UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 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)
(910) 626-8300
(Registrant's telephone number, including area code)
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 1,812,275 shares of $2.50 par value common stock outstanding
at July 19, 1997.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FNB Corp. and Subsidiary
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
--------------------------------------
ASSETS 1997 1996 1996
---------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Cash and due from banks $ 11,065,084 $ 10,153,261 $ 13,052,150
Federal funds sold - - -
Investment securities:
Available for sale, at estimated fair value
(amortized cost of $30,794,985,
$25,260,957 and $28,875,531) 30,776,055 25,053,292 28,928,543
Held to maturity (estimated fair value of
$58,383,363, $57,433,590 and $61,274,858) 58,548,941 58,633,939 61,387,196
Loans 204,128,158 185,605,875 195,272,683
Less: Allowance for loan losses (2,091,206) (1,920,198) (1,985,581)
---------------- ----------------- ----------------
Net loans 202,036,952 183,685,677 193,287,102
---------------- ----------------- ----------------
Premises and equipment 6,203,051 5,918,240 6,290,471
Other assets 4,298,374 4,297,872 4,189,015
---------------- ----------------- ----------------
TOTAL ASSETS $ 312,928,457 $ 287,742,281 $ 307,134,477
=============== ================== ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand deposits $ 39,162,055 $ 37,252,713 $ 38,805,364
Interest-bearing deposits:
NOW, savings and money market deposits 87,515,163 81,561,396 82,576,792
Time deposits of $100,000 or more 43,765,858 37,468,815 48,944,981
Other time deposits 101,928,634 98,131,085 101,052,928
---------------- ----------------- ----------------
Total deposits 272,371,710 254,414,009 271,380,065
Retail repurchase agreements 6,029,662 3,099,675 3,724,929
Federal funds purchased 900,000 285,000 575,000
Other liabilities 3,326,509 2,749,757 2,687,241
---------------- ----------------- ----------------
TOTAL LIABILITIES 282,627,881 260,548,441 278,367,235
---------------- ----------------- ----------------
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 - 1,812,275, 1,802,778 and 1,806,994 4,530,688 4,506,945 4,517,485
Surplus 340,659 113,055 213,510
Retained earnings 25,441,722 22,710,899 24,001,259
Net unrealized securities gains (losses) (12,493) (137,059) 34,988
---------------- ----------------- ----------------
TOTAL SHAREHOLDERS' EQUITY 30,300,576 27,193,840 28,767,242
---------------- ----------------- ----------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 312,928,457 $ 287,742,281 $ 307,134,477
=============== =============== ================
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
FNB Corp. and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------
1997 1996
------------ --------
<S> <C> <C>
-
INTEREST INCOME:
Interest and fees on loans $ 8,997,462 $ 8,150,262
Interest and dividends on investment securities:
Taxable income 2,375,958 2,342,727
Non-taxable income 452,915 371,801
Federal funds sold 63,795 14,670
----------- -----------
Total interest income 11,890,130 10,879,460
----------- -----------
INTEREST EXPENSE:
Deposits 5,014,088 4,603,365
Retail repurchase agreements 112,922 92,400
Federal funds purchased 8,815 30,257
----------- -----------
Total interest expense 5,135,825 4,726,022
----------- -----------
NET INTEREST INCOME 6,754,305 6,153,438
Provision for loan losses 240,000 195,000
----------- -----------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 6,514,305 5,958,438
----------- -----------
OTHER OPERATING INCOME:
Service charges on deposit accounts 727,724 722,706
Annuity and brokerage commissions 164,225 80,890
Cardholder and merchant services income 181,613 151,163
Other service charges, commissions and fees 210,103 146,643
Other income 89,741 73,241
----------- -----------
Total other operating income 1,373,406 1,174,643
----------- -----------
OTHER OPERATING EXPENSE:
Personnel expense 2,565,184 2,362,966
Net occupancy expense 289,755 233,821
Furniture and equipment expense 386,497 330,869
Data processing services 550,167 456,830
Other expense 1,093,793 1,023,949
----------- -----------
Total other operating expense 4,885,396 4,408,435
----------- -----------
INCOME BEFORE INCOME TAXES 3,002,315 2,724,646
Income taxes 909,644 827,622
----------- -----------
NET INCOME $ 2,092,671 $ 1,897,024
=========== ===========
PER SHARE DATA:
Net income $ 1.16 $ 1.05
Cash dividends declared .36 .30
Weighted average number of shares outstanding 1,810,055 1,800,230
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
FNB Corp. and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
June 30,
---------------------
1997 996
--------- -----------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $4,569,390 $4,106,460
Interest and dividends on investment securities:
Taxable income 1,167,503 1,133,382
Non-taxable income 224,924 193,632
Federal funds sold 35,644 9,487
---------- ----------
Total interest income 5,997,461 5,442,961
---------- ----------
INTEREST EXPENSE:
Deposits 2,504,155 2,286,957
Retail repurchase agreements 68,617 46,684
Federal funds purchased 4,207 12,139
---------- ----------
Total interest expense 2,576,979 2,345,780
---------- ----------
NET INTEREST INCOME 3,420,482 3,097,181
Provision for loan losses 115,000 95,000
---------- ----------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 3,305,482 3,002,181
---------- ----------
OTHER OPERATING INCOME:
Service charges on deposit accounts 381,815 374,179
Annuity and brokerage commissions 72,998 36,670
Cardholder and merchant services income 95,223 82,920
Other service charges, commissions and fees 107,655 61,751
Other income 51,826 33,299
---------- ----------
Total other operating income 709,517 588,819
---------- ----------
OTHER OPERATING EXPENSE:
Personnel expense 1,308,818 1,181,771
Net occupancy expense 141,287 114,565
Furniture and equipment expense 191,533 166,119
Data processing services 275,502 242,226
Other expense 568,550 517,712
---------- ----------
Total other operating expense 2,485,690 2,222,393
---------- ----------
INCOME BEFORE INCOME TAXES 1,529,309 1,368,607
Income taxes 469,388 416,363
---------- ----------
NET INCOME $1,059,921 $ 952,244
========== ==========
PER SHARE DATA:
Net income $ .59 $ .53
Cash dividends declared .18 .15
Weighted average number of shares outstanding 1,811,320 1,801,478
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
FNB Corp. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------------
1997 1996
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 2,092,671 $ 1,897,024
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of premises and equipment 370,548 321,594
Provision for loan losses 240,000 195,000
Deferred income taxes (benefit) (53,522) 56,733
Deferred loan fees and costs, net 242,004 126,788
Premium amortization and discount accretion
of investment securities, net (21,125) 11,044
Amortization of intangibles 16,166 21,934
Net decrease (increase) in loans held for sale (318,600) 365,503
Increase in other assets (84,529) (532,735)
Increase in other liabilities 691,346 1,840
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,174,959 2,464,725
------------ ------------
INVESTING ACTIVITES:
Available-for-sale securities:
Proceeds from maturities 11,904,437 8,112,397
Purchases (13,812,126) (5,234,844)
Held-to-maturity securities:
Proceeds from maturities 3,375,594 13,319,961
Purchases (527,224) (15,755,586)
Net increase in loans (8,919,595) (6,364,041)
Proceeds from sales of premises and equipment 1,181 9,575
Purchases of premises and equipment (283,128) (323,437)
Other, net 42,573 (19,274)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (8,218,288) (6,255,249)
------------ ------------
FINANCING ACTIVITIES:
Net increase in deposits 991,645 4,269,533
Increase (decrease) in retail repurchase agreements 2,304,733 (1,541,852)
Increase in federal funds purchased 325,000 285,000
Common stock issued 140,352 106,307
Cash dividends paid (705,467) (539,742)
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 3,056,263 2,579,246
------------ ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,987,066) (1,211,278)
Cash and cash equivalents at beginning of period 13,052,150 11,364,539
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 11,065,084 $ 10,153,261
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 5,205,171 $ 4,526,180
Income taxes 836,765 866,058
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
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 periods. 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. On June 3, 1997, the Corporation entered into a definitive
agreement to acquire Home Savings Bank of Siler City, Inc., SSB
("Home Savings") of Siler City, North Carolina. Under terms of
the agreement, Home Savings will be merged into the Bank. The
acquisition will be accounted for as a purchase transaction and
is subject to several conditions, including the affirmative vote
of at least two-thirds of Home Savings' shareholders and approval
from applicable regulatory agencies. Completion of the
transaction is expected in the first quarter of 1998. At June 30,
1997, Home Savings operated one office and had approximately
$55,456,000 in total assets, $44,401,000 in deposits and
$9,711,000 in stockholders' equity.
