FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 2000
Commission file number: 33-66014
FNB Financial Corporation
(Exact name of registrant as specified in its charter)
Commonwealth of Pennsylvania 23-2466821
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 Lincoln Way West, McConnellsburg, PA 17233
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: 717/485-3123
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 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
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at September 30, 2000
(Common stock, $0.315 par value) 800,000
FNB FINANCIAL CORPORATION
INDEX
Page
PART I - FINANCIAL INFORMATION
Condensed consolidated balance sheets -
September 30, 2000 and December 31, 1999 5
Condensed consolidated statements of income -
Three months ended September 30, 2000 and 1999 6
Condensed consolidated statements of income -
Nine months ended September 30, 2000 and 1999 7
Condensed consolidated statements of comprehensive
income -
Nine months ended September 30, 2000 and 1999 8
Condensed consolidated statements of cash flows -
Nine months ended September 30, 2000 and 1999 9
Notes to condensed consolidated financial
statements 10-12
Table #1 - Schedule of held to maturity and
available for sale investment activity for the
period January 1, 2000 through September 30, 2000 13
Table #2 - Schedule of gross unrealized gains and
unrealized losses within the held to maturity and
available for sale investment portfolios by
investment type 14
Management's discussion and analysis of financial
condition and results of operations 15-17
PART II - OTHER INFORMATION 19
Signatures 20
Exhibits 21-24
PART I - FINANCIAL INFORMATION
FNB FINANCIAL CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<S> <C> <C>
September 30, December 31,
2000 1999
ASSETS: (unaudited) (audited*)
Cash and Due from banks $ 3,774,275 $ 3,565,173
Interest-bearing deposits with banks 779,837 723,094
Marketable Debt Securities
Held-to-maturity (Market value - 2000:
$1,194,411 and 1999: $1,556,865) 1,312,093 1,669,712
Available-for-sale 26,629,878 27,886,136
Marketable Equity Securities available for sale 185,230 199,112
Federal Reserve, Atlantic Central Banker's Bank
and Federal Home Loan Bank Stock 833,700 681,200
Federal Funds Sold 86,000 0
Loans, net of unearned discount &
Allowance for loan losses 81,912,928 76,137,080
Bank buildings, equipment, furniture &
fixtures, net 3,084,734 3,119,101
Accrued interest receivable 821,491 687,259
Deferred income tax charges 570,415 676,502
Other real estate owned 124,803 165,603
Intangible Assets 149,216 161,491
Cash surrender value of life insurance 2,185,201 2,107,104
Other assets 205,752 150,616
Total Assets $122,655,553 $117,929,183
========== ==========
LIABILITIES :
Deposits:
Demand deposits $12,303,365 $10,959,096
Savings deposits 28,983,808 27,567,017
Time certificates 62,019,660 60,509,040
Other time deposits 744,126 294,783
Total deposits $104,050,959 $ 99,329,936
Accrued interest payable & other liabilities 1,127,697 861,514
Liability for other borrowed money 5,410,206 6,364,996
Deferred income taxes 0 0
Accrued dividends payable 96,000 172,000
Total Liabilities $110,684,862 $106,728,446
STOCKHOLDERS' EQUITY:
Capital stock, Common, par value $0.315; 12,000,000
shares authorized; 800,000 outstanding $ 252,000 $ 252,000
Additional paid-in capital 1,789,833 1,789,833
Retained earnings 10,607,054 10,125,145
Net unrealized gain/(loss) on Available-for-sale
securities, net of tax effects (678,196) (966,241)
Total Stockholders' Equity $11,970,691 $11,200,737
Total Liabilities & Stockholders' Equity$122,655,553 $117,929,183
========== ==========
</TABLE>
*Condensed from audited financial statements.
The accompanying notes are an integral part of these condensed
financial statements.
FNB FINANCIAL CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended September 30, 2000 and 1999
(UNAUDITED)
<TABLE>
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2000 1999
Interest & Dividend Income
Interest & fees on loans $1,791,648 $1,484,161
Interest on investment securities:
U.S. Treasury Securities 0 0
Obligations of other U.S.
