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 June 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: 1,463,850 SHARES OF COMMON STOCK, $5 PAR VALUE,
OUTSTANDING ON JUNE 30, 1995.
<PAGE>
FIRST COLONIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
June 30 Dec. 31
1995 1994
--------- ---------
<S> <C> <C>
ASSETS
Cash and Due From Banks $ 11,191 $ 10,669
Federal Funds Sold 2,000 --
--------- ---------
Total Cash and Cash Equivalents 13,191 10,669
Interest-Bearing Deposits With Banks 941 401
Investment Securities 37,251 36,525
(Market Value: June 30, 1995 - $37,177;
Dec. 31, 1994 - $34,398)
Securities Available-for-Sale at Fair Value 48,072 43,610
Mortgage Loans Held-for-Sale 684 69
Total Loans, Net of Unearned Discount 190,002 185,215
LESS: Allowance for Possible Loan Losses (2,303) (2,187)
--------- ---------
Net Loans 187,699 183,028
Premises and Equipment 5,974 5,862
Other Real Estate Owned 616 373
Accrued Interest Income 1,833 1,748
Other Assets 2,827 2,268
--------- ---------
TOTAL ASSETS $ 299,088 $ 284,553
========= =========
LIABILITIES
Deposits
Non-Interest Bearing Deposits $ 24,971 $ 25,028
Interest-Bearing Deposits 226,843 222,504
--------- ---------
Total Deposits 251,814 247,532
Securities Sold Under Agreements to Repurchase 10,695 9,027
Short-Term Borrowing -- 750
Long-Term Debt 7,669 862
Accrued Interest Payable 3,052 2,682
Other Liabilities 2,262 1,300
--------- ---------
TOTAL LIABILITIES 275,492 262,153
--------- ---------
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 - 1,463,850 shares at June 30, 1995
and 1,455,427 shares at Dec.31,1994 7,319 7,277
Additional Paid in Capital 6,968 6,882
Retained Earnings 9,674 10,050
Employee Stock Ownership Plan Debt (669) (775)
Net Unrealized Gain (Loss) on
Securities Available-for-Sale 304 (1,034)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 23,596 22,400
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 299,088 $ 284,553
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
FIRST COLONIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and Fees on Loans $ 4,204 $ 3,581 $ 8,261 $ 7,305
Investment Securities Income
Taxable 1,085 848 2,150 1,554
Tax-Exempt 98 85 195 167
Interest on Other Investments
Deposits With Banks 45 36 67 88
Federal Funds Sold 1 13 1 33
--------- --------- --------- ---------
Total Interest Income 5,433 4,563 10,674 9,147
--------- --------- --------- ---------
INTEREST EXPENSE:
Interest on Deposits 2,070 1,657 3,932 3,367
Interest on Repurchase Agreements 107 27 191 45
Interest on Short-Term Borrowing 5 -- 31 --
Interest on Long-Term Debt 141 34 236 66
--------- --------- --------- ---------
Total Interest Expense 2,323 1,718 4,390 3,478
--------- --------- --------- ---------
NET INTEREST INCOME: 3,110 2,845 6,284 5,669
Provision (credit) for
Possible Loan Losses (172) 100 1,598 200
--------- --------- --------- ---------
Net Interest Income After
Provision For Possible
Loan Losses 3,282 2,745 4,686 5,469
--------- --------- --------- ---------
OTHER INCOME:
Trust Income 160 173 320 345
Service Charges on Deposit Accounts 273 192 516 379
Investment Securities Gains
(Losses) , Net 11 80 (14) 80
Gain on the Sale of Mortgage Loans 7 -- 13 94
Other Operating Income 109 119 253 226
--------- --------- --------- ---------
Total Other Income 560 564 1,088 1,124
--------- --------- --------- ---------
OTHER EXPENSES:
Salaries and Employee Benefits 1,301 1,149 2,594 2,280
Net Occupancy and Equipment Expense 453 295 915 811
Other Operating Expenses 972 952 2,206 1,814
--------- --------- --------- ---------
Total Other Expenses 2,726 2,496 5,715 4,905
--------- --------- --------- ---------
Income Before Income Taxes 1,116 813 59 1,688
Provision for Income Taxes (Credit) 345 245 (49) 512
--------- --------- --------- ---------
NET INCOME $ 771 $ 568 $ 108 $ 1,176
========= ========= ========= =========
Net Income Per Share $ .54 $ .40 $ .08 $ .83
========= ========= ========= =========
Average Shares Outstanding 1,430,246 1,408,564 1,427,534 1,405,711
</TABLE>
See accompanying notes to interim financial statements.
