UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number 0-13823
FNB CORP.
(Exact name of registrant as specified in its charter)
North Carolina 56-1456589
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 Sunset Avenue, Asheboro, North Carolina 27203
(Address of principal executive offices) (Zip Code)
(910) 626-8300
(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
The registrant had 1,797,734 shares of $2.50 par value common
stock outstanding at October 19, 1995.
Transitional Small Business Disclosure Format (Check One):
Yes No X
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FNB Corp. and Subsidiary
CONSOLIDATED BALANCE SHEETS
<TABLE>
<S> <C> <C> <C>
September 30, December 31,
ASSETS 1995 1994 1994
Cash and due from banks $ 10,101,219 $ 8,594,034 $ 9,348,113
Federal funds sold 1,110,000 2,225,000 -
Investment securities:
Available for sale,
at estimated fair
value (amortized cost
of $17,596,230,
$25,864,213 and
$25,713,359) 17,643,012 25,196,478 24,569,036
Held to maturity
(estimated fair value
of $59,266,365,
$49,627,640 and
$50,809,510) 58,927,148 50,349,271 52,414,194
Loans 179,946,120 164,519,018 168,327,821
Less: Allowance for
loan losses (1,918,551) (1,692,125) (1,719,717)
Net loans 178,027,569 162,826,893 166,608,104
Premises and equipment 5,615,433 5,264,596 5,024,522
Other assets 3,716,288 3,817,684 3,651,740
TOTAL ASSETS $275,140,669 $258,273,956 $261,615,709
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing
demand deposits $ 33,645,798 $ 36,333,073 $ 37,282,808
Interest-bearing
deposits:
NOW, savings and
money market
deposits 77,882,815 85,770,243 82,400,774
Time deposits of
$100,000 or more 33,276,391 18,525,436 20,191,213
Other time deposits 98,470,076 89,326,413 90,050,517
Total deposits 243,275,080 229,955,165 229,925,312
Retail repurchase
agreements 3,216,322 3,304,685 3,526,226
Federal funds
purchased - - 3,050,000
Other liabilities 3,367,950 1,828,234 1,735,041
TOTAL LIABILITIES 249,859,352 235,088,084 238,236,579
Shareholders' equity:
Preferred stock -
$10.00 par value;
authorized 200,000
shares, none issued - - -
Common stock - $2.50
par value; authorized
5,000,000 shares,
issued shares -
1,797,734, 1,200,000
and 1,200,000 4,494,335 3,000,000 3,000,000
Surplus 14,007 900,000 900,000
Retained earnings 20,742,098 19,726,577 20,234,383
Net unrealized
securities gains
(losses) 30,877 (440,705) (755,253)
TOTAL SHAREHOLDERS'
EQUITY 25,281,317 23,185,872 23,379,130
TOTAL LIABILITIES
AND SHAREHOLDERS'
EQUITY $275,140,669 $258,273,956 $261,615,709
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
FNB Corp. and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<S> <C> <C>
Nine Months Ended
September 30,
1995 1994
INTEREST INCOME:
Interest and fees on loans $ 11,542,039 $ 9,696,456
Interest and dividends on
investment securities:
Taxable income 3,063,765 2,735,783
Non-taxable income 453,498 487,788
Federal funds sold 102,400 64,438
Total interest income 15,161,702 12,984,465
INTEREST EXPENSE:
Deposits 6,461,909 5,026,191
Retail repurchase agreements 113,150 36,875
Federal funds purchased 13,431 10,742
Total interest expense 6,588,490 5,073,808
NET INTEREST INCOME 8,573,212 7,910,657
Provision for loan losses 350,000 115,000
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 8,223,212 7,795,657
OTHER OPERATING INCOME:
Service charges on deposit
accounts 996,148 897,948
Annuity and brokerage commissions 143,576 260,476
Credit card income 187,283 55,356
Other service charges, commissions
and fees 208,343 212,537
Losses on sales of securities (414,596) -
Other income 107,964 128,328
Total other operating income 1,228,718 1,554,645
OTHER OPERATING EXPENSE:
Personnel expense 3,310,483 3,693,285
Net occupancy expense 344,790 344,575
Furniture and equipment expense 336,907 399,189
Data processing services 645,135 168,767
Restructuring charges 460,457 -
Other expense 1,800,060 1,781,254
Total other operating expense 6,897,832 6,387,070
INCOME BEFORE INCOME TAXES 2,554,098 2,963,232
Income taxes 735,578 860,172
NET INCOME $ 1,818,520 $ 2,103,060
PER SHARE DATA:
Net income $ 1.01 $ 1.17
Cash dividends declared .37 .347
Average number of shares
outstanding 1,799,012 1,800,000
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
FNB Corp. and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<S> <C> <C>
Three Months Ended
September 30,
1995 1994
INTEREST INCOME:
Interest and fees on loans $ 4,000,995 $ 3,377,965
Interest and dividends on
investment securities:
Taxable income 1,049,443 941,759
Non-taxable income 144,617 154,307
Federal funds sold 34,774 40,035
Total interest income 5,229,829 4,514,066
INTEREST EXPENSE:
Deposits 2,285,120 1,720,725
Retail repurchase agreements 30,992 36,602
Federal funds purchased 323 3,713
Total interest expense 2,316,435 1,761,040
NET INTEREST INCOME 2,913,394 2,753,026
Provision for loan losses 130,000 30,000
NET INTEREST INCOME AFTER
PROVISION
FOR LOAN LOSSES 2,783,394 2,723,026
OTHER OPERATING INCOME:
Service charges on deposit
accounts 354,329 307,392
Annuity and brokerage commissions 45,723 26,497
Credit card income 67,438 33,871
Other service charges, commissions
and fees 56,088 59,212
Losses on sales of securities - -
Other income 37,351 35,749
Total other operating income 560,929 462,721
OTHER OPERATING EXPENSE:
Personnel expense 1,124,936 1,246,776
Net occupancy expense 114,494 117,688
Furniture and equipment expense 109,633 130,018
Data processing services 217,186 89,360
Restructuring charges - -
Other expense 516,861 608,170
Total other operating expense 2,083,110 2,192,012
INCOME BEFORE INCOME TAXES 1,261,213 993,735
Income taxes 375,949 283,631
NET INCOME $ 885,264 $ 710,104
PER SHARE DATA:
Net income $ .49 $ .39
Cash dividends declared .13 .18
Average number of shares
outstanding 1,797,115 1,800,000
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
FNB Corp. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<S> <C> <C>
Nine Months Ended
September 30,
1995 1994
OPERATING ACTIVITIES:
Net income $ 1,818,520 $ 2,103,060
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization
of premises and equipment 308,024 327,405
Provision for loan losses 350,000 115,000
Deferred income taxes (58,162) 313,493
Deferred loan fees and costs, net (92,009) (466,702)
Premium amortization and discount
accretion of investment
securities, net 121,963 348,902
Amortization of intangibles 44,336 59,390
Losses on sales of securities 414,596 -
Net decrease (increase) in loans
held for sale (233,600) 984,236
