Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
|
(1)
|
The
Company and Summary of Significant Accounting Policies
|
FNB
Bancorp (the “Company”) is a bank holding company registered under the Bank Holding Company Act of 1956, as amended.
The Company was incorporated under the laws of the State of California on February 28, 2001. The consolidated financial statements
include the accounts of FNB Bancorp and its wholly-owned subsidiary, First National Bank of Northern California (the “Bank”).
The Bank provides traditional banking services in San Mateo, San Francisco and Santa Clara Counties.
The
preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the financial statements and revenue and expenses during the
reporting period. Actual results could differ from those estimates. The significant accounting estimates are the allowance for
loan losses, the valuation of goodwill, the valuation of the allowance for deferred tax assets and fair value determinations such
as OREO and impaired loans. A summary of the significant accounting policies applied in the preparation of the accompanying consolidated
financial statements follows.
On
December 11, 2017, the Company’s Board of Directors signed a definitive agreement to sell FNB Bancorp and its wholly owned
subsidiary, First National Bank of Northern California, in an all stock transaction, to TriCo Bancshares. The details of the definitive
agreement are discussed in Note 2 – The Agreement and Plan of Merger and Reorganization.
|
(a)
|
Basis
of Presentation
|
The
accounting and reporting policies of the Company and its wholly-owned subsidiary are in accordance with accounting principles
generally accepted in the United States of America. All intercompany balances and transactions have been eliminated.
|
(b)
|
Cash
and Cash Equivalents
|
Cash
and cash equivalents include cash on hand, amounts due from banks, and federal funds sold. Generally, federal funds are sold for
one-day periods. The cash equivalents are readily convertible to known amounts of cash and present insignificant risk of changes
in value due to original maturity dates of 90 days or less. Included in cash and cash equivalents are restricted balances at the
Federal Reserve Bank of San Francisco which relate to a minimum cash reserve requirement of approximately $0 and $1,810,000 at
December 31, 2017 and 2016, respectively.
|
(c)
|
Investment
Securities
|
Investment
securities consist of U.S. Treasury securities, U.S. agency securities, obligations of states and political subdivisions, obligations
of U.S. corporations, mortgage-backed securities and other securities. At the time of purchase of a security, the Company designates
the security as held-to-maturity or available-for-sale, based on its investment objectives, operational needs, and intent to hold.
The Company classifies securities as held to maturity only if and when it has the positive intent and ability to hold the security
to maturity. The Company does not purchase securities with the intent to engage in trading activity. Held to maturity securities
are recorded at amortized cost, adjusted for amortization of premiums or accretion of discounts.
The
Company did not have any investments in the held-to-maturity portfolio at December 31, 2017 or 2016. Securities available-for-sale
are recorded at fair value with unrealized holding gains or losses, net of the related tax effect, reported as a separate component
of stockholders’ equity until realized.
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
An
impairment charge will be recorded if the Company has the intent to sell a security that is currently in an unrealized loss position
or where the Company may be required to sell a security that is currently in an unrealized loss position. A decline in the fair
value of any security available-for-sale or held-to-maturity below cost that is deemed other than temporary will cause a charge
to earnings to be recorded and the corresponding establishment of a new cost basis for the security. Amortization of premiums
and accretion of discounts on debt securities are included in interest income over the life of the related security held-to-maturity
or available-for-sale using the effective interest method. Dividend and interest income are recognized when earned. Realized gains
and losses for securities classified as available-for-sale and held-to-maturity are included in earnings and are derived using
the specific identification method for determining the cost of securities sold.
Investments
with fair values that are less than amortized cost are considered impaired. Impairment may result from either a decline in the
financial condition of the issuing entity or, in the case of fixed interest rate investments, from rising interest rates. At each
consolidated financial statement date, management assesses each investment to determine if impaired investments are temporarily
impaired or if the impairment is other than temporary. This assessment includes a determination of whether the Company intends
to sell the security, or if it is more likely than not that the Company will be required to sell the security before recovery
of its amortized cost basis less any current-period credit losses. For debt securities that are considered other than temporarily
impaired and that the Company does not intend to sell and will not be required to sell prior to recovery of the amortized cost
basis, the amount of impairment is separated into the amount that is credit related (credit loss component) and the amount due
to all other factors. The credit loss component is recognized in earnings and is calculated as the difference between the security’s
amortized cost basis and the present value of its expected future cash flows. The remaining difference between the security’s
fair value and the present value of the future expected cash flows is deemed to be due to factors that are not credit related
and is recognized in other comprehensive earnings.
All
derivatives contracts and instruments are recognized as either assets or liabilities in the consolidated balance sheet and measured
at fair value. The Company did not hold any derivative contracts at December 31, 2017 or 2016.
Loans
are reported at the principal amount outstanding, net of deferred loan fees and the allowance for loan losses. An unearned discount
on installment loans is recognized as income over the terms of the loans by the interest method. Interest on other loans is calculated
by using the simple interest method on the daily balance of the principal amount outstanding. Loan fees net of certain direct
costs of origination, which represent an adjustment to interest yield, are deferred and amortized over the contractual term of
the loan using the interest method.
Loans
on which the accrual of interest has been discontinued are designated as nonaccrual loans. Accrual of interest on loans is discontinued
either when reasonable doubt exists as to the full and timely collection of interest or principal when a loan becomes contractually
past due by 90 days or more with respect to interest or principal. When a loan is placed on nonaccrual status, all interest previously
accrued but not collected is reversed against current period interest income. Interest accruals are resumed on such loans only
when they are brought fully current with respect to interest and principal and when, in the judgment of management, the loans
are estimated to be fully collectible as to both principal and interest.
FNB
Bancorp and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
A
loan is considered impaired if, based on current information and events, it is probable that the Company will be unable to collect
the scheduled payments of principal or interest when due, according to the contractual terms of the loan agreement. An impaired
loan is measured based upon the present value of future cash flows discounted at the loan’s effective rate, the loan’s
observable market price, or the fair value of collateral if the loan is collateral dependent. Interest on impaired loans is recognized
on a cash basis. If the measurement of the impaired loan is less than the recorded investment in the loan, an impairment is recognized
by a charge to the allowance for loan losses. Large groups of smaller balance loans are collectively evaluated for impairment.
Restructured
loans are loans on which concessions in terms have been granted because of the borrowers’ financial difficulties. Interest
is generally accrued on such loans in accordance with the new terms, once the borrower has demonstrated a history of at least
six months repayment. A loan is considered to be a troubled debt restructuring when the Company, for economic or legal reasons
related to the debtor’s financial difficulties grants a concession to the debtor that makes it easier for the debtor to
make their required loan payments. The concession may take the form of a temporary reduction in the interest rate or monthly payment
amount due or may extend the maturity date of the loan. Other financial concessions may be agreed to as conditions warrant. Troubled
debt restructured loans are accounted for as impaired loans. For an impaired loan that has been restructured, the contractual
terms of the loan agreement refer to the contractual terms specified by the original loan agreement, not the contractual terms
specified by the restructuring agreement.
Loans
acquired in business combinations are recorded on a loan-by-loan basis at their estimated fair value. The Company uses third party
valuation specialists to determine the estimated fair value on all acquired loans. The Company acquires both performing and impaired
loans (loans acquired with evidence of credit quality deterioration at the time of purchase) in its acquisitions. For acquired
performing loans, any discount or premium related to fair value adjustments at the time of purchase is recognized as interest
income over the estimated life of the loan using the effective yield method. Loans acquired with evidence of credit quality deterioration,
at the time of purchase, are accounted for under ASC 310-30
Loans and Debt Securities Acquired with Deteriorated Credit Quality
(“ASC 310-30 Loans”). For ASC 310-30 loans, the excess of cash flows expected to be collected over a loan’s
carrying value is considered to be the accretable yield and is recognized as interest income over the estimated life of the loan
using the effective yield method. The acquisition date estimates of accretable yield may subsequently change due to changes in
management’s estimates of timing and amounts of expected cash flows.
The
excess of the contractual amounts due over the cash flows expected to be collected is considered to be the nonaccretable difference.
The nonaccretable difference represents the Company’s estimate of the credit losses expected to occur and is considered
in determining the fair value of the loans as of the acquisition date. Subsequent to the acquisition date, any increases in expected
cash flows over those expected at acquisition date in excess of fair value are adjusted through an increase to the accretable
yield on a prospective basis. Any subsequent decreases in cash flows attributable to credit deterioration are recognized by recording
additional provision for loan losses.
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December
31, 2017, 2016 and 2015
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(f)
|
Allowance
for Loan Losses
|
The
allowance for loan losses is established through a provision for loan losses charged to expense. Loans are charged off against
the allowance for loan losses when management believes that the collectability of the principal is unlikely. The allowance is
an amount that management believes will be adequate to absorb probable losses inherent in existing loans, standby letters of credit,
overdrafts, and commitments to extend credit based on evaluations of collectability and prior loss experience. The evaluations
take into consideration such factors as changes in the nature and volume of the portfolio, overall portfolio quality, loan concentrations,
specific problem loans and current and anticipated economic conditions that may affect the borrowers’ ability to pay. While
management uses these evaluations to determine the level of the allowance for loan losses, future provisions may be necessary
based on changes in the factors used in the evaluations. Material estimates relating to the determination of the allowance for
loan losses are particularly susceptible to significant change in the near term. Management believes that the allowance for loan
losses is adequate as of December 31, 2017. While management uses available information to recognize losses on loans, future additions
to the allowance may be necessary based on changes in economic conditions, and our borrowers’ ability to pay. In addition,
the banking regulators, as an integral part of its examination process, periodically review the Bank’s allowance for loan
losses. The banking regulators may require the Bank to recognize additions to the allowance based on their judgment about information
available to them at the time of their examination.
|
(g)
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Premises
and Equipment
|
Premises
and equipment are reported at cost less accumulated depreciation using the straight-line method over the estimated service lives
of related assets ranging from 3 to 50 years. Leasehold improvements are amortized over the estimated lives of the respective
leases or the service lives of the improvements, whichever is shorter.
|
(h)
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Impairment
of long-lived assets
|
Long-lived
assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may
not be recoverable. No impairment loss was recognized in 2017 or 2016.
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(i)
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Other
Real Estate Owned
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Real
estate properties acquired through, or in lieu of, loan foreclosure are initially recorded at the lower of the carrying amount
of the loan or fair value of the property at the date of foreclosure, less anticipated selling costs. Subsequent to foreclosure,
valuations are periodically performed, and any subsequent revisions in the estimate of fair value are reported as an adjustment
to the carrying value of the real estate, provided the adjusted carrying amount does not exceed the original amount at foreclosure.
Revenues and expenses from operations and changes in the valuation allowance are included in other operating expenses.
The
Company may make loans to facilitate the sale of foreclosed real estate. Gains and losses on financed sales are recorded in accordance
with the appropriate accounting standard, taking into account the buyer’s initial and continuing investment in the property,
potential subordination and transfer of ownership.
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(j)
|
Goodwill and Other
Intangible Assets
|
Goodwill
is recognized in a business acquisition transaction when the acquisition purchase price exceeds the fair value of identified tangible
and intangible assets and liabilities. Goodwill is subsequently evaluated for possible impairment at least annually. If impairment
is determined to exist, it is recorded in the period it is identified. The Company evaluated goodwill at December 31, 2017 and
found no impairment.
Other
intangible assets consist of core deposit and customer intangible assets that are initially recorded at fair value and subsequently
amortized over their estimated useful lives, usually no longer than a seven year period.
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
The
Company’s ability to pay cash dividends is subject to restrictions set forth in the California General Corporation Law.
Funds for payment of any cash dividends by the Company would be obtained from its investments as well as dividends and/or management
fees from the Bank. The Bank’s ability to pay cash dividends is also subject to restrictions imposed under the National
Bank Act and regulations promulgated by the Office of the Comptroller of the Currency.
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(l)
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Stock
Dividends and Stock Split
|
On
March 31, 2017, the Company announced that its board of directors had declared a 3 for 2 stock split aggregating approximately
2,436,057 shares. The stock split had a record date of May 5, 2017 and a payable date of May 26, 2017. On October 28, 2016, the
Company announced that its Board of Directors had declared a five percent (5%) stock dividend which resulted in approximately
231,000 shares being issued, payable to investors at the rate of one share of Common Stock for every twenty (20) shares of Common
Stock owned. The stock dividend was paid on December 30, 2016. The earnings per share data for all periods presented have been
adjusted for the stock split and the stock dividend. Stock splits are reflected retroactively back to the earliest period presented.
However, the Consolidated Statement of Changes in Stockholders’ Equity shows the historical roll forward of stock dividends
declared.
Other
income includes the following major items for the year ended December 31:
(Dollar
amounts in thousands)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Dividend
income-other equity securities
|
|
$
|
558
|
|
|
$
|
775
|
|
|
$
|
651
|
|
Rental income-other
real estate owned
|
|
|
152
|
|
|
|
144
|
|
|
|
144
|
|
All
other items
|
|
|
286
|
|
|
|
375
|
|
|
|
497
|
|
Total
other income
|
|
$
|
996
|
|
|
$
|
1,294
|
|
|
$
|
1,292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
expense includes the following major items for the year ended December 31:
(Dollar amounts in thousands)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Dues and memberships
|
|
$
|
176
|
|
|
$
|
146
|
|
|
$
|
125
|
|
Real estate appraisals
|
|
|
58
|
|
|
|
75
|
|
|
|
75
|
|
Training and seminars
|
|
|
99
|
|
|
|
54
|
|
|
|
66
|
|
Amortization of deposit premium
|
|
|
171
|
|
|
|
207
|
|
|
|
82
|
|
Card based third party fees
|
|
|
113
|
|
|
|
104
|
|
|
|
96
|
|
Armored transit
|
|
|
86
|
|
|
|
113
|
|
|
|
113
|
|
Regulatory assessment
|
|
|
290
|
|
|
|
269
|
|
|
|
238
|
|
Operating losses
|
|
|
100
|
|
|
|
188
|
|
|
|
97
|
|
All other items
|
|
|
337
|
|
|
|
512
|
|
|
|
390
|
|
|
|
$
|
1,430
|
|
|
$
|
1,668
|
|
|
$
|
1,282
|
|
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
Deferred
income taxes are determined using the asset and liability method. Under this method, net deferred tax assets and liabilities are
recognized by applying current tax rates to temporary timing differences between the financial reporting and tax basis of existing
assets and liabilities. Deferred tax assets and liabilities are reflected at currently enacted income tax rates applicable to
the period in which the deferred tax assets or liabilities are expected to be realized or settled. A valuation allowance is established
through the provision for income taxes for any deferred tax assets where the utilization of the asset is in doubt. As changes
in tax laws or rates are enacted, or as significant changes are made in financial projections, deferred tax assets and liabilities
are adjusted through the provision for income taxes.
On
December 22, 2017, President Donald Trump signed into law the Tax Cuts and Jobs Act of 2017 (the “Act”), which reduced
the federal income tax rate from 35% to 21% beginning in 2018. Pursuant to the passage of the Act, the Company has revalued our
deferred assets and liabilities in accordance with the lower federal income tax rate resulting in a reduction in our net deferred
tax asset and an additional income tax expense of $2,987,000 during 2017.
The
Company had no unrecognized tax benefits as of December 31, 2017, 2016 and 2015, respectively. The Company recognizes interest
accrued and penalties related to unrecognized tax benefits in tax expense. During the years ended December 31, 2017, 2016 and
2015, the Company believes that any penalties and interest that may exist are not material and the Company has not accrued for
them.
At
December 31, 2017, the Bank had a $1,358,000 net investment in five partnerships, which own low-income affordable housing projects
that generate tax benefits in the form of federal and state housing tax credits. As a limited partner investor in these partnerships,
the Company receives tax benefits in the form of tax deductions from partnership operating losses and federal and state income
tax credits.
The
federal and state income tax credits are earned over a 10-year period as a result of the investment properties meeting certain
criteria and are subject to recapture for noncompliance with such criteria over a 15-year period.
The
expected benefit resulting from the low-income housing tax credits is recognized in the period for which the tax benefit is recognized
in the Company’s consolidated tax returns. These investments are accounted for using the historical cost method less depreciation
and amortization and are recorded in other assets on the balance sheet. The Company recognizes tax credits as they are allocated
and amortizes the initial cost of the investments over the period that tax credits are allocated to the Company. There is no residual
value for the investment at the end of the tax credit allocation period. Cash received from operations of the limited partnership
or sale of the properties, if any, will be included in earnings when realized.
Earnings
per common share (EPS) are computed based on the weighted average number of common shares outstanding during the period. Basic
EPS excludes dilution and is computed by dividing net earnings available to common stockholders by the weighted average of common
shares outstanding. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common
stock were exercised or converted into common stock. The number of potential common shares included in the quarterly diluted EPS
is computed using the average market price during the three months included in the reporting period under the treasury method.
In years where a stock split or stock dividend occurs, all weighted average shares reported are adjusted to reflect the stock
split retroactively applied to each of the periods presented. The number of potential common shares included in year-to-date diluted
EPS is a year-to-date weighted average of potential shares included in each quarterly diluted EPS computation. All common stock
equivalents are anti-dilutive when a net loss occurs. A 3-for-2 stock split occurred in 2017, and a 5% stock dividend was declared
in both 2016 and 2015 and therefore prior per share amounts and weighted average shares outstanding have been adjusted for the
stock split and stock dividends that occurred.
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December
31, 2017, 2016 and 2015
(Number
of shares in thousands)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Weighted
average common shares outstanding-used in computing basic earnings per share
|
|
|
7,361
|
|
|
|
7,233
|
|
|
|
7,113
|
|
Dilutive
effect of stock options outstanding, using the treasury stock method
|
|
|
246
|
|
|
|
184
|
|
|
|
201
|
|
Shares
used in computing diluted earnings per share
|
|
|
7,607
|
|
|
|
7,417
|
|
|
|
7,314
|
|
Measurement
of the cost of stock options granted is based on the grant-date fair value of each stock option granted using the Black-Scholes
valuation model. The cost is then amortized to expense on a straight-line basis over each option’s requisite service period.
