks and companies with which Employer does business;
WHEREAS, the retention of Employee's services for and on behalf of
Employer and/or its subsidiaries, is of material importance to the
preservation and enhancement of the value of Employer's business;
WHEREAS, Employer recognizes that, as is the case with many publicly
held corporations, the possibility of a change of control may arise and that
such possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of Employer and its shareholders;
WHEREAS, the Board of Directors of Employer (the "Board") has determined
that appropriate steps should be taken to reinforce and encourage the
continued attention and dedication of members of Employer's management to
their assigned duties without distraction by the possibility of a change of
control; and
WHEREAS, the Board believes it important, should Employer or its
shareholders receive a proposal for transfer of control of Employer, that
Employee be able to assess such proposal and advise the Board thereon, without
being influenced by the uncertainties of Employee's own employment status.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants herein set forth, Employer and Employee do hereby agree as follows:
I. Active Term
1.1 Employer hereby employs Employee as President and Chief Executive
Officer of First National Bank to perform executive services as hereinafter
provided, and Employee hereby accepts said employment and agrees to render
such services to the Employer on the terms and conditions set forth in this
Agreement. In addition, he will also serve as Executive Vice President of FNB
Corporation. This Agreement shall be for a term of three years beginning on
the date of execution of this Agreement and shall automatically renew on the
anniversary date of the Agreement for an additional period of one year on each
renewal date until there is a change in control (as hereinafter defined) or
the Employee retires; and consequently, upon the anniversary date each year,
the Agreement will be automatically extended and have a remaining term of
three years.
<PAGE>
1.2 During the term of this Agreement, Employee agrees to perform such
duties as are customarily performed by one holding the position of President
and Chief Executive Officer of a bank and Executive Vice President of a bank
holding company, including but not limited to those duties as set forth in a
written job description. In addition, the Employee shall perform such
executive services for Employer as may from time to time be assigned to
Employee by Employer, the Board of First National Bank or the Corporation or
any Committee of the either Board.
1.3 During the term of this Agreement, Employee shall devote his best
efforts, including such portion of his time and effort as he has customarily
provided in recent years, to the affairs and business of the Employer and its
subsidiaries.
1.4 In the event Employer completes an affiliation with any other
institution in which there is no change in control (as hereinafter defined)
and, as a result of the affiliation, the Employee occupies a position of less
authority than the current position held under the terms of this Agreement and
job responsibilities less than Chief Executive Officer or President of FNB, or
Executive Vice President of FNB Corporation, the Employee may elect to
terminate employment under Section 7.2 of this Agreement and receive the
compensation as provided therein.
1.5 Employee's services shall be rendered principally in Christiansburg,
Virginia but Employee shall travel on behalf of Employer, its subsidiaries or
affiliates, as may reasonably be required.
II. Competitive Activities
2.1 During the term of this Agreement, Employee shall not, directly or
indirectly engage or participate in, become a director of, or render advisory
or other services for, or in connection with, or make any financial investment
in, any entity primarily engaging in financial or investment services which
competes with FNB in the Employer's trading area (as constituted at any time
during Employee's employment with FNB). Notwithstanding the foregoing, the
Employee may invest in any such financial or investment firm, corporation,
business entity or enterprise so long as the investment is "passive" (as such
term is defined in the Internal Revenue Code or its implementing regulations).
Notwithstanding anything to the contrary contained in this Agreement, while
Employee is employed by Employer during the term of this Agreement, Employee
shall have no employment contract or other written or oral agreement
concerning his employment as an officer of the Employer with any entity or
person other than the Employer.
2.2 Employee acknowledges that by virtue of his employment with FNB,
Employee shall be privy to confidential information concerning the activities
and affairs of the Employer, its subsidiaries and affiliates, if any,
including trade secrets and other confidential matters. During the term of
employment, should Employee render services to someone else in violation of
Section 2.1 hereof, other than as expressly authorized by the Board, Employer
shall be entitled to immediate equitable relief to restrain such conduct.