Government Agencies 324,261 334,357
Obligations of State & Political
Subdivisions 103,049 118,438
Interest on deposits with banks 16,380 13,453
Dividends on Equity Securities 16,166 7,645
Interest on federal funds sold 3,445 6,901
Total Interest & Dividend Income 2,254,949 1,964,955
Interest Expense
Interest on deposits 1,102,784 1,008,512
Interest on Other borrowed money 99,638 23,033
Total interest expense 1,202,422 1,031,545
Net interest income 1,052,527 933,410
Provision for loan losses 45,000 30,000
Net interest income after
Provision for loan losses 1,007,527 903,410
Other income
Service charges on deposit accounts 52,100 35,384
Other service charges, collection &
exchange charges, commissions
and fees 55,241 60,534
Other income 37,743 32,051
Net Securities gains/(losses) 0 0
Total other income 145,084 127,969
Other expenses 821,818 756,281
Income before income taxes 330,793 275,098
Applicable income taxes 69,018 42,435
Net income $261,775 $232,663
======= =======
Earnings per share of Common Stock:
Net income per share* $0.33 $0.29
Cash dividend declared per share* $0.12 $0.10
Weighted average number of shares outstanding 800,000 800,000
* Per share data has been adjusted to reflect a 2 for 1 stock split effective September 1, 2000, which resulted in 800,000 common
shares outstanding.
</TABLE>
The accompanying notes are an integral part of these condensed
financial statements.
FNB FINANCIAL CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Nine Months Ended September 30, 2000 and 1999
(UNAUDITED)
<TABLE>
<S> <C> <C>
2000 1999
Interest & Dividend Income
Interest & fees on loans $5,134,593 $4,179,348
Interest on investment securities:
U.S. Treasury Securities 0 1,585
Obligations of other U.S.
Government Agencies 981,217 1,032,983
Obligations of State & Political
Subdivisions 321,828 368,364
Interest on deposits with banks 37,940 58,001
Dividends on Equity Securities 45,451 22,936
Interest on federal funds sold 3,445 80,130
Total Interest & Dividend Income 6,524,474 5,743,347
Interest Expense
Interest on deposits 3,107,443 3,020,015
Interest on other borrowed money 368,937 28,604
Total Interest Expense 3,476,380 3,048,619
Net interest income 3,048,094 2,694,728
Provision for loan losses 150,000 96,000
Net interest income after
Provision for loan losses 2,898,094 2,598,728
Other income
Service charges on deposit accounts 132,995 85,927
Other service charges, collection &
exchange charges, commissions
and fees 196,167 190,514
Other income 121,167 97,196
Net Securities gains/(losses) (474) 49,675
Total other income 449,855 423,312
Other expenses 2,410,021 2,224,616
Income before income taxes 937,928 797,424
Applicable income taxes 191,768 139,664
Net income $746,160 $657,760
======= =======
Earnings per share of Common Stock:
Net income per share $0.93 $0.82
Cash dividend declared per share $0.33 $0.285
Weighted average number of shares outstanding 800,000 800,000
* Per share data has been adjusted to reflect a 2 for 1 stock split effective September 1, 2000, which resulted in 800,000 common
shares outstanding.
</TABLE>
The accompanying notes are an integral part of these condensed
financial statements.
FNB FINANCIAL CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Nine Months Ended September 30, 2000 and 1999
(UNAUDITED)
<TABLE>
<S> <C> <C>
2000 1999
Net Income $746,160 $657,760
Other Comprehensive income, net of tax
Unrealized holding gains/(losses) for period 288,045 (910,811)
Comprehensive Income $1,034,205 $(253,051)
======= =======
</TABLE>
The accompanying notes are an integral part of these condensed
financial statements.
