0000905870-95-000020.txt : 19950816 0000905870-95-000020.hdr.sgml : 19950816 ACCESSION NUMBER: 0000905870-95-000020 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FNB CORP/NC CENTRAL INDEX KEY: 0000764811 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 561456589 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-13823 FILM NUMBER: 95563898 BUSINESS ADDRESS: STREET 1: 101 SUNSET AVE STREET 2: P O BOX 1328 CITY: ASHEBORO STATE: NC ZIP: 27203 BUSINESS PHONE: 9106268300 MAIL ADDRESS: STREET 1: P.O. BOX 1328 CITY: ASHEBORO STATE: NC ZIP: 27203 10QSB 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-QSB X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1995 OR TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from_________________to________________ Commission File Number 0-13823 FNB CORP. (Exact name of registrant as specified in its charter) North Carolina 56-1456589 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 101 Sunset Avenue, Asheboro, North Carolina 27203 (Address of principal executive offices) (Zip Code) (910) 626-8300 (Registrant's telephone number, including area code) Not Applicable (Former name, former address and former fiscal year, if changed since last report) 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_____ The registrant had 1,796,768 shares of $2.50 par value common stock outstanding at July 19, 1995. Transitional Small Business Disclosure Format (Check One): Yes____ No X PART I. FINANCIAL INFORMATION Item 1. Financial Statements FNB Corp. and Subsidiary CONSOLIDATED BALANCE SHEETS June 30, December 31, ASSETS 1995 1994 1994 Cash and due from banks $ 11,837,605 $ 8,925,396 $ 9,348,113 Federal funds sold 1,650,000 1,375,000 - Investment securities: Available for sale, at estimated fair value (amortized cost of $18,690,507, $26,040,635 and $25,713,359) 18,800,267 25,543,779 24,569,036 Held to maturity (estimated fair value of $56,411,187, $47,776,215 and $50,809,510) 55,905,263 48,080,987 52,414,194 Loans 172,196,954 163,495,441 168,327,821 Less: Allowance for loan losses (1,837,256) (1,770,789) (1,719,717) Net loans 170,359,698 161,724,652 166,608,104 Premises and equipment 5,667,952 5,357,461 5,024,522 Other assets 3,429,601 3,523,004 3,651,740 TOTAL ASSETS $ 267,650,386 $ 254,530,279 $ 261,615,709 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Noninterest-bearing demand deposits $ 37,533,696 $ 36,843,313 $ 37,282,808 Interest-bearing deposits: NOW, savings and money market deposits 77,982,983 85,964,281 82,400,774 Time deposits of $100,000 or more 27,020,230 19,473,499 20,191,213 Other time deposits 95,464,399 87,362,146 90,050,517 Total deposits 238,001,308 229,643,239 229,925,312 Retail repurchase agreements 2,322,457 136,471 3,526,226 Federal funds purchased - - 3,050,000 Other liabilities 2,671,721 1,946,021 1,735,041 TOTAL LIABILITIES 242,995,486 231,725,731 238,236,579 Shareholders' equity: Preferred stock - $10.00 par value; authorized 200,000 shares, none issued - - - Common stock - $2.50 par value; authorized 5,000,000 shares, issued shares - 1,796,768, 1,200,000 and 1,200,000 4,491,920 3,000,000 3,000,000 Surplus - 900,000 900,000 Retained earnings 20,090,539 19,232,473 20,234,383 Net unrealized securities gains (losses) 72,441 (327,925) (755,253) TOTAL SHAREHOLDERS' EQUITY 24,654,900 22,804,548 23,379,130 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 267,650,386 $ 254,530,279 $ 261,615,709 See accompanying notes to consolidated financial statements.
1 FNB Corp. and Subsidiary CONSOLIDATED STATEMENTS OF INCOME Six Months Ended June 30, 1995 1994 INTEREST INCOME: Interest and fees on loans $ 7,541,044 $ 6,318,491 Interest and dividends on investment securities: Taxable income 2,014,322 1,794,024 Non-taxable income 308,881 333,481 Federal funds sold 67,626 24,403 Total interest income 9,931,873 8,470,399 INTEREST EXPENSE: Deposits 4,176,789 3,305,466 Retail repurchase agreements 82,158 273 Federal funds purchased 13,108 7,029 Total interest expense 4,272,055 3,312,768 NET INTEREST INCOME 5,659,818 5,157,631 Provision for loan losses 220,000 85,000 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 5,439,818 5,072,631 OTHER OPERATING INCOME: Service charges on deposit accounts 641,819 590,556 Annuity and brokerage commissions 97,853 233,979 Credit card income 119,845 21,485 Other service charges, commissions and fees 152,255 153,325 Losses on sales of securities (414,596) - Other income 70,613 92,579 Total other operating income 667,789 1,091,924 OTHER OPERATING EXPENSE: Personnel expense 2,185,547 2,446,509 Net occupancy expense 230,296 226,887 Furniture and equipment expense 227,274 269,171 Data processing services 427,949 79,407 Restructuring charges 460,457 - Other expense 1,283,199 1,173,084 Total other operating expense 4,814,722 4,195,058 INCOME BEFORE INCOME TAXES 1,292,885 1,969,497 Income taxes 359,629 576,541 NET INCOME $ 933,256 $ 1,392,956 PER SHARE DATA: Net income $ .52 $ .77 Cash dividends declared .24 .227 Average number of shares outstanding 1,799,976 1,800,000 See accompanying notes to consolidated financial statements.
2 FNB Corp. and Subsidiary CONSOLIDATED STATEMENTS OF INCOME Three Months Ended June 30, 1995 1994 INTEREST INCOME: Interest and fees on loans $ 3,843,971 $ 3,235,429 Interest and dividends on investment securities: Taxable income 1,015,178 904,098 Non-taxable income 149,448 158,044 Federal funds sold 53,986 13,033 Total interest income 5,062,583 4,310,604 INTEREST EXPENSE: Deposits 2,150,682 1,644,644 Retail repurchase agreements 42,078 273 Federal funds purchased 545 5,701 Total interest expense 2,193,305 1,650,618 NET INTEREST INCOME 2,869,278 2,659,986 Provision for loan losses 125,000 50,000 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 2,744,278 2,609,986 OTHER OPERATING INCOME: Service charges on deposit accounts 338,218 307,943 Annuity and brokerage commissions 33,937 129,134 Credit card income 67,442 10,566 Other service charges, commissions and fees 72,437 62,291 Losses on sales of securities - - Other income 39,097 36,269 Total other operating income 551,131 546,203 OTHER OPERATING EXPENSE: Personnel expense 1,096,921 1,242,448 Net occupancy expense 111,869 105,853 Furniture and equipment expense 108,032 132,578 Data processing services 219,825 40,648 Restructuring charges - - Other expense 591,252 595,304 Total other operating expense 2,127,899 2,116,831 INCOME BEFORE INCOME TAXES 1,167,510 1,039,358 Income taxes 367,400 309,802 NET INCOME $ 800,110 $ 729,556 PER SHARE DATA: Net income $ .44 $ .41 Cash dividends declared .12 .113 Average number of shares outstanding 1,799,952 1,800,000 See accompanying notes to consolidated financial statements.
3 FNB Corp. and Subsidiary CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended June 30, 1995 1994 OPERATING ACTIVITIES: Net income $ 933,256 $ 1,392,956 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of premises and equipment 205,350 220,260 Provision for loan losses 220,000 85,000 Deferred income taxes (257,759) 60,567 Deferred loan fees and costs, net (24,538) (360,810) Premium amortization and discount accretion of investment securities, net 93,995 268,593 Amortization of intangibles 29,558 39,593 Losses on sales of securities 414,596 - Net decrease (increase) in loans held for sale (139,600) 992,013 Decrease (increase) in other assets 55,865 (240,662) Increase in other liabilities 720,448 487,806 NET CASH PROVIDED BY OPERATING ACTIVITIES 2,251,171 2,945,316 INVESTING ACTIVITES: Available-for-sale securities: Proceeds from sales 5,896,328 - Proceeds from maturities 877,492 5,108,504 Purchases (249,405) (2,033,678) Held-to-maturity securities: Proceeds from maturities 9,577,838 10,517,988 Purchases (13,079,417) (9,609,046) Net increase in loans (3,774,915) (6,754,234) Proceeds from sales of premises and equipment 620 155 Purchases of premises and equipment (848,780) (154,398) Other, net (64,099) (82,091) NET CASH USED IN INVESTING ACTIVITIES (1,664,338) (3,006,800) FINANCING ACTIVITIES: Net increase in deposits 8,075,996 5,383,183 Increase (decrease) in retail repurchase agreements (1,203,769) 136,471 Decrease in federal funds purchased (3,050,000) (1,800,000) Common stock repurchased (52,800) - Cash dividends and fractional shares paid (216,768) (408,000) NET CASH PROVIDED BY FINANCING ACTIVITIES 3,552,659 3,311,654 NET INCREASE IN CASH AND CASH EQUIVALENTS 4,139,492 3,250,170 Cash and cash equivalents at beginning of period 9,348,113 7,050,226 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 13,487,605 $ 10,300,396 Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 3,800,489 $ 3,226,994 Income taxes 589,647 432,414 See accompanying notes to consolidated financial statements.