<PAGE>
FIRST COLONIAL GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30, June 30,
1995 1994
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income (Loss) $ 108 $ 1,176
Adjustments to Reconcile Net
Income to Net Cash
Provided by Operating Activities:
Provision for Possible Loan Losses 1,598 200
Depreciation and Amortization 303 208
Amortization of Security Discounts (75) (45)
Amortization of Security Premiums 102 144
Amortization of Deferred Fees on Loans 40 (241)
Investment Securities Gains, Net 14 (80)
Gain on Sale of Mortgage Loans (12) (94)
Mortgage Loans Originated for Sale (2,048) (3,159)
Mortgage Loan Sales 1,434 17,059
Changes in Assets and Liabilities:
Net (Increase) Decrease in
Accrued Interest Income (85) (125)
Increase (Decrease) in Accrued
Interest Payable 370 (413)
Net Increase in Other Assets (568) (548)
Net Increase (Decrease) in Other Liabilities 272 223
-------- --------
Net Cash Provided by (Used In)
Operating Activities 1,452 14,305
-------- --------
INVESTING ACTIVITIES
Proceeds from Maturities of Securities
Available-for-Sale 3,208 8,722
Proceeds from Maturities of Securities
Held-to-Maturity 1,022 2,192
Proceeds from Sales of Securities
Available-for-Sale 6,077 3,782
Purchase of Securities Available-for (11,719) (18,008)
Purchase of Securities Held-to-Maturity (1,788) (10,682)
Net (Increase) Decrease in Interest
Bearing Deposits With Banks (540) 141
Net Increase in Loans (6,540) (8,609)
Purchase of Premises and Equipment, Net (406) (282)
Proceeds from Sale of Other Real Estate Owned -- 203
-------- --------
Net Cash Used In Investing Activities (10,687) (22,540)
-------- --------
FINANCING ACTIVITIES
Net Increase (Decrease) in Interest
and Non-Interest Bearing Demand Deposits
and Savings Accounts (7,468) 6,419
Net Increase (Decrease) in Certificates
of Deposits 11,750 (2,455)
Net Increase (Decrease) in Long-Term Debt 6,913 (163)
Net Increase in Repurchase Agreements 1,668 2,743
Proceeds from Issuance of Stock 128 118
Cash Dividends (484) (467)
Cash in Lieu of Fractional Shares -- (3)
-------- --------
Net Cash Provided by (Used In)
Financing Activities 11,757 6,192
-------- --------
Increase in Cash and Cash Equivalents 2,522 (2,043)
Cash and Cash Equivalents, January 1 10,669 14,931
-------- --------
Cash and Cash Equivalents, End of Period $ 13,191 $ 12,888
======== ========
</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 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 adjust-
ments) necessary to present fairly the unaudited financial information
have been made. The results for the three and six months ended June 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 May 22, 1995 the Company paid its 1995 second quarter dividend on its common
stock of $.17 per share to shareholders of record on May 11, 1995.
NOTE C - STOCK DIVIDEND
On June 28, 1994 the Company paid a 5% stock dividend to shareholders of record
of June 6, 1994. Fractional shares were paid in cash based on the closing price
of $17.00 per share on the record date. Earnings per share and average shares
outstanding have been restated to reflect the 5% stock dividend.
NOTE D - 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.
<PAGE>
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:
June 30,
1995
----------
Principal amount of impaired loans $1,766,000
Accrued interest ---
Deferred loan costs 5,000
----------
1,771,000
Less valuation allowance 231,000
----------
$1,540,000
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 June
30, 1995 is as follows:
Valuation allowance at January 1, 1995 $ 160,000
Provision for loan impairment 85,000
Direct charge-offs 14,000
Recoveries ---
---------
Valuation allowance at June 30, 1995 $ 231,000
Total cash collected on impaired loans during the six month period ended June
30, 1995 was $126,000, of which $87,000 was credited to the principal balance
outstanding on such loans and $38,000 was recognized as interest income.