FNB FINANCIAL CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 2000 and 1999
<TABLE>
<S> <C>
<C>
(UNAUDITED) 2000
1999
Cash flows from operating activities:
Net income $ 746,160 $ 657,760
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation & amortization 208,219 205,446
Provision for loan losses 150,000 96,000
Net (gain)/loss on sales of investments 474 (49,675)
Loss on Disposal of Other Assets (Net) (865) 4,346
Loss on Disposal of Other Real Estate (Net) 805 3,106
(Increase) decrease in deferred taxes (47,522) (16,312)
(Increase) decrease in accrued interest receivable (134,232) (15)
Increase in cash value of life insurance (78,097) (61,196)
Increase (decrease) in accrued interest payable and other liabilities 266,183 107,024
Other (net) (54,170) (69,468)
Net cash provided (used)by operating activities 1,056,955 877,016
Cash flows from investing activities:
Net (increase) decrease in interest-bearing deposits with banks (56,743) 1,112,145
Purchases of Held-to-maturity securities 0 0
Purchases of Available-for-sale securities 0 (2,221,470)
Proceeds from sales of Available-for-sale securities 0 1,077,301
Proceeds from maturities of Held-to-maturity securities 357,619 479,984
Proceeds from maturities of Available-for-sale securities 1,706,098 3,945,924
Purchases of marketable equity securities 0 (53,250)
Proceeds from sales of marketable equity securities 0 74,200
Net (increase) decrease in loans (6,156,237) (10,173,147)
Proceeds from sale of Other real estate owned 273,937 153,997
Purchases of bank premises & equipment (net) (160,966) (222,135)
Purchase of life insurance 0 0
Purchase of other bank stock (152,500) (20,900)
Proceeds from sale of other assets & equipment 706 15,654
Net cash provided (used) by investing activities (4,188,086) (5,831,697)
Cash flows from financing activities:
Net increase (decrease) in deposits 4,721,023 (738,922)
Net increase (decrease) in other borrowings (954,790) 1,667,453
Cash dividends paid (340,000) (256,000)
Net cash provided (used) by financing activities 3,426,233 672,531
Net increase (decrease) in cash & cash equivalents 295,102 (4,282,150)
Cash & cash equivalents, beginning balance 3,565,173 7,270,802
Cash & cash equivalents, ending balance $3,860,275 $2,988,652
Supplemental disclosure of cash flows information
Cash paid during the year for:
Interest $3,236,819 $2,969,592
Income taxes 161,206 200,866
Supplemental schedule of noncash investing & financing activities
Unrealized gain (loss) on Available-for-sale securities net of tax effects 290,045 (910,811)
Accrued dividends payable 96,000 80,000
Other real estate and property acquired in settlement of loans 0 0
Loan advanced for sale of other real estate 0 35,000
</TABLE>
The accompanying notes are an integral part of these condensed
financial statements.
FNB FINANCIAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The financial information presented at and for the nine
months ended September 30, 2000, is reviewed and for
September 30, 1999, is unaudited. Information presented at
December 31, 1999, is condensed from audited year-end
financial statements. However, this unaudited information
reflects all adjustments, consisting solely of normal
recurring adjustments, that are, in the opinion of
management, necessary for a fair presentation of the
financial position, results of operations and cash flows for
the interim period.
NOTE 2 - PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
the corporation and its wholly-owned subsidiary, The First
National Bank of McConnellsburg. All significant
intercompany transactions and accounts have been
eliminated.
NOTE 3 - CASH FLOWS
For purposes of the statements of cash flows, the corporation
has defined cash and cash equivalents as those amounts
included in the balance sheet captions "cash and due from
banks" and "federal funds sold". As permitted by Statement
of Financial Accounting Standards No. 104, the corporation
has elected to present the net increase or decrease in
deposits in banks, loans and time deposits in the statement
of cash flows.
NOTE 4 - FEDERAL INCOME TAXES
For financial reporting purposes the provision for loan
losses charged to operating expense is based on management's
judgement, whereas for federal income tax purposes, the
amount allowable under present tax law is deducted.
Additionally, certain expenses are charged to operating
expense in the period the liability is incurred for financial
reporting purposes, whereas for federal income tax purposes,
these expenses are deducted when paid. As a result of these
timing differences, deferred taxes were computed after
reducing pre-tax accounting income for nontaxable municipal
and loan income.