4 FNB Corp. and Subsidiary NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The accompanying consolidated financial statements, prepared without audit, include the accounts of FNB Corp. (the Corporation) and its wholly-owned subsidiary, First National Bank and Trust Company (the Bank). All significant intercompany balances and transactions have been eliminated in consolidation. 2. For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, and federal funds sold. Generally, federal funds are purchased and sold for one-day periods. 3. On December 30, 1993, the Corporation entered into definitive agreements to acquire two mutual savings banks, Home Savings Bank of Siler City, SSB ("Home") of Siler City, North Carolina and Randleman Savings Bank, SSB ("Randleman") of Randleman, North Carolina, in merger/conversion transactions, pursuant to which the savings banks would convert from mutual to stock form and the Corporation would simultaneously acquire the shares issued in the conversions. Consummation of such proposed acquisitions is subject to regulatory approval by the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System and the Administrator of the North Carolina Savings Institutions Division. At December 31, 1994, Home operated one office and had approximately $43,614,000 in total assets, $37,732,000 in deposits and $5,105,000 in retained earnings. On this same date, Randleman had approximately $15,610,000 in total assets, $13,459,000 in deposits and $2,100,000 in retained earnings. Regulatory applications for approval to consummate the proposed acquisitions were filed in April, 1994. Substantial changes in regulatory policy occurring shortly after the applications were filed effectively resulted in a moratorium on federal approval of merger/conversions, and the Corporation subsequently withdrew the applications to the FDIC and the Federal Reserve. Due to the likelihood that regulatory approval would not be received for an acquisition of the magnitude represented by Home, the agreement with Home was discontinued in May, 1995. The Corporation and Randleman are exploring other methods of effecting a combination and continue to monitor developments in federal regulations and policy with respect to merger/ conversions. The Corporation has incurred certain costs in connection with the proposed Randleman acquisition. Those costs, which amounted to $71,494 at June 30, 1995, have been deferred and are included in other assets on the consolidated balance sheet. Costs amounting to $113,833, previously deferred in connection with the proposed Home acquisition, were charged to expense in the first quarter of 1995. 4. Loans as presented are net of unearned income of $318,081, $2,048,192 and $944,168 at June 30, 1995, June 30, 1994 and December 31, 1994, respectively. 5 5. Significant components of other expense were as follows: Three Months Ended Six Months Ended June 30, June 30, 1995 1994 1995 1994 FDIC insurance $127,974 $123,924 $255,948 $247,880 Stationery, printing and supplies 63,271 72,234 135,380 142,341 Deferred acquisition costs charged to expense - - 113,833 - 6. In 1995, management adopted a comprehensive restructuring project for the purpose of reengineering all Bank operations to become more competitive and cost-effective in developing business and servicing customers and to improve long-term profitability. This project, scheduled for completion in 1995, will eliminate or realign some positions within the bank and will result in one-time charges to earnings. It is expected that the most significant costs have been incurred in the first half of 1995. A summary of the restructuring charges incurred or accrued during the six months ended June 30, 1995 is as follows: Retirement benefits $256,266 Other personnel costs 48,431 Total personnel costs 304,697 Professional fees related to restructuring project 155,760 Total restructuring charges $460,457 7. Certain amounts for 1994 have been reclassified to conform with the presentation for 1995. The reclassifications had no effect on shareholders' equity or net income as previously reported. 8. All references to per share data have been restated to reflect the three-for-two stock split in May 1995. 9. In the opinion of management, the financial information furnished in this report includes all adjustments (consisting of normal recurring accruals) necessary to a fair statement of the results for the periods presented. 6 Item 2. Management's Discussion and Analysis or Plan of Operation The purpose of this discussion and analysis is to assist in the understanding and evaluation of the financial condition, changes in financial condition and results of operations of FNB Corp. (the Corporation) and its wholly-owned subsidiary, First National Bank and Trust Company (the Bank). This discussion and analysis should be read in conjunction with the financial information appearing elsewhere in this report. OVERVIEW The Corporation earned $933,256 in the first six months of 1995, a 33.0% decline from the same period in 1994. Earnings per share decreased from $.77 to $.52 in comparing these six-month periods. The 1995 results, especially as related to the operations of the first quarter, have been impacted by certain special charges described in more detail in the "Earnings Review". Earnings for the 1995 second quarter amounted to $800,110, which represents a 9.7% increase from the 1994 second quarter and a gain in earnings per share from $.41 to $.44. Total assets were $267,650,386 at June 30, 1995, up 5.2% from June 30, 1994 and 2.3% from December 31, 1994. Loans amounted to $172,196,954 at June 30, 1995, increasing 5.3% from June 30, 1994 and 2.3% from December 31, 1994. Total deposits grew 3.6% from June 30, 1994 and 3.5% from December 31, 1994 to $238,001,308 at June 30, 1995. In December 1993, the Corporation entered into definitive agreements to acquire two mutual savings banks, Home Savings Bank of Siler City, SSB ("Home") and Randleman Savings Bank, SSB ("Randleman"), which had total assets at December 31, 1994 of $43,614,000 and $15,610,000, respectively. In 1994, the Corporation withdrew the applications it had filed with the FDIC and Federal Reserve for approval of the acquisitions as substantial changes in regulatory policy in 1994 effectively resulted in a moratorium on federal approval of such merger/conversion transactions. Due to the likelihood that regulatory approval would not be received for an acquisition of the magnitude of Home, the agreement with Home was discontinued in May 1995. The Corporation and Randleman are exploring other methods of effecting a combination and continue to monitor developments in federal regulations and policy with respect to merger/conversions. EARNINGS REVIEW The Corporation's net income declined $459,700 or 33.0% in the first six months of 1995 compared to the same period of 1994 and increased $70,554 or 9.7% in comparing second quarter periods. The earnings decline for the first six months of 1995 primarily related to the first quarter results which were negatively affected by restructuring charges of $460,457 and losses on sales of securities of $414,596, which are considered one-time charges taken for the strategic purposes discussed in "Business Development Matters". Additionally, and as further discussed in "Other Operating Expense", there was a $113,833 charge to expense in the 1995 first quarter related to costs that had been deferred in connection with the proposed acquisition of Home Savings Bank of Siler City, SSB. Earnings were positively impacted in the first six months of 1995 by an increase of $502,187 or 9.7% in net interest income. Similarly, the 1995 second quarter results benefited from a $209,292 or 7.9% increase in net interest income. Return on average assets, affected by the special charges in 1995, declined from 1.11% in the first six months of 1994 to 0.71% in the first six months of 1995. Similarly, return on average shareholders' 7 equity declined from 12.33% to 7.76% in comparing the same periods. In comparing second quarter periods, however, with increased net income in 1995, return on average assets improved from 1.15% in 1994 to 1.21% in 1995 and return on average shareholders' equity improved from 12.86% to 13.15%. Net Interest Income Net interest income is the difference between interest income, principally from loans and investments, and interest expense, principally on customer deposits. Changes in net interest income result from changes in interest rates and in the volume, or average dollar level, and mix of earning assets and interest-bearing liabilities. Net interest income was $5,658,818 in the first six months of 1995 compared to $5,157,631 in the same period of 1994. This increase of $502,187 or 9.7% resulted from an improvement in the net yield on earning assets, or net interest margin, from 4.53% in the first six months of 1994 to 4.74% in the same period of 1995 coupled with a 4.3% increase in the level of average earning assets. In comparing second quarter periods, net interest income increased in similar fashion by $209,292 or 7.9%, as the net interest margin improved from 4.64% to 4.76% and average earning assets increased 4.6%. The net interest margin, affected for some period prior to early 1994 by a significant decline in the interest rate structure, had generally improved until the second quarter of 1993 as a result of lower deposit rates and then decreased as the impact of declining yields on earning assets became more significant. The interest rate scenario changed significantly in 1994, influenced by actions taken by the Federal Reserve to combat a possible resurgence in inflation. The interest rate increases in 1994 and early 1995 have resulted in an improvement in the net interest margin. Additionally, there has been a continuing negative impact on the margin from certain variable-rate time deposits with minimum rates in excess of current market rates. Such variable-rate time deposits are being phased out over a two-year period that commenced in January 1994. On a taxable equivalent basis, the increase in net interest income in the first six months and second quarter of 1995 were slightly lower at $493,000 and $203,000, respectively, reflecting a decline in the yield of non-taxable investment securities. Table 1 on page 15 and Table 2 on page 16 set forth for the periods indicated information with respect to the Corporation's average balances of assets and liabilities, as well as the total dollar amounts of interest income (taxable equivalent basis) from earning assets and interest expense on interest-bearing liabilities, resultant rates earned or paid, net interest income, net interest spread and net yield on earning assets. Net interest spread refers to the difference between the average yield on earning assets and the average rate paid on interest- bearing liabilities. Net yield on earning assets, or net interest margin, refers to net interest income divided by average earning assets and is influenced by the level and relative mix of earning assets and interest-bearing liabilities. Changes in net interest income on a taxable equivalent basis, as measured by volume and rate variances, are also analyzed in Tables 1 and 2. Volume refers to the average dollar level of earning assets and interest-bearing liabilities. Changes in the net interest margin and spread tend to correlate with movements in the prime rate of interest. The prime rate, which had been 6.00% at December 31, 1992 and 1993, moved up significantly in 1994 to close the year at 8.50%. The average prime for those three years amounted to 6.25%, 6.00% and 7.09%, respectively. The prime rate had declined significantly from 1991 to 1993, but began to increase in 1994 following steps taken by the Federal Reserve to combat a possible resurgence in inflation. The prime rate increased towards the end of the first quarter in 1994 and an additional four times during the remainder of that year. In the first quarter of 1995, it increased again to 9.00% and remained at that level at June 30, 8 1995. Subsequent to that time, actions taken by the Federal Reserve have resulted in a decrease of the prime rate to 8.75% and there appears to be some possibility of a further 1995 decrease. The average prime was 8.89% in the first six months of 1995 compared to 6.43% in the same period of 1994. In comparing six-month periods, the net interest