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, 1999
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: 000-24141
FNB Corporation
(Exact name of registrant as specified in its charter)
Virginia 54-1791618
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) 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
4,093,996 shares outstanding as of September 30, 1999
<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 26
Signatures 27
Index to Exhibits 28
<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, 1998 and September 30,
1999 (unaudited);
2. Unaudited Consolidated Statements of Income for the quarter and nine-
month periods ended September 30, 1999 and 1998;
3. Unaudited Consolidated Statements of Comprehensive Income for the
quarter and nine-month periods ended September 30, 1999 and 1998;
4. Unaudited Consolidated Statements of Cash Flows for the nine-month
periods ended September 30, 1999 and 1998; and,
5. Unaudited Consolidated Statements of Changes in Stockholders' Equity for
the nine-month periods ended September 30, 1999 and 1998.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
FNB Corporation and subsidiaries
September 30, 1999
In Thousands, Except Share and Per Share Data
(Unaudited)
<S> <C>
ASSETS
Cash and due from banks $ 10,471
Federal funds sold 2,265
Securities available-for-sale, at fair value 66,554
Securities held-to-maturity, at amortized cost
(market value $34,513) 34,004
Mortgage loans held for sale 408
Loans:
Commercial 109,962
Consumer 67,067
Real estate - commercial 70,985
Real estate - construction 20,745
Real estate - mortgage 100,214
Total loans 368,973
Less unearned income 0
Loans, net of unearned income 368,973
Less allowance for loan losses 4,983
Loans, net 363,990
Bank premises and equipment, net 13,433
Other real estate owned 130
Other assets 5,998
Total assets $ 497,253
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand deposits 44,293
Interest-bearing demand and savings deposits 142,320
Time deposits 163,084
Certificates of deposit of $100,000 and over 44,497
Total deposits 394,194
Federal funds purchased and securities sold under
agreements to repurchase 6,829
Other borrowed funds 46,354
Other liabilities 2,939
Total liabilities 450,316
Stockholders' equity:
Common stock, $5.00 par value, Authorized 10,000,000
shares; issued and outstanding 4,093,996 shares 20,470
Surplus 25,595
Unearned ESOP shares (106,013 shares) (1,747)
Retained earnings 3,051
Accumulated other comprehensive income (loss) (432)
Total stockholders' equity 46,937
Total liabilities and stockholders' equity $ 497,253
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
FNB Corporation and subsidiaries
December 31, 1998
In Thousands, Except Share and Per Share Data
<S> <C>
ASSETS
Cash and due from banks $ 11,875
Federal funds sold 10,600
Securities available-for-sale, at fair value 57,232
Securities held-to-maturity, at amortized cost
(market value $39,641) 38,352
Mortgage loans held for sale 1,646
Loans:
Commercial 85,536
Consumer 66,526
Real estate - commercial 65,165
Real estate - construction 16,686
Real estate - mortgage 94,686
Total loans 328,599
Less unearned income -
Loans, net of unearned income 328,599
Less allowance for loan losses 4,640
Loans, net 323,959
Bank premises and equipment, net 12,977
Other real estate owned 30
Other assets 5,245
Total assets $ 461,916
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand deposits 39,141
Interest-bearing demand and savings deposits 126,204
Time deposits 172,368
Certificates of deposit of $100,000 and over 48,544
Total deposits 386,257
Securities sold under agreements to repurchase 6,650
Other borrowed funds 21,612
Other liabilities 2,996
Total liabilities 417,515
Stockholders' equity:
Common stock, $5.00 par value. Authorized 10,000,000
shares; issued and outstanding 3,722,139 shares 18,611
Surplus 19,320
Unearned ESOP shares (117,660 shares) (2,120)
Retained earnings 8,307
Accumulated other comprehensive income 283
Total stockholders' equity 44,401
Total liabilities and stockholders' equity $ 461,916
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, 1999 and 1998
In Thousands, Except Share and Per Share Data
