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Previous: MURRAY INCOME PROPERTIES I LTD, 10-Q, 1996-05-13 |
Next: PARKER & PARSLEY 83-B LTD, 10-Q, 1996-05-13 |
<PAGE> 1
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
Quarterly report Under Section 13 or 15(d)
of the Securities and Exchange Act of 1934
For Quarter Ended: March 31, 1996
--------------
Commission File Number: 0-13086
-------
FNB FINANCIAL SERVICES CORPORATION
------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
North Carolina 56-1382275
------------------------------ -------------------
(State or other jurisdiction (I.R.S. Employer
incorporation of organization) Identification No.)
202 S. Main St., Reidsville, N. C. 27320
------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
910-342-3346
------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
------------------------------------------------------------------
(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.
Yes X No
----- -----
1,378,580 common shares were outstanding as of March 31, 1996, with a par value
of $1.00.
<PAGE> 2
FNB FINANCIAL SERVICES CORPORATION
AND SUBSIDIARY
INDEX
-----
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION:
Page
Number
------
<S> <C> <C>
Item 1 Financial Statements
Consolidated Balance Sheet 1
March 31, 1996, and December 31,
1995
Consolidated Statement of Income 2
Three months ended March 31, 1996,
and 1995
Consolidated Statement of changes in 3
Shareholder's Equity March 31, 1996,
and December 31, 1995
Regulatory Capital Ratio Requirements 3a
Consolidated Statement of Cash Flows 4 - 4a
Three months ended March 31, 1996, and
1995
Notes to Consolidated Financial Statements 5 - 9
Item 2 Management's Discussion and Analysis of 10 - 11
Financial Condition and Results of Operations
PART II OTHER INFORMATION:
Item 3 Exhibits and Reports on Form 8-K 12
</TABLE>
<PAGE> 3
FNB FINANCIAL SERVICES CORPORATION
AND SUBSIDIARY
Consolidated Balance Sheet
<TABLE>
<CAPTION>
(In Thousands)
March 31, December 31,
1996 1995
---- ----
<S> <C> <C>
ASSETS:
Cash and due from banks $ 4,872 $ 4,647
Federal funds sold - -
-------- --------
Total cash and cash equivalents 4,872 4,647
Securities available for sale 57,742 56,436
Other equity securities 1,059 1,059
Loans 121,720 111,708
Less unearned income - -
Less allowance for credit losses (1,351) (1,258)
-------- --------
Net loans 120,369 110,450
Property and equipment, net 3,672 3,434
Intangible assets 858 -
Accrued income and other assets 2,521 1,871
-------- --------
TOTAL ASSETS $191,093 $177,897
======== ========
LIABILITIES AND SHAREHOLDER'S EQUITY
Deposits
Non Interest Bearing $ 21,490 $ 19,329
Interest Bearing
Savings Accounts 17,884 15,413
NOW Accounts 17,255 16,634
Money Market Investment 12,439 12,355
Other time deposits 101,498 90,669
-------- --------
Total deposits 170,566 154,400
Federal funds purchased and securities
sold under repurchase agreements 226 3,152
Accrued expenses and other liabilities 1,096 1,363
-------- --------
TOTAL LIABILITIES $171,888 $158,915
======== ========
SHAREHOLDERS EQUITY:
Common stock, $1.00 par value; authorized
3,000,000 shares, 1,378,580 shares
issued in 1996; 1,098,450 shares
issued in 1995 1,378 1,098
Paid-In Capital 2,648 2,580
Net unrealized holding gain/(loss) on
available for sale securities 278 467
Retained Earnings 14,901 14,837
-------- --------
TOTAL SHAREHOLDER'S EQUITY 19,205 18,982
-------- --------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $191,093 $177,897
======== ========
</TABLE>
1
<PAGE> 4
FNB FINANCIAL SERVICES CORPORATION
AND SUBSIDIARY
Consolidated Statement of Income
(In thousands, except per share data)
