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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, 1998
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 (I.R.S. Employer Identification
or organization) 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 12, 1999, was $76,789,064.
3,722,139 shares outstanding as of March 12, 1999
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Corporation's Annual Report to Stockholders for the year ended
December 31, 1998, 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 11, 1999, are incorporated into Part III hereof.
TABLE OF CONTENTS
PART I
Item 1. Business
General
Competition
Loan Commitments
Deposit Concentrations
Employees
Securities Act Guide 3. Statistical
Disclosure by Bank Holding Companies
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of
Security Holders
PART II
Item 5. Market for the Bank's Common Stock and
Related Security Holder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
PART III
Item 10. Directors and Executive Officers of the Bank
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners
and Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K
Signatures
Index to Consolidated Financial Statements
Index to Exhibits
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 surrounding 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 twelve full service offices, nine are located
in Montgomery County, one in the City of Radford, one in the Town of Dublin
and one in Wythe County. One paying and receiving office is located in
Montgomery County.
Refer to the Corporation's 1998 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
six 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,
1998 1997
Commercial $ 85,536 64,247
Consumer 66,526 66,059
Real estate - commercial 65,165 56,404
Real estate - construction 16,686 8,657
Real estate - mortgage 94,686 95,703
Total loans $ 328,599 291,070
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.
Except for unused home equity lines totaling $27,008 at December 31, 1998, and
$14,526 at December 31, 1997, the Corporation may not require collateral or
other security to support the following financial instruments with credit risk
(in thousands):
December 31,
1998 1997
Contract Amounts
Financial instruments whose contract amounts
represent credit risk:
Commitments to extend credit $ 86,583 63,194
Standby letters of credit and
financial guarantees written 6,252 4,300
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 212 full-time equivalent employees as of
December 31, 1998, of which 66 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
1998
Average
Average Income/ Yield/
(thousands) Balance Expense Rate
ASSETS
Loans (Net of unearned income) (1)(2) $ 312,369 29,980 9.60%
Securities:
Taxable 49,206 3,082 6.26
Nontaxable (2) 46,425 3,452 7.44
Total securities 95,631 6,534 6.83
Federal funds sold 9,518 507 5.33
Total interest-earning assets 417,518 37,021 8.87
Allowance for loan losses (4,401)
Cash and due from banks, noninterest-
bearing 10,415
Bank premises and equipment, net 12,642
Other real estate owned 37
Other assets 4,788
Total assets $ 440,999
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing deposit:
Demand and savings $ 105,744 2,958 2.80%
Time 173,533 9,801 5.65
Certificates of deposit of
$100,000 and over 49,607 2,870 5.79
Total interest-bearing deposits 328,884 15,629 4.75
Federal funds purchased and securities
sold under agreements to repurchase 6,496 261 4.02
Other borrowed funds 22,612 1,283 5.67
ESOP debt 874 76 8.70
Subordinated capital notes 0 0 0.00
Total interest-bearing liabilities 358,866 17,249 4.81
Demand deposits, noninterest-bearing 36,239
Other liabilities 3,539
Stockholders' equity 42,355
Total liabilities and stockholders'
equity $ 440,999
Interest income and rate earned $ 37,021 8.87%
Interest expense and rate paid 17,249 4.81
Interest rate spread 4.06
NET INTEREST INCOME AND NET YIELD
ON AVERAGE EARNING ASSETS $ 19,772 4.74%
(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 1998.
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 deposits:
Demand and savings $ 96,485 2,823 2.93%
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 and savings $ 91,380 2,675 2.93%
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.
RATE/VOLUME VARIANCE
1998 Compared to 1997 1997 Compared to 1996
Due to Due to Due to Due to
(thousands) Change Volume Rate Change Volume Rate
INTEREST INCOME
Loans $ 3,021 3,231 (210) 1,732 2,068 (336)
Securities:
Taxable (559) (417) (142) 643 534 109
Nontaxable (144) (12) (132) (7) 72 (79)
Federal funds sold 163 168 (5) 156 155 1
Total 2,481 2,970 (489) 2,524 2,829 (305)
INTEREST EXPENSE
Demand and savings 135 265 (130) 148 148 0
Time (270) (40) (230) 574 578 (4)
Certificates of deposit
of $100,0000 and over 722 749 (27) 292 262 30
Federal funds purchased
and securities sold
under agreements to
repurchase 11 27 (16) 21 16 5
Other borrowed funds (102) (105) 3 811 840 (29)
ESOP debt (12) (6) (6) (30) (47) 17
Subordinated capital notes 0 0 0 (67) (33) (34)
Total 484 890 (406) 1,749 1,764 (15)
Net interest income $ 1,997 2,080 (83) 775 1,065 (290)
Variances caused by changes in rate times the changes in volume are allocated
equally.
