-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Vz2Eo6nw9bZ/pEhMyJwDrHmB31APkhFIyHKPqzteWbNqH8hfw3PlDYvgCOUxS8pg OHQct55V5pqdZGxHf3PTSA== 0001157523-07-007075.txt : 20070723 0001157523-07-007075.hdr.sgml : 20070723 20070723150514 ACCESSION NUMBER: 0001157523-07-007075 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20070720 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20070723 DATE AS OF CHANGE: 20070723 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FNB United Corp. CENTRAL INDEX KEY: 0000764811 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 561456589 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-13823 FILM NUMBER: 07993637 BUSINESS ADDRESS: STREET 1: 150 SOUTH FAYETTEVILLE STREET STREET 2: P O BOX 1328 CITY: ASHEBORO STATE: NC ZIP: 27203 BUSINESS PHONE: 3366268300 MAIL ADDRESS: STREET 1: P.O. BOX 1328 CITY: ASHEBORO STATE: NC ZIP: 27204 FORMER COMPANY: FORMER CONFORMED NAME: FNB CORP/NC DATE OF NAME CHANGE: 19920703 8-K 1 a5453680.txt FNB UNITED CORP. 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of Earliest Event Reported) July 20, 2007 ------------- FNB United Corp. --------------------------------------------------- (Exact Name of Registrant as Specified in its Charter) North Carolina 0-13823 56-1456589 - -------------------------------------------------------------------------------- (State or Other Jurisdiction (Commission File (IRS Employer of Incorporation) Number) Identification No.) 150 South Fayetteville Street, Asheboro, North Carolina 27203 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code (336) 626-8300 ------------------------------ N/A - -------------------------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 2.02. Results of Operations and Financial Condition On July 20, 2007, FNB United Corp. issued a news release announcing the results of operations for the quarter ended June 30, 2007. A copy of the FNB United news release is attached hereto as Exhibit 99.1. The information in this Form 8-K and Exhibit 99.1 attached hereto shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing made by FNB United under the Securities Act of 1933, whether made before or after the date hereof, except as shall be expressly set forth by specific reference in such filing. ITEM 9.01. Financial Statements and Exhibits Exhibits: 99.1 News release dated July 20, 2007 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FNB UNITED CORP. Date: July 23, 2007 By /s/ Jerry A. Little ---------------------------------------- Jerry A. Little Treasurer and Secretary (Principal Financial and Accounting Officer) INDEX TO EXHIBITS Exhibit No. Description - ----------- ----------- 99.1 News Release dated July 20, 2007. EX-99.1 2 a5453680ex99_1.txt EXHIBIT 99.1 Exhibit 99.1 FNB United Year-to-Date Profits Increase 11% to $7.4 Million ASHEBORO, N.C.--(BUSINESS WIRE)--July 20, 2007--FNB United Corp. (NASDAQ: FNBN), the holding company for CommunityONE Bank, N.A. and Dover Mortgage Company, today reported that moderate loan growth and increased service charge fees led to solid second quarter and year-to-date profits for the periods ended June 30, 2007. Net income was $3.7 million, or $0.33 per diluted share, in the second quarter of 2007, compared to $4.0 million, or $0.41 per diluted share, in the second quarter year ago. For the first six months of 2007, net income increased 11% to $7.4 million, or $0.66 per diluted share, compared to $6.7 million, or $0.83 per diluted share, in the first six months of 2006. The comparability of second quarter and year-to-date results were impacted by the acquisition of Integrity which occurred on April 28, 2006. "Our efforts to generate new business and expand existing relationships, combined with the ongoing improvement in the local economy, have resulted in continued strong loan production," stated Michael Miller, President and CEO. "We continue to maintain a diversified loan portfolio and to manage our risk profile. As a result, we have grown our loan portfolio while improving credit quality." Year-to-Date 2007 Highlights (compared to first half of 2006) -- Net income increased 11% to $7.4 million. -- Net interest income before provision for loan losses increased 30% to $31.9 million. -- Revenues advanced 30% to $42.2 million. -- Net interest margin was 4.11%. -- Non-interest-bearing deposits increased 5%. -- Loans increased 7% to $1.38 billion. -- Return on tangible equity was 16.26%. Operating Results "We had several one time expenses during the second quarter that impacted our earnings performance," said Miller. "We wrote off $154,000 in equipment when we closed our Gastonia operations facility in May and we incurred branding costs of approximately $368,000 when we changed the name of all of the Bank's divisions to CommunityONE on June 4. Our desire for a new name was the result of significant growth in recent years through acquisition, including last year's merger with Integrity Financial Corporation. While the systems and charters of Integrity's