The amortized expense of the stock option’s fair value has been included in salaries and employee benefits expense on the
consolidated statements of earnings for the three years ended December 31, 2017, 2016 and 2015. The expected term of options granted
is derived from the output of the option valuation model and represents the period of time that options granted are expected to
be outstanding. The risk-free rate for periods within the expected term of the option is based on the U. S. Treasury yield curve
in effect at the time of the grant. Volatility was calculated using historical price changes on a monthly basis over the expected
life of the option. The dividend yield was calculated using the annual projected cash dividends divided by the market value of
the Company’s stock.
|
(r)
|
Fair
Values of Financial Instruments
|
The
accounting standards provide for a fair value measurement framework that quantifies fair value estimates by the level of pricing
precision. The degree of judgment utilized in measuring the fair value of assets generally correlates to the level of pricing
precision. Financial instruments rarely traded or not quoted will generally have a higher degree of judgment utilized in measuring
fair value. Pricing precision is impacted by a number of factors including the type of asset or liability, the availability of
the asset or liability, the market demand for the asset or liability, and other conditions that were considered at the time of
the valuation.
In
general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or
liabilities that the Company has the ability to access. Level 2 inputs include quoted prices for similar assets and liabilities
in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates
and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability,
and include situations where there is little, if any, market activity for the asset or liability. In certain cases, the inputs
used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value
hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that
is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular
input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
Transfers between levels of the fair values hierarchy are recognized at the actual date of the event or circumstance that caused
the transfer.
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
|
(s)
|
Bank
Owned Life Insurance
|
The
Company purchased insurance on the lives of certain executives. The policies accumulate asset values to meet future liabilities
including the payment of employee benefits such as the deferred compensation plan. Changes in the cash surrender value are recorded
as other noninterest income in the consolidated statements of earnings.
|
(t)
|
Federal
Home Loan Bank Borrowings
|
The
Bank maintains a collateralized line of credit with the Federal Home Loan Bank (“FHLB”) of San Francisco. Under this
line, the Bank may borrow on a short term or a long term (over one year) basis at the then stated interest rate. FHLB advances
are recorded and carried at their historical cost. FHLB advances are not transferable and may contain prepayment penalties. In
addition to the collateral pledged, the Company is required to hold prescribed amounts of FHLB stock that vary with the usage
of FHLB borrowings.
|
(u)
|
Comprehensive
Earnings
|
Certain
changes in assets and liabilities, such as unrealized gain and losses on available-for-sale securities are reported as a separate
component of the equity section of the consolidated balance sheet, such items, along with net income, are components of comprehensive
income.
The
Company obtained a corporate loan with a five year term, for $6,000,000, payable at $50,000 principal monthly, plus interest,
and is based on the 3-month LIBOR rate plus 4%.
|
(w)
|
Federal
Home Loan Bank Stock
|
Federal
Home Loan Bank (FHLB) stock represents an equity interest that does not have a readily determinable fair value because its ownership
is restricted and it lacks a market (liquidity). FHLB stock is recorded at cost.
Certain
prior year information has been reclassified to conform to current year presentation. The reclassifications had no impact on consolidated
net earnings or retained earnings.
|
(y)
|
Recent
Accounting Pronouncements
|
In May
2014, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2014-9,
Revenue from Contracts
with Customers.
The core principal of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised
goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange
for those goods or services. The guidance also specifies the accounting for some costs to obtain or fulfill a contract with a
customer, as well as enhanced disclosure requirements. In August 2015, the FASB issued 2015-14 which deferred the effective date
of ASU 2014-09 to fiscal years, and interim reporting periods within those fiscal years, beginning after December 31, 2017. In
March 2016, the FASB issued ASU 2016-08 which clarified the revenue recognition implementation guidance on principal versus agent
considerations and is effective during the same period as ASU 2014-09. In April 2016, The FASB issued ASU 2016-10 which clarified
the revenue recognition guidance regarding the identification of performance obligations and the licensing implementation and
is effective during the same period as ASU 2014-09. In May 2016, the FASB issued ASU 2016-12 which narrowly amended the revenue
recognition guidance regarding collectability, noncash consideration, presentation of sales tax and transition. ASU 2016-12 is
effective during the same period as ASU 2014-09.
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
The majority of the Company’s
revenue consists of net interest income on financial assets and financial liabilities, which is explicitly excluded from the scope
of ASU 2014-09. The Company adopted the new standard beginning January 1, 2018. The Company completed its analysis for determining
the extent ASU 2014-09 will affect its noninterest income, primarily in the area of fees and service charges on deposit accounts.
Based on the analysis performed, the Company did not have a material change in timing or measurement of revenues related to noninterest
income. The Company will continue to evaluate the effect that this guidance will have on other revenue steams within its scope,
as well as changes in disclosures required by the new guidance. However, the Company does not expect this to have a material impact
on the Company’s consolidated financial statements.
In January
2016 FASB issued ASU 2016-01,
Financial Instruments-overall (subtopic 825-10) Recognition and Measurement of Financial Assets
and Financial Liabilities
. Before the global financial crisis that began in 2008, both the Financial Accounting Standards
Board (FASB) and the International Accounting Standards Board (IASB) began a joint project to improve and to achieve convergence
of their respective standards on the accounting for financial instruments. The global economic crisis further highlighted the
need for improvement in the accounting models for financial instruments in today’s complex economic environment. As a result,
the main objective in developing this Update is enhancing the reporting model for financial instruments to provide users of financial
statements with more decision-useful information. For public business entities, the amendments in this Update address certain
aspects of recognition measurement. The amendments in this Update are effective for fiscal years beginning after December 15,
2017, including interim periods within those fiscal years. The adoption of this Update is not expected to have a material impact
on the Company’s consolidated financial statements.
In February
2016 FASB issued ASU 2016-02
, Leases (Topic 842).
The FASB is issuing this Update to increase transparency and comparability
among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about
leasing arrangements. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise
from leases. All leases create an asset and a liability for the lessee in accordance with FASB Concepts Statement No. 6, Elements
of Financial Statements, and, therefore, recognition of those lease assets and lease liabilities represents an improvement over
previous GAAP, which did not require lease assets and lease liabilities to be recognized for most leases. ASU 2016-02 is effective
for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Although an estimate
of the impact on the new leasing standard has not yet been determined, the Company expects a significant new lease asset and related
liability to be recorded on the consolidated balance sheet due to the number of branch facilities that are subject to a formal
Lease agreement.
In March
2016, the FASB issued ASU 2016-08,
Revenue from Contracts with Customers (Topic 606); Principal versus agent considerations
(reporting revenue gross versus net
). The core principle of the guidance in Topic 606 is that an entity should recognize revenue
to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. The amendments in this Update do not change the core principle
of the guidance. The amendments clarify the implementation guidance on principal versus agent considerations. When another party
is involved in providing goods or services to a customer, an entity is required to determine whether the nature of its promise
to provide the specified good or service itself (that is, the entity is a principal) or to arrange for that good or service to
be provided by the other party (that is, the entity is an agent). When (or as) an entity that is a principal satisfies a performance
obligation, the entity recognizes revenue in the gross amount of consideration to which it expects to be entitled in exchange
for the specified good or service transferred to the customer. When (or as) an entity that is an agent satisfies a performance
obligation, the entity recognizes revenue in the amount of any fee or commission to which it expects to be entitled in exchange
for arranging for the specified good or service to be provided by the other party. ASU 2016-08 is effective for fiscal years beginning
after December 15, 2017, including interim periods within those fiscal years. The Company has reviewed all our customer relationships
in order to determine whether an agency relationship exists and if it does, whether the Company needed to change the way we recognize
income related to these relationships. The Company does not believe the adoption of this ASU will have a material impact on the
Company’s consolidated financial statements.
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December
31, 2017, 2016 and 2015
In
March 2016, the FASB issued ASU No. 2016-09
, Compensation – Stock Compensation (Topic 718).
ASU 2016-09,
among other things, requires: (i) that all excess tax benefits and tax deficiencies (including tax benefits of dividends
on share-based payment awards) should be recognized as income tax expense or benefit in the income statement, (ii) the tax
effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur, (iii) an
entity also should recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period,
(iv) excess tax benefits should be classified along with other income tax cash flows as an operating activity, (v) an
entity can make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest (current
GAAP) or account for forfeitures when they occur, (vi) the threshold to qualify for equity classification permits withholding
up to the maximum statutory tax rates in the applicable jurisdictions, and (vii) cash paid by an employer when directly withholding
shares for tax withholding purposes should be classified as a financing activity. ASU 2016-09 was effective for the Company
on January 1, 2017 and did not have a significant impact on the Company’s consolidated financial statements.
In June
2016 FASB issued ASU 2016-13,
Financial Instruments-Credit Losses
(Topic 326). Measurement of Credit Losses. The amendments
in this Update require a financial
asset (or a group of financial assets) measured at amortized cost to be presented at
the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized
cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial
asset. The income statement reflects the measurement of credit losses for newly recognized financial assets, as well as the expected
increases or decreases of expected credit losses that have taken place during the period. ASU 2016-13 is effective for fiscal
years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating
the impact of this ASU on the Company’s consolidated financial statements.
In
August 2016, FASB issued ASU 2016-15,
Statement of Cash Flows (Topic 230; Classification of Certain Cash Receipts and Cash
Payments.
This ASU update addresses eight cash flow classification issues related to: debt prepayment or debt extinguishment
costs; settlement of zero coupon debt instruments; contingent consideration payments made after a business combination; proceeds
from the payment of insurance claims; proceeds from the settlement of corporate owned life insurance policies, including bank
owned life insurance policies; distributions received from equity method investees; beneficial interests in securitization transactions;
and separately identifiable cash flows and application of the predominance principal. ASU 2016-15 is effective for fiscal years
beginning after December 15, 2017. The adoption of this Update is not expected to have a material impact on the Company’s
consolidated financial statements.
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
In January
2017, FASB issued ASU 2017-01,
Business Combinations, (Topic 805) Clarifying the Definition of a Business.
The amendments
are intended to provide guidance to companies in evaluating whether transactions should be accounted for as acquisitions (or disposals)
of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill
and consolidation. The amendments are effective for annual and interim reporting periods after December 31, 2017. The Company
has begun the process to implement this guidance. The guidance, is not, however, expected to have a material impact on the Company’s
financial statements.
In January
2017, FASB issued ASU 2017-03,
Accounting Changes and Error Corrections (Topic 250) and Investments – Equity Method and
Joint Ventures (Topic 323).
This ASU amends the Codification for SEC Staff Announcements made at recent Emerging Issues Task
Force (EITF) meetings. The SEC staff expressed their expectations about the extent of disclosures registrant should make about
the effects of the new FASB guidance as well as any amendments issued prior to adoption, or revenue (ASU 2014-09), leases (ASU
2016-02) and credit losses on financial instruments (ASU 2106-013). In accordance with SAB Topic M, Registrants are required to
disclose the effect that recently issued accounting standards will have on their financial statements when adopted in a future
period. In cases where a registrant cannot reasonably estimate the impact of the adoption, then additional qualitative disclosures
should be considered. The amendments are effective for annual and interim periods after December 31, 2017. The adoption of this
ASU in not expected to have a material impact on the Company’s consolidated financial statements.
In January
2017, FASB issued ASU 2017-04,
Intangibles-Goodwill and Other (Topc350). Simplifying the Test for Goodwill Impairment.
To
simplify the subsequent measurement of goodwill, the Board eliminated Step 2 from the goodwill impairment test. In computing the
implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value, at the impairment
testing date, of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would
be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under
the amendments in this Update, an entity should perform its annual, or interim, goodwill impairment testing by comparing the fair
value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the
carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount
of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible
goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The Board also
eliminated the requirements for any reporting unit with a zero or negative carrying amount of net assets. An entity still has
the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary.
This Update also includes amendments to the Overview and Background Sections of the Codification (as discussed in Part II of the
amendments) as part of the Board’s initiative to unify and improve the Overview and Background Sections across Topics and
Subtopics. This ASU is effective for fiscal years beginning after December 15, 2019. The adoption of this Update is not expected
to have a material impact on the Company’s consolidated financial statements.
In March
2017, FASB issued ASU 2017-08,
Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20). Premium Amortization
on Purchased Callable Debt Securities.
This Update was issued in order to shorten the amortization period for certain purchased
callable debt securities held at a premium to the earliest call date. This amendment does not require an accounting change for
securities held at a discount; the discount continues to be amortized to maturity. Before this update was issued, previous generally
accepted accounting principles (GAAP) allowed purchased premiums to be amortized as an adjustment of yield over the contractual
life of the instrument.
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
Stakeholders
raised concerns that current GAAP excludes certain callable debt securities from consideration of early repayment of principal
even if the holder is certain that the call will be exercised.
As a
result, upon the exercise of a call on a callable debt security held at a premium, the unamortized premium is recorded as a loss
in earnings. Additionally, stakeholders told the Board that there is diversity in practice (1) in the amortization period for
premiums of callable debt securities and (2) in how the potential for exercise of a call is factored into current impairment assessments.
Stakeholders noted that generally, in the United States, callable debt securities are quoted, priced, and traded assuming a model
that incorporates consideration of calls (also referred to as “yield-to-worst” pricing). For public business entities,
the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December
15, 2018. The adoption of this Update is not expected to have a material impact on the Company’s consolidated financial
statements.
In May 2017, FASB issued
ASU 2017-09,
Compensation – Stock Compensation (Topic 718). Scope of Modification Accounting.
This update was issued
in order to provide clarity regarding accounting for changes to terms and conditions of share-based payment awards. This amendment
requires a company to account for the effects of a share based payment award modification unless (i) the fair value of the modified
award is the same as the original award; (ii) the vesting of the modified award is the same as the original award; and (iii) the
classification of the modified award as an equity instrument or a liability instrument is the same as the original award. The
amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December
15, 2017. The adoption of this Update is not expected to have a material impact on the Company’s consolidated financial
statements.
In July, 2017, FASB issued
ASU 2017-11,
Earnings Per Share (Topic 260);Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic
815); (Part I) Accounting for Certain Financial Instruments with Down Round Features, (PartII) Replacement of the Indefinite Deferral
for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling
Interests with a Scope Exception.
This update was issued in order to provide additional clarity related to accounting for
certain financial instruments that have characteristics of both liabilities and equity. In particular, this update addresses freestanding
and embedded financial instruments with down round features and whether they should be treated as a liability or equity instrument.
Part II of the Update addresses the accounting and disclosure requirements of mandatorily redeemable financial instruments. For
public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal
years, beginning after December 15, 2018. The adoption of this Update is not expected to have a material impact on the Company’s
consolidated financial statements.
In August
2017, FASB issued ASU 2017-12,
Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.
This Update was issued in order to improve the financial reporting of hedging relationships and to portray the economic results
of an entity’s risk management activities in a manner that is easier to understand. For public business entities, the amendments
in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.
The adoption of this Update is not expected to have a material impact on the Company’s consolidated financial statements.
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
In February
2018, FASB issued 2018-02,
Income Statement – Reporting Comprehensive Income (Topic 220)
. The Update was issued in
order to allow a reclassification from accumulated other comprehensive income to retained earnings in order to eliminate the “stranded”
tax effects resulting from the federal income tax rate reduction contained in the Tax Cuts and Jobs Act that was signed into law
on December 22, 2017. However, because the amendments only relate to the reclassification of the income tax effects of the Tax
Cuts and Jobs Act, the underlying guidance that requires the effect of a change in tax law or rates to be included in income from
continuing operations is not affected. For all business entities, the amendments in this Update are effective for fiscal years,
and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption for public business entities
for which financial statements have not yet been issued is allowed. The adoption of this Update is expected to result in a reduction
in retained earnings of approximately $165,000.
|
(2)
|
Agreement
and Plan of Merger and Reorganization
|
On
December 11, an Agreement and Plan of Merger and Reorganization (the “Agreement”) was entered into between FNB Bancorp
and TriCo Bancshares whereby FNB Bancorp agreed to be merged with and into TriCo Bancshares, with TriCo as the surviving corporation
in the merger. Immediately following the merger, First National Bank of Northern California will merge with and into Tri Counties
Bank (“TriCo”), with TriCo as the surviving bank. The respective boards of both FNB Bancorp and TriCo Bancshares have
approved the merger, but the merger must still receive shareholder and regulatory approval to proceed. Under the terms of the
agreement, so long as the market price of TriCo Bancshares stays within prescribed limits, shareholders of FNB Bancorp will exchange
each of their FNB Bancorp shares for 0.98 shares of TriCo Bancshares. The upcoming FNB Bancorp shareholder meeting where shareholders
of record will be asked to vote on this merger is expected to occur in April 2018 with the merger closing date expected sometime
in either May or June 2018.
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
FNB
Bancorp acquired all of the assets and liabilities of America California Bank on September 4, 2015, using the acquisition method
of accounting for cash consideration of $21,500,000, and accordingly, the operating results of the acquired entities have been
included in the consolidated financial statements from the date of the acquisition. On the date of the acquisition, the fair value
of the assets acquired and the liabilities assumed were as follows:
|
|
America
|
|
|
|
California
|
|
|
|
Bank
|
|
|
|
September 4,
|
|
(In
thousands)
|
|
2015
|
|
Assets acquired:
|
|
|
|
|
Cash and
due from banks, net of cash paid
|
|
$
|
10,855
|
|
Loans
|
|
|
92,962
|
|
Premises and equipment,
net
|
|
|
62
|
|
Bank owned life insurance
|
|
|
2,971
|
|
Goodwill
|
|
|
2,739
|
|
Core deposit intangible
|
|
|
727
|
|
Other
assets
|
|
|
4,803
|
|
Total
assets acquired
|
|
$
|
115,119
|
|
|
|
|
|
|
Liabilities assumed:
|
|
|
|
|
Noninterest-bearing deposits
|
|
$
|
14,500
|
|
Interest-bearing deposits
|
|
|
75,626
|
|
Other
liabilities
|
|
|
3,493
|
|
Total
liabilities assumed:
|
|
|
93,619
|
|
Merger
consideration (all cash)
|
|
$
|
21,500
|
|
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
|
|
America
|
|
|
|
California
|
|
|
|
Bank
|
|
|
|
September 4,
|
|
(In
thousands)
|
|
2015
|
|
Book value of net assets
acquired from
|
|
|
|
|
America
California Bank
|
|
$
|
18,138
|
|
|
|
|
|
|
Fair value adjstments:
|
|
|
|
|
Loans
|
|
|
2,171
|
|
Core deposit intangible
asset
|
|
|
727
|
|
Time deposits
|
|
|
(1,732
|
)
|
Other
liabilities
|
|
|
(243
|
)
|
Total purchase accounting
adjustments
|
|
|
19,061
|
|
|
|
|
|
|
Deferred
tax liabilities
|
|
|
(300
|
)
|
Fair
value of net assets acquired from America California Bank
|
|
$
|
18,761
|
|
|
|
|
|
|
Merger consideration
|
|
|
21,500
|
|
Less
fair value of net assets acquired
|
|
|
(18,761
|
)
|
Goodwill
|
|
$
|
2,739
|
|
As
a result of this acquisition, the Company recorded $2.7 million in goodwill, which represents the excess of the total purchase
price paid over the fair value of the assets acquired, net of the fair values of liabilities assumed. Goodwill reflects the expected
value created through the combination of the Company and the acquired company. The entire amount of recorded goodwill in the America
California Bank acquisition is expected to be deductible. In the case of the America California Bank acquisition, the Company
gains greater customer relationships to the Asian community in San Francisco, we can increase the borrowing to loan customers
due to higher loan borrower concentration limits, and we leverage our capital to help improve our return on equity. At December
31, 2017 and 2016, management determined that the market value of our Company exceeded our carrying value; therefore, there was
no goodwill impairment. The following is a description of the methods used to determine the fair values of significant assets
and liabilities at acquisition date:
Loans
As
discussed in Note 1, the fair values of acquired loans are derived from the present values of the expected cash flows for Each
acquired loan were projected based on contractual cash flows adjusted for expected prepayment, probability of default and expected
prepayment, probability of default and expected loss given default, and principal recovery.
