<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of
1934 for the quarterly period ended September 30, 1996
Commission file number 33-37078
FNC BANCORP, INC.
(Exact name of Small Business Issuer
as specified in its charter)
Georgia 58-1910615
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
420 South Madison Avenue
Douglas, Georgia
(Address of principal executive offices)
(912) 384-1100
(Issuer's telephone number)
Check whether the Issuer (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 number of shares outstanding of the Issuer's class of common stock at
September 30, 1996 was 405,710 shares of common stock.
Transitional Small Business Disclosure Format (Check one): Yes No X
----- -----
<PAGE> 2
FNC BANCORP, INC.
FORM 10-QSB
TABLE OF CONTENTS
-----------------
PAGE
----
Part I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets - September 30, 1996
(Unaudited) and December 31, 1995 . . . . . . . . . . . . . 3
Consolidated Statements of Income (Unaudited) - Three and Nine
Month Periods Ended September 30, 1996 and 1995 . . . . . . 4
Consolidated Statements of Stockholders' Equity (Unaudited) -
Nine Month Periods Ended September 30, 1996 and 1995 . . . . 5
Consolidated Statements of Cash Flows (Unaudited) - Nine
Month Periods Ended September 30, 1996 and 1995 . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . . . . 7
Accountants' Disclaimer of Opinion . . . . . . . . . . . . . . 8
Item 2. Management's Discussion and Analysis
or Plan of Operation . . . . . . . . . . . . . . . . . . . . . 9
Part II - Other Information
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . 15
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . 15
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . 15
Item 4. Submission of Matters to A Vote
of Security Holders . . . . . . . . . . . . . . . . . 15
Item 5. Other Information . . . . . . . . . . . . . . . . . . . 15
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 15
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE> 3
<TABLE>
FNC BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
---------------------------
ASSETS
------
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------ ------------
(Unaudited)
<S> <C> <C>
Cash and Cash Equivalents:
Cash and due from banks $ 3,622,296 6,795,444
Federal funds sold 2,600,000 3,820,000
------------ ------------
Total Cash and Cash Equivalents 6,222,296 10,615,444
Interest-bearing deposits in banks 14,728 638,567
Investment securities (Fair value of $6,841,314 - 1996
and $5,196,885 - 1995) 6,841,314 5,191,927
Loans, net of allowance for loan losses and
unearned interest 29,870,180 31,532,756
Bank premises and equipment 1,687,151 1,694,013
Accrued interest receivable 946,552 686,724
Organization costs, net of amortization -0- 15,240
Property acquired in settlement of loans 41,827 13,677
Other assets 689,050 129,941
------------ ------------
Total Assets $ 46,313,098 50,518,289
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Deposits:
Demand $ 7,361,911 9,965,771
NOW accounts 5,913,426 7,976,781
Savings 1,922,472 2,040,414
Time, $100,000 and over 5,237,529 6,629,345
Other time 19,422,512 18,573,233
------------ ------------
Total Deposits 39,857,850 45,185,544
Advances from Federal Home Loan Bank 2,540,000 595,000
Accrued interest 497,808 577,420
Income taxes payable -0- 55,195
Other liabilities 214,244 27,743
------------ ------------
Total Liabilities 43,109,902 46,440,902
------------ ------------
Stockholders' Equity:
Preferred stock, 10,000,000 shares authorized,
no shares issued -0- -0-
Common stock, $1 par value, 10,000,000
shares authorized, 405,710 shares issued
and outstanding 405,710 405,710
Additional paid in capital 3,610,541 3,610,541
Retained earnings (deficit) (800,329) 62,003
Unrealized gains (losses) on available-for-sale
securities, net of applicable deferred income