NOTE 5 - INVESTMENTS
The activity within the held to maturity and available for
sale portfolios for the period January 1, 2000, through
September 30, 2000, is summarized in Table #1 on page 13. No
sales were conducted from securities contained within the
held to maturity portfolio.
The amortized cost and estimated market values of investments
by investment type and classification as available for sale
or held to maturity along with each portfolio's gross
unrealized gain or gross unrealized loss are contained
in Table #2 on page 14.
Management has purchased for the portfolio mortgage-backed
securities. The large portion of these securities have a
variable rate coupon and all have scheduled principal
payments. During periods of rising interest rates, payments
from variable rate mortgage-backed securities may accelerate
as prepayments of underlying mortgages occur as home-owners
refinance to a fixed rate while during periods of declining
interest rates, prepayments on high fixed rate mortgage-
backed securities may accelerate as home owners refinance to
lower rate mortgages. These prepayments cause yields on
mortgage-backed securities to fluctuate as larger payments of
principal necessitate the acceleration of premium
amortization or discount accretion. Due to the low dollar
amount of mortgage-backed securities in relation to the total
portfolio, management feels that interest rate risk and
prepayment risks associated with mortgage-backed securities
will not have a material impact on the financial condition of
the Bank.
In regard to Collateralized Mortgage Obligations (CMOs), the
Bank presently has none of these types of investments in its
portfolio.
NOTE 6 - ALLOWANCE FOR LOAN LOSSES
Activity in the allowance for loan losses is summarized as
follows:
<TABLE>
<S> <C> <C>
2000 1999
Allowance for loan losses beginning of the year $746,067 $731,641
Loans charged-off during the year:
Real estate mortgages 1,000 100,000
Installment loans 69,925 27,112
Commercial & all other 24,395 31,973
Total charge-offs 95,320 159,085
Recoveries of loans previously charged-off:
Real estate mortgages 0 200
Installment loans 21,794 20,043
Commercial & all other 1,360 1,517
Total recoveries 23,154 21,760
Net loans charged-off (recovered) 72,166 137,325
Provision for loan losses charged to operations 150,000 96,000
Allowance for loan losses, September 30 $823,901 $690,316
========= ========
</TABLE>
The following table shows the principal balance of nonaccrual
loans as of September 30, 2000:
<TABLE>
<S> <C>
Nonaccrual loans $ 306,912.98
==========
Interest income that would have been
accrued at original contract rates $ 20,926.04
Amount recognized as interest income 9,496.76
Foregone revenue $ 11,429.28
=========
</TABLE>
NOTE 7 - IMPAIRED LOANS
As the Bank has undertaken a more rigorous review of loans,
their underlying collateral values and ability to repay,
management has determined that based upon this review there
are presently loans on the Bank's books which may not be paid
in full according to contractual terms and may require
additional specific provisions to the allowance for loan
losses. As of September 20, 2000, the dollar amount
outstanding on these impaired loans was $1,376,737; the
underlying collateral values for these loans based upon
contractual lending terms was approximately $1,371,476;
and the specific amount allocated for these loans in the
allowance for loan losses was $150,000.
NOTE 8 - OTHER COMMITMENTS
In the normal course of business, the bank makes various
commitments and incurs certain contingent liabilities which
are not reflected in the accompanying financial statements.
These commitments include various guarantees and commitments
to extend credit. The bank does not anticipate any losses
as a result of these transactions.
NOTE 9 - STOCK SPLIT
At a meeting of the Board of Directors of FNB Financial
Corporation, held on July 12, 2000, the Directors of the
Corporation approved and adopted an Amendment to the
Corporation's Articles of incorporation. The amendment
changes the par value per share of Common Stock from $0.63
per share to $0.315 per share and increases the number of
authorized shares of the Corporation's Common Stock from
6,000,000 shares to 12,000,000 shares, thereby effecting a
two-for-one split of the Corporation's Common Stock.
Articles of Amendment containing the amendment to the
Articles of Incorporation were filed with and approved by the
Commonwealth of Pennsylvania, Department of State,
Corporation Bureau. The Amendment to the Articles of
Incorporation and the two-for-one Common Stock Split became
effective at 12:01 a.m. prevailing time on September 1,
2000.