Interest that would have been accrued on impaired loans during the first six
months of 1995 was $46,000 . Interest income on loans recognized for the first
half of 1995 was $18,261,000. The valuation allowance for impaired loans of
$231,000 at June 30, 1995 is included in the "Allowance for Possible Loan
Losses" which amounts to $2,303,000 at June 30, 1995.
NOTE E - 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 F - INVESTMENT CONSIDERATIONS
In analyzing whether to make, or to continue, an invstment 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 six month periods ended June 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 June 30, 1995, cash, due from banks, Federal
Funds Sold and interest-bearing deposits with banks totaled $14,132,000, and
securities maturing within one year totaled $4,365,000. 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 $10,695,000 at June 30, 1995 and
$9,027,000 at December 31, 1994. At June 30, 1995 the Company had no short-term
borrowings, but did have 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. The Company had short-term borrowings of $750,000 from the Federal
Home Loan Bank at December 31, 1994. Federal Funds sold totaled $2,000,000 at
June 30, 1995. The Company had no Federal Funds sold 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 $544,000 at June 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. The Federal Home
Loan Bank of Pittsburgh provides the Bank with a line of credit in the amount of
$27,666,000, all of which was available at June 30, 1995, subject to certain
collateral requirements.
Cash flows for the six months ended June 30, 1995 consisted of cash
provided by financing activities of $11,757,000 partially offset by cash used in
investing activities of $10,687,000 resulting in an increase in cash and cash
equivalents of $2,522,000. Cash provided by operating activities consisted
principally of net income of $108,000, mortgage loan sales of $1,434,000,
provision for possible loan losses of $1,598,000, increases in accrued interest
expense of $370,000 and depreciation and amortization of $303,000; reduced in
part by mortgage loans originated for sale of $2,048,000 and increases in other
assets of $568,000. The increase in other assets was the result of higher
prepaid operating expenses. The increase in accrued interest expense was caused
by growth in certificates of deposit.
<PAGE>
Cash from financing activities was provided by certificates of deposit
growth of $11,750,000; increases in repurchase agreements of $1,668,000,
net-increase in long-term debt of $6,913,000 offset inpart by a $7,468,000
decrease in non-interest bearing demand deposits and savings accounts. Also
affecting financing activities was the issuance of 8,423 new shares of common
stock pursuant to the Dividend Reinvestment Plan for proceeds of $128,000 and
the payment of cash dividends of $484,000. Investing activities used cash for
the purchase of securities available-for-sale of $11,719,000, the purchase of
securities held-to-maturity of $1,788,000 and an increase in loans of
$6,540,000, partially offset by the sales of securities available-for-sale of
$6,077,000, maturities of securities available-for-sale of $3,208,000 and
maturities of securities held-to-maturity of $1,022,000.
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 June 30, 1995 was $23,596,000 as
compared to $22,400,000 at December 31, 1994, for an increase of $1,196,000 or
5.3%. This was attributable to net income for the first six months of 1995 of
$108,000, proceeds of the sale of common stock to the Dividend Reinvestment Plan
of $128,000 and a $1,338,000 increase in the fair value of the
available-for-sale securities during the first six months of 1995 (see
discussion on "Investment Securities"), less dividends paid on common stock of
$484,000.
On June 28, 1994 the Company paid a 5% stock dividend to shareholders of
record on June 6, 1994. Fractional shares were paid in cash based on the stock
price of $17.00 per share at the close of business on the record date.
The Company maintains a Dividend Reinvestment and Stock Purchase Plan.
During the first six months of 1995, 8,423 shares of common stock were purchased
from authorized and unissued shares at an average price of $15.20 for proceeds
of $128,000.
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
following tables 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
June 30, December 31, Minimum
1995 1994 Regulatory Requirement
---- ----
Tier 1 Leverage Ratio 7.66% 8.43% 3.00% - 5.00%
Risk-Based Capital Ratios
Tier I Capital 14.29% 14.82% 4.00%
Total Capital 15.53% 16.06% 8.00%
CAPITAL RATIOS OF THE BANK
Bank
June 30, December 31, Minimum
1995 1994 Regulatory Requirement
Tier 1 Leverage Ratio 6.54% 7.23% 3.00% - 5.00%
Risk-Based Capital Ratios
Tier I Capital 12.18% 12.77% 4.00%
Total Capital 13.44% 14.23% 8.00%
The Company is not aware of any trends, events or uncertainties that
will have a material effect on the Company's liquidity, capital resources or
operations, except for changes in interest rates which could cause deposit
disintermediation and current uncertain economic conditions, the results of
which cannot be determined at this time. The Company is not under any agreement
with the regulatory authorities nor is it aware of any current recommendation by
regulatory authorities which, if they were implemented, would have a material
effect on liquidity, capital resources, or the operations of the Company.
