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, 2003
-------------------------------------------------
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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [x]
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 7,
2003: 2,399,694 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
2003 2002
------------ -----------
Cash and due from banks $ 17,665 $ 17,804
Federal funds sold 4,865 2,395
------------ -----------
Cash and cash equivalents 22,530 20,199
Securities available-for-sale 77,774 75,963
Loans, net 300,280 284,889
Bank premises, equipment, and leasehold improvements 10,712 11,280
Accrued interest receivable and other assets 8,951 9,503
------------ -----------
$ 420,247 $ 401,834
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Demand, noninterest bearing $ 95,742 $ 88,495
Demand, interest bearing 51,795 52,480
Savings and money market 128,010 116,879
Time 89,992 89,552
------------ -----------
Total deposits 365,539 347,406
Accrued expenses and other liabilities 3,390 3,225
------------ -----------
Total liabilities 368,929 350,631
------------ -----------
Stockholders' equity
Common stock, no par value, authorized 10,000,000 shares;
issued and outstanding 2,403,000 shares at September 30, 2003
and 2,437,000 at December 31, 2002 25,503 26,492
Additional paid-in capital 2 --
Retained earnings 24,499 22,907
Accumulated other comprehensive income 1,314 1,804
------------ -----------
Total stockholders' equity 51,318 51,203
------------ -----------
Total liabilities and stockholders' equity $ 420,247 $ 401,834
============ ===========
See accompanying notes to 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,
2003 2002 2003 2002
---------- ---------- ---------- ----------
Interest income:
Interest and fees on loans $ 4,978 $ 5,614 $ 14,984 $ 16,957
Interest on securities 347 375 1,124 1,335
Interest on tax-exempt securities 358 435 1,022 1,099
Federal funds sold 12 92 62 208
---------- ---------- ---------- ----------
Total interest income 5,695 6,516 17,192 19,599
Interest expense:
Interest on deposits 626 1,089 2,088 3,387
Other 1 1 1 13
---------- ---------- ---------- ----------
Total interest expense 627 1,090 2,089 3,400
---------- ---------- ---------- ----------
Net interest income 5,068 5,426 15,103 16,199
Provision for loan losses 40 -- 780 150
---------- ---------- ---------- ----------
Net interest income after provision for loan losses 5,028 5,426 14,323 16,049
Noninterest income:
Service charges 668 480 1,997 1,333
Credit card fees 275 255 733 709
Gain on sale of securities -- 121 -- 121
Other income 61 49 212 218
---------- ---------- ---------- ----------
Total noninterest income 1,004 905 2,942 2,381
Noninterest expense:
Salaries and employee benefits 2,540 2,683 8,167 7,963
Occupancy expense 296 311 939 926
Equipment expense 398 374 1,171 1,594
Professional fees 183 241 592 915
Telephone, postage and supplies 227 249 675 835
Bankcard expenses 235 215 629 603
Other expense 489 441 1,430 1,352
---------- ---------- ---------- ----------
Total noninterest expense 4,368 4,514 13,603 14,188
---------- ---------- ---------- ----------
Earnings before income tax expense 1,664 1,817 3,662 4,242
Income tax expense 404 457 905 1,101
---------- ---------- ---------- ----------
NET EARNINGS 1,260 $ 1,360 $ 2,757 $ 3,141
========== ========== ========== ==========
Earnings per share data:
Basic $ 0.52 $ 0.56 $ 1.13 $ 1.29
Diluted $ 0.52 $ 0.56 $ 1.13 $ 1.28
Weighted average shares outstanding:
Basic 2,427,000 2,437,000 2,433,000 2,437,000
Diluted 2,441,000 2,446,000 2,441,000 2,446,000
See accompanying notes to consolidated financial statements
3
FNB BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
Nine months ended
September 30
2003 2002
-------- --------
Cash flow from operating activities
Net earnings $ 2,757 $ 3,141
Adjustments to reconcile net earnings to net cash provided by
operating activities
Depreciation and amortization 1,428 1,282
Gain on sale of securities -- (121)
Provision for loan losses 780 150
Changes in assets and liabilities
Accrued interest receivable and other assets 552 630
Accrued expenses and other liabilities (69) (80)
-------- --------
Net cash provided by operating activities 5,448 5,002
Cash flows from investing activities
Purchase of securities available-for-sale (27,100) (38,614)
Proceeds from matured/called/securities available-for-sale 24,619 24,740
Net (increase) decrease in loans (16,171) 5,998
Purchases of bank premises, equipment, leasehold improvements (368) (952)
-------- --------
Net cash used in investing activities (19,020) (8,828)
Cash flows from financing activities
Net increase in demand and savings deposits 17,693 21,495
Net increase (decrease) in time deposits 440 (11,838)
Net (decrease) in federal funds purchased -- (2,100)
Payments on capital note payable (78) (75)
Dividends paid (1,165) (2,041)
Issuance of common stock -- 57
Stock options granted 2 --
Repurchase of FNB Bancorp securities (989) --
-------- --------
Net cash provided by financing activities 15,903 5,498
-------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 2,331 1,672
Cash and cash equivalents at beginning of period 20,199 22,493
-------- --------
Cash and cash equivalents at end of period $ 22,530 $ 24,165
======== ========
Additional cash flow information
Interest paid $ 2,202 $ 3,816
Income taxes paid $ 657 $ 530
See accompanying notes to consolidated financial statements.
