UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 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 1,803,003 shares of $2.50 par value common
stock outstanding at July 19, 1996.
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>
June 30, December 31,
ASSETS 1996 1995 1995
Cash and due from banks $ 10,153,261 $ 11,837,605 $ 8,764,539
Federal funds sold - 1,650,000 2,600,000
Investment securities:
Available for sale,
at estimated fair
value(amortized cost
of $25,260,957,
$18,690,507 and
$28,183,155) 25,053,292 18,800,267 28,375,645
Held to maturity
(estimated fair value
of $57,433,590,
$56,411,187 and
$57,008,236) 58,633,939 55,905,263 56,160,814
Loans 185,605,875 172,196,954 179,922,737
Less: Allowance for
loan losses (1,920,198) (1,837,256) (1,902,640)
Net loans 183,685,677 170,359,698 178,020,097
Premises and equipment 5,918,240 5,667,952 6,029,541
Other assets 4,297,872 3,429,601 3,727,476
TOTAL ASSETS $287,742,281 $ 67,650,386 $283,678,112
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing
demand deposits $ 37,252,713 $ 37,533,696 $ 38,590,985
Interest-bearing
deposits:
NOW, savings
and money market
deposits 81,561,396 77,982,983 78,728,366
Time deposits of
$100,000 or more 37,468,815 27,020,230 36,427,161
Other time deposits 98,131,085 95,464,399 96,397,964
Total deposits 254,414,009 238,001,308 250,144,476
Retail repurchase
agreements 3,099,675 2,322,457 4,641,527
Federal funds purchased 285,000 - -
Other liabilities 2,749,757 2,671,721 2,897,038
TOTAL LIABILITIES 260,548,441 242,995,486 257,683,041
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 -
1,802,778,
1,796,768 and
1,797,995 4,506,945 4,491,920 4,494,988
Surplus 113,055 - 18,705
Retained earnings 22,710,899 20,090,539 21,354,335
Net unrealized
securities gains
(losses) (137,059) 72,441 127,043
TOTAL SHAREHOLDERS'
EQUITY 27,193,840 24,654,900 25,995,071
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $287,742,281 $267,650,386 $283,678,112
See accompanying notes to consolidated financial statements.
</TABLE>
1
<PAGE>
FNB Corp. and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<S> <C> <C>
Six Months Ended
June 30,
1996 1995
INTEREST INCOME:
Interest and fees on loans $ 8,150,262 $ 7,541,044
Interest and dividends on
investment securities:
Taxable income 2,342,727 2,014,322
Non-taxable income 371,801 308,881
Federal funds sold 14,670 67,626
Total interest income 10,879,460 9,931,873
INTEREST EXPENSE:
Deposits 4,603,365 4,176,789
Retail repurchase agreements 92,400 82,158
Federal funds purchased 30,257 13,108
Total interest expense 4,726,022 4,272,055
NET INTEREST INCOME 6,153,438 5,659,818
Provision for loan losses 195,000 220,000
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 5,958,438 5,439,818
OTHER OPERATING INCOME:
Service charges on deposit accounts 722,706 641,819
Annuity and brokerage commissions 80,890 97,853
Credit card income 151,163 119,845
Other service charges,
commissions and fees 146,643 152,255
Losses on sales of investment
securities - (414,596)
Other income 73,241 70,613
Total other operating income 1,174,643 667,789
OTHER OPERATING EXPENSE:
Personnel expense 2,362,966 2,185,547
Net occupancy expense 233,821 230,296
Furniture and equipment expense 330,869 227,274
Data processing services 456,830 427,949
Restructuring charges - 460,457
Other expense 1,023,949 1,283,199
Total other operating expense 4,408,435 4,814,722
INCOME BEFORE INCOME TAXES 2,724,646 1,292,885
Income taxes 827,622 359,629
NET INCOME $ 1,897,024 $ 933,256
PER SHARE DATA:
Net income $ 1.05 $ .52
Cash dividends declared .30 .24
Average number of shares
outstanding 1,800,230 1,799,976
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
June 30,
1996 1995
INTEREST INCOME:
Interest and fees on loans $ 4,106,460 $ 3,843,971
