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SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
Quarterly Report
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 2002
-------------------------------------------------
FNB BANCORP
------------------------------------------------------
(Exact name of registrant as specified in its charter)
California
----------------------------------------------
(State or other jurisdiction of incorporation)
000-49693 92-2115369
------------------------ ---------------------------------
(Commission File Number) (IRS Employer Identification No.)
975 El Camino Real, South San Francisco, California 94080
- --------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (650) 588-6800
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: Common Stock as of November 12,
2002: 2,321,236 shares.
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
FNB BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(Dollars in thousands)
ASSETS
September 30 December 31
2002 2001
-------- --------
Cash and due from banks $ 18,165 $ 22,493
Federal funds sold 6,000 --
-------- --------
Cash and cash equivalents 24,165 22,493
Securities available-for-sale 81,073 65,311
Loans, net 281,919 288,067
Premises and equipment, net 11,385 11,655
Accrued interest receivable and other assets 9,232 9,862
-------- --------
$407,774 $397,388
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand, noninterest bearing $ 87,186 $ 87,982
Demand, interest bearing 46,959 55,357
Savings and money market 129,579 98,891
Time 90,012 101,849
-------- --------
Total deposits 353,736 344,079
Federal funds purchased -- 2,100
Accrued expenses and other liabilities 3,724 4,686
-------- --------
Total liabilities 357,460 350,865
-------- --------
Stockholders' equity
Preferred stock, no par value, authorized 5,000,000 -- --
shares; issued and outstanding - none
Common stock, no par value, authorized 10,000,000 shares;
issued and outstanding 2,321,236 shares at September 30, 2002
and 2,318,849 shares at December 31, 2001 23,452 23,396
Retained earnings 24,852 22,546
Accumulated other comprehensive income 2,010 581
-------- --------
Total stockholders' equity 50,314 46,523
-------- --------
Total liabilities and stockholders' equity $407,774 $397,388
======== ========
See accompanying notes to unaudited consolidated financial statements.
2
FNB BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(In thousands, except per share amounts)
Three months ended Nine months ended
September 30, September 30,
2002 2001 2002 2001
---------- ---------- ---------- ----------
Interest income:
Interest and fees on loans $ 5,614 $ 6,879 $ 16,957 $ 20,266
Interest on securities 375 619 1,335 2,128
Interest on tax-exempt securities 435 330 1,099 1,110
Federal funds sold 92 100 208 595
---------- ---------- ---------- ----------
Total interest income 6,516 7,928 19,599 24,099
Interest expense:
Interest on deposits 1,089 1,942 3,387 6,469
Other 1 3 13 7
---------- ---------- ---------- ----------
Total interest expense 1,090 1,945 3,400 6,476
---------- ---------- ---------- ----------
Net interest income 5,426 5,983 16,199 17,623
Provision for loan losses -- 75 150 225
---------- ---------- ---------- ----------
Net interest income after provision for loan losses 5,426 5,908 16,049 17,398
Noninterest income:
Service charges 480 409 1,333 1,205
Credit card fees 255 262 709 727
Gain on sales of securities 121 21 121 56
Other income 49 58 218 321
---------- ---------- ---------- ----------
Total noninterest income 905 750 2,381 2,309
Noninterest expense:
Salaries and employee benefits 2,683 2,769 7,963 8,035
Occupancy expense 311 320 926 943
Equipment expense 374 375 1,594 1,114
Professional fees 241 123 915 378
Telephone, postage and supplies 249 250 835 761
Bankcard expenses 215 58 603 389
Other expense 441 451 1,352 1,470
---------- ---------- ---------- ----------
Total noninterest expense 4,514 4,346 14,188 13,090
---------- ---------- ---------- ----------
Earnings before income tax expense 1,817 2,312 4,242 6,617
Income tax expense 457 740 1,101 2,118
---------- ---------- ---------- ----------
NET EARNINGS $ 1,360 $ 1,572 $ 3,141 $ 4,499
========== ========== ========== ==========
Earnings per share data:
Basic $ 0.59 $ 0.71 $ 1.35 $ 2.03
Diluted $ 0.58 $ 0.71 $ 1.35 $ 2.03
Weighted average shares outstanding:
Basic 2,321,236 2,214,092 2,319,680 2,214,092
Diluted 2,331,751 2,219,606 2,331,093 2,219,606
Cash dividends per share $ 0.12 $ 0.12 $ 0.36 $ 0.36
See accompanying notes to unaudited consolidated financial statements
3
FNB BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
Nine months ended
September 30
2002 2001
-------- --------
Cash flow from operating activities
Net earnings $ 3,141 $ 4,499
Adjustments to reconcile net earnings to net cash provided by
operating activities
Depreciation and amortization 1,282 754
Gain on sale of securities (121) (56)
Provision for loan losses 150 225
Changes in assets and liabilities
Accrued interest receivable and other assets 630 (912)
Accrued expenses and other liabilities (80) (160)
-------- --------
Net cash provided by operating activities 5,002 4,350
-------- --------
Cash flows from investing activities
Purchase of securities available-for-sale (38,614) (18,978)
Proceeds from matured/called/securities available-for-sale 24,740 36,139
Net decrease (increase) in loans 5.998 (55,468)
Proceeds from sale of automobile -- 8
Purchases of bank premises, equipment, leasehold improvements (952) (1,672)
-------- --------
Net cash used in investing activities (8,828) (39,971)
-------- --------
Cash flows from financing activities
Net increase in demand and savings deposits 21,495 19,368
Net (decrease) increase in time deposits (11,838) 1,877
Net decrease in federal funds purchased (2,100) --
Dividends paid (2,041) (2,451)
Issuance of common stock 57 --
Payments on capital note payable (75) (71)
-------- --------
Net cash provided by financing activities 5,498 18,723
-------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,672 (16,898)
Cash and cash equivalents at beginning of period 22,493 41,753
-------- --------
Cash and cash equivalents at end of period $ 24,165 $ 24,855
======== ========
Additional cash flow information
Interest paid $ 3,816 $ 6,547
Income taxes paid $ 530 $ 2,188
See accompanying notes to unaudited consolidated financial statements.