4
FNB BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
(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") for this
purpose, 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 footnotes normally included in financial statements prepared in
conformity with accounting principles generally accepted in the United States of
America. Accordingly, these financial statements should be read in conjunction
with the audited financial statements and notes thereto for the year ended
December 31, 2002.
Results of operations for interim periods are not necessarily indicative
of results for the full year.
NOTE B - STOCK OPTION PLAN
At September 30, 2003, the Company has one stock-based employee
compensation plan. Prior to 2003, the Company accounted for the plan under the
recognition and measurement provisions of APB Opinion No. 25, Accounting for
Stock Issued to Employees, and related interpretations. No stock-based employee
compensation cost is reflected in 2002 net earnings, as all options granted
under the plan had an exercise price equal to the market value of the underlying
common stock on the date of grant. Effective January 1, 2003, the Company
adopted the fair value recognition provisions of FASB Statement No. 123,
Accounting for Stock-Based Compensation, prospectively to all employee awards
granted, modified, or settled after January 1, 2003. Therefore, the cost related
to stock-based employee compensation included in the determination of net income
for 2003 is less than that which would have been recognized if the fair value
based method had been applied to all awards since the original effective date of
Statement No. 123. Awards under the Company's plan vest over periods ranging
from three to
5
five years. The following table illustrates the effect on net income and
earnings per share if the fair value based method had been applied to all
outstanding and unvested awards in each period.
Three months ended Nine months ended
(In thousands, except per share) September 30 September 30
------------------------ ------------------------
2003 2002 2003 2002
----------- ---------- ---------- ----------
Net income as reported $ 1,260 $ 1,360 $ 2,757 $ 3,141
Add: Stock-based employee compensation
expense included in reported net income, net
of related tax effects 1 2
Deduct total stock-based employee
compensation expense determined
under fair value method for all
awards, net of related tax effect (3) (3) (9) (7)
----------- ---------- ---------- ----------
Pro forma net income $ 1,258 $ 1,357 $ 2,750 $ 3,134
Earnings per share:
Basic - as reported $ 0.52 $ 0.56 $ 1.13 $ 1.29
Basic - pro forma $ 0.52 $ 0.55 $ 1.13 $ 1.29
Diluted - as reported $ 0.52 $ 0.56 $ 1.13 $ 1.28
Diluted - pro forma $ 0.52 $ 0.55 $ 1.13 $ 1.28
NOTE C - LOANS
The loan portfolio consisted of the following at the dates indicated:
September 30, December 31,
(In thousands) 2003 2002
------------- -------------
Real Estate $ 217,037 $ 211,473
Construction 44,925 32,947
Commercial 41,199 42,549
Consumer 2,188 2,956
------------- -------------
Gross loans 305,349 289,925
Net deferred loan fees (1,769) (1,640)
Allowance for loan losses (3,300) (3,396)
------------- -------------
Net loans $ 300,280 $ 284,889
============= =============
NOTE D - 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
6
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,
------------------------- -------------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Net earnings $ 1,260 $ 1,360 $ 2,757 $ 3,141
Average number of shares outstanding 2,427,000 2,437,000 2,433,000 2,437,000
Effect of dilutive options 14,000 9,000 8,000 9,000
---------- ---------- ---------- ----------
Average number of shares outstanding used
to calculate diluted earnings per share 2,441,000 2,446,000 2,441,000 2,446,000
========== ========== ========== ==========
Options to purchase 47,106 shares of common stock were not included in
the computation of diluted EPS for nine months ended September 30, 2003, because
the options' exercise price was greater than the average market price of the
common shares. 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 for the same reason. The options that expire on May 31, 2008 were still
outstanding as of June 30, 2003.
NOTE E - 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
on investment securities available for sale. Comprehensive income for the three
months ended September 30, 2003 was $984,000 compared to $2,437,000 for the
three months ended September 30, 2002. Comprehensive income for the nine months
ended September 30, 2003 was $2,267,000 compared to $4,570,000 for the nine
months ended September 30, 2002.
NOTE F - STATEMENT OF FINANCIAL ACCOUNTING STANDARDS No. 150 - ACCOUNTING FOR
CERTAIN FINANCIAL INSTRUMENTS WITH CHARACTERISTICS OF BOTH LIABILITIES AND
EQUITY
This Statement establishes standards for how an issuer classifies and
measures certain financial instruments with characteristics of both liabilities
and equity. It requires that an issuer classify a financial instrument that is
within its scope as a liability (or an asset, in some circumstance). Many of
those instruments were previously classified as equity. The Statement is
effective for financial instruments entered into or modified after May 31, 2003.
The Company does not issue the kinds of financial instruments to which
this Statement refers.
