SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES ACT OF 1993
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): MARCH 29, 1996
------------------------
F&M NATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
VIRGINIA 0-5929 54-0857462
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
------------------------
38 ROUSS AVENUE
WINCHESTER, VIRGINIA 22601
(Address of principal executive offices, including zip code)
------------------------
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (540) 665-4200
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On March 29, 1996, F&M National Corporation, a Virginia corporation
("F&M"), acquired FB&T Financial Corporation, Fairfax, Virginia ("FB&T"),
through the statutory merger of FB&T with and into F&M (the "Merger"). The
Merger was accounted for as a pooling of interests business combination. F&M
issued 2,518,087 shares of common stock for all the outstanding common shares of
FB&T. The exchange ratio was 1.983 shares of F&M common stock for each share of
FB&T common stock outstanding on March 29, 1996. F&M reserved an additional
172,723 shares of common stock for issuance in connection with the exercise of
employee stock options assumed by F&M in the Merger. Upon consummation of the
Merger on March 29, 1996, F&M had outstanding a total of 19,095,859 shares of
common stock.
FB&T was the holding company for Fairfax Bank & Trust Company, a
Virginia chartered banking corporation with eleven banking offices in the
Fairfax and Prince William County area of Northern Virginia. Fairfax Bank &
Trust will continue to carry on its banking business in substantially the same
manner as before the Merger.
For additional information concerning the Merger, reference is made to
the Registration Statement on Form S-4 (No. 333-363) filed by F&M and declared
effective on March 1, 1996.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of the Business Acquired
The consolidated financial statements of FB&T are included in Exhibit
99.1 of this filing and include the consolidated balance sheets of FB&T and
Subsidiary as of December 31, 1995 and 1994, and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
years in the three year period ended December 31, 1995, and the report of
Thompson, Greenspon & Co., independent auditors, dated January 26, 1996 thereon.
(b) Pro Forma Financial Information
Pro forma condensed financial information regarding the Merger is
included in Exhibit 99.2 of this filing.
(c) Exhibits
Exhibit 99.1: Consolidated financial statements of FB&T as of
December 31, 1995 and for the period then ended.
Exhibit 99.2: Pro forma condensed financial information regarding
the Merger.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
F&M NATIONAL CORPORATION
Date: April 11, 1996 By: /s/ ALFRED B. WHITT
Alfred B. Whitt
Senior Vice President and Secretary
EXHIBIT 99.1
FB&T FINANCIAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED FINANCIAL REPORT
YEARS ENDED DECEMBER 31, 1995 AND 1994
INDEX TO FINANCIAL STATEMENTS
Page
INDEPENDENT AUDITOR'S REPORT ON THE CONSOLIDATED
FINANCIAL STATEMENTS 1
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets 2 - 3
Consolidated Statements of Operations 4
Consolidated Statements of Changes in Shareholders' Equity 5
Consolidated Statements of Cash Flows 6 - 7
Notes to Consolidated Financial Statements 8 - 30
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders
FB&T Financial Corporation and Subsidiary
Fairfax, Virginia
We have audited the accompanying consolidated balance sheets of FB&T
Financial Corporation and Subsidiary as of December 31, 1995 and 1994, and the
related consolidated statements of operations, changes in shareholders' equity
and cash flows for the years ended December 31, 1995, 1994 and 1993. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We have conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall consolidated financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of FB&T
Financial Corporation and Subsidiary as of December 31, 1995 and 1994, and the
results of its operations, shareholders' equity, and its cash flows for the
years ended December 31, 1995, 1994 and 1993, in conformity with generally
accepted accounting principles.
THOMPSON, GREENSPON & CO., P.C.
Fairfax, Virginia
January 26, 1996
1
<PAGE>
FB&T FINANCIAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
ASSETS
CASH AND CASH DUE FROM BANKS $ 26,016,379 $ 14,225,350
INVESTMENT SECURITIES (market value of $40,277,285 and
$35,490,355 at December 31, 1995 and 1994,
respectively) 38,684,625 35,093,178
SECURITIES AVAILABLE FOR SALE 3,113,250 12,797,620
FEDERAL FUNDS SOLD 16,492,674 -
LOANS RECEIVABLE 149,061,902 133,988,121
LESS ALLOWANCE FOR POSSIBLE LOAN LOSSES (2,195,216) (1,332,118)
-------------- --------------
Net Loans 146,866,686 132,656,003
ACCRUED INTEREST RECEIVABLE 1,685,869 1,548,205
BANK PREMISES AND EQUIPMENT, net 3,522,751 3,045,822
OTHER REAL ESTATE OWNED 1,972,494 2,301,499
INTANGIBLE ASSETS 2,667,916 3,073,298
PREPAID AND OTHER ASSETS 2,046,404 930,952
-------------- --------------
TOTAL ASSETS $243,069,048 $205,671,927
============== ==============
</TABLE>
THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE
STATEMENTS.
2
<PAGE>
<TABLE>
<CAPTION>
1995 1994
------------- -------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Demand deposits $ 55,569,545 $ 41,881,181
Interest checking 23,393,571 28,423,068
Savings deposits 60,729,424 57,116,333
Time deposits 51,821,531 42,531,106
------------- -------------
Total Deposits 191,514,071 169,951,688
Securities sold under agreements to repurchase and
other borrowed funds 33,377,144 15,344,476
Federal funds purchased - 3,862,000
Accrued interest payable 635,666 289,808
Accrued expenses and other liabilities 608,556 355,493
------------- -------------
Total Liabilities 226,135,437 189,803,465
------------- -------------
STOCKHOLDERS' EQUITY
Preferred stock, $1.25 par value, 3,000,000 shares
authorized;
Common stock, $1.25 par value, 5,000,000 shares
authorized; 1,269,580 shares issued and
outstanding in 1995 and 1,178,257 shares
issued and outstanding in 1994 1,586,975 1,472,821
Surplus 8,854,837 7,715,123
Market value adjustment for securities available
for sale (8,250) (159,266)
Retained earnings 6,500,049 6,839,784
------------- -------------
Total Stockholders' Equity 16,933,611 15,868,462
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $243,069,048 $205,671,927
============= =============
</TABLE>
3
<PAGE>
FB&T FINANCIAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $12,800,973 $10,185,668 $ 7,918,547
Interest on Federal funds sold 605,992 56,696 153,421
Interest on investment securities 2,069,805 1,612,441 1,426,327
Interest on securities available for sale 301,830 574,662 -
------------ ------------ ------------
Total Interest Income 15,778,600 12,429,467 9,498,295
------------ ------------ ------------
INTEREST EXPENSE
Interest on deposits 5,187,507 3,615,985 2,515,242
Interest on repurchase agreements 657,975 324,817 230,479
Interest on Federal Funds purchased 37,080 230,855 13,541
------------ ------------ ------------
Total Interest Expense 5,882,562 4,171,657 2,759,262
------------ ------------ ------------
Net Interest Income 9,896,038 8,257,810 6,739,033
Provision for Possible Loan Losses 1,067,618 64,714 348,238
------------ ------------ ------------
Net Interest Income after Provision
for Possible Loan Losses 8,828,420 8,193,096 6,390,795
------------ ------------ ------------
OTHER INCOME
Service charges 1,499,001 1,171,164 1,235,040
Other 930,461 815,675 516,657
------------ ------------ ------------
2,429,462 1,986,839 1,751,697
------------ ------------ ------------
11,257,882 10,179,935 8,142,492
------------ ------------ ------------
OPERATING EXPENSES
Compensation and benefits 3,578,783 2,772,356 1,969,890
Occupancy expense 1,604,873 1,210,663 965,110
Other 3,773,242 2,665,870 2,275,909
------------ ------------ ------------
Total Operating Expenses 8,956,898 6,648,889 5,210,909
------------ ------------ ------------
Income before Income Taxes 2,300,984 3,531,046 2,931,583
INCOME TAXES 725,502 1,166,626 926,144
------------ ------------ ------------
NET INCOME $ 1,575,482 $ 2,364,420 $ 2,005,439
============ ============ ============
NET INCOME PER COMMON SHARE $ 1.26 $ 1.87 $ 1.90
============ ============ ============
</TABLE>
THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE
STATEMENTS.
