UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
COMMISSION FILE NUMBER 0-13823
------------
FNB CORP.
(Exact name of Registrant as specified in its charter)
NORTH CAROLINA 56-1456589
(State of incorporation) (I.R.S. Employer
Identification No.)
101 SUNSET AVENUE, ASHEBORO, NORTH CAROLINA 27203
(Address of principal executive offices)
(336) 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 3,656,402 shares of $2.50 par value common stock outstanding
at May 11, 2000.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FNB Corp. and Subsidiary
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31,
------------------------------- December 31,
2000 1999 1999
------------ ------------ -------------
(in thousands, except share data)
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 11,342 $ 11,878 $ 14,271
Investment securities:
Available for sale, at estimated fair value
(amortized cost of $56,531, $48,305 and $56,088) 53,486 47,787 53,196
Held to maturity (estimated fair value of
$50,725, $57,775 and $50,987) 52,466 57,328 52,636
Loans 278,108 235,087 265,029
Less: Allowance for loan losses (2,881) (2,535) (2,745)
Net loans ------------ ------------ -------------
275,227 232,552 262,284
------------ ------------ -------------
Premises and equipment, net 7,501 7,464 7,698
Other assets 7,373 5,875 5,982
------------ ------------ -------------
Total Assets $ 407,395 $ 362,884 $ 396,067
============ ============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand deposits $ 41,431 $ 40,264 $ 39,183
Interest-bearing deposits:
NOW, savings and money market deposits 103,610 100,577 101,843
Time deposits of $100,000 or more 80,002 59,916 72,624
Other time deposits 113,814 103,173 109,117
------------ ------------ -------------
Total deposits 338,857 303,930 322,767
Retail repurchase agreements 10,597 12,179 10,667
Federal Home Loan Bank advances 15,000 7,000 15,000
Federal funds purchased 1,550 450 7,735
Other liabilities 4,860 3,958 3,968
------------ ------------ -------------
Total Liabilities 370,864 327,517 360,137
------------ ------------ -------------
Shareholders' equity:
Preferred stock - $10.00 par value;
authorized 200,000 shares, none issued - - -
Common stock - $2.50 par value;
authorized 10,000,000 shares, issued
shares - 3,655,802, 3,657,776 and 3,661,000 9,140 9,144 9,153
Surplus 97 137 174
Retained earnings 29,304 26,427 28,512
Accumulated other comprehensive income (loss) (2,010) (341) (1,909)
------------ ------------ -------------
Total Shareholders' Equity 36,531 35,367 35,930
------------ ------------ -------------
Total Liabilities and
Shareholders' Equity $ 407,395 $ 362,884 $ 396,067
==================================================
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
FNB Corp. and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------
2000 1999
------------ -------------
(in thousands, except per share data)
<S> <C> <C>
Interest Income
Interest and fees on loans $ 5,897 $ 5,002
Interest and dividends on investment securities:
Taxable income 1,354 1,342
Non-taxable income 249 255
Federal funds sold 23 27
------------ -------------
Total interest income 7,523 6,626
------------ -------------
Interest Expense
Deposits 3,161 2,636
Retail repurchase agreements 113 111
Federal Home Loan Bank advances 203 62
Federal funds purchased 25 17
------------ -------------
Total interest expense 3,502 2,826
------------ -------------
Net Interest Income 4,021 3,800
Provision for loan losses 130 65
------------ -------------
Net Interest Income After Provision for Loan Losses 3,891 3,735
------------ -------------
Noninterest Income
Service charges on deposit accounts 469 423
Annuity and brokerage commissions 99 121
Cardholder and merchant services income 107 88
Other service charges, commissions and fees 158 144
Other income 79 62
------------ -------------
Total noninterest income 912 838
------------ -------------
Noninterest Expense
Personnel expense 1,646 1,540
Net occupancy expense 159 151
Furniture and equipment expense 394 226
Data processing services 136 383
Other expense 696 641
------------ -------------
Total noninterest expense 3,031 2,941
------------ -------------
Income Before Income Taxes 1,772 1,632
Income taxes 541 487
------------ -------------
Net Income $ 1,231 $ 1,145
============ ============
Net income per common share:
Basic $ .34 $ .31
Diluted .33 .30
============ =============
Weighted average number of shares outstanding:
Basic 3,655,777 3,657,200
Diluted 3,695,416 3,803,149
============ =============
Cash dividends declared per common share $ .12 $ .12
=========== =============
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
FNB Corp. and Subsidiary
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME
Three Months Ended March 31, 2000 and March 31, 1999
<TABLE>
<CAPTION>
Accumulated
Common Stock Other
------------------------- Retained Comprehensive
Shares Amount Surplus Earnings Income Total
----------- ------------ ------------ ------------ -------------- -----------
(in thousands, except share data)
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 3,655,376 $ 9,138 $ 117 $ 25,721 $ 26 35,002
Comprehensive income:
Net income - - - 1,145 - 1,145
Other comprehensive income:
Unrealized securities gains (losses),
net of income tax benefit of $189 - - - - (367) (367)
----------
