FNBF Fnb Financial Services Corp (MM)

FNB Financial Services Corporation (NASDAQ: FNBF)("FNB"), parent of FNB Southeast, today reported operating results for the year ended December 31, 2005. FNB recorded net income of $792,000, representing diluted earnings per share of $0.11, which is in line with projections previously released by FNB on January 18, 2006. Net income for 2004 was $8.34 million, or diluted earnings per share of $1.17. "FNB Southeast underwent a very eventful year in 2005. We continued to experience solid growth in our market areas and we topped the billion dollar mark in assets," stated Pressley A. Ridgill, President and Chief Executive Officer. "During the year we also experienced adverse credit developments in our loan portfolio. We addressed these issues by significantly increasing the allowance for credit losses in the third and fourth quarters. Additionally, we have effected changes in personnel, procedures and policies to strengthen internal controls related to credit operations. Despite setbacks in the loan portfolio, we expanded our customer base and increased deposits by $100 million during 2005. " The decrease in 2005 net income is primarily attributable to an aggregate provision for credit losses of $13.6 million recorded during the fourth quarter of the year ended December 31, 2005. This charge had the effect of reducing net income by approximately $8.50 million. As a result of this charge, the Company posted a net loss of $5.61 million, or ($0.80) per diluted share for the fourth quarter of 2005. For the year ended December 31, 2005, the after-tax financial impact from the adverse credit conditions discussed above amounted to $8.93 million, or $1.24 per diluted share. Interest income totaled $62.11 million for the full year of 2005, compared to $44.47 million in 2004; fourth quarter interest income was $17.18 million and $12.32 million for 2005 and 2004, respectively. Total interest expense was $24.71 million in 2005, compared to $15.09 million in 2004. Interest expense on deposits was $21.48 million, an increase of $7.92 million from the prior year. Fourth quarter interest expense on deposits totaled $6.10 million in 2005, an increase of $2.23 million from one year earlier. The current trend in interest income and expense is reflective of higher average balances of loans and deposits, combined with continuing efforts by the Federal Reserve to increase interest rates. Noninterest income totaled $7.38 million in 2005, an 8.7% decline from the $8.09 million recorded in 2004. For the fourth quarter, noninterest income decreased 12.8%, from $1.95 million in 2004, to $1.70 million in 2005. Assets at December 31, 2005 totaled $1.01 billion, an increase of $142.07 million, or 16.4%, over one year earlier. Loans amounted to $757.97 million at December 31, 2005, an increase of $94.54 million, or 14.3%, over the previous yearend balance of $663.43 million. Net credit charge-offs for the fourth quarter of 2005 amounted to $3.63 million, or 1.90% of average outstanding loans on an annualized basis. Annual net credit losses to average outstanding loans are 0.59% for 2005, compared to 0.17% for 2004. FNB recorded a provision for credit losses of $16.13 million for the full year of 2005, compared to $1.28 million in 2004. The yearend allowance for credit losses to outstanding loans was 2.53% for 2005 and 1.11% for 2004. Deposits increased $100.35 million, or 13.9%, to $824.63 million at December 31, 2005. Shareholders' equity was $67.23 million at December 31, 2005, compared to the year ago balance of $70.43 million. FNB increased annual cash dividends by 9.8% to $0.45 per share in 2005. During 2005, FNB repurchased 47,820 shares of its common stock at an average cost of $17.89. The Company also increased regulatory capital through the issuance of $25 million of trust preferred securities during 2005. 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. Forward Looking Statements This news release contains forward looking statements with respect to the financial conditions and results of operations of FNB Financial Services Corporation. These forward looking statements involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward looking statements include, among others, the following possibilities: (1) projected results in connection with the implementation of our business plan are lower than expected; (2) competitive pressure among financial services companies increases significantly; (3) costs or difficulties related to the integration of acquisitions or expenses in general are greater than expected; (4) general