FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
------------------------------------
(Mark One)
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File No. 0-11526
FIRST COLONIAL GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
PENNSYLVANIA 23-2228154
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION
76 SO. MAIN ST., NAZARETH, PA 18064
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 610-746-7300
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO _____
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK AS OF THE LATEST PRACTICABLE DATE: 1,467,619 SHARES OF COMMON
STOCK, $5 PAR VALUE, OUTSTANDING ON SEPTEMBER 30, 1995.
<PAGE>
FIRST COLONIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
(Unaudited)
<TABLE>
Sept. 30 Dec. 31
1995 1994
--------- ---------
<S> <C> <C>
ASSETS
Cash and Due From Banks $ 11,082 $ 10,669
Federal Funds Sold -- --
--------- ---------
Total Cash and Cash Equivalents 11,082 10,669
Interest-Bearing Deposits With Banks 447 401
Investment Securities 37,296 36,525
(Market Value: Sept. 30, 1995 - $37,195;
Dec. 31, 1994 - $34,298
Securities Available-for-Sale at Fair Value 45,618 43,610
Mortgage Loans Held-for-Sale 732 69
Total Loans, Net of Unearned Discount 192,523 185,215
Less: Allowance for Possible Loan Losses (2,422) (2,187)
--------- ---------
Net Loans 190,101 183,028
Premises and Equipment 6,315 5,862
Other Real Estate 528 373
Accrued Interest Income 2,025 1,748
Other Assets 2,774 2,268
--------- ---------
TOTAL ASSETS $ 296,918 $ 284,553
========= =========
LIABILITIES
Deposits
Non-Interest Bearing Deposits $ 27,106 $ 25,028
Interest-Bearing Deposits 220,275 222,504
--------- ---------
Total Deposits 247,381 247,532
Securities Sold Under Agreements to Repurchase 8,769 9,027
Short-Term Borrowing 10,293 750
Long-Term Debt 643 862
Accrued Interest Payable 3,049 2,682
Other Liabilities 2,668 1,300
--------- ---------
TOTAL LIABILITIES 272,803 262,153
--------- ---------
SHAREHOLDERS' EQUITY
Preferred Stock, Par Value $5.00 a share
Authorized - 500,000 shares, none Issued -- --
Common Stock, Par Value $5.00 a share
Authorized - 10,000,000 shares
Issued - 1,467,619 shares at
Sept. 30, 1995 and 1,455,427 shares
at Dec. 31, 1994 7,338 7,277
Additional Paid in Capital 7,010 6,882
Retained Earnings 10,089 10,050
Employee Stock Ownership Plan Debt (643) (775)
Net Unrealized Gain (Loss) on
Securities Available-for-Sale 321 (1,034)
--------- ---------
Total Shareholders' Equity 24,115 22,400
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 296,918 $ 284,553
========= =========
</TABLE>
See accompanying notes to interim consolidated financial statements.
<PAGE>
FIRST COLONIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Dollars in Thousands, except Per Share Data)
(Unaudited)
<TABLE>
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and Fees on Loans $4,316 $3,774 $12,577 $11,079
Investment Securities Income
Taxable 1,174 890 3,324 2,444
Tax-Exempt 95 86 290 253
Interest on Other Investments
Deposits With Banks 34 38 101 126
Federal Funds Sold 1 24 2 57
--------- --------- --------- ---------
Total Interest Income 5,620 4,812 16,294 13,959
--------- --------- --------- ---------
INTEREST EXPENSE:
Interest on Deposits 2,182 1,703 6,114 5,070
Interest on Repurchase Agreements 93 46 284 91
Interest on Short-Term Borrowing 114 3 317 3
Interest on Long-Term Debt 31 32 95 98
--------- --------- --------- ---------
Total Interest Expense 2,420 1,784 6,810 5,262
--------- --------- --------- ---------
NET INTEREST INCOME: 3,200 3,028 9,484 8,697
Provision for Possible Loan Losses 100 100 1,698 300
--------- --------- --------- ---------
Net Interest Income After Provision
For Possible Loan Losses 3,100 2,928 7,786 8,397
--------- --------- --------- ---------
OTHER INCOME:
Trust Income 161 171 481 516
Service Charges on Deposit Accounts 260 194 776 573
Investment Securities Gains, Net 29 9 15 89
Gain (Loss) on the Sale of
Mortgage Loans (4) (15) 9 79
Other Operating Income 161 117 414 343
--------- --------- --------- ---------
Total Other Income 607 476 1,695 1,600
--------- --------- --------- ---------
OTHER EXPENSES:
Salaries and Employee Benefits 1,273 1,170 3,867 3,450
Net Occupancy and Equipment Expense 476 427 1,391 1,238
Other Operating Expenses 1,009 1,003 3,215 2,817
--------- --------- --------- ---------
Total Other Expenses 2,758 2,600 8,473 7,505
--------- --------- --------- ---------
Income Before Income Taxes 949 804 1,008 2,492
Provision for Income Taxes 290 243 241 755
--------- --------- --------- ---------
NET INCOME $659 $561 $767 $1,737
========= ========= ========= =========
Net Income Per Share $0.46 $0.40 $0.54 $1.23
========= ========= ========= =========
Average Shares Outstanding 1,435,068 1,413,664 1,430,073 1,408,391
</TABLE>
See accompanying notes to interim consolidated financial statements.
