FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 2002
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Commission file number: 33-66014
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FNB Financial Corporation
-------------------------
(Exact name of registrant as specified in its charter)
Commonwealth of Pennsylvania 23-2466821
- ------------------------------- ----------------------
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.)
101 Lincoln Way West, McConnellsburg, PA 17233
- -------------------------------------------- -------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: 717-485-3123
---------------
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 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.
Class Outstanding at September 30, 2002
- ------------------------------- ---------------------------------
(Common stock, $0.315 par value) 800,000
FNB FINANCIAL CORPORATION
INDEX
Page
PART I - FINANCIAL INFORMATION
Condensed consolidated balance sheets -
September 30, 2002 and December 31, 2001 4
Condensed consolidated statements of income -
Three months ended September 30, 2002 and 2001 5
Condensed consolidated statements of income -
Nine months ended September 30, 2002 and 2001 6
Condensed consolidated statements of comprehensive income -
Nine months ended September 30, 2002 and 2001 7
Condensed consolidated statements of cash flows -
Nine months ended September 30, 2002 and 2001 8
Notes to condensed consolidated financial
Statements 9 - 10
Management's discussion and analysis of financial
condition and results of operations 11 - 14
PART II - OTHER INFORMATION 16
Signatures 17
Certifications of Principal Executive Officer and
Principal Financial Officer 18 - 21
Exhibits 22 - 24
PART I - FINANCIAL INFORMATION
FNB FINANCIAL CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2002 2001*
(Unaudited) (Audited*)
ASSETS..
Cash and due from banks $ 5,773,975 $ 5,400,929
Interest-bearing deposits with banks 860,376 2,572,574
Investment securities..
Held-to-maturity (Market value
2002 $ 714,997 and 2001
$ 1,088,459) 714,148 1,114,764
Available-for-sale 17,355,304 19,554,290
Federal Reserve, Atlantic Central Bankers
Bank, Federal Home Loan Bank 511,800 833,700
Federal Funds Sold 3,716,000 6,000,000
Loans 98,672,896 91,050,008
Less: Allowance for loan losses ( 902,808) ( 882,330)
------------- -------------
Loans, net 97,770,088 90,167,678
Bank building, equipment, furniture &
fixtures, net 2,781,710 2,914,416
Accrued interest receivable 680,831 619,464
Deferred income tax charges 37,784 160,529
Other real estate owned 66,512 103,568
Cash surrender value of life insurance 2,382,047 2,313,129
Other assets 371,473 405,475
------------- -------------
Total assets $ 133,022,048 $ 132,160,516
============= =============
LIABILITIES..
Deposits..
Demand deposits $ 15,305,519 $ 13,343,930
Savings deposits 29,910,321 32,659,787
Time certificates 66,330,247 65,647,473
Other time deposits 775,105 311,190
------------- -------------
Total deposits 112,321,192 111,962,380
Accrued interest payable & other
Liabilities 985,978 1,190,681
Libility for other borrowed funds 5,399,138 5,403,458
Dividends payable 120,000 216,000
------------- -------------
Total liabilities 118,826,308 118,772,519
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STOCKHOLDERS' EQUITY..
Capital stock, common, par value
$ 0.315; 12,000,000 shares authorized,
800,000 outstanding 252,000 252,000
Additional paid-in capital 1,789,833 1,789,833
Retained earnings 11,689,136 11,124,857
Accumulated other comprehensive
Income 464,771 221,307
------------- -------------
Total stockholders' equity 14,195,740 13,387,997
------------- -------------
Total liabilities and
stockholders' equity $ 133,022,048 $ 132,160,516
============= =============
*Condensed from audited financial statements.
The accompanying notes are an integral part of these
condensed financial statements.
