-----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, SPazcs06t3OigW+nWKSeKINhccaqBqPV0fmfVvTjGbE8GEnbY0iIoCvwCUQQTsfE w35lSIhm1BsV0+1FZQ70iw== 0001019056-07-000434.txt : 20070507 0001019056-07-000434.hdr.sgml : 20070507 20070507151108 ACCESSION NUMBER: 0001019056-07-000434 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20070331 FILED AS OF DATE: 20070507 DATE AS OF CHANGE: 20070507 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: 07823702 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_1q07.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, 2007 --------------------------------------------- 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 [X] Non-accelerated filer [ ] 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 April 30, 2007: 2,861,455 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, 2007 2006 ------------ ------------ Cash and due from banks $ 16,731 $ 18,297 Federal funds sold 23,420 8,725 ------------ ------------ Cash and cash equivalents 40,151 27,022 Securities available-for-sale at fair value 90,679 94,945 Loans, net 440,487 419,437 Bank premises, equipment, and leasehold improvements 13,723 13,476 Goodwill 1,841 1,841 Accrued interest receivable and other assets 28,106 24,549 ------------ ------------ Total assets $ 614,987 $ 581,270 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Demand, noninterest bearing $ 120,720 $ 123,884 Demand, interest bearing 62,728 60,378 Savings and money market 187,284 162,915 Time 143,805 134,390 ------------ ------------ Total deposits 514,537 481,567 Federal Home Loan Bank advances 30,000 30,000 Accrued expenses and other liabilities 7,744 7,640 ------------ ------------ Total liabilities 552,281 519,207 ------------ ------------ Stockholders' equity: Common stock, no par value, authorized 10,000,000 shares; Issued and outstanding 2,853,000 shares at March 31, 2007 and 2,853,000 shares at December 31, 2006 39,824 39,824 Additional paid-in capital 149 141 Retained earnings 22,706 22,102 Accumulated other comprehensive income (loss) 27 (4) ------------ ------------ Total stockholders' equity 62,706 62,063 ------------ ------------ Total liabilities and stockholders' equity $ 614,987 $ 581,270 ============ ============
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, ----------------------- 2007 2006 ---------- ---------- Interest income: Interest and fees on loans $ 8,741 $ 7,660 Interest on taxable securities 368 560 Interest on tax-exempt securities 525 445 Federal funds sold 270 172 ---------- ---------- Total interest income 9,904 8,837 ---------- ---------- Interest expense: Deposits 2,672 1,951 Federal Home Loan Bank advances 413 -- Federal funds purchased 1 -- ---------- ---------- Total interest expense 3,086 1,951 ---------- ---------- Net interest income 6,818 6,886 Provision for loan losses 150 193 ---------- ---------- Net interest income after provision for loan losses 6,668 6,693 ---------- ---------- Noninterest income: Gain on sale of other equity securities -- 1,348 Service charges 612 603 Credit card fees 199 193 Other income 193 172 ---------- ---------- Total noninterest income 1,004 2,316 ---------- ---------- Noninterest expense: Salaries and employee benefits 3,225 3,179 Occupancy expense 449 416 Equipment expense 381 433 Professional fees 386 273 Telephone, postage and supplies 291 249 Bankcard expenses 179 184 Other expense 847 752 ---------- ---------- Total noninterest expense 5,758 5,486 ---------- ---------- Earnings before income tax expense 1,914 3,523 Income tax expense 455 1,075 ---------- ---------- NET EARNINGS $ 1,459 $ 2,448 ========== ========== Earnings per share data: Basic $ 0.51 $ 0.86 Diluted $ 0.50 $ 0.84 Weighted average shares outstanding: Basic 2,853,000 2,837,000 Diluted 2,893,000 2,908,000 See accompanying notes to consolidated financial statements. 3 - -------------------------------------------------------------------------------- FNB BANCORP AND SUBSIDIARY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Dollars in thousands) Three months ended March 31, ----------------------- 2007 2006 ---------- ---------- Net earnings $ 1,459 $ 2,448 Unrealized gain/(loss) on AFS securities 31 (25) ---------- ---------- Total comprehensive income $ 1,490 $ 2,423 ========== ========== FNB BANCORP AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Dollars in thousands)