Total comprehensive income - - - - - 778
----------
Cash dividends declared - - - (439) - (439)
Common stock issued through:
Dividend reinvestment plan - - - - - -
Stock option plan 2,400 6 20 - - 26
----------- ------------ ------------ ------------ -------------- -----------
Balance, March 31, 1999 3,657,776 $ 9,144 $ 137 $ 26,427 $ (341) 35,367
=========== ============ ============ ============ ============== ===========
Balance, December 31, 1999 3,661,000 $ 9,153 $ 174 $ 28,512 $ (1,909) 35,930
Comprehensive income:
Net income - - - 1,231 - 1,231
Other comprehensive income:
Unrealized securities gains (losses),
net of income tax benefit of $52 - - - - (101) (101)
----------
Total comprehensive income - - - - - 1,130
----------
Cash dividends declared - - - (439) - (439)
Common stock issued through:
Dividend reinvestment plan 2 - - - - -
Stock option plan 1,500 4 11 - - 15
Common stock repurchased (6,700) (17) (88) - - (105)
----------- ------------ ------------ ------------ -------------- -----------
Balance, March 31, 2000 3,655,802 $ 9,140 $ 97 $ 29,304 $ (2,010) 36,531
=========== ============ ============ ============ ============== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
FNB Corp. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------
2000 1999
------------ -------------
(in thousands)
<S> <C> <C>
Operating Activities:
Net income $ 1,231 $ 1,145
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of premises and equipment 329 218
Provision for loan losses 130 65
Deferred income taxes (benefit) (78) -
Deferred loan fees and costs, net (8) 31
Premium amortization and discount accretion
of investment securities, net 15 (60)
Amortization of intangibles 4 5
Net decrease (increase) in loans held for sale (26) 948
Increase in other assets (1,363) (796)
Increase in other liabilities 1,064 169
------------ -------------
Net Cash Provided by Operating Activities 1,298 1,725
------------ -------------
Investing Activities:
Available-for-sale securities:
Proceeds from maturities and calls - 6,965
Purchases (442) (10,283)
Held-to-maturity securities:
Proceeds from maturities and calls 459 3,484
Purchases (303) (1,000)
Net increase in loans (13,039) (6,423)
Proceeds from sales of premises and equipment - -
Purchases of premises and equipment (132) (708)
Other, net 34 13
------------ -------------
Net Cash Used in Investing Activities (13,423) (7,952)
------------ -------------
Financing Activities:
Net increase (decrease) in deposits 16,090 (760)
Increase (decrease) in retail repurchase agreements (70) 695
Increase in Federal Home Loan Bank advances - 7,000
Decrease in federal funds purchased (6,185) (1,095)
Common stock issued 15 26
Common stock repurchased (105) -
Cash dividends paid (549) (548)
------------ -------------
Net Cash Provided by Financing Activities 9,196 5,318
------------ -------------
Net Decrease in Cash and Cash Equivalents (2,929) (909)
Cash and cash equivalents at beginning of period 14,271 12,787
------------ -------------
Cash and Cash Equivalents at End of Period $ 11,342 $ 11,878
=====================================
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 2,606 $ 3,028
Income taxes 87 65
</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 a complete line of financial
services, including deposit, loan, investment and trust services, to
individual 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 results of operations of the
Corporation and its subsidiary are reviewed as a single enterprise by
the chief operating decision maker.
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 October 16, 1999, the Corporation entered into a definitive merger
agreement to acquire Carolina Fincorp, Inc. ("Carolina Fincorp"),
holding company for Richmond Savings Bank, Inc., SSB ("Richmond
Savings"), headquartered in Rockingham, North Carolina. On March 21,
2000, the shareholders of both FNB Corp. and Carolina Fincorp voted to
approve the merger, leaving certain contractual conditions of the
merger agreement to be satisfied. Following the satisfaction of these
conditions, the merger of the holding companies was effected on April
10, 2000 through the conversion of each share of Carolina Fincorp
common stock into .79 of a share of FNB Corp. common stock. Subject to
approval by applicable regulatory authorities, the merger of Richmond
Savings with and into the Bank is expected to occur in June 2000. The
merger will be accounted for as a pooling-of-interests transaction in
the second quarter of 2000. Merger-related costs will also be recorded
in the second quarter of 2000. At December 31, 1999, Carolina Fincorp
operated five offices through Richmond Savings and had approximately
$120,069,000 in total assets, $102,917,000 in deposits and $16,138,000
in stockholders' equity.
5
<PAGE>
4. Basic net income per share, or basic earnings per share (EPS), is
computed by dividing net income by the weighted average number of
common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if the Corporation's dilutive stock
options were exercised. The numerator of the basic EPS computation is
the same as the numerator of the diluted EPS computation for all
periods presented. A reconciliation of the denominators of the basic
and diluted EPS computations is as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31, .
-----------------------------
2000 1999 .