FNB FINANCIAL CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended September 30, 2002 and 2001
(UNAUDITED)
2002 2001
Interest & Dividend Income
Interest & fees on loans $ 1,826,087 $ 1,787,582
Interest on investment securities:
Obligations of other U.S. Government
Agencies 121,975 182,244
Obligations of State & Political
Subdivisions 98,059 105,828
Interest on deposits with banks 23,152 49,723
Dividends on Equity Securities 7,551 14,542
Interest on federal funds sold 4,817 48,669
----------- -----------
Total Interest & Dividend Income 2,081,641 2,188,588
Interest Expense
Interest on deposits 841,509 1,075,922
Interest on Other borrowed money 89,377 84,106
----------- -----------
Total interest expense 930,886 1,160,028
Net interest income 1,150,755 1,028,560
Provision for loan losses 37,000 36,000
----------- -----------
Net interest income after
provision for loan losses 1,113,755 992,560
Other income
Service charges on deposit accounts 73,550 54,770
Other service charges, collection &
exchange charges, commissions and
fees 18,166 89,739
Other income 55,868 34,183
Net gain/(loss) on sale of other real
Estate 15,673 ( 10,151)
Net Securities gains/(losses) 18,836 4,320
----------- -----------
Total other income 182,093 172,861
----------- -----------
Other expenses 890,455 833,405
----------- -----------
Income before income taxes 405,393 332,016
Applicable income taxes 155,866 64,244
----------- -----------
Net income $ 249,527 $ 267,772
=========== ===========
Earnings per share of Common Stock:
Net income per share $ 0.31 $ 0.33
Cash dividend declared per share $ 0.15 $ 0.13
Weighted average number of shares
Outstanding 800,000 800,000
The accompanying notes are an integral part of these
condensed financial statements.
FNB FINANCIAL CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Nine Months Ended September 30, 2002 and 2001
(UNAUDITED)
2002 2001
Interest & Dividend Income
Interest & fees on loans $ 5,367,611 $ 5,361,904
Interest on investment securities:
Obligations of other U.S.
Government Agencies 392,021 692,742
Obligations of State & Political
Subdivisions 307,471 311,764
Interest on deposits with banks 43,489 110,346
Dividends on Equity Securities 19,990 45,438
Interest on federal funds sold 59,706 133,091
----------- ----------
Total Interest & Dividend Income 6,190,288 6,655,285
Interest Expense
Interest on deposits 2,589,934 3,363,610
Interest on other borrowed money 254,428 249,034
----------- ----------
Total Interest Expense 2,844,362 3,612,644
----------- ----------
Net interest income 3,345,926 3,042,641
Provision for loan losses 103,000 108,000
----------- ----------
Net interest income after provision
for loan losses 3,242,926 2,934,641
Other income
Service charges on deposit accounts 219,193 158,914
Other service charges, collection &
exchange charges, commissions and fees 152,992 222,403
Other income 119,862 122,856
Net gain/(loss) on sale of other real
estate 15,673 ( 21,038)
Net gain/(loss) on disposal of other
assets ( 1,636)( 1,250)
Net Securities gains/(losses) 26,861 14,288
----------- ----------
Total other income 532,945 496,173
----------- ----------
Other expenses 2,575,680 2,540,585
----------- ----------
Income before income taxes 1,200,191 890,229
Applicable income taxes 307,912 155,327
----------- ----------
Net income $ 892,279 $ 734,902
=========== ===========
Earnings per share of Common Stock:
Net income per share $ 1.12 $ 0.92
Cash dividend declared per share $ 0.41 $ 0.36
Weighted average number of shares outstanding 800,000 800,000
The accompanying notes are an integral part of these
condensed financial statements.
FNB FINANCIAL CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Nine Months Ended September 30, 2002 and 2001
(UNAUDITED)
2002 2001
Net Income $ 892,279 $ 734,902
----------- ------------
Other Comprehensive:
Gross unrealized holding gains (losses) 395,745 514,710
Reclassification adjustment for (gains) losses
realized in net income ( 26,861) ( 14,288)
----------- -----------
Net unrealized holding gains (losses) before
taxes 368,884 500,422
Tax effect ( 125,420) ( 170,143)
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Other comprehensive income (loss) 243,464 330,279
----------- -----------
Comprehensive Income $ 1,135,743 $ 1,065,181
=========== ===========
The accompanying notes are an integral part of these
condensed financial statements.