Interest and dividends on
investment securities:
Taxable income 1,133,382 1,015,178
Non-taxable income 193,632 149,448
Federal funds sold 9,487 53,986
Total interest income 5,442,961 5,062,583
INTEREST EXPENSE:
Deposits 2,286,957 2,150,682
Retail repurchase agreements 46,684 42,078
Federal funds purchased 12,139 545
Total interest expense 2,345,780 2,193,305
NET INTEREST INCOME 3,097,181 2,869,278
Provision for loan losses 95,000 125,000
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 3,002,181 2,744,278
OTHER OPERATING INCOME:
Service charges on deposit accounts 374,179 338,218
Annuity and brokerage commissions 36,670 33,937
Credit card income 82,920 67,442
Other service charges,
commissions and fees 61,751 72,437
Losses on sales of investment
securities - -
Other income 33,299 39,097
Total other operating income 588,819 551,131
OTHER OPERATING EXPENSE:
Personnel expense 1,181,771 1,096,921
Net occupancy expense 114,565 111,869
Furniture and equipment expense 166,119 108,032
Data processing services 242,226 219,825
Restructuring charges - -
Other expense 517,712 591,252
Total other operating expense 2,222,393 2,127,899
INCOME BEFORE INCOME TAXES 1,368,607 1,167,510
Income taxes 416,363 367,400
NET INCOME $ 952,244 $ 800,110
PER SHARE DATA:
Net income $ .53 $ .44
Cash dividends declared .15 .12
Average number of shares outstanding 1,801,478 1,799,952
See accompanying notes to consolidated financial statements.
</TABLE>
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FNB Corp. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<S> <C> <C>
Six Months Ended
June 30,
1996 1995
OPERATING ACTIVITIES:
Net income $ 1,897,024 $ 933,256
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization of premises
and equipment 321,594 205,350
Provision for loan losses 195,000 220,000
Deferred income taxes 56,733 (257,759)
Deferred loan fees and
costs, net 126,788 (24,538)
Premium amortization and
discount accretion of
investment securities,
net 11,044 93,995
Amortization of intangibles 21,934 29,558
Losses on sales of investment
securities - 414,596
Net decrease (increase) in
loans held for sale 365,503 (139,600)
Decrease (increase) in
other assets (532,735) 55,865
Increase in other liabilities 1,840 720,448
NET CASH PROVIDED BY
OPERATING ACTIVITIES 2,464,725 2,251,171
INVESTING ACTIVITIES:
Available-for-sale securities:
Proceeds from sales - 5,896,328
Proceeds from maturities 8,112,397 877,492
Purchases (5,234,844) (249,405)
Held-to-maturity securities:
Proceeds from maturities 13,319,961 9,577,838
Purchases (15,755,586) (13,079,417)
Net increase in loans (6,364,041) (3,774,915)
Proceeds from sales of
premises and equipment 9,575 620
Purchases of premises and equipment (323,437) (848,780)
Other, net (19,274) (64,099)
NET CASH USED IN
INVESTING ACTIVITIES (6,255,249) (1,664,338)
FINANCING ACTIVITIES:
Net increase in deposits 4,269,533 8,075,996
Decrease in retail repurchase
agreements (1,541,852) (1,203,769)
Increase (decrease) in federal
funds purchased 285,000 (3,050,000)
Common stock issued 106,307 -
Common stock repurchased - (52,800)
Cash dividends and fractional
shares paid (539,742) (216,768)
NET CASH PROVIDED BY
FINANCING ACTIVITIES 2,579,246 3,552,659
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (1,211,278) 4,139,492
Cash and cash equivalents at
beginning of period 11,364,539 9,348,113
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 10,153,261 $ 13,487,605
Supplemental disclosure of
cash flow information:
Cash paid during the period for:
Interest $ 4,526,180 $ 3,800,489
Income taxes 866,058 589,647
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
$212,026 and $133,400 at June 30, 1996 and December 31,
1995, respectively, and are reduced by net unearned income
of $318,081 at June 30, 1995.