4
<PAGE>
FB&T FINANCIAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
Net Unrealized
gain (loss) on
Number Par Value available for
of and Treasury Retained sale
Shares Warrants Surplus Stock Earnings securities Total
---------- ----------- ----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 956,865 $1,217,571 $5,034,301 $(221,563) $3,372,467 $ - $ 9,402,776
Sale of Treasury Stock 20,545 - - 259,714 - - 259,714
Acquisition of Treasury Stock (3,353) - (1,840) (38,151) (380) - (40,371)
Dividend Paid - - - - (243,514) - (243,514)
Net Unrealized Loss on Available
for Sale Securities - - - - - (12,757) (12,757)
Sale of Common Stock 200,000 250,000 2,660,862 - - - 2,910,862
Net Income for 1993 - - - - 2,005,439 - 2,005,439
---------- ----------- ----------- ----------- ----------- ------------ ------------
Balance, December 31, 1993 1,174,057 1,467,571 7,693,323 - 5,134,012 (12,757) 14,282,149
Dividend Paid - - - - (658,648) - (658,648)
Exercise of Stock Options 4,200 5,250 21,800 - - - 27,050
Net Unrealized Loss on Available
for Sale Securities - - - - - (146,509) (146,509)
Net Income for 1994 - - - - 2,364,420 - 2,364,420
---------- ----------- ----------- ----------- ----------- ------------ ------------
Balance, December 31, 1994 1,178,257 1,472,821 7,715,123 - 6,839,784 (159,266) 15,868,462
Dividend Paid - - - - (747,478) - (747,478)
Stock Dividend 58,536 73,170 995,112 - (1,068,282) - -
Exercise of Stock Options 35,937 44,922 144,602 - - - 189,524
Repurchase Company Stock (3,150) (3,938) - - (99,457) - (103,395)
Net Unrealized Gain on Available
for Sale Securities - - - - - 151,016 151,016
Net Income for 1995 - - - - 1,575,482 - 1, 575,482
---------- ----------- ----------- ----------- ----------- ------------ ------------
Balance, December 31, 1995 1,269,580 $1,586,975 $8,854,837 $ - $6,500,049 $ (8,250) $16,933,611
========== =========== =========== =========== =========== ============ ============
</TABLE>
THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE
STATEMENTS.
5
<PAGE>
FB&T FINANCIAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------- -------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,575,482 $ 2,364,420 $ 2,005,439
Noncash items included in net income
Depreciation and amortization 737,634 347,484 263,025
Loss (gain) on sale of securities - 2,417 (15,028)
Loss (gain) on sale and write-down of other
real estate owned 213,048 (61,712) 74,239
Net accretion of discount on investment
securities (26,731) (10,045) 32,069
Provision for possible loan losses 1,067,618 64,714 348,238
(Increase) Decrease in
Accrued interest receivable (137,664) (448,532) (216,035)
Prepaid expenses and other (1,115,452) (203,421) (162,647)
Increase (Decrease) in
Accrued interest payable 345,858 84,163 (43,121)
Other accrued expenses 253,063 (222,300) 141,237
------------- -------------- -------------
Net Cash Provided by
Operating Activities 2,912,856 1,917,188 2,427,416
------------- -------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease in Federal funds sold (20,354,674) - -
Proceeds from maturity of investment
securities 19,700,000 5,500,000 11,730,415
Proceeds from sale of investment securities - - 12,500,000
Proceeds from sale of securities available
for sale 3,870,862 1,376,522 -
Proceeds from maturity of securities available
for sale 5,800,000 4,000,000 -
Loans, net (16,829,651) (25,606,282) (21,937,389)
Purchase of securities (23,100,192) (15,500,000) (39,150,000)
Acquisition of Bank premises and equipment (809,181) (1,493,254) (365,598)
Other real estate owned
Capitalized expenses (187,185) (54,623) (25,907)
Proceeds from sale 1,854,492 740,408 1,693,178
Acquisition of intangible assets - (3,175,798) -
------------- -------------- -------------
Net Cash Used by Investing
Activities (30,055,529) (34,213,027) (35,555,301)
------------- -------------- -------------
</TABLE>
THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE
STATEMENTS.
6
<PAGE>
FB&T FINANCIAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in Federal funds purchased - 862,000 13,775,000
Net securities sold under agreements to repurchase 18,032,668 1,393,841 3,783,915
Net increase in demand, saving and time deposits 21,562,383 37,131,996 11,586,170
Proceeds from sale of treasury stock - - 259,714
Acquisition of treasury stock (103,395) - -
Dividends paid (747,478) (658,648) (243,514)
Proceeds from sale of common stock 189,524 27,050 2,910,862
------------- ------------ ------------
Net Cash Provided by
Financing Activities 38,933,702 38,756,239 32,072,147
------------- ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH DUE
FROM BANKS 11,791,029 6,460,400 (1,055,738)
CASH AND DUE FROM BANKS, BEGINNING OF YEAR 14,225,350 7,764,950 8,820,688
------------- ------------ ------------
CASH AND DUE FROM BANKS, END OF YEAR $26,016,379 $14,225,350 $ 7,764,950
============= ============ ============
SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Acquisition of other real estate owned in
satisfaction of loan receivable $ 1,551,350 $ 955,120 $ 573,181
============= ============ ============
Acquisition of treasury stock in satisfaction of
loan receivable $ - $ - $ 40,373
============= ============ ============
Net unrealized gain (loss) on available for
sale securities $ 151,016 $ (146,509) $ (12,757)
============= ============ ============
Stock dividends paid $ 1,068,282 $ - $ -
============= ============ ============
</TABLE>
7
<PAGE>
FB&T FINANCIAL CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Corporation follows generally accepted accounting principles and
reporting practices applicable to the banking industry. Significant
accounting practices are summarized below.
PROPOSED MERGER
The Corporation has entered into an Agreement and Plans of
Reorganization which will provide for an affiliation with F&M National
Corporation, a Winchester, Virginia - based holding company with total
assets of approximately $1.83 billion as of December 1995, in a
tax-free stock merger transaction. The merger provides for the
exchange of each outstanding share of FB&T common stock for F&M common
stock. F&M will then serve as the parent bank holding company for
Fairfax Bank, which will continue to carry on its banking business in
substantially the same manner as before the merger. At the effective
date of the merger, each outstanding share of FB&T common stock will
be exchanged for shares of F&M common stock with an aggregate market
value equal to $35.00, and cash in lieu of any fractional shares.
During December, 1995, in preparation for the merger, the Corporation
elected to increase the reserve for loan losses, implement a reserve
for potential selling expenses related to foreclosed properties, and
expense various accounting and legal expenses related to the proposed
merger. Charges to income resulting from these adjustments amounted to
approximately $1.0 million. The increased reserve levels reflect a
compliance with F&M bank operating guidelines.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of FB&T Financial Corporation
(the Corporation) include the accounts of the corporation and its
subsidiary, Fairfax Bank & Trust Company (the Bank), and Fairfax Bank
& Trust Company's wholly-owned subsidiary, Bank Title Company. All
significant intercompany transactions have been eliminated.
FB&T Financial Corporation, a holding company, is the successor to
Fairfax Bank & Trust Company after a tax-free exchange of stock which
occurred on July 1, 1994. Shares of Fairfax Bank & Trust Company were
exchanged for an equivalent number of FB&T Financial Corporation
shares. The parent company, FB&T Financial Corporation carries its
investment in the bank at cost adjusted for earnings and dividends of
the subsidiary.
8
<PAGE>
FB&T FINANCIAL CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
INVESTMENT SECURITIES
Securities are classified as investment securities when management has
the intent and the Bank has the ability at the time of purchase to
hold them until maturity or on a long-term basis. These securities are
carried at cost adjusted for amortization of premium and accretion of
discount, computed by the straight-line method over their contractual
lives. If the interest method of accounting for amortization of
premiums and accretion of discounts was used, it would not have a
material effect on the consolidated financial statements. Gains and
losses on the sale of such securities are determined by the specific
identification method.
Securities to be held for indefinite periods of time and not intended
to be held to maturity or on a long-term basis are classified as
available for sale and accounted for at fair value on an aggregate
basis. These include securities used as part of the Bank's
asset/liability management strategy and may be sold in response to
changes in interest rates, prepayment risk, the need or desire to
increase capital, to satisfy regulatory requirements and other similar
factors. Unrealized gains and losses of securities available for sale
are excluded from earnings and shown as a separate component of
stockholders' equity, net of related income taxes. Realized gains and
losses of securities available for sale are included in net securities
gains (losses) based on the specific identification method.