4
FNB BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION
FNB Bancorp (the "Company") is a bank holding company registered under
the Bank Holding Company Act of 1956, as amended. The Company was incorporated
under the laws of the State of California on February 28, 2001. The consolidated
financial statements include the accounts of FNB Bancorp and its wholly owned
subsidiary, First National Bank of Northern California (the Bank). The Bank
provides traditional banking services in San Mateo and San Francisco counties.
The Bank and the Company entered into an Agreement and Plan of
Reorganization dated November 1, 2001 (the "Plan of Reorganization"), and the
shareholders of the Bank approved the Plan of Reorganization at a Special
Meeting of the Shareholders of the Bank held on February 27, 2002. The Plan of
Reorganization was consummated on March 15, 2002. Each outstanding share of the
common stock, par value $1.25 per share, of the Bank (other than any shares as
to which dissenters' rights of appraisal have been properly exercised) was
converted into one share of the common stock of the Company, and the former
holders of Bank common stock became the holders of all of the Company common
stock. The change in capital structure has been included for all periods
presented.
Significant intercompany transactions and balances have been eliminated
in consolidation. The financial statements include all adjustments of a normal
and recurring nature, which are, in the opinion of management, necessary for a
fair presentation of the financial results for the interim periods.
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-Q and, therefore, do not include all
information and notes normally included in financial statements prepared in
conformity with accounting principles generally accepted in the United States of
America. Accordingly, these unaudited financial statements should be read in
conjunction with the audited financial statements and notes thereto for the year
ended December 31, 2001.
Results of operations for interim periods are not necessarily
indicative of results for the full year.
5
NOTE B - LOANS
The loan portfolio consisted of the following at the dates indicated:
September 30, December 31,
(In thousands) 2002 2001
--------- ---------
Real Estate $ 211,008 $ 217,604
Construction 36,437 34,062
Commercial 37,887 39,195
Consumer 2,058 2,600
--------- ---------
Gross loans 287,390 293,461
Net deferred loan fees (1,801) (1,851)
Allowance for loan losses (3,670) (3,543)
--------- ---------
Net loans $ 281,919 $ 288,067
========= =========
NOTE C - EARNINGS PER SHARE CALCULATION
Earnings per common share (EPS) are computed based on the weighted
average number of common shares outstanding during the period. Basic EPS
excludes dilution and is computed by dividing net earnings by the weighted
average of common shares outstanding. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock.
Earnings per share have been computed based on the following (dollars
in thousands):
Three months ended Nine months ended
(In thousands, except number of shares) September 30, September 30,
2002 2001 2002 2001
---------- ---------- ---------- ----------
Net earnings $ 1,360 $ 1,572 $ 3,141 $ 4,499
Average number of shares outstanding 2,321,236 2,214,092 2,319,680 2,214,092
Effect of dilutive options 10,515 5,514 11,413 5,514
---------- ---------- ---------- ----------
Average number of shares outstanding used
to calculate diluted earnings per share 2,331,751 2,219,606 2,331,093 2,219,606
========== ========== ========== ==========
Options to purchase 15,336 shares of common stock were not included in
the computation of diluted EPS for nine months ended September 30, 2002, because
the options' exercise price was greater than the average market price of the
common shares. Options to purchase 17,466 shares of common stock were not
included in the computation of diluted EPS for nine months ended September 30,
2001 for the same reason. The options that expire on May 31, 2008 were still
outstanding as of September 30, 2002.
NOTE D - COMPREHENSIVE INCOME
Comprehensive income is the change in equity of a business enterprise
during a period from transactions and other events and circumstances from
non-owner sources. Other comprehensive income consists of net unrealized gains
6
on investment securities available for sale. Comprehensive income for the three
months ended September 30, 2002 was $2,437,000 compared to $1,909,000 for the
three months ended September 30, 2001. Comprehensive income for the nine months
ended September 30, 2002 was $4,570,000 compared to $5,222,000 for the nine
months ended September 30, 2001.
NOTE E - IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
Goodwill and Other Intangible Assets
In July 2001, the Financial Accounting Standards Board (FASB) issued
Statement No. 142, Goodwill and Other Intangible Assets. Statement 142 requires
that goodwill and intangible assets with indefinite useful lives no longer be
amortized, but instead tested for impairment at least annually in accordance
with the provisions of Statement 142. Statement 142 also requires that
intangible assets with definite useful lives be amortized over their respective
estimated useful lives to their estimated residual values, and reviewed for
impairment in accordance with SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.
The Company adopted the provisions of Statement 142 effective January
1, 2002. The Company does not have any goodwill and intangible assets acquired
in business combinations. The adoption of Statement 142 did not have a material
impact on the financial condition or operating results of the Company.
Accounting For Asset Retirement Obligations
The FASB issued Statement No. 143, Accounting for Asset Retirement
Obligations in August 2001. This Statement addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs.
As a result, Statement No. 143 applies to all entities that have legal
obligations associated with the retirement of long-lived tangible assets that
result from the acquisition, construction, development or normal use of the
asset. As used in this Statement, a legal obligation results from existing law,
statute, ordinance, written or oral contract, or by legal construction of a
contract under the doctrine of promissory estoppels.
Statement No. 143 requires an enterprise to record the fair value of an
asset retirement obligation as a liability in the period in which it incurs a
legal obligation associated with the retirement of a tangible long-lived asset.
Since the requirement is to recognize the obligation when incurred, approaches
that have been used in the past to accrue the asset retirement obligation over
the life of the asset are no longer acceptable. Statement No. 143 also requires
the enterprise to record the contra to the initial obligation as an increase to
the carrying amount of the related long-lived asset (i.e., the associated asset
retirement costs) and to depreciate that cost over the remaining useful life of
the asset. The liability is changed at the end of each period to reflect the
passage of time (i.e., accretion expense) and changes in the estimated future
cash flows underlying the initial fair value measurement. Enterprises are
7
required to adopt Statement No. 143 for fiscal years beginning after June 15,
2002. Early adoption is encouraged. The Company does not expect adoption of
Statement No. 143 to have a material impact on the financial condition or
operating results of the Company.