NOTE G - STOCK REPURCHASE PROGRAM
On July 25, 2003, the Board of Directors authorized a stock repurchase
program, which calls for the repurchase of up to 5% of the Company's shares,
which at that time represented 121,852 shares, based on approximately 2,437,043
shares outstanding at that date. A total of 34,284 shares of the Company's
common stock had been repurchased as of September 30, 2003.
7
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Critical Accounting Policies And Estimates
------------------------------------------
Management's discussion and analysis of its financial condition and
results of operations are based upon the Company's financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States of America. The preparation of these financial statements
requires the Company to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities,. On an on-going basis, the Company evaluates
its estimates, including those related to its loans and allowance for loan
losses. The Company bases its estimates on current market conditions, historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. The Company believes the
following critical accounting policy requires significant judgments and
estimates used in the preparation of its consolidated financial statements.
Allowance for Loan Losses
-------------------------
The allowance for loan losses is periodically evaluated for adequacy by
management. Factors considered include the Company's loan loss experience, known
and inherent risks in the portfolio, current economic conditions, known adverse
situations that may affect the borrower's ability to repay, regulatory policies,
and the estimated value of underlying collateral. The evaluation of the adequacy
of the allowance is based on the above factors along with prevailing and
anticipated economic conditions that may impact borrowers' ability to repay
loans. Determination of the allowance is in part objective and in part a
subjective judgment by management based on the information it currently has in
its possession. Adverse changes in any of these factors or the discovery of new
adverse information could result in higher charge-offs and loan loss provisions.
Earnings Analysis
-----------------
Net earnings for the quarter and nine months ended September 30, 2003
were $1,260,000 and $2,757,000, respectively, compared to net earnings of
$1,360,000 and $3,141,000 for the quarter and nine months ended September 30,
2002.
Net interest income for the quarter and nine months ended September 30,
2003 was $5,068,000 and $15,103,000, compared to $5,426,000 and $16,199,000 for
the quarter and nine months ended September 30, 2002, a decrease of $358,000 or
6.60% for the quarter and a decrease of $1,096,000 or 6.77% for the year to
date. This decline is due to the fact that the prime lending rate continued to
drop at a faster pace than the cost of funds rate, which adjusts at a lagged
rate. The prime lending rate was 4.25% from January 1 through June 26, 2003, and
dropped to 4.00% from June 27 through September 30, 2003, compared to 4.75%
during the first nine months of 2002. The Federal Home Loan Bank of San
Francisco's Weighted Monthly Cost of Funds Index averaged 2.149% for the eight
months ended August 2003, compared to 2.768% for eight months ended August 2002.
Nevertheless, the effect of the rate
8
changes was reduced, due to the fact that that a significant amount of the Real
Estate loan portfolio is subject to interest rate caps and floors.
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, 2003 compared to the three- and nine-month periods ended
September 30, 2002.
Table 1 NET INTEREST INCOME AND AVERAGE BALANCES
- ------- FNB BANCORP AND SUBSIDIARY
Three months ended September 30,
2003 2002
---- Annualized ---- Annualized
Interest Average Interest Average
Average Income Yield Average Income Yield
INTEREST EARNING ASSETS Balance (Expense) (Cost) Balance (Expense) (Cost)
--------- --------- --------- --------- --------- ---------
Loans, gross $ 297,898 $ 4,978 6.63% $ 285,465 $ 5,614 7.80%
Taxable securities 40,533 347 3.40 42,131 375 3.53
Nontaxable securities 39,158 358 3.63 31,643 435 5.45
Federal funds sold 5,137 12 0.93 22,694 92 1.61
--------- --------- --------- ---------
Total interest earning assets $ 382,726 $ 5,695 5.90 $ 381,933 $ 6,516 6.77
NONINTEREST EARNING ASSETS
Cash and due from banks $ 17,925 $ 17,387
Premises and equipment 10,749 11,522
Other assets 6,001 5,797
--------- ---------
Total noninterest earning assets $ 34,675 $ 34,706
--------- ---------
TOTAL ASSETS $ 417,401 $ 416,639
========= =========
INTEREST BEARING LIABILITIES
Deposits:
Demand, interest bearing $ 52,877 $ (24) (0.18) $ 50,371 $ (64) (0.50)
Money market 65,616 (124) (0.75) 77,919 (317) (1.61)
Savings 57,275 (40) (0.28) 52,642 (79) (0.60)
Time deposits 91,512 (438) (1.90) 93,688 (629) (2.66)
Federal funds purchased and other
Borrowings 345 (1) (1.15) 84 (1) (4.72)
--------- --------- --------- ---------
Total interest bearing liabilities $ 267,625 $ (627) (0.93) $ 274,704 $ (1,090) (1.57)
--------- --------- --------- ---------
NONINTEREST BEARING LIABILITIES
Demand deposits
93,034 88,018
Other liabilities
5,095 4,989
--------- ---------
Total noninterest bearing liabilities $ 98,129 $ 93,007
--------- ---------
TOTAL LIABILITIES $ 365,754 $ 367,711
Stockholders' equity $ 51,647 $ 48,928
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 417,401 $ 416,639
========= =========
NET INTEREST INCOME AND MARGIN
ON TOTAL EARNING ASSETS $ 5,068 5.25% $ 5,426 5.64%
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.