spread improved modestly by 3 basis points from 3.89% in 1994 to 3.92% in 1995 due to the fact that a higher level of interest rates has, on a year-to-date basis, resulted in a greater increase in the average total yield on earning assets than in the average rate paid on interest-bearing liabilities, or cost of funds. The yield on earning assets increased by 88 basis points from 7.35% in 1994 to 8.23% in 1995, while the cost of funds increased by 85 basis points in moving from 3.46% to 4.31%. A comparison of second quarter periods, however, reveals that the net interest spread, which declined from 3.99% to 3.92%, has become subject to pressure from a faster rate of increase in the cost of funds than in the yield on earning assets. While the second quarter increase in the yield on earning assets was 88 basis points, the same as on the year-to-date basis, the cost of funds increased 95 basis points. Provision for Loan Losses This provision is the charge against earnings to provide an allowance or reserve for possible future losses on loans. The amount of each period's charge is affected by several considerations including management's evaluation of various risk factors in determining the adequacy of the allowance (see "Asset Quality"), actual loan loss experience and loan portfolio growth Earnings were negatively impacted in the first six months and second quarter of 1995 compared to the same periods in 1994 by increases in the provision of $135,000 and $75,000, respectively. Other Operating Income Total other operating, or noninterest, income decreased $424,135 or 38.8% in the first six months of 1995 compared to the same period in 1994 due principally to losses on sales of securities in the 1995 first quarter of $414,596 (see "Business Development Matters"). In comparing second quarter periods, noninterest income increased $4,928 or 0.9%. The increase in service charges on deposit accounts resulted primarily from the change in the 1994 fourth quarter in the method of collecting fees on returned checks and overdraft items and from the implementation of daily charges on overdraft balances in May 1995. Annuity and brokerage commissions declined because of a reduction in sales of tax-deferred annuity products. There was a lower level of "other income" in the first six months of 1995 due largely to a reduction in gains on loan sales. Increases in mortgage loan rates have negatively impacted both mortgage loan activity and the average level of profitability on loans actually sold. Credit card income increased due to a new program (see "Business Development Matters"). Other Operating Expense Total other operating, or noninterest, expense increased $619,664 or 14.8% in the first six months of 1995 compared to the same period of 1994 due primarily to restructuring charges recorded in the 1995 first quarter of $460,457 (see "Business Development Matters") and to deferred acquisition costs charged to expense in the 1995 first quarter of $113,833. In comparing second quarter periods, noninterest expense increased $11,068 or 0.5%. The components of other operating expense have been significantly changed by the Bank's decision in 1994 to outsource its data processing operations (see "Business Development Matters"). The conversion of data processing operations to a service bureau arrangement was completed in the 1994 fourth quarter. Consequently, the level of expense for data processing services, which includes trust and credit card processing costs in addition to basic data processing operations, has increased 9 significantly in 1995. Personnel and equipment costs are being reduced, however, as a result of the outsourcing decision. A change in credit card operations (see "Business Development Matters") has also contributed to a higher cost of data processing services. Personnel expense, as noted above, has been positively impacted by the outsourcing of data processing operations with only a slight offset from the change implemented in mid-1994 in credit card operations. Additional reductions in personnel and other expenses are resulting from the comprehensive project being undertaken in 1995 for the reengineering of all bank operations (see "Business Development Matters"). The restructuring charges noted above are expected to constitute the majority of the costs to be incurred in connection with this project. The number of full-time equivalent employees decreased in 1994, reflecting in particular the outsourcing of data processing operations. A further decrease has occurred in the first six months of 1995 as the benefits of the reengineering project have begun to be realized. As is the situation for other operating expenses, personnel expense is subject to the continuing effects of inflation through normal salary adjustments and higher costs of fringe benefits. As discussed in the "Overview", the Corporation in December 1993 entered into definitive agreements to acquire two mutual savings banks, Home Savings Bank of Siler City, SSB ("Home") and Randleman Savings Bank, SSB ("Randleman"). Changes in regulatory policy, however, have effectively resulted in a moratorium on federal approval of such merger/conversion transactions. Based on the results of the continuing evaluation of the progress toward finding a method of effecting a combination, the Corporation elected to charge to expense in the first quarter of 1995 certain costs, amounting to $113,833, that had been deferred in connection with the proposed Home acquisition. As noted in the "Overview", the agreement with Home was formally discontinued in May 1995. Costs deferred in connection with the proposed Randleman acquisition amounted to $71,494 at June 30, 1995. Because of the Federal Deposit Insurance Corporation Improvement Act (FDICIA) enacted in 1989, FDIC insurance expense was increased substantially, with the Bank's expense amounting to $503,379 in the year ended December 31, 1994 and $255,948 in the first six months of 1995. The FDIC has two separate insurance funds, which are the Bank Insurance Fund (BIF) and the Savings Association Insurance Fund (SAIF). When each fund reaches the 1.25 percent reserve ratio required by FDICIA, then the corresponding insurance assessment rates can be lowered starting within that semiannual period. While the BIF fund is expected to reach the mandated reserve ratio in mid-1995, the SAIF fund may not reach this level for several years. Since most of the Bank's deposits are insured through BIF, the Bank could experience a significant savings in FDIC insurance expense, if as currently projected, the effective BIF rate is lowered by as much as 83%. Income Taxes The effective income tax rate decreased from 29.3% in the first six months of 1994 to 27.8% in the same period of 1995 due principally to a decrease in the ratio of taxable to tax-exempt income. LIQUIDITY Liquidity refers to the continuing ability of the Bank to meet deposit withdrawals, fund loan and capital expenditure commitments, maintain reserve requirements, pay operating expenses and provide funds to the Corporation for payment of dividends, debt service and other operational requirements. Liquidity is immediately available from three major sources: (a) cash on hand and on deposit at other banks, (b) the 10 outstanding balance of federal funds sold and (c) the available- for-sale securities portfolio. While additional liquidity is readily obtainable by purchasing federal funds from other banks, the Bank has not found it necessary to utilize this resource to any substantial extent in recent years. Further, while available-for-sale securities are intended to be a source of immediate liquidity, the entire investment securities portfolio is managed to provide both income and a ready source of liquidity. The average portfolio life of debt securities is approximately three and one-half years, resulting in a substantial level of maturities each year. All debt securities are of investment grade quality and, if the need arises, can be promptly liquidated on the open market or pledged as collateral for short-term borrowing. In line with its approach to liquidity, the Bank as a matter of policy does not solicit or accept brokered deposits for funding asset growth. Instead, loans and other assets are based on a solid core of local deposits and the Bank's strong capital position. To date, the steady increase in deposits, retail repurchase agreements and capital has been adequate to fund loan demand in the Bank's market area, while maintaining the desired level of immediate liquidity and a substantial investment portfolio available for both immediate and secondary liquidity purposes. ASSET/LIABILITY MANAGEMENT AND INTEREST RATE SENSITIVITY One of the primary objectives of asset/liability management is to maximize net interest margin while minimizing the earnings risk associated with changes in interest rates. One method used to manage interest rate sensitivity is to measure, over various time periods, the interest rate sensitivity positions, or gaps; however, this method addresses only the magnitude of timing differences and does not address earnings or market value. Therefore, management uses an earnings simulation model to prepare, on a regular basis, earnings projections based on a range of interest rate scenarios in order to more accurately measure interest rate risk. The Bank's balance sheet is liability-sensitive, meaning that in a given period there will be more liabilities than assets subject to immediate repricing as market rates change. Because immediately rate sensitive interest-bearing liabilities exceed rate sensitive assets, the earnings position could improve in a declining rate environment and could deteriorate in a rising rate environment, depending on the correlation of rate changes in these two categories. Included in interest-bearing liabilities subject to rate changes within 30 days are NOW, savings, and money market deposits totaling $77,983,000 as of June 30, 1995. These types of deposits historically have not repriced coincidentally with or in the same proportion as general market indicators. CAPITAL ADEQUACY Under guidelines established by the Federal Reserve Board, capital adequacy is currently measured for regulatory purposes by certain risk-based capital ratios, supplemented by a leverage ratio. The risk-based capital ratios are determined by expressing allowable capital amounts, defined in terms of Tier 1 and Tier 2, as a percentage of risk-adjusted assets, which are computed by measuring the relative credit risk of both the asset categories on the balance sheet and various off-balance sheet exposures. Tier 1 capital consists primarily of common shareholders' equity and qualifying perpetual preferred stock, net of goodwill and other disallowed intangible assets. Tier 2 capital, which is limited to the total of Tier 1 capital, includes allowable amounts of subordinated debt, mandatory convertible securities, preferred stock and the allowance for loan losses. Under current requirements, the minimum Tier 1 capital ratio is 4% and the minimum total capital ratio, consisting of both Tier 1 and Tier 2 capital, is 8%. At June 30, 1995, the Corporation had a Tier 1 capital ratio of 13.81% and a total capital ratio of 14.84%. 