-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IzLLCW4LovEtIh4NZSMWDmHJWe5KShexBN+UtgQELMpxJ1gwUamT+ckEfjmKLnL8 xJzCaF+DT/ou8t46PXrERQ== 0001019056-06-000533.txt : 20060512 0001019056-06-000533.hdr.sgml : 20060512 20060512074716 ACCESSION NUMBER: 0001019056-06-000533 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20060331 FILED AS OF DATE: 20060512 DATE AS OF CHANGE: 20060512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FNB BANCORP/CA/ CENTRAL INDEX KEY: 0001163199 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 922115369 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-49693 FILM NUMBER: 06832210 BUSINESS ADDRESS: STREET 1: 975 EL CAMINO REAL 3RD FL STREET 2: C/O FIRST NATIONAL BANK CITY: S. SAN FRANCISCO STATE: CA ZIP: 94080 BUSINESS PHONE: 6505886800 MAIL ADDRESS: STREET 1: 975 EL CAMINO REAL 3RD FL STREET 2: C/O FIRST NATIONAL BANK CITY: S. SAN FRANCISCO STATE: CA ZIP: 94080 10-Q 1 fnb_1q06.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 March 31, 2006 --------------------------------------------- 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 a large accelerated filer an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X] Indicate by check mark whether the registrant is a shell company (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 May 10, 2006: 2,704,014 shares.
PART I--FINANCIAL INFORMATION Item 1. Financial Statements. FNB BANCORP AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Dollars in thousands) ASSETS March 31, December 31, 2006 2005 ------------ ------------ Cash and due from banks $ 21,123 $ 19,068 Federal funds sold 22,710 16,230 ------------ ------------ Cash and cash equivalents 43,833 35,298 Securities available-for-sale 121,295 113,463 Loans, net 357,037 380,051 Bank premises, equipment, and leasehold improvements 12,361 12,028 Other real estate owned 2,600 2,600 Goodwill 1,841 1,841 Accrued interest receivable and other assets 23,906 23,860 ------------ ------------ Total assets $ 562,873 $ 569,141 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Deposits Demand, noninterest bearing $ 120,960 $ 123,641 Demand, interest bearing 60,036 62,581 Savings and money market 177,601 180,489 Time 139,487 140,833 ------------ ------------ Total deposits 498,084 507,544 Accrued expenses and other liabilities 7,853 6,354 ------------ ------------ Total liabilities 505,937 513,898 ------------ ------------ Stockholders' equity Common stock, no par value, authorized 10,000,000 shares; issued and outstanding 2,704,000 shares at March 31, 2006 and 2,700,000 shares at December 31, 2005 34,871 34,793 Additional paid-in capital 22 19 Retained earnings 22,469 20,832 Accumulated other comprehensive loss (426) (401) ------------ ------------ Total stockholders' equity 56,936 55,243 ------------ ------------ Total liabilities and stockholders' equity $ 562,873 $ 569,141 ============ ============
See accompanying notes to consolidated financial statements. 2
FNB BANCORP AND SUBSIDIARY CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) (Dollars in thousands, except share and per share amounts) Three months ended March 31, ---------------------------- 2006 2005 ------------ ------------ Interest income: Interest and fees on loans $ 7,660 $ 5,694 Interest on securities 560 441 Interest on tax-exempt securities 445 329 Federal funds sold 172 51 ------------ ------------ Total interest income 8,837 6,515 ------------ ------------ Interest expense: Interest on deposits 1,951 909 Other interest expense -- 56 ------------ ------------ Total interest expense 1,951 965 ------------ ------------ Net interest income 6,886 5,550 Provision for loan losses 150 120 ------------ ------------ Net interest income after provision for loan losses 6,736 5,430 ------------ ------------ Noninterest income: Gain on sale of other equity securities 1,348 -- Service charges 603 567 Credit card fees 193 216 Other income 172 120 ------------ ------------ Total noninterest income 2,316 903 ------------ ------------ Noninterest expense: Salaries and employee benefits 3,179 2,805 Occupancy expense 416 315 Equipment expense 433 370 Professional fees 273 250 Telephone, postage and supplies 249 194 Bankcard expenses 184 199 Other expense 795 769 ------------ ------------ Total noninterest expense 5,529 4,902 ------------ ------------ Earnings before income tax expense 3,523 1,431 Income tax expense 1,075 415 ------------ ------------ NET EARNINGS $ 2,448 1,016 ============ ============ Dividends declared per common share $ 0.15 $ 0.15 Earnings per share data: Basic $ 0.86 $ 0.38 Diluted $ 0.84 $ 0.37 Weighted average shares outstanding: Basic 2,834,000 2,706,000 Diluted 2,905,000 2,764,000