Such equitable relief shall be in addition to any other remedies to which
Employer may be entitled under law. Except for the purpose of carrying out
Employee's duties hereunder, Employee shall not remove or retain, or make
copies or reproductions of any inquiries, calculations, letters, papers, or
information of any type or description relating to the business of Employer,
its subsidiaries or affiliates, if any, and Employee shall not divulge to
others any information or data acquired by him while in Employer's employ
relating to methods, processes, or other trade secrets or confidential
information owned or utilized by FNB. Employer shall acquire the sole and
exclusive rights to any innovations, ideas, and concepts, whether or not
<PAGE>
subject to patent or trademark protection, and all copyrightable materials
which are conceived by Employee during his employment, which relate to the
business of Employer or any of its subsidiaries or affiliates, which are
confidential, and which are not readily ascertainable from persons or other
sources outside Employer and its subsidiaries and affiliates.
III. Compensation
3.1 Employer shall compensate and pay Employee for his services as
follows:
a. Employee shall be paid a salary at an annual rate set by the
Board from time to time. At a minimum, the base salary shall equal or exceed
the base salary paid Employee at the time of the execution of this agreement.
b. Employee shall be reimbursed, in a manner consistent with
policies of Employer presently or later established for executive personnel,
for all reasonable expenses directly incurred by the Employee in the discharge
of any duties hereunder;
c. Employee shall receive all fringe benefits that Employee has
received immediately prior to the execution of this Agreement, including, but
not limited to, the use of an Employer's car and memberships at country clubs,
health and civic clubs; provided, however, that expenses for meetings and
conferences shall not exceed $15,000 annually(excluding VBA) and memberships
and club charges shall not exceed $12,000. Fringe benefits shall not be
considered to include health, life, disability and dental insurance provided
to the Employee through group welfare benefit plans sponsored by FNB nor to
retirement benefits provided to Employee through retirement plans sponsored by
FNB. Fringe benefits in excess of the amount specified herein shall be
subject to Board approval.
d. Employee shall receive all FNB sponsored welfare and
retirement plan benefits as shall be made generally and proportionally
available to other executive employees of Employer. Employer shall receive an
annual complete physical examination to be performed by a physician of
Employee's choice with a report of the results provided to Employer.
e. Employee shall receive the number of paid vacation days in
each calendar year determined by Employer from time to time for its executive
officers, but not less than four weeks in any calendar year (prorated in any
calendar year during which the Employee is employed hereunder for less than
the entire year in accordance with the number of days in such calendar year
during which he is employed).
All payments made payable to Employee under this Agreement shall be
subject to withholding for applicable taxes, social security or other
governmental levies and to any other deductions authorized by or for
Employee's benefit, under any welfare or retirement plan established for or
made generally available to employees of Employer.
3.2 Nothing in this Agreement shall prevent the Board from, at any time,
increasing the compensation and fringe benefits to be paid to Employee in the
event the Board, in its sole discretion, shall deem it advisable so to do in
order to compensate Employee for his services.
3.3 The Employer shall not reduce or eliminate any fringe benefit
available to the Employee immediately prior to the execution of this Agreement
unless the Employer pays the Employee a cash allowance in an amount equal to
the value to the Employee of such reduced or eliminated fringe benefit.
<PAGE>
IV. Termination Prior to Change, Including
Termination for Cause, and Related Provisions
4.1 Employer shall have the right, at any time prior to a change of
control of Employer(as hereinafter defined) upon written notice of not less
than thirty (30) days, to terminate the Employee's employment hereunder.
4.2 In the event that, prior to a change of control of Employer (as
hereinafter defined), employment is terminated for cause (as hereinafter
defined), Employee shall have no right to compensation or other benefits for
any period after such termination. For purpose of this subsection, the term
"cause" shall mean personal dishonesty, incompetence, willful misconduct,
willful breach of fiduciary duty, willful violation of any law, rule or
regulation (other than traffic violations or similar offenses), willful
violation of a final cease and desist order, willful or intentional breach or
neglect of Employee's duties hereunder, persistent negligence, or misconduct
in the performance of Employee's duties.
