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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, 2004
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, 2004
(Common stock, $0.315 par value) 800,000
FNB FINANCIAL CORPORATION
INDEX
Page
PART I - FINANCIAL INFORMATION
Condensed consolidated balance sheets -
June 30, 2004 and December 31, 2003 4
Condensed consolidated statements of income -
Three months ended June 30, 2004 and 2003 5
Condensed consolidated statements of income -
Six months ended June 30, 2004 and 2003 6
Condensed consolidated statements of comprehensive
income - Six months ended June 30, 2004 and 2003 7
Condensed consolidated statements of cash flows -
Six months ended June 30, 2004 and 2003 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
PART I - FINANCIAL INFORMATION
FNB FINANCIAL CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2004 2003
(unaudited) (audited*)
ASSETS:
Cash and Due from banks $ 6,730,525 $ 3,495,604
Interest-bearing deposits with banks 775,499 1,518,766
Investment Securities
Held-to-maturity (Market value - 2004
$ 299,269; 2003 $ 325,957) 299,970 326,809
Available-for-sale 35,888,340 32,039,636
Federal Reserve, Atlantic Central Banker's
Bank and Federal Home Loan Bank Stock 1,721,000 1,136,500
Loans 106,744,626 102,177,917
Less: Allowance for loan losses ( 984,879) ( 892,933)
--------------- ---------------
Loans, net 105,759,747 101,284,984
Bank building, equipment, furniture and
fixtures, net 3,194,498 3,269,724
Accrued interest receivable 587,622 555,760
Cash surrender value of life insurance 2,784,495 2,747,474
Other assets 1,181,983 659,758
--------------- ---------------
Total Assets $ 158,923,679 $ 147,035,015
=============== ===============
LIABILITIES :
Deposits:
Demand deposits $ 16,994,700 $ 15,901,219
Savings deposits 33,371,946 32,535,398
Time certificates 66,017,086 68,000,625
Other time deposits 505,836 284,667
--------------- ---------------
Total deposits 116,889,568 116,721,909
Accrued interest payable & other liabilities 751,259 640,972
Liability for other borrowed funds 26,708,445 14,680,992
Dividends payable 128,000 272,000
--------------- ---------------
Total Liabilities
STOCKHOLDERS' EQUITY
Capital stock, common, par value $ 0.315;
6,000,000 shares autorized; 800,000
outstanding 252,000 252,000
Additional paid-in capital 1,789,833 1,789,833
Retained earnings 12,659,854 12,330,729
Accumulated other comprehensive income (loss) ( 255,280) 346,580
--------------- ---------------
Total Stockholders' Equity 14,446,407 14,719,142
--------------- ---------------
Total Liabilities & Stockholders' Equity $ 158,923,679 $ 147,035,015
=============== ===============
* 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 June 30, 2004 and 2003
(UNAUDITED)
2004 2003
Interest & Dividend Income
Interest & fees on loans $1,737,700 $1,705,250
Interest on investment securities:
Obligations of other U.S. Government Agencies 186,917 251,055
Obligations of State & Political Subdivisions 112,925 88,791
Interest on deposits with banks 2,258 10,765
Dividends on Equity Securities 6,895 9,015
Interest on federal funds sold 566 4,968
---------- ----------
Total Interest & Dividend Income 2,047,261 2,069,844
---------- ----------
Interest Expense
Interest on deposits 628,126 741,750
Interest on other borrowed money 143,927 99,744
---------- ----------
Total Interest Expense 772,053 841,494
---------- ----------
Net interest income 1,275,208 1,228,350
Provision for loan losses 54,000 36,000
---------- ----------
Net interest income after
provision for loan losses 1,221,208 1,192,350
---------- ----------
Other income
Service charges on deposit accounts 114,358 57,619
Other service charges, collection & exchange
charges, commissions and fees 96,257 85,105
Other income 27,490 10,325
Net securities gains/(losses) 0 45,859
---------- ----------
Total other income 238,105 198,908
---------- ----------
Other expenses 1,055,671 941,906
---------- ----------
Income before income taxes 403,642 449,352
Applicable income taxes 102,500 134,895
---------- ----------
Net income $ 301,142 $ 314,457
========== ==========
Earnings per share of Common Stock:
Net income per share $ 0.38 $ 0.39
Cash dividend declared per share $ 0.16 $ 0.16
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
Six Months Ended June 30, 2004 and 2003
