<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 June 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 July 22, 1997.
<PAGE>
FNB BANKING COMPANY AND SUBSIDIARY
INDEX
Page No.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet (unaudited) at June 30, 1997 3
Consolidated Statements of Earnings (unaudited) for the Three
Months and the Six Months Ended June 30, 1997 and 1996 4
Consolidated Statements of Cash Flows (unaudited) for the Six
Months Ended June 30, 1997 and 1996 5
Notes to Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FNB BANKING COMPANY AND SUBSIDIARY
Consolidated Balance Sheet
June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Assets
<S> <C>
Cash and due from banks $ 11,508,029
Investment securities held to maturity
(approximate market value of $13,540,307) 11,978,051
Investment securities available for sale
(amortized cost of $9,471,383) 9,445,358
Other investments 1,351,710
Mortgage loans held for sale 646,474
Loans 138,077,446
Less: Unearned income (346,407)
Allowance for loan losses (1,710,278)
Loans, net 136,020,761
Premises and equipment, net 6,362,971
Other assets 1,692,255
$ 179,005,609
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Noninterest-bearing $ 24,019,813
Interest-bearing 125,935,599
Total deposits 149,955,412
Federal funds purchased 1,650,000
FHLB advances 5,571,429
Notes payable 694,446
Other liabilities 1,449,517
Total liabilities 159,320,804
Stockholders' equity:
Common stock, $1 par value; authorized
5,000,000 shares; issued and outstanding
807,800 shares 807,800
Retained earnings 18,893,921
Unrealized loss on investment securities,
net of tax (16,916)
Total stockholders' equity 19,684,805
$ 179,005,609
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
FNB BANKING COMPANY AND SUBSIDIARY
Consolidated Statements of Earnings
For the Three Months and the Six Months Ended
June 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Interest income:
Loans $ 3,701,730 2,990,314 7,185,403 5,905,502
Investment securities:
Tax exempt 106,178 121,929 212,191 245,734
Taxable 264,096 259,444 512,118 551,164
Federal funds sold 28,191 92,480 62,768 181,003
Total interest income 4,100,195 3,464,167 7,972,480 6,883,403
Interest expense:
Deposits 1,309,683 1,161,867 2,563,724 2,299,012
Federal funds purchased and
FHLB advances 74,631 31,607 150,965 68,337
Notes payable 13,871 15,791 27,154 32,582
Total interest expense 1,398,185 1,209,265 2,741,843 2,399,931
Net interest income 2,702,010 2,254,902 5,230,637 4,483,472
Provision for loan losses 161,650 99,000 297,450 106,100
Net interest income after
provision for loan losses 2,540,360 2,155,902 4,933,187 4,377,372
Other income:
Service charges on deposit accounts 398,343 389,953 761,702 761,008
Fees for trust services 45,000 45,000 90,000 90,000
Securities losses, net (1,250) - (13,421) -
Other operating income 152,601 102,976 263,192 201,836
Total other income 594,694 537,929 1,101,473 1,052,844
Other expense:
Salaries and other personnel expense 1,131,125 1,012,560 2,151,333 2,004,303
Net occupancy and equipment expense 330,131 278,811 673,233 568,948
Other operating expense 488,542 505,286 1,011,307 1,014,115
Total other expense 1,949,798 1,796,657 3,835,873 3,587,366
Earnings before income taxes 1,185,256 897,174 2,198,787 1,842,850
Income taxes 430,100 266,100 804,900 548,100
Net earnings $ 755,156 631,074 1,393,887 1,294,750
Earnings per common share based on average outstanding
shares of 807,800 in 1997 and 1996:
Net earnings per share $ .93 .79 1.73 1.60
Dividends declared per common share $ .50 .40 .50 .40
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> FNB BANKING COMPANY AND SUBSIDIARY
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1997 and 1996
(Unaudited)
[CAPTION]
<TABLE>
Six Months Ended June 30,
<S> <C> <C>
1997 1996
Cash flows from operating activities:
Net earnings $ 1,393,887 1,294,750
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Provision for loan losses 297,450 106,100
Gain on sale of repossessed collateral (15,925) -
Depreciation, amortization and accretion 249,371 165,713
Losses on sales of investment securities 13,421 -
Gain on sales of premises and equipment - (3,150)
Change in assets and liabilities:
Interest receivable 17,477 15,175
Interest payable 37,059 12,200
Other, net 70,646 362,777
Mortgage loans held for sale 325,802 (68,814)
Net cash provided by operating activities 2,389,188 1,884,751
Cash flows from investing activities:
Proceeds from maturities and paydowns of
investment securities held to maturity 224,115 2,492,011
Proceeds from maturities and paydowns of
investment securities available for sale 365,880 504,836
Proceeds from sales of investment securities
available for sale 3,087,750 -
Purchases of investment securities
available for sale (2,882,871) (4,534,031)
Net change in loans (10,052,127) (6,882,340)
Purchases of other investments (196,800) (34,400)
Purchases of premises and equipment (531,587) (216,353)
Proceeds from sales of premises and equipment - 3,150
Proceeds from sale of repossessed collateral 53,363 -
Net cash used by investing activities (9,932,277) (8,667,127)
Cash flows from financing activities:
Net change in deposits 4,150,128 5,178,657
Net change in federal funds purchased 1,650,000 -
Proceeds from FHLB Advances 8,000,000 -
Repayments of long-term debt (83,333) (85,190)
Repayments of FHLB Advances (6,642,857) (141,000)
Dividends paid (484,680) (484,680)
Net cash provided by financing activities 6,589,258 4,467,787
Net increase (decrease) in cash and cash equivalents (953,831) (2,314,589)
Cash and cash equivalents at beginning of period 12,461,860 12,633,327
Cash and cash equivalents at end of period $ 11,508,029 10,318,738
Supplemental cash flow information:
Cash paid for income taxes $ 700,000 501,000
Cash paid for interest $ 2,704,784 2,387,731
</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
of FNB Banking Company (the Company) 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 Six Months in the Periods Ended
June 30, 1997 and 1996
Financial Condition
Total assets at June 30, 1997 were $179,005,609,representing a
$8,229,213 (4.8%) increase from December 31, 1996.Deposits increased
$4,150,128 (2.8%) from December 31, 1996. Loans increased $9,742,240
(7.7%). The allowance for loan losses at June 30, 1997 totaled $1,710,278,
representing 1.2% of total loans compared to December 31, 1996 total of
$1,422,603 representing 1.1% of total loans. Cash and cash equivalents
decreased $953,831 from December 31, 1996.