V. Change in Control
5.1 For purposes of this Agreement, a "change in control" of Employer
shall have occurred at such time as (a) the closing of a corporate
reorganization in which the Bank becomes a subsidiary of a holding company,
the majority of the common stock of which is owned, in aggregate, by persons
who did not own the majority of the common stock of FNB Corporation (or its
successor) immediately prior to the reorganization; (b) individuals who
constitute the Board of FNB Corporation on the date hereof (the "Incumbent
Board") cease for any reason to constitute at least a majority thereof;
provided that any person becoming a director subsequent to the date hereof
whose nomination for election was approved by a vote of at least three-
quarters (3/4) of the directors comprising the Incumbent Board shall be
considered as though such person were a member of the Incumbent Board for
purposes of this subsection; (c) the closing of the merger of First National
Bank with or into another person; or (d) the closing of the sale, conveyance
or other transfer of substantially all of the assets of First National Bank to
another person.
5.2 For purposes of this Agreement, the term "person" shall include any
individual, corporation, partnership, group, association or other "person", as
such term is used in section 14(d) of the Exchange Act, other than Employer,
any entity in which the Employer owns a majority of the voting interest or any
employee benefit plan(s) sponsored by Employer.
VI. Termination Following Change in Control
6.1 Employer recognizes that a change in control as defined in Section V
may directly affect the direction and philosophy of FNB. A change in control
may also affect Employee's responsibilities and position with the Employer.
Should a change in control occur, Employee shall be entitled to a lump sum
payment of $100,000 due and payable within thirty (30) days after the change
in control. Employee will be entitled also to the compensation provided in
subsection 7.2 of Section VII hereof, upon Employee's determination to
terminate his employment with Employer or upon termination by Employer or upon
termination by Employer of Employee's employment with Employer.
6.2 Any termination by Employer or by Employee following a change in
control shall be communicated by written notice of termination ("Notice of
Termination") to the other party hereto. Such Notice of Termination shall
<PAGE>
specify the date as of which employment shall terminate ("Date of
Termination"), which Date of Termination shall not be more than sixty (60)
days from the date of the Notice of Termination.
VII. Compensation Upon Termination; Other Agreements
7.1 During any period following a change in control that Employee fails
to perform his duties as a result of incapacity due to physical or mental
illness, Employee shall continue to receive a salary which, when added to
insurance benefits received as compensation and social security benefits, will
equal the Employee's rate of compensation immediately prior to the illness.
Any benefits or awards under any plans shall continue to accrue during such
period of illness, to the extent not inconsistent with such Plans, until
Employee's employment is terminated pursuant to and in accordance with Section
VI hereof. Thereafter, Employee's compensation and benefits shall be
determined in accordance with subsection 7.2 hereof and the plans then in
effect.
7.2 Subject to Section X hereof, if within thirty-six (36) months of the
date after which a change in control of the Employer shall have occurred, as
defined in Section V above, Employee's employment with Employer shall be
terminated by the Employer or by Employee, then Employee shall be entitled,
without regard to any contrary provisions of any Plan, to the following
benefits:
(A) For the period which the greater of (i) the remaining term of
employment provided in this Agreement or (ii) thirty-six (36) months,
commencing on the Date of Termination, Employer shall continue to provide
Employee with membership in a country club (the payment of dues and
assessments to be paid by Employer and all other charges such as for food or
special member events to be paid by Employee), and shall make provisions so
that Employee's medical insurance benefits, life insurance and accident
insurance plan coverage and all other welfare and retirement plan and fringe
benefits associated with Employee's employment will continue to be on terms
and at levels substantially the same as those existing on the day prior to the
Date of Termination;
(B) Employer shall transfer to Employee title to the automobile
which has been furnished to Employee for his use immediately prior to
Termination. The transfer of ownership of the vehicle shall be at no expense
(excluding any income tax consequences) to Employee.