<PAGE>
FIRST COLONIAL GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
Nine Months Ended
Sept. 30, Sept. 30,
1995 1994
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 767 $ 1,737
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Provision for Possible Loan Losses 1,698 300
Depreciation and Amortization 463 321
Amortization of Security Discounts (115) (66)
Amortization of Security Premiums 145 202
Amortization of Deferred Fees on Loans 49 (258)
Investment Securities Gains, Net (15) (89)
Gain on Sale of Mortgage Loans (9) (79)
Mortgage Loans Originated for Sale (4,105) (4,141)
Mortgage Loan Sales 3,442 18,836
Changes in Assets and Liabilities:
Net Increase in Accrued Interest Income (277) (243)
Increase (Decrease) in Accrued Interest Payable 367 (621)
Net Increase in Other Assets (519) (835)
Net Increase in Other Liabilities 669 40
-------- --------
Net Cash Provided by Operating Activities 2,560 15,104
-------- --------
INVESTING ACTIVITIES
Proceeds from Maturities of Securities
Available-for-Sale 6,175 8,288
Proceeds from Maturities of Securities
Held-to-Maturity 2,036 3,805
Proceeds from Sales of Securities
Available-for-Sale 6,156 3,850
Purchase of Securities Available-for-Sale (12,272) (20,268)
Purchase of Securities Held-to-Maturity (2,836) (13,522)
Net (Increase) Decrease in Interest Bearing
Deposits With Banks (46) 248
Net Increase in Loans (9,055) (11,327)
Purchase of Premises and Equipment, Net (903) (432)
Proceeds from Sale of Other Real Estate Owned 89 882
-------- --------
Net Cash Used In Investing Activities (10,656) (28,476)
-------- --------
FINANCING ACTIVITIES
Net Increase (Decrease) in Interest and
Non-Interest Bearing Demand Deposits
and Savings Accounts (14,550) 8,342
Net Increase (Decrease) in Certificates
of Deposits 14,399 (2,144)
Repayment of Long-Term Debt (219) (250)
Increase in Short-Term Borrowings 9,675 540
Net (Decrease) Increase in
Repurchase Agreements (258) 4,154
Proceeds from Issuance of Stock 190 184
Cash Dividends (728) (713)
Cash in Lieu of Fractional Shares -- (3)
-------- --------
Net Cash Provided by Financing Activities 8,509 10,110
-------- --------
Increase in Cash and Cash Equivalents 413 (3,262)
Cash and Cash Equivalents, January 1 10,669 14,931
-------- --------
Cash and Cash Equivalents, End of Period $ 11,082 $ 11,669
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
FIRST COLONIAL GROUP, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - GENERAL
The accompanying Consolidated Financial Statements, Footnotes and Discussion
should be read in conjunction with the Audited Financial Statements, Footnotes,
and Discussion contained in the Company's Annual Report for the year ended
December 31, 1994.
The financial information presented herein is unaudited; however, in the opinion
of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the unaudited financial information
have been made. The results for the three and nine months ended September 30,
1995 are not necessarily indicative of results to be expected for the full year
or any other interim period.
NOTE B - CASH DIVIDENDS
On August 21, 1995 the Company paid its 1995 third quarter dividend on its
common stock of $.17 per share to shareholders of record on August 10, 1995.
NOTE C - IMPAIRED LOANS
On January 1, 1995 the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 114, "Accounting for Creditors for Impairment of a Loan",
as amended by SFAS No. 118, "Accounting by Creditors for Impairment of a Loan -
Income Recognition and Disclosures". SFAS No. 114 requires that a creditor
measure impairment based on the present value of expected future cash flows
discounted at the loan's effective interest rate, except that as a practical
expedient, a creditor may measure impairment based on a loans' observable market
price, or the fair value of the collecteral if the loan is collateral dependent.