----------- ------------
<S> <C> <C>
Basic EPS denominator - Weighted average
number of common shares outstanding 3,655,777 3,657,200
Dilutive share effect arising from assumed
exercise of stock options 39,639 145,949
----------- ----------
Diluted EPS denominator 3,695,416 3,803,149
=========== ==========
</TABLE>
5. Loans as presented are reduced by net deferred loan fees of $545,000,
$468,000 and $553,000 at March 31, 2000, March 31, 1999 and December
31, 1999, respectively.
6. Significant components of other expense were as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
2000 1999
---------- -------
(in thousands)
<S> <C> <C>
Stationery, printing and supplies $100 $116
Advertising and marketing 108 57
</TABLE>
7. In the opinion of management, the financial information furnished in
this report includes all adjustments (consisting of normal recurring
accruals) necessary to a fair statement of the results for the periods
presented.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT
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 $1,231,000 in the first quarter of 2000, a 7.5%
increase over the same period in 1999. Basic earnings per share increased from
$.31 to $.34 in comparing these first quarter periods and diluted earnings per
share increased from $.30 to $.33. Total assets were $407,395,000 at March 31,
2000, up 12.3% from March 31, 1999 and 2.9% from December 31, 1999. Loans
amounted to $278,108,000 at March 31, 2000, increasing 18.3% from March 31, 1999
and 4.9% from December 31, 1999. Total deposits grew 11.5% from March 31, 1999
and 5.0% from December 31, 1999 to $338,857,000 at March 31, 2000.
On October 16, 1999, the Corporation entered into a definitive merger
agreement to acquire Carolina Fincorp, Inc. ("Carolina Fincorp"), holding
company for Richmond Savings Bank, Inc., SSB ("Richmond Savings"), headquartered
in Rockingham, North Carolina. On March 21, 2000, the shareholders of both FNB
Corp. and Carolina Fincorp voted to approve the merger, leaving certain
contractual conditions of the merger agreement to be satisfied. Following the
satisfaction of these conditions, the merger of the holding companies was
effected on April 10, 2000 through the conversion of each share of Carolina
Fincorp common stock into .79 of a share of FNB Corp. common stock. Subject to
approval by applicable regulatory authorities, the merger of Richmond Savings
with and into the Bank is expected to occur in June 2000. The merger will be
accounted for as a pooling-of-interests transaction in the second quarter of
2000. Merger-related costs will also be recorded in the second quarter of 2000.
At December 31, 1999, Carolina Fincorp operated five offices through Richmond
Savings and had approximately $120,069,000 in total assets, $102,917,000 in
deposits and $16,138,000 in stockholders' equity.
EARNINGS REVIEW
The Corporation's net income increased $86,000 or 7.5% in the first
quarter of 2000 compared to the same period of 1999. Earnings were positively
impacted in the first quarter of 2000 by increases of $221,000 or 5.8% in net
interest income and $74,000 in noninterest income. These gains were partially
offset, however, by a $90,000 increase in noninterest expense, as discussed in
"Noninterest Expense", and by a $65,000 increase in the provision for loan
losses.
On an annualized basis, return on average assets decreased from 1.28%
in the first quarter of 1999 to 1.23% in the first quarter of 2000. Return on
average shareholders' equity increased from 12.92% to 13.53% in comparing the
same periods.
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.
7
<PAGE>
Net interest income was $4,021,000 in the first quarter of 2000
compared to $3,800,000 in the same period of 1999. This increase of $221,000 or
5.8% resulted primarily from a 12.7% increase in the level of average earning
assets, the effect of which was partially offset by a decline in the net yield
on earning assets, or net interest margin, from 4.83% in the first quarter of
1999 to 4.50% in the same period of 2000. On a taxable equivalent basis, the
increase in net interest income in the first quarter of 2000 was $214,000,
reflecting changes in the relative mix of taxable and non-taxable earning assets
in each period.
Table 1 on page 16 sets 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 Table 1. 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 been relatively stable in recent years,
averaging 7.99%, 8.37% and 8.44% in 1999, 1998 and 1997, respectively. This
general stability has tended to apply to the interest rates both earned and paid
by the Bank. During the last three months of 1998, however, a significant change
occurred in the prime rate when the Federal Reserve took action on the level of
interest rates in response to the downturn of the economies of certain Asian and
Latin American countries and the effects or potential effects of those downturns
on the U.S. economy. In rapid succession, three 25 basis point cuts were
recorded in the prime rate, lowering it from 8.50% to 7.75%. This decrease in
the prime rate, through the effect on the average total yield on earning assets,
tended to negatively impact the Corporation's net interest margin and net
interest spread. Due to subsequent concern about inflationary pressures that
appeared to be building in the U.S. economy, the Federal Reserve elected to
raise the level of interest rates in the third and fourth quarters of 1999,
resulting in three 25 basis point increases in the prime rate that increased it
from 7.75% to 8.50%, thereby effectively reversing the rate reductions that
occurred in 1998. Continued concerns about possible inflationary pressures
caused the Federal Reserve to further raise the level of interest rates in the
2000 first quarter, resulting in two additional 25 basis point increases in the
prime rate that raised it to the 9.00% level. While the Corporation has tended
to see some improvement in the average total yield on earning assets due to the
prime rate increases, the average rate paid on interest-bearing liabilities has
increased by a greater amount, which has further negatively impacted the net
interest margin and interest spread.