To effect the acquisition, FNB Corp. intends to issue common stock and
to pay cash to shareholders of Home Savings in an amount equal to
$15.50 per share of the common stock of Home Savings. Home Savings
shareholders will be able to elect stock or cash or a combination
thereof, subject to the limitation that FNB Corp. common stock issued
in the merger will be no more than 60% and not less than 50% of the
total consideration.
Concurrently with the excution of the agreement, FNB Corp. received an
option to purchase 19.9% of Home Savings' common stock. The option is
exercisable only under certain specified conditions.
4. Loans as presented are reduced by net unearned income of $163,691 at
June 30, 1997 and are increased by net deferred expense of $212,026 and
$37,998 at June 30, 1996 and December 31, 1996, respectively.
5
<PAGE>
5. Significant components of other expense were as follows:
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
Stationery, printing and supplies $70,559 $58,958 $163,145 $133,935
6. 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 of Financial Condition and
Results of Operations
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 $2,092,671 in the first six months of 1997, a
10.3% increase over the same period in 1996. Earnings per share increased from
$1.05 to $1.16 in comparing these six-month periods. For the 1997 second
quarter, earnings amounted to $1,059,921, which represents a 11.3% increase from
the 1996 second quarter and a gain in earnings per share from $.53 to $.59.
Total assets were $312,928,457 at June 30, 1997, up 8.8% from June 30, 1996 and
1.9% from December 31, 1996. Loans amounted to $204,128,158 at June 30, 1997,
increasing 10.0% from June 30, 1996 and 4.5% from December 31, 1996. Total
deposits grew 7.1% from June 30, 1996 and 0.4% from December 31, 1996 to
$272,371,710 at June 30, 1997.
On June 3, 1997, the Corporation entered into a definitive agreement to
acquire Home Savings Bank of Siler City, Inc., SSB ("Home Savings") of Siler
City, North Carolina. Under terms of the agreement, Home Savings will be merged
into the Bank. The acquisition will be accounted for as a purchase transaction
and is subject to several conditions, including the affirmative vote of at least
two-thirds of Home Savings' shareholders and approval from applicable regulatory
agencies. Completion of the transaction is expected in the first quarter of
1998. At June 30, 1997, Home Savings operated one office and had approximately
$55,456,000 in total assets, $44,401,000 in deposits and $9,711,000 in
stockholders' equity.
To effect the acquisition, FNB Corp. intends to issue common stock and
to pay cash to shareholders of Home Savings in an amount equal to $15.50 per
share of the common stock of Home Savings. Home Savings shareholders will be
able to elect stock or cash or a combination thereof, subject to the limitation
that FNB Corp. common stock issued in the merger will be no more than 60% and
not less than 50% of the total consideration.
Concurrently with the excution of the agreement, FNB Corp. received an
option to purchase 19.9% of Home Savings' common stock. The option is
exercisable only under certain specified conditions.
EARNINGS REVIEW
The Corporation's net income increased $195,647 or 10.3% in the first
six months of 1997 compared to the same period of 1996 and increased $107,677 or
11.3% in comparing second quarter periods. Earnings were positively impacted in
the first six months and second quarter of 1997 by increases in net interest
income of $600,867 or 9.8% and $323,301 or 10.1%, respectively, and by increases
of $198,763 and $120,698 in total other operating income. These gains were
significantly offset, however, by increases in total other operating expense of
$476,961 in the first six months of 1997 and $263,297 in the 1997 second quarter
and by increases in the provision for loan losses amounting to $45,000 and
$20,000, respectively.
7
<PAGE>
Return on average assets improved from 1.32% in the first six months of
1996 to 1.35% in the first six months of 1997. Return on average shareholders'
equity decreased slightly from 14.17% to 14.12% in comparing the same periods.
In comparing second quarter periods, return on average assets improved from
1.32% to 1.37% and return on average shareholders' equity improved from 14.07%
to 14.14%.
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 $6,754,305 in the first six months of 1997
compared to $6,153,438 in the same period of 1996. This increase of $600,867 or
9.8% resulted primarily from a 8.2% increase in the level of average earning
assets coupled with an improvement in the net yield on earning assets, or net
interest margin, from 4.86% in the first six months of 1996 to 4.95% in the same
period of 1997. In comparing second quarter periods, net interest income
increased $323,301 or 10.1%, reflecting a 8.0% increase in average earning
assets and an improvement in the net interest margin from 4.87% to 4.98%. On a
taxable equivalent basis, the increases in net interest income in the first six
months and second quarter of 1997 were $651,000 and $341,000, 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.
The prime rate of interest has moved to generally higher levels in
recent years, due primarily to actions taken by the Federal Reserve to combat
potential increases in inflation. After averaging 6.00% in 1993, the prime rate
has subsequently averaged 7.09%, 8.82% and 8.28% in 1994, 1995 and 1996,
respectively. The prime rate reached a level of 9.00% in the first quarter of
1995, and then, following actions by the Federal Reserve to lower interest
rates, it decreased over time to a level of 8.25% in the first quarter of 1996.
In the first quarter of 1997, the Federal Reserve elected to tighten rates, and
the prime rate increased to 8.50%. The average prime rate was 8.38% in the first
six months of 1997 compared to 8.31% in the same period of 1996. In comparing
six-month periods, the net interest spread increased by 8 basis points from
4.10% in 1996 to 4.18% in 1997, reflecting an increase in the average total
yield on earning assets that was
8
<PAGE>
only partially offset by an increase in the average rate paid on
interest-bearing liabilities, or cost of funds. The yield on earning assets
increased by 12 basis points from 8.38% in 1996 to 8.50% in 1997, while the cost
of funds increased by 4 basis points from 4.28% to 4.32%. A comparison of second
quarter periods indicates a slightly greater improvement of 9 basis points in
the net interest spread from 4.11% to 4.20%, with the yield on earning assets
increasing 17 basis points compared to 8 basis points for 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
negatively impacted in the first six months and second quarter of 1997 compared
to the same periods in 1996 by increases in the provision of $45,000 and
$20,000, respectively.