Increase in other assets (493,277) (574,114)
Increase in other liabilities 1,397,809 413,485
NET CASH PROVIDED BY OPERATING
ACTIVITIES 3,578,200 3,624,155
INVESTING ACTIVITES:
Available-for-sale securities:
Proceeds from sales 5,896,328 -
Proceeds from maturities 1,928,649 6,090,481
Purchases (249,405) (2,901,190)
Held-to-maturity securities:
Proceeds from maturities 13,607,837 14,127,990
Purchases (20,116,148) (15,505,695)
Net increase in loans (11,411,849) (7,826,077)
Proceeds from sales of premises
and equipment 1,395 155
Purchases of premises and
equipment (898,935) (212,966)
Other, net 5,928 (203,839)
NET CASH USED IN INVESTING
ACTIVITIES (11,236,200) (6,431,141)
FINANCING ACTIVITIES:
Net increase in deposits 13,349,768 5,695,109
Increase (decrease) in retail
repurchase agreements (309,904) 3,304,685
Decrease in federal funds
purchased (3,050,000) (1,800,000)
Proceeds from issuance of
common stock 16,422 -
Repurchase of common stock (52,800) -
Cash dividends and fractional
shares paid (432,380) (624,000)
NET CASH PROVIDED BY FINANCING
ACTIVITIES 9,521,106 6,575,794
NET INCREASE IN CASH AND CASH
EQUIVALENTS 1,863,106 3,768,808
Cash and cash equivalents at
beginning of period 9,348,113 7,050,226
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $11,211,219 $10,819,034
Supplemental disclosure of cash
flow information:
Cash paid during the period for:
Interest $ 5,758,000 $ 5,008,252
Income taxes 631,320 779,250
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> FNB Corp. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
1. The accompanying consolidated financial statements,
preparedwithout audit, include the accounts of FNB Corp.
(the Corporation) and its wholly-owned subsidiary, First
National Bank and Trust Company (the Bank). All significant
intercompany balances and transactions have been eliminated
in consolidation.
2. For purposes of reporting cash flows, cash and case
equivalents include cash on hand, amounts due from banks,
and federal funds sold. Generally, federal funds are
purchased and sold for one-day periods.
3. On December 30, 1993, the Corporation entered into definitive
agreements to acquire two mutual savings banks, Home Savings
Bank of Siler City, SSB ("Home") of Siler City, North
Carolina and Randleman Savings Bank, SSB ("Randleman") of
Randleman, North Carolina, in merger/conversion transactions,
pursuant to which the savings banks would convert from mutual
to stock form and the Corporation would simultaneously
acquire the shares issued in the conversions. Consummation
of such proposed acquisitions is subject to regulatory
approval by the Federal Deposit Insurance Corporation, the
Board of Governors of the Federal Reserve System and the
Administrator of the North Carolina Savings Institutions
Division. At December 31, 1994, Home operated one office and
had approximately $43,614,000 in total assets, $37,732,000 in
deposits and $5,105,000 in retained earnings. On this same
date, Randleman had approximately $15,610,000 in total
assets,$13,459,000 in deposits and $2,100,000 in retained
earnings.
Regulatory applications for approval to consummate the
proposed acquisitions were filed in April, 1994. Substantial
changes in regulatory policy occurring shortly after the
applications were filed effectively resulted in a moratorium
on federal approval of merger/conversions, and the
Corporation subsequently withdrew the applications to the
FDIC and the Federal Reserve. Due to the likelihood that
regulatory approval would not be received for an acquisition
of the magnitude represented by Home, the agreement with Home
was discontinued in May, 1995. The Corporation and Randleman
are exploring other methods of effecting a combination and
continue to monitor developments in federal regulations and
policy with respect to merger/conversions.
The Corporation has incurred certain costs in connection with
the proposed Randleman acquisition. Those costs, which
amounted to $71,494 at September 30, 1995, have been deferred
and are included in other assets on the consolidated balance
sheet. Costs amounting to $113,833, previously deferred in
connection with the proposed Home acquisition, were charged
to expense in the first quarter of 1995.
4. Loans as presented are net of unearned income of $55,247,
$1,732,724 and $944,168 at September 30, 1995, September 30,
1994 and December 31, 1994, respectively.
5
<PAGE>
5. Significant components of other expense were as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
FDIC insurance $ 21,092 $127,750 $277,040 $375,630
Stationery, printing
and supplies 87,519 77,142 222,899 219,483
Deferred acquisition
costs charged to
expense - - 113,833 -
6. In 1995, management adopted a comprehensive restructuring
project for the purpose of reengineering all Bank operations
to become more competitive and cost-effective in developing
business and servicing customers and to improve long-term
profitability. This project, scheduled for completion in
1995, will eliminate or realign some positions within the
bank and will result in one-time charges to earnings. It is
expected that the most significant costs have been incurred
in the first nine months of 1995.
A summary of the restructuring charges incurred or accrued
during the nine months ended September, 30 1995 is as
follows:
Retirement benefits $256,266
Other personnel costs 48,431
Total personnel costs 304,697
Professional fees related to
restructuring project 155,760
Total restructuring charges $460,457
7. Certain amounts for 1994 have been reclassified to conform
with the presentation for 1995. The reclassifications had
no effect on shareholders' equity or net income as previously
reported.
8. All references to per share data have been restated to
reflect the three-for-two stock split in May 1995.
9. In the opinion of management, the financial information
furnished in this report includes all adjustments (consisting
of normal recurring accruals) necessary to a fair statement
of the results for the periods presented.
6
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of
Operation
The purpose of this discussion and analysis is to assist in
the understanding and evaluation of the financial condition,
changes in financial condition and results of operations of FNB
Corp. (the Corporation) and its wholly-owned subsidiary, First
National Bank and Trust Company (the Bank). This discussion and
analysis should be read in conjunction with the financial
information appearing elsewhere in this report.