Following the reductions in late 1998, the prime rate averaged 7.75% in
the first quarter of 1999. The subsequent increases resulted in an average prime
rate of 8.66% in the first quarter of 2000. The net interest spread, in
comparing first quarter periods, declined by 33 basis points from 4.14% in 1999
to 3.81% in 2000, reflecting the effect of a slight decrease in the average
total yield on earning assets coupled with a more significant increase in the
average rate paid on interest-bearing liabilities, or cost of funds. The yield
on earning assets decreased by 3 basis points from 8.23% in 1999 to 8.20% in
2000, while the cost of funds increased by 30 basis points from 4.09% to 4.39%.
8
<PAGE>
PROVISION FOR LOAN LOSSES
This provision is the charge against earnings to provide an allowance
or reserve for probable losses inherent in the loan portfolio. 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 the first quarter of 2000
compared to the same period in 1999 by a $65,000 increase in the provision.
The allowance for loan losses, as a percentage of loans outstanding,
amounted to 1.04% at March 31, 2000 and 1.08% at March 31, 1999. The reduction
in the allowance percentage reflected changes in the loan portfolio mix. As
discussed in "Loans", the 1-4 family residential mortgage loan portfolio, which
requires a relatively lower level of reserve for loan losses, has significantly
increased since March 31, 1999. Further, a riskier loan segment, retail
installment loan contracts purchased from automobile and equipment dealers, has
been discontinued.
NONINTEREST INCOME
Noninterest income increased $74,000 or 8.8% in the first quarter of
2000 compared to the same period in 1999, reflecting in part the general
increase in the volume of business. The increase in service charges on deposit
accounts was primarily due to the selected increases in service charge rates
that became effective in the 1999 first quarter. Other income was higher due
mainly to an increase in fees for trust services.
NONINTEREST EXPENSE
Noninterest expense was $90,000 or 3.1% higher in the first quarter of
2000 compared to the same period in 1999, due largely to increased personnel
expense, a higher level of advertising and marketing expense and the continuing
effects of inflation. The level of noninterest expense was further affected by
the opening of a new branch office in August 1999 (see "Business Development
Matters"). The components of noninterest expense were affected by the major data
processing conversion completed in the first quarter of 1999, which conversion
ultimately resulted in a major reduction in the cost of data processing services
provided by outside processors. Personnel expense was impacted by increased
staffing requirements, especially as related to the data processing conversion
and to the opening of the new branch office, and by normal salary adjustments.
Furniture and equipment expense increased largely as a result of the data
processing conversion, especially for depreciation and maintenance charges.
Advertising and marketing expense, included in other expense, increased $51,000
in 2000 due primarily to an increased level of expenditures related to the major
marketing plan centered around the "YES YOU CAN, YES WE CAN(R)" program.
The major data processing conversion from a service bureau arrangement
to an in-house basis, completed on March 26, 1999 and discussed in "Business
Development Matters", significantly affected operating results for the 1999
first quarter. The cost of data processing services in the 1999 first quarter
was impacted by the higher rate charged by the service bureau on a
month-to-month basis, subsequent to the termination of the prior long-term
agreement in late 1998. Also, personnel expense was negatively affected by the
staffing and training requirements that were preliminary to the implementation
of the new system.
9
<PAGE>
Subsequent to the 1999 first quarter, the total cost related to data
processing operations on an in-house basis compares favorably to the cost that
was being experienced under the service bureau arrangement prior to the start of
the conversion process in the 1998 fourth quarter. Noninterest expense
components are being significantly affected, however, as there is a major
decrease in the direct cost of data processing services, but increases in the
levels of personnel expense and furniture and equipment expense.
INCOME TAXES
The effective income tax rate increased from 29.8% in the first quarter
of 1999 to 30.5% in the same period of 2000 due principally to an increase in
the ratio of taxable to tax-exempt income.
LIQUIDITY
Liquidity refers to the continuing ability of the Bank to meet deposit
withdrawals, fund loan and capital expenditure commitments, maintain reserve
requirements, pay operating expenses and provide funds to the Parent Company for
payment of dividends, debt service and other operational requirements. Liquidity
is immediately available from 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 $48,800,000
line of credit established at the Federal Home Loan Bank, less existing advances
against that line, 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. 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 primarily on a core of local deposits
and the Bank's capital position. To date, the steady increase in deposits,
retail repurchase agreements and capital, supplemented by Federal Home Loan Bank
advances, 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 SENSTIVITY
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 was liability-sensitive at March 31, 2000. A
liability-sensitive position means that in gap measurement periods of one year
or less there are 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.
10
<PAGE>
Included in interest-bearing liabilities subject to rate changes within 90 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.
