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FORM 10-K-ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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, 1996
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 incorporation or organization) (I.R.S. Employer
Identification No.)
105 Arbor Drive, Christiansburg, Virginia 24073
(Address of principal executive offices) (Zip Code)
(540) 382-4951
(Registrant's telephone number, including area code)
50 North Franklin Street, Christiansburg, Virginia 24073
(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]
The aggregate market value of voting stock held by non-affiliates of the
registrant as of March 10, 1997, was $59,642,290.
1,661,900 shares outstanding as of March 10,1997
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Corporation's Annual Report to Stockholders for the year ended
December 31, 1996, 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, 1997, are incorporated into Part III hereof.
TABLE OF CONTENTS
PART I
Item 1. Business Page
General 3
Competition 4
Loan Commitments 4
Deposit Concentrations 5
Employees 5
Securities Act Guide 3. Statistical
Disclosure by Bank Holding Companies 5
Item 2. Properties 15
Item 3. Legal Proceedings 15
Item 4. Submission of Matters to a Vote of
Security Holders 15
PART II
Item 5. Market for the Bank's Common Stock and
Related Security Holder Matters 16
Item 6. Selected Financial Data 16
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 16
Item 8. Financial Statements and Supplementary Data 16
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 17
PART III
Item 10. Directors and Executive Officers of the Bank 17
Item 11. Executive Compensation 17
Item 12. Security Ownership of Certain Beneficial Owners
and Management 18
Item 13. Certain Relationships and Related Transactions 18
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K 19
Signatures 20
Index to Consolidated Financial Statements 22
Index to Exhibits 23
PART I
Item 1. Business
General. Subsequent to December 31, 1995, The Board of Directors of First
National Bank (the "Bank") approved a reorganization whereby a bank holding
company (FNB Corporation) was incorporated under the laws of the Commonwealth
of Virginia. On June 11, 1996, the shareholders of the Bank approved a plan
for the holding company to exchange one share of its stock for each share of
stock of the Bank. A registration statement was filed with the Securities and
Exchange Commission (SEC) to register the stock of the holding company, and
such registration statement was subsequently declared effective by the SEC. On
July 11, 1996, the Office of the Comptroller of the Currency (OCC) approved the
plan, and the exchange was subsequently consummated. As a result, the Bank
became a wholly owned subsidiary of the holding company during the third
quarter of 1996, and the holding company began filing periodic reports under
the Securities Exchange Act of 1934. Prior to the consummation of the
exchange, the Bank filed periodic reports with the OCC.
The financial statements included herein reflect the balances and activity of
the Bank and its subsidiaries for periods ending prior to the consummation of
the reorganization and of the holding company and its subsidiaries
(collectively, the "Corporation")for periods ending subsequent to the
reorganization. The exchange of stock was accounted for using the pooling of
interests method. That is, the bases of the assets and liabilities of the Bank
prior to the reorganization were carried forward without adjustment. Because
of this, and because the holding company's revenues, expenses and changes in
financial position subsequent to the reorganization have been minimal, the
consolidated financial statements for periods subsequent to the reorganization
are comparable to those for periods prior to the reorganization.
First National Bank, which was organized in 1905, does a general banking
business, serving the commercial, agricultural, and personal banking needs of
its trade territory, commonly referred to as the New River Valley, which
consists of Montgomery County, Virginia and portions of adjacent counties. The
Bank engages in and offers a full range of banking services, including trust
services; demand, savings, and time deposits used to fund the loan demand in
our trade area; commercial, farm, consumer installment, mortgage, credit card,
and SBA guaranteed loans.
Under national banking law, nontraditional activities of a bank must be
operated through a corporate subsidiary of the bank. During 1992, FNB formed
a wholly-owned subsidiary in order to expand its business operations. FNB
Financial Services, Inc. is a member of the Virginia Title Center, L.L.C. and
acts as an agent in the issuance of title insurance policies. Additionally,
this subsidiary has been licensed by the Commonwealth of Virginia to offer
annuity products through First National's Trust Department. Any reference in
this report to the operations of the Corporation shall include the activities
of FNB Financial Services, Inc.