TABLE #1
SCHEDULE OF HELD TO MATURITY AND AVAILABLE FOR SALE
DEBT SECURITY PORTFOLIOS
TRANSACTION SUMMARY
FOR THE PERIOD JANUARY 1, 2000 THROUGH SEPTEMBER 30, 2000
<TABLE>
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HELD TO AVAILABLE TOTAL
MATURITY FOR SALE INVESTMENT
PORTFOLIO PORTFOLIO PORTFOLIO
BEGINNING BALANCE 1/1/00 $1,669,712 $29,339,102 $31,008,814
PURCHASES 0 0 0
PROCEEDS FROM SALES 0 0 0
NET LOSSES/(GAINS) 0 474 474
MATURITIES/CALLS PAYDOWNS/
PREMIUM AMORTIZATION/DISCOUNT
ACCRETION 357,619 1,706,098 2,063,717
ENDING BALANCE 9/30/00 $1,312,093 $27,632,530 $28,944,623
========= ========== ==========
</TABLE>
TABLE #2
SCHEDULE OF UNREALIZED GAINS AND UNREALIZED LOSSES
WITHIN THE HELD TO MATURITY AND AVAILABLE FOR SALE
INVESTMENT PORTFOLIOS BY INVESTMENT TYPE
SEPTEMBER 30, 2000
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
HELD TO HELD TO HELD TO HELD TO AVAILABLE AVAILABLE AVAILABLE AVAILABLE
MATURITY MATURITY MATURITY MATURITY FOR SALE FOR SALE FOR SALE FOR SALE
BOOK MARKET UNREALIZED UNREALIZED BOOK MARKET UNREALIZED UNREALIZED
SECURITY PORTFOLIO VALUE VALUE GAIN LOSS VALUE VALUE GAIN LOSS
U.S. GOVERNMENT TREASURIES 0 0 0 0 0 0 0 0
U.S. GOVERNMENT TREASURIES 0 0 0 0 0 0 0 0
U.S. GOVERNMENT AGENCIES 0 0 0 0 0 0 0 0
U.S. GOVERNMENT AGENCIES 516,651 404,805 0 (111,846) 17,321,447 16,597,807 0 (723,640)
SBA GUARANTEED LOAN POOL
CERTIFICATES 203,283 204,449 1,166 0 189,508 190,649 1,141 0
SBA GUARANTEED LOAN POOL
CERTIFICATES 517,159 509,947 0 (7,212) 666,456 661,088 0 (5,368)
MORTGAGE-BACKED SECURITIES 0 0 0 0 373,127 378,008 4,881 0
MORTGAGE-BACKED SECURITIES 0 0 0 0 557,418 538,296 0 (19,122)
SECURITIES ISSUED BY STATES
& POLITICAL SUBDIVISIONS IN
THE U.S. 75,000 75,210 210 0 1,363,069 1,368,465 5,395 0
SECURITIES ISSUED BY STATES
& POLITICAL SUBDIVISIONS IN
THE U.S. 0 0 0 0 7,161,503 6,895,564 0 (265,939)
MARKETABLE EQUITY SECURITIES 0 0 0 0 71,002 77,640 6,638 0
MARKETABLE EQUITY SECURITIES 0 0 0 0 139,146 107,590 0 (31,556)
FEDERAL RESERVE BANK STOCK,
ATLANTIC CENTRAL BANKERS BANK
STOCK AND FEDERAL HOME LOAN
BANK STOCK 0 0 0 0 833,700 833,700 0 0
GRAND TOTALS 1,312,093 1,194,411 1,376 (119,058) 28,676,378 27,648,808 18,055 (1,045,625)
========= ========= ====== ====== ========== ========== ======= =======
</TABLE>
CLASSIFICATION OF HELD TO MATURITY AND AVAILABLE FOR SALE
SECURITIES
Due to the implementation of FAS 115, management has segregated
securities as Held to Maturity, Available for Sale or Trading
securities. At the implementation of FAS 115 on January 1, 1994,
management determined that no securities were Trading securities;
that tax-free municipal with maturity dates less than the year
2000 were classified as Held to maturity securities due to
management's intention to hold these securities for tax planning
purposes; and that all other securities were classified as
Available for Sale securities due to management's intention to
hold these securities for liquidity planning purposes. Purchases
of tax-free municipals with maturities of 5 years or less made
following implementation of FAS 115 are classified as Held to
Maturity securities with all other purchase Available for Sale;
however, management may decide on a case-by-case basis that a
security may be either classified as Held to Maturity or Available
for Sale depending upon the reasons for purchase. Held to
Maturity classifications are typically used for securities
purchased specifically for interest rate management or tax-
planning purposes while Available for Sale classifications are
typically used for liquidity planning purposes.
