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, 1996
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 1,803,004 shares of $2.50 par value common stock
outstanding at October 19, 1996.
Transitional Small Business Disclosure Format (Check One): Yes No X
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
FNB Corp. and Subsidiary
CONSOLIDATED BALANCE SHEETS
<S> <C> <C> <C>
September 30, December 31,
ASSETS 1996 1995 1995
Cash and due from banks $ 11,499,468 $ 10,101,219 $ 8,764,539
Federal funds sold 8,100,000 1,110,000 2,600,000
Investment securities:
Available for sale, at estimated fair value
(amortized cost of $25,336,568,
$17,596,230 and $28,183,155) 25,204,638 17,643,012 28,375,645
Held to maturity (estimated fair value of
$57,525,441, $59,266,365 and $57,008,236 58,242,929 58,927,148 56,160,814
Loans 191,148,360 179,946,120 179,922,737
Less: Allowance for loan losses (1,959,638) (1,918,551) (1,902,640)
Net loans 189,188,722 178,027,569 178,020,097
Premises and equipment 6,119,525 5,615,433 6,029,541
Other assets 4,301,581 3,716,288 3,727,476
TOTAL ASSETS $ 302,656,863 $ 275,140,669 $ 283,678,112
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand deposits $ 38,841,700 $ 33,645,798 $ 38,590,985
Interest-bearing deposits:
NOW, savings and money market deposits 80,383,848 77,882,815 78,728,366
Time deposits of $100,000 or more 45,218,260 33,276,391 36,427,161
Other time deposits 103,470,397 98,470,076 96,397,964
Total deposits 267,914,205 243,275,080 250,144,476
Retail repurchase agreements 3,809,475 3,216,322 4,641,527
Federal funds purchased - - -
Other liabilities 3,017,509 3,367,950 2,897,038
TOTAL LIABILITIES 274,741,189 249,859,352 257,683,041
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 - 1,803,004, 1,797,734 and 1,797,995 4,507,510 4,494,335 4,494,988
Surplus 116,175 14,007 18,705
Retained earnings 23,379,063 20,742,098 21,354,335
Net unrealized securities gains (losses) (87,074) 30,877 127,043
TOTAL SHAREHOLDERS' EQUITY 27,915,674 25,281,317 25,995,071
TOTAL LIABILITIIES AND
SHAREHOLDERS' EQUITY $ 302,656,863 $ 275,140,669 $ 283,678,112
See accompanying notes to consolidated financial statements.
</TABLE>
1
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FNB Corp. and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<S> <C> <C>
Nine Months Ended
September 30,
1996 1995
INTEREST INCOME:
Interest and fees on loans $ 12,366,713 $ 11,542,039
Interest and dividends on investment securities:
Taxable income 3,450,503 3,063,765
Non-taxable income 568,197 453,498
Federal funds sold 31,687 102,400
Total interest income 16,417,100 15,161,702
INTEREST EXPENSE:
Deposits 6,911,701 6,461,909
Retail repurchase agreements 128,711 113,150
Federal funds purchased 42,433 13,431
Total interest expense 7,082,845 6,588,490
NET INTEREST INCOME 9,334,255 8,573,212
Provision for loan losses 305,000 350,000
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 9,029,255 8,223,212
OTHER OPERATING INCOME:
Service charges on deposit accounts 1,060,490 996,148
Annuity and brokerage commissions 148,170 143,576
Credit card income 231,046 187,283
Other service charges, commissions and fees 219,416 208,343
Losses on sales of investment securities - (414,596)
Other income 108,119 107,964
Total other operating income 1,767,241 1,228,718
OTHER OPERATING EXPENSE:
Personnel expense 3,562,709 3,310,483
Net occupancy expense 356,003 344,790
Furniture and equipment expense 495,756 336,907
Data processing services 688,097 645,135
Restructuring charges - 460,457
Other expense 1,611,122 1,800,060
Total other operating expense 6,713,687 6,897,832
INCOME BEFORE INCOME TAXES 4,082,809 2,554,098
Income taxes 1,247,170 735,578
NET INCOME $ 2,835,639 $ 1,818,520
PER SHARE DATA:
Net income $ 1.57 $ 1.01
Cash dividends declared .45 .37
Average number of shares outstanding 1,801,148 1,799,012
See accompanying notes to consolidated financial statements.