(Unaudited)
Quarter Ended Nine Months Ended
September 30 September 30
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 8,405 7,781 24,109 22,066
Interest on securities:
Taxable 855 741 2,283 2,445
Nontaxable 533 586 1,708 1,731
Interest on federal funds sold 59 122 178 348
Total interest income 9,852 9,230 28,278 26,590
Interest expense:
Interest on interest-bearing
demand and savings deposits 933 755 2,397 2,210
Interest on time deposits 2,156 2,443 6,732 7,409
Interest on certificates of
deposit of $100,000 and over 745 796 2,281 2,165
Interest on federal funds purchased
and securities sold under
agreements to repurchase 64 73 208 194
Interest on other borrowed funds 631 320 1,393 965
Interest on ESOP debt 0 4 0 76
Total interest expense 4,529 4,391 13,011 13,019
Net interest income 5,323 4,839 15,267 13,571
Provision for loan losses 300 390 889 710
Net interest income after
provision for loan losses 5,023 4,449 14,378 12,861
Noninterest income:
Service charges on deposit accounts 323 294 923 842
Loan origination fees 71 95 260 279
Other service charges and fees 169 121 496 354
Other income 150 203 705 571
Securities gains (losses), net 11 22 11 47
Total noninterest income 724 735 2,395 2,093
Noninterest expense:
Salaries and employee benefits 1,886 1,637 5,486 4,858
Occupancy and equipment expense, net 620 508 1,847 1,569
Credit card expense 220 175 558 441
Supplies expense 108 134 340 361
FDIC assessment expense 11 11 33 32
Other expenses 792 692 2,325 1,905
Total noninterest expense 3,637 3,157 10,589 9,166
Income before income tax expense 2,110 2,027 6,184 5,788
Income tax expense 503 456 1,452 1,305
Net income $ 1,607 1,571 4,732 4,483
Net income per share (as restated) $ 0.40 0.39 1.19 1.13
Dividends declared per share
(as restated) $ 0.15 0.14 0.46 0.42
Average number of shares
outstanding (as restated) 3,986,953 3,963,845 3,980,202 3,956,679
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FNB Corporation and subsidiaries
Quarter and Nine Months Ended September 30, 1999 and 1998
In Thousands
(unaudited)
Quarter Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net Income $ 1,607 1,571 4,732 4,483
Other comprehensive income, before tax:
Unrealized holding gains (losses)
arising during period on
securities (116) 264 (1,075) 298
Less: reclassification adjustment
for (gains) losses included in
net income (11) (17) (11) (42)
Other comprehensive income (loss)
before tax (127) 247 (1,086) 256
Income tax effect of items of other
comprehensive income 45 (84) 371 (87)
Other comprehensive income (loss),
net of tax (82) 163 (715) 169
Comprehensive Income $ 1,525 1,734 4,017 4,652
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, 1999 and 1998
In Thousands
(Unaudited)
Nine Months Ended
September 30,
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,732 4,483
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 889 710
Depreciation and amortization of bank
premises and equipment 918 812
ESOP compensation 373 488
Amortization of premiums and accretion
of discounts, net 400 137
Gain on sale of securities, net 11 (47)
Net gain on sale of fixed assets and
other real estate (13) (30)
Net (increase) decrease in mortgage
loans held for sale 1,238 (1,031)
Increase in other assets (943) (1,079)
Increase (decrease) in other liabilities (57) 203
Net cash provided by operating activities 7,548 4,646
Cash flows from investing activities:
Net (increase) decrease in federal funds sold 8,335 (1,540)
Proceeds from calls and maturities of
securities available-for-sale 13,297 29,442
Proceeds from calls and maturities of
securities held-to-maturity 4,355 2,265
Purchase of securities available-for-sale (23,879) (14,366)
Net increase in loans (41,017) (37,475)
Proceeds from sale of other real estate owned 120 203
Recoveries on loans previously charged off 145 145
Bank premises and equipment expenditures (895) (734)
Net cash used in investing activities (39,539) (22,060)
Cash flows from financing activities:
Net increase in deposits 7,937 16,157
Net increase in federal funds purchased and
securities sold under agreements to
repurchase 179 1,105
Net increase (decrease) in other borrowed funds 24,742 (1,944)