Three months ended March 31, ------------------------ 2007 2006 ---------- ---------- Cash flow from operating activities: Net earnings $ 1,459 $ 2,448 Adjustments to reconcile net earnings to net cash provided by operating activities Depreciation and amortization 273 373 Stock-based compensation expense 8 3 Provision for loan losses 150 193 Gain on sale of other equity securities -- (1,348) Changes in assets and liabilities: Accrued interest receivable and other assets (1,480) 1,302 Accrued expenses and other liabilities (344) 1,242 ---------- ---------- Net cash provided by operating activities 66 4,213 ---------- ---------- Cash flows from investing activities: Purchase of securities available-for-sale (10,964) (14,183) Proceeds from matured and called securities available-for-sale 13,220 6,251 Net (increase)/decrease in loans (21,200) 22,691 Purchase of bank premises, equipment and leasehold improvements (535) (650) ---------- ---------- Net cash (used) provided by investing activities (19,479) 14,109 ---------- ---------- Cash flows from financing activities: Net increase (decrease) in demand and savings deposits 23,555 (8,114) Net increase (decrease) in time deposits 9,415 (1,346) Dividends paid (428) (405) Issuance of common stock -- 78 ---------- ---------- Net cash provided by financing activities 32,542 (9,787) ---------- ---------- NET INCREASE IN CASH AND CASH EQUIVALENTS 13,129 8,535 Cash and cash equivalents at beginning of period 27,022 35,298 ---------- ---------- Cash and cash equivalents at end of period $ 40,151 $ 43,833 ========== ========== Additional cash flow information: Interest paid $ 2,964 $ 1,799 Income taxes paid $ -- $ 410 Non-cash investing and financing activity: Accrued dividends 427 405
See accompanying notes to consolidated financial statements. 4 FNB BANCORP AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2007 (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, 2006. Results of operations for interim periods are not necessarily indicative of results for the full year. NOTE B - STOCK OPTION PLANS There were no options granted during the first quarter of 2007. The amount of compensation expense for options recorded in the quarters ended March 31, 2007 and March 31, 2006 was $8,000 and $5,000, respectively. The income tax benefit recognized in the income statements for these amounts was under $1,000 for the same two periods. There were no options exercised during the first quarter of 2007. The total intrinsic value of options 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, 2007 was $84,000, and the weighted average period it will be amortized over is 2.6 years. 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. 5 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. Earnings per share have been computed based on the following (dollars in thousands): Three months ended March 31, 2007 2006 ---------- ---------- Net earnings $ 1,459 $ 2,448 Average number of shares outstanding 2,853,000 2,837,000 Effect of dilutive options 40,000 71,000 Average number of shares outstanding used to calculate diluted earnings per share 2,893,000 2,908,000 All outstanding options were included in the 2007 and 2006 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 gains and losses on investment securities available-for-sale. Comprehensive income for the three months ended March 31, 2007 was $1,490,000 compared to $2,423,000 for the three months ended March 31, 2006. NOTE E - SALE OF SHARES OF PACIFIC COAST BANKERS' BANCSHARES. During the first quarter of 2006, 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 pre-tax gain on sale of equity securities of $1,348,000 during the first quarter of 2006. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Forward-Looking Information and Uncertainties Regarding Future -------------------------------------------------------------- Financial Performance. - ---------------------- This report, including management's discussion below, 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 6 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. 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. All adjustments that, in the opinion of management, are necessary for a fair presentation for the periods presented have been reflected as required by Regulation S-X, Rule 10-01. The 7 Company believes the following critical accounting policy requires significant judgments and estimates used in the preparation of the consolidated financial statements. 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. Goodwill -------- Goodwill arises from the Company's purchase price exceeding the fair value of the net assets of an acquired business. Goodwill represents the value attributable to intangible elements acquired. The value of this goodwill is supported ultimately by profit from the acquired business. A decline in earnings could lead to impairment, which would be recorded as a write-down in the Company's consolidated statements of income. Events that may indicate goodwill impairment include significant or adverse changes in results of operations of the acquired business or asset, economic or political climate; an adverse action or assessment by a regulator; unanticipated competition; and a more-likely-than-not expectation that a reporting unit will be sold or disposed of at a loss. Provision for Income Taxes -------------------------- The Company is subject to income tax laws of the United States, its states, and municipalities in which it operates. The Company considers its income tax provision methodology to be critical, as the determination of current and deferred taxes based on complex analyses of many factors including interpretation of federal and state laws, the difference between tax and financial reporting bases of assets and liabilities (temporary differences), estimates