11 The leverage ratio, which serves as a minimum capital standard, considers Tier 1 capital only and is expressed as a percentage of average total assets for the most recent quarter, after reduction of those assets for goodwill and other disallowed intangible assets at the measurement date. The required ratio ranges from 3% to 5%, subject to federal bank regulatory evaluation of the organization's overall safety and soundness. At June 30, 1995, the Corporation had a leverage ratio of 9.29%. BALANCE SHEET REVIEW Total assets, which declined slightly in the 1995 first quarter, grew 2.9% in the second quarter. Deposits grew similarly in the second quarter at a rate of 3.4%, but the comparison to prior periods has been affected by the new retail repurchase agreements program. Total assets at June 30, 1995 were higher than at June 30, 1994 and December 31, 1994 by $13,120,000 or 5.2% and $6,034,000 or 2.3%, respectively; deposits were ahead by $8,358,000 or 3.6% and $8,076,000 or 3.5%. A new retail repurchase agreements program that commenced in the second quarter of 1994 generated $2,322,000 of the total asset balance at June 30, 1995, $136,000 at June 30, 1994 and $3,526,000 at December 31, 1994. Average assets increased $10,411,000 or 4.1% in the first six months of 1995 compared to the same period in 1994, while average deposits increased $5,090,000 or 2.2%; the second quarter increases being $11,530,000 or 4.6% and $6,521,000 or 2.9%, respectively. Investment Securities Additions to the investment securities portfolio depend to a large extent on the availability of investable funds that are not otherwise needed to satisfy loan demand. During the twelve-month period ended June 30, 1995, when significant loan growth occurred relative to the growth in total assets, there was a modest increase in the level of investment securities, amounting to $1,081,000 or 1.5%. Of this total increase, $607,000 resulted from the change in the valuation of available-for-sale securities for unrealized gains and losses. Investable funds not otherwise utilized are temporarily invested on an overnight basis as federal funds sold, the level of which is affected by such considerations as near-term loan demand and liquidity needs. Loans The Corporation's primary source of revenue and largest component of earning assets is the loan portfolio. Loans increased $8,702,000 or 5.3% during the twelve-month period ended June 30, 1995. The net loan increase during the first six months of 1995 was $3,869,000 or 2.3%, with the second quarter accounting for all of this increase. Loan growth in the first quarter was flat due to a decrease in the commercial loan portfolio which, as a result of its more volatile nature, tends to have larger fluctuations, both increases and decreases, than other portfolio components. The commercial loan portfolio regained all of its first quarter loss in the second quarter and registered a small net increase for the six- onth period. Average loans were $11,320,000 or 7.2% higher in the first six months of 1995 than in the same period of 1994. The ratio of average loans to average deposits, in comparing six-month periods, increased from 69.8% in 1994 to 73.1% in 1995. Part of this increase is due to the effect of the new retail repurchase agreements program which began generating additional funds in 1994 that can be used for loan growth and other purposes. The ratio of loans to deposits at June 30, 1995 was 72.4%. The residential construction and mortgage loan portfolio accounted for more than three-fourths of the loan increase during the last twelve months. The consumer loan portfolio was affected by a decline in automobile loans that largely offset the gains in credit card loans, in balances related to the home equity line program and in 12 installment loans other than for automobiles. Automobile lending was especially strong in the first half of 1994, but the pace has significantly subsided since that time. Asset Quality Management considers the Bank's asset quality to be of primary importance. A formal loan review function, independent of loan origination, is used to identify and monitor problem loans. In determining the allowance for loan losses and any resulting provision to be charged against earnings, particular emphasis is placed on the results of the loan review process. Consideration is also given to historical loan loss experience, the value and adequacy of collateral, and economic conditions in the Bank's market area. Management's policy in regard to past due loans is conservative and normally requires a prompt charge-off to the allowance for loan losses following timely collection efforts and a thorough review. Further efforts are then pursued through various means available. Loans carried in a nonaccrual status are generally collateralized and the possibility of future losses is considered minimal. Deposits The level and mix of deposits is affected by various factors, including general economic conditions, the particular circumstances of local markets and the specific deposit strategies employed. Broad interest rate declines such as have occurred from 1991 to early 1994 tend to encourage customers to consider alternative investments such as mutual funds and tax-deferred annuity products. Interest rate increases subsequent to this last broad decline have tended to reduce the consideration of these alternative investments. The Bank's level and mix of deposits has been specifically affected by the following factors. Certain variable-rate time deposits with minimum rates in excess of current market rates are being phased out over a two-year period that commenced in January 1994. A retail repurchase agreements program, established in the second quarter of 1994, has tended to transfer funds away from deposits. The balance of retail repurchase agreements was $3,526,000 at December 31, 1994 and $2,322,000 at June 30, 1995. Further, the level of public funds on deposit fluctuates, amounting to $18,376,000, $11,578,000 and $10,940,000 at June 30, 1995, June 30, 1994 and December 31, 1994, respectively. BUSINESS DEVELOPMENT MATTERS As discussed in the "Overview" and "Other Operating Expense" above, the Corporation has entered into a definitive agreement to acquire a mutual savings bank. An additional agreement for the acquisition of a mutual savings bank was discontinued in May 1995. During 1994, a new credit card operation was established in which the Bank carries its own credit card receivables as opposed to the former fee-based arrangement under which accounts were generated for and owned by a correspondent bank. As part of the new credit card strategy, extensive customer solicitation efforts are being undertaken in 1995. Additionally, the merchant aspect of credit card operations has been shifted to an in-house basis from the prior correspondent arrangement. In a significant 1994 development, the Bank elected to outsource all of its data processing, item capture and statement rendering operations. The conversion to a service bureau arrangement was completed in the 1994 fourth quarter. The major items of data processing equipment that were no longer needed by the Bank were acquired by the new processor. While the Bank does not plan to resume any major data 13 processing operations, the level of computer equipment is expected to be significantly increased in 1995 through expanded use of personal computer networks. The new networks will allow for a more direct input of basic loan and deposit account information to the data files maintained by the service bureau. Capital expenditures for these and other projects are expected to be approximately $900,000 in 1995. In 1995, management adopted a comprehensive restructuring project for the purpose of reengineering all Bank operations to become more competitive and cost-effective in developing business and servicing customers and to improve long-term profitability. This project, scheduled for completion in 1995, will eliminate or realign some positions within the Bank and will result in one-time charges to earnings. It is believed that the majority of these restructuring charges were incurred or accrued in the 1995 first quarter. The total recorded in the first quarter, which is equal to the total for the first six months of 1995, was $460,457, of which $304,697 related to personnel costs and $155,760 to professional fees. The Bank also decided in March 1995 to recognize losses of $414,596 from the sales of certain securities held in the available-for-sale investment portfolio in order to gain favorable tax treatment for the losses and to take advantage of reinvestment opportunities at higher coupon rates. While these actions will have a significant adverse impact on 1995 earnings, management believes these decisions will enhance the long-term value of FNB Corp. and insure the competitive edge of its community banking operations. 14 TABLE 1 CONSOLIDATED AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Taxable Equivalent Basis, Dollars in Thousands) 1995 1994 SIX MONTHS ENDED JUNE 30 Average Interest Rates Average Income/ Earned/ Average Balance Expense Paid Balance EARNING ASSETS Loans (2) (3) $169,695 $7,569 8.98 % $158,375 Investment securities: Taxable income 64,774 2,014 6.22 66,746 Non-taxable income (2) 10,195 463 9.09 10,123 Federal funds sold 2,269 68 6.01 1,418 Total earning assets 246,933 10,114 8.23 236,662 Cash and due from banks 9,007 8,345 Other assets, net 6,313 6,835 TOTAL ASSETS $262,253 $251,842 INTEREST-BEARING LIABILITIES Interest-bearing deposits: NOW accounts $ 32,082 338 2.12 $ 32,122 Savings deposits 30,093 439 2.94 31,864 Money market accounts 17,587 270 3.10 21,862 Certificates and other time deposits 116,526 3,130 5.42 107,029 Retail repurchase agreements 3,236 82 5.12 16 Federal funds purchased 456 13 5.80 350 Total interest-bearing liabilities 199,980 4,272 4.31 193,243 Noninterest-bearing demand deposits 35,844 34,165 Other liabilities 2,365 1,833 Shareholders' equity 24,064 22,601 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $262,253 $251,842 NET INTEREST INCOME AND SPREAD $5,842 3.92 % NET YIELD ON EARNING ASSETS 4.74 %
(1) The mix variance, not separately stated, has been proportionally allocated to the rate and volume variances based on their absolute dollar amount. (2) Interest income reated to tax-exempt securities and to certain loans exempt from federal income tax is stated on a taxable equivalent basis, assuming a 34% tax rate. (3) Nonaccrual loans are included in the average loan balance. Loan fees and the incremental direct costs associated with making loans are deferred and subsequently recognized over the life of the loan as an adjustment of interest income. 15 TABLE 1 CONSOLIDATED AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Taxable Equivalent Basis, Dollars in Thousands) 1994 SIX MONTHS ENDED JUNE 30 Average 1995 Versus 1994 Interest Rates Interest Variance Income/ Earned/ due to (1) Net Expense Paid Volume Rate Change EARNING ASSETS Loans (2) (3) $ 6,343 8.05 % $ 469 $ 757 $1,226 Investment securities: Taxable income 1,794 5.38 (54) 274 220 Non-taxable income (2) 500 9.88 4 (41) (37) Federal funds sold 24 3.47 20 24 44 Total earning assets 8,661 7.35 439 1,014 1,453 Cash and due from banks Other assets, net TOTAL ASSETS INTEREST-BEARING LIABILITIES Interest-bearing deposits: NOW accounts 316 1.98 - 22 22 Savings deposits 401 2.54 (23) 61 38 Money market accounts 260 2.40 (57) 67 10 Certificates and other time deposits 2,328 4.39 221 581 802 Retail repurchase agreements - 3.41 82 - 82 Federal funds purchased 7 4.05 2 4 6 Total interest- bearing liabilities 3,312 3.46 225 735 960 Noninterest-bearing demand deposits Other liabilities Shareholders' equity TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY NET INTEREST INCOME AND SPREAD $5,349 3.89 % $214 $279 $493 NET YIELD ON EARNING ASSETS 4.53 %
(1) The mix variance, not separately stated, has been proportionally allocated to the rate and volume variances based on their absolute dollar amount. (2) Interest income reated to tax-exempt securities and to certain loans exempt from federal income tax is stated on a taxable equivalent basis, assuming a 34% tax rate. (3) Nonaccrual loans are included in the average loan balance. Loan fees and the incremental direct costs associated with making loans are deferred and subsequently recognized over the life of the loan as an adjustment of interest income. 15a TABLE 2 CONSOLIDATED AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Taxable Equivalent Basis, Dollars in Thousands) 1995 1994 THREE MONTHS ENDED JUNE 30 Average Interest Rates Average Income/ Earned/ Average Balance Expense Paid Balance EARNING ASSETS Loans (2) (3) $170,750 $3,855 9.05 % $160,042 Investment securities: Taxable income 63,968 1,015 6.35 66,241 Non-taxable income (2) 10,111 224 8.86 9,859 Federal funds sold 3,653 54 5.93 1,368 Total earning assets 248,482 5,148 8.30 237,510 Cash and due from banks 9,206 8,538 Other assets, net 6,531 6,641 TOTAL ASSETS $264,219 $252,689 INTEREST-BEARING LIABILITIES Interest-bearing deposits: NOW accounts $ 32,799 172 2.10 $ 32,352 Savings deposits 29,950 222 2.97 32,341 Money market accounts 16,115 126 3.15 21,945 Certificates and other time deposits 118,855 1,631 5.50 105,845 Retail repurchase agreements 3,255 42 5.19 32 Federal funds purchased 44 - 4.97 530 Total interest-bearing liabilities 201,018 2,193 4.38 193,045 Noninterest-bearing demand deposits 36,289 35,004 Other liabilities 2,575 1,947 Shareholders' equity 24,337 22,693 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $264,219 $252,689 NET INTEREST INCOME AND SPREAD $2,955 3.92 % NET YIELD ON EARNING ASSETS 4.76 %