Regardless of the measurement method, a creditor must measure impairment based
on the fair value of the collateral when the creditor determines that
foreclosure is probable. SFAS No. 118 allows creditors to use existing methods
for recognizing interest income on impaired loans.
The Company has identified a loan as impaired when it is probable that interest
and principal will not be collected according to the contractual terms of the
loan agreement. The accrual of interest is discontinued in such loans and no
income is recognized until all recorded amounts of interest and principal are
recovered in full.
Loan impairment is measured by estimating the expected future cash flows and
discounting them at the respective effective interest rate or by valuing the
underlying collateral. The recorded investment in these loans and the valuation
for credit loses related to loan impairment are as follows:
<PAGE>
<TABLE>
Sept. 30,
1995
----------
<S> <C>
Principal amount of impaired loans $1,638,000
Accrued interest ---
Deferred loan costs 4,000
----------
1,642,000
Less valuation allowance 205,000
$1,437,000
</TABLE>
On January 1, 1995 a valuation for credit losses related to impaired loans was
established. The activity in this allowance account for the quarter ending
September 30, 1995 is as follows:
<TABLE>
<S> <C>
Valuation allowance at January 1, 1995 $160,000
Provision for loan impairment 89,000
Direct charge-offs 44,000
Recoveries ---
-------
Valuation allowance at September 30, 1995 $205,000
</TABLE>
Total cash collected on impaired loans during the nine month period ended
September 30, 1995 was $156,000, of which $115,000 was credited to the principal
balance outstanding on such loans and $41,000 was recognized as interest income.
Interest that would have been accrued on impaired loans during the first nine
months of 1995 was $135,000. Interest income on impaired loans recognized for
the first nine months of 1995 was $3,000. The valuation allowance for
impaired loans of $205,000 at September 30, 1995 is included in the "Allowance
for Possible Loan Losses" which amounts to $2,422,000 at September 30, 1995.
NOTE D - SUBSIDIARIES
First Colonial Group, Inc. (the Company) is a Pennsylvania business corporation
which is registered as a bank holding company under the Bank Holding Company Act
of 1956. The Company has two wholly-owned subsidiaries, Nazareth National Bank
and Trust Company (the "Bank") founded in 1897 and First C. G. Company, Inc.
founded in 1986.
NOTE E - INVESTMENT CONSIDERATIONS
In analyzing whether to make, or to continue, an investment in the Company,
investors should consider, among other factors, certain investment
considerations more particularly described in the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1994, a copy of which can be
obtained from Reid L. Heeren, Vice President, First Colonial Group, Inc., 76 S.
Main Street, Nazareth, PA 18064.
<PAGE>
FIRST COLONIAL GROUP, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following financial review and analysis is of the financial condition and
earnings performance of the Company and its wholly owned subsidiaries for the
three and nine month periods ended September 30, 1995.
Liquidity and Capital Resources
Liquidity is a measure of the Company's ability to raise funds to support asset
growth, meet deposit withdrawal and other borrowing needs, maintain reserve
requirements and otherwise operate the Company on an ongoing basis. The Company
manages its assets and liabilities to maintain liquidity and earnings stability.
Among the sources of asset liquidity are money market investments, securities
available-for-sale, funds received from the repayment of loans and short-term
borrowings. At September 30, 1995, cash, due from banks, and interest-bearing
deposits with banks totaled $11,529,000, and securities maturing within one year
totaled $5,257,000. At December 31, 1994, cash, due from banks and
interest-bearing deposits with banks totaled $11,070,000, and securities
maturing within one year were $3,858,000. Securities sold under an agreement to
repurchase totaled $8,769,000 at September 30, 1995 and $9,027,000 at December
31, 1994. The Bank is a member of the Federal Home Loan Bank of Pittsburgh. The
Bank had interest-bearing deposits at the Federal Home Loan Bank of Pittsburgh
in the amount of $51,000 at September 30, 1995 and $4,000 at December 31, 1994.
These deposits are included in due from banks on the Company's financial
statements. As a result of this relationship, the Company places most of its
short-term funds at the Federal Home Loan Bank of Pittsburgh in place of
interest bearing deposits with other banks. The Company had no Federal Funds
Sold at September 30, 1995 or at December 31, 1994.
The Federal Home Loan Bank of Pittsburgh provides the Bank with a line of credit
in the amount of $27,666,000. The Bank had short-term (overnight) borrowings
against this line of $3,293,000 at September 30, 1995 and $750,000 at December
31, 1994. At September 30, 1995 the Bank had additional short-term borrowings
from the Federal Home Loan Bank totaling $7,000,000 of which $4,000,000 is due
in November 1995 and $3,000,000 is due in August 1996.
