UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT of 1934.
For the fiscal year ended December 31, 2002
or
[] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 333-2524
FNB Corporation
(Exact name of registrant as specified in its charter)
Virginia 54-1791618
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
105 Arbor Drive, Christiansburg, Virginia 24068
(Address of principal executive offices) (Zip Code)
(540)382-4951
Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report.)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common stock, $5 par value
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). YES X NO
The aggregate market value of voting stock held by non-affiliates of the
registrant as of March 7, 2003, was $142,048,282.
There were 5,813,897 shares outstanding as of March 7, 2003.
1
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Corporation's Annual Report to Stockholders for the year ended
December 31, 2002, are incorporated into Parts I and II hereof. Portions of
the Corporation's Notice of Annual Meeting and Proxy Statement for the Annual
Meeting of May 13, 2003, are incorporated into Part III hereof.
2
TABLE OF CONTENTS
PART I
Item 1. Business Page
General development of business 4
Description of business 4
Pending acquisitions 4
Supervision and Regulation 9
Competition 9
Governmental Monetary Policies 9
Employees 9
Available information 9
Securities Act Guide 3. Statistical
Disclosure by Bank Holding Companies 10
Item 2. Properties 24
Item 3. Legal Proceedings 25
Item 4. Submission of Matters to a Vote of
Security Holders 25
PART II
Item 5. Market for the Bank's Common Stock and
Related Security Holder Matters 26
Item 6. Selected Financial Data 26
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 26
Item 7(A) Quantitative and Qualitative Disclosures About
Market Risks 26
Item 8. Financial Statements and Supplementary Data 27
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 27
PART III
Item 10. Directors and Executive Officers of the Bank 28
Item 11. Executive Compensation 28
Item 12. Security Ownership of Certain Beneficial Owners
and Management 29
Item 13. Certain Relationships and Related Transactions 30
PART IV
Item 14. Controls and Procedures 31
Item 15. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K 31
Index to Consolidated Financial Statements 31
Signatures 32
Certifications 34
Index to Exhibits 38
3
PART I
Item 1. Business
General development of business. FNB Corporation, a Virginia corporation, was
organized in 1996 as a bank holding company for First National Bank, a
national banking association formed in 1905. In 2001 FNB acquired FNB
Southwest (formerly Southwest Virginia Savings Bank, F.S.B.) which was formed
in 1927 and two First Union National Bank branches. Also on
December 31, 2001, FNB acquired Salem Bank and Trust, National Association,
which was incorporated in 1976. FNB Southwest and Salem Bank and Trust,
National Association, merged on May 6, 2002, into a single charter with
the name "FNB Salem Bank and Trust, National Association." In 1992, FNB
formed FNB Financial Services, Inc., a wholly-owned subsidiary, to allow the
company to participate as an agent in the real estate title insurance
business. Additionally, this subsidiary has been licensed by the Commonwealth
of Virginia to offer annuity products through First National's Trust Division.
For more information regarding merger and acquisition activity of the Company
in 2001, please read Note 22 of the notes to consolidated financial statements
included in the Corporation's Annual Report to Stockholders for the year ended
December 31, 2002 incorporated as Exhibit 13.
Description of business. FNB through its two banking subsidiaries (bank or
banks) provides a full complement of consumer and commercial banking services
to its primary service areas which include the New River Valley, consisting of
Montgomery County, Virginia and surrounding counties, the Cities of Roanoke
and Salem, Virginia and Roanoke and contiguous counties, including Bedford and
Franklin, Virginia. With an emphasis on personal service, the Company offers
a broad range of commercial and retail banking products and services including
checking, savings and time deposits, individual retirement accounts, merchant
bankcard processing, residential and commercial mortgages, home equity loans,
credit card and consumer installment loans, agricultural loans, investment
loans, small business, agricultural, and FHA and SBA guaranteed loans,
commercial loans, lines and letters of credit as well as trust services. In
addition to its twenty-two full service branches, a loan production office,
and a financial services center, the Company has thirty-three ATMs located
both on premises and in other strategic positions within its primary market
areas. The Corporation operates two business segments: community banking and
mortgage banking. These segments are primarily identified by the products
and services offered and the channels through which they are offered. The
banking segment consists of full-service banks that offer customers
traditional banking products and services through various delivery channels.
For more information regarding the two primary segments of the Company,
community banking and mortgage banking, please read Note 23 of the notes to
consolidated financial statements included in the Corporation's Annual Report
to Stockholders for the year ended December 31, 2002 incorporated as
Exhibit 13.
Pending Acquisitions. On March 21, 2003, FNB Corporation (the "Company")
announced that it had executed a Agreement and Plan of Merger, dated as of
March 20, 2003, between the Company and Bedford Bancshares, Inc. ("Bedford"),
pursuant to which Bedford will merge with and into the Company, with Bedford
Federal Savings Bank, FSB, Bedford's subsidiary, becoming a wholly-owned
subsidiary of the Company.
Under the terms of the transaction, Bedford shareholders will receive from
0.8066 to 0.9135 shares of Company common stock, or the equivalent cash value
per share, for each outstanding share of Bedford common stock. The exchange
will float between the Company's per share market value of $26.00 to $30.00
and will be fixed outside of that range. Approximately 20% of the total
consideration will be cash, subject to election procedures set forth in the
4
Merger Agreement. The Merger is expected to close during the second half of
2003, pending receipt of all requisite regulatory approvals and the approval
of the shareholders of the Company and Bedford.
The following Pro Forma Combined Condensed Balance Sheet reflects FNB's
acquisition of Bedford using the latest audited financial statements of each;
December 31, 2002 as to FNB and September 30, 2002 as to Bedford.
Adjustments to reflect the transaction and adjust assets and liabilities
acquired to estimated fair values are reflected as "Bedford Adjustments."
The following Pro Forma Combined Condensed Statement of Income reflects
the combined operations of FNB and Bedford using the latest audited
financial statements of each and reflecting the acquisition as though it
occurred at the beginning of 2002, with amortization of estimated purchase
adjustments and the financing cost of the transaction reflected as
"Bedford Adjustments" for a full twelve month period of operations. All
adjustments have been made using FNB's market value at date of announcement
of the transaction and an 80%/20% allocation of the purchase price to
stock/cash consideration. It should be noted that per the Definitive
Agreement, the final exchange ratio will adjust within fixed parameters
at closing and the mix of consideration may fluctuate.