Accounting For The Impairment Or Disposal Of Long-Lived Assets
In October 2001, the FASB issued Statement No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
While Statement No. 144 supersedes Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, it
retains many of the fundamental provisions of that Statement.
Statement No. 144 also supersedes the accounting and reporting
provisions of APB Opinion No. 30, Reporting the Results of Operations--Reporting
the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions, for the disposal of a
segment of a business. However, it retains the requirement in Opinion 30 to
report separately discontinued operations and extends that reporting to a
component of an entity that either has been disposed of (by sale, abandonment,
or in a distribution to owners) or is classified as held for sale. By broadening
the presentation of discontinued operations to include more disposal
transactions, the FASB has enhanced management's ability to provide information
that helps financial statement users to assess the effects of a disposal
transaction on the ongoing operations of an entity. The Company adopted the
provisions of Statement 144 on January 1, 2002. The adoption of Statement No.
144 did not have a material impact on the financial condition or operating
results of the Company.
Rescission Of Sfas No. 4, 44, And 64, Amendments Of Sfas No. 13, And
Technical Corrections
Statement Financial Accounting Standards No. 145 rescinds SFAS No. 4,
which requires all gains and losses from extinguishment of debt to be aggregated
and, if material, classified as an extraordinary item, net of related income tax
effect. As a result, the criteria in Opinion No. 30 will now be used to classify
those gains and losses. SFAS No. 64 amended SFAS No. 4, and is no longer
necessary because SFAS No. 4 has been rescinded.
The accounting, disclosure and financial statements provision of SFAS
No. 145 are effective for financial statements in fiscal years beginning after
May 15, 2002. Any gain or loss on extinguishment of debt that was classified as
an extraordinary item in prior periods presented that does not meet the criteria
in Opinion No. 30 for classification as an extraordinary item shall be
reclassified. The implementation of Statement No. 145 is not expected to have a
material impact on the financial condition or operating results of the Company.
Accounting For Costs Associated With Exit Or Disposal Activities
The Financial Accounting Standards Board issued FASB Statement No. 146,
Accounting for Costs Associated with Exit or Disposal Activities, (SFAS 146),
which requires the Company to recognize costs associated with exit or disposal
activities when they are incurred rather than at the date of a commitment to an
8
exit or disposal plan. SFAS 146 replaces Emerging Issues Task Force ("EITF")
Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)." The provisions of SFAS 146 are to apply prospectively to exit
or disposal activities initiated after December 31, 2002.
Acquisitions Of Certain Financial Institutions
On October 1, the Financial Accounting Standards Board issued Financial
Accounting Standard (FAS) No. 147, Acquisitions of Certain Financial
Institutions. This Statement brings all business combinations involving
financial institutions, except mutuals, into the scope of FAS 141, Business
Combinations.
FAS 147 requires that all acquisitions of financial institutions that
meet the definition of a business, including acquisitions of part of a financial
institution that meet the definition of a business, must be accounted for in
accordance with FAS 141 and the related intangibles accounted for in accordance
with FAS 142, Goodwill and Other Intangible Assets. FAS 147 removes such
acquisitions from the scope of FAS 72, Accounting for Certain Acquisitions of
Banking or Thrifts Institutions, which was adopted in February 1983 to address
financial institutions acquisitions during a period when many of such
acquisitions involved "troubled" institutions.
FAS 147 also amends FAS 144, Accounting for the Impairment of Disposal
of Long-Lived Assets to include in its scope long-term customer-relations
intangible assets of financial institutions. FAS 147 is generally effective
immediately and provides guidance with respect to amortization and impairment of
intangibles recognized in connection with acquisitions previously within the
scope of FAS 72.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Management's Discussion and Analysis of Financial Condition and Results
of Operations contains statements relating to future results of the Company
(including certain projections and business trends) that are considered
"forward-looking statements." Actual results may differ materially from those
projected as a result of certain risks and uncertainties including, but not
limited to, changes in political and economic conditions, interest rate
fluctuations, competitive product and pricing pressures within the Company's
market, equity and bond market fluctuations, personal and corporate customers'
bankruptcies and financial condition, inflation and results of litigation.
Accordingly, historical performance, as well as reasonably applied projections
and assumptions, may not be a reliable indicator of future earnings due to risks
and uncertainties.
As circumstances, conditions or events change that affect the Company's
assumptions and projections on which any of the statements are based, the
Company disclaims any obligation to issue any update or revision to any
forward-looking statement contained herein.
9
Earnings Analysis
-----------------
Net earnings for the quarter and nine months ended September 30, 2002
were $1,360,000 and $3,141,000 respectively, compared to net earnings of
$1,572,000 and $4,499,000 respectively, for the quarter and nine months ended
September 30, 2001.
The year 2001 experienced a succession of 11 reductions in the prime
lending rate and the effects of the lower rate have continued through the third
quarter of 2002. As a result, net interest income for the quarter ended
September 30, 2002 decreased $557,000 compared to the quarter ended September
30, 2001. Net interest income for nine months ended September 30, 2002 decreased
$1,424,000 compared to the nine months ended September 30, 2001.
Net interest income is the difference between interest yield generated
by earning assets and the interest expense associated with the funding of those
assets.
The following tables present an analysis of net interest income and
average earning assets and liabilities for the three- and nine-month periods
ended September 30, 2002 compared to the three- and nine-month periods ended
September 30, 2001.