The total of nonperforming assets which includes nonaccruing loans,
repossessed collateral and loans for which payments are more than 90 days
past due increased 226.8% or $1,776,000 from $783,000 at December 31, 1996
to $2,559,000 at June 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
June 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 $747,165 (16.7%) in the first six months of
1997 compared to the same period for 1996. Interest income for the first six
months of 1997 was $7,972,480, representing an increase of $1,089,077 (15.8%)
over the same period in 1996. Interest expense for the first six months of 1997
increased $341,912 (14.2%) compared to the same period in 1996. The increase in
interest income and interest expense during the first six months of 1997
compared to the same period in 1996 is primarily attributable to the increase
in the volume of both loans and deposits and to the additional FHLB advances
obtained during 1997.
The provision for loan losses for the six months of 1997 increased $191,350
compared to the same period for 1996. The increase is primarily attributable
to the significant increase in loans during the first six months of 1997
compared to the same period in 1996 due to the significant loan that was
classified as nonaccrual 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 six months of 1997 increased $48,629 (4.6%) compared to
the first six months in 1996. The net increase is related to an increase of
$37,000 in gains recognized on mortgage loans sold during the first six months
of 1997 compared to the same period in 1996. Other expenses for the six months
of 1997 increased $248,507 (6.9%) compared to the first six months in 1996.
The net increase is related to an increase in salaries of $151,000 and repairs
and maintenance of $43,000, 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 were 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 the Six Months Ended June 30, 1997
Capital
The following tables present FNB Banking Company's regulatory
capital position at June 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 15.9%
Total Capital minimum requirement 8.0%
Excess 7.9%
Leverage Ratio
Tier 1 Tangible Capital to adjusted total assets
("Leverage Ratio") 11.4%
Minimum leverage requirement 3.0%
Excess 8.4%
<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:
By: \s\ William K. Holmes
William K. Holmes
Assistant Treasurer
(Principal Accounting Officer)
Date:
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 11,508,029
<INT-BEARING-DEPOSITS> 125,935,599
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 9,445,358
<INVESTMENTS-CARRYING> 11,978,051
<INVESTMENTS-MARKET> 13,540,307
<LOANS> 136,020,761
<ALLOWANCE> 1,710,278
<TOTAL-ASSETS> 179,005,609
<DEPOSITS> 149,955,412
<SHORT-TERM> 4,000,000
<LIABILITIES-OTHER> 1,449,517
<LONG-TERM> 2,265,875
0
0
<COMMON> 807,800
<OTHER-SE> 18,877,005
<TOTAL-LIABILITIES-AND-EQUITY> 19,684,805
<INTEREST-LOAN> 7,185,403
<INTEREST-INVEST> 724,309
<INTEREST-OTHER> 62,768
<INTEREST-TOTAL> 7,972,480
<INTEREST-DEPOSIT> 2,563,724
<INTEREST-EXPENSE> 2,741,843
<INTEREST-INCOME-NET> 5,230,637
<LOAN-LOSSES> 297,450
<SECURITIES-GAINS> (13,421)
<EXPENSE-OTHER> 3,835,873
<INCOME-PRETAX> 2,198,787
<INCOME-PRE-EXTRAORDINARY> 2,198,787
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,393,887
<EPS-PRIMARY> 1.73
<EPS-DILUTED> 0
<YIELD-ACTUAL> 6.56
<LOANS-NON> 2,400,000
<LOANS-PAST> 153,000
<LOANS-TROUBLED> 283,000
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,422,603
<CHARGE-OFFS> 157,784
<RECOVERIES> 148,009
<ALLOWANCE-CLOSE> 1,710,278
<ALLOWANCE-DOMESTIC> 1,710,278
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