FNB FINANCIAL CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 2002 and 2001
(UNAUDITED) (UNAUDITED)
2002 2001
Cash flows from operating activities:
Net income $ 892,279 $ 734,902
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation & amortization 198,913 223,054
Provision for loan losses 103,000 108,000
Net (gain)/loss on sales of
Investments ( 26,861) ( 14,288)
Loss on Disposal of Other Assets (Net) 1,636 1,250
(Gain)/loss on Disposal of Other Real
Estate ( 15,673) 21,038
(Increase) decrease in deferred taxes 122,745 ( 35,441)
(Increase) decrease in accrued interest
receivable ( 61,367) 128,042
Increase in cash value of life
insurance ( 68,918) ( 77,624)
Increase (decrease) in accrued interest
payable and other liabilities ( 204,703) ( 1,716)
Increase (decrease) in other assets ( 94,005) ( 72,021)
----------- ----------
Net cash provided (used)by operating activities 847,046 1,015,196
----------- ----------
Cash flows from investing activities:
Net (increase) decrease in interest
bearing deposits with banks 1,712,198 ( 6,420,385)
Purchases of Available-for-sale-securities ( 1,432,843) ( 1,225,000)
Proceeds from maturities and calls of
securities 4,231,613 8,906,428
Proceeds from sales of available for sale
securities 196,577 22,970
Net (increase) decrease in loans ( 7,705,410) ( 3,275,765)
Proceeds from sale of Other real estate owned 52,729 65,085
Purchases of bank premises & equipment (net) ( 57,256) ( 93,666)
Purchase of investment in insurance company ( 8,000) ( 25,000)
Sale of other bank stock 321,900 0
----------- ----------
Net cash provided (used) by investing activities ( 2,688,492) ( 2,045,333)
----------- ----------
Cash flows from financing activities:
Net increase (decrease) in deposits 358,812 4,788,370
Net increase (decrease) in other borrowings ( 4,320) ( 772,048)
Cash dividends paid ( 424,000) ( 376,000)
----------- ----------
Net cash provided (used) by financing activities ( 69,508) 3,640,322
----------- ----------
Net increase (decrease) in cash & cash
equivalents ( 1,910,954) 2,610,185
Cash & cash equivalents, beginning balance 11,400,929 4,020,479
----------- ----------
Cash & cash equivalents, ending balance $ 9,489,975 $ 6,630,664
=========== ===========
The accompanying notes are an integral part of these
condensed financial statements.
FNB FINANCIAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(UNAUDITED)
REVIEW OF INTERIM FINANCIAL STATEMENTS
The condensed consolidated financial statements as of and for
the three and nine month periods ended September 30, 2002 and
2001 have been reviewed by independent certified public
accountants. Their report on their review is attached as
Exhibit 99 to this 10-Q.
NOTE 1 - BASIS OF PRESENTATION
The financial information presented at and for the nine
months ended September 30, 2002 and September 30, 2001 is
unaudited. Information presented at December 31, 2001, is
condensed from audited year-end financial statements.
However, this unaudited information reflects all adjustments,
consisting solely of normal recurring adjustments, that are,
in the opinion of management, necessary for a fair
presentation of the financial position, results of operations
and cash flows for the interim period.
NOTE 2 - PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
the corporation and its wholly-owned subsidiary, The First
National Bank of McConnellsburg. All significant inter-
company transactions and accounts have been eliminated.
NOTE 3 - CASH FLOWS
For purposes of the statements of cash flows, the corporation
has defined cash and cash equivalents as those amounts
included in the balance sheet captions "cash and due from
banks" and "federal funds sold". As permitted by Statement
of Financial Accounting Standards No. 104, the corporation
has elected to present the net increase or decrease in
deposits in banks, loans and deposits in the statement of
cash flows.
