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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, 1997
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 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]
The aggregate market value of voting stock held by non-affiliates of the
registrant as of March 9, 1998, was $72,540,275.
3,384,015 shares outstanding as of March 9, 1998
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Corporation's Annual Report to Stockholders for the year ended
December 31, 1997, 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 12, 1998, are incorporated into Part III hereof.
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, FHA 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 Christiansburg, 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 1997 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 and multi-state bank holding
companies located in our trade area. Competition in the trade area consists of
seven state-wide and multi-state 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 the
officer loan committee which can approve loans up to 80% of the bank's legal
lending limit. Loan requests exceeding this limit 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,
1997 1996
Commercial $ 64,247 56,461
Consumer 66,059 62,906
Real estate - commercial 56,404 52,232
Real estate - construction 8,657 4,926
Real estate - mortgage 95,703 96,856
Total loans $ 291,070 273,381
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,
1997 1996
Contract Amounts
Financial instruments whose contract amounts
represent credit risk:
Commitments to extend credit $ 63,194 50,209
Standby letters of credit and
financial guarantees written 4,300 3,479
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 204 full-time equivalent employees as of
December 31, 1997, of which 63 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 SHEET
1997
Average
Average Income/ Yield/
(thousands) Balance Expense Rate
ASSETS
Loans (Net of unearned income) (1)(2) $278,824 26,959 9.67%
Securities:
Taxable 55,721 3,641 6.53
Nontaxable (2) 46,581 3,596 7.72
Total securities 102,302 7,237 7.07
Federal funds sold 6,376 344 5.40
Total interest-earning assets 387,502 34,540 8.91
Allowance for loan losses (4,316)
Cash and due from banks, noninterest-
bearing 11,061
Bank premises and equipment, net 11,965
Other real estate owned 77
Other assets 4,719
Total assets $411,008
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing deposit:
Demand $ 47,394 1,367 2.88%
Savings 49,091 1,456 2.97
Time 174,225 10,071 5.78
Certificates of deposit of
$100,000 and over 36,724 2,148 5.85
Total interest-bearing deposits 307,434 15,042 4.89
Federal funds purchased and securities
sold under agreements to repurchase 5,849 250 4.27
Other borrowed funds 24,469 1,385 5.66
ESOP debt 942 88 9.34
Subordinated capital notes 0 0 0.00
Total interest-bearing liabilities 338,694 16,765 4.95
Demand deposits, noninterest-bearing 31,358
Other liabilities 2,941
Stockholders' equity 38,015
Total liabilities and stockholders'
equity $411,008
Interest income and rate earned $34,540 8.91%
Interest expense and rate paid 16,765 4.95
Interest rate spread 3.96
NET INTEREST INCOME AND NET YIELD
ON AVERAGE EARNING ASSETS $17,775 4.59%
(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 1997.
AVERAGE BALANCE SHEET
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.
AVERAGE BALANCE SHEET
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 1995.
RATE/VOLUME VARIANCE
1997 Compared to 1996 1996 Compared to 1995
Due to Due to Due to Due to
(thousands) Change Volume Rate Change Volume Rate
INTEREST INCOME
Loans $ 1,732 2,068 (336) 1,990 2,231 (241)
Securities:
Taxable 643 534 109 (111) (173) 62
Nontaxable (7) 72 (79) 629 664 (35)
Federal funds sold 156 155 1 2 (5) 7
Total 2,524 2,829 (305) 2,510 2,717 (207)
INTEREST EXPENSE
Demand 87 94 (7) (130) 44 (174)
Savings 61 54 7 (297) (172) (125)
Time 574 578 (4) 757 831 (74)
Certificates of deposit
of $100,0000 and over 292 262 30 253 359 (106)
Federal funds purchased
and securities sold
under agreements to
repurchase 21 16 5 (3) 26 (29)
Other borrowed funds 811 840 (29) 430 396 34
ESOP debt (30) (47) 17 (55) (63) 8
Subordinated capital notes (67) (33) (34) (20) (30) 10
Total 1,749 1,764 (15) 935 1,391 (456)
Net interest income $ 775 1,065 (290) 1,575 1,326 249
Variances caused by changes in rate times the changes in volume are allocated
equally.