5
FNB CORPORATION (FNB)
Pro Forma Combined Condensed Balance Sheet
At Year-End 2002 (1)
(Dollars in thousands)
Selected Balance Sheet Data
FNB Bedford
Corp- Banc- Bedford
oration shares Adjust- FNB &
(FNB) (Bedford) ments Bedford
Assets:
Cash and due from
banks $ 29,241 6,803 - 36,044
Interest-bearing
deposits with
banks - 8,865 - 8,865
Federal funds sold
and securities
purchased with
resale agreements
or similar
arrangements 11,150 - - 11,150
Securities
available-for-
sale 141,888 13,589 (19)(2) 155,458
Securities
held-to-
maturity 16,075 502 - 16,577
Other investments
at cost 5,320 2,600 - 7,920
Mortgage loans
held for sale 34,271 - - 34,271
Loans and leases,
net of unearned
income 691,661 220,828 4,115 (3) 916,604
Allowance for
loan and lease
losses 9,466 1,194 - 10,660
Loans and
leases, net 682,195 219,634 4,115 905,944
Premises and equip-
ment, net 23,201 1,239 839 (4) 25,279
Other real estate
owned 1,001 26 - 1,027
Goodwill 21,735 - 22,717 (5) 44,452
Core deposit
intangibles 4,804 - 5,400 (6) 10,204
Other assets 21,550 2,356 798 (7) 24,704
Total assets $ 992,431 255,614 33,850 1,281,895
6
Selected Balance Sheet Data (Continued)
FNB Bedford
Corp- Banc- Bedford
oration shares Adjust- FNB &
(FNB) (Bedford) ments Bedford
Liabilities and stock-
holders' equity:
Deposits $ 845,688 177,214 3,072 (8) 1,025,974
Short-term borrowed
funds 8,071 - - 8,071
Long-term debt 38,531 52,000 14,328 (9) 104,859
Accounts payable
and other
liabilities 5,042 1,838 - 6,880
Total liabilities 897,332 231,052 17,400 1,145,784
Stockholders' equity:
Common stock 29,038 201 6,319 (10) 35,558
Additional paid-
in-capital 51,289 10,089 24,403 (11) 85,781
Retained earnings 12,588 14,570 (14,570)(12) 12,588
Unearned ESOP
shares and
compensation (721) (320) 320 (13) (721)
Treasury stock
account - - - -
Net unrealized
(depreciation)
appreciation on
securities
available-
for-sale 2,905 22 (22)(14) 2,905
Total stock-
holders'
equity 95,099 24,562 16,450 136,111
Total liabilities
and stockholders'
equity $ 992,431 255,614 33,850 1,281,895
Footnotes:
(1) For FNB Corporation year ending December 31, 2002; for Bedford
Bancshares fiscal year ending September 30, 2002.
(2) (-$19) Fair value adjustment.
(3) ($4,115) Fair value adjustment.
(4) ($839) Fair value adjustment on premises.
(5) ($22,717) Recording of goodwill.
(6) ($5,400) Estimated value of core deposit intangibles.
(7) ($798) Fair value federal taxes payable adjustment.
(8) ($3,072) Fair value adjustment
7
(9) ($14,328) Fair value adjustment on borrowings ($3,370) plus cash
consideration paid to Bedford shareholders ($9,696) plus cash payment
for investment banking, legal fees and employee contracts of $1,262.
Cash consideration equals 2,003,560 Bedford shares times 8136 exchange
ratio (exchange ratio per agreement at FNB stock price of $29.74) times
20% cash times $29.74 value of FNB stock equals $9,696. $3,370 plus
$9,696 plus $1,262 equals $14,328.
(10) ($6,319) Elimination of Bedford common stock (-$201) plus recording FNB
stock issuance at par for the Bedford transaction (2,003,560 Bedford
shares times exchange ratio of .8136 times 80% stock equals 1,304,077
shares of FNB stock times $5 par equals $6,520). $6,520 minus $201
equals $6,319.
(11) ($24,403) Elimination of Bedford paid-in-capital (-$10,089) plus
recording FNB stock issuance at market ($29.74) less par of $5.00 or
$24.74 (1,304,077 FNB shares times $24.74 equals $32,263 plus recording
of the fair value of the options $2,229. -$10,089 plus $32,263 plus
$2,229 equals $24,403.
(12) (-$14,570) Elimination of Bedford retained earnings.
(13) ($320) Elimination of Bedford ESOP. Bedford's ESOP will be paid out at
consumation date.
(14) (-$22) Elimination of Bedford unrealized appreciation on securities
available-for-sale. Securities written to fair value.
FNB CORPORATION (FNB)
Pro Forma Combined Condensed Statement of Income
Year Ending 2002 (1)
(Dollars in thousands)
FNB Bedford
Corp- Banc- Bedford
oration shares Adjust- FNB &
(FNB) (Bedford) ments Bedford
Interest income $ 59,618 15,612 (2,567)(2) 72,663
Interest expense 22,196 7,888 (2,394)(3) 27,690
Net interest income 37,422 7,724 (173) 44,973
Provision for loan
losses 1,369 295 - 1,664
Noninterest income 11,545 1,843 - 13,388
Noninterest expense 31,282 4,570 1,071 (4) 36,923
Income before taxes 16,316 4,702 (1,243) 19,775
Income taxes 5,225 1,763 (91)(5) 6,897
Net income $ 11,091 2,939 (1,152) 12,878
Based on FNB stock
closing price at March
21, 2003 (date of
announcement)($29.74)
Weighted average common
shares outstanding for:
Basic earnings per
share 5,758,490 1,978,563 1,287,794 7,046,284
Fully diluted
earnings per
share 5,833,190 2,056,536 1,338,545 7,171,735
Per common share data:
Basic earnings per
common share $ 1.93 N/A N/A 1.83
Fully diluted
earnings per common
share $ 1.90 N/A N/A 1.80
8
Footnotes:
(1) For FNB Corporation year ending December 31, 2002; for Bedford
Bancshares fiscal year ending September 30, 2002.
(2) (-$2,567) Fair value amortization of loans and investments.