</TABLE>
2
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FNB Corp. and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<S> <C> <C>
Three Months Ended
September 30,
1996 1995
INTEREST INCOME:
Interest and fees on loans $ 4,216,451 $ 4,000,995
Interest and dividends on investment securities:
Taxable income 1,107,776 1,049,443
Non-taxable income 196,396 144,617
Federal funds sold 17,017 34,774
Total interest income 5,537,640 5,229,829
INTEREST EXPENSE:
Deposits 2,308,336 2,285,120
Retail repurchase agreements 36,311 30,992
Federal funds purchased 12,176 323
Total interest expense 2,356,823 2,316,435
NET INTEREST INCOME 3,180,817 2,913,394
Provision for loan losses 110,000 130,000
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 3,070,817 2,783,394
OTHER OPERATING INCOME:
Service charges on deposit accounts 337,784 354,329
Annuity and brokerage commissions 67,280 45,723
Credit card income 79,883 67,438
Other service charges, commissions and fees 72,773 56,088
Losses on sales of investment securities
- -
Other income 34,878 37,351
Total other operating income 592,598 560,929
OTHER OPERATING EXPENSE:
Personnel expense 1,199,743 1,124,936
Net occupancy expense 122,182 114,494
Furniture and equipment expense 164,887 109,633
Data processing services 231,267 217,186
Restructuring charges
- -
Other expense 587,173 516,861
Total other operating expense 2,305,252 2,083,110
INCOME BEFORE INCOME TAXES 1,358,163 1,261,213
Income taxes 419,548 375,949
NET INCOME $ 938,615 $ 885,264
PER SHARE DATA:
Net income $ .52 $ .49
Cash dividends declared .15 .13
Average number of shares outstanding 1,802,964 1,797,115
See accompanying notes to consolidated financial statements.
</TABLE>
3
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FNB Corp. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<S> <C> <C>
Nine Months Ended
September 30,
1996 1995
OPERATING ACTIVITIES:
Net income $ 2,835,639 $ 1,818,520
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of premises and equipment 482,391 308,024
Provision for loan losses 305,000 350,000
Deferred income taxes (64,559) (58,162)
Deferred loan fees and costs, net 265,232 (92,009)
Premium amortization and discount accretion
of investment securities, net 29,998 121,963
Amortization of intangibles 32,905 44,336
Losses on sales of investment securities - 414,596
Net decrease (increase) in loans held for sale 5,306 (233,600)
Increase in other assets (451,831) (493,277)
Increase in other liabilities 258,813 1,397,809
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,698,894 3,578,200
INVESTING ACTIVITES:
Available-for-sale securities:
Proceeds from sales - 5,896,328
Proceeds from maturities 11,558,226 1,928,649
Purchases (8,774,291) (249,405)
Held-to-maturity securities:
Proceeds from maturities 13,818,718 13,607,837
Purchases (15,864,280) (20,116,148)
Net increase in loans (11,738,996) (11,411,849)
Proceeds from sales of premises and equipment 20,320 1,395
Purchases of premises and equipment (685,519) (898,935)
Other, net (35,653) 5,928
NET CASH USED IN INVESTING ACTIVITIES (11,701,475) (11,236,200)
FINANCING ACTIVITIES:
Net increase in deposits 17,769,729 13,349,768
Decrease in retail repurchase agreements (832,052) (309,904)
Decrease in federal funds purchased
- (3,050,000)
Common stock issued 109,992 16,422
Common stock repurchased - (52,800)
Cash dividends and fractional shares paid (810,159) (432,380)
NET CASH PROVIDED BY FINANCING ACTIVITIES 16,237,510 9,521,106
NET INCREASE IN CASH AND CASH EQUIVALENTS 8,234,929 1,863,106
Cash and cash equivalents at beginning of period 11,364,539 9,348,113
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 19,599,468 $ 11,211,219
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 7,277,550 $ 5,758,000
Income taxes 1,367,131 631,320
See accompanying notes to consolidated financial statements.
</TABLE>
4
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FNB Corp. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. FNB Corp. is a one-bank holding company whose wholly-owned
subsidiary is the First National Bank and Trust Company (the "Bank").
The Bank is an independent community bank that offers full
banking and trust services to consumer and business customers
primarily in the region of North Carolina that includes Randolph,
Montgomery and Chatham counties.
The accompanying consolidated financial statements, prepared
without audit, include the accounts of FNB Corp. and the Bank
(collectively the "Corporation"). All significant intercompany
balances and transactions have been eliminated.
The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
2. For purposes of reporting cash flows, cash and cash 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. Loans as presented are increased by net deferred expense of
$130,027 and $133,400 at September 30, 1996 and December 31, 1995,
respectively, and are reduced by net unearned income of $55,247 at
September 30, 1995.
4. Significant components of other expense were as follows:
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
FDIC insurance $ 83,771 $ 21,092 $101,621 $277,040
Stationery, printing and supplies 73,960 87,519 207,895 222,899
Deferred acquisition costs
charged to expense - - - 113,833
</TABLE>
5. In 1995, management adopted a comprehensive restructuring
project for the purpose of reengineering Bank operations to
become more competitive and cost-effective in developing
business and servicing customers and to improve long-term
profitability. In connection with this project, certain
positions within the Bank have either been realigned or
eliminated. It is expected that all significant project costs
were incurred in and paid in 1995.