FNB FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Net income for the first nine months of 1999 was $746,160 compared
to $657,760 for the same period in 1999 and compared to $574,163
for the same period in 1998. This represents an increase of
$88,400 or 13.44% over 1999 and an increase of $171,997 or 29.96%
from 1998. Net income on an adjusted per share basis for the
first nine months of 2000 reflecting the two-for-1 stock split
which became effective September 1, 2000, and resulted in 800,000
common shares outstanding was $0.94 an increase of $0.12 from the
$0.82 per share for the same period in 1999 and an increase of
$0.22 from the $0.72 per share for the nine months ended September
30, 1998.
Total interest and dividend income for the first nine months of
1999 was $6,524,474 compared to $5,743,347 in 1999 and compared to
$5,741,512 for the nine months ended September 30, 1998. This
represents an increase of $781,127 from 1999 and $782,962 from
1998. This significant increase is a result of an increase in
interest income on loans which has increased $955,245 from 1999.
Since September 30, 1999, net loans have increased $9,900,200.
This increase in loans, our highest yielding interest-earning
asset, combined with the increase in short-term interest rates of
1.25% since September 30, 1999, has increased our interest income
for the first nine months of 2000.
During the first nine months of 2000, interest rates on loans have
increased as the Federal Reserve has increased short term interest
rates 100 basis points since December 31, 2000. In order to
retain and attract deposits, we have increased deposit rates while
at the same time borrowing costs of loans at the Federal Home Loan
Bank of Pittsburgh utilized to fund loan demand have also
increased. The combination of the increase in loan balances and
in loan interest rates has resulted in an increase in our net
interest income and an increase in our net interest margin. We
anticipate the increase in interest rates on loans and the
increase of deposit rates will result in a slight improvement of
our net interest margin during the next few earning periods over
the net interest margin in 1999.
Interest expense for the nine months ended September 30, 1999, was
$3,476,380, an increase of $427,761 over the $3,048,619 incurred
for the same period in 1999, and an increase of $418,409 from the
$3,057,971 incurred for the same period in 1998. This increase is
due primarily to an increase in the balance of other borrowed
funds. Total other borrowed funds increased $3,573,989 since
September 30, 1999. Interest expense on deposits was $3,107,443
as of September 30, 2000, an increase of $87,428 from the
$3,020,015 incurred for the same period in 1999 while interest
expense on other borrowed money was $368,937 for the period ended
September 30, 2000, an increase of $340,333 over the $28,604
incurred for the same period in 1999.
The tax-adjusted net interest margin has increased 10 basis points
to 3.84% for the first nine months of 2000 from that of the first
nine months of 1999 which was 3.74%. This increase was the result
of an increase in the yield on earning assets which occurred
during the latter part of 1999 and continued into 2000. The tax-
equivalent yield on earning assets for the first nine months of
2000 increased 35 basis points from 7.63% in 1999 to 7.98% in
2000. The cost of interest-bearing liabilities increased 26 basis
points to 4.79% in 2000 compared to 4.53% in 1999. The increased
yield on earning assets is due to adjustable rate loans increasing
to higher interest rates and new loans having higher interest
rates. The cost of deposits increased 16 basis points from 4.51%
in 1999 to 4.67% in 2000. We anticipate net interest margin to
improve slightly throughout the remainder of the year. Increases
in interest rates on adjustable rate loans and securities will be
offset by maturing lower cost time deposits repriced to higher
yielding deposits. Through the retention of savings and NOW
account deposit interest rates at their present levels, we will
strive to maintain and improve our net interest margin.