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended
March 31,
1996 1995
---- ----
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $2,763 $ 1,946
Interest on federal funds sold 1 30
Interest on federal home loan bank deposits 5 -
Interest and dividends on investments:
U.S. Treasury securities 114 27
Federal Agency Securities 516 955
State, County and municipal Secur. 199 221
Other securities 23 20
------ ------
TOTAL INTEREST INCOME $3,621 $3,199
------ ------
INTEREST EXPENSE
Interest on savings deposits $ 88 $ 90
Interest on other time deposits 1,414 1,134
Interest on federal funds purchased and
securities sold under repur. agreements 64 2
Interest on long term debt - 308
------ ------
TOTAL INTEREST EXPENSE $1,566 $1,534
------ ------
NET INTEREST INCOME $2,055 $1,665
Provision for possible loan losses 101 32
------ ------
Net Interest Income after possible loan
loss provision $1,954 $1,633
------ ------
NON INTEREST INCOME
Deposit Service Charges $ 181 $ 164
Insurance Commissions 18 17
Net Securities Gains 4 (37)
Net Gain/(Loss) on sale of mortgages (5) 67
Other Operating Income 25 29
------ ------
TOTAL NON INTEREST INCOME $ 223 $ 240
------ ------
NON INTEREST EXPENSE
Salaries and employee benefits $ 830 $ 694
Net occupancy expense 76 76
Furniture and equipment expense 110 112
Insurance, including FDIC assessment 9 83
Director fees 55 30
Printing and supplies 46 38
Other operating expense 289 240
------ ------
TOTAL NON INTEREST EXPENSE $1,415 $1,273
------ ------
INCOME BEFORE INCOME TAXES $ 762 $ 600
Applicable Income Taxes (219) (160)
------ ------
Net Income $ 543 $ 440
====== ======
PER SHARE DATA
Net Income .49 .40
Cash Dividends .18 .16
Weighted average shares outstanding 1,100,900 1,097,653
</TABLE>
2
<PAGE> 5
FNB FINANCIAL SERVICES CORPORATION
AND SUBSIDIARY
Consolidated Statements of Changes in Shareholder's Equity
<TABLE>
<CAPTION>
(In thousands)
Three Months Ended Twelve Months Ended
March 31, December 31,
1996 1995
------------------ ------------------
<S> <C> <C>
COMMON STOCK
Balances at beginning of years $ 1,098 $ 1,097
Stock dividend (Note 2) 275 -
Exercise stock options 5 -
Employee stock awards - 1
------- -------
BALANCES AT END OF YEARS $ 1,378 $ 1,098
------- -------
PAID-IN CAPITAL
Balances at beginning of years $ 2,580 $ 2,562
Exercise stock options 65 -
Employee stock awards 3 18
------- -------
BALANCES AT END OF YEARS $ 2,648 $ 2,580
------- -------
RETAINED EARNINGS
Balances at beginning of years $14,837 $13,403
Net income for years 543 2,170
Cash dividend paid (198) (736)
Stock dividend (Note 2) (275) -
Cash paid for fractional shares
shares (Note 2) (6) -
------- -------
BALANCES AT END OF YEARS $14,901 $14,837
------- -------
NET UNREALIZED HOLDING GAINS
<LOSSES> ON AVAILABLE-FOR-SALE
SECURITIES $ 278 $ 467
------- -------
TREASURY STOCK
Balances at beginning of years - -
- -
------- -------
BALANCES AT END OF YEARS - -
------- -------
TOTAL SHAREHOLDER'S EQUITY $19,205 $18,982
======= =======
</TABLE>
3
<PAGE> 6
FNB FINANCIAL SERVICES CORPORATION
AND SUBSIDIARY
Regulatory Capital Ratio Requirements
<TABLE>
<CAPTION>
Three Months Ended
Minimum March 31, 1996
Standard Current Ratio
-------- ------------------
<S> <C> <C>
CAPITAL ADEQUACY-RISK BASED
Tier I 4.0 % 13.9%
Total Capital 8.0 % 14.9%
LEVERAGE RATIO
Tier I 3.0 % 9.90%
</TABLE>
3A
<PAGE> 7
FNB FINANCIAL SERVICES CORPORATION
AND SUBSIDIARY
Consolidated Statement of Cash Flows
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
------ ------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS
- -------------------------------
Cash flows from operating activities:
Interest received $ 3,212 $3,125