bank divisions, Catawba Valley, First Gaston and Northwestern, were merged into First National during the third quarter of 2006, the bank had still been operating as four separate brands. Now that the name change is behind us we should be able to improve efficiencies and our performance in the second half of 2007." In the second quarter, total revenues (net interest income before the provision for loan losses plus non-interest income) increased 13% to $21.4 million compared to $19.0 million in the second quarter a year ago. For the first six months of 2007, total revenues increased 30% to $42.2 million, compared to $32.6 million in the first six months of 2006. Second quarter net interest income before the provision for loan losses increased 12% to $16.1 million, with interest income rising 23% and interest expense increasing 37%. Non-interest income increased 17% to $5.4 million compared to $4.6 million in the second quarter a year ago. The increase was largely due to increased deposit account fees, which were up 9% from the second quarter a year ago and increased mortgage loan sales which were 21% higher than in the same quarter a year ago. For the first six months of 2007, net interest income before the provision for loan losses increased 30% to $31.9 million, compared to $24.5 million in the same period a year ago. Interest income increased 46%, primarily due to the increase in interest earning assets brought about through the acquisition of Integrity Financial in April 2006, while interest expense increased 66%. Year-to-date, non-interest income grew 27% to $10.3 million, compared to $8.1 million in the first six months a year ago, primarily due to a rise in service charge on deposit accounts and the increase in mortgage loan sales. "Our margin came under pressure again this quarter as costs associated with borrowings increased faster than loan yields," Miller said. "However, our strategy of growing deposits is proving to be successful as we have already increased the balances in these accounts by 4% on an annual basis since the beginning of the year." The net interest margin was 4.07% for the second quarter, compared to 4.15% in the preceding quarter, and 4.23% in the second quarter a year ago. Year-to-date, the net interest margin was 4.11%, compared to 4.24% in the first six months of 2006. Second quarter non interest expense was $15.3 million, compared to $14.6 million in the preceding quarter and $12.3 million in the second quarter a year ago. For the first six months of 2007, non interest expense increased to $29.9 million, from $21.7 million in the same period a year earlier. The increase in expense was due to a number of one time costs associated with the name change, write-off of equipment and search and relocation costs for two key executives at Dover Mortgage; as well as the expanded size of the company following the merger. "Several initiatives are underway which should have a positive impact on second half 2007 earnings," said Miller. "A teller platform system was installed late in the second quarter, which should improve customer service, automate the collection of data for commercial deposit account analysis and provide better information regarding customer activity. This information should improve the utilization of staffing levels. Concurrently, we are reviewing our credit card products and operations, as well as the consolidation of ATM processing. These initiatives should expand the quality of our products, increase revenues and reduce operating costs. In addition, a number of service contracts have been renegotiated to save operating expenses." Bob Bratton, Chief Administrative Officer, will be retiring effective September 30, 2007. "Bob as provided tremendous assistance in our transition to a larger banking organization," said Miller. Balance Sheet "Loan production for the quarter was strong showing significant growth over year ago balances," Miller said. "We increased commercial real estate loans 21% and construction loans 25%, compared to a year ago." Gross loans increased 7% to $1.38 billion at June 30, 2007, compared to $1.29 billion a year earlier. "We continue to see growth in our core funding sources of non interest bearing deposits and money market accounts," said Miller. "Non interest bearing and interest bearing transactional accounts have grown at a 6% annualized rate." Total deposits were up 3%, to $1.45 billion at June 30, 2007, from $1.40 billion a year earlier. Non interest-bearing deposits increased 5% at quarter-end compared to a year earlier. Interest-bearing transaction and savings accounts increased 2% during the twelve months ending June 30, 2007, while certificates of deposit increased 3%. Assets increased 3% to $1.86 billion at June 30, 2007, from $1.82 billion a year earlier. Book value per share improved to $18.72 at June 30, 2007, from $18.37 a year earlier, and tangible book value per share was $8.37 at quarter-end, compared to $7.53 a year earlier. Provision for loan