The local economy is tied primarily to the area's three largest employers -
Virginia Polytechnic Institute and State University, with a student population
in excess of 23,000; Radford University, with a student population in excess of
9,000; and the Radford Arsenal, a large munitions plant operated under contract
to the U.S. Army by the Hercules Corporation. Other industries include a wide
variety of manufacturing concerns and agriculture-related enterprises. The
Bank's main office is located in Christianburg, the County Seat, with offices
strategically located to take advantage of its trade area's population mix. Of
the Bank's ten full service offices, eight are located in Montgomery County,
one in the City of Radford and one in the Town of Dublin. One paying and
receiving office is located in Montgomery County.
Refer to the Corporation's 1996 Annual Report to Stockholders under the heading
"Selected Consolidated Financial Information" for a five year summary of
selected consolidated financial information which is incorporated by reference
into this Form 10-K.
Construction of a new corporate headquarters facility was completed during the
first quarter of 1997.
Competition. The Corporation is the largest bank in the area, with
approximately 65 percent of those deposits held by independent banks. It is
estimated that the Corporation holds 37 percent of total deposits in its trade
area including the offices of those state-wide bank holding companies located
in our trade area. Competition in the trade area consists of five statewide
bank holding companies, one independent bank, two offices of a regional bank,
and five credit unions.
Loan Commitments. The portfolio is not concentrated within 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.
Corporation policy establishes lending limits for each officer. Loan requests
for amounts exceeding loan officer lending authority are referred to loan
committees, and unsecured requests in excess of $750,000 and secured requests
in excess of $1,500,000 are referred to the Executive Committee of the Board of
Directors. The following table relates outstanding loans for the dates
indicated (in thousands):
December 31,
1996 1995
Commercial $ 56,461 52,374
Consumer 62,906 61,888
Real estate - commercial 52,232 52,075
Real estate - construction 4,926 9,600
Real estate - mortgage 96,856 76,505
Total loans $ 273,381 252,442
The Corporation is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit. Those instruments involve, to varying degrees, elements of
credit risk in excess of the amount recognized in the balance sheet. The
contract amounts of those instruments reflect the extent of involvement the
Corporation has in particular classes of financial instruments.
The Corporation's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual amount of those
instruments. The Corporation uses the same credit policies in making
commitments and conditional obligations as it does for on-balance-sheet
instruments.
Unless noted otherwise, the Corporation does not require collateral or other
security to support the following financial instruments with credit risk (in
thousands):
December 31,
1996 1995
Contract Amounts
Financial instruments whose contract amounts
represent credit risk:
Commitments to extend credit $50,209 47,551
Standby letters of credit and
financial guarantees written 3,479 2,769
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The Corporation evaluates each
customer's credit worthiness on a case-by-case basis. The amount of collateral
obtained, if deemed necessary by the Corporation upon extension of credit, is
based on management's credit evaluation of the customer. Collateral held
varies but may include securities, accounts receivable, inventory, property,
plant and equipment, and income-producing commercial properties.
Standby letters of credit are conditional commitments issued by the Corporation
to guarantee the performance of a customer to a third party. Those guarantees
are primarily issued to support public and private borrowing arrangements,
including commercial paper, bond financing, and similar transactions. The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loans to customers. Collateral held varies but may
include securities, accounts receivable, inventory, property, plant and
equipment and income-producing commercial properties.
Deposit Concentrations. The Corporation's deposits are obtained from a wide
range of depositors. There are no material concentrations of deposits from any
individual or organization.
Employees. The Corporation had 185 full-time equivalent employees as of
December 31, 1996, of which 57 were officers.