Principal payments on ESOP debt (373) (488)
Dividends paid (1,846) (1,668)
Dividends on unallocated ESOP shares (52) (58)
Proceeds from sale of shares to ESOP -- 1,400
Net cash provided by financing
activities 30,587 14,504
Net decrease in cash and due from banks (1,404) (2,910)
Cash and due from banks at beginning of period 11,875 14,406
Cash and due from banks at end of period $ 10,471 11,496
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, 1999 and 1998
In Thousands
(Unaudited)
1999 1998
<S> <C> <C>
Balance, beginning of period $ 44,401 40,213
Net income for period 4,732 4,483
Cash dividends (1,846) (1,668)
ESOP shares allocated upon loan repayment 373 488
Change in accumulated other comprehensive income (715) 169
Cash payment of fractional shares in 10% stock
dividend (8) (7)
Balance, end of period $ 46,937 43,678
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FNB Corporation and subsidiaries
September 30, 1999 and 1998
In Thousands, Except Share Data
(Unaudited)
(1) Summary of Significant Accounting Policies
The accompanying financial statements of FNB Corporation and subsidiaries 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,
periodically review the Corporation's allowance for loan losses and valuation
of other real estate owned. Such agencies may require the Corporation 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?). The
primary subsidiary is First National Bank (the ?Bank?). 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.
<PAGE>
(c) 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, 1998, or
September 30, 1999. 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
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.
<PAGE>
(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.
(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.
In July 1999, the Corporation declared a 10% dividend to
shareholders of record on August 27, 1999. As a result, all share
and per share data have been adjusted retroactively to reflect the
dividend.
(i) Trust Assets
Assets held by the Corporation'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 Corporation to maintain certain
average balances as cash reserves. The reserve requirements
approximated $1,399 and $1,113 at September 30, 1999 and December 31,
1998, respectively.
<PAGE>
(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, 1999 and
December 31, 1998:
<TABLE>
<CAPTION>
Gross Gross Approx.
Amortized Unrealized Unrealized Fair
September 30, 1999 Costs Gains Losses Values
<S> <C> <C> <C> <C>
U.S. Treasury $ 4,030 19 -- 4,049
U.S. Government agencies
and corporations 13,545 13 (165) 13,393
States and political
subdivisions 13,610 68 (287) 13,391
Other securities 36,051 6 (336) 35,721
Totals $ 67,236 106 (788) 66,554
</TABLE>
<TABLE>
<CAPTION>
Gross Gross Approx
Amortized Unrealized Unrealized Fair
December 31, 1998 Costs Gains Losses Values
<S> <C> <C> <C> <C>
U.S. Treasury $ 7,062 102 -- 7,164
U.S. Government agencies
and corporations 19,511 120 (7) 19,624
States and political
subdivisions 11,436 231 (19) 11,648
Other securities 18,794 16 (14) 18,796
Totals $ 56,803 469 (40) 57,232
</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, 1999 Costs Values
<S> <C> <C>
Due in one year or less $ 21,327 21,274
Due after one year through five years 21,321 21,048
Due after five years through ten years 15,925 15,714
Due after ten years 8,663 8,518
Totals $ 67,236 66,554
</TABLE>
Realized gains and losses on securities available-for-sale were not
material in 1999.
Gross gains of $47 and gross losses of $5 were realized on sales and
calls of securities available-for-sale through September 30, 1998.
<PAGE>
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
$17,781 at September 30, 1999 and $17,887 at December 31, 1998.
(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, 1999 and
December 31, 1998 are as follows:
<TABLE>
<CAPTION>
Gross Gross Approx.
Amortized Unrealized Unrealized Fair
September 30, 1999 Costs Gains Losses Values
<S> <C> <C> <C> <C>
States and political
subdivisions $ 34,004 549 (40) 34,513
Totals $ 34,004 549 (40) 34,513
</TABLE>
<TABLE>
<CAPTION>
Gross Gross Approx.