9
Table 2 NET INTEREST INCOME AND AVERAGE BALANCES
- ------- FNB BANCORP AND SUBSIDIARY
Nine months ended September 30,
2003 2002
---- Annualized ---- Annualized
Interest Average Interest Average
Average Income Yield Average Income Yield
INTEREST EARNING ASSETS Balance (Expense) (Cost) Balance (Expense) (Cost)
--------- --------- --------- --------- --------- ---------
Loans, gross $ 291,566 $ 14,984 6.87% $ 289,739 $ 16,957 7.82%
Taxable securities 41,202 1,124 3.65 37,373 1,335 4.78
Nontaxable securities 35,562 1,022 3.84 31,550 1,099 4.66
Federal funds sold 7,369 62 1.12 17,026 208 1.63
--------- --------- --------- ---------
Total interest earning assets $ 375,699 $ 17,192 6.12 $ 375,688 $ 19,599 6.97
NONINTEREST EARNING ASSETS
Cash and due from banks $ 17,975 $ 18,426
Premises and equipment 10,960 11,647
Other assets 5,877 5,897
--------- ---------
Total noninterest earning assets $ 34,826 $ 35,970
--------- ---------
TOTAL ASSETS $410,511 $411,658
========= =========
INTEREST BEARING LIABILITIES
Deposits:
Demand, interest bearing $ 51,485 $ (85) (0.22) $ 53,229 $ (194) (0.49)
Money market 65,088 (442) (0.91) 69,421 (866) (1.67)
Savings 55,285 (147) (0.36) 51,829 (230) (0.59)
Time deposits 90,642 (1,414) (2.09) 97,154 (2,097) (2.89)
Federal funds purchased and other
borrowings 151 (1) (0.89) 308 (13) (5.64)
--------- --------- --------- ---------
Total interest bearing liabilities $ 262,651 $ (2,089) (1.06) $ 271,941 $ (3,400) (1.67)
--------- --------- --------- ---------
NONINTEREST BEARING LIABILITIES
Demand deposits 91,152 87,190
Other liabilities 5,010 4,564
--------- ---------
Total noninterest bearing liabilities $ 96,162 $ 91,754
--------- ---------
TOTAL LIABILITIES $ 358,813 $ 363,695
Stockholders' equity $ 51,698 $ 47,963
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 410,511 $ 411,658
========= =========
NET INTEREST INCOME AND MARGIN
ON TOTAL EARNING ASSETS $ 15,103 5.37% $ 16,199 5.76%
Tables 1 and 2, above, show the various components that contributed to
changes in net interest income for the two quarterly and nine month periods of
2002 and 2003. The principal earning assets are loans, from a volume perspective
as well as from an earnings rate. For the quarter ended September 30, 2003,
compared to the quarter ended September 30, 2002, interest on loans decreased
$636,000 or 11.33%, while the yield decreased 117 basis points, and average
loans outstanding increased $12,433,000. Average taxable securities decreased
$1,598,000 in the same period. Yields on these securities decreased 13 basis
points, and their income decreased $28,000. Average nontaxable securities
increased $7,515,000, and their interest decreased $77,000, while the yield
decreased 182 basis points.
10
Average federal funds sold decreased $17,557,000, and interest decreased
$80,000, while yield decreased 68 basis points. Average total interest earning
assets increased by $793,000, but their income decreased $821,000 and the yield
decreased 87 basis points.
For the quarter ended September 30, 2003, compared to the quarter ended
September 30, 2002, interest on interest bearing demand deposits decreased
$40,000 or 62.50%, but the average balance increased $2,506,000 or 4.98%, while
the yield decreased 32 basis points. For the same periods, interest on money
market deposits decreased by $193,000 or 60.88%, their average balance decreased
by $12,303,000, and the yield decreased 86 basis points. Interest on savings for
the same periods decreased $39,000, while savings volume increased $4,633,000 or
8.80%, and the yield decreased 32 basis points. Interest on time deposits
decreased $191,000 or 30.37%, and volume decreased $2,176,000 or 2.32%, while
yields decreased 76 basis points. Interest on federal funds purchased and other
borrowings was unchanged, while volume increased by $261,000, but yields
decreased 357 basis points. Finally, total interest on interest bearing
liabilities decreased $463,000 quarter-to-quarter, volume decreased $7,079,000
or 2.58%, and the yield decreased 64 basis points. The net interest income and
margin as a percent of total earning assets decreased by 39 basis points in the
third quarter of 2003 compared to the third quarter of 2002. . .
For the nine months ended September 30, 2003 compared to the nine months
ended September 30, 2002, interest on loans decreased $1,973,000 or 11.64%,
while the yield decreased 95 basis points, and average loans outstanding
increased $1,827,000. Average taxable securities increased $3,829,000. Yields on
these securities decreased 113 basis points, and their income decreased
$211,000. Average nontaxable securities increased $4,012,000, their income
decreased $77,000 and the yield decreased 82 basis points. Average federal funds
sold decreased $9,657,000, their income decreased $146,000 and the yield
decreased 51 basis points. Total interest earning assets increased by $11,000,
and their income decreased by $2,407,000, while yields decreased 85 basis
points.
