SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
Quarterly Report
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 2004
--------------------------------------------
FNB BANCORP
------------------------------------------------------
(Exact name of registrant as specified in its charter)
California
----------------------------------------------
(State or other jurisdiction of incorporation)
000-49693 92-2115369
------------------------ ---------------------------------
(Commission File Number) (IRS Employer Identification No.)
975 El Camino Real, South San Francisco, California 94080
- --------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (650) 588-6800
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: Common Stock as of August 5,
2004: 2,486,608 shares.
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements.
FNB BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(Dollars in thousands)
ASSETS
June 30 December 31
2004 2003
------------ ------------
Cash and due from banks $ 19,243 $ 22,764
Federal funds sold 43,365 7,880
------------ ------------
Cash and cash equivalents 62,608 30,644
Securities available-for-sale 77,997 63,692
Loans, net 303,960 312,929
Bank premises, equipment, and leasehold improvements 11,453 10,904
Accrued interest receivable and other assets 13,988 11,279
------------ ------------
$ 470,006 $ 429,448
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Demand, noninterest bearing $ 112,069 $ 96,567
Demand, interest bearing 60,082 62,974
Savings and money market 156,163 122,705
Time 84,895 91,968
------------ ------------
Total deposits 413,209 374,214
Accrued expenses and other liabilities 5,173 3,247
------------ ------------
Total liabilities 418,382 377,461
------------ ------------
Stockholders' equity
Common stock, no par value, authorized 10,000,000 shares;
issued and outstanding 2,498,000 shares at June 30, 2004
and 2,519,000 shares at December 31, 2003 28,163 28,903
Additional paid-in capital 5 3
Retained earnings 23,002 22,041
Accumulated other comprehensive income 454 1,040
------------ ------------
Total stockholders' equity 51,624 51,987
------------ ------------
Total liabilities and stockholders' equity $ 470,006 $ 429,448
============ ============
See accompanying notes to consolidated financial statements.
2
FNB BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENT OF EARNINGS
(UNAUDITED)
(Dollars in thousands, except per share amounts)
Three months ended Six months ended
June 30, June 30,
--------------------------- ---------------------------
2004 2003 2004 2003
------------ ------------ ------------ ------------
Interest income:
Interest and fees on loans $ 5,091 $ 4,961 $ 10,282 $ 10,006
Interest on securities 253 352 466 777
Interest on tax-exempt securities 282 344 583 664
Federal funds sold 59 28 91 50
------------ ------------ ------------ ------------
Total interest income 5,685 5,685 11,422 11,497
------------ ------------ ------------ ------------
Interest expense:
Interest on deposits 576 712 1,139 1,462
------------ ------------ ------------ ------------
Total interest expense 576 712 1,139 1,462
------------ ------------ ------------ ------------
Net interest income 5,109 4,973 10,283 10,035
------------ ------------ ------------ ------------
Provision for loan losses 120 120 240 740
------------ ------------ ------------ ------------
Net interest income after provision for loan losses 4,989 4,853 10,043 9,295
------------ ------------ ------------ ------------
Noninterest income:
Service charges 649 649 1,310 1,329
Credit card fees 233 255 440 458
Other income 76 55 131 151
------------ ------------ ------------ ------------
Total noninterest income 958 959 1,881 1,938
------------ ------------ ------------ ------------
Noninterest expense:
Salaries and employee benefits 2,664 2,796 5,354 5,627
Occupancy expense 333 320 691 643
Equipment expense 418 394 840 773
Professional fees 330 212 580 409
Telephone, postage and supplies 265 214 578 448
Bankcard expenses 209 208 387 394
Other expense 524 495 1,058 941
------------ ------------ ------------ ------------
Total noninterest expense 4,743 4,639 9,488 9,235
------------ ------------ ------------ ------------
Earnings before income tax expense 1,204 1,173 2,436 1,998
Income tax expense 241 294 570 501
------------ ------------ ------------ ------------
NET EARNINGS $ 963 $ 879 $ 1,866 $ 1,497
============ ============ ============ ============
Earnings per share data:
Basic $ 0.38 $ 0.34 $ 0.74 $ 0.59
Diluted $ 0.38 $ 0.34 $ 0.73 $ 0.58
Weighted average shares outstanding:
Basic 2,502,000 2,557,000 2,510,000 2,557,000
Diluted 2,545,000 2,562,000 2,553,000 2,561,000
See accompanying notes to consolidated financial statements
3
FNB BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
Three months ended Six months ended
June 30, June 30,
--------------------------- ---------------------------
2004 2003 2004 2003
------------ ------------ ------------ ------------
Net earnings $ 963 $ 879 $ 1,866 $ 1,497
Unrealized gain/(loss) on AFS securities (650) 197 (586) (214)
------------ ------------ ------------ ------------
Total comprehensive income $ 313 $ 1,076 $ 1,280 $ 1,283
============ ============ ============ ============
See accompanying notes to consolidated financial statements.
4
FNB BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in thousands)
Six months ended
June 30
---------------------------
2004 2003
------------ ------------
Cash flow from operating activities
Net earnings $ 1,866 $ 1,497
Adjustments to reconcile net earnings to net cash provided by
operating activities
Depreciation and amortization 897 929
Provision for loan losses 120 740
Stock based compensation expense 2 --
Changes in assets and liabilities:
Accrued interest receivable and other assets (2,709) 324
Accrued expenses and other liabilities 2,333 (292)
------------ ------------
Net cash provided by operating activities 2,509 3,198
------------ ------------
Cash flows from investing activities
Purchase of securities available-for-sale (35,352) (23,362)
Proceeds from matured/called/securities available-for-sale 19,790 19,990
Net (increase) decrease in loans 8,849 (8,683)
Proceeds from sale of bank premises, equipment and leasehold improvements 121 --
Purchases of bank premises, equipment, leasehold improvements (1,303) (284)
------------ ------------
Net cash provided by investing activities (7,895) (12,339)
------------ ------------
Cash flows from financing activities
Net increase in demand and savings deposits 46,068 3,135
Net increase (decrease) in time deposits (7,073) 2,582
Net increase in federal funds purchased -- 2,452
Dividends paid (905) (878)
Repurchase of common stock (865) --
Issuance of common stock 125 1
Payments on capital note payable -- (78)
------------ ------------
Net cash provided by financing activities 37,350 7,214
------------ ------------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 31,964 (1,927)
Cash and cash equivalents at beginning of period 30,644 20,199
------------ ------------
Cash and cash equivalents at end of period $ 62,608 $ 18,272
============ ============
Additional cash flow information
Interest paid $ 1,138 $ 1,521
Income taxes paid $ 761 $ 642
See accompanying notes to consolidated financial statements.
