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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 June 30, 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 June 30, 2003
- -------------------------------- ----------------------------
(Common stock, $0.315 par value) 800,000
Page 1 of 24
FNB FINANCIAL CORPORATION
INDEX
Page
PART I - FINANCIAL INFORMATION
Condensed consolidated balance sheets -
June 30, 2003 and December 31, 2002 4
Condensed consolidated statements of income -
Three months ended June 30, 2003 and 2002 5
Condensed consolidated statements of income -
Six months ended June 30, 2003 and 2002 6
Condensed consolidated statements of comprehensive
income - Six months ended June 30, 2003 and 2002 7
Condensed consolidated statements of cash flows -
Six months ended June 30, 2003 and 2002 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
Exhibits 18-24
Page 2 of 24
PART I - FINANCIAL INFORMATION
Page 3 of 24
FNB FINANCIAL CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2003 December 31, 2002*
(Unaudited) (Audited*)
ASSETS
Cash and due from banks $ 4,435,536 $ 3,650,351
Interest-bearing deposits with banks 904,124 968,266
Investment securities
Held-to-maturity (Market value -
2003 $ 514,997 and 2002
$ 692,188) 515,270 692,839
Available-for-sale 23,147,442 20,583,684
Federal Reserve, Atlantic Central Bankers
Bank, Federal Home Loan Bank 905,400 666,000
Federal Funds Sold 311,000 0
Loans 102,330,375 101,455,355
Less: Allowance for loan losses ( 974,785) ( 928,488)
--------------- ---------------
Loans, net 101,355,590 100,526,867
Bank building, equipment, furniture &
fixtures, net 3,349,961 2,723,375
Accrued interest receivable 660,039 658,856
Deferred income tax charges 2,212 51,703
Other real estate owned 66,512 66,512
Cash surrender value of life insurance 2,453,102 2,405,020
Other assets 359,739 371,932
--------------- ---------------
Total assets $ 138,465,927 $ 133,365,405
=============== ===============
LIABILITIES
Deposits
Demand deposits $ 15,829,696 $ 13,930,687
Savings deposits 27,694,295 30,520,623
Time certificates 68,876,540 65,934,931
Other time deposits 519,248 306,118
--------------- ---------------
Total deposits 112,919,779 110,692,359
Accrued interest payable & other liabilities
Liability for other borrowed funds 9,895,133 7,232,659
Dividends payable 128,000 264,000
--------------- ---------------
Total liabilities 123,710,705 119,188,582
--------------- ---------------
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 12,226,911 11,746,170
Accumulated other comprehensive income 486,478 388,820
--------------- ---------------
Total stockholders' equity 14,755,222 14,176,823
--------------- ---------------
Total liabilities and
stockholders' equity $ 138,465,927 $ 133,365,405
=============== ===============
*Condensed from audited financial statements.
The accompanying notes are an integral part of these
condensed financial statements.
Page 4 of 24
FNB FINANCIAL CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended June 30, 2003 and 2002
(UNAUDITED)
2003 2002
Interest & Dividend Income
Interest & fees on loans $1,705,250 $1,803,483
Interest on investment securities:
Obligations of other U.S. Government
Agencies 251,055 129,396
Obligations of State & Political
Subdivisions 88,791 102,123
Interest on deposits with banks 10,765 3,903
Dividends on Equity Securities 9,015 3,484
Interest on federal funds sold 4,968 30,599
---------- ----------
Total Interest & Dividend Income 2,069,844 2,072,988
---------- ----------
Interest Expense
Interest on deposits 741,750 850,237
Interest on other borrowed money 99,744 80,857
---------- ----------
Total Interest Expense 841,494 931,094
---------- ----------
Net interest income 1,228,350 1,141,894
Provision for loan losses 36,000 36,000
---------- ----------
Net interest income after
Provision for loan losses 1,192,350 1,105,894
---------- ----------
Other income
Service charges on deposit accounts 57,619 74,443
Other service charges, collection & exchange
charges, commissions and fees 85,105 81,001
Other income 10,325 8,151
Net gain/(loss) on disposal of other assets 0 ( 1,636)
Net securities gains/(losses) 45,859 0
---------- ----------
Total other income 198,908 161,959
---------- ----------
Other expenses 941,906 832,091
---------- ----------
Income before income taxes 449,352 435,762
Applicable income taxes 134,895 72,230
---------- ----------
Net income $ 314,457 $ 363,532
========== ==========
Earnings per share of Common Stock:
Net income per share $ 0.39 $ 0.45
Cash dividend declared per share $ 0.16 $ 0.14
Weighted average number of shares outstanding 800,000 800,000
The accompanying notes are an integral part of these
condensed financial statements.