Table 1 NET INTEREST INCOME AND AVERAGE BALANCES
- ------- FNB BANCORP AND SUBSIDIARY
Three months ended September 30
2002 2001
------------------------------ ------------------------------
Interest Average Interest Average
Average Income Yield Average Income Yield
INTEREST EARNING ASSETS Balance (Expense) (Cost) Balance (Expense) (Cost)
-------- -------- -------- -------- -------- --------
Loans, gross $285,465 $ 5,614 7.80% $283,137 $ 6,879 9.64%
Taxable securities 42,131 375 3.53 41,540 619 5.91
Nontaxable securities 31,643 435 5.45 28,571 330 4.58
Federal funds sold 22,694 92 1.61 11,152 100 3.56
-------- -------- -------- --------
Total interest earning assets $381,933 $ 6,516 6.77 $364,400 $ 7,928 8.63
NONINTEREST EARNING ASSETS
Cash and due from banks $ 17,387 $ 23,039
Premises and equipment 11,522 11,967
Other assets 5,797 6,294
-------- --------
Total noninterest earning assets $ 34,706 $ 41,300
-------- --------
TOTAL ASSETS $416,639 $405,700
======== ========
INTEREST BEARING LIABILITIES
Deposits:
Demand, interest bearing $ 50,371 ($ 64) (0.50) $ 52,123 ($ 133) (1.01)
Money market 77,919 (317) (1.61) 59,405 (399) (2.66)
Savings 52,642 (79) (0.60) 46,777 (191) (1.62)
Time deposits 93,688 (629) (2.66) 105,324 (1,219) (4.59)
Federal funds purchased and other
Borrowings 84 (1) (4.72) 258 (3) (4.61)
-------- -------- -------- --------
Total interest bearing liabilities $274,704 ($ 1,090) (1.57) $263,887 ($ 1,945) (2.92)
-------- -------- -------- --------
NONINTEREST BEARING LIABILITIES
Demand deposits 88,018 89,227
Other liabilities 4,989 6,287
-------- --------
Total noninterest bearing liabilities $ 93,007 $ 95,514
-------- --------
TOTAL LIABILITIES $367,711 $359,401
Stockholders' equity $ 48,928 $ 46,299
-------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $416,639 $405,700
======== ========
NET INTEREST INCOME AND MARGIN
ON TOTAL EARNING ASSETS $ 5,426 5.64% $ 5,983 6.59%
10
Interest income is reflected on an actual basis, not on a fully taxable
equivalent basis. Yield on gross loans was not adjusted for nonaccrual loans,
which were not considered material for this calculation.
Table 2 NET INTEREST INCOME AND AVERAGE BALANCES
- ------- FNB BANCORP AND SUBSIDIARY
Nine months ended September 30
2002 2001
------------------------------ ------------------------------
Interest Average Interest Average
Average Income Yield Average Income Yield
INTEREST EARNING ASSETS Balance (Expense) (Cost) Balance (Expense) (Cost)
-------- -------- -------- -------- -------- --------
Loans, gross $289,739 $ 16,957 7.82% $265,442 $ 20,266 10.21%
Taxable securities 37,373 1,335 4.78 46,009 2,128 6.18
Nontaxable securities 31,550 1,099 4.66 32,001 1,110 4.64
Federal funds sold 17,026 208 1.63 16,851 595 4.72
-------- -------- -------- --------
Total interest earning assets $375,688 $ 19,599 6.97 $360,303 $ 24,099 8.94
NONINTEREST EARNING ASSETS
Cash and due from banks $ 18,426 $ 22,621
Premises and equipment 11,647 11,752
Other assets 5,897 5,948
-------- --------
Total noninterest earning assets $ 35,970 $ 40,321
-------- --------
TOTAL ASSETS $411,658 $400,624
======== ========
INTEREST BEARING LIABILITIES
Deposits:
Demand, interest bearing $ 53,229 ($ 194) (0.49) $ 54,862 ($ 592) (1.44)
Money market 69,421 (866) (1.67) 55,420 (1,206) (2.91)
Savings 51,829 (230) (0.59) 45,910 (629) (1.83)
Time deposits 97,154 (2,097) (2.89) 105,514 (4,042) (5.12)
Federal funds purchased and other
Borrowings 308 (13) (5.64) 226 (7) (4.14)
-------- -------- -------- --------
Total interest bearing liabilities $271,941 ($ 3,400) (1.67) $261,932 ($ 6,476) (3.31)
-------- -------- -------- --------
NONINTEREST BEARING LIABILITIES
Demand deposits 87,190 87,825
Other liabilities 4,564 5,614
-------- --------
Total noninterest bearing liabilities $ 91,754 $ 93,439
-------- --------
TOTAL LIABILITIES $363,695 $355,371
Stockholders' equity $ 47,963 $ 45,253
-------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $411,658 $400,624
======== ========
NET INTEREST INCOME AND MARGIN
ON TOTAL EARNING ASSETS $ 16,199 5.76% $ 17,623 6.54%
11
Interest income is reflected on an actual basis, not on a fully taxable
basis. Yield on gross loans was not adjusted for nonaccrual loans, which were
not considered material for this calculation.
Tables 1 and 2, above, show the various components that contributed to
changes in net interest income for the quarterly and nine month periods. The
principal earning assets are loans, from a volume perspective as well as from an
earnings rate. As mentioned earlier, there was a series of eleven declines in
the prime lending rate during 2001, which continues to affect net interest
income. For the quarter ended September 30, 2002, compared to the quarter ended
September 30, 2001, interest on loans decreased $1,265,000 or 18.39%, while the
yield decreased 184 basis points, and average loans outstanding increased
$2,328,000. Average taxable securities increased $591,000 in the same periods,
as fewer callable issues remained, and reinvestment took place. Yields on these
securities decreased 238 basis points, and their income decreased $244,000.
Average nontaxable securities increased $3,072,000, and their interest increased
$105,000, while the yield increased 87 basis points. Average federal funds sold
increased $11,542,000, but interest decreased $8,000, as the much higher volume
was offset by decrease in yield from 3.56% to 1.61 % Average total interest
earning assets increased by $17,533,000, but their income decreased $1,412,000
and the yield decreased 186 basis points.
For the quarter ended September 30, 2002 compared with the quarter
ended September 30, 2001, average interest bearing demand deposits decreased
$1,752,000, while the rate paid decreased 51 basis points, and the cost
decreased $69,000.Average money market deposits increased $18,514,000 but the
rate decreased from 2.66% to 1.61%, and the cost decreased $82,000. Average
savings accounts increased $5,865,000, while their rate decreased 102 basis
points, and the cost decreased $112,000. Average time deposits decreased
$11,636,000, as rates decreased 193 basis points, and their cost decreased
$590,000. Average federal funds purchased and other borrowed money decreased
$174,000, rates increased 11 basis points, but the cost decreased $2,000.