(C) For the period which is the greater of (i) the remaining term
of employment provided for in this Agreement or (ii) thirty-six (36) months,
commencing on the Date of Termination, Employee shall receive the Annual
Compensation theretofore received by Employee from Employer. Payment shall be
made each month when the Employer's payroll is customarily paid unless
Employee irrevocably elects to receive all salary compensation due hereunder
in a lump sum which shall be paid within thirty (30) days of the Employee's
election. Should Employee elect to receive a lump sum settlement instead of
monthly payments, the amount payable shall be reduced to the present value of
monthly payments by using the one year certificate of deposit rate then in
effect at FNB. For purposes of this Agreement, "Annual Compensation" shall
mean Employee's current annual base salary immediately preceding the change in
control in accordance with Section 3.1(a) hereof.
(D) The Employee shall be fully vested under the Bank's ESOP Plan
and retain all of his rights under the ESOP Plan as of the date when the last
compensation under this Agreement is due to be paid to Employee.
<PAGE>
7.3 The amount of any payment provided for in this Section VII shall not
be reduced, offset or subject to recovery by the Employer by reason of any
compensation earned by Employee as a result of subsequent employment by
another employer, other than compensation from employment with a banking
institution located in any county in Virginia whose county seat lies within
fifty (50) miles by highway from Christiansburg, Virginia earned within
thirty-six (36) months after a change in control.
7.4 Notwithstanding the other provisions of this Section VII, should
Employer terminate Employee for cause as defined in subsection 4.2, no further
compensation shall be paid to Employee after the Date of Termination.
Otherwise, Employee shall be entitled to the full compensation provided for
herein after his Termination, whether such Termination is initiated by
Employee or Employer.
VIII. Successors; Binding Agreement
8.1 This Agreement shall inure to the benefit of and be binding upon any
corporate or other successor of Employer which shall result from a change in
control of Employer as defined in Section V hereof. Employer shall require
any such successor, by an agreement in form and substance satisfactory to
Employee, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent as Employer would be required to perform if no
such succession had taken place.
8.2 This Agreement shall inure to the benefit and be enforceable by
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Employee should
die while any amount would still be payable to Employee hereunder at the time
of death of Employee, such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to Employee's devisee,
legatee or the devisee's or legatee's designee; or if there be no such
devisee, legatee or designee, to Employee's estate.
IX. Fees and Expenses
9.1 Both Employer and the Employee covenant and agree that in the event
of a breach or default of either party of any of the terms of this agreement,
then the defaulting party shall reimburse the non-defaulting party for any and
all legal expenses incurred to enforce the contract, including reasonable
attorney's fees.
X. Taxes
10.1 All payments to be made to Employee under this Agreement will be
subject to required withholding of federal, state and local income and
employment taxes.
10.2 Notwithstanding anything to the contrary in this Agreement, in the
event that mutually satisfactory independent auditors (the "Auditors") shall
determine that any payment or distribution by Employer to or for Employee's
benefit (whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise) (a "Payment") would be a "parachute
payment" as defined in Section 280G of the Code, then the aggregate present
value of amounts payable or distributable to or for Employee's benefit
pursuant to this Agreement (such payments or distributions pursuant to this
Agreement are hereinafter referred to as "Agreement Payments") shall be
reduced (but not below zero) to the Reduced Amount. For purposes of this
subsection 10.2 of this Section X, the "Reduced Amount" shall be an amount
<PAGE>
expressed in present value which maximizes the aggregate present value of
Agreement Payments such that the aggregate present value of Payments does not
constitute a parachute payment.