(3) (-$2,394) Fair value amortization of certificates of deposit and
borrowings (-$2,876) plus cost of trust preferred borrowings to pay cash
consideration of the merger ($482-rate of 4.40% which is current libor
of 1.25% plus 3.15%). -$2,876 plus $482 equals -$2,394.
(4) ($1,071) Amortization of estimated core deposit intangibles on an
accelerated basis over 10 years ($976) plus amortization of fair value
adjustment on buildings over remaining life of buildings ($95). $976
plus $95 equals $1,071.
(5) (-$91) Taxes on net of fair value amortizations. Core deposit
intangible amortization considered non deductible.
Supervision and Regulation. FNB Corporation is a bank holding company within
the definition of the Bank Holding Company Act of 1956, as amended, and is
supervised and examined by the Federal Reserve Bank. As national
associations, the primary supervisory authority over the banks is the Office
of the Comptroller of the Currency which regularly examines such areas as
loans and reserves, investments, management practices and other aspects of the
bank's operations. These examinations are focused primarily on the protection
of the depositors of the bank. In addition, the banks are members of the
Federal Deposit Insurance Corporation ("FDIC") which insures the deposits of
customers of the bank up to the statutory maximum.
Competition. The bank not only competes with local, regional and local
offices of multi-state bank holding companies for both deposits and loans but
also with diversified providers of financial services such as brokers and
mutual funds and mortgage and finance companies. Deposits are acquired from a
highly diversified customer base that includes individuals, small and large
businesses and municipal and other governmental entities, none of which
represent a material concentration of the bank's core deposits. The bank's
loan portfolio is not concentrated in any single industry or group of related
industries, nor is there any material risk other than that which is expected
in the normal course of business of a bank in this location. The bank does
not experience a material seasonal fluctuation in its business.
Governmental Monetary Policies. The policies of the Federal Reserve Board
have a direct effect on the amount of the banks loans and deposits and the
interest rates charged and paid thereon. While future economic conditions
and the policies of the Federal Reserve Board designed to deal with those
conditions cannot accurately be predicted, they can materially affect the
revenue and income of commercial banks.
Employees. The Corporation had 395 full-time equivalent employees as of
December 31, 2002.
Available Information. The Corporation's principal executive offices are
located at 105 Arbor Drive, Christiansburg, Virginia 24068. The Corporation's
telephone number is (540) 382-4951. The Corporation's home page on the
Internet is www.fnbonline.com. The Corporation makes web site content
available for information purposes only. It should not be relied upon for
investment purposes, nor is it incorporated by reference into this Form 10-K.
Throughout this Form 10-K, the Corporation incorporates by reference
information from parts of other documents filed with the Securities and
Exchange Commission (SEC). The SEC allows the Corporation to disclose
important information by referring to it in this manner, and you should
review this information.
9
The Corporation's annual report on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K and proxy statement for the Corporation annual
shareholders' meeting, as well as any amendments to those reports, are
available free of charge through the Corporation web site as soon as
reasonably practicable after electronic filing of such material with the
SEC. You can learn more about the Corporation by reviewing the Corporation
SEC filings on the Corporation web site. The Corporation SEC reports can
be accessed through the investor relations page of the Corporation web
site. The SEC also maintains a web site at www.sec.gov that contains
reports, proxy statements and other information regarding SEC registrants,
including FNB Corporation.
Securities Act Guide 3. Statistical Disclosure by Bank Holding Companies.
The following schedules are included:
Average Balance Sheet and Analysis of Net Interest Earnings
Rate/Volume Variance
Securities Available-For-Sale at Fair Value
Securities Held-To-Maturity at Amortized Cost
Securities--Maturity/Yield Schedule
Types of Loans
Loan Maturities and Interest Sensitivity
Nonperforming Assets and Past Due Loans
Pro forma/Recorded Interest on Nonaccrual Loans
Analysis of the Allowance for Loan Losses
Allocation of Allowance for Loan Losses
Deposit Maturities
Return on Equity and Assets
Interest Sensitivity Analysis
10
GUIDE 3. I. DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL
A. and B. AVERAGE BALANCE SHEET AND ANALYSIS OF NET INTEREST EARNINGS
2002
Average
Average Income/ Yield/
(thousands) Balance Expense Rate
ASSETS
Loans (Net of unearned income) (1)(2) $666,213 49,398 7.41%
Securities:
Taxable 150,390 7,988 5.31
Nontaxable (2) 32,040 2,314 7.22
Total securities 182,430 10,302 5.65
Federal funds sold 27,760 813 2.93
Total interest-earning assets 876,403 60,513 6.90
Allowance for loan losses (9,393)
Cash and due from banks, noninterest-
bearing 23,300
Bank premises and equipment, net 22,908
Other real estate owned 1,077
Other assets 44,995
Total assets $959,290
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing deposits:
Demand and savings $269,952 3,225 1.19%
Time 357,464 12,756 3.57
Certificates of deposit of
$100,000 and over 88,817 4,070 4.58
Total interest-bearing deposits 716,233 20,051 2.80
Federal funds purchased and securities
sold under agreements to repurchase 9,013 111 1.23
Other borrowed funds 36,617 2,034 5.55
Total interest-bearing liabilities 761,863 22,196 2.91
Demand deposits, noninterest-bearing 100,265
Other liabilities 7,415
Stockholders' equity 89,747
Total liabilities and stockholders'
equity $959,290
Interest income and rate earned $ 60,513 6.90%
Interest expense and rate paid 22,196 2.91
Interest rate spread 3.99
NET INTEREST INCOME AND NET YIELD
ON AVERAGE EARNING ASSETS $ 38,317 4.37%
(1) Interest on nonaccrual loans has been included only to the extent
reflected in the statements of income. Nonaccrual loans are included in
average balances for yield computations.
(2) Income and rates on non-taxable loans and securities are computed on a tax
equivalent basis using a federal tax rate of 34%.