SECURITIES AVAILABLE-FOR-SALE AT FAIR VALUE
December 31,
(thousands) 1998 1997 1996
U.S. Treasury $ 7,164 8,162 5,647
U.S. Government agencies and
corporations 19,624 47,020 37,989
States and political subdivisions 11,648 3,070 4,047
Other securities 18,796 4,604 7,203
Totals $ 57,232 62,856 54,886
SECURITIES HELD-TO-MATURITY AT AMORTIZED COST
December 31,
(thousands) 1998 1997 1996
U.S. Treasury $ -- -- --
U.S. Government agencies and
corporations -- -- 500
States and political subdivisions 38,322 42,360 42,394
Other securities 30 60 195
Totals $ 38,352 42,420 43,089
SECURITIES--MATURITY/YIELD SCHEDULE
As of December 31, 1998
Securities Available-for-Sale
Approximate Taxable
Amortized Fair Equivalent
(thousands) Costs Values Yield(1)
U.S. Treasury:
Within 1 year $ 3,088 3,110 6.27
1 through 5 years 2,001 2,047 6.00
6 through 10 years 2,057 2,092 6.02
Total 7,146 7,249 6.12
U.S. Government
agencies and corporations:
Within 1 year 400 407 8.58
1 through 5 years 4,600 4,619 5.75
6 through 10 years 12,556 12,640 6.74
Over 10 years 1,870 1,873 6.27
Total 19,426 19,539 6.50
State and political
subdivisions:
Within 1 year 100 100 5.59
1 through 5 years 2,729 2,785 7.48
6 through 10 years 5,691 5,783 6.49
Over 10 years 2,917 2,980 6.60
Total 11,437 11,648 6.75
Other securities:
Within 1 year 499 509 10.00
1 through 5 years 15,298 15,292 4.99
6 through 10 years 613 611 6.22
Over 10 years 2,384 2,384 7.05
Total 18,794 18,796 5.43
$ 56,803 57,232 6.15
(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, 1998
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 3,330 3,357 7.10
1 through 5 years 21,977 22,652 7.52
6 through 10 years 12,736 13,316 7.55
Over 10 years 279 286 7.90
Total 38,322 39,611 7.49
Other securities:
Within 1 year 30 30 9.80
1 through 5 years 0 0 0.00
6 through 10 years 0 0 0.00
Over 10 years 0 0 0.00
Total 30 30 9.80
$ 38,352 39,641 7.49
(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,
1998 1997 1996
% of % of % of
(thousands) Amount Total Amount Total Amount Total
Commercial $ 85,536 26.0 64,247 22.0 56,461 20.7
Consumer 66,526 20.3 66,059 22.7 62,906 23.0
Real estate - commercial 65,165 19.8 56,404 19.4 52,232 19.1
Real estate - construction 16,686 5.1 8,657 3.0 4,926 1.8
Real estate - mortgage 94,686 28.8 95,703 32.9 96,856 35.4
$ 328,599 100.0 291,070 100.0 273,381 100.0
TYPES OF LOANS
December 31,
1995 1994
% of % of
(thousands) Amount Total Amount Total
Commercial $ 52,374 20.7 42,237 19.4
Consumer 61,888 24.5 54,155 24.8
Real estate - commercial 52,075 20.6 49,858 22.9
Real estate - construction 9,600 3.8 7,936 3.6
Real estate - mortgage 76,505 30.3 63,831 29.3
$ 252,442 100.0 218,017 100.0
LOAN MATURITIES AND INTEREST SENSITIVITY
As of December 31, 1998
One
Within Through Over
(thousands) One Year Five Years Five Years Total
Commercial:
Fixed interest rates $ 7,426 19,010 17,883 44,319
Floating interest rates 40,898 319 --- 41,217
Total 48,324 19,329 17,883 85,536
Real estate-commercial:
Fixed interest rates 3,215 5,714 17,649 26,578
Floating interest rates 35,243 2,783 561 38,587
Total 38,458 8,497 18,210 65,165
Real estate-construction:
Fixed interest rates 499 2,213 4,158 6,870
Floating interest rates 9,816 --- --- 9,816
Total 10,315 2,213 4,158 16,686
$ 97,097 30,039 40,251 167,387
NONPERFORMING ASSETS AND PAST DUE LOANS
December 31,
(thousands) 1998 1997 1996 1995 1994
Nonaccrual loans $ 1,109 893 573 1,769 857
Restructured loans -- -- -- -- --
Other real estate owned 30 98 185 387 444
Total nonperforming assets 1,139 991 758 2,156 1,301
Accruing loans past due
90 days $ 161 196 595 43 365
PRO FORMA/RECORDED INTEREST ON NONACCRUAL LOANS
(thousands) 1998 1997 1996 1995 1994
Pro forma interest-nonaccrual
loans $ 105 92 60 161 90
Recorded interest-nonaccrual
loans $ 1 3 3 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.
