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 September 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 1,817,256 shares of $2.50 par value common stock outstanding
at November 6, 1997.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FNB Corp. and Subsidiary
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30,
----------------------------------- December 31,
ASSETS 1997 1996 1996
------------- ------------- -------------
<S> <C> <C> <C>
Cash and due from banks $ 12,331,035 $ 11,499,468 $ 13,052,150
Federal funds sold -- 8,100,000 --
Investment securities:
Available for sale, at estimated fair value
(amortized cost of $29,550,120,
$25,336,568 and $28,875,531) 29,643,623 25,204,638 28,928,543
Held to maturity (estimated fair value of
$58,843,653, $57,525,441 and $61,274,858) 58,516,379 58,242,929 61,387,196
Loans 211,501,710 191,148,360 195,272,683
Less: Allowance for loan losses (2,188,476) (1,959,638) (1,985,581)
------------- ------------- -------------
Net loans 209,313,234 189,188,722 193,287,102
------------- ------------- -------------
Premises and equipment 6,143,442 6,119,525 6,290,471
Other assets 4,753,644 4,301,581 4,189,015
------------- ------------- -------------
TOTAL ASSETS $ 320,701,357 $ 302,656,863 $ 307,134,477
============= ============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand deposits $ 35,912,097 $ 38,841,700 $ 38,805,364
Interest-bearing deposits:
NOW, savings and money market deposits 87,057,063 80,383,848 82,576,792
Time deposits of $100,000 or more 51,996,700 45,218,260 48,944,981
Other time deposits 103,116,662 103,470,397 101,052,928
------------- ------------- -------------
Total deposits 278,082,522 267,914,205 271,380,065
Retail repurchase agreements 7,296,864 3,809,475 3,724,929
Federal funds purchased 875,000 -- 575,000
Other liabilities 3,181,976 3,017,509 2,687,241
------------- ------------- -------------
TOTAL LIABILITIES 289,436,362 274,741,189 278,367,235
------------- ------------- -------------
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 - 1,816,853, 1,803,004 and 1,806,994 4,542,133 4,507,510 4,517,485
Surplus 456,816 116,175 213,510
Retained earnings 26,204,334 23,379,063 24,001,259
Net unrealized securities gains (losses) 61,712 (87,074) 34,988
------------- ------------- -------------
TOTAL SHAREHOLDERS' EQUITY 31,264,995 27,915,674 28,767,242
------------- ------------- -------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 320,701,357 $ 302,656,863 $ 307,134,477
============= ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
FNB Corp. and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $13,853,084 $12,366,713
Interest and dividends on investment securities:
Taxable income 3,527,849 3,450,503
Non-taxable income 680,301 568,197
Federal funds sold 90,609 31,687
----------- -----------
Total interest income 18,151,843 16,417,100
----------- -----------
INTEREST EXPENSE:
Deposits 7,613,564 6,911,701
Retail repurchase agreements 192,209 128,711
Federal funds purchased 22,749 42,433
----------- -----------
Total interest expense 7,828,522 7,082,845
----------- -----------
NET INTEREST INCOME 10,323,321 9,334,255
Provision for loan losses 470,000 305,000
----------- -----------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 9,853,321 9,029,255
----------- -----------
OTHER OPERATING INCOME:
Service charges on deposit accounts 1,114,437 1,060,490
Annuity and brokerage commissions 236,788 148,170
Cardholder and merchant services income 254,203 231,046
Other service charges, commissions and fees 301,917 219,416
Other income 203,718 108,119
----------- -----------
Total other operating income 2,111,063 1,767,241
----------- -----------
OTHER OPERATING EXPENSE:
Personnel expense 3,908,156 3,562,709
Net occupancy expense 432,153 356,003
Furniture and equipment expense 589,197 495,756
Data processing services 823,771 688,097
Other expense 1,629,266 1,611,122
----------- -----------
Total other operating expense 7,382,543 6,713,687
----------- -----------
INCOME BEFORE INCOME TAXES 4,581,841 4,082,809
Income taxes 1,399,525 1,247,170
----------- -----------
NET INCOME $ 3,182,316 $ 2,835,639
=========== ===========
PER SHARE DATA:
Net income $ 1.76 $ 1.57
Cash dividends declared .54 .45
Weighted average number of shares outstanding 1,811,450 1,801,148
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
