<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
HERITAGE FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
(unaudited)
<CAPTION>
March 31, December 31
1996 1995
<S> <C> <C>
ASSETS
Cash and due from banks $46,967 $44,268
Federal funds sold and
interest-bearing deposits 15,692 5,611
------ ------
Total cash and cash equivalents 62,659 49,879
Securities:
Held-to-maturity
(market value: $111,288 in 1996 and
$99,306 in 1995) 111,572 97,456
Available-for-sale, at market 363,641 318,159
------- -------
Total securities 475,213 415,615
Loans, net of unearned income 614,694 569,494
Less: allowance for loan losses (9,582) (8,477)
------- -------
Net loans 605,112 561,017
Premises and equipment 18,771 16,304
Goodwill and core deposit intangibles 19,882 13,554
Other assets 10,416 9,999
---------- ----------
TOTAL ASSETS $1,192,053 $1,066,368
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Demand deposits $168,376 $161,400
NOW accounts 83,794 71,467
Money market accounts 114,941 103,940
Savings deposits 221,478 201,542
Time deposits 437,019 376,943
-------- --------
Total deposits 1,025,608 915,292
Securities sold under agreements to
repurchase 45,063 47,002
Notes payable 14,000 -
Other liabilities 8,752 7,291
--------- -------
TOTAL LIABILITIES 1,093,423 969,585
Shareholders' Equity
Preferred shares - no par value; shares
authorized:12,000,000;
shares issued: none - -
Common shares - $.625 par value; shares
authorized: 16,000,000;
shares issued: 7,963,559 in 1996 and
7,939,359 in 1995 4,977 4,962
Surplus 17,617 17,499
Retained earnings 75,123 72,681
Net unrealized gains on securities, net
of tax 913 1,641
------ ------
TOTAL SHAREHOLDERS' EQUITY 98,630 96,783
------ ------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,192,053 $1,066,368
========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
HERITAGE FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share data)
(unaudited)
<CAPTION>
Three Months Ended
March 31
------------------
1996 1995
------- -----
<S> <C> <C>
INTEREST INCOME
Loans, including fees $12,831 $11,507
Securities:
Taxable 5,556 3,951
Exempt from federal income taxes 1,466 989
Federal funds sold and interest-bearing
deposits 236 694
------ ------
TOTAL INTEREST INCOME 20,089 17,141
------ ------
INTEREST EXPENSE
Deposits 8,708 6,749
Securities sold under agreements to
repurchase 495 327
Notes payable 144 89
------ ------
TOTAL INTEREST EXPENSE 9,347 7,165
------ ------
NET INTEREST INCOME 10,742 9,976
------ ------
Provision for loan losses 100 50
------ ------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 10,642 9,926
------ ------
OTHER INCOME
Service charges on deposit accounts 957 1,012
Income for trust services 191 183
Investment product fees 219 271
Other operating income 306 261
Securities gains 9 4
------ ------
TOTAL OTHER INCOME 1,682 1,731
------ ------
OTHER EXPENSE
Salaries and employee benefits 4,140 3,895
Net occupancy expense 719 655
Equipment expense 418 382
Federal deposit insurance premiums 4 457
Data processing expense 276 194
Amortization of intangible assets 513 399
Other operating expenses 1,294 1,114
------ ------
TOTAL OTHER EXPENSE 7,364 7,096
------ ------
INCOME BEFORE INCOME TAXES 4,960 4,561
------ ------
Income tax expense 1,483 1,500
------ ------
NET INCOME $3,477 $3,061
====== ======
NET INCOME PER COMMON SHARE:
Primary $0.42 $0.37
Fully diluted $0.42 $0.37
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING:
Primary 8,324,841 8,283,737
Fully diluted 8,324,841 8,292,122
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
HERITAGE FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<CAPTION>
Three Months Ended
March
-------------------
1996 1995
--------- -------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $3,477 $3,061
Adjustments to reconcile net income to net cash
provided by operating activities:
Discount accretion on securities (314) (248)
Deferred loan fee accretion (113) (88)
Provision for loan losses 100 50
Securities gains (9) (4)
Depreciation and amortization 416 425
Deferred income taxes (145) (109)
Net amortization of purchase accounting
adjustments 620 495
Increase in accrued interest income (1,267) (791)
Increase in accrued interest expense 106 318
Other, net 669 (316)
----- -----
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,540 2,793
----- -----
INVESTING ACTIVITIES
Securities held-to-maturity:
Proceeds from maturities, repayments
and calls 1,963 7,545
Purchases (13,934) (42,270)
Securities available-for-sale:
Proceeds from maturities, repayments
and calls 27,457 3,451
Purchases (24,735) (4,214)
Net increase in loans (9,730) (3,898)