NOTE 4 - FEDERAL INCOME TAXES
For financial reporting purposes the provision for loan
losses charged to operating expense is based on management's
judgment, whereas for federal income tax purposes, the amount
allowable under present tax law is deducted. Additionally,
certain expenses are charged to operating expense in the
period the liability is incurred for financial reporting
purposes, whereas for federal income tax purposes, these
expenses are deducted when paid. As a result of these timing
differences, deferred taxes were computed after reducing pre-
tax accounting income for nontaxable municipal and loan
income.
NOTE 5 - OTHER COMMITMENTS
In the normal course of business, the bank makes various
commitments and incurs certain contingent liabilities which
are not reflected in the accompanying financial statements.
These commitments include various guarantees and commitments
to extend credit. The bank does not anticipate any losses
as a result of these transactions.
FNB FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SUMMARY
Net income for the first nine months of 2002 was $ 892,279 compared
to $ 734,902 for the first nine months of 2001. This represents an
increase of $ 151,377 or 21.4% from 2001. Net income on an adjusted
per share basis for the first nine months of 2002 was $ 1.12 which
is an increase of $ 0.20 from the $ 0.92 per share for the nine
months ended September 30, 2001.
NET INTEREST INCOME
Total interest and dividend income for the first nine months of 2002
was $ 6,190,288 compared to $ 6,655,285 for the first nine months of
2001, a decrease of $ 464,997.
This decrease was due primarily to the downward trend of effective
yields on earning assets as rates continue to be well below yields
realized in 2001. Although the loan portfolio has grown by
$ 11,543,918 or 13.2% over totals at the end of the first nine
months of 2001, the decreasing interest rate environment along with
a shift of earning assets from investments to Federal funds has
resulted in a 7.0% decrease in total interest income from first nine
months of 2001.
Due to the depressed interest rate environment, investment
securities with call features have been exercised by the issuer
resulting in excess funds being invested in lower yielding federal
funds until such time as they can be invested in loans or other
securities. This situation has improved during the second and third
quarters of 2002 as loan demand increased and allowed the bank to
place some excess funds into higher yielding loans.
In order to sustain desired net interest margins, deposit rates were
lowered to decrease our funding costs.
Interest expense for the nine months ended September 30, 2002, was
$ 2,844,362, a decrease of $ 768,282 from the $ 3,612,644 for the
same period in 2001. Total deposits increased $ 3,900,334 from
totals at September 30, 2001. This increase was concentrated in
demand deposit accounts. This coupled with the aforementioned
general reduction in deposit rates decreased the cost of funds
enough to more than compensate for the decrease in interest income
and allowed us to produce a 10% increase in net interest income over
first nine months of 2001.
The tax-adjusted net interest margin has increased 31 basis points
for the first nine months of 2002 from that of the first nine months
of 2001. Management will continue to competitively price its loan
and deposit products while maintaining desired net interest spreads.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
Activity in the allowance for loan losses is summarized as follows:
2002 2001
(000 Omitted)
Allowance for loan losses beginning of the year $ 882 $ 811
Loans charged-off during the year
Real estate mortgages 39 18
Installment loans 68 64
Commercial and all other 0 1
----- -----
Total charge offs 107 83
----- -----
Recoveries of loans previously charged-off:
Real estate mortgages 9 0
Installment loans 16 13
Commercial and all other 0 0
----- -----
Total recoveries 25 13
----- -----
Net loans charged-off (recovered) 82 70
Provision for loan losses charged to operations 103 108
----- -----
Allowance for loan losses, September 30 $ 903 $ 849
===== =====
We utilize a comprehensive systematic review of our loan portfolio
on a quarterly basis in order to determine the adequacy of the
Allowance for Loan losses. Each quarter the loan portfolio is
categorized into various Pools as follows:
POOL #1 Specific allowances for any individually identified
trouble loans
POOL #2 Commercial and Industrial
POOL #3 Commercial and Industrial -- Real Estate Secured
POOL #4 Consumer Demand and Installment
POOL #5 Guaranteed Loans and Farmers and Commercial
POOL #6 Consumer Mortgage and Home Equity
POOL #7 Real Estate Secured -- Farmland
POOL #8 Off-Balance Sheet Commitments
Lines of credit and non-secured commercial loans with balances of
$ 100,000 and over are individually reviewed. Also, loans that are
90 days or more past due or have been previously classified as
substandard are individually reviewed. Allocations to the Allowance
for Loan Losses are based upon classifications assigned to those
loans.