(UNAUDITED)
2004 2003
Interest & Dividend Income
Interest & fees on loans $ 3,466,945 $ 3,480,554
Interest on investment securities:
Obligations of other U.S. Government Agencies 382,414 403,583
Obligations of State & Political Subdivisions 216,174 178,916
Interest on deposits with banks 5,683 20,577
Dividends on Equity Securities 16,387 18,322
Interest on federal funds sold 603 4,968
------------- -------------
Total Interest & Dividend Income 4,088,206 4,106,920
------------- -------------
Interest Expense
Interest on deposits 1,297,989 1,492,900
Interest on other borrowed money 267,003 190,258
------------- -------------
Total Interest Expense 1,564,992 1,683,158
------------- -------------
Net interest income 2,523,214 2,423,762
Provision for loan losses 152,000 72,000
------------- -------------
Net interest income after provision
for loan losses 2,371,214 2,351,762
------------- -------------
Other income
Service charges on deposit accounts 195,502 148,456
Other service charges, collection & exchange
charges, commissions and fees 204,970 140,538
Other income 56,550 77,651
Net securities gains/(losses) 79,417 48,057
------------- -------------
Total other income 536,439 414,702
------------- -------------
Other expenses 2,133,379 1,812,755
------------- -------------
Income before income taxes 774,274 953,709
Applicable income taxes 205,149 240,968
------------ ------------
Net income $ 569,125 $ 712,741
============ ============
Earnings per share of Common Stock:
Net income per share $ 0.71 $ 0.89
Cash dividend declared per share $ 0.30 $ 0.29
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
Six Months Ended June 30, 2004 and 2003
(UNAUDITED)
2004 2003
Net Income $ 569,125 $ 712,741
---------- ----------
Other Comprehensive:
Gross unrealized holding gains (losses) ( 832,491) 196,024
Reclassification adjustment for (gains) losses realized
in net income ( 79,417) ( 48,057)
---------- ----------
Net unrealized holding gains (losses) before taxes ( 911,908) 147,967
Tax effect 310,048 ( 50,309)
---------- ----------
Other comprehensive income (loss) ( 601,860) 97,658
---------- ----------
Comprehensive income (loss) ($ 32,735) $ 810,399
========== ==========
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
Six Months Ended June 30, 2004 and 2003
(UNAUDITED)
2004 2003
Cash flows from operating activities:
Net income $ 569,125 $ 712,741
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation & amortization 160,161 157,388
Provision for loan losses 152,000 72,000
Increase in Cash Surrender value
of Life Insurance ( 37,021) ( 48,082)
Net (gain)/loss on sales of investments ( 79,417) ( 48,057)
(Increase) decrease in accrued
interest receivable ( 31,862) ( 1,183)
Increase (decrease) in accrued interest
payable and other liabilities 110,287 ( 231,771)
(Increase) decrease in other assets ( 212,177) 45,761
----------- -----------
Net cash provided (used) by operating activities: 631,096 658,797
----------- -----------
Cash flows from investing activities:
Net (increase) decrease in interest-
bearing deposits with banks 743,267 64,142
Purchases of Available-for-sale securities ( 12,462,521) ( 7,004,394)
Proceeds from maturities and calls of securities 1,822,137 4,634,317
Proceeds sale of available-for-sale securities 5,986,028 179,094
Net (increase) decrease in loans ( 4,626,763) ( 900,723)
Purchases of bank premises & equipment (net) ( 84,935) ( 783,974)
Purchases of investment in insurance company 0 ( 33,568)
(Purchase) sale of other bank stock ( 584,500) ( 239,400)
----------- -----------
Net cash provided (used) by investing activities ( 9,207,287) ( 4,084,506)
----------- -----------
Cash flows from financing activities:
Net increase (decrease) in deposits 167,659 2,227,420
Net increase (decrease) in other borrowings 12,027,453 2,662,474
Cash dividends paid ( 384,000) ( 368,000)
----------- -----------
Net cash provided (used) by financing activities 11,811,112 4,521,894
----------- -----------
Net increase (decrease) in cash & cash equivalents 3,234,921 1,096,185
Cash & cash equivalents, beginning balance 3,495,604 3,650,351
----------- -----------
Cash & cash equivalents, ending balance $ 6,730,525 $ 4,746,536
=========== ===========
The accompanying notes are an integral part of these
condensed financial statements.