Average total interest bearing liabilities increased by $10,817,000, while the
overall rate decreased 135 basis points, as costs decreased $855,000.
For the nine months ended September 30, 2002, compared to the nine
months ended September 30, 2001, interest on loans decreased $3,309,000 or
16.33%, while the yield decreased 239 basis points, although average loans
outstanding increased $24,297,000. Average taxable securities decreased
$8,636,000. Yields on these securities decreased 140 basis points, and their
income decreased $793,000. Average nontaxable securities decreased $451,000,
while interest decreased $11,000 and the yield increased slightly by 2 basis
points. Average federal funds sold increased $175,000, but interest decreased
$387,000 while their yield decreased from 4.72% to 1.63%. Total interest earning
assets increased by $15,385,000 but their income decreased by $4,500,000 and
their yields decreased 197 basis points.
For the nine months ended September 30, 2002 compared with the nine
months ended September 30, 2001, average interest bearing demand deposits
decreased $1,633,000 and the rate paid decreased 95 basis points, and the cost
decreased $398,000. Average money market deposits increased $14,001,000, but the
rate decreased from 2.91% to 1.67%, while the cost decreased $340,000. Average
savings accounts increased $5,919,000, while their rate decreased 124 basis
points, and the cost decreased $399,000. Average time deposits decreased
$8,360,000, as rates decreased 223 basis points, and their cost decreased
$1,945,000. Average federal funds purchased and other borrowed money increased
$82,000, interest increased 150 basis points, and the cost increased $6,000.
Average total interest bearing liabilities increased by $10,009,000, while the
overall rate decreased 164 basis points, as costs decreased $3,076,000.
For the three months and nine months ended September 30, 2002 compared
to the three months and nine months ended September 30, 2001, the following
Tables 3 and 4 show the dollar amount of change in interest income and expense
and the dollar amounts attributable to: (a) changes in volume (changes in volume
at the current year rate), b) changes in rate (changes in rate times the prior
year's volume) and (c) changes in rate/volume (changes in rate times change in
volume). In this table, the dollar change in rate/volume is prorated to volume
and rate proportionately.
12
Table 3 FNB BANCORP AND SUBSIDIARY
RATE/VOLUME VARIANCE ANALYSIS
Three Months Ended September 30,
(In thousands) 2002 Compared To 2001
Increase (decrease)
Interest Variance
Income/Expense Attributable To
Variance Rate Volume
------- ------- -------
INTEREST EARNING ASSETS
Loans ($1,265) ($1,311) $ 46
Taxable securities (244) (249) 5
Nontaxable securities 105 63 42
Federal funds sold (8) (55) 47
------- ------- -------
Total ($1,412) ($1,552) $ 140
------- ------- -------
INTEREST BEARING LIABILITIES
Demand deposits ($ 69) ($ 65) ($ 4)
Money market (82) (157) 75
Savings deposits (112) (121) 9
Time deposits (590) (455) (135)
Federal funds purchased and other borrowings (2) -- (2)
------- ------- -------
Total ($ 855) ($ 798) ($ 57)
------- ------- -------
NET INTEREST INCOME (557) (754) $ 197
======= ======= =======
Table 4 FNB BANCORP AND SUBSIDIARY
RATE/VOLUME VARIANCE ANALYSIS
Nine Months Ended September 30,
(In thousands) 2002 Compared To 2001
Increase (decrease)
Interest Variance
Income/Expense Attributable To
Variance Rate Volume
------- ------- -------
INTEREST EARNING ASSETS
Loans ($3,309) ($4,731) $ 1,422
Taxable securities (793) (394) (399)
Nontaxable securities (11) 5 (16)
Federal funds sold (387) (389) 2
------- ------- -------
Total ($4,500) (5,509) $ 1,009
------- ------- -------
INTEREST BEARING LIABILITIES
Demand deposits ($398) ($380) ($18)
Money market (340) (515) 175
Savings deposits (399) (425) 26
Time deposits (1,945) (1,625) (320)
Federal funds purchased and other borrowings 6 3 3
------- ------- -------
Total ($3,076) ($2,942) ($134)
------- ------- -------
NET INTEREST INCOME ($1,424) ($2,567) $ 1,143
======= ======= =======
Noninterest income
13
The following table shows the principal components of noninterest
income for the periods indicated.
Table 5
NONINTEREST INCOME
Three months ended Nine months ended
September 30, September 30,
(In thousands) 2002 2001 2002 2001
------- ------- ------- -------
Service charges $ 480 $ 409 $ 1,333 $ 1,205
Credit card fees 255 262 709 727
Gain on sales of securities 121 21 121 56
Other income 49 58 218 321
------- ------- ------- -------
Total noninterest income $ 905 $ 750 $ 2,381 $ 2,309
Noninterest income consists mainly of service charges on deposits and
credit card fees, gain on sale of securities, and other miscellaneous types of
income. Service charges and credit card fees increased by 10% in the quarter
ended September 30, 2002 over the same quarter in 2001, and increased 6% in the
nine months ended September 30, 2002 compared to the same period in 2001, due to
a reduction in waived charges. Security gains increased 476% for the quarter
ended September 2002 over the same quarter in 2001, and increased 116% for the
nine months ended September 30, 2002 over the same nine months in 2001, due to a
significant increase in the value of fixed rate securities sold.
Noninterest expense
The following table shows the principal components of noninterest
expense for the periods indicated.
Table 6
NONINTEREST EXPENSE
Three months ended Nine months ended
September 30, September 30,
(In thousands) 2002 2001 2002 2001
------- ------- ------- -------
Salaries and employee benefits $ 2,683 $ 2,769 $ 7,963 $ 8,035
Occupancy expense 311 320 926 943
Equipment expense 374 375 1,594 1,114
Professional fees 241 123 915 378
Telephone, postage & supplies 249 250 835 761
Bankcard expenses 215 58 603 389
Other expense 441 451 1,352 1,470
------- ------- ------- -------
Total noninterest expense $ 4,514 $ 4,346 $14,188 $13,090
14
Noninterest expense consists of salaries and employee benefits
representing more than half of the total, and various other categories. The only
significant variance was the equipment expense and professional fees, which
increased $117,000 for the quarter and $1,017,000 for the nine months ended
September 30, 2002. The nine months also included non-recurring expenses in
connection with the final phase of the conversion of the Bank's accounting and
related application systems.