LOANS AND LOAN FEES
Loans are stated at the principal amount outstanding, net of deferred
loan fees. Interest on loans is generally computed using the simple
interest method. Loan fees and related direct loan origination costs
are deferred and recognized as an adjustment of yield over the life of
the loan or currently upon the sale or repayment of the loans.
Interest on all categories of loans is accrued based upon the
principal amounts outstanding. The accrual of interest income is
discontinued on loans which are past due ninety or more days as to
principal or interest payments, except for certain guaranteed loans
and other limited exceptions. When loans are placed on nonaccrual
status, interest accrued in the current year is charged against
interest income, and interest accrued in prior years is charged to the
allowance for loan losses. Loans may be reinstated to accrual status
when all payments are brought current, and, in the opinion of
management, collection of the remaining balance can reasonably be
expected. The classification of a loan as nonaccrual is not
necessarily indicative of a potential loan loss.
9
<PAGE>
FB&T FINANCIAL CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
LOANS AND LOAN FEES (continued)
Gains or losses on sales of residential mortgage loans, including
unearned discounts, are recognized when the loans are sold to
investors. The loans are carried at the lower of cost or market,
determined on the aggregate basis.
IMPAIRED LOANS
Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 114, as amended by SFAS 118. SFAS
No. 114, as amended provided that a loan is impaired when, based on
current information and events, it is probable that the creditor will
be unable to collect all principal and interest amounts due according
to the contractual terms of the loan agreement. SFAS No. 114, as
amended provides guidelines relating to recognition of interest income
on impaired loans and requires that impaired loans be measured based
on the present value of the expected future cash flows, discounted at
the loan's effective interest rate. The effective rate of a loan is
defined as the contractual interest rate adjusted for any deferred
loan fees or costs, premiums or discounts existing at the inception or
acquisition of the loan. If the loan is collateral dependent, as a
practical expedient, impairment can be based on the loan's observable
market price of the fair value of the collateral.
The value of the loan is adjusted through a valuation allowance
created through a charge against income. Residential mortgages,
consumer installment obligations and credit cards are excluded. Loans
that were treated as in-substance foreclosures under previous
accounting pronouncements are considered to be impaired loans and
under SFAS 114 will remain in the loan portfolio.
A loan may be placed on non-accrual status and not classified as an
imparied loan when in the opinion of management, based on current
information and events, it is probable that the Bank will eventually
collect all principal and interest amounts due according to the
contractual terms of the loan agreement. Interest income for impaired
loans is generally recognized on an accrual basis unless it is deemed
inappropriate to do so. In those cases which the receipt of interest
payments is deemed more uncertain, the cash basis on income
recognition is utilized. Loans are placed on non-accrual status when,
in the judgment of management, the probability of timely collection of
interest is deemed to be insufficient to warrant further accrual. As a
matter of policy, the Bank does not accrue interest on loans past due
90 days or more except when the estimated value of the collateral and
collection efforts are deemed sufficient to ensure full recovery. When
a loan is placed on non-accrual status, previously accrued but unpaid
interest is deducted from interest income.
<PAGE>
FB&T FINANCIAL CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
IMPAIRED LOANS (CONTINUED)
As of the year ended December 31, 1995, the Bank had no loans which
the management considered impaired.
ALLOWANCE FOR POSSIBLE LOAN LOSSES
The Bank grants loans to customers located in Northern Virginia. The
Bank has a diversified portfolio, however, a substantial number of
loans are secured by real estate or are unsecured.
The allowance is established to absorb possible future losses on
existing loans. It is maintained at a level considered adequate by
management to provide for potential losses based on management's
evaluation of the loan portfolio, historical loan loss experience and
prevailing and anticipated economic conditions.
The allowance is increased by provisions for loan losses charged to
operating expense and reduced by net chargeoffs. The provisions are
based on management's estimate of net realizable value or fair value
of the collateral, as applicable, considering the current and future
operating or sales conditions. These estimates are susceptible to
changes that could result in a material adjustment to future results
of operations.
BANK PREMISES AND EQUIPMENT
Premises and equipment are stated at cost, less accumulated
depreciation and amortization. Leasehold improvements are amortized
over their estimated useful lives using the straight-line method.
Furniture, equipment and automobiles are depreciated over their
estimated useful lives using straight-line methods.
<PAGE>
FB&T FINANCIAL CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
FEDERAL FUNDS PURCHASED/SOLD
The Bank is required to maintain legal cash reserves, computed by
applying prescribed percentages to its various types of deposits. When
the Bank's cash reserves are in excess of that required, it may lend
the excess to other banks on a daily basis. Conversely, when cash
reserves are less than required, the Bank borrows funds on a daily
basis.
The Bank has $47,162,000 of Federal fund lines of credit with
correspondent banks, of which $28,000,000 is secured. Continued
availability of the lines are at the correspondent banks' discretion.
The rate of interest charged fluctuates daily in response to market
conditions. Borrowings on these lines amounted to $-0- at December 31,
1995 and $3,862,000 at December 31, 1994.
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND OTHER BORROWINGS
Securities sold under agreements to repurchase generally mature within
one to four days from the transaction date. Other borrowed funds at
December 31, 1994 consisted of a $1,700,000 fixed rate credit with a
three month maturity from Federal Home Loan Bank of Atlanta. The
credit matured in February, 1995.
SHAREHOLDERS' EQUITY
In September 1993, the Bank's shareholders approved an increase in the
authorized common shares for the Bank from 2,000,000 shares to
5,000,000 shares. Additionally, the shareholders approved the
authorization of 3,000,000 shares of Preferred Stock with a par value
of $1.25 per share. No Preferred Stock is issued or outstanding at
December 31, 1995 and 1994.
In December 1993, the Bank completed a public offering of 200,000
shares of common stock at $16 per share. The offering generated net
proceeds of $2,910,862 after deducting underwriting discounts and
other offering expenses. Prior to the offering, there was no public
market for the Bank's common stock. The Company's common stock trades
on the Nasdaq Stock Market under the symbol: FBTC
State banking laws restrict the availability of surplus for the
payment of dividends. Such restrictions have been outlined in the
By-Laws, which incorporate the appropriate provisions of Section
6.1-56 of the 1940 Code of Virginia.
<PAGE>
FB&T FINANCIAL CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
INCOME TAXES
The Bank utilizes an asset and liability approach to accounting for
income taxes. The objective is to recognize the amount of income taxes
payable or refundable in the current year based on the Bank's income
tax return and the deferred tax liabilities and assets for the
expected future tax consequences of events that have been recognized
in the Bank's financial statements or tax returns. The asset and
liability method accounts for deferred income taxes by applying
enacted statutory rates to temporary differences, the difference
between financial statement amounts and tax bases of assets and
liabilities. Deferred income tax liabilities or assets are adjusted to
reflect changes in tax laws or rates in the year of enactment.
The Bank pays state franchise tax in lieu of state income taxes.
INCOME PER COMMON SHARE
Income per common share is based on the weighted average number of
common and common equivalent shares outstanding. Common equivalent
shares result from the assumed exercise of outstanding stock options
that have a dilutive effect when applying the treasury stock method.
Weighted average number of shares amounted to 1,253,278 in 1995,
1,266,426 in 1994, and 1,053,040 in 1993.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could vary
from the estimates that were used.
STATEMENT OF CASH FLOWS
For purposes of reporting cash flows, cash and cash equivalents
include cash on hand and amounts due from banks.
Cash paid for interest amounted to $5,536,704 in 1995 and $4,087,494
in 1994 and $2,785,719 in 1993.
<PAGE>
FB&T FINANCIAL CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
STATEMENT OF CASH FLOWS (continued)
Net income taxes paid in 1995, 1994 and 1993 amounted to $1,067,457,
$1,681,713 and $818,298, respectively.
The Corporation from time to time keeps cash balances in a financial
institution in excess of federally insured limits.