Securities Act Guide 3. Statistical Disclosure by Bank Holding Companies. The
following schedules are included:
Average Balance Sheets
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 Allowance for Loan Losses
Allocation of Allowance for Loan Losses
Deposit Maturities
Interest Sensitivity Analysis
AVERAGE BALANCE SHEETS
1996
Average
Average Income/ Yield/
(thousands) Balance Expense Rate
ASSETS
Loans (Net of unearned income) (1) (2) $ 257,571 25,227 9.79 %
Securities:
Taxable 47,420 2,998 6.32
Nontaxable (2) 45,660 3,603 7.89
Total securities 93,080 6,601 7.09
Federal funds sold 3,496 188 5.38
Total interest-earning assets 354,147 32,016 9.04
Allowance for loan losses (4,116)
Cash and due from banks, noninterest-bearing 8,524
Bank premises and equipment, net 6,772
Other real estate owned 277
Other assets 4,363
Total assets $ 369,967
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing deposits:
Demand $ 44,127 1,280 2.90 %
Savings 47,253 1,395 2.95
Time 164,236 9,497 5.78
Certificates of deposit of $100,000 and over 32,219 1,856 5.76
Total interest-bearing deposits 287,835 14,028 4.87
Federal funds purchased and securities sold
under agreements to repurchase 5,461 229 4.19
Other borrowed funds 9,846 574 5.83
ESOP debt 1,469 118 8.03
Subordinated capital notes 661 67 10.14
Total interest-bearing liabilities 305,272 15,016 4.92
Demand deposits, noninterest-bearing 27,862
Other liabilities 2,583
Stockholders' equity 34,250
Total liabilities and stockholders' equity $ 369,967
Interest income and rate earned $ 32,016 9.04 %
Interest expense and rate paid 15,016 4.92
Interest rate spread 4.12
NET INTEREST INCOME AND NET YIELD
ON AVERAGE EARNING ASSETS $ 17,000 4.80 %
(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% for 1996, 1995 and 1994.
AVERAGE BALANCE SHEETS
1995
Average
Average Income/ Yield/
(thousands) Balance Expense Rate
ASSETS
Loans (Net of unearned income) (1) (2) $ 234,904 23,237 9.89 %
Securities:
Taxable 50,178 3,109 6.20
Nontaxable (2) 37,294 2,974 7.97
Total securities 87,472 6,083 6.95
Federal funds sold 3,594 186 5.18
Total interest-earning assets 325,970 29,506 9.05
Allowance for loan losses (3,923)
Cash and due from banks, noninterest-bearing 7,748
Bank premises and equipment, net 4,350
Other real estate owned 416
Other assets 4,717
Total assets $ 339,278
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing deposits:
Demand $ 42,715 1,410 3.30 %
Savings 52,828 1,692 3.20
Time 149,923 8,740 5.83
Certificates of deposit of $100,000 and over 26,170 1,603 6.13
Total interest-bearing deposits 271,636 13,445 4.95
Federal funds purchased and securities sold
under agreements to repurchase 4,874 232 4.76
Other borrowed funds 2,722 144 5.29
ESOP debt 2,273 173 7.61
Subordinated capital notes 978 87 8.90
Total interest-bearing liabilities 282,483 14,081 4.98
Demand deposits, noninterest-bearing 24,501
Other liabilities 2,414
Stockholders' equity 29,880
Total liabilities and stockholders' equity $ 339,278
Interest income and rate earned $ 29,506 9.05 %
Interest expense and rate paid 14,081 4.98
Interest rate spread 4.07
NET INTEREST INCOME AND NET YIELD
ON AVERAGE EARNING ASSETS $ 15,425 4.73 %
(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% for 1996, 1995 and 1994.
AVERAGE BALANCE SHEETS
1994
Average
Average Income/ Yield/
(thousands) Balance Expense Rate
ASSETS
Loans (Net of unearned income) (1) (2) $ 209,668 19,212 9.16 %
Securities:
Taxable 59,618 3,607 6.05
Nontaxable (2) 24,536 1,939 7.90
Total securities 84,154 5,546 6.59
Federal funds sold 2,789 128 4.59
Total interest-earning assets 296,611 24,886 8.39
Allowance for loan losses (3,801)
Cash and due from banks, noninterest-bearing 7,596
Bank premises and equipment, net 3,900
Other real estate owned 715
Other assets 4,320
Total assets $ 309,341
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing deposits:
Demand $ 41,332 1,244 3.01 %
Savings 63,965 1,916 3.00
Time 122,246 6,180 5.06
Certificates of deposit of $100,000 and over 21,565 1,259 5.84
Total interest-bearing deposits 249,108 10,599 4.25
Federal funds purchased and securities sold
under agreements to repurchase 5,262 184 3.50
Other borrowed funds 1,319 39 2.96
ESOP debt 1,789 117 6.54
Subordinated capital notes 1,085 83 7.65
Total interest-bearing liabilities 258,563 11,022 4.26
Demand deposits, noninterest-bearing 21,970
Other liabilities 1,967
Stockholders' equity 26,841
Total liabilities and stockholders' equity $ 309,341
Interest income and rate earned $ 24,886 8.39 %
Interest expense and rate paid 11,022 4.26
Interest rate spread 4.13
NET INTEREST INCOME AND NET YIELD
ON AVERAGE EARNING ASSETS $ 13,864 4.67 %
(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% for 1996, 1995 and 1994.