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
(thousands) 1998 1997 1996 1995 1994
AVERAGE LOANS OUTSTANDING $ 312,369 278,824 257,571 234,904 209,668
ALLOWANCE FOR LOAN LOSSES
Balance, beginning of period $ 4,291 4,179 3,988 3,815 3,471
Provision for loan losses 1,135 550 595 300 360
5,426 4,729 4,583 4,115 3,831
Loans charged off:
Commercial 507 42 122 27 80
Consumer 441 402 402 326 317
Real estate - commercial -- 25 21 12 55
Real estate - construction -- -- -- -- --
Real estate - mortgage 22 159 15 -- 64
Total loans charged off 970 628 560 365 516
Recovery of loans previously
charged off:
Commercial 54 17 29 36 80
Consumer 130 134 125 142 155
Real estate - commercial -- 37 2 24 210
Real estate - construction -- 2 -- -- --
Real estate - mortgage -- -- -- 36 55
Total recoveries 184 190 156 238 500
Net loans charged off 786 438 404 127 16
Balance, end of period $ 4,640 4,291 4,179 3,988 3,815
Net charge-offs to average
loans outstanding 0.25% 0.16 0.16 0.05 0.01
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
December 31,
(thousands) 1998 1997 1996 1995 1994
Commercial $ 2,388 1,218 961 652 603
Consumer 841 792 487 391 208
Real estate - commercial 418 649 738 412 242
Real estate - construction 58 161 28 69 11
Real estate - mortgage 621 688 743 612 248
Unassigned portion of allowance 314 783 1,222 1,852 2,503
$ 4,640 4,291 4,179 3,988 3,815
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, 1998 is adequate to cover potential
loan losses inherent in the loan portfolio.
DEPOSIT MATURITIES
As of December 31, 1998
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 $ 8,481 5,727 18,399 15,937 48,544
All other deposits 102,158 54,392 54,877 126,286 337,713
Total deposits $ 110,639 60,119 73,276 142,223 386,257
INTEREST SENSITIVITY ANALYSIS
As of December 31, 1998
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 $ 121,188 91,028 75,996 40,924 329,136
Loans
Securities:
Available-for-sale,
at fair value 4,923 14,913 26,963 10,433 57,232
Held-to-maturity,
at amortized cost 1,608 4,092 25,800 6,852 38,352
Other interest-earning
assets 10,689 -- -- -- 10,689
Total interest-
earning assets $ 138,408 110,033 128,759 58,209 435,409
INTEREST-BEARING LIABILITIES
Certificates of deposit
and other time deposits
of $100M and over $ 15,537 18,715 14,292 -- 48,544
Time 50,857 65,157 56,315 39 172,368
All other deposits 68,097 24,903 33,204 -- 126,204
Securities sold under
agreements to
repurchase 6,650 -- -- -- 6,650
Other borrowed funds 10,283 -- 9,963 1,366 21,612
Total interest-
bearing
liabilities $ 151,424 108,775 113,774 1,405 375,378
Interest sensitivity
gap per period $ (13,016) 1,258 14,985 56,804 60,031
Cumulative interest
sensitivity gap (13,016) (11,758) 3,227 60,031 --
Refer to the Bank's 1998 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 twelve 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.
11. Wytheville Office, 280 West Main Street, Wytheville, Virginia,
containing 3,000 square feet.
12. South Main Blacksburg Office, 1206 South Main Street, Blacksburg,
Virginia, containing 1,100 square feet.