Page 5 of 24
FNB FINANCIAL CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Six Months Ended June 30, 2003 and 2002
(UNAUDITED)
2003 2002
Interest & Dividend Income
Interest & fees on loans $ 3,480,554 $ 3,541,524
Interest on investment securities:
Obligations of other U.S. Government
Agencies 403,583 270,046
Obligations of State & Political
Subdivisions 178,916 209,412
Subdivisions
Interest on deposits with banks 20,577 20,337
Dividends on Equity Securities 18,322 12,439
Interest on federal funds sold 4,968 54,889
------------- -----------
Total Interest & Dividend Income 4,106,920 4,108,647
------------- -----------
Interest Expense
Interest on deposits 1,492,900 1,748,425
Interest on other borrowed money 190,258 165,051
------------- -----------
Total Interest Expense 1,683,158 1,913,476
------------- -----------
Net interest income 2,423,762 2,195,171
Provision for loan losses 72,000 66,000
------------- -----------
Net interest income after provision
for loan losses 2,351,762 2,129,171
------------- -----------
Other income
Service charges on deposit accounts 148,456 145,643
Other service charges, collection & exchange
charges, commissions and fees 140,538 134,826
Other income 77,651 63,994
Net gain/(loss) on disposal of other assets 0 ( 1,636)
Net securities gains/(losses) 48,057 8,025
------------- -----------
Total other income 414,702 350,852
------------- -----------
Other expenses 1,812,755 1,685,225
------------- -----------
Income before income taxes 953,709 794,798
Applicable income taxes 240,968 152,046
------------- -----------
Net income $ 712,741 $ 642,752
============= ===========
Earnings per share of Common Stock:
Net income per share $ 0.89 $ 0.80
Cash dividend declared per share $ 0.29 $ 0.26
Weighted average number of shares outstanding 800,000 800,000
The accompanying notes are an integral part of these
condensed financial statements.
Page 6 of 24
FNB FINANCIAL CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Six Months Ended June 30, 2003 and 2002
(UNAUDITED)
2003 2002
Net Income $ 712,741 $ 642,752
---------- ----------
Other Comprehensive:
Gross unrealized holding gains (losses) 196,024 113,244
Reclassification adjustment for (gains)losses
realized in net income ( 48,057) ( 8,025)
---------- ----------
Net unrealized holding gains (losses) before taxes 147,967 105,219
Tax effect ( 50,309) ( 35,774)
---------- ----------
Other comprehensive income (loss) 97,658 69,445
---------- ----------
Comprehensive Income $ 810,399 $ 712,197
========== ==========
The accompanying notes are an integral part of these
condensed financial statements.