OVERVIEW
The Corporation earned $1,818,520 in the first nine months
of 1995, a 13.5% decline from the same period in 1994. Earnings
per share decreased from $1.17 to $1.01 in comparing these nine-
month periods. The 1995 results, especially as related to the
operations of the first quarter, have been impacted by certain
special charges described in more detail in the "Earnings
Review". Earnings for the 1995 third quarter amounted to
$885,264, which represents a 24.7% increase from the 1994 third
quarter and a gain in earnings per share from $.39 to $.49.
Total assets were $275,140,669 at September 30, 1995, up
6.5% from September 30, 1994 and 5.2% from December 31, 1994.
Loans amounted to $179,946,120 at September 30, 1995, increasing
9.4% from September 30, 1994 and 6.9% from December 31, 1994.
Total deposits grew 5.8% from September 30, 1994 and 5.8% from
December 31, 1994 to $243,275,080 at September 30, 1995.
In December 1993, the Corporation entered into definitive
agreements to acquire two mutual savings banks, Home Savings Bank
of Siler City, SSB ("Home") and Randleman Savings Bank, SSB
("Randleman"), which had total assets at December 31, 1994 of
$43,614,000 and $15,610,000, respectively. In 1994, the
Corporation withdrew the applications it had filed with the FDIC
and Federal Reserve for approval of the acquisitions as
substantial changes in regulatory policy in 1994 effectively
resulted in a moratorium on federal approval of such
merger/conversion transactions. Due to the likelihood that
regulatory approval would not be received for an acquisition of
the magnitude of Home, the agreement with Home was discontinued
in May 1995. The Corporation and Randleman are exploring other
methods of effecting a combination and continue to monitor
developments in federal regulations and policy with respect to
merger/conversions.
EARNINGS REVIEW
The Corporation's net income declined $284,540 or 13.5% in
the first nine months of 1995 compared to the same period of 1994
and increased $175,160 or 24.7% in comparing third quarter
periods. The earnings decline for the first nine months of 1995
primarily related to the first quarter results which were
negatively affected by restructuring charges of $460,457 and
losses on sales of securities of $414,596, which are considered
one-time charges taken for the strategic purposes discussed in
"Business Development Matters". Additionally, and as further
discussed in "Other Operating Expense", there was a $113,833
charge to expense in the 1995 first quarter related to costs that
had been deferred in connection with the proposed acquisition of
Home Savings Bank of Siler City, SSB. Earnings were positively
impacted in the first nine months of 1995 by an increase of
$662,555 or 8.4% in net interest income. Similarly, the 1995
third quarter results benefited from a $160,368 or 5.8% increase
in net interest income. Earnings were negatively impacted in
these same periods of 1995 by increases in the provision for loan
losses of $235,000 and $100,000, respectively.
7
<PAGE>
As discussed in "Other Operating Expense", earnings are
being favorably affected, starting in the 1995 third quarter, by
a significant reduction in the rate charged for FDIC insurance.
Compared to the same periods of 1994, FDIC insurance expense was
$98,590 lower in the first nine months of 1995 and $106,658 lower
in the third quarter.
Return on average assets, affected by the special charges in
1995, declined from 1.11% in the first nine months of 1994 to
0.92% in the first nine months of 1995. Similarly, return on
average shareholders' equity declined from 12.31% to 9.94% in
comparing the same periods. In comparing third quarter periods,
however, with increased net income in 1995, return on average
assets improved from 1.10% in 1994 to 1.31% in 1995 and return on
average shareholders' equity improved from 12.29% to 14.15%.
Net Interest Income
Net interest income is the difference between interest
income, principally from loans and investments, and interest
expense, principally on customer deposits. Changes in net
interest income result from changes in interest rates and in the
volume, or average dollar level, and mix of earning assets and
interest-bearing liabilities.
Net interest income was $8,573,212 in the first nine months
of 1995 compared to $7,910,657 in the same period of 1994. This
increase of $662,555 or 8.4% resulted from an improvement in the
net yield on earning assets, or net interest margin, from 4.58%
in the first nine months of 1994 to 4.74% in the same period of
1995 coupled with a 4.5% increase in the level of average earning
assets. In comparing third quarter periods, net interest income
increased in similar fashion by $160,368 or 5.8%, as the net
interest margin improved from 4.69% to 4.72% and average earning
assets increased 4.7%. The net interest margin, affected for
some period prior to early 1994 by a significant decline in the
interest rate structure, had generally improved until the second
quarter of 1993 as a result of lower deposit rates and then
decreased as the impact of declining yields on earning assets
became more significant. The interest rate scenario changed
significantly in 1994, influenced by actions taken by the Federal
Reserve to combat a possible resurgence in inflation. The
interest rate increases in 1994 and early 1995, later offset to
some extent by Federal Reserve action to reduce rates in the 1995
third quarter, have resulted in an improvement in the net
interest margin. Additionally, there has been a continuing
negative impact on the margin from certain variable-rate time
deposits with minimum rates in excess of current market rates.
Such variable-rate time deposits are being phased out over a two-
year period that commenced in January 1994. On a taxable
equivalent basis, the increase in net interest income in the
first nine months and third quarter of 1995 were slightly lower
at $645,000 and $152,000, respectively, reflecting a decline in
the yield of non-taxable investment securities.
Table 1 on page 15 and Table 2 on page 16 set forth for the
periods indicated information with respect to the Corporation's
average balances of assets and liabilities, as well as the total
dollar amounts of interest income (taxable equivalent basis) from
earning assets and interest expense on interest-bearing
liabilities, resultant rates earned or paid, net interest income,
net interest spread and net yield on earning assets. Net
interest spread refers to the difference between the average
yield on earning assets and the average rate paid on interest-
bearing liabilities. Net yield on earning assets, or net
interest margin, refers to net interest income divided by average
earning assets and is influenced by the level and relative mix of
earning assets and interest-bearing liabilities. Changes in net
interest income on a taxable equivalent basis, as measured by
volume and rate variances, are also analyzed in Tables 1 and 2.
Volume refers to the average dollar level of earning assets and
interest-bearing liabilities.