FNB FINANCIAL CORPORATION
JUNE 30, 2004
(UNAUDITED)
REVIEW OF INTERIM FINANCIAL STATEMENTS
The condensed consolidated financial statements as of and
for the three and six month periods ended June 30, 2004 and
2003 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, 2004 and June 30, 2003 is unaudited.
Information presented at December 31, 2003, 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 subsidiaries, The
First National Bank of McConnellsburg and FNB Mortgage
Brokers, Inc. 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.
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.
NOTE 6 - SUBSEQUENT EVENTS
On July 16, 2004 FNB Financial Corporation's wholly owned
subsidiary, the First National Bank of McConnellsburg, acquired
the deposits of the Hancock Branch of Farmers and Merchants Bank
(F&M). Total deposits acquired aggregated $ 10,016,872 which were
acquired at a premium of 10.66%
FNB FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SUMMARY
Net income for the first six months of 2004 was $ 569,125 compared to
$ 712,741, for the first six months of 2003. This represents a decrease of
$ 143,616 or 20.15% from 2003. Net income on an adjusted per share basis
for the first six months of 2004 was $ 0.71 which is a decrease of $ 0.18
from the $ 0.89 per share for the six months ended June 30, 2003.
NET INTEREST INCOME
Total interest and dividend income for the first six months of 2004 was
$ 4,088,206 compared to $ 4,106,920 for the first six months of 2003, a
decrease of $ 18,714.
This decrease was due primarily to a small decrease in income from
Investments and interest and fees on loans. Loan growth has stabilized and
the banks loan portfolio increased 4.35% over average balances for the
first six months of 2003. Effective yields on earning assets continue to
be below yields realized in the first six months of 2003. The
stabilization in the growth of earning assets and the reduced interest
margins has resulted in a decrease in interest and fees on loans of
$ 13,609.
In order to sustain desired net interest margins, deposit rates were
lowered in the end of the first quarter to decrease funding costs of the
lower rates on loans.
Interest expense for the six months ended June 30, 2004, was $ 1,564,992, a
decrease of $ 118,166 from the $ 1,683,158 for the same period in 2003.
Total deposits increased $ 3,802,130 from totals at June 30, 2003. This
increase of $ 5,796,000 in interest bearing accounts and a decrease in
demand deposit accounts by $1,994,000 further pressured our margins. This
coupled with the aforementioned general reduction in loan rates and the
lack of growth in loans outstanding caused an increase in net interest
income by only 4.10% over the first six months of 2003.
The bank further shored up its allowance for loan losses during the first
six months by increasing the provision by $ 80,000 or 111% over the
$ 72,000 provision over the previous period in 2003. The net interest
margin has decreased 27 basis points to 3.69% for the first six months of
2004 from that of the first six months of 2003 which was 3.96%. Management
will continue to competitively price its loan and deposit products to
maintain desired net interest spreads.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
Activity in the allowance for loan losses is summarized as follows:
2004 2003
(000 Omitted)
Allowance for loan losses beginning of the year $ 893 $ 928
Loans charged-off during the year
Real estate mortgages 0 0
Installment loans 69 48
Commercial and all other 15 0
----- -----
Total charge offs 84 48
----- -----
Recoveries of loans previously charged-off:
Real estate mortgages 0 0
Installment loans 24 13
Commercial and all other 0 0
----- -----
Total recoveries 24 13
----- -----
Net loans charged-off (recovered) 60 35
Provision for loan losses charged to 152 36
operations
----- -----
Allowance for loan losses, June 30 $ 985 $ 929
===== =====
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 Consumer Mortgage and Home Equity
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 engaged an
outside Firm to conduct an independent loan review during the first quarter
of 2004 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 2004 increased
$ 121,737 over totals for the first six months of 2003. This was due
primarily to $ 138,741 in loan origination revenue produced by FNB Mortgage
Brokers, Inc. This company began operations in September 2003. Operating
expenses for the period ended June 30, 2004, were $ 2,133,379, a $ 320,624
increase from the operating expenses incurred for the same period in 2003
of $1,812,755. This increase was mainly the result of increased personnel
costs and $ 143,000 in expenses associated with FNB Mortgage Brokers, Inc.