losses As of June 30, 2007, nonperforming assets were $14.9 million, or 0.80% of total assets, compared to $15.8 million or 0.85% of total assets at March 31, 2007 and $22.2 million, or 1.22% of total assets a year ago. During the second quarter, net charge offs were 16 basis points. Asset quality improved primarily in the commercial and consumer term real estate portfolios. As a result of the above factors, the second quarter provision was $476,000. The allowance for loan losses was $15.7 million, or 1.16% of loans held for investment at June 30, 2007 compared to $15.6 million or 1.23% a year earlier. Performance Ratios Year-to-date and second quarter 2007 return on average tangible equity was 16.26% and 15.72%, respectively; while return on average equity was 7.13% and 6.99%, respectively for the same periods. About the Company FNB United Corp. is the Asheboro, North Carolina-based bank holding company for CommunityONE Bank, N.A., and Dover Mortgage Company. Opened in 1907, CommunityONE (formerly First National Bank and Trust Company) has over $1.8 billion in assets and operates 43 banking offices in 35 communities throughout the state. A complete line of consumer, mortgage and banking business services is offered, including loan, deposit, cash management and wealth management. Internet banking is available at MyYesBank.com. CommunityONE is an Equal Housing Lender, Member FDIC. Opened in 1986, Dover Mortgage Company (dovermortgage.com) has grown from a one-market mortgage provider based in Charlotte, into a network of nine loan origination offices in key North Carolina growth markets. This news release contains forward-looking statements, including estimates of future operating results and other forward-looking financial information for FNB United. These estimates constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and involve various risks and uncertainties. Actual results may differ materially due to such factors as: (1) expected cost savings from the mergers not materializing within the expected time frame; (2) revenues following the mergers not meeting expectations; (3) competitive pressures among financial institutions increasing significantly; (4) costs or difficulties related to the integration of the businesses of FNB United, United Financial and Integrity being greater than anticipated; (5) general economic conditions being less favorable than anticipated; and (6) changes in accounting principles, policies or guidelines; (7) changes in the securities markets; (8) legislation or regulatory changes adversely affecting the business in which the FNB United will be engaged; and (9) other economic, competitive, governmental, regulatory and technological factors affecting FNB United specifically or the banking industry or economy generally. FNB United does not assume any obligation to update these forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements. RESULTS OF OPERATIONS Quarters Ended Percent Change - --------------- ---------------------------------- ------------------- (In thousands except share and per share June 30, December June 30, data) 2007 31, 2006 2006 December-06 June-06 ----------- ----------- ---------- ----------- ------- INTEREST INCOME: Interest and fees on loans $ 28,569 $ 27,633 $ 22,831 3% 25% Interest and dividends on investments securities: Taxable income 2,231 1,269 1,968 76% 13% Non-taxable income 491 536 548 -8% -10% Other interest income 423 1,052 459 -60% -8% ----------- ----------- ---------- Total interest income 31,714 30,490 25,806 4% 23% ----------- ----------- ---------- INTEREST EXPENSE: Deposits 13,245 12,267 9,247 8% 43% Borrowed funds 2,410 2,347 2,182 3% 10% ----------- ----------- ---------- Total interest expense 15,655 14,614 11,429 7% 37% ----------- ----------- ---------- Net interest income before provision for loan losses 16,059 15,876 14,377 1% 12% PROVISION FOR LOAN LOSSES 476 220 405 116% 18% ----------- ----------- ---------- Net interest income after provision for loan losses 15,583 15,656 13,972 0% 12% ----------- ----------- ---------- NONINTEREST INCOME: Service charges on deposit accounts 2,279 2,386 2,099 -4% 9% Mortgage loan sales 1,368 1,343 1,133 2% 21% Cardholder and merchant services income 537 512 420 5% 28% Trust and investment services 461 481 362 -4% 27% Other service charges, commissions and fees 319 244 247 31% 29% Bank owned life insurance 215 597 219 -64% -2% Other income 199 119 124 67% 60% ----------- ----------- ---------- Total noninterest income 5,378 5,682 4,604 -5% 17% ----------- ----------- ---------- NONINTEREST EXPENSE: Salary and employee benefits 8,199 7,741 6,766 6% 21% Net occupancy expense 1,390 1,238 931 12% 49% Furniture and equipment expense 1,247 1,051 1,134 19% 10% Data processing services 470 436 427 8% 10% Goodwill impairment - 1,625 - -100% NA Other expense 4,015 4,134 3,003 -3% 34% ----------- ----------- ---------- Total other operating expense 15,321 16,225 12,261 -6% 25% ----------- ----------- ---------- Income