of amounts due or owed, the timing of reversals of temporary differences and current financial standards. Actual results could differ significantly from the estimates due to tax law interpretations used in determining the current and deferred income tax liabilities. Additionally, there can be no assurances that estimates and interpretations used in determining income tax liabilities may not be challenged by federal and state taxing authorities. Recent Accounting Changes ------------------------- In June 2006, the FASB issued FASB Interpretation No. ("FIN") 48, "Accounting for Uncertainty in Income Taxes." This interpretation guides the accounting and reporting of income taxes where interpretation of the law is uncertain. FIN 48 prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of income tax uncertainties with respect to positions taken or expected to be taken in income tax returns. FIN 48 is effective for fiscal years beginning after December 31, 2006. The Company adopted this Statement on January 1, 2007. As a result of the 8 implementation of FIN 48, it was not necessary for the Company to recognize any increase in the liability for unrecognized tax benefits. The total amount of unrecognized tax benefits as of the adoption of FIN 48, including estimated penalties and interest, was $35,000 and relates to the level of Enterprise Zone credits that have been claimed on filed California tax returns. The Company and its subsidiary file income tax returns in the U. S. federal jurisdiction and in California. The Company is no longer subject to U. S. federal and California examinations by tax authorities for years before 2003 and 2001, respectively. The Company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense. In February 2007, the Financial Accounting Standards Board ("FASB") issued Statement No. 159 The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115. Statement No. 159 establishes a fair value option that allows an entity to designate individual financial assets and liabilities as fair value option instruments. Under the fair value option, the change in unrealized gains and losses created by the change in fair value of financial instruments shall be reported in an entity's earnings for each reporting period. Additional disclosures regarding fair value for financial assets and liabilities accounting for under the fair value option are also required. This statement is effective as of the beginning of an entity's first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of FASB Statement No, 157, Fair Value Measurements, makes the choice within 120 days of the beginning of the fiscal year of adoption, and provided the entity has not yet issued interim financial statements in the year of adoption. If an entity elects early adoption, any unrealized gains and losses related to assets and liabilities that are accounted for using the fair value option that existed as of the beginning of the reporting period shall be charged to the opening balance of retained earnings. The Company does not intend to early adopt and does not expect this standard to have a material impact on the Company's financial statements. Earnings Analysis ----------------- Net earnings for the quarter ended March 31, 2007 were $1,459,000, compared to net earnings of $2,448,000 for the quarter ended March 31, 2006, a decrease of $989,000, or 40.4%. Earnings before income tax expense for the quarter ended March 31, 2007 were $1,914,000, compared to $3,523,000 for the quarter ended March 31, 2006, a decrease of $1,609,000, or 45.7%. The principal contributor to the decreased income was a non-recurring gain on sale of other equity securities (common stock of Pacific Coast Bankers' Bancshares), which resulted in a pre tax profit of $1,348,000 in the first quarter of 2006. Net interest income for the quarter ended March 31, 2007 was $6,818,000, compared to $6,886,000 for the quarter ended March 31, 2006, a decrease of $68,000, or 0.99%. The prime lending rate was 8.25% for the entire first quarter of 2007. The prime lending rate was 7.25% at the end of 2005, increased to 7.5% 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 for the three months ended March 2007 (based on the three Index Months ended February 28), averaged 4.39%, compared to 3.42% for the three months ended March 2006 (based on the three Index Months ended February 28). The rate of increase in the rates paid for interest bearing liabilities exceeded the rate of increase in 9 rates earned on interest earning assets during the first quarter of 2007, effectively causing a rate related drop in net interest income compared to the same period in 2006. Basic earnings per share were $0.51 for the first quarter of 2007 compared to $0.86 for the first quarter of 2006. Diluted earnings per share were $0.50 for the first quarter of 2007 compared to $0.84 for the first quarter of 2006. The following table presents an analysis of net interest income and average earning assets and liabilities for the three-month period ended March 31, 2007 compared to the three-month period ended March 31, 2006.