11
A. and B. AVERAGE BALANCE SHEET AND ANALYSIS OF NET INTEREST EARNINGS
2001
Average
Average Income/ Yield/
(thousands) Balance Expense Rate
ASSETS
Loans (net of unearned income)(1)(2) $458,756 39,603 8.63%
Securities:
Taxable 92,921 5,829 6.27
Nontaxable(2) 38,382 2,803 7.30
Total securities 131,303 8,632 6.57
Federal funds sold 20,224 730 3.61
Total interest-earning assets 610,283 48,965 8.02
Allowance for loan losses (6,399)
Cash and due from banks, noninterest-
bearing 15,341
Bank premises and equipment, net 18,266
Other real estate owned 303
Other assets 11,817
Total assets $649,611
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing deposits:
Demand and savings $166,065 3,683 2.22%
Time 257,988 13,601 5.27
Certificates of deposit of
$100,000 and over 71,165 4,195 5.89
Total interest-bearing deposits 495,218 21,479 4.34
Federal funds purchased and securities
sold under agreements to repurchase 8,325 271 3.26
Other borrowed funds 19,249 1,077 5.60
Total interest-bearing liabilities 522,792 22,827 4.37
Demand deposits, noninterest-bearing 62,719
Other liabilities 6,363
Stockholders' equity 57,737
Total liabilities and stockholders'
equity $649,611
Interest income and rate earned $ 48,965 8.02%
Interest expense and rate paid 22,827 4.37
Interest rate spread 3.66
NET INTEREST INCOME AND NET YIELD
ON AVERAGE EARNING ASSETS $ 26,138 4.28%
(1) Interest on nonaccrual loans has been included only to the extent
reflected in the statements of income. Nonaccrual loans are included in
average balances for yield computations.
(2) Income and rates on non-taxable loans and securities are computed on a tax
equivalent basis using a federal tax rate of 34%.
12
A. and B. AVERAGE BALANCE SHEET AND ANALYSIS OF NET INTEREST EARNINGS
2000
Average
Average Income/ Yield/
(thousands) Balance Expense Rate
ASSETS
Loans (Net of unearned income) (1)(2) $397,154 36,769 9.26%
Securities:
Taxable 50,307 3,186 6.33
Nontaxable (2) 43,119 3,182 7.38
Total securities 93,426 6,368 6.82
Federal funds sold 1,686 99 5.87
Total interest-earning assets 492,266 43,236 8.78
Allowance for loan losses (5,588)
Cash and due from banks, noninterest-
bearing 11,465
Bank premises and equipment, net 13,546
Other real estate owned 253
Other assets 6,159
Total assets $518,101
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing deposits:
Demand and savings $134,661 3,966 2.95%
Time 174,097 9,915 5.70
Certificates of deposit of
$100,000 and over 55,793 3,348 6.00
Total interest-bearing deposits 364,551 17,229 4.73
Federal funds purchased and securities
sold under agreements to repurchase 9,274 437 4.71
Other borrowed funds 41,735 2,436 5.84
Total interest-bearing liabilities 415,560 20,102 4.84
Demand deposits, noninterest-bearing 48,333
Other liabilities 4,573
Stockholders' equity 49,635
Total liabilities and stockholders'
equity $518,101
Interest income and rate earned $ 43,236 8.78%
Interest expense and rate paid 20,102 4.84
Interest rate spread 3.95
NET INTEREST INCOME AND NET YIELD
ON AVERAGE EARNING ASSETS $ 23,134 4.70%
(1) Interest on nonaccrual loans has been included only to the extent
reflected in the statements of income. Nonaccrual loans are included in
average balances for yield computations.
(2) Income and rates on non-taxable loans and securities are computed on a tax
equivalent basis using a federal tax rate of 34%.
13
A. RATE/VOLUME VARIANCE
2002 Compared to 2001 2001 Compared to 2000
Due to Due to Due to Due to
(thousands) Change Volume Rate Change Volume Rate
INTEREST INCOME
Loans(1) $ 9,795 16,646 (6,851) 2,834 5,511 (2,677)
Securities:
Taxable 2,159 3,329 (1,170) 2,643 2,686 (43)
Nontaxable(1) (489) (461) (28) (379) (348) (31)
Federal funds sold 83 246 (163) 631 879 (248)
Total 11,548 19,760 (8,212) 5,729 8,728 (2,999)
INTEREST EXPENSE
Demand and savings (458) 1,773 (2,231) (283) 811 (1,094)
Time (845) 4,397 (5,242) 3,686 4,600 (914)
Certificates of deposit
of $100,0000 and over (125) 925 (1,050) 847 914 (67)
Federal funds purchased
and securities sold
under agreements to
repurchase (160) 15 (175) (166) (38) (128)
Other borrowed funds 957 968 (11) (1,359) (1,285) (74)
Total (631) 8,078 (8,709) 2,725 5,002 (2,277)
Net interest income $ 12,179 11,682 497 3,004 3,726 (722)
Variances caused by changes in rate times the changes in volume are allocated
equally.
(1) Income and rates on non-taxable loans and securities are computed on a
tax equivalent basis using a federal tax rate of 34%.
14
GUIDE 3. II. INVESTMENT PORTFOLIO
A. SECURITIES AVAILABLE-FOR-SALE AT FAIR VALUE
December 31,
(thousands) 2002 2001 2000
U.S. Treasury $ - 503 503
U.S. Government agencies and
corporations 16,234 50,884 14,318
Mortgage-backed 77,616 38,756 1,834
States and political subdivisions 21,974 23,302 17,092
Corporate 26,064 32,892 31,643
Totals $ 141,888 146,337 65,390
A. SECURITIES HELD-TO-MATURITY AT AMORTIZED COST
December 31,
(thousands) 2002 2001 2000
U.S. Government agencies and
corporations $ - 6,331 -
Mortgage-backed 259 376 -
States and political subdivisions 15,816 24,105 28,193
Totals $ 16,075 30,812 28,193
15
B. SECURITIES--MATURITY/YIELD SCHEDULE
As of December 31, 2002
Securities Available-for-Sale
Approximate Taxable
Amortized Fair Equivalent
(thousands) Costs Values Yield(1)
U.S. Government agencies and
corporations:
1 through 5 years $ 12,847 13,257 4.25
6 through 10 years 15,273 15,755 5.39
Over 10 years 63,215 64,838 4.38
Total 91,335 93,850 4.53
States and political
subdivisions:
Within 1 year 1,848 1,876 6.80
1 through 5 years 8,111 8,376 6.02
6 through 10 years 7,310 7,334 5.87
Over 10 years 4,278 4,388 6.93
Total 21,547 21,974 6.22
Other securities:
Within 1 year 2,927 3,028 7.21
1 through 5 years 18,528 19,752 6.16
6 through 10 years 3,149 3,284 5.37
Total 24,604 26,064 6.19
$ 137,486 141,888 5.09
(1) Yields on non-taxable investment securities are computed on a tax
equivalent basis using a federal tax rate of 34%.