taxes (12,726) (867)
------------ ------------
Total Stockholders' Equity 3,203,196 4,077,387
------------ ------------
Total Liabilities and Stockholders' Equity $ 46,313,098 50,518,289
============ ============
</TABLE>
<PAGE> 4
<TABLE>
FNC BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------- -------------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans $ 764,304 767,170 2,412,323 2,084,021
Interest on investment securities:
Taxable 80,450 71,617 217,192 249,883
Interest on federal funds sold 65,057 50,862 190,576 79,059
Interest on deposits in banks 198 8 4,278 12
----------- ----------- ----------- -----------
Total 910,009 889,657 2,824,369 2,412,975
----------- ----------- ----------- -----------
Interest Expense:
Interest on deposits 437,933 442,303 1,362,651 1,155,017
Interest on Federal Funds purchased 9 -0- 9 12,253
Interest on advances from Federal Home Loan Bank 35,713 288 100,365 2,049
----------- ----------- ----------- -----------
473,655 442,591 1,463,025 1,169,319
----------- ----------- ----------- -----------
Net Interest Income 436,354 447,066 1,361,344 1,243,656
Provision For Loan Losses 481,843 201,894 1,826,158 245,688
----------- ----------- ----------- -----------
Net Interest Income (Loss) After Provision For
Loan Losses (45,489) 245,172 (464,814) 997,968
----------- ----------- ----------- -----------
Other Income:
Service charges on deposit accounts 96,769 66,825 276,429 208,654
Insurance commissions 4,151 3,109 10,235 3,109
Fees on mortgage loans originated for sale 6,815 -0- 16,407 -0-
Gain on sale of assets -0- 600 -0- 5,191
Gain (Loss) on sale of investment securities -0- (1,727) -0- (1,727)
Other Income 20,952 1,122 64,045 39,832
----------- ----------- ----------- -----------
Total 128,687 69,929 367,116 255,059
----------- ----------- ----------- -----------
Other Expenses:
Salaries 137,036 141,487 442,993 417,221
Other personnel expenses 84,849 25,327 213,284 76,748
Occupancy expense of bank premises 26,485 27,261 79,226 77,941
Furniture and equipment expense 24,294 19,906 72,470 65,511
Federal deposit insurance 500 (2,751) 2,000 40,026
Advertising 17,890 10,809 33,238 32,714
Data processing 17,103 16,178 50,059 39,547
Printing and office supplies 10,753 17,295 43,909 53,047
Amortization 4,056 5,593 15,240 16,777
Other operating expenses 93,462 64,868 254,016 214,022
----------- ----------- ----------- -----------
Total 416,428 325,973 1,206,435 1,033,554
----------- ----------- ----------- -----------
Income (Loss) Before Taxes (333,230) (10,872) (1,304,133) 219,473
Income Taxes (Credit) (112,512) 913 (441,801) 61,587
----------- ----------- ----------- -----------
Net Income (Loss) $ (220,718) (11,785) (862,332) 157,886
=========== =========== =========== ===========
Earnings (Loss) Per Common and Common Equivalent Share $ (.45) (.01) (1.82) .37
=========== =========== =========== ===========
</TABLE>
<PAGE> 5
<TABLE>
FNC BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
---------------------------------------------
<CAPTION>
UNREALIZED
GAINS (LOSSES)
ON
AVAILABLE-
FOR-SALE
SECURITIES,
NET OF
APPLICABLE
COMMON STOCK ADDITIONAL RETAINED DEFERRED
NUMBER OF PAR PAID IN EARNINGS INCOME
SHARES VALUE CAPITAL (DEFICIT) TAXES TOTAL
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 405,710 $ 405,710 3,610,541 (251,173) (74,805) 3,690,273
Net Income -0- -0- -0- 157,886 -0- 157,886
Change in unrealized gains/losses on
available-for-sale securities, net of
applicable deferred income taxes -0- -0- -0- -0- 66,264 66,264
----------- ---------- ---------- ---------- ---------- ----------
Balance, September 30, 1995 (unaudited) 405,710 $ 405,710 3,610,541 (93,287) (8,541) 3,914,423
=========== ========== ========== ========== ========== ==========
Balance December 31, 1995 405,710 $ 405,710 3,610,541 62,003 (867) 4,077,387
