<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended September 30, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from ______________ to _____________
Commission file number 0-19028
CCFNB BANCORP, INC.
(Name of small business Issuer in its charter)
PENNSYLVANIA 23-2254643
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
232 East Street, Bloomsburg, PA 17815
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (570) 784-4400
Check whether the issuer (1) 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
issuer was required to file such reports), and (2) has been subject to
such filing requirings 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.
1,379,722 shares of $1.25 (par) common stock were outstanding as of
October 20, 1999.
<PAGE> 2
CCFNB BANCORP, INC. AND SUBSIDIARY
SEPTEMBER 30, 1999
INDEX 10-Q
<TABLE>
<CAPTION>
EXHIBIT 27 - FINANCIAL DATA SCHEDULE NO PAGE
#
<S> <C>
PART I - FINANCIAL INFORMATION:
- Consolidated Balance Sheets 1
- Consolidated Statements of Income 2
- Consolidated Statements of Cash Flows 3
- Notes to Consolidated Financial Statements 4 - 6
- Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations 7 - 15
PART II - OTHER INFORMATION 16
SIGNATURES 17
</TABLE>
<PAGE> 3
CCFNB BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
ASSETS
Cash and due from banks ............................................. $ 3,873 $ 5,105
Interest-bearing deposits with other banks .......................... 215 6,381
Federal funds sold .................................................. 0 1,000
Investment securities:
Securities Available-for-Sale ..................................... 49,988 47,586
Securities to be Held-to-Maturity (estimated
fair value 1999, $201; 1998, $569) .............................. 200 565
Loans, net of unearned income ....................................... 124,484 118,558
Allowance for loan losses ........................................... 980 954
-------- --------
Net loans ......................................................... $123,504 $117,604
Premises and equipment .............................................. 5,332 5,650
Other real estate owned ............................................. 68 24
Accrued interest receivable ......................................... 958 832
Other assets ........................................................ 1,188 511
-------- --------
TOTAL ASSETS ................................................... $185,326 $185,258
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Non-interest bearing .............................................. $ 12,537 $ 13,315
Interest bearing .................................................. 124,621 124,364
-------- --------
Total Deposits ................................................. $137,158 $137,679
Short-term borrowings ............................................... 21,477 20,418
Long-term borrowings ................................................ 2,346 2,291
Accrued interest and other expenses ................................. 1,142 1,176
Other liabilities ................................................... 15 214
-------- --------
TOTAL LIABILITIES .............................................. $162,138 $161,778
-------- --------
STOCKHOLDERS' EQUITY
Common stock, par value $1.25 per share; authorized 5,000,000 shares;
issued 1,379,722 shares 1999 and
1,382,433 shares in 1998 .......................................... $ 1,725 $ 1,728
Surplus ............................................................. 5,722 5,849
Retained earnings ................................................... 16,642 15,670
Accumulated other comprehensive income (loss) ....................... (901) 448
Less: Treasury stock at cost, 0 shares 1999,
6,976 shares 1998 ................................................. 0 (215)
-------- --------
TOTAL STOCKHOLDERS' EQUITY ..................................... $ 23,188 $ 23,480
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ..................... $185,326 $185,258
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
-1-
<PAGE> 4
CCFNB BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER SHARE DATA)
UNAUDITED
<TABLE>
<CAPTION>
FOR THE NINE FOR THE THREE
MONTHS ENDING MONTHS ENDING
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans:
Taxable ...................................... $7,060 $7,130 $2,422 $2,362
Tax exempt ................................... 90 86 30 29
Interest and dividends on investment securities:
Taxable interest ............................. 1,508 1,445 527 491
Tax exempt interest .......................... 507 443 173 158
Dividends .................................... 60 55 21 19
Interest on federal funds sold ................. 39 20 9 16
Interest on deposits in other banks ............ 129 154 16 49
------ ------ ------ ------
TOTAL INTEREST INCOME ..................... $9,393 $9,333 $3,198 $3,124
------ ------ ------ ------
INTEREST EXPENSE
Interest on deposits ........................... $3,707 $3,654 $1,241 $1,233
Interest on short-term borrowings .............. 700 804 235 263
Interest on long-term borrowings ............... 97 72 33 32
------ ------ ------ ------
TOTAL INTEREST EXPENSE .................... $4,504 $4,530 $1,509 $1,528
------ ------ ------ ------
Net interest income ............................ $4,889 $4,803 $1,689 $1,596
Provision for loan losses ...................... 59 59 20 20
------ ------ ------ ------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES ................................ $4,830 $4,744 $1,669 $1,576
------ ------ ------ ------
NON-INTEREST INCOME
Service charges and fees ....................... $ 454 $ 447 $ 156 $ 165
Trust department income ........................ 129 90 44 27