Amortized Unrealized Unrealized Fair
December 31, 1998 Costs Gains Losses Values
<S> <C> <C> <C> <C>
States and political
subdivisions $ 38,322 1,289 -- 39,611
Other securities 30 -- -- 30
Totals $ 38,352 1,289 -- 39,641
</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, 1999 Costs Values
<S> <C> <C>
Due in one year or less $ 3,365 3,387
Due after one year through five years 21,180 21,533
Due after five years through ten years 9,180 9,319
Due after ten years 279 274
Totals $ 34,004 34,513
</TABLE>
Realized gains and losses on securities held-to-maturity were not
material in 1999 or 1998.
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
$18,075 at September 30, 1999 and $18,386 at December 31, 1998.
<PAGE>
(5) Loans
At September 30, 1999 and December 31, 1998, there were direct loans to
executive officers and directors of $2,961 and $6,167, respectively. In
addition, there were loans of $4,874 and $6,324 at September 30, 1999
and December 31, 1998, respectively, which directors endorsed or had
been made to companies in which directors had an equity interest.
At September 30, 1999 and December 31, 1998, the Corporation had sold
without recourse, participations in various loans to financial
institutions and other customers of the Corporation in the amount of
$41,377 and $37,994, 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,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Balance at beginning of period $ 4,981 4,330 4,640 4,291
Provisions for loan losses 300 390 889 710
Loan recoveries 54 32 145 145
Loan charge-offs (352) (272) (691) (666)
Balance at end of period $ 4,983 4,480 4,983 4,480
</TABLE>
Nonperforming assets consist of the following:
<TABLE>
<CAPTION>
September 30 December 31,
1999 l998
<S> <C> <C>
Nonaccrual loans $ 4,097 1,109
Other real estate owned 130 30
Total nonperforming assets $ 4,227 1,139
</TABLE>
<PAGE>
There were no material commitments to lend additional funds to customers
whose loans were classified as nonperforming at September 30, 1999.
(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,
1999 1998
<S> <C> <C>
Land $ 1,515 1,515
Buildings 9,555 9,355
Furniture and equipment 8,145 7,641
Leasehold improvements 506 428
Construction in progress 726 613
20,447 19,552
Less accumulated depreciation
and amortization 7,014 6,575
Totals $ 13,433 12,977
</TABLE>
(8) Other Borrowed Funds
Other borrowed funds include advances from the Federal Home Loan Bank of
Atlanta totaling $46,354 and $21,304 on September 30, 1999 and December
31, 1998, respectively. The interest rates on the advances range from
5.11 to 6.65 percent and have maturity dates through June 7, 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. The
purchase of some of the shares has been financed by borrowings by the
ESOP. In February 1998, the Corporation sold 60,215 shares to the ESOP
for $23.25 per share. The ESOP borrowed $1,400 from another financial
institution to finance the purchase. During the third quarter of 1998,
First National Bank purchased all ESOP loans from the outside financial
institution which had originally financed them. Consequently, in the
September 30, 1999 and December 31, 1998 consolidated balance sheets the
loans and the related liability have been eliminated. The amounts
representing unearned employee benefits have been recorded as reductions
in stockholders' equity. These amounts will be reduced as the ESOP debt
<PAGE>
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.
In 1997 the Corporation instituted a 401(k) plan that covers
substantially all employees who work at least 1,000 hours per year.
Participants have the option to have up to 12% of their salary withheld
on a pre-tax basis to be contributed to the plan. The Corporation
matches 100% of the first 3% of the participant's contributions.
Participants may choose among several investment options comprised
primarily of mutual funds, but there is no stock of the Corporation in
the plan. Matching contributions totaled $110 and $88 for the nine-
month periods ended September 30, 1999 and 1998, respectively.
(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
Corporation's Bank subsidiary in any calendar year to the net profits of
that year, as defined, combined with the retained net profits for the
two preceding years. In effect, this limits total 1999 dividends of the
bank (unless prior regulatory approval is obtained) to $7,467 plus year-
to-date 1999 net profits as of the declaration date.
(12) Supplemental Cash Flow Information
The Corporation paid $13,147 and $13,157 for interest and it paid $1,501
and $1,257 for income taxes for the nine-month periods ended September
30, 1999 and 1998, 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.
