10-Q 1 fnb_q.txt FORM 10-Q 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 ========== ==========
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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