Securities gains - net ......................... 39 21 8 21
Other income ................................... 162 182 53 62
------ ------ ------ ------
TOTAL NON-INTEREST INCOME ................. $ 784 $ 740 $ 261 $ 275
------ ------ ------ ------
NON-INTEREST EXPENSES
Salaries and wages ............................. $1,415 $1,421 $ 478 $ 468
Pensions and other employee benefits ........... 471 464 155 149
Occupancy expense, net ......................... 259 251 90 76
Furniture and equipment expense ................ 450 417 157 147
Other operating expenses ....................... 1,026 1,111 336 361
------ ------ ------ ------
TOTAL NON-INTEREST EXPENSES ............... $3,621 $3,664 $1,216 $1,201
------ ------ ------ ------
Income before income taxes ..................... $1,993 $1,820 $ 714 $ 650
Income tax expense ............................. 503 449 183 160
------ ------ ------ ------
NET INCOME ................................. $1,490 $1,371 $ 531 $ 490
====== ====== ====== ======
NET INCOME PER SHARE ........................... $ 1.08 $ .99 $ .39 $ .36
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-2-
<PAGE> 5
CCFNB BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDING SEPTEMBER 30,
--------------------
1999 1998
--------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income ................................................... $ 1,490 $ 1,371
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses ................................. 59 59
Provision for depreciation and amortization ............... 398 389
Premium amortization on investment securities ............. 62 64
Discount accretion on investment securities ............... (18) (25)
(Gain) on sales of investment securities Available-for-Sale (39) (21)
Deferred income taxes (benefit) ........................... 21 (4)
(Gain) on sale of other real estate ....................... (2) 0
(Increase) in accrued interest receivable and other assets (308) (124)
(Decrease) in accrued interest, other expenses and other
liabilities ............................................. (53) 25
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES ............... $ 1,610 $ 1,734
-------- --------
INVESTING ACTIVITIES
Proceeds from sales, maturities and redemptions of investment
securities Available-for-Sale .............................. $ 11,195 $ 21,304
Proceeds from maturities and redemptions of Held-to-Maturity
investment securities ...................................... 365 155
Purchase of investment securities Available-for-Sale ......... (15,647) (26,111)
Net (increase) decrease in loans ............................. (6,027) 2,221
Purchases of premises and equipment .......................... (80) (1,001)
Proceeds from sale of other real estate ...................... 26 0
-------- --------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES ..... $(10,168) $ (3,432)
-------- --------
FINANCING ACTIVITIES
Net increase (decrease) in deposits .......................... $ (521) $ 4,787
Net increase (decrease) in short-term borrowings ............. 1,059 (3,414)
Net increase in long-term borrowings ......................... 55 1,852
Proceeds from issuance of common stock ....................... 109 101
Acquisition of treasury stock ................................ (37) (300)
Proceeds from sale of treasury stock ......................... 13 10
Cash dividends paid .......................................... (518) (480)
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES ............... $ 160 $ 2,556
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ........ $ (8,398) $ 858
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ............. 12,486 5,317
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ............. $ 4,088 $ 6,175
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the year
for:
Interest............................................................. $ 4,513 $ 4,517
Income taxes......................................................... $ 514 $ 441
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
-3-
<PAGE> 6
CCFNB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
UNAUDITED
BASIS OF PRESENTATION
NOTE 1 - The accounting and reporting policies of CCFNB Bancorp and its
subsidiary conform to generally accepted accounting principles and to
general practices within the banking industry. These consolidated
interim financial statements include the accounts of CCFNB Bancorp,
Inc. and its wholly owned subsidiary, Columbia County Farmers National
Bank. All significant inter-company balances have been eliminated.
NOTE 2 - The accompanying consolidated interim financial statements are
unaudited. In management's opinion, the consolidated interim financial
statements reflect a fair presentation of the consolidated financial
position of CCFNB Bancorp, Inc. and Subsidiary, the results of their
operations and their cash flows for the interim periods presented.
Further, the consolidated interim financial statements reflect all
adjustments, which are in the opinion of management, necessary to
present fairly the consolidated financial condition and consolidated
results of operations and cash flows for the interim period presented
and that all such adjustments to the consolidated financial statements
are of a normal recurring nature.
NOTE 3 - The results of operations for the nine month period ended September 30,
1999 are not necessarily indicative of the results to be expected for
the full year.
NOTE 4 - Net income per share of common stock for the interim periods is based
on the weighted average number of shares for each period; 1999 -
1,377,041 shares and 1998 - 1,379,506 shares.