See accompanying notes to consolidated financial statements. 3
FNB BANCORP AND SUBSIDIARY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (Dollars in thousands) Three months ended March 31 --------------------------- 2006 2005 ------------ ------------ Net earnings $ 2,448 $ 1,016 Unrealized gain/(loss) on AFS securities (25) (563) ------------ ------------ Total comprehensive income $ 2,423 $ 453 ============ ============ See accompanying notes to consolidated financial statements. FNB BANCORP AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Dollars in thousands) Three months ended March 31 --------------------------- 2006 2005 ------------ ------------ Cash flow from operating activities Net earnings $ 2,448 $ 1,016 Adjustments to reconcile net earnings to net cash provided by operating activities Depreciation, amortization and accretion, net 373 379 Stock-based compensation expense 3 2 Provision for loan losses 150 120 Securities write-down -- 66 Gain on sale of other equity securities (1,348) Changes in assets and liabilities: Accrued interest receivable and other assets 1,302 (716) Accrued expenses and other liabilities 1,112 626 ------------ ------------ Net cash provided by operating activities 4,040 1,493 ------------ ------------ Cash flows from investing activities Purchase of securities available-for-sale (14,183) (3,746) Proceeds from matured/called/securities available-for-sale 6,251 10,361 Net decrease in loans 22,864 8,447 Purchases of bank premises, equipment, leasehold improvements (650) (237) ------------ ------------ Net cash provided by investing activities 14,282 14,825 ------------ ------------ Cash flows from financing activities Net increase (decrease) in demand and savings deposits (8,114) 5,289 Net increase (decrease) in time deposits (1,346) 6,080 Net decrease in federal funds purchased -- (19,172) Dividends paid (405) (382) Repurchase of common stock -- (765) Issuance of common stock 78 28 ------------ ------------ Net cash provided by financing activities (9,787) (8,922) ------------ ------------ NET INCREASE IN CASH AND CASH EQUIVALENTS 8,535 7,396 Cash and cash equivalents at beginning of period 35,298 17,084 ------------ ------------ Cash and cash equivalents at end of period $ 43,833 $ 24,480 ============ ============ Additional cash flow information Interest paid $ 1,799 $ 864 Income taxes paid $ 410 $ 337 Non-cash financial activity Accrued dividends $ 405 $ 384
See accompanying notes to consolidated financial statements. 4 FNB BANCORP AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2006 (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. 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, 2005. Results of operations for interim periods are not necessarily indicative of results for the full year. Sequoia National Bank was acquired and merged into the Bank effective April 30, 2005. The estimated fair values of the assets acquired and liabilities assumed by First National Bank of Northern California included Cash and equivalents $20,583,000, Net loans $40,652,000, Core deposit intangibles and goodwill $3,116,000, All other assets $2,837,000, Total deposits $56,025,000, Other liabilities $274,000, or Total net assets of $10,889,000. NOTE B - STOCK OPTION PLANS In 1997, the Company adopted an incentive employee stock option plan, known as the 1997 FNB Bancorp Plan. In 2002, the Company adopted an incentive employee stock option plan known as the 2002 FNB Bancorp Plan. The Plans allow the Company to grant options to employees of up to 348,997 shares, which includes the effect of stock dividends of common stock. At March 31, 2006, the Company has two stock-based employee compensation plans. Prior to 2003, the