10.3 If the Auditors determine that any Payment would be a "parachute
payment" as defined in Section 280G of the Code, Employer shall promptly give
Employee notice to that effect and a copy of the detailed calculation thereof
and of the Reduced Amount. Employee may then elect, in his sole discretion,
which and how much of Agreement Payments shall be eliminated or reduced (as
long as after such election the aggregate present value of the Agreement
Payments equals the Reduced Amount), and the Employee shall advise Employer in
writing of Employee's election within ten (10) days of Employee's receipt of
notice. If no such election is made by Employee, Employer may elect which and
how much of the Agreement Payments shall be eliminated or reduced (as long as
after such election the aggregate present value of the Agreement Payments
equals the Reduced Amount) and shall notify Employee promptly of such
election. For purposes of this subsection 10.3 of this Section X, present
value shall be determined in accordance with Section 280G(D)(4) of the Code.
All determinations made by the Auditors under this paragraph shall be made
within sixty (60) days of the Notice of Termination. In accordance with
Section VII hereof and as promptly as practicable following such determination
and the elections hereunder, Employer shall pay or distribute to or for the
Employee's benefit in the future such amounts as become due to Employee under
this Agreement.
10.4 As a result of the uncertainty in the application of Section 280G
of the Code, it is possible the Agreement Payments will have been made by
Employer which should not have been made ("Overpayment") or that additional
Agreement Payments which will have not been made by Employer should have been
made ("Underpayment"), in each case consistent with the calculation of the
Reduced Amount hereunder. In the event that the Auditors, based upon the
assertion of a deficiency by the Internal Revenue Service against Employer or
Employee which the Auditor believes has a high probability of success,
determines that an Overpayment has been made and such Overpayment shall be
treated for all purposes as a loan to Employee which Employee shall repay to
Employer together with interest at the applicable federal rate for short-term
obligations provided for in Section 7872(f)(2) of the Code; provided, however,
that no amount shall be payable by Employee to Employer if and to the extent
such payment would not be considered for federal income tax purposes to reduce
the amount of Payments which are considered to be "parachute payments" within
the meaning of Section 280G of the Code. In the event that the Auditors,
based upon controlling precedent, determine that an Underpayment has occurred,
any such underpayment shall be promptly paid by Employer to or for Employee's
benefit together with interest at the applicable federal rate for short-term
obligations provided for in Section 7872(f)(2) of the Code.
10.5 All determinations made by the Auditors pursuant to Section X shall
be binding upon Employer and Employee.
XI. Survival
11.1 The respective obligations of, and benefits accorded, Employer and
Employee as provided in Sections III, VII, VIII, IX ,X ,XI, XII, XIII, XIV,
XV, XVI, XVII of this Agreement shall survive termination of this Agreement.
<PAGE>
XII. Notices
12.1 For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid and addressed to
the addresses set forth on the first page of this Agreement, provided that all
notices to Employer shall be directed to the attention of the Chairman of the
Board, or to such other addresses either party may have furnished to the other
in writing in accordance herewith; except that notice of change of address
shall be in effect only upon receipt.
XIII. Miscellaneous
13.1 No provision of this Agreement may be modified, waived or
discharged unless such modification, waiver or discharge is agreed to in
writing signed by Employee and the Chairman of the Board or President of
Employer (or highest ranking executive officer of FNB other than Employee, if
applicable). No waiver by either party hereto at any time of any breach by
the other party hereto of, or of compliance with, any condition or provision
of this Agreement to be performed by such other party shall be deemed a waiver
of similar or dissimilar provisions or conditions at the same or at any prior
or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made
by either party which are not expressly set forth in this Agreement. The
validity, interpretation, construction and performance of this Agreement shall
be governed by the laws of the Commonwealth of Virginia.
XIV. Validity
14.1 The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
XV. Related Agreements
15.1 To the extent that any provision of any other agreement between
Employer or any of its subsidiaries and Employee shall limit, qualify or be
inconsistent with any provision of this Agreement, then for purposes of this
Agreement, while the same shall remain in force, the provision of this
Agreement shall control and such provision of such other agreement shall be
deemed to have been superseded, and to be of no force or effect, as if such
other agreement had been formally amended to the extent necessary to
accomplish such purpose.