before provision for income taxes 5,640 5,113 6,315 10% -11% PROVISION FOR INCOME TAXES 1,949 2,115 2,282 -8% -15% ----------- ----------- ---------- NET INCOME $ 3,691 $ 2,998 $ 4,033 23% -8% =========== =========== ========== Earnings per common share: Basic $ 0.33 $ 0.27 $ 0.42 22% -22% Diluted $ 0.33 $ 0.27 $ 0.41 23% -21% Cash dividends declared per common share $ 0.15 $ 0.17 $ 0.15 -12% 0% Weighted average shares outstanding: Basic 11,318,908 11,196,885 9,670,409 Diluted 11,343,367 11,287,752 9,795,772 Shares repurchased during the period - - - RESULTS OF OPERATIONS Percent Year to Date Change - --------------------------------- --------------------------- ------- (In thousands except share and per share data) June 30, 2007 June 30, 2006 ------------- ------------- INTEREST INCOME: Interest and fees on loans $ 56,438 $ 38,037 48% Interest and dividends on investments securities: Taxable income 3,887 3,264 19% Non-taxable income 1,045 1,008 4% Other interest income 1,241 623 99% ------------- ------------- Total interest income 62,611 42,932 46% ------------- ------------- INTEREST EXPENSE: Deposits 26,043 14,750 77% Borrowed funds 4,684 3,724 26% ------------- ------------- Total interest expense 30,727 18,474 66% ------------- ------------- Net interest income before provision for loan losses 31,884 24,458 30% PROVISION FOR LOAN LOSSES 1,000 482 107% ------------- ------------- Net interest income after provision for loan losses 30,884 23,976 29% ------------- ------------- NONINTEREST INCOME: Service charges on deposit accounts 4,329 3,516 23% Mortgage loan sales 2,506 2,096 20% Cardholder and merchant services income 1,044 655 59% Trust and investment services 832 789 5% Other service charges, commissions and fees 656 497 32% Bank owned life insurance 451 378 19% Other income 502 183 174% ------------- ------------- Total noninterest income 10,320 8,114 27% ------------- ------------- NONINTEREST EXPENSE: Salary and employee benefits 16,618 12,037 38% Net occupancy expense 2,569 1,532 68% Furniture and equipment expense 2,360 1,779 33% Data processing services 1,002 1,020 -2% Goodwill impairment - - Other expense 7,353 5,308 39% ------------- ------------- Total other operating expense 29,902 21,676 38% ------------- ------------- Income before provision for income taxes 11,302 10,414 9% PROVISION FOR INCOME TAXES 3,859 3,704 4% ------------- ------------- NET INCOME $ 7,443 $ 6,710 11% ============= ============= Earnings per common share: Basic $ 0.66 $ 0.84 -21% Diluted $ 0.66 $ 0.83 -20% Cumulative dividends declared per common share $ 0.30 $ 0.30 0% Weighted average shares outstanding: Basic 11,291,270 8,034,332 Diluted 11,319,427 8,129,695 Shares repurchased during the period - - FINANCIAL CONDITION Quarters Ended Percent Change - --------------- -------------------------------------- --------------- (In thousands except share and per share June 30, December 31, June 30, December- June- data) 2007 2006 2006 06 06 ------------ ------------ ------------ --------- ----- ASSETS - --------------- Cash and due from banks $ 34,844 $ 35,225 $ 27,544 -1% 27% Interest- bearing bank balances 1,729 42,929 30,873 -96% -94% Federal funds sold 317 30,186 18,643 -99% -98% Securities available for sale 200,141 128,945 193,681 55% 3% Securities held to maturity 38,418 42,870 42,480 -10% -10% Loans receivable: Held for sale 27,123 20,862 21,879 30% 24% Held for portfolio 1,352,576 1,301,840 1,267,323 4% 7% Allowance for loan losses (15,705) (15,943) (15,603) -1% 1% ------------ ------------ ------------ 1,363,994 1,306,759 1,273,599 4% 7% ------------ ------------ ------------ Property and equipment, net 45,882 45,691 43,502 0% 5% Goodwill 110,553 110,956 112,926 0% -2% Core deposit premiums 6,968 7,378 7,788 -6% -11% Other assets 60,561 64,643 65,668 -6% -8% ------------ ------------ ------------ $ 1,863,407 $ 1,815,582 $ 1,816,704 3% 3% ============ ============ ============ LIABILITIES - --------------- Deposits: Noninterest- bearing $ 163,339 $ 158,938 $ 155,071 3% 5% Interest- bearing deposits: Demand 169,763 177,434 186,309 -4% -9% Money market 260,353 235,404 225,415 11% 15% Savings 48,360 50,517 57,150 -4% -15% Time deposits 803,515 798,720 780,053 1% 3% ------------ ------------ ------------ 1,445,330 1,421,013 1,403,998 2% 3% ------------ ------------ ------------ Retail repurchase agreements 28,181 23,161 21,113 22% 33% Federal Home Loan Bank advances 64,602 65,825 87,703 -2% -26% Other borrowed funds 92,834 78,032 78,992 19% 18% Other liabilities 19,988 19,883 20,424 1% -2% ------------ ------------ ------------ 1,650,935 1,607,914 1,612,230 3% 2% ------------ ------------ ------------ STOCKHOLDERS' EQUITY - --------------- Common stock 28,432 28,235 27,820 1% 2% Surplus 113,282 112,213 111,143 1% 2% Retained earnings 72,701 68,662 66,793 6% 9% Accumulated other comprehensive income (loss) (1,943) (1,442) (1,282) 35% 52% ------------ ------------ ------------ 212,472 207,668 204,474 2% 4% ------------ ------------ ------------ $ 1,863,407 $ 1,815,582 $ 1,816,704 3% 3% ============ ============ ============ Shares Issued: Shares outstanding at end of period 11,348,201 11,293,992 11,127,864 0% 2% ============ ============ ============ Book value per share (1) $ 18.72 $ 18.39 $ 18.37 2% 0% Tangible book value per share (1) $ 8.37 $ 7.91 $ 7.53 6% 5% Consolidated Tier 1 leverage capital ratio 7.41% 7.16% 6.59% 4% 9% (1) - Calculation is based on number of shares outstanding at the end of the period rather than weighted average shares outstanding ADDITIONAL FINANCIAL INFORMATION (Dollars in Percent Change thousands) Quarters Ended from ------------------------------------ --------------- June 30, December 31, June 30, December- June- 2007 2006 2006 06 06 ----------- ------------ ----------- --------- ----- LOANS (including loans held for sale): - ----------------- Commercial real estate $ 330,027 $ 304,546 $ 271,759 8% 21% Multifamily real estate 40,375 34,048 33,524 19% 20% Commercial & multifamily construction (1) 46,478 n/a n/a - - One- to four- family construction (1) 98,282 n/a n/a - - Land and land development (1) 152,316 n/a n/a - - Construction loans (1) - 278,124 238,077 -100% -100% Commercial business 298,468 310,130 338,617 -4% -12% Agricultural business including secured by farmland 20,444 16,708 17,513 22% 17% One- to four- family real estate 358,086 340,044 349,714 5% 2% Consumer 35,223 39,102 39,998 -10% -12% ----------- ------------ ----------- Total loans outstanding $1,379,699 $1,322,702 $1,289,202 4% 7% =========== ============ =========== (1) Construction loan individual categories not available prior to 3/31/07 NON-PERFORMING June 30, December 31, June 30, December- June- ASSETS: 2007 2006 2006 06 06 - ----------------- ----------- ------------ ----------- --------- ----- Loans on non- accrual status $ 8,457 $ 8,282 $ 15,646 2% -46% Loans more than 90 days delinquent, still on accrual 3,152 2,852 2,337 11% 35% ----------- ------------ ----------- Total non- performing loans 11,609 11,134 17,983 4% -35% Real estate owned (REO) / Repossessed assets 3,278 3,557 4,176 -8% -22% ----------- ------------ ----------- Total non- performing assets $ 14,887 $ 14,691 $ 22,159 1% -33% =========== ============ =========== Total non- performing assets / Total assets 0.80% 0.81% 1.22% -1% -35% CHANGE IN THE ALLOWANCE FOR June 30, December 31, June 30, December- June- LOAN LOSSES: 2007 2006 2006 06 06 - ----------------- ----------- ------------ ----------- --------- ----- Balance, beginning of period $ 15,757 $ 15,813 $ 9,713 $ 0% 62% Provision 476 220 405 116% 18% Adjustment for reserve for unfunded commitments - (172) 36 -100% -100% Recoveries of loans previously charged off 503 642 720 -22% -30% Loans charged-off (1,031) (560) (1,309) 84% -21% ----------- ------------ ----------- Net (charge- offs) recoveries (528) 82 (589) -744% -10% ----------- ------------ ----------- Purchase accounting adjustment - - 6,038 ----------- ------------ ----------- Balance, end of period $ 15,705 $ 15,943 $ 15,603 -1% 1% =========== ============ =========== Net charge-offs / Average loans outstanding (annualized) 0.16% (0.03%) 0.21% -723% -25% Allowance for loan losses / Loans held for investment 1.16% 1.22% 1.23% -5% -6% DEPOSITS June 30, December 31, June 30, December- June- 2007 2006 2006 06 06 - ----------------- ----------- ------------ ----------- --------- ----- Noninterest- bearing $ 163,339 $ 158,856 $ 155,071 3% 5% Interest-bearing transaction deposits: Checking 169,763 177,434 186,309 -4% -9% Money Market 260,353 235,404 225,415 11% 15% Savings 48,360 50,517 57,150 -4% -15% ----------- ------------ ----------- Total interest- bearing transaction deposits 478,476 463,355 468,874 3% 2% Interest-bearing time deposits 803,515 798,720 780,053 1% 3% ----------- ------------ ----------- Total deposits $1,445,330 $1,420,931 $1,403,998 2% 3% ==================================== ADDITIONAL FINANCIAL INFORMATION (Dollars in thousands) (Rates / Ratios Annualized) Percent Change Quarters Ended from ----------------------------------- --------------- OPERATING June 30, December June 30, December- June- PERFORMANCE: 2007 31, 2006 2006 06 06 - ------------------ ----------- ----------- ----------- --------- ----- Average loans $1,355,601 $1,311,120 $1,134,738 3% 19% Average securities and deposits 258,519 240,935 262,961 7% -2% Average non- interest-earning assets 241,316 245,269 197,372 -2% 22% ----------- ----------- ----------- Total average assets $1,855,436 $1,797,324 $1,595,071 3% 16% =========== =========== =========== Average interest- bearing deposits $1,285,315 $1,243,478 $1,079,231 3% 19% Average non- interest bearing deposits 162,707 160,666 139,631 1% 17% Average borrowings 174,143 168,963 175,957 3% -1% Average non- interest-earning liabilities 21,592 13,144 22,128 64% -2% ----------- ----------- ----------- Total average liabilities 1,643,757 1,586,251 1,416,947 4% 16% Total average stockholders' equity 211,679 211,073 178,124 0% 