Income taxes The effective tax rate was 32% for the first nine months
of 2001. Investment in tax-exempt securities and tax-favored Enterprise Zone
loans generated a higher proportion of tax-exempt interest income to total
interest income in 2002 than 2001. The effective tax rate for the nine months of
2002 was reduced to 26%.
Asset and Liability Management
Ongoing management of the Company's interest rate sensitivity limits
interest rate risk by controlling the mix and maturity of assets and
liabilities. Management regularly reviews the Company's position and evaluates
alternative sources and uses of funds as well as changes in external factors.
Various methods are used to achieve and maintain the desired rate sensitivity
position including the sale or purchase of assets and product pricing.
In order to ensure that sufficient funds are available for loan growth
and deposit withdrawals, as well as to provide for general needs, the Company
must maintain an adequate level of liquidity. Asset liquidity comes from the
Company's ability to convert short-term investments into cash and from the
maturity and repayment of loans and investment securities. Liability liquidity
is the Company's customer base, which provides core deposit growth. The overall
liquidity position of the Company is closely monitored and evaluated regularly.
Management believes the Company's liquidity sources at September 30, 2002 are
adequate to meet its operating needs in 2002 and going forward into the
foreseeable future.
The following table sets forth information concerning rate sensitive
assets and rate sensitive liabilities as of September 30, 2002. The assets and
liabilities are classified by the earlier of maturity or repricing date in
accordance with their contractual terms. Since all interest rates and yields do
not adjust at the same speed or magnitude, and since volatility is subject to
change, the gap is only a general indicator of interest rate sensitivity.
The Company's asset/liability gap is the difference between the cash
flow amounts of interest-sensitive assets and liabilities that will be
refinanced (or repriced) during a given period. For example, if the asset amount
to be repriced exceeds the corresponding liability amount for a certain day,
month, year or longer period, the institution is in an asset-sensitive gap
position. In this situation, net interest income would increase if market
interest rates rose or decrease if market interest rates fell. Alternatively, if
more liabilities than assets will reprice, the institution is in a
liability-sensitive position. Accordingly, net interest income would decline
when rates rose and increase when rates fell.
15
Table 7 RATE SENSITIVE ASSETS/LIABILITIES
As of September 30, 2002
Over
Three Three To Over One Over Not
Months Twelve Through Five Rate-
Or Less Months Five Years Years Sensitive Total
--------- --------- --------- --------- --------- ---------
Interest earning assets:
Federal funds sold $ 6,000 $ -- $ -- $ -- $ -- $ 6,000
Securities available for sale 2,963 10,889 46,102 21,119 -- 81,073
Loans 243,768 21,930 8,056 11,726 (3,561) 281,919
--------- --------- --------- --------- --------- ---------
Total interest earning assets 252,731 32,819 54,158 32,845 (3,561) 368,992
Noninterest earning assets -- -- -- -- 38,782 38,782
--------- --------- --------- --------- --------- ---------
Total assets $ 252,731 $ 32,819 $ 54,158 $ 32,845 $ 35,221 $ 407,774
========= ========= ========= ========= ========= =========
Interest bearing liabilities:
Demand, interest bearing $ 46,959 $ -- $ -- $ -- $ -- $ 46,959
Savings and money market 129,579 -- -- -- -- 129,579
Time deposits 38,303 35,621 16,088 -- -- 90,012
--------- --------- --------- --------- --------- ---------
Total interest bearing liabilities 214,841 35,621 16,088 -- -- 286,550
--------- --------- --------- --------- --------- ---------
Noninterest demand deposits -- -- -- -- 87,186 87,186
Other liabilities -- -- -- -- 3,724 3,724
Stockholders' equity -- -- -- -- 50,314 50,314
--------- --------- --------- --------- --------- ---------
Total liabilities and stockholders' equity $ 214,841 $ 35,621 $ 16,088 $ -- $ 141,224 $ 407,224
========= ========= ========= ========= ========= =========
Interest rate sensitivity gap $ 37,890 ($ 2,802) $ 38,070 $ 32,845 ($106,003) $ --
Cumulative interest rate sensitivity gap $ 37,890 $ 35,088 $ 73,158 $ 106,003 $ -- $ --
========= ========= ========= ========= ========= =========
Cumulative interest rate sensitivity gap ratio 14.99% 12.29% 21.54% 28.45%
16
Financial Condition
Assets. Total assets increased to $407,774,000 at September 30, 2002
from $397,388,000 at December 31, 2001, an increase of $10,386,000. Most of this
increase was in Securities available for sale, which increased $15,762,000 and
was partly offset by a decrease in loans. Most of the increase in total assets
came from total deposits, which increased by $9,657,000.
Loans. Net loans at September 30, 2002 were $281,919,000, a decrease of
$6,148,000 or 2.1% from December 31, 2001, which showed $288,067,000. Real
Estate loans decreased $6,596,000, representing most of the change. The
portfolio breakdown was as follows.
Table 8 LOAN PORTFOLIO
September 30, December 31
(In thousands) 2002 Percent 2001 Percent
--------- ------- --------- -------
Real Estate $ 211,008 73.4% $ 217,604 74.1%
Construction 36,437 12.7 34,062 11.6
Commercial 37,887 13.2 39,195 13.4
Consumer 2,058 0.7 2,600 0.9
--------- ----- --------- -----
Gross loans 287,390 100.0% 293,461 100.0%
===== =====
Net deferred loan fees (1,801) (1,851)
Allowance for loan losses (3,670) (3,543)
--------- ---------
Net loans $ 281,919 $ 288,067
========= =========
Allowance for loan losses. The Company has the responsibility of
assessing the overall risks in its portfolio, assessing the specific loss
expectancy, and determining the adequacy of the allowance for loan losses. The
level of the allowance is determined by internally generating credit quality
ratings, reviewing economic conditions in the Company's market area, and
considering the Company's historical loan loss experience. The Company is
committed to maintaining an adequate allowance, identifying credit weaknesses by
consistent review of loans, and maintaining the ratings and changing those
ratings in a timely manner as circumstances change.