16
B. SECURITIES--MATURITY/YIELD SCHEDULE
As of December 31, 2002
Securities Held-To-Maturity
Approximate Taxable
Amortized Fair Equivalent
(thousands) Costs Values Yield(1)
U.S. Government agencies and
corporations:
6 through 10 years $ 127 137 8.00
Over 10 years 132 136 5.52
Total 259 273 6.62
States and political
subdivisions:
Within 1 year 5,655 5,727 7.13
1 through 5 years 9,549 10,044 7.07
6 through 10 years 612 637 6.25
Total 15,816 16,408 7.05
$ 16,075 16,681 7.04
(1) Yields on non-taxable investment securities are computed on a tax
equivalent basis using a federal tax rate of 34%.
17
GUIDE 3. III LOANS
A. TYPES OF LOANS
December 31,
2002 2001 2000
% of % of % of
(thousands) Amount Total Amount Total Amount Total
Commercial $ 76,665 11.1 75,705 11.7 76,023 18.6
Consumer 133,304 19.3 130,072 20.1 77,395 18.9
Real estate - commercial 225,316 32.6 193,575 29.9 108,338 26.4
Real estate - construction 49,186 7.1 42,404 6.5 20,326 5.0
Real estate - mortgage 207,190 29.9 206,507 31.8 127,504 31.1
$691,661 100.0 648,263 100.0 409,586 100.0
TYPES OF LOANS
December 31,
1999 1998
% of % of
(thousands) Amount Total Amount Total
Commercial $ 76,796 20.1 85,536 26.0
Consumer 69,278 18.1 66,526 20.3
Real estate - commercial 104,608 27.4 65,165 19.8
Real estate - construction 19,449 5.1 16,686 5.1
Real estate - mortgage 112,141 29.3 94,686 28.8
$382,272 100.0 328,599 100.0
18
B. LOAN MATURITIES AND INTEREST SENSITIVITY
As of December 31, 2002
One
Within Through Over
(thousands) One Year Five Years Five Years Total
Commercial:
Fixed interest rates $ 9,960 22,639 5,582 38,181
Floating interest rates 7,856 12,499 18,129 38,484
Total 17,816 35,138 23,711 76,665
Real estate-commercial:
Fixed interest rates 11,396 46,930 28,494 86,820
Floating interest rates 42,347 68,335 27,814 138,496
Total 53,743 115,265 56,308 225,316
Real estate-construction: (1)
Fixed interest rates 4,933 1,897 13,514 20,344
Floating interest rates 13,348 9,253 6,241 28,842
Total 18,281 11,150 19,755 49,186
$ 89,840 161,553 99,774 351,167
(1) Included under the caption Real estate-construction are loans which
originated as construction loans but which have been converted to permanent
financing.
19
C. NONPERFORMING ASSETS AND PAST DUE LOANS
December 31,
(thousands) 2002 2001 2000 1999 1998
Nonaccrual loans $ 2,914 2,815 2,391 4,517 1,109
Other real estate owned 1,001 1,420 281 129 30
Accruing loans past due
90 days 596 1,031 410 25 161
Total nonperforming assets $ 4,511 5,266 3,082 4,671 1,300
PRO FORMA/RECORDED INTEREST ON NONACCRUAL LOANS
(thousands) 2002 2001 2000 1999 1998
Pro forma interest-nonaccrual
loans $ 225 248 239 406 105
Recorded interest-nonaccrual
loans $ - 64 - 1 1
Interest related to nonaccrual loans is recognized on the cash basis. Loans
are generally placed on nonaccrual status when the collection of principal or
interest is 90 days or more past due, unless the obligation is both well-
secured and in the process of collection. Pro forma interest represents the
amount of interest that would have been recorded if the loans had been current
in accordance with their original terms.
20
GUIDE 3. IV. SUMMARY OF LOAN LOSS EXPERIENCE
A. ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
(thousands)
2002 2001 2000 1999 1998
AVERAGE LOANS OUTSTANDING $ 666,213 458,756 397,154 359,268 312,369
ALLOWANCE FOR LOAN LOSSES
Balance, beginning of period $ 8,827 5,670 5,173 4,640 4,291
Provision for loan losses 1,369 1,637 1,082 1,445 1,135
Reserve acquired through merger - 2,956 - - -
Additional reserve for branch
loans purchased - 188 - - -
10,196 10,451 6,255 6,085 5,426
Loans charged off:
Commercial 299 980 377 713 507
Consumer 1,034 950 494 355 441
Real estate - commercial 60 - - 50 -
Real estate - construction - - - - -
Real estate - mortgage 278 59 - 15 22
Total loans charged off 1,671 1,989 871 1,133 970
Recovery of loans previously
charged off:
Commercial 117 111 22 9 54
Consumer 402 249 249 178 130
Real estate - commercial 383 - - - -
Real estate - construction - - - - -
Real estate - mortgage 39 5 15 34 -
Total recoveries 941 365 286 221 184
Net loans charged off 730 1,624 585 912 786
Balance, end of period $ 9,466 8,827 5,670 5,173 4,640
Net charge-offs to average
loans outstanding 0.11% 0.35 0.15 0.25 0.25
21
B. ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
(thousands)
December 31,
2002 2001 2000 1999 1998
Commercial $ 2,642 2,794 3,140 2,555 2,388
Consumer 2,179 1,894 837 839 841
Real estate - commercial 2,117 2,178 867 612 418
Real estate - construction 649 534 164 66 58
Real estate - mortgage 1,314 1,016 576 538 621
Unassigned portion of allowance 565 411 86 563 314
$ 9,466 8,827 5,670 5,173 4,640
Management continually reviews the loan portfolio for signs of deterioration.
In making their evaluation of the portfolio, factors considered include the
individual strength of borrowers, the strength of the individual industries,
the value and marketability of collateral, specific market strengths and
weaknesses, and general economic conditions. Management believes that the
allowance for loan losses at December 31, 2002 is adequate to cover potential
loan losses inherent in the loan portfolio.