Purchases of premises and equipment (719) (345)
Proceeds from the sale of premises
and equipment 2 15
Proceeds from sales of other real estate owned 299 102
Cash and cash equivalents of acquisition
less the purchase price (7,798) -
------ ------
NET CASH USED IN INVESTING ACTIVITIES (27,195) (39,614)
------ ------
FINANCING ACTIVITIES
Net increase (decrease) in demand deposits,
NOW and money market accounts and savings
deposits 2,866 (18,777)
Net increase in time deposits 26,319 59,046
Net increase (decrease) in securities sold
under agreements to repurchase (5,848) 4,313
Proceeds from notes payable 14,000 -
Principal payments on notes payable - (2,000)
Proceeds from stock option exercises 133 117
Dividends paid (1,035) (873)
------ ------
NET CASH PROVIDED FROM FINANCING ACTIVITIES 36,435 41,826
------ ------
NET INCREASE IN CASH AND CASH EQUIVALENTS 12,780 5,005
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 49,879 86,156
------ ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $62,659 $91,161
====== ======
SUPPLEMENTAL DISCLOSURES:
Interest paid $9,279 $6,883
Income taxes paid - 14
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
HERITAGE FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The unaudited consolidated financial statements include the accounts of
Heritage Financial Services, Inc. and its subsidiaries (the "Company"). In the
opinion of management, all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the financial position,
results of operations and cash flows for the interim periods have been made.
Certain amounts reported in prior periods have been reclassified for
presentation or comparative purposes. The results of operations for the three
months ended March 31, 1996 are not necessarily indicative of the results to
be expected for the entire fiscal year.
The unaudited interim financial statements have been prepared in conformity
with generally accepted accounting principles and reporting practices. Certain
information in footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles has been
condensed or omitted pursuant to rules and regulations of the Securities and
Exchange Commission, although the Company believes the disclosures are adequate
to make the information not misleading. These financial statements should be
read in conjunction with the consolidated financial statements and notes
thereto included in the Company's 1995 Form 10-K.
EARNINGS PER SHARE
Primary and fully diluted earnings per common share for the three months ended
March 31, 1996 and 1995 are computed by dividing net income by the weighted
average number of common shares outstanding and common equivalent shares,
assumed to be issued under the Company's stock option plan. Common share
equivalents attributable to stock options are computed based on the treasury
stock method.
NEW ACCOUNTING PRONOUNCEMENTS
As of January 1, 1996, the Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". SFAS 121
requires that long-lived assets and certain identifiable intangibles that are
used in operations be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of assets might not be
recoverable. The adoption of SFAS 121 did not effect the Company's financial
condition or results of operations.
As of January 1, 1996, the Company adopted the provisions SFAS 122, "Accounting
for Mortgage Servicing Rights". SFAS 122 provides guidance on the accounting
for mortgage servicing rights and the evaluation and recognition of impairment
of mortgage servicing rights. The provisions of SFAS 122 do not currently
impact the Company since it sells mortgage loans to investors on a servicing
released basis.
As of January 1, 1996, the Company adopted SFAS 123, "Accounting for Stock-
Based Compensation". SFAS 123 encourages, but does not require, companies to
recognize compensation expense for grants of stock, stock options and other
equity instruments based on the fair value of those instruments. The Company
has elected to continue to account for employee stock compensation plans under
APB Opinion 25 and related Interpretations.
HERITAGE FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
ACQUISITION
On February 2, 1996, the Company acquired all of the common shares of the First
National Bank of Lockport ("Lockport") for $16.8 million in cash. The
acquisition was accounted for as a purchase and, accordingly, the results of
operations of Lockport have been included in the consolidated statement of
income from the date of acquisition. In connection with the acquisition, the
Company acquired assets with an aggregate fair value of $104,375,000 and
assumed deposits and other liabilities of $87,555,000.