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 1, Tier 2 and Tier 3, as a percentage of
risk-weighted assets, which are computed by measuring the relative credit risk
of both the asset categories on the balance sheet and various off-balance sheet
exposures. Tier 1 capital consists primarily of common shareholders' equity and
qualifying perpetual preferred stock, net of goodwill and other disallowed
intangible assets. Tier 2 capital, which is limited to the total of Tier 1
capital, includes allowable amounts of subordinated debt, mandatory convertible
debt, preferred stock and the allowance for loan losses. Tier 3 capital,
applicable only to financial institutions subject to certain market risk capital
guidelines, is capital allocated to support the market risk related to a
financial institution's ongoing trading activities. At March 31, 2000, FNB Corp.
and the Bank were not subject to the market risk capital guidelines and,
accordingly, had no Tier 3 capital allocation. Total capital, for risk-based
purposes, consists of the sum of Tier 1, Tier 2 and Tier 3 capital. Under
current requirements, the minimum total capital ratio is 8.00% and the minimum
Tier 1 capital ratio is 4.00%. At March 31, 2000, FNB Corp. and the Bank had
total capital ratios of 14.58% and 14.08%, respectively, and Tier 1 capital
ratios of 13.57% and 13.06%.
The leverage capital ratio, which serves as a minimum capital standard,
considers Tier 1 capital only and is expressed as a percentage of average total
assets for the most recent quarter, after reduction of those assets for goodwill
and other disallowed intangible assets at the measurement date. As currently
required, the minimum leverage capital ratio is 4.00%. At March 31, 2000, FNB
Corp. and the Bank had leverage capital ratios of 9.56% and 9.20%, 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 1 capital of 6.00% and for leverage
capital of 5.00%. As noted above, the Bank met all of those ratio requirements
at March 31, 2000 and, accordingly, is well-capitalized under the regulatory
framework for prompt corrective action.
BALANCE SHEET REVIEW
Total assets at March 31, 2000 were higher than at March 31, 1999 and
December 31, 1999 by $44,511,000 or 12.3% and $11,328,000 or 2.9%, respectively;
deposits were ahead by $34,927,000 or 11.5% and $16,090,000 or 5.0%. A portion
of the asset growth was funded by advances from the Federal Home Loan Bank which
at March 31, 2000 had increased by $8,000,000 or 114.3% from March 31, 1999 and
were unchanged compared to December 31, 1999. The level of funds provided by
retail repurchase agreements at March 31, 2000 had decreased by $1,582,000 or
13.0% from March 31, 1999 and by $70,000 or 0.7% from December 31, 1999. Average
assets increased 11.7% in the first quarter of 2000 compared to the same period
in 1999, while average deposits increased 10.2%.
11
<PAGE>
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 March 31, 2000, when
the growth in total assets exceeded that for loans, the level of investment
securities was increased $837,000 or 0.8%, with a net increase of $120,000 or
0.1% occurring in the first quarter of 2000. Investable funds not otherwise
utilized are temporarily invested on an overnight basis as federal funds sold,
the level of which is affected by such considerations as near-term loan demand
and liquidity needs. Based on funds requirements, the Bank was a net purchaser
of funds at March 31, 2000.
LOANS
The Corporation's primary source of revenue and largest component of
earning assets is the loan portfolio. Loans increased $43,021,000 or 18.3%
during the twelve-month period ended March 31, 2000. The net loan increase
during the first quarter of 2000 was $13,079,000 or 4.9%. Average loans were
$37,584,000 or 16.2% higher in the first quarter of 2000 than in the same period
of 1999. The ratio of average loans to average deposits, in comparing first
quarter periods increased from 77.1% in 1999 to 81.3% in 2000. The ratio of
loans to deposits at March 31, 2000 was 82.1%.
The commercial and agricultural loan portfolio has experienced strong
gains during both the twelve-month period ended March 31, 2000 and the first
quarter of 2000. The 1-4 family residential mortgage loan portfolio has also
gained significantly during the twelve-month period ended March 31, 2000 and to
a lesser extent during the first quarter of 2000. Lease financing contracts, a
new loan product in 1999, have further added to the balance of the total loan
portfolio. Loan growth and the composition of the loan portfolio are being
affected by management's decision in March 1996 to discontinue the purchase of
retail installment loan contracts from automobile and equipment dealers (see
"Business Development Matters"). The outstanding balance of these loan
contracts, which are primarily included in consumer loans, experienced a net
decrease of $2,074,000 during the twelve-month period ended March 31, 2000.
Consequently, total consumer loans declined significantly during that period.
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. For loans
determined to be impaired, the allowance is based on discounted cash flows using
the loan's initial effective interest rate or the fair value of the collateral
for certain collateral dependent loans. 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. The unallocated portion of the allowance for loan losses
represents management's estimate of the appropriate level of reserve to provide
for probable losses inherent in the loan portfolio. Considerations in
determining the unallocated portion of the allowance for loan losses include
general economic and lending trends and other factors.
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
in the determination of the allowance for loan losses.