Cash flows for the nine months ended September 30, 1995 consisted of cash
provided by operating activities of $2,560,000 and cash provided by financing
activities of $8,509,000 partially offset by cash used in investing activities
of $10,656,000 resulting in an increase in cash and cash equivalents of
$413,000. Cash provided by operating activities consisted principally of net
income of $767,000, mortgage loan sales of $3,442,000, provision for loan losses
of $1,698,000, increases in other liabilities of $669,000, an increase in
accrued interest payable of $367,000 and depreciation and amortization of
$463,000; reduced in part by mortgage loans originated for sale of $4,105,000,
increases in other assets of $519,000 and an increase in accrued interest income
<PAGE>
of $277,000. The increase in other assets was primarily the result of higher
prepaid operating expenses. The increase in accrued interest expense was caused
by growth in certificates of deposit. Cash from financing activities was
provided by an increase in certificates of deposit of $14,399,000 and an
increase in short-term borrowings of $9,675,000 offset in part by a $14,550,000
decrease in demand and savings deposits, a $258,000 decline in repurchase
agreements and repayments of long-term debt of $219,000. Also affecting
financing activities was the issuance of 12,191 new shares of common stock
pursuant to the Dividend Reinvestment Plan for proceeds of $190,000 and the
payment of cash dividends of $728,000. Investing Activities used cash for the
purchase of securities available-for-sale of $12,272,000, the purchase of
securities held-to-maturity of $2,836,000, a net increase in loans of $9,055,000
and the purchase of premises and equipment of $903,000, partially offset by the
proceeds from the sales of available-for-sale securities of $6,156,000,
maturities of securities available-for-sale of $6,175,000 and maturities of
securities held-to-maturity of $2,036,000.
The Company recognizes the importance of maintaining adequate capital levels to
support sound, profitable growth and to encourage depositor and investor
confidence. Shareholders' equity at September 30, 1995 was $24,115,000 as
compared to $22,400,000 at December 31, 1994, for an increase of $1,715,000 or
7.7%. This increase was primarily attributable to net income for the first nine
months of 1995 of $767,000, proceeds of the sale of common stock to the Dividend
Reinvestment Plan of $190,000 and a $1,355,000 increase in the fair value of the
available-for-sale securities during the first nine months of 1995 (see
discussion on "Investment Securities"), less dividends paid on common stock of
$728,000.
The Company maintains a Dividend Reinvestment and Stock Purchase Plan. During
the first nine months of 1995, 12,191 shares of common stock were purchased from
authorized and unissued shares at an average price of $15.58 for proceeds of
approximately $190,000.
Banking regulators require bank holding companies and banks to maintain certain
capital levels, through risk-based capital standards by which all bank holding
companies and banks are evaluated in terms of capital adequacy. These guidelines
relate a banking company's capital to the risk profile of its assets. The
risk-based capital standards now require all banks to have Tier 1 capital of at
least 4% and total capital, Tier 1 and Tier 2, of 8% of risk-adjusted assets.
Tier 1 capital includes common shareholders' equity, qualifying perpetual
preferred stock together with related surpluses and retained earnings. Tier 2
capital may be comprised of limited life preferred stock, qualifying debt
instruments, and the allowance for possible loan losses.
Banking regulators also require bank holding companies and banks to maintain a
certain Tier 1 leverage ratio. The leverage ratio requirement is measured as the
ratio of Tier 1 capital to adjusted average assets. The tables below provide a
comparison of the Company's and Bank's risk-based capital ratios and leverage
ratio, to the minimum regulatory guidelines for the periods indicated.
<PAGE>
CAPITAL RATIOS OF THE COMPANY
Company
Sept. 30, December 31, Minimum Regulatory
1995 1994 Requirement
---- ----
Tier 1 Leverage Ratio 7.93% 8.43% 3.00% - 5.00%
Risk-Based Capital Ratios
Tier I Capital 14.51% 14.82% 4.00%
Total Capital 15.77% 16.06% 8.00%
CAPITAL RATIOS OF THE BANK
Bank
Sept. 30, December 31, Minimum Regulatory
1995 1994 Requirement
---- ----
Tier 1 Leverage Ratio 6.76% 7.23% 3.00% - 5.00%
Risk-Based Capital Ratios
Tier I Capital 12.21% 12.77% 4.00%
Total Capital 13.47% 14.23% 8.00%
The Company is not aware of any known trends, events or uncertainties that will
have a material effect on the Company's liquidity, capital resources or
operations, except for lower interest rates which could cause deposit
disintermediation and current recessionary trends, the results of which cannot
be determined at this time. The Company is not under any agreement with the
regulatory authorities not is it aware of any current recommendation by
regulatory authorities which, if they were implemented, would have a material
adverse effect on liquidity, capital resources, or the operations of the
Company.