5
FNB BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION
FNB Bancorp (the "Company") is a bank holding company registered under
the Bank Holding Company Act of 1956, as amended. The Company was incorporated
under the laws of the State of California on February 28, 2001. The consolidated
financial statements include the accounts of FNB Bancorp and its wholly owned
subsidiary, First National Bank of Northern California (the "Bank"). The Bank
provides traditional banking services in San Mateo and San Francisco counties.
The Bank and the Company entered into an Agreement and Plan of
Reorganization dated November 1, 2001 (the "Plan of Reorganization"), and the
shareholders of the Bank approved the Plan of Reorganization at a Special
Meeting of the Shareholders of the Bank held on February 27, 2002. The Plan of
Reorganization was consummated on March 15, 2002. Each outstanding share of the
common stock, par value $1.25 per share, of the Bank (other than any shares as
to which dissenters' rights of appraisal have been properly exercised) was
converted into one share of the common stock of the Company, and the former
holders of Bank common stock became the holders of all of the Company's common
stock. The change in capital structure has been included for all periods
presented.
All intercompany transactions and balances have been eliminated in
consolidation. The financial statements include all adjustments of a normal and
recurring nature, which are, in the opinion of management, necessary for a fair
presentation of the financial results for the interim periods.
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-Q and, therefore, do not include all
information and footnotes normally included in financial statements prepared in
conformity with accounting principles generally accepted in the United States of
America. Accordingly, these financial statements should be read in conjunction
with the audited financial statements and notes thereto for the year ended
December 31, 2003.
Results of operations for interim periods are not necessarily
indicative of results for the full year.
NOTE B - STOCK OPTION PLAN
At June 30, 2004, the Company has two stock-based employee compensation
plans. Prior to 2003, the Company accounted for the plan under the recognition
and measurement provisions of APB Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations. Effective January 1, 2003, the Company
adopted the fair value recognition provisions of FASB Statement No. 123,
Accounting for Stock-Based Compensation, prospectively to all employee awards
granted, modified, or settled after January 1, 2003. Therefore, the cost related
to stock-based employee compensation included in the determination of net income
for 2003 and 2004 is less than that which would have been recognized if the fair
value based method had been applied to all awards since the original effective
date of Statement No. 123. Awards under the Company's plan vest over periods
ranging from three to five years.
6
The following table illustrates the effect on net income and earnings
per share if the fair value based method had been applied to all outstanding and
unvested awards in each period.
(Dollars in thousands, except per share) Three months ended Six months ended
June 30 June 30
----------------------- -----------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------
Net income as reported $ 963 $ 879 $ 1,866 $ 1,497
Add: stock-based employee compensation
expense included in reported net income,
net of related tax effects 2 1 3 1
Deduct: total stock-based employee
compensation expense determined under
fair value method for all awards, net of
related tax effect (3) (2) (4) (2)
---------- ---------- ---------- ----------
Pro forma net income $ 962 $ 878 $ 1,865 $ 1,496
Earnings per share:
Basic - as reported $ 0.38 $ 0.34 $ 0.74 $ 0.59
Basic - pro forma $ 0.38 $ 0.34 $ 0.73 $ 0.58
Diluted - as reported $ 0.38 $ 0.34 $ 0.73 $ 0.58
Diluted - pro forma $ 0.38 $ 0.34 $ 0.73 $ 0.58
NOTE C - LOANS
The loan portfolio consisted of the following at the dates indicated:
June 30, December 31,
(Dollars in thousands) 2004 2003
---------- ----------
Real Estate $ 224,203 $ 214,588
Construction 33,092 48,610
Commercial 49,360 52,248
Consumer 2,086 2,551
---------- ----------
Gross loans 308,741 317,997
Net deferred loan fees (1,641) (1,784)
Allowance for loan losses (3,140) (3,284)
---------- ----------
Net loans $ 303,960 $ 312,929
========== ==========
7
NOTE D - EARNINGS PER SHARE CALCULATION
Earnings per common share (EPS) are computed based on the weighted
average number of common shares outstanding during the period. Basic EPS
excludes dilution and is computed by dividing net earnings by the weighted
average of common shares outstanding. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock.
Earnings per share have been computed based on the following (dollars
in thousands):
Three months ended Six months ended
June 30, June 30,
2004 2003 2004 2003
------------ ------------ ------------ ------------
Net earnings $ 963 $ 879 $ 1,866 $ 1,497
Average number of shares outstanding 2,502,000 2,557,000 2,510,000 2,557,000
Effect of dilutive options 43,000 5,000 43,000 4,000
Average number of shares outstanding used
to calculate diluted earnings per share 2,545,000 2,562,000 2,553,000 2,561,000
All outstanding options were included in the 2004 and 2003 computations.
NOTE E - COMPREHENSIVE INCOME
Comprehensive income is the change in equity of a business enterprise
during a period from transactions and other events and circumstances from
non-owner sources. Other comprehensive income consists of net unrealized gains
and losses on investment securities available-for-sale. Comprehensive income for
the three months ended June 30, 2004 was $313,000 compared to $1,076,000 for the
three months ended June 30, 2003. Comprehensive income for the six months ended
June 30, 2004 was $1,280,000 compared to $1,283,000 for the six months ended
June 30, 2003.
NOTE F - OTHER REAL ESTATE OWNED
Loans that have become delinquent through non payment of scheduled
principal and/or interest for 90 days are placed in nonaccrual and interest is
no longer accrued. If a favorable restructuring cannot be made for the loan
(provided the market value of the collateral is sufficient), or, if
insufficient, or the borrower is unable to make further payments, foreclosure
procedures are initiated. If there are no bidders, or if bids are made and are
insufficient to cover the debt, the Bank will acquire the property at sale under
judgments, decrees, or mortgages where the property was originally security for
debts previously contracted. During the quarter ended March 31, 2004 the Company
foreclosed on a $5,827,000 loan secured by a residential care facility, and
placed it in Other Real Estate Owned. It was sold in May and the loan amount was
recovered.
