SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
( ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to ____________
Commission File Number 003 31149-NY
LETCHWORTH INDEPENDENT BANCSHARES CORPORATION (Exact name of
registrant as specified in its charter)
___New York __16-1168175
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
50 North Main Street Box 129 Castile NY 14427 (Address of
principal executive offices) (Zip Code)
(716) 493-2576 (Registrant's
telephone number, including area code)
____________________________________________________________
(Former name, address, fiscal year, if changed)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(b) 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.
Y Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding as of October 31, 1995
Common Stock, $1.00 per share 896,720 shares
LETCHWORTH INDEPENDENT BANCSHARES CORPORATION
INDEX
Page
PART I Financial Information
ITEM 1. Financial Statements
Consolidated Statement of Condition
September 30, 1995(Unaudited) and
December 31, 1994 2
Consolidated Statement of Income (Unaudited)
Three and Nine Months Ended September 30, 1995
and 1994 3
Consolidated Statement of Cash Flows (Unaudited)
Nine Months Ended September 30, 1995 and 1994 4
Notes to Consolidated Financial Information 6
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8
PART II Other Information
Item 6 13
Item 11 14
Signatures 15
<PAGE>
LETCHWORTH INDEPENDENT BANCSHARES CORPORATION
CONSOLIDATED STATEMENT OF CONDITION
September 30, December 31,
1995 1994
Assets (unaudited)
Cash and due from banks $10,267,428 $6,264,350
Fed funds sold 8,000,000 5,600,000
Investment securities:
Available for sale, 21,636,322 22,280,800
Held to maturity 60,928,413 48,802,730
Loans 128,473,299 121,367,741
Less-Allowance for possible loan losses (1,625,763) (1,526,900)
Net Loans $126,847,536 $119,840,841
Accrued interest receivable 2,255,895 1,711,571
Premises and equipment, net 4,570,340 4,259,030
Other assets 2,240,346 2,955,312
Total Assets $236,746,280 $211,714,634
Liabilities and Shareholders' Equity
Deposits:
Noninterest-bearing $24,511,106 $23,138,166
Interest bearing 184,226,461 164,319,775
Total deposits $208,737,567 $187,457,941
Securities sold under agreements to 1,224,488 900,000
purchase
Accrued interest payable 763,373 419,953
Accrued taxes and other liabilities 669,838 197,702
Advances from Federal Home Loan Bank 3,213,062 2,936,368
Total Liabilities $214,608,328 $191,911,964
Shareholders' equity:
Common stock, par value $1.00 per share
1,500,000 shares authorized, 896,720
shares issued $896,720 $896,720
Capital surplus 10,087,067 10,087,067
Retained earnings 11,360,547 9,605,255
Unrealized gain on securities 217,942 (389,976)
Minimum pension liability adjustment (58,646) (58,646)
Employee stock ownership plan loan (365,678) (337,750)
payable
Total shareholders' equity $22,137,952 $19,802,670
Total Liabilities and Shareholders' Equity $236,746,280 $211,714,634
<TABLE>
<CAPTION>
LETCHWORTH INDEPENDENT BANCSHARES CORPORATION
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
Three Nine
Months Ended MonthsEnded
September September 30,
30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $3,261,112 $2,718,378 $9,525,136 $7,748,311
Interest on investment securities
Available for sale 311,005 330,615 1,029,626 916,889
Held to maturity 898,846 503,283 2,419,927 1,318,328
Interest on federal funds sold 110,251 29,846 306,438 113,452
Total interest income $4,581,214 $3,582,122 $13,281,127 $10,096,980
Interest on deposits 1,975,617 1,334,266 5,576,596 3,705,103
Net interest income $2,605,597 $2,247,856 $7,704,531 $6,391,877
Provision for possible loan losses 55,439 93,495 193,946 210,683
Net interest income after
provision for possible loan
losses $2,550,158 $2,154,361 $7,510,585 $6,181,194
Other operating income:
Service charges on deposit
accounts $229,182 $206,786 $662,687 $575,904
Other charges and fees 19,627 17,504 65,357 52,540
Other operating income 48,839 47,495 93,633 93,440
Gains on sales of loans and
securities available for sale 6,902 17,699 16,461 89,309