<PAGE>
Assets and Liabilities
Total assets at September 30, 1995 were $296,918,000, representing an increase
of 4.3% over total assets of $284,553,000 at December 31, 1994. Deposits
decreased by $151,000 or 0.1% from $247,532,000 on December 31, 1994 to
$247,381,000 on September 30, 1995. Contributing to this decrease was a decline
of $10,583,000 in savings, club and money market deposits and $6,045,000 in
interest-bearing checking accounts offset in part by increases of $2,078,000 in
non-interest checking deposits and $14,400,000 in certificates of deposit. Loans
outstanding at September 30, 1995 were $192,523,000 as compared to $185,215,000
at December 31, 1994. This is an increase of $7,308,000 or 3.9%. The growth in
loans was comprised of an increase of $4,734,000 or 7.0% in residential real
estate loans, a $2,423,000 or 5.0% increase in consumer loans and a $151,000 or
0.2% increase in commercial loans. During the first nine months of 1995,
$3,443,000 of residential real estate loans were sold. The amount of these loans
originated in 1995 was $3,374,000 with the remaining $69,000 being originated in
1994. The Bank continues to service all of these loans. As of September 30, 1995
there were $732,000 of mortgage loans identified as held-for-sale. The loan to
deposit ratio was 77.8% at September 30, 1995 and 74.8% at December 31, 1994.
Premises and equipment increased by $453,000 to $6,315,000 at September 30, 1995
from $5,862,000 at December 31, 1994. This increase was primarily the result of
the establishment of a new branch in the Redner's Supermarket on Airport Road,
Allentown, Lehigh County, Pennsylvania.
The Company had long-term debt totaling $643,000 at September 30, 1995 as
compared to $862,000 at December 31, 1994.
At September 31, 1995 the Bank had total short-term borrowings from the Federal
Home Loan Bank of Pittsburgh of $10,293,000 as compared to $750,000 at September
31, 1994. Included in this amount was overnight borrowings against a line of
credit of $27,666,000 of $3,293,000 and $750,000 at September 31, 1995 and 1994,
respectively. In addition, during the first quarter of 1995 the Bank borrowed
$7,000,000 from the Federal Home Loan Bank of Pittsburgh. Of this amount
$4,000,000 matures in November 1995 and the remaining $3,000,000 matures in
August 1996. The interest rate on these loans is based on LIBOR plus 2 basis
points (currently 5.895%) and changes quarterly in February, May, August and
November. The loans are secured by the Bank's investment in residential real
estate loans and securities. These funds were borrowed to improve liquidity and
to fund loans.
Results of Operations
The net income for the three month period ended September 30, 1995 was $659,000,
a $98,000 or a 17.5% increase compared to net income of $561,000 for the same
period in 1994. This increase was primarily attributable to an increase in net
interest income of $172,000, an increase in total other income, exclusive of
securities gains, of $111,000 and a $20,000 increase in securities gains. This
was partially offset by higher total other expenses of $158,000 and an increase
in Federal income taxes of $47,000.
The net income for the nine months ended September 30, 1995 was $767,000, a
$970,000 or 55.8% decline from net income of $1,737,000 for the same period in
1994. This decrease is primarily the result of a higher provision for possible
loan losses of $1,398,000 for the first nine months of 1995 as compared to the
same period in 1994. Most of this additional provision for possible loan losses
($1,278,000 net of recoveries of $272,000) is attributable to losses resulting
<PAGE>
from the checking account overdrafts of a certain customer. Also contributing to
the decrease in net income was increases in total other expenses of $968,000 and
a $74,000 decline in investment securities gains. This was partially offset by
an increase in net interest income of $787,000, an increase in total other
income, exclusive of security gains of $169,000 and a $514,000 decline in
Federal income taxes.
Per share earnings for the three months ended September 30 were $.46 for 1995
and $.40 for 1994. Average shares outstanding during this three month period
were 1,435,068 in 1995 and 1,413,664 in 1994. The net income per share was $.54
for the first nine months of 1995 as compared to net income per share of $1.23
for the same period in 1994. Average shares outstanding are 1,430,073 for the
first nine months of 1995 and 1,408,391 for the first nine months of 1994.
Net Interest Income
Net interest income is the difference between the interest earned on loans,
other investments and other interest earning assets and the interest paid on
deposits and other interest bearing liabilities. The net interest income
amounted to $3,200,000 for the three months ended September 30, 1995, as
compared to $3,028,000 for the three months ended September 30, 1994, an
increase of $172,000 or 5.7%. During the three month period ended September 30,
1995, interest income increased $808,000 or 16.8% and interest expense also
increased by $636,000 or 35.7% over the same time period of 1994. The increase
in net interest income was the result of the increase in interest earned on
interest earning assets being greater than the increase in the cost of funds.
