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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 March 31, 2003
Commission file number: 33-66014
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 March 31, 2003
- -------------------------------- -----------------------------
(Common stock, $0.315 par value) 800,000
Page 1
FNB FINANCIAL CORPORATION
INDEX
Page
PART I - FINANCIAL INFORMATION
Condensed consolidated balance sheets -
March 31, 2003 and December 31, 2002 4
Condensed consolidated statements of income -
Three months ended March 31, 2003 and 2002 5
Condensed consolidated statements of comprehensive
Income -
Three months ended March 31, 2003 and 2002 6
Condensed consolidated statements of cash flows -
Three months ended March 31, 2003 and 2002 7
Notes to condensed consolidated financial
Statements 8 - 9
Management's discussion and analysis of financial
condition and results of operations 10 - 13
PART II - OTHER INFORMATION 15
Signatures 16
Certifications of Principal Executive Officer
And Principal Financial Officer 17 - 20
Exhibits 21 - 23
Page 2
PART I - FINANCIAL INFORMATION
Page 3
FNB FINANCIAL CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2003 2002
(unaudited) (audited*)
ASSETS:
Cash and Due from $ 5,282,995 $ 3,650,351
Interest-bearing deposits with banks 1,111,277 968,266
Investment Securities
Held-to-maturity (Market value - 2003
$ 542,730; 2002 $ 692,188) 545,370 692,839
Available-for-sale 22,689,048 20,583,684
Federal Reserve, Atlantic Central Banker's
Bank and Federal Home Loan Bank Stock 927,700 666,000
Federal Funds Sold 243,000 0
Loans 102,403,378 101,455,355
Less: Allowance for loan losses ( 929,056) ( 928,488)
--------------- -------------
Loans, net 101,474,322 100,526,867
Bank building, equipment, furniture and 3,062,584 2,723,375
fixtures, net
Accrued interest receivable 603,967 658,856
Deferred income tax charges 66,455 51,703
Other real estate owned 66,512 66,512
Cash surrender value of life insurance 2,429,061 2,405,020
Other assets 307,983 371,932
--------------- -------------
Total Assets $ 138,810,274 $ 133,365,405
=============== =============
LIABILITIES :
Deposits:
Demand deposits $ 16,936,285 $ 13,930,687
Savings deposits 27,401,807 30,520,623
Time certificates 67,300,201 65,934,931
Other time deposits 517,263 306,118
--------------- -------------
Total deposits 112,155,556 110,692,359
Accrued interest payable & other liabilities 796,589 999,564
Liability for other borrowed funds 11,311,657 7,232,659
Dividends payable 104,000 264,000
--------------- -------------
Total Liabilities 124,367,802 119,188,582
--------------- -------------
STOCKHOLDERS' EQUITY:
Capital stock, Common, par value $ 0.315;
6,000,000 shares authorized; 800,000
outstanding 252,000 252,000
Additional paid-in capital 1,789,833 1,789,833
Retained earnings 12,040,454 11,746,170
Accumulated other comprehensive income 360,185 388,820
--------------- -------------
Total Stockholders' Equity 14,442,472 14,176,823
--------------- -------------
Total Liabilities & Stockholders' Equity $ 138,810,274 $ 133,365,405
=============== =============
*Condensed from audited financial statements.
The accompanying notes are an integral part of these condensed financial
statements.
Page 4
FNB FINANCIAL CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31, 2003 and 2002
(UNAUDITED)
2003 2002
Interest & Dividend Income
Interest & fees on loans $ 1,775,304 $ 1,738,041
Interest on investment securities:
Obligations of other U.S. Government Agencies 152,528 140,650
Obligations of State & Political Subdivisions 90,125 107,289
Interest on deposits with banks 9,812 16,434
Dividends on Equity Securities 9,307 8,955
Interest on federal funds sold 0 24,290
------------ ------------
Total Interest & Dividend Income 2,037,076 2,035,659
------------ ------------
Interest Expense
Interest on deposits 751,150 898,188
Interest on Other Borrowed Money 90,514 84,194
------------ ------------
Total interest expense 841,664 982,382
------------ ------------
Net interest income 1,195,412 1,053,277
Provision for loan losses 36,000 30,000
------------ ------------
Net interest income after provision for loan
losses 1,159,412 1,023,277
------------ ------------
Other income
Service charges on deposit accounts 90,837 71,200
Other service charges, collection & exchange charges,
commissions and fees 55,433 53,825
Other income 67,326 55,843
Net Securities gains/(losses) 2,198 8,025
------------ ------------
Total other income 215,794 188,893
------------ ------------
Other expenses 870,849 853,134
------------ ------------
Income before income taxes 504,357 359,036
Applicable income taxes 106,073 79,816
------------ ------------
Net income $ 398,284 $ 279,220
============ ============
Earnings per share of Common Stock:
Net income per share $ 0.50 $ 0.35
Cash dividend declared per share $ 0.13 $ 0.12
Weighted average number of shares outstanding 800,000 800,000
The accompanying notes are an integral part of these condensed financial
statements.