FNB Corp. and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
September 30,
-----------------------
1997 1996
---------- ----------
INTEREST INCOME:
Interest and fees on loans $4,855,622 $4,216,451
Interest and dividends on investment securities:
Taxable income 1,151,891 1,107,776
Non-taxable income 227,386 196,396
Federal funds sold 26,814 17,017
---------- ----------
Total interest income 6,261,713 5,537,640
---------- ----------
INTEREST EXPENSE:
Deposits 2,599,476 2,308,336
Retail repurchase agreements 79,287 36,311
Federal funds purchased 13,934 12,176
---------- ----------
Total interest expense 2,692,697 2,356,823
---------- ----------
NET INTEREST INCOME 3,569,016 3,180,817
Provision for loan losses 230,000 110,000
---------- ----------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 3,339,016 3,070,817
---------- ----------
OTHER OPERATING INCOME:
Service charges on deposit accounts 386,713 337,784
Annuity and brokerage commissions 72,563 67,280
Cardholder and merchant services income 72,590 79,883
Other service charges, commissions and fees 91,814 72,773
Other income 113,977 34,878
---------- ----------
Total other operating income 737,657 592,598
---------- ----------
OTHER OPERATING EXPENSE:
Personnel expense 1,342,972 1,199,743
Net occupancy expense 142,398 122,182
Furniture and equipment expense 202,700 164,887
Data processing services 273,604 231,267
Other expense 535,473 587,173
---------- ----------
Total other operating expense 2,497,147 2,305,252
---------- ----------
INCOME BEFORE INCOME TAXES 1,579,526 1,358,163
Income taxes 489,881 419,548
---------- ----------
NET INCOME $1,089,645 $ 938,615
========== ==========
PER SHARE DATA:
Net income $ .60 $ .52
Cash dividends declared .18 .15
Weighted average number of shares outstanding 1,814,196 1,802,964
See accompanying notes to consolidated financial statements.
3
<PAGE>
FNB Corp. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 3,182,316 $ 2,835,639
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of premises and equipment 555,821 482,391
Provision for loan losses 470,000 305,000
Deferred income taxes (benefit) (103,809) (64,559)
Deferred loan fees and costs, net 323,933 265,232
Premium amortization and discount accretion
of investment securities, net (21,664) 29,998
Amortization of intangibles 24,251 32,905
Net decrease (increase) in loans held for sale (476,250) 5,306
Increase in other assets (530,812) (451,831)
Increase in other liabilities 545,989 258,813
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,969,775 3,698,894
------------ ------------
INVESTING ACTIVITES:
Available-for-sale securities:
Proceeds from maturities 16,296,849 11,558,226
Purchases (16,960,157) (8,774,291)
Held-to-maturity securities:
Proceeds from maturities 4,267,140 13,818,718
Purchases (1,385,186) (15,864,280)
Net increase in loans (16,335,014) (11,738,996)
Proceeds from sales of premises and equipment 1,181 20,320
Purchases of premises and equipment (408,792) (685,519)
Other, net 22,419 (35,653)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (14,501,560) (11,701,475)
------------ ------------
FINANCING ACTIVITIES:
Net increase in deposits 6,702,457 17,769,729
Increase (decrease) in retail repurchase agreements 3,571,935 (832,052)
Increase in federal funds purchased 300,000 --
Common stock issued 267,954 109,992
Cash dividends paid (1,031,676) (810,159)
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 9,810,670 16,237,510
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (721,115) 8,234,929
Cash and cash equivalents at beginning of period 13,052,150 11,364,539
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 12,331,035 $ 19,599,468
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 7,726,419 $ 7,277,550
Income taxes 1,333,031 1,367,131
</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 September 30, 1997, Home
Savings operated one office and had approximately $56,379,000 in total
assets, $45,396,000 in deposits and $9,533,000 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 not be
more than 60% and not less than 50% of the total consideration.
Concurrently with the execution 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 $237,964 at
September 30, 1997 and are increased by net deferred expense of $130,027
and $37,998 at September 30, 1996 and December 31, 1996, respectively.