(1) The mix variance, not separately stated, has been proportionally allocated to the rate and volume variances based on their absolute dollar amount. (2) Interest income reated to tax-exempt securities and to certain loans exempt from federal income tax is stated on a taxable equivalent basis, assuming a 34% tax rate. (3) Nonaccrual loans are included in the average loan balance. Loan fees and the incremental direct costs associated with making loans are deferred and subsequently recognized over the life of the loan as an adjustment of interest income. 16 TABLE 2 CONSOLIDATED AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Taxable Equivalent Basis, Dollars in Thousands) 1994 THREE MONTHS ENDED JUNE 30 Average 1995 Versus 1994 Interest Rates Interest Variance Income/ Earned/ due to (1) Net Expense Paid Volume Rate Change EARNING ASSETS Loans (2) (3) $ 3,248 8.13 % $ 226 $ 381 $ 607 Investment securities: Taxable income 904 5.46 (32) 143 111 Non-taxable income (2) 237 9.62 6 (19) (13) Federal funds sold 13 3.82 31 10 41 Total earning assets 4,402 7.42 231 515 746 Cash and due from banks Other assets, net TOTAL ASSETS INTEREST-BEARING LIABILITIES Interest-bearing deposits: NOW accounts 159 1.97 2 11 13 Savings deposits 202 2.51 (16) 36 20 Money market accounts 134 2.45 (41) 33 (8) Certificates and other time deposits 1,149 4.36 153 329 482 Retail repurchase agreements - 3.41 42 - 42 Federal funds purchased 6 4.31 (7) 1 (6) Total interest- bearing liabilities 1,650 3.43 133 410 543 Noninterest-bearing demand deposits Other liabilities Shareholders' equity TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY NET INTEREST INCOME AND SPREAD $2,752 3.99 % $ 98 $105 $203 NET YIELD ON EARNING ASSETS 4.64 %
(1) The mix variance, not separately stated, has been proportionally allocated to the rate and volume variances based on their absolute dollar amount. (2) Interest income reated to tax-exempt securities and to certain loans exempt from federal income tax is stated on a taxable equivalent basis, assuming a 34% tax rate. (3) Nonaccrual loans are included in the average loan balance. Loan fees and the incremental direct costs associated with making loans are deferred and subsequently recognized over the life of the loan as an adjustment of interest income. 16a PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders The Annual Meeting of Shareholders of FNB Corp. (the "Corporation") was held on May 9, 1995. The total number of shares of the Corporation's Common Stock, par value $2.50 per share, outstanding as of March 30, 1995, the record date for the Annual Meeting, was 1,200,000. The following nominees were elected to the Board of Directors for the terms indicated: Class I Directors - Elected for One-Year Terms Expiring with the Annual Meeting in 1996. Nominee Votes For Withheld James M. Culberson, Jr. 831,424 4,400 J. M. Ramsay III 831,824 4,000 Charles W. Stout, M.D. 831,824 4,000 Earlene V. Ward 831,824 4,000 Class II Directors - Elected for Two-Year Terms Expiring with the Annual Meeting in 1997. Nominee Votes For Withheld W. L. Hancock 831,824 4,000 R. Reynolds Neely, Jr. 831,824 4,000 Richard K. Pugh 829,744 6,080 E. C. Watkins, Jr. 831,224 4,600 Class III Directors - Elected for Three-Year Terms Expiring with the Annual Meeting in 1998. Nominee Votes For Withheld James M. Campbell, Jr. 832,224 3,600 Thomas A. Jordan 831,824 4,000 Michael C. Miller 831,824 4,000 The shareholders voted upon and approved the amendment to the Corporation's bylaws to provide for staggered terms for Directors and to increase the minimum number of directors to nine. The votes on this proposal were as follows: Votes for 804,090 Votes against 28,695 Abstaining 3,039 17 The shareholders ratified the selection of KPMG Peat Marwick, Certified Public Accountants, as independent auditors of the Corporation for the 1995 fiscal year. The votes on ratification were as follows: Votes for 831,529 Votes against 608 Abstaining 3,687 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. Exhibits to this report are listed in the index to exhibits on pages 15 and 16 of this report. (b) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter ended June 30, 1995. SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FNB Corp. (Registrant) Date: August 8, 1995 By: /s/ Jerry A. Little Jerry A. Little Treasurer and Secretary (Principal Financial and Accounting Officer) 18 FNB CORP. INDEX TO EXHIBITS Exhibit No. Description of Exhibit Page No. 3.10 Articles of Incorporation of the Registrant, incorporated herein by reference to Exhibit 3.1 to the Registrant's Form S-14 Registration Statement (No. 2-96498) filed March 16, 1985. 3.11 Articles of Amendment to Articles of Incorporation of the Registrant, adopted May 10, 1988, incorporated herein by reference to Exhibit 19.10 to the Registrant's Form 10-Q Quarterly Report for the quarter ended June 30, 1988. 3.20 Amended and Restated Bylaws of the Registrant, adopted May 9, 1995. 4 Specimen of Registrant's Common Stock Certificate, incorporated herein by reference to Exhibit 4 to Amendment No. 1 to the Registrant's Form S-14 Registration Statement (No. 2-96498) filed April 19, 1985. 10.10 Form of Split Dollar Insurance Agreement dated as of November 1, 1987 between First National Bank and Trust Company and certain of its key employees and directors, incorporated herein by reference to Exhibit 19.20 to the Registrant's Form 10-Q Quarterly Report for the Quarter ended June 30, 1988. 10.11 Form of Amendment to Split Dollar Insurance Agreement dated as of November 1, 1994 between First National Bank and Trust Company and certain of its key employees and directors, incorporated herein by reference to Exhibit 10.11 to the Registrant's Form 10-KSB Annual Report for the fiscal year ended December 31, 1994. 19 10.20 Copy of Split Dollar Insurance Agreement dated as of May 28, 1989 between First National Bank and Trust Company and James M. Culberson, Jr., incorporated herein by reference to Exhibit 10.30 to the Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1989. 10.30 Copy of Stock Compensation Plan adopted May 11, 1993, incorporated herein by reference to Exhibit 10.40 to the Registrant's Form 10-QSB Quarterly Report for the quarter ended June 30, 1993. 10.31 Form of Incentive Stock Option Agreement between FNB Corp. and certain of its key employees, pursuant to the Registrant's Stock Compensation Plan, incorporated herein by reference to Exhibit 10.11 to the Registrant's Form 10-KSB Annual Report for the fiscal year ended December 31, 1994. 10.32 Form of Nonqualified Stock Option Agreement between FNB Corp. and certain of its directors, pursuant to the Registrant's Stock Compensation Plan, incorporated herein by reference to Exhibit 10.11 to the Registrant's Form 10-KSB Annual Report for the fiscal year ended December 31, 1994. 10.40 Copy of FNB Corp. Savings Institutions Management Stock Compensation Plan adopted May 10, 1994, incorporated herein by reference to Exhibit 10.40 to the Registrant's Form 10-QSB Quarterly Report for the quarter ended June 30, 1994. 27.10 Financial Data Schedule for the six months ended June 30, 1995. 27.11 Amended and Restated Financial Data Schedule for the three months ended March 31, 1995. 27.12 Restated Financial Data Schedule for the fiscal year ended December 31, 1994. 20
EX-3 2 May 9, 1995 AMENDED AND RESTATED BYLAWS OF FNB CORP. ARTICLE I Offices 1. Princinal Office. The principal office of the corporation shall be located at such place as the Board of Directors may determine. 2. Other Offices. The corporation may have offices at such other places, either within or without the State of North Carolina, as the Board of Directors may from time to time determine, or as the affairs of the corporation may require. ARTICLE II Shareholders' Meetings 1. Place of Meetings. All meetings of the shareholders shall be held at the principal office of the corporation, or at such other place, either within or without the State of North Carolina, as shall be designated in the notice of the meeting or agreed upon by a majority of the shareholders entitled to vote thereat. 2. Annual Meetings. The annual meeting of shareholders shall be held on the second Tuesday in May, if not a legal holiday, but if a legal holiday, then on the next day following not a legal holiday, for the purpose of electing directors of the corporation and for the transaction of such other business as may be properly brought before the meeting. 3. Substitute Annual Meetings. If the annual meeting shall not be held on the day designated by these bylaws, a substitute annual meeting may be called in accordance with the provisions of Section 4 of this Article. A meeting so called shall be designated and treated for all purposes as the annual meeting. 4. Special Meetings. Special meetings of the shareholders may be called at any time by the President, Secretary or Board of Directors of the corporation. 5. Notice of Meetings. Written or printed notice stating the time and place of the meeting shall be delivered no fewer than 10 nor more than 60 days before the date thereof, either personally or by mail, by or at the direction of the President, the Secretary, or other person calling the meeting, to each shareholder of record entitled to vote at such meeting and to each nonvoting shareholder entitled to notice of the meeting. If the corporation is required by law to give notice of proposed action to nonvoting shareholders and the action is to be taken without a meeting pursuant to Se~ction 9 of this Article, written notice of such proposed action shall be delivered to such shareholders not less than 10 days before such action is taken. If notice is mailed, such notice shall be effective when deposited in the United States mail with postage thereon prepaid and correctly addressed to the shareholder's address shown in the corporation's current record of shareholders. In the case of an annual or substitute annual meeting, the notice of meeting need not specifically state the business to be transacted thereat unless it is a matter with respect to which specific notice to the shareholders is expressly required by the provisions of the North Carolina Business Corporation Act. In the case of a special meeting the notice of meeting shall specifically state the purpose or purposes for which the meeting is called. When a meeting is adjourned for more than 120 days after the date fixed for the original meeting or if a new record date for the adjourned meeting is fixed, notice of the adjourned meeting shall be given as in the case of an original meeting. When a meeting is adjourned for 120 days or less and no new record date for the adjourned meeting is fixed, it is not necessary to give notice of the adjourned meeting other than by announcement at the meeting at which the adjournment is taken. 6. Waiver of Notice. A shareholder may waive any notice required by law, the Articles of Incorporation or these bylaws before or after the date and time stated in the notice. Such waiver must be in writing, be signed by the shareholder entitled to the notice, and be delivered to the corporation for inclusion in the minutes or filing with the corporate records. A shareholder's attendance at a meeting waives objection to lack of notice or defective notice of the meeting, unless the shareholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting. A shareholder's attendance at a meeting also waives objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the notice of meeting, unless the shareholder objects to considering the matter before it is voted upon. 7. Quorum. Shares representing a majority of the outstanding votes entitled to vote upon a particular matter within each voting group represented in person or by proxy shall constitute a quorum at meetings of shareholders. If there is no -2- quorum at the opening of a meeting of shareholders, such meeting may be adjourned from time to time by a vote of a majority of the votes cast on the motion to adjourn; at any adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the original meeting unless a new record date is or must be set for the adjourned meeting. Once a share is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is set for that adjourned meeting. 