SECURITIES AVAILABLE-FOR-SALE AT FAIR VALUE
December 31,
(thousands) 1997 1996 1995
U.S. Treasury $ 8,162 5,647 9,639
U.S. Government agencies and corporations 47,020 37,989 25,874
States and political subdivisions 3,070 4,047 2,388
Other securities 4,604 7,203 9,950
Totals $ 62,856 54,886 47,851
SECURITIES HELD-TO-MATURITY AT AMORTIZED COST
December 31,
(thousands) 1997 1996 1995
U.S. Treasury $ -- -- --
U.S. Government agencies and corporations -- 500 500
States and political subdivisions 42,360 42,394 39,110
Other securities 60 195 501
Totals $ 42,420 43,089 40,111
SECURITIES--MATURITY/YIELD SCHEDULE
As of December 31, 1997
Securities Available-for-Sale
Approximate Taxable
Amortized Fair Equivalent
(thousands) Costs Values Yield(1)
U.S. Treasury:
Within 1 year $ 1,001 1,001 5.49%
1 through 5 years 5,011 5,055 6.17
6 through 10 years 2,097 2,106 6.02
Total 8,109 8,162 6.04
U.S. Government
agencies and corporations:
Within 1 year 7,048 7,012 5.26
1 through 5 years 7,033 7,032 6.34
6 through 10 years 32,643 32,835 6.87
Over 10 years 140 141 6.57
Total 46,864 47,020 6.54
State and political
subdivisions:
Within 1 year 200 201 6.88
1 through 5 years 500 504 10.52
6 through 10 years 2,049 2,150 7.85
Over 10 years 213 215 7.57
Total 2,962 3,070 8.22
Other securities:
Within 1 year 576 579 6.81
1 through 5 years 497 523 10.00
6 through 10 years 627 626 6.21
Over 10 years 2,876 2,876 7.00
Total 4,576 4,604 7.20
$ 62,511 62,856 6.61
(1) Yields on non-taxable investment securities are computed on a tax
equivalent basis using a federal tax rate of 34%.
SECURITIES--MATURITY/YIELD SCHEDULE
As of December 31, 1997
Securities Held-To-Maturity
Approximate Taxable
Amortized Fair Equivalent
(thousands) Costs Values Yield(1)
U.S. Treasury:
Within 1 year $ 0 0 0.00%
1 through 5 years 0 0 0.00
6 through 10 years 0 0 0.00
Total 0 0 0.00
U.S. Government
agencies and corporations:
Within 1 year 0 0 0.00
1 through 5 years 0 0 0.00
6 through 10 years 0 0 0.00
Over 10 years 0 0 0.00
Total 0 0 0.00
State and political subdivisions:
Within 1 year 2,519 2,529 7.59
1 through 5 years 19,528 19,973 7.64
6 through 10 years 19,665 20,207 7.50
Over 10 years 648 661 7.74
Total 42,360 43,370 7.57
Other securities:
Within 1 years 0 0 0.00
1 through 5 years 60 60 9.79
6 through 10 years 0 0 0.00
Over 10 years 0 0 0.00
Total 60 60 9.79
$ 42,420 43,430 7.57
(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,
1997 1996 1995
% of % of % of
(thousands) Amount Total Amount Total Amount Total
Commercial $ 64,247 22.0 56,461 20.7 52,374 20.7
Consumer 66,059 22.7 62,906 23.0 61,888 24.5
Real estate - commercial 56,404 19.4 52,232 19.1 52,075 20.6
Real estate - construction 8,657 3.0 4,926 1.8 9,600 3.8
Real estate - mortgage 95,703 32.9 96,856 35.4 76,505 30.3
$ 291,070 100.0 273,381 100.0 252,442 100.0
TYPES OF LOANS
December 31,
1994 1993
% of % of
(thousands) Amount Total Amount Total
Commercial $ 42,237 19.4 37,163 18.1
Consumer 54,155 24.8 46,816 22.8
Real estate - commercial 49,858 22.9 47,940 23.4
Real estate - construction 7,936 3.6 5,107 2.5
Real estate - mortgage 63,831 29.3 68,142 33.2
$218,017 100.0 205,168 100.0
LOAN MATURITIES AND INTEREST SENSITIVITY
As of December 31, 1997
One
Within Through Over
(thousands) One Year Five Years Five Years Total
Commercial:
Fixed interest rates $ 5,418 11,694 8,353 25,465
Floating interest rates 38,455 327 --- 38,782
Total 43,873 12,021 8,353 64,247
Real estate-commercial:
Fixed interest rates 650 3,832 8,110 12,592
Floating interest rates 39,847 3,965 --- 43,812
Total 40,497 7,797 8,110 56,404
Real estate-construction:
Fixed interest rates 166 572 5,126 5,864
Floating interest rates 2,793 --- --- 2,793
Total 2,959 572 5,126 8,657
$ 87,329 20,390 21,589 129,308
NONPERFORMING ASSETS AND PAST DUE LOANS
December 31,
(thousands) 1997 1996 1995 1994 1993
Nonaccrual loans $ 893 573 1,769 857 736
Restructured loans -- -- -- -- --
Other real estate owned 98 185 387 444 2,364
Total nonperforming assets 991 758 2,156 1,301 3,100
Accruing loans past due 90 days $ 196 595 43 365 534
PRO FORMA/RECORDED INTEREST ON NONACCRUAL LOANS
(thousands) 1997 1996 1995 1994 1993
Pro forma interest-nonaccrual
loans $ 92 60 161 90 67
Recorded interest-nonaccrual
loans $ 3 3 1 1 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. 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.