For the nine months ended September 30, 2003 compared with the nine
months ended September 30, 2002, average interest bearing demand deposits
decreased $1,744,000 while the rate paid decreased 27 basis points, and the cost
decreased $109,000. Average money market deposits decreased $4,333,000, while
their rate decreased 76 basis points, and their cost decreased $424,000. Average
savings accounts increased $3,456,000, but their rates decreased 23 basis
points, and their cost decreased $83,000. Average time deposits decreased
$6,512,000, while the rate decreased 80 basis points, and the cost decreased
$683,000. Average federal funds purchased and other borrowed money decreased
$157,000, interest decreased 475 basis points, and the cost decreased $12,000.
Average total interest bearing liabilities decreased by $9,290,000, while the
rate decreased 61 basis points, and costs decreased $1,311,000. The net interest
income and margin as a percent of total earning assets for the nine month period
ended September 30, 2003 compared to September 30, 2002 decreased 39 basis
points.
For the three and nine months ended September 30, 2003 compared to the
three and nine months ended September 30, 2002, the following Tables 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 these
tables, the dollar change in rate/volume is prorated to volume and rate
proportionately.
11
Table 3 FNB BANCORP AND SUBSIDIARY
- ------- RATE/VOLUME VARIANCE ANALYSIS
Three Months Ended September 30,
(In thousands) 2003 Compared To 2002
Increase (decrease)
Interest Variance
Income/Expense Attributable To
Variance Rate Volume
------------- ------------- -------------
INTEREST EARNING ASSETS
Loans $ (636) $ (881) $ 245
Taxable securities (28) (14) (14)
Nontaxable securities (77) (146) 69
Federal funds sold (80) (9) (71)
------------- ------------- -------------
Total $ (821) $ (1,050) $ 229
------------- ------------- -------------
INTEREST BEARING LIABILITIES
Demand deposits $ (40) $ (43) $ 3
Money market (193) (170) (23)
Savings deposits (39) (42) 3
Time deposits (191) (176) (15)
Federal funds purchased and other borrowings 0 (3) 3
------------- ------------- -------------
Total
$ (463) $ (434) $ (29)
------------- ------------- -------------
NET INTEREST INCOME $ (358) $ (616) $ 258
============= ============= =============
Table 4 FNB BANCORP AND SUBSIDIARY
- ------- RATE/VOLUME VARIANCE ANALYSIS
Nine Months Ended September 30,
(In thousands) 2003 Compared To 2002
Increase (decrease)
Interest Variance
Income/Expense Attributable To
Variance Rate Volume
------------- ------------- -------------
INTEREST EARNING ASSETS
Loans $ (1,973) $ (2,080) $ 107
Taxable securities (211) (315) 104
Nontaxable securities (77) (192) 115
Federal funds sold (146) (28) (118)
------------- ------------- -------------
Total
$ (2,407) $ (2,615) $ 208
------------- ------------- -------------
INTEREST BEARING LIABILITIES
Demand deposits $ (109) $ (103) $ (6)
Money market (424) (395) (29)
Savings deposits (83) (92) 9
Time deposits (683) (542) (141)
Federal funds purchased and other borrowings (12) (5) (7)
------------- ------------- -------------
Total $ (1,311) $ (1,137) $ (174)
------------- ------------- -------------
NET INTEREST INCOME $ (1,096) $ (1,478) $ 382
============= ============= =============
12
Noninterest income
- ------------------
The following table shows the principal components of noninterest income
for the periods indicated.
Table 5 NONINTEREST INCOME
- -------
Three months Nine months
ended September 30, ended September 30,
(In thousands) 2003 2002 2003 2002
---------- ---------- ---------- ----------
Service charges $ 668 $ 480 $ 1,997 $ 1,333
Credit card fees 275 255 733 709
Gain on sales of securities -- 121 -- 121
Other income 61 49 212 218
---------- ---------- ---------- ----------
Total noninterest income $ 1,004 $ 905 $ 2,942 $ 2,381
========== ========== ========== ==========
Noninterest income consists mainly of service charges on deposits and
credit card fees, and other miscellaneous types of income. Service charges
increased $188,000 or 39.2% in the quarter ended September 30, 2003 over the
same quarter in 2002. Most of this was from an increase of $92,000 in charges
for checks returned for insufficient funds (NSF). Service charges, per incident,
in general, were increased in October 2002, including NSF charges. In addition,
there were fewer waivers of NSF charges since the increase. There was a gain on
sale of securities of $121,000 in the third quarter of 2002, but no sales in the
corresponding period in 2003. Credit card fees and other income, increased by
$32,000 or 10.5% for the quarter ended September 30, 2003 compared to the same
quarter in 2002. For the nine months ended September 30, 2003 compared to the
nine months ended September 30, 2002, service charges increased by $664,000 or
49.8%. In addition to the increase in fees mentioned previously, Business
Analysis charges had previously been done on a mostly manual basis, and not all
the data was captured. Under the new ITI system, the process has become
automated. Analysis charges involve the net effect of giving credit for
collected funds available to the bank, minus various activity charges such as
volume of checks and special services provided, which came into effect for all
of 2003, but only part of 2002, and are contributing a considerable amount to
noninterest income. Credit card and other income categories increased by $18,000
or 1.9%. For the nine months of 2002, there was a gain of $121,000 on sale of
securities, with no sales in 2003.