Table 1 NET INTEREST INCOME AND AVERAGE BALANCES - ------- FNB BANCORP AND SUBSIDIARY (Dollars in thousands) Three months ended March 31, ------------------------------------------------------------------------------- 2007 2006 ------------------------------------- ------------------------------------- Annualized Annualized Interest Average Interest Average Average Income Yield Average Income Yield INTEREST EARNING ASSETS Balance (Expense) (Cost) Balance (Expense) (Cost) ---------- ---------- ---------- ---------- ---------- ---------- Loans, gross $ 429,405 $ 8,741 8.26% $ 378,617 $ 7,660 8.21% Taxable securities 31,351 368 4.76 60,514 560 3.75 Nontaxable securities 59,041 525 3.61 51,892 445 3.48 Federal funds sold 20,683 270 5.29 15,583 172 4.48 ---------- ---------- ---------- ---------- ---------- ---------- Total interest earning assets $ 540,480 $ 9,904 7.43 $ 506,606 $ 8,837 7.07 NONINTEREST EARNING ASSETS Cash and due from banks $ 18,043 $ 19,320 Premises and equipment 13,700 12,152 Other assets 23,803 23,477 ---------- ---------- Total noninterest earning assets $ 55,546 $ 54,949 ---------- ---------- TOTAL ASSETS $ 596,026 $ 561,555 ========== ========== INTEREST BEARING LIABILITIES Deposits: Demand, interest bearing $ 60,911 ($ 103) (0.69)% $ 60,535 ($ 60) (0.40)% Money market 120,075 (965) (3.26) 122,284 (713) (2.36) Savings 50,469 (65) (0.52) 57,162 (57) (0.40) Time deposits 141,109 (1,539) (4.42) 140,094 (1,121) (3.25) Federal Home Loan Bank advances 30,000 (413) (5.58) -- -- -- Federal funds purchased 100 (1) (4.06) -- -- -- ---------- ---------- ---------- ---------- ---------- ---------- Total interest bearing liabilities $ 402,664 ($ 3,086) (3.11) $ 380,075 ($ 1,951) (2.08) ---------- ---------- ---------- ---------- NONINTEREST BEARING LIABILITIES Demand deposits 122,530 117,480 Other liabilities 8,240 7,417 ---------- ---------- Total noninterest bearing liabilities $ 130,770 $ 124,897 ---------- ---------- TOTAL LIABILITIES $ 533,434 $ 504,972 Stockholders' equity $ 62,592 $ 56,583 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 596,026 $ 561,555 ========== ========== NET INTEREST INCOME AND MARGIN ON TOTAL EARNING ASSETS $ 6,818 5.12% $ 6,886 5.51%
Interest income is reflected on an actual basis, not on a fully taxable equivalent basis. Yield on gross loans was not adjusted for nonaccrual loans, which were not considered material for this calculation. Net interest income is the difference between interest yield generated by earning assets and the interest expense associated with the funding of those assets. 10 Table 1, above, shows the various components that contributed to changes in net interest income for the three months ended March 31, 2007 and 2006. The principal interest earning assets are loans, from a volume as well as from an earnings rate perspective. For the quarter ended March 31, 2007, average loans outstanding represented 79.4% of average earning assets. For the quarter ended March 31, 2006, they represented 74.7% of average earning assets. The yield on average interest earning assets for the quarter ended March 31, 2007 compared to the quarter ended March 31, 2006 increased from 7.07% to 7.43%, or 36 basis points. Contributing to this was a larger volume invested in loans, which increased by $50,788,000 or 13.41% quarter to quarter, with a yield increase of 5 basis points. Interest income on total interest earning assets increased $1,067,000 or 12.07%. For the three months ended March 31, 2007 compared to the three months ended March 31, 2006, the cost on total interest bearing liabilities increased from 2.08% to 3.11%, an increase of 103 basis points. The most expensive as well as principal source of deposit liabilities comes from time deposits. Their average cost increased from 3.25% to 4.42%, and the expense on these deposits increased $418,000 for the three months ended March 31, 2007 compared to 2006. Their average volume increased by $1,015,000, or 0.72%. The other significant increase was in Federal Home Loan Bank advances, which averaged $30,000,000 in the quarter ended March 31, 2007, at a rate of 5.58%. There were no advances during the same quarter of 2006. For the three month periods ended March 31, 2007 and March 31, 2006, 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), and (b) changes in rate (changes in rate times the prior year's volume). In this table, the dollar change in rate/volume is prorated to volume and rate proportionately.