8
<PAGE>
Changes in the net interest margin and spread tend to
correlate with movements in the prime rate of interest. The
prime rate, which had been 6.00% at December 31, 1992 and 1993,
moved up significantly in 1994 to close the year at 8.50%. The
average prime for those three years amounted to 6.25%, 6.00% and
7.09%, respectively. The prime rate had declined significantly
from 1991 to 1993, but began to increase in 1994 following steps
taken by the Federal Reserve to combat a possible resurgence in
inflation. The prime rate increased towards the end of the first
quarter in 1994 and an additional four times during the remainder
of that year. In the first quarter of 1995, it increased again
to 9.00% and remained at that level until the third quarter when,
in response to action taken by the Federal Reserve, it decreased
to 8.75%. There appears to be some possibility of a further 1995
decrease in the prime rate. The average prime was 8.85% in the
first nine months of 1995 compared to 6.77% in the same period of
1994. In comparing nine-month periods, the net interest spread
declined modestly by 3 basis points from 3.94% in 1994 to 3.91%
in 1995 due to the fact that the average total yield on earning
assets increased by slightly less than the average rate paid on
interest-bearing liabilities, or cost of funds. The yield on
earning assets increased by 84 basis points from 7.43% in 1994 to
8.27% in 1995, while the cost of funds increased by 87 basis
points in moving from 3.49% to 4.36%. A comparison of third
quarter periods, however, indicates greater pressure on the net
interest spread, which declined from 4.01% to 3.89%. While the
third quarter increase in the yield on earning assets was 77
basis points, the cost of funds increased 89 basis points.
Provision for Loan Losses
This provision is the charge against earnings to provide an
allowance or reserve for possible future losses on loans. The
amount of each period's charge is affected by several
considerations including management's evaluation of various risk
factors in determining the adequacy of the allowance (see "Asset
Quality"), actual loan loss experience and loan portfolio growth.
Earnings were negatively impacted in the first nine months and
third quarter of 1995 compared to the same periods in 1994 by
increases in the provision of $235,000 and $100,000,
respectively.
Other Operating Income
Total other operating, or noninterest, income decreased
$325,927 or 21.0% in the first nine months of 1995 compared to
the same period in 1994 due principally to losses on sales of
securities in the 1995 first quarter of $414,596 (see "Business
Development Matters"). In comparing third quarter periods,
noninterest income increased $98,208 or 21.2%. The increase in
service charges on deposit accounts resulted primarily from a
change in the 1994 fourth quarter in the method of collecting
fees on returned checks and overdraft items and from the
implementation of daily charges on overdraft balances in May
1995. Annuity and brokerage commissions declined in the first
nine months of 1995 because of a reduction in sales of tax-
deferred annuity products, although such sales were higher in the
1995 third quarter compared to the same period in 1994. There
was a lower level of "other income" in the first nine months of
1995 due largely to a reduction in gains on loan sales.
Increases in mortgage loan rates have negatively impacted both
mortgage loan activity and the average level of profitability on
loans actually sold. Credit card income increased due to a new
program (see "Business Development Matters").
Other Operating Expense
Total other operating, or noninterest, expense increased
$510,762 or 8.0% in the first nine months of 1995 compared to the
same period of 1994 due primarily to restructuring charges
recorded in the 1995 first quarter of $460,457 (see "Business
Development Matters") and to deferred acquisition costs charged
to expense in the 1995 first quarter of $113,833. In comparing
third quarter periods, noninterest expense
9
<PAGE>
decreased $108,902 or 5.0% due primarily to a significant
reduction in the rate charged for FDIC insurance as discussed
below. The components of other operating expense have been
significantly changed by the Bank's decision in 1994 to outsource
its data processing operations (see "Business Development
Matters"). The conversion of data processing operations to a
service bureau arrangement was completed in the 1994 fourth
quarter. Consequently, the level of expense for data processing
services, which includes trust and credit card processing costs
in addition to basic data processing operations, has increased
significantly in 1995. Personnel and equipment costs are being
reduced, however, as a result of the outsourcing decision. A
change in credit card operations (see "Business Development
Matters") has also contributed to a higher cost of data
processing services.
Personnel expense, as noted above, has been positively
impacted by the outsourcing of data processing operations with
only a slight offset from the change implemented in mid-1994 in
credit card operations. Additional reductions in personnel and
other expenses are resulting from the comprehensive project being
undertaken in 1995 for the reengineering of all bank operations
(see "Business Development Matters"). The restructuring charges
noted above are expected to constitute the majority of the costs
to be incurred in connection with this project. The number of
full-time equivalent employees decreased in 1994, reflecting in
particular the outsourcing of data processing operations. A
further decrease has occurred in the first nine months of 1995 as
the benefits of the reengineering project have begun to be
realized. As is the situation for other operating expenses,
personnel expense is subject to the continuing effects of
inflation through normal salary adjustments and higher costs of
fringe benefits.
As discussed in the "Overview", the Corporation in December
1993 entered into definitive agreements to acquire two mutual
savings banks, Home Savings Bank of Siler City, SSB ("Home") and
Randleman Savings Bank, SSB ("Randleman"). Changes in regulatory
policy, however, have effectively resulted in a moratorium on
federal approval of such merger/conversion transactions. Based
on the results of the continuing evaluation of the progress
toward finding a method of effecting a combination, the
Corporation elected to charge to expense in the first quarter of
1995 certain costs, amounting to $113,833, that had been deferred
in connection with the proposed Home acquisition. As noted in
the "Overview", the agreement with Home was formally discontinued
in May 1995. Costs deferred in connection with the proposed
Randleman acquisition amounted to $71,494 at September 30, 1995.
Because of the Federal Deposit Insurance Corporation
Improvement Act (FDICIA) enacted in 1989, FDIC insurance expense
was increased substantially, with the Bank's expense amounting to
$503,379 in the year ended December 31, 1994 and $255,948 in the
first six months of 1995. The FDIC has two separate insurance
funds, which are the Bank Insurance Fund (BIF) and the Savings
Association Insurance Fund (SAIF). When each fund reaches the
1.25 percent reserve ratio required by FDICIA, then the
corresponding insurance assessment rates can be lowered starting
within that semiannual period. While the SAIF fund has not yet
reached the mandated reserve ratio, the BIF fund was found in the
third quarter of 1995 to have reached this level by the end of
May 1995. Accordingly, the BIF rate was reduced effective June
1, 1995 and currently is as much as 83% lower than before for
financial institutions with BIF-insured deposits. Since most of
the Bank's deposits are insured through BIF, the Bank experienced
a significant reduction in FDIC insurance expense in the 1995
third quarter when the effect of the rate adjustment was
initially recorded. Consequently, FDIC insurance expense,
compared to the same periods of 1994, was $98,590 lower in the
first nine months of 1995 and $106,658 lower in the third
quarter.