XVI. Counterparts
16.1 This Agreement may be executed in one or more counterparts which
shall be construed together as one constituted agreement.
XVII. Governing Law
17.1 This Agreement shall be governed according to the laws of the
Commonwealth of Virginia. Should either party bring suit to enforce the
provisions hereof, Employer and Employee expressly consent to the exclusive
jurisdiction and venue of the Circuit Court of Montgomery County, Virginia to
resolve such dispute.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first written above.
Employer:
First National Bank
s/W. Nelson Ridinger
W. Nelson Ridinger, Chairman
FNB Corporation
s/Samuel H. Tollison
Samuel H. Tollison, President
Employee:
s/Julian Daniel Hardy, Jr.
Julian Daniel Hardy, Jr.
Exhibit # (10)C
CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT, made and entered into this day of
, 1997, by and between FIRST NATIONAL BANK, a national banking
association, with principal offices in Christiansburg, Virginia and FNB
CORPORATION, a one-bank holding company organized and existing under the laws
of the Commonwealth of Virginia which owns all of the outstanding stock of
First National Bank (collectively "First National Bank" and "FNB Corporation"
hereinafter referred to as "Employer" or "FNB"), and
, residing at
(sometimes hereinafter referred to as
"Employee").
WITNESSETH:
WHEREAS, Employee has been a principal executive of Employer for a number
of years, and in such capacity has developed an intimate and thorough
knowledge of Employer's business methods, trade secrets, and operations, as
well as personal relationships with key individual employees of Employer and
other banks and companies with which Employer does business;
WHEREAS, the retention of Employee's services for and on behalf of
Employer and/or its subsidiaries, is of material importance to the
preservation and enhancement of the value of Employer's business;
WHEREAS, Employer recognizes that, as is the case with many publicly held
corporations, the possibility of a change of control may arise and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of Employer and its shareholders;
WHEREAS, the Board of Directors of Employer (the "Board") has determined
that appropriate steps should be taken to reinforce and encourage the
continued attention and dedication of members of Employer's management to
their assigned duties without distraction by the possibility of a change of
control; and
WHEREAS, the Board believes it important, should Employer or its
shareholders receive a proposal for transfer of control of Employer, that
Employee be able to assess such proposal and advise the Board thereon, without
being influenced by the uncertainties of Employee's own employment status.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants herein set forth, Employer and Employee do hereby agree as follows:
I. Change in Control
1.1 For purposes of this Agreement, a "change in control" of Employer shall
have occurred at such time as (a) the closing of a corporate reorganization in
which the Bank becomes a subsidiary of a holding company, the majority of the
common stock of which is owned by persons who did not own the majority of the
common stock of FNB Corporation (or its successor) immediately prior to the
reorganization; (b) individuals who constitute the Board on the date hereof
(the "Incumbent Board") cease for any reason to constitute at least a majority
thereof; provided that any person becoming a director subsequent to the date
hereof whose nomination for election was approved by a vote of at least three-
quarters (3/4) of the directors comprising the Incumbent Board shall be
considered as though such person were a member of the Incumbent Board for
purposes of this subsection; (c) the closing of the merger of Employer with or
into another person; or (d) the closing of the sale, conveyance or other
transfer of substantially all of the assets of Employer to another person.
<PAGE>
1.2 For purposes of this Agreement, the term "person" shall include any
individual, corporation, partnership, group, association or other "person", as
such term is used in section 14(d) of the Exchange Act, other than Employer,
any entity in which the Employer owns a majority of the voting interest or any
employee benefit plan(s) sponsored by Employer.
1.3 In the event Employer completes an affiliation with any other
institution in which there is a change in control and, as a result of the
affiliation, the Employee occupies a position of less authority than the
current position held under the terms of this Agreement and job
responsibilities less than of FNB,
the Employee may elect to terminate employment under Section 2.2 of this
Agreement and receive the compensation as provided in Section 3.1 hereof.