Table 2 FNB BANCORP AND SUBSIDIARY ------- RATE/VOLUME VARIANCE ANALYSIS Three Months Ended March 31, (Dollars in thousands) 2007 Compared to 2006 Interest Variance Income/Expense Attributable To Variance Rate Volume -------------- ---------- ---------- INTEREST EARNING ASSETS Loans $ 1,081 $ 47 $ 1,034 Taxable securities (192) 150 (342) Nontaxable securities 80 16 64 Federal funds sold 98 42 56 -------------- ---------- ---------- Total $ 1,067 255 $ 812 -------------- ---------- ---------- INTEREST BEARING LIABILITIES Demand deposits $ 43 $ 43 $ -- Money market 252 270 (18) Savings deposits 8 17 (9) Time deposits 418 410 8 Federal Home Loan Bank advances 413 -- 413 Federal funds purchased 1 -- 1 -------------- ---------- ---------- Total $ 1,135 $ 740 $ 395 -------------- ---------- ---------- NET INTEREST INCOME ($ 68) ($ 485) $ 417 ============== ========== ==========
11 Noninterest income - ------------------ The following table shows the principal components of noninterest income for the periods indicated. Table 3 NONINTEREST INCOME (Dollars in thousands) Three months ended March 31, ----------------------- 2007 2006 ---------- ---------- Gain on sale of other equity securities $ -- $ 1,348 Service charges 612 603 Credit card fees 199 193 Other income 193 172 ---------- ---------- Total noninterest income $ 1,004 $ 2,316 ========== ========== Noninterest income consists mainly of service charges on deposits, credit card fees, and several other miscellaneous types of income. For the quarter ended March 31, 2007 compared to quarter ended March 31, 2006, the only significant change was the gain on sale of other equity securities in the first quarter of 2006 (Common Stock of Pacific Coast Bankers' Bancshares, described above). Noninterest expense - ------------------- The following table shows the principal components of noninterest expense for the periods indicated. Table 4 NONINTEREST EXPENSE (Dollars in thousands) Three months ended March 31, ----------------------- 2007 2006 ---------- ---------- Salaries and employee benefits $ 3,225 $ 3,179 Occupancy expense 449 416 Equipment expense 381 433 Professional fees 386 273 Telephone, postage and supplies 291 249 Bankcard expense 179 184 Other expense 847 752 ---------- ---------- Total noninterest expense $ 5,758 $ 5,486 ========== ========== Noninterest expense consists mainly of salaries and employee benefits. For the three months ended March 31, 2007 compared to three months ended March 31, 2006, it represented 56.0% and 57.5% of total noninterest expenses. The increase in salary and employee benefits expense in 2007 compared to the same three month period in 2006 is attributable to normal salary progression, partially offset by staff reductions in the Bank's proof operations. The proof operations staff reduction was made possible by the implementation of item capture processes performed by branch personnel. Occupancy expense increased $33,000 for the quarter ended March 31, 2007 compared to the same quarter in 2006, as a result of lease rental adjustments on branch premises not owned by the Bank, and depreciation on new leasehold improvements. Equipment expense 12 decreased $52,000 primarily as a result of a decrease in depreciation on equipment fully depreciated by the first quarter of 2007. Professional fees increased by $113,000, largely as a result of outside technical personnel involved in the conversion to IBM computers, which should result in savings in operating and maintenance costs in the near future. Other expense increased by $95,000, quarter-over-quarter. The significant items in this group of accounts were $52,000 in expenses in connection with investments in Low Income Housing, (principally depreciation), commencing in January 2007, and a $27,000 increase in surety insurance. The remaining accounts in this group increased by $16,000, but individually represented small variances. Income Taxes - ------------ The effective tax rate for the quarter ended March 31, 2007 was 23.8% compared to 30.5% for the quarter ended March 31, 2006. 