FNBF Fnb Financial Services Corp (MM)

FNB Financial Services Corporation (NASDAQ:FNBF)("FNB"), parent of FNB Southeast, today reported second quarter 2006 net income of $2.39 million and earnings for the first six months of $4.77 million. This represents earnings per diluted share of $0.33 and $0.66, respectively. FNB earned $2.14 million in the second quarter of 2005 and $4.18 million for the first six months a year ago. Quarterly earnings and year to date earnings for 2006 increased 11.9% and 14.1%, respectively. FNB's second quarter 2006 results produced an annualized return on average assets of 0.94% and an annualized return on average equity of 14.07%, compared with prior year results of 0.90% and 11.87%, respectively. "Overall, the results during the first half of 2006 are encouraging. We are continuing to focus on resolving credit issues in our loan portfolio while building upon our earnings momentum," stated Pressley A. Ridgill, President and Chief Executive Officer. "We appreciate the confidence placed in us by our customers and shareholders." Interest income was $18.02 million and $15.06 million for the three months ended June 30, 2006 and 2005, respectively. On a year-to-date basis, interest income amounted to $35.91 million in 2006 and $28.44 million in 2005. Interest expense totaled $8.48 million in the 2006 second quarter, an increase of $2.50 million from the year ago quarter. Interest expense on deposits was $6.98 million in the current quarter, compared to $5.25 million for the same quarter a year ago. The net interest margin for the second quarter of 2006 declined to 4.00%, as the current interest rate environment, along with increased competition for deposits, contributed to a negative impact on the margins. Net interest income totaled $9.54 million in the second quarter of 2006, an increase of $453,000, or 5.0%, compared to $9.09 million in 2005. Noninterest income totaled $1.31 million in the second quarter of 2006, compared with $1.82 million for the same period a year ago. Noninterest expense totaled $6.85 million for the second quarter of 2006, compared with $7.05 million for the same period in 2005. As of June 30, 2006 assets were $1.03 billion, a $20.4 million, or 2.0%, increase during the first six months of 2006. Outstanding loans totaled $750.7 million at the end of the current quarter, compared to $758.0 million at December 31, 2005. Net credit losses for the second quarter of 2006 amounted to $791,000, or 0.42% of average outstanding loans on an annualized basis, compared to 0.06% recorded in the 2005 second quarter. The allowance for credit losses to outstanding loans was 2.43% at June 30, 2006, compared to 2.53% at December 31, 2005, and 1.10% at June 30, 2005. FNB recorded provisions for credit losses of $365,000 and $638,000 for the three months ended June 30, 2006 and 2005, respectively. The decrease in the provision resulted primarily from the continued evaluation and analysis of the risk grades of loans in the credit portfolio. During the second quarter of 2006, FNB continued working to identify and resolve credit portfolio issues. At June 30, 2006 nonperforming loans totaled $14.5 million, compared to $9.0 million at March 31, 2006 and $10.4 million at the prior yearend. While the balance of risk grade loans classified special mention, substandard, doubtful or loss increased to $86.1 million from $78.5 million at yearend 2005, the reserve requirement for these categories of loans decreased to $11.7 million from $11.8 million. Retail loans past due 90 days or more decreased from $3.1 million at December 31, 2005 to $1.4 million at June 30, 2006. The required reserve for retail loans past due 90 days or more decreased from $787,000 to $355,000. During the past year, deposits increased $35.4 million, or 4.4%, to $846.8 million at June 30, 2006. Other borrowings were $108.1 million and $89.2 million at June 30, 2006 and 2005, respectively. Shareholders' equity was $69.4 million at June 30, 2006, compared to $73.4 million a year ago. During 2006, the Company repurchased 80,877 shares of its common stock at an average cost of $15.11 per share. FNB Financial Services Corporation is a bank 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 ("FNB"). 