The following table presents an analysis of the changes in the
allowance for loan losses.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
2000 1999
------- ------
(in thousands)
<S> <C> <C>
Balance at beginning of period $2,745 $2,517
Charge-offs 34 74
Recoveries 40 27
--------- ---------
Net loan charge-offs (recoveries) (6) 47
Provision for loan losses 130 65
-------- ---------
Balance at end of period $2,881 $2,535
======== =========
</TABLE>
At March 31, 2000, the Bank had impaired loans with three borrowers
that totaled $1,363,000, of which $1,313,000 was on nonaccrual status. The
related allowance for loan losses on these loans amounted to $253,000. The
payment of principal and interest on impaired loans with one borrower is
guaranteed up to a specified percentage by an agency of the U. S. Government.
Based on the balances outstanding at March 31, 2000, the guaranteed portion of
impaired loans amounted to $793,000.
Nonperforming loans were $1,966,000 in total at March 31, 2000,
nonaccrual loans and accruing loans past due 90 days or more amounting to
$1,634,000 and $332,000, respectively.
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. The growth in money market accounts of $4,143,000 during
the twelve-month period ended March 31, 2000 and $739,000 during the first
quarter of 2000 was due to a high-yield product that has had steady growth since
its introduction in the 1996 fourth quarter. Time deposits of $100,000 or more
accounted for $20,086,000 of total time deposit growth of $30,727,000 during the
twelve-month period ended March 31, 2000 and $7,378,000 of total time deposit
growth of $12,075,000 during the first quarter of 2000. Further, the level of
time deposits obtained from governmental units fluctuates, amounting to
$45,743,000, $22,583,000 and $38,529,000 at March 31, 2000, March 31, 1999 and
December 31, 1999, respectively.
13
<PAGE>
BUSINESS DEVELOPMENT MATTERS
As discussed in the "Overview" and in Note 3 to Consolidated Financial
Statements, the Corporation completed a merger in the second quarter of 2000 for
the acquisition of Carolina Fincorp, headquartered in Rockingham, North
Carolina.
Prior to March 26, 1999, the Bank's data processing, item capture and
statement rendering operations were outsourced under a service bureau
arrangement. Commencing in the 1998 fourth quarter, the Bank began the process
of converting these operations to an in-house basis. Conversion to the
replacement systems occurred on March 26, 1999. The total capital expenditure
outlay for hardware and software amounted to approximately $1,700,000, of which
approximately one-half was recorded in 1998 and the remainder in 1999. In
addition to capital expenditures for the new system, the Bank incurred certain
expenses in 1998, totaling approximately $302,000, related to deconversion from
the prior arrangement.
In the 1998 fourth quarter, the Bank received regulatory approval for
establishment of a new branch office in Trinity, North Carolina. Construction of
the permanent Trinity facility is expected to be complete in 2001, resulting in
a total capital outlay of approximately $1,000,000, of which approximately
one-third was recorded in 1998 related to the purchase of land. Prior to
completion of the permanent facility, a temporary mobile office, which opened in
August 1999, is being operated at this site.
Management decided in March 1996 that the Bank would discontinue the
purchase of retail installment loan contracts from automobile and equipment
dealers, due largely to the declining yields being experienced in this loan
program. Contracts of this nature included in loans at March 31, 2000, March 31,
1999 and December 31, 1999 amounted to $613,000, $2,687,000 and $963,000,
respectively. While there will be no purchases of new contracts, current plans
call for the collection of outstanding loans based on their contractual terms.
The funds previously invested in this loan program are being redeployed, as loan
payments occur, to other loan programs or to the investment securities
portfolio.
YEAR 2000 STATUS
As of the date of this report, the Corporation has not experienced any
material effects related to the Year 2000 readiness problem. Although the
Corporation has not been informed of any material risks associated with the year
2000 problem from third parties, there can be no assurance that the Corporation
will not be impacted in the future. The Corporation will continuously monitor
its business applications and maintain contact with its third-party vendors and
key business partners to resolve any Year 2000 problems that may arise in the
future.
CAUTIONARY SATEMENT FOR PURPOSE OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
The statements contained in this Quarterly Report on Form 10-Q that are
not historical facts are forward-looking statements (as such term is defined in
the Private Securities Litigation Reform Act of 1995), which can be identified
by the use of forward-looking terminology such as "believes", "expects",
"plans", "projects", "goals", "estimates", "may", "could", "should", or
"anticipates" or the negative thereof or other variations thereon of comparable
terminology, or by discussions of strategy that involve risks and uncertainties.
In addition, from time to time, the Corporation or its representatives have made
or may make forward-looking statements, orally or in writing. Such
forward-looking statements may be included in, but
14
<PAGE>
are not limited to, various filings made by the Corporation with the Securities
and Exchange Commission, or press releases or oral statements made by or with
the approval of an authorized executive officer of the Corporation.