II. Termination Following Change in Control
2.1 Employer recognizes that a change in control as defined in Section I
may directly affect the direction and philosophy of FNB. A change in control
may also affect Employee's responsibilities and position with the Employer.
Employee will be entitled to the compensation provided in subsection 3.1 of
Section III hereof, upon Employee's determination to terminate his employment
with Employer or upon termination by Employer or upon termination by Employer
of Employee's employment with Employer.
2.2 Any termination by Employer or by Employee following a change in
control shall be communicated by written notice of termination ("Notice of
Termination") to the other party hereto. Such Notice of Termination shall
specify the date as of which employment shall terminate ("Date of
Termination"), which Date of Termination shall not be more than sixty (60)
days from the date of the Notice of Termination.
III. Compensation Upon Termination; Other Agreements
3.1 If within twelve (12) months of the date after which a change in
control of the Employer shall have occurred, as defined in Section I above,
Employee's employment with Employer shall be terminated by the Employer or by
Employee, then Employee shall be entitled, without regard to any contrary
provisions of any Plan, to the following benefits:
(A) For a period of twelve (12) months, commencing on the Date of
Termination, Employer shall make provisions so that Employee's medical
insurance benefits, life insurance and accident insurance plan coverage and
all other welfare and retirement plan and fringe benefits associated with
Employee's employment will continue to be on terms and at levels substantially
the same as those existing on the day prior to the Date of Termination;
(B) For a period of twelve (12) months, commencing on the Date of
Termination, Employee shall receive the Annual Compensation theretofore
received by Employee from Employer. Payment shall be made each month when the
Employer's payroll is customarily paid unless Employee irrevocably elects to
receive all salary compensation due hereunder in a lump sum which shall be
paid within thirty (30) days of the Employee's election. Should Employee
elect to receive a lump sum settlement instead of monthly payments, the amount
payable shall be reduced to the present value of monthly payments by using
the one year certificate of deposit rate then in effect at FNB. For purposes
of this Agreement, "Annual Compensation" shall mean Employee's current annual
base salary immediately preceding the change in control in accordance with
Section 3.1(a) hereof.
<PAGE>
3.2 The amount of any payment provided for in this Section III shall not
be reduced, offset or subject to recovery by the Employer by reason of any
compensation earned by Employee as a result of subsequent employment by
another employer, other than compensation from employment with a banking
institution located in any county in Virginia whose county seat lies within
fifty (50) miles by highway from Christiansburg, Virginia earned within
twelve (12) months after a change in control.
3.3 Notwithstanding the other provisions of this Section III, should
Employer terminate Employee for cause, no further compensation shall be paid
to Employee after the Date of Termination. Otherwise, Employee shall be
entitled to the full compensation provided for herein after his Termination,
whether such Termination is initiated by Employee or Employer. For purposes
of this subsection, the term "cause" shall mean personal dishonesty,
incompetence, willful misconduct, willful breach of fiduciary duty, willful
violation of any law, rule or regulation (other than traffic violations or
similar offenses), willful violation of a final cease and desist order,
willful or intentional breach or neglect of Employee's duties hereunder,
persistent negligence, or misconduct in the performance of Employee's duties.
IV. Successors; Binding Agreement
4.1 This Agreement shall inure to the benefit of and be binding upon any
corporate or other successor of Employer which shall result from a change in
control of Employer as defined in Section I hereof. Employer shall require
any such successor, by an agreement in form and substance satisfactory to
Employee, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent as Employer would be required to perform if no
such succession had taken place.
4.2 This Agreement shall inure to the benefit and be enforceable by
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Employee should
die while any amount would still be payable to Employee hereunder at the time
of death of Employee, such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to Employee's devisee,
legatee or the devisee's or legatee's designee; or if there be no such
devisee, legatee or designee, to Employee's estate.