5
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A summary of the restructuring charges, all of which were
incurred or accrued during the three months ended March 31,
1995, is as follows:
Retirement benefits $256,266
Other personnel costs 44,850
Total personnel costs 301,116
Professional fees related to restructuring project 159,341
Total restructuring charges $460,457
6. All per share data has been retroactively adjusted to reflect
the three-for-two common stock split effected in the form of a
50% stock dividend paid in the second quarter of 1995.
7. 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
"Parent Company") and its wholly-owned subsidiary, First National
Bank and Trust Company (the "Bank"), collectively referred to as the
"Corporation". This discussion should be read in conjunction with
the financial information appearing elsewhere in this report.
OVERVIEW
The Corporation earned $2,835,639 in the first nine months of
1996, a 55.9% increase over the same period in 1995. Earnings per
share, adjusted for the three-for-two common stock split in 1995,
increased from $1.01 to $1.57 in comparing these nine-month periods.
The 1995 results, especially as related to the operations of the
first quarter, were impacted by restructuring charges and losses on
sales of investment securities discussed in more detail in the
"Earnings Review" and in "Business Development matters". Earnings
for the 1996 third quarter amounted to $938,615, which represents a
6.0% increase from the 1995 third quarter and a gain in earnings per
share from $.49 to $.52. Results for both the first nine months and
third quarter of 1996 were negatively affected by a special
legislative assessment for FDIC insurance purposes as further
discussed in the "Earnings Review" and in "Other Operating Expense".
Total assets were $302,656,683 at September 30, 1996, up 10.0%
from September 30, 1995 and 6.7% from December 31, 1995. Loans
amounted to $191,148,360 at September 30, 1996, increasing 6.2% from
September 30, 1995 and 6.2% from December 31, 1995. Total deposits
grew 10.1% from September 30, 1995 and 7.1% from December 31, 1995
to $267,914,205 at September 30, 1996. A significant portion of
asset and deposit growth in 1996 has resulted from a deposit
promotion in the third quarter as discussed in the "Balance Sheet
Review" and in "Deposits".
On December 30, 1993, the Corporation entered into definitive
agreements to acquire two mutual savings banks 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. In 1995, the
agreements expired without the acquisitions having been completed
due to changes in federal and state regulatory policies which
strictly limited the circumstances under which such transactions
would be permitted.
EARNINGS REVIEW
The Corporation's net income increased $1,017,119 or 55.9% in
the first nine months of 1996 compared to the same period of 1995
and increased $53,351 or 6.0% in comparing third quarter periods.
Earnings were negatively affected in the 1995 first quarter by
restructuring charges of $460,457 and losses on sales of investment
securities of $414,596, which were charges taken for the strategic
purposes discussed in "Business Development Matters". Additionally,
certain costs, amounting to $113,833, that had been deferred in
connection with the proposed acquisitions discussed in the
"Overview" were charged to expense in the 1995 first quarter.
Earnings were positively impacted in the first nine months and third
quarter of 1996 by increases in net interest income of $761,043 or
8.9% and $267,423 or 9.2%, respectively.
7
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As discussed in "Other Operating Expense", earnings have been
favorably affected, since the 1995 third quarter, by a significant
reduction in the rate charged for FDIC insurance. Due to the
passage of new legislation on September 30, 1996, however, the Bank
was assessed $74,845 on a one-time basis for its deposits that are
insured through the Savings Association Insurance Fund. This
assessment, which was recorded on September 30, 1996 and is further
discussed in "Other Operating Expense", is part of a broad change
being implemented in connection with deposit insurance. Compared to
the same periods of 1995 and considering the effect of the special
assessment, FDIC insurance expense was $175,419 lower in the first
nine months of 1996 and $62,679 higher in the third quarter.
Return on average assets, affected by the restructuring charges
and losses on sales of investment securities in 1995, improved from
0.92% in the first nine months of 1995 to 1.32% in the first nine
months of 1996. Similarly, return on average shareholders' equity
improved from 9.94% to 13.95% in comparing the same periods. In
comparing third quarter periods, return on average assets declined
from 1.31% in 1995 to 1.30% in 1996 and return on average
shareholders' equity declined from 14.15% to 13.53%.