NOTE G - STOCK REPURCHASE PROGRAM
On July 25, 2003, the Board of Directors authorized a stock repurchase
program, which calls for the repurchase of up to 5% of the Company's shares,
which, at that time, represented 121,852 shares, based on 2,437,043 shares
outstanding.
On January 23, 2004 the Board of Directors authorized an extension of
this stock repurchase program. Through June 30, 2004, a total of 66,054 shares,
or approximately 2.58% of the shares outstanding on that date (adjusted for the
stock dividend paid by the registrant on December 15, 2003, to shareholders of
record on November 28, 2003) had been repurchased pursuant to the program.
8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Critical Accounting Policies And Estimates
------------------------------------------
Management's discussion and analysis of its financial condition and
results of operations are based upon the Company's financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States of America. The preparation of these financial statements
requires the Company to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. On an on-going basis, the Company evaluates
its estimates, including those related to its loans and allowance for loan
losses. The Company bases its estimates on current market conditions, historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. The Company believes the
following policies require significant judgments and estimates.
Allowance for Loan Losses
-------------------------
The allowance for loan losses is periodically evaluated for adequacy by
management. Factors considered include the Company's loan loss experience, known
and inherent risks in the portfolio, current economic conditions, known adverse
situations that may affect the borrower's ability to repay, regulatory policies,
and the estimated value of underlying collateral. The evaluation of the adequacy
of the allowance is based on the above factors along with prevailing and
anticipated economic conditions that may impact borrowers' ability to repay
loans. Determination of the allowance is in part objective and in part a
subjective judgment by management based on the information it currently has in
its possession. Adverse changes in any of these factors or the discovery of new
adverse information could result in higher than expected charge-offs and loan
loss provisions.
Earnings Analysis
-----------------
Net earnings for the quarter ended June 30, 2004 were $963,000,
compared to net earnings of $879,000 for the quarter ended June 30, 2003. Net
earnings for the six months ended June 30, 2004 were $1,866,000 compared to
$1,497,000 for the six months ended June 30, 2003.Earnings before income tax
expense for the quarter ended June 30, 2004 were $1,204,000, compared to
$1,173,000 for the quarter ended June 30, 2003. Earnings before income tax were
$2,436,000 for the six months ended June 30, 2004 compared to $1,998,000 for the
six months ended June 30, 2003.
Net interest income for the quarter ended June 30, 2004 was $5,109,000,
compared to $4,973,000 for the quarter ended June 30, 2003. Net interest income
for the six months ended June 30, 2004 was $10,283,000 compared to $10,035,000
for the six months ended June 30, 2003. The prime lending rate was 4.00% in the
second quarter of 2004 compared to 4.25% in the second quarter of 2003. The
Federal Home Loan Bank of San Francisco's Weighted Monthly Cost of Funds Index
for the three months ended June 2004 (based on the three Index Months ended May
31), averaged 1.78%, compared to 2.18% for the three months ended June 2003.
Net interest income is the difference between interest yield generated
by earning assets and the interest expense associated with the funding of those
assets.
Basic earnings per share were $0.38 for the second quarter of 2004
compared to $0.34 for the second quarter of 2003. Diluted earnings per share
were $0.38 for the second quarter of 2004 compared to $0.34 for the second
quarter of 2003. Basic earnings per share were $0.74 for the six months ended
June 30, 2004 compared to $0.59 for the six months ended June 30, 2003. Diluted
earnings per share were $0.73 for the six months ended June 30, 2004 compared to
$0.58 for the six months ended June 30, 2003.
9
The following table presents an analysis of net interest income and
average earning assets and liabilities for the three-and six-month periods ended
June 30, 2004 compared to the three- and six-month periods ended June 30, 2003.
Table 1 NET INTEREST INCOME AND AVERAGE BALANCES
- ------- FNB BANCORP AND SUBSIDIARY
(Dollars in thousands)
Three months ended June 30,
---------------------------------------------------------------------------
2004 2003
------------------------------------ ------------------------------------
Annualized Annualized
Interest Average Interest Average
Average Income Yield Average Income Yield
INTEREST EARNING ASSETS Balance (Expense) (Cost) Balance (Expense) (Cost)
---------- ---------- ---------- ---------- ---------- ----------
Loans, gross $ 315,883 $ 5,091 6.48% $ 288,669 $ 4,961 6.89%
Taxable securities 29,303 253 3.47 40,862 352 3.46
Nontaxable securities 32,803 282 3.46 36,554 344 3.77
Federal funds sold 25,555 59 0.93 9,388 28 1.20
---------- ---------- ---------- ----------
Total interest earning assets $ 403,544 $ 5,685 5.67 $ 375,473 $ 5,685 6.07
NONINTEREST EARNING ASSETS
Cash and due from banks $ 19,312 $ 17,753
Premises and equipment 11,296 10,994
Other assets 13,771 5,573
---------- ----------
Total noninterest earning assets $ 44,379 $ 34,320
---------- ----------
TOTAL ASSETS $ 447,923 $ 409,793
========== ==========
INTEREST BEARING LIABILITIES
Deposits:
Demand, interest bearing $ 56,839 $ (30) (0.21) $ 51,597 $ (33) (0.26)
Money market 80,426 (168) (0.84) 65,363 (153) (0.94)
Savings 60,047 (40) (0.27) 54,681 (54) (0.40)
Time deposits 88,738 (338) (1.53) 90,723 (472) (2.09)
Federal funds purchased and other
borrowings -- -- -- 63 -- --
---------- ---------- ---------- ----------
Total interest bearing liabilities $ 286,050 $ (576) (0.81) $ 262,427 $ (712) (1.09)
---------- ---------- ---------- ----------
NONINTEREST BEARING LIABILITIES
Demand deposits 104,248 90,741
Other liabilities 5,569 4,990
---------- ----------
Total noninterest bearing liabilities $ 109,817 $ 95,731
---------- ----------
TOTAL LIABILITIES $ 395,867 $ 358,158
Stockholders' equity $ 52,056 $ 51,635
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 447,923 $ 409,793
========== ==========
NET INTEREST INCOME AND MARGIN
ON TOTAL EARNING ASSETS $ 5,109 5.09% $ 4,973 5.31%
Interest income is reflected on an actual basis, not on a fully taxable basis
due to immaterial effect. Yield on gross loans was not adjusted for nonaccrual
loans, which were not considered material for this calculation.