For the nine month period ended September 30, 1995, net interest income
increased $787,000 or 9.0% to $9,484,000 over the same period in 1994 of
$8,697,000. In this nine month period, interest income increased by $2,335,000
or 16.7% and interest expense increased $1,548,000 or 29.4% as compared to 1994.
The increase in interest income during the nine month period is due to increased
interest rates earned on loans and investments as a result of changing economic
conditions and a higher prime interest rate. The increase in interest expense
for the nine month period was primarily due to an increase in certificate of
deposit balances and higher interest rates. Interest earning assets, including
loans were $276,616,000 at September 30, 1995 as compared to $259,355,000 at
September 30, 1994. This represents an increase of $17,261,000 or 6.6%.
Other Income and Other Expenses
Other income for the three months ended September 30, 1995 including service
charges, trust fees, gains on the sale of mortgage loans and other miscellaneous
income, but exclusive of securities gains or losses, was $578,000 as compared to
$467,000 for the same period in 1994. This was an increase of $111,000 or 23.7%.
In the three month period ended September 30, 1995 service charges were
$260,000, a $66,000 or 34.0% increase over the 1994 amount of $194,000. The
revenues from the Trust Department operations were $161,000 for the three months
ended September 30, 1995 as compared to $171,000 for the three months ended
September 30, 1994, a decrease of $10,000 or 5.8%. There was a loss on the sale
<PAGE>
of mortgage loans of $4,000 for the three month period ending September 30, 1995
as compared to a loss of $15,000 for the same period ended in 1994. Other
operating income for the three months ended September 30, 1995 was $161,000
versus $117,000 for the same period in 1994, an increase of $44,000 or 37.6%.
Total other income, including service charges, trust fees, gains on the sale of
mortgage loans and other miscellaneous income, but exclusive of securities gains
or losses, increased by 11.2% or $169,000 to $1,680,000 from $1,511,000 for the
nine months ended September 30, 1995 over the same time period in 1994. This
increase was primarily due to higher service charges which amounted to $776,000
for the first nine months of 1995 as compared to $573,000 for the same period of
1994, a gain of $203,000 or 35.4%. The revenue from the Trust Department
operations was $481,000 for the nine months ended September 30, 1995,
representing a $35,000 or 6.8% decrease over the $516,000 for the nine months
ended September 30, 1994. Other operating income for the nine months ended
September 30, 1995 was $414,000 as compared to $343,000 for the same period in
1994, an increase of $71,000 or 21.1%. Gains on the sale of mortgage loans
amounted to $9,000 for the first nine months of 1995 versus $79,000 in 1994.
This is a reduction of $70,000 or 88.6%.
The total reduction in gains on the sale of mortgage loans was the result of a
reduced level of mortgage loans refinancing and rising interest rates. The
higher service charges are due to increased fees being charged by the Bank for
Automated Teller Machine services and increased number of checking accounts.
Total other expenses for the three month period ended September 30, 1995
increased by $158,000 or 6.1% to $2,758,000 as compared to the total other
expenses for the same time period in 1994 of $2,600,000. Included in this
increase is a $103,000 or 8.8% increase in salary and benefit expenses which
were $1,273,000 and $1,170,000 for the third quarter of 1995 and 1994,
respectively. This increase is the result of the additional staff for the new
Stroudsburg Branch opened in October 1994, the new Airport Road Branch opened in
March 1995 and general salary increases of approximately 3%. Occupancy and
equipment expenses were $476,000 for the three month period ended September 30,
1995 and $427,000 for the same period in 1994, an increase of $49,000 or 11.5%.
Most of this increase is due to expenses related to the new branches. Other
operating expenses for the three month period ended September 30, 1995 were
$1,009,000, an increase of $6,000 or 0.6% over the $1,003,000 in other expenses
for 1994.
Other expenses for the nine months ended September 30, 1995 increased by
$968,000 or 12.9%, to $8,473,000 from $7,505,000 for the same period in 1994.
Salaries and employee benefits were $3,867,000 for the nine months ended
September 30, 1995 as compared to $3,450,000 for the nine months ended September
30, 1994 representing an increase of $417,000 or 12.1%. These increases are
primarily due to staff additions as a result of the new Stroudsburg and Airport
Road Branches and normal salary increases of approximately 3% . Occupancy and
equipment expenses were $1,391,000 for the nine months ended September 30, 1995
and $1,238,000 for the nine months ended September 30, 1994, an increase of
$153,000 or 12.4%. Most of this increase is also due to the addition of the new
<PAGE>
branches. Other operating expenses for the nine months ended September 30, 1995
were $3,215,000 in relation to $2,817,000 for the nine months ended September
30, 1994, an increase of $398,000 or 14.1%. This increase is primarily the
result of higher legal fees related to a customer overdraft and expenses to open
the Airport Road Branch.