4. Significant components of other expense were as follows:
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
FDIC insurance $ 9,662 $127,974 $ 17,850 $255,948
Stationery,
printing and
supplies 58,958 63,271 133,935 135,380
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
<PAGE>
A summary of the restructuring charges, all of which were
incurred or accrued during the three months ended March 31,
1995, is as follows:
<TABLE>
<S> <C>
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
</TABLE>
6. All per share data has been retroactively adjusted to
reflect the three-for-two common stock spliteffected 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
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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 $1,897,024 in the first six months of
1996, a 103.3% increase over the same period in 1995. Earnings
per share, adjusted for the three-for-two common stock split in
1995, increased from $.52 to $1.05 in comparing these six-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 second quarter amounted to
$952,244, which represents a 19.0% increase from the 1995 second
quarter and a gain in earnings per share from $.44 to $.53.
Total assets were $287,742,281 at June 30, 1996, up 7.5%
from June 30, 1995 and 1.4% from December 31, 1995. Loans
amounted to $185,605,875 at June 30, 1996, increasing 7.8% from
June 30, 1995 and 3.2% from December 31, 1995. Total deposits
grew 6.9% from June 30, 1995 and 1.7% from December 31, 1995 to
$254,414,009 at June 30, 1996.
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 $963,768 or 103.3% in
the first six months of 1996 compared to the same period of 1995
and increased $152,134 or 19.0% in comparing second 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 six months and second quarter of 1996 by increases in
net interest income of $493,620 or 8.7% and $227,903 or 7.9%,
respectively.
As discussed in "Other Operating Expense", earnings are
being favorably affected, since the 1995 third quarter, by a
significant reduction in the rate charged for FDIC insurance.
Compared to the same periods of 1995, FDIC insurance expense was
$238,098 lower in the first six months of 1996 and $118,312 lower
in the second quarter.
7
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Return on average assets, affected by the restructuring
charges and losses on sales of investment securities in 1995,
improved from 0.71% in the first six months of 1995 to 1.32% in
the first six months of 1996. Similarly, return on average
shareholders' equity improved from 7.76% to 14.17% in comparing
the same periods. In comparing second quarter periods, return on
average assets improved from 1.21% in 1995 to 1.32% in 1996 and
return on average shareholders' equity improved from 13.15% to
14.07%.
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 $6,153,438 in the first six months
of 1996 compared to $5,659,818 in the same period of 1995. This
increase of $493,620 or 8.7% resulted primarily from a 9.1%
increase in the level of average earning assets coupled with a
slight improvement in the net yield on earning assets, or net
interest margin, from 4.85% in the first six months of 1995 to
4.86% in the same period of 1996. In comparing second quarter
periods, net interest income increased $227,903 or 7.9%,
reflecting an 8.9% increase in average earning assets while the
net interest margin was unchanged at 4.87%. 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
resulted in an 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 six months and second quarter of
1996 were $564,000 and $270,000, 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 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.
8
<PAGE>
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 8.31% in the
first six months of 1996 compared to 8.89% in the same period of
1995. In comparing six-month periods, the net interest spread
increased by 7 basis points from 4.03% in 1995 to 4.10% in 1996
as the result of an 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 4 basis points from 8.34% in 1995 to
8.38% in 1996, while the cost of funds decreased by 3 basis
points in moving from 4.31% to 4.28%. A comparison of second
quarter periods indicates a slightly greater improvement of 8
basis points in the net interest spread, which increased from
4.03% to 4.11%. Unlike the situation for the six months,
however, the second quarter comparison saw a decline in the yield
on earning assets, although that decline of 6 basis points was
more than offset by a decrease of 14 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 six months and
second quarter of 1996 compared to the same periods in 1995 by
decreases in the provision of $25,000 and $30,000, respectively.
Other Operating Income
Total other operating income, or noninterest income,
increased $506,854 or 75.9% in the first six 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 second quarter periods, noninterest
income increased $37,688 or 6.8%. The 1996 increases reflect in
part the general increase in the volume of business. The
increase in service charges on deposit accounts resulted
primarily from increases in the fees collected on returned checks
and overdraft items and in the daily charges collected on
overdraft balances, the latter service charge being initially
implemented in the 1995 second quarter. Annuity and brokerage
commissions declined in the first six months of 1996 because of a
reduction in sales of tax-deferred annuity products. Credit card
income increased due to the continuing development of the new
credit card operation discussed in "Business Development
Matters".