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. The tax rate for 2006 was also affected by the taxable gain on sale of equity securities. The decrease in the effective tax rate provision for the first three months of 2007 compared to the same period in 2006 is primarily related to changes in the relative proportion of tax advantaged income in comparison to fully taxable income period over period. 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, 2007 are adequate to meet its operating needs in 2007 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, 2007. 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 13 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.
Table 5 RATE SENSITIVE ASSETS/LIABILITIES - ------- As of March 31, 2007 (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 $ 23,420 $ -- $ -- $ -- $ -- $ 23,420 Securities available for sale 6,332 18,479 32,204 33,664 -- 90,679 Loans 162,379 60,147 153,924 66,679 2,489 445,618 ------------- ------------- ------------- ------------- ------------- ------------- Total interest earning assets 192,131 78,626 186,128 100,343 2,489 559,717 Cash and due from banks -- -- -- -- 16,731 16,731 Allowance for loan losses -- -- -- -- (5,131) (5,131) Other assets -- -- -- -- 43,670 43,670 ------------- ------------- ------------- ------------- ------------- ------------- Total assets $ 192,131 $ 78,626 $ 186,128 $ 100,343 $ 57,759 $ 614,987 ============= ============= ============= ============= ============= ============= Interest bearing liabilities: Demand, interest bearing $ 62,728 $ -- $ -- $ -- $ -- $ 62,728 Savings and money market 187,284 -- -- -- -- 187,284 Time deposits 57,932 71,534 14,339 -- -- 143,805 Federal Home Loan Bank advances -- 10,000 20,000 -- -- 30,000 ------------- ------------- ------------- ------------- ------------- ------------- Total interest bearing liabilities 307,944 81,534 34,339 -- -- 423,817 ------------- ------------- ------------- ------------- ------------- ------------- Noninterest demand deposits -- -- -- -- 120,720 120,720 Other liabilities -- -- -- -- 7,744 7,744 Stockholders' equity -- -- -- -- 62,706 62,706 ------------- ------------- ------------- ------------- ------------- ------------- Total liabilities and stockholders' equity $ 307,944 $ 81,534 $ 34,339 $ -- $ 191,170 $ 614,987 ============= ============= ============= ============= ============= ============= Interest rate sensitivity gap ($ 115,813) ($ 2,908) $ 151,789 $ 100,343 ($ 133,411) $ -- ============= ============= ============= ============= ============= ============= Cumulative interest rate sensitivity gap ($ 115,813) ($ 118,721) $ 33,068 $ 133,411 $ -- $ -- Cumulative interest rate sensitivity gap ratio (60.28%) (43.85%) 7.24% 23.94% -- --
Financial Condition - ------------------- Assets. Total assets increased to $614,987,000 at March 31, 2007 from $581,270,000 at December 31, 2006, an increase of $33,717,000. Most of this increase was in net loans, which increased $21,050,000, and federal funds sold, which increased $14,695,000. The remaining assets decreased a net $2,028,000. Most of the increase in total assets was funded by a $24,369,000 increase in savings and money market accounts, an increase of $9,415,000 in time certificates of deposit, a net decrease of $814,000 in other deposits, an increase of $643,000 in stockholders' equity and a $104,000 increase in other liabilities. The increase in savings and money market accounts and time deposit volumes was primarily due to rate increases. There were no new product lines introduced. Loans. Gross loans at March 31, 2007 were $446,225,000, an increase of $21,058,000 or 4.95% from December 31, 2006. Gross real estate loans increased $13,711,000, construction loans increased $4,293,000, and commercial loans increased $3,426,000, but consumer loans decreased by $372,000. The loan portfolio breakdown was as follows: 14