Forward-looking statements are based on management's current views and
assumptions and involve risks and uncertainties that could significantly affect
expected results. The Corporation wishes to caution the reader that factors,
such as those listed below, in some cases have affected and could affect the
Corporation's actual results, causing actual results to differ materially from
those in any forward-looking statement. These factors include: (i) expected cost
savings from the merger completed with Carolina Fincorp in the second quarter of
2000 may not materialize, (ii) the Corporation may experience greater than
expected deposit attrition, customer loss, or revenue loss in connection with
the merger, (iii) competitive pressure in the banking industry or in the
Corporation's markets may increase significantly, (iv) changes in the interest
rate environment may reduce margins, (v) general economic conditions, either
nationally or regionally, may be less favorable than expected, resulting in,
among other things, credit quality deterioration, (vi) changes may occur in
banking legislation and in the environment, (vii) changes may occur in general
business conditions and inflation and (viii) changes may occur in the securities
markets. Readers should also consider information on risks and uncertainties
contained in the discussions of competition, supervision and regulation, and
effect of governmental policies contained in the Corporation's most recent
Annual Report on Form 10-K.
15
<PAGE>
Table 1
Average Balances and Net Interest Income Analysis
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31 2000
--------------------------------------------
Average
Interest Rates
Average Income/ Earned/
Balance Expense Paid
------------ ------------ ------------
<S> <C> <C> <C>
Earning Assets
Loans (2) (3) $ 269,432 $ 5,911 8.79%
Investment securities (2):
Taxable income 88,745 1,452 6.55
Non-taxable income 19,963 384 7.70
Federal funds sold 1,573 23 5.80
------------ ------------ ------------
Total earning assets 379,713 7,770 8.20
------------ ------------ ------------
Cash and due from banks 11,985
Other assets, net 8,328
------------
Total Assets $ 400,026
============
Interest-Bearing Liabilities
Interest-bearing deposits:
NOW accounts $ 43,014 133 1.24
Savings deposits 25,371 127 2.01
Money market accounts 34,340 329 3.84
Certificates and other time deposits 188,592 2,572 5.47
Retail repurchase agreements 10,942 113 4.15
Federal Home Loan Bank advances 15,714 203 5.17
Federal funds purchased 1,704 25 5.82
------------ ------------ ------------
Total interest-bearing liabilities 319,677 3,502 4.39
------------ ------------ ------------
Noninterest-bearing demand deposits 39,965
Other liabilities 3,978
Shareholders' equity 36,406
------------
Total Liabilities and
Shareholders' Equity $ 400,026
============
Net Interest Income and Spread $ 4,268 3.81 %
============ ============
Net Yield on Earning Assets 4.50 %
============
</TABLE>
<PAGE>
Table 1
Average Balances and Net Interest Income Analysis
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31 1999
-------------------------------------------
Average
Interest Rates
Average Income/ Earned/
Balance Expense Paid
------------ ------------- ------------
(Taxable Equivalent Basis, Dollars in Thousands)
<S> <C> <C> <C>
Earning Assets
Loans (2) (3) $ 231,848 $ 5,012 8.74%
Investment securities (2):
Taxable income 82,663 1,445 6.99
Non-taxable income 20,188 396 7.86
Federal funds sold 2,273 27 4.75
------------ ------------- ------------
Total earning assets 336,972 6,880 8.23
------------ ------------- ------------
Cash and due from banks 11,502
Other assets, net 9,607
------------
Total Assets $ 358,081
============
Interest-Bearing Liabilities
Interest-bearing deposits:
NOW accounts $ 42,675 137 1.30
Savings deposits 26,162 135 2.10
Money market accounts 29,309 258 3.57
Certificates and other time deposits 163,246 2,106 5.23
Retail repurchase agreements 12,064 111 3.73
Federal Home Loan Bank advances 5,056 62 4.99
Federal funds purchased 1,457 17 4.71
------------ ------------- ------------
Total interest-bearing liabilities 279,969 2,826 4.09
------------ ------------- ------------
Noninterest-bearing demand deposits 39,171
Other liabilities 3,507
Shareholders' equity 35,434
------------
Total Liabilities and
Shareholders' Equity $ 358,081
============
Net Interest Income and Spread $ 4,054 4.14 %
============= ============
Net Yield on Earning Assets 4.83 %
============
</TABLE>
<PAGE>
Table 1
Average Balances and Net Interest Income Analysis
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
2000 Versus 1999
--------------------------------------------
Interest Variance
due to (1)
---------------------------- Net
Volume Rate Change
------------ ------------ ------------
<S> <C> <C> <C>
Earning Assets
Loans (2) (3) $ 868 $ 31 $ 899
Investment securities (2):
Taxable income 102 (95) 7
Non-taxable income (4) (8) (12)
Federal funds sold (9) 5 (4)
------------ ------------ ------------
Total earning assets 957 (67) 890
------------ ------------ ------------
Cash and due from banks
Other assets, net
Total Assets
Interest-Bearing Liabilities
Interest-bearing deposits:
NOW accounts 1 (5) (4)
Savings deposits (3) (5) (8)
Money market accounts 49 22 71
Certificates and other time deposits 360 106 466
Retail repurchase agreements (11) 13 2
Federal Home Loan Bank advances 139 2 141
Federal funds purchased 3 5 8
------------ ------------ ------------
Total interest-bearing liabilities 538 138 676
------------ ------------ ------------
Noninterest-bearing demand deposits
Other liabilities
Shareholders' equity
Total Liabilities and
Shareholders' Equity
Net Interest Income and Spread $ 419 $ (205) $ 214
============ ============ ============
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>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk reflects the risk of economic loss resulting from adverse
changes in market price and interest rates. This risk of loss can be reflected
in diminished current market values and/or reduced potential net interest income
in future periods.