A summary of transactions in the allowance for loan losses for the nine
months ended September 30, 2002 and the year ended December 31, 2001 is as
follows:
17
Table 9 ALLOWANCE FOR LOAN LOSSES
Nine months ended Year ended
(In thousands) September 30, 2002 December 31, 2001
------------------ -----------------
Balance, beginning of period $ 3,543 $ 3,332
Provision for loan losses 150 300
Recoveries 7 5
Amounts charged off (30) (94)
------- -------
Balance, end of period $ 3,670 $ 3,543
======= =======
In management's judgment, the allowance was adequate to absorb
potential losses currently inherent in the loan portfolio at September 30, 2002.
However, changes in prevailing economic conditions in the Company's markets or
in the financial condition of its customers could result in changes in the level
of nonperforming assets and charge-offs in the future and, accordingly, changes
in the allowance.
Nonperforming assets. Nonperforming assets consist of nonaccrual loans,
foreclosed assets, and loans that are 90 days or more past due but are still
accruing interest. At September 30, 2002, there was $1,910,000 in non-accrual
loans, compared to $1,964,000 at December 31, 2001. There were no foreclosed
assets or loans past due 90 days and still accruing on either date.
Deposits. Total deposits at September 30, 2002 were $353,736,000
compared to $344,079,000 on December 31, 2001. Of these totals,
noninterest-bearing demand deposits were $87,186,000 or 24.7% of the total on
September 30, 2002 and $87,982,000 or 25.6% on December 31, 2001. Time deposits
were $90,012,000 on September 30, 2002 and $101,849,000 on December 31, 2001.
The following table sets forth the maturity schedule of the time certificates of
deposit on September 30, 2002:
Table 10
(In thousands) Under $100,000
Maturities: $100,000 or more Total
-------- -------- --------
Three months or less $ 18,380 $ 19,923 $ 38,303
Over three to six months 11,561 9,044 20,605
Over six through twelve months 10,329 4,687 15,016
Over twelve months 12,474 3,614 16,088
-------- -------- --------
Total $ 52,744 $ 37,268 $ 90,012
-------- -------- ========
18
The following table shows the risk-based capital ratios and leverage ratios at
September30, 2002 and December 31, 2001:
Table 11 Minimum "Well
September 30, December 31, Capitalized"
Risk-Based Capital Ratios 2002 2001 Requirements
Tier 1 Capital 13.57% 12.98% > 6.00%
-
Total Capital 14.61% 13.98% > 10.00%
-
Leverage Ratios 11.66% 11.41% > 5.00%
-
Liquidity. Liquidity is a measure of the Company's ability to convert
assets into cash with minimum loss. As of September 30, 2002, Liquid Assets were
$105,238,000 or 25.8% of total assets. Liquidity consists of cash and due from
other banks accounts, federal funds sold, and securities available-for-sale. The
Company's primary uses of funds are loans, and the primary sources of funds are
deposits. The relationship between total net loans and total deposits is a
useful additional measure of liquidity.
A higher loan to deposit ratio means that assets will be less liquid.
This has to be balanced against the fact that loans represent the highest
earning assets, so that a lower loan to deposit ratio means lower potential
income. On September 30, 2002 net loans were at 79.7% of deposits.
The primary source of liquidity for FNB Bancorp, on a stand-alone
basis, is the receipt of dividends from First National Bank of Northern
California, and the ability of First National Bank of Northern California to pay
dividends is subject to restrictions imposed under the National Bank Act and
regulations promulgated by the Office of the Comptroller of the Currency. In
addition, under certain circumstances, the Federal Deposit Insurance Corporation
has the authority to place restrictions on the ability of a bank to pay
dividends.
Forward-Looking Information and Uncertainties Regarding Future
--------------------------------------------------------------
Financial Performance.
- ---------------------
This report, including management's discussion above, concerning
earnings and financial condition, contains "forward-looking statements".
Forward-looking statements are estimates of or statements about our expectations
or beliefs regarding the Company's future financial performance or anticipated
future financial condition that are based on current information and that are
subject to a number of risks and uncertainties that could cause actual operating
results in the future to differ significantly from those expected at the current
time. Those risks and uncertainties include, although they are not limited to,
the following:
Increased competition. Increased competition from other banks and
financial service businesses, mutual funds and securities brokerage and
investment banking firms that offer competitive loan and investment products
could require us to reduce interest rates and loan fees to attract new loans or
to increase interest rates that we offer on time deposits, either or both of
which could, in turn, reduce interest income and net interest margins.
19
Possible Adverse Changes in Economic Conditions. Adverse changes in
national or local economic conditions could (i) reduce loan demand which could,
in turn, reduce interest income and net interest margins; (ii) adversely affect
the financial capability of borrowers to meet their loan obligations, which, in
turn, could result in increases in loan losses and require increases in
provisions for possible loan losses, thereby adversely affecting operating
results; and (iii) lead to reductions in real property values that, due to the
Company's reliance on real property to secure many of its loans, could make it
more difficult to prevent losses from being incurred on non-performing loans
through the sale of such real properties.
Possible Adverse Changes in National Economic Conditions and Federal
Reserve Board Monetary Policies. Changes in national economic policies, such as
increases in inflation or declines in economic output often prompt changes in
Federal Reserve Board monetary policies that could reduce interest income or
increase the cost of funds to the Company, either of which could result in
reduced earnings.
Changes in Regulatory Policies. Changes in federal and national bank
regulatory policies, such as increases in capital requirements or in the
allowance for loan losses or asset/liability ratio requirements, could adversely
affect earnings by reducing yields on earning assets or increasing operating
costs.
Due to these and other possible uncertainties and risks, readers are
cautioned not to place undue reliance on the forward-looking statements
contained in this Report, which speak only as of the date of the Quarterly
Report, or to make predictions based solely on historical financial performance.
