<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to
Commission file number 2-94292
FNB Banking Company
(Exact name of registrant as specified in its charter)
Georgia 58-1479370
(State of Incorporation) (I.R.S. Employer Identification No.)
318 South Hill Street
Griffin, Georgia 30224
(Address of principal executive (Zip Code)
offices)
770-227-2251
(Telephone Number)
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 XX NO
Common stock, par value $1 per share: 807,800 shares
outstanding as of October 25, 1997
<PAGE>
FNB BANKING COMPANY AND SUBSIDIARY
INDEX
Page No.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet (unaudited)
at September 30, 1997 3
Consolidated Statements of Earnings (unaudited)
for the Three Months and the Nine Months Ended
September 30, 1997 and 1996 4
Consolidated Statements of Cash Flows (unaudited)
for the Nine Months Ended September 30, 1997
and 1996 5-6
Notes to Consolidated Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FNB BANKING COMPANY AND SUBSIDIARY
Consolidated Balance Sheet
September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Assets
<S> <C>
Cash and due from banks $ 11,198,944
Interest-bearing deposits in banks 500,000
Investment securities held to maturity
(approximate market value of $10,126,265) 9,756,031
Investment securities available for sale
(amortized cost of $11,688,868) 12,601,202
Other investments 825,700
Mortgage loans held for sale 844,069
Loans 142,766,753
Less: Unearned income (337,779)
Allowance for loan losses (1,805,298)
Loans, net 140,623,676
Premises and equipment, net 6,672,415
Other assets 1,676,810
$ 184,698,847
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Noninterest-bearing $ 25,608,265
Interest-bearing 130,290,617
Total deposits 155,898,882
FHLB advances 5,571,429
Notes payable 652,779
Other liabilities 1,564,230
Total liabilities 163,687,320
Stockholders' equity:
Common stock, $1 par value; authorized 5,000,000
shares; issued and outstanding 807,800 shares 807,800
Retained earnings 19,602,936
Unrealized gain on investment securities,
net of tax 600,791
Total stockholders' equity 21,011,527
$ 184,698,847
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
FNB BANKING COMPANY AND SUBSIDIARY
Consolidated Statements of Earnings
For the Three Months and the Nine Months Ended September 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
1997 1996 1997 1996
<S> <C> <C> <C> <C> <C>
Interest income:
Loans $ 3,865,061 3,217,282 11,050,464 9,122,784
Investment securities:
Tax exempt 93,713 104,103 305,904 349,837
Taxable 265,947 285,573 778,065 836,737
Federal funds sold 36,768 40,948 99,536 221,951
Total interest income 4,261,489 3,647,906 12,233,969 10,531,309
Interest expense:
Deposits 1,417,307 1,194,377 3,981,031 3,493,389
Federal funds purchased and
FHLB advances 88,456 24,260 239,421 92,597
Notes payable 12,832 15,047 39,986 47,629
Total interest expense 1,518,595 1,233,684 4,260,438 3,633,615
Net interest income 2,742,894 2,414,222 7,973,531 6,897,694
Provision for loan losses 154,600 132,550 452,050 238,650
Net interest income after provision
for loan losses 2,588,294 2,281,672 7,521,481 6,659,044
Other income:
Service charges on deposit accounts 398,246 370,916 1,159,948 1,131,924
Fees for trust services 45,000 45,000 135,000 135,000
Net gain (loss)on securities trans 179 100,683 (13,242) 100,683
Other operating income 151,637 83,126 414,829 284,961
Total other income 595,062 599,725 1,696,535 1,652,568
Other expense:
Salaries and other personnel expense 1,196,129 1,020,028 3,347,462 3,024,331
Net occupancy and equipment expense 336,707 300,686 1,009,940 869,635
Other operating expense 528,896 441,564 1,540,203 1,455,679
Total other expense 2,061,732 1,762,278 5,897,605 5,349,645
Earnings before income taxes 1,121,624 1,119,119 3,320,411 2,961,967
Income taxes 412,609 340,900 1,217,509 889,000
Net earnings $ 709,015 778,219 2,102,902 2,072,967
Earnings per common share based on average
outstanding shares of 807,800 in 1997 and 1996:
Net earnings per share $ 0.88 0.96 2.60 2.56
Dividends per share $ - - 0.50 0.40
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
FNB BANKING COMPANY AND SUBSIDIARY
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1997 and 1996
(Unaudited)
<TABLE>
Nine Months Ended
September 30,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 2,102,902 2,072,967
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Provision for loan losses 452,050 238,650
Depreciation, amortization and accretion 368,773 265,575
Loss(gain)on securities transactions 13,242 (100,683)
Gain on disposal of premises and equipment - (3,150)
Gain on sale of repossessed collateral (15,732) -
Change in assets and liabilities:
Interest receivable 80,710 50,050
Interest payable 71,581 (4,816)
Other, net 180,296 241,055
Mortgage loans held for sale 128,207 (164,843)