Page 5
FNB FINANCIAL CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three Months Ended March 31, 2003 and 2002
(UNAUDITED)
2003 2002
Net income $ 398,284 $ 279,220
---------- ----------
Other Comprehensive income:
Gross unrealized holding gains (losses) ( 41,189) ( 166,396)
Reclassification adjustment for (gains)
losses realized in net income ( 2,198) ( 8,025)
---------- ----------
Net unrealized holding gains (losses) before taxes ( 43,387) ( 174,421)
Tax effect 14,752 59,303
---------- ----------
Other comprehensive income (loss) ( 28,635) ( 115,118)
---------- ----------
Comprehensive Income $ 369,649 $ 164,102
========== ==========
The accompanying notes are an integral part of these condensed financial
statements.
Page 6
FNB FINANCIAL CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 2003 and 2002
(UNAUDITED)
2003 2002
Cash flows from operating activities:
Net income $ 398,284 $ 279,220
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation & amortization 81,527 60,596
Provision for loan losses 36,000 30,000
Net (gain)/loss on sales of investments ( 2,198) ( 8,025)
(Increase) decrease in accrued interest receivable 54,889 ( 52,581)
Deferred Income Taxes 0 ( 2,675)
Increase (decrease) in accrued interest payable and
other liabilities ( 202,975) ( 90,816)
Increase in cash value of insurance ( 24,041) ( 22,973)
(Increase) decrease in other assets 63,949 ( 115,423)
----------- -----------
Net cash provided (used)by operating activities 405,435 77,323
----------- -----------
Cash flows from investing activities:
Net (increase) decrease in interest-bearing
deposits with banks ( 143,011) 322,636
Purchases of Available-for-sale securities ( 3,904,356) ( 119,560)
Proceeds from maturities and calls of securities 1,905,272 1,189,875
Proceeds from sale of available for sale securities 0 48,150
Net (increase) decrease in loans ( 983,455) ( 1,820,282)
Proceeds from sale of Other real estate owned 0 20,250
Purchases of bank premises & equipment (net) ( 420,736) ( 6,365)
Proceeds from Sale of Furniture & Fixtures 0 12,069
Sale (purchase) of other bank stock ( 261,700) 332,000
----------- -----------
Net cash provided (used) by investing activities ( 3,807,986) ( 21,227)
----------- -----------
Cash flows from financing activities:
Net increase (decrease) in deposits 1,463,197 ( 1,291,193)
Net increase (decrease) in Other borrowings 4,078,998 ( 1,418)
Cash dividends paid ( 264,000) ( 216,000)
----------- -----------
Net cash provided (used) by financing activities 5,278,195 ( 1,508,611)
----------- -----------
Net increase (decrease) in cash & cash equivalents 1,875,644 ( 1,452,515)
Cash & cash equivalents, beginning balance 3,650,351 11,400,929
----------- -----------
Cash & cash equivalents, ending balance $ 5,525,995 $ 9,948,414
=========== ===========
The accompanying notes are an integral part of these condensed financial
statements.
Page 7
FNB FINANCIAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
(UNAUDITED)
REVIEW OF INTERIM FINANCIAL STATEMENTS
The condensed consolidated financial statements as of and
for the three month periods ended March 31, 2003 and 2002
have been reviewed by independent certified public
accountants. The 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 three
months ended March 31, 2003 and March 31, 2002 is unaudited.
Information presented at December 31, 2002, 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
intercompany 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.
Page 8
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.
Page 9
FNB FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SUMMARY
Net income for the first three months of 2003 was $ 398,284,
compared to $ 279,220 for the first three months of 2002. This
represents an increase of $ 119,064 or 42.6% from 2002. Net
income on an adjusted per share basis for the first three months
of 2003 was $ 0.50 which is an increase of $ 0.15 from the $ 0.35
per share for the three months ended March 31, 2002.
NET INTEREST INCOME
Total interest and dividend income for the first three months of
2003 was $ 2,037,076 compared to $ 2,035,659 for the first three
months of 2002, an increase of $ 1,417.
This increase was due primarily to growth in the loan portfolio.
This growth was concentrated in commercial loans and real estate
mortgages which increased 1% and 14.8%, respectively, over
average balances for the first quarter of 2002. Effective yields
on earning assets continue to be below yields realized in the
first quarter of 2002. The increases in the volume of earning
assets and the shift in the growth of earning assets more toward
higher yielding loans has offset the decreases in average yields
to allow for a slight increase in interest income over totals for
the first three months of 2002.
In order to sustain desired net interest margins, deposit rates
were lowered to decrease funding costs.