8. Voting of Shares. Except as otherwise provided in the Articles of Incorporation, each outstanding share having voting rights shall be entitled to one vote on each matter submitted to a vote at a meeting of the shareholders. Except in the election of directors, a majority of the votes cast on any matter at a meeting of shareholders at which a quorum is present shall be the act of the shareholders on that matter, unless a greater vote is required by law, by the Articles of Incorporatign or by a bylaw adopted by the shareholders of the corporation. 9. Informal Action by Shareholders. Any action which is required or permitted to be taken at a meeting of the shareholders may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed, either before or after the time the action which is the subject of the shareholder approval is taken, by all of the persons who would be entitled to vote upon such action at a meeting and delivered to the corporation for inclusion in the minutes or filing with the corporate records. Unless otherwise fixed by law or these bylaws, the record date for determining the shareholders entitled to take action without a meeting shall be the date the first shareholder signs the consent. 10. Voting Lists. After fixing a record date for a meeting, the corporation shall prepare an alphabetical list of the names of all the shareholders entitled to notice of such meeting, arranged by voting group and within each voting group by class or series of shares, with the address of and number of shares held by each shareholder. Such list shall be available for inspection by any shareholder, beginning two business days after notice is given of the meeting for which the list was prepared and continuing through the meeting, at the corporation's principal office or at a place identified in the meeting notice in the city where the meeting will be held. A shareholder, or his agent or attorney, is entitled on written demand to inspect and, subject to the requirements of North Carolina law, to copy the list, during regular business hours and at his expense, during the period it is available for inspection. This list shall also be produced and kept open at the time and place of the meeting and shall be subject to inspection by any shareholder, or his agent or attorney, during the whole time of the meeting or any adjournment. -3- 11. Proxies. Shares may be voted either in person or by one or more agents authorized by a written appointment form executed by the shareholder or by his duly authorized attorney in fact. An appointment form is valid for 11 months from the date of its execution, unless a different period is expressly provided in the appointment form. An appointment is revocable by the shareholder unless the appointment form conspicuously states that it is irrevocable and the appointment is coupled with an interest. 12. Shares Held bv Nominees. The corporation may establish a procedure by which the beneficial owner of shares that are registered in the name of a nominee is recognized by the corporation as a shareholder. The extent of this recognition may be determined in the procedure. ARTICLE III Directors 1. General Powers. Subject to the Articles of Incorporation, all corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation be managed under the direction of, its Board of Directors. 2. Number, Term and Qualifications. The number of directors of the corporation shall be not less than nine (9) nor more than twenty-five (25), the exact number of directors within such minimum and maximum limits to be fixed and determined from time to time by resolution by a majority of the full Board of Directors or by resolution of the shareholders at any annual or special meeting thereof. The Board of Directors shall be divided into three classes, which shall be as nearly equal in number as possible. In the event of a change in the number of directors, the Board of Directors shall determine the class or classes to which the increased or decreased number of directors shall be apportioned; provided, however, that no decrease in the number of directors shall affect the term of any director then in office. The directors elected at the 1995 Annual Meeting of Shareholders shall be designated as Class I Directors, Class II Directors and Class III Directors at the time of their election and shall have terms of office as follows: the term of office of Class I Directors shall expire at the 1996 Annual Meeting of Shareholders, the term of office of Class II Directors shall expire at the 1997 Annual Meeting of Shareholders, and the term of office of Class III Directors shall expire at the 1998 Annual Meeting of Shareholders, with the members of each class of directors to hold office until their successors are elected and qualified. At each Annual Meeting of Shareholders subsequent -4- to the 1995 Annual Meeting of Shareholders, directors elected to succeed those whose terms are expiring shall be elected for a term of office to expire at the third succeeding Annual Meeting of Shareholders and when their respective successors are elected and qualified. Directors need not be residents of the State of North Carolina or shareholders of the corporation, except insofar as such requirements are imposed by national banking laws or by regulations of the Federal Reserve and/or the U.S. Comptroller of the Currency. 3. Election of Directors. Except as provided in Section 5 of this Article, the directors shall be elected at the annual meeting of shareholders by a plurality of the votes cast. 4. Removal. Directors may be removed from office with or without cause by the affirmative vote of a majority of the outstanding votes of the corporation entitled to be cast at an election of the directors. However, unless the entire Board of Directors is removed, an individual director may be removed only if the number of votes cast for the removal exceeds the number of votes cast against the removal. If any directors are so removed, new directors may be elected at the same meeting. A director may not be removed by the shareholders at a meeting unless the notice of the meeting states that the purpose, or one of the purposes, of the meeting is removal of the director. 5. Vacancies. Unless the Articles of Incorporation provide otherwise, if a vacancy occurs on the Board of Directors, including, without limitation, a vacancy resulting from an increase in the number of directors or from the failure by the shareholders to elect the full authorized number of directors, the vacancy may be filled by the shareholders or the Board of Directors. If the directors remaining in office constitute fewer than a quorum of the Board of Directors, vacancies may be filled by the affirmative vote of a majority of all the directors, or by the sole remaining director. A vacancy that will occur at a specific later date may be filled before the vacancy occurs but the new director may not take office until the vacancy occurs. A director elected to fill a vacancy shall serve for the unexpired term of his predecessor in office and until his successor is elected and qualified. 6. Chairman. There may be a Chairman of the Board of Directors elected by the directors from their number at any meeting of the Board. The Chairman shall preside at all meetings of the Board of Directors and perform such other duties as may be directed by the Board. The Chairman of the Board shall not be an officer of the corporation unless specifically so designated by the Board. -5- 7. Compensation. The Board of Directors may compensate a director for his services as such and may provide for the payment of all expenses incurred by a director in attending regular and special meetings of the Board or in otherwise fulfilling his duties as a director. 8. Executive and Other Committees. Unless otherwise provided in the Articles of Incorporation or the bylaws, the Board of Directors, by resolution adopted by a majority of the number of directors then in office, may designate from among its members an executive committee and one or more other committees, each consisting of two or more directors. To the extent specified by the Board of Directors or in the Articles of Incorporation of the corporation, such committees shall have and may exercise all of the authority of the Board of Directors in the management of the business and affairs of the corporation, except that a committee may not authorize distributions; approve or propose to shareholders action that North Carolina law requires be approved by shareholders; fill vacancies on the Board of Directors or on any committee; amend the Articles of Incorporation; adopt, amend, or repeal bylaws; approve a plan of merger not requiring shareholder approval; authorize or approve reacquisition of shares of capital stock of the corporation, except according to a formula or method prescribed by the Board of Directors; or authorize or approve the issuance or sale or contract for sale of shares, or determine the designation and relative rights, preferences, and limitations of a class or series of shares, except that the Board of Directors may authorize a committee (or a senior executive officer of the corporation) to do so within limits specifically prescribed by the Board of Directors. ARTICLE IV Meetings of Directors 1. Regular Meetings. A regular meeting of the Board of Directors shall be held immediately after, and at the same place as, the annual meeting of the shareholders. In addition, the Board of Directors may provide, by resolution, the time and place, either within or without the State of North Carolina, for the holding of additional regular meetings. 2. Special Meetings. Special meetings of the Board of Directors may be called by or at the request of the Chairman of the Board, the President or any two directors. Such meetings may be held within or without the State of North Carolina. 3. Notice of Meetings. Regular meetings of the Board of Directors may be held without notice. The person or persons calling a special meeting of the Board of Directors shall, at least two days before the meeting, give -6- notice thereof by any usual means of communication. Such notice need not specify the purpose for which the meeting is called. 4. Waiver of Notice. Any director may waive any required notice before or after the date and time stated in the notice. Attendance at or participation by a director in a meeting shall constitute a waiver of notice of such meeting, unless the director at the beginning of the meeting (or promptly upon his arrival) objects to holding the meeting or transacting any business at the meeting and does not thereafter vote for or assent to action taken at the meeting. 5. Quorum. A majority of the number of directors prescribed, or, if no number is prescribed, the number in office immediately before the meeting begins, shall constitute a quorum for the transaction of business at any meeting of the Board of Directors. 6. Manner of Acting. Except as otherwise provided by law, the Articles of Incorporation or these bylaws, an act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. The vote of a majority of the directors then holding office shall be required to adopt, amend or repeal a bylaw, if otherwise permissible. Approval of a transaction in which one or more directors have an adverse interest shall require a majority, not less than two, of the disinterested directors then in office, even though less than a quorum. 7. Presumption of Assent. A director of the corporation who is present at a meeting of the Board of Directors or a committee of the Board of Directors when corporate action is taken shall be deemed to have assented to the action taken unless his contrary vote is recorded; he objects at the beginning of the meeting (or promptly upon his arrival) to holding it or transacting business at the meeting; his dissent or abstention is entered in the minutes of the meeting; or he files written notice of dissent or abstention with the presiding officer of the meeting before its adjournment or with the corporation immediately after the adjournment of the meeting. The right of dissent or abstention is not available to a director who voted in favor of such action. 