NEW ACCOUNTING PRONOUNCEMENTS
Statement for Financial Accounting Standards No. 122, Accounting for
Mortgage Servicing Rights. SFAS No. 122 will be effective for fiscal
years beginning after December 15, 1995, which requires a corporation
to allocate the cost of the mortgage loans to the servicing rights and
to the loans for both purchased and orginated mortgage loans. SFAS
122 is not expected to have a material impact on the Corporation.
REQUIRED DEPOSITORY RESERVES AND CAPITAL RATIOS
The Bank is required by regulatory authorities to maintain a specified
portion of its assets in the form of reserves. Such reserves consist
of vault cash and balances maintained at the Federal Reserve Bank. The
average balance required to be maintained at the Federal Reserve Bank
at December 31, 1995, was approximately $61,000.
All banks are required to maintain minimum amounts of capital to total
"risk weighted" assets, as defined by the Federal Deposit Insurance
Corporation. At December 31, 1995, banks are required to have minimum
Tier 1 and Total capital ratios of 4.00 percent and 8.00 percent,
respectively. The Bank's actual ratios at that date were 9.47 percent
and 10.72 percent, respectively. The Bank's leverage ratio at December
31, 1995, was 6.65 percent.
<PAGE>
FB&T FINANCIAL CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
2. INVESTMENT SECURITIES AND SECURITIES AVAILABLE FOR SALE
The carrying amounts as shown in the balance sheets of the Bank and
their approximate market values are as follows:
<TABLE>
<CAPTION>
INVESTMENT SECURITIES
Gross Gross Approximate
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
December 31, 1995:
U.S. Government and
agency securities $35,526,315 $459,919 $ - $35,986,234
Mortgage-backed
securities 3,158,310 6,991 - 3,165,301
------------ --------- --------- ------------
$38,684,625 $466,910 $ - $39,151,535
============ ========= ========= ============
December 31, 1994:
U.S. Government and
agency securities $33,043,383 $ - $560,737 $32,482,646
Mortgage-backed
securities 2,049,795 - 81,746 1,968,049
------------ --------- --------- ------------
$35,093,178 $ - $642,483 $34,450,695
============ ========= ========= ============
<CAPTION>
SECURITIES AVAILABLE FOR SALE
Gross Gross Approximate
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
December 31, 1995:
U.S. Government and
agency securities $ 2,000,000 $ - $ 12,500 $ 1,987,500
Other securities 1,125,750 - - 1,125,750
------------ --------- --------- ------------
$ 3,125,750 $ - $ 12,500 $ 3,113,250
============ ========= ========= ============
December 31, 1994:
U.S. Government and
agency securities $11,999,282 $ - $241,312 $11,757,970
Other securities 1,039,650 - - 1,039,650
------------ --------- --------- ------------
$13,038,932 $ - $241,312 $12,797,620
============ ========= ========= ============
</TABLE>
<PAGE>
FB&T FINANCIAL CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
2. INVESTMENT SECURITIES AND SECURITIES AVAILABLE FOR SALE (continued)
Gross realized gains and losses for the years ended December 31, are as
follows:
1995 1994 1993
------ ------- -------
Realized gains $ - $2,022 $15,028
========= ======= =======
Realized losses $ - $4,439 $ -
========= ======= =======
The scheduled maturities of investment securities and securities
available for sale at December 31, 1995 were as follows:
<TABLE>
<CAPTION>
Investment Securities
Securities Available for Sale
Amortized Fair Amortized Fair
Cost Value Cost Value
------------ -------------- ----------- -----------
<S> <C> <C> <C> <C>
Due in one year or less $10,019,465 $10,059,390 $2,000,000 $1,987,500
Due from one year to
five years 25,506,850 25,926,844 - -
Due from five years
to ten years - - - -
Mortgage-backed securities 3,158,310 3,165,301 - -
Federal Reserve Board
common stock and other
equity securities - - 1,125,750 1,125,750
------------ ------------ ----------- -----------
$38,684,675 $39,151,535 $3,125,750 $3,113,250
============ ============ =========== ===========
</TABLE>
<PAGE>
FB&T FINANCIAL CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
2. INVESTMENT SECURITIES AND SECURITIES AVAILABLE FOR SALE (continued)
Maturities may differ from contractual maturities in mortgage-backed
securities because the mortgages underlying the securities may be
called or repaid without any penalties.
Investment securities with a carrying amount of $40,687,022 and
$18,047,358 at December 31, 1995 and 1994, respectively, were pledged
as collateral on public deposits, repurchase agreements, and for other
purposes as required or permitted by law.
3. LOANS RECEIVABLE
Loans receivable include the following at December 31:
1995 1994
------------- -------------
Real Estate Loans
Construction $ 11,176,567 $ 11,822,967
Farm 335,391 250,916
1-4 family residential 65,738,709 58,978,194
Multifamily 411,710 1,163,687
Non-farm nonresidential 33,192,062 25,580,662
Commercial 26,590,521 25,380,555
Credit card 2,150,910 2,647,571
Installment and Other 9,466,032 8,163,569
------------- -------------
Totals $149,061,902 $133,988,121
============= =============
At December 31, 1995, mortgages with unpaid balances of $21,811,808
were pledged as collateral for a line of credit facility in the amount
of $25,000,000 to a financial institution. Gains on sale of mortgages
held for sale amounted to $148,000 in 1995 and $161,000 in 1994 and
are included in other income.
Loans on which the accrual of interest has been discontinued amounted
to $1,521,462 at December 31, 1995, and $834,480 at December 31, 1994.
Had interest been accrued on those loans, such income would have
approximated $267,677 as of December 31, 1995, and $11,988 as of
December 31, 1994.
<PAGE>
FB&T FINANCIAL CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
3. LOANS RECEIVABLE (continued)
A summary of transactions in the allowance for possible loan losses
for the years ended December 31, follows:
1995 1994
----------- -----------
Balance at beginning of year $1,332,118 $1,102,155
Provision charged to operations 1,067,618 64,714
Loans charged off, net of recoveries (204,520) 165,249
----------- -----------
Balance at end of year $2,195,216 $1,332,118
=========== ===========
4. BANK PREMISES AND EQUIPMENT
Bank premises and equipment are as follows:
1995 1994
------------ ------------
Furniture and equipment $ 2,862,635 $ 2,264,603
Leasehold improvements 1,369,317 1,171,894
Building 460,204 459,187
Land 322,748 322,748
Automobiles 132,155 140,005
------------ ------------
5,147,059 4,358,437
Less accumulated depreciation (1,624,308) (1,312,615)
------------ ------------
Totals $ 3,522,751 $ 3,045,822
============ ============
Depreciation of bank premises and equipment charged to expense
amounted to $332,252 for 1995, $241,198 for 1994 and $224,289 for
1993.
5. OTHER REAL ESTATE OWNED
Other real estate owned includes properties acquired through
foreclosure or other proceedings in full or partial satisfaction of
indebtedness. At the date of acquisition, such property is recorded at
the lower of the recorded investment in the related receivable, net
realizable value for single family residential, or fair value.
Write-downs at the date of acquisition are charged to the allowance
for loan losses. Subsequent declines in market value and/or losses on
disposition of other real estate are reflected in other income.
Expenses related to other real estate are included in other operating
expenses and amounted to $37,942 in 1995, $63,485 in 1994, and
$105,764 in 1993.
<PAGE>
FB&T FINANCIAL CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
5. OTHER REAL ESTATE OWNED (continued)
A summary of transactions in the other real estate owned for the years
ended December 31, follows:
1995 1994
------------ -----------
Balance at beginning of year $ 2,301,499 $1,970,452
Acquired 1,551,350 955,120
Capitalized expenses 187,185 54,623
Write-downs (155,904) -
Sales (1,854,492) (740,408)
Net gain (loss) on sales (57,144) 61,712
------------ -----------
$ 1,972,494 $2,301,499
============ ===========
6. INTANGIBLE ASSETS
During the year ended December 31, 1994, the Bank acquired the
deposits of the Federal Savings Association of Virginia (Federal) and
Commonwealth Federal Savings Bank (Commonwealth) from the Resolution
Trust Corporation. The Bank paid a premium of $46,043 and assumed
liabilities of approximately $1,407,000 and one branch location in
connection with the Federal acquisition. The Bank paid a premium of
$3,015,000 and assumed liabilities of approximately $27,923,000 and
three branch locations in connection with the Commonwealth
acquisition. These intangible assets are being amortized by systematic
charges against income over the periods in which the benefits are
expected to arise, but not exceeding 10 years. Amortization expense
amounted to $405,000 in 1995 and $102,500 in 1994.