5
<PAGE>
5. Significant components of other expense were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ --------------------
1997 1996 1997 1996
------- ------- -------- --------
<S> <C> <C> <C> <C>
Stationery, printing and supplies $78,809 $73,960 $241,954 $207,895
</TABLE>
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 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 $3,182,316 in the first nine months of 1997, a 12.2%
increase over the same period in 1996. Earnings per share increased from $1.57
to $1.76 in comparing these nine-month periods. For the 1997 third quarter,
earnings amounted to $1,089,645, which represents a 16.1% increase from the 1996
third quarter and a gain in earnings per share from $.52 to $.60. Results for
both the first nine months and third quarter of 1996 were negatively impacted by
a special legislative assessment for FDIC insurance purposes as further
discussed in the "Earnings Review" and in "Other Operating Expense". Total
assets were $320,701,357 at September 30, 1997, up 6.0% from September 30, 1996
and 4.4% from December 31, 1996. Loans amounted to $211,501,710 at September 30,
1997, increasing 10.6% from September 30, 1996 and 8.3% from December 31, 1996.
Total deposits grew 3.8% from September 30, 1996 and 2.5% from December 31, 1996
to $278,082,522 at September 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 September 30, 1997, Home Savings operated one office and had
approximately $56,379,000 in total assets, $45,396,000 in deposits and
$9,533,000 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 not be more than 60% and not less
than 50% of the total consideration.
Concurrently with the execution 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 $346,677 or 12.3% in the first nine
months of 1997 compared to the same period of 1996 and increased $151,030 or
16.1% in comparing third quarter periods. Earnings were positively impacted in
the first nine months and third quarter of 1997 by increases in net interest
income of $989,066 or 10.6% and $388,199 or 12.2%, respectively, and by
increases of $343,822 and $145,059 in total other operating income. These gains
were significantly offset, however, by increases in total other operating
expense of $668,856 in the first nine months of 1997 and $191,985 in the 1997
third quarter and by increases in the provision for loan losses amounting to
$165,000 and $120,000, respectively.
7
<PAGE>
As discussed in "Other Operating Expense", earnings have been favorably
affected, since the 1995 third quarter, by a significant reduction in the rate
charged for FDIC insurance. Due to the passage of legislation on September 30,
1996, however, the Bank was assessed $74,845 on a one-time basis for its
deposits that are insured through the Savings Association Insurance Fund. This
assessment, which was recorded on September 30, 1996 and is further discussed in
"Other Operating Expense", was part of a broad change being implemented in
connection with deposit insurance. Compared to the same periods of 1996 and
considering the effect of the special assessment, FDIC insurance expense was
$71,118 lower in the first nine months of 1997 and $73,674 lower in the third
quarter.
On an annualized basis, return on average assets improved from 1.32% in the
first nine months of 1996 to 1.36% in the first nine months of 1997. Return on
average shareholders' equity improved from 13.95% to 14.10% in comparing the
same periods. In comparing third quarter periods, return on average assets
improved from 1.30% to 1.38% and return on average shareholders' equity improved
from 13.53% to 14.09%.
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 $10,323,321 in the first nine months of 1997
compared to $9,334,255 in the same period of 1996. This increase of $989,066 or
10.6% resulted primarily from an 8.7% increase in the level of average earning
assets coupled with an improvement in the net yield on earning assets, or net
interest margin, from 4.90% in the first nine months of 1996 to 4.99% in the
same period of 1997. In comparing third quarter periods, net interest income
increased $388,199 or 12.2%, reflecting a 9.7% increase in average earning
assets and an improvement in the net interest margin from 4.97% to 5.06%. On a
taxable equivalent basis, the increases in net interest income in the first nine
months and third quarter of 1997 were $1,051,000 and $400,000, 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 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 8.42% in the first
nine months of 1997 compared to 8.29% in the same period of 1996. In comparing
nine-month periods, the net interest spread increased by 8 basis points from
4.14% in 1996 to 4.22% in 1997, reflecting an increase in the average total
yield on earning assets that was 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 16 basis points from 8.39% in 1996 to 8.55% in
1997, while the cost of funds increased by 8 basis points from 4.25% to 4.33%. A
comparison of third quarter periods indicates a similar improvement of 8 basis
points in the net interest spread from 4.21% to 4.29%, with the yield on earning
assets increasing 23 basis points compared to 15 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 nine months and third quarter of 1997 compared
to the same periods in 1996 by increases in the provision of $165,000 and
$120,000, respectively, due primarily to loan growth and increases in net loan
charge-offs. As a percentage of average loans outstanding, however, net loan
charge-offs were .18% (annualized) for the first nine months of both 1997 and
1996, thus reflecting no increase over the same period of 1996. Nonperforming
loans as a percentage of total loans at September 30, 1997 were .08%, as
compared to .12% at September 30, 1996.