economic conditions, in the markets in which the Corporation does business, are less favorable than expected; (5) risks inherent in making loans, including repayment risks and risks associated with collateral values, are greater than expected; (6) changes in the interest rate environment reduce interest margins and affect funding sources; (7) changes in market rates and prices may adversely affect the value of financial products; (8) legislation or regulatory requirements or changes thereto adversely affect the businesses in which the Corporation is engaged; (9) regulatory compliance cost increases are greater than expected; and (10) decisions to change the business mix of the Corporation. For further information and other factors which could affect the accuracy of forward looking statements, please see the Corporation's reports filed with the SEC pursuant to the Securities Exchange Act of 1934 which are available at the SEC's website (www.sec.gov) or at the Corporation's website (www.fnbsoutheast.com). Readers are cautioned not to place undue reliance on these forward looking statements, which reflect management's judgments only as of the date hereof. The Corporation undertakes no obligation to publicly revise those forward looking statements to reflect events and circumstances that arise after the date hereof. -0- *T FINANCIAL SUMMARY ----------------- 2005 2004 ------------------------------------------- --------- Fourth Third Second First Fourth Quarter Quarter Quarter Quarter Quarter ----------- ----------- --------- --------- --------- Average Balances (Dollars in thousands) Assets $1,011,103 $996,274 $954,786 $899,083 $851,696 Loans 764,331 767,524 737,735 691,180 646,078 Investment securities 181,222 162,760 153,411 141,963 142,290 Earning assets 953,263 939,458 899,522 842,142 797,623 Noninterest- bearing deposits 89,999 87,335 86,656 78,685 78,260 Interest-bearing deposits 733,000 729,740 694,494 659,834 649,198 Interest-bearing liabilities 831,665 821,369 781,663 736,051 695,436 Shareholders' equity 74,153 73,592 72,154 70,820 69,666 Fourth Twelve Months Ended Quarter December 31 2005-2004 ---------------------------- Percent Percent Variance 2005 2004 Variance ---------- --------- --------- -------- Average Balances (Dollars in thousands) Assets 18.7% $965,704 $815,581 18.4 % Loans 18.3 740,468 613,522 20.7 Investment securities 27.4 159,957 139,930 14.3 Earning assets 19.5 910,858 764,096 19.2 Noninterest- bearing deposits 15.0 85,704 75,712 13.2 Interest-bearing deposits 12.9 704,537 598,720 17.7 Interest-bearing liabilities 19.6 793,028 662,860 19.6 Shareholders' equity 6.4 72,692 67,860 7.1 2005 2004 ------------------------------------------- --------- Fourth Third Second First Fourth Quarter Quarter Quarter Quarter Quarter ----------- ----------- --------- --------- --------- Period-End Balances (Dollars in thousands) Assets $1,007,406 $1,011,778 $979,446 $920,520 $865,335 Loans 757,967 771,359 763,255 713,310 663,425 Investment securities 201,890 178,422 155,568 144,666 141,603 Earning assets 964,431 954,139 924,506 860,575 807,482 Noninterest- bearing deposits 92,884 88,809 95,335 84,707 78,810 Interest-bearing deposits 731,746 741,021 716,031 682,792 645,475 Interest-bearing liabilities 839,826 839,032 805,184 758,375 712,009 Shareholders' equity 67,233 74,605 73,360 71,386 70,430 Fourth Quarter 2005-2004 Percent Variance ---------- Period-End Balances (Dollars in thousands) Assets 16.4 % Loans 14.3 Investment securities 42.6 Earning assets 19.4 Noninterest-bearing deposits 17.9 Interest-bearing deposits 13.4 Interest-bearing liabilities 18.0 Shareholders' equity (4.5) 2005 2004 ------------------------------------------- --------- Fourth Third Second First Fourth Quarter Quarter Quarter Quarter Quarter ----------- ----------- --------- --------- --------- Asset Quality Data (Dollars in thousands) Nonperforming loans $10,159 $4,108 $4,002 $2,613 $3,515 Other nonperforming assets 1,483 1,485 2,554 5,357 5,559 Net credit losses 3,629 422 102 189 318 Allowance for credit losses 19,142 9,333 8,380 7,843 7,352 Nonperforming loans to outstanding loans 1.34 % 0.53 % 0.52 % 0.37 % 0.53 % Annualized net credit losses to average loans 1.90 0.22 0.06 0.11 0.20 Allowance for credit losses to outstanding loans 2.53 1.21 1.10 1.10 1.11 Allowance for credit losses to nonperforming loans 1.88X 2.27X 2.09X 3.00X 2.09X Fourth Twelve Months Ended Quarter December 31 2005-2004 -------------------------- Percent Percent Variance 2005 2004 Variance ---------- -------- -------- -------- Asset Quality Data (Dollars in thousands) Nonperforming