Company accounted for the plans 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 2005 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. Incentive stock options are 5 granted to bank officers who have been employed for at least one year at the time the options are granted. Non-qualified options are granted to non-employee directors at the same time as the bank officers, but do not require a minimum of one year service. Awards under the Company's plan vest at a rate of 20 percent per year over a period of five years for Incentive Options and vest immediately for Nonstatutory Options. All Options are exercisable for a period of 10 years. Options are granted at an exercise price equal to the market price of the Company's stock at the date of grant. The expected life is the five-year vesting period. The options granted are increased by the amount, if any, of stock dividends granted annually. There were no options granted in the first quarter of 2006. The amount of compensation expense for options recorded in the quarters ended March 31, 2006 and March 31, 2005 was $5,000 and $3,000, respectively. The income tax benefit recognized in the income statements for these amounts was $2,000 and $1,000, respectively for the same two periods. The total intrinsic value of option exercised during the quarter ended March 31, 2006 was $19,000 under the 2002 Plan and $26,000 under the 1997 Plan. The amount of total unrecognized compensation expense related to non-vested options at March 31, 2006 was $56,000, and the weighted average period it will be amortized over is 3.1 years. Effective January 1, 2006, the Company adopted SFAS No. 123(R), "Share-Based Payment", on a modified prospective basis. A summary of option activity under the 2002 FNB Bancorp Plan as of March 31, 2006 and changes during the quarter then ended is presented below:
Weighted- Average 2002 FNB Bancorp Plan Weighted- Remaining Aggregate Average Contractual Intrinsic Exercise Term Value Options Shares Price (in years) (000) - ------------------------------ ------------ ------------ ------------ ------------ Outstanding at January 1, 2006 154,899 $ 25.83 Granted -- -- Exercised 1,827 24.85 Forfeited or expired -- -- Outstanding at march 31, 2006 153,072 25.84 7.8 $ 1,479 Exercisable at March 31, 2006 47,290 23.96 7.1 $ 546
6 A summary of option activity under the 1997 FNB Bancorp Plan as of March 31, 2006, and changes during the quarter then ended is presented below:
Weighted- Average 1997 FNB Bancorp Plan Weighted- Remaining Aggregate Average Contractual Intrinsic Exercise Term Value Options Shares Price (in years) (000) - ------------------------------ ------------ ------------ ------------ ------------ Outstanding at January 1, 2006 68,739 $ 19.84 Granted -- -- Exercised 1,659 19.66 Forfeited or expired -- -- Outstanding at March 31, 2006 67,080 $ 19.84 3.9 $ 1,505 Exercisable at March 31, 2006 62,347 $ 19.86 3.9 $ 975
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 at March 31, 2005 Three months ended March 31, ------------ 2005 ------------ Net earnings as reported $ 1,016 Add: stock-based employee compensation expense included in reported net earnings, net of related tax effects 2 Deduct: total stock-based employee compensation expense determined under fair value method for all awards, net of related tax effect (3) Pro forma net earnings $ 1,015 Earnings per share: Basic - as reported $ 0.38 Basic - pro forma $ 0.38 Diluted - as reported $ 0.37 Diluted - pro forma $ 0.37 NOTE C - 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. 7 (In thousands, except number of shares) Three months ended March 31, ---------------------------- 2006 2005 ------------ ------------ Net earnings $ 2,448 $ 1,016 Weighted average basic shares outstanding 2,834,000 2,706,000 Effect of dilutive options 71,000 58,000 ------------ ------------ Weighted average number of shares outstanding used to calculate diluted earnings per share 2,905,000 2,764,000 ============ ============ All outstanding options were included in the 2006 and 2005 computations. NOTE D - 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 losses on investment securities available for sale. Comprehensive income for