GUIDE 3. V. DEPOSITS
D. DEPOSIT MATURITIES
As of December 31, 2002
Mature Within
Over Six
Three Over Three Months
Months Months Through Over
or Through Twelve Twelve
(thousands) Less Six Months Months Months Total
Certificates of
deposit and other
time deposits of
$100M and over $ 17,251 8,520 13,298 52,245 91,314
All other deposits 206,916 59,911 97,485 390,062 754,374
Total deposits $ 224,167 68,432 110,783 442,307 845,688
GUIDE 3. VI. RETURN ON EQUITY AND ASSETS
Refer to the Bank's 2002 Annual Report to Stockholders under the heading
"Selected Consolidated Financial Information" for a five year summary of
financial information which includes return on equity, return on assets and
other ratios, which is incorporated by reference into this Form 10-K.
22
INTEREST SENSITIVITY ANALYSIS
As of December 31, 2002
Mature or Reprice Within
Over Three
Three Months Over One
Months Through Year To Over
or Twelve Five Five
(thousands) Less Months Years Years Total
INTEREST-EARNING ASSETS
Loans $ 234,851 151,286 254,881 47,729 688,747
Securities:
Available-for-sale,
at fair value 6,157 2,876 39,347 93,508 141,888
Held-to-maturity,
at amortized cost 848 3,818 10,552 857 16,075
Other interest-earning
assets 46,561 12,474 - 5,320 64,355
Total interest-
earning assets $ 288,417 170,454 304,780 147,414 911,065
INTEREST-BEARING LIABILITIES
Certificates of deposit
and other time deposits
of $100M and over $ 17,251 21,818 52,045 200 91,314
Time 78,648 108,095 170,802 728 358,273
All other deposits 120,763 33,458 136,579 591 291,391
Federal funds purchased
and securities sold
under agreements to
repurchase 8,071 - - - 8,071
Other borrowed funds 15,464 5,000 8,067 10,000 38,531
Total interest-
bearing
liabilities $ 240,197 168,371 367,493 11,519 787,580
Interest sensitivity
gap per period $ 48,220 2,083 (62,713) 135,895 123,485
Cumulative interest
sensitivity gap 48,220 50,303 (12,410) 123,485 -
23
Item 2. Properties
FNB Corporation owns sixteen branches and one other location for its Salem
operations center, and leases seven branches, one location for a loan
production office, and one location for a financial services office.
All of the Corporation's properties are listed below.
Square
Properties Owned: Location Footage
Christiansburg Office 50 North Franklin Street 9,000
Christiansburg, VA
Blacksburg Office 601 North Main Street 8,750
Blacksburg, VA
Riner Office Route 8 1,600
Riner, VA
Radford Office 50 First Street 8,000
Radford, VA
Shawsville Office 250 Alleghany Spring Road 2,712
Shawsville, VA
Dublin Office 2 Town Center Drive 2,640
Dublin, VA
FNB Center 105 Arbor Drive 72,816
Christiansburg, VA
Wytheville Office 320 West Main Street 16,932
Wytheville, VA
Wytheville Office 900 North 4th Street 3,000
Wytheville, VA
Pearisburg Office 605 Wenonah Avenue 7,350
Pearisburg, VA
Salem Operations Center 110 East Main Street 31,000
Salem, VA
Salem West Main Office 1251 West Main Street 1,350
Salem, VA
Second Street Office 302 Second Street 28,639
Roanoke, VA
Vinton Office 1006 Hardy Road 2,328
Vinton, VA
Roanoke Office 2133 Electric Road 1,550
Roanoke, VA
Roanoke Office 1611 Hershberger Road 1,974
Roanoke, VA
Salem Office 40 West Main Street 1,974
Salem, VA
Square
Properties Leased: Location Footage
Roanoke Street Office 1540 Roanoke Street 1,200
Christiansburg, VA
Corporate Research Center 1872 Pratt Drive, Suite 1125 360
Office Blacksburg, VA
South Main Blacksburg 1206 South Main Street 1,100
Office Blacksburg, VA
24
Salem Main Office 220 East Main Street 5,740
Salem, VA
South Salem Office 1406 Colorado Street 940
Salem, VA
Hollins Office 7337 Williamson Road 1,400
Roanoke, VA
Brandon Oaks Office 3804 Brandon Avenue 1,867
Roanoke, VA
Southwest Loan Building D, Suite 101
Production Office 2847 Penn Forest Blvd. 1,715
Roanoke, VA
Oak Grove Financial 2103 Electric Road 1,862
Services Office Roanoke, VA
The majority of such space is used by the Corporation in its operations. The
leased properties are from independent parties on terms which management
believes are reasonable in relationship to other available properties in
similar markets.
Item 3. Legal Proceedings
From time to time, the Corporation is a party to lawsuits arising in the
normal course of business in which claims for money damages are asserted.
Management, after consulting with legal counsel handling the respective
matters, is of the opinion that the ultimate outcome of such pending actions,
whether or not adverse to the Corporation, will not have a material effect
upon the Corporation's financial condition.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of 2002.
25
PART II
Item 5. Market for the Corporation's Common Stock and Related Security
Holder Matters
The Corporation has one class of Common Stock with a Par Value of $5 per
share. There were approximately 1,509 stockholders of record as of December
31, 2002, holding 5,807,508 shares of the authorized 25,000,000 shares of
common stock. On July 9, 2002, FNB Corporation was formally named to the
Russell 2000 stock index. The Russell 2000 index is comprised of the
3,000 largest U.S. corporations ranked in order of total market
capitalization (excluding from that group the 1000 largest companies).
The Corporation's stock began appearing on the Nasdaq Stock Market under
the symbol FNBP on July 7, 1998.
The recent market prices and other related shareholder data is incorporated by
reference into this Form 10-K from the section entitled, "Market Price and
Dividend Data," in the Corporation's 2002 Annual Report to Stockholders which
is filed as Exhibit 13 to this Annual Report on Form 10-K.
Beginning in the second quarter of 1997, the Corporation changed its policy
and began paying dividends on a quarterly basis, which is currently
anticipated to be the normal frequency for the foreseeable future. There are
no known restrictions on retained earnings that would affect the ability to
pay further dividends other than those imposed by regulatory agencies. See
Note 13 of the notes to consolidated financial statements in the
Corporation's 2002 Annual Report to Stockholders under the caption "Dividend
Restrictions and Capital Requirements," which is filed as Exhibit 13 to this
Form 10-K and is incorporated herein by reference.