Total noninterest income for the first nine months of 2000
increased $26,543 from the same period in 1999. Service charges
on deposits accounts increased $47,068 from 1999, the result of
increased insufficient fund charges and minimum balance charges.
Other Service Charges increased $5,653 while other income
increased $23,971 due mainly to an increase in the cash value of
life insurance. This increase in other income were offset by a
decrease in net security gains in the amount of $50,149 due to
security gains taken in 1999.
Operating expenses for the period ended September 30, 2000, were
$2,410,021, a $185,405 increase from the operating expenses
incurred for the same period in 2000 of $2,224,616. This increase
is mainly the result of a $104,975 increase in wages and benefits;
a $13,317 increase in occupancy expenses; and a $27,106 increase
in advertising and promotional expenses.
Our income tax provision for the first nine months of 2000 was
$191,768 as compared to $139,664 for the first nine months of
1999. This increase in the tax provision in the amount of $52,104
is the direct result of the increase in taxable income in relation
to tax free income. We continue to operate with a marginal tax
rate of 34%. The effective income tax rate for the first nine
months of 2000 was 20.45%, an increase of 2.94% from the effective
tax rate for the first nine months of 1999 of 17.51%.
Total assets as of September 30, 2000, were $122,655,553 an
increase of $4,726,370 over the period ending December 31, 1999,
representing an increase of 4.0%. Funding this increase in assets
was an increase in deposits of $4,721,023 or 4.75%. This increase
in deposits is attributable to the movement of a local
municipality deposit to our Money Market accounts and an increase
in our commercial account relationships. The increase in total
assets was the result of increased lending activity. Net loans as
of September 30, 2000, were $81,912,928 compared to $76,137,080 as
of December 30, 1999. As a result of increased deposit activity,
other borrowed fund decreased $954,790 to $5,410,206 as of
September 30, 2000. The allowance for loan losses at the end of
the nine months ended September 30, 2000, was $823,901 compared to
$746,067 at year end 1999 and is considered adequate, in our
opinion, to absorb possible losses on existing loans. The
provision for loan losses for the first nine months of 2000 was
$150,000 compared to $96,000 for the first nine months of 2000.
This increase from the 1999 provision is a result of increased
commercial loan activity.
Total equity as of September 30, 2000, was $11,970,691, 9.76% of
total assets as compared to $11,200,737, 9.50% of total assets as
of December 31, 1999. This ratio increase is a result of a
decrease in the equity adjustment for the net unrealized loss on
Available for sale securities net of taxes which decreased
$288,045 since December 31, 1999.
The Corporation has risk-based capital ratios exceeding regulatory
requirements. Risk-based capital guidelines require a minimum
ratio of 8.0%. At September 30, 2000, the risk-based capital
ratio of the Corporation was 16.66% while at December 31, 1999,
the risk-based capital ratio was 16.43%. The following table
presents the risk-based capital ratios for the Corporation:
<TABLE>
<S> <C> <C>
September 30, Regulatory
2000 Minimum
Leverage Ratio 9.63% 4.00%
Risk-based capital ratios:
Tier I (core capital) 15.58% 4.00%
Total Capital
(Tier I and Tier II Capital) 16.66% 8.00%
PART II - OTHER INFORMATION
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
None
Item 3 - Defaults Upon Senior Securities
Not Applicable
Item 4 - Submission of Matters to a Vote of Security Holders
None
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
a. Exhibits:
Exhibit Number Referred to
Item 601 of Regulation S-K Description of Exhibit
3 Amendment to Articles of
Incorporation
27 Financial Data Schedule
99 Report of Independent
Accountant's on Interim
Financial Statements
b. Reports on Form 8-K - None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
/s/John C. Duffey
(John C. Duffey, President