Noninterest expense
- -------------------
The following table shows the principal components of noninterest
expense for the periods indicated.
Table 6 NONINTEREST EXPENSE
- -------
Three months Nine months
ended September 30, ended September 30,
(In thousands) 2003 2002 2003 2002
---------- ---------- ---------- ----------
Salaries and employee benefits $ 2,540 $ 2,683 $ 8,167 $ 7,963
Occupancy expense 296 311 939 926
Equipment expense 398 374 1,171 1,594
Professional fees 183 241 592 915
Telephone, postage & supplies 227 249 675 835
Bankcard expenses 235 215 629 603
Other expense 489 441 1,430 1,352
---------- ---------- ---------- ----------
Total noninterest expense $ 4,368 $ 4,514 $ 13,603 $ 14,188
========== ========== ========== ==========
13
Noninterest expense consists of salaries and employee benefits
representing more than half of the total, and various smaller categories.
Salaries and employee benefits decreased by $143,000 or 5.3% in the quarter
ended September 2003 compared to the same quarter of 2002. During August of
2003, the in-bank courier service was outsourced, and will start to reduce
expenses for gasoline, maintenance, and automobile insurance as well as
salaries. Year to date, salaries and employee benefits increased by only
$204,000 or 2.6% over 2002. In the quarter ended September 30, 2003 compared to
the same quarter in 2002, equipment expense and professional fees dropped
$34,000 or 5.5% .However, year to date, these two expenses dropped $746,000 or
29.7%. These decreases are largely attributable to the conversion to new
application software and some equipment as well as consultants hired to help in
the conversion process to the ITI accounting system in the first quarter of
2002. There were additional professional fees related to the activation of FNB
Bancorp, which took place in the first quarter of 2002. The remaining three
categories remained relatively stable.
Income Taxes
- ------------
The effective tax rate was 26.0% for the first nine months of 2002.
Investment in tax-free securities and tax-favored Enterprise Zone loans
generated a slightly higher proportion of tax-free interest income to total
interest income for the nine months ended September 30, 2003 compared to the
nine months ended September 30, 2002. Consequently, the effective tax rate for
the first nine months of 2003 decreased to 24.7%.
Asset and Liability Management
- ------------------------------
Ongoing management of the Company's interest rate sensitivity limits
interest rate risk by managing the mix and maturity of loans and investments and
deposits. 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, 2003 are
adequate to meet its operating needs in 2003 and going forward into the
foreseeable future.
The following table sets forth information concerning rate sensitive
assets and liabilities as of September 30, 2003. 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.
14
Table 7 RATE SENSITIVE ASSETS/LIABILITIES
- ------- As of September 30, 2003
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 $ 4,865 $ -- $ -- $ -- $ -- $ 4,865
Securities available for sale 2,593 10,606 38,754 25,821 -- 77,774
Loans 264,955 5,814 5,758 17,841 9,212 303,580
--------- --------- --------- --------- --------- ---------
Total interest earning assets 272,413 16,420 44,512 43,662 9,212 386,219
Cash and due from banks -- -- -- -- 17,665 17,665
Allowance for loan losses -- -- -- -- (3,300) (3,300)
Other assets -- -- -- -- 19,663 19,663
--------- --------- --------- --------- --------- ---------
Total assets $ 272,413 $ 16,420 $ 44,512 $ 43,662 $ 43,240 $ 420,247
========= ========= ========= ========= ========= =========
Interest bearing liabilities:
Demand, interest bearing $ 51,795 $ -- $ -- $ -- $ -- $ 51,795
Savings and money market 128,010 -- -- -- -- 128,010
Time deposits 40,354 37,257 12,381 -- -- 89,992
Fed funds purchased -- -- -- -- -- --
--------- --------- --------- --------- --------- ---------
Total interest bearing liabilities 220,159 37,257 12,381 -- -- 269,797
--------- --------- --------- --------- --------- ---------
Noninterest demand deposits -- -- -- -- 95,742 95,742
Other liabilities -- -- -- -- 3,390 3,390
Stockholders' equity -- -- -- -- 51,318 51,318
--------- --------- --------- --------- --------- ---------
Total liabilities and stockholders' equity $ 220,159 $ 37,257 $ 12,381 $ -- $ 150,450 $ 420,247
========= ========= ========= ========= ========= =========
Interest rate sensitivity gap $ 52,254 $ (20,837) $ 32,131 $ 43,662 $(107,210) $ --
========= ========= ========= ========= ========= =========
Cumulative interest rate sensitivity gap $ 52,254 $ 31,417 $ 63,548 $ 107,210 $ -- $ --
Cumulative interest rate sensitivity gap ratio 19.18% 10.88% 19.06% 28.44% -- --
Financial Condition
- -------------------
Assets. Total assets increased to $420,247,000 at September 30, 2003
from $401,834,000 at December 31, 2002, an increase of $18,413,000. Most of this
increase was in net loans, which increased $15,391,000 and securities available
for sale, which increased $1,811,000. The increase in total assets and in net
loans was funded mainly by an increase in deposits of $18,133,000.