<TABLE>
LOANS
The following table summarizes loan balances by category (in thousands):
<CAPTION>
March 31, December 31,
1996 1995
-------- --------
<S> <C> <C>
Commercial and industrial $141,899 $130,508
Commercial real estate 150,368 145,080
Construction 12,991 8,645
Residential real estate 220,777 200,323
Home equity 76,990 73,525
Other consumer 13,808 13,782
------- -------
Gross Loans 616,833 571,863
------- -------
Less: unearned income (2,139) (2,369)
------- -------
Total $614,694 $569,494
======= =======
</TABLE>
LITIGATION
On May 16, 1995, Federal Insurance Company ("Federal"), a subrogee of SSM
Health Care ("SSM"), filed a lawsuit against the Company in the United States
District Court for the Northern District of Illinois alleging that the Company
had made unauthorized wire transfers. The wire transfers were made at the
request of a former SSM officer who allegedly diverted the funds and defrauded
SSM. As the insurer of SSM, Federal honored SSM's claim of loss incurred as
a result of the employee defalcation. The lawsuit seeks damages in the amount
of $1,247,500 plus interest and legal costs. The Company believes it has
meritorious defenses and is vigorously defending its position. Management
believes, after discussions with counsel, that the outcome of this litigation
will not have a material impact on the Company's financial position or results
of operations.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The following represents management's analysis of the Company's results
of operations for the three month period ended March 31, 1996 and 1995 and its
consolidated financial condition at March 31, 1996 as compared to December 31,
1995. This discussion should be read in conjunction with the consolidated
financial statements and notes thereto appearing elsewhere in this Form 10-Q.
On February 2, 1996, the Company acquired all of the common shares of the
First National Bank of Lockport ("Lockport") for $16.8 million in cash. At the
acquisition date Lockport had total assets of approximately $104 million. The
acquisition was accounted for as a purchase and, accordingly, the results of
operations of Lockport have been included in the consolidated statement of
income from the date of acquisition.
ANALYSIS OF INCOME STATEMENTS
SUMMARY OF OPERATIONS
Net income in the first quarter of 1996 increased to $3,477,000, up 14%
from $3,061,000 earned in the same quarter of 1995. On a fully diluted basis,
earnings per share for the quarterly period increased to 42 cents per share
compared to 37 cents per share earned in the first quarter of 1995. Higher
earnings in the 1996 period were principally due to an increase in net interest
income and lower FDIC deposit insurance premiums.
NET INTEREST INCOME
First quarter net interest income was $10,742,000, an increase of $766,000
or 8% compared with the first quarter of 1995. The growth in net interest
income in 1996 was attributable to an increase in the volume of average earning
assets, partially off set by a reduction in the net interest spread.
Average earning assets for the 1996 first quarter were $1.058 billion, up
$168 million or 19% compared to the same quarter a year ago. The higher levels
of average earning assets were primarily the result of strong deposit growth
in the twelve month period ending March 31, 1996. The increase also reflects
approximately $64 million of average earning assets of Lockport, which was
acquired on February 2, 1996.
On a taxable equivalent basis, the annualized net interest spread in the
first quarter decreased to 3.67% compared to 4.13% in the 1995 quarter. The
change in the net interest rate spread reflected a decrease of .13% in the
yield on average earning assets and an increase of .33% in the rate paid on
interest-bearing liabilities. The decrease in the yield on earning assets was
primarily due to lower rates earned on prime-based floating-rate loans and new
tax-exempt securities. Higher rates paid on interest-bearing liabilities were
primarily due to increases in interest rates paid on time deposits and money
market accounts. Changes in the deposit mix and premium rates paid on short-
term deposit promotions also resulted in increased funding costs in 1996.
Another factor contributing to the decrease in the net interest spread was
the flattening of the treasury yield curve throughout 1995. As the yield curve
flattened, the spreads between long-term and short-term market interest rates
compressed. In general, the flattening yield curve reduced the interest
spreads earned on new loans and securities compared to the cost of funds.
During the first quarter of 1996, the level of intermediate and long-term
market interest rates increased resulting in a steepening of the yield curve.
The Company cannot predict whether the recent changes in the yield curve
environment will continue or be sustained.