Net Income (Loss) -0- -0- -0- (862,332) -0- (862,332)
Change in unrealized gains/losses on
available-for-sale securities, net of
applicable deferred income taxes -0- -0- -0- -0- (11,859) (11,859)
----------- ---------- ---------- ---------- ---------- ----------
Balance, September 30, 1996 (unaudited) 405,710 $ 405,710 3,610,541 (800,329) (12,726) 3,203,196
=========== ========== ========== ========== ========== ==========
</TABLE>
<PAGE> 6
<TABLE>
FNC BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(UNAUDITED)
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------
1996 1995
---------- ----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income (loss) $ (862,332) 157,886
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 78,284 76,228
Amortization 15,240 16,777
Deferred income taxes (benefit) (438,626) -0-
(Gain) Loss sale of assets -0- (5,191)
(Gain) Loss on sale of securities -0- 1,727
Provision for loan losses 1,826,158 245,688
Securities (accretion) amortization (27,150) (24,013)
Change in assets and liabilities:
(Increase) Decrease in accrued interest receivable (259,828) (186,436)
Increase (Decrease) in accrued interest payable (79,612) 223,785
(Increase) Decrease in other assets (114,372) (18,004)
Increase (Decrease) in other liabilities 186,501 144,069
Increase (Decrease) in income taxes payable (55,195) 33,690
----------- -----------
Net cash provided (used) by operating activities 269,068 666,206
----------- -----------
Cash Flows From Investing Activities:
Capital expenditures (71,422) (30,046)
Net increase in loans (191,732) (1,792,365)
(Increase) Decrease in interest-bearing deposits 623,839 122
Proceeds from sale of fixed assets -0- 12,850
Proceeds from sale of available-for-sale securities 7,500 494,453
Proceeds from maturity of available-for-sale securities 3,490,000 1,000,000
Purchase of available-for-sale securities (5,186,710) (524,800)
Proceeds from maturity of held-to-maturity securities -0- 2,750,000
Purchase of held-to-maturity securities -0- (758,402)
Proceeds of maturity of securities purchased under
agreements to resell -0- 1,250,000
Payments received on mortgage-backed securities 49,003 66,180
----------- -----------
Net cash provided (used) by investing activities (1,279,522) 2,467,992
----------- -----------
Cash Flows From Financing Activities:
Increase (Decrease) in time deposits (542,537) 5,559,987
Increase (Decrease) in other deposits (4,785,157) (7,735,266)
Proceeds from advances from Federal Home Loan Bank 2,000,000 100,000
Payments on advances from Federal Home Loan Bank (55,000) (575)
----------- -----------
Net cash provided (used) by financing activities (3,382,694) (2,075,854)
----------- -----------
Net increase (decrease) in cash and cash equivalents (4,393,148) 1,058,344
Cash and Cash Equivalents at Beginning of Year 10,615,444 5,715,087
----------- -----------
Cash and Cash Equivalents at End of Year $ 6,222,296 6,773,431
=========== ===========
Supplemental Disclosures of Cash Flow Information
- -------------------------------------------------
Cash paid during the year for:
Interest $ 1,542,637 945,534
=========== ===========
Income taxes $ 121,555 27,897
=========== ===========
Schedule of Non-Cash Investing and Financing Activities
- -------------------------------------------------------
Total increase (decrease) in unrealized losses on
securities available-for-sale $ 17,969 (100,400)
=========== ===========
</TABLE>
<PAGE> 7
FNC BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Basis of Presentation
- ---------------------
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine months ended September 30,
1996 are not necessarily indicative of the results that may be expected for
the year ending December 31, 1996. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report to stockholders for the year ended December 31, 1995.