RATE/VOLUME VARIANCE
1996 Compared to 1995 1995 Compared to 1994
Due to Due to Due to Due to
(thousands) Change Volume Rate Change Volume Rate
INTEREST INCOME
Loans $ 1,990 2,231 (241) 4,025 2,404 1,621
Securities:
Taxable (111) (173) 62 (498) (578) 80
Nontaxable 629 664 (35) 1,035 1,013 22
Federal funds sold 2 (5) 7 58 39 19
Total 2,510 2,717 (207) 4,620 2,878 1,742
INTEREST EXPENSE
Demand (130) 44 (174) 166 44 122
Savings (297) (172) (125) (224) (345) 121
Time 757 831 (74) 2,560 1,506 1,054
Certificates of deposit of $100,000 and over 253 359 (106) 344 275 69
Federal funds purchased and securities sold
under agreements to repurchase (3) 26 (29) 48 (16) 64
Other borrowed funds 430 396 34 105 58 47
ESOP debt (55) (63) 8 56 34 22
Subordinated capital notes (20) (30) 10 4 (9) 13
Total 935 1,391 (456) 3,059 1,547 1,512
Net interest income $ 1,575 1,326 249 1,561 1,331 230
Variances caused by changes in rate times the changes in volume are allocated
equally.
SECURITIES AVAILABLE - FOR - SALE AT FAIR VALUE
December 31,
(thousands) 1996 1995 1994
U.S. Treasury $ 5,647 9,639 11,299
U.S. Government agencies and corporations 37,989 25,874 30,637
States and political subdivisions 4,047 2,388 1,555
Other securities 7,203 9,950 11,550
Totals $ 54,886 47,851 55,041
SECURITIES HELD - TO - MATURITY AT AMORTIZED COST
December 31,
(thousands) 1996 1995 1994
U.S. Treasury $ 0 0 0
U.S. Government agencies and corporations 500 500 0
States and political subdivisions 42,394 39,110 30,972
Other securities 195 501 0
Totals $ 43,089 40,111 30,972
SECURITIES--MATURITY/YIELD SCHEDULE
As of December 31, 1996
Securities Available - For - Sale Securities Held - To - Maturity
Approximate Taxable Approximate Taxable
Amortized Fair Equivalent Amortized Fair Equivalent
(thousands) Costs Values Yield(1) Costs Values Yield(1)
U.S. Treasury:
Within 1 year $ 2,503 2,505 5.87 % $ 0 0 0.00 %
1 through 5 years 3,131 3,142 6.35 0 0 0.00
Total 5,634 5,647 6.13 0 0 0.00
U.S. Government agencies and corporations:
Within 1 year 500 500 6.19 0 0 0.00
1 through 5 years 15,190 15,094 5.97 0 0 0.00
6 through 10 years 20,975 20,893 7.18 0 0 0.00
Over 10 years 1,500 1,502 8.94 500 501 7.99
Total 38,165 37,989 6.76 500 501 7.99
State and political subdivisions:
Within 1 year 291 292 6.66 1,593 1,593 6.47
1 through 5 years 1,200 1,188 6.51 14,855 15,072 7.96
6 through 10 years 1,875 1,947 8.74 24,249 24,573 7.82
Over 10 years 614 620 7.59 1,697 1,698 7.75
Total 3,980 4,047 7.74 42,394 42,936 7.81
Other securities:
Within 1 year 1,000 1,015 7.60 110 110 8.47
1 through 5 years 1,075 1,123 8.29 85 85 9.78
6 through 10 years 0 0 0.00 0 0 0.00
Over 10 years 5,089 5,065 6.90 0 0 0.00
Total 7,164 7,203 7.20 195 195 9.04
$ 54,943 54,886 6.83 $ 43,089 43,632 7.82
(1) Yields on non-taxable investment securities are computed on a tax
equivalent basis using a federal tax rate of 34%.