Table 6 LOAN PORTFOLIO - ------- March 31, December 31, (In thousands) 2007 Percent 2006 Percent ------------ ------------ ------------ ------------ Real Estate $ 332,366 74.4% $ 318,655 74.9% Construction 41,387 9.3 37,094 8.7 Commercial 69,565 15.6 66,139 15.6 Consumer 2,907 0.7 3,279 0.8 ------------ ------------ ------------ ------------ Gross loans 446,225 100.0% 425,167 100.0% ============ ============ Net deferred loan fees (607) (728) Allowance for loan losses (5,131) (5,002) ------------ ------------ Net loans $ 440,487 $ 419,437 ============ ============
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 considers changes in national and local economic conditions, as well as the condition of various market segments. It also reviews any changes in the nature and volume of the portfolio. It watches for the existence and effect of any concentrations of credit, and changes in the level of such concentrations. The Company also reviews the effect of external factors, such as competition and legal and regulatory requirements. Finally, 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, 2007 and the three months ended March 31, 2006 is as follows: Table 7 ALLOWANCE FOR LOAN LOSSES - ------- Three months ended Three months ended (In thousands) March 31, 2007 March 31, 2006 -------------- -------------- Balance, beginning of period $ 5,002 $ 4,374 Provision for loan losses 150 193 Recoveries 2 1 Amounts charged off (23) (6) -------------- -------------- Balance, end of period $ 5,131 $ 4,562 ============== ============== In management's judgment, the allowance was adequate to absorb losses currently inherent in the loan portfolio at March 31, 2007. 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 and other real estate owned. At March 31, 2007, there was $2,489,000 in non-accrual loans, which are well-secured, compared to $2,628,000 at December 31, 2006. The non accrual loans outstanding at December 31, 2006 have all paid off with no loss of principal or interest. There was no Other Real Estate Owned at March 31, 2007, and there were no loans past due 90 days and still accruing. 15 Deposits. Total deposits at March 31, 2007 were $514,537,000 compared to $481,567,000 on December 31, 2006. Of these totals, noninterest-bearing demand deposits were $120,720,000 or 23.5% of the total on March 31, 2007 and $123,884,000 or 25.7% on December 31, 2006. Time deposits were $143,805,000 on March 31, 2007 and $134,390,000 on December 31, 2006. During the first three months of 2007, compared to the same period in 2006, the deposit mix has changed to include a higher proportion of deposits in savings, money market and time deposits. This change was driven primarily by the relatively higher interest paid on these accounts. The following table sets forth the maturity schedule of the time certificates of deposit on March 31, 2007:
Table 8 ------- (Dollars in thousands) Under $100,000 Maturities: $100,000 Or more Total ------------ ------------ ------------ Three months or less $ 22,387 $ 35,545 $ 57,932 Over three to six months 13,077 19,593 32,670 Over six through twelve months 12,289 26,575 38,864 Over twelve months 9,636 4,703 14,339 ------------ ------------ ------------ Total $ 57,389 $ 86,416 $ 143,805 ------------ ------------ ------------ The following table shows the risk-based capital ratios and leverage ratios at March 31, 2007 and December 31, 2006 for the Bank: Table 9 Minimum "Well ------- March 31, December 31, Capitalized" Risk-Based Capital Ratios 2007 2006 Requirements -------------------------- ---------- -------------- ------------- Tier 1 Capital 10.71% 11.03% > 6.00% - Total Capital 11.65% 11.98% > 10.00% - Leverage Ratios 10.07% 10.06% > 5.00% -