ALLOWANCE AND PROVISION FOR LOAN LOSSES
The allowance for loan losses is maintained at a level management believes
to be adequate to provide for known and potential risks inherent in the
Company's loan portfolio. On a quarterly basis, management assesses the
adequacy of the allowance for loan losses. Management's evaluation of the
adequacy of the allowance considers such factors as prior loss experience, loan
portfolio growth and reviews of impaired loans and the value of underlying
collateral securing these loans. A provision for loan losses is charged to
income to increase the allowance to a level deemed to be adequate, but not
excessive, based on management's evaluation. When a loan or a part thereof is
considered by management to be uncollectible, a charge is made against the
allowance. Recoveries of previously charged-off loans are credited back to the
allowance.
<TABLE>
The changes in the allowance for loan losses for the three months ended
March 31, 1996 and 1995 were as follows (in thousands):
<CAPTION>
Three Months Ended
March 31,
--------------------
1996 1995
----- -----
<S> <C> <C>
Balance at beginning of period $8,477 $8,720
Allowance of acquired bank 1,179 -
Provision for loan losses 100 50
Loan charge-offs (231) (145)
Loan recoveries 57 47
----- -----
Balance at beginning of period $9,582 $8,672
===== =====
Net charge-offs to average loans 0.12% 0.08%
Allowance for loan losses to loans 1.56% 1.64%
Allowance for loan losses to
nonperforming loans 193% 174%
</TABLE>
The increase in the provision for loan losses in 1996 was primarily the
result of the increase in net charge-offs during the three month period.
<TABLE>
The following table sets forth an allocation of the allowance for loan
losses and the percent of loans in each category to total loans outstanding for
the periods and categories shown (in thousands):
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
Amount % Amount %
------ -- ------ --
<S> <C> <C> <C> <C>
Commercial and industrial $2,432 23 $2,077 23
Commercial real estate 4,450 24 4,100 25
Construction - 2 - 2
Residential real estate 1,900 36 1,550 35
Home equity and other consumer 800 15 750 15
----- --- ----- ---
Total $9,582 100 $8,477 100
===== === ===== ===
</TABLE>
Changes in the allocation of the allowance to individual loan categories
since December 31, 1995 were primarily the result of changes in management's
risk assessment and assignment of unallocated reserves. Notwithstanding
management's allocation of the allowance, the entire allowance for loan losses
is available to absorb losses in any particular category of loans.
ASSET QUALITY
NONPERFORMING ASSETS
<TABLE>
The following table sets forth the Company's nonperforming assets and
asset quality ratios (in thousands):
<CAPTION>
March 31, December 31,
1996 1995
-------- -----------
<S> <C> <C>
Nonaccrual loans $3,850 $3,919
Loans past due 90 days or more 1,105 938
----- -----
Total nonperforming loans 4,955 4,857
----- -----
Other real estate owned 465 760
----- -----
Total nonperforming assets $5,420 $5,617
Restructured loans - -
===== =====
Nonperforming loans to loans 0.81% 0.85%
Nonperforming assets to loans
plus OREO 0.88% 0.98%
</TABLE>
IMPAIRED LOANS
<TABLE>
The following table sets forth the recorded investment in impaired loans
and the related valuation allowance for each loan category (in thousands):
<CAPTION>
Amount of Impaired Loans
--------------------------------
No Valuation Valuation Amount of
Allowance Allowance Valuation
Required Required Total Allowance
------------ --------- ----- ---------
<S> <C> <C> <C> <C>
March 31, 1996
Commercial and industrial $274 $697 $971 $228
Commercial real estate 3,882 1,042 4,924 260
Residential real estate 903 349 1,252 66
----- ----- ----- ---
Total impaired loans $5,059 $2,088 $7,147 $554
===== ===== ===== ===
<S> <C> <C> <C> <C>
December 31, 1995
Commercial and industrial $271 $796 $1,067 $285
Commercial real estate 3,312 1,410 4,722 486
Residential real estate 1,104 134 1,238 51
----- ----- ----- ---
Total impaired loans $4,687 $2,340 $7,027 $822
===== ===== ===== ===
</TABLE>
The average recorded investment in impaired loans for the three months
ended March 31, 1996 was approximately $7,087,000. Interest income recognized
on impaired loans in the 1996 first quarter totaled $98,000 compared to $76,000
in the same period a year ago. Included in the balance of impaired loans at
March 31, 1996, are $590,000 of loans 90 days or more past due and $3,278,000
of nonaccrual loans.