and Director of the Company and
President of the Bank)
(Duly Authorized Officer)
Date November 8, 2000 /s/Daniel E. Waltz
(Daniel E. Waltz, Treasurer
and Director of the Company and
Senior Vice President/CFO of
the Bank)
(Principal Financial &
Accounting Officer)
EX-27
ARTICLE 9 FDS FOR 10-Q
9
1,000
9-MOS
DEC-31-2000
SEP-30-2000
3,774
780
86
0
26,630
1,312
1,194
82,737
824
122,656
104,051
0
1,224
5,410
252
0
0
11,719
122,656
5,135
1,348
41
6,524
3,107
3,476
3,048
150
0
2,410
938
938
0
0
746
0.93
0.93
3.84
307
99
0
0
746
95
23
824
824
0
0
EXHIBIT 3
COMMONWEALTH OF PENNSYLVANIA
DEPARTMENT OF STATE
CORPORATION BUREAU
ARTICLES OF AMENDMENT - DOMESTIC BUSINESS CORPORATION
In compliance with the requirement of 15 Pa.C.S. Section 1915
(relating to Articles of Amendment), the undersigned business
corporation, desiring to amend its Articles, does hereby certify
and state that:
1. The Name of the Corporation is: FNB Financial Corporation
2. The Address, including street and number, of its Registered
Office in this Commonwealth is: (The Department of State is
Hereby authorized to correct the following statement to
conform to the records of the Department):
101 Lincoln Way West
McConnellsburg, PA 17233
3. The Statute by or under which the Corporation was
Incorporated is:
Business Corporation Law of 1933, Act of May 5, 1993, P.L.
364, No. 106, as amended.
4. The Date of its Incorporation is: June 22, 1987
5. The Manner in which the Amendment was Adopted by the
Corporation is:
The amendment was duly adopted by the Board of Directors of
the Corporation pursuant to Section 1914(c)(3)(ii) of the
Business Corporation Law of 1988, as amended, at a meeting of
the Board of Directors duly called, convened and conducted on
July 12, 2000.
6. The Amendment adopted by the Corporation, set forth in full
is:
Article 4 of the Amended Articles of Incorporation of FNB
Financial Corporation are amended and restated to read in full and
in its entirety as follows:
4. "The aggregate number of shares which the Corporation
shall have authority to issues is Twelve Million
(12,000,000) shares of Common Stock of the par value of
Thirty-One and One-Half Cents ($0.315) per share (the
"Common Stock")."
7. The Amendment shall be effective at 12:01 a.m., prevailing
time, September 1, 2000.
IN TESTIMONY WHEREOF, the undersigned Corporation has caused these
Articles of Amendment to be signed by a duly authorized officer
thereof and its corporate seal, duly attested by another such
officer, to be hereunto affixed this 21st day of July 2000.
FNB FINANCIAL CORPORATION
Attest:
/s/ Daniel E. Waltz By: /s/ John C. Duffey
Daniel E. Waltz, Secretary John C. Duffey, President
(CORPORATE SEAL)
EXHIBIT 99
INDEPENDENT ACCOUNTANT'S REPORT
Board of Directors
FNB Financial Corporation
McConnellsburg, Pennsylvania
We have reviewed the accompanying consolidated balance sheet
of FNB Financial Corporation and Subsidiary as of September 30,
2000 and the related consolidated statements of income for the
three month periods ended September 30, 2000 and 1999 and
consolidated statements of comprehensive income for the nine
months ended September 30, 2000 and 1999 and consolidated
statements of cash flows for the nine months ended September 30,
2000 and 1999. These financial statements are the responsibility
of the corporation's management.
We conducted our reviews in accordance with standards
established by the American Institute of Certified Public
Accountants. A review of interim financial information consists
principally of applying analytical procedures to financial data
and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an
audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the consolidated financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material
modifications that should be made to the accompanying
consolidated financial statements for them to be in conformity
with generally accepted accounting principles.
/s/ Smith Elliott Kearns & Company, LLC
SMITH ELLIOTT KEARNS & COMPANY, LLC
Chambersburg, Pennsylvania
November 8, 2000
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