Other Operating Income
Total other operating income, or noninterest income, for the first nine
months and third quarter of 1997 increased $343,812 or 19.5% and $145,059 or
24.5%, 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.
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 $668,856 or
10.0% higher in the first nine months of 1997 compared to the same period in
1996 and for the third quarter was $191,895 or 8.3% 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. The 1996 results were
specifically affected, as discussed below, by a one-time FDIC insurance
assessment of $74,845 on September 30, 1996.
9
<PAGE>
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.
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 nine months of 1997 and 1996 (exclusive of the one-time
assessment of $74,845 on September 30, 1996) amounted to $30,503 and $26,776,
respectively, and was included in "other expense".
Income Taxes
The effective income tax rate of 30.6% in the first nine months of 1997 was
unchanged from the effective rate for 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
10
<PAGE>
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 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 September 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
September 30, 1997, FNB Corp. and the Bank had total capital ratios of 15.78%
and 15.45%, respectively, and Tier I capital ratios of 14.75% and 14.41%.
11
<PAGE>
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 September 30, 1997,
FNB Corp. and the Bank had leverage capital ratios of 9.86% and 9.63%,
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 September 30, 1997 and, accordingly, is well-capitalized under the regulatory
framework for prompt corrective action.
BALANCE SHEET REVIEW
Total assets at September 30, 1997 were higher than at September 30, 1996
and December 31, 1996 by $18,044,000 or 6.0% and $13,567,000 or 4.4%,
respectively; deposits were ahead by $10,169,000 or 3.8% and $6,703,000 or 2.5%.
The balance of retail repurchase agreements, a program that has tended to
transfer funds away from deposits, amounted to $7,297,000 at September 30, 1997,
$3,809,000 at September 30, 1996 and $3,725,000 at December 31, 1996. Average
assets increased $24,385,000 or 8.5% in the first nine months of 1997 compared
to the same period in 1996, while average deposits increased $20,060,000 or
8.0%; the third quarter increases being $27,147,000 or 9.4% and $19,934,000 or
7.8%, 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. Although the growth in loans exceeded that for total assets during
the twelve-month period ended September 30, 1997, the level of investment
securities was increased by a net amount of $4,712,000 or 5.6% due to the
redeployment of funds previously invested as federal funds sold. In the first
nine months of 1997, however, when loan growth again exceeded that for total
assets, there was a net reduction in the level of investment securities of
$2,156,000 or 2.4%. 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 $20,354,000 or 10.6%
during the twelve-month period ended September 30, 1997. The net loan increase
during the first nine months of 1997 was $16,229,000 or 8.3%. Average loans were
$17,119,000 or 9.2% higher in the first nine months of 1997 than in the same
period of 1996. The ratio of average loans to average deposits, in comparing
nine-month periods, increased from 73.4% in 1996 to 74.3% in 1997. The ratio of
loans to deposits at September 30, 1997 was 76.1%.
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
$12,461,825 during the twelve-month
12
<PAGE>
period ended September 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 September 30,1997 and the first nine 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.
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 $6,426,000 increase in time deposits during the twelve-month period ended
September 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 $7,297,000 at September 30, 1997 and $3,809,000 at September 30, 1996.
Further, the level of time deposits obtained from governmental units fluctuates,
amounting to $23,169,000, $20,673,000 and $21,602,000 at September 30, 1997,
September 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.
13
<PAGE>
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 $2,390,753, $2,067,226 and $2,257,204 at September 30, 1997,
September 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.