<PAGE>
Assets and Liabilities
Total assets at June 30, 1995 were $299,088,000, representing an
increase of 5.1% over total assets of $284,553,000 at December 31, 1994.
Deposits increased by $4,282,000 or 1.7% from $247,532,000 on December 31, 1994
to $251,814,000 on June 30, 1995. This increase was a result of growth of
$11,750,000 in certificates of deposit partially offset by declines of $57,000
in non-interest checking deposits, $237,000 in interest-bearing checking
accounts, $993,000 in money market deposits and $6,181,000 in savings and club
accounts. Loans outstanding at June 30, 1995 were $190,002,000, as compared to
$185,215,000 at December 31, 1994. This is an increase of $4,787,000 or 2.6%.
The growth in loans was comprised primarily of an increase of $3,106,000 or 4.6%
in residential real estate loans, a $1,660,000 or 3.5% increase in consumer
loans, and a $21,000 increase in commercial loans. During the first half of
1995, $1,434,000 of residential real estate loans were sold. The amount of these
sold loans originated in the first half of 1995 was $1,365,000 with the
remaining $69,000 being originated in 1994. The bank continues to service all of
these loans. As of June 30, 1995 there were $684,000 of mortgage loans
identified as held-for-sale. The loan to deposit ratio was 75.5% at June 30,
1995 and 74.8% at December 31, 1994.
Premises and equipment increased by $112,000 to $5,974,000 at June 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 Redners Supermarket on
Airport Road, Allentown, Lehigh County, Pennsylvania.
The Company had long-term debt totaling $7,669,000 at June 30, 1995 as
compared to $862,000 at December 31, 1994. 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 6.21%) 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 ended June 30, 1995 was $771,000, a
$203,000 or 35.7% increase compared to net income of $568,000 for the same
period in 1994. This increase was primarily attributable to an increase in net
interest income of $265,000 and a decrease in the provision for loan losses of
$272,000 due to a partial recovery of losses in the first quarter of 1995
relating to the overdrafts of a certain customer. This was partially offset by a
decrease in total other income of $4,000, increases in total other expenses of
$230,000 and higher Federal income taxes of $100,000.
The net income for the six months ended June 30, 1995 was $108,000, a
$1,068,000 decline from net income of $1,176,000 for the same period in 1994.
This decrease is primarily attributable to an additional provision for possible
losses of $1,278,000 (net of recoveries of $272,000) as a result of checking
account overdrafts of a certain customer. Also contributing to the decrease in
net income was increases in total other expenses of $810,000 and decreases in
total other income of $36,000. This was partially offset by an increase in net
interest income and a $561,000 decrease in Federal income taxes.
<PAGE>
Per share earnings for the three months ended June 30 were $.54 and $.40
for 1995 and 1994, respectively. Average shares outstanding during this three
month period were 1,430,246 in 1995 and 1,408,564 in 1994. The net income per
share was $.08 for the first six months of 1995 as compared to earnings per
share of $.83 for the same time period in 1994. Average shares outstanding were
1,427,534 for the first six months of 1995 and 1,405,711 for the first six
months of 1994. Per share earnings and average shares outstanding have been
restated to reflect the 5% stock dividend paid on June 28, 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 $3,110,000 for the three months ended June 30, 1995, as compared to
$2,845,000 for the three months ended June 30, 1994, an increase of $265,000 or
9.3%. During the three month period ended June 30, 1995, interest income
increased $870,000 or 19.1% and interest expense increased by $605,000 or 35.2%
over the same time period of 1994. The increase in interest income was the
result of the increases in interest earned on interest earning assets being
greater than the increase in the cost of funds.