Other Operating Income
Total other operating income, or noninterest income, for the first six
months and second quarter of 1997 increased $198,763 or 16.9% and $120,698 or
20.5%, respectively, compared to the same periods in 1996, reflecting in part
the general increase in the volume of business. The gain in annuity and
brokerage commissions resulted principally from increased brokerage commissions.
Cardholder and merchant services 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 the 1996 third quarter of a fee charged to
noncustomers for usage of the Bank's automated teller machines.
Other Operating Expense
Total other operating expense, or noninterest expense, was $476,961 or
10.8% higher in the first six months of 1997 compared to the same period in 1996
and for the second quarter was $263,297 or 11.8% higher, due largely to costs
associated with changes in operations, increased personnel expense and the
continuing effects of inflation. Personnel expense was impacted by increased
staffing requirements, normal salary adjustments and higher costs of fringe
benefits. Net occupancy expense was affected by increased maintenance charges.
The expanded use of personal computer networks has contributed to higher levels
of equipment costs and data processing services.
FDIC insurance expense has been significantly affected in recent years
by major legislation, including the Federal Deposit Insurance Corporation
Improvement Act (FDICIA) enacted in 1989. 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 had reached a mandated 1.25 percent
reserve ratio. While 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.
9
<PAGE>
The Deposit Insurance Funds Act of 1996 (DIFA) was enacted on September
30, 1996 and has three main components. The first component included a one-time
assessment on SAIF deposits to capitalize the SAIF fund to the mandated 1.25
percent reserve ratio. The second component is a requirement that the repayment
of the Financing Corporation (FICO) bonds be shared by both banks and thrifts.
The third component 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. Effective January 1, 1997, FDIC insurance
premiums are being assessed for FICO bond purposes at an approximate rate of
$.065 per $100 for SAIF deposits and at a rate equal to one-fifth of that 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. FDIC insurance
expense for the first six months of 1997 and 1996 amounted to $20,406 and
$17,850, respectively, and was included in "other expense".
Income Taxes
The effective income tax rate of 30.3% in the first six months of 1997
did not significantly change from the 30.4% rate in the same period of 1996.
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 five 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, (d) the line of credit
established at the Federal Home Loan Bank and (e) 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 five 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.
Consistent 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.
10
<PAGE>
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 is a portion of the NOW, savings and money market deposits. These
types of deposits historically have not repriced coincidentally with or in the
same proportion as general market indicators.
As a specific asset/liability management tool, the Bank, at June 30,
1997, had entered into interest rate floor agreements with a correspondent bank
to protect certain variable-rate loans from the downward effects of their
repricing in the event of a decreasing rate environment. The total notional
amount of the agreements is $20,000,000. The agreements require the
correspondent bank to pay to the Bank the difference between the specified floor
rate of interest in each agreement and the prime rate of interest in the event
that the prime rate is less. Any payments received under the agreements, net of
premium amortization, will be treated as an adjustment of interest income on
loans.
CAPITAL ADEQUACY
Under guidelines established by the Board of Governors of the Federal
Reserve System, capital adequacy is currently measured for regulatory purposes
by certain risk-based capital ratios, supplemented by a leverage capital ratio.
The risk-based capital ratios are determined by expressing allowable capital
amounts, defined in terms of Tier I and Tier II, 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 I capital consists primarily of common shareholders' equity and
qualifying perpetual preferred stock, net of goodwill and other disallowed
intangible assets. Tier II capital, which is limited to the total of Tier I
capital, includes allowable amounts of subordinated debt, mandatory convertible
securities, preferred stock and the allowance for loan losses. Under current
requirements, the minimum total capital ratio, consisting of both Tier I and
Tier II capital, is 8.00% and the minimum Tier I capital ratio is 4.00%. At June
30, 1997, FNB Corp. and the Bank had total capital ratios of 15.73% and 15.44%,
respectively, and Tier I capital ratios of 14.71% and 14.42%.
The leverage capital ratio, which serves as a minimum capital standard,
considers Tier I 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. As currently
required, the minimum leverage capital ratio is 4.00%. At June 30, 1997, FNB
Corp. and the Bank had leverage capital ratios of 9.76% and 9.57%, respectively.
The Bank is also required to comply with prompt corrective action
provisions established by the Federal Deposit Insurance Corporation Improvement
Act. To be categorized as well-capitalized, the Bank must have a minimum ratio
for total capital of 10.00%, for Tier I capital of 6.00% and for leverage
capital of 5.00%. As noted above, the Bank met all of those ratio requirements
at June 30, 1997 and, accordingly, is well-capitalized under the regulatory
framework for prompt corrective action.
BALANCE SHEET REVIEW
Total assets at June 30, 1997 were higher than at June 30, 1996 and
December 31, 1996 by $25,186,000 or 8.8% and $5,794,000 or 1.9%, respectively;
deposits were ahead by $17,958,000 or 7.1% and
11
<PAGE>
$992,000 or 0.4%. The balance of retail repurchase agreements, a program that
has tended to transfer funds away from deposits, amounted to $6,030,000 at June
30, 1997, $3,100,000 at June 30, 1996 and $3,725,000 at December 31, 1996.
Average assets increased $22,976,000 or 8.0% in the first six months of 1997
compared to the same period in 1996, while average deposits increased
$20,118,000 or 8.0%; the second quarter increases being $22,096,000 or 7.7% and
$17,965,000 or 7.1%, respectively.
Investment Securities
Additions to the investment securities portfolio depend to a large
extent on the availability of investable funds that are not otherwise needed to
satisfy loan demand. During the twelve-month period ended June 30, 1997, when
the growth in total assets exceeded that for loans, the level of investment
securities was increased by a net amount of $5,638,000 or 6.7%. Based on funds
requirements in the first six months of 1997, however, when loan growth was at a
much higher rate than that for either total assets or deposits, there was a net
reduction in the level of investment securities of $991,000 or 1.1%. Investable
funds not otherwise utilized are temporarily invested on an overnight basis as
federal funds sold, the level of which is affected by such considerations as
near-term loan demand and liquidity needs.
Loans
The Corporation's primary source of revenue and largest component of
earning assets is the loan portfolio. Loans increased $18,422,000 or 10.0%
during the twelve-month period ended June 30, 1997. The net loan increase during
the first six months of 1997 was $8,855,000 or 4.5%. Average loans were
$15,034,000 or 8.2% higher in the first six months of 1997 than in the same
period of 1996. The ratio of average loans to average deposits, in comparing
six-month periods, increased from 73.3% in 1996 to 73.4% in 1997. The ratio of
loans to deposits at June 30, 1997 was 74.9%.
Loan growth and the composition of the loan portfolio are being
affected by management's decision in June 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 $14,346,001 during the twelve-month period ended June 30, 1997.
Consequently, total consumer loans declined significantly during that period.
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 both the twelve-month period ended June 30,1997 and the
first six months of 1997.
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. As part of the loan review function,
a third party assessment group is employed to review the underwriting
documentation and risk grading analysis. 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.