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
$11,640,487, $24,102,312 and $20,355,367 at September 30, 1997, September 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
----------------------------- ----------------------------
THREE MONTHS ENDED SEPTEMBER 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) $202,287 $ 13,876 9.17% $185,168 $ 12,403 8.92%
Investment securities:
Taxable income 71,710 3,778 7.03 70,215 3,685 7.00
Non-taxable income (2) 17,429 1,061 8.12 13,934 889 8.50
Federal funds sold 2,225 91 5.44 812 32 5.20
-------- -------- ---- -------- -------- ----
Total earning assets 293,651 18,806 8.55 270,129 17,009 8.39
-------- -------- ---- -------- -------- ----
Cash and due from banks 9,812 9,130
Other assets, net 8,277 8,096
-------- --------
TOTAL ASSETS $311,740 $287,355
======== ========
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
NOW accounts $ 37,640 503 1.79 $ 34,584 505 1.94
Savings deposits 29,497 516 2.34 30,333 577 2.53
Money market accounts 18,792 502 3.57 15,934 325 2.71
Certificates and other time deposits 149,580 6,093 5.45 136,038 5,505 5.39
Retail repurchase agreements 5,740 192 4.45 3,957 129 4.33
Federal funds purchased 535 23 5.69 1,017 42 5.56
-------- -------- ---- -------- -------- ----
Total interest-bearing liabilities 241,784 7,829 4.33 221,863 7,083 4.25
-------- -------- ---- -------- -------- ----
Noninterest-bearing demand deposits 36,918 35,478
Other liabilities 2,952 2,906
Shareholders' equity 30,086 27,108
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $311,740 $287,355
======== ========
NET INTEREST INCOME AND SPREAD $ 10,977 4.22% $ 9,926 4.14%
======== ==== ======== ====
NET YIELD ON EARNING ASSETS 4.99% 4.90%
==== ====
</TABLE>
<TABLE>
<CAPTION>
1997 Versus 1996
--------------------------------
NINE MONTHS ENDED SEPTEMBER 30 Interest Variance
due to (1)
-------------------- Net
Volume Rate Change
-------- -------- --------
<S> <C> <C> <C>
EARNING ASSETS
Loans (2) (3) $ 1,131 $ 342 $ 1,473
Investment securities:
Taxable income 77 16 93
Non-taxable income (2) 214 (42) 172
Federal funds sold 58 1 59
-------- -------- --------
Total earning assets 1,480 317 1,797
-------- -------- --------
Cash and due from banks
Other assets, net
TOTAL ASSETS
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
NOW accounts 40 (42) (2)
Savings deposits (17) (44) (61)
Money market accounts 64 113 177
Certificates and other time deposits 529 59 588
Retail repurchase agreements 59 4 63
Federal funds purchased (20) 1 (19)
-------- -------- --------
Total interest-bearing liabilities 655 91 746
-------- -------- --------
Noninterest-bearing demand deposits
Other liabilities
Shareholders' equity
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY
NET INTEREST INCOME AND SPREAD $ 825 $ 226 $ 1,051
======== ======== ========
NET YIELD ON EARNING ASSETS
</TABLE>
(1) The mix variance, not separately stated, has been proportionally allocated
to the volume and rate variances based on their absolute dollar amount.
(2) Interest income and yields related to certain investment securities and
loans exempt from both federal and state income tax or from state income
tax alone are stated on a fully taxable equivalent basis, assuming a 34%
federal tax rate and applicable state tax rate, reduced by the
nondeductible portion of interest expense.
(3) Nonaccrual loans are included in the average loan balance. Loan fees and
the incremental direct costs associated with making loans are deferred and
subsequently recognized over the life of the loan as an adjustment of
interest income.