Other Operating Expense
Total other operating expense, or noninterest expense,
decreased $406,287 or 8.4% in the first six 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
9
<PAGE>
"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 $94,494 or 4.4%. The 1996 results were
generally impacted by the continuing effects of inflation.
FDIC insurance expense decreased $238,098 or 93.0% in the
first six months of 1996 and $118,312 or 92.5% in the second
quarter, reflecting the effect of a rate reduction as discussed
below. 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"). There has been a decrease in the number
of full-time equivalent employees. 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, 1995 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 there is 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
amounted to only $281,894 with the expense for the first six
months of 1996 amounting to $17,850.
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 at the rate of 85 to 90 basis points on their
SAIF deposits. The Bank's maximum, one-time assessment for its
SAIF deposits at June 30, 1996, under the proposed legislation as
described, would be $140,000.
Income Taxes
The effective income tax rate increased from 27.8% in the
first six months of 1995 to 30.4% 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
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<PAGE>
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 $81,561,000 as of June 30, 1996.
These 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 June 30,
1996, the Corporation had a Tier 1 capital ratio of 14.34% and a
total capital ratio of 15.35%.
11
<PAGE>
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 six
months, 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 June 30, 1996, the Corporation had a leverage
ratio of 9.48%.
BALANCE SHEET REVIEW
Total assets at June 30, 1996 were higher than at June 30,
1995 and December 31, 1995 by $20,092,000 or 7.5% and $4,064,000
or 1.4%, respectively; deposits were ahead by $16,413,000 or 6.9%
and $4,270,000 or 1.7%. Average assets increased $24,148,000 or
9.2% in the first six months of 1996 compared to the same period
in 1995, while average deposits increased $19,166,000 or 8.3%;
the second quarter increases being $23,847,000 or 9.0% and
$18,834,000 or 8.0%, 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 June 30, 1996, when the growth in total assets
significantly exceeded that for loans, the level of investment
securities was increased $8,981,000 or 12.0%. In the shorter
period of the first six months of 1996, however, when the growth
in loans exceeded that for total assets, there was a net decrease
in investment securities of $849,000 or 1.0%. 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.
Based on funds requirements, the Bank was a net purchaser of
federal funds at June 30, 1996.
Loans
The Corporation's primary source of revenue and largest
component of earning assets is the loan portfolio. Loans
increased $13,409,000 or 7.8% during the twelve-month period
ended June 30, 1996. The net loan increase during the first six
months of 1996 was $5,683,000 or 3.2%. Average loans were
$14,414,000 or 8.5% higher in the first six months of 1996 than
in the same period of 1995. The ratio of average loans to
average deposits, in comparing six-month periods, increased from
73.1% in 1995 to 73.3% in 1996. The ratio of loans to deposits
at June 30, 1996 was 73.0%.
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 $5,012,626 during the first six months of 1996.
Consequently, total consumer loans declined significantly during
that time and to a lesser extent during the twelve-month period
ended June 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 accounted for more than half
of total loan growth during the twelve-month period ended June
30, 1996, with a very strong gain also being recorded by the
residential construction and mortgage loan portfolio. During the
shorter period of the first six months of 1996, however, the
situation was reversed with the residential construction and
mortgage loan portfolio being responsible for more than half of
total loan growth.
12
<PAGE>
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. 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
$3,100,000 at June 30, 1996 and $2,322,000 at June 30, 1995.
Further, the level of time deposits obtained from governmental
units fluctuates, amounting to $17,520,000, $11,190,000 and
$17,820,000 at June 30, 1996, June 30, 1995 and December 31,
1995, respectively.
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
13
<PAGE>
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 first occurs 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 $28,512,517 at June 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>
1996
SIX MONTHS ENDED JUNE 30 Average
Interest Rates
Average Income/ Earned/
Balance Expense Paid
EARNING ASSETS
Loans (2) (3) $ 184,109 $ 8,174 8.90%
Investment securities:
Taxable income 71,079 2,500 7.04
Non-taxable income (2) 13,539 582 8.59
Federal funds sold 570 15 5.16
Total earning assets 269,297 11,271 8.38
Cash and due from banks 8,983
Other assets, net 8,121
TOTAL ASSETS $ 286,401
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
NOW accounts $ 34,549 349 2.02
Savings deposits 30,421 391 2.58
Money market accounts 16,075 220 2.75
Certificates and other time
deposits 134,969 3,644 5.41
Retail repurchase agreements 4,251 92 4.36
Federal funds purchased 1,091 30 5.56
Total interest-bearing
liabilities 221,356 4,726 4.28
Noninterest-bearing demand deposits 35,284
Other liabilities 2,977
Shareholders' equity 26,784
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 286,401
NET INTEREST INCOME AND SPREAD $ 6,545 4.10%
NET YIELD ON EARNING ASSETS 4.86%
(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 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.