<PAGE>
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 $27,990 at September 30, 1999, and
$27,008 at December 31, 1998, the Corporation may not require collateral
or other security to support the following financial instruments with
credit risk:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
Contract Amount
<S> <C> <C>
Financial instruments whose contract amounts
represent credit risk:
Commitments to extend credit $ 93,693 86,583
Standby letters of credit and
financial guarantees written 6,185 6,252
</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.
<PAGE>
(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
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 $42
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.
<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.
1999 Compared to 1998
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
$15,267 for the nine months ended September 30, 1999, an increase of $1,696
from the same period in 1998. Net interest income before provision for loan
losses was $5,323 for the quarter ended September 30, 1999, an increase of
$484 from the same period in 1998. The increase in net interest income in
both the third quarter and first nine months was primarily the result of
growth in average earning assets, partially offset by growth in interest
bearing liabilities. Average earning asset growth totaled $51,647 (12.27%)
and $42,791 (10.36%), respectively, for the third quarter and first nine
months of 1999 over the respective prior year periods. The largest component
of the increase in earning assets was average loans, reflecting increases of
$49,306 (15.57%) and $46,632 (15.21%), respectively, for the third quarter and
first nine months of 1999. Growth in the loan portfolio was concentrated
primarily in commercial loans reflecting increases of $29,013 and $28,473,
respectively, for the third quarter and first nine months of 1999. Loans
secured by real estate increased $21,847 and $21,756, respectively, for the
third quarter and first nine months of 1999. Average securities increased
$6,873 and decreased $345, respectively, for the third quarter and first nine
months of 1999. Average Federal Funds sold decreased $4,532 and $3,496 for
the third quarter and first nine months of 1999. Federal Funds sold were used
as a source of funds to partially fund loan growth.
Average interest-bearing liabilities increased $46,404 (12.89%) and $34,471
(9.69%), respectively, for the third quarter and first nine months of 1999
over the respective prior year periods. The largest component of interest-
bearing liabilities was average deposits, reflecting an increase of $21,230
and $22,730, respectively, for the third quarter and first nine months of
1999. Growth in the deposit portfolio was concentrated in certificates of
deposit of $100 and over with an increase of $2,569 and $8,269 for the third
quarter and first nine months of 1999 and in demand and savings deposits with
an increase of $27,847 and $20,393 for the third quarter and first nine months
of 1999. Increased market penetration in new markets and a concerted effort
to obtain business deposit accounts from our business loan customers accounted
for the increase. Average other borrowed funds increased $24,942 and $11,748,
respectively, for the third quarter and first nine months of 1999. The primary
<PAGE>
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
liquidity to fund loan growth.
Net interest yield decreased to 4.79% from 4.93% for the third quarter and
increased to 4.78% from 4.72% for the first nine months of 1999 from the
comparable prior year periods. The yield on average earning assets decreased
47 basis points, to 8.63% from 9.10% for the third quarter and decreased 34
basis points, to 8.58% from 8.92% for the first nine months of 1999 from the
comparable prior year periods. The cost of interest-bearing liabilities
decreased 42 basis points, to 4.46% from 4.88% for the third quarter and 43
basis points to 4.45% from 4.88% for the first nine months of 1999. Overall,
160.0% and 123.3% of the net interest income increase, respectively, for the
third quarter and first nine months of 1999 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 1999 were due to a change in average rates.
Provision for Loan Losses
The provision for loan losses was $300 and $889, respectively, for the quarter
and nine months ended September 30, 1999, and $390 and $710, respectively, for
the quarter and nine months ended September 30, 1998. Net charge-offs
amounted to $298 and $546, respectively, for the quarter and nine months ended
September 30, 1999 and $240 and $521, respectively, for the quarter and nine
months ended September 30, 1998. The allowance for loan losses was $4,983,
1.35% of outstanding loans, at September 30, 1999, and $4,640, 1.41% of
outstanding loans, at December 31, 1998. The nine month provision for loan
losses was increased in anticipation of additional write-downs relating to two
commercial customers. As a result, 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 $724 and $2,395, respectively, for the quarter and nine months
ended September 30, 1999, and $735 and $2,093, respectively, for the quarter
and nine months ended September 30, 1998. The year to date increase in
noninterest income resulted primarily from an increase in new mortgage loan
underwriting fees, non-sufficient fund check charges due to higher pricing and
volume, and trust fees due to higher volume and new brokerage service. These
increases were partially offset by reductions in other areas; most notably in
net gains on the sale of securities and a decrease in mortgage loan
origination fees resulting from a decrease in the volume of loans refinanced,
which reflected the upward trend in mortgage rates.