the three months ended March 31, 2006 was $2,422,000 compared to $453,000 for the three months ended March 31, 2005. NOTE E - 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 can not be made for the loan (provided the market value of the collateral is sufficient), or, if insufficient, 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. On April 1, 2005, the Bank foreclosed on a loan previously held in non accrual with a balance of $2,600,000, its appraised value at February 2005, less estimated costs to sell and is currently in Other Real Estate Owned. The property securing the loan is a research and development 19,000 square foot office building in Mountain View, California. NOTE F - SALE OF SHARES OF PACIFIC COAST BANKERS' BANCSHARES. A sale of 3,950 shares of Pacific Coast Bankers' Bancshares was arranged by Pacific Coast Bankers' Bancshares (PCBB) as part of its desire to expand the number of PCBB shareholders. The Bank continues to hold a remaining 1,450 shares. The sale resulted in a gain on sale of equity securities, of $1,348,000. 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 8 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 March 31, 2006 were $2,448,000, compared to net earnings of $1,016,000 for the quarter ended March 31, 2005. Gross earnings before income tax expense for the quarter ended March 31, 2006 were $3,523,000, compared to $1,431,000 for the quarter ended March 31, 2005. The $1,432,000 improvement in net earnings was largely attributable to the $1,348,000 gain on sale of other equity securities and the changes in prime rate and cost of funds, as mentioned below. The $1,336,000 increase in net interest income was partly offset by a $627,000 increase in noninterest expense. Net interest income for the quarter ended March 31, 2006 was $6,886,000, compared to $5,550,000 for the quarter ended March 31, 2005. The prime lending rate was 5.25% at the beginning of 2005, and rose to 5.50% on February 2, 2005 and 5.75% on March 22, 2005. This compares with 7.25% on January 1, 2006, 7.50% on January 31, 2006 and 7.75% on March 28, 2006. The Federal Home Loan Bank of San Francisco's Weighted Monthly Cost of Funds Index, based on the months when it is announced, averaged 3.42% for the quarter ended March 31, 2006 compared with 2.21% for the quarter ended March 31, 2005. This, coupled with a net increase in average earning assets over interest bearing liabilities of $4,041,000 in the quarter ended March 31, 2006 compared to the quarter ended March 31, 2005, resulted in a $1,336,000 increase in net interest for the quarter ended March 31, 2006 compared to March 31, 2005. The volume of loans affected by the prime lending rate compared to the volume of interest-bearing deposits, and the size of the rate changes, as well as the timing of when they took effect all contributed to the improvement of net interest income. Net interest income is the difference between interest yield generated by earning assets and the interest expense associated with the funding of those assets. Noninterest income was $2,316,000 and $903,000 for the quarters ended March 31, 2006 and 2005, respectively. The principal item was the $1,348,000 gain on sale of other equity securities, mentioned above. Service charges rose $36,000. Other income increased $52,000, and Credit card fees decreased $23,000. Noninterest expense increased $627,000 in the quarter ended March 31, 2006 compared to the same quarter in 2005. Salaries and employee benefits increased $374,000, while the remaining categories increased by $253,000. 9 The effective tax rate was 30.5% in the first quarter of 2006 compared to 29.0% in the same quarter of 2005. The variance from period to period was due to different volumes of investments in tax-free securities, Low Income Housing Credits, loans in Enterprise Zones, and the effective state tax rate. Basic earnings per share were $0.86 for the first quarter of 2006 compared to $0.38 for the first quarter of 2005. Diluted earnings per share were $0.84 for the first quarter of 2006, compared to $0.37 for the first quarter of 2005. The following table presents an analysis of net interest income and average earning assets and liabilities for the three-month period ended March 31, 2006 compared to the three-month period ended March 31, 2005. Table 1 NET INTEREST INCOME AND AVERAGE BALANCES - ------- (Dollars in thousands)