19% ----------- ----------- ----------- Total average liabilities and equity $1,855,436 $1,797,324 $1,595,071 3% 16% =========== =========== =========== Interest rate yield on loans 8.47% 8.38% 8.09% Interest rate yield on securities and deposits 5.29% 5.18% 4.97% ----------- ----------- ----------- Interest rate yield on interest-earning assets 7.96% 7.88% 7.51% ----------- ----------- ----------- Interest rate expense on deposits 4.13% 3.91% 3.44% Interest rate expense on borrowings 5.55% 5.51% 4.97% ----------- ----------- ----------- Interest rate expense on interest-bearing liabilities 4.30% 4.10% 3.65% ----------- ----------- ----------- Interest rate spread 3.66% 3.78% 3.85% =========== =========== =========== Net interest margin 4.07% 4.15% 4.23% =========== =========== =========== Other operating income / Average assets 1.16% 1.25% 1.16% Other operating expense / Average assets 3.31% 3.58% 3.08% Efficiency ratio ( other operating expense / revenue ) 71.47% 75.26% 64.60% Return on average assets 0.80% 0.66% 1.01% Return on average tangible assets 0.85% 0.71% 1.08% Return on average equity 6.99% 5.64% 9.08% Return on average tangible equity 15.72% 13.02% 18.59% Average equity / Average assets 11.41% 11.74% 11.17% ADDITIONAL FINANCIAL INFORMATION (Dollars in thousands) Percent Year to Date Change --------------------------- ------- June 30, 2007 June 30, 2006 ------------- ------------- LOANS (including loans held for sale): - ---------------------------------- Commercial real estate $ 330,027 $ 271,759 21% Multifamily real estate 40,375 33,524 20% Commercial & multifamily construction (1) 46,478 n/a - One- to four-family construction (1) 98,282 n/a - Land and land development (1) 152,316 n/a - Construction loans (1) - 238,077 -100% Commercial business 298,468 338,617 -12% Agricultural business including secured by farmland 20,444 17,513 17% One- to four-family real estate 358,086 349,714 2% Consumer 35,223 39,998 -12% ------------- ------------- Total loans outstanding $1,379,699 $1,289,202 7% ============= ============= (1) Construction loan individual categories not available prior to 3/31/07 NON-PERFORMING ASSETS: June 30, 2007 June 30, 2006 - ---------------------------------- ------------- ------------- Loans on non-accrual status $ 8,457 $ 15,646 -46% Loans more than 90 days delinquent, still on accrual 3,152 2,337 35% ------------- ------------- Total non-performing loans 11,609 17,983 -35% Real estate owned (REO) / Repossessed assets 3,278 4,176 -22% ------------- ------------- Total non-performing assets $ 14,887 $ 22,159 -33% ============= ============= Total non-performing assets / Total assets 0.80% 1.22% -35% CHANGE IN THE ALLOWANCE FOR LOAN LOSSES: June 30, 2007 June 30, 2006 - ---------------------------------- ------------- ------------- Balance, beginning of period $ 15,943 $ 9,698 64% Provision 1,000 482 107% Adjustment for reserve for unfunded commitments - 36 -100% Recoveries of loans previously charged off 991 1,207 -18% Loans charged-off (2,229) (1,858) 20% ------------- ------------- Net (charge-offs) recoveries (1,238) (651) 90% ------------- ------------- Purchase accounting adjustment - 6,038 ------------- ------------- Balance, end of period $ 15,705 $ 15,603 1% ============= ============= Net charge-offs / Average loans outstanding (annualized) 0.37% 0.27% 38% Allowance for loan losses / Loans held for investment 1.16% 1.23% -6% DEPOSITS June 30, 2007 June 30, 2006 - ---------------------------------- ------------- ------------- Noninterest-bearing $ 163,339 $ 155,071 5% Interest-bearing transaction deposits: Checking 169,763 186,309 -9% Money Market 260,353 225,415 15% Savings 48,360 57,150 -15% ------------- ------------- Total interest-bearing transaction deposits 478,476 468,874 2% Interest-bearing time deposits 803,515 780,053 3% ------------- ------------- Total deposits $1,445,330 $1,403,998 3% ============= ============= ADDITIONAL FINANCIAL INFORMATION (Dollars in thousands) (Rates / Ratios Annualized) Percent Year to Date Change --------------------------- ------- OPERATING PERFORMANCE: June 30, 2007 June 30, 2006 - ---------------------------------- ------------- ------------- Average loans $1,344,256 $ 973,024 38% Average securities and deposits 254,824 220,163 16% Average non-interest-earning assets 243,934 151,675 61% ------------- ------------- Total average assets $1,843,014 $1,344,862 37% ============= ============= Average interest-bearing deposits $1,278,023 $ 909,053 41% Average non-interest bearing deposits 159,367 119,646 33% Average borrowings 173,680 158,315 10% Average non-interest-earning liabilities 21,509 16,391 31% ------------- ------------- Total average liabilities 1,632,579 1,203,405 36% Total average stockholders' equity 210,435 141,457 49% ------------- ------------- Total average liabilities and equity $1,843,014 $1,344,862 37% ============= ============= Interest rate yield on loans 8.48% 7.90% Interest rate yield on securities and deposits 5.33% 