Under legislation now being considered in connection with
the SAIF fund, the FDIC insurance rate on SAIF deposits could be
lowered to match that on BIF deposits. As part of this
legislation, financial institutions would be charged a special,
one-time assessment on their SAIF deposits.
10
<PAGE>
Income Taxes
The effective income tax rate of 28.8% in the first nine
months of 1995 did not vary significantly from the 29.0% rate in
the same period of 1994.
LIQUIDITY
Liquidity refers to the continuing ability of the Bank to
meet deposit withdrawals, fund loan and capital expenditure
commitments, maintain reserve requirements, pay operating
expenses and provide funds to the Corporation for payment of
dividends, debt service and other operational requirements.
Liquidity is immediately available from three major sources:
(a) cash on hand and on deposit at other banks, (b) the
outstanding balance of federal funds sold and (c) the
available-for-sale securities portfolio. While additional
liquidity is readily obtainable by purchasing federal funds
from other banks, the Bank has not found it necessary to utilize
this resource to any substantial extent in recent years.
Further, while available-for-sale securities are intended to be a
source of immediate liquidity, the entire investment securities
portfolio is managed to provide both income and a ready source of
liquidity. The average portfolio life of debt securities is
approximately three and three-fourths years, resulting in a
substantial level of maturities each year. All debt securities
are of investment grade quality and, if the need arises,
can be promptly liquidated on the open market or pledged as
collateral for short-term borrowing.
In line with its approach to liquidity, the Bank as a matter
of policy does not solicit or accept brokered deposits for
funding asset growth. Instead, loans and other assets are based
on a solid core of local deposits and the Bank's strong capital
position. To date, the steady increase in deposits, retail
repurchase agreements and capital has been adequate to fund loan
demand in the Bank's market area, while maintaining the desired
level of immediate liquidity and a substantial investment
portfolio available for both immediate and secondary liquidity
purposes.
ASSET/LIABILITY MANAGEMENT AND INTEREST RATE SENSITIVITY
One of the primary objectives of asset/liability management
is to maximize net interest margin while minimizing the earnings
risk associated with changes in interest rates. One method used
to manage interest rate sensitivity is to measure, over various
time periods, the interest rate sensitivity positions, or gaps;
however, this method addresses only the magnitude of timing
differences and does not address earnings or market value.
Therefore, management uses an earnings simulation model to
prepare, on a regular basis, earnings projections based on a
range of interest rate scenarios in order to more accurately
measure interest rate risk.
The Bank's balance sheet is liability-sensitive, meaning
that in a given period there will be more liabilities than assets
subject to immediate repricing as market rates change. Because
immediately rate sensitive interest-bearing liabilities exceed
rate sensitive assets, the earnings position could improve in a
declining rate environment and could deteriorate in a rising rate
environment, depending on the correlation of rate changes in
these two categories. Included in interest-bearing liabilities
subject to rate changes within 30 days are NOW, savings, and
money market deposits totaling $77,883,000 as of September 30,
1995. These types of deposits historically have not repriced
coincidentally with or in the same proportion as general
market indicators.
11
<PAGE>
CAPITAL ADEQUACY
Under guidelines established by the Federal Reserve Board,
capital adequacy is currently measured for regulatory purposes by
certain risk-based capital ratios, supplemented by a leverage
ratio. The risk-based capital ratios are determined by
expressing allowable capital amounts, defined in terms of Tier 1
and Tier 2, as a percentage of risk-adjusted assets, which are
computed by measuring the relative credit risk of both the asset
categories on the balance sheet and various off-balance sheet
exposures. Tier 1 capital consists primarily of common
shareholders' equity and qualifying perpetual preferred stock,
net of goodwill and other disallowed intangible assets. Tier 2
capital, which is limited to the total of Tier 1 capital,
includes allowable amounts of subordinated debt, mandatory
convertible securities, preferred stock and the allowance for
loan losses. Under current requirements, the minimum Tier 1
capital ratio is 4% and the minimum total capital ratio,
consisting of both Tier 1 and Tier 2 capital, is 8%. At
September 30, 1995, the Corporation had a Tier 1 capital ratio of
13.63% and a total capital ratio of 14.66%.
The leverage ratio, which serves as a minimum capital
standard, considers Tier 1 capital only and is expressed as a
percentage of average total assets for the most recent quarter,
after reduction of those assets for goodwill and other disallowed
intangible assets at the measurement date. The required ratio
ranges from 3% to 5%, subject to federal bank regulatory
evaluation of the organization's overall safety and soundness.
At September 30, 1995, the Corporation had a leverage ratio of
9.32%.
BALANCE SHEET REVIEW
Total assets at September 30, 1995 were higher than at
September 30, 1994 and December 31, 1994 by $16,867,000 or 6.5%
and $13,525,000 or 5.2%, respectively; deposits were ahead by
$13,320,000 or 5.8% and $13,350,000 or 5.8%. Growth was
significant in the 1995 third quarter when total assets and
deposits increased by $7,491,000 or 2.8% and $5,274,000 or 2.2%,
respectively. A new retail repurchase agreements program that
commenced in the second quarter of 1994 generated $3,216,000 of
the total asset balance at September 30, 1995, $3,305,000 at
September 30, 1994 and $3,526,000 at December 31, 1994.
Average assets increased $11,266,000 or 4.4% in the first nine
months of 1995 compared to the same period in 1994, while average
deposits increased $7,290,000 or 3.2%; the third quarter
increases being $12,948,000 or 5.0% and $11,618,000 or 5.1%,
respectively.
Investment Securities
Additions to the investment securities portfolio depend to a
large extent on the availability of investable funds that are not
otherwise needed to satisfy loan demand. During the twelve-month
period ended September 30, 1995, when significant loan growth
occurred relative to the growth in total assets, there was a
modest increase in the level of investment securities, amounting
to $1,024,000 or 1.4%. Of this total increase, $715,000 resulted
from the change in the valuation of available-for-sale securities
for unrealized gains and losses. Investable funds not otherwise
utilized are temporarily invested on an overnight basis as
federal funds sold, the level of which is affected by such
considerations as near-term loan demand and liquidity needs.
Loans
The Corporation's primary source of revenue and largest
component of earning assets is the loan portfolio. Loans
increased $15,427,000 or 9.4% during the twelve-month period
ended September 30, 1995. The net loan increase during the first
nine months of 1995 was $11,618,000 or 6.9%, with the third
quarter
12
<PAGE>
accounting for $7,749,000 or 66.7% of this increase.