<PAGE> 8
Board of Directors
FNC Bancorp, Inc. and Subsidiary
Douglas, Georgia
The accompanying consolidated balance sheet of FNC Bancorp, Inc. and
Subsidiary as of September 30, 1996, and the related statements of income,
stockholders' equity and cash flows for the nine months ended September 30,
1996 and 1995 were not audited by us and, accordingly, we do not express an
opinion on them.
We have audited, in accordance with generally accepted auditing standards,
the consolidated balance sheet of FNC Bancorp, Inc. and Subsidiary as of
December 31, 1995, and the related consolidated statements of income,
stockholders' equity and cash flows for the year then ended (not presented
herein); and in our report dated March 20, 1996, we expressed an unqualified
opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying consolidated
balance sheet is fairly stated, in all material respects, in relation to the
consolidated financial statements from which it has been derived.
STEWART, FOWLER & STALVEY, P.C.
- -------------------------------
Valdosta, Georgia
November 5, 1996
<PAGE> 9
Item 2. Management's Discussion and Analysis or Plan of Operation
- ------------------------------------------------------------------
Results of Operations
- ---------------------
The Company, including the operations of its subsidiary, reported a
consolidated net loss of $(862,332) for the nine months ended September 30,
1996 compared to a net income $157,886 for the nine months ended September
30, 1995. Net interest income after provision for loan losses was a loss of
$(464,814) for the nine months ended September 30, 1996 and a net income of
$997,968 for the nine months ended September 30, 1995. The provision for
loan losses was $1,826,158 and $245,688 for the nine months ended September
30, 1996 and 1995, respectively. Non-interest income totalled $367,116 and
$255,059 for the nine months ended September 30, 1996 and 1995, respectively.
Noninterest expenses totalled $1,206,435 and $1,033,554 for the nine months
ended September 30, 1996 and 1995, respectively.
The following table summarizes the results of operations of the Company for
the three and nine month periods ended September 30, 1996 and 1995.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -------------------
1996 1995 1996 1995
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Interest income $ 910 890 2,824 2,413
Interest expense (474) (443) (1,463) (1,169)
-------- -------- -------- --------
Net interest income 436 447 1,361 1,244
Provision for loan losses (482) (202) (1,826) (246)
Noninterest income 129 70 367 255
Noninterest expense (416) (326) (1,206) (1,034)
-------- -------- -------- --------
Income (loss) before taxes (333) (11) (1,304) 219
Income taxes (credit) (113) 1 (442) 61
-------- -------- -------- --------
Net income (loss) $ (220) (12) (862) 158
======== ======== ======== ========
</TABLE>
Interest Income
- ---------------
Total interest income increased approximately $411,000 for the nine months
ended September 30, 1996 compared to the nine months ended September 30,
1995. This increase is attributed to the factors explained in the following
paragraphs.
This increase was the combined effect of an increase in the average loan
portfolio balance from approximately $28.4 million for the nine months ended
September 30, 1995 to approximately $32.2 million for the nine months ended
September 30, 1996 and an increase in the average rate earned on the loan
portfolio from 9.80% for the nine months ended September 30, 1995 to 9.99%
for the nine months ended September 30, 1996. The effect of these two
changes increased the interest income earned on the loan portfolio from
approximately $2,084,000 for the nine months ended September 30, 1995 to
approximately $2,412,000 for the nine months ended September 30, 1996, an
increase of $328,000. Interest income on the loan portfolio decreased from
approximately $767,000 for the quarter ended September 30, 1995 to
approximately $764,000 for the quarter ended September 30, 1996, a decrease
of $3,000.
Interest earned on taxable investment securities decreased from approximately
$250,000 for the nine months ended September 30, 1995 to approximately
$217,000 for the nine months ended September 30, 1996, a decrease of $33,000.