The Bank's market risk arises primarily from interest rate risk
inherent in its lending and deposit-taking activities. The structure of the
Bank's loan and deposit portfolios is such that a significant decline in
interest rates may adversely impact net market values and net interest income.
The Bank does not maintain a trading account nor is the Bank subject to currency
exchange risk or commodity price risk. Interest rate risk is monitored as part
of the Bank's asset/liability management function, which is discussed above in
Item 2 "Management's Discussion and Analysis of Financial Condition and Results
of Operations" under the heading "Asset/Liability Management and Interest Rate
Sensitivity".
Management does not believe there has been any significant change in
the overall analysis of financial instruments considered market risk sensitive,
as measured by the factors of contractual maturities, average interest rates and
estimated fair values, since the analysis prepared and presented in conjunction
with the Form 10-K Annual Report for the fiscal year ended December 31, 1999.
17
<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 19 and 20 of this report.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended
March 31, 2000.
-------------------------------------------
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: May 12, 2000 By: /s/ Jerry A. Little
-------------------
Jerry A. Little
Treasurer and Secretary
(Principal Financial and
Accounting Officer)
18
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
<S> <C>
2.10 Amended and Restated Agreement and Plan of Merger by and between FNB Corp. and
Carolina Fincorp, Inc., dated as of December 28, 1999, incorporated herein by
reference to Exhibit 2.10 to the Registrant's Form S-4 Registration Statement
(No. 333-93869) filed December 30, 1999.
2.11 Stock Option Agreement issued by Carolina Fincorp, Inc. to FNB Corp., dated as
of October 16, 1999, incorporated herein by reference to Exhibit 2.11 to the
Registrant's Form S-4 Registration Statement (No, 333-93869) filed December 30, 1999.
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.
3.12 Articles of Amendment to Articles of Incorporation of the Registrant,
adopted May 12, 1998, incorporated herein by reference to Exhibit 3.12 to
the Registrant's Form 10-Q Quarterly Report for the quarter ended June 30, 1998.
3.20 Amended and Restated Bylaws of the Registrant, adopted May 21, 1998,
incorporated herein by reference to Exhibit 3.20 to the Registrant's Form 10-Q
Quarterly Report for the quarter ended June 30, 1998.
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.
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
<S> <C>
10.11 Form of Amendment to Split Dollar Insurance Agreement dated as of
November 1, 1994 between First National Bank and Trust Company and
certain of its key employees and directors, incorporated herein by reference
to Exhibit 10.11 to the Registrant's Form 10-KSB Annual Report for the
fiscal year ended December 31, 1994.
10.20 Stock Compensation Plan, as amended, effective May 12, 1998,
incorporated herein by reference to Exhibit 10.30 the Registrant's Form 10-Q
Quarterly Report for the quarter ended June 30, 1998.
10.21 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.
10.22 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.
10.30 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 for the three months ended March 31, 2000.
</TABLE>
20
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 11,342
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 53,486
<INVESTMENTS-CARRYING> 52,466
<INVESTMENTS-MARKET> 0
<LOANS> 278,108
<ALLOWANCE> 2,881
<TOTAL-ASSETS> 407,395
<DEPOSITS> 338,857
<SHORT-TERM> 12,147
<LIABILITIES-OTHER> 4,860
<LONG-TERM> 15,000
0
0
<COMMON> 9,140
<OTHER-SE> 27,391
<TOTAL-LIABILITIES-AND-EQUITY> 407,395
<INTEREST-LOAN> 5,897
<INTEREST-INVEST> 1,603
<INTEREST-OTHER> 23
<INTEREST-TOTAL> 7,523
<INTEREST-DEPOSIT> 3,161
<INTEREST-EXPENSE> 3,502
<INTEREST-INCOME-NET> 4,021
<LOAN-LOSSES> 130
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,031
<INCOME-PRETAX> 1,772
<INCOME-PRE-EXTRAORDINARY> 1,772
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,231
<EPS-BASIC> .34
<EPS-DILUTED> .33
<YIELD-ACTUAL> 4.23
<LOANS-NON> 1,634
<LOANS-PAST> 332
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,745
<CHARGE-OFFS> 34
<RECOVERIES> 40
<ALLOWANCE-CLOSE> 2,881
<ALLOWANCE-DOMESTIC> 2,561
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 320
</TABLE>