Prepayment
rates were applied to the principal outstanding based on the type of loan acquired. Prepayments were based on a constant prepayment
rate (“CPR”) applied over the life of the loan. The Company used a CPR of between 6% and 24%, depending on the characteristics
of the loan acquired.
FNB
Bancorp and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
Non-credit-impaired
loans with similar characteristics were grouped together and were treated in the aggregate when applying the discount rate to
the expected cash flows. Aggregation factors, considered included in the type of loan and related collateral, risk classification,
fixed or variable interest rate, term of loan and whether or not the loan was amortizing.
Core
Deposit Intangible
The
core deposit intangible represents the estimated future benefits of acquired deposits and is recorded separately from the related
deposits. The value of the core deposit intangible asset was determined using a discounted cash flow approach to arrive at the
cost differential
between the core deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
In
thousands
|
|
2018
|
|
|
2019
|
|
|
2020
|
|
|
2021
|
|
|
later
|
|
|
Total
|
|
Core deposit intangible amortization
|
|
$
|
1
|
|
|
$
|
66
|
|
|
$
|
45
|
|
|
$
|
29
|
|
|
$
|
174
|
|
|
$
|
315
|
|
Pro
Forma Results of Operations
The
contribution of the acquired operations of America California Bank to our results of operation for the period September 5, 2015
to December 31, 2015 is as follows: interest income of $1,889,000, interest expense of $152,000, non-interest income of $58,000,
non-interest expense of $551,018, and income before taxes of $1,244,000. These amounts include acquisition-related costs, accretion
or amortization of the discount or premium on the acquired loans, amortization of the fair value markup on time deposits, and
core deposit intangible amortization. America California Bank’s results of operations prior to the acquisition date are
not included in our operating results for 2015.
The
following table presents America California Bank’s revenue and earnings included in the Company’s consolidated statement
of comprehensive income for the year ended December 31, 2015 on a pro forma basis as if the acquisition date had been December
31 in the year before the pro forma year presented. This pro forma information does not necessarily reflect the results of operations
that would have resulted had the acquisition been completed at the beginning of the periods presented, nor is it indicative of
the results of operations in future periods.
Pro Forma Revenue and
Earnings
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
(in
thousands)
|
|
Revenue
|
|
|
Earnings
|
|
Actual
from September 5, 2015 to December 31, 2015 for America California Bank only
|
|
$
|
1,889
|
|
|
$
|
734
|
|
|
|
|
|
|
|
|
|
|
2015 supplemental pro
forma of the combined entity for the year ended December 31, 2015
|
|
|
42,749
|
|
|
|
9,458
|
|
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
Acquisition-related expenses
are recognized as incurred and continue until all systems have been converted and operational functions become fully integrated.
The Bank incurred one-time third-party acquisition related expenses in the consolidated statement of comprehensive
earnings
during 2015 as follows:
|
|
December 31,
|
|
(in
thousands)
|
|
2015
|
|
|
|
|
|
|
Data
processing expense
|
|
$
|
515
|
|
Occupancy
expense
|
|
|
342
|
|
Surety
insurance
|
|
|
35
|
|
Equipment
expense
|
|
|
2
|
|
Total
|
|
$
|
894
|
|
|
(4)
|
Restricted
Cash Balance
|
Cash
and due from banks includes balances with the Federal Reserve Bank of San Francisco (the FRB). The Bank is required to maintain
specified minimum average balances with the FRB, based primarily upon the Bank’s deposit balances. As of December 31, 2017,
and 2016, the Bank maintained deposits in excess of the FRB reserve requirement, which was $0 and $1,810,000, respectively.
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
|
(5)
|
Securities
Available-for-Sale
|
The
amortized cost and fair values of securities available-for-sale are as follows:
(Dollar amounts in
thousands)
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
cost
|
|
|
gains
|
|
|
losses
|
|
|
value
|
|
December 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury
securities
|
|
$
|
1,989
|
|
|
$
|
—
|
|
|
$
|
(14
|
)
|
|
$
|
1,975
|
|
Obligations of U.S.
government agencies
|
|
|
42,247
|
|
|
|
10
|
|
|
|
(434
|
)
|
|
|
41,823
|
|
Mortgage-backed securities
|
|
|
121,087
|
|
|
|
421
|
|
|
|
(1,716
|
)
|
|
|
119,792
|
|
Asset-backed securities
|
|
|
3,734
|
|
|
|
—
|
|
|
|
(48
|
)
|
|
|
3,686
|
|
Obligations of states and
political subdivisions
|
|
|
150,724
|
|
|
|
1,325
|
|
|
|
(946
|
)
|
|
|
151,103
|
|
Corporate
debt
|
|
|
37,409
|
|
|
|
199
|
|
|
|
(130
|
)
|
|
|
37,478
|
|
|
|
$
|
357,190
|
|
|
$
|
1,955
|
|
|
$
|
(3,288
|
)
|
|
$
|
355,857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
|
$
|
977
|
|
|
$
|
10
|
|
|
$
|
—
|
|
|
$
|
987
|
|
Obligations of U.S.
government agencies
|
|
|
60,773
|
|
|
|
112
|
|
|
|
(340
|
)
|
|
|
60,545
|
|
Mortgage-backed securities
|
|
|
85,709
|
|
|
|
397
|
|
|
|
(1,822
|
)
|
|
|
84,284
|
|
Obligations of states and
political subdivisions
|
|
|
151,988
|
|
|
|
1,458
|
|
|
|
(1,828
|
)
|
|
|
151,618
|
|
Corporate
debt
|
|
|
63,277
|
|
|
|
121
|
|
|
|
(727
|
)
|
|
|
62,671
|
|
|
|
$
|
362,724
|
|
|
$
|
2,098
|
|
|
$
|
(4,717
|
)
|
|
$
|
360,105
|
|
At
December 31, 2017, there were 65 securities in an unrealized loss position for greater than 12 consecutive months, and
135
securities in an unrealized loss position for under 12 months. At December 31, 2016, there were no securities in an unrealized
loss position for greater than 12 consecutive months, and 227 securities in an unrealized loss position for under 12 months. Management
periodically evaluates each security in an unrealized loss position to determine if the impairment is temporary or other-than-temporary.
Management has determined that no investment security is other-than-temporarily impaired at December 31, 2017 and 2016. The unrealized
losses are due solely to interest rate changes, and the Company does not intend to sell nor expects it will be required to sell
investment securities identified with impairments resulting from interest rate declines prior to the earliest of forecasted recovery
or the maturity of the underlying investment security.
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
|
|
Total
|
|
|
< 12 Months
|
|
|
Total
|
|
|
12 Months or >
|
|
|
Total
|
|
|
Total
|
|
December 31,
2017:
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
(Dollar
amounts in thousands)
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
U. S. Treasury
securities
|
|
$
|
1,975
|
|
|
$
|
(14
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,975
|
|
|
$
|
(14
|
)
|
Obligations of U.S. government
agencies
|
|
|
22,364
|
|
|
|
(195
|
)
|
|
|
16,461
|
|
|
|
(236
|
)
|
|
|
38,825
|
|
|
|
(434
|
)
|
Mortgage-backed securities
|
|
|
46,515
|
|
|
|
(424
|
)
|
|
|
38,003
|
|
|
|
(1,292
|
)
|
|
|
84,518
|
|
|
|
(1,716
|
)
|
Asset-backed securities
|
|
|
3,685
|
|
|
|
(48
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
3,685
|
|
|
|
(48
|
)
|
Obligations of states and
political subdivisions
|
|
|
46,919
|
|
|
|
(460
|
)
|
|
|
15,243
|
|
|
|
(486
|
)
|
|
|
62,162
|
|
|
|
(946
|
)
|
Corporate
debt
|
|
|
13,255
|
|
|
|
(112
|
)
|
|
|
1,982
|
|
|
|
(18
|
)
|
|
|
15,237
|
|
|
|
(130
|
)
|
Total
|
|
$
|
134,713
|
|
|
$
|
(1,253
|
)
|
|
$
|
71,689
|
|
|
$
|
(2,032
|
)
|
|
$
|
206,402
|
|
|
$
|
(3,288
|
)
|
|
|
Total
|
|
|
< 12 Months
|
|
|
Total
|
|
|
12 Months or >
|
|
|
Total
|
|
|
Total
|
|
December 31,
2016:
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
(Dollar
amounts in thousands)
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
U. S. Treasury securities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Obligations
of U.S. government agencies
|
|
|
36,828
|
|
|
|
(340
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
36,828
|
|
|
|
(340
|
)
|
Mortgage-backed securities
|
|
|
67,990
|
|
|
|
(1,822
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
67,990
|
|
|
|
(1,822
|
)
|
Obligations of states and
political subdivisions
|
|
|
84,728
|
|
|
|
(1,828
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
84,728
|
|
|
|
(1,828
|
)
|
Corporate
debt
|
|
|
41,012
|
|
|
|
(727
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
41,012
|
|
|
|
(727
|
)
|
Total
|
|
$
|
230,558
|
|
|
$
|
(4,717
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
230,558
|
|
|
$
|
(4,717
|
)
|
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
The
amortized cost and fair value of debt securities as of December 31, 2017, by contractual maturity, are shown below. Expected maturities
may differ from contractual maturities because borrowers may have the
right to call or prepay
obligations with or without call or prepayment penalties.
|
|
Amortized
|
|
|
Fair
|
|
(Dollar
amounts in thousands)
|
|
Cost
|
|
|
Value
|
|
Available for sale:
|
|
|
|
|
|
|
|
|
Due
in one year or less
|
|
$
|
12,653
|
|
|
$
|
12,647
|
|
Due after one
year through five years
|
|
|
190,357
|
|
|
|
190,119
|
|
Due after five
years through ten years
|
|
|
96,147
|
|
|
|
95,999
|
|
Due
after ten year
|
|
|
58,033
|
|
|
|
57,092
|
|
|
|
$
|
357,190
|
|
|
$
|
355,857
|
|
At
December 31, 2017 and 2016, securities with an amortized cost of $131,613,000 and $116,240,000, and fair value of $130,546,000
and $115,315,000, respectively, were pledged as collateral for public deposits and for other purposes required by law.
During
the years ended December 31, 2107, 2016, and 2015 there were no investment securities that were sold for a loss. The investment
securities sold totaled $34,056,000, $43,647,000 and $16,017,000 resulting in a pretax gain on sale of $210,000, $438,000 and
$339,000 for the twelve months ended December 31, 2017, 2016, and 2016, respectively.
The
following table summarizes Other Equity Securities Outstanding:
(Dollar amounts in
thousands)
|
|
December 31,
|
|
|
December 31,
|
|
Equity
Securities
|
|
2017
|
|
|
2016
|
|
Federal
Home Loan Bank stock
|
|
$
|
5,969
|
|
|
$
|
5,613
|
|
Federal Reserve Bank
stock
|
|
|
1,273
|
|
|
|
1,268
|
|
Pacific Coast Bankers
Bank stock
|
|
|
145
|
|
|
|
145
|
|
Texas Independent Bank
stock
|
|
|
176
|
|
|
|
176
|
|
Community
Bank of the Bay stock
|
|
|
4
|
|
|
|
4
|
|
Totals
|
|
$
|
7,567
|
|
|
$
|
7,206
|
|
These
investments are carried at cost and evaluated periodically for impairment. Federal Home Loan Bank and FRB stock can be redeemed
at par by the government agencies. These securities cannot be sold to other investors. Management reviews the financial statements,
credit rating and other pertinent financial information of these entities to determine if impairment has occurred. So long as
there is sufficient evidence to support the ability of these entities to continue to redeem their stock, management believes these
securities are not impaired.
FNB
Bancorp and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
Loans
are summarized as follows at December 31:
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
FNB
|
|
|
|
|
|
|
|
|
Balance
|
|
|
|
Bancorp
|
|
|
|
|
|
|
|
|
December 31,
|
|
(Dollar
amounts in thousands)
|
|
Originated
|
|
|
PNCI
|
|
|
PCI
|
|
|
2017
|
|
Commercial
real estate
|
|
$
|
401,157
|
|
|
$
|
55,835
|
|
|
$
|
—
|
|
|
$
|
456,992
|
|
Real estate construction
|
|
|
35,206
|
|
|
|
—
|
|
|
|
—
|
|
|
|
35,206
|
|
Real estate multi-family
|
|
|
91,642
|
|
|
|
13,496
|
|
|
|
—
|
|
|
|
105,138
|
|
Real estate 1 to 4
family
|
|
|
160,425
|
|
|
|
13,051
|
|
|
|
—
|
|
|
|
173,476
|
|
Commercial & industrial
|
|
|
52,270
|
|
|
|
3,457
|
|
|
|
—
|
|
|
|
55,727
|
|
Consumer
loans
|
|
|
14,057
|
|
|
|
—
|
|
|
|
—
|
|
|
|
14,057
|
|
Gross loans
|
|
|
754,757
|
|
|
|
85,839
|
|
|
|
—
|
|
|
|
840,596
|
|
Net deferred loan fees
|
|
|
(659
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(659
|
)
|
Allowance
for loan losses
|
|
|
(10,171
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(10,171
|
)
|
Net
loans
|
|
$
|
743,927
|
|
|
$
|
85,839
|
|
|
$
|
—
|
|
|
$
|
829,766
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
FNB
|
|
|
|
|
|
|
|
|
Balance
|
|
|
|
Bancorp
|
|
|
|
|
|
|
|
|
December 31,
|
|
(Dollar
amounts in thousands)
|
|
Originated
|
|
|
PNCI
|
|
|
PCI
|
|
|
2016
|
|
Commercial
real estate
|
|
|
351,261
|
|
|
|
68,736
|
|
|
|
1,225
|
|
|
|
421,222
|
|
Real estate construction
|
|
|
43,683
|
|
|
|
—
|
|
|
|
—
|
|
|
|
43,683
|
|
Real estate multi-family
|
|
|
90,763
|
|
|
|
15,200
|
|
|
|
—
|
|
|
|
105,963
|
|
Real estate 1 to 4
family
|
|
|
153,843
|
|
|
|
16,680
|
|
|
|
—
|
|
|
|
170,523
|
|
Commercial & industrial
|
|
|
40,140
|
|
|
|
8,734
|
|
|
|
—
|
|
|
|
48,874
|
|
Consumer
loans
|
|
|
3,533
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,533
|
|
Gross loans
|
|
|
683,223
|
|
|
|
109,350
|
|
|
|
1,225
|
|
|
|
793,798
|
|
Net deferred loan fees
|
|
|
(1,142
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,146
|
)
|
Allowance
for loan losses
|
|
|
(10,167
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(10,167
|
)
|
Net
loans
|
|
|
671,914
|
|
|
|
109,350
|
|
|
|
1,225
|
|
|
|
782,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note:
PNCI means Purchased, Not Credit Impaired. PCI means Purchased, Credit Impaired. These designations are assigned to the purchased
loans on their date of purchase. Once the loan designation has been made, each loan will retain its designation for the life of
the loan.
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
Commercial
Real Estate Loans
Commercial Real
Estate loans consist of loans secured by non-farm, non-residential properties, including, but not limited to industrial, hotel,
assisted care, retail, office and mixed use buildings. Our commercial real estate loans are made primarily to investors or small
businesses where our primary source of repayment is from cash flows generated by the properties, either through rent collection
or business profits. The borrower’s promissory notes are secured with recorded liens on the underlying property. The borrowers
would normally also be required to personally guarantee repayment of the loan. The Bank uses conservative underwriting standards
in reviewing applications for credit. Generally, our borrowers have multiple sources of income, so if cash flow generated from
the property declines, at least in the short term, the borrowers can normally cover these short term cash flow deficiencies from
their available cash reserves. Risk of loss to the Bank is increased when there are cash flow decreases sufficiently large and
for such a prolonged period of time that loan payments can no longer be made by the borrowers.
Real
Estate Construction Loans
Our real
estate construction loans are generally made to borrowers who are rehabilitating a building, converting a building use from one
type of use to another, or developing land and building residential or commercial structures for sale or lease.
The borrower’s
promissory notes are secured with recorded liens on the underlying property. The borrowers would normally also be required to
personally guarantee repayment of the loan. The Bank uses conservative underwriting standards in reviewing applications for credit.
Generally, our borrowers have sufficient resources to make the required construction loan payments during the construction and
absorption or lease-up period.
After
construction is complete, the loans are normally paid off from proceeds from the sale of the building or through a refinance to
a commercial real estate loan. Risk of loss to the Bank is increased when there are material construction cost overruns, significant
delays in the time to complete the project and/or there has been a material drop in the value of the projects in the marketplace
since the inception of the loan.
Real
Estate – Multi-Family
Our multi-family
commercial real estate loans are secured by multi-family properties located primarily in San Mateo and San Francisco Counties.
These loans are made to investors where the primary source of loan repayment is from cash flows generated by the properties, through
rent collections. The borrowers’ promissory notes are secured with recorded liens on the underlying properties. The borrowers
would normally also be required to personally guarantee repayment of the loans. The Bank uses conservative underwriting standards
in reviewing applications for credit. Generally, our borrowers have multiple sources of income, so if cash flow generated from
the property declines, at least in the short term, the borrowers can normally cover these short term cash flow deficiencies from
their available cash reserves. Risk of loss to the Bank is increased when there are cash flow decreases sufficiently large and
for such a prolonged period of time that loan payments can no longer be made by the borrowers.