V. Fees and Expenses
5.1 Both Employer and the Employee covenant and agree that in the event
of a breach or default of either party of any of the terms of this agreement,
then the defaulting party shall reimburse the non-defaulting party for any and
all legal expenses incurred to enforce the contract, including reasonable
attorney's fees.
VI. Taxes
6.1 All payments to be made to Employee under this Agreement will be
subject to required withholding of federal, state and local income and
employment taxes.
VII. Survival
7.1 The respective obligations of, and benefits accorded, Employer and
Employee as provided in this Agreement shall survive termination of this
Agreement.
<PAGE>
VIII. Notices
8.1 For purposes of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by United States registered mail,
return receipt requested, postage prepaid and addressed to the addresses set
forth on the first page of this Agreement, provided that all notices to
Employer shall be directed to the attention of the Chairman of the Board, or
to such other addresses either party may have furnished to the other in
writing in accordance herewith; except that notice of change of address shall
be in effect only upon receipt.
IX. Miscellaneous
9.1 No provision of this Agreement may be modified, waived or discharged
unless such modification, waiver or discharge is agreed to in writing signed
by Employee and the Chairman of the Board or President of Employer (or highest
ranking executive officer of FNB other than Employee, if applicable). No
waiver by either party hereto at any time of any breach by the other party
hereto of, or of compliance with, any condition or provision of this Agreement
to be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement.
X. Validity
10.1 The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
XI. Related Agreements
11.1 To the extent that any provision of any other agreement between
Employer or any of its subsidiaries and Employee shall limit, qualify or be
inconsistent with any provision of this Agreement, then for purposes of this
Agreement, while the same shall remain in force, the provision of this
Agreement shall control and such provision of such other agreement shall be
deemed to have been superseded, and to be of no force or effect, as if such
other agreement had been formally amended to the extent necessary to
accomplish such purpose.
XII. Counterparts
12.1 This Agreement may be executed in one or more counterparts which
shall be construed together as one constituted agreement.
XIII. Governing Law
13.1 This Agreement shall be governed according to the laws of the
Commonwealth of Virginia. Should either party bring suit to enforce the
provisions hereof, Employer and Employee expressly consent to the exclusive
jurisdiction and venue of the Circuit Court of Montgomery County, Virginia to
resolve such dispute.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first written above.
Employer:
First National Bank
Julian D. Hardy, President
FNB Corporation
Samuel H. Tollison, President
Employee:
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 12,496
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 6,500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 62,312
<INVESTMENTS-CARRYING> 42,665
<INVESTMENTS-MARKET> 43,487
<LOANS> 283,656
<ALLOWANCE> 4,319
<TOTAL-ASSETS> 421,610
<DEPOSITS> 343,298
<SHORT-TERM> 13,457
<LIABILITIES-OTHER> 2,792
<LONG-TERM> 22,552
0
0
<COMMON> 16,619
<OTHER-SE> 22,892
<TOTAL-LIABILITIES-AND-EQUITY> 421,610
<INTEREST-LOAN> 19,872
<INTEREST-INVEST> 4,439
<INTEREST-OTHER> 228
<INTEREST-TOTAL> 24,539
<INTEREST-DEPOSIT> 11,166
<INTEREST-EXPENSE> 12,375
<INTEREST-INCOME-NET> 12,164
<LOAN-LOSSES> 400
<SECURITIES-GAINS> (20)
<EXPENSE-OTHER> 8,431
<INCOME-PRETAX> 5,064
<INCOME-PRE-EXTRAORDINARY> 5,064
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,019
<EPS-PRIMARY> 1.24
<EPS-DILUTED> 1.24
<YIELD-ACTUAL> 4.63
<LOANS-NON> 1,044
<LOANS-PAST> 55
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,179
<CHARGE-OFFS> 391
<RECOVERIES> 131
<ALLOWANCE-CLOSE> 4,319
<ALLOWANCE-DOMESTIC> 3,795
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 524
</TABLE>