12
<PAGE>
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 maturities, has resulted in a significant portion
of the $10,095,000 increase in time deposits during the twelve-month period
ended June 30, 1997. Similarly, money market accounts have been increased by a
new high-yield product introduced in the 1996 fourth quarter. As noted in the
"Balance Sheet Review", the retail repurchase agreements program has tended to
transfer funds away from deposits. The balance of retail repurchase agreements
was $6,030,000 at June 30, 1997 and $3,100,000 at June 30, 1996. Further, the
level of time deposits obtained from governmental units fluctuates, amounting to
$17,858,000, $17,520,000 and $21,602,000 at June 30, 1997, June 30, 1996 and
December 31, 1996, respectively.
BUSINESS DEVELOPMENT MATTERS
As discussed in the "Overview" and in Note 3 to Consolidated Financial
Statements, the Corporation has entered into a definitive agreement to acquire a
savings bank which will be merged, upon the expected completion of the
transaction in the first quarter of 1998, into the Bank.
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. Credit card receivables
amounted to $2,311,839, $1,846,848 and $2,257,204 at June 30, 1997, June 30,
1996 and December 31, 1996, respectively. Additionally, the merchant services
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 was not recognized until 1996. Approximately one-third of
1996 capital expenditures, which totaled $1,019,109, also related to personal
computer networks.
13
<PAGE>
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 that were being experienced in this
loan program. Contracts of this nature included in loans amounted to
$14,166,516, $28,512,517 and $20,355,367 at June 30, 1997, June 30, 1996 and
December 31, 1996, respectively. 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>
<CAPTION>
1997 1996
---------------------------------------- ---------------------------------------------
SIX MONTHS ENDED JUNE 30
Average Average
Interest Rates Interest Rates
Average Income/ Earned/ Average Income/ Earned/
Balance Expense Paid Balance Expense Paid
------------ ----------------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
EARNING ASSETS
Loans (2) (3) $ 199,143 $ 9,017 9.11% $ 184,109 $ 8,174 8.90%
Investment securities:
Taxable income 72,503 2,545 7.02 71,079 2,500 7.04
Non-taxable income (2) 17,322 706 8.16 13,539 582 8.59
Federal funds sold 2,390 64 5.38 570 15 5.16
------------ ----------- ------- ------------ ----------- -----------
Total earning assets 291,358 12,332 8.50 269,297 11,271 8.38
------------ ----------- ------- ------------ ----------- -----------
Cash and due from banks 9,786 8,983
Other assets, net 8,233 8,121
------------ ------------
TOTAL ASSETS $ 309,377 $ 286,401
============ ============
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
NOW accounts $ 37,313 330 1.78 $ 34,549 349 2.02
Savings deposits 29,600 345 2.35 30,421 391 2.58
Money market accounts 18,367 315 3.45 16,075 220 2.75
Certificates and other time deposits 149,167 4,024 5.44 134,969 3,644 5.41
Retail repurchase agreements 5,147 113 4.42 4,251 92 4.36
Federal funds purchased 319 9 5.57 1,091 30 5.56
------------ ----------- ------- ------------ ----------- ------------
Total interest-bearing liabilities $ 239,913 5,136 4.32 221,356 4,726 4.28
------------ ----------- ------- ------------ ----------- ------------
Noninterest-bearing demand deposits 36,969 35,284
Other liabilities 2,845 2,977
Shareholders' equity 29,650 26,784
------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 309,377 $ 286,401
============ ============
NET INTEREST INCOME AND SPREAD $ 7,196 4.18% $ 6,545 4.10%
=========== ========= =========== ============
NET YIELD ON EARNING ASSETS 4.95% 4.86%
========= ============
</TABLE>
<TABLE>
<CAPTION>
1997 Versus 1996
------------------------------------------
Interest Variance
due to (1) Net
Volume Rate Change
------------ ----------- ------------
<S> <C> <C> <C>
EARNING ASSETS
Loans (2) (3) $ 654 $ 189 $ 843
Investment securities:
Taxable income 52 (7) 45
Non-taxable income (2) 154 (30) 124
Federal funds sold 48 1 49
------------ ----------- ------------
Total earning assets 908 153 1,061
------------ ----------- ------------
Cash and due from banks
Other assets, net
TOTAL ASSETS
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
NOW accounts 26 (45) (19)
Savings deposits (11) (35) (46)
Money market accounts 35 60 95
Certificates and other time deposits 361 19 380
Retail repurchase agreements 20 1 21
Federal funds purchased (21) - (21)
------------ ----------- ------------
Total interest-bearing liabilities 410 - 410
------------ ----------- ------------
Noninterest-bearing demand deposits
Other liabilities
Shareholders' equity
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY
NET INTEREST INCOME AND SPREAD $ 498 $ 153 $ 651
========= ============ ===========
NET YIELD ON EARNING ASSETS
</TABLE>
(1) The mix variance, not separately stated, has been proportionally allocated
to the rate and volume variances based on their absolute dollar amount.
(2) Interest income 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.
15
<PAGE>
TABLE 2
CONSOLIDATED AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS
(Taxable Equivalent Basis, Dollars in Thousands)
<TABLE>
<CAPTION>
1997 1996
-------------------------------- ----------------------------------
THREE MONTHS ENDED JUNE 30 Average Average
Interest Rates Interest Rates
Average Income/ Earned/ Average Income/ Earned/
Balance Expense Paid Balance Expense Paid
------------ ------------ ------------ ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
EARNING ASSETS
Loans (2) (3) $ 200,738 $ 4,576 9.14% $ 185,509 $ 4,118 8.90%
Investment securities:
Taxable income 71,484 1,251 7.00 69,963 1,210 6.92
Non-taxable income (2) 17,299 350 8.11 14,386 303 8.41
Federal funds sold 2,607 36 5.48 731 10 5.21
------------ ------------ ------------ -------- ------------ --------
Total earning assets 292,128 6,213 8.52 270,589 5,641 8.35
------------ ------------ ------------ ------- ------------ --------
Cash and due from banks 9,820 9,387
Other assets, net 8,214 8,090
------------ ---------
TOTAL ASSETS $ 310,162 $ 288,066
============ ========
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
NOW accounts $ 38,297 173 1.81 $ 34,737 172 1.98
Savings deposits 29,661 172 2.32 30,704 194 2.54
Money market accounts 18,891 169 3.59 16,012 108 2.70
Certificates and other time deposits 146,300 1,990 5.46 135,288 1,814 5.38
Retail repurchase agreements 6,028 69 4.57 4,224 46 4.43
Federal funds purchased 293 4 5.76 880 12 5.53
------------ -------- -------- --------- ------------ ---------
Total interest-bearing liabilities 239,470 2,577 4.32 221,845 2,346 4.24
------------ -------- --------- ------------ ------------ --------
Noninterest-bearing demand deposits 37,658 36,101
Other liabilities 3,060 3,053
Shareholders' equity 29,974 27,067
------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 310,162 $ 288,066
============ ============
NET INTEREST INCOME AND SPREAD $ 3,636 4.20% $ 3,295 4.11%
======== ========== ============ ========
NET YIELD ON EARNING ASSETS 4.98% 4.87%
========== =======
</TABLE>
<TABLE>
<CAPTION>
1997 Versus 1996
Interest Variance
due to (1) Net
Volume Rate Change
--------- ------- --------
<S> <C> <C> <C>
EARNING ASSETS
Loans (2) (3) $ 345 $ 113 $ 458
Investment securities:
Taxable income 27 14 41
Non-taxable income (2) 58 (11) 47
Federal funds sold 25 1 26
----- ----- -----
Total earning assets 455 117 572
----- ----- -----
Cash and due from banks
Other assets, net
TOTAL ASSETS
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
NOW accounts 17 (16) 1
Savings deposits (6) (16) (22)
Money market accounts 21 40 61
Certificates and other time
deposits 149 27 176
Retail repurchase agreements 21 2 23
Federal funds purchased (9) 1 (8)
----- ----- -----
Total interest-bearing
liabilities 193 38 231
----- ----- -----
Noninterest-bearing demand deposits
Other liabilities
Shareholders' equity
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY
NET INTEREST INCOME AND SPREAD $ 262 $ 79 $ 341
===== ===== =====
NET YIELD ON EARNING ASSETS
</TABLE>
(1) The mix variance, not separately stated, has been proportionally allocated
to the rate and volume variances based on their absolute dollar amount.