Page 7 of 24
FNB FINANCIAL CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 2003 and 2002
(UNAUDITED)
2003 2002
---- ----
Cash flows from operating activities:
Net income $ 712,741 $ 642,752
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation & amortization 157,388 126,069
Provision for loan losses 72,000 66,000
Increase in Cash Surrender value
of Life Insurance ( 48,082) ( 45,945)
Net (gain)/loss on sales of investments ( 48,057) ( 8,025)
Deferred income taxes 0 ( 26,675)
(Increase) decrease in accrued
interest receivable ( 1,183) ( 34,498)
Loss on Disposal of Other Assets 0 1,636
Increase (decrease) in accrued interest
payable and other liabilities ( 231,771) ( 359,278)
(Increase) decrease in other assets 45,761 47,206
------------ ------------
Net cash provided (used) by operating activities: 658,797 409,242
------------ ------------
Cash flows from investing activities:
Net (increase) decrease in interest-
bearing deposits with banks 64,142 1,806,251
Purchases of Available-for-sale securities ( 7,004,394) ( 1,288,977)
Proceeds from maturities and calls of securities 4,634,317 3,251,469
Proceeds sale of available-for-sale securities 179,094 48,150
Net (increase) decrease in loans ( 900,723) ( 6,707,002)
Proceeds from sale of other real estate owned 0 73,111
Purchases of bank premises & equipment (net) ( 783,974) ( 32,855)
Purchases of investment in insurance company ( 33,568) ( 8,000)
(Purchase) sale of other bank stock ( 239,400) 321,900
------------ ------------
Net cash provided (used) by investing activities ( 4,084,506) ( 2,535,953)
------------ ------------
Cash flows from financing activities:
Net increase (decrease) in deposits 2,227,420 759,792
Net increase (decrease) in other borrowings 2,662,474 ( 3,335)
Cash dividends paid ( 368,000) ( 312,000)
------------ ------------
Net cash provided (used) by financing activities 4,521,894 444,457
------------ ------------
Net increase (decrease) in cash & cash equivalents 1,096,185 ( 1,682,254)
Cash & cash equivalents, beginning balance 3,650,351 11,400,929
------------ ------------
Cash & cash equivalents, ending balance $ 4,746,536 $ 9,718,675
============ ============
The accompanying notes are an integral part of these
condensed financial statements.
Page 8 of 24
FNB FINANCIAL CORPORATION
JUNE 30, 2003
(UNAUDITED)
REVIEW OF INTERIM FINANCIAL STATEMENTS
The condensed consolidated financial statements as of and for the three
and six month periods ended June 30, 2003 and 2002 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 six months ended
June 30, 2003 and June 30, 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 9 of 24
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 10 of 24
FNB FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SUMMARY
Net income for the first six months of 2003 was $ 712,741, compared to $ 642,752
for the first six months of 2002. This represents an increase of $ 69,989 or
10.89% from 2002. Net income on an adjusted per share basis for the first six
months of 2003 was $ 0.89 which is an increase of $ 0.09 from the $ 0.80 per
share for the six months ended June 30, 2002.
NET INTEREST INCOME
Total interest and dividend income for the first six months of 2003 was
$ 4,106,920 compared to $ 4,108,647 for the first six months of 2002, a decrease
of $ 1,727.
The slight decrease is due primarily to the continuing decline in rates, which
has been offset by the growth in the loan portfolio. This growth was
concentrated in commercial loans and real estate mortgages which increased 3.3%
and 11.7%, respectively, over average balances for the first half of 2002.
Effective yields on earning assets continue to be below yields realized in the
first half 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 interest income to remain relatively
consistent with totals for the first six months of 2002.
In order to sustain desired net interest margins, deposit rates were lowered to
decrease funding costs.
Interest expense for the six months ended June 30, 2003, was $ 1,683,158, a
decrease of $ 230,318 from the $ 1,913,476 for the same period in 2002. Total
deposits increased only $ 198,000 from totals at June 30, 2002. However, the
mix of deposits has shifted away from interest bearing transaction accounts to
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 10.4% increase in net interest
income over second quarter 2002.
The net interest margin has increased 22 basis points to 3.96% for the first six
months of 2003 from that of the first six months of 2002 which was 3.74%.
Management will continue to competitively price its loan and deposit products to
maintain desired net interest spreads.