TYPES OF LOANS
December 31,
1996 1995 1994 1993 1992
% of % of % of % of % of
(thousands) Amount Total Amount Total Amount Total Amount Total Amount Total
Commercial $ 56,461 20.7 52,374 20.7 42,237 19.4 37,163 18.1 38,877 19.1
Consumer 62,906 23.0 61,888 24.5 54,155 24.8 46,816 22.8 50,635 24.9
Real estate - commercial 52,232 19.1 52,075 20.6 49,858 22.9 47,940 23.4 47,155 23.2
Real estate - construction 4,926 1.8 9,600 3.8 7,936 3.6 5,107 2.5 4,864 2.4
Real estate - mortgage 96,856 35.4 76,505 30.3 63,831 29.3 68,142 33.2 61,729 30.4
$ 273,381 100.0 252,442 100.0 218,017 100.0 205,168 100.0 203,260 100.0
LOAN MATURITIES AND INTEREST SENSITIVITY
As of December 31, 1996
One
Within Through Over
(thousands) One Year Five Years Five Years Total
Commercial:
Fixed interest rates $ 4,812 10,379 4,856 20,047
Floating interest rates 36,173 241 ---- 36,414
Total 40,985 10,620 4,856 56,461
Real estate-commercial:
Fixed interest rates 76 3,039 7,243 10,358
Floating interest rates 40,065 1,809 ---- 41,874
Total 40,141 4,848 7,243 52,232
Real estate-construction:
Fixed interest rates 278 149 19 446
Floating interest rates 4,480 ---- ---- 4,480
Total 4,758 149 19 4,926
$ 85,884 15,617 12,118 113,619
NONPERFORMING ASSETS AND PAST DUE LOANS
December 31,
(thousands) 1996 1995 1994 1993 1992
Nonaccrual loans $ 573 1,769 857 736 1,562
Restructured loans --- --- --- --- ---
Other real estate owned 185 387 444 2,364 2,831
Total nonperforming assets 758 2,156 1,301 3,100 4,393
Accruing loans past due 90 days $ 595 43 365 534 322
PRO FORMA/RECORDED INTEREST ON NONACCRUAL LOANS
December 31,
(thousands) 1996 1995 1994 1993 1992
Pro forma interest-nonaccrual loans $ 60 161 90 67 131
Recorded interest-nonaccrual loans $ 3 1 1 3 3
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.
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
(thousands) 1996 1995 1994 1993 1992
AVERAGE LOANS OUTSTANDING $ 257,571 234,904 209,668 202,059 203,624
ALLOWANCE FOR LOAN LOSSES
Balance, beginning of period $ 3,988 3,815 3,471 3,068 2,587
Provision for loan losses 595 300 360 1,125 1,500
4,583 4,115 3,831 4,193 4,087
Loans charged off:
Commercial 122 27 80 465 781
Consumer 402 326 317 286 402
Real estate - commercial 21 12 55 227 52
Real estate - construction 0 0 --- --- ---
Real estate - mortgage 15 0 64 --- 50
Total loans charged off 560 365 516 978 1,285
Recovery of loans previously charged off:
Commercial 29 36 80 110 120
Consumer 125 142 155 132 138
Real estate - commercial 2 24 210 1 8
Real estate - construction 0 0 --- --- ---
Real estate - mortgage 0 36 55 13 ---
Total recoveries 156 238 500 256 266
Net loans charged off 404 127 16 722 1,019
Balance, end of period $ 4,179 3,988 3,815 3,471 3,068
Net charge-offs to average loans outstanding 0.16 % 0.05 0.01 0.36 0.50
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
December 31,
(thousands) 1996 1995 1994 1993 1992
Commercial $ 961 652 603 950 1,298
Consumer 487 391 208 450 523
Real estate - commercial 738 412 242 313 252
Real estate - construction 28 69 11 50 35
Real estate - mortgage 743 612 248 250 168
Unassigned portion of allowance 1,222 1,852 2,503 1,458 792
$ 4,179 3,988 3,815 3,471 3,068
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, 1996 is adequate to cover potential
loan losses inherent in the loan portfolio.