Paying and Receiving
13. 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, 11, 12 and 13 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 1998.
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 1,062 stockholders of record as of
December 31, 1998, holding 3,722,139 shares of the authorized 10,000,000
shares. The Corporation's stock began appearing on the Nasdaq Stock Market
under the symbol FNBP on July 7, 1998. Previously, the stock appeared on the
over-the-counter bulletin board under the same symbol. 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 1998 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 1998 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 1998 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 1998 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 1998
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 1998
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, 1998 and 1997
Consolidated Statements of Income - Years ended December 31, 1998, 1997,
and 1996
Consolidated Statements of Comprehensive Income - Years ended December
31, 1998, 1997, and 1996
Consolidated Statements of Cash Flows - Years ended December 31, 1998,
1997, and 1996
Consolidated Statements of Changes in Stockholders' Equity - Years
ended December 31, 1998, 1997, and 1996
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 1999 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 1999 Annual Meeting of Stockholders
under the heading "Executive Officers of the Corporation."
Election of Directors. A total of 2,548,241 shares of a possible 3,384,015
shares or 75.3 percent of eligible shares were voted at the May 12, 1998,
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 1999 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, termination, 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 1998 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 1999 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, 1999.
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 3/5/99(A)(B) Shares
Samuel H. Chairman & Chief 147,343 3.96
Tollison (66) Executive Officer
Julian D. President & Chief 42,174 1.13
Hardy, Jr. (49) Administrative Officer
(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 1998 Employee Stock Ownership Plan allocation.
Directors. Information on security ownership of directors is incorporated by
reference from the Corporation's Proxy Statement for the 1999 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 1999 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 1998.
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/Julian D. Hardy, Jr.
Julian D. Hardy, Jr.
President & Chief Administrative Officer
By: s/Daniel A. Becker
Daniel A. Becker
Chief Financial Officer
Date: March 29, 1999
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 29, 1999
Kendall O. Clay
s/Daniel D. Hamrick March 29, 1999
Daniel D. Hamrick
s/Julian D. Hardy, Jr. March 29, 1999
Julian D. Hardy, Jr.
s/Joan H. Munford March 29, 1999
Joan H. Munford
s/Samuel H. Tollison March 29, 1999
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 1998 Annual Report to Stockholders included within this document
as an Exhibit:
Independent Auditors' Report
Consolidated Balance Sheets --
December 31, 1998 and 1997
Consolidated Statements of Income -- Years
Ended December 31, 1998, 1997, and 1996
Consolidated Statements of Comprehensive Income -- Years
Ended December 31, 1998, 1997, and 1996
Consolidated Statements of Cash Flows -
Years Ended December 31, 1998, 1997, and 1996
Consolidated Statements of Changes in
Stockholders' Equity -- Years Ended
December 31, 1998, 1997, and 1996
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)(i) 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)(ii) Registrant's Bylaws
Registrant's Bylaws, filed with the Commission as Exhibit 3.2 to
the Annual Report on Form 10-K for the year ended December 31,
1997, is incorporated herein by reference.
(10) Material Contracts
(10)A 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. This
agreement was terminated under the terms of the Consulting and
Noncompetition Agreement referred to in Exhibit (10)D below.
(10)B 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)C Change in control agreements with eight 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) Carol H. Brockmeyer, Senior Vice President, Director,
Relationship Banking, dated July 1, 1998
(2) Darlene S. Lancaster, Senior Vice President, Manager,
Mortgage Loan Department, dated August 25, 1997
(3) R. Bruce Munro, Senior Vice President, Chief Credit
Administration Officer, dated August 25, 1997
(4) Woody B. Nester, Senior Vice President, Cashier, dated
August 25, 1997
(5) Fred L. Newhouse, Jr., Senior Vice President, Branch
Administrator, dated August 25, 1997
(6) Peter A. Seitz, Executive Vice President, dated August 25,
1997
(7) Perry D. Taylor, Senior Vice President, Comptroller, dated
August 25, 1997
(8) Litz H. Van Dyke, Executive Vice President, dated August 25,
1997
(10)D Consulting and Noncompetition Agreement With Put Option dated
January 15, 1999, between Samuel H. Tollison and Registrant.
(13) 1998 Annual Report to Stockholders
(21) Subsidiaries of the Registrant
(27) Financial Data Schedule