10
Table 2 NET INTEREST INCOME AND AVERAGE BALANCES
- ------- FNB BANCORP AND SUBSIDIARY
(Dollars in thousands)
Six months ended June 30,
---------------------------------------------------------------------------
2004 2003
------------------------------------ ------------------------------------
Annualized Annualized
Interest Average Interest Average
Average Income Yield Average Income Yield
INTEREST EARNING ASSETS Balance (Expense) (Cost) Balance (Expense) (Cost)
---------- ---------- ---------- ---------- ---------- ----------
Loans, gross $ 315,224 $ 10,282 6.56% $ 288,348 $ 10,006 7.00%
Taxable securities 28,118 466 3.33 41,542 777 3.77
Nontaxable securities 32,667 583 3.59 33,734 664 3.97
Federal funds sold 19,465 91 0.94 8,503 50 1.19
---------- ---------- ---------- ----------
Total interest earning assets $ 395,474 $ 11,422 5.81 $ 372,127 $ 11,497
6.23
NONINTEREST EARNING ASSETS
Cash and due from banks $ 18,735 $ 18,000
Premises and equipment 11,172 11,067
Other assets 13,267 5,836
---------- ----------
Total noninterest earning assets $ 43,174 $ 34,903
---------- ----------
TOTAL ASSETS $ 438,648 $ 407,030
========== ==========
INTEREST BEARING LIABILITIES
Deposits:
Demand, interest bearing $ 57,162 $ (60) (0.21) $ 50,778 $ (61) (0.24)
Money market 73,753 (295) (0.80) 64,820 (318) (0.99)
Savings 59,180 (78) (0.27) 54,273 (107) (0.40)
Time deposits 90,484 (706) (1.57) 90,199 (976) (2.18)
Federal funds purchased and other
borrowings 0 0 -- 53 -- --
---------- ---------- ---------- ----------
Total interest bearing liabilities $ 280,579 $ (1,139) (0.82) $ 260,123 $ (1,462) (1.13)
---------- ---------- ---------- ----------
NONINTEREST BEARING LIABILITIES
Demand deposits 100,250 90,195
Other liabilities 5,616 4,993
---------- ----------
Total noninterest bearing liabilities $ 105,866 $ 95,188
---------- ----------
TOTAL LIABILITIES $ 386,445 $ 355,311
Stockholders' equity $ 52,203 $ 51,719
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 438,648 $ 407,030
========== ==========
NET INTEREST INCOME AND MARGIN
ON TOTAL EARNING ASSETS $ 10,283 5.23% $ 10,035 5.44%
Tables 1 and 2, above, show the various components that contributed to
changes in net interest income for the three and six months ended June 30, 2004
and 2003. The principal interest earning assets are loans, from a volume as well
as from an earnings perspective. For the quarter ended June 30, 2004, average
loans outstanding represented 78.3% of average earning assets. For the quarter
ended June 30, 2003, they represented 76.9% of average earning assets. For the
six months ended June 30, 2004 and 2003, average loans outstanding represented
79.7% and 77.5%, respectively, of average earning assets.
11
While the yield on total interest earning assets for the quarter ended
June 30, 2004 compared to the quarter ended June 30, 2003 decreased from 6.07%
to 5.67%, or 40 basis points, this was offset by the larger volume invested in
loans, which resulted in no change in total interest income, which stayed at
$5,685,000 in both periods. Comparing the six months ended June 30, 2004 to the
six months ended June 30, 2003, the yield on total interest earning assets
decreased by 42 basis points. Again, this was offset by a larger volume invested
in loans, producing a small decrease in total interest income of $75,000, or
0.65%
For the three months ended June 30, 2004 compared to the three months
ended June 30, 2003, the cost on total interest bearing liabilities decreased
from 1.09% to 0.81%, a decrease of 28 basis points. The most expensive as well
as principal source of interest bearing liabilities comes from time deposits.
Their average cost decreased from 2.09% to 1.53%, and the expense on these
deposits decreased $134,000 for the three months ended June 30, 2004 compared to
2003. This accounted for most of the expense of interest bearing liabilities,
which decreased $136,000.
For the six months ended June 30, 2004 compared to the six months ended
June 30, 2003, the cost on total interest bearing liabilities decreased from
1.13% to 0.82%.
For the three and six month period ended June 30, 2004 and June 2003,
respectively, the following tables show the dollar amount of change in interest
income and expense and the dollar amounts attributable to: (a) changes in volume
(changes in volume at the current year rate), b) changes in rate (changes in
rate times the prior year's volume) and (c) changes in rate/volume (change in
rate times change in volume). In this table, the dollar change in rate/volume is
prorated to volume and rate proportionately.
Table 3 FNB BANCORP AND SUBSIDIARY
- ------- RATE/VOLUME VARIANCE ANALYSIS
Three Months Ended June 30,
(Dollars in thousands) 2004 Compared to 2003
Interest Variance
Income/Expense Attributable To
Variance Rate Volume
------------ ------------ ------------
INTEREST EARNING ASSETS
Loans $ 130 $ (338) $ 468
Taxable securities (99) 1 (100)
Nontaxable securities (62) (30) (32)
Federal funds sold 31 (17) 48
------------ ------------ ------------
Total $ (0) $ (384) $ 384
------------ ------------ ------------
INTEREST BEARING LIABILITIES
Demand deposits $ (3) $ (6) $ 3
Money market 15 (16) 31
Savings deposits (14) (18) 4
Time deposits (134) (124) (10)
------------ ------------ ------------
Total $ (136) $ (164) $ 28
------------ ------------ ------------
NET INTEREST INCOME $ (136) $ (220) $ 356
============ ============ ============
12
Table 4 FNB BANCORP AND SUBSIDIARY
- ------- RATE/VOLUME VARIANCE ANALYSIS
Six Months Ended June 30,
(Dollars in thousands) 2004 Compared To 2003
Interest Variance
Income/Expense Attributable To
Variance Rate Volume
------------ ------------ ------------
INTEREST EARNING ASSETS
Loans $ 276 $ (657) $ 933
Taxable securities (311) (89) (222)
Nontaxable securities (81) (62) (19)
Federal funds sold 41 (23) 64
------------ ------------ ------------
Total $ (75) $ (831) $ 756
------------ ------------ ------------
INTEREST BEARING LIABILITIES
Demand deposits $ (1) $ (9) $ 8
Money market (23) (59) 36
Savings deposits (29) (35) 6
Time deposits (270) (273) 3
------------ ------------ ------------
Total $ (323) $ (376) $ 53
------------ ------------ ------------
NET INTEREST INCOME $ 248 $ (455) $ 703
============ ============ ============
Noninterest income
- ------------------
The following table shows the principal components of noninterest
income for the periods indicated.