This decrease was the combined effect of a decrease in the average taxable
<PAGE> 10
investment portfolio balance from approximately $6.1 million for the nine
months ended September 30, 1995 to approximately $5.4 million for the nine
months ended September 30, 1996 and a decrease in the average rate earned on
the taxable investment securities portfolio from 5.47% for the nine months
ended September 30, 1995 to 5.41% for the nine months ended September 30,
1996. Interest income on the taxable investment portfolio increased from
approximately $72,000 for the quarter ended September 30, 1995 to
approximately $80,000 for the quarter ended September 30, 1996, an increase
of $8,000.
Interest earned on interest-bearing deposits in banks increased from $12 for
the nine months ended September 30, 1995 to approximately $4,000 for the nine
months ended September 30, 1996, an increase of $3,988. This increase was
the result of an increase in the average interest-bearing deposits balance
from approximately $.0 million for the nine months ended September 30, 1995
to approximately $.2 million for the nine months ended September 30, 1996.
The average rate was 3.41%. Interest income on the interest-bearing deposits
increased from $8 for the quarter ended September 30, 1995 to $198 for the
quarter ended September 30, 1996, an increase of $190.
Interest earned on federal funds sold increased from approximately $79,000
for the nine months ended September 30, 1995 to approximately $191,000 for
the nine months ended September 30, 1996, an increase of $112,000. This
increase was the combined effect of an increase in the average federal funds
sold balance from approximately $1.9 million for the nine months ended
September 30, 1995 to approximately $4.6 million for the nine months ended
September 30, 1996 and an increase in the rate earned on the federal funds
sold from 5.46% for the nine months ended September 30, 1995 to approximately
5.56% for the nine months ended September 30, 1996. Interest income on
federal funds sold increased from approximately $51,000 for the quarter ended
September 30, 1995 to approximately $65,000 for the quarter ended September
30, 1996, an increase of $14,000.
Interest Expense
- ----------------
Total interest expense increased approximately $294,000 for the nine months
ended September 30, 1996 compared to the nine months ended September 30,
1995. This increase is attributed to the factors explained in the following
paragraphs.
This increase was the combined effect of an increase in the average balance
of interest-bearing deposits from approximately $32.0 million for the nine
months ended September 30, 1995 to approximately $34.6 million for the nine
months ended September 30, 1996 and an increase in the average rate paid on
interest-bearing deposits from 4.81% for the nine months ended September 30,
1995 to 5.25% for the nine months ended September 30, 1996. The effect of
these two changes increased the interest expense on interest-bearing deposits
from approximately $1,155,000 for the nine months ended September 30, 1995 to
approximately $1,363,000 for the nine months ended September 30, 1996, an
increase of $208,000. Interest expense on interest-bearing deposits
decreased from approximately $442,000 for the quarter ended September 30,
1995 to approximately $438,000 for the quarter ended September 30, 1996, a
decrease of $4,000.
The Bank also incurred $9 of interest expense on Federal Funds purchased
during the nine months ended September 30, 1996 compared to approximately
$12,000 for the nine months ended September 30, 1995.
<PAGE> 11
At September 30, 1996, the Bank had outstanding advances from the Federal
Home Loan Bank of $2,540,000 at an average rate of 5.56% maturing through May
16, 2005. Interest expense incurred for the nine months ended September 30,
1996 totalled approximately $100,000 and $2,000 for the nine months ended
September 30, 1995.
Noninterest Income
- ------------------
The following table presents the principal components of noninterest income
for the three and nine month periods ended September 30, 1996 and 1995.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -------------------
1996 1995 1996 1995
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Service charges on deposit
accounts $ 97 67 277 209
Insurance commissions 4 3 10 3
Fees on mortgage loans
originated for sale 7 -0- 16 -0-
Gain (loss) on sale of
investment securities -0- (2) -0- (2)
Gain on sale of assets -0- 1 -0- 5
Other income 21 1 64 40
-------- -------- -------- --------
Total noninterest income $ 129 70 367 255
======== ======== ======== ========
</TABLE>
Service charges on deposit accounts for the nine months ended September 30,
1996 as compared to the nine months ended September 30, 1995, increased
approximately $68,000. This increase was related primarily to an increase in
NSF fees and transaction deposit account activity. Insurance commissions for
the nine months ended September 30, 1996 as compared to the nine months ended
September 30, 1995, increased approximately $7,000. The Company recognized a
gain on the sale of fixed assets of approximately $5,000 during the nine
months ended September 30, 1995 and a loss on the sale of available-for-sale
securities of approximately $(2,000) for the nine months ended September 30,
1995. All other income totalled approximately $80,000 and $40,000 for the
nine months ended September 30, 1996 and 1995, respectively.