Total other operating income $304,550 $289,484 $838,138 $811,193
Other operating expenses:
Salaries and employee benefits $956,606 $834,760 $2,767,894 $2,323,822
Occupancy expense 104,750 84,453 315,336 281,927
Printing and supplies 66,630 56,638 227,657 181,468
Equipment expense 118,599 120,193 385,150 368,554
FDIC assessment 117,914 91,367 318,229 263,809
Other non-detailed expenses 379,228 335,967 1,293,089 1,071,520
Total other operating expense $1,743,727 $1,523,378 $5,307,355 $4,491,100
Income before income taxes 1,110,981 920,467 3,041,368 2,501,287
Provision for income taxes 347,500 306,500 990,150 808,500
Net income $763,481 $613,967 $2,051,218 $1,692,787
Net income per common and common
equivalent share $0.81 $0.68 $2.24 $1.89
</TABLE>
<TABLE>
<CAPTION>
LETCHWORTH INDEPENDENT BANCSHARES CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Nine Ended
Months
September 30,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Interest received $12,911,357 $10,145,090
Service charges, fees and other inc. received 821,677 721,884
Interest paid (5,920,016) (3,620,042)
Cash paid to suppliers and employees (2,881,447) (4,460,525)
Income taxes paid (875,000) (788,150)
Net cash provided by operating activities $4,056,571 $1,998,257
Cash flows from investing activities:
Proceeds from sales of invest.securities- $0 $4,053,749
Proceeds from maturities of invest. $9,248,312 $7,547,897
securities
Purchases of investment securities-HTM (19,309,902) (21,883,043)
Purchases of investment securities-AFS (986,250) 0
Net increase in federal funds sold (2,400,000) (150,000)
Net increase in loans (9,730,617) (10,798,920)
Proceeds from sale of loans 2,181,059 5,339,023
Expenditures for capital assets (642,321) (801,084)
Net cash used in investing activities ($21,639,719) ($16,692,378)
Cash flows from financing activities:
Net increase in demand deposits, NOW
accounts and money market accounts $6,062,044 $4,402,604
Net increase in time deposits 15,217,582 11,572,082
Proceeds from current FHLB borrowings 540,511 2,667,900
Repayment FHLB borrowings (262,472) (23,197)
Increase (decrease) in repos 324,488 (198,057)
Dividends paid (295,927) (269,018)
Net cash provided by financing activities $21,586,226 $18,152,314
Net increase in cash and due from banks $4,003,078 $3,458,193
Cash and due from banks, beginning of year 6,264,350 5,098,785
Cash and due from banks, end of quarter $10,267,428 $8,556,978
Reconciliation of net income to
net cash provided by operating activities:
Net income $2,051,218 $1,692,787
Adjustments to reconcile net income to
net cash provided by operating activities-
Depreciation 462,969 402,861
Provision for possible loan losses 193,646 210,683
Loss on sale of investments 0 (34,895)
(Gain) on sale of loans (16,461) (54,414)
(Increase) in interest receivable (544,324) (166,699)
Amortization of bond premium 230,173 264,617
Accretion of bond discount (55,619) (49,808)
Decrease (increase) in other assets 583,008 (262,872)
Increase in interest payable 343,420 81,058
Decrease (increase) in accrued taxes
and other liabilities 808,541 (85,061)
Net cash provided by operating activities $4,056,571 $1,998,257
</TABLE>
<PAGE>
LETCHWORTH INDEPENDENT BANCSHARES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL INFORMATION
September 30, 1995
Note 1 Basis of Presentation
The unaudited interim financial information includes the accounts of
Letchworth Independent Bancshares Corporation and its subsidiary, The
Bank of Castile. The financial information has been prepared in
accordance with the Summary of Significant Accounting Policies as
outlined in the Company's Form 10-KSB for the year ended December 31,
1994 and, in the opinion of management contains all adjustments
necessary to present fairly the Company's financial position as of
September 30, 1995 and December 31, 1994, the results of its
operations for the three month and nine month periods ended September
30, 1995 and 1994, and its cash flows for the nine month periods ended
September 30, 1995 and 1994.
Certain amounts in the prior period financial statements have been
reclassified to conform to the current period presentation.