Page 11 of 24
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 19
Installment loans 64 50
Commercial and all other 0 0
------ ------
Total charge offs 64 69
------ ------
Recoveries of loans previously charged-off:
Real estate mortgages 0 8
Installment loans 39 11
Commercial and all other 0 0
------ ------
Total recoveries 39 19
------ ------
Net loans charged-off (recovered) 25 50
Provision for loan losses charged to operations 72 66
------ ------
Allowance for loan losses, June 30 $ 975 $ 900
====== ======
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
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 12 of 24
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 six months of 2003 increased $ 63,850
over totals for the first half of 2002 due primarily to service charges on
deposit accounts and securities gains. Operating expenses for the period ended
June 30, 2003, were $ 1,812,755, a $ 127,530 increase from the operating
expenses incurred for the same period in 2002 of $ 1,685,225. This increase was
mainly the result of increases in data processing costs in connection with a
core system conversion in March 2003.
Our income tax provision for the first six months of 2003 was $ 240,968 as
compared to $ 152,046 for the first six months of 2002. We continue to operate
with a marginal tax rate of 34% during the first half of 2003. The effective
income tax rate for the first six months of 2003 was 25.3% compared to 19.13%
for the first six months of 2002.
BALANCE SHEET AND EQUITY CHANGES
Total assets as of June 30, 2003, were $ 138,465,927, an increase of $ 5,508,035
from the period ended June 30, 2002, representing an increase of 4.1%. This
increase was primarily due to the aforementioned growth in the loan portfolio.
Loans as of June 30, 2003, were $ 102,330,375 compared to $ 97,709,045 as of
June 30, 2002.
Total equity as of June 30, 2003, was $ 14,755,222, 10.65% of total assets, as
compared to $ 13,892,193, 10.45% of total assets as of June 30, 2002.
The Company's risk based capital ratios continue to exceed regulatory minimum
requirements.
Page 13 of 24
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 14 of 24
PART II - OTHER INFORMATION
Page 15 of 24
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:
31.1 Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer pursuant to 18
U.S.C. Section 1350
32.2 Certification of Chief Financial Officer pursuant to 18
U.S.C. Section 1350
99 Report of Independent Accountant's on Interim Financial
Statements
b. Reports on Form 8-K - None
Page 16 of 24
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 of the Bank
(Duly Authorized Officer)
Date August 11, 2003 /s/Dale M. Fleck
---------------- -----------------------------------
Dale M. Fleck
Controller of the Bank
(Principal Financial &
Accounting Officer)
Page 17 of 24
Exhibit 31.1
CERTIFICATION
I, John C. Duffey, President/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-15(e) and 15d-15(e)) for the
registrant and we have:
(a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, 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 and presented in this quarterly report
our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by
this quarterly report based on such evaluation; and
(c) disclosed in this quarterly report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Page 18 of 24
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, 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 and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: August 11, 2003 By: /s/John C. Duffey
--------------- -------------------------
John C. Duffey,
President/CEO
(Principal Executive
Officer)
Page 19 of 24
Exhibit 31.2
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-15(e) and 15d-15(e)) for the
registrant and we have:
(a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, 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 and presented in this quarterly report
our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by
this quarterly report based on such evaluation; and
(c) disclosed in this quarterly report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Page 20 of 24
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, 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 and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: August 11, 2003 By: /s/Dale M. Fleck
--------------- -------------------------
Dale M. Fleck
Controller
(Principal Financial
Officer)
Page 21 of 24
EXHIBIT 32.1
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 June 30, 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 financial condition and results of operations of the
Company.
/s/ John C. Duffey
-----------------------------
Chief Executive Officer
August 11, 2003
Page 22 of 24
EXHIBIT 32.2
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 June 30, 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 financial condition and results of operations of the
Company.
/s/ Dale M. Fleck
-----------------------------
Chief Financial Officer
August 11, 2003
Page 23 of 24
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 June 30, 2003 and the related
consolidated statements of income for the three and six month periods ended June
30, 2003 and 2002 and consolidated statements of comprehensive income for the
six months ended June 30, 2003 and 2002 and consolidated statements of cash
flows for the six months ended June 30, 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.
/s/ Smith Elliott Kearns & Company, LLC
---------------------------------------
SMITH ELLIOTT KEARNS & COMPANY, LLC
Chambersburg, Pennsylvania
August 11, 2003
Page 24 of 24