Real
Estate-1 to 4 family Loans
Our residential
real estate loans are generally made to borrowers who are buying or refinancing their primary personal residence or a rental property
of 1-4 single family residential units. The Bank uses conservative underwriting standards in reviewing applications for credit.
Risk of loss to the Bank is increased when borrowers lose their primary source of income and/or property values decline significantly.
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
Commercial
and Industrial Loans
Our commercial
and industrial loans are generally made to small businesses to provide them with at least some of the working capital necessary
to fund their daily business operations. These loans are generally either unsecured or secured by fixed assets, accounts receivable
and/or inventory. The borrowers would normally also be required to personally guarantee repayment of the loan. The Bank uses conservative
underwriting standards in reviewing applications for credit. Risk of loss to the Bank is increased when our small business customers
experience a significant business downturn, incur significant financial losses, or file for relief from creditors through bankruptcy
proceedings.
Consumer
Loans
Our consumer
and installment loans generally consist of personal loans, credit card loans, automobile loans or other loans secured by personal
property. The Bank uses conservative underwriting standards in reviewing applications for credit. Risk of loss to the Bank is
increased when borrowers lose their primary source of income, or file for relief from creditors through bankruptcy proceedings.
|
|
Recorded Investment in Loans at December
31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
|
|
|
Real
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estate
|
|
|
Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
Real Estate
|
|
|
Multi
|
|
|
1 to 4
|
|
|
Commercial
|
|
|
|
|
|
|
|
(Dollar amounts
in thousands)
|
|
Real Estate
|
|
|
Construction
|
|
|
family
|
|
|
family
|
|
|
& industrial
|
|
|
Consumer
|
|
|
Total
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance
|
|
$
|
456,992
|
|
|
$
|
35,206
|
|
|
$
|
105,138
|
|
|
$
|
173,476
|
|
|
$
|
55,727
|
|
|
$
|
14,057
|
|
|
$
|
840,596
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance:
individually evaluated for impairment
|
|
$
|
6,530
|
|
|
$
|
814
|
|
|
$
|
—
|
|
|
$
|
2,750
|
|
|
$
|
860
|
|
|
$
|
—
|
|
|
$
|
10,954
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance:
collectively evaluated for impairment
|
|
$
|
450,462
|
|
|
$
|
34,392
|
|
|
$
|
105,138
|
|
|
$
|
170,726
|
|
|
$
|
54,867
|
|
|
$
|
14,057
|
|
|
$
|
829,642
|
|
FNB
Bancorp and Subsidiary
Notes
to Consolidated Financial Statements
December 31, 2017, 2016 and 2015
|
|
Recorded Investment in Loans at December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
|
|
|
Real
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estate
|
|
|
Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
Real Estate
|
|
|
Multi
|
|
|
1 to 4
|
|
|
Commercial
|
|
|
|
|
|
|
|
(Dollar amounts
in thousands)
|
|
Real Estate
|
|
|
Construction
|
|
|
family
|
|
|
family
|
|
|
& industrial
|
|
|
Consumer
|
|
|
Total
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance
|
|
$
|
421,222
|
|
|
$
|
43,683
|
|
|
$
|
105,963
|
|
|
$
|
170,523
|
|
|
$
|
48,874
|
|
|
$
|
3,533
|
|
|
$
|
793,798
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance:
individually evaluated for impairment
|
|
$
|
10,023
|
|
|
$
|
843
|
|
|
$
|
—
|
|
|
$
|
3,530
|
|
|
$
|
1,065
|
|
|
$
|
—
|
|
|
$
|
15,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance:
collectively evaluated for impairment
|
|
$
|
411,199
|
|
|
$
|
42,840
|
|
|
$
|
105,963
|
|
|
$
|
166,993
|
|
|
$
|
47,809
|
|
|
$
|
3,533
|
|
|
$
|
778,337
|
|
|
|
Recorded Investment in Loans at December
31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
|
|
|
Real
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estate
|
|
|
Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
Real Estate
|
|
|
Multi
|
|
|
1 to 4
|
|
|
Commercial
|
|
|
|
|
|
|
|
(Dollar amounts
in thousands)
|
|
Real Estate
|
|
|
Construction
|
|
|
family
|
|
|
family
|
|
|
& industrial
|
|
|
Consumer
|
|
|
Total
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance
|
|
$
|
399,993
|
|
|
$
|
44,816
|
|
|
$
|
63,597
|
|
|
$
|
171,964
|
|
|
$
|
52,033
|
|
|
$
|
1,574
|
|
|
$
|
733,977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance:
individually evaluated for impairment
|
|
$
|
11,292
|
|
|
$
|
2,154
|
|
|
$
|
—
|
|
|
$
|
4,218
|
|
|
$
|
1,782
|
|
|
$
|
—
|
|
|
$
|
19,446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance:
collectively evaluated for impairment
|
|
$
|
388,701
|
|
|
$
|
42,662
|
|
|
$
|
63,597
|
|
|
$
|
167,746
|
|
|
$
|
50,251
|
|
|
$
|
1,574
|
|
|
$
|
714,531
|
|
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
A summary of impaired
loans, the related allowance for loan losses, average investment and income recognized on impaired loans follows. The following
tables include originated and purchased non-credit impaired loans.
Impaired Loans
|
As of and for the year ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Recorded
|
|
|
Principal
|
|
|
Related
|
|
|
Recorded
|
|
|
Income
|
|
(Dollar amounts in
thousands)
|
|
Investment
|
|
|
Balance
|
|
|
Allowance
|
|
|
Investment
|
|
|
Recognized
|
|
With no related allowance
recorded
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
real estate
|
|
$
|
5,785
|
|
|
$
|
5,785
|
|
|
$
|
—
|
|
|
$
|
8,317
|
|
|
$
|
212
|
|
Commercial real
estate construction
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
520
|
|
|
|
22
|
|
Real estate
multi-family
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
764
|
|
|
|
12
|
|
Residential-
1 to 4 family
|
|
|
464
|
|
|
|
464
|
|
|
|
—
|
|
|
|
561
|
|
|
|
21
|
|
Commercial and
industrial
|
|
|
115
|
|
|
|
115
|
|
|
|
—
|
|
|
|
117
|
|
|
|
7
|
|
Consumer
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
|
6,364
|
|
|
|
6,364
|
|
|
|
—
|
|
|
|
10,279
|
|
|
|
274
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real
estate
|
|
$
|
745
|
|
|
$
|
745
|
|
|
$
|
15
|
|
|
$
|
2,294
|
|
|
$
|
72
|
|
Commercial real
estate construction
|
|
|
814
|
|
|
|
814
|
|
|
|
4
|
|
|
|
556
|
|
|
|
52
|
|
Residential-
1 to 4 family
|
|
|
2,286
|
|
|
|
2,286
|
|
|
|
318
|
|
|
|
1,503
|
|
|
|
69
|
|
Commercial and
industrial
|
|
|
745
|
|
|
|
745
|
|
|
|
72
|
|
|
|
841
|
|
|
|
—
|
|
Consumer
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
|
4,590
|
|
|
|
4,590
|
|
|
|
409
|
|
|
|
5,194
|
|
|
|
193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real
estate
|
|
$
|
4,182
|
|
|
$
|
4,182
|
|
|
$
|
15
|
|
|
$
|
10,611
|
|
|
$
|
284
|
|
Commercial real
estate construction
|
|
|
814
|
|
|
|
814
|
|
|
|
4
|
|
|
|
556
|
|
|
|
74
|
|
Real estate
multi-family
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
764
|
|
|
|
12
|
|
Residential-
1 to 4 family
|
|
|
2,750
|
|
|
|
2,750
|
|
|
|
318
|
|
|
|
2,064
|
|
|
|
90
|
|
Commercial and
industrial
|
|
|
860
|
|
|
|
860
|
|
|
|
72
|
|
|
|
958
|
|
|
|
7
|
|
Consumer
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
$
|
10,954
|
|
|
$
|
10,954
|
|
|
$
|
409
|
|
|
|
14,953
|
|
|
$
|
467
|
|
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
Impaired Loans
|
As of and for the year ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Recorded
|
|
|
Principal
|
|
|
Related
|
|
|
Recorded
|
|
|
Income
|
|
(Dollar amounts
in thousands)
|
|
Investment
|
|
|
Balance
|
|
|
Allowance
|
|
|
Investment
|
|
|
Recognized
|
|
With no related allowance
recorded
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
real estate
|
|
$
|
8,516
|
|
|
$
|
9,026
|
|
|
$
|
—
|
|
|
$
|
9,730
|
|
|
$
|
716
|
|
Commercial real
estate construction
|
|
|
843
|
|
|
|
843
|
|
|
|
—
|
|
|
|
857
|
|
|
|
53
|
|
Residential-
1 to 4 family
|
|
|
678
|
|
|
|
678
|
|
|
|
—
|
|
|
|
685
|
|
|
|
—
|
|
Commercial
and industrial
|
|
|
120
|
|
|
|
120
|
|
|
|
—
|
|
|
|
322
|
|
|
|
25
|
|
Total
|
|
|
10,157
|
|
|
|
10,667
|
|
|
|
—
|
|
|
|
11,594
|
|
|
|
794
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real
estate
|
|
$
|
1,507
|
|
|
$
|
1,507
|
|
|
$
|
50
|
|
|
$
|
1,528
|
|
|
$
|
89
|
|
Residential-
1 to 4 family
|
|
|
2,852
|
|
|
|
2,852
|
|
|
|
442
|
|
|
|
3,202
|
|
|
|
157
|
|
Commercial
and industrial
|
|
|
945
|
|
|
|
945
|
|
|
|
96
|
|
|
|
1,240
|
|
|
|
1
|
|
Total
|
|
|
5,304
|
|
|
|
5,304
|
|
|
|
588
|
|
|
|
5,970
|
|
|
|
247
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real
estate
|
|
$
|
10,023
|
|
|
$
|
10,533
|
|
|
$
|
50
|
|
|
$
|
11,258
|
|
|
$
|
805
|
|
Commercial real
estate construction
|
|
|
843
|
|
|
|
843
|
|
|
|
—
|
|
|
|
857
|
|
|
|
53
|
|
Residential-
1 to 4 family
|
|
|
3,530
|
|
|
|
3,530
|
|
|
|
442
|
|
|
|
3,887
|
|
|
|
157
|
|
Commercial
and industrial
|
|
|
1,065
|
|
|
|
1,065
|
|
|
|
96
|
|
|
|
1,562
|
|
|
|
26
|
|
|
|
$
|
15,461
|
|
|
$
|
15,971
|
|
|
$
|
588
|
|
|
$
|
17,564
|
|
|
$
|
1,041
|
|
FNB
Bancorp and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
Impaired Loans
|
As of and for the year ended December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Recorded
|
|
|
Principal
|
|
|
Related
|
|
|
Recorded
|
|
|
Income
|
|
(Dollar amounts
in thousands)
|
|
Investment
|
|
|
Balance
|
|
|
Allowance
|
|
|
Investment
|
|
|
Recognized
|
|
With no related allowance
recorded
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
real estate
|
|
$
|
8,169
|
|
|
$
|
9,271
|
|
|
$
|
—
|
|
|
$
|
8,379
|
|
|
$
|
282
|
|
Commercial real
estate construction
|
|
|
2,154
|
|
|
|
2,337
|
|
|
|
—
|
|
|
|
2,264
|
|
|
|
130
|
|
Residential-
1 to 4 family
|
|
|
457
|
|
|
|
457
|
|
|
|
—
|
|
|
|
460
|
|
|
|
36
|
|
Commercial
and industrial
|
|
|
524
|
|
|
|
524
|
|
|
|
—
|
|
|
|
731
|
|
|
|
27
|
|
Total
|
|
|
11,304
|
|
|
|
12,589
|
|
|
|
—
|
|
|
|
11,834
|
|
|
|
475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real
estate
|
|
$
|
2,634
|
|
|
$
|
2,638
|
|
|
$
|
96
|
|
|
$
|
2,664
|
|
|
$
|
160
|
|
Residential-
1 to 4 family
|
|
|
3,761
|
|
|
|
3,782
|
|
|
|
479
|
|
|
|
3,786
|
|
|
|
149
|
|
Commercial
and industrial
|
|
|
1,258
|
|
|
|
1,497
|
|
|
|
182
|
|
|
|
1,484
|
|
|
|
7
|
|
Total
|
|
|
7,653
|
|
|
|
7,917
|
|
|
|
757
|
|
|
|
7,934
|
|
|
|
316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real
estate
|
|
$
|
10,803
|
|
|
$
|
11,909
|
|
|
$
|
96
|
|
|
$
|
11,043
|
|
|
$
|
442
|
|
Commercial real
estate construction
|
|
|
2,154
|
|
|
|
2,337
|
|
|
|
—
|
|
|
|
2,264
|
|
|
|
130
|
|
Residential-
1 to 4 family
|
|
|
4,218
|
|
|
|
4,239
|
|
|
|
479
|
|
|
|
4,246
|
|
|
|
185
|
|
Commercial
and industrial
|
|
|
1,782
|
|
|
|
2,021
|
|
|
|
182
|
|
|
|
2,215
|
|
|
|
34
|
|
|
|
$
|
18,957
|
|
|
$
|
20,506
|
|
|
$
|
757
|
|
|
$
|
19,768
|
|
|
$
|
791
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There
has been no additional impairment recognized on previous credit impairment loans subsequent to acquisition. Not all impaired loans
are in a nonaccrual status. The majority of the difference between impaired loans and nonaccrual loans represents loans that are
restructured and performing under modified loan agreements, and where principal and interest is considered to be collectible.
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
The following
is a summary of non-accrual loans outstanding as of December 31, 2107 and 2016:
|
|
Loans on Nonaccrual
Status as of
|
|
(Dollar amounts
in thousands)
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Commercial
real estate
|
|
$
|
731
|
|
|
$
|
5,553
|
|
Real estate 1 to 4
family
|
|
|
464
|
|
|
|
149
|
|
Commercial
& industrial
|
|
|
745
|
|
|
|
945
|
|
Total
|
|
$
|
1,940
|
|
|
$
|
6,647
|
|
|
|
|
|
|
|
|
|
|
Interest
income on impaired loans of $374,000, $1,041,000 and $791,000 was recognized based upon cash payments received in 2017, 2016,
and 2015, respectively. The amount of interest on impaired loans not collected in 2017, 2016 and 2015, was $6,000, $569,000 and
$460,000, respectively. The cumulative amount of unpaid interest on impaired loans was $22,000, $3,973,000 and $3,405,000 at December
31, 2017, 2016 and 2015, respectively.
The following
is a summary of the total outstanding principal of troubled debt restructurings as of December 31, 2017 and 2016:
|
|
Total troubled debt restructurings outstanding
at year end
|
|
(dollars
in thousands)
|
|
December
31, 2017
|
|
|
December
31, 2016
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
Accrual
|
|
|
accrual
|
|
|
Total
|
|
|
Accrual
|
|
|
accrual
|
|
|
Total
|
|
|
|
status
|
|
|
status
|
|
|
modifications
|
|
|
status
|
|
|
status
|
|
|
modifications
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
real estate
|
|
$
|
3,451
|
|
|
$
|
646
|
|
|
|
4,097
|
|
|
$
|
4,466
|
|
|
$
|
4,494
|
|
|
|
8,960
|
|
Real estate construction
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Real estate 1 to 4
family
|
|
|
2,286
|
|
|
$
|
464
|
|
|
|
2,750
|
|
|
|
3,381
|
|
|
|
—
|
|
|
|
3,381
|
|
Commercial
& industrial
|
|
|
115
|
|
|
|
746
|
|
|
|
861
|
|
|
|
120
|
|
|
|
902
|
|
|
|
1,022
|
|
Total
|
|
$
|
5,852
|
|
|
$
|
1,856
|
|
|
$
|
7,708
|
|
|
$
|
7,967
|
|
|
$
|
5,396
|
|
|
$
|
13,363
|
|
|
|
Modifications
|
|
|
|
For the Year
Ended December 31, 2017
|
|
|
|
|
|
|
Pre-
|
|
|
Post-
|
|
|
|
|
|
|
Modification
|
|
|
Modification
|
|
|
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
|
Number of
|
|
|
Recorded
|
|
|
Recorded
|
|
|
|
Contracts
|
|
|
Investment
|
|
|
Investment
|
|
(Dollar amounts
in thousands)
|
|
|
|
|
|
|
|
|
|
Commercial
real estate
|
|
|
1
|
|
|
$
|
646
|
|
|
$
|
646
|
|
Total
|
|
|
1
|
|
|
$
|
646
|
|
|
$
|
646
|
|
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
|
|
Modifications
|
|
|
|
For the Year
Ended December 31, 2016
|
|
|
|
|
|
|
Pre-
|
|
|
Post-
|
|
|
|
|
|
|
Modification
|
|
|
Modification
|
|
|
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
|
Number of
|
|
|
Recorded
|
|
|
Recorded
|
|
|
|
Contracts
|
|
|
Investment
|
|
|
Investment
|
|
(Dollar amounts
in thousands)
|
|
|
|
|
|
|
|
|
|
Commercial
real estate
|
|
|
2
|
|
|
$
|
3,527
|
|
|
$
|
3,527
|
|
Total
|
|
|
2
|
|
|
$
|
3,527
|
|
|
$
|
3,527
|
|
|
|
Modifications
|
|
|
|
For the Year
Ended December 31, 2015
|
|
|
|
|
|
|
Pre-
|
|
|
Post-
|
|
|
|
|
|
|
Modification
|
|
|
Modification
|
|
|
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
|
Number of
|
|
|
Recorded
|
|
|
Recorded
|
|
|
|
Contracts
|
|
|
Investment
|
|
|
Investment
|
|
(Dollar amounts
in thousands)
|
|
|
|
|
|
|
|
|
|
Commercial
real estate
|
|
|
1
|
|
|
$
|
472
|
|
|
$
|
472
|
|
Total
|
|
|
1
|
|
|
$
|
472
|
|
|
$
|
472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the years ended December 31,
2017, 2016 and 2015, no loans defaulted within twelve months following the date of restructure. All restructurings were a modification
of interest rate and/or payment. There were no principal reductions granted.