(2) Interest income 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.
16
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of FNB Corp. (the "Corporation") was
held on May 13, 1997. The total number of shares of the Corporation's Common
Stock, par value $2.50 per share, outstanding as of March 27, 1997, the record
date for the Annual Meeting, was 1,811,104.
The following nominees were elected to the Board of Directors for the
terms indicated:
Class II Directors - Elected for Three-Year Terms Expiring with the
Annual Meeting in 2000.
Nominee Votes For Withheld
W. L. Hancock 1,399,706 29,780
R. Reynolds Neely, Jr. 1,399,706 29,780
Richard K. Pugh 1,391,041 38,445
The shareholders approved the Corporation's Stock Compensation Plan,
including certain amendments. The votes on this proposal were as follows:
Votes for 1,342,389
Votes against 61,231
Abstaining 25,866
The shareholders ratified the selection of KPMG Peat Marwick LLP,
Certified Public Accountants, as independent auditors of the Corporation for the
1997 fiscal year. The votes on ratification were as follows:
Votes for 1,421,536
Votes against 0
Abstaining 7,950
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibits to this report are listed in the index to exhibits on
pages 19 and 20 of this report.
(b) Reports on Form 8-K.
During the quarter ended June 30, 1997, the Registrant filed a
Current Report on Form 8-K dated June 3, 1997, which reported under "Item 5" the
entering into by the Registrant of a definitive agreement to acquire Home
Savings Bank of Siler City, Inc., SSB. This matter is further discussed in Note
3 to Consolidated Financial Statements.
17
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
FNB Corp.
(Registrant)
Date: August 11, 1997 By: /s/ Jerry A. Little
Jerry A. Little
Treasurer and Secretary
(Principal Financial and
Accounting Officer)
18
<PAGE>
FNB CORP.
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit
2.10 Agreement and Plan of Reorganization and Merger by and among
Home Savings Bank of Siler City, Inc., SSB, FNB Corp. and
First National Bank and Trust Company dated June 3, 1997,
incorporated herein by reference to Exhibit 2(a) to the
Registrant's Current Report on Form 8-K dated June 3, 1997.
2.11 Stock Option Agreement issued by Home Savings Bank of Siler City,
Inc., SSB to FNB. Corp. dated June 3, 1997, incorporated
herein by reference to Exhibit 2(b) to the Registrant's Current
Report on Form 8-K dated June 3, 1997.
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 June 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.
19
<PAGE>
Exhibit No. Description of Exhibit
10.20 Copy of Split Dollar Insurance Agreement dated as of May 28, 1989
between First National Bank and Trust Company and James M.
Culberson, Jr., incorporated herein by reference to Exhibit 10.30
to the Registrant's Form 10-K Annual Report for the fiscal year
ended December 31, 1989.
10.30 Copy of Stock Compensation Plan adopted May 11, 1993,
incorporated herein by reference to Exhibit 10.40 to the
Registrant's Form 10-QSB Quarterly Report for the quarter ended
June 30, 1993.
10.31 Form of Incentive Stock Option Agreement between FNB Corp. and
certain of its key employees, pursuant to the Registrant's Stock
Compensation Plan, incorporated herein by reference to Exhibit
10.31 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.
20
<PAGE>
FNB CORP.
STOCK COMPENSATION PLAN
ARTICLE I
GENERAL PROVISIONS
1. Purpose. The Stock Compensation Plan (the "Plan") of FNB Corp. (the
"Company") is intended to allow certain key employees, directors and advisory
directors of the Company and its subsidiaries to have an opportunity to acquire
an ownership interest in the Company as an additional incentive to attract and
retain employees, directors and advisory directors and to encourage them to
promote the Company's business.
2. Elements of the Plan. Options granted under the Plan shall be granted
pursuant to either Article II or Article III of the Plan. Options granted
pursuant to Article II are intended to qualify as incentive stock options
("Incentive Stock Options") under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"). Options granted pursuant to Article III of the
Plan are not intended to qualify as Incentive Stock Options ("Nonqualified
Options"). Stock bonus awards granted pursuant to Article IV of the Plan will be
subject to Section 83 of the Code.
3. Administration. The Plan shall be administered by an option committee
(the "Committee") appointed by the Board of Directors of the Company (the
"Board"). The Committee shall be comprised of at least two members of the Board,
each of whom shall be an "Outside Director" within the meaning of Section
162(m) of the Code and any regulations promulgated thereunder. No member of the
Committee or the Board shall be liable for any action or determination made in
good faith with respect to the Plan or to any option or award granted hereunder.
In addition, directors and Committee members shall be eligible for
indemnification from the Company, pursuant to the Company's bylaws, with respect
to any matter arising under the Plan.
4. Authority of Board of Directors and Committee
(a) Subject to the other provisions of this Plan, the Committee
shall have sole authority in its absolute discretion: to grant options
and stock bonuses under the Plan; to determine the number of shares
subject to any option or stock bonus under the Plan; to fix the option
price and the duration of each option and stock bonus; to establish any
other terms and conditions of options and stock bonuses; and to
accelerate the time at which any outstanding option may be exercised or
the time when restrictions and conditions on stock bonus shares will
lapse. Notwithstanding the foregoing, the Board
<PAGE>
may grant Nonqualified Options to nonemployee directors and advisory
board members of the Company.
(b) Subject to the other provisions of this Plan, and with a view
to effecting its purpose, the Committee shall have sole authority in its
absolute discretion: to construe and interpret the Plan; to define the
terms used herein; to prescribe, amend, and rescind rules and
regulations relating to the Plan; to make any other determinations and
to do everything necessary or advisable to administer the Plan.
(c) All decisions, determinations, and interpretations made by
the Committee shall be binding and conclusive on all participants in the
Plan and on their legal representatives, heirs and beneficiaries.
5. Shares Subject to the Plan. The maximum aggregate number of shares of
Common Stock available pursuant to the Plan, subject to adjustment as provided
in Section 10 of this Article I, shall be 180,000 shares of the Company's Common
Stock, par value $2.50 per share ("Common Stock"). If any option granted
pursuant to the Plan expires or terminates for any reason before it has been
exercised in full, the unpurchased shares subject to that option shall again be
available for the purposes of the Plan, regardless of whether the option was
granted pursuant to Article II or Article III of the Plan. If any shares issued
pursuant to a stock bonus are forfeited, they shall again be available under the
Plan. The Company, during the term of this Plan, will at all times reserve and
keep available such number of shares of its Common Stock as shall be sufficient
to satisfy the requirements of the Plan. Authorized but unissued shares of the
Company shall also be subject to issuance under the Plan.