Investment Securities
The Company classifies its debt and marketable securities into three categories:
trading, available-for-sale, and held-to-maturity as provided by the Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities". The Company had no trading securities at September 30, 1995
and December 31, 1994.
Available-for-sale securities are carried at fair value with the net unrealized
gains or losses reported in equity. The Company had $45,618,000 in
available-for-sale securities at September 30, 1995 with a net unrealized gain
of $321,000. At December 31, 1994 available-for-sale securities amounted to
$43,610,000 with a net unrealized loss of $1,034,000.
During the three month period ended September 30, 1995 $45,000 of securities
available-for-sale were sold for a net gain of $29,000. For the same period in
1994, $165,000 of available-for-sale securities were sold for a net gain of
$9,000. For the first nine months of 1995, net securities gains amounted to
$15,000 on the sale of $6,144,000 of available-for-sale securities, as compared
to securities gains of $89,000 on the sale of $3,850,000 of available-for-sale
securities for the same period in 1994.
Held-to-maturity securities totaling $37,296,000 at September 30, 1995 are
carried at cost. At December 31, 1994 the held-to-maturity securities totaled
$36,525,000. The Company has the intent and ability to hold the held-to-maturity
securities until maturity. The Company, at September 30, 1995 and December 31,
1994, did not hold any securities identified as derivatives. At September 30,
1995 and December 31, 1994 the Company did hold $8,000,000 in various U.S.
Agency Step-up or Multi Step-up securities ($5,000,000 in available-for-sale and
$3,000,000 in held-to-maturity).
Allowance and Provision for Possible Loan Losses
The provision for loan losses for the three month periods ended September 30,
1995 and September 30, 1994 was $100,000. The provision for loan losses for the
first nine months of 1995 was $1,698,000 as compared to $300,000 for the first
nine months of 1994. Included in the nine month 1995 provision is $1,550,000 for
overdrawn checking accounts of a certain customer less recoveries of $272,000.
For the same period in 1994 there were net loan losses of $93,000. For the first
nine months of 1995 net loan losses were $1,463,000 including $1,278,000 related
to the overdrawn checking accounts, as compared to $173,000 during the first
nine months of 1994.
<PAGE>
The allowance for possible loan losses at September 30, 1995 totaled $2,422,000
an increase of $235,000 over the December 31, 1994 amount of $2,187,000. The
allowance for possible loan losses as a percentage of total loans outstanding at
September 30, 1995 was 1.25%. This compares to 1.18% at December 31, 1995. As
provided by SFAS No. 114, as amended by SFAS No. 118, $205,000 of the allowance
for possible loan losses is allocated to impaired loans at September 30, 1995
(see Note C "Impaired Loans" in the Interim Consolidated Financial Statements).
Non-Performing Loans
The following discussion relates to the Bank's non-performing loans which
consist of those on a non-accrual basis and accruing loans which are past due
ninety days or more.
Accrual of interest is discontinued on a loan when management believes, after
considering economic and business conditions and collection efforts, that the
borrower's financial condition is such that the collection of interest is
doubtful. The Company views these loans as non-accrual, but considers the
principal to be substantially collectible because the loans are protected by
adequate collateral or other resources. Interest on these loans is recognized
only when received. The following table shows the balance of non-performing
loans for each of the dates indicated.
Sept. 30, December 31,
1995 1994
Non-accrual loans on a cash basis $1,764,000 $1,724,000
Non-accrual loans as a percentage
of total loans .92% .93%
Accruing loans past due 90 days or more $ 804,000 $1,069,000
Accruing loans past due 90 days or more
as a percentage of total loans .42% .58%
Other Real Estate Owned from
Foreclosed Property $ 528,000 $ 373,000
There are no significant loans classified for regulatory purposes that have not
been included in the above table of non-performing loans. At September 30, 1995
the Company has no significant loans that qualify as "Troubled Debt
Restructuring" as defined by The Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 15 "Accounting for Debtors and
Creditors for Troubled Debt Restructuring".