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 FNB 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 FNB is engaged; (9) regulatory compliance cost increases are greater than expected; and (10) decisions to change the business mix of FNB. For further information and other factors which could affect the accuracy of forward looking statements, please see FNB's reports filed with the Securities and Exchange Commission ("SEC") pursuant to the Securities Exchange Act of 1934 which are available at the SEC's website (www.sec.gov) or at FNB'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. FNB 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 ----------------- 2006 2005 ---------------------- ------------------------------- Second First Fourth Third Second Quarter Quarter Quarter Quarter Quarter ----------- ----------- ---------------------- --------- Average Balances (Dollars in thousands) Assets $1,022,267 $1,015,797 $1,011,103 $ 996,274 $954,786 Loans 759,948 760,026 764,331 767,524 737,735 Investment securities 209,041 204,468 181,222 162,760 153,411 Earning assets 977,031 974,586 953,263 939,458 899,522 Noninterest- bearing deposits 89,311 87,174 89,999 87,335 86,656 Interest- bearing deposits 734,631 741,104 733,000 729,740 694,494 Interest- bearing liabilities 827,762 850,713 831,665 821,369 781,663 Shareholders' equity 68,897 68,203 74,153 73,592 72,154 Period-End Balances (Dollars in thousands) Assets $1,027,827 $1,019,878 $1,007,406 $1,011,778 $979,446 Loans 750,725 754,921 757,967 771,359 763,255 Investment securities 204,855 203,824 201,890 178,422 155,568 Earning assets 968,126 965,004 964,431 954,139 924,506 Noninterest- bearing deposits 90,116 89,996 92,884 88,809 95,335 Interest- bearing deposits 756,668 746,422 731,746 741,021 716,031 Interest- bearing liabilities 864,769 855,611 839,826 839,032 805,184 Shareholders' equity 69,363 68,986 67,233 74,605 73,360 Asset Quality Data (Dollars in thousands) Nonperforming loans $ 14,490 $ 8,966 $ 10,386 $ 4,108 $ 4,002 Other nonperforming assets 1,609 1,527 1,483 1,485 2,554 Net credit losses 791 1,232 3,629 422 102 Allowance for credit losses 18,239 18,665 19,142 9,333 8,380 Nonperforming loans to outstanding loans 1.93 % 1.19 % 1.37 0.53 % 0.52 % Annualized net credit losses to average loans 0.42 0.65 1.90 0.22 0.06 Allowance for credit losses to outstanding loans 2.43 2.47 2.53 1.21 1.10 Allowance for credit losses to nonperforming loans 125.87 X 208.18 X 184.31 227.19 X 209.40 X FINANCIAL SUMMARY --------------------------- Second Six Months Ended Quarter June 30 2006-2005 ------------------------------- Percent Percent Variance 2006 2005 Variance ---------- ----------- --------- -------- Average Balances (Dollars in thousands) Assets 7.1 % $1,019,050 $927,089 9.9 % Loans 3.0 759,988 714,586 6.4 Investment securities 36.3 206,767 147,719 40.0 Earning assets 8.6 975,815 870,990 12.0 Noninterest-bearing deposits 3.1 88,248 82,693 6.7 Interest-bearing deposits 5.8 737,850 677,260 8.9 Interest-bearing liabilities 5.9 826,358 758,983 8.9 Shareholders' equity (4.5) 68,552 71,490 (4.1) Period-End Balances (Dollars in thousands) Assets 4.9 % Loans (1.6) Investment securities 31.7 Earning assets 4.7 Noninterest-bearing deposits (5.5) Interest-bearing deposits 5.7 Interest-bearing liabilities 7.4 Shareholders' equity (5.4) Asset Quality Data (Dollars in thousands) Nonperforming loans $14,490 $4,002 Other nonperforming assets 1,609 2,554 Net credit losses 2,023 291 Allowance for credit losses 18,524 8,380 Nonperforming loans to outstanding loans 1.93 % 0.52 % Annualized net credit losses to average loans 