Table 5 NONINTEREST INCOME
- -------
Three months ended Six months ended
June 30, June 30,
(Dollars in thousands) 2004 2003 2004 2003
------------ ------------ ------------ ------------
Service charges $ 649 $ 649 $ 1,310 $ 1,329
Credit card fees 233 255 440 458
Other income 76 55 131 151
------------ ------------ ------------ ------------
Total noninterest
income $ 958 $ 959 $ 1,881 $ 1,938
============ ============ ============ ============
Noninterest income consists mainly of service charges on deposits,
credit card fees, and other miscellaneous types of income. For the quarter ended
June 30, 2004 compared to June 30, 2003, total noninterest income decreased by
$1,000 or 0.10%. The major component, service charges, remained unchanged at
$649,000. For the six months ended June 30, 2004 and June 30, 2003, total
noninterest income declined by $57,000, or 2.94%. The major component, service
charges, declined $19,000, or 1.43%.
13
Noninterest expense
- -------------------
The following table shows the principal components of noninterest
expense for the periods indicated.
Table 6 NONINTEREST EXPENSE
- -------
(Dollars in thousands) Three months ended Six months ended
June 30, June 30,
2004 2003 2004 2003
------------ ------------ ------------ ------------
Salaries and employee benefits $ 2,664 $ 2,796 $ 5,354 $ 5,627
Occupancy expense 333 320 691 643
Equipment expense 418 394 840 773
Professional fees 330 212 580 409
Telephone, postage and supplies 265 214 578 448
Bankcard expense 209 208 387 394
Other expense 524 495 1,058 941
------------ ------------ ------------ ------------
Total noninterest expense $ 4,743 $ 4,639 $ 9,488 $ 9,235
============ ============ ============ ============
Noninterest expense consists mainly of salaries and employee benefits.
For the three months ended June 30, 2004 compared to three months ended June 30,
2003, it represented 56.2% and 60.3% of total noninterest expenses. For the six
months ended June 30, 2004 and 2003, it was 56.4% and 60.9% respectively of
total noninterest expense. These decreases are attributable to outsourcing the
bank's in-house courier service, and attrition, which saw full-time equivalent
employees decline from 181 employees at June 30, 2003 to 162 employees at June
30, 2004. The remaining categories are less significant. However, professional
fees increased by 55.7% in the quarter ended June 30, 2004 compared to the
quarter ended June 30, 2003, and increased by 41.8% for the six months ended
June 30, 2004 compared to 2003. This reflects the increasing costs associated
with compliance issues such as the Patriot Act, Sarbanes-Oxley, and the
Gramm-Leach-Bliley Act. Telephone, postage and supplies increased 23.8% for the
quarter ended June 30, 2004 compared to the same quarter in 2003, and increased
29.0% for the six months ended June 30, 2004 compared to the six months ended
June 30, 2003. During 2004, an overhaul of our telephone and general
telecommunications systems are being implemented, with some parallel billing
accounting for the increase.
Income Taxes
- ------------
The effective tax rate for the quarter ended June 30, 2004 was 20.0%
compared to 25.1% for the quarter ended June 30, 2003. The effective tax rate
for the six months ended June 30, 2004 and June 30, 2003, respectively was 23.4%
and 25.1%. The primary difference between the statutory tax rate of 34% and the
effective tax rate in each case is due to a reduction due to municipal bond
interest, a reduction due to Low Income Housing tax credits, and an increase for
state taxes.
Asset and Liability Management
- ------------------------------
Ongoing management of the Company's interest rate sensitivity limits
interest rate risk through monitoring the mix and maturity of loans, investments
and deposits. Management regularly reviews the Company's position and evaluates
alternative sources and uses of funds as well as changes in external factors.
Various methods are used to achieve and maintain the desired rate sensitivity
position including the sale or purchase of assets and product pricing.
14
In order to ensure that sufficient funds are available for loan growth
and deposit withdrawals, as well as to provide for general needs, the Company
must maintain an adequate level of liquidity. Asset liquidity comes from the
Company's ability to convert short-term investments into cash and from the
maturity and repayment of loans and investment securities. Liability liquidity
comes from Company's customer base, which provides core deposit growth. The
overall liquidity position of the Company is closely monitored and evaluated
regularly. Management believes the Company's liquidity sources at June 30, 2004
are adequate to meet its operating needs in 2004 and going forward into the
foreseeable future.
The following table sets forth information concerning interest rate
sensitive assets and liabilities as of June 30, 2004. The assets and liabilities
are classified by the earlier of maturity or repricing date in accordance with
their contractual terms. Since all interest rates and yields do not adjust at
the same speed or magnitude, and since volatility is subject to change, the gap
is only a general indicator of interest rate sensitivity.
The Company's asset/liability gap is the difference between the cash
flow amounts of interest-sensitive assets and liabilities that will be
refinanced (or repriced) during a given period. For example, if the asset amount
to be repriced exceeds the corresponding liability amount for a certain day,
month, year or longer period, the institution is in an asset-sensitive gap
position. In this situation, net interest income would increase if market
interest rates rose or decrease if market interest rates fell. Alternatively, if
more liabilities than assets will reprice, the institution is in a
liability-sensitive position. Accordingly, net interest income would decline
when rates rose and increase when rates fell.