7. TIME DEPOSITS
The following is a maturity distribution of time certificates of
deposit in denominations of $100,000 or more:
1995 1994
------------ ------------
Three months or less $ 6,678,233 $ 6,225,670
Over three months through twelve months 8,337,671 5,554,439
Over twelve months 3,172,077 3,043,178
------------ ------------
Totals $18,187,981 $14,823,287
============ ============
<PAGE>
FB&T FINANCIAL CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
8. INCOME TAXES
Income tax expense (benefit) is composed of the following:
1995 1994 1993
----------- ----------- -----------
Current $1,141,924 $1,240,012 $1,012,485
Deferred (416,422) (73,386) (86,341)
----------- ----------- -----------
$ 725,502 $1,166,626 $ 926,144
=========== =========== ===========
A reconciliation between the amount of reported Federal income tax
expense and the amount computed by multiplying the applicable statutory
Federal income tax rate is as follows:
1995 1994 1993
----------- ----------- -----------
Income before income taxes $2,300,984 $3,531,046 $2,931,538
=========== =========== ===========
Computed "expected" Federal
tax expense $ 782,335 $1,200,556 $ 996,747
Adjustments to Federal
income tax resulting from:
Tax exempt income - - (3,203)
Other (56,833) (33,930) (67,400)
----------- ----------- -----------
Provision for Federal income taxes $ 725,502 $1,166,626 $ 926,144
=========== =========== ===========
The deferred tax asset (liability) for the years ended December 31, are
applicable to the following items:
Deferral Source 1995 1994
--------------- ---------- ----------
Depreciation $(226,689) $(168,270)
Allowance for credit losses 559,020 250,323
Deferred loan costs 87,351 42,906
Goodwill amortization 57,547 -
Net unrealized loss on securities
available for sale 4,250 82,046
---------- ----------
Net deferred tax asset $ 481,479 $ 207,005
========== ==========
The deferred tax asset in 1995 and 1994 are included in Other Assets.
<PAGE>
FB&T FINANCIAL CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
9. OPERATING EXPENSES - OTHER
Significant amounts included in other operating expense for the years
ended December 31, are as follows:
1995 1994 1993
----------- ----------- -----------
Advertising and Promotion $ 51,213 $ 105,399 $ 41,796
Amortization - Goodwill 373,324 102,546 -
Credit Card Expenses 345,958 218,609 9,976
Data Processing 521,398 328,994 485,826
Directors Fees 118,476 97,449 84,900
FDIC Insurance 237,043 311,087 284,468
Insurance 121,989 114,650 113,544
Legal and Professional fees 374,346 170,759 166,870
Postage and Delivery 232,008 187,181 154,384
Printing and Supplies 266,677 238,379 161,110
Virginia Bank Franchise Tax 108,132 17,282 78,186
Other 1,022,673 751,580 694,849
----------- ----------- -----------
Totals $3,773,237 $2,643,915 $2,275,909
=========== =========== ===========
10. OPERATING LEASES
The Bank leases facilities for its headquarters and branches under
non-cancelable operating leases expiring from 1992 through 2014 with
current monthly rental payments of $83,110. The headquarters facility,
which is leased from a partnership including certain partners who also
serve on the Bank's Board of Directors, requires monthly payments of
$35,363 and expires December 31, 2005. At expiration, the Bank has an
option to renew the lease for four additional five-year terms at
market rates. Rental expense of $986,358 and $792,084 was charged to
operations for the years ended December 31, 1995 and 1994.
The following is a schedule, by years, of future minimum rental
payments required under operating leases that have a noncancelable
lease term in excess of one year as of December 31, 1995:
Year ending December 31:
1996 $ 969,599
1997 951,090
1998 920,169
1999 722,739
2000 655,881
Thereafter 3,489,395
------------
Total $ 7,708,873
============
<PAGE>
FB&T FINANCIAL CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
11. EMPLOYEE BENEFIT PLAN
Effective January 1, 1993, the Bank adopted a noncontributory,
defined contribution plan. The plan is established in accordance
with IRS Code Section 401(K) and employees are eligible to
participate after three months of employment. The Bank did not make
a contribution for December 31, 1995, 1994 and 1993.
12. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
In the ordinary course of business, the Bank has granted loans to
directors, executive officers, employees, and their associates.
These transactions have been made on substantially the same terms,
including interest rates and collateral, as those prevailing at the
time for comparable transactions with unrelated persons. Directors
and executive officers were indebted to the Bank for loans totaling
$3,951,052 at December 31, 1995, and $4,924,079 at December 31,
1994. These amounts include loans of family members or businesses
indirectly associated with directors or officers. Similarly the Bank
occasionally contracts for services from certain companies related
indirectly or directly to board members.
The Bank has engaged the law firm of Tydings, Bryan & Adams, P.C.,
of which Mr. Tydings, Chairman of the Board of the Corporation, is a
principal, to perform certain legal services for the Bank and the
serve as its general counsel. The Bank paid $199,232 in 1995 and
$164,853 in 1994 in professional fees to the law firm.
13. COMMITMENTS AND CONTINGENCIES
At December 31, 1995 and 1994, the Bank was contingently liable for
undrawn loan commitments and outstanding letters of credit amounting
to approximately $47,690,790 and $41,740,227, respectively. Included
in the total is stand-by letters of credit of $3,681,957 in 1995 and
$1,845,285 in 1994.
The Bank uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet instruments.
The amount of collateral obtained, if deemed necessary by the Bank
upon extension of credit, is based on management's credit evaluation
of the counter-party. Collateral held varies but may include cash,
securities, accounts receivable, inventory, property, plant and
equipment and income-producing commercial properties and residential
properties.
<PAGE>
FB&T FINANCIAL CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
13. COMMITMENTS AND CONTINGENCIES (continued)
All of the Bank's loans, commitments, and commercial and standby
letters of credit have been granted to customers in the Bank's
market area. The concentrations of credit by type of loan are set
forth in Note 3. The distribution of commitments to extend credit
approximates the distribution of loans outstanding. Commercial and
standby letters of credit were granted primarily to commercial
borrowers. The Bank does not extend credit to any single borrower or
group of related borrowers in excess of their legal lending limit.
The Bank is party to litigation and claims arising in the normal
course of business. Management, after consultation with legal
counsel, believes that the liabilities, if any, arising from such
litigation and claims will not be material to the financial
position.
14. INCENTIVE STOCK OPTION PLAN
On October 31, 1985, the shareholders approved a qualified incentive
stock option plan and reserved 110,250 shares of the Bank's common
stock for the granting of options to key employees. Under the terms
of the plan, options may be granted at not less than fair market
value at date of the grant. Individual employees may not be granted
options in excess of $100,000 per year. The options are exercisable
for a period of ten years from the date of the grant and may not be
exercised before a specified date. The following summarizes the
option activity under the stock option plan for the last two years:
Number of Option Price
Shares Per Share
Outstanding, December 31, 1993 108,211 $ 4.54 - $21.71
Grants 2,039 $15.24
Exercised (4,410) $ 6.44
---------
Outstanding, December 31, 1994 105,840 $ 4.54 - $21.71
Grants -
Exercised (33,075) $ 4.54
---------
Outstanding, December 31, 1995 72,765 $ 4.54 - $21.71
=========
<PAGE>
FB&T FINANCIAL CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
15. STOCK PLANS
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
The Dividend Reinvestment and Stock Purchase Plan ("DRSP") of FB&T
Financial Corporation (the "Company") provides each registered
holder of Company common stock with a simple and convenient method
of investing cash dividends in additional shares of Company common
stock without fees of any kind at a 5 percent discount from the
market price. Participants also may make optional cash payments to
purchase shares of Company common stock at 100 percent of market
value. The Company reserved for issuance 200,000 shares of Company
common stock for use under the DRSP and registered such shares with
the Securities and Exchange Commission (the "Commission"). Two
investment options are available to shareholders: (1) the Company
may be directed to invest cash dividends on all of the shares then
or subsequently held by the shareholder for the purchase of
additional shares or (ii) the Company may be directed to invest cash
dividends on all of the shares then or subsequently held by the
shareholder, and also to purchase additional shares with optional
cash payments by the shareholder of at least $100 but not more than
$5,000 per quarter.