For the six month period ended June 30, 1995, net interest income
increased $615,000 or 10.8% to $6,284,000 over the same period in 1994 of
$5,669,000. In this six month period, interest income increased by $1,527,000 or
16.7% and interest expense increased $912,000 or 26.2% as compared to 1994. This
increase in net interest income during the six month time period is due to an
increase on interest rates earned on loans and investments as a result of higher
interest rates. The increase in interest expense for the six month period was
primarily due to an increase in certificates of deposit balances and higher
interest rates. Interest earnings assets, including loans were $278,951,000 at
June 30, 1995 as compared to $256,393,000 at June 30, 1994. This represents an
increase of $22,558,000 or 8.8%.
Other Income and Other Expenses
Other income for the three months ended June 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 $549,000 as compared to
$484,000 for the same period in 1994. This was an increase of $65,000 or 13.4%
In the three month period ended June 30, 1995 service charges were $273,000 an
$81,000 or 42.2% increase over the 1994 amount of $192,000. The revenues from
the Trust Department operations were $160,000 for the three months ended June
30, 1995 as compared to $173,000 for the three months ended June 30, 1994, a
decrease of $13,000 or 7.5%. There were $7,000 in gains on the sale of mortgage
loans for the three month period ending June 30, 1995. There were no such gains
during the same period in 1994. Other miscellaneous income for the three months
ended June 30, 1995 was $109,000 as compared to $119,000 for the same period in
1994, a reduction of $10,000 or 8.4%.
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 5.6% or $58,000 to $1,102,000 from
$1,044,000 for the six months ended June 30, 1995 over the same time period in
1994. Service charges amounted to $516,000 for the six months ended June 30,
1995 compared to $379,000 for the six months ended June 30, 1994, an increase of
$137,000 or 36.1%. The revenue from the Trust Department operations was $320,000
for the six months ended June 30, 1995, representing a $25,000 or 7.2% decrease
<PAGE>
over the $345,000 for the six months ended June 30, 1994. The gain on the sale
of mortgage loans amounted to $13,000 for the first six months of 1995 as
compared to $94,000 for the same period in 1994, a reduction of $81,000 or
86.2%. Other income for the six months ended June 30, 1995 was $253,000 as
compared to $226,000 for the same period in 1994. This is an increase of
$27,000 or 11.9%.
Total other expenses for the three month period ended June 30, 1995
increased by $230,000 or 9.2% to $2,726,000 over the total other expenses for
the same time period in 1994 of $2,496,000. Included in this increase is a
$152,000 or 13.2% increase in salary and benefit expenses which were $1,301,000
as compared to $1,149,000 in 1994. This increase is primarily the result of the
additional staff related to the opening of the new Stroudsburg branch in October
1994, the new Airport Road branch in March 1995 and general salary increases of
approximately 3%. Occupancy and equipment expenses were $453,000 for the three
month period ended June 30, 1995 and $395,000 for the three month period ended
June 30, 1994 an increase of $58,000 or 14.7%. Most of this increase is due to
increases in rent and maintenance expenses related to the new branches. Other
operating expenses for the three month period ended June 30, 1995 were $972,000
an increase of $20,000 or 2.1% over the $952,000 in other expenses for the same
period in 1994.
Other expenses for the six months ended June 30, 1995 increased by
$810,000 or 16.5%, to $5,715,000 from $4,905,000 for the same period in 1994.
Salaries and employee benefits were $2,594,000 for the six months ended June 30,
1995 as compared to $2,280,000 for the six months ended June 30, 1994
representing an increase of $314,000 or 12.1%. These increases are primarily due
to the addition of the Stroudsburg and Airport Road branches. Occupancy and
equipment expenses were $915,000 for the six months ended June 30, 1995 and
$811,000 for the six months ended June 30, 1994, an increase of $104,000 or
12.8%. Most of this increase is also due to the new branches. Other operating
expenses for the six months ended June 30, 1995 were $2,206,000 in relation to
$1,814,000 for the six months ended June 30, 1994, an increase of $392,000 or
21.6%. This increase is primarily the result of higher legal fees related to a
customer overdraft and expenses to open the new 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
June 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 $48,072,000 in
available-for-sale securities at June 30, 1995 with a net unrealized gain of
$304,000. 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 June 30, 1995 $4,047,000 of
securities available-for-sale were sold for a net gain of $11,000. For the same
period in 1994, $3,685,000 of available-for-sale securities were sold for a net
gain of $80,000. For the six months of 1995, net securities losses amounted to
$14,000 on the sale of $6,099,000 of available-for-sale securities. As compared
to securities gains of $80,000 on the sale of $3,685,000 of available-for-sale
securities for the same period in 1994.