Net cash provided by operating activities 3,382,029 2,594,805
Cash flows from investing activities:
Proceeds from maturities and paydowns of
investment securities held to maturity 2,449,183 3,141,716
Proceeds from maturities and paydowns of
investment securities available for sale 538,928 531,401
Proceeds from sales of investment securities
available for sale 3,087,750 990,000
Purchases of investment securities available
for sale (4,751,473) (5,543,379)
Purchases of other investments (196,800) (34,400)
Change in loans (14,809,642) (16,342,370)
Purchases of premises and equipment (959,222) (255,888)
Change in interest-bearing deposits in other banks (500,000) 3,150
Proceeds from sales of repossessed collateral 59,170 -
Net cash used by investing activities (15,082,106) (17,509,770)
Cash flows from financing activities:
Net change in deposits 10,093,598 10,589,937
Proceeds from FHLB advances 8,000,000 2,500,000
Repayments of long-term debt (125,000) (124,999)
Repayments of FHLB advances (6,642,857) (142,857)
Dividends paid (888,580) (807,800)
Net cash provided by financing activities 10,437,161 12,014,281
Net change in cash and cash equivalents (1,262,916) (2,900,684)
Cash and cash equivalents at beginning
of the period 12,461,860 12,633,327
Cash and cash equivalents at end of period 11,198,944 9,732,643
Supplemental cash flow information:
Cash paid for income taxes $ 1,195,000 781,000
Cash paid for interest $ 4,188,856 3,638,431
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> FNB BANKING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
(1) Basis of Presentation
The consolidated financial statements include the accounts
ofFNB Banking Company (theCompany) and its wholly owned
subsidiary, the First National Bank of Griffin (Griffin).
All significant intercompany accounts and transactions have
been eliminated in consolidation.
The consolidated financial information furnished herein
reflects all adjustments which are, in the opinion of
management, necessary to present a fair statement of the
results of operations and financial position for the periods
covered herein. All such adjustments are of a normal
recurring nature.
(2) Recent Accounting Pronouncements
During February 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No.
128, "Earnings Per Share" (SFAS 128). SFAS 128 simplifies
current standards by eliminating the presentation of primary
earnings per share (EPS) and requiring the presentation of
basic EPS, which includes no potential common shares and
thus no dilution. The Statement also requires entities with
complex capital structures to present basic and diluted EPS
on the face of the income statement and also eliminates the
modified treasury stock method of computing potential common
shares. The Statement is effective for financial statements
issued for periods ending after December 15, 1997, including
interim periods. Early application is not permitted. Upon
adoption, restatement of all prior-period EPS data presented
is required. Based upon the current capital structure of the
Company, this Statement will have no effect on the EPS
calculation.
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
For Each of the Nine Months in the Periods Ended
September 30, 1997 and 1996
Financial Condition
Total assets at September 30, 1997 were $184,698,847 representing
a $13,922,451 (8.2%) increase from December 31, 1996. Deposits
increased $10,093,598 (6.9%) from December 31, 1996. Loans
increased $14,345,155 (11.4%). The allowance for loan losses at
September 30, 1997 totalled $1,805,298, representing 1.3% of
total loans compared to December 31, 1996 totals of $1,422,603
representing 1.1% of total loans. Cash and cash equivalents
decreased $1,262,916 from December 31, 1996. During the third
fiscal quarter of 1997, the Company transferred $526,010 of other
investments carried at amortized cost to investment securities
available for sale with a fair value of $1,404,596 due to the
securities becoming publicly traded securities with a readily
determinable fair market value.
The total of nonperforming assets which includes nonaccruing
loans, repossessed collateral and loans for which payments are
more than 90 days past due increased 345.0% or $2,701,000 from
$783,000 at December 31, 1996 to $3,484,000 at September 30,
1997. The significant increase is directly related to a loan of
$1.9 million that has been classified as a nonaccruing loan
during 1997.There were no related party loans which were
considered nonperforming at September 30, 1997.
The Company's subsidiary bank was most recently examined by its
primary regulatory authority in June 1996. There were no
recommendations by the regulatory authority that in management's
opinion will have material effects on the Company's liquidity,
capital resources or operations.