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
Allowance
for Credit Losses
|
As
of and For the Year Ended December 31, 2017
|
(Dollar amounts in thousands)
|
|
|
|
Real
|
|
|
Real
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estate
|
|
|
Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
Real Estate
|
|
|
Multi
|
|
|
1 to 4
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
Real estate
|
|
|
Construction
|
|
|
family
|
|
|
family
|
|
|
& industrial
|
|
|
Consumer
|
|
|
Total
|
|
Allowance for credit losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
|
$
|
6,392
|
|
|
$
|
617
|
|
|
$
|
389
|
|
|
$
|
2,082
|
|
|
$
|
650
|
|
|
$
|
37
|
|
|
$
|
10,167
|
|
Charge-offs
|
|
|
(91
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(39
|
)
|
|
|
(8
|
)
|
|
|
(138
|
)
|
Recoveries
|
|
|
8
|
|
|
|
—
|
|
|
|
—
|
|
|
|
175
|
|
|
|
319
|
|
|
|
—
|
|
|
|
502
|
|
(Recovery
of) / provision for loan losses
|
|
|
(814
|
)
|
|
|
(229
|
)
|
|
|
1,107
|
|
|
|
(249
|
)
|
|
|
(490
|
)
|
|
|
315
|
|
|
|
(360
|
)
|
Ending balance
|
|
$
|
5,495
|
|
|
$
|
388
|
|
|
$
|
1,496
|
|
|
$
|
2,008
|
|
|
$
|
440
|
|
|
$
|
344
|
|
|
$
|
10,171
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance:
individually evaluated for impairment
|
|
$
|
15
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
318
|
|
|
$
|
72
|
|
|
$
|
—
|
|
|
$
|
409
|
|
Ending
balance:
collectively evaluated for impairment
|
|
$
|
5,480
|
|
|
$
|
384
|
|
|
$
|
1,496
|
|
|
$
|
1,690
|
|
|
$
|
368
|
|
|
$
|
344
|
|
|
$
|
9,762
|
|
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
Allowance for Credit Losses
|
As of and For the Year Ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollar amounts in thousands)
|
|
|
Real
|
|
|
Real
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estate
|
|
|
Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
Real Estate
|
|
|
Multi
|
|
|
1 to 4
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
Real estate
|
|
|
Construction
|
|
|
family
|
|
|
family
|
|
|
& industrial
|
|
|
Consumer
|
|
|
Total
|
|
Allowance for credit losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
6,059
|
|
|
$
|
589
|
|
|
$
|
243
|
|
|
$
|
2,176
|
|
|
$
|
853
|
|
|
$
|
50
|
|
|
$
|
9,970
|
|
Charge-offs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(36
|
)
|
|
|
(164
|
)
|
|
|
(18
|
)
|
|
|
(218
|
)
|
Recoveries
|
|
|
8
|
|
|
|
—
|
|
|
|
—
|
|
|
|
53
|
|
|
|
204
|
|
|
|
—
|
|
|
|
265
|
|
Provision for / (recovery of) loan losses
|
|
|
325
|
|
|
|
28
|
|
|
|
146
|
|
|
|
(111
|
)
|
|
|
(243
|
)
|
|
|
5
|
|
|
|
150
|
|
Ending balance
|
|
$
|
6,392
|
|
|
$
|
617
|
|
|
$
|
389
|
|
|
$
|
2,082
|
|
|
$
|
650
|
|
|
$
|
37
|
|
|
$
|
10,167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance:
individually evaluated for impairment
|
|
$
|
50
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
442
|
|
|
$
|
96
|
|
|
$
|
—
|
|
|
$
|
588
|
|
Ending balance:
collectively evaluated for impairment
|
|
$
|
6,342
|
|
|
$
|
617
|
|
|
$
|
389
|
|
|
$
|
1,640
|
|
|
$
|
554
|
|
|
$
|
37
|
|
|
$
|
9,579
|
|
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
Allowance for Credit Losses
|
As of and For the Year Ended December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollar amounts in thousands)
|
|
|
|
|
Real
|
|
|
Real
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estate
|
|
|
Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
Real Estate
|
|
|
Multi
|
|
|
1 to 4
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
Real estate
|
|
|
Construction
|
|
|
family
|
|
|
family
|
|
|
& industrial
|
|
|
Consumer
|
|
|
Total
|
|
Allowance for credit losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
5,549
|
|
|
$
|
849
|
|
|
$
|
206
|
|
|
$
|
1,965
|
|
|
$
|
1,073
|
|
|
$
|
58
|
|
|
$
|
9,700
|
|
Charge-offs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(45
|
)
|
|
|
—
|
|
|
|
(36
|
)
|
|
|
(81
|
)
|
Recoveries
|
|
|
576
|
|
|
|
—
|
|
|
|
—
|
|
|
|
15
|
|
|
|
60
|
|
|
|
5
|
|
|
|
656
|
|
(Recovery of) / provision for
loan losses
|
|
|
(66
|
)
|
|
|
(260
|
)
|
|
|
37
|
|
|
|
241
|
|
|
|
(280
|
)
|
|
|
23
|
|
|
|
(305
|
)
|
Ending balance
|
|
$
|
6,059
|
|
|
$
|
589
|
|
|
$
|
243
|
|
|
$
|
2,176
|
|
|
$
|
853
|
|
|
$
|
50
|
|
|
$
|
9,970
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance:
individually evaluated for impairment
|
|
$
|
96
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
479
|
|
|
$
|
182
|
|
|
$
|
—
|
|
|
$
|
757
|
|
Ending balance:
collectively evaluated for impairment
|
|
$
|
5,963
|
|
|
$
|
589
|
|
|
$
|
243
|
|
|
$
|
1,697
|
|
|
$
|
671
|
|
|
$
|
50
|
|
|
$
|
9,213
|
|
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
The following
is a summary of the aging analysis of loans outstanding at December 31, 2017 and 2016:
Age Analysis of Past Due Loans
|
As of December 31, 2017
|
(Dollar amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-59
|
|
|
60-89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Days
|
|
|
Days
|
|
|
Over
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
Past
|
|
|
Past
|
|
|
90
|
|
|
Past
|
|
|
|
|
|
Total
|
|
Originated
|
|
Due
|
|
|
Due
|
|
|
Days
|
|
|
Due
|
|
|
Current
|
|
|
Loans
|
|
Commercial
real estate
|
|
$
|
989
|
|
|
$
|
597
|
|
|
$
|
—
|
|
|
$
|
1,586
|
|
|
$
|
399,571
|
|
|
$
|
401,157
|
|
Real estate construction
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
35,206
|
|
|
|
35,206
|
|
Real estate multi
family
|
|
|
—
|
|
|
|
2,348
|
|
|
|
—
|
|
|
|
2,348
|
|
|
|
89,294
|
|
|
|
91,642
|
|
Real estate 1 to 4
family
|
|
|
1,603
|
|
|
|
1,082
|
|
|
|
464
|
|
|
|
3,149
|
|
|
|
157,276
|
|
|
|
160,425
|
|
Commercial & industrial
|
|
|
69
|
|
|
|
250
|
|
|
|
745
|
|
|
|
1,064
|
|
|
|
51,206
|
|
|
|
52,270
|
|
Consumer
|
|
|
52
|
|
|
|
—
|
|
|
|
—
|
|
|
|
52
|
|
|
|
14,005
|
|
|
|
14,057
|
|
|
|
$
|
2,713
|
|
|
$
|
4,277
|
|
|
$
|
1,209
|
|
|
$
|
8,199
|
|
|
$
|
746,558
|
|
|
$
|
754,757
|
|
Purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Not credit impaired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
—
|
|
|
$
|
85
|
|
|
$
|
—
|
|
|
$
|
85
|
|
|
$
|
55,750
|
|
|
$
|
55,835
|
|
Real estate multi-family
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
13,496
|
|
|
|
13,496
|
|
Real estate 1 to 4
family
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
13,051
|
|
|
|
13,051
|
|
Commercial
& industrial
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,457
|
|
|
|
3,457
|
|
Total
|
|
$
|
—
|
|
|
$
|
85
|
|
|
$
|
—
|
|
|
$
|
85
|
|
|
$
|
85,754
|
|
|
$
|
85,839
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit impaired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Real estate construction
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Real estate multi-family
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Real estate 1 to 4
family
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Commercial
& industrial
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
Age Analysis of Past Due Loans
|
As of December 31, 2016
|
(Dollar amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-59
|
|
|
60-89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Days
|
|
|
Days
|
|
|
Over
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
Past
|
|
|
Past
|
|
|
90
|
|
|
Past
|
|
|
|
|
|
Total
|
|
Originated
|
|
Due
|
|
|
Due
|
|
|
Days
|
|
|
Due
|
|
|
Current
|
|
|
Loans
|
|
Commercial real estate
|
|
$
|
835
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
837
|
|
|
$
|
350,424
|
|
|
$
|
351,261
|
|
Real estate construction
|
|
|
645
|
|
|
|
—
|
|
|
|
—
|
|
|
|
645
|
|
|
|
43,038
|
|
|
|
43,683
|
|
Real estate multi family
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
90,763
|
|
|
|
90,763
|
|
Real estate 1 to 4 family
|
|
|
1,365
|
|
|
|
61
|
|
|
|
74
|
|
|
|
1,500
|
|
|
|
152,343
|
|
|
|
153,843
|
|
Commercial & industrial
|
|
|
241
|
|
|
|
—
|
|
|
|
945
|
|
|
|
1,186
|
|
|
|
38,954
|
|
|
|
40,140
|
|
Consumer
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,533
|
|
|
|
3,533
|
|
|
|
$
|
3,086
|
|
|
$
|
63
|
|
|
$
|
1,019
|
|
|
$
|
4,168
|
|
|
$
|
679,055
|
|
|
$
|
683,223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Not credit impaired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
1,869
|
|
|
$
|
1,909
|
|
|
|
550
|
|
|
|
4,328
|
|
|
|
64,408
|
|
|
|
68,736
|
|
Real estate multi-family
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
15,200
|
|
|
|
15,200
|
|
Real estate 1 to 4 family
|
|
|
—
|
|
|
|
—
|
|
|
|
75
|
|
|
|
75
|
|
|
|
16,605
|
|
|
|
16,680
|
|
Commercial & industrial
|
|
|
285
|
|
|
|
—
|
|
|
|
—
|
|
|
|
285
|
|
|
|
8,449
|
|
|
|
8,734
|
|
Total
|
|
$
|
2,154
|
|
|
$
|
1,909
|
|
|
$
|
625
|
|
|
$
|
4,688
|
|
|
$
|
104,662
|
|
|
$
|
109,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit impaired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,225
|
|
|
$
|
1,225
|
|
Real estate construction
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Real estate multi-family
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Real estate 1 to 4 family
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Commercial & industrial
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,225
|
|
|
$
|
1,225
|
|
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
Risk rating
system
Loans to borrowers
graded as pass or pooled loans represent loans to borrowers of acceptable or better credit quality. They demonstrate sound financial
positions, repayment capacity and credit history. They have an identifiable and stable source of repayment.
Special mention
loans have potential weaknesses that deserve management’s attention. If left uncorrected these potential weaknesses may
result in a deterioration of the repayment prospects for the asset or in the Bank’s credit position at some future date.
These assets are “not adversely classified” and do not expose the Bank to sufficient risk to warrant adverse classification.
Substandard
loans are inadequately protected by current sound net worth, paying capacity of the borrower, or pledged collateral. Loans are
normally classified as Substandard when there are unsatisfactory characteristics causing more than acceptable levels of risk.
A substandard loan normally has one or more well-defined weakness that could jeopardize the repayment of the debt. For example,
a) cash flow deficiency, which may jeopardize future payments; b) sale of non-collateral assets has become primary source of repayment;
c) the borrower is bankrupt; or d) for any other reason, future repayment is dependent on court action.
Doubtful loans
represent credits with weakness inherent in the Substandard classification and where collection or liquidation in full is highly
questionable. To be classified Doubtful, there must be specific pending factors which prevent the Loan Review Officer from determining
the amount of loss contained in the credit. When the amount of loss can be reasonably estimated, that amount is classified as
“loss” and the remainder is classified as Substandard.
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
The following is a summary of the
credit quality indicators in the loan portfolio as of December 31, 2017 and 2016:
|
|
Credit Quality Indicators
|
|
|
|
As of December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollar amounts in thousands)
|
|
|
|
|
Special
|
|
|
Sub-
|
|
|
|
|
|
Total
|
|
Originated
|
|
Pass
|
|
|
mention
|
|
|
standard
|
|
|
Doubtful
|
|
|
loans
|
|
Commercial real estate
|
|
$
|
397,311
|
|
|
$
|
—
|
|
|
$
|
3,846
|
|
|
$
|
—
|
|
|
$
|
401,157
|
|
Real estate construction
|
|
|
34,392
|
|
|
|
—
|
|
|
|
814
|
|
|
|
—
|
|
|
|
35,206
|
|
Real estate multi-family
|
|
|
91,642
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
91,642
|
|
Real estate 1 to 4 family
|
|
|
159,881
|
|
|
|
—
|
|
|
|
544
|
|
|
|
—
|
|
|
|
160,425
|
|
Commercial & industrial
|
|
|
51,968
|
|
|
|
—
|
|
|
|
302
|
|
|
|
—
|
|
|
|
52,270
|
|
Consumer loans
|
|
|
14,057
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
14,057
|
|
Totals
|
|
$
|
749,251
|
|
|
$
|
—
|
|
|
$
|
5,506
|
|
|
$
|
—
|
|
|
$
|
754,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Not credit impaired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
53,656
|
|
|
$
|
873
|
|
|
$
|
1,306
|
|
|
$
|
—
|
|
|
$
|
55,835
|
|
Real estate multi-family
|
|
|
13,496
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
13,496
|
|
Real estate 1 to 4 family
|
|
|
13,051
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
13,051
|
|
Commercial & industrial
|
|
|
3,457
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,457
|
|
Total
|
|
$
|
83,660
|
|
|
$
|
873
|
|
|
$
|
1,306
|
|
|
$
|
—
|
|
|
$
|
85,839
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit impaired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
—
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
—
|
|
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
|
|
Credit Quality Indicators
|
|
|
|
As of December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollar amounts in thousands)
|
|
|
|
|
Special
|
|
|
Sub-
|
|
|
|
|
|
Total
|
|
Originated
|
|
Pass
|
|
|
mention
|
|
|
standard
|
|
|
Doubtful
|
|
|
loans
|
|
Commercial real estate
|
|
$
|
348,785
|
|
|
$
|
902
|
|
|
$
|
1,574
|
|
|
$
|
—
|
|
|
$
|
351,261
|
|
Real estate construction
|
|
|
42,840
|
|
|
|
—
|
|
|
|
843
|
|
|
|
—
|
|
|
|
43,683
|
|
Real estate multi-family
|
|
|
90,763
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
90,763
|
|
Real estate 1 to 4 family
|
|
|
153,769
|
|
|
|
—
|
|
|
|
74
|
|
|
|
—
|
|
|
|
153,843
|
|
Commercial & industrial
|
|
|
39,752
|
|
|
|
—
|
|
|
|
384
|
|
|
|
4
|
|
|
|
40,140
|
|
Consumer loans
|
|
|
3,533
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,533
|
|
Totals
|
|
$
|
679,442
|
|
|
$
|
902
|
|
|
$
|
2,875
|
|
|
$
|
4
|
|
|
$
|
683,223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Not credit impaired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
61,705
|
|
|
$
|
—
|
|
|
$
|
7,031
|
|
|
$
|
—
|
|
|
$
|
68,736
|
|
Real estate multi-family
|
|
|
15,200
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
15,200
|
|
Real estate 1 to 4 family
|
|
|
16,605
|
|
|
|
—
|
|
|
|
75
|
|
|
|
—
|
|
|
|
16,680
|
|
Commercial & industrial
|
|
|
8,644
|
|
|
|
—
|
|
|
|
90
|
|
|
|
—
|
|
|
|
8,734
|
|
Total
|
|
$
|
102,154
|
|
|
$
|
—
|
|
|
$
|
7,196
|
|
|
$
|
—
|
|
|
$
|
109,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit impaired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,225
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,225
|
|
Purchased
credit impaired loans are not included in the Company’s risk-rated methodology
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
(7)
|
Other Real Estate Owned
|
A
summary of the activity in the balance of foreclosed assets follows:
|
|
Year ended December 31,
|
|
(Dollar amounts in thousands)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Beginning foreclosed asset balance, net
|
|
$
|
1,427
|
|
|
$
|
1,026
|
|
|
$
|
763
|
|
Additions/transfers from loans
|
|
|
1,817
|
|
|
|
—
|
|
|
|
—
|
|
Capitalized expenditures
|
|
|
56
|
|
|
|
401
|
|
|
|
263
|
|
Disposition/sales
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Valuation adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Ending foreclosed asset balance, net
|
|
$
|
3,300
|
|
|
$
|
1,427
|
|
|
$
|
1,026
|
|
Ending valuation allowance
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Ending number of foreclosed properties
|
|
|
2
|
|
|
|
2
|
|
|
|
1
|
|
Proceeds from sale of foreclosed properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Loans to finance sale of foreclosed properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Gain on sale of foreclosed properties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
At
December 31, 2017, there were two properties reported in other real estate owned. The first property was a commercial building
located at 416 Browning Way, South San Francisco, California that had a net book balance of $1,483,000, $1,427,000 and
$1,026,000 as of December 31, 2017, 2016 and 2015, respectively. This commercial property has toxic issues related to soil and
water contamination related to the property’s use by previous owners. The building is fully leased on a triple net lease
and the market value of the building, supported by appraisal and other market data, is greater than the net book value of the
property. Remediation efforts to date include, but are not limited to, removal of contaminated soil around the building down to
the water table, water detoxification treatments, drilling of water monitoring wells, obtaining air samples inside the building,
and engaging in ongoing discussions with the San Francisco Bay Regional Water Quality Control Board (the “Water Board”)
with the stated objective of obtaining a final approved remediation plan. The Bank has engaged a soil engineering and consulting
company consultant to provide cost estimates related to the final clean-up costs that are expected to be incurred as part of any
final remediation plan that would be acceptable to the Water Board. Those costs, along with reimbursable costs incurred by the
Water Board, are expected to total approximately $725,000, but could vary depending on the extent of final remediation
requirements and the time required to complete them. The Bank developed this cost estimate based on advice from its soil engineering
expert and consulting company consultant and over six years of coordinated remediation efforts with the Water Board. The second
property is an elderly care facility located in Lafayette, California that was acquired in November 2017 and has a net book balance
of $1,817,000.