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 SEPTEMBER 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) $208,472 $ 4,859 9.26% $187,263 $ 4,229 8.98%
Investment securities:
Taxable income 70,150 1,233 7.03 68,506 1,185 6.92
Non-taxable income (2) 17,640 355 8.04 14,715 307 8.35
Federal funds sold 1,900 27 5.60 1,291 17 5.23
-------- -------- ---- -------- -------- ----
Total earning assets 298,162 6,474 8.64 271,775 5,738 8.41
-------- -------- ---- -------- -------- ----
Cash and due from banks 9,863 9,421
Other assets, net 8,364 8,046
-------- --------
TOTAL ASSETS $316,389 $289,242
======== ========
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
NOW accounts $ 38,283 173 1.79 $ 34,653 156 1.79
Savings deposits 29,294 171 2.32 30,159 186 2.44
Money market accounts 19,628 187 3.79 15,655 105 2.65
Certificates and other time deposits 150,393 2,069 5.46 138,153 1,861 5.35
Retail repurchase agreements 6,907 79 4.55 3,375 37 4.27
Federal funds purchased 960 14 5.76 871 12 5.55
-------- -------- ---- -------- -------- ----
Total interest-bearing liabilities 245,465 2,693 4.35 222,866 2,357 4.20
-------- -------- ---- -------- -------- ----
Noninterest-bearing demand deposits 36,818 35,862
Other liabilities 3,162 2,765
Shareholders' equity 30,944 27,749
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $316,389 $289,242
======== ========
NET INTEREST INCOME AND SPREAD $ 3,781 4.29% $ 3,381 4.21%
======== ==== ======== ====
NET YIELD ON EARNING ASSETS 5.06% 4.97%
==== ====
</TABLE>
<TABLE>
<CAPTION>
1997 Versus 1996
--------------------------------
THREE MONTHS ENDED SEPTEMBER 30 Interest Variance
due to (1)
-------------------- Net
Volume Rate Change
-------- -------- --------
<S> <C> <C> <C>
EARNING ASSETS
Loans (2) (3) $ 494 $ 136 $ 630
Investment securities:
Taxable income 29 19 48
Non-taxable income (2) 59 (11) 48
Federal funds sold 9 1 10
-------- -------- --------
Total earning assets 591 145 736
-------- -------- --------
Cash and due from banks
Other assets, net
TOTAL ASSETS
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
NOW accounts 17 -- 17
Savings deposits (5) (10) (15)
Money market accounts 30 52 82
Certificates and other time deposits 169 39 208
Retail repurchase agreements 40 2 42
Federal funds purchased 1 1 2
-------- -------- --------
Total interest-bearing liabilities 252 84 336
-------- -------- --------
Noninterest-bearing demand deposits
Other liabilities
Shareholders' equity
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY
NET INTEREST INCOME AND SPREAD $ 339 $ 61 $ 400
======== ======== ========
NET YIELD ON EARNING ASSETS
</TABLE>
(1) The mix variance, not separately stated, has been proportionally allocated
to the volume and rate variances based on their absolute dollar amount.
(2) Interest income and yields related to certain investment securities and
loans exempt from both federal and state income tax or from state income
tax alone are stated on a fully taxable equivalent basis, assuming a 34%
federal tax rate and applicable state tax rate, reduced by the
nondeductible portion of interest expense.
(3) Nonaccrual loans are included in the average loan balance. Loan fees and
the incremental direct costs associated with making loans are deferred and
subsequently recognized over the life of the loan as an adjustment of
interest income.
16
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibits to this report are listed in the index to exhibits on
pages 18 and 19 of this report.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended
September 30, 1997.
------------------------------------------
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: November 7, 1997 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
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.
18
<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, as amended, effective May 13,
1997, incorporated herein by reference to Exhibit 10.30 the
Registrant's Form 10-Q Quarterly Report for the quarter ended June
30, 1997.
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
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM FORM 10-Q FOR
THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 12,331,035
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 29,643,623
<INVESTMENTS-CARRYING> 58,516,379
<INVESTMENTS-MARKET> 0
<LOANS> 211,501,710
<ALLOWANCE> 2,188,476
<TOTAL-ASSETS> 320,701,357
<DEPOSITS> 278,082,522
<SHORT-TERM> 8,171,864
<LIABILITIES-OTHER> 3,181,976
<LONG-TERM> 0
0
0
<COMMON> 4,542,133
<OTHER-SE> 26,722,862
<TOTAL-LIABILITIES-AND-EQUITY> 320,701,357
<INTEREST-LOAN> 13,853,084
<INTEREST-INVEST> 4,208,150
<INTEREST-OTHER> 90,609
<INTEREST-TOTAL> 18,151,843
<INTEREST-DEPOSIT> 7,613,564
<INTEREST-EXPENSE> 7,828,522
<INTEREST-INCOME-NET> 10,323,321
<LOAN-LOSSES> 470,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 7,382,543
<INCOME-PRETAX> 4,581,841
<INCOME-PRE-EXTRAORDINARY> 4,581,841
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,182,316
<EPS-PRIMARY> 1.76
<EPS-DILUTED> 1.76
<YIELD-ACTUAL> 4.69
<LOANS-NON> 47,000
<LOANS-PAST> 126,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,986,000
<CHARGE-OFFS> 386,000
<RECOVERIES> 119,000
<ALLOWANCE-CLOSE> 2,189,000
<ALLOWANCE-DOMESTIC> 2,029,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 160,000
</TABLE>