6. Eligibility.
(a) Incentive Stock Options and Stock Bonus Awards. Incentive
Stock Options and stock bonus awards may be granted only to key
employees of the Company or any of its subsidiaries (including directors
and officers who are key employees).
(b) Nonqualified Options. Nonqualified Options may be granted
only to key employees, officers, directors (whether or not employees)
and advisory board members of the Company or any of its subsidiaries.
(c) Maximum Number of Shares to One Individual Notwithstanding
any other provision of this Plan, the aggregate number of shares of
Common Stock that may be issued to any one individual pursuant to
options or awards granted under the Plan shall not exceed 50,000 shares.
2
<PAGE>
(d) Number of Options and Bonuses. More than one option and more
than one stock bonus may be granted to the same person, if the person
otherwise is an eligible recipient under this Plan.
7. Terms and Conditions of Options. Stock options granted under the Plan
shall be evidenced by agreements in such form as the Committee may from time to
time approve, which agreements shall comply with and be subject to the following
terms and conditions, in addition to the provisions of Article II or Article
III, as applicable:
(a) Number of Shares; Designation. Each option shall state the
number of shares to which it pertains and whether it is an Incentive
Stock Option granted under Article II of the Plan or a Nonqualified
Option granted under Article III of the Plan.
(b) Option Price. Each option shall state the option price, which
shall not be less than the fair market value (as hereinafter defined)
per share of the Common Stock at the time the option is granted (except
that for Incentive Stock Options granted to any employee who owns more
than 10% of the combined voting power of all classes of stock of the
Company, or of its parent or subsidiary, the option price shall not be
less than 110% of fair market value). Fair market value shall be
determined by the Committee on the basis of such factors as it deems
appropriate; provided, however, that fair market value shall be
determined without regard to any restriction other than a restriction
which, by its terms, will never lapse, and further provided that if at
the time the determination of fair market value is made, the Common
Stock is admitted to trading on a national securities exchange for which
sales prices are regularly reported, fair market value shall not be less
than the mean of the high and low asked or closing sales prices reported
for the Common Stock on that exchange on the day (or most recent trading
day preceding the day on which the option is granted). For purposes of
this Plan, the term "national securities exchange" shall include the
National Association of Securities Dealers Automated Quotation System
and the over-the-counter market.
(c) Exercise of Options. Except as otherwise provided in this
Plan or in the applicable option agreement, each option shall be
exercisable in installments as follows:
(i) up to 20% of the total shares subject to the option
at any time after one year from the date of grant and prior to
termination of the option;
(ii) up to 40% of the total shares subject to the option
(less any shares previously purchased pursuant to the option) at
any time after two years from the date of grant and prior to
termination of the option;
(iii) up to 60% of the total shares subject to the
option (less any shares previously purchased pursuant to the
option) at any time after three years from the date of grant and
prior to termination of the option; and
3
<PAGE>
(iv) up to 80% of the total shares subject to the option
(less any shares previously purchased pursuant to the option) at
any time after four years from the date of grant and prior to
termination of the option; and
(v) in full at any time after five years from the date
of grant and prior to termination of the option.
Not less than 25 shares may be purchased at any one time unless the
number purchased is the total number that may be purchased under the
option at that time. No option may be exercised for any fraction of a
share of Common Stock.
(d) Written Notice and Payment Required. An option granted
pursuant to the terms of this Plan shall be exercised when written
notice of that exercise has been received by the Company at its
principal office from the person entitled to exercise the option and
full payment for the shares with respect to which the option is
exercised has been received by the Company. The purchase price of any
shares purchased shall be paid in full in cash or by certified or
cashier's check payable to the order of the Company or, unless
prohibited by the applicable option agreement, by shares of Common Stock
or by a combination of cash, check, and (unless prohibited by the
applicable option agreement) shares of Common Stock. If any portion of
the purchase price is paid in shares of Common Stock, those shares shall
be tendered at their then fair market value as determined in accordance
with Section 7(b) of this Article I.
(e) Compliance With Securities I Laws. The options granted under
the Plan and the shares issuable pursuant to the Plan may, at the option
of the Company, be registered under applicable federal and state
securities laws, but the Company shall have no obligation to undertake
any such registrations. Shares of Common Stock shall not be issued with
respect to any option granted under the Plan unless the exercise of that
option and the issuance and delivery of those shares pursuant to that
exercise shall comply with all relevant provisions of state and federal
law including, without limitation, the Securities Act of 1933, as
amended, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the shares may then be
listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance. The Committee may also require
an optionee to furnish evidence satisfactory to the Company, including a
written and signed representation letter and consent to be bound by any
transfer restriction imposed by law, legend, condition, or otherwise,
that the shares are being purchased only for investment and without any
present intention to sell or distribute the shares in violation of any
state or federal law, rule, or regulation. Further, each optionee shall
consent to the imposition of a legend on the shares of Common Stock
subject to his or her option restricting their transferability as
required by law or by this Plan.
4
<PAGE>
(f) Options Not Transferable. Options granted pursuant to this
Plan may not be sold, pledged, assigned, or transferred in any manner
otherwise than by will or the laws of descent or distribution and may be
exercised during the lifetime of an optionee only by that optionee.
(g) Duration of Options. Each option and all rights thereunder
granted pursuant to the terms of this Plan shall expire on the date
specified in the applicable option agreement, but in no event shall any
option expire later than 10 years from the date on which the option is
granted. Moreover, any Incentive Stock Option granted to an employee who
owns more than 10% of the combined voting power of all classes of stock
of the Company, or of its parent or subsidiary, must expire within five
years from the date of grant. In addition, each option shall be subject
to early termination as provided in the Plan or applicable option
agreement.
(h) Termination of Employment Disability or Death.
(i) Except as otherwise provided in the applicable
option agreement, if an optionee ceases to be employed by the
Company, its parent, or any of its subsidiaries (or a corporation
or a parent or subsidiary of such corporation issuing or assuming
a stock option in a transaction to which Section 424(a) of the
Code applies), for any reason other than disability or death, his
or her option may be exercised at any time up to three months
after the date of termination of employment.
(ii) Except as otherwise provided in the applicable
option agreement, if an optionee becomes disabled within the
meaning of Section 22(e)(3) of the Code while employed by the
Company, or any parent or subsidiary corporation (or a
corporation or a parent or subsidiary of such corporation issuing
or assuming a stock option in a transaction to which Section
424(a) of the Code applies), the option may be exercised at any
time within three months after the date of termination of
employment due to disability.
(iii) Except as otherwise provided in the applicable
option agreement, if an optionee dies while employed by the
Company, its parent or any of its subsidiaries, (or a corporation
or a parent or subsidiary of such corporation issuing or assuming
a stock option in a transaction to which Section 424(a) of the
Code applies), his or her option shall expire one year after the
date of death During this period, the option may be exercised,
except as otherwise provided in the applicable option agreement,
by the person or persons to whom the optionee's rights under the
option shall pass by will or by the laws of descent and
distribution.
5
<PAGE>
(iv) Any option that may be exercised for a period
following termination of the optionee's employment may be
exercised only to the extent it was exercisable immediately
before such termination and in no event after the option would
expire by its terms without regard to such termination.