<PAGE> 12
Noninterest Expenses
- --------------------
The following table presents the principal components of noninterest expenses
for the three and nine month periods ended September 30, 1996 and 1995.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -------------------
1996 1995 1996 1995
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Salaries $ 137 141 443 417
Other personnel expenses 85 25 213 77
Occupancy expense of bank
premises 26 27 79 78
Furniture and equipment expense 24 20 73 65
Federal deposit insurance 1 (2) 2 40
Advertising 18 11 33 33
Data processing 17 16 50 40
Printing and office supplies 11 17 44 53
Amortization 4 6 15 17
Other operating expenses 93 65 254 214
-------- -------- -------- --------
Total noninterest expenses $ 416 326 1,206 1,034
======== ======== ======== ========
</TABLE>
Noninterest expenses for the nine months ended September 30, 1996 as compared
to the nine months ended September 30, 1995, increased approximately $172,000
or 16.6%. Compensation and other personnel expenses increased approximately
$162,000 for the nine months ended September 30, 1996 as compared to the nine
months ended September 30, 1995. This increase reflects increases in the
number of employees, in wage levels and in the cost of employee benefits and
the payment in the prior year of a termination amount upon the termination of
the employment agreement with the Bank's President. Excluding federal
deposit insurance, all other expenses increased approximately $48,000 or 9.6%
for the nine months ended September 30, 1996 compared to the nine months
ended September 30, 1995. This increase is attributed primarily to a larger
volume of business. Additionally, federal deposit insurance amounted to
approximately $2,000 for the nine months ended September 30, 1996 compared to
approximately $40,000 for the nine months ended September 30, 1995.
Provision for Loan Losses
- -------------------------
The provision for loan losses for the nine months ended September 30, 1996
was approximately $1,826,000 compared to approximately $246,000 for the nine
months ended September 30, 1995. The balance of the allowance for loan
losses was approximately $1,313,000 (approximately 4.2% of outstanding loans)
at September 30, 1996 and approximately $461,000 (approximately 1.6% of
outstanding loans) at September 30, 1995. Actual loan charge-offs net of
recoveries were approximately $898,000 of net charge-offs for the nine months
ended September 30, 1996 and approximately $188,000 of net charge-offs for
the nine months ended September 30, 1995. Non-accrual loans were
approximately $794,000 at September 30, 1996. Loans ninety days or more past
due and still accruing amounted to approximately $29,000 at September 30,
1996. In determining an adequate level of loan loss reserves, such loans
were included in such consideration.
The amount of the provision for loan losses is a result of the amount of
loans charged off, the amount of loans recovered and management's conclusion
concerning the level of the allowance for loan losses. The level of the
<PAGE> 13
allowance for loan losses is based upon a number of factors including the
Bank's past loan loss experience, management's evaluation of the
collectibility of loans, the general state of the economy and other relevant
factors.
In June, 1996, the Bank completed a review of its loan portfolio in
conjunction with the departure of two lending officials. Based upon that
review and subsequent ongoing review, the allowance for loan losses was
increased to approximately $1,313,000 and the Bank has recognized actual loan
charge-offs net of recoveries of approximately $898,000.
Income Taxes
- ------------
The provision for income taxes reflected an effective rate of 28.1% for the
nine months ended September 30, 1995. A tax credit was accrued for the nine
months ended September 30, 1996 based upon the loss incurred of approximately
$1,304,000 before taxes.