OTHER INCOME
Other income, excluding securities transactions, for the three months
ended March 31, 1996 decreased $54,000 compared to the same period in 1995.
Service charges on deposit accounts, the primary component of other income,
decreased $55,000 or 5% and investment product fees decreased $52,000 or 19%
from the year ago quarter.
OTHER EXPENSE
Other expense in the 1996 first quarter increased $268,000 or 4% compared
to the same period in 1995. The growth in other expense categories was largely
attributable to the additional operating expenses of Lockport, partially offset
by the reduction in deposit insurance premiums.
Salaries and employee benefits, the largest component of other expenses,
increased $245,000 or 6% compared to the 1995 first quarter. At March 31,
1996, the number of full-time equivalent employees totaled 463 compared to 434
at December 31, 1995 and 431 at March 31, 1995.
For the three months ended March 31, 1996, FDIC deposit insurance premiums
decreased $453,000 or 99% compared with the same period in 1995. The decrease
reflects a reduction in the BIF assessment rate from 23 cents per $100 in the
1995 first quarter to zero for the same period in 1996. While the FDIC has set
the BIF assessment rate at zero for the first six months of 1996, there are no
assurances that future assessment rates will remain at that level.
INCOME TAXES
Income tax expense for the three months ended March 31, 1996 decreased
$17,000 compared to the same period in 1995. The Company's effective tax rate
(income tax expense divided by net income before taxes) decreased to 29.9% in
1996 compared to 32.9% in the same period a year ago. The decrease in income
tax expense in 1996 was primarily due to an increase in the amount of tax-
exempt income earned on state and municipal securities.
ANALYSIS OF BALANCE SHEETS
ASSETS
Total assets at March 31, 1996 were $1.192 billion, an increase of $126
million compared to December 31, 1995. The growth in all asset categories was
primarily due to the acquisition of Lockport in February, 1996. Including
Lockport balances, changes in total assets since December 31, 1995 reflect
increases of $60 million in securities, $44 million in net loans and a $13
million in cash and cash equivalents. In the first quarter of 1996 the Company
purchased $19 million of fixed rate CMOs and REMICs with average lives of 4 to
5 years and $14 million of bank-qualified tax-exempt securities. The Company
continued to experience increased loan demand despite higher market interest
rates in the first quarter. Excluding the loans acquired from Lockport, net
loans increased approximately $10 million from the year-end 1995.
LIABILITIES
The Company's funding sources, consisting of deposits and short-term
borrowings, increased $122 million since December 31, 1995. The increase in
funding sources was primarily due to the additional deposits provided by
Lockport. Including Lockport balances, changes in funding sources since year
end reflect increases of $19 million in demand deposits and NOW accounts, $31
million in money market accounts and savings deposits and $60 million in time
deposits. Approximately $27 million of the increase in time deposits resulted
from a five-month, premium-rate certificate of deposit promotion offered in
February and March, 1996.
To fund a majority of the Lockport purchase price, the Company borrowed
$14 million under an unsecured $20 million revolving line of credit established
with an unrelated financial institution. The borrowings are structured as
revolving notes and bear interest at either prime floating or may, at the
Company's option, be fixed at 1% above LIBOR for periods up to one year.
Periodic interest payments are required on revolving notes. On January 1,
1998, the unpaid principal balance of the revolving notes will convert into a
term loan. The Company is required to make quarterly principal reductions
beginning January 1, 1998. The weighted average interest rate on notes payable
at March 31, 1996 was 6.31%.
CAPITAL
At March 31, 1996 total shareholders' equity increased to $98.6 million,
up $1.8 million from December 31, 1995. The growth in equity reflects the
retention of current year earnings, less dividends paid, plus the proceeds from
the issuance of 24,000 common shares pursuant to the exercise of stock options.
The change in equity also reflects a $728,000 decrease in the market value of
securities available-for-sale.
The capital ratios of the Company and Heritage Bank are presently in
excess of the requirements necessary to meet the "well capitalized" capital
category established by bank regulators. At March 31, 1996, the Company's
consolidated Tier 1 and total risk-based capital ratios were 11.79% and
13.04%, respectively. The Company's leverage ratio at quarter-end was 6.95%.
Presently the Company has no commitments for material capital expenditures.
Management believes that the Company has sufficient financing options available
to fund commitments that may arise in the future.