<PAGE>
PART 11 - OTHER INFORMATION
ITEM 5. Other Information
The Office of the Comptroller of the Currency has approved the Bank's
application to purchase and assume the Pointe North Branch of CoreStates Bank
located on Bath Pike (Rt. 512) Hanover Township, Northampton County,
Pennsylvania. The deposits and loans are being acquired at book value with no
premium being paid. In addition, the Bank will be purchasing leasehold
improvements and furniture at book value of approximately $270,000. The branch
facility is leased from a third party. The branch office has approximately
$7,000,000 in deposits and $1,800,000 in loans. It is anticipated the purchase
will be completed in November of 1995. Following the acquisition of the Pointe
North Branch, the Bank will close its Park Plaza office which is located about
one mile south of the Pointe North location on Rt. 512 and consolidate the Park
Plaza deposits and loans into the Pointe North facility.
The Bank has also received approval from the Office of the Comptroller of the
Currency to establish a branch inside the Redner's Supermarket at the
Northampton Crossings Shopping Center on Rt. 248, Lower Nazareth Township,
Northampton County, Pennsylvania. In addition, approval has been received to
establish a Customer-Bank Communication Terminal (CBCT) Branch within the
parking lot of the above shopping center. Both of these locations should open
for business late in the fourth quarter of 1995.
In September, the Company was saddened by the unexpected death of a director,
Walter L. Peters, Esquire. Mr. Peters had been a director of the Company and the
Bank and was a member of the Executive Committee.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11.1 Statement Re: Computation of Per Share Earnings
27.1 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed for the quarter during
which this report is filed.
<PAGE>
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.
FIRST COLONIAL GROUP, INC.
DATE: BY: /S/ S. ERIC BEATTIE
S. ERIC BEATTIE
PRESIDENT
(PRINCIPAL EXECUTIVE OFFICER)
DATE: BY: /S/ REID L. HEEREN
REID L. HEEREN
VICE PRESIDENT
(PRINCIPAL FINANCIAL OFFICER)
Exhibit 11.1
First Colonial Group, Inc. and Subsidiaries
COMPUTATION OF NET INCOME PER COMMON SHARE
<TABLE>
Three Months Ended Six Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Primary
Net Income $ 659 $ 561 $ 767 $ 1,737
--------- --------- --------- ---------
Shares
Weighted average number of
common shares outstanding 1,435,068 1,413,664 1,430,073 1,408,391
Primary earnings per common share $ 0.46 $ 0.40 $ 0.54 $ 1.23
========= ========= ========= =========
Assuming full dilution
Net Income $ 659 $ 561 $ 767 $ 1,737
--------- --------- --------- ---------
Shares
Weighted average number of
common shares outstanding 1,435,068 1,413,664 1,430,073 1,408,391
Assuming exercise of option
reduced by the number of shares
which could have been purchased
with the proceeds from exercise
of such options 129 ** 129 **
Weighted average number of common
shares outstanding as adjusted 1,435,197 1,413,664 1,430,202 1,408,391
--------- --------- --------- ---------
Net Income per common share
assuming full dilution $ 0.46 $ 0.40 $ 0.54 $ 1.23
========= ========= ========= =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
Exhibit 27.1 95SEP10QSB
</LEGEND>
<CIK> 0000714719
<NAME> FIRST COLONIAL GROUP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 11,082
<INT-BEARING-DEPOSITS> 447
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 45,618
<INVESTMENTS-CARRYING> 37,296
<INVESTMENTS-MARKET> 37,195
<LOANS> 193,255
<ALLOWANCE> 2,422
<TOTAL-ASSETS> 296,918
<DEPOSITS> 247,381
<SHORT-TERM> 19,062
<LIABILITIES-OTHER> 5,717
<LONG-TERM> 643
<COMMON> 7,338
0
0
<OTHER-SE> 16,777
<TOTAL-LIABILITIES-AND-EQUITY> 296,918
<INTEREST-LOAN> 12,577
<INTEREST-INVEST> 3,614
<INTEREST-OTHER> 103
<INTEREST-TOTAL> 16,294
<INTEREST-DEPOSIT> 6,114
<INTEREST-EXPENSE> 6,810
<INTEREST-INCOME-NET> 9,484
<LOAN-LOSSES> 1,698
<SECURITIES-GAINS> 15
<EXPENSE-OTHER> 8,473
<INCOME-PRETAX> 1,008
<INCOME-PRE-EXTRAORDINARY> 767
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 767
<EPS-PRIMARY> 0.54
<EPS-DILUTED> 0.54
<YIELD-ACTUAL> 4.61
<LOANS-NON> 1,764
<LOANS-PAST> 804
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,187
<CHARGE-OFFS> 1,628
<RECOVERIES> 164
<ALLOWANCE-CLOSE> 2,422
<ALLOWANCE-DOMESTIC> 2,422
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