Note 2 Loans
Loans consist of the following:
September-30 December-31
1995 1994
(unaudited)
Agricultural loans $24,567,718 $22,091,563
Commercial and industrial 21,839,153 19,670,283
loans
Real estate loans:
Secured by 1 to 4 family
residential properties 41,096,258 40,353,744
Other 31,591,805 27,971,189
$72,688,063 $68,324,933
Consumer loans 10,378,365 11,280,962
$129,473,299 $121,367,741
An analysis of changes in the
allowance for possible loan losses
is as follows:
September-30 September-30
1995 1994
(unaudited) (unaudited)
Balance, beginning of year $1,526,877 $1,448,026
Provision, expense 193,945 210,683
Charge-offs 155,164 209,982
Recoveries 60,105 38,653
Balance, end of period $1,625,763 $1,487,380
LETCHWORTH INDEPENDENT BANCSHARES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL INFORMATION, CONTINUED
Note 3 Investment Securities
The book and approximate market
value of investment securities
at September 30, 1995:
<TABLE>
<CAPTION>
September-30-1995 December-31-1995
Amortized Market Value Amortized Cost Market
Cost
(unaudited) (unaudited) (unaudited) Value
Available for Sale
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S.Government
corporations and agencies $16,425,784 $16,802,447 $17,449,363 $17,050,000
State and political subdivision
obligations $0 $0 $0 $0
Mortgage-Backed Securities $4,205,906 $4,197,575 $4,909,776 $4,651,700
Federal Home Loan Bank stock $636,300 $636,300 $579,100 $579,100
$21,267,990 $21,636,322 $22,938,239 $22,280,800
Held to Maturity
U.S. Treasury securities and
obligations of U.S.Government
corporations and agencies $29,970,302 $30,326,425 $20,698,476 $20,184,700
State and political subdivision
obligations $23,252,083 $24,062,382 $20,166,690 $19,971,500
Mortgage-Backed Securities $7,706,028 $7,713,032 $7,937,564 $7,649,900
$60,928,413 $62,101,839 $48,802,730 $47,806,100
</TABLE>
Note 4 Earnings Per Share
During November 1993, the Company sold 200,000 share of its common
stock with attached warrants to purchase an additional 200,000 shares.
The warrants are exerciseable at $23 per share and expire on December
31, 1997. Gross proceeds from the sale of stock totaled $4,000,000.
Direct expenses associated with the offering approximated $168,000 and
were netted against capital surplus.
Earnings per share are based on the weighted average number of common,
and when applicable, common equivalent shares outstanding during the
period.
<PAGE>
LETCHWORTH INDEPENDENT BANCSHARES CORPORATION
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
September 30, 1995
Financial Condition
Total assets of Letchworth Independent Bancshares
Corporation (the "Company") were $236.7 million as of
September 30, 1995, an increase of $25.0 million, or 11.82%,
over total assets at December 31, 1994. Deposits, the
Company's primary source of funds, increased $21.3 million
or 11.35% to $208.7 million at September 30, 1995.
Total loans outstanding as of September 30, 1995 increased
by $7.1 million, or 5.85%, over total loans at December 31,
1994. The total loans outstanding figure of $128.5 million
is net of loans sold during the first half of 1995.
Residential real estate loans increased by $.7 million or
1.84%; while, consumer loans decreased $.9 million or 8.00%.
As a result of expansions of several of our large
agricultural customers, agricultural loans at September 30,
1995 increased $2.5 million or 11.21%. Commercial and
industrial loans increased $1.2 million or 5.94% and other
real estate loans increased $3.6 million or 12.94%. These
increases are due to the development of our newer market
areas in Batavia, Arcade and our expansion into Livington
and southern Monroe counties with the addition of our
Caledonia office in late 1994.
The Company's shareholders' equity increased to $22.14
million, an increase of 11.79% or $2.3 million from December
31, 1994. The Company's shareholders equity as a percentage
of total assets at September 30, 1995 was 9.35% which is
considered favorable when compared to other peer group
banks. The increase in market value of the available for
sale investments accounted, net of tax, for approximately
$607,918 of the increase in shareholders' equity.
Liquidity measures the ability of the Company to meet its
maturing obligations and existing commitments, to withstand
fluctuations in deposit levels, to fund its operations, and
to provide for customer's credit needs. At September 30,
1995, the Company sold $8.0 million in federal funds. These
funds are available on one day's notice to meet upcoming
obligations. The Company has not been forced to sacrifice
profitability by selling investments prior to maturity nor
has it transferred any securities between its available for
sale and held to maturity portfolios. However, due to the
low return available on federal funds the Company has
attempted to minimize the level of federal funds while
maintaining adequate daily liquidity. Lines of credit are
available from M & T Bank and Federal Home Loan Bank of New
York. Due to the Company's excess liquidity, these lines
have not been utilized during the nine months ended
September 30, 1995.
Results of Operations - Nine Months Ended September 30, 1995
Compared to 1994
Net income of $2,051,218 for the nine months ended September
30, 1995 represents an increase of $358,431 or 21.17%, over
the $1,692,787 earned during the same period ended September
30, 1994. Net income per common share was $2.24 for the
nine months ended September 30, 1995 compared to $1.89 for
the same period in 1994.