Financial Condition
- -------------------
The Company, including its subsidiary bank, reported consolidated total
assets of approximately $46.3 million at September 30, 1996 and approximately
$50.5 million at December 31, 1995, representing a decrease of approximately
$4.2 million. During the nine months ended September 30, 1996, cash and due
from banks decreased $3.2 million, Federal Home Loan Bank advances increased
$1.9 million, federal funds sold decreased $1.2 million, interest-bearing
deposits decreased $.6 million and operations generated $.2 million providing
$7.1 million of funds available which were used to reduce deposits by $5.3
million, increase loans by $.2 million and increase investment securities by
$1.6 million.
The decrease in cash and due from banks and other liquid assets was
attributed to the reduction in deposits. Deposits were reduced primarily as
a result of local government and agri-business depositors making substantial
deposits near the end of the calendar year with such funds being disbursed
during the following calendar year in the ordinary course of business.
A number of factors contribute to the volume of lending. Such factors
include competition, the pricing of loans and other lending policies and the
general state of the economy. The interest rates as previously discussed are
reflective of interest rates in general and market conditions including
competition. Changes in short-term funds including cash and due from banks,
federal funds sold, interest-bearing deposits and investment securities are
reflective of the liquidity position of the Company.
The Company's subsidiary Bank is required to maintain minimum amounts of
capital to total "risk-weighted" assets, as defined by the banking
regulators. At September 30, 1996, a comparison of the minimum required and
actual capital ratios are as follows:
MINIMUM
REQUIRED ACTUAL
-------- -------
Leverage capital ratio 4.0% 6.3%
Tier one capital to "risk-weighted" assets 4.0 8.8
Tier two capital to "risk-weighted" assets 8.0 10.1
<PAGE> 14
Liquidity and Capital Resources
- -------------------------------
Liquidity management involves the matching of the cash flow requirements of
customers, either depositors withdrawing funds or funding additional loans,
and the ability of the Bank to meet those requirements. Management monitors
and maintains appropriate levels of assets and liabilities so that maturities
of assets are such that adequate funds are provided to meet estimated
customer withdrawals and loan requests.
The Bank's liquidity position depends primarily upon the liquidity of its
assets relative to its need to respond to short-term demand for funds caused
by withdrawals from deposit accounts and loan funding commitments. Primary
sources of liquidity are scheduled payments on its loans and interest on the
Bank's investments. The Bank may also utilize its cash and due from banks,
short-term deposits with financial institutions, federal funds sold and
investment securities to meet liquidity requirements. At September 30, 1996,
the Company's cash and due from banks were approximately $3.4 million in
excess of its reserve requirement and its federal funds sold were
approximately $2.6 million. All of the above can be converted to cash on
short notice. The sale of investments which had a market value of
approximately $6.8 million at September 30, 1996 can also be used to meet
liquidity requirements to the extent the investments are not pledged. At
September 30, 1996, the market value of pledged securities was $3.8 million.
The Bank also has the ability, on a short-term basis, to borrow and purchase
federal funds from other financial institutions.
The Bank is a member of the Federal Home Loan Bank of Atlanta and as such has
the ability to secure advances therefrom, although the cost of such advances
exceed lower cost alternatives such as deposits from the local Community.
The Bank had advances outstanding of $2,540,000 at September 30, 1996, at an
average of 5.56%.
<PAGE> 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
None.
Item 2. Changes in Securities
- ------------------------------
None.
Item 3. Defaults Upon Senior Securities
- ----------------------------------------
None.
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 No.
-----------
27.1 Financial Data Schedule
(B) The Company did not file any reports on Form 8-K during the
quarter ended September 30, 1996.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
FNC BANCORP, INC.
------------------------------
(Registrant)
Date NOVEMBER 7, 1996 By/s/ BOB CATION
--------------------------------- ----------------------------
Bob Cation
Chairman
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<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 3,622,296
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