DEPOSIT MATURITIES
As of December 31, 1996
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 $ 9,184 4,925 10,524 13,367 38,000
All other deposits 88,197 41,280 43,371 124,554 297,402
Total deposits $ 97,381 46,205 53,895 137,921 335,402
INTEREST SENSITIVITY ANALYSIS
As of December 31, 1996
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 $ 131,556 87,755 47,198 6,629 273,138
Securities:
Available-for-sale, at fair value 13,431 5,293 22,377 13,785 54,886
Held-to-maturity, at amortized cost 1,665 2,628 21,318 17,478 43,089
Other interest-earning assets 2,579 --- 190 --- 2,769
Total interest-earning assets $ 149,231 95,676 91,083 37,892 373,882
INTEREST-BEARING LIABILITIES
Certificates of deposit and other time deposits
of $100M and over $ 15,363 9,673 12,964 --- 38,000
Time 51,782 49,809 69,412 --- 171,003
All other deposits 50,535 19,314 25,752 --- 95,601
Securities sold under agreements to repurchase 4,795 --- --- --- 4,795
Other borrowed funds 1,625 --- 11,000 1,779 14,404
ESOP debt 1,252 --- --- --- 1,252
Total interest-bearing liabilities $ 125,352 78,796 119,128 1,779 325,055
Interest sensitivity gap per period $ 23,879 16,880 (28,045) 36,113 48,827
Cumulative interest sensitivity gap 23,879 40,759 12,714 48,827 ---
Refer to the Bank's 1996 Annual Report to Stockholders under the heading
"Selected Consolidated Financial Information" for a five year summary of
financial information which includes return on equity and assets and is
incorporated by reference into this Form 10-K
Item 2. Properties
The Corporation has ten full service offices and one paying and receiving
office at the following locations:
Full Service
1. Christiansburg Office, 50 North Franklin Street, Christiansburg,
Virginia, containing 9,000 square feet;
2. Blacksburg Office, 601 North Main Street, Blacksburg, Virginia,
containing 8,750 square feet;
3. Riner Office, Route 8, Riner, Virginia, containing 1,950 square
feet;
4. Hills Office, l340 Roanoke Street, Christiansburg, Virginia,
containing 1,200 square feet;
5. Radford Office, 50 First Street, Radford, Virginia, containing
8,000 square feet;
6. New River Valley Mall Office, 646 New River Road, Christiansburg,
Virginia, containing 917 square feet.
7. Corporate Research Center Office, 1872 Pratt Drive, Suite 1125,
Blacksburg, Virginia, containing 360 square feet.
8. Shawsville Office, 250 Alleghany Spring Road, Shawsville,
Virginia, containing 1,600 square feet.
9. Dublin Office, 2 Town Center Drive, Dublin, Virginia, containing
2,640 square feet.
10. FNB Center, 105 Arbor Drive, Christiansburg, Virginia, containing
72,816 square feet.
Paying and Receiving
11. Foothills Office, 1580 North Franklin Street, Christiansburg,
Virginia, containing 652 square feet.
All of such space is used by the Corporation in its operations. The
Corporation owns properties 1, 2, 3, 5, 8, 9 and 10 and leases properties 4, 6,
7 and 11 from independent parties on terms which management believes are
satisfactory.
Other Real Estate.
Other Real Estate is composed of 54% commercial real estate and 46%
residential. There were no covered transactions.
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 1996.
PART II
Item 5. Market for the Corporation's Common Stock and Related Security
Holder Matters
The Corporation has only one (1) class of Common Stock with a Par Value of $5
per share. There were approximately 1,082 stockholders of record as of
December 31, 1996, holding 1,661,900 shares of the authorized 5,000,000 shares.
The Corporation's stock is listed on the NASDAQ over-the-counter bulletin
board. Trading activity has been light. 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
1996 Annual Report which is filed as Exhibit 13 to this Annual Report on Form
10-K. The Corporation has consistently paid a semi-annual dividend on its
common stock. There are no known restrictions on the retained earnings that
would affect the ability to pay further dividends other thatn those imposed by
regulatory agencies. See Note 13 of the notes to consolidated financial
statements in the Corporation's 1996 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 hereby incorporated by reference.