Subsequent
to December 31, 2017, the other real estate owned property located at 416 Browning Way, South San Francisco, California
was sold subject to a purchase and sale agreement between the Bank and the buyer of the property. Please see Note 23 – Subsequent
Event for additional information.
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
(8)
|
Related Party Transactions
|
In
the ordinary course of business, the Bank made loans and advances under lines of credit to directors, officers, and their related
interests. The Bank’s policies require that all such loans be made at substantially the same terms as those prevailing at
the time for comparable transactions with unrelated parties and do not involve more than normal risk or unfavorable features.
The following summarizes activities of loans to such parties at December 31:
(Dollar amounts in thousands)
|
|
2017
|
|
|
2016
|
|
Balance, beginning of year
|
|
$
|
6,397
|
|
|
$
|
3,988
|
|
Additions
|
|
|
4,093
|
|
|
|
2,474
|
|
Repayments
|
|
|
(678
|
)
|
|
|
(65
|
)
|
Balance, end of year
|
|
$
|
9,812
|
|
|
$
|
6,397
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
2016
|
|
Related party deposits
|
|
$
|
3,670
|
|
|
$
|
3,316
|
|
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
(9)
|
Bank Premises, Equipment,
and Leasehold Improvements
|
Bank
premises, equipment and leasehold improvements are stated at cost, less accumulated depreciation and amortization, and are summarized
as follows at December 31:
(Dollar amounts in thousands)
|
|
2017
|
|
|
2016
|
|
Buildings
|
|
$
|
10,087
|
|
|
$
|
10,099
|
|
Equipment & furniture
|
|
|
8,767
|
|
|
|
8,803
|
|
Leasehold improvements
|
|
|
1,428
|
|
|
|
1,496
|
|
|
|
|
20,282
|
|
|
|
20,398
|
|
Accumulated depreciation and amortization
|
|
|
(15,702
|
)
|
|
|
(15,275
|
)
|
|
|
|
4,580
|
|
|
|
5,123
|
|
Land
|
|
|
4,742
|
|
|
|
4,714
|
|
|
|
$
|
9,322
|
|
|
$
|
9,837
|
|
Depreciation
and amortization expense for the years ended December 31, 2017, 2016, and 2015 were $947,000, $1,051,000, and $1,098,000, respectively.
The
aggregate amount of time certificates, each with a minimum denomination of $250,000 or more, was $63,678,000 and $46,553,000 at
December 31, 2017 and 2016, respectively.
At
December 31, 2017, the scheduled maturities of all time certificates of deposit are as follows:
(Dollar amounts in thousands)
|
|
|
|
|
|
|
|
|
|
Year ending December 31:
|
|
Under
|
|
|
$250,000
|
|
|
|
|
|
|
$
|
250,000
|
|
|
|
or
more
|
|
|
|
Total
|
|
2018
|
|
$
|
47,906
|
|
|
$
|
49,908
|
|
|
$
|
97,814
|
|
2019
|
|
|
20,423
|
|
|
|
12,461
|
|
|
|
32,884
|
|
2020
|
|
|
4,944
|
|
|
|
1,309
|
|
|
|
6,253
|
|
2021
|
|
|
967
|
|
|
|
—
|
|
|
|
967
|
|
2022
|
|
|
166
|
|
|
|
—
|
|
|
|
166
|
|
|
|
$
|
74,406
|
|
|
$
|
63,678
|
|
|
$
|
138,084
|
|
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
(11)
|
Federal Home Loan Bank Advances
|
|
|
As of December 31, 2017
|
|
|
As of December 31, 2016
|
|
|
|
Maturity
|
|
|
Interest
|
|
|
Amount
|
|
|
Maturity
|
|
|
Interest
|
|
|
Amount
|
|
(Dollar amounts in thousands)
|
|
Date
|
|
|
Rate
|
|
|
Outstanding
|
|
|
Date
|
|
|
Rate
|
|
|
Outstanding
|
|
FHLB Overnight Advance
|
|
|
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
01/03/17
|
|
|
|
0.61
|
%
|
|
$
|
10,000
|
|
FHLB Term Advance
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
01/05/17
|
|
|
|
0.55
|
%
|
|
|
7,000
|
|
FHLB Term Advance
|
|
|
01/02/18
|
|
|
|
1.35
|
%
|
|
|
15,000
|
|
|
|
01/09/17
|
|
|
|
0.49
|
%
|
|
|
7,000
|
|
FHLB Term Advance
|
|
|
01/04/18
|
|
|
|
1.39
|
%
|
|
|
10,000
|
|
|
|
01/27/17
|
|
|
|
0.63
|
%
|
|
|
11,000
|
|
FHLB Term Advance
|
|
|
01/22/18
|
|
|
|
1.49
|
%
|
|
|
10,000
|
|
|
|
01/30/17
|
|
|
|
0.63
|
%
|
|
|
6,000
|
|
FHLB Term Advance
|
|
|
01/29/18
|
|
|
|
1.49
|
%
|
|
|
20,000
|
|
|
|
01/30/17
|
|
|
|
0.61
|
%
|
|
|
10,000
|
|
FHLB Term Advance
|
|
|
01/29/18
|
|
|
|
1.49
|
%
|
|
|
20,000
|
|
|
|
02/28/17
|
|
|
|
0.67
|
%
|
|
|
20,000
|
|
Totals
|
|
|
|
|
|
|
|
|
|
$
|
75,000
|
|
|
|
|
|
|
|
|
|
|
$
|
71,000
|
|
At
December 31, 2017, the Bank had a maximum borrowing capacity under Federal Home Loan Bank advances of $508,861,000 of which $433,861,000
was available. The Federal Home Loan Bank advances are secured by a blanket collateral agreement pledge of FHLB stock and certain
other qualifying collateral, such as commercial and mortgage loans. Interest rates are at the prevailing rate when advances are
made.
(12)
|
Commitments and Contingencies
|
Operating
Lease Commitments
The
Bank leases a portion of its facilities and equipment under non-cancelable operating leases expiring at various dates through
2024. Some of these leases provide that the Bank pay taxes, maintenance, insurance, and other occupancy expenses applicable to
leased premises.
The
minimum rental commitments under the operating leases as of December 31, 2017 are as follows:
(Dollars in thousands)
|
|
|
|
2018
|
|
$
|
1,150
|
|
2019
|
|
|
895
|
|
2020
|
|
|
806
|
|
2021
|
|
|
806
|
|
2022
|
|
|
806
|
|
Thereafter
|
|
|
528
|
|
|
|
$
|
4,991
|
|
Total
rent expense for operating leases was $1,121,000, $1,127,000 and $1,092,000, in 2017, 2016, and 2015, respectively.
Legal
Commitments
The
Bank is engaged in various lawsuits either as plaintiff or defendant in the ordinary course of business and, in the opinion of
management, based upon the advice of counsel, the ultimate outcome of these lawsuits does not expect to have a material effect
on the Bank’s financial condition or results of operations.
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
(13)
|
Salary Deferral 401(k) Plan
|
The
Company maintains a salary deferral 401(k) plan covering substantially all employees, known as the FNB Bancorp Savings Plan (the
“Plan”). The Plan allows employees to make contributions to the Plan up to a maximum allowed by law, and the Company’s
contribution is discretionary. Beginning in 2008, the Board approved a safe harbor election related to the Plan which requires
the Company to contribute 3% of qualifying employees’ wages as a profit sharing contribution. The Bank’s accrued contribution
to the Plan on the safe harbor basis for the years ended December 31, 2017, 2016, and 2015 was $366,000, $375,000, and $355,000,
respectively.
(14)
|
Salary Continuation and
Deferred Compensation Plans
|
The
Company maintains Salary Continuation Agreements for certain Executive officers. Executives participating in the Salary Continuation
Plan are entitled to receive a monthly payment for a period of twenty years beginning six months after their retirement. The Company
accrues the present value of such post-retirement benefits over the individual’s employment period. The Salary Continuation
Plan expense for the years ended December 31, 2017, 2016, and 2015 was $1,838,000, $1,860,000 and $1,786,000, respectively. Accrued
compensation payable under the salary continuation plan totaled $8,270,000 and $6,659,000 at December 31, 2017 and 2016, respectively.
All salary continuation agreements are fully vested and accrued for as of December 31, 2017.
Beginning
January 1, 2015 and for all subsequent periods the Company elected to utilize straight line service cost amortization accounting.
In December 2015, the current executive officers of the Bank and the Company’s Board of Directors agreed to amend and restate
the salary agreements. The effect of these agreed upon amendments and restatements was to reduce the remaining time to retirement
which accelerated the vesting and increased the service cost component of the Salary Continuation Agreement expense. Expense recognition
was recorded using a straight line service cost amortization method. There was no change in benefit payment amounts recorded in
2017, 2016 or 2015.
The
Deferred Compensation Plan allows eligible officers to defer annually their compensation up to a maximum 80% of their base salary
and 100% of their cash bonus. The officers are entitled to receive distributions upon reaching a specified age, passage of at
least five years or termination of employment. As of December 31, 2017 and 2016, the related liability included in accrued expenses
and other liabilities on the consolidated balance sheets was $3,131,000 and $1,790,000, respectively.
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
The
provision (benefit) for income taxes for the years ended December 31, consists of the following:
(Dollar amounts in thousands)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
4,991
|
|
|
$
|
4,597
|
|
|
$
|
2,929
|
|
State
|
|
|
2,131
|
|
|
|
2,249
|
|
|
|
1,321
|
|
|
|
$
|
7,122
|
|
|
$
|
6,846
|
|
|
$
|
4,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
2,782
|
|
|
$
|
(808
|
)
|
|
$
|
(158
|
)
|
State
|
|
|
(597
|
)
|
|
|
(342
|
)
|
|
|
(728
|
)
|
|
|
|
2,185
|
|
|
|
(1,150
|
)
|
|
|
(886
|
)
|
Total provision for taxes
|
|
$
|
9,307
|
|
|
$
|
5,696
|
|
|
$
|
3,364
|
|
The
reason for the differences between the statutory federal income tax rate and the effective tax rates for the years ending December
31, are summarized as follows:
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Statutory rates
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
34.0
|
%
|
Increase (decrease) resulting from:
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax exempt Income for federal purposes
|
|
|
-5.1
|
%
|
|
|
-7.1
|
%
|
|
|
-8.2
|
%
|
State taxes on income, net of federal benefit
|
|
|
5.0
|
%
|
|
|
7.8
|
%
|
|
|
3.4
|
%
|
Benefits from low income housing credits
|
|
|
-1.3
|
%
|
|
|
-1.6
|
%
|
|
|
-2.3
|
%
|
Stock based compensation
|
|
|
-0.9
|
%
|
|
|
1.7
|
%
|
|
|
2.0
|
%
|
Tax Cut and Jobs Act rate reduction
|
|
|
14.9
|
%
|
|
|
-%
|
|
|
|
-%
|
|
Other, net
|
|
|
-0.6
|
%
|
|
|
-0.6
|
%
|
|
|
0.2
|
%
|
Effective tax rate
|
|
|
47.0
|
%
|
|
|
35.2
|
%
|
|
|
29.1
|
%
|
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
The
tax effects of temporary differences giving rise to the Company’s net deferred tax asset are as follows:
|
|
December 31,
|
|
(Dollar amounts in thousands)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
$
|
3,295
|
|
|
$
|
4,661
|
|
|
$
|
4,470
|
|
Accrued salaries and officers compensation
|
|
|
3,130
|
|
|
|
3,717
|
|
|
|
2,770
|
|
Expenses accrued on books, not yet deductible in tax return
|
|
|
1,236
|
|
|
|
1,908
|
|
|
|
1,766
|
|
Depreciation
|
|
|
254
|
|
|
|
388
|
|
|
|
399
|
|
Net operating loss carryforward
|
|
|
824
|
|
|
|
1,069
|
|
|
|
1,335
|
|
Acquisition accounting differences
|
|
|
141
|
|
|
|
325
|
|
|
|
—
|
|
Unrealized depreciation on available-for-sale securities
|
|
|
394
|
|
|
|
1,074
|
|
|
|
—
|
|
|
|
|
9,274
|
|
|
|
13,142
|
|
|
|
10,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized appreciation on available-for-sale securities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,075
|
|
State income taxes
|
|
|
713
|
|
|
|
1,156
|
|
|
|
1,070
|
|
Core deposit intangible
|
|
|
109
|
|
|
|
236
|
|
|
|
323
|
|
Expenses and credits deducted on tax return, not on books
|
|
|
314
|
|
|
|
933
|
|
|
|
754
|
|
Total deferred tax liabilities
|
|
|
1,136
|
|
|
|
2,325
|
|
|
|
3,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets (included in other assets)
|
|
$
|
8,138
|
|
|
$
|
10,817
|
|
|
$
|
7,518
|
|
As
of December 31, 2017, management believes that it is more likely than not that the deferred tax assets will be realized through
recovery of taxes previously paid and/or future taxable income. In assessing the Company’s ability to realize the tax benefits
of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets
will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during
the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax
liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical
taxable income and projections for future taxable income over the periods which the deferred tax assets are deductible, management
believes it is more likely than not that the Company will realize the recorded benefits of these deductible differences.
On
December 22, 2017, President Donald Trump signed into law the Tax Cuts and Jobs Act (the “Act”), which among other
things reduced the federal corporate income tax rate to 21% effective January 1, 2018. As a result, the Company has concluded
that this Act caused a reduction in the net deferred tax asset and an increase in the income tax expense of the Company of approximately
$3 million, as of December 31, 2017, due to the revaluation of the Company’s net timing differences at the lower statutory
income tax rate.
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
(16)
|
Financial Instruments
|
The
Bank is a party to financial instruments with off-balance-sheet risk in the normal course of business. These financial instruments
include commitments to extend credit in the form of loans or through standby letters of credit. These instruments involve, to
varying degrees, elements of credit and interest-rate risk in excess of the amount recognized in the balance sheet. The Bank’s
exposure to credit loss is represented by the contractual amount of those instruments and is usually limited to amounts funded
or drawn. The contract or notional amounts of these agreements, which are not included in the balance sheets, are an indicator
of the Bank’s credit exposure. Commitments to extend credit generally carry variable interest rates and are subject to the
same credit standards used in the lending process for on-balance-sheet instruments. Additionally, the Bank periodically reassesses
the customer’s creditworthiness through ongoing credit reviews. The Bank generally requires collateral or other security
to support commitments to extend credit. The following table provides summary information on financial instruments whose contract
amounts represent credit risk as of December 31:
(Dollars amounts in thousands)
|
|
December 31
|
|
|
|
2017
|
|
|
2016
|
|
Financial instruments whose contract amounts represent credit risk:
|
|
|
|
|
|
|
|
|
Lines of credit
|
|
$
|
131,737
|
|
|
$
|
103,316
|
|
Other Commercial Commitments:
|
|
|
|
|
|
|
|
|
Undisbursed loan commitments
|
|
|
45,718
|
|
|
|
59,249
|
|
Mastercard/Visa lines
|
|
|
5,754
|
|
|
|
5,696
|
|
Standby Letters of credit
|
|
|
5,286
|
|
|
|
4,995
|
|
|
|
$
|
188,495
|
|
|
$
|
173,256
|
|
Commitments
to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of
the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future
cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis, following normal lending
policies. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s
credit evaluation. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, and
income-producing commercial and residential properties. Equity reserves and unused credit card lines are additional commitments
to extend credit. Many of these customers are not expected to draw down their total lines of credit, and therefore, the total
contract amount of these lines does not necessarily represent future cash requirements. Standby letters of credit are conditional
commitments issued by the Bank to guarantee the performance of a customer to a third party. The credit risk involved in issuing
letters of credit is essentially the same as that involved in extending loan facilities to customers.
The
Bank issues both financial and performance standby letters of credit. The financial standby letters of credit are primarily to
guarantee payment to third parties. As of December 31, 2017, there were financial standby letters of credit of $5,274,000 issued.
The performance standby letters of credit are typically issued to municipalities as specific performance bonds.
As
of December 31, 2017 there were performance letters of credit of $12,000,000 issued. The terms of the guarantees will expire in
2018. The Bank has experienced no draws on these letters of credit and does not expect to in the future. However, should a triggering
event occur, the Bank either has collateral in excess of the letters of credit or embedded agreements of recourse from the customer.
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
(17)
|
Fair Value Measurements
|
The
following tables present information about the Company’s assets and liabilities measured at fair value on a recurring basis
as of December 31, 2017 and 2016. Management has also described the fair value techniques used by the Company to determine such
fair value. During 2017 and 2016 there were no transfers of assets and liabilities that are valued using different valuation technologies.