Liquidity. Liquidity is a measure of the Company's ability to convert assets into cash with minimal loss. As of March 31, 2007, Liquid Assets were $130,830,000, or 21.3% of total assets. As of December 31, 2006, Liquid Assets were $121,967,000, or 21.0% of total assets. Liquidity consists of cash and due from banks, 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 funds borrowing facilities for a total of $70,000,000, a Federal Home Loan Bank line of credit up to 25% of total assets, and a Federal Reserve Bank borrowing facility. A higher loan to deposit ratio may lead to a loss of liquid assets in the future. This must 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, 2007 net loans were at 85.6% of deposits. On December 31, 2006 net loans were at 87.1% of deposits. 16 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, 2007 and December 31, 2006, 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 $151,485,000 and $137,221,000 at March 31, 2007 and December 31, 2006, respectively. As a percentage of net loans, these off-balance sheet items represent 34.4% and 32.7% respectively. Corporate Reform Legislation President George W. Bush signed the Sarbanes-Oxley Act of 2002 (the "Act") on July 30, 2002, in response to corporate accounting scandals. Among other matters, the Act increased the penalties for securities fraud, established new rules for financial analysts to prevent conflicts of interest, created a new independent oversight board for the accounting profession, imposed restrictions on the consulting activities of accounting firms that audit company records and required 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 estimates that compliance with the Act (including the rules adopted pursuant to the Act) after the initial cost of compliance in 2005 and 2006, will increase the Company's ongoing operating expenses by an estimated $300,000 to $400,000 annually. 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 (see discussion of comparative changes in the 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 9 above). 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 17 and other members of the Company's senior management as of the end of the Company's fiscal quarter ended March 31, 2007. 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 March 31, 2007, 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 Proceedings There are no material legal proceedings adverse to the Company or First National Bank to which any director, officer, affiliate of the Company, or 5% shareholder of the Company, or any associate of any such director, officer, affiliate or 5% shareholder of the Company are a party, and none of the foregoing persons has a material interest adverse to the Company or First National Bank. From time to time, the Company and/or First National Bank are a party to claims and legal proceedings arising in the ordinary course of business. The Company's management is not aware of any material pending legal proceedings to which either it or First National Bank may be a party or has recently been a party, which will have a material adverse effect on the financial condition or results of operations of the Company and First National Bank, taken as a whole. 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, 2006. 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 7, 2007. By: /s/ THOMAS C. MCGRAW ----------------------------- Thomas C. McGraw Chief Executive Officer (Authorized Officer) By: /s/ DAVID A. CURTIS ----------------------------- David A. Curtis 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. Mc Graw, 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 15d-15(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 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. /s/ THOMAS C. MC GRAW Date: May 7, 2007. ------------------------------------------ Thomas C. Mc Graw, Chief Executive Officer 20 I, David A. Curtis, 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 15d-15(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 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. /s/ DAVID A CURTIS Date: May 7, 2007. ------------------------------------------------- David A Curtis, 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, 2007 (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. /s/ THOMAS C. MC GRAW Dated: May 7, 2007. ------------------------------ Thomas C. Mc Graw Chief Executive Officer /s/ DAVID A. CURTIS Dated: May 7, 2007. ------------------------------ David A. Curtis 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. 23 -----END PRIVACY-ENHANCED MESSAGE-----