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 $9,334,255 in the first nine months of
1996 compared to $8,573,212 in the same period of 1995. This
increase of $761,043 or 8.9% resulted primarily from an 8.4%
increase in the level of average earning assets coupled with an
improvement in the net yield on earning assets, or net interest
margin, from 4.85% in the first nine months of 1995 to 4.90% in the
same period of 1996. In comparing third quarter periods, net
interest income increased $267,423 or 9.2%, reflecting a 7.2%
increase in average earning assets while the net interest margin
improved to a greater extent than for the nine-month period in
increasing from 4.84% to 4.97%. Following a period of generally
lower interest rates which had ultimately resulted in a decline in
the net interest margin, interest rates began to increase
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 second half of 1995
and in the first quarter of 1996, have contributed to a general
improvement in the net interest margin. Additionally, there had
been a continuing negative impact on the margin from certain
variable-rate time deposits with rate floors in excess of current
market rates. Such variable-rate time deposits were phased out over
a two-year period that commenced in January 1994. On a taxable
equivalent basis, the increases in net interest income in the first
nine months and third quarter of 1996 were $873,000 and $309,000,
respectively, reflecting changes in the relative mix of taxable and
non-taxable earning assets.
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
8
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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.
Changes in the net interest margin and net interest spread tend
to correlate with movements in the prime rate of interest. There
are variations, however, in the degree and timing of rate changes,
compared to prime, for the different types of earning assets and
interest-bearing liabilities.
The prime rate, which had been 6.00% at December 31, 1993,
moved up significantly in 1994 to close the year at 8.50% and,
after certain changes during 1995, remained at that level at
December 31, 1995. The average prime for those three years amounted
to 6.20%, 7.09% and 8.82%, 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 second half of
the year when, in response to actions taken by the Federal Reserve, it
decreased twice. In the first quarter of 1996 the prime rate
decreased again to 8.25%. The average prime was 8.29% in the first
nine months of 1996 compared to 8.85% in the same period of 1995.
In comparing nine-month periods, the net interest spread increased
by 12 basis points from 4.02% in 1995 to 4.14% in 1996 as the result
of a slight increase in the average total yield on earning assets
coupled with a decrease in the average rate paid on interest-bearing
liabilities, or cost of funds. The yield on earning assets
increased by 1 basis point from 8.38% in 1995 to 8.39% in 1996,
while the cost of funds decreased by 11 basis points in moving from
4.36% to 4.25%. A comparison of third quarter periods indicates a
greater improvement of 21 basis points in the net interest spread,
which increased from 4.00% to 4.21%. Unlike the situation for the
nine months, however, the third quarter comparison saw a decline in
the yield on earning assets, although that decline of 5 basis points
was more than offset by a decrease of 26 basis points in the cost of
funds.
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 positively impacted
in the first nine months and third quarter of 1996 compared to the same
periods in 1995 by decreases in the provision of $45,000 and $20,000,
respectively.
Other Operating Income
Total other operating income, or noninterest income, increased
$538,523 or 43.8% in the first nine months of 1996 compared to the
same period in 1995 due principally to the recognition in the 1995
first quarter of losses on sales of investment securities of
$414,596 (see "Business Development Matters"). In comparing third
quarter periods, noninterest income increased $31,669 or 5.6%. The
1996 increases reflect in part the general increase in the volume
of business. The increase in service charges on deposit accounts in
the first nine months of 1996 resulted primarily from the
implementation of daily charges on overdraft balances in the second
quarter of 1995 and from the introduction in March 1996 of a new NOW
account version that provides a package of products and services for
a stated monthly fee. Credit card income increased due to the
continuing development of the new credit card operation discussed in
"Business Development Matters". The level of other service charges,
commissions and fees is higher due primarily to the implementation
in September 1996 of a fee charged to noncustomers for usage of the
Bank's automated teller machines.
9
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Other Operating Expense
Total other operating expense, or noninterest expense,
decreased $184,145 or 2.7% in the first nine months of 1996 compared
to the same period of 1995 due primarily to the recognition in the
1995 first quarter of restructuring charges of $460,457 (see
"Business Development Matters") and of certain costs charged to
"other expense", amounting to $113,833, that had been deferred in
connection with proposed acquisitions (see "Overview"). In
comparing third quarter periods, noninterest expense increased
$222,142 or 10.7%. The 1996 results, which were generally impacted
by the continuing effects of inflation, were specifically affected
by a one-time FDIC insurance assessment of $74,845 on September 30,
1996. In total, compared to the same periods of 1995, FDIC
insurance expense decreased $175,419 in the first nine months of
1996 and increased $62,679 in the third quarter, reflecting, as
discussed below, both the effect of a major rate reduction in mid-1995
and the one-time assessment related to new legislation enacted
on September 30, 1996.