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
(thousands) 1997 1996 1995 1994 1993
AVERAGE LOANS OUTSTANDING $278,824 257,571 234,904 209,668 202,059
ALLOWANCE FOR LOAN LOSSES $ 4,179 3,988 3,815 3,471 3,068
Balance, beginning of period 550 595 300 360 1,125
Provision for loan losses 4,729 4,583 4,115 3,831 4,193
Loans charged off:
Commercial 42 122 27 80 465
Consumer 402 402 326 317 286
Real estate - commercial 25 21 12 55 227
Real estate - construction -- -- -- -- --
Real estate - mortgage 159 15 -- 64 --
Total loans charged off 628 560 365 516 978
Recovery of loans previously
charged off:
Commercial 17 29 36 80 110
Consumer 134 125 142 155 132
Real estate - commercial 37 2 24 210 1
Real estate - construction 2 -- -- -- --
Real estate - mortgage -- -- 36 55 13
Total recoveries 190 156 238 500 256
Net loans charged off 438 404 127 16 722
Balance, end of period $ 4,291 4,179 3,988 3,815 3,471
Net charge-offs to average
loans outstanding 0.16% 0.16 0.05 0.01 0.36
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
December 31,
(thousands) 1997 1996 1995 1994 1993
Commercial $ 1,218 961 652 603 950
Consumer 792 487 391 208 450
Real estate - commercial 649 738 412 242 313
Real estate - construction 161 28 69 11 50
Real estate - mortgage 688 743 612 248 250
Unassigned portion of allowance 783 1,222 1,852 2,503 1,458
$ 4,291 4,179 3,988 3,815 3,471
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, 1997 is adequate to cover potential
loan losses inherent in the loan portfolio.
DEPOSIT MATURITIES
As of December 31, 1997
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 $ 4,883 5,479 19,500 13,562 43,424
All other deposits 77,855 49,448 59,476 122,342 309,121
Total deposits $ 82,738 54,927 78,976 135,904 352,545
INTEREST SENSITIVITY ANALYSIS
As of December 31, 1997
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 $ 110,351 96,982 65,864 18,139 291,336
Loans
Securities:
Available-for-sale,
at fair value 19,701 17,297 18,250 7,608 62,856
Held-to-maturity,
at amortized cost 1,140 4,640 24,300 12,340 42,420
Other interest-earning
assets 3,759 -- -- -- 3,759
Total interest-
earning assets $ 134,951 118,919 108,414 38,087 400,371
INTEREST-BEARING LIABILITIES
Certificates of deposit
and other time deposits
of $100M and over $ 5,475 25,014 12,935 -- 43,424
Time 26,537 83,294 64,238 50 174,119
All other deposits 53,030 20,012 26,681 -- 99,723
Securities sold under
agreements to
repurchase 5,460 -- -- -- 5,460
Other borrowed funds 24,337 90 476 1,190 26,093
ESOP debt 901 -- -- -- 901
Total interest-
bearing
liabilities $ 115,740 128,410 104,330 1,240 349,720
Interest sensitivity
gap per period $ 19,211 (9,491) 4,084 36,847 50,651
Cumulative interest
sensitivity gap 19,211 9,720 13,804 50,651 --
Refer to the Bank's 1997 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.
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 1,600 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 2,712 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 one residential property. 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 1997.
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 1,028 stockholders of record as of
December 31, 1997, holding 3,323,800 shares of the authorized 5,000,000
shares. The Corporation's stock is listed on the 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
1997 Annual Report to Stockholders 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. Beginning in the second quarter of 1997, the
dividend payment was changed to a quarterly basis, which is currently
anticipated to be the normal frequency for the foreseeable future. There are
no known restrictions on the 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
1997 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 located in the Corporation's 1997 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 located in the section of the Corporation's 1997 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 1997
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.