Fees and Commission received 345 268
Interest paid (1,595) (1,559)
Non Interest expense paid (1,485) (1,251)
Income taxes paid (77) (8)
------- ------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 400 $ 575
Cash flows from investing activities:
Acquisitions, net of cash used 537 -
Proceeds from sale of securities 10,009 5,027
Proceeds from maturities of securities 3,379 1,920
Purchase in investment securities (16,105) (3,634)
Purchase of asset (342) -
Capital expenditures (331) 8
(Incr)/decr in other real estate owned 115 74
Net (increase)/decr in loans to customers (10,566) (5,030)
Proceeds (paydown) on mortgage loans held
for sale 281 (248)
------ -------
NET CASH USED IN INVESTING ACTIVITIES (13,023) (1,883)
Cash flows from financing activities:
Incr(Decrease) in demand, savings, and
interest checking accounts 5,115 (592)
Increase/(Decrease) in time deposits 10,790 4,963
Dividends Paid (198) (176)
Proceeds from issuance of common stock 72 17
Purchase of common stock fractional shares (5) -
Incr/(Decrease) in repurchase agreements (2,926) (1,027)
------ ------
NET CASH PROVIDED BY FINANCING ACTIVITIES 12,848 3,185
Net increase (decrease) in cash equivalents 225 1,877
Cash and cash equivalents on January 1 4,647 6,352
------- ------
CASH AND CASH EQUIVALENTS ON MARCH 31 $ 4,872 $8,229
======= ======
Schedule on noncash investing and financing
activities NONE NONE
======= ======
</TABLE>
4
<PAGE> 8
FNB FINANCIAL SERVICES CORPORATION
AND SUBSIDIARY
Consolidated Statement of Cash Flows
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
------ ------
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Net Income $543 $440
ADJUSTMENTS TO RECONCILE NET INCOME
TO CASH:
Provision for loan losses 101 32
(Gain)/Loss on sale of securities (4) 37
(Gain)/Loss on sale of assets 36 22
Increase/(Decrease) in taxes payable 142 152
Increase/(Decrease) in interest payable (29) (25)
(Increase)/Decrease in interest receivable (294) (146)
Increase/(Decrease) in accrued expenses (127) 50
Increase in prepaid income 16 18
(Increase)/Decrease in prepaid expenses (72) (143)
(Increase)/Decrease in accrued income (2) (10)
Increase/(Decrease) in miscellaneous
liabilities 8 14
Accretion and amortization 40 116
Depreciation 93 93
(Increase)/Decrease in miscellaneous
assets (56) (8)
(Gain)/Loss on mortgages sold 5 (67)
---- ----
NET CASH PROVIDED BY OPERATIONS $400 $575
</TABLE>
4A
<PAGE> 9
FNB FINANCIAL SERVICES CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.In
the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended are
not necessarily indicative of the results that may be expected for the
year ended December 31, 1996.
2. On February 8, 1996, the Board of Directors declared a one-for-four
split of the common stock in the form of a 25% stock dividend to
holders of record on March 8, 1996 to be issued on March 29, 1996. As
a result $275,194 ($1 for each share issued pursuant to the stock
split) was transferred from retained earnings to the common stock
account. Cash was paid in lieu of fractional shares from retained
earnings of $5,344.98. All per share data in the financial statements
have been adjusted to reflect the split.
5
<PAGE> 10
FNB FINANCIAL SERVICES CORPORATION
AND SUBSIDIARY
Notes to Consolidated Balance Sheet
<TABLE>
<CAPTION>
(In Thousands) (In Thousands)
Three Months Ended Twelve Months Ended
March 31, 1996 December 31, 1995
------------------ -------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
---- ----- ---- -----
<S> <C> <C> <C> <C>
2. INVESTMENT SECURITIES*
A) SECURITIES AVAILABLE FOR SALE
U.S. Treasury Securities $16,333 $16,292 $ 4,220 $ 4,226
Obligations of other U.S.