The levels of certain expenses, including personnel, are being
favorably affected by the comprehensive project undertaken in 1995
for the reengineering of Bank operations (see "Business Development
Matters"). Despite an increase in the volume of business, the
average number of full-time equivalent employees for the first nine
months of 1996 is approximately equal to that for the same period of
1995. As is the situation for other operating expenses, however,
personnel expense is subject to the continuing effects of inflation
through normal salary adjustments and higher costs of fringe
benefits. Personnel expense is also being impacted in 1996 by
changes in the incentive compensation program. Furniture and
equipment expense has increased due to a higher level of
depreciation charges associated primarily with computer equipment
purchases in 1995 (see "Business Development Matters").
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 currently has two separate
insurance funds, which are the Bank Insurance Fund (BIF) and the
Savings Association Insurance Fund (SAIF). As provided by FIDICA,
the insurance assessment rate could be lowered once a fund has
reached a mandated 1.25 percent reserve ratio. Although the SAIF
fund did not reach 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, resulting in only a minimum annual charge
of $2,000 for the majority of 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 commencing in the 1995 third quarter when the
effect of the rate adjustment was initially recorded.
Consequently, FDIC insurance expense for the entire 1995 year and
for the first nine months of 1995 amounted to only $281,894 and
$277,040, respectively, with the expense for the first nine months
of 1996, excluding the effect of the one-time assessment of
$74,845, amounting to $26,776.
The Deposit Insurance Funds Act of 1996 (DIFA) was enacted on
September 30, 1996 and has three main components. The first
includes both a one-time assessment on SAIF deposits to capitalize
the SAIF fund to the mandated 1.25 percent reserve ratio and a
separate refund of all excess SAIF premiums paid for the 1996 fourth
quarter. The second is a requirement that the repayment of the
Financing Corporation (FICO) bonds be shared by both banks and
thrifts. The third is the ultimate elimination of the BIF and SAIF
funds by merging them into a new Deposit Insurance Fund. The
one-time assessment on the Bank's SAIF deposits, which amounted to
$74,845, was determined on the date of enactment and expensed at
that time. Under the provisions of DIFA for the refund of all
excess SAIF premiums, it is expected that all SAIF premiums that the
Bank has paid for the 1996 fourth quarter will be refunded,
effectively eliminating all FDIC insurance expense for that period.
Beginning January 1, 1997, FDIC insurance premiums will be assessed
for FICO
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bond purposes at an estimated rate of $.0644 per $100 for SAIF
deposits and a rate equal to one-fifth of that, or $.0129 per $100,
for BIF deposits. Additional premiums could be assessed in order to
maintain the BIF and SAIF funds at the required 1.25 percent reserve
ratio. Based on the Bank's deposits at September 30, 1996, the
total annual FDIC assessment for FICO bond purposes could amount to
approximately $42,000 in 1997.
Income Taxes
The effective income tax rate increased from 28.8% in the first
nine months of 1995 to 30.5% in the same period of 1996 due
principally to an increase in the ratio of taxable to tax-exempt
income.
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 Parent Company for payment of dividends, debt service
and other operational requirements. Liquidity is immediately
available from four major sources: (a) cash on hand and on deposit
at other banks, (b) the outstanding balance of federal funds sold,
(c) lines for the purchase of federal funds from other banks and (d)
the available-for-sale securities portfolio. 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 four 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 securities 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 $80,384,000 as of September 30, 1996. These
11
<PAGE>
types of deposits historically have not repriced coincidentally
with or in the same proportion as general market indicators.
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, 1996,
the Corporation had a Tier 1 capital ratio of 14.64% and a total
capital ratio of 15.67%.
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, 1996, the
Corporation had a leverage ratio of 9.67%.
BALANCE SHEET REVIEW
Total assets at September 30, 1996 were higher than at
September 30, 1995 and December 31, 1995 by $27,516,000 or 10.0%
and $18,979,000 or 6.7%, respectively; deposits were ahead by
$24,639,000 or 10.1% and $17,770,000 or 7.1%. Due largely to a
deposit promotion as discussed in "Deposits" below, growth was
particularly significant in the 1996 third quarter with assets
increasing $14,915,000 or 5.2% and deposits increasing $13,500,000
or 5.3%. Average assets increased $22,393,000 or 8.5% in the
first nine months of 1996 compared to the same period in 1995,
while average deposits increased $17,691,000 or 7.5%; the third
quarter increases being $18,950,000 or 7.0% and $14,801,000 or
6.2%, 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, 1996, when the growth in total assets
significantly exceeded that for loans, the level of investment
securities was increased $6,878,000 or 9.0%. 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. The
$8,100,000 balance of federal funds sold at September 30, 1996
reflects the temporary investment of a portion of the proceeds of a
deposit promotion (see "Deposits") in the 1996 third quarter.