<PAGE>
Held-to-maturity totaling $37,251,000 at June 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 June 30, 1995 and December 31, 1994, did not
hold any securities identified as derivatives. At June 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
There was a $172,000 credit to the provision for loan losses for the
three month period ended June 30, 1995. This credit was the result of a $272,000
partial recovery related to losses on the overdrawn checking accounts of a
certain customer offset in part by a $100,000 provision for other loan losses.
The provision for loan losses for the same period in 1994 was $100,000. The
provision for loan losses for the first six months of 1995 was $1,598,000 as
compared to $200,000 for the first six months of 1994. Included in the six month
1995 provision is $1,550,000 for an overdrawn checking accounts of a certain
customer less the recovery of $272,000.
Net loan losses were $1,383,000 including $1,278,000 related to the
overdrawn checking accounts for the three month period ending June 30, 1995. Net
loan losses for the same period in 1994 were $10,000. For the first six months
of 1995 net loan losses were $1,482,000, including $1,278,000 related to the
overdrawn checking accounts, as compared to $80,000 during the first six months
of 1994.
The allowance for possible loan losses at June 30, 1995 totaled
$2,303,000 an increase of $116,000 over the December 31, 1994 amount of
$2,187,000. The allowance for possible loan losses as a percentage of total
loans outstanding at June 30, 1995 was 1.21%. This compares to 1.18% at December
31, 1995. As provided by SFAS No. 114, as amended by SFAS No. 118, $231,000 of
the allowance for possible loan losses is allocated to impaired loans at June
30, 1995 (see Note D "Impaired Loans").
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 effort, 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 periods indicated.
<PAGE>
NON-PERFORMING LOANS
June 30, December 31,
1995 1994
Non-accrual loans on a cash basis $1,915,000 $1,724,000
Non-accrual loans as a percentage
of total loans 1.01% .93%
Accruing loans past due 90 days or more 877,000 1,069,000
Accruing loans past due 90 days or more
as a percentage of total loans .46% .58%
Other Real Estate Owned from
Foreclosed Property $ 616,000 $ 373,000
There are no significant loans classified for regulatory purposes that
have not been included in the above table of non-performing loans. 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 No. 15 "Accounting for Debtors and Creditors for Troubled Debt
Restructuring" at June 30, 1995.
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders
On April 20, 1995 the Company held its annual meeting of shareholders.
At the annual meeting, the shareholders elected Robert J. Bergren, Gordon B.
Mowrer and Richard Stevens III as Class 3 Directors of the Company to serve for
a term of four years and until their successors are duly elected and qualified.
The following is a tabulation of the vote for these directors.
Votes
Withheld
For Authority
Robert J. Bergren 1,060,369 13,121
Gordon B. Mowrer 1,060,261 13,229
Richard Stevens III 1,057,533 15,957
The other directors whose terms of office as a director continued after
the meeting are S. Eric Beattie, Paul A. Lentz, Daniel B. Mulholland, Robert C.
Nagel, Walter L. Peters, John J. Schlamp, Maria Zumas Thulin and Graham McKelvy
Walker.
At the annual meeting, the shareholders also adopted an amendment to the
Non-Employee Directors Stock Option Plan to provide for the automatic grant of
options to non-employee directors who are appointed to the Board. The aggregate
number of shares which may be issued upon the exercise of options under this
plan is 20,000 shares of the Company's common stock, adjusted for any change in
capitalization of the Company. The Plan, as amended, provides that any
non-employee who is first elected or appointed as a director of the Company or
any subsidiary after May 1, 1994, shall as of the date of such election or
appointment automatically be granted an option to purchase 1,050 shares of the
Company's stock; provided, however, that any non-employee director who is first
appointed as a directer after May 1, 1994 and prior to the 1995 Annual Meeting
of Shareholders shall receive such automatic grant of options on the date of the
1995 Annual Meeting (April 20, 1995).
Votes
Broker
For Against Abstained Non-Vote
Amendment to the Non-Employee
Director Stock Option Plan 1,001,727 55,966 18,496 None
There were no other matters brought before the meeting.