NON-EMPLOYEE DIRECTOR STOCK COMPENSATION PLAN
Effective June 15, 1994, the Company implemented a Non-Employee
Director Stock Compensation Plan (the "Option Plan"). Under this
plan each Director who is not an employee of the Company or its
subsidiary will receive an option grant covering 1,000 shares of
Company common stock on June 15, of each year during the five-year
term of the Plan. The first grant under the Plan was made on June
15, 1994. The exercise price of awards are fixed at the fair market
value of the shares on the date the option is granted. A total of
40,000 shares of common stock have been registered with the
Commission and may be granted under the option plan during its term.
The options granted under the Option Plan are not exercisable for
six months from the date of grant except in the case of death or
disability. Options that are not exercisable at the time a
director's services on the Board
<PAGE>
FB&T FINANCIAL CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
15. STOCK PLANS (continued)
NON-EMPLOYEE DIRECTOR STOCK COMPENSATION PLAN (continued)
terminates for reasons other than death, disability or retirement in
accordance with the Company's policy will be forfeited. The purpose
of the plan is to promote a greater identity of interest between
non-employee directors and the Company's shareholders by increasing
each participant's proprietary interest in the Company through the
award of options to purchase Company common stock. The following
summarizes the option activity under the stock option plan for the
last two years:
Number of Option Price
Shares Per Share
Outstanding, December 31, 1993 - $ -0-
Grants 7,350 $14.38
Exercised - -
--------
Outstanding, December 31, 1994 7,350 $14.38
Grants 7,000 $17.41
Exercised - -
--------
Outstanding, December 31, 1995 14,350 $14.38 - 17.41
========
1995 EMPLOYEE STOCK PURCHASE PLAN
Effective January 1, 1995, the Company implemented its 1995 Employee
Stock Discount Plan (the "Discount Plan"). This plan provides
eligible employees with a simple and convenient method for investing
in Company common stock at a 15 percent discount. The purpose of the
Plan is to increase employee interest and productivity through
ownership of common stock. The Discount Plan will be in effect for
the calendar years 1995 through 1999. A total of 50,000 shares of
common stock have been registered with the Commission for issuance
under the Discount Plan. Eligible employees of the Company and its
participating subsidiaries may purchase common stock through payroll
deduction. The price of the shares purchased will be the lesser of
85 percent of the market price of the shares as determined under the
Discount Plan at January 1 of the calendar year of purchase or 85
percent of the market price of the shares as determined under the
Discount Plan at December 31 of the calendar year of purchase. The
Discount Plan operates on a calendar year basis. Eligible employees
are determined at each January 1 and provided with the right to
purchase shares of common stock at the following December 31 with
their payroll deductions made for the calendar year. Payroll
deductions may be made at any rate from 2 percent through 15 percent
of base pay and may also be made from bonuses paid in December.
Shares of Common Stock are purchased as of December 31 of each
calendar year the Discount Plan is in effect.
<PAGE>
FB&T FINANCIAL CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
16. STOCK PRICES FOR THE LAST TWO YEARS
The common stock of the Corporation is traded on the Nasdaq Stock
Market under the symbol FBTC. The prices listed below are the high and
low sales prices for common shares during the last two years.
Price
Dated Low High
------------------ ------ ------
1/1/94 - 3/31/94 $14.00 $15.75
4/1/94 - 6/30/94 $14.00 $16.00
7/1/94 - 9/30/94 $16.25 $16.50
10/1/94 - 12/31/94 $15.25 $17.25
1/1/95 - 3/31/95 $16.00 $17.25
4/1/95 - 6/30/95 $16.00 $18.00
7/1/95 - 9/30/95 $17.00 $19.75
10/1/95 - 12/31/95 $17.75 $33.00
17. FIVE-YEAR SUMMARY OF OPERATIONS
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Operating income $11,257,882 $10,179,935 $8,142,492 $6,066,386 $5,071,897
Operating
expenses 8,956,898 6,648,889 5,210,909 4,547,874 4,390,539
------------ ------------ ----------- ----------- -----------
Income before
taxes 2,300,984 3,531,046 2,931,583 1,518,512 681,358
Income taxes 725,502 1,166,626 926,144 513,091 226,507
------------ ------------ ----------- ----------- -----------
Net income $ 1,575,482 $ 2,364,420 $2,005,439 $1,005,421 $ 454,851
============ ============ =========== =========== ===========
Net income per
share $ 1.26 $ 1.87 $ 1.90 $ 1.02 $ 0.44
============ ============ =========== =========== ===========
Weighted average
number of
shares 1,253,278 1,266,426 1,053,040 982,970 1,038,247
============ ============ =========== =========== ===========
</TABLE>
Earnings per common share were computed based on the assumption that
all stock dividends issued or declared and stock splits for the
periods covered were outstanding for the entire period.
<PAGE>
FB&T FINANCIAL CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
18. CASH DIVIDENDS
During 1995, the Board of Directors declared four quarterly cash
dividends of 15.4 cents per share.
During 1994, the Board of Directors declared four quarterly cash
dividends of 14.0 cents per share.
19. SUBSEQUENT EVENTS
The Corporation declared a dividend of 15.4 cents a share on January
19, 1996. The dividend is payable to shareholders of record on
February 1, 1996, and payable on February 15, 1996.
20. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is
practicable to estimate that value.
CASH AND SHORT-TERM INVESTMENT
For those short-term instruments, the carrying amount is a reasonable
estimate of fair value.
INVESTMENT SECURITIES AND SECURITIES AVAILABLE FOR SALE
Fair value is based on quoted market prices or dealer quotes. If a
quoted market price is not available, fair value is estimated using
quoted market prices for similar securities.
LOANS RECEIVABLE
For certain homogeneous categories of loans, such as some residential
mortgages and other consumer loans, fair value is estimated using the
quoted market prices for securities backed by similar loans, adjusted
for differences in loan characteristics. The fair value of other types
of loans is estimated by discounting the future cash flows using the
current rates at which similar loans would be made to borrowers with
similar credit ratings and for the same remaining maturities.
DEPOSIT LIABILITIES
The fair value of demand deposits, savings account, and certain money
market deposits is the amount payable on demand at the reporting date.
The fair value of fixed-maturity certificates of deposit is estimated
using the rates currently offered for deposits of similar remaining
maturities.
<PAGE>
FB&T FINANCIAL CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
20. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)
COMMITMENTS TO EXTEND CREDIT, STAND-BY LETTERS OF CREDIT, AND
FINANCIAL GUARANTEES
The fair value of commitments is estimated using the fees currently
charged to enter into similar agreements, taking into account the
remaining terms of the agreements and the present credit worthiness of
the counterparties. For fixed-rate loan commitments, fair value also
considers the difference between current levels of interest rates and
the committed rates. The fair value of guarantees and letters of
credit is based on fees currently charged for similar agreements or on
the estimated cost to terminate them or otherwise settle the
obligations with the counterparties at the reporting date.
Unrecognized financial instrument accrual and deferral fees were not
considered material.