Loans
The Corporation's primary source of revenue and largest
component of earning assets is the loan portfolio. Loans increased
$11,202,000 or 6.2% during the twelve-month period ended September
30, 1996.
12
<PAGE>
The net loan increase during the first nine months of 1996 was
$11,225,000 or 6.2%. Average loans were $13,239,000 or 7.7% higher
in the first nine months of 1996 than in the same period of 1995.
The ratio of average loans to average deposits, in comparing
nine-month periods, increased from 73.3% in 1995 to 73.4% in 1996.
The ratio of loans to deposits at September 30, 1996 was 71.3%.
Loan growth and the composition of the loan portfolio are being
affected by management's decision in March 1996 to discontinue the
purchase of retail installment loan contracts from automobile and
equipment dealers (see "Business Development Matters"). The
outstanding balance of these loan contracts, which are primarily
included in consumer loans, experienced a net decrease of $9,315,332
during the first nine months of 1996. Consequently, total consumer
loans declined significantly during both that period and the
twelve-month period ended September 30, 1996. Other consumer loan
elements, including credit cards and home equity lines of credit,
have continued to grow. Changes in the credit card operation are
discussed in "Business Development Matters". The commercial loan
portfolio and the residential construction and mortgage loan
portfolio have each experienced strong gains during the last twelve
months and also during the first nine months of 1996.
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. This evaluation is inherently subjective as it requires
material estimates, including the amounts and timing of future cash
flows expected to be received on impaired loans that may be
susceptible to significant change.
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. In
general, broad interest rate declines tend to encourage customers
to consider alternative investments such as mutual funds and tax-deferred
annuity products, while interest rate increases tend to have the
opposite effect.
The Bank's level and mix of deposits has been specifically
affected by the following factors. A promotion that offered
premium-rate certificates of deposit, based on a selected maturity,
has resulted in a significant portion of the $13,088,000 increase in
time deposits during the 1996 third quarter. Certain variable-rate
time deposits with minimum rates in excess of current market rates
were 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
$3,809,000 at September 30, 1996 and $3,216,000 at September 30,
1995. Further, the level of time deposits obtained from
governmental units fluctuates, amounting to $20,673,000,
$17,520,000, $15,248,000 and $17,820,000 at September 30, 1996, June
30, 1996, September 30, 1995 and December 31, 1995, respectively.
13
<PAGE>
BUSINESS DEVELOPMENT MATTERS
As discussed in the "Overview", the Corporation had entered
into definitive agreements to acquire two mutual savings banks. In
1995, the agreements expired without the acquisitions having been
completed due to changes in federal and state regulatory policies
which strictly limited the circumstances under which such
transactions would be permitted.
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 marketing efforts were undertaken in 1995,
primarily to Bank customers. 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
currently plan to resume any major data processing operations,
the level of computer equipment was significantly increased in
1995 through expanded use of personal computer networks.
The new networks allow for a more direct input of basic loan and
deposit account information to the data files maintained by the
service bureau. Capital expenditures in 1995, which totaled
$1,302,230, related primarily to the increase in computer equipment.
Since most of this equipment was not placed into service until late
in 1995, the full effect on annual depreciation expense is being
initially recognized in 1996.
In 1995, as discussed in Note 5 to Consolidated Financial
Statements, management adopted a comprehensive restructuring project
for the purpose of reengineering Bank operations to become more
competitive and cost-effective in developing business and servicing
customers and to improve long-term profitability. In connection
with this project, certain positions within the Bank have either
been realigned or eliminated. Total restructuring charges in 1995
(all recorded in the first quarter), with the expectation that all
significant costs were incurred and paid within that year, amounted
to $460,457, of which $301,116 related to personnel costs and
$159,341 to professional fees. The Bank also decided in March 1995
to recognize losses of $414,596 from the sales of certain investment
securities held in the available-for-sale 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 had a significant adverse impact on 1995 earnings,
management believes these decisions will enhance the long-term value
of the Corporation and strengthen the competitive position of its
community banking operations.
Management decided in March 1996 that the Bank would
discontinue the purchase of retail installment loan contracts from
automobile and equipment dealers, due largely to the declining
yields being experienced in this loan program. Contracts of this
nature included in loans amounted to $33,525,143 at December 31,
1995 and $24,209,811 at September 30, 1996. While there will be no
purchases of new contracts, current plans call for the collection of
outstanding loans based on their contractual terms. It is expected
that the funds previously invested in this loan program will be
redeployed, as loan payments occur, to other loan programs or to the
investment securities portfolio.