Item 6. Selected Financial Data
Selected financial data is located in the Corporation's 1996 Annual Report to
Stockholders, which is filed as Exhibit 13 to this Form 10-K, under the caption
"Selected Consolidated Financial Information," which is hereby incorporated by
reference into this Form 10-K.
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 located in the section of the Corporation's 1996 Annual Report to
Stockholders, which is filed as Exhibit 13 to this Form 10-K, under the same
heading, and is hereby incorporated by reference into this Form 10-K.
Item 8. Financial Statements and Supplementary Data
The following independent auditors' report, consolidated financial statements,
and supplementary financial information included in the Corporation's 1996
Annual Report to Stockholders, which is filed as Exhibit 13 to this Form 10-K,
are incorporated by reference into this Form 10-K:
Independent Auditors' Report
Consolidated Balance Sheets - December 31, 1996 and 1995
Consolidated Statements of Income - Years ended December 31, 1996, 1995,
and 1994
Consolidated Statements of Cash Flows - Years ended December 31, 1996,
1995, and 1994
Consolidated Statements of Changes in Stockholders' Equity - Years
ended December 31, 1996, 1995, and 1994
Notes to Consolidated Financial Statements
The independent auditors' report covering the consolidated statements of
income, changes in stockholders' equity and cash flows of First National Bank
and subsidiaries for the year ended December 31, 1994 is filed as Exhibit (99)
to this form 10-K and is incorporated by reference herein.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
KPMG Peat Marwick LLP ("KPMG") served as the Corporation's independent auditors
for the calendar year 1994. The Audit/Compliance Committee of the Corporation
recommended and the Board of Directors approved the appointment of McLeod &
Company to serve as the Corporation's independent auditors for calendar year
1995, which was subsequently ratified by the Corporation's shareholders.
KPMG's opinion on the Corporation's 1994 consolidated financial statements was
unqualified. There was no disagreement with the former auditors concerning
matter of accounting principles or practices, financial statement disclosure,
or auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of KPMG, would have caused the firm to make reference to such
disagreements in their report. McLeod & Company served as the Corporation's
auditors for 1995 and 1996 and has been appointed to serve as the Corporation's
auditors for 1997.
PART III
Item 10. Directors and Executive Officers of the Corporation
Information on directors is incorporated by reference from the Corporation's
Proxy Statement for the 1997 Annual Meeting of Stockholders under the heading
"Election of Directors."
Information on executive officers is incorporated by reference from the
Corporation's Proxy Statement for the 1997 Annual Meeting of Stockholders under
the heading "Executive Officers of the Corporation."
Election of Directors. A total of 1,399,946 shares of a possible 1,661,900
shares or 84.2 percent of eligible shares were voted at the June 11, 1996,
stockholders meeting. No class of voting stock withheld or cast against any
nominee for Director in aggregate five percent or more of total shares cast by
such class.
Item 11. Executive Compensation Information on executive compensation is
incorporated by reference from the Corporation's Proxy Statement for the 1997
Annual Meeting of Stockholders under the heading "Executive Compensation."
Employee Stock Ownership Plan. The Corporation instituted a qualified employee
stock ownership plan in 1983 which covers substantially all employees. The
Corporation makes periodic contributions to the plan that are used to purchase
the Corporation's common stock from available sources. The shares are then
allocated among plan participants based upon compensation and years of service.
Stock allocated to a particular participant (or its value) is generally
distributed upon retirement, death, disability, or (under certain
circumstances) attaining a specified age. The plan is administered by a
committee appointed by the Corporation's Board of Directors. Information on
the Corporation's leveraged ESOP is included in Note 11 of notes to
consolidated financial statements, and is incorporated by reference from the
Corporation's 1996 Annual Report to Stockholders which is included as Exhibit
13 to this Form 10-K.
Information on compensation of directors compensation committee and executive
compensation matters is incorporated by reference from the Corporation's Proxy
Statement for the 1997 Annual Meeting of Stockholders under the heading "Board
of Directors and Committees of the Board."