Three months ended March 31, --------------------------------------------------------------------------------------- 2006 2005 ------------------------------------------ ------------------------------------------ Annualized Annualized Interest Average Interest Average Average Income Yield Average Income Yield INTEREST EARNING ASSETS Balance (Expense) (Cost) Balance (Expense) (Cost) ------------ ------------ ------------ ------------ ------------ ------------ Loans, gross $ 378,617 $ 7,660 8.21% $ 337,687 $ 5,694 6.84% Taxable securities 60,514 560 3.75 58,804 441 3.04 Nontaxable securities 51,892 445 3.48 40,093 329 3.33 Federal funds sold 15,583 172 4.48 8,382 51 2.47 ------------ ------------ ------------ ------------ Total interest earning assets $ 506,606 $ 8,837 7.07 $ 444,966 $ 6,515 5.94 NONINTEREST EARNING ASSETS Cash and due from banks $ 19,320 $ 19,026 Premises and equipment 12,152 11,589 Other assets 23,477 14,616 ------------ ------------ Total noninterest earning assets $ 54,949 $ 45,231 ------------ ------------ TOTAL ASSETS $ 561,555 $ 490,197 ============ ============ INTEREST BEARING LIABILITIES Deposits: Demand, interest bearing $ 60,535 $ (60) (0.40) $ 53,894 $ (36) (0.27) Money market 122,284 (713) (2.36) 102,963 (355) (1.40) Savings 57,162 (57) (0.40) 59,358 (39) (0.27) Time deposits 140,094 (1,121) (3.25) 97,310 (479) (2.00) Federal funds purchased and other borrowings -- -- -- 8,951 (56) (2.54) ------------ ------------ ------------ ------------ Total interest bearing liabilities $ 380,075 (1,951) (2.08) $ 322,476 $ (965) (1.21) ------------ ------------ ------------ ------------ NONINTEREST BEARING LIABILITIES Demand deposits 117,480 109,456 Other liabilities 7,417 5,618 ------------ ------------ Total noninterest bearing liabilities $ 124,897 $ 115,074 ------------ ------------ TOTAL LIABILITIES $ 504,972 $ 437,550 Stockholders' equity $ 56,583 $ 52,647 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 561,555 $ 490,197 ============ ============ NET INTEREST INCOME AND MARGIN ON TOTAL EARNING ASSETS $ 6,886 5.51% $ 5,550 5.06%
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 1, above, shows the various components that contributed to changes in net interest income for the two quarterly periods of 2006 and 2005. Average interest earning assets for the quarter ended March 31, 2006 increased $61,640,000 or 13.9% over the same quarter the year before. The principal interest earning assets are loans, from a volume perspective as well as from an earnings rate perspective. For the quarter ended March 31, 2006, average loans outstanding represented 74.7% of average earning assets. For the quarter ended March 31, 2005, they represented 75.9% of average earning assets. Average loan volume increased $40,930,000 in the first quarter of 2006 compared to the same quarter in 2005, an increase of 12.1%. Loan income increased $1,966,000 in the same period, or 34.5%. The yield increased by 137 basis points. The average volume of taxable securities increased by $1,710,000, and the yield increased by 71 basis points, as a result of the return of rising interest rates. The cost on total interest bearing liabilities increased from 1.21% to 2.08%, an increase of 87 basis points. Most of the change could be seen in time deposits, where rates paid in the first quarter of 2005 were 2.00%, and rose to 3.25% in the first quarter of 2006. Higher interest rates paid on money market deposits, caused an increase in money market deposits, which averaged $19,321,000 or 18.8% higher in the first quarter of 2006. Average time deposits increased by $42,784,000 from the first quarter of 2005 compared to the first quarter in 2006. Interest paid increased 125 basis points the same quarter to quarter . For the three months ended March 31, 2006 the following table shows 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 (changes in rate times change in volume). In this table, the dollar change in rate/volume is prorated to volume and rate proportionately.