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> <C> <C>
1996 1995
NINE MONTHS ENDED SEPTEMBER 30 Average Average
Interest Rates Interest Rates
Average Income/ Earned/ Average Income/ Earned/
Balance Expense Paid Balance Expense Paid
EARNING ASSETS
Loans (2) (3) $ 185,168 $ 12,403 8.92 % $ 171,929 $ 11,589 9.01 %
Investment securities:
Taxable income 70,215 3,685 7.00 64,614 3,241 6.69
Non-taxable income (2) 13,934 889 8.50 10,274 710 9.21
Federal funds sold 812 32 5.20 2,318 102 5.91
Total earning assets 270,129 17,009 8.39 249,135 15,642 8.38
Cash and due from banks 9,130 9,130
Other assets, net 8,096 6,697
TOTAL ASSETS $ 287,355 $ 264,962
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
NOW accounts $ 34,584 505 1.94 $ 32,142 513 2.13
Savings deposits 30,333 577 2.53 29,931 646 2.89
Money market accounts 15,934 325 2.71 16,783 386 3.08
Certificates and other
time deposits 136,038 5,505 5.39 119,831 4,917 5.49
Retail repurchase agreements 3,957 129 4.33 3,004 113 5.04
Federal funds purchased 1,017 42 5.56 310 14 5.79
Total interest-bearing
liabilities 221,863 7,083 4.25 202,001 6,589 4.36
Noninterest-bearing demand
deposits 35,478 35,989
Other liabilities 2,906 2,585
Shareholders' equity 27,108 24,387
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 287,355 $ 264,962
NET INTEREST INCOME AND SPREAD $ 9,926 4.14 % $ 9,053 4.02 %
NET YIELD ON EARNING ASSETS 4.90 % 4.85 %
(1) The mix variance, not separately stated, has been proportionally allocated to the volume and rate
variances based on their absolute dollar amount.
(2) Interest income and yields related to certain investment securities and loans exempt from both
federal and state income tax or from state income tax alone are stated on a fully taxable
equivalent basis, assuming a 34% federal tax rate and applicable state tax rate, reduced by the
nondeductible portion of interest expense.
(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.
</TABLE>
15(a)
<PAGE>
TABLE 1
CONSOLIDATED AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS
(Taxable Equivalent Basis, Dollars in Thousands)
<TABLE>
<S> <C> <C> <C>
NINE MONTHS ENDED SEPTEMBER 30 1996 Versus 1995
Interest Variance
due to (1) Net
Volume Rate Change
EARNING ASSETS
Loans (2) (3) $ 926 $ (112) $ 814
Investment securities:
Taxable income 289 155 444
Non-taxable income (2) 237 (58) 179
Federal funds sold (59) (11) (70)
Total earning assets 1,393 (26) 1,367
Cash and due from banks
Other assets, net
TOTAL ASSETS
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
NOW accounts 39 (47) (8)
Savings deposits 9 (78) (69)
Money market accounts (18) (43) (61)
Certificates and other time
deposits 677 (89) 588
Retail repurchase agreements 33 (17) 16
Federal funds purchased 29 (1) 28
Total interest-bearing
liabilities 769 (275) 494
Noninterest-bearing demand deposits
Other liabilities
Shareholders' equity
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY
NET INTEREST INCOME AND SPREAD $ 624 $ 249 $ 873
NET YIELD ON EARNING ASSETS
(1) The mix variance, not separately stated, has been proportionally allocated
to the volume and rate variances based on their absolute dollar amount.
(2) Interest income and yields related to certain investment securities and
loans exempt from both federal and state income tax or from state income
tax alone are stated on a fully taxable equivalent basis, assuming a 34%
federal tax rate and applicable state tax rate, reduced by the nondeductible
portion of interest expense.
(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.
</TABLE>
15(b)
<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> <C>
1996 1995
THREE MONTHS ENDED SEPTEMBER 30 Average Average
Interest Rates Interest Rates
Average Income/ Earned/ Average Income/ Earned/
Balance Expense Paid Balance Expense Paid
EARNING ASSETS
Loans (2) (3) $ 187,263 $ 4,229 8.98 % $ 176,324 $ 4,014 9.05 %
Investment securities:
Taxable income 68,506 1,185 6.92 64,299 1,115 6.93
Non-taxable income (2) 14,715 307 8.35 10,429 226 8.66
Federal funds sold 1,291 17 5.23 2,414 34 5.72
Total earning assets 271,775 5,738 8.41 253,466 5,389 8.46
Cash and due from banks 9,421 9,372
Other assets, net 8,046 7,454
TOTAL ASSETS $ 289,242 $ 270,292
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
NOW accounts $ 34,653 156 1.79 $ 32,260 175 2.15
Savings deposits 30,159 186 2.44 29,612 207 2.78
Money market accounts 15,655 105 2.65 15,201 116 3.02
Certificates and other
time deposits 138,153 1,861 5.35 126,334 1,787 5.61
Retail repurchase agreements 3,375 37 4.27 2,548 31 4.83
Federal funds purchased 871 12 5.55 23 1 5.57
Total interest-bearing
liabilities 222,866 2,357 4.20 205,978 2,317 4.46
Noninterest-bearing demand deposits 35,862 36,274
Other liabilities 2,765 3,018
Shareholders' equity 27,749 25,022
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 289,242 $ 270,292
NET INTEREST INCOME AND SPREAD $ 3,381 4.21 % $ 3,072 4.00 %
NET YIELD ON EARNING ASSETS 4.97 % 4.84 %
(1) The mix variance, not separately stated, has been proportionally allocated to the volume and rate
variances based on their absolute dollar amount.