The Corporation's performance graph is incorporated by reference from the
Corporation's Proxy Statement under the heading "Performance Graph."
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 February 28, 1997.
Executive Officers. The persons currently serving as executive officers of the
Corporation, their security ownership, and their length of service with the
Corporation and it's predecessor (the Bank), are as follows:
Percent of
Title and Length Number Shares Owned Outstanding
Name (Age) of Service as of 2/28/97(A)(B) Shares
Samuel H. President & Chief 68,081 4.10
Tollison (64) Executive Officer
since January, 1971
Julian D. Executive Vice 18,631 1.12
Hardy, Jr. (47) President since
November 19, 1984
Perry D. Chief Financial Officer 14,193 *
Taylor (50) since January 1, 1989
Previously Senior Vice
President and Cashier
* 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 1996 Employee Stock Ownership Plan allocation.
Directors. Information on security ownership of directors is incorporated by
reference from the Corporation's Proxy Statement for the 1997 Annual Meeting of
Stockholders under the heading "Election of Directors."
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.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
a(1). Consolidated Financial Statements. See index 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.
The Corporation did not file any reports on Form 8-K during the
fourth quarter of 1996.
c. Exhibits.
Included in item 14a(3) above
d. Financial Statement Schedules.
Included in item 14a(2) above
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
President & Chief Executive Officer
By: s/Perry D. Taylor
Chief Financial Officer
Date: March 26, 1997
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
March 26, 1997
Kendall O. Clay
s/Archie E. Cromer, Jr. March 26, 1997
Archie E. Cromer, Jr.
s/Daniel D. Hamrick March 26, 1997
Daniel D. Hamrick
s/Julian D. Hardy, Jr. March 26, 1997
Julian D. Hardy, Jr.
s/James L. Hutton March 26, 1997
James L. Hutton
s/Carl N. McNeil March 26, 1997
Carl N. McNeil
s/Joan H. Munford March 26, 1997
Joan H. Munford
s/W. N. Ridinger March 26, 1997
W. N. Ridinger
s/William M. Sterrett, Jr. March 26, 1997
William M. Sterrett, Jr.
s/Robert J. Styne March 26, 1997
Robert J. Styne
s/Samuel H. Tollison March 26, 1997
Samuel H. Tollison
s/Nelson J. Wimmer March 26, 1997
Nelson J. Wimmer
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
The following independent auditors' report and consolidated financial
statements of the Corporation are incorporated by reference from the
Corporation's 1996 Annual Report to Stockholders included within this document
as an Exhibit:
Independent Auditors' Report
Consolidated Balance Sheets --
December 31, 1996 and 1995
Consolidated Statements of Income -- Years
Ended December 31, 1996, 1995, and 1994
Consolidated Statements of Cash Flows --
Years Ended December 31, 1996, 1995, and 1994
Consolidated Statements of Changes in
Stockholders' Equity -- Years Ended
December 31, 1996, 1995, and 1994
Notes to Consolidated Financial Statements
All schedules are omitted as the required information is inapplicable or the
information is presented in the consolidated financial statements or related
notes.
INDEX TO EXHIBITS
Exhibit # Description
(2) Plan of Reorganization
Agreement and Plan of Reorganization dated as of
February 1, 1996, between the Registrant, First
National Bank, and FNB Bank, filed as
Exhibit 2 to the Registration Statement on Form S-4
filed by FNB Corporation with the Securities and
Exchange Commission May 3, 1996 (Registration
number 333-2524) is incorporated herein by reference.
(3.1) Registrant's Articles of Incorporation
(3.2) Registrant's Bylaws
(10) Material Contracts
The construction contract dated October 2, 1995,
with J. M. Turner & Co., Inc. filed as Exhibit 10.9
to the Registration Statement on Form S-4
filed by FNB Corporation with the Securities
and Exchange Commission May 3, 1996 (Registration
number 333-2524) is incorporated herein by reference.
(13) 1996 Annual Report to Stockholders
(21) Subsidiaries of the Registrant
(27) Financial Data Schedule
(99) Independent Auditors' Report of KPMG Peat
Marwick LLP on the consolidated statements of
income, changes in stockholders' equity and
cash flows of First National Bank and subsidiaries
for the year ended December 31, 1994.