NOTE 5 - LOANS
Loans are stated at their outstanding principal balances, net of any
deferred fees or costs, unearned income, and the allowance for loan
losses. Interest on loans is accrued on the principal amount
outstanding, primarily on an actual day basis. Non-refundable loan fees
and certain direct costs are deferred and amortized over the life of
the loans using the interest method. The amortization is reflected as
an interest yield adjustment, and the deferred portion of the net fees
and costs is reflected as a part of the loan balance.
-4-
<PAGE> 7
Non-Accrual Loans - Generally, a loan is classified as non-accrual, and
the accrual of interest on such a loan is discontinued when the
contractual payment of principal or interest has become 90 days past
due or management has serious doubts about further collectibility of
principal or interest, even though the loan currently is performing. A
loan may remain on accrual status if it is in the process of collection
and is either guaranteed or well secured. When a loan is placed on
non-accrual status, unpaid interest credited to income in the current
year is reversed, and unpaid interest accrued in prior years is charged
against the allowance for credit losses. Certain non-accrual loans may
continue to perform, that is, payments are still being received.
Generally, the payments are applied to principal. These loans remain
under constant scrutiny and if performance continues, interest income
may be recorded on a cash basis based on management's judgement as to
collectibility of principal.
Allowance for Loan Losses - The allowance for loan losses is
established through provisions for loan losses charged against income.
Loans deemed to be uncollectible are charged against the allowance for
loan losses, and subsequent recoveries, if any, are credited to the
allowance.
A principal factor in estimating the allowance for loan losses is the
measurement of impaired loans. A loan is considered impaired when,
based on current information and events, it is probable that the
Corporation will be unable to collect all amounts due according to the
contractual terms of the loan agreement. Under current accounting
standards, the allowance for loan losses related to impaired loans is
based on discounted cash flows using the loan's effective interest rate
or the fair value of the collateral for certain collateral dependent
loans.
The allowance for loan losses is maintained at a level established by
management to be adequate to absorb estimated potential loan losses.
Management's periodic evaluation of the adequacy of the allowance for
loan losses is based on the Corporation's past loan loss experience,
known and inherent risks in the portfolio, adverse situations that may
affect the borrower's ability to repay (including the timing of future
payments), the estimated value of any underlying collateral,
composition of the loan portfolio, current economic conditions, and
other relevant factors. This evaluation is inherently subjective as it
requires material estimates, including the amounts and timing of future
cash flows expected to be received on impaired loans that may be
susceptible to significant change.
The following table presents the changes in the allowance for credit
losses:
<TABLE>
<CAPTION>
IN THOUSANDS
------------
<S> <C>
Balance at January 1, 1999............................ $954
Provisions charged to operations...................... 59
Loans charged off..................................... (62)
Recoveries............................................ 29
----
Balance at September 30, 1999......................... $980
====
</TABLE>
At September 30, 1999 no loans were considered impaired as defined by
Statement No. 114. Accordingly, no additional charge to operations was
required since the total allowance for loan losses was estimated by
management to be adequate to provide for the loan loss allowance under
Statement No. 114 as well as any other potential loan losses.
-5-
<PAGE> 8
NOTE 6 - The following represents changes in stockholders' equity for the
current year:
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
COMPREHENSIVE COMPREHENSIVE
COMMON COMMON INCOME RETAINED INCOME TREASURY
SHARES STOCK SURPLUS (LOSS) EARNINGS (LOSS) STOCK TOTAL
------ ----- ------- ------ -------- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1999 .......... 1,382,433 $1,728 $5,849 $ 0 $15,670 $ 448 $(215) $23,480
Comprehensive Income:
Net income ......................... 0 0 0 1,490 1,490 0 0 1,490
Other comprehensive income (loss),
net of tax:
Unrealized (losses) gains on
investment securities of
($1,323), net of reclassification
adjustment for gains included
in net income of $26 ............ 0 0 0 (1,349) 0 (1,349) 0 (1,349)
-------
TOTAL COMPREHENSIVE INCOME (LOSS) . $ 141
Issuance of 5,416 shares of common .. =======
stock under dividend reinvestment
and stock purchase plans .......... 5,416 7 102 0 0 0 109
Purchase of 1,700 shares of
treasury stock .................... 0 0 0 0 0 (37) (37)
Sale of 549 shares of treasury
stock ............................. 0 0 (5) 0 0 18 13
Retirement of 8,127 shares of
treasury stock .................... (8,127) (10) (224) 0 0 234 0
Cash dividends $.376 per share ...... 0 0 0 (518) 0 0 (518)
--------- ------ ------ ------- ------- ------- -------
Balance at September 30, 1999 ....... 1,379,722 $1,725 $5,722 $16,642 $ (901) $ 0 $23,188
========= ====== ====== ======= ======= ======= =======
</TABLE>
NOTE 7 - The consolidated interim financial statements have been prepared in
accordance with requirements of Form 10-Q and therefore do not include
all the disclosures normally required by generally accepted accounting
principles, or those normally made in the Corporation's annual 10-K
filing. The reader of these consolidated interim financial statements
may wish to refer to the Corporation's annual report on Form 10-K for
the period ended December 31, 1998, filed with the Securities and
Exchange Commission.