Table 2 - ------- RATE/VOLUME VARIANCE ANALYSIS Three Months Ended March 31, (In thousands) 2006 Compared To 2005 Interest Variance Income/Expense Attributable To Variance Rate Volume ------------ ------------ ------------ INTEREST EARNING ASSETS Loans $ 1,966 $ 1,138 $ 828 Taxable securities 119 103 16 Nontaxable securities 116 15 101 Federal funds sold 121 77 44 ------------ ------------ ------------ Total $ 2,322 $ 1,333 $ 989 ------------ ------------ ------------ INTEREST BEARING LIABILITIES Demand deposits $ 24 $ 20 $ 4 Money market 358 245 113 Savings deposits 18 20 (2) Time deposits 642 431 211 Federal funds and other borrowed money (56) -- (56) ------------ ------------ ------------ Total $ 986 $ 716 $ 270 ------------ ------------ ------------ NET INTEREST INCOME $ 1,336 $ 617 $ 719 ============ ============ ============
11 Noninterest income - ------------------ The following table shows the principal components of noninterest income for the periods indicated. Table 3 - ------- NONINTEREST INCOME (In thousands) Three months ended March 31, 2006 2005 ------------ ------------ Gain on sale of other equity securities $ 1,348 $ -- Service charges 603 567 Credit card fees 193 216 Other income 172 120 ------------ ------------ Total noninterest income $ 2,316 $ 903 ============ ============ Noninterest income consists mainly of service charges on deposits, credit card fees, and other miscellaneous types of income. The principal increase was proceeds from the sale of shares of common stock in Pacific Coast Bancshares (see Note F, above). Service charges increased slightly by $36,000 in the quarter ended March 31, 2006 from the same quarter in 2005. Credit card fees decreased by $23,000. Other income increased $52,000 in the first quarter of 2006 compared to the first quarter of 2005. This represents a number of small accounts each with variances under $15,000. The only larger increase was $16,000 in earnings from an outside service which reconciles official checks, and pays interest on the balances maintained until checks are collected. The increased earnings are influenced by the increased interest rates quarter over quarter. Noninterest expense - ------------------- The following table shows the principal components of noninterest expense for the periods indicated. Table 4 - ------- NONINTEREST EXPENSE (In thousands) Three months ended March 31, 2006 2005 ------------ ------------ Salaries and employee benefits $ 3,179 $ 2,805 Occupancy expense 416 315 Equipment expense 433 370 Professional fees 273 250 Telephone, postage and supplies 249 194 Bankcard expenses 184 199 Other expense 795 769 ------------ ------------ Total noninterest expense $ 5,529 $ 4,902 ============ ============ Noninterest expense consists of salaries and employee benefits representing more than half of the total, and various smaller categories. Salaries and employee benefits increased by $374,000 or 13.3% in the quarter ended March 31, 2006 compared to the same quarter of 2005. Occupancy, 12 equipment,, telephone, postage and supplies expense, as well as salaries and benefits increased due to the acquisition of the two branches of Sequoia National Bank in the second quarter of 2005, which affected the first quarter expenses of 2006, but not 2005. Income Taxes - ------------ The effective tax rate for the quarter ended March 31, 2006 was 30.5% compared to 29.0% for the quarter ended March 31, 2005. This is affected by changing amounts invested in tax-free securities, by available Low Income Housing Credits, by amounts of interest income on qualifying loans in Enterprise zones, and by the effective state tax rate. 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. 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 March 31, 2006 are adequate to meet its operating needs in 2006 and going forward into the foreseeable future. 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. The following table sets forth information concerning interest rate sensitive assets and liabilities as of March 31, 2006. 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. 13