Government agencies and
corporations 29,605 29,329 38,386 38,218
Obligations of states and
political sub-divisions 11,350 12,121 13,064 13,992
------- ------- ------- -------
TOTAL AVAILABLE FOR SALE $57,288 $57,742 $55,670 $56,436
======= ======= ======= =======
B) OTHER EQUITY SECURITIES $ 1,059 $ 1,059 $ 1,059 $ 1,059
------- ------- ------- -------
</TABLE>
6
<PAGE> 11
FNB FINANCIAL SERVICES CORPORATION
AND SUBSIDIARY
Notes to Consolidated Balance Sheet
<TABLE>
<CAPTION>
(In Thousands)
Three Months Ended Twelve Months Ended
March 31, 1996 December 31, 1995
------------------ -------------------
<S> <C> <C> <C>
3. LOANS:
Home Equity $ 10,245 $ 9,579
Commercial/Agricultural 23,074 17,327
Credit Line 564 445
Consumer Installment 6 6
Simple Interest 15,154 14,540
Mortgage Loans 72,293 69,028
Overdrafts 384 783
-------- --------
TOTAL LOANS (*) $121,720 $111,708
======== ========
</TABLE>
(*) The bank has no foreign loan activity.
7
<PAGE> 12
FNB FINANCIAL SERVICES CORPORATION
AND SUBSIDIARY
4. ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1996 1995
------ ------
<S> <C> <C>
BALANCE AT BEGINNING OF PERIOD 1,258 1,052
Charge-offs:
Commercial, Financial and Agricultural - -
Real Estate-Construction - -
Real Estate-Mortgage - -
Consumer 18 21
----- -----
18 21
Recoveries:
Commercial, Financial and Agricultural - -
Real Estate-Construction - -
Real Estate-Mortgage - -
Consumer 10 19
----- -----
10 19
NET CHARGE-OFFS 8 2
----- -----
Additions Charged to Operations 101 32
----- -----
BALANCE AT END OF PERIOD 1,351 1,082
===== =====
Ratio of net charge-offs during the
period to average loans outstanding
during the period .01 .01
===== =====
Ratio of allowance for loan losses to
month end loans 1.11 1.22
===== =====
</TABLE>
8
<PAGE> 13
FNB FINANCIAL SERVICES CORPORATION AND
SUBSIDIARY
5. ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
------------------- ------------------
Percent of Percent of
Loans in Loans in
Each Category Each Category
Amt. to Total Loans Amt. to Total Loans
---- --------------- ---- --------------
<S> <C> <C> <C> <C>
BALANCE AT END OF PERIOD
APPLICABLE TO:
Commercial 648 20% 508 11%
Real Estate-Construction 10 2% 3 1%
Real Estate-Mortgage 141 57% 74 62%
Consumer 321 21% 267 26%
Unallocated 210 0% 112 0%
----- --- ----- ---
Total balance sheet
allocation 1,330 100% 964 100%
Off balance sheet
commitments 21 - 118 -
----- --- ----- ---
TOTAL ALLOCATION 1,351 100% 1,082 100%
===== === ===== ===
</TABLE>
6. NON-PERFORMING ASSETS:
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, March 31,
1996 1995
------------------ -------------------
<S> <C> <C>
Nonaccrual (1) $ 87 $ 217
Past due 90 days or more - 2
Other real estate 77 117
Renegotiated troubled debt - -
</TABLE>
(1) Other than amounts listed above, there were no other loans which (a)
represent or result from trends or uncertainties which management reasonably
expects will materially impact future operating results, liquidity, or capital
resources, or (b) represent material credits about which management is aware of
any information which causes management to have serious doubts as to the
ability of such borrowers to comply with the loan repayment terms.
9
<PAGE> 14
PART I - ITEM 2
Management's Analysis of Financial Condition
and Results of Operations
Summary
Net income for the quarter ended March 31, 1996 was 23.4% more than the
same quarter last year, returning an annualized 1.19% on average assets,
compared with 1.04% in 1995. The earnings increase is attributed primarily to
a 23.4% improvement in net interest income including 42.0% more in interest and
fees on loans.
Interest Income and Interest Expense
Total first quarter interest income was up 13.2%, with a 7.1% increase
in average earnings assets. Loans outstanding averaged 41.8% more in this
year's first quarter, with commercial up 131% and mortgage-related loans 39%
higher. As noted earlier, loan income climbed 42%. Overall loan yields were
relatively unchanged, in the area of 9.5%. Investment securities income was
30.4% lower this year, mirroring a decline of 27.5% in average balances in the
first quarter, principally due to the unwinding of a $20 million arbitrage with
the Federal Home Loan Bank. Yields on investments were 27 basis points higher
than 1995, as higher-yielding-municipal securities represented 24% of average
total investments in 1996, compared with only 17% last year.