Item 6. Selected Financial Data
Selected financial data is presented in the Corporation's 2002 Annual Report
to Stockholders, which is filed as Exhibit 13 to this Form 10-K, under the
caption "Selected Consolidated Financial Information," which is incorporated
herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Management's Discussion and Analysis of Financial Condition and Results of
Operations is included in the section of the Corporation's 2002 Annual Report
to Stockholders, which is filed as Exhibit 13 to this Form 10-K, under the
same heading, and is incorporated herein by reference.
Item 7(A) Quantitative and Qualitative Disclosures About Market Risk
Information regarding market risks is included in the section of the 2002
Annual Report to Stockholders entitled "Market Risks Related to Financial
Instruments," which is filed as Exhibit 13 to this Form 10-K and is
incorporated herein by reference.
26
Item 8. Financial Statements and Supplementary Data
The following independent auditors' report, consolidated financial statements,
and supplementary financial information included in the Corporation's 2002
Annual Report to Stockholders, which is filed as Exhibit 13 to this Form 10-K,
are incorporated herein by reference:
Independent Auditor's Report
Consolidated Balance Sheets - December 31, 2002 and 2001
Consolidated Statements of Income and Comprehensive Income - Years
ended December 31, 2002, 2001,and 2000
Consolidated Statements of Cash Flows - Years ended December 31,
2002, 2001, and 2000
Consolidated Statements of Changes in Stockholders' Equity - Years
ended December 31, 2002, 2001, and 2000
Notes to Consolidated Financial Statements
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
27
PART III
Item 10. Directors and Executive Officers of the Corporation
Information on directors is incorporated by reference to the Corporation's
Proxy Statement for the 2002 Annual Meeting of Stockholders under the heading
"Proposals to be Voted on - Proposal No. 1 - Election of Directors."
Information on executive officers is incorporated by reference
to the Corporation's Proxy Statement for the 2002 Annual Meeting of
Stockholders under the heading "Non-Director Executive Officers of
the Corporation."
Item 11. Executive Compensation
Information on executive compensation is incorporated by reference to the
Corporation's Proxy Statement for the 2002 Annual Meeting of Stockholders
under the heading "Executive Compensation."
Information on compensation of directors, the directors compensation committee
and the report on executive compensation is incorporated by reference to the
Corporation's Proxy Statement for the 2002 Annual Meeting of Stockholders
under the heading "Board of Directors and Committees of the Board."
The Corporation's performance graph is incorporated by reference to the
Corporation's Proxy Statement for the 2002 Annual Meeting of Stockholders
under the heading "Performance Graph."
28
Item 12. Security Ownership of Certain Beneficial Owners and Management
Principal Security Holders. The Corporation knows of no person or group that
beneficially owned more than five percent of the outstanding shares of Common
Stock as of March 7, 2003.
Executive Officers. The persons currently serving as executive officers of
the Corporation and their security ownership, are as follows:
Percent of
Number Shares Owned Outstanding
Name (Age) Title as of 3/7/03(A)(B) Shares
Samuel H. President & Chief 157,955 2.7
Tollison (70) Executive Officer
Litz H. Van Executive Vice President 12,458 *
Dyke (39)
Peter A. Seitz Executive Vice President/
(40) General Counsel 8,315 *
Daniel A. Senior Vice President &
Becker (60) Chief Financial Officer 1,247 *
* Less than one percent.
(A) Includes shares that may be deemed beneficially owned due to sole or
joint ownership, voting power or investment power; including shares owned by
or held for the benefit of an executive officer's spouse or another immediate
family member residing in the household of the executive officer that may be
deemed beneficially owned.
(B) Includes estimated 2002 Employee Stock Ownership Plan allocation.
Directors. Information on security ownership of directors is incorporated by
reference to the Corporation's Proxy Statement for the 2002 Annual Meeting of
Stockholders under the heading "Security Ownership of Certain Beneficial
Owners and Management."
29
In 2000 the Corporation's stockholders approved the FNB Corporation 2000
Incentive Stock Plan which makes up to 424,000 shares of common stock
available for awards to key employees and non-employee directors of the
Corporation in the form of stock options, stock appreciation rights and
stock awards. For a full description of the Corporation's stock compensation
plans please read Note 21 of the notes to consolidated financial statements
included in the Corporation's Annual Report to Stockholders for the year ended
December 31, 2002 incorporated as Exhibit 13.
Equity Compensation Plan Information
Number of
securities
remaining
available
for future
issuance
Plan category Number of Weighted- under equity
securities average compensation
to be issued exercise plans
upon exercise price of (excluding
of outstanding outstanding securities
options, options, reflected in
warrants and warrants and column
rights rights (a))
(a) (b) (c)
Equity compensation
plans approved by
security holders 261,050 $15.552 162,950
Equity compensation
plans not approved
by security holders - - -
Total 261,050 $15.552 162,950
Item 13. Certain Relationships and Related Transactions
Directors and officers of the Corporation and persons with whom they are
associated have had and expect to have in the future, banking transactions
with the Corporation in the ordinary course of their businesses. In the
opinion of management of the Corporation, all such loans and commitments for
loans were made on substantially the same terms, including interest rates,
collateral and repayment terms as those prevailing at the same time for
comparable transactions with other persons, were made in the ordinary course
of business, and do not involve more than a normal risk of collectibility or
present other unfavorable features. The aggregate amount of direct loans to
any one director, officer or principal stockholder (and related persons), does
not exceed 10 percent of the Corporation's equity capital accounts (nor 20
percent of such accounts for all such persons as a group) and did not during
the previous two fiscal years.
Information on transactions with management is incorporated herein by
reference from the Corporation's Proxy Statement for the 2002 Annual Meeting
of Stockholders under the heading "Transactions with Management."