Loans. Net loans at September 30, 2003 were $300,280,000, an increase of
$15,391,000 or 5.40% over December 31, 2002, which were $284,889,000. Real
Estate and Construction loans increased $17,542,000, representing most of the
increase, while Commercial loans decreased $1,350,000 and Consumer loans
decreased $768,000. The portfolio breakdown was as follows.
15
Table 8 LOAN PORTFOLIO
- -------
September 30, December 31,
(In thousands) 2003 Percent 2002 Percent
--------- --------- --------- ---------
Real Estate $ 217,037 71.1% $ 211,473 72.9%
Construction 44,925 14.7 32,947 11.4
Commercial 41,199 13.5 42,549 14.7
Consumer 2,188 0.7 2,956 1.0
--------- --------- --------- ---------
Gross loans 305,349 100.0% 289,925 100.0%
========= =========
Net deferred loan fees (1,769) (1,640)
Allowance for loan losses (3,300) (3,396)
--------- ---------
Net loans $ 300,280 $ 284,889
========= =========
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 loan loss reserve. The level of
reserves 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. In addition to the $739,000 charged to
the allowance for loan losses for the two office building loans described under
the heading "Nonperforming assets" (below), the Company maintains specific
allowances for these loans These allowances are based on the value of the
related collateral, which was obtained from the sales price in the case of the
San Francisco property and a recent appraisal in the case of the Mountain View
property, less all selling costs associated with the sale. Further, the Company
has reserved for the unsecured portions of each of these loans.
A summary of transactions in the allowance for loan losses for the nine
months ended September 30, 2003 and the year ended December 31, 2002 is as
follows:
Table 9 ALLOWANCE FOR LOAN LOSSES
- -------
Nine months ended Year ended
September 30, December 31,
(In thousands) 2003 2002
----------------- -----------------
Balance, beginning of period $3,396 $3,543
Provision for loan losses 780 150
Recoveries 4 8
Amounts charged off (880) (305)
----------------- -----------------
Balance, end of period $3,300 $3,396
================= =================
In management's judgment, the allowance was adequate to absorb losses
currently inherent in the loan portfolio at September 30, 2003. 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, 2003, there was $9,212,000 in non-accrual
loans, compared to $2,161,000 at December 31, 2002 due to the two office
building loans described below. There were no foreclosed assets or loans past
due 90 days and still accruing on either date.
16
In the second quarter of 2003, a $4,409,000 term real estate loan
secured by an office building located in the South of Market area of San
Francisco was placed in non-accrual status due to a significant decline in value
of the underlying collateral of the loan. The property was sold by the owner of
the property in the third quarter of 2003 for $4,250,000. The Company recognized
a $200,000 loss on the loan and the guarantor of the loan contributed the
balance of funds necessary to close the transaction resulting in no further
losses for the Company.
In the second quarter of 2003, a $3,352,000 construction loan secured by
an office building located in the Silicon Valley community of Mountain View was
placed in nonaccrual status due to a significant decline in the value of the
underlying collateral of the loan. The loan has been written down to its current
market value. Despite the decline in the value of the collateral, the guarantors
have continued to perform according to the contractual obligations of the loan
documents. The Company has recognized a loss of $539,000, which represents an
estimate of the unsecured portion of the loan.
In the first quarter of 2003, a loan secured by a residential care
facility, with a net loan balance of $5,828,000 was placed in nonaccrual status
due to a payment default and subsequent foreclosure actions by the Company. The
borrower has filed for bankruptcy. Under guidance from the bankruptcy court, the
Company negotiated a settlement with the borrower where the borrower will resume
payments beginning December 1, 2003 or the Company will be granted an automatic
relief from stay from the court and can resume foreclosure. An independent
appraiser determined the "as is" market value of the property as of May 20, 2003
was $7,300,000. This value provides adequate collateral coverage for the loan
balance.
Deposits. Total deposits at September 30, 2003 were $365,539,000
compared to $347,406,000 on December 31, 2002. Of these totals,
noninterest-bearing demand deposits were $95,742,000 or 26.2% of the total on
September 30, 2003 and $88,495,000 or 25.5% on December 31, 2002. Time deposits
were $89,992,000 on September 30, 2003 and $89,552,000 on December 31, 2002.