0.53 0.08 Allowance for credit losses to outstanding loans 2.43 1.10 Allowance for credit losses to nonperforming loans 1.28 X 2.09 X FINANCIAL SUMMARY ------------------------ 2006 2005 ----------------- --------------------------- Second First Fourth Third Second Quarter Quarter Quarter Quarter Quarter -------- -------- --------- -------- -------- Income Statement Data (Dollars in thousands, except share data) Interest income: Loans $15,814 $15,757 $ 15,363 $14,917 $13,630 Other 2,204 2,131 1,819 1,575 1,431 ------- ------- -------- ------- ------- Total interest income 18,018 17,888 17,182 16,492 15,061 Interest expense 8,479 7,786 7,181 6,690 5,975 ------- ------- -------- ------- ------- Net interest income 9,539 10,102 10,001 9,802 9,086 Provision for credit losses 365 755 13,627 1,187 638 ------- ------- -------- ------- ------- Net interest income after provision for credit losses 9,174 9,347 (3,626) 8,615 8,448 Noninterest income 1,311 1,332 1,696 1,734 1,815 Noninterest expense 6,846 7,057 7,276 6,993 7,045 ------- ------- -------- ------- ------- Income before income tax expense 3,639 3,622 (9,206) 3,356 3,218 Income tax expense 1,249 1,244 (3,601) 1,138 1,083 ------- ------- -------- ------- ------- Net income $ 2,390 $ 2,378 ($5,605) $ 2,218 $ 2,135 ======= ======= ======== ======= ======= Net income per share: Basic $ 0.34 $ 0.34 ($0.80) $ 0.32 $ 0.30 Diluted $ 0.33 $ 0.33 ($0.80) $ 0.31 $ 0.29 Cash dividends per share $ 0.12 $ 0.12 $ 0.12 $ 0.11 $ 0.11 Other Data Return on average assets 0.94 % 0.95 % (2.20) 0.88 % 0.90 % Return on average equity 14.07 14.14 (29.99) 11.96 11.87 Net yield on earning assets 4.00 4.28 4.24 4.21 4.12 Efficiency 61.87 60.70 61.23 59.77 63.67 Equity to assets 6.74 6.71 7.33 7.39 7.56 Loans to assets 74.34 74.82 75.59 77.04 77.27 Loans to deposits 92.23 91.76 92.87 93.94 94.44 Noninterest - bearing deposits to total deposits 10.84 10.52 10.94 10.69 11.09 FINANCIAL SUMMARY ------------------------------- Second Six Months Ended Quarter June 30 2006-2005 -------------------------- Percent Percent Variance 2006 2005 Variance ---------- ------- ------- -------- Income Statement Data (Dollars in thousands, except share data) Interest income: Loans 16.0 % $31,571 $25,732 22.7 % Other 54.0 4,335 2,706 60.2 ------- ------- Total interest income 19.6 35,906 28,438 26.3 Interest expense 41.9 16,265 10,839 50.1 ------- ------- Net interest income 5.0 19,641 17,599 11.6 Provision for credit losses (42.8) 1,120 1,318 (15.0) ------- ------- Net interest income after provision for credit losses 8.6 18,521 16,281 13.8 Noninterest income (27.8) 2,643 3,953 (33.1) Noninterest expense (2.8) 13,903 13,937 (0.2) ------- ------- Income before income tax expense 13.1 7,261 6,297 15.3 Income tax expense 15.3 2,493 2,119 17.6 ------- ------- Net income 11.9 $ 4,768 $ 4,178 14.1 ======= ======= Net income per share: Basic 13.3 % $ 0.68 $ 0.60 13.3 % Diluted 13.8 % $ 0.66 $ 0.58 13.8 % Cash dividends per share 9.1 % $ 0.24 $ 0.22 9.1 % Other Data Return on average assets 0.94 % 0.91 % Return on average equity 14.03 11.79 Net yield on earning assets 4.14 4.15 Efficiency 61.29 63.70 Equity to assets 6.73 7.71 Loans to assets 74.58 77.08 Loans to deposits 92.00 94.03 Noninterest - bearing deposits to total deposits 10.68 10.88 COMMON STOCK DATA ------------------ 2006 2005 --------------------- -------------------------------- Second First Fourth Third Second Quarter Quarter Quarter Quarter Quarter ---------- ---------- ---------- ---------- ---------- Market value: End of period $15.16 $16.05 $16.40 $17.58 $18.39 High 15.67 16.46 17.89 18.52 20.25 Low 14.70 14.00 14.40 16.56 16.82 Book value 9.81 9.79 9.55 10.60 10.49 Dividend 0.12 0.12 0.12 0.11 0.11 Shares outstanding at period-end 7,048,976 7,045,335 7,038,110 7,036,148 6,995,029 Average shares outstanding 7,074,254 7,040,964 7,036,704 7,003,950 6,991,912 Shares traded 544,000 474,471 282,011 194,165 263,966 *T