Loan classifications utilized are consistent with OCC regulatory
guidelines and are as follows:
Allowance Factors
-----------------
Loss Charge-off
Doubtful 20% - 50%
Substandard 10% - 20%
Special Mention 5% - 10%
Watch 1% - 5%
The remaining portion of the Pools are evaluated as groups with
allocations made to the Allowance based on historical loss
experience, current and anticipated trends in delinquencies, and
general economic conditions within the bank's trading area.
In addition to the aforementioned internal loan review, the Bank
engages an outside Firm to conduct annually an independent loan
review in order to validate the methodologies used internally and to
independently test the adequacy of the Allowance for Loan Losses.
Delinquencies are well below peer group averages and management is
not aware of any problem loans that are indicative of trends,
events, or uncertainties that would significantly impact operations,
liquidity or capital.
NON-INTEREST INCOME AND EXPENSES
Total non-interest income for the first nine months of 2002
increased $ 36,772 over totals for the first nine months of 2001 due
to service charges on deposit accounts, trust referral income and
net earnings from the Company's investment in CBIA, which is a joint
venture with several other community banks to provide property and
casualty insurance products. Operating expenses for the period
ended September 30, 2002, were $ 2,575,680, a $ 35,095 increase from
the operating expenses incurred for the same period in 2001 of
$ 2,540,585. This increase was mainly the result of personnel
changes.
INCOME TAX EXPENSE
Our income tax provision for the first nine months of 2002 was
$ 307,912 as compared to $ 155,327 for the first nine months of
2001. We continue to operate with a marginal tax rate of 34%
throughout 2002. The effective income tax rate for the first nine
months of 2002 was 25.6%, a 8.1% increase compared to 17.5% for the
first nine months of 2001.
BALANCE SHEET AND EQUITY CHANGES
Total assets as of September 30, 2002, were $ 133,022,048, an
increase of $ 861,532 from the period ending December 31, 2001,
representing an increase of 0.6%. This increase was primarily due
to increases in loans. Loans as of September 30, 2002, were
$ 98,672,896 compared to $ 91,050,008 as of December 31, 2001, an
increase of $ 7,622,888 or 8.4%, a result of commercial loan
settlements.
Total equity as of September 30, 2002, was $ 14,195,740, 10.7% of
total assets, as compared to $ 13,387,997, 10.13% of total assets as
of December 31, 2001.
The Company's risk based capital ratios continue to exceed
regulatory minimum requirements.
CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. The company
maintains controls and procedures designed to ensure that
information required to be disclosed in the reports that the
company files or submits under the Securities Exchange Act of
1934 is recorded, processed, summarized and reported within the
time periods specified in the rules and forms of the Securities
and Exchange Commission. Based upon their evaluation of those
controls and procedures performed within 90 days of the filing
date of this report, the chief executive and chief financial
officers of the company concluded that the company's disclosure
controls and procedures were adequate.
(b) Changes in internal controls. The Company made no significant
changes in its internal controls or in other factors that could
significantly affect these controls subsequent to the date of
the evaluation of the controls by the chief executive and chief
financial officers.