<PAGE>
ITEM 5. Other Information
On July 14, 1995, the Bank signed a definitive agreement to purchase a
branch office of CoreStates Bank, Philadelphia located in Hanover Township,
Bethlehem, Northampton County, Pennsylvania, and to assume the related deposits.
The branch office has a deposit base of approximately $9,000,000 and loans of
approximately $3,000,000. The acquisition is subject to required regulatory
approvals and other customary conditions. It is anticipated that the purchase
will be completed in the fourth quarter of 1995 although there can be no
assurance that the regulatory approvals will be obtained or that the purchase
will be completed.
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: August 11, 1995 BY: /S/ S. ERIC BEATTIE
S. ERIC BEATTIE
PRESIDENT
(PRINCIPAL EXECUTIVE OFFICER)
DATE: August 11, 1995 BY: /S/ REID L. HEEREN
REID L. HEEREN
VICE PRESIDENT
(PRINCIPAL FINANCIAL OFFICER)
Exhibit 11.1
First Colonial Group, Inc. and Subsidiaries
COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1995 1994 1995 1994
--------- --------- --------- ---------
Primary
<S> <C> <C> <C> <C>
Earnings $ 771 $ 568 $ 108 $ 1,176
--------- --------- --------- ---------
Shares
Weighted average number
of common shares outstanding 1,430,246 1,408,564 1,427,534 1,405,711
Assuming exercise of option
reduced by the number of shares
which could have been purchased
with the proceeds from exercise
of such options ** ** ** **
--------- --------- --------- ---------
Weighted average number of
common shares outstanding as
adjusted 1,430,246 1,408,564 1,427,534 1,405,711
Primary earnings per common share $ 0.54 $ 0.40 $ 0.08 $ 0.83
========= ========= ========= =========
Assuming full dilution
Earnings $ 771 $ 568 $ 108 $ 1,176
--------- --------- --------- ---------
Shares
Weighted average number
of common shares outstanding 1,430,246 1,408,564 1,427,534 1,405,711
Assuming exercise of option
reduced by the number of shares
which could have been purchased
with the proceeds from exercise
of such options ** ** ** **
--------- --------- --------- ---------
Weighted average number of
common shares outstanding as
adjusted 1,430,246 1,408,564 1,427,534 1,405,711
Earnings per common share assuming
full dilution $ 0.54 $ 0.40 $ 0.08 $ 0.83
========= ========= ========= =========
</TABLE>
* Restated per 5% Stock Dividend paid on June 28, 1994.
** The stock options are not included since the option price on the stock
options outstanding was greater than the average market price and the
period-end market price.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
Exhibit 27.1 95JUN10Q
</LEGEND>
<CIK> 0000714719
<NAME> FIRST COLONIAL GROUP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 11,191
<INT-BEARING-DEPOSITS> 941
<FED-FUNDS-SOLD> 2,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 48,072
<INVESTMENTS-CARRYING> 37,251
<INVESTMENTS-MARKET> 37,177
<LOANS> 190,686
<ALLOWANCE> 2,303
<TOTAL-ASSETS> 299,088
<DEPOSITS> 251,814
<SHORT-TERM> 10,695
<LIABILITIES-OTHER> 5,314
<LONG-TERM> 7,669
<COMMON> 7,319
0
0
<OTHER-SE> 16,277
<TOTAL-LIABILITIES-AND-EQUITY> 299,088
<INTEREST-LOAN> 8,261
<INTEREST-INVEST> 2,345
<INTEREST-OTHER> 68
<INTEREST-TOTAL> 10,674
<INTEREST-DEPOSIT> 3,932
<INTEREST-EXPENSE> 4,390
<INTEREST-INCOME-NET> 6,284
<LOAN-LOSSES> 1,598
<SECURITIES-GAINS> (14)
<EXPENSE-OTHER> 1,088
<INCOME-PRETAX> 59
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 108
<EPS-PRIMARY> 0.08
<EPS-DILUTED> 0.08
<YIELD-ACTUAL> 4.60
<LOANS-NON> 1,915
<LOANS-PAST> 877
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,187
<CHARGE-OFFS> 1,579
<RECOVERIES> 97
<ALLOWANCE-CLOSE> 2,303
<ALLOWANCE-DOMESTIC> 2,303
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