Fair
values established for available-for-sale investment securities are based on estimates of fair values quoted for similar types
of securities with similar maturities, risk and yield characteristics. The following tables present the recorded amount of assets
measured at fair value on a recurring basis:
|
|
|
|
|
Fair Value Measurements
|
|
(Dollar amounts in thousands)
|
|
|
|
|
at December 31, 2017, Using
|
|
|
|
|
|
|
Quoted Prices
|
|
|
|
|
|
|
|
|
|
|
|
|
in Active
|
|
|
|
|
|
|
|
|
|
|
|
|
Markets
|
|
|
Other
|
|
|
Significant
|
|
|
|
|
|
|
for Identical
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
Fair Value
|
|
|
Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
Description
|
|
12/31/2017
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
U. S. Treasury securities
|
|
$
|
1,975
|
|
|
$
|
1,975
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Obligations of U.S.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government agencies
|
|
|
41,823
|
|
|
|
—
|
|
|
|
41,823
|
|
|
|
—
|
|
Mortgage-backed securities
|
|
|
119,792
|
|
|
|
—
|
|
|
|
119,792
|
|
|
|
—
|
|
Asset-backed securities
|
|
|
3,686
|
|
|
|
—
|
|
|
|
3,686
|
|
|
|
—
|
|
Obligations of states and political subdivisions
|
|
|
151,103
|
|
|
|
—
|
|
|
|
151,103
|
|
|
|
—
|
|
Corporate debt
|
|
|
37,478
|
|
|
|
—
|
|
|
|
37,478
|
|
|
|
—
|
|
Total assets measured at fair value
|
|
$
|
355,857
|
|
|
$
|
1,975
|
|
|
$
|
353,882
|
|
|
$
|
—
|
|
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
|
|
|
|
|
Fair Value Measurements
|
|
(Dollar amounts in thousands)
|
|
|
|
|
at December 31, 2016, Using
|
|
|
|
|
|
|
Quoted Prices
|
|
|
|
|
|
|
|
|
|
|
|
|
in Active
|
|
|
|
|
|
|
|
|
|
|
|
|
Markets
|
|
|
Other
|
|
|
Significant
|
|
|
|
|
|
|
for Identical
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
Fair Value
|
|
|
Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
Description
|
|
12/31/2016
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
U. S. Treasury securities
|
|
$
|
987
|
|
|
$
|
987
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Obligations of U.S.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government agencies
|
|
|
60,545
|
|
|
|
—
|
|
|
|
60,545
|
|
|
|
—
|
|
Mortgage-backed securities
|
|
|
84,284
|
|
|
|
—
|
|
|
|
84,284
|
|
|
|
—
|
|
Obligations of states and political subdivisions
|
|
|
151,618
|
|
|
|
—
|
|
|
|
151,618
|
|
|
|
—
|
|
Corporate debt
|
|
|
62,671
|
|
|
|
—
|
|
|
|
62,671
|
|
|
|
—
|
|
Total assets measured at fair value
|
|
$
|
360,105
|
|
|
$
|
987
|
|
|
$
|
359,118
|
|
|
$
|
—
|
|
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
The following tables present the
recorded amounts of assets measured at fair value on a non-recurring basis:
|
|
|
|
|
Fair
Value Measurements
|
|
(Dollar
amounts in thousands)
|
|
|
|
|
at
December 31, 2017, Using
|
|
|
|
|
|
|
Quoted
Prices in
|
|
|
|
|
|
|
|
|
|
|
|
|
Active
Markets
|
|
|
Other
|
|
|
Significant
|
|
|
|
|
|
|
for
Identical
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
Fair
Value
|
|
|
Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
Description
|
|
12/31/2017
|
|
|
(Level
1)
|
|
|
(Level
2)
|
|
|
(Level
3)
|
|
Impaired
loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
real estate
|
|
$
|
745
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
745
|
|
Commercial
real estate construction
|
|
|
814
|
|
|
|
—
|
|
|
|
—
|
|
|
|
814
|
|
Residential-1
to 4 family
|
|
|
2,286
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,286
|
|
Commercial
and industrial
|
|
|
745
|
|
|
|
—
|
|
|
|
—
|
|
|
|
745
|
|
Other
real estate owned
|
|
|
3,300
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,300
|
|
Total
impaired assets measured at fair value
|
|
$
|
7,890
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,890
|
|
|
|
|
|
|
Fair
Value Measurements
|
|
(Dollar
amounts in thousands)
|
|
|
|
|
at
December 31, 2016, Using
|
|
|
|
|
|
|
Quoted
Prices in
|
|
|
|
|
|
|
|
|
|
|
|
|
Active
Markets
|
|
|
Other
|
|
|
Significant
|
|
|
|
|
|
|
for
Identical
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
Fair
Value
|
|
|
Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
Description
|
|
12/31/2016
|
|
|
(Level
1)
|
|
|
(Level
2)
|
|
|
(Level
3)
|
|
Impaired
loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
real estate
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Residential-1
to 4 family
|
|
|
67
|
|
|
|
—
|
|
|
|
—
|
|
|
|
67
|
|
Commercial
and industrial
|
|
|
815
|
|
|
|
—
|
|
|
|
—
|
|
|
|
815
|
|
Other
real estate owned
|
|
|
1,427
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,427
|
|
Total
impaired assets measured at fair value
|
|
$
|
2,309
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,309
|
|
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
The
following methods and assumptions were used by the Company in estimating the fair value disclosures for financial instruments
that are not carried at fair value on either a recurring or non-recurring basis:
Cash
and Cash Equivalents including Interest Bearing Time Deposits with Financial Institutions
.
The
carrying amounts reported in the balance sheet for cash and short-term instruments are a reasonable estimate of fair value, which
will approximate their historical cost.
Securities
Available-for-Sale.
Fair
values for investment securities are based on quoted market prices, where available. If quoted market prices are not available,
fair values are based on quoted market prices of comparable instruments.
Loans.
For
variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values.
For fixed rate loans, fair values are based on discounted cash flows, credit risk factors, and liquidity factors.
Other
equity securities.
These
are mostly Federal Reserve Bank stock and Federal Home Loan Bank stock, carried in other assets on the consolidated balance sheet.
These securities can only be issued and redeemed at par by the issuing entities. They cannot be sold in in open market transactions.
Fair value is estimated to be carrying value.
Deposit
liabilities.
The
fair values disclosed for demand deposits (e.g., interest and non-interest checking, savings, and money market accounts) are,
by definition, equal to the amount payable on demand at reporting date (i.e., their carrying amounts). The fair values for fixed-rate
certificates of deposit are based on discounted cash flows.
Federal
Home Loan Bank Advances.
The
fair values of Federal Home Loan Bank Advances are based on discounted cash flows. The discount rate is equal to the market currently
offered on similar products.
Note
payable.
Fair
value is equal to the current balance. They represent a corporate loan with a monthly variable rate, based on the 3-month LIBOR
rate plus 4%.
Accrued
Interest Receivable and Payable.
The
interest receivable and payable balances approximate their fair value due to the short-term nature of their settlement dates.
Undisbursed
loan commitments, lines of credit, Mastercard line and standby letters of credit.
The
fair value of these off-balance sheet items are based on discounted cash flows of expected fundings.
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
The
Company has excluded non-financial assets and non-financial liabilities defined by the Codification (ASC 820-10-15-A), such as
Company premises and equipment, deferred taxes and other liabilities. In addition, the Company has not disclosed the fair value
of financial instruments specifically excluded from disclosure requirements of the Financial Instruments Topic of the Codification
(ASC 825-10-50-8), such as Bank-owned life insurance policies.
The
following table provides summary information on the estimated fair value of financial instruments at December 31, 2017 and 2016:
December 31, 2017
|
|
Carrying
|
|
|
Fair
|
|
|
Fair value measurements
|
|
(Dollar amounts in thousands)
|
|
amount
|
|
|
value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
18,353
|
|
|
$
|
18,353
|
|
|
$
|
18,353
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest-bearing time deposits with financial institutions
|
|
|
130
|
|
|
|
130
|
|
|
|
—
|
|
|
|
130
|
|
|
|
—
|
|
Securities available for sale
|
|
|
355,857
|
|
|
|
355,857
|
|
|
|
1,975
|
|
|
|
350,196
|
|
|
|
—
|
|
Loans
|
|
|
829,766
|
|
|
|
811,382
|
|
|
|
—
|
|
|
|
—
|
|
|
|
811,382
|
|
Other equity securities
|
|
|
7,567
|
|
|
|
7,567
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,567
|
|
Accrued interest receivable
|
|
|
5,317
|
|
|
|
5,317
|
|
|
|
5,317
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
1,050,295
|
|
|
|
1,050,858
|
|
|
|
912,211
|
|
|
|
138,647
|
|
|
|
—
|
|
Federal Home Loan Bank advances
|
|
|
75,000
|
|
|
|
75,000
|
|
|
|
—
|
|
|
|
75,000
|
|
|
|
—
|
|
Note payable
|
|
|
3,750
|
|
|
|
3,750
|
|
|
|
—
|
|
|
|
3,750
|
|
|
|
—
|
|
Accrued interest payable
|
|
|
510
|
|
|
|
510
|
|
|
|
510
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Off-balance-sheet liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Undisbursed loan commitments, lines of credit, standby letters of credit and Mastercard lines of credit
|
|
|
—
|
|
|
|
1,884
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,884
|
|
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
December 31, 2016
|
|
Carrying
|
|
|
Fair
|
|
|
Fair value measurements
|
|
(Dollar amounts in thousands)
|
|
amount
|
|
|
value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
15,758
|
|
|
$
|
15,758
|
|
|
$
|
15,758
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest-bearing time deposits with financial institutions
|
|
|
205
|
|
|
|
205
|
|
|
|
—
|
|
|
|
205
|
|
|
|
—
|
|
Securities available for sale
|
|
|
360,105
|
|
|
|
360,105
|
|
|
|
987
|
|
|
|
359,118
|
|
|
|
—
|
|
Loans
|
|
|
782,485
|
|
|
|
769,661
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
769,661
|
|
Other equity securities
|
|
|
7,206
|
|
|
|
7,206
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,206
|
|
Accrued interest receivable
|
|
|
4,942
|
|
|
|
4,942
|
|
|
|
4,942
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
1,019,506
|
|
|
|
1,020,088
|
|
|
|
951,743
|
|
|
|
68,345
|
|
|
|
—
|
|
Federal Home Loan Bank advances
|
|
|
71,000
|
|
|
|
71,000
|
|
|
|
—
|
|
|
|
71,000
|
|
|
|
—
|
|
Note payable
|
|
|
4,350
|
|
|
|
4,350
|
|
|
|
—
|
|
|
|
4,350
|
|
|
|
—
|
|
Accrued interest payable
|
|
|
246
|
|
|
|
246
|
|
|
|
246
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Off-balance-sheet liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Undisbursed loan commitments, lines of credit, standby letters of credit and Mastercard lines of
credit
|
|
|
—
|
|
|
|
1,733
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,733
|
|
(18)
|
Significant Group Concentrations
of Credit Risk
|
Most
of the Bank’s business activity is with customers located within San Mateo and San Francisco counties. Generally, loans
are secured by assets of the borrowers. Loans are expected to be repaid from cash flows or proceeds from the sale of selected
assets of the borrowers. The Bank does not have significant concentrations of loans to any one industry, but does have loan concentrations
in commercial real estate loans that are considered high by regulatory standards. The Bank has mitigated this concentration to
a large extent by utilizing underwriting standards that are more conservative than regulatory guidelines, and performing stress
testing on this segment of the portfolio to insure that the commercial real estate loan portfolio will perform within management
expectations given an additional downturn in commercial lease rates and commercial real estate valuations. The distribution of
commitments to extend credit approximates the distribution of loans outstanding. Commercial and standby letters of credit were
granted primarily to commercial borrowers. The contractual amounts of credit-related financial instruments such as commitments
to extend credit, credit-card arrangements, and letters of credit represent the amounts of potential accounting loss should the
contract be fully drawn upon, the customer default, and the value of any existing collateral become worthless.
The
Company, as a bank holding company, is subject to regulation by the Board of Governors of the Federal Reserve System under the
Bank Holding Company Act of 1956, as amended. The Bank is subject to various regulatory capital requirements administered by the
federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial
statements.
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
Under
capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific
capital guidelines that involve quantitative measures of the Company’s and the Bank’s assets, liabilities and certain
off balance-sheet items as calculated under regulatory accounting practices.
The
capital amounts and classification are also subject to qualitative judgments by the regulators about asset groupings, risk weightings
and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank
to maintain minimum amounts and ratios (set forth in the table below) of total, Tier 1 Common Equity and Tier 1 capital
(as defined in the regulations) to risk-weighted assets (as defined), and leverage capital (as defined) to average assets
(as defined). Management believes, as of December 31, 2017, that the Company and the Bank have met all regulatory capital requirements.
As
of December 31, 2017, the most recent notification from the regulatory agencies categorized the Bank as well capitalized under
the regulatory framework for prompt corrective action. To be categorized as well capitalized the Bank must maintain minimum total
risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table. There are no conditions or events since that
notification that management believes have changed the Bank’s categories.
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
The
consolidated actual capital amounts and ratios of the Company and the Bank are presented in the following table:
|
|
|
|
|
|
|
|
Required
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for Capital
|
|
|
To be Well-Capitalized
|
|
|
|
|
|
|
|
|
|
Adequacy Purposes
|
|
|
Under Prompt Correction
|
|
Dollars in thousands
|
|
|
|
|
|
|
|
Effective January 1, 2017
|
|
|
Action Regulations
|
|
|
|
At December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulatory Capital Ratios
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
Leverage Ratio
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
$
|
115,364
|
|
|
|
9.09
|
%
|
≥
|
$
|
50,768
|
|
|
|
4.00
|
%
(2)
|
|
|
N/A
|
|
|
|
N/A
|
|
Bank
|
|
|
117,180
|
|
|
|
9.23
|
%
|
≥
|
|
50,768
|
|
|
|
4.00
|
%
(2)
|
|
$
|
63,460
|
|
|
|
5.00
|
%
|
Tier 1 Common Equity Capital Ratio
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
115,364
|
|
|
|
11.57
|
%
|
≥
|
|
57,342
|
|
|
|
5.75
|
%
(2)
|
|
|
N/A
|
|
|
|
N/A
|
|
Bank
|
|
|
117,180
|
|
|
|
11.75
|
%
|
≥
|
|
57,342
|
|
|
|
5.75
|
%
(2)
|
|
|
64,822
|
|
|
|
6.50
|
%
|
Tier 1 Capital Ratio
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
115,364
|
|
|
|
11.57
|
%
|
≥
|
|
72,301
|
|
|
|
7.25
|
%
(2)
|
|
|
N/A
|
|
|
|
N/A
|
|
Bank
|
|
|
117,180
|
|
|
|
11.75
|
%
|
≥
|
|
72,301
|
|
|
|
7.25
|
%
(2)
|
|
|
79,781
|
|
|
|
8.00
|
%
|
Total Capital Ratio
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
125,712
|
|
|
|
12.61
|
%
|
≥
|
|
92,246
|
|
|
|
9.25
|
%
(2)
|
|
|
N/A
|
|
|
|
N/A
|
|
Bank
|
|
|
127,528
|
|
|
|
12.79
|
%
|
≥
|
|
92,246
|
|
|
|
9.25
|
%
(2)
|
|
|
99,726
|
|
|
|
10.00
|
%
|
(1)
|
The leverage ratio consists of
Tier 1 Capital divided by the most recent quarterly average total assets, excluding certain intangible assets.
|
(2)
|
Includes 125% capital conservation
buffer.
|
|
|
|
|
|
|
|
|
|
|
Required
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for Capital
|
|
|
To be Well-Capitalized
|
|
|
|
|
|
|
|
|
|
Adequacy Purposes
|
|
|
Under Prompt Correction
|
|
Dollars in thousands
|
|
|
|
|
|
|
|
Effective January 1, 2016
|
|
|
Action Regulations
|
|
|
|
At December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulatory Capital Ratios
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
Leverage Ratio
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
$
|
106,971
|
|
|
|
9.02
|
%
|
≥
|
$
|
47,443
|
|
|
|
4.000
|
%
(2)
|
|
|
N/A
|
|
|
|
N/A
|
|
Bank
|
|
|
109,538
|
|
|
|
9.27
|
%
|
≥
|
|
47,248
|
|
|
|
4.000
|
%
(2)
|
|
$
|
59,060
|
|
|
|
5.00
|
%
|
Tier 1 Common Equity Capital Ratio
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
106,971
|
|
|
|
11.32
|
%
|
≥
|
|
48,441
|
|
|
|
5.125
|
%
(2)
|
|
|
N/A
|
|
|
|
N/A
|
|
Bank
|
|
|
109,538
|
|
|
|
11.59
|
%
|
≥
|
|
48,441
|
|
|
|
5.125
|
%
(2)
|
|
|
61,437
|
|
|
|
6.50
|
%
|
Tier 1 Capital Ratio
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
106,971
|
|
|
|
11.32
|
%
|
≥
|
|
62,618
|
|
|
|
6.625
|
%
(2)
|
|
|
N/A
|
|
|
|
N/A
|
|
Bank
|
|
|
109,538
|
|
|
|
11.59
|
%
|
≥
|
|
62,618
|
|
|
|
6.625
|
%
(2)
|
|
|
75,615
|
|
|
|
8.00
|
%
|
Total Capital Ratio
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
117,315
|
|
|
|
12.42
|
%
|
≥
|
|
81,522
|
|
|
|
8.625
|
%
(2)
|
|
|
N/A
|
|
|
|
N/A
|
|
Bank
|
|
|
119,882
|
|
|
|
12.68
|
%
|
≥
|
|
81,522
|
|
|
|
8.625
|
%
(2)
|
|
|
94,518
|
|
|
|
10.00
|
%
|
(1)
|
The
leverage ratio consists of Tier 1 Capital divided by the most recent quarterly average total assets, excluding
certain intangible assets.
|
(2)
|
Includes
125% capital conservation buffer.
|
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
Management
believes that the Company and the Bank are both “well capitalized” by regulatory definitions for all required regulatory
capital ratios, including leverage, Tier 1 common equity, Tier 1 risk based and total risk based capital requirements for all
periods presented. The capital position of the Company is stable, composed primarily of common stock and retained earnings. Management
believes that relations with our regulatory agencies are good, as evidenced by the regulatory approval received to purchase America
California Bank.
The
Federal Reserve and the Federal Deposit Insurance Corporation approved final capital rules in July 2013, that substantially amend
the existing capital rules for banks. These new rules reflect, in part, certain standards initially adopted by the Basel Committee
on Banking Supervision in December 2010 (which standards are commonly referred to as “Basel III”) as well as requirements
contemplated by the Dodd-Frank Act.
Under
these capital rules, the Bank is required to meet certain minimum capital requirements. The Bank will also be required to establish
a “conservation buffer,” consisting of a common equity Tier 1 capital amount equal to 2.5% of risk-weighted assets
to be phased in by 2019. An institution that does not meet the conservation buffer will be subject to restrictions on certain
activities including payment of dividends, stock repurchases, and discretionary bonuses to executive officers.
The
prompt corrective action rules are modified to include the common equity Tier 1 capital ratio and to increase the Tier 1 capital
ratio requirements for the various thresholds. For example, the requirements for the Bank to be considered well-capitalized under
the rules will be a 5.0% leverage ratio, a 6.5% common equity Tier l capital ratio, an 8.0% Tier 1 capital ratio, and a 10.0%
total capital ratio. To be adequately capitalized, those ratios are 4.0%, 4.5%, 6.0%, and 8.0%, respectively.
The
rules modify the manner in which certain capital elements are determined. The rules make changes to the methods of calculating
the risk-weighting of certain assets, which in turn affects the calculation of the risk-weighted capital ratios. Higher risk weights
are assigned to various categories of assets, including commercial real estate loans, credit facilities that finance the acquisition,
development or construction of real property, certain exposures or credit that are 90 days past due or are nonaccrual, securitization
exposures, and in certain cases mortgage servicing rights and deferred tax assets.