-6-
<PAGE> 9
CCFNB BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Consolidated Summary of Operations
- ----------------------------------
(Dollars in Thousands, except for per share data)
<TABLE>
<CAPTION>
AT AND FOR THE NINE MONTHS
--------------------------
ENDED SEPTEMBER 30, AT AND FOR THE YEARS ENDED DECEMBER 31,
------------------- ---------------------------------------
1999 1998 1998 1997 1996 1995 1994
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Income and Expense:
Interest income ...................... $ 9,393 $ 9,333 $ 12,444 $ 12,498 $ 11,844 $ 11,466 $ 10,459
Interest expense ..................... 4,504 4,530 6,072 5,976 5,588 5,557 4,785
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income .................. 4,889 4,803 $ 6,372 6,522 6,256 5,909 5,674
Loan loss provision .................. 59 59 78 60 80 42 160
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income after loan loss
provision .......................... 4,830 4,744 6,294 6,462 6,176 5,867 5,514
Non-interest income .................. 784 740 981 804 762 693 569
Non-interest expense ................. 3,621 3,664 4,739 4,492 4,450 4,374 3,958
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes ........... 1,993 1,820 2,536 2,774 2,488 2,186 2,125
Income taxes ......................... 503 449 634 749 664 561 560
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income ........................... 1,490 1,371 1,902 2,025 1,824 1,625 1,565
========== ========== ========== ========== ========== ========== ==========
Per Share: (1)
Net income ........................... $ 1.08 $ .99 $ 1.38 $ 1.47 $ 1.33 $ 1.19 $ 1.35
Cash dividends paid .................. .376 .348 .46 .46 .45 .45 .42
Average shares outstanding ........... 1,377,041 1,379,506 1,381,062 1,381,800 1,375,875 1,367,595 1,163,199
Average Balance Sheet:
Loans ................................ $ 120,883 $ 116,402 $ 116,490 $ 116,771 $ 112,341 $ 111,980 $ 100,628
Investments .......................... 50,093 45,676 45,878 40,307 39,248 37,063 41,410
Other earning assets ................. 3,596 3,736 4,952 5,053 3,739 1,727 2,696
Total assets ......................... 185,509 176,609 177,643 171,159 164,512 157,957 151,752
Deposits ............................. 138,796 130,143 131,366 117,086 117,414 116,495 115,071
Other interest-bearing liabilities ... 22,219 22,890 22,660 20,198 14,860 11,766 11,014
Stockholders' equity ................. 23,177 22,272 22,264 20,690 19,512 18,067 13,736
Balance Sheet Data:
Loans ................................ 124,484 116,779 118,558 119,045 115,590 111,831 109,800
Investments .......................... 50,188 48,774 48,151 43,862 37,407 40,384 39,323
Other earning assets ................. 215 2,439 7,381 582 6,856 385 4,174
Total assets ......................... 185,325 178,092 185,258 173,866 170,086 162,066 157,124
Deposits ............................. 137,158 132,506 137,679 127,719 131,400 128,985 126,864
Other interest-bearing liabilities ... 23,823 21,240 22,709 22,802 16,951 12,430 11,910
Stockholders' equity ................. 23,188 22,993 23,480 22,105 20,657 19,512 17,650
Ratios: (2)
Return on average assets ............. 1.07% 1.03% 1.07% 1.18% 1.11% 1.03% 1.03%
Return on average equity ............. 8.57% 8.21% 8.54% 9.79% 9.35% 8.99% 11.39%
Dividend payout ratio ................ 34.77% 35.01% 33.59% 31.65% 33.95% 34.35% 36.54%
Average equity to average assets ratio 12.49% 12.61% 12.53% 12.71% 11.86% 11.44% 9.05%
</TABLE>
(1) Per share data has been calculated on the weighted average number of shares
outstanding.
(2) The ratios for the nine month period ending September 30, 1999 are
annualized.
-7-
<PAGE> 10
The following discussion and analysis of the financial condition and results of
operations of the Corporation should be read in conjunction with the
consolidated financial statements of the Corporation. The consolidated financial
condition and results of operations of the Corporation are essentially those of
the Bank. Therefore, the discussion