The estimated fair value of the Bank's financial instruments are as
follows:
1995 (In Thousands) 1994 (In Thousands)
------------------- -------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
Financial assets:
Cash and short-term
investments $ 42,512 $ 42,512 $ 14,225 $ 14,225
Securities 41,798 42,265 47,886 47,248
Loans 149,062 140,110 133,988 130,336
Less allowance for loan
losses (2,195) - (1,332) -
--------- --------- --------- ---------
Net loans 146,867 140,110 132,656 130,336
--------- --------- --------- ---------
Total financial assets $231,177 $224,887 $194,767 $191,809
========= ========= ========= =========
Financial liabilities:
Deposits $191,514 $186,895 $169,952 $166,697
Short-term borrowings - - 3,862 3,862
Securities sold not owned 33,377 33,377 15,344 15,344
--------- --------- --------- ---------
Total financial liabilities $224,891 $220,272 $189,158 $185,903
========= ========= ========= =========
<PAGE>
FB&T FINANCIAL CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
21. CONDENSED FINANCIAL STATEMENTS - PARENT COMPANY ONLY
Balance Sheets
December 31, 1995 and 1994
1995 1994
------------ ------------
ASSETS
Cash $ 189,966 $ -
Investment in bank subsidiary 16,743,645 15,868,462
------------ ------------
Total Assets $16,933,611 $15,868,462
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Shareholders' Equity
Common stock $ 1,586,975 $ 1,472,821
Surplus 8,854,837 7,715,123
Retained Earnings 6,500,049 6,839,784
Net Unrealized Loss on Available For Sale
Securities (8,250) (159,266)
------------ ------------
Total Shareholders' Equity 16,933,611 15,868,462
------------ ------------
Total Liabilities and Shareholders'
Equity $16,933,611 $15,868,462
============ ===========
Statements of Income
December 31, 1995 and 1994
1995 1994 1993
----------- ----------- ---------
Dividend Income $ 987,682 $ 329,912 $ -
Equity in Undistributed Income in
Bank Subsidiary 587,800 951,388 -
----------- ----------- ---------
Net Income $1,575,482 $1,281,300 $ -
=========== =========== =========
<PAGE>
FB&T FINANCIAL CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
21. CONDENSED FINANCIAL STATEMENTS - PARENT COMPANY ONLY (continued)
Statements of Cash Flows
December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $1,575,482 $1,281,300 $ -
Undistributed earnings in bank subsidiary (587,800) (951,388) -
----------- ----------- -------
Net Cash Provided by Operating Activities 987,682 329,912 -
CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends paid (797,716) (329,912) -
----------- ----------- -------
Net Increase in Cash 189,966 - -
Cash, beginning of year - - -
----------- ----------- -------
Cash, end of year $ 189,966 $ - $ -
=========== =========== =======
</TABLE>
EXHIBIT 99.2
PRO FORMA CONDENSED FINANCIAL INFORMATION
On March 29, 1996, F&M National Corporation ("F&M") acquired FB&T
Financial Corporation ("FB&T"), a bank holding company and parent company of
Fairfax Bank & Trust Company, through the merger of FB&T with and into F&M (the
"Merger"). The Merger was accounted for as a pooling of interests business
combination. Based on an exchange ratio of 1.983 shares of F&M common stock for
each outstanding share of FB&T common stock, F&M issued 2,518,087 shares of
common stock, and reserved an additional 172,723 shares of common stock for
issuance in connection with the exercise of FB&T employee stock options assumed
by F&M in the Merger.
PRO FORMA CONDENSED BALANCE SHEET
The following unaudited pro forma condensed balance sheet combines the
consolidated historical balance sheets of F&M and FB&T on the assumption that
the Merger had been effective as of December 31, 1995, giving effect to the
transaction on a pooling of interests accounting basis. The pro forma condensed
balance sheet should be read in conjunction with the consolidated historical
financial statements of F&M and FB&T, including the respective notes thereto,
included in documents incorporated herein by reference.
<PAGE>
F&M AND FB&T
PRO FORMA CONDENSED BALANCE SHEET
AS OF DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
F&M FB&T ADJUSTMENTS COMBINED
(IN THOUSANDS)
<S>
ASSETS <C> <C> <C> <C>
Cash and due from banks....... . . . . . . . . . $ 81,626 $ 26,016 $ 107,642
Interest-bearing deposits
in other banks.. . . . . . . . . . . . . . . . 100 - - 100
Securities . . . . . . . . . . . . . . . . . . . 569,269 41,798 611,067
Other short-term investments . . . . . . . . . . 64,408 16,493 80,901
Loans, net of unearned income . . . . . . . . . 1,053,829 149,062 1,202,891
Less allowance for loan losses . . . . . . . . . 15,016 2,195 17,211
------------ ----------- ------------ ----------
Net loans. . . . . . . . . . . . . . . . 1,038,813 146,867 - - 1,185,680
Other assets. . . . . . . . . . . . . . . . . . 79,604 11,895 - - 91,499
------------- ----------- ------------ ------------
Total assets. . . . . . . . . . . . . . $1,833,820 $ 243,069 $ - - $ 2,076,889
============= =========== ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest bearing... . . . . . . . . . . . $ 236,630 $ 55,569 $ 292,199
Interest bearing. . . . . . . . . . . . . . . 1,346,847 135,945 1,482,792
------------- ----------- ------------ ------------
Total deposits. . . . . . . . . . . . . 1,583,477 191,514 - - 1,774,991
Short-term borrowings..... . . . . . . . . . . 38,618 33,377 - - 71,995
Long-term debt.. . . . . . . . . . . . . . . . 3,225 - - - - 3,225
Other liabilities. . . . . . . . . . . . . . . 15,018 1,244 - - 16,262
------------- ----------- ------------ ------------
Total liabilities. . . . . . . . . . . . 1,640,338 226,135 - - 1,866,473
------------- ----------- ------------ ------------
SHAREHOLDERS' EQUITY
Preferred stock. . . . . . . . . . . . . . . . - - - - - - - -
Common stock, par value
$2.00 per share. . . . . . . . . . . . . . . 33,104 - - 5 035 (1) 38,139
Common stock, par value
$1.25 per share. . . . . . . . . . . . . . . - - 1,587 (1 587) (1) - -
Capital surplus. . . . . . . . . . . . . . . . 57,681 8,855 (3 448) (1) 63,088
Unrealized gain (loss) on securities
available for sale, net. . . . . . . . . . . 3,467 (8) - - 3,459
Retained earnings . . . . . . . . . . . . . . 99,230 6,500 - - 105,730
------------- ----------- ------------ ------------
Total shareholders' equity . . . . . . 193,482 16,934 - - 210,416
------------- ----------- ------------ ------------
Total liabilities and
shareholders' equity . . . . . . . . $1,833,820 $ 243,069 $ - - $ 2,076,889
============= =========== ============ ============
</TABLE>
(1) See Note (b) of Notes to Pro Forma Condensed Financial Information.
See Notes to Pro Forma Condensed Financial Information.
<PAGE>
PRO FORMA CONDENSED STATEMENT OF INCOME
The following unaudited pro forma condensed statement of income
presents the combined statement of income of F&M and FB&T assuming that FB&T was
combined at the beginning of the period presented on a pooling of interests
accounting basis. The unaudited pro forma condensed statement of income should
be read in conjunction with the consolidated historical financial statements of
F&M and FB&T, including the respective notes thereto, included in documents
incorporated herein by reference. The pro forma information is not necessarily
indicative of the results of operations that would have resulted had the Merger
been consummated at the beginning of the periods indicated, nor is it
necessarily indicative of the results of operations of future periods.
<PAGE>
F&M AND FB&T
PRO FORMA CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
F&M FB&T COMBINED
(IN THOUSANDS)
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans . . . . . . . . . . . . . . . . . . . . $ 96,081 $ 12,801 $ 108,882
Interest and dividends on securities . . . . . . . . . . . . . . . 32,853 2,371 35,224
Federal funds sold and securities purchased under agree-
ments to resell . . . . . . . . . . . . . . . . . . . . . . . . . 4,302 606 4,908
Interest-bearing deposits in other banks . . . . . . . . . . . . 26 - - 26
---------- ---------- ------------
Total interest income. . . . . . . . . . . . . . . . . . . . 133,262 15,778 149,040
---------- ---------- ------------
INTEREST EXPENSE
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,802 5,187 60,989
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . 1,252 695 1,947
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . 243 - - 243
---------- ---------- ------------
Total interest expense . . . . . . . . . . . . . . . . . . 57,297 5,882 63,179
---------- ---------- ------------
Net interest income . . . . . . . . . . . . . . . . . . . . 75,965 9,896 85,861
Provision for loan losses . . . . . . . . . . . . . . . . . . . . 1,081 1,068 2,149
---------- ---------- ------------
Net interest income after
provision for loan losses . . . . . . . . . . . . . . . . 74,884 8,828 83,712
----------- ---------- ------------
OTHER INCOME
Service charges on deposit accounts . . . . . . . . . . . . . 6,011 1,499 7,510
Securities gains, net . . . . . . . . . . . . . . . . . . . . . . . . 366 - - 366
Other operating income . . . . . . . . . . . . . . . . . . . . . . 9,843 931 10,774
----------- ---------- ------------
Total other income . . . . . . . . . . . . . . . . . . . . . 16,220 2,430 18,650
----------- ---------- ------------
OTHER EXPENSES
Salaries and employee benefits . . . . . . . . . . . . . . . . . 29,362 3,579 32,941
Net occupancy expense . . . . . . . . . . . . . . . . . . . . . 3,982 1,163 5,145
Furniture and equipment expense . . . . . . . . . . . . . . . 4,253 442 4,695
Other operating expenses . . . . . . . . . . . . . . . . . . . . 18,398 3,773 22,171
----------- ---------- ------------
Total other expenses . . . . . . . . . . . . . . . . . . . 55,995 8,957 64,952
----------- ---------- ------------
Income before income taxes . . . . . . . . . . . . . . . . . . . 35,109 2,301 37,410
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . 11,677 725 12,402
----------- ---------- ------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . $ 23,432 $ 1,576 $ 25,008
=========== ========== ============
PER SHARE DATA
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.42 $ 1.26 $ 1.32
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.61 0.60 0.61
Average common shares outstanding . . . . . . . . . . . . . . . . . 16,529 1,253 19,014
</TABLE>
See Notes to Pro Forma Condensed Financial Information.