(2) Interest income and yields related to certain investment securities and loans exempt from both
federal and state income tax or from state income tax alone are stated on a fully taxable
equivalent basis, assuming a 34% federal tax rate and applicable state tax rate, reduced
by the nondeductible portion of interest expense.
(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.
</TABLE>
16(a)
<PAGE>
TABLE 2
CONSOLIDATED AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS
(Taxable Equivalent Basis, Dollars in Thousands)
<TABLE>
<S> <C> <C> <C>
THREE MONTHS ENDED SEPTEMBER 30 1996 Versus 1995
Interest Variance
due to (1) Net
Volume Rate Change
EARNING ASSETS
Loans (2) (3) $ 246 $ (31) $ 215
Investment securities:
Taxable income 72 (2) 70
Non-taxable income (2) 89 (8) 81
Federal funds sold (14) (3) (17)
Total earning assets 393 (44) 349
Cash and due from banks
Other assets, net
TOTAL ASSETS
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
NOW accounts 12 (31) (19)
Savings deposits 4 (25) (21)
Money market accounts 3 (14) (11)
Certificates and other time deposits 159 (85) 74
Retail repurchase agreements 10 (4) 6
Federal funds purchased 11 - 11
Total interest-bearing
liabilities 199 (159) 40
Noninterest-bearing demand deposits
Other liabilities
Shareholders' equity
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY
NET INTEREST INCOME AND SPREAD $ 194 $ 115 $ 309
NET YIELD ON EARNING ASSETS
(1) The mix variance, not separately stated, has been proportionally allocated to the
volume and rate variances based on their absolute dollar amount.
(2) Interest income and yields related to certain investment securities and loans exempt
from both federal and state income tax or from state income tax alone are stated on
a fully taxable equivalent basis, assuming a 34% federal tax rate and applicable
state tax rate, reduced by the nondeductible portion of interest expense.
(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.
</TABLE>
16(b)
<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, 1996.
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, 1996 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
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 Exhibit 3.20 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.
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.
18
<PAGE>
Exhibit No. Description of Exhibit
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 10.31 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
10.32 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.
10.50 Copy of Employment Agreement dated as of
December 27, 1995 between First National Bank and
Trust Company and Michael C. Miller, incorporated
herein by reference to Exhibit 10.50 to the
Registrant's Form 10-KSB Annual Report for the
fiscal year ended December 31, 1995.
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, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 11,499,468
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 25,204,638
<INVESTMENTS-CARRYING> 58,242,929
<INVESTMENTS-MARKET> 0
<LOANS> 191,148,360
<ALLOWANCE> 1,959,638
<TOTAL-ASSETS> 302,656,863
<DEPOSITS> 267,914,205
<SHORT-TERM> 3,809,475
<LIABILITIES-OTHER> 3,017,509
<LONG-TERM> 0
0
0
<COMMON> 4,507,510
<OTHER-SE> 23,408,164
<TOTAL-LIABILITIES-AND-EQUITY> 302,656,863
<INTEREST-LOAN> 12,366,713
<INTEREST-INVEST> 4,018,700
<INTEREST-OTHER> 31,687
<INTEREST-TOTAL> 16,417,100
<INTEREST-DEPOSIT> 6,911,701
<INTEREST-EXPENSE> 7,082,845
<INTEREST-INCOME-NET> 9,334,255
<LOAN-LOSSES> 305,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 6,713,687
<INCOME-PRETAX> 4,082,809
<INCOME-PRE-EXTRAORDINARY> 4,082,809
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,835,639
<EPS-PRIMARY> 1.57
<EPS-DILUTED> 1.57
<YIELD-ACTUAL> 4.61
<LOANS-NON> 65,000
<LOANS-PAST> 160,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,903,000
<CHARGE-OFFS> 371,000
<RECOVERIES> 122,000
<ALLOWANCE-CLOSE> 1,959,000
<ALLOWANCE-DOMESTIC> 1,716,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 243,000
</TABLE>