30
PART IV
Item 14. Controls and Procedures
We maintain a system of internal controls and procedures designed to provide
reasonable assurance as to the reliability of our published financial
statements and other disclosures included in this report. Within the 90-day
period prior to the date of this report, we evaluated the effectiveness of
the design and operation of our disclosure controls and procedures pursuant
to Rule 13a-14 of the Securities Exchange Act of 1934. Based upon that
evaluation, our Chief Executive Officer and our Chief Financial Officer
concluded that our disclosure controls and procedures are effective in timely
alerting them to material information relating to FNB Corporation (including
its consolidated subsidiaries) required to be included in this annual report
on Form 10-K.
There have been no significant changes in our internal controls or in other
factors which could significantly affect internal controls subsequent to the
date that we carried out our evaluation.
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
a(1). Consolidated Financial Statements. The following independent
auditors' report and consolidated financial statements of the Corporation are
incorporated by reference from the Corporation's 2002 Annual Report to
Stockholders included within this document as an Exhibit:
Independent Auditor's Report
Consolidated Balance Sheets --
December 31, 2002 and 2001
Consolidated Statements of Income and Comprehensive Income --
Years Ended December 31, 2002, 2001, and 2000
Consolidated Statements of Cash Flows --
Years Ended December 31, 2002, 2001, and 2000
Consolidated Statements of Changes in Stockholders' Equity --
Years Ended December 31, 2002, 2001, and 2000
Notes to Consolidated Financial Statements
a(2). Financial Statement Schedules. The financial statement schedules
are omitted as the required information is inapplicable or the
information is presented in the consolidated financial statements
or related notes.
a(3). Exhibits.
See Index to Exhibits
b. Reports on Form 8-K.
A report on Form 8-K was filed on December 20, 2002 (with
a Date of Report of December 20, 2002) disclosing under
Item 5 the appointment of Samuel H. Tollison as FNB's new
president and chief executive officer.
c. Exhibits.
Included in item 15(3) above
d. Financial Statement Schedules.
Included in item 15(2) above
31
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
FNB Corporation
By: s/Samuel H. Tollison
Samuel H. Tollison
President & Chief Executive Officer
By: s/Daniel A. Becker
Daniel A. Becker
Senior Vice President &
Chief Financial Officer
Date: March 27, 2003
32
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following directors on behalf of the
registrant and in that capacity and on the dates indicated.
Signature Date
s/Kendall O. Clay March 27, 2003
Kendall O. Clay
s/Douglas Covington March 27, 2003
Douglas Covington
s/Beverley E. Dalton March 27, 2003
Beverley E. Dalton
s/Daniel D. Hamrick March 27, 2003
Daniel D. Hamrick
s/F. Courtney Hoge March 27, 2003
F. Courtney Hoge
s/Walter A. Hunt March 27, 2003
Walter A. Hunt
s/Steven D. Irvin March 27, 2003
Steven D. Irvin
s/Clark Owen, Jr. March 27, 2003
Clark Owen, Jr.
s/B.L. Rakes March 27, 2003
B.L. Rakes
s/Charles W. Steger March 27, 2003
Charles W. Steger
s/Carl E. Tarpley, Jr. March 27, 2003
Carl E. Tarpley, Jr.
s/Jon T. Wyatt March 27, 2003
Jon T. Wyatt
33
CERTIFICATIONS
I, Samuel H. Tollison, certify that:
1. I have reviewed this annual report on Form 10-K of FNB
Corporation;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in
all material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in this
annual report;
4. The registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about
the effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability
to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant's
internal controls; and
34
6. The registrant's other certifying officer and I have indicated
in this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: March 27, 2003 s//Samuel H. Tollison
Samuel H. Tollison
President & Chief Executive Officer
35
CERTIFICATIONS
I, Daniel A. Becker., certify that:
1. I have reviewed this annual report on Form 10-K of FNB
Corporation;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in
all material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in this
annual report;
4. The registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about
the effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability
to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant's
internal controls; and
36
6. The registrant's other certifying officer and I have indicated
in this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: March 27, 2003 s/Daniel A. Becker
Daniel A. Becker
Senior Vice President & Chief Financial Officer
37
INDEX TO EXHIBITS
Exhibit # Description
(2) Plan of Merger
(2)A Merger agreement dated July 31, 2001 between FNB Corporation and
Salem Community Bankshares, Inc. filed with the Commission as
Exhibit (2)D on Form 10-Q for the quarter ended June 30, 2001, is
incorporated herein by reference.
(2)B Amendment to merger agreement dated August 7, 2001 between FNB
Corporation and Salem Community Bankshares, Inc. filed with the
Commission as exhibit (2)E on Form 10-Q for the quarter ended
June 30, 2001, is incorporated herein by reference.
(3)(i)(a) Articles of Incorporation
Registrant's Articles of Incorporation, filed with the Commission
as exhibit 3.1 to the Annual Report on Form 10-K for the year
ended December 31, 1996, is incorporated herein by reference.
(3)(i)(b) Articles of Amendment to Articles of Incorporation, incorporated
herein by reference to Exhibit 3.3 of Registrant's
Registration Statement on Form S-4 dated September 13, 2000.
(3)(i)(c) Articles of Amendment to Articles of Incorporation, filed with
the Commission as exhibit (3)(i)(c) on Form 10-Q for the quarter
ended June 30, 2002, is incorporated herein by reference.
(3)(ii) Registrant's Amended Bylaws, filed with the Commission as exhibit
(3)(iii) on Form 10-Q for the quarter ended June 30, 2001, is
incorporated herein by reference.
(10) Material Contracts
(10)A Employment agreement dated April 1, 2002 between FNB Corporation
and Julian D. Hardy, Jr., filed with the Commission as exhibit
(10)A on Form 10-Q for the quarter ended June 30, 2002, is
incorporated herein by reference.
(10)B Employment agreement dated April 1, 2002 between FNB Corporation
and Peter A. Seitz, filed with the Commission as exhibit (10)B
on Form 10-Q for the quarter ended June 30, 2002, is incorporated
herein by reference.
(10)C Employment agreement dated April 1, 2002 between FNB Corporation
and Litz H. Van Dyke, filed with the Commission as exhibit (10)C
on Form 10-Q for the quarter ended June 30, 2002, is incorporated
herein by reference.
38
(13) 2002 Annual Report to Stockholders
(21) Subsidiaries of the Registrant
Name of Subsidiary Incorporation
First National Bank United States
FNB Financial Services, Inc. Virginia
FNBO Co., Inc. Virginia
Salem Bank and Trust, N.A. United States
39