<PAGE>
Noninterest Expense
Noninterest expense, consisting of salaries and employee benefits, occupancy
costs, credit cards, supplies, FDIC assessment and other expenses was $3,637
and $10,589, respectively, for the quarter and nine months ended September 30,
1999, and $3,157 and $9,166, respectively, for the quarter and nine months
ended September 30, 1998. The net increase in noninterest expense resulted
from increases in several categories, primarily personnel costs, occupancy and
equipment expense, credit card expense, advertising and online banking
expense. Personnel costs increased primarily as the result of merit
increases, and additional branch personnel necessitated by the new locations
noted below. The increases in occupancy and equipment expense resulted from
an increase in depreciation expense for furniture and fixtures, which was
related to a new telephone system and document imaging system. Leased
property expense increased as a result of the new Wytheville office, which
opened in May 1998, and the new South Main office in Blacksburg, which opened
in April 1999. These increases were partially offset by reductions in other
areas.
Income Taxes
Income tax expense as a percentage of pre-tax income was 23.8% and 23.5% for
the quarter and nine months ended September 30, 1999, and 22.5% for both the
quarter and nine months ended September 30, 1998. The increase in the rate was
due to a reduction in the anticipated dividends paid deduction, and a decline
in nontaxable interest as a percent of pre-tax income.
Balance Sheet
Total assets of the Corporation at September 30, 1999, were $497,253, compared
to $461,916 at December 31, 1998. Total loans were $368,973 at September 30,
1999, an increase of $40,374 from December 31, 1998. Loan growth was
concentrated in the commercial, real estate-commercial and mortgage portfolios
and amounted to $35,774. Federal Funds sold decreased $8,335 and was used to
partially fund loan growth. Securities increased $4,974 with growth
concentrated in the available-for-sale portfolio.
Total deposits at September 30, 1999, were $394,194, an increase of $7,937
from December 31, 1998. Interest-bearing demand and savings deposits
increased $16,116, and noninterest-bearing demand deposits increased $5,152
since year end. These increases were partially offset by a decrease of $9,284
in time deposits and $4,047 in certificates of deposit of $100 and over since
year end 1998. New interest bearing demand and savings deposits account for
approximately $31,023 (192.5%) of the increase. Included in this amount is
approximately $14,700 from the new high yield money market product. New
noninterest-bearing demand deposits account for approximately $5,527 (107.3%)
of the increase. Competition for deposits among local financial institutions
continues to be strong.
Other borrowed funds at September 30, 1999, were $46,354, an increase of
$24,742 from December 31, 1998. 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.
<PAGE>
Stockholders' Equity
Stockholders' equity was $46,937 at September 30, 1999, compared to $44,401 at
December 31, 1998. This increase of $2,536 was the net result of earnings
retention, a decrease of $715 in net unrealized gains (net of tax) on
securities available-for-sale, a decrease of $373 in unearned ESOP shares
resulting from principal repayments on ESOP debt, and dividends paid to
shareholders.
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, 1999, 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, 1999, totaled $208 compared
to $161 at December 31, 1998. In addition, nonaccrual loans and other real
estate owned totaled $4,227 at September 30, 1999, compared to $1,139 at
December 31, 1998. The increase in nonaccrual loans can be attributed to one
commercial customer. Management considers the credit to be adequately secured
and no loss is anticipated. The New River Valley economy remains strong.