The
Bank was required to comply with all capital requirements on December 31, 2017. The conservation buffer began to be phased-in
beginning in 2016 and will take full effect on January 1, 2019. Certain calculations under the rules will also have phase-in periods.
In
1997, the Board of Directors of the Bank adopted the First National Bank of Northern California 1997 stock option plan. Pursuant
to the holding company reorganization effective March 15, 2002, the Bank stock option plan became the FNB Bancorp stock option
Plan. In 2002, the Company adopted an incentive employee stock option plan known as the 2002 FNB Bancorp plan. In 2008, the Company
adopted an incentive employee stock option plan known as the 2008 FNB Bancorp stock option plan. The plans allow the Company as
of December 31, 2017 to grant options to employees covering 404,766 shares.
Incentive
stock options currently outstanding become exercisable in one to five years from the grant date, based on a vesting schedule of
20% per year and expire 10 years after the grant date. Nonqualified options to directors become vested on the date of grant. The
options exercise price is the fair value of the per share price of the underlying stock options at the grant date.
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
The
amount of compensation expense for options recorded in the years ended December 31, 2017, 2016, and 2015 was $418,000, $513,000
and $427,000, respectively. There was an income tax benefit related to stock option exercises for the year ended December 31,
2017 of $340,000 that was reflected as an excess income tax benefit. During 2016 and 2015, the tax benefit related to disqualified
stock option exercises and non-qualified stock option exercises totaled $600,000 and $553,000, respectively. During 2016 and 2015,
this tax benefit was reflected as an increase in common equity and a decrease in income taxes payable. The amount of unrecognized
compensation expense related to non-vested options at December 31, 2017 was $947,000, and the remaining weighted average amortization
period was 3.1 years. There were no new stock options granted during 2017.
The
amount of total unrecognized compensation expense related to non-vested options at December 31, 2016 was $1,409,000, and the weighted
average period it will be amortized over was 3.9 years. The assumptions for options granted in 2016 were as follows: dividend
yield of 1.94% for the year; risk-free interest rate of 2.15%; expected volatility of 37%; expected life of 7.2 years. This resulted
in a weighted average fair value of $7.43 per share. The amount of total unrecognized compensation expense related to non-vested
options at December 31, 2015 was $1,061,000, and the weighted average period it will be amortized over is 4.0 years. The assumptions
for options granted in 2015 were as follows: dividend yield of 1.96% for the year; risk-free interest rate of 2.14%; expected
volatility of 41%; expected life of 8.9 years. This resulted in a weighted average option fair value of $2.72 per share.
A
summary of option activity, adjusted for stock dividends and stock splits, issued under the 2008 FNB Bancorp Plan as of December
31, 2017 and changes during the year then ended is presented below.
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
2008 FNB Bancorp Plan
|
|
|
|
|
Weighted
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
|
|
Average
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
|
|
|
Exercise
|
|
|
Term
|
|
|
Value
|
|
Options
|
|
Shares
|
|
|
Price/share
|
|
|
(in years)
|
|
|
per share
|
|
Outstanding at January 1, 2017
|
|
|
632,635
|
|
|
$
|
13.99
|
|
|
|
|
|
|
$
|
22.50
|
|
Granted
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(164,389
|
)
|
|
$
|
10.71
|
|
|
|
|
|
|
$
|
20.35
|
|
Forfeited or expired
|
|
|
(12,955
|
)
|
|
$
|
15.35
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2017
|
|
|
455,291
|
|
|
$
|
15.14
|
|
|
|
6.4
|
|
|
$
|
21.35
|
|
Exercisable at December 31, 2017
|
|
|
278,911
|
|
|
$
|
13.20
|
|
|
|
5.6
|
|
|
$
|
23.29
|
|
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
The
following supplemental information applies to the three years ended December 31:
2008 FNB Bancorp Plan
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Options outstanding
|
|
|
455,291
|
|
|
|
632,635
|
|
|
|
586,344
|
|
Range of exercise prices/share
|
|
$
|
3.53 to $20.95
|
|
|
$
|
3.53
to $20.95
|
|
|
$
|
3.53-$16.27
|
|
Weighted average remaining contractual life (in years)
|
|
|
6.4
|
|
|
|
6.9
|
|
|
|
7.0
|
|
Fully vested options
|
|
|
278,911
|
|
|
|
366,286
|
|
|
|
326,461
|
|
Weighted average exercise price/sh
|
|
$
|
13.20
|
|
|
$
|
11.35
|
|
|
$
|
11.83
|
|
Aggregate intrinsic value
|
|
$
|
6,496,216
|
|
|
$
|
4,876,927
|
|
|
$
|
4,307,190
|
|
Weighted average remaining contractual life (in years)
|
|
|
5.6
|
|
|
|
5.7
|
|
|
|
5.9
|
|
A
summary of option activity, adjusted for stock dividends, under the 2002 FNB Bancorp Plan as of December 31, 2017 and changes
during the year then ended is presented below.
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
2002 FNB Bancorp Plan
|
|
|
|
|
Weighted
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
|
|
Average
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
|
|
|
Exercise
|
|
|
Term
|
|
|
Value
|
|
Options
|
|
Shares
|
|
|
Price/share
|
|
|
(in years)
|
|
|
per share
|
|
Outstanding at January 1, 2017
|
|
|
28,555
|
|
|
$
|
12.48
|
|
|
|
|
|
|
$
|
24.01
|
|
Granted
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(28,555
|
)
|
|
$
|
12.48
|
|
|
|
|
|
|
$
|
14.14
|
|
Forfeited or expired
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2017
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
Exercisable at December 31, 2017
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
The
following supplemental information applies to the three years ended December 31:
2002 FNB Bancorp Plan
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Options outstanding
|
|
|
—
|
|
|
|
28,555
|
|
|
|
96,023
|
|
Range of exercise prices/share
|
|
$
|
—
|
|
|
$
|
12.48
to $12.48
|
|
|
$
|
12.48
to $14.13
|
|
Weighted average remaining contractual life (in years)
|
|
|
—
|
|
|
|
0.5
|
|
|
|
0.9
|
|
Fully vested options
|
|
|
—
|
|
|
|
28,555
|
|
|
|
96,023
|
|
Weighted average exercise price/sh
|
|
$
|
—
|
|
|
$
|
12.48
|
|
|
$
|
13.48
|
|
Aggregate intrinsic value
|
|
$
|
—
|
|
|
$
|
263,324
|
|
|
$
|
547,108
|
|
Weighted average remaining contractual life (in years)
|
|
|
—
|
|
|
|
0.5
|
|
|
|
0.9
|
|
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
A
summary of option activity, adjusted for stock dividends, under the 1997 FNB Bancorp Plan as of December 31, 2017 and changes
during the year then ended is presented below.
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
1997 First National Bank Plan
|
|
|
|
|
Weighted
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
|
|
Average
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
|
|
|
Exercise
|
|
|
Term
|
|
|
Value
|
|
Options
|
|
Shares
|
|
|
Price
|
|
|
(in years)
|
|
|
per share
|
|
Outstanding at January 1, 2016
|
|
|
16,616
|
|
|
$
|
12.48
|
|
|
|
|
|
|
$
|
9.15
|
|
Granted
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(16,616
|
)
|
|
|
12.48
|
|
|
|
|
|
|
$
|
15.93
|
|
Forfeited or expired
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2017
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
Exercisable at December 31, 2017
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
The
following supplemental information applies to the three years ended December 31
1997 FNB Bancorp Plan
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Options outstanding
|
|
|
—
|
|
|
|
16,616
|
|
|
|
50,823
|
|
Range of exercise prices
|
|
$
|
—
|
|
|
$
|
12.48
|
|
|
$
|
12.48
|
|
Weighted average remaining contractual life (in years)
|
|
|
—
|
|
|
|
0.5
|
|
|
|
1.5
|
|
Fully vested options
|
|
|
—
|
|
|
|
16,616
|
|
|
|
50,823
|
|
Weighted average exercise price/sh
|
|
$
|
—
|
|
|
$
|
12.48
|
|
|
$
|
12.48
|
|
Aggregate intrinsic value
|
|
$
|
—
|
|
|
$
|
152,593
|
|
|
$
|
340,094
|
|
Weighted average remaining contractual life (in years)
|
|
|
—
|
|
|
|
0.5
|
|
|
|
1.5
|
|
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
(21)
|
Quarterly Data (Unaudited)
|
Per share
amounts adjusted for stock splits and stock dividends
|
|
2017
|
|
(Dollars in thousands)
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
Interest income
|
|
$
|
12,027
|
|
|
$
|
12,378
|
|
|
$
|
12,785
|
|
|
$
|
13,028
|
|
Interest expense
|
|
|
835
|
|
|
|
946
|
|
|
|
1,032
|
|
|
|
1,058
|
|
Net interest income
|
|
|
11,192
|
|
|
|
11,432
|
|
|
|
11,753
|
|
|
|
11,970
|
|
Provision for loan losses
|
|
|
—
|
|
|
|
(140
|
)
|
|
|
—
|
|
|
|
(220
|
)
|
Net interest income, after provision for loan losses
|
|
|
11,192
|
|
|
|
11,572
|
|
|
|
11,753
|
|
|
|
12,190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest income
|
|
|
1,010
|
|
|
|
1,012
|
|
|
|
972
|
|
|
|
866
|
|
Noninterest expense
|
|
|
7,605
|
|
|
|
7,678
|
|
|
|
7,648
|
|
|
|
7,618
|
|
Earnings before income taxes
|
|
|
4,597
|
|
|
|
4,906
|
|
|
|
5,077
|
|
|
|
5,438
|
|
Provision for income taxes
|
|
|
1,508
|
|
|
|
1,555
|
|
|
|
1,766
|
|
|
|
4,478
|
|
Net earnings
|
|
$
|
3,089
|
|
|
$
|
3,351
|
|
|
$
|
3,311
|
|
|
$
|
960
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
0.42
|
|
|
$
|
0.46
|
|
|
$
|
0.45
|
|
|
$
|
0.13
|
|
Diluted earnings per share
|
|
$
|
0.41
|
|
|
$
|
0.44
|
|
|
$
|
0.43
|
|
|
$
|
0.13
|
|
Per share
amounts adjusted for stock splits and stock dividends.
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
|
|
2016
|
|
(Dollars in thousands)
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
Interest income
|
|
$
|
11,565
|
|
|
$
|
11,316
|
|
|
$
|
11,122
|
|
|
$
|
11,510
|
|
Interest expense
|
|
|
848
|
|
|
|
766
|
|
|
|
721
|
|
|
|
734
|
|
Net interest income
|
|
|
10,717
|
|
|
|
10,550
|
|
|
|
10,401
|
|
|
|
10,776
|
|
Provision for (recovery) of loan losses
|
|
|
75
|
|
|
|
75
|
|
|
|
—
|
|
|
|
—
|
|
Net interest income, after provision for loan losses
|
|
|
10,642
|
|
|
|
10,475
|
|
|
|
10,401
|
|
|
|
10,776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest income
|
|
|
1,134
|
|
|
|
1,036
|
|
|
|
1,102
|
|
|
|
1,323
|
|
Non-interest expense
|
|
|
7,787
|
|
|
|
7,649
|
|
|
|
7,513
|
|
|
|
7,743
|
|
Income before income taxes
|
|
|
3,989
|
|
|
|
3,862
|
|
|
|
3,990
|
|
|
|
4,356
|
|
Provision for income taxes
|
|
|
1,422
|
|
|
|
1,414
|
|
|
|
1,546
|
|
|
|
1,314
|
|
Net earnings
|
|
$
|
2,567
|
|
|
$
|
2,448
|
|
|
$
|
2,444
|
|
|
$
|
3,042
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
0.36
|
|
|
$
|
0.34
|
|
|
$
|
0.33
|
|
|
$
|
0.42
|
|
Diluted earnings per share
|
|
$
|
0.35
|
|
|
$
|
0.33
|
|
|
$
|
0.33
|
|
|
$
|
0.41
|
|
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
|
(22)
|
Condensed Financial Information
of Parent Company
|
The
parent company-only condensed balance sheets, condensed statements of earnings, and condensed statements of cash flows information
are presented as of and for the years ended December 31, as follows:
FNB Bancorp
|
|
Condensed balance sheets
|
|
|
|
December 31,
|
|
(Dollars in thousands)
|
|
2017
|
|
|
2016
|
|
Assets:
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
1,947
|
|
|
$
|
1,795
|
|
Investments in subsidiary
|
|
|
121,096
|
|
|
|
112,881
|
|
Dividend receivable from subsidiary
|
|
|
964
|
|
|
|
739
|
|
Other assets
|
|
|
242
|
|
|
|
243
|
|
Total assets
|
|
$
|
124,249
|
|
|
$
|
115,658
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Dividend declared
|
|
$
|
964
|
|
|
$
|
739
|
|
Income tax payable to subsidiary
|
|
|
244
|
|
|
|
244
|
|
Note payable
|
|
|
3,750
|
|
|
|
4,350
|
|
Other liabilities
|
|
|
11
|
|
|
|
11
|
|
Total liabilities
|
|
|
4,969
|
|
|
|
5,344
|
|
Stockholders’equity
|
|
|
119,280
|
|
|
|
110,314
|
|
Total liabilities and stockholders’ equity
|
|
$
|
124,249
|
|
|
$
|
115,658
|
|
FNB Bancorp
|
|
Condensed statements of earnings
|
|
|
|
Years Ended December 31,
|
|
(Dollars in thousands)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends from subsidiary
|
|
$
|
3,634
|
|
|
$
|
2,890
|
|
|
$
|
2,439
|
|
Total income
|
|
|
3,634
|
|
|
|
2,890
|
|
|
|
2,439
|
|
Expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on note payable
|
|
|
214
|
|
|
|
222
|
|
|
|
229
|
|
Other expense
|
|
|
317
|
|
|
|
135
|
|
|
|
128
|
|
Total expense
|
|
|
531
|
|
|
|
357
|
|
|
|
357
|
|
Income before income tax benefit and equity in undistributed earnings of subsidiary
|
|
|
3,103
|
|
|
|
2,533
|
|
|
|
2,082
|
|
Income tax benefit
|
|
|
—
|
|
|
|
—
|
|
|
|
(56
|
)
|
Income before equity in undistributed earnings of subsidiary
|
|
|
3,103
|
|
|
|
2,533
|
|
|
|
2,138
|
|
Equity in undistributed earnings of subsidiary
|
|
|
7,608
|
|
|
|
7,968
|
|
|
|
6,059
|
|
Net earnings
|
|
$
|
10,711
|
|
|
$
|
10,501
|
|
|
$
|
8,197
|
|
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
FNB Bancorp
|
|
Condensed statement of cash flows
|
|
|
|
Years ended December 31,
|
|
(Dollars in thousands)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Net earnings
|
|
$
|
10,711
|
|
|
$
|
10,501
|
|
|
$
|
8,197
|
|
Decrease in income tax receivable from subsidiary
|
|
|
—
|
|
|
|
166
|
|
|
|
165
|
|
Net increase in dividend receivable and other assets
|
|
|
(224
|
)
|
|
|
(90
|
)
|
|
|
(163
|
)
|
Net increase in other liabilities
|
|
|
565
|
|
|
|
—
|
|
|
|
147
|
|
Excess tax benefit from exercised stock options
|
|
|
(340
|
)
|
|
|
(600
|
)
|
|
|
(222
|
)
|
Undistributed earnings of subsidiary
|
|
|
(7,608
|
)
|
|
|
(8,044
|
)
|
|
|
(6,059
|
)
|
Stock-based compensation expense
|
|
|
418
|
|
|
|
513
|
|
|
|
427
|
|
Cash flows from operating activities
|
|
|
3,522
|
|
|
|
2,446
|
|
|
|
2,492
|
|
Investment in subsidiary
|
|
|
—
|
|
|
|
—
|
|
|
|
(882
|
)
|
Cash flows from investing activities
|
|
|
—
|
|
|
|
—
|
|
|
|
(882
|
)
|
Payment on note payable
|
|
|
(600
|
)
|
|
|
(600
|
)
|
|
|
(600
|
)
|
Exercise of stock options
|
|
|
864
|
|
|
|
1,115
|
|
|
|
924
|
|
Excess tax benefit from exercised stock options
|
|
|
—
|
|
|
|
600
|
|
|
|
222
|
|
Dividends on common stock
|
|
|
(3,634
|
)
|
|
|
(2,890
|
)
|
|
|
(1,786
|
)
|
Cash flows provided by financing activities
|
|
|
(3,370
|
)
|
|
|
(1,775
|
)
|
|
|
(1,240
|
)
|
Net increase (decrease) in cash
|
|
|
152
|
|
|
|
671
|
|
|
|
370
|
|
Cash, beginning of year
|
|
|
1,795
|
|
|
|
1,124
|
|
|
|
754
|
|
Cash, end of year
|
|
$
|
1,947
|
|
|
$
|
1,795
|
|
|
$
|
1,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued dividends
|
|
|
964
|
|
|
|
739
|
|
|
|
649
|
|
Stock dividend of 5%
|
|
|
—
|
|
|
|
7,850
|
|
|
|
6,663
|
|
FNB Bancorp
and Subsidiary
Notes to Consolidated
Financial Statements
December 31,
2017, 2016 and 2015
|
|
During
2017, the Company entered into a purchase and sale contract to sell the Company’s
OREO property located at 416 Browning Way, South San Francisco, California. This property
was acquired by the Company through foreclosure on July 12, 2011 and contained soil and
ground water contamination in and around the property. The sale closed escrow on February
22, 2018 and the contract sales price of $2.8 million consisted of a down payment by
the buyer of $1,600,000 as well as the Company providing the buyer a $1.2 million 15
year fully amortized loan at an interest rate of 4.25% fixed.
The purchase and sale contract
required the Company to transfer title of the property to the buyer, and the buyer obtained all rights and responsibilities of
ownership of the property including the right to the lease revenue generated by the tenant that currently leases the building.
The Company retained the obligation to continue working with the Water Board to obtain and complete a final remediation plan for
the property. Included in the sale agreement is the requirement that the Company set aside $500,000 in the form of a good faith
deposit that is to be used to fund the ongoing efforts remediation efforts. If the Company spends more than $500,000, the Company
is required to fund certain remediation costs beyond the initial $500,000 good faith deposit. Those costs along
with reimbursable costs incurred by the Water Board are currently estimated to be approximately $725,000 by the Company’s
soil engineering and consulting company consultant but could vary in the future depending on the extent of final remediation
requirements and the time required to complete them.
|