Item 8. Financial Statements and Supplementary Data
The following independent auditors' report, consolidated financial statements,
and supplementary financial information included in the Corporation's 1997
Annual Report to Stockholders, which is filed as Exhibit 13 to this Form 10-K,
are incorporated herein by reference:
Independent Auditors' Report
Consolidated Balance Sheets - December 31, 1997 and 1996
Consolidated Statements of Income - Years ended December 31, 1997, 1996,
and 1995
Consolidated Statements of Cash Flows - Years ended December 31, 1997,
1996, and 1995
Consolidated Statements of Changes in Stockholders' Equity - Years ended
December 31, 1997, 1996, and 1995
Notes to Consolidated Financial Statements
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
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 1998 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 1998 Annual Meeting of Stockholders
under the heading "Executive Officers of the Corporation."
Election of Directors. A total of 1,463,123 shares of a possible 1,661,900
shares or 88.0 percent of eligible shares were voted at the May 13, 1997,
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 1998
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 1997 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 1998 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 March 5, 1998.
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 3/5/98(A)(B) Shares
Samuel H. President & Chief 137,873 4.15
Tollison (65) Executive Officer
since January, 1971
Julian D. Executive Vice 36,815 1.11
Hardy, Jr. (48) President since
November 19, 1984
Perry D. Chief Financial Officer 26,586 *
Taylor (51) since January 1, 1989
* 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 1997 Employee Stock Ownership Plan allocation.
Directors. Information on security ownership of directors is incorporated by
reference from the Corporation's Proxy Statement for the 1998 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.
Information on transactions with management is incorporated herein by
reference from the Corporation's Proxy Statement for the 1998 Annual Meeting
of Stockholders under the heading "Transactions with Management."
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 1997.
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
Samuel H. Tollison
President & Chief Executive Officer
By: s/Perry D. Taylor
Perry D. Taylor
Chief Financial Officer
Date: March 25, 1998
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 25, 1998
Kendall O. Clay
s/Daniel D. Hamrick March 25, 1998
Daniel D. Hamrick
s/Julian D. Hardy, Jr. March 25, 1998
Julian D. Hardy, Jr.
s/Joan H. Munford March 25, 1998
Joan H. Munford
s/Samuel H. Tollison March 25, 1998
Samuel H. Tollison
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 1997 Annual Report to Stockholders included within this document
as an Exhibit:
Independent Auditors' Report
Consolidated Balance Sheets --
December 31, 1997 and 1996
Consolidated Statements of Income -- Years
Ended December 31, 1997, 1996, and 1995
Consolidated Statements of Cash Flows --
Years Ended December 31, 1997, 1996,
and 1995
Consolidated Statements of Changes in
Stockholders' Equity -- Years Ended
December 31, 1997, 1996, and 1995
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) 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.
(3.2) Registrant's Bylaws
(10) Material Contracts
(10)A 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.
(10)B Employment agreement dated September 11, 1997 between Samuel H.
Tollison, First National Bank, and Registrant, filed with the
Commission as Exhibit (10)A on Form 10-Q for the quarter ended
September 30, 1997, is incorporated herein by reference.
(10)C Employment agreement dated September 11, 1997 between Julian D.
Hardy, Jr., First National Bank, and Registrant, filed with the
Commission as Exhibit (10)B on Form 10-Q for the quarter ended
September 30, 1997, is incorporated herein by reference.
(10)D Change in control agreements with seven senior officers of First
National Bank. All agreements have identical terms and, as such,
only a sample copy of the agreements was filed with the Commission
as Exhibit (10)C on Form 10-Q for the quarter ended September 30,
1997, and is incorporated herein by reference. The officers
covered by the agreements are as follows:
(1) Darlene S. Lancaster, Senior Vice President, Manager,
Mortgage Loan Department, dated August 25, 1997
(2) R. Bruce Munro, Senior Vice President, Chief Credit
Administration Officer, dated August 25, 1997
(3) Woody B. Nester, Senior Vice President, Cashier, dated
August 25, 1997
(4) Fred L. Newhouse, Jr., Senior Vice President, Branch
Administrator, dated August 25, 1997
(5) Peter A. Seitz, Senior Vice President, General Counsel,
dated August 25, 1997
(6) Perry D. Taylor, Senior Vice President, Chief Financial
Officer, dated August 25, 1997
(7) Litz H. Van Dyke, Senior Vice President, Manager, Commercial
Banking Department, dated August 25, 1997
(13) 1997 Annual Report to Stockholders
(21) Subsidiaries of the Registrant
(27) Financial Data Schedule