Table 7 RATE SENSITIVE ASSETS/LIABILITIES
- ------ As of June 30, 2004
(Dollars in thousands)
Over
Three Three To Over One Over Not
Months Twelve Through Five Rate-
Or Less Months Five Years Years Sensitive Total
------------ ------------ ------------ ------------ ------------ ------------
Interest earning assets:
Federal funds sold $ 43,365 $ -- $ -- $ -- $ -- $ 43,365
Securities available for sale -- 7,653 55,813 14,531 -- 77,997
Loans 247,219 19,867 8,772 28,559 2,683 307,100
------------ ------------ ------------ ------------ ------------ ------------
Total interest earning assets 290,584 27,520 64,585 43,090 2,683 428,462
Cash and due from banks -- -- -- -- 19,243 19,243
Allowance for loan losses -- -- -- -- (3,140) (3,140)
Other assets -- -- -- -- 25,441 25,441
------------ ------------ ------------ ------------ ------------ ------------
Total assets $ 290,584 $ 27,520 $ 64,585 $ 43,090 $ 44,227 $ 470,006
============ ============ ============ ============ ============ ============
Interest bearing liabilities:
Demand, interest bearing $ 60,082 $ -- $ -- $ -- $ -- $ 60,082
Savings and money market 156,163 -- -- -- -- 156,163
Time deposits 35,258 34,590 15,047 -- -- 84,895
------------ ------------ ------------ ------------ ------------ ------------
Total interest bearing liabilities 251,503 34,590 15,047 -- -- 301,040
------------ ------------ ------------ ------------ ------------ ------------
Noninterest demand deposits -- -- -- -- 112,069 112,069
Other liabilities -- -- -- -- 5,173 5,173
Stockholders' equity -- -- -- -- 51,624 51,624
------------ ------------ ------------ ------------ ------------ ------------
Total liabilities and stockholders'
equity $ 251,503 $ 34,590 $ 15,047 $ -- $ 168,866 $ 470,006
============ ============ ============ ============ ============ ============
Interest rate sensitivity gap $ 39,081 $ (7,070) $ 49,538 $ 43,090 $ (124,639) $ --
============ ============ ============ ============ ============ ============
Cumulative interest rate sensitivity gap $ 39,081 $ 32,011 $ 81,549 $ 124,639 $ -- $ --
Cumulative interest rate sensitivity gap
ratio 13.45% 10.06% 21.31% 29.27% -- --
15
Financial Condition
- -------------------
Assets. Total assets increased to $470,006,000 at June 30, 2004 from
$429,448,000 at December 31, 2003, an increase of $40,558,000. Most of this
increase was in cash and cash equivalents, which increased $31,964,000,
securities available-for-sale, which increased $14,305,000, offset by a decline
of $8,969,000 in net loans, and other assets increased $3,207,000. The increase
in total assets was funded mainly by an increase in deposits of $38,995,000.
Loans. Net loans at June 30, 2004 were $303,960,000, a decrease of
$8,969,000 or 2.89% over December 31, 2003. Construction loans decreased
$15,518,000, representing most of the decrease, while real estate loans
increased by $9,615,000. The remainder decreased $3,066,000. The portfolio
breakdown was as follows.
Table 8 LOAN PORTFOLIO
- -------
June 30, December 31,
(In thousands) 2004 Percent 2003 Percent
---------- ---------- ---------- ----------
Real Estate $ 224,203 72.6% $ 214,588 67.5%
Construction 33,092 10.7 48,610 15.3
Commercial 49,360 16.0 52,248 16.4
Consumer 2,086 0.7 2,551 0.8
---------- ---------- ---------- ----------
Gross loans 308,741 100.0% 317,997 100.0%
========== ==========
Net deferred loan fees (1,641) (1,784)
Allowance for loan losses (3,140) (3,284)
---------- ----------
Net loans $ 303,960 $ 312,929
========== ==========
Allowance for loan losses. The Company has the responsibility of
assessing the overall risks in its portfolio, assessing the specific loss
expectancy, and determining the adequacy of the allowance for loan losses. The
level of the allowance is determined by internally generating credit quality
ratings, reviewing economic conditions in the Company's market area, and
considering the Company's historical loan loss experience. The Company is
committed to maintaining an adequate allowance, identifying credit weaknesses by
consistent review of loans, and maintaining the ratings and changing those
ratings in a timely manner as circumstances change.
A summary of transactions in the allowance for loan losses for the six
months ended June 30, 2004 and the six months ended December 31, 2003 is as
follows:
Table 9 ALLOWANCE FOR LOAN LOSSES
- -------
Six months ended Six months ended
June 30, December 31,
(In thousands) 2004 2003
------------ ------------
Balance, beginning of period $ 3,284 $ 3,314
Provision for loan losses 240 40
Recoveries 1 --
Amounts charged off (385) (70)
------------ ------------
Balance, end of period $ 3,140 $ 3,284
============ ============
In management's judgment, the allowance was adequate to absorb losses
currently inherent in the loan portfolio at June 30, 2004. However, changes in
prevailing economic conditions in the Company's markets or in the financial
condition of its customers could result in changes in the level of nonperforming
assets and charge-offs in the future and, accordingly, changes in the allowance.
Nonperforming assets. Nonperforming assets consist of nonaccrual loans,
foreclosed assets, and loans that are 90 days or more past due but are still
accruing interest. At June 30, 2004, there was $2,683,000 in non-accrual loans,
compared to $9,085,000 at December 31, 2003. One loan secured by an office
building, and another to a residential care facility were the main portion of
the December 31, 2003 nonaccrual loans. The first loan was secured by an office
building in the Silicon Valley community of Mountain View, which was placed in
nonaccrual status due to a significant decline in the underlying value of the
collateral. At December 31, 2003, its balance was $3,128,000.The loan had been
16
written down to its current market value of $2,670,000 on June 30, 2004. The
guarantors continue to perform according to the contractual obligations of the
documents. The other loan was to a residential care facility with a balance of
$5,827,000, which was sold in May, 2004. There were no foreclosed assets or
loans past due 90 days and still accruing on either date.
In the first quarter of 2004, the Company foreclosed and took into
Other Real Estate Owned, the loan secured by a residential care facility with a
net loan balance of $5,827,000. This loan was previously in nonaccrual status
due to a payment default, and ultimately a bankruptcy filed by the borrower. The
Other Real Estate Owned was sold with no loss of principal in the second quarter
of 2004.