We also disclaim any obligation to update forward-looking statements contained
in this Report, in our Prospectus, or in our Annual Report.
Other Matters
Off-Balance Sheet Items The Company has certain ongoing commitments
under operating leases. These commitments do not significantly impact operating
results.
As of September 30, 2002 and December 31, 2001, commitments to extend
credit and letters of credit were the only financial instruments with
off-balance sheet risk. The Company has not entered into any contracts for
financial derivative instruments such as futures, swaps, options or similar
instruments. Loan commitments and letters of credit were $70,544,000 and
$67,983,000 at September 30, 2002 and December 31, 2001, respectively. As a
percentage of net loans, these off-balance sheet items represent 25.0% and 23.6%
respectively.
Certain financial institutions have elected to use special purpose
vehicles ("SPV") to dispose of problem assets. An SPV is typically a subsidiary
company with an asset and liability structure and legal status that transfers
its obligations to a third party even if the parent corporation goes bankrupt.
Under the circumstances, these financial institutions may exclude the problem
assets from their reported impaired and non-performing assets. The Company does
not use SPV or other structures to dispose of problem assets.
20
Corporate Reform Legislation
President George W. Bush signed the "Public Company Accounting Reform
and Investor Protection Act of 2002" (the "Act") on July 30, 2002, which
responds to the recent corporate accounting scandals. Among other matters, the
Act increases the penalties for securities fraud, establishes new rules for
financial analysts to prevent conflicts of interest, creates a new independent
oversight board for the accounting profession, imposes restrictions on the
consulting activities of accounting firms that audit company records and
requires certification of financial reports by corporate executives. The effect
of the Act upon corporations is uncertain; however, it is likely that compliance
costs may increase as corporations modify procedures if required to conform to
the provisions of the Act. The Company does not currently anticipate that
compliance with the Act will have a material effect upon the results of
operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk is the risk of loss to future earnings, to fair values of
assets or to future cash flows that may result from changes in the price or
value of a financial instrument. The value of a financial instrument may change
as a result of changes in interest rates and other market conditions. Market
risk is attributed to all market risk sensitive financial instruments, including
loans, investment securities, deposits and borrowings. The Company does not
engage in trading activities or participate in foreign currency transactions for
its own account. Accordingly, exposure to market risk is primarily a function of
asset and liability management activities and of changes in market rates of
interest. Changes in rates can cause or require increases in the rates paid on
deposits that may take effect more rapidly or may be greater than the increases
in the interest rates that the Company is able to charge on loans and the yields
that it can realize on its investments. The extent of that market risk depends
on a number of variables including the sensitivity to changes in market interest
rates and the maturities of the Company's interest earning assets and deposits.
There have been no material changes in the Company's quantitative and
qualitative disclosures about market risk as of September 30, 2002, from those
presented in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2001.
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures: An
evaluation of the Company's disclosure controls and procedures (as defined in
Section 13(a)-14(c)) of the Securities Exchange Act of 1934 (the "Act")) was
carried out under the supervision and with the participation of the Company's
Chief Executive Officer, Chief Financial Officer and other members of the
Company's senior management within the 90-day period preceding the filing date
of this quarterly report. The Company's Chief Executive Officer and Chief
Financial Officer concluded that the Company's disclosure controls and
procedures as currently in effect are effective in ensuring that the information
required to be disclosed by the Company in the reports it files or submits under
the Act is (i) accumulated and communicated to the Company's management
(including the Chief Executive Officer and Chief Financial Officer) in a timely
manner, and (ii) recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms.
21
(b) Changes in Internal Controls: In the quarter ended September
30, 2002, the Company did not make any significant changes in, nor take any
corrective actions regarding, its internal controls or other factors that could
significantly affect these controls.
PART II--OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.23 FNB Bancorp 2002 Stock Option Plan, adopted June 28,
2002, incorporated by reference to Exhibit 99.1 to
registrant's Registration Statement on Form S-8 (No.
333-98293) filed with the Commission on August 16,
2002. *
10.24 Form of Incentive Stock Option Agreement under FNB
Bancorp 2002 Stock Option Plan, adopted June 28,
2002, incorporated by reference to Exhibit 99.2 to
registrant's Registration Statement on Form S-8 (No.
333-98293) filed with the Commission on August 16,
2002. *
10.25 Form of Nonstatutory Stock Option Agreement under FNB
Bancorp 2002 Stock Option Plan, adopted June 28,
2002, incorporated by reference to Exhibit 99.3 to
registrant's Registration Statement on Form S-8 (No.
333-98293) filed with the Commission on August 16,
2002. *
99.10 Certification Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
--------------------------------------------------------------
*Denotes management contracts, compensatory plans or
arrangements.
22
(b) Reports on Form 8-K
The following reports on Form 8-K have been filed during the
quarter ended September 30, 2002:
Filed August 9, 2002: cash dividend payable to shareholders of
record on July 31, 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FNB BANCORP
(Registrant)
Dated: November 12, 2002. By: /s/ THOMAS C. MCGRAW
------------------------------
Thomas C. McGraw
Chief Executive Officer
(Authorized Officer)
By: /s/ JAMES B. RAMSEY
------------------------------
James B. Ramsey
Senior Vice President
Chief Financial Officer
(Principal Financial Officer)
23
CERTIFICATIONS
- --------------
I, Thomas C. McGraw, Chief Executive Officer (Principal Executive Officer) of
the registrant, FNB Bancorp, certify that:
1. I have reviewed this quarterly report on Form 10-Q of FNB Bancorp;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
24
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 12, 2002.
/s/ THOMAS C. MCGRAW
- ------------------------------
Thomas C. McGraw
Chief Executive Officer
(Principal Executive Officer)
25
I, James B. Ramsey, Senior Vice President and Chief Financial Officer (Principal
Financial Officer) of the registrant, FNB Bancorp, certify that:
1. I have reviewed this quarterly report on Form 10-Q of FNB Bancorp;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
26
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 12, 2002.
/s/ JAMES B. RAMSEY
- ------------------------------
James B. Ramsey
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
27