The following table sets forth the maturity schedule of the time certificates of
deposit on September 30, 2003:
Table 10
- --------
Under $100,000
(In thousands) $100,000 or more Total
-------- -------- --------
Maturities:
Three months or less $ 18,535 $ 21,818 $ 40,353
Over three to six months 12,782 10,638 23,420
Over six through twelve months 10,654 3,183 13,837
Over twelve months 8,829 3,553 12,382
-------- -------- --------
Total $ 50,800 $ 39,192 $ 89,992
-------- -------- ========
The following table shows the risk-based capital ratios and leverage
ratios at September 30, 2003 and December 31, 2002:
Table 11
- -------- Minimum "Well
September 30, December 31, Capitalized"
Risk-Based Capital Ratios 2003 2002 Requirements
Tier 1 Capital 13.75% 13.92% > 6.00%
-
Total Capital 14.65% 14.87% > 10.00%
-
Leverage Ratios 12.07% 12.16% > 5.00%
-
Liquidity. Liquidity is a measure of the Company's ability to convert
assets into cash with minimum loss. As of September 30, 2003, Liquid Assets were
$100,304,000 or 23.9% of total assets.
17
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, 2003 net loans were at 82.1% of deposits.
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 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.
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 loan loss
reserve 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 this report, or to
make predictions based solely on historical financial performance. The Company
also disclaims any obligation to update forward-looking statements contained in
this report.
18
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, 2003 and December 31, 2002, 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 $63,880,000 and $61,470,000 at September 30, 2003 and
December 31, 2002, respectively. As a percentage of net loans, these off-balance
sheet items represent 21.3% and 21.6% respectively.
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 SEC has
adopted a number of rule changes to implement the provisions of the Act. The
SEC has also approved new rules proposed and adopted by the New York Stock
Exchange and the Nasdaq Stock Market to strengthen corporate governance
standards for listed companies. The Company does not currently anticipate that
compliance with the Act (including the rules adopted pursuant to the Act) will
have a material effect upon its financial position or results of its operations
or its cash flows.
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.
From December 31, 2002 through June 26, 2003, the prime lending rate was 4.25%,
and dropped to 4.00% from June 27 to the end of September 2003. During the nine
months ended September 30, 2002, the rate was 4.75%. The effect of these rate
changes was mitigated, because a significant amount of the Real Estate loan
portfolio is subject to interest rate caps and floors. Consequently, this did
not have a material effect on earnings.
Item 4. Controls and Procedures.
(a) Disclosure Controls and Procedures: An evaluation of the Company's
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) 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 as of the end of the Company's fiscal
quarter ended September 30, 2003. 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) to allow
timely decisions regarding required disclosure, and (ii) recorded, processed,
summarized and reported within the time periods specified in the Commission's
rules and forms.
19
(b) Internal Control Over Financial Reporting: An evaluation of any
changes in the Company's internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)), that occurred during the
Company's fiscal quarter ended September 30, 2003, 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.
The Company's Chief Executive Officer and Chief Financial Officer concluded that
no change identified in connection with such evaluation has materially affected,
or is reasonably likely to materially affect, the Company's internal control
over financial reporting.
PART II--OTHER INFORMATION
Item 2. Use of Proceeds and Issuer Purchases of Equity Securities
Issuer Purchases of Equity Securities
- -------------------------- ---------------- ------------ ---------------- ------------------------ -----------------------------
Period (a) (b) (c) (d) (e)
Total Number Average Identity of Number of Shares Maximum Number (or
Of Shares (or Price Paid Broker-dealer (or Units) Purchased Approximate Dollar Value)
Units) Per Share (s) Used to As Part of Publicly Of Shares (or Units) that
Purchased Effect Announced Plans or May Yet Be Purchased
Purchases Programs Under the Plans or
Programs
- -------------------------- ---------------- ------------ ---------------- ------------------------ -----------------------------
Month #1
July 25 None N/a N/a None 121,852
through
July 31, 2003
- -------------------------- ---------------- ------------ ---------------- ------------------------ -----------------------------
Month #2 Seidler
August 1 23,284 $28.50 Companies 23,284 98,568
through Wedbush,
August 31, 2003 Morgan
- -------------------------- ---------------- ------------ ---------------- ------------------------ -----------------------------
Month #3 Wedbush,
September 1 11,000 $29.50 Morgan 11,000 87,568
through
September 30, 2003
- -------------------------- ---------------- ------------ ---------------- ------------------------ -----------------------------
Total 34,284 34,284
- -------------------------- ---------------- ------------ ---------------- ------------------------ -----------------------------
Footnote: on July 25, 2003 the Board of Directors of the Company authorized a
stock repurchase program which calls for the repurchase of up to five percent
(5%) of the Company's then outstanding shares of common stock, or approximately
121,852 shares. The repurchases are to be made from time to time in the open
market as conditions allow and will be structured to comply with Commission Rule
10b-18. All repurchased shares reflected in the table above were made in open
market transactions and then retired. The Board of Directors has reserved the
right to suspend, terminate, modify or cancel this repurchase program at any
time for any reason.
20
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
31: Rule 13a-14(a)/15d-14(a) Certifications
32: Section 1350 Certifications
(b) Reports on Form 8-K
The following report on Form 8-K has been filed during the
quarter ended September 30, 2003:
Filed July 28, 2003, announcing the stock repurchase program
authorized by the Board of Directors on July 25, 2003.
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 7, 2003. 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)
21