Net interest income increased to $7.7 million for the nine
months ended September 30, 1995, up 20.54% from the $6.4
million earned during the nine months ended September 30,
1994. This increase resulted from increases of $1.8 million
in total loan income; $1.4 million in securities income; and
$1.9 million in interest expense on deposits.
The provision for possible loan losses, the charge to
earnings for potential credit losses associated with lending
activities, was $193,946 for the nine months ended September
30, 1995, down 7.9% from the $210,683 provision recorded
during the nine months ended September 30, 1994. This
decrease in the provision resulted from management's
assessment of the allowance for possible loan losses.
Management conducts a periodic evaluation which assigns risk
weights for individual loans and different classes of loan
groups in determining the adequacy of the reserve.
Regulatory examination, historical gross loan losses, an
assessment of prevailing and anticipated economic conditions
and other relevant factors are used in this analysis. The
Company believes this analysis indicates that the level of
the loan loss reserve is adequate to absorb any potential
losses within the loan portfolio. The allowance for
possible loan losses of the Company at September 30, 1995
was $1,625,763 or 1.265% of total loans and is up 6.47% or
$98,863 from the allowance at December 31, 1994.
Other operating income for the nine months ended September
30, 1995 was $838,138 compared to $811,193 at September 30,
1994. This 3.32% increase was due primarily to increases
in: service charges on deposit accounts of $86,783 or
15.07%; other charges and fees of $12,817 or 24.39%; and
decreases in gains on sales of loans and securities
available for sale of $72,848 of 81.57%.
Other operating expense for the nine month period ended
September 30, 1995 was $5,307,355, and increase of 18.17%
over the $4,491,100 recorded for the same period in the
prior year. This increase is a result of increases in the
following: salaries and employee benefits expense of
$444,072 or 19.11%; occupancy expense of $33,409 or 11.85%;
printing and supplies of $46,189 or 25.45%; FDIC Assessment
of $54,420 or 20.63%; equipment expense of $16,596 or 4.50%;
and other non-detailed expenses of $221,569 or 20.68%.
These increases are primarily a result of general increases
in overall volume and operation, the renovation and
expansions of our Avon facility and Operations Center and
the addition of our Caledonia facility in December of 1994.
These income and expense numbers fall very close to the
budgeted amounts for the first nine months of 1995.
Three Months Ended September 30, 1995 Compared to Three
Months Ended September 30, 1994
Net interest income increased 15.91% to $2.6 million for the
three months ended September 30, 1995 over the same period
in 1994. This increase is due primarily to higher volumes
of loans and other interest earning assets during the third
quarter of 1995.
The provision for possible loan losses for the third quarter
of 1995 was $55,439, down 40.70% from the $93,495 for the
same period of 1994. The decrease in the provision is due
to management's assessment of the allowance for possible
loan losses as previously discussed.
Other operating income for the three month period September
30, 1995 was $304,550 compared with $289,484 at September
30, 1994. The 5.20% increase was due primarily to increases
in: service charges of deposit accounts of $22,396 or
10.83%; other charges and fees of $2,123 or 12.13%; and
decreases in gains on sales of $10,797 or 61.00%.
Other operating expense for the three month period ended
September 30, 1995 was $1,743,727 compared to $1,523,378 at
September 30, 1994. The 14.46% increase was due primarily
to increases in: salaries and employee benefits of $121,846
or 14.60%; FDIC Assessment of $26,547 or 29.06%; occupancy
expense of $20,297 or 24.03%; and other non-detailed
expenses of $43,261 or 12.88%.
New Accounting Pronouncements
Letchworth Independent Bancshares Corporation adopted SFAS
No. 114, Accounting by Creditors for Impairment of a Loan,
in the first quarter of 1995. This pronouncement has
required some changes in operating procedures relating to
loans, but has not significantly impacted the financial
statements of the organization.
Other Events of Significance
Three new ATM machines were installed during the third
quarter. The machines are located at our main office in
Castile, our Retsof branch, and an off premise cash
dispenser at Genesee Memorial Hospital in Batavia. The
activity thus far at these three ATM's exceeds original
expectations.
In mid September, the Bank received a refund from the FDIC
for the premium reduction to $.04 from $.23 per $100 of
deposits. This refund encompasses payments made for the
first three quarters of 1995. Accruals are presently being
made toward the FDIC's proposed $.66 one time fee for those
institutions with SAIF deposits, of which the Bank's LeRoy
depostits are included.
During the third quarter, members of the Board of Directors
of the Company and The Bank of Castile attended a two day
retreat in order to begin the strategic planning process for
the Company. We continue to believe that there are many
opportunities for our Company in the years ahead.
