FNBF Fnb Financial Services Corp (MM)

FNB Financial Services Corporation (NASDAQ:FNBF)("FNB"), parent of FNB Southeast (the "Bank"), today reported third quarter 2005 net income of $2.22 million and earnings for the first nine months of $6.40 million. This represents 2005 earnings per diluted share of $0.31 and $0.89, respectively. FNB earned $1.91 million in the third quarter of 2004 and $6.32 million for the first nine months a year ago. Excluding a one-time after-tax gain of $548,000 from the sale of a banking operation in the second quarter of 2004, year to date earnings for 2005 increased 10.8%. FNB's third quarter 2005 results produced an annualized return on average assets of 0.88% and an annualized return on average equity of 11.96%, compared with prior year results of 0.92% and 11.28%, respectively. "We are excited about achieving our billion dollar goal," noted Ernest J. Sewell, Vice Chairman, President and Chief Executive Officer. "Begun in 1910 as a rural bank, FNB has built strong relationships with its customers and has evolved into a highly successful financial services company." Interest income was $16.49 million and $11.28 million for the three months ended September 30, 2005 and 2004, respectively. On a year-to-date basis, interest income amounted to $44.93 million in 2005 and $32.15 million in 2004. Interest expense totaled $6.69 million in the 2005 third quarter, an increase of $2.80 million from one year earlier. Interest expense on deposits was $5.84 million in the current quarter, compared to $3.54 million for the same quarter a year ago. The current rising interest rate environment, combined with a 17.5% increase in average interest-bearing deposits over the third quarter of 2004, is the principal source of this increase in deposit interest expense. FNB recorded provisions for credit losses of $1.19 million and $285,000 for the three months ended September 30, 2005 and 2004, respectively. The provision for the third quarter of 2005 included special provisions of approximately $900,000 related to the reclassification of risk grades of certain loans in the Bank's Harrisonburg, VA Region loan portfolio, as previously announced in a press release dated September 16, 2005. Excluding a one-time pre-tax gain of $825,000 from the sale of a banking operation in the second quarter of 2004, noninterest income year to date for 2005 increased 7.0% over the same period a year ago. Noninterest income totaled $1.73 million in the third quarter of 2005, compared with $1.70 million for the same period a year ago. Noninterest expense totaled $6.99 million for the third quarter of 2005, compared with $5.97 million for the same period in 2004. Expense items significantly contributing to this increase include personnel expense, occupancy and equipment expense, and other items related to FNB's continued growth and expansion. Pressley A. Ridgill, President and Chief Operating Officer of FNB Southeast, commented: "FNB is now in an elite group of community banks. We have assembled a team of talented individuals who give us confidence about future growth and we look forward to continuing the tradition of service to our customers." As of September 30, 2005 assets were $1.01 billion, a $146.4 million, or 16.9%, increase during the first nine months of 2005. Outstanding loans totaled $771.4 million at the end of the current quarter compared to $663.4 million at December 31, 2004. Net credit losses for the third quarter of 2005 amounted to $422,000, or 0.22% of average outstanding loans on an annualized basis, compared to 0.08% recorded in the 2004 third quarter. Nonperforming assets continue to trend downward, declining to $5.59 million at September 30, 2005 and represents a 40.0% decrease from a year ago. The allowance for credit losses to outstanding loans was 1.21% at September 30, 2005, compared to 1.15% one year earlier. Deposits at September 30, 2005 were $829.8 million, compared with $723.9 million one year earlier. Other borrowings were $72.2 million and $47.8 million at September 30, 2005 and 2004, respectively. Shareholders' equity increased 7.7%, from $69.3 million at September 30, 2004 to $74.6 million at the end of the current period. During 2005, FNB repurchased 44,920 shares of its common stock at an average cost of $17.99. In May 2005, FNB completed a five-for-four common stock split effected