(i) Option Agreements. The option agreements authorized under the
Plan may differ from one another and shall contain such other provisions
not inconsistent with the Plan and Article II or Article III as
applicable as the Committee may in its discretion deem advisable from
time to time, including, without limitation, conditions precedent to the
exercise of the option covered by any agreement, which conditions may
include the satisfaction of specified performance criteria by the
Company or the optionee.
8. Tax Withholding. The exercise of any option granted under the Plan is
subject to the condition that if at any time the Company shall determine, in its
discretion, that the satisfaction of withholding tax or other withholding
liabilities under any state or federal law is necessary or desirable as a
condition of, or in any connection with, such exercise or the delivery or
purchase of shares pursuant thereto, then in such event, the exercise of the
option shall not be effective unless such withholding tax or other withholding
liabilities shall have been satisfied in a manner acceptable to the Company.
9 Employment. Nothing in the Plan or in any option or stock bonus award
shall confer upon any eligible employee any right to continued employment by the
Company, or by its parent or subsidiary corporations, or limit in any way the
right of the Company or its parent or subsidiary corporation at any time to
terminate or alter the terms of that employment.
10. Adjustments.
(a) If the shares of Common Stock of the Company are increased,
decreased, changed into, or exchanged for a different number or kind of
shares or securities through merger, consolidation, combination,
exchange of shares, other reorganization, recapitalization,
reclassification, stock dividend, stock split or reverse stock split in
which the Company is the surviving entity, the Committee shall make an
appropriate and proportionate adjustment in the maximum number and kind
of shares as to which options and stock bonuses may be granted under
this Plan. A corresponding adjustment changing the number or kind of
shares allocated to unexercised options that shall have been granted
prior to any such change, shall likewise be made. Any such adjustment in
outstanding options shall be made without change in the aggregate
purchase price applicable to the unexercised portion of the option, but
with a corresponding adjustment in the price for each share or other
unit of any security covered by the option. In making any adjustment
pursuant to this Section 10(a), any fractional shares shall be
disregarded.
6
<PAGE>
(b) In the event of a consolidation or a merger in which the
Company is not the surviving corporation, or any other merger in which
the shareholders of the Company exchange their shares of stock in the
Company for stock of another corporation, or in the event of complete
liquidation of the Company, or in the case of a tender offer approved by
the Board of Directors, all outstanding options, unless the applicable
option agreement provides otherwise, shall become exercisable in full
immediately prior to the effective date of any such transaction,
regardless of the exercise schedule.
11. Effective Date of Plan. The Plan shall be effective March 11, 1993,
the date of adoption of the Plan by the Board of Directors of the Company,
subject to approval of the Plan by the Shareholders by the vote of the holders
of the majority of the Company's Common Stock present or represented at the duly
held annual meeting of shareholders scheduled to be held on May 11, 1993.
12. Termination and Amendment of Plan. The Plan may be terminated at any
time by the Board of Directors. Unless sooner terminated the Plan shall
terminate March 10, 2003. No options or stock bonuses shall be granted under the
Plan after the Plan is terminated. Subject to the limitation contained in
Section 13 of this Article 1, the Board of Directors may at any time amend or
revise the terms of the Plan, including the form and substance of the option
agreements and stock bonus awards to be used hereunder; provided that no
amendment or revision shall (a) increase the maximum aggregate number of shares
subject to this Plan, except as permitted under Section 10 of this Article l;
(b) change the minimum purchase price for shares subject to options granted
under the Plan; (c) extend the maximum term established under the Plan for any
option or stock bonus award; or (d) permit the granting of an option or stock
bonus award to anyone other than as provided in the Plan.
13. Prior Rights and Obligations. No amendment, suspension, or
termination of the Plan shall, without the consent of the person who has
received an option or stock bonus award, alter or impair any of that person's
rights or obligations under any option or stock bonus award, granted under the
Plan prior to such amendment, suspension, or termination.
14. Construction. The provisions set forth in Article II, III and IV
shall not apply to any other of those Articles.
15. Compliance with Section 16(b). In the case of recipients of options
or awards hereunder who are or may be subject to Section 16 of the Securities
Exchange Act of 1934, it is the intent of the Company that this Plan and any
such option or award granted hereunder satisfy and be interpreted in a manner
that satisfies the applicable requirements of Rule 16b-3, so that such grantees
will be entitled to the benefits of Rule 16b-3 or any other exemptive rule under
Section 16 and will not be subjected to liability thereunder. If any provision
of the Plan or any option or award would otherwise conflict with the intent
expressed herein, that provision, to the extent possible, shall be interpreted
and deemed amended so as to avoid such
7
<PAGE>
conflict. To the extent of any remaining irreconcilable conflict with such
intent, such provision shall be deemed void as applicable to grantees who are or
may be subject to Section 16.
ARTICLE 11
INCENTIVE STOCK OPTIONS
Options granted pursuant to this Article II of the Plan shall constitute
Incentive Stock Options under Section 422 of the Code and shall be designated as
such at the time of grant. Incentive Stock Options granted pursuant to this
Article II shall be subject to the terms, conditions and limitations set forth
in Article I above and to the following:
1. Maximum Amount of Incentive Stock Options. The maximum aggregate fair
market value of Common Stock, determined as of the time the Incentive Stock
Option is granted, for which any employee may be granted Incentive Stock Options
(as defined in Section 422(b) of the Code) exercisable for the first time during
any calendar year under all incentive stock option plans of the Company and any
parent, subsidiary, and predecessor corporations held by such employee shall not
exceed $100,000. Any option in excess of the foregoing limitation shall be
granted pursuant to Article III of this Plan and shall be clearly and
specifically designated as not being an Incentive Stock Option.
2. Compliance with section 479 of the Code. This Plan is intended to
comply in every respect with Section 422 of the Code and the regulations
promulgated thereunder with regard to the grant of Incentive Stock Options and
the purchase and delivery of shares of Common Stock upon the exercise thereof.
In the event any future statute or regulation shall modify Section 422, this
Plan shall be deemed to incorporate by reference such modification for purposes
of granting Incentive Stock Options or the purchase and delivery of any shares
of Common Stock upon the exercise thereof. Any option agreement relating to an
Incentive Stock Option granted pursuant to this Plan that is outstanding and
unexercised at the time any modifying statute or regulation becomes effective
shall also be deemed to incorporate by reference such modification, and no
notice of such modification need be given to the optionee. If any provision of
this Plan is determined to disqualify the shares purchasable pursuant to
Incentive Stock Options granted under this Plan from the special tax treatment
provided by Section 422, such provision shall be deemed to incorporate by
reference for purposes of the Incentive Stock Options the modification required
to qualify the shares for said tax treatment.
ARTICLE III
NONQUALIFIED STOCK OPTION'S
Options granted pursuant to this Article III shall constitute
Nonqualified Options and shall be designated as not being Incentive Stock
Options under Section 422 of the Code.
8
<PAGE>
Nonqualified Options shall be subject to the terms, conditions and limitations
set forth in Article I above and to the following:
1. Tax Reimbursement. In view of the federal and state income tax
savings expected to be realized by the Company by reason of exercise of a
Nonqualified Option granted pursuant to this Article III, the Committee may, in
its discretion, grant Nonqualified Options the terms of which provide that, upon
exercise, the Company will make a cash compensation payment to the optionee (or
his personal representatives or heirs). The basis for determining the amount of
such cash payment shall be specified in the applicable option agreement.