15A
</TABLE>
<PAGE>
TABLE 1
CONSOLIDATED AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS
(Taxable Equivalent Basis, Dollars in Thousands)
<TABLE>
<S> <C> <C> <C>
1995
SIX MONTHS ENDED JUNE 30 Average
Interest Rates
Average Income/ Earned/
Balance Expense Paid
EARNING ASSETS
Loans (2) (3) $ 169,695 $ 7,575 8.98%
Investment securities:
Taxable income 64,774 2,126 6.57
Non-taxable income (2) 10,195 484 9.50
Federal funds sold 2,269 68 6.01
Total earning assets 246,933 10,253 8.34
Cash and due from banks 9,007
Other assets, net 6,313
TOTAL ASSETS $ 262,253
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
NOW accounts $ 32,082 338 2.12
Savings deposits 30,093 439 2.94
Money market accounts 17,587 270 3.10
Certificates and other
time deposits 116,526 3,130 5.42
Retail repurchase agreements 3,236 82 5.12
Federal funds purchased 456 13 5.80
Total interest-bearing
liabilities 199,980 4,272 4.31
Noninterest-bearing demand deposits 35,844
Other liabilities 2,365
Shareholders' equity 24,064
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 262,253
NET INTEREST INCOME AND SPREAD $ 5,981 4.03%
NET YIELD ON EARNING ASSETS 4.85%
(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 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.
15B
</TABLE>
<PAGE>
TABLE 1
CONSOLIDATED AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS
(Taxable Equivalent Basis, Dollars in Thousands)
<TABLE>
<S> <C> <C> <C>
SIX MONTHS ENDED JUNE 30 1996 Versus 1995
Interest Variance
due to (1) Net
Volume Rate Change
EARNING ASSETS
Loans (2) (3) $ 665 $ (66) $ 599
Investment securities:
Taxable income 216 158 374
Non-taxable income (2) 147 (49) 98
Federal funds sold (44) (9) (53)
Total earning assets 984 34 1,018
Cash and due from banks
Other assets, net
TOTAL ASSETS
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
NOW accounts 27 (16) 11
Savings deposits 5 (53) (48)
Money market accounts (22) (28) (50)
Certificates and other
time deposits 520 (6) 514
Retail repurchase agreements 23 (13) 10
Federal funds purchased 18 (1) 17
Total interest-bearing
liabilities 571 (117) 454
Noninterest-bearing demand deposits
Other liabilities
Shareholders' equity
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY
NET INTEREST INCOME AND SPREAD $ 413 $ 151 $ 564
NET YIELD ON EARNING ASSETS
(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 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>
15C
<PAGE>
TABLE 2
CONSOLIDATED AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS
(Taxable Equivalent Basis, Dollars in Thousands)
<TABLE>
<S> <C> <C> <C>
1996
THREE MONTHS ENDED JUNE 30 Average
Interest Rates
Average Income/ Earned/
Balance Expense Paid
EARNING ASSETS
Loans (2) (3) $ 185,509 $ 4,118 8.90%
Investment securities:
Taxable income 69,963 1,210 6.92
Non-taxable income (2) 14,386 303 8.41
Federal funds sold 731 10 5.21
Total earning assets 270,589 5,641 8.35
Cash and due from banks 9,387
Other assets, net 8,090
TOTAL ASSETS $ 288,066
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
NOW accounts $ 34,737 172 1.98
Savings deposits 30,704 194 2.54
Money market accounts 16,012 108 2.70
Certificates and other
time deposits 135,288 1,814 5.38
Retail repurchase agreements 4,224 46 4.43
Federal funds purchased 880 12 5.53
Total interest-bearing
liabilities 221,845 2,346 4.24
Noninterest-bearing demand deposits 36,101
Other liabilities 3,053
Shareholders' equity 27,067
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 288,066
NET INTEREST INCOME AND SPREAD $ 3,295 4.11%
NET YIELD ON EARNING ASSETS 4.87%
(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 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>