PART II - OTHER INFORMATION
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
- --------------------------
None
Item 2 - Changes in Securities
- ------------------------------
None
Item 3 - Defaults Upon Senior Securities
- ----------------------------------------
Not Applicable
Item 4 - Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
None
Item 5 - Other Information
- --------------------------
None
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
a. Exhibits:
Exhibit Number referred to Description of
Item 601 of Regulation S-K Exhibit
Exhibit 99 Report of Independent
Accountant's on
Interim Financial
Statements
Exhibit 99.1 Certification of
Chief Executive
Officer pursuant to
18 U.S.C. Section
1350
Exhibit 99.2 Certification of
Chief Financial
Officer pursuant to
18 U.S.C. Section
1350
b. Reports on Form 8-K - None
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 thereunto duly authorized.
Date November 12, 2002 /s/John C. Duffey
----------------- --------------------------------
John C. Duffey, President
and Director of the Company and
President/CEO of the Bank)
(Duly Authorized Officer)
Date November 12, 2002 /s/Dale M. Fleck
----------------- --------------------------------
Dale M. Fleck
Controller of the Bank
(Principal Financial &
Accounting Officer)
CERTIFICATION
I, John C. Duffy, President and CEO, certify, that:
--------------------------------
1. I have reviewed this quarterly report on Form 10-Q of
FNB Financial Corporation.
- -------------------------
2. Based on my knowledge, the 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 officer 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 officer 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 the 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.
6. The registrant's other certifying officer 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 the 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 By:/s/John C. Duffey
---------------------- -----------------------
John C. Duffey
President & CEO
(Principal Executive
Officer)
CERTIFICATION
I, Dale M. Fleck, Controller, certify, that:
-------------------------
1. I have reviewed this quarterly report on Form 10-Q of
FNB Financial Corporation.
- -------------------------
2. Based on my knowledge, the 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 officer 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 officer 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 the 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.
6. The registrant's other certifying officer 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 the 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 By:/s/Dale M. Fleck
--------------------- ---------------------
Dale M. Fleck
Controller
(Principal Financial
Officer)
Exhibit 99
INDEPENDENT ACCOUNTANT'S REPORT
Board of Directors
FNB Financial Corporation
McConnellsburg, Pennsylvania
We have reviewed the accompanying consolidated balance sheet
of FNB Financial Corporation and Subsidiary as of September 30,
2002 and the related consolidated statements of income for the
three and nine month periods ended September 30, 2002 and 2001 and
consolidated statements of comprehensive income for the nine months
ended September 30, 2002 and 2001 and consolidated statements of
cash flows for the nine months ended September 30, 2002 and 2001.
These financial statements are the responsibility of the
corporation's management.
We conducted our reviews in accordance with standards
established by the American Institute of Certified Public
Accountants. A review of interim financial information consists
principally of applying analytical procedures to financial data and
making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an
audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the consolidated financial statements take as a whole.
Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material
modifications that should be made to the accompanying consolidated
financial statements for them to be in conformity with generally
accepted accounting principles.
/s/ Smith Elliott Kearns & Company, LLC
---------------------------------------
SMITH ELLIOTT KEARNS & COMPANY, LLC
Chambersburg, Pennsylvania
November 11, 2002
EXHIBIT 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of FNB Financial
Corporation (the "Company") on Form 10-Q for the period ending
September 30, 2002 as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), I, John C. Duffey,
Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. section 1350, as adopted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and
(2) The information contained in the Report fairly
presents, in all material respects, the final condition and
results of operations of the Company.
/s/ John C. Duffey
------------------------
John C. Duffey
Chief Executive Officer
November 12, 2002
EXHIBIT 99.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of FNB Financial
Corporation (the "Company") on Form 10-Q for the period ending
September 30, 2002 as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), I, Dale M. Fleck,
Chief Financial Officer of the Company, certify, pursuant to 18
U.S.C. section 1350, as adopted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and
(2) The information contained in the Report fairly
presents, in all material respects, the final condition and
results of operations of the Company.
/s/ Dale M. Fleck
------------------------
Dale M. Fleck
Chief Financial Officer
November 12, 2002