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
<PAGE>
operations. Another source of liquidity is additional borrowings from the
Federal Home Loan Bank of Atlanta; approximately $12,000 of the Corporation's
borrowing capacity under an existing agreement with the FHLB remains unused as
of September 30, 1999, based on the level of qualifying portfolio mortgage
loans available for securitization. Secondary sources of liquidity are
available should the need arise, including approximately $39,000 in unused
Federal Funds lines of credit and the ability to liquidate assets held for
sale, especially investment securities.
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 total 1999 dividends of the bank (unless prior
regulatory approval is obtained) to $7,467 plus year-to-date 1999 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 1999. During the
first nine months of 1999 the bank paid $1,994 in dividends to the holding
company.
Year 2000 Readiness Disclosure.
A number of electronic systems utilize a two-digit field for year references,
e.g., "99" for "1999." Such systems may interpret the year reference
"00" as referring to the Year 1900 rather than the Year 2000. If these
systems are not corrected prior to December 31, 1999, many processing failures
could result. This section describes the status of the Corporation's efforts
to correct these systems deficiencies.
State of Readiness. The Corporation has committed personnel and other
resources to resolve potential Year 2000 issues, both internally and
externally (with respect to the Corporation's service providers, vendors and
customers) for both information technology assets and non-information
technology assets. The Corporation has identified Year 2000 dependencies in
its systems, equipment, and processes and has implemented changes to such
systems, updating or replacing such equipment, and modifying such processes to
make them Year 2000 compliant. The Corporation has completed both its
assessment of internal Year 2000 issues and remediation of the critical
systems.
The Corporation does not employ computer programmers and relies heavily on
outside vendors to make the necessary software and hardware changes for Year
2000 compliance. All mission-critical service providers delivered Year 2000
upgrades to the Corporation before December 31, 1998. All systems were tested
before June 30, 1999, by entering various critical future dates into the
systems in an off line mode. Final testing indicated that all mission-
critical systems were compliant as of June 30, 1999.
<PAGE>
The Corporation is also assessing the operability of other devices after 1999,
including vaults, fax machines, stand-alone personal computers, security
systems and elevators and addressing deficiencies, if necessary. These
efforts are currently underway and we anticipate compliance to be achieved in
1999.
Costs. In order to achieve and confirm Year 2000 readiness, significant costs
are being incurred to test and modify or replace computer software and
hardware, as well as a variety of other items, such as automated teller
machines. The Corporation had an estimated capital outlay of $1,000 in 1997
and $800 during 1998 on hardware and software equipment. Approximately $55 in
related expenses has been recognized through December 31, 1998, in the
Statement of Income. Total estimated outlays for all of 1999 for computer
hardware and software approximate $75 with an additional $25 for related
expenses.
Risks. If the Corporation's mission-critical applications are not compliant
by 2000, it may not be able to correctly process transactions in a reasonable
period of time. This scenario could result in a wide variety of claims
against the Corporation for improper handling of its assets as well as
deposits and other borrowings from its customers. For example, the
Corporation's ability to process interest payments on deposits and other
liabilities could be impaired. The Corporation is also at risk if the credit
worthiness of a few of its large borrowers or a significant number of its
small borrowers, were to deteriorate quickly and severely as a result of their
inability to conduct business operations after December 31, 1999, for whatever
reason. Such risks would include a potential negative impact on earnings and
financial position to the extent that a significant amount of loans were not
repaid based on contractual terms. The Corporation is presently monitoring
existing and assessing new large credit customers' Year 2000 plans to
ascertain the sufficiency of their remediation efforts and the implication of
their actions on their credit worthiness. The Corporation explicitly
disclaims, however, any obligation or liability for the completeness, or lack
thereof, of its customers' Year 2000 remediation plans or actions.
Contingency Plans. The Corporation has developed contingency plans in the
event that the remediation plan fails for reasons that are not presently
foreseen. In the event of such a failure, these plans outline the steps that
will be taken to deal with the situation to minimize the effect on customers
and losses to the Corporation.
<PAGE>
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 9, 1999 by: s/J. Daniel Hardy, Jr.
J. Daniel Hardy, Jr.
President & Chief Executive Officer
Date November 9, 1999 by: s/Daniel A. Becker
Daniel A. Becker
Senior Vice President & Chief Financial Officer
<PAGE>
INDEX TO EXHIBITS
Exhibit #
(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,
1997, is incorporated herein by reference.