16A
<PAGE>
TABLE 2
CONSOLIDATED AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS
(Taxable Equivalent Basis, Dollars in Thousands)
<TABLE>
<S> <C> <C> <C>
1995
THREE MONTHS ENDED JUNE 30 Average
Interest Rates
Average Income/ Earned/
Balance Expense Paid
EARNING ASSETS
Loans (2) (3) $ 170,750 $ 3,857 9.05%
Investment securities:
Taxable income 63,968 1,074 6.72
Non-taxable income (2) 10,111 233 9.23
Federal funds sold 3,653 54 5.93
Total earning assets 248,482 5,218 8.41
Cash and due from banks 9,206
Other assets, net 6,531
TOTAL ASSETS $ 264,219
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
NOW accounts $ 32,799 172 2.10
Savings deposits 29,950 222 2.97
Money market accounts 16,115 126 3.15
Certificates and other
time deposits 118,855 1,631 5.50
Retail repurchase agreements 3,255 42 5.19
Federal funds purchased 44 - 4.97
Total interest-bearing
liabilities 201,018 2,193 4.38
Noninterest-bearing demand
deposits 36,289
Other liabilities 2,575
Shareholders' equity 24,337
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 264,219
NET INTEREST INCOME AND SPREAD $ 3,025 4.03%
NET YIELD ON EARNING ASSETS 4.87%
(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 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>
16B
<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 JUNE 30 1996 Versus 1995
Interest Variance
due to (1) Net
Volume Rate Change
EARNING ASSETS
Loans (2) (3) $ 326 $ (65) $ 261
Investment securities:
Taxable income 103 33 136
Non-taxable income (2) 92 (22) 70
Federal funds sold (38) (6) (44)
Total earning assets 483 (60) 423
Cash and due from banks
Other assets, net
TOTAL ASSETS
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
NOW accounts 10 (10) -
Savings deposits 6 (34) (28)
Money market accounts (1) (17) (18)
Certificates and other
time deposits 220 (37) 183
Retail repurchase agreements 11 (7) 4
Federal funds purchased 12 - 12
Total interest-bearing
liabilities 258 (105) 153
Noninterest-bearing demand deposits
Other liabilities
Shareholders' equity
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY
NET INTEREST INCOME AND SPREAD $ 225 $ 45 $ 270
NET YIELD ON EARNING ASSETS
(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 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>
16C
<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 June 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: August 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 JUNE 30, 1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 10,153,261
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 25,053,292
<INVESTMENTS-CARRYING> 58,633,939
<INVESTMENTS-MARKET> 0
<LOANS> 185,605,875
<ALLOWANCE> 1,920,198
<TOTAL-ASSETS> 287,742,281
<DEPOSITS> 254,414,009
<SHORT-TERM> 3,384,675
<LIABILITIES-OTHER> 2,749,757
<LONG-TERM> 0
0
0
<COMMON> 4,506,945
<OTHER-SE> 22,686,895
<TOTAL-LIABILITIES-AND-EQUITY> 287,742,281
<INTEREST-LOAN> 8,150,262
<INTEREST-INVEST> 2,714,528
<INTEREST-OTHER> 14,670
<INTEREST-TOTAL> 10,879,460
<INTEREST-DEPOSIT> 4,603,365
<INTEREST-EXPENSE> 4,726,022
<INTEREST-INCOME-NET> 6,153,438
<LOAN-LOSSES> 195,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,408,435
<INCOME-PRETAX> 2,724,646
<INCOME-PRE-EXTRAORDINARY> 2,724,646
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,897,024
<EPS-PRIMARY> 1.05
<EPS-DILUTED> 1.05
<YIELD-ACTUAL> 4.57
<LOANS-NON> 26,000
<LOANS-PAST> 152,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,903,000
<CHARGE-OFFS> 258,000
<RECOVERIES> 80,000
<ALLOWANCE-CLOSE> 1,920,000
<ALLOWANCE-DOMESTIC> 1,677,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 243,000
</TABLE>