Loan growth in the first quarter was flat due to a decrease in
the commercial loan portfolio which, as a result of its more
volatile nature, tends to have larger fluctuations, both
increases and decreases, than other portfolio components. The
commercial loan portfolio regained all of its first quarter loss
in the second quarter and registered a strong increase in the
third quarter. Despite the quarterly fluctuations, the
commercial loan portfolio accounted for more than 40% of total
loan growth during both the twelve-month period ended September
30, 1995 and the first nine months of 1995. Average loans were
$12,129,000 or 7.6% higher in the first nine months of 1995 than
in the same period of 1994. The ratio of average loans to
average deposits, in comparing nine-month periods, increased from
70.3% in 1994 to 73.3% in 1995. Part of this increase is due to
the effect of the new retail repurchase agreements program
which began generating additional funds in 1994 that can be used
for loan growth and other purposes. The ratio of loans to
deposits at September 30, 1995 was 74.0%.
The residential construction and mortgage loan portfolio
accounted for approximately 40% of the loan increase during the
last twelve months and 35% of the increase during the first nine
months of 1995. The consumer loan portfolio has been adversely
affected by a decline in automobile loans that has largely offset
the gains in credit card receivables, in balances related to the
home equity line program and in installment loans other than for
automobiles. Automobile lending was especially strong in the
first half of 1994, but the pace has significantly subsided since
that time. Reflecting an improvement in the volume of automobile
loans in the 1995 third quarter, however, the results of the
consumer loan portfolio have contributed more significantly
toward the net loan increases for the last twelve months and for
the first nine months of 1995.
Asset Quality
Management considers the Bank's asset quality to be of
primary importance. A formal loan review function, independent
of loan origination, is used to identify and monitor problem
loans. In determining the allowance for loan losses and any
resulting provision to be charged against earnings, particular
emphasis is placed on the results of the loan review process.
Consideration is also given to historical loan loss experience,
the value and adequacy of collateral, and economic conditions in
the Bank's market area.
Management's policy in regard to past due loans is
conservative and normally requires a prompt charge-off to the
allowance for loan losses following timely collection efforts and
a thorough review. Further efforts are then pursued through
various means available. Loans carried in a nonaccrual status
are generally collateralized and the possibility of future losses
is considered minimal.
Deposits
The level and mix of deposits is affected by various
factors, including general economic conditions, the particular
circumstances of local markets and the specific deposit
strategies employed. Broad interest rate declines such as have
occurred from 1991 to early 1994 tend to encourage customers to
consider alternative investments such as mutual funds and tax-
deferred annuity products. Interest rate increases subsequent to
this last broad decline have tended to reduce the consideration
of these alternative investments.
The Bank's level and mix of deposits has been specifically
affected by the following factors. Certain variable-rate time
deposits with minimum rates in excess of current market rates are
being phased out over a two-year period that commenced in January
1994. A retail repurchase agreements program, established in the
second quarter of 1994, has tended to transfer funds away from
deposits. The balance of retail repurchase agreements was
$3,526,000 at December 31, 1994 and $3,216,000 at September 30,
1995. Further, the level of public funds on deposit fluctuates,
amounting to $22,538,000, $10,081,000 and $10,940,000 at
September 30, 1995, September 30, 1994 and December 31, 1994,
respectively.
13
<PAGE>
BUSINESS DEVELOPMENT MATTERS
As discussed in the "Overview" and "Other Operating Expense"
above, the Corporation has entered into a definitive agreement to
acquire a mutual savings bank. An additional agreement for the
acquisition of a mutual savings bank was discontinued in May
1995.
During 1994, a new credit card operation was established in
which the Bank carries its own credit card receivables as opposed
to the former fee-based arrangement under which accounts were
generated for and owned by a correspondent bank. As part of the
new credit card strategy, extensive customer solicitation efforts
have been undertaken in 1995. Credit card receivables exceeded
$1,200,000 at September 30, 1995. Additionally, the merchant
aspect of credit card operations has been shifted to an in-house
basis from the prior correspondent arrangement.
In a significant 1994 development, the Bank elected to
outsource all of its data processing, item capture and statement
rendering operations. The conversion to a service bureau
arrangement was completed in the 1994 fourth quarter. The major
items of data processing equipment that were no longer needed by
the Bank were acquired by the new processor. While the Bank does
not plan to resume any major data processing operations, the
level of computer equipment is being significantly increased in
1995 through expanded use of personal computer networks. The new
networks will allow for a more direct input of basic loan and
deposit account information to the data files maintained by the
service bureau. Capital expenditures for these and other
projects are expected to be approximately $1,000,000 in 1995.
In 1995, management adopted a comprehensive restructuring
project for the purpose of reengineering all Bank operations to
become more competitive and cost-effective in developing business
and servicing customers and to improve long-term profitability.
This project, scheduled for completion in 1995, will eliminate or
realign some positions within the Bank and will result in one-
time charges to earnings. It is believed that the majority of
these restructuring charges were incurred or accrued in the 1995
first quarter. The total recorded in the first quarter, which is
equal to the total for the first nine months of 1995, was
$460,457, of which $304,697 related to personnel costs and
$155,760 to professional fees. The Bank also decided in March
1995 to recognize losses of $414,596 from the sales of certain
securities held in the available-for-sale investment portfolio in
order to gain favorable tax treatment for the losses and to take
advantage of reinvestment opportunities at higher coupon rates.
While these actions will have a significant adverse impact on
1995 earnings, management believes these decisions will enhance
the long-term value of FNB Corp. and insure the competitive edge
of its community banking operations.
14
<PAGE>
TABLE 1
CONSOLIDATED AVERAGE BALANCE SHEETS AND NET INTEREST INCOME
ANALYSIS
(Taxable Equivalent Basis, Dollars in Thousands)
<TABLE>
<S> <C> <C> <C> <C>
1995 1994
NINE MONTHS ENDED SEPTEMBER 30
Average
Interest Rates
Average Income/ Earned/ Average
Balance Expense Paid Balance
EARNING ASSETS
Loans (2) (3) $171,929 $11,580 9.00% $159,800
Investment securities:
Taxable income 64,614 3,064 6.32 66,517
Non-taxable income (2) 10,274 682 8.84 9,996
Federal funds sold 2,318 102 5.91 2,175
Total earning assets 249,135 15,428 8.27 238,488
Cash and due from banks 9,130 8,428
Other assets, net 6,697 6,780
TOTAL ASSETS $264,962 $253,696
INTEREST-BEARING
LIABILITIES
Interest-bearing
deposits:
NOW accounts $ 32,142 513 2.13 $ 32,483
Savings deposits 29,931 646 2.89 31,845
Money market accounts 16,783 386 3.08 21,504
Certificates and other
time deposits 119,831 4,917 5.49 106,689
Retail repurchase
agreements 3,004 113 5.04 1,262
Federal funds purchased 310 14 5.79 332
Total interest-bearing
liabilities 202,001 6,589 4.36 194,115
Noninterest-bearing
demand deposits 35,989 34,865
Other liabilities 2,585 1,940
Shareholders' equity 24,387 22,776
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $264,962 $253,696
NET INTEREST INCOME AND
SPREAD $ 8,839 3.91%
NET YIELD ON EARNING
ASSETS 4.73%
</TABLE>
(1) The mix variance, not separately stated, has been
proportionally allocated to the rate and volume variances
based on their absolute dollar amount.