Interest expense for the three months ended March 31, 2003, was
$ 841,664, a decrease of $ 140,718 from the $ 982,382 for the
same period in 2002. Total deposits increased $ 1,484,369 from
totals at March 31, 2002. This increase was concentrated in
demand deposit accounts which represent the lowest cost of funds.
This coupled with the aforementioned general reduction in deposit
rates and the increase in volume of earning assets allowed us to
produce a 13.5% increase in net interest income over first
quarter 2002.
The net interest margin has increased 56 basis points to 3.96%
for the first three months of 2003 from that of the first three
months of 2002 which was 3.40%. Management will continue to
competitively price its loan and deposit products to maintain
desired net interest spreads.
Page 10
PROVISION AND ALLOWANCE FOR LOAN LOSSES
Activity in the allowance for loan losses is summarized as
follows:
2003 2002
(000 Omitted)
Allowance for loan losses beginning of the year $ 928 $ 884
Loans charged-off during the year
Real estate mortgages 0 9
Installment loans 48 27
Commercial and all other 0 0
----- -----
Total charge offs 48 36
----- -----
Recoveries of loans previously charged-off:
Real estate mortgages 0 0
Installment loans 13 6
Commercial and all other 0 0
----- -----
Total recoveries 13 6
----- -----
Net loans charged-off (recovered) 35 30
Provision for loan losses charged to
operations 36 30
----- -----
Allowance for loan losses, March 31 $ 929 $ 884
===== =====
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
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.
Page 11
In addition to the aforementioned internal loan review, the Bank
engaged an outside Firm to conduct an independent loan review
during the first quarter of 2003 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 noninterest income for the first three months of 2003
increased $ 26,901 over totals for the first quarter of 2002 due
primarily to service charges on deposit accounts 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 March 31, 2003, were $ 870,849, a $ 17,715 increase from
the operating expenses incurred for the same period in 2002 of
$ 853,134. This increase was mainly the result of increases in
data processing costs as the bank was completing a core system
conversion in March 2003.
Our income tax provision for the first three months of 2003 was
$ 106,073 as compared to $ 79,816 for the first three months of
2002. We continue to operate with a marginal tax rate of 34%
during the first quarter of 2003. The effective income tax rate
for the first three months of 2003 was 21.03% compared to 22.23%
for the first three months of 2002.
BALANCE SHEET AND EQUITY CHANGES
Total assets as of March 31, 2003, were $ 138,810,274, an
increase of $ 8,085,083 from the period ended March 31, 2002,
representing an increase of 6.2%. This increase was primarily
due to the aforementioned growth in the loan portfolio. Loans as
of March 31, 2003, were $ 102,403,378 compared to $ 92,842,360 as
of March 31, 2002.
Total equity as of March 31, 2003, was $ 14,442,472, 10.40% of
total assets, as compared to $ 13,456,099, 10.29% of total assets
as of March 31, 2002.
The Company's risk based capital ratios continue to exceed
regulatory minimum requirements.
Page 12
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 or Chief Financial officers.
Page 13
PART II - OTHER INFORMATION
Page 14
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
Item 601 of Regulation S-K Description of Exhibit
99 Report of independent
Accountant's on interim
financial statements
99.1 Certification of Chief
Executive Officer pursuant to
18 U.S.C. Section 1350
99.2 Certification of Chief
Financial Officer pursuant to
18 U.S.C. Section 1350
b. Reports on Form 8-K - None
Page 15
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.
/s/John C. Duffey
(John C. Duffey, President
and Director of the Company and
President/CEO of the Bank)
(Duly Authorized Officer)
Date May 9, 2002 /s/Dale M. Fleck
(Dale M. Fleck
Controller of the Bank
Principal Financial &
Accounting Officer)
Page 16
CERTIFICATION
I, John C. Duffey, 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
Page 17
(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: May 9, 2003 By:/s/John C. Duffey
John C. Duffey
President & CEO
(Principal Executive
Officer)
Page 18
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
Page 19
(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: May 9, 2002 By:/s/Dale M. Fleck
Dale M. Fleck
Controller
(Principal Financial
Officer)
Page 20
Exhibit 99
INDEPENDENT ACCOUNTANT'S REPORT
Board of DirectorsFNB Financial Corporation
McConnellsburg, Pennsylvania
We have reviewed the accompanying consolidated balance sheet
of FNB Financial Corporation and Subsidiary as of March 31, 2003
and the related consolidated statements of income for the three
months ended March 31, 2003 and 2002 and consolidated statements
of comprehensive income for the three months ended March 31, 2003
and 2002 and consolidated statements of cash flows for the three
months ended March 31, 2003 and 2002. 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 taken 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.
SMITH ELLIOTT KEARNS & COMPANY, LLC
/s/ Smith Elliott Kearns & Company, LLC
Chambersburg, Pennsylvania
May 9, 2003
Page 21
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
March 31, 2003 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
May 9, 2003
Page 22
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
March 31, 2003 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
May 9, 2003
Page 23