Deposits. Total deposits at June 30, 2004 were $413,209,000 compared to
$374,214,000 on December 31, 2003. Of these totals, noninterest-bearing demand
deposits were $112,069,000 or 27.1% of the total on June 30, 2004 and
$96,567,000 or 25.8% on December 31, 2003. Time deposits were $84,895,000 on
June 30, 2004 and $91,968,000 on December 31, 2003.
The following table sets forth the maturity schedule of the time
certificates of deposit on June 30, 2004:
Table 10
- --------
(Dollars in thousands) Under $100,000
Maturities: $100,000 or more Total
------------ ------------ ------------
Three months or less $ 18,674 $ 16,585 $ 35,259
Over three to six months 9,614 8,551 18,165
Over six through twelve months 10,862 5,562 16,424
Over twelve months 10,900 4,147 15,047
------------ ------------ ------------
Total $ 50,050 $ 34,845 $ 84,895
------------ ------------ ============
The following table shows the risk-based capital ratios and leverage
ratios at June 30, 2004 and December 31, 2003:
Table 11
- -------- Minimum "Well
June 30, December 31, Capitalized"
Risk-Based Capital Ratios 2004 2003 Requirements
------------ ------------ ------------
Tier 1 Capital 13.75% 13.29% > 6.00%
-
Total Capital 14.59% 14.15% > 10.00%
-
Leverage Ratios 11.47% 12.06% > 5.00%
-
Liquidity. Liquidity is a measure of the Company's ability to
convert assets into cash with minimum loss. As of June 30, 2004, Liquid Assets
were $140,605,000, or 29.9% of total assets. As of December 31, 2003, Liquid
Assets were $94,336,000, or 22.0% of total assets. Liquidity consists of cash
and due from other banks accounts, federal funds sold, and securities
available-for-sale. The Company's primary uses of funds are loans, and the
primary sources of funds are deposits. The relationship between total net loans
and total deposits is a useful additional measure of liquidity.
A higher loan to deposit ratio means that assets will be less liquid.
This has to be balanced against the fact that loans represent the highest
interest earning assets. A lower loan to deposit ratio means lower potential
income. On June 30, 2004 net loans were at 73.6% of deposits. On December 31,
2003 net loans were at 83.6%.
17
Forward-Looking Information and Uncertainties Regarding Future
Financial Performance.
---------------------------------------------------------------
This report, including management's discussion above, concerning
earnings and financial condition, contains "forward-looking statements".
Forward-looking statements are estimates of or statements about expectations or
beliefs regarding the Company's future financial performance or anticipated
future financial condition that are based on current information and that are
subject to a number of risks and uncertainties that could cause actual operating
results in the future to differ significantly from those expected at the current
time. Those risks and uncertainties include, although they are not limited to,
the following:
Increased competition. Increased competition from other banks and
financial service businesses, mutual funds and securities brokerage and
investment banking firms that offer competitive loan and investment products
could require us to reduce interest rates and loan fees to attract new loans or
to increase interest rates that we offer on time deposits, either or both of
which could, in turn, reduce interest income and net interest margins.
Possible Adverse Changes in Economic Conditions. Adverse changes in
national or local economic conditions could (i) reduce loan demand which could,
in turn, reduce interest income and net interest margins; (ii) adversely affect
the financial capability of borrowers to meet their loan obligations, which, in
turn, could result in increases in loan losses and require increases in
provisions for possible loan losses, thereby adversely affecting operating
results; and (iii) lead to reductions in real property values that, due to the
Company's reliance on real property to secure many of its loans, could make it
more difficult to prevent losses from being incurred on non-performing loans
through the sale of such real properties.
Possible Adverse Changes in National Economic Conditions and Federal
Reserve Board Monetary Policies. Changes in national economic policies, such as
increases in inflation or declines in economic output often prompt changes in
Federal Reserve Board monetary policies that could reduce interest income or
increase the cost of funds to the Company, either of which could result in
reduced earnings.
Changes in Regulatory Policies. Changes in federal and national bank
regulatory policies, such as increases in capital requirements or in loan loss
reserve or asset/liability ratio requirements, could adversely affect earnings
by reducing yields on earning assets or increasing operating costs.
Due to these and other possible uncertainties and risks, readers are
cautioned not to place undue reliance on the forward-looking statements
contained in this report, which speak only as of the date of this report, or to
make predictions based solely on historical financial performance. The Company
also disclaims any obligation to update forward-looking statements contained in
this report.
Other Matters
- -------------
Off-Balance Sheet Items
The Company has certain ongoing commitments under operating leases.
These commitments do not significantly impact operating results. As of June 30,
2004 and December 31, 2003, commitments to extend credit and letters of credit
were the only financial instruments with off-balance sheet risk. The Company has
not entered into any contracts for financial derivative instruments such as
futures, swaps, options or similar instruments. Loan commitments and letters of
credit were $77,810,000 and $56,888,000 at June 30, 2004 and December 31, 2003,
respectively. As a percentage of net loans, these off-balance sheet items
represent 25.6% and 18.2% respectively.
Corporate Reform Legislation
President George W. Bush signed the "Sarbanes-Oxley Act of 2002" (the
"Act") on July 30, 2002, which responds to the recent corporate accounting
scandals. Among other matters, the Act increases the penalties for securities
fraud, establishes new rules for financial analysts to prevent conflicts of
interest, creates a new independent oversight board for the accounting
profession, imposes restrictions on the consulting activities of accounting
18
firms that audit company records and requires certification of financial reports
by corporate executives. The SEC has adopted a number of rule changes to
implement the provisions of the Act.. The SEC has also approved new rules
proposed and adopted by the New York Stock Exchange and the Nasdaq Stock Market
to strengthen corporate governance standards for listed companies. The Company
does not currently anticipate that compliance with the Act (including the rules
adopted pursuant to the Act) will have a material effect upon its financial
position or results of its operations or its cash flows.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Market risk is the risk of loss to future earnings, to fair values of
assets or to future cash flows that may result from changes in the price or
value of a financial instrument. The value of a financial instrument may change
as a result of changes in interest rates and other market conditions. Market
risk is attributed to all market risk sensitive financial instruments, including
loans, investment securities, deposits and borrowings. The Company does not
engage in trading activities or participate in foreign currency transactions for
its own account. Accordingly, exposure to market risk is primarily a function of
asset and liability management activities and of changes in market rates of
interest. Changes in rates can cause or require increases in the rates paid on
deposits that may take effect more rapidly or may be greater than the increases
in the interest rates that the Company is able to charge on loans and the yields
that it can realize on its investments. The extent of that market risk depends
on a number of variables including the sensitivity to changes in market interest
rates and the maturities of the Company's interest earning assets and deposits.