<PAGE>
Index to Exhibits
3(a) Certificate of Incorporation of Registrant filed by the New
York Department of State on July 17, 1981, incorporated by reference
to the Registrant's Registration Statement on Form S-18 (Reg. No. 33-
31149-NY), filed with the commission on September 2, 1989 and wherein
such Exhibit is designed Exhibit 3(a).
3(b) Certificate of Amendment of Certificate of Incorporation of
Registrant filed by the New York Department of State on July 26, 1989,
incorporated by reference to the Registrant's Registration Statement
on Form S-18 (Reg. No. 33-31149-NY), filed with the Commission on
September 2, 1989, and wherein such Exhibit is designated Exhibit
3(b).
3(c) Certificate of Amendment to Certificate of Incorporation of
Registrant filed by the New York Department of State on May 2, 1990,
incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1990 and filed with the Commission
on August 9, 1990, and wherein such Exhibit is designed Exhibit (4)b.
3(d) Bylaws of Registrant, as amended by the stockholders of the
Registrant at a special meeting of stockholders on July 11, 1989,
incorporated by reference to the Registrant's Registration Statement
on From S-18 (Reg. No. 33-31149-NY), filed with the Commission on
September 2, 1989 and wherein such Exhibit is designated Exhibit 3(c).
4(a) Form of Common Stock Certificate of Registrant, incorporated by
reference to the Registrant's Amendment No. 1 to Form s-18
Registration Statement (Reg. No. 33-31149-NY), filed with the
Commission on October 31, 1989, and wherein such Exhibit is designated
Exhibit 4.
4(b) Letchworth Independent Bancshares Corporation Stock Option Plan
of 1990 and form of Stock Option Agreement, incorporated by reference
to the Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1990 and filed with the Commission on August 9, 1990,
and wherein such Exhibit is designated Exhibit 4.
4(c) Form of Warrant of Registrant, and Warrant Agreement, dated as
of September 27, 1993, by and between Registrant and Mellon Securities
Trust Company.
11 Computation of Earnings Per Share for the quarter ended March
31, 1995 is presented on Note 4 of the financial information presented
in Part I of this Report on Form 10-QSB.
<PAGE>
LETCHWORTH INDEPENDENT BANCSHARES CORPORATION
Form 10-Q
Part II - OTHER INFORMATION - September 30, 1995
ITEM 4 Exhibits and Reports on Form 8-K
(a) See Index to Exhibits
(b) The Company did not file any Reports on Form 8-K during the
period ended September 30, 1995.
<PAGE>
LETCHWORTH INDEPENDENT BANCSHARES CORPORATION
COMPUTATION OF EARNINGS PER SHARE
SEPTEMBER 30, 1995
Exhibit 11:
Quarter Ended
September 30, 1995
Net income $763,481
Number of shares:
Weighted average number of shares
outstanding 896,720
Add - Common stock equivalent shares
due to assumed exercise of options
and warrants 65,824
Less - ESOP shares accounted for in
accordance with SOP 93-6 not
committed to be released (19,674)
Total common and common equivalent shares
outstanding 942,870
Net income per common and common equivalent
share $ .81
Year to Date
September 30, 1995
Net income $2,051,218
Number of shares:
Weighted average number of shares
outstanding 896,720
Add - Common stock equivalent shares
due to assumed exercise of options
and warrants 38,498
Less - ESOP shares accounted for in
accordance with SOP 93-6 not
committed to be released (19,674)
Total common and common equivalent shares
outstanding 915,544
Net income per common and common equivalent
share $2.24
<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.
LETCHWORTH INDEPENDENT BANCSHARES CORPORATION
Date 11/09/95 /s/ James W. Fulmer
James W. Fulmer
President & C.E.O.
Date 11/09/95 /s/ Steven C. Lockwood
Steven C. Lockwood
Treasurer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 10267
<SECURITIES> 82565
<RECEIVABLES> 128473
<ALLOWANCES> 1626
<INVENTORY> 0
<CURRENT-ASSETS> 8000
<PP&E> 7188
<DEPRECIATION> 2617
<TOTAL-ASSETS> 236746
<CURRENT-LIABILITIES> 209962
<BONDS> 0
<COMMON> 897
0
0
<OTHER-SE> 21241
<TOTAL-LIABILITY-AND-EQUITY> 236746
<SALES> 0
<TOTAL-REVENUES> 13281
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5577
<LOSS-PROVISION> 194
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3041
<INCOME-TAX> 990
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2051
<EPS-PRIMARY> 2.24
<EPS-DILUTED> 2.24
</TABLE>