in the form of a 25 percent stock dividend. Relevant information has been restated to reflect this action. FNB Financial Services Corporation is a financial holding company with one subsidiary, FNB Southeast, a North Carolina chartered commercial bank. FNB Southeast currently operates 17 banking offices located in North Carolina and Virginia. FNB Southeast Mortgage Corporation and FNB Southeast Investment Services, Inc. are operating subsidiaries of FNB Southeast. Information in this press release may contain "forward-looking statements." These statements involve risks and uncertainties that could cause actual results to differ materially, including without limitation, the effects of future economic conditions, governmental fiscal and monetary policies, legislative and regulatory changes, the risks of changes in interest rates and the effects of competition. Additional factors that could cause actual results to differ materially are discussed in FNB's recent filings with the Securities and Exchange Commission, including, but not limited to, its Annual Report on Form 10-K and its other periodic reports. -0- *T FINANCIAL SUMMARY ----------------------------------------------------- 2005 2004 ------------------------------ ------------------- Third Second First Fourth Third Quarter Quarter Quarter Quarter Quarter ----------- --------- --------- --------- --------- Average Balances (Dollars in thousands) Assets $ 996,274 $954,786 $899,083 $851,696 $830,732 Loans 767,524 737,735 691,180 646,078 619,178 Investment securities 162,760 153,411 141,963 142,290 138,554 Earning assets 939,458 899,522 842,142 797,623 776,481 Noninterest- bearing deposits 87,335 86,656 78,685 78,260 77,690 Interest-bearing deposits 729,740 694,494 659,834 649,198 621,170 Interest-bearing liabilities 821,369 781,663 736,051 695,436 675,685 Shareholders' equity 73,592 72,154 70,820 69,666 67,827 Period-End Balances (Dollars in thousands) Assets $1,011,778 $979,446 $920,520 $865,335 $844,646 Loans 771,359 763,255 713,310 663,425 641,057 Investment securities 178,422 155,568 144,666 141,603 145,800 Earning assets 954,139 924,506 860,575 807,482 789,233 Noninterest- bearing deposits 88,809 95,335 84,707 78,810 75,614 Interest-bearing deposits 741,021 716,031 682,792 645,475 648,281 Interest-bearing liabilities 839,032 805,184 758,375 712,009 696,079 Shareholders' equity 74,605 73,360 71,386 70,430 69,273 Asset Quality Data (Dollars in thousands) Nonperforming loans $ 4,108 $ 4,002 $ 2,613 $ 3,515 $ 4,354 Other nonperforming assets 1,485 2,554 5,357 5,559 4,966 Net credit losses 422 102 189 318 127 Allowance for credit losses 9,333 8,380 7,843 7,352 7,341 Nonperforming loans to outstanding loans 0.53 % 0.52 % 0.37 % 0.53 % 0.68 % Annualized net credit losses to average loans 0.22 0.06 0.11 0.20 0.08 Allowance for credit losses to outstanding loans 1.21 1.10 1.10 1.11 1.15 Allowance for credit losses to nonperforming loans 2.27 X 2.09 X 3.00 X 2.09 X 1.69 X FINANCIAL SUMMARY ----------------------------------------------------- Third Nine Months Ended Quarter September 30 2005-2004 ------------------------------- Percent Percent Variance 2005 2004 Variance -------------- ---------- -------- -------- Average Balances (Dollars in thousands) Assets 19.9 % $ 950,406 $803,455 18.3 % Loans 24.0 732,426 602,591 21.5 Investment securities 17.5 152,778 139,151 9.8 Earning assets 21.0 895,167 752,852 18.9 Noninterest-bearing deposits 12.4 84,257 74,856 12.6 Interest-bearing deposits 17.5 694,945 581,771 19.5 Interest-bearing liabilities 21.6 780,007 651,922 19.6 Shareholders' equity 8.5 72,199 67,288 7.3 Period-End Balances (Dollars in thousands) Assets 19.8 % Loans 20.3 Investment securities 22.4 Earning assets 20.9 Noninterest-bearing deposits 17.5 Interest-bearing deposits 14.3 Interest-bearing liabilities 20.5 Shareholders' equity 7.7 Asset Quality Data (Dollars in thousands) Nonperforming loans $ 4,108 $ 4,354 Other nonperforming assets 1,485 4,966 Net credit losses 713 728 Allowance for credit losses 9,333 7,341 Nonperforming loans to outstanding loans 0.53 % 0.68 % Annualized net credit losses to average loans 0.29 0.16 Allowance for credit losses to outstanding loans 1.21 1.15 Allowance for credit losses to nonperforming loans 2.27 X 1.69 X FINANCIAL SUMMARY ---------------------------------------------------- 2005 2004 --------------------------- ----------------- Third Second First Fourth Third Quarter Quarter Quarter Quarter Quarter --------- -------- -------- -------- -------- Income Statement Data (Dollars in thousands, except share data) Interest income: Loans $14,917 $13,630 $12,102 $11,081 $10,030 Other 1,575 1,431 1,275 1,236 1,245 ------- ------- ------- ------- ------- Total interest income 16,492 15,061 13,377 12,317 11,275 Interest expense 6,690 5,975 4,864 4,211 3,891 ------- ------- ------- ------- ------- Net interest income 9,802 9,086 8,513 8,106 7,384 Provision for credit losses 1,187 638 680 330 285 ------- ------- ------- ------- ------- Net interest income after provision for credit losses 8,615 8,448 7,833 7,776 7,099 Noninterest income 1,734 1,815 2,138 1,945 1,695 Noninterest expense 6,993 7,045 6,892 6,760 5,969 ------- ------- ------- ------- ------- Income before income tax expense 3,356 3,218 3,079 2,961 2,825 Income tax expense 1,138 1,083 1,036 941 913 ------- ------- ------- ------- ------- Net income $ 2,218 $ 2,135 $ 2,043 $ 2,020 $ 1,912 ======= ======= ======= ======= ======= Net income per share: Basic $ 0.32 $ 0.30 $ 0.30 $ 0.30 $ 0.28 Diluted $ 0.31 $ 0.29 $ 0.29 $ 0.28 $ 0.27 Cash dividends per share $ 0.11 $ 0.11 $ 0.11 $ 0.11 $ 0.10 Other Data Return on average assets 0.88 % 0.90 % 0.92 % 0.95 % 0.92 % Return on average equity 11.96 11.87 11.71 11.60 11.28 Net yield on earning assets 4.21 4.12 4.18 4.15 3.90 Efficiency 59.77 63.67 63.73 66.17 64.48 Net interest position to total assets(a) 11.85 12.34 11.80 12.00 12.13 Equity to assets 7.39 7.56 7.88 8.18 8.16 Loans to assets 77.04 77.27 76.88 75.86 74.53 Loans to deposits 93.94 94.44 93.59 88.81 88.60 Noninterest - bearing deposits to total deposits 10.69 11.09 10.65 10.76 11.12 (a)Net interest position is average earning assets less average interest-bearing liabilities. NOTE: Per share data have been adjusted for the five-for- four (5:4) stock split, effected as a 25% stock dividend, effective May 31, 2005. FINANCIAL SUMMARY ---------------------------------------------------- Third Nine Months Ended Quarter September 30 2005-2004 -------------------------------- Percent Percent Variance 2005 2004 Variance ------------- ------------ ---------- -------- Income Statement Data (Dollars in thousands, except share data) Interest income: Loans 48.7 % $ 40,649 $ 28,528 42.5 % Other 26.5 4,282 3,626 18.1 ---------- --------- Total interest income 46.3 44,931 32,154 39.7 Interest expense 71.9 17,529 10,876 61.2 ---------- --------- Net interest income 32.7 27,402 21,278 28.8 Provision for credit losses 316.5 2,505 945 165.1 ---------- --------- Net interest income after provision for credit losses 21.4 24,897 20,333 22.4 Noninterest income 2.3 5,687 6,140 (7.4) Noninterest expense 17.2 20,930 17,005 23.1 ---------- --------- Income before income tax expense 18.8 9,654 9,468 2.0 Income tax expense 24.6 3,257 3,148 3.5 ---------- --------- Net income 16.0 $ 6,397 $ 6,320 1.2 ========== ========= Net income per share: Basic 14.3 % $ 0.92 $ 0.92 0.0 % Diluted 14.8 % $ 0.89 $ 0.89 0.0 % Cash dividends per share 10.0 % $ 0.33 $ 0.30 10.0 % Other Data Return on average assets 0.90 % 1.05 % Return on average equity 11.85 12.52 Net yield on earning assets 4.16 3.86 Efficiency 62.33 60.86 Net interest position to total assets(a) 12.12 12.56 Equity to assets 7.60 8.37 Loans to assets 77.06 75.00 Loans to deposits 94.00 91.77 Noninterest - bearing deposits to total deposits 10.81 11.40 (a)Net interest position is average earning assets less average interest-bearing liabilities. NOTE: Per share data have been adjusted for the five-for- four (5:4) stock split, effected as a 25% stock dividend, effective May 31, 2005. COMMON STOCK - PER SHARE ---------------------------------------------------- 2005 2004 ------------------------------- ---------------- Third Second First Fourth Third Quarter Quarter Quarter Quarter Quarter -------------------------------- ----------------- Market value: End of period $ 17.58 $ 18.39 $ 18.00 $ 22.80 $ 19.25 High 18.52 20.25 18.74 23.35 19.47 Low 16.56 16.82 16.66 18.79 16.38 Book value 10.60 10.49 10.22 10.15 10.12 Dividend 0.11 0.11 0.11 0.10 0.10 Shares traded 194,165 263,966 504,388 663,392 552,764 NOTE: Per share data have been adjusted for the five-for- four (5:4) stock split, effected as a 25% stock dividend, effective May 31, 2005. *T