<PAGE>
F&M AND FB&T
PRO FORMA CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
F&M FB&T COMBINED
(IN THOUSANDS)
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans . . . . . . . . . . . . . . . . . . . . $ 85,238 $ 10,186 $ 95,424
Interest and dividends on securities . . . . . . . . . . . . . . 31,233 2,186 33,419
Federal funds sold and securities purchased under agree-
ments to resell . . . . . . . . . . . . . . . . . . . . . . . . . . 3,105 57 3,162
Interest-bearing deposits in other banks . . . . . . . . . . . . 38 - - 38
--------- ---------- ----------
Total interest income. . . . . . . . . . . . . . . . . . . . 119,614 12,429 132,043
--------- ---------- ----------
INTEREST EXPENSE
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,287 3,616 48,903
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . 1,053 556 1,609
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . 91 - - 91
--------- ---------- ----------
Total interest expense . . . . . . . . . . . . . . . . . . 46,431 4,172 50,603
--------- ---------- ----------
Net interest income . . . . . . . . . . . . . . . . . . . . 73,183 8,257 81,440
Provision for loan losses . . . . . . . . . . . . . . . . . . . . 2,535 64 2,599
--------- ---------- ----------
Net interest income after
provision for loan losses . . . . . . . . . . . . . . . . 70,648 8,193 78,841
--------- ---------- ----------
OTHER INCOME
Service charges on deposit accounts . . . . . . . . . . . . . 5,676 1,171 6,847
Securities gains, net . . . . . . . . . . . . . . . . . . . . . . . . 748 2 750
Other operating income . . . . . . . . . . . . . . . . . . . . . . 9,888 814 10,702
--------- ---------- ----------
Total other income . . . . . . . . . . . . . . . . . . . . . 16,312 1,987 18,299
--------- ---------- ----------
OTHER EXPENSES
Salaries and employee benefits . . . . . . . . . . . . . . . . . 28,824 2,772 31,596
Net occupancy expense . . . . . . . . . . . . . . . . . . . . . 3,959 895 4,854
Furniture and equipment expense . . . . . . . . . . . . . . . 4,057 316 4,373
Other operating expenses . . . . . . . . . . . . . . . . . . . . 19,443 2,666 22,109
--------- ---------- ----------
Total other expenses . . . . . . . . . . . . . . . . . . . 56,283 6,649 62,932
--------- ---------- ----------
Income before income taxes . . . . . . . . . . . . . . . . . . 30,677 3,531 34,208
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . 9,976 1,167 11,143
--------- ---------- ----------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,701 $ 2,364 $ 23,065
========= ========== ==========
PER SHARE DATA
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.25 $ 1.87 $ 1.21
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.54 0.52 0.54
Average common shares outstanding . . . . . . . . . . . . . 16,517 1,266 19,028
</TABLE>
See Notes to Pro Forma Condensed Financial Information.
<PAGE>
F&M AND FB&T
PRO FORMA CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1993
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
F&M FB&T COMBINED
(IN THOUSANDS)
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans . . . . . . . . . . . . . . . . . . . . $ 74,616 $ 7,919 $ 82,535
Interest and dividends on securities . . . . . . . . . . . . . . 30,222 1,426 31,648
Federal funds sold and securities purchased under agree-
ments to resell . . . . . . . . . . . . . . . . . . . . . . . . 2,591 153 2,744
Interest-bearing deposits in other banks . . . . . . . . . . . . 105 - - 105
---------- --------- ----------
Total interest income. . . . . . . . . . . . . . . . . . . . 107,534 9,498 117,032
---------- --------- ----------
INTEREST EXPENSE
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,927 2,516 45,443
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . 688 244 932
---------- --------- ----------
Total interest expense . . . . . . . . . . . . . . . . . . 43,615 2,760 46,375
---------- --------- ----------
Net interest income . . . . . . . . . . . . . . . . . . . . 63,919 6,738 70,657
Provision for loan losses . . . . . . . . . . . . . . . . . . . . 2,857 348 3,205
---------- --------- ----------
Net interest income after
provision for loan losses . . . . . . . . . . . . . . . . 61,062 6,390 67,452
---------- --------- ----------
OTHER INCOME
Service charges on deposit accounts . . . . . . . . . . . . . 5,212 1,235 6,447
Securities gains, net . . . . . . . . . . . . . . . . . . . . . . . 1,781 15 1,796
Other operating income . . . . . . . . . . . . . . . . . . . . . . 7,851 502 8,353
---------- --------- ----------
Total other income . . . . . . . . . . . . . . . . . . . . . 14,844 1,752 16,596
---------- --------- ----------
OTHER EXPENSES
Salaries and employee benefits . . . . . . . . . . . . . . . . . 24,361 1,970 26,331
Net occupancy expense . . . . . . . . . . . . . . . . . . . . . 3,576 689 4,265
Furniture and equipment expense . . . . . . . . . . . . . . . 3,649 276 3,925
Other operating expenses . . . . . . . . . . . . . . . . . . . . 16,744 2,276 19,020
---------- --------- ----------
Total other expenses . . . . . . . . . . . . . . . . . . . 48,330 5,211 53,541
---------- --------- ----------
Income before income taxes . . . . . . . . . . . . . . . . . . 27,576 2,931 30,507
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . 8,844 926 9,770
---------- --------- ----------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,732 $ 2,005 $ 20,737
========== ========= ==========
PER SHARE DATA
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.16 $ 1.90 $ 1.14
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . 0.58 0.23 0.58
Average common shares outstanding . . . . . . . . . . . . . 16,124 1,053 18,212
</TABLE>
See Notes to Pro Forma Condensed Financial Information.
<PAGE>
NOTES TO PRO FORMA CONDENSED FINANCIAL INFORMATION
(UNAUDITED)
(a) The pro forma information presented is not necessarily indicative of
the results of operations or the financial position that would have
resulted had the Merger been consummated at the beginning of the
periods indicated, nor is it necessarily indicative of the results of
operations in future periods or the future financial position of the
combined entities.
(b) It is assumed that the Merger will be accounted for on a pooling of
interests accounting basis and, accordingly, the related pro forma
adjustments have been calculated using an assumed Exchange Ratio,
whereby F&M will issue 1.983 shares of F&M Common Stock for each share
of FB&T Common Stock, which has been computed as follows: $35.00
divided by the average closing price of F&M Common Stock on the NYSE
Composite Transactions List for the ten trading days extending from
March 15 through March 28, 1996 ($17.65) to arrive at an assumed
Exchange Ratio of 1.983 shares of F&M Common Stock for each share of
FB&T Common Stock.
As a result, information was appropriately adjusted for the Merger by
the (i) addition of 2,517,577 shares of F&M Common Stock amounting to
$5,035,000, (ii) elimination of 1,269,580 shares of FB&T Common Stock
amounting to $1,587,000; and (iii) recordation of the remaining amount
of $3,448,000 as a decrease in capital surplus at December 31, 1995.
(c) Per share data has been computed based on the combined historical net
income applicable to common shareholders of F&M and FB&T using the
historical weighted average shares outstanding of F&M Common Stock and
the weighted average shares, adjusted to equivalent shares of F&M
Common Stock, of FB&T, as of the earliest period presented.