4.96% ------------- ------------- Interest rate yield on interest- earning assets 7.98% 7.36% ------------- ------------- Interest rate expense on deposits 4.11% 3.27% Interest rate expense on borrowings 5.44% 4.74% ------------- ------------- Interest rate expense on interest-bearing liabilities 4.27% 3.49% ------------- ------------- Interest rate spread 3.71% 3.87% ============= ============= Net interest margin 4.11% 4.24% ============= ============= Other operating income / Average assets 1.13% 1.22% Other operating expense / Average assets 3.27% 3.25% Efficiency ratio ( other operating expense / revenue ) 70.85% 66.55% Return on average assets 0.81% 1.01% Return on average tangible assets 0.87% 1.05% Return on average equity 7.13% 9.57% Return on average tangible equity 16.26% 17.03% Average equity / Average assets 11.42% 10.52% FINANCIAL CONDITION Quarters Ended - ------------------- -------------------------------------------------- (In thousands except share and per share data) June 30, 2007 March 31,2007 ------------- ------------- ASSETS - ------------------------------------------ Cash and due from banks $ 34,844 $ 38,905 Interest-bearing bank balances 1,729 10,757 Federal funds sold 317 50,130 Securities available for sale 200,141 182,552 Securities held to maturity 38,418 42,318 Loans receivable: Held for sale 27,123 26,497 Held for portfolio 1,352,576 1,313,168 Allowance for loan losses (15,705) (15,757) ------------- ------------- 1,363,994 1,323,908 ------------- ------------- Property and equipment, net 45,882 45,780 Goodwill 110,553 110,961 Core deposit premiums 6,968 7,173 Other assets 60,561 61,920 ------------- ------------- $ 1,863,407 $ 1,874,404 ============= ============= LIABILITIES - ------------------------------------------ Deposits: Noninterest-bearing $ 163,339 $ 161,909 Interest-bearing deposits: Demand 169,763 174,014 Money market 260,353 255,051 Savings 48,360 50,938 Time deposits 803,515 823,800 ------------- ------------- 1,445,330 1,465,712 ------------- ------------- Retail repurchase agreements 28,181 27,225 Federal Home Loan Bank advances 64,602 65,866 Other borrowed funds 92,834 83,439 Other liabilites 19,988 21,739 ------------- ------------- 1,650,935 1,663,981 ------------- ------------- STOCKHOLDERS' EQUITY - ------------------------------------------ Common stock 28,432 28,371 Surplus 113,282 112,872 Retained earnings 72,701 70,716 Accumulated other comprehensive income (loss) (1,943) (1,536) ------------- ------------- 212,472 210,423 ------------- ------------- $ 1,863,407 $ 1,874,404 ============= ============= Shares Issued: Shares outstanding at end of period 11,348,201 11,348,201 ============= ============= Book value per share (1) $ 18.72 $ 18.54 Tangible book value per share (1) $ 8.37 $ 8.13 Consolidated Tier 1 leverage capital ratio 7.41% 7.24% (In thousands except share and per share data) December 31, 2006 September 20, 2006 June 30, 2006 ----------------- ------------------ ------------- ASSETS - ------------------- Cash and due from banks $ 35,225 $ 41,112 $ 27,544 Interest-bearing bank balances 42,929 5,870 30,873 Federal funds sold 30,186 17,500 18,643 Securities available for sale 128,945 86,108 193,681 Securities held to maturity 42,870 42,928 42,480 Loans receivable: Held for sale 20,862 20,054 21,879 Held for portfolio 1,301,840 1,276,636 1,267,323 Allowance for loan losses (15,943) (16,318) (15,603) ----------------- ------------------ ------------- 1,306,759 1,280,372 1,273,599 ----------------- ------------------ ------------- Property and equipment, net 45,691 45,113 43,502 Goodwill 110,956 112,926 112,926 Core deposit premiums 7,378 7,583 7,788 Other assets 64,643 159,199 65,668 ----------------- ------------------ ------------- $ 1,815,582 $ 1,798,711 $ 1,816,704 ================= ================== ============= LIABILITIES - ------------------- Deposits: Noninterest- bearing $ 158,938 $ 155,526 $ 155,071 Interest- bearing deposits: Demand 177,434 180,462 186,309 Money market 235,404 230,655 225,415 Savings 50,517 53,051 57,150 Time deposits 798,720 762,914 780,053 ----------------- ------------------ ------------- 1,421,013 1,382,608 1,403,998 ----------------- ------------------ ------------- Retail repurchase agreements 23,161 24,540 21,113 Federal Home Loan Bank advances 65,825 90,311 87,703 Other borrowed funds 78,032 77,084 78,992 Other liabilites 19,883 19,041 20,424 ----------------- ------------------ ------------- 1,607,914 1,593,584 1,612,230 ----------------- ------------------ ------------- STOCKHOLDERS' EQUITY - ------------------- Common stock 28,235 28,071 27,820 Surplus 112,213 111,502 111,143 Retained earnings 68,662 67,588 66,793 Accumulated other comprehensive income (loss) (1,442) (2,034) (1,282) ----------------- ------------------ ------------- 207,668 205,127 204,474 ----------------- ------------------ ------------- $ 1,815,582 $ 1,798,711 $ 1,816,704 ================= ================== ============= Shares Issued: Shares outstanding at end of