2. Termination of Nonemployee Relationships with the Company. If a
nonemployee optionee ceases to serve the Company in the capacity which made the
optionee eligible to receive Nonqualified Options pursuant to Article III of
this Plan, then the optionee's rights upon such termination shall be governed in
the manner of an optionee's rights upon termination of employment as set forth
in Article I of this Plan.
ARTICLE IV
STOCK BONUS AVAILABLE
Stock bonus awards granted pursuant to this Article IV shall be subject
to those terms, conditions and limitations set forth in Article I above that are
applicable to stock bonus awards and to the following additional terms:
1. Agreement. Each stock bonus award shall be evidenced by an agreement
in such form and containing such provisions not inconsistent with the Plan as
the Committee may from time to time approve. Each award shall be effective as of
the date so stated in the resolution of the Committee making the award.
2. Restrictions and Conditions. Shares of Common Stock awarded under
this Article IV shall be subject to such restrictions and conditions (if any) as
may be imposed by the Committee at the time of making the award. Such
restrictions and conditions may include, without limitation, the satisfaction of
specified performance criteria by the Company or by the grantee of the stock
bonus award; provided, however, that no award shall require any payment of cash
consideration by the recipient. Restrictions and conditions imposed on shares of
Common Stock awarded under this Article IV may differ from one award to another
as the Committee shall in its discretion. determine. Any restrictions and
conditions shall lapse. in whole or in part, as provided in the agreement
evidencing the stock bonus award, but in no event later than ten years from the
date of the award.
Shares with respect to which no restrictions or conditions are imposed
and shares with respect to which the restrictions and conditions imposed thereon
have lapsed are hereinafter
9
<PAGE>
referred to as "Unrestricted Shares." Shares with respect to which the
restrictions and conditions imposed thereon have not lapsed are hereinafter
referred to as "Restricted Shares."
3. Rights as a Shareholder. A holder of Unrestricted Shares shall have
all of the rights of a shareholder of the Company with respect thereto and shall
be entitled to receive a stock certificate evidencing such Unrestricted Shares.
A holder of Restricted Shares shall be the owner thereof and shall,
subject to the restrictions and conditions, have all of the rights of a
shareholder with respect thereto, including, but not limited to, the right to
receive all dividends paid on the Common Stock (ordinary or extraordinary,
whether in cash, securities or other property) and the right to vote the
Restricted Shares; provided, however, that each stock certificate evidencing
Restricted Shares shall bear a conspicuous legend stating that the shares
evidenced thereby are subject to forfeiture and shall be deposited by the holder
with the Company or its designee together with a stock power endorsed in blank.
4. Forfeiture. Except as provided in this Section 4 with respect to a
grantee's death or retirement from the employ of the Company or any of its
subsidiaries, upon termination of the grantee's employment with the Company or
any of its subsidiaries for any reason whatsoever (voluntarily or involuntarily,
with or without cause), all Restricted Shares then owned by him shall
automatically and without any action on his part be forfeited and transferred to
the Corporation.
If a grantee shall retire in good standing from the employ of the
Company or any of its subsidiaries under the then established retirement
policies of the Company or if his employment with the Company or any of its
subsidiaries is terminated by reason of his death, then, in either such event,
all restrictions and conditions on his Restricted Shares shall thereupon lapse
and such Restricted Shares shall automatically and without any action on his
part be converted into Unrestricted Shares.
5. Transferability. Restricted Shares held by a grantee shall not be
subject to alienation, sale, transfer, assignment, pledge, attachment or
encumbrances of any kind, and any attempt to alienate, sell, transfer, assign,
pledge or otherwise encumber any Restricted Shares shall be void. In addition,
the Company may impose such additional restrictions on the issuance of Common
Stock and on the transfer of Unrestricted Shares as it deems necessary or
desirable to ensure compliance with all applicable federal and state securities
laws.
6. Adjustments. If there is a change in the Common Stock of the Company
by reason of any stock dividend, stock split, merger, consolidation,
recapitalization, exchange of shares, or otherwise, any stock or other
securities or other property issued with respect to Restricted Shares shall be
subject to the same restrictions and conditions as the Restricted Shares, and
the certificates or other evidence of such stock, securities or other property,
together with an appropriate power of attorney, shall be delivered to the
Company or its
10
<PAGE>
successor or designee and held until such time as the restrictions and
conditions applicable thereto lapse or until the stock, securities or other
property is forfeited in accordance with the provisions of Article IV of the
Plan.
7. Tax Reimbursement. In view of the federal and state income tax
savings expected to be realized by the Company upon the award of Unrestricted
Shares or upon the lapse of restrictions and conditions applicable to Restricted
Shares, the Committee may, in its discretion, grant stock bonus awards the terms
of which provide that, upon the grantee's receipt of Unrestricted Shares, the
Company will pay to the grantee (or his personal representatives or heirs) an
amount in cash equal to the amount of tax benefit realized or expected to be
realized by the Company through the utilization of deductions claimed for income
tax purposes as a result of the grantee's receipt of Unrestricted Shares. The
tax reimbursement payment provided for herein shall be made on or before the
last day of the calendar year in which taxable income is recognized by a grantee
under Section 83 of the Code.
8. Withholding for Taxes. No grantee shall be entitled to issuance of a
stock certificate evidencing Unrestricted Shares until he has paid, or made
arrangements for payment, to the Company of an amount equal to the income and
other taxes that the Company is required to withhold from the grantee as a
result of his receipt of Unrestricted Shares. In addition, such amounts as the
Company is required to withhold by reason of any tax reimbursement payments made
pursuant to Section 7 of this Article IV shall be deducted from such payments.
11
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 11,065,084
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 30,776,055
<INVESTMENTS-CARRYING> 58,548,941
<INVESTMENTS-MARKET> 0
<LOANS> 204,128,158
<ALLOWANCE> 2,091,206
<TOTAL-ASSETS> 312,928,457
<DEPOSITS> 272,371,710
<SHORT-TERM> 6,929,662
<LIABILITIES-OTHER> 3,326,509
<LONG-TERM> 0
0
0
<COMMON> 4,530,688
<OTHER-SE> 25,769,888
<TOTAL-LIABILITIES-AND-EQUITY> 312,928,457
<INTEREST-LOAN> 8,997,462
<INTEREST-INVEST> 2,828,873
<INTEREST-OTHER> 63,795
<INTEREST-TOTAL> 11,890,130
<INTEREST-DEPOSIT> 5,014,088
<INTEREST-EXPENSE> 5,135,825
<INTEREST-INCOME-NET> 6,754,305
<LOAN-LOSSES> 240,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,885,396
<INCOME-PRETAX> 3,002,315
<INCOME-PRE-EXTRAORDINARY> 3,002,315
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,092,671
<EPS-PRIMARY> 1.16
<EPS-DILUTED> 1.16
<YIELD-ACTUAL> 4.65
<LOANS-NON> 9,000
<LOANS-PAST> 103,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,986,000
<CHARGE-OFFS> 215,000
<RECOVERIES> 80,000
<ALLOWANCE-CLOSE> 2,091,000
<ALLOWANCE-DOMESTIC> 1,931,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 160,000
</TABLE>