Total interest expense increased just 2.1% in the quarter, with
average interest bearing liabilities up 1.9%. Rates paid on time deposits were
minimally higher in 1996 as deposit growth occurred mainly in higher-cost
certificates of deposit; however, with greatly reduced borrowing (at even
higher cost), and a 24% increase in non-interest bearing deposits, our overall
cost of funds actually declined by 12 basis points.
Comparable net interest margins were as follows:
<TABLE>
<S> <C>
First Quarter, 1996 8.65% - 3.87% = 4.78%
First Quarter, 1995 8.10% - 3.99% = 4.11%
</TABLE>
Non Interest Income and Expense
Non interest income in the first quarter this year was down $16,500 or
6.9%. The single largest line item difference was a reduction of $62,700 in
unrealized gains on mortgages held for sale, principally because we were
recouping 1994 losses in the first quarter last year. Deposit service charges
were 10.3% higher in 1996, with a 19.7% increase in insufficient fund charges,
while minimal gains on investment securities sales this year favorably compared
with a $37,000 lost in 1995.
10
<PAGE> 15
Primarily in anticipation of further loan growth, along with the 40%
increase already booked last year, the loan loss provision was increased
$68,800 or 215% over 1995. The reserve for loan losses equaled 1.11% of net
loans at March 31, 1996, compared with 1.27% one year ago.
All other non interest expense increased $142,700 or 11.2% over 1995,
which included $136,400 or 19.7% in personnel expense. Regular salaries and
wages were 5.4% higher, owing mainly to beginning of year salary adjustments.
Other compensation increased $57,300, because of higher funding of profit-based
short and long term management incentive plans. Employee benefits were $43,400
or 36.5% more, with higher funding for the retirement plan and a 35.1% increase
in FICA taxes because of 1995 bonuses paid in the first quarter this year.
Other line items increasing at least $10,000 and 10% were directors fees, cash
over and short and conventions expense. Insurance expense was sharply lower,
including $74,000 less in FDIC insurance, and marketing expense was down 43.6%.
11
<PAGE> 16
FNB FINANCIAL SERVICES CORPORATIONS AND
SUBSIDIARY
ITEM 3. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
Financial Data Schedule (for SEC use only).
12
<PAGE> 17
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 FINANCIAL SERVICES CORPORATION
-------------------------------------
(Registrant)
Date 4/22/96 /s/ Ernest J. Sewell
----------------- -------------------------------------
ERNEST J. SEWELL
(PRESIDENT & CHIEF EXECUTIVE OFFICER)
Date 4/22/96 /s/ Robert F. Albright
----------------- -------------------------------------
ROBERT F. ALBRIGHT
(SENIOR VICE PRESIDENT)
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF FNB FINANCIAL SERVICES CORPORATION FOR THE THREE MONTHS
ENDED MARCH 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 4,807
<INT-BEARING-DEPOSITS> 65
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 57,742
<INVESTMENTS-CARRYING> 1,059
<INVESTMENTS-MARKET> 0
<LOANS> 121,720
<ALLOWANCE> (1,351)
<TOTAL-ASSETS> 191,093
<DEPOSITS> 170,566
<SHORT-TERM> 226
<LIABILITIES-OTHER> 1,096
<LONG-TERM> 0
1,378
0
<COMMON> 0
<OTHER-SE> 17,827
<TOTAL-LIABILITIES-AND-EQUITY> 191,093
<INTEREST-LOAN> 2,763
<INTEREST-INVEST> 852
<INTEREST-OTHER> 6
<INTEREST-TOTAL> 3,621
<INTEREST-DEPOSIT> 1,502
<INTEREST-EXPENSE> 1,566
<INTEREST-INCOME-NET> 2,055
<LOAN-LOSSES> 101
<SECURITIES-GAINS> 4
<EXPENSE-OTHER> 1,415
<INCOME-PRETAX> 762
<INCOME-PRE-EXTRAORDINARY> 543
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 543
<EPS-PRIMARY> .49
<EPS-DILUTED> .49
<YIELD-ACTUAL> 8.59
<LOANS-NON> 87
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,258
<CHARGE-OFFS> 18
<RECOVERIES> 10
<ALLOWANCE-CLOSE> 1,351
<ALLOWANCE-DOMESTIC> 1,351
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 210
</TABLE>
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