period 11,293,992 11,228,461 11,127,864 ================= ================== ============= Book value per share (1) $ 18.39 $ 18.27 $ 18.37 Tangible book value per share (1) $ 7.91 $ 7.54 $ 7.53 Consolidated Tier 1 leverage capital ratio 7.16% 6.79% 6.59% (1) - Calculation is based on number of shares outstanding at the end of the period rather than weighted average shares outstanding RESULTS OF OPERATIONS Quarters Ended - --------------------- ------------------------------------------------ (In thousands except share and per share data) June 30, 2007 March 31,2007 ------------- ------------- INTEREST INCOME: Interest and fees on loans $ 28,569 $ 27,870 Interest and dividends on investments securities: Taxable income 2,231 1,656 Non-taxable income 491 553 Other interest income 423 818 ------------- ------------- Total interest income 31,714 30,897 ------------- ------------- INTEREST EXPENSE: Deposits 13,245 12,798 Borrowed funds 2,410 2,274 ------------- ------------- Total interest expense 15,655 15,072 ------------- ------------- Net interest income before provision for loan losses 16,059 15,825 PROVISION FOR LOAN LOSSES 476 524 ------------- ------------- Net interest income after provision for loan losses 15,583 15,301 ------------- ------------- NONINTEREST INCOME: Service charges on deposit accounts 2,279 2,050 Mortgage loan sales 1,368 1,138 Cardholder and merchant services income 537 507 Gain (loss) on sale of securities - - Trust and investment services 461 371 Other service charges, commissions and fees 319 336 Bank owned life insurance 215 236 Other income 199 304 ------------- ------------- Total noninterest income 5,378 4,942 ------------- ------------- NONINTEREST EXPENSE: Salary and employee benefits 8,199 8,419 Net occupancy expense 1,390 1,178 Furniture and equipment expense 1,247 1,113 Data processing services 470 532 Goodwill impairment - - Other expense 4,015 3,338 ------------- ------------- Total other operating expense 15,321 14,580 ------------- ------------- Income before provision for income taxes 5,640 5,663 PROVISION FOR INCOME TAXES 1,949 1,910 ------------- ------------- NET INCOME $ 3,691 $ 3,753 ============= ============= Earnings per common share: Basic $ 0.33 $ 0.33 Diluted $ 0.33 $ 0.33 Cash dividends declared per common share $ 0.15 $ 0.15 Weighted average shares outstanding: Basic 11,318,908 11,263,325 Diluted 11,343,367 11,295,221 Shares repurchased during the period - - (In thousands except share and per share data) December 31, 2006 September 30,2006 June 30, 2006 ----------------- ----------------- ------------- INTEREST INCOME: Interest and fees on loans $ 27,633 $ 26,894 $ 22,831 Interest and dividends on investments securities: Taxable income 1,269 2,258 1,968 Non-taxable income 536 537 548 Other interest income 1,052 258 459 ----------------- ---------------- ------------- Total interest income 30,490 29,947 25,806 ----------------- ---------------- ------------- INTEREST EXPENSE: Deposits 12,267 11,548 9,247 Borrowed funds 2,347 2,519 2,182 ----------------- ---------------- ------------- Total interest expense 14,614 14,067 11,429 ----------------- ---------------- ------------- Net interest income before provision for loan losses 15,876 15,880 14,377 PROVISION FOR LOAN LOSSES 220 1,824 405 ----------------- ---------------- ------------- Net interest income after provision for loan losses 15,656 14,056 13,972 ----------------- ---------------- ------------- NONINTEREST INCOME: Service charges on deposit accounts 2,386 2,312 2,099 Mortgage loan sales 1,343 1,402 1,133 Cardholder and merchant services income 512 607 420 Gain (loss) on sale of securities - (557) - Trust and investment services 481 393 362 Other service charges, commissions and fees 244 246 247 Bank owned life insurance 597 251 219 Other income 119 765 124 ----------------- ---------------- ------------- Total noninterest income 5,682 5,419 4,604 ----------------- ---------------- ------------- NONINTEREST EXPENSE: Salary and employee benefits 7,741 8,300 6,766 Net occupancy expense 1,238 1,004 931 Furniture and equipment expense 1,051 1,002 1,134 Data processing services 436 976 427 Goodwill impairment 1,625 - - Other expense 4,134 4,258 3,003 ----------------- ---------------- ------------- Total other operating expense 16,225 15,540 12,261 ----------------- ---------------- ------------- Income before provision for income taxes 5,113 3,935 6,315 PROVISION FOR INCOME TAXES 2,115 1,456 2,282 ----------------- ---------------- ------------- NET INCOME $ 2,998 $ 2,479 $ 4,033 ================= ================ ============= Earnings per common share: Basic $ 0.27 $ 0.22 $ 0.42 Diluted $ 0.27 $ 0.22 $ 0.41 Cash dividends declared per common share $ 0.17 $ 0.15 $ 0.15 Weighted average shares outstanding: Basic 11,196,885 11,162,228 9,670,409 Diluted 11,287,752 11,263,279 9,795,772 Shares repurchased during the period - - - CONTACT: FNB United Corp. Robert O. Bratton, 336-318-7883 -----END PRIVACY-ENHANCED MESSAGE-----