Table 5 - ------- RATE SENSITIVE ASSETS/LIABILITIES As of March 31, 2006 (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 $ 22,710 $ -- $ -- $ -- $ -- $ 22,710 Securities available for sale 5,660 42,518 43,801 29,316 -- 121,295 Loans 262,657 8,600 40,736 49,592 144 361,729 ---------- ---------- ---------- ---------- ---------- ---------- Total interest earning assets 291,027 51,118 84,537 78,908 144 505,734 ---------- ---------- ---------- ---------- ---------- ---------- Cash and due from banks -- -- -- -- 21,123 21,123 Allowance for loan losses -- -- -- -- (4,692) (4,692) Other assets -- -- -- -- 40,708 40,708 ---------- ---------- ---------- ---------- ---------- ---------- Total assets $ 291,027 $ 51,118 $ 84,537 $ 78,908 $ 57,283 $ 562,873 ========== ========== ========== ========== ========== ========== Interest bearing liabilities: Demand, interest bearing $ 60,036 $ -- $ -- $ -- $ -- $ 60,036 Savings and money market 177,601 -- -- -- -- 177,601 Time deposits 58,144 62,804 18,539 -- -- 139,487 ---------- ---------- ---------- ---------- ---------- ---------- Total interest bearing liabilities 295,781 62,804 18,539 -- -- 377,124 ---------- ---------- ---------- ---------- ---------- ---------- Noninterest demand deposits -- -- -- -- 120,960 120,960 Other liabilities -- -- -- -- 7,853 7,853 Stockholders' equity -- -- -- -- 56,936 56,936 ---------- ---------- ---------- ---------- ---------- ---------- Total liabilities and stockholders' equity $ 295,781 $ 62,804 $ 18,539 $ -- $ 185,749 $ 562,873 ========== ========== ========== ========== ========== ========== Interest rate sensitivity gap $ (4,754) $ (11,686) $ 65,998 $ 78,908 $ (128,466) $ -- ========== ========== ========== ========== ========== ========== Cumulative interest rate sensitivity gap $ (4,754) $ (16,440) $ 49,558 $ 128,466 $ -- $ -- Cumulative interest rate sensitivity gap ratio (1.63%) (4.80%) 11.61% 25.41% -- --
Financial Condition - ------------------- Assets. Total assets decreased to $562,873,000 at March 31, 2006 from $569,141,000 at December 31, 2005, a decrease of $6,268,000. Most of this decrease was in net loans, which decreased $23,014,000, offset by an increase of $8,535,000 in cash and equivalents, $7,832,000 in securities available for sale, and an increase of $379,000 in remaining categories. Total liabilities decreased $7,961,000. All deposit categories decreased slightly, with total deposits decreasing $9,460,000, offset by an increase of $1,499,000 in accrued expenses and other liabilities. Loans. Gross loans at March 31, 2006 were $362,505,000, a decrease of $23,041,000 or 6.0% from December 31, 2005. Real estate and construction loans decreased $22,475,000, representing most of the decrease..The principal reason for the runoff represents Real Estate payoffs due to refinancing at other institutions at rates with which we presently do not choose to compete. Commercial and consumer loans decreased a total of $566,000. The portfolio mix was as follows.
Table 6 - ------- LOAN PORTFOLIO March 31, December 31, (Dollars in thousands) 2006 Percent 2005 Percent ---------- ---------- ---------- ---------- Real Estate $ 281,880 77.8% $ 302,813 78.5% Construction 24,701 6.8 26,243 6.8 Commercial 52,860 14.6 53,070 13.8 Consumer 3,064 0.8 3,420 0.9 ---------- ---------- ---------- ---------- Gross loans 362,505 100.0% 385,546 100.0% ========== ========== Net deferred loan fees (776) (948) Allowance for loan losses (4,692) (4,547) ---------- ---------- Net loans $ 357,037 $ 380,051 ========== ==========
14 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 three months ended March 31, 2006 and three months ended March 31, 2005 is as follows: Table 7 - ------- ALLOWANCE FOR LOAN LOSSES Three months ended Three months ended (In thousands) March 31, 2006 March 31, 2005 --------------- --------------- Balance, beginning of period $ 4,547 $ 3,334 Provision for loan losses 150 120 Recoveries 1 13 Amounts charged off (6) (73) --------------- --------------- Balance, end of period $ 4,692 $ 3,394 =============== =============== In management's judgment, the allowance was adequate to absorb losses currently inherent in the loan portfolio at March 31, 2006. 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 March 31, 2006, there were four non-accrual loans for a total of $144,000, compared to one for $17,000 at December 31, 2005, since paid off. Deposits. Total deposits at March 31, 2006 were $498,084,000 compared to $507,544,000 on December 31, 2005. Of these totals, noninterest-bearing demand deposits were $120,960,000 or 24.3% of the total on March 31, 2006 and $123,641,000 or 24.4% on December 31, 2005. Time deposits were $139,487,000 on March 31, 2006 and $140,833,000 on December 31, 2005. The following table sets forth the maturity schedule of the time certificates of deposit on March 31, 2006:
Table 8 - ------- (In thousands) Under $100,000 Maturities: $100,000 or more Total --------------- --------------- --------------- Three months or less $ 20,550 $ 37,594 $ 58,144 Over three to six months 14,010 21,014 35,024 Over six through twelve months 14,947 12,834 27,781 Over twelve months 11,978 6,560 18,538 --------------- --------------- --------------- Total $ 61,485 $ 78,002 $ 139,487 =============== =============== ===============