8. Informal Action by Directors and Attendance by Telephone. Action taken by a majority of the directors without a meeting is nevertheless Board action if written consent to the action in question, describing the action taken, is signed by all the directors and filed with the minutes of the proceedings of the Board or with the corporate records, whether done before or after the action so taken. Such action shall be effective when the last director signs the consent, unless the consent specifies a different effective date. The Board of Directors may permit any or all directors to participate in a regular or special -7- meeting by, or conduct the meeting through the use of, any means of communication by which all directors participating may simultaneously hear each other during the meeting. A director participating in a meeting by this means is deemed to be present in person at the meeting. 9. Loans to Directors. Except as otherwise provided by law, the corporation shall not directly or indirectly lend money to or guarantee the obligation of a director of the corporation unless the particular loan or guarantee is approved by a majority of the votes represented by the outstanding voting shares of all classes, voting as a single voting group, except the votes of shares owned by or voted under control of the benefited director, or unless the corporation's Board of Directors determines that the loan or guarantee benefits the corporation and either approves the specific loan or guarantee or a general plan authorizing loans and guarantees. The fact that a loan or guarantee is made in violation of this Section does not affect the borrower's liability on the loan. ARTICLE V Officers 1. Number. The officers of the corporation shall consist of a Chairman, a President, a Secretary, a Treasurer, and such Vice Presidents, Assistant Vice Presidents, Assistant Secretaries, Assistant Treasurers and other officers as may be elected from time to time. Any two or more offices may be held by the same person, except the offices of President and Secretary, but no officer may act in more than one capacity where action of two or more officers is required. It shall not be necessary for any officer to be a shareholder of the corporation. 2. Election and Term. Except as hereafter provided, the officers of the corporation shall be elected by the Board of Directors. Such election may be held at any regular or special meeting of the Board. Unless otherwise determined by the Board of Directors, the Chief Executive Officer may appoint assistant officers. Each officer shall hold office until his death, resignation, retirement, removal, disqualification or until his successor is elected and qualified. 3. Removal. Any officer or agent elected or appointed by the Board of Directors may be removed by the Board with or without cause. Officers appointed by the Chief Executive Officer may be removed by him. Any such removal shall be without prejudice to the contract rights, if any, of the person so removed. 4. Compensation, The compensation of all officers of the corporation other than assistant officers shall be fixed by the -8- Board of Directors. No officer shall serve the corporation in any other capacity and receive compensation therefor unless such additional compensation be authorized by the Board of Directors. The compensation of all assistant officers shall be fixed by the Chief Executive Officer of the corporation or his designee. 5. President. The President shall, unless otherwise determined by the Board of Directors, be the Chief Executive Officer of the corporation and, subject to the control of the Board of Directors, shall supervise and control the management of the corporation according to these bylaws. He shall, in the absence of the Chairman, preside at all meetings of the shareholders. He shall sign, with any other proper officer, certificates for shares of the corporation, and any deeds, mortgages, bonds, contracts or other instruments that may lawfully be executed on behalf of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be delegated by the Board of Directors to some other officer or agent; and, in general, he shall perform all duties incident to the office of President and such other duties as may be prescribed by the Board of Directors from time to time. 6. Vice Presidents. The Vice Presidents shall perform such duties and shall have such other powers as the Board of Directors or the President shall prescribe. The Board of Directors may designate one or more Vice Presidents as Executive or Senior Vice President, or any other title that the Board of Directors deems appropriate, and may rank the Vice Presidents in order of authority. The Vice President, or, if more than one, the highest ranking available Vice President, shall, in the absence or disability of the President, perform the duties and exercise the powers of that office. 7. Secretary. The Secretary shall keep accurate records of the acts and proceedings of all meetings of shareholders and directors. He shall give all notices required by law and by these bylaws. He shall have general charge of the corporate records and books and of the corporate seal, and he shall affix the corporate seal to any lawfully executed instruments requiring it. He shall have general charge of the stock transfer books of the Corporation and shall keep, at the registered or principal office of the Corporation, a record of shareholders showing the name and address of each shareholder and the number and class of the shares held by each. He shall sign such instruments as may require his signature, and in general, shall perform all duties incident to the office of Secretary and such other duties as may be assigned to him from time to time by the President or by the Board of Directors. 8. Treasurer. The Treasurer shall have custody of all funds and securities belonging to the Corporation and shall receive, -9- deposit or disburse the same under the direction of the Board of Directors and the President. He shall keep full and accurate records of the finances of the Corporation in books especially provided for the purpose; and he shall cause a true statement of the assets and liabilities as of the close of each fiscal year and of the results of its operations and of changes in surplus for such fiscal year, all in reasonable detail, including particulars as to convertible securities then outstanding, to be made and filed at the registered or principal office of the Corporation within four months after the end of such fiscal year. The statement so filed shall be kept available for inspection by any shareholder for a period of ten years and the Treasurer shall mail or otherwise deliver a copy of the latest such statement to any shareholder upon his written request therefor. The Treasurer shall, in general, perform all duties incident to his office and such other duties as may be assigned to him from time to time by the President or by the Board of Directors. 9. Assistant Officers. The Assistant Vice Presidents, Secretaries and Treasurers shall, in the absence or disability of their superiors, perform the duties and exercise the powers of those offices and shall, in general, perform such other duties as shall be assigned to them by the President or by the respective officers to whom they report. 10. Executive Officers. The Board of Directors may designate any officer as Chief Executive Officer, Chief Operating Officer, Chief Financial Officer or Chief Accounting Officer, which officer shall have such authority as the Board of Directors may designate. 11. Contract Rights. The appointment of an officer does not itself create contract rights in the officer. 12. Bonds. The Board of Directors may by resolution require any or all officers, agents and employees of the corporation to give bond to the corporation, with sufficient sureties, conditioned on the faithful performance of the duties of their respective offices or positions, and to comply with such other conditions as may from time to time be required by the Board of Directors. ARTICLE VI Contracts. Checks and Deposits 1. Contracts. The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument on behalf of the -10- corporation, and such authority may be general or confined to specific instances. 2. Checks and Drafts. All checks, drafts or orders for the payment of money issued in the name of the corporation shall be signed by such officer or officers, agent or agents of the corporation and in such manner as shall from time to time be determined by resolution of the Board of Directors. 3. Deposits. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such depositories as the Board of Directors shall direct. ARTICLE VII Certificates for Shares and Transfer Thereof 1. Certificates for Shares. The Chairman or the President and the Secretary or the Treasurer or any other two officers designated by the Board of Directors shall sign (either manually or in facsimile) share certificates. Shares may but need not be represented by certificates. Unless otherwise provided by law, the rights and obligations of shareholders are identical whether or not their shares are represented by certificates. If shares are issued without certificates, the corporation shall, within a reasonable time after such issuance, send the shareholder a written statement of the information required on certificates by law. At a minimum each share certificate or information statement shall state on its face the following information: the name of the corporation and that it is organized under the law of North Carolina; the name of the person to whom issued; the number and class of shares and the designation of the series, if any, the certificate or information statement represents; if the corporation is authorized to issue different classes of shares or different series within a class, a summary of, or alternatively, a conspicuous statement on the back or front of the certificate or contained in the information statement that the corporation will furnish in writing and without charge, the designations, relative rights, preferences, and limitations applicable to each class and the variations in rights, preferences, and limitations determined for each series (and the authority of the Board of Directors to determine variations for future series); and, a conspicuous statement of any restrictions on the transfer or registration of transfer of the shares. 2. Transfer of Shares. Transfer of shares of the corporation evidenced by certificates shall be made only on the stock transfer books of the corporation by the holder of record thereof, or by his legal representative, who shall furnish proper evidence of authority to transfer, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary or other officer or agent designated by the Board of -11- Directors, and on surrender for cancellation of the certificate for such shares. Transfer of shares of the corporation not evidenced by certificates shall be made upon delivery to the corporation of such documentation as the corporation shall require. 3. Fixing Record Date. For the purpose of determining the shareholders entitled to notice of a meeting of shareholders, to vote, to take any other action, or to receive a dividend with respect to their shares, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders. Such record date fixed by the Board of Directors under this Section shall not be more than 70 days before the meeting or action requiring a determination of shareholders. If no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to a dividend, the close of the business day before the first notice is delivered to shareholders or the date on which the Board of Directors authorizes the dividend, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting - of shareholders has been made as provided in this Section, such determination shall apply to any adjournment thereof unless the Board of Directors fixes a new record date, which it must do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting. 4. Lost Certificates. If a shareholder claims that a certificated security has been lost, apparently destroyed or wrongfully taken, the corporation shall issue a new certificated security or, at the option of the corporation, an equivalent noncertificated security in place of the original security, if the shareholder so requests before the corporation has notice that the security has been acquired by a bona fide purchaser, files with the corporation a sufficient indemnity bond if so required by the corporation, and satisfies any other reasonable requirements imposed by thq corporation. 