For the quarter ended June 30, 2004, the prime lending rate held steady at 4.00%
From January 1, 2003 through June 26, 2003, the prime lending rate was 4.25%,
and dropped to 4.00% from June 27 to the end of December 2003. The changes were
not as significant as in prior years. The effect of these rate changes was
mitigated, because a significant amount of the Real Estate loan portfolio is
subject to interest rate caps and floors. Consequently, this did not have a
material effect on earnings.
Item 4. Controls and Procedures.
(a) Disclosure Controls and Procedures: An evaluation of the
Company's disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) was carried out under the supervision and with the
participation of the Company's Chief Executive Officer, Chief Financial Officer
and other members of the Company's senior management as of the end of the
Company's fiscal quarter ended June 30, 2004. The Company's Chief Executive
Officer and Chief Financial Officer concluded that the Company's disclosure
controls and procedures as currently in effect are effective in ensuring that
the information required to be disclosed by the Company in the reports it files
or submits under the Act is (i) accumulated and communicated to the Company's
management (including the Chief Executive Officer and Chief Financial Officer)
to allow timely decisions regarding required disclosure, and (ii) recorded,
processed, summarized and reported within the time periods specified in the
Commission's rules and forms.
(b) Internal Control Over Financial Reporting: An evaluation of
any changes in the Company's internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), that occurred during the
Company's fiscal quarter ended June 30, 2004, was carried out under the
supervision and with the participation of the Company's Chief Executive Officer,
Chief Financial Officer and other members of the Company's senior management.
The Company's Chief Executive Officer and Chief Financial Officer concluded that
no change identified in connection with such evaluation has materially affected,
or is reasonably likely to materially affect, the Company's internal control
over financial reporting.
19
PART II--OTHER INFORMATION
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
Securities
ISSUER PURCHASES OF EQUITY SECURITIES
- ---------------------------------------------------------------------------------------------
Period (a) (b) (c) (d)
Total Number Average Number of Shares Maximum Number (or
Of Shares (or Price Paid (or Units) Purchased Approximate Dollar Value)
Units) Per Share As Part of Publicly of Shares (or Units) that
Purchased (or Unit) Announced Plans or May Yet Be Purchased
Programs Under the Plans or
Programs
- -------------------- ------------- ----------- -------------------- -------------------------
Month #1
April 1 9,443 $31.85 9,443 66,342
through
April 30, 2004
- -------------------- ------------- ----------- -------------------- -------------------------
Month #2
May 1 2,200 $32.60 2,200 64,142
through
May 31, 2004
- -------------------- ------------- ----------- -------------------- -------------------------
Month #3
June 1 2,251 $32.10 2,251 61,891
through
June 30, 2004
- -------------------- ------------- ----------- -------------------- -------------------------
Total 13,894 13,894
- -------------------- ------------- ----------- -------------------- -------------------------
Footnote: On July 25, 2003, the Board of Directors of the Company authorized a
stock repurchase program which calls for the repurchase of up to five percent
(5%) of the Company's then outstanding shares of common stock, or approximately
121,852 shares. The repurchases are to be made from time to time in the open
market as conditions allow and will be structured to comply with Commission Rule
10b-18. All repurchased shares reflected in the table above were made in open
market transactions and then retired. The Board of Directors has reserved the
right to suspend, terminate, modify or cancel this repurchase program at any
time for any reason. On January 23, 2004, the Board of Directors of the
registrant authorized an extension of the FNB Bancorp stock repurchase program
previously adopted on July 25, 2003. On June 30, 2004, a total of 66,054 shares,
or approximately 2.58% of the shares outstanding on that date (adjusted for the
stock dividend paid by the registrant on December 15, 2003, to shareholders of
record on November 28, 2003) had been repurchased pursuant to the program. The
program (as extended) calls for the further purchase of an additional 61,891
shares, subject to an aggregate limit of five percent of the registrant's common
stock. All such transactions, including any block purchases, will be structured
to comply with Commission Rule 10b-18 and all shares that are purchased under
this program will be retired. The Board of Directors has reserved the right to
suspend, terminate, modify or cancel the program at any time for any reason.
20
Item 4. Submission of Matters to a Vote of Securities Holders
The Annual Meeting of Shareholders of FNB Bancorp was held on May 19,
2004. Two matters were voted on at the Annual Meeting: the election of
Directors, and a proposal to ratify and approve the appointment of KPMG LLP as
independent auditors of FNB Bancorp for the 2004 fiscal year. The nine nominees
identified in the proxy statement for the Annual Meeting were elected as
Directors, and the appointment of KPMG LLP was approved. Set forth below is a
summary of the voting:
Election of Directors Votes For Votes Withheld
--------------------- --------- --------------
Michael R. Wyman 1,948,251 71,814
Thomas C. McGraw 1,948,314 71,751
Neil J. Vannucci 1,948,314 71,751
Edward J. Watson 1,948,314 71,751
Daniel J. Modena 1,948,314 71,751
Lisa Angelot 1,948,314 71,751
Jim D. Black 1,948,251 71,814
Anthony J. Clifford 1,947,952 72,113
R. Albert Roensch 1,947,952 72,113
Appointment of KPMG LLP For Against Abstain
----------------------- --- ------- -------
2,005,699 799 13,567
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
31: Rule 13a-14(a)/15d-14(a) Certifications
32: Section 1350 Certifications
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter
ended June 30, 2004.
21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FNB BANCORP
(Registrant)
Dated: August 09, 2004 By: /s/ JIM D. BLACK
-------------------------------------
Jim D. Black
President
(Authorized Officer)
By: /s/ JAMES B. RAMSEY
-------------------------------------
James B. Ramsey
Senior Vice President
Chief Financial Officer
(Principal Financial Officer)
22