(10) Material Contracts
(10) A Consulting and Noncompetition Agreement With Put Option dated
January 15, 1999, between Samuel H. Tollison and Registrant, filed
with the Commission as Exhibit (10) D on Form 10-K for the year
ended December 31, 1998, is incorporated herein by reference.
(10) B Employment agreement dated September 11, 1997 between Julian D.
Hardy, Jr., First National Bank, and Registrant, filed with the
Commission as Exhibit (10) B on Form 10-Q for the quarter ended
September 30, 1997, is incorporated herein by reference.
(10) C Change in control agreements with eight senior officers of
First National Bank and one senior officer of Registrant. All
agreements have identical terms and, as such, only a sample copy
of the agreements was filed with the Commission as Exhibit (10) C
on Form 10-Q for the quarter ended September 30, 1997, and is
incorporated herein by reference. The officers covered by the
agreements are as follows:
(1) Daniel A. Becker, Senior Vice President, Chief Financial
Officer, dated April 1, 1999
(2) Carol H. Brockmeyer, Senior Vice President, Manager, Retail
Banking, dated July 1, 1998
(3) Keith J. Houghton, Senior Vice President, Manager,
Commercial Banking, dated April 1, 1999
(4) Darlene S. Lancaster, Senior Vice President, Manager,
Mortgage Loan Department, dated August 25, 1997
(5) R. Bruce Munro, Senior Vice President, Chief Credit
Administration Officer, dated August 25, 1997
(6) Woody B. Nester, Senior Vice President, Cashier, dated
August 25, 1997
(7) Peter A. Seitz, Executive Vice President, dated August 25,
1997
(8) Perry D. Taylor, Senior Vice President, Comptroller, dated
August 25, 1997
(9) Litz H. Van Dyke, Executive Vice President, dated August 25,
1997
<PAGE>
The agreements with Mr. Seitz and Mr. Van Dyke were terminated
under the terms of the Employment Agreement referred to in Exhibit
(10) D below.
(10) D Employment agreement dated March 23, 1999 with two executive
officers of First National Bank. Both agreements have identical
terms, and as such, only a sample copy of the agreement was filed
with the Commission as Exhibit (10) E on Form 10-Q for the quarter
ended March 31, 1999, and is incorporated herein by reference.
The officers covered by this agreement are:
(1) Peter A. Seitz, Executive Vice President
(2) Litz H. Van Dyke, Executive Vice President
(27) Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 10,471
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 2,265
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 66,554
<INVESTMENTS-CARRYING> 34,004
<INVESTMENTS-MARKET> 34,513
<LOANS> 368,973
<ALLOWANCE> 4,983
<TOTAL-ASSETS> 497,253
<DEPOSITS> 394,194
<SHORT-TERM> 16,829
<LIABILITIES-OTHER> 2,939
<LONG-TERM> 36,355
0
0
<COMMON> 20,470
<OTHER-SE> 26,467
<TOTAL-LIABILITIES-AND-EQUITY> 497,253
<INTEREST-LOAN> 24,109
<INTEREST-INVEST> 3,991
<INTEREST-OTHER> 178
<INTEREST-TOTAL> 28,278
<INTEREST-DEPOSIT> 11,410
<INTEREST-EXPENSE> 13,011
<INTEREST-INCOME-NET> 15,267
<LOAN-LOSSES> 889
<SECURITIES-GAINS> 11
<EXPENSE-OTHER> 10,589
<INCOME-PRETAX> 6,184
<INCOME-PRE-EXTRAORDINARY> 6,184
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,732
<EPS-BASIC> 1.19
<EPS-DILUTED> 1.19
<YIELD-ACTUAL> 4.78
<LOANS-NON> 4,097
<LOANS-PAST> 208
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,640
<CHARGE-OFFS> 691
<RECOVERIES> 145
<ALLOWANCE-CLOSE> 4,983
<ALLOWANCE-DOMESTIC> 4,637
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 346
</TABLE>