(2) Interest income related to tax-exempt securities and to
certain loans exempt from federal income tax is stated on a
taxable equivalent basis, assuming a 34% tax rate.
(3) Nonaccrual loans are included in the average loan balance.
Loan fees and the incremental direct costs associated with
making loans are deferred and subsequently recognized over
the life of the loan as an adjustment of interest income.
15a
<PAGE>
TABLE 1
CONSOLIDATED AVERAGE BALANCE SHEETS AND NET INTEREST INCOME
ANALYSIS
(Taxable Equivalent Basis, Dollars in Thousands)
<TABLE>
<S> <C> <C> <C> <C> <C>
NINE MONTHS ENDED 1994
SEPTEMBER 30 Average 1995 Versus 1994
Interest Rates Interest Variance
Income/ Earned/ due to (1) Net
Expense Paid Volume Rate Change
EARNING ASSETS
Loans (2) (3) $ 9,736 8.14% $ 771 $ 1,073 $1,844
Investment securities:
Taxable income 2,736 5.48 (80) 408 328
Non-taxable income(2) 732 9.76 20 (70) (50)
Federal funds sold 64 3.96 4 34 38
Total earning assets 13,268 7.43 715 1,445 2,160
Cash and due from banks
Other assets, net
TOTAL ASSETS
INTEREST-BEARING
LIABILITIES
Interest-bearing
deposits:
NOW accounts 484 1.99 (5) 34 29
Savings deposits 609 2.56 (39) 76 37
Money market accounts 399 2.48 (98) 85 (13)
Certificates and other
time deposits 3,534 4.43 470 913 1,383
Retail repurchase
agreements 37 3.91 60 16 76
Federal funds purchased 11 4.33 (1) 4 3
Total interest-bearing
liabilities 5,074 3.49 387 1,128 1,515
Noninterest-bearing
demand deposits
Other liabilities
Shareholders' equity
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY
NET INTEREST INCOME
AND SPREAD $ 8,194 3.94% $ 328 $ 317 $ 645
NET YIELD ON EARNING
ASSETS 4.58%
</TABLE>
(1) The mix variance, not separately stated, has been
proportionally allocated to the rate and volume variances
based on their absolute dollar amount.
(2) Interest income related to tax-exempt securities and to
certain loans exempt from federal income tax is stated on a
taxable equivalent basis, assuming a 34% tax rate.
(3) Nonaccrual loans are included in the average loan balance.
Loan fees and the incremental direct costs associated with
making loans are deferred and subsequently recognized over
the life of the loan as an adjustment of interest income.
15b
<PAGE>
TABLE 2
CONSOLIDATED AVERAGE BALANCE SHEETS AND NET INTEREST INCOME
ANALYSIS
(Taxable Equivalent Basis, Dollars in Thousands)
<TABLE>
<S> <C> <C> <C> <C>
1995 1994
THREE MONTHS ENDED SEPTEMBER 30 Average
Interest Rates
Average Income/ Earned/ Average
Balance Expense Paid Balance
EARNING ASSETS
Loans (2) (3) $176,324 $4,011 9.04% $162,604
Investment securities:
Taxable income 64,299 1,050 6.53 66,067
Non-taxable income(2) 10,429 219 8.37 9,746
Federal funds sold 2,414 34 5.72 3,664
Total earning assets 253,466 5,314 8.35 242,081
Cash and due from banks 9,372 8,591
Other assets, net 7,454 6,672
TOTAL ASSETS $270,292 $257,344
INTEREST-BEARING
LIABILITIES
Interest-bearing deposits:
NOW accounts $ 32,260 175 2.15 $ 33,193
Savings deposits 29,612 207 2.78 31,808
Money market accounts 15,201 116 3.02 20,800
Certificates and other
time deposits 126,334 1,787 5.61 106,020
Retail repurchase
agreements 2,548 31 4.83 3,713
Federal funds purchased 23 1 5.57 297
Total interest-bearing
liabilities 205,978 2,317 4.46 195,831
Noninterest-bearing
demand deposits 36,274 36,242
Other liabilities 3,018 2,151
Shareholders' equity 25,022 23,120
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $270,292 $257,344
NET INTEREST INCOME AND
SPREAD $2,997 3.89%
NET YIELD ON EARNING
ASSETS 4.72%
</TABLE>
(1) The mix variance, not separately stated, has been
proportionally allocated to the rate and volume variances
based on their absolute dollar amount.
(2) Interest income related to tax-exempt securities and to
certain loans exempt from federal income tax is stated on a
taxable equivalent basis, assuming a 34% tax rate.
(3) Nonaccrual loans are included in the average loan balance.
Loan fees and the incremental direct costs associated with
making loans are deferred and subsequently recognized over
the life of the loan as an adjustment of interest income.