loans $10,159 $3,515 Other nonperforming assets 1,483 5,559 Net credit losses 4,342 1,046 Allowance for credit losses 19,142 7,352 Nonperforming loans to outstanding loans 1.34 % 0.53 % Annualized net credit losses to average loans 0.59 0.17 Allowance for credit losses to outstanding loans 2.53 1.11 Allowance for credit losses to nonperforming loans 1.88X 2.09X FINANCIAL SUMMARY ----------------------- Fourth 2005 2004 Quarter ----------------------------------- -------- 2005-2004 Fourth Third Second First Fourth Percent Quarter Quarter Quarter Quarter Quarter Variance -------- -------- -------- -------- -------- ---------- Income Statement Data (Dollars in thousands, except share data) Interest income: Loans $15,363 $14,917 $13,630 $12,102 $11,081 38.6% Other 1,819 1,575 1,431 1,275 1,236 47.2 -------- -------- -------- -------- -------- Total interest income 17,182 16,492 15,061 13,377 12,317 39.5 Interest expense 7,181 6,690 5,975 4,864 4,211 70.5 -------- -------- -------- -------- -------- Net interest income 10,001 9,802 9,086 8,513 8,106 23.4 Provision for credit losses 13,627 1,187 638 680 330 4,029.4 -------- -------- -------- -------- -------- Net interest income after provision for credit losses (3,626) 8,615 8,448 7,833 7,776 (146.6) Noninterest income 1,696 1,734 1,815 2,138 1,945 (12.8) Noninterest expense 7,276 6,993 7,045 6,892 6,760 7.6 -------- -------- -------- -------- -------- Income before income tax expense (9,206) 3,356 3,218 3,079 2,961 (410.9) Income tax expense (3,601) 1,138 1,083 1,036 941 (482.7) -------- -------- -------- -------- -------- Net income ($5,605) $2,218 $2,135 $2,043 $2,020 (377.5) ======== ======== ======== ======== ======== Net income per share: Basic ($0.80) $0.32 $0.30 $0.30 $0.30 (366.7)% Diluted ($0.80) $0.31 $0.29 $0.29 $0.28 (385.7)% Cash dividends per share $0.12 $0.11 $0.11 $0.11 $0.11 9.1 % Twelve Months Ended December 31 -------------------------- Percent 2005 2004 Variance -------- -------- -------- Income Statement Data (Dollars in thousands, except share data) Interest income: Loans $56,012 $39,609 41.4 % Other 6,100 4,862 25.5 -------- -------- Total interest income 62,112 44,471 39.7 Interest expense 24,709 15,087 63.8 -------- -------- Net interest income 37,403 29,384 27.3 Provision for credit losses 16,132 1,275 1,165.3 -------- -------- Net interest income after provision for credit losses 21,271 28,109 (24.3) Noninterest income 7,383 8,086 (8.7) Noninterest expense 28,206 23,766 18.7 -------- -------- Income before income tax expense 448 12,430 (96.4) Income tax expense (344) 4,089 (108.4) -------- -------- Net income $792 $8,341 (90.5) ======== ======== Net income per share: Basic $0.11 $1.22 (91.0)% Diluted $0.11 $1.17 (90.6)% Cash dividends per share $0.45 $0.41 9.8 % Fourth 2005 2004 Quarter ----------------------------------- -------- 2005-2004 Fourth Third Second First Fourth Percent Quarter Quarter Quarter Quarter Quarter Variance -------- -------- -------- -------- -------- ---------- Other Data Return on average assets (2.20)% 0.88 % 0.90 % 0.92 % 0.95 % Return on average equity (29.99) 11.96 11.87 11.71 11.60 Net yield on earning assets 4.24 4.21 4.12 4.18 4.15 Efficiency 61.23 59.77 63.67 63.73 66.17 Net interest position to total assets(a) 12.03 11.85 12.34 11.80 12.00 Equity to assets 7.33 7.39 7.56 7.88 8.18 Loans to assets 75.59 77.04 77.27 76.88 75.86 Loans to deposits 92.87 93.94 94.44 93.59 88.81 Noninterest -bearing deposits to total deposits 10.94 10.69 11.09 10.65 10.76 Twelve Months Ended December 31 -------------------------- Percent 2005 2004 Variance -------- -------- -------- Other Data Return on average assets 0.08 % 1.02 % Return on average equity 1.09 12.29 Net yield on earning assets 4.18 3.94 Efficiency 62.04 62.28 Net interest position to total assets(a) 12.20 12.41 Equity to assets 7.53 8.32 Loans to assets 76.68 75.23 Loans to deposits 93.70 90.97 Noninterest - bearing deposits to total deposits 10.85 11.23 (a) Net interest position is average earning assets less average interest-bearing liabilities. COMMON STOCK - PER SHARE ------------------------ 2005 2004 ----------------------------------- -------- Fourth Third Second First Fourth Quarter Quarter Quarter Quarter Quarter -------- -------- -------- -------- -------- Market value: End of period $16.40 $17.58 $18.39 $18.00 $18.24 High 17.89 18.52 20.25 18.74 18.68 Low 14.40 16.56 16.82 16.66 15.03 Book value 9.55 10.60 10.49 10.22 10.15 Dividend 0.12 0.11 0.11 0.11 0.11 Shares traded 282,011 194,165 263,966 504,388 829,240 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