LIQUIDITY
Liquidity management in banking involves the ability to generate funds to
support asset growth and meet cash flow requirements of customers and other
obligations. Liquidity of Heritage Bank is primarily maintained by daily
investments in federal funds sold, monthly cash flows from mortgage-backed and
asset-backed securities and maturities of other securities. At March 31, 1996
federal funds sold and securities having contractual maturities of one year or
less totaled $52 million. In addition to these funds, the Bank expects to
receive approximately $68 million of payments on mortgage-backed and asset-
backed securities over the next twelve months. These cash flow projections are
based on the consensus prepayment estimates of securities brokers. For the
three and twelve months ended March 31, 1996, the aggregate principal payments
received on these securities totaled approximately $16 million and $51 million,
respectively.
The Bank's immediate liquidity needs have historically been met by federal
funds sold and cash flows from securities. Other sources of potential liquidity
include the sale of securities classified as available for sale, borrowings up
to $35 million under informal federal funds lines with correspondent banks and
advances under a $112 million credit facility with the Federal Home Loan Bank.
For the parent company, Heritage Financial Services, Inc.("HFS"),
liquidity means having cash available to pay shareholder dividends, to service
debt and to fund operating expenses. The ability of HFS to pay dividends, as
well as fund its operations and service debt, is dependent upon receipt of
dividends from Heritage Bank. Regulatory authorities limit the amount of
dividends which can be paid by Heritage Bank without prior approval from such
authorities. At March 31, 1996, the amount of undistributed earnings of
Heritage Bank available for the payment of dividends within such limitations
is more than adequate to fund the anticipated cash requirements of HFS.
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibit 11 - Statement Re Computation of Per Share Earnings
(included at page 13).
(b) There were no reports on Form 8-K filed by the registrant during
the quarter ending March 31, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HERITAGE FINANCIAL SERVICES, INC.
(Registrant)
Date: May 13, 1996 by /s/ Frederick J. Sampias
Frederick J. Sampias
President
(Duly Authorized Officer)
Date: May 13, 1996 by /s/ Paul A. Eckroth
Paul A. Eckroth
Executive Vice President and Treasurer
(Principal Financial and Chief Accounting Officer)
EXHIBIT 11 - Statement Re: Computation of Per Share Earnings
<TABLE>
Presented below is the calcuation of the Registrant's primary and fully
diluted earnings per share required by Item 601(b)(11) of Regulation S-K
(dollars in thousands, except per share data):
<CAPTION>
Three Months Ended
March 31,
------------------
1996 1995
------ -----
<S> <C> <C>
PRIMARY
Net income $3,477 $3,061
===== =====
Average common shares outstanding 7,956 7,931
Common stock equivalents - net effect
of the assumed exercise of stock options
- -- based on the treasury stock method
using average market price 369 353
----- -----
Average primary shares outstanding 8,325 8,284
===== =====
PRIMARY EARNINGS PER SHARE $ .42 $ .37
==== ====
FULLY DILUTED EARNINGS PER SHARE
Net income $3,477 $3,061
===== =====
Average common shares outstanding 7,956 7,931
Common stock equivalents - net effect
of the assumed exercise of stock options
- -- based on the treasury stock method
using average market price or year-end
market price, whichever was higher 369 361
----- -----
Average fully diluted shares
outstanding 8,325 8,292
===== =====
FULLY DILUTED EARNINGS PER
SHARE $ .42 $ .37
==== ====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 46,967
<INT-BEARING-DEPOSITS> 242
<FED-FUNDS-SOLD> 15450
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 363641
<INVESTMENTS-CARRYING> 111572
<INVESTMENTS-MARKET> 111288
<LOANS> 614694
<ALLOWANCE> 9582
<TOTAL-ASSETS> 1192053
<DEPOSITS> 1025608
<SHORT-TERM> 59063
<LIABILITIES-OTHER> 8752
<LONG-TERM> 0
0
0
<COMMON> 4977
<OTHER-SE> 93653
<TOTAL-LIABILITIES-AND-EQUITY> 1192053
<INTEREST-LOAN> 12831
<INTEREST-INVEST> 7022
<INTEREST-OTHER> 236
<INTEREST-TOTAL> 20089
<INTEREST-DEPOSIT> 8708
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</TABLE>