5. Holder of Record. The corporation may treat as absolute owner of shares the person in whose name the shares stand of record on its books just as if that person had full competency, capacity and authority to exercise all rights of ownership irrespective of any knowledge or notice to the contrary or any description indicating a representative, pledge or other fiduciary relation or any reference to any other instrument or to the rights of any other person appearing upon its record or upon the share certificates except that any person furnishing to the corporation proof of his appointment as a fiduciary shall be treated as if he were a holder of record of its share. -12- The corporation may reject a vote, consent, waiver, or proxy appointment if the Secretary or other officer or agent authorized to tabulate votes, acting in good faith, has reasonable basis for doubt about the validity of the signature on it or about the signatory's authority to sign for the shareholder. 6. Reacquired Shares. The corporation may acquire its own shares and shares so acquired constitute authorized but unissued shares. 7. Richts, Options and Warrants. The corporation may issue rights, options or warrants for the purchase of shares of the corporation. The Board of Directors shall determine the terms upon which the rights, options or warrants are issued, their form and content, and the consideration for which the shares are to be issued. Without limitation, the Board of Directors may include on such rights, options and warrants restrictions or conditions that preclude or limit the exercise, transfer or receipt of such rights, options or warrants by the holder or holders, or beneficial owner or owners, of a specified number or percentage of the outstanding voting shares of the corporation or by any transferee of such holder or owner, or that invalidate or void such rights, options or warrants held by any such holder or owner or by such transferee. In addition, the Board of Directors may implement rights plans that create purchase or conversion rights that are not exercisable by a hostile bidder involved in a hostile takeover of the corporation. ARTICLE VIII. Indemnification 1. Extent. In addition to the indemnification otherwise provided by law, the corporation shall indemnify and hold harmless its directors and officers against liability and litigation expense, including reasonable attorneys' fees, arising out of their status as directors or officers or their activities in any of such capacities or in any capacity in which any of them is or was serving, at the corporation's request, in another corporation, partnership, joint venture, trust or other enterprise, and the corporation shall indemnify and hold harmless those directors, officers or employees of the corporation and who are deemed to be fiduciaries of the corporation's employee pension and welfare benefit plans as defined under the Employee Retirement Income Security Act of 1974, as amended ("ERISA fiduciaries") against all liability and litigation expense, including reasonable attorneys' fees, arising out of their status or activities as ERISA fiduciaries; provided, however, that the corporation shall not indemnify a director or officer against liability or litigation expense that he may incur on account of his activities that at the time taken were known or reasonably -13- should have been known by him to be clearly in conflict with the best interests of the corporation, and the corporation shall not indemnify an ERISA fiduciary against any liability or litigation expense that he may incur on account of his activities that at the time taken were known or reasonably should have been known by him to be clearly in conflict with the best interests of the employee benefit plan to which the activities relate. The corporation shall also indemnify the director, officer, and ERISA fiduciary for reasonable costs, expenses and attorneys' fees in connection with the enforcement of rights to indemnification granted herein, if it is determined in accordance with Section 2 of this Article that the director, officer and ERISA fiduciary is entitled to indemnification hereunder. 2. Determination. Any indemnification under Section 1 of this Article shall be paid by the corporation in any specific case only after a determination that the director, officer or ERISA fiduciary did not act in a manner, at the time the activities were taken, that was known or reasonably should have been known by him to be clearly in conflict with the best interests of the corporation, or the employee benefit plan to which the activities relate, as the case may be. Such determination shall be made (a) by the affirmative vote of a majority (but not less than two) of directors who are or were not parties to such action, suit or proceeding or against whom any such claim is asserted ("disinterested directors") even though less than a quorum, or (b) if a majority (but not less than two) of disinterested directors so direct, by independent legal counsel in a written opinion, or (c) by the vote of a majority of all of the voting shares other than those owned or controlled by directors, officers or ERISA fiduciaries who were parties to such action, suit or proceeding or against whom such claim is asserted, or by a unanimous vote of all of the voting shares, or (d) by a court of competent jurisdiction, 3. Advanced Expenses. Expenses incurred by a director, officer or ERISA fiduciary in defending a civil or criminal claim, action, suit or proceeding may, upon approval of a majority (but not less than two) of the disinterested directors, even though less than a quorum, or, if there are less than two disinterested directors, upon unanimous approval of the Board of Directors, be paid by the corporation in advance of the final disposition of such claim, action, suit or proceeding upon receipt of an undertaking by or on behalf of the director, officer or ERISA fiduciary to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified against such expenses by the corporation. 4. Corporation, For purposes of this Article, references to directors, officers or ERISA fiduciaries of the "corporation" shall be deemed to include directors, officers and ERISA fiduciaries of FNB Corp., its subsidiaries, and all constituent -14- corporations absorbed into FNB Corp. or any of its subsidiaries by a consolidation or merger. 5. Reliance and Consideration. Any director, officer or ERISA fiduciary who at any time after the adoption of this Bylaw serves or has served in any of the aforesaid capacities for or on behalf of the corporation shall be deemed to be doing or to have done so in reliance upon, and as consideration for, the right of indemnification provided herein. Such right shall inure to the benefit of the legal representatives of any such person and shall not be exclusive of any other rights to which such person may be entitled apart from the provision of this Bylaw. No amendment, modification or repeal of this Article VIII shall adversely affect the right of any director, officer or ERISA fiduciary to indemnification hereunder with respect to any activities occurring prior to the time of such amendment, modification or repeal. 6. Insurance. The corporation may purchase and maintain insurance on behalf of its directors, officers, employees and agents and those persons who were serving at the request of the corporation as a director, officer, partner or trustee of, or in some other capacity in, another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this Article or otherwise. Any full or partial payment made by an insurance company under any insurance policy covering any director, officer, employee or agent made to or on behalf of a person entitled to indemnification under this Article shall relieve the corporation of its liability for indemnification provided for in this Article or otherwise to the extent of such payment, and no insurer shall have a right of subrogation against the corporation with respect to such payment. ARTICLE IX General Provisions 1. Dividends. Th6 Board of Directors may from time to time declare, and the corporation may pay, dividends on its outstanding shares in such manner and upon such terms and conditions as are permitted by law and by its Articles of Incorporation. 2. Waiver of Notice. Whenever any notice is required to be given to any shareholder or director under the provisions of the North Carolina Business Corporation Act or under the provisions of the Articles of Incorporation or bylaws of the corporation, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be equivalent to such notice. -15- 3. Fiscal Year. Unless otherwise ordered by the Board of Directors, the fiscal year of the corporation shall be from January 1 to December 31. 4. Inspection of Records bv Shareholders. The shareholders shall not be entitled to inspect or copy any accounting records of the corporation or any records of the corporation with respect to any matter which the corporation determines in good faith may, if disclosed, adversely affect the corporation in the conduct of its business or may constitute material nonpublic information at the time the shareholder's notice of demand to inspect and copy is received by the corporation. 5. Amendments. Except as otherwise provided herein, these bylaws may be amended or repealed and new bylaws may be adopted by the affirmative vote of a majority of the directors then holding office at any regular or special meeting of the Board of Directors. The Board of Directors shall have no power to adopt a bylaw: (1) requiring more than a majority of the voting shares for a quorum at a meeting of shareholders or more than a majority of the votes cast to constitute action by the shareholders, except where higher percentages are required by law; (2) providing for the management of the corporation otherwise than by the Board of Directors or its Executive or other committees; (3) increasing or decreasing the number of directors authorized by these bylaws; (4) classifying and staggering the election of directors. No bylaw adopted or amended by the shareholders shall be altered or repealed by the Board of Directors unless specifically authorized by the shareholders at the time of such adoption or amendment. 6. Inapplicability of Article 9. Article 9 of Chapter 55 of the General Statutes of North Carolina entitled, "The North Carolina Shareholder Protection Act," shall not apply to this corporation. 7. Inapplicability of Article 9. Article 9A of Chapter 55 of the General Statutes of North Carolina, entitled "Control Share Acquisition Act," shall not apply to this corporation. -16- EX-27 3
9 This schedule contains summary financial information extracted from Form 10-QSB for the quarterly period ended June 30, 1995 and is qualified in its entirety by reference to such financial statements. 6-MOS DEC-31-1995 JUN-30-1995 11,837,605 0 1,650,000 0 18,800,267 55,905,263 0 172,196,954 1,837,256 267,650,386 238,001,308 2,322,457 2,671,721 0 4,491,920 0 0 20,162,980 267,650,386 7,541,044 2,323,203 67,626 9,931,873 4,176,789 4,272,055 5,659,818 220,000 (414,596) 4,814,722 1,292,885 1,292,885 0 0 933,256 .52 .52 4.59 149,000 169,000 0 0 1,720,000 168,000 65,000 1,837,000 1,618,000 0 219,000
EX-27 4
9 This schedule contains summary financial information extracted from Form 10-QSB for the quarterly period ended March 31, 1995 and is qualified in its entirety by reference to such financial statements. 3-MOS DEC-31-1995 MAR-31-1995 10,104,157 0 2,615,000 0 18,952,290 53,367,045 0 168,265,885 1,748,616 260,089,157 230,161,223 3,729,667 2,263,449 0 3,000,000 0 0 20,934,818 260,089,157 3,697,073 1,158,577 13,640 4,869,290 2,026,107 2,078,750 2,695,540 95,000 (414,596) 2,686,823 125,375 125,375 0 0 133,146 .07 .07 4.57 149,000 224,000 0 0 1,720,000 93,000 27,000 1,749,000 1,530,000 0 219,000
EX-27 5
9 This schedule contains summary financial information extracted from Form 10-KSB for the year ended December 31, 1994 and is qualified in its entirety by reference to such financial statements. YEAR DEC-31-1994 DEC-31-1994 9,348,113 0 0 0 24,569,036 52,414,194 0 166,327,821 1,719,717 261,615,709 229,925,312 6,576,226 1,735,041 0 3,000,000 0 0 20,379,130 261,615,709 13,228,841 4,368,181 91,034 17,688,056 6,880,389 6,978,734 10,709,322 220,000 0 8,577,948 3,986,252 3,986,252 0 0 2,826,866 1.57 1.57 4.46 0 118,000 0 0 1,745,000 436,000 191,000 1,720,000 1,501,000 0 219,000