15 The following table shows the risk-based capital ratios and leverage ratios at March 31, 2006 and December 31, 2005 for the Bank. Table 9 - ------- Minimum "Well March 31, December 31, Capitalized" Risk-Based Capital Ratios 2006 2005 Requirements - ------------------------- ---------- ------------ ------------- Tier 1 Capital 11.48% 10.67% > 6.00% - Total Capital 12.48% 11.59% > 10.00% - Leverage Ratios 9.70% 9.50% > 5.00% - Liquidity. Liquidity is a measure of the Company's ability to convert assets into cash with minimum loss. As of March 31, 2006, Liquid Assets were $165,128,000, or 29.3% of total assets. As of December 31, 2005, Liquid Assets were $148,761,000, or 26.1% 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. The Company also has federal fund borrowing facilities for a total of $50,000,000, a Federal Home Loan Bank line of up to 25% of total assets, and a Federal Reserve Bank facility. As of March 31, 2006, there were no amounts outstanding. 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 March 31, 2006 net loans were at 71.7% of deposits. On December 31, 2005 net loans were at 74.9%. 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 components. 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. 16 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 March 31, 2006 and December 31, 2005, 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 $105,571,000 and $97,701,000 at March 31, 2006 and December 31, 2005, respectively. As a percentage of net loans, these off-balance sheet items represent 29.6% and 25.7% 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 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 17 (See discussion of comparative changes in prime lending rate and the Federal Home Loan Bank of San Francisco's Weighted Monthly Cost of Funds, in the second paragraph under Earnings Analysis on page 8). The changes 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 March 31, 2006. 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: Management has responsibility for establishing and maintaining adequate internal control over financial reporting for the Company. 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 March 31, 2006, 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. PART II--OTHER INFORMATION Item 1. Legal Procedures There are currently no material legal procedures in effect, other than those in the normal course of business. Item 1A. Risk Factors There have been no material changes from risk factors previously disclosed by the Company in response to Item 1A., Part 1 of Form 10-K as of December 31, 2005. Item 6. Exhibits Exhibits 31: Rule 13a-14(a)/15d-14(a) Certifications 32: Section 1350 Certifications 18 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: May 12, 2006. By: /s/ THOMAS C. MCGRAW ------------------------------------- Thomas C. McGraw Chief Executive Officer (Authorized Officer) By: /s/ JAMES B. RAMSEY ------------------------------------- James B. Ramsey Senior Vice President Chief Financial Officer (Principal Financial Officer) 19 EX-31 2 ex_31.txt EXHIBIT 31 EXHIBIT 31 Rule 13a-14(a)/15d-14(a) Certifications I, Thomas C. McGraw, certify that: 1. I have reviewed this quarterly report on Form 10-Q of FNB Bancorp; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15-d15(f) for the registrant and we have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors: a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 12, 2006. /s/ THOMAS C. MC GRAW ----------------------------------------- Thomas C. McGraw, Chief Executive Officer 20 I, James B. Ramsey, certify that: 1. I have reviewed this quarterly report on Form 10-Q of FNB Bancorp; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15-d-15(f) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors: a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 12, 2006. /s/ JAMES B. RAMSEY ----------------------------------------- James B. Ramsey, Senior Vice President and Chief Financial Officer 21 EX-32 3 ex_32.txt EXHIBIT 32 EXHIBIT 32 Section 1350 Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of FNB Bancorp, a California corporation (the "Company"), does hereby certify that: 1. The Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2006 (the "Form 10-Q") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. Information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: May 12, 2006. /s/ THOMAS C. MCGRAW ----------------------------------------- Thomas C. McGraw Chief Executive Officer Dated: May 12, 2006. /s/ JAMES B. RAMSEY ----------------------------------------- James B. Ramsey Senior Vice President and Chief Financial Officer A signed original of this statement required by Section 906 has been provided to FNB Bancorp and will be retained by FNB Bancorp and furnished to the Securities and Exchange Commission or its staff upon request. 22 -----END PRIVACY-ENHANCED MESSAGE-----