Our income tax provision for the first six months of 2004 was $ 205,149 as
compared to $ 240,968 for the first six months of 2003. We continue to
operate with a marginal tax rate of 34% during the first six months of
2004. The effective income tax rate for the first six months of 2004 was
26.50% compared to 25.27% for the first six months of 2003.
BALANCE SHEET AND EQUITY CHANGES
Total assets as of June 30, 2004, were $ 158,923,679, an increase of
$ 11,388,664 from the period ended June 30, 2003, representing an increase
of 7.75%. This increase was primarily due to the increased borrowings from
the Federal Home Loan Bank. Borrowings as of June 30, 2004, were
$ 26,708,445 compared to $ 14,680,992 as of June 30, 2003.
Total equity as of June 30, 2004, was $ 14,446,407, 9.09% of total assets,
as compared to $ 14,755,222, 10.66% of total assets as of June 30, 2003.
The decline was due to unrealized losses from the decline in market value
of investments available for sale. At the end of the reporting period
there was a significant increase in U. S. Treasury yield rates which
resulted in a reduction in market values of our investment portfolio. We
believe this movement to be temporary.
The Company's risk based capital ratios continue to exceed regulatory
minimum requirements.
CONTROLS AND PROCEDURES
The company's Chief Executive Officer and Chief Financial Officer
have evaluated the effectiveness of the company's disclosure
controls and procedures (as such term is defined in Rules 13a-14(c)
under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) as of June 30, 2004. Based on such evaluation,
such officers have concluded that, as of June 30, 2004, the
company's disclosure controls and procedures are effective in
alerting them on a timely basis to material information relating to
the company (including its consolidated subsidiaries) required to
be included in the company's periodic filings under the Exchange
Act.
CHANGES IN INTERNAL CONTROLS
There have not been any significant changes in the company's
internal control over financial reporting or in other factors that
could significantly affect such control during the second quarter
of 2004.
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
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
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 August 9, 2004 /s/John C. Duffey
------------------------------------
John C. Duffey, President
and Director of the Company and
President/CEO of the Bank
(Duly Authorized Officer)
Date August 9, 2004 /s/Dale M. Fleck
------------------------------------
Dale M. Fleck
Controller of the Bank
(Principal Financial &
Accounting Officer)
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.
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 9, 2004 By: /s/John C. Duffey
------------------------------ --------------------
John C. Duffey,
President/CEO
(Principal Executive
Officer)
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.
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 9, 2004 By: /s/Dale M. Fleck
------------------------------ --------------------
Dale M. Fleck
Controller
(Principal Financial
Officer)
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, 2004 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 9, 2004
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, 2004 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 9, 2004
Exhibit 99
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of DirectorsFNB Financial Corporation
McConnellsburg, Pennsylvania
We have reviewed the accompanying consolidated balance sheet of FNB
Financial Corporation and Subsidiaries as of June 30, 2004 and the related
consolidated statements of income for the three and six months ended June
30, 2004 and 2003 and consolidated statements of comprehensive income for
the six months ended June 30, 2004 and 2003 and consolidated statements of
cash flows for the six months ended June 30, 2004 and 2003. These
financial statements are the responsibility of the corporation's
management.
We conducted our reviews in accordance with standards of the Public
Company Accounting Oversight Board (United States). 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 the standards of the Public
Company Accounting Oversight Board, 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
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SMITH ELLIOTT KEARNS & COMPANY, LLC
Chambersburg, Pennsylvania
August 9, 2004