Results of Operations
Net interest income increased $1,075,836 (15.6%) in the first
nine months of 1997 compared to the same period for 1996.
Interest income for the first nine months of 1997 was
$12,233,969, representing a increase of $1,702,660 (16.2%) over
the same period in 1996. Interest expense for the first nine
months of 1997 increased $626,823 (17.3%) compared to the same
period in 1996.
The provision for loan losses for the first nine months of 1997
increased $213,400 compared to the same period for 1996. The
increase is primarily attributable to the significant increase in
loans during the first nine months of 1997 and for the possible
loss of the significant loan that was classified as nonaccraul
during 1997. It is management's belief that the allowance for
loan losses is adequate to absorb probable losses in the
portfolio.
Other income for the first nine months of 1997 increased $43,967
(2.7%) compared to the first nine months of 1997. The net
increase is related to an increase of $62,000 in gains recognized
on mortgage loans sold and an increase in credit card fee income
of $21,000 during the first nine months of 1997 compared to the
same period in 1996. Other expenses for the nine months of 1997
increased $547,960 (10.2%) compared the first nine months in
1996. The net increase is related to an increase in salaries of
$214,000, depreciation expense of $26,000 and repairs and
maintenance of $52,000, primarily attributable to the Henry
County branch that began operations in late 1996. Income tax
expense as a percentage of earnings before income taxes increased
as a result of the provision for state taxes which had, in the
past, not been required due to carryforward state income tax
credits. Prior to 1997, management provided a valuation allowance
against these credits which was reduced as the Company was able
to utilize them. Additionally, tax exempt income relative to
pre-tax earnings decreased causing the income tax expense to
increase as a percentage of pretax earnings.
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, continued
For Each of the Nine Months in the Periods Ended
September 30, 1997 and 1996
Capital
The following tables present FNB Banking Company's regulatory
capital position at September 30, 1997:
Risk-Based Capital Ratios
Tier 1 Tangible Capital, Actual 14.7%
Tier 1 Tangible Capital minimum requirement 4.0%
Excess 10.7%
Total Capital, Actual 16.0%
Total Capital minimum requirement 8.0%
Excess 8.0%
Leverage Ratio
Tier 1 Tangible Capital to adjusted total assets
("Leverage Ratio") 11.7%
Minimum leverage requirement 3.0%
Excess 8.7%
<PAGE>
PART II. OTHER INFORMATION
FNB BANKING COMPANY AND SUBSIDIARY
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
<PAGE>
FNB BANKING COMPANY AND SUBSIDIARY
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 BANKING COMPANY
By: \s\ C.A. Knowles
C.A. Knowles, President and Treasurer
(Principal Executive Officer)
Date: November 12, 1997
By: \s\ William K. Holmes
William K. Holmes
Assistant Treasurer
(Principal Accounting Officer)
Date: November 12, 1997
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 11,698,944
<INT-BEARING-DEPOSITS> 130,290,617
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 9,756,031
<INVESTMENTS-CARRYING> 11,688,868
<INVESTMENTS-MARKET> 12,601,202
<LOANS> 140,623,676
<ALLOWANCE> 1,805,298
<TOTAL-ASSETS> 184,698,847
<DEPOSITS> 155,898,882
<SHORT-TERM> 4,000,000
<LIABILITIES-OTHER> 1,564,230
<LONG-TERM> 2,224,208
0
0
<COMMON> 807,800
<OTHER-SE> 20,203,727
<TOTAL-LIABILITIES-AND-EQUITY> 184,698,847
<INTEREST-LOAN> 11,050,464
<INTEREST-INVEST> 1,083,969
<INTEREST-OTHER> 99,536
<INTEREST-TOTAL> 12,233,969
<INTEREST-DEPOSIT> 3,981,031
<INTEREST-EXPENSE> 4,260,438
<INTEREST-INCOME-NET> 7,973,531
<LOAN-LOSSES> 452,050
<SECURITIES-GAINS> (13,242)
<EXPENSE-OTHER> 5,897,605
<INCOME-PRETAX> 3,320,411
<INCOME-PRE-EXTRAORDINARY> 3,320,411
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,102,902
<EPS-PRIMARY> 2.62
<EPS-DILUTED> 0
<YIELD-ACTUAL> 6.43
<LOANS-NON> 2,622,000
<LOANS-PAST> 862,000
<LOANS-TROUBLED> 276,000
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,422,603
<CHARGE-OFFS> 275,072
<RECOVERIES> 205,717
<ALLOWANCE-CLOSE> 1,805,298
<ALLOWANCE-DOMESTIC> 1,805,298
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