16a
<PAGE>
TABLE 2
CONSOLIDATED AVERAGE BALANCE SHEETS AND NET INTEREST INCOME
ANALYSIS
(Taxable Equivalent Basis, Dollars in Thousands)
<TABLE>
<S> <C> <C> <C> <C> <C>
THREE MONTHS ENDED 1994
SEPTEMBER 30 Average 1995 Versus 1994
Interest Rates Interest Variance
Income/ Earned/ due to (1) Net
Expense Paid Volume Rate Change
EARNING ASSETS
Loans (2) (3) $3,393 8.30% $ 301 $ 317 $ 618
Investment
securities:
Taxable income 942 5.70 (26) 134 108
Non-taxable
income (2) 232 9.51 16 (29) (13)
Federal funds sold 40 4.34 (17) 11 (6)
Total earning
assets 4,607 7.58 274 433 707
Cash and due
from banks
Other assets, net
TOTAL ASSETS
INTEREST-BEARING
LIABILITIES
Interest-bearing
deposits:
NOW accounts 168 2.01 (5) 12 7
Savings deposits 208 2.59 (15) 14 (1)
Money market
accounts 139 2.64 (41) 18 (23)
Certificates and
other time
deposits 1,206 4.51 255 326 581
Retail repurchase
agreements 37 3.91 (14) 8 (6)
Federal funds
purchased 4 4.97 (3) - (3)
Total interest-
bearing
liabilities 1,762 3.57 177 378 555
Noninterest-bearing
demand deposits
Other liabilities
Shareholders'
equity
TOTAL LIABILITIES
AND SHAREHOLDERS'
EQUITY
NET INTEREST INCOME
AND SPREAD $2,845 4.01% $ 97 $ 55 $ 152
NET YIELD ON
EARNING ASSETS 4.69%
</TABLE>
(1) The mix variance, not separately stated, has been
proportionally allocated to the rate and volume variances
based on their absolute dollar amount.
(2) Interest income related to tax-exempt securities and to
certain loans exempt from federal income tax is stated on a
taxable equivalent basis, assuming a 34% tax rate.
(3) Nonaccrual loans are included in the average loan balance.
Loan fees and the incremental direct costs associated with
making loans are deferred and subsequently recognized over
the life of the loan as an adjustment of interest income.
16b
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibits to this report are listed in the index to
exhibits on pages 18 and 19 of this report.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the
quarter ended September 30, 1995.
____________________________________
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant has caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
FNB Corp.
(Registrant)
Date: November 8, 1995 By:/s/ Jerry A. Little
Jerry A. Little
Treasurer and Secretary
(Principal Financial and
Accounting Officer)
17
<PAGE>
FNB CORP.
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit Page No.
3.10 Articles of Incorporation of the
Registrant, incorporated herein by
reference to Exhibit 3.1 to the
Registrant's Form S-14 Registration
Statement (No. 2-96498) filed March
16, 1985.
3.11 Articles of Amendment to Articles of
Incorporation of the Registrant,
adopted May 10, 1988, incorporated
herein by reference to Exhibit 19.10
to the Registrant's Form 10-Q Quarterly
Report for the quarter ended June 30,
1988.
3.20 Amended and Restated Bylaws of the
Registrant, adopted May 9, 1995,
incorporated herein by reference to the
Registrant's Form 10-QSB Quarterly
Report for the quarter ended June 30,
1995.
4 Specimen of Registrant's Common Stock
Certificate, incorporated herein by
reference to Exhibit 4 to Amendment
No. 1 to the Registrant's Form S-14
Registration Statement (No. 2-96498)
filed April 19, 1985.
10.10 Form of Split Dollar Insurance
Agreement dated as of November 1, 1987
between First National Bank and Trust
Company and certain of its key
employees and directors, incorporated
herein by reference to Exhibit 19.20 to
the Registrant's Form 10-Q Quarterly
Report for the Quarter ended June 30,
1988.
10.11 Form of Amendment to Split Dollar
Insurance Agreement dated as of
November 1, 1994 between First
National Bank and Trust Company
and certain of its key employees and
directors, incorporated herein by
reference to Exhibit 10.11 to the
Registrant's Form 10-KSB Annual Report
for the fiscal year ended December 31,
1994.
18
<PAGE>
10.20 Copy of Split Dollar Insurance
Agreement dated as of May 28, 1989
between First National Bank and Trust
Company and James M. Culberson, Jr.,
incorporated herein by reference to
Exhibit 10.30 to the Registrant's Form
10-K Annual Report for the fiscal year
ended December 31, 1989.
10.30 Copy of Stock Compensation Plan adopted
May 11, 1993, incorporated herein by
reference to Exhibit 10.40 to the
Registrant's Form 10-QSB Quarterly
Report for the quarter ended June 30,
1993.
10.31 Form of Incentive Stock Option Agreement
between FNB Corp. and certain of its key
employees, pursuant to the Registrant's
Stock Compensation Plan, incorporated
herein by reference to Exhibit 10.11 to
the Registrant's Form 10-KSB Annual
Report for the fiscal year ended
December 31, 1994.
10.32 Form of Nonqualified Stock Option
Agreement between FNB Corp. and certain
of its directors, pursuant to the
Registrant's Stock Compensation Plan,
incorporated herein by reference to
Exhibit 10.11 to the Registrant's Form
10-KSB Annual Report for the fiscal year
ended December 31, 1994.
10.40 Copy of FNB Corp. Savings Institutions
Management Stock Compensation Plan
adopted May 10, 1994, incorporated herein
by reference to Exhibit 10.40 to the
Registrant's Form 10-QSB Quarterly Report
for the quarter ended June 30, 1994.
27 Financial Data Schedule.
19
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from Form
10-QSB for the quarterly period ended September 30, 1995 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 10,101,219
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 1,110,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 17,643,012
<INVESTMENTS-CARRYING> 58,927,148
<INVESTMENTS-MARKET> 0
<LOANS> 179,946,120
<ALLOWANCE> 1,918,551
<TOTAL-ASSETS> 275,140,669
<DEPOSITS> 243,275,080
<SHORT-TERM> 3,216,322
<LIABILITIES-OTHER> 3,367,950
<LONG-TERM> 0
<COMMON> 4,494,335
0
0
<OTHER-SE> 20,786,982
<TOTAL-LIABILITIES-AND-EQUITY> 275,140,669
<INTEREST-LOAN> 11,542,039
<INTEREST-INVEST> 3,517,263
<INTEREST-OTHER> 102,400
<INTEREST-TOTAL> 15,161,702
<INTEREST-DEPOSIT> 6,461,909
<INTEREST-EXPENSE> 6,588,490
<INTEREST-INCOME-NET> 8,573,212
<LOAN-LOSSES> 350,000
<SECURITIES-GAINS> (414,596)
<EXPENSE-OTHER> 6,897,832
<INCOME-PRETAX> 2,554,098
<INCOME-PRE-EXTRAORDINARY> 2,554,098
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,818,520
<EPS-PRIMARY> 1.01
<EPS-DILUTED> 1.01
<YIELD-ACTUAL> 4.59
<LOANS-NON> 103,000
<LOANS-PAST> 246,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,720,000
<CHARGE-OFFS> 259,000
<RECOVERIES> 108,000
<ALLOWANCE-CLOSE> 1,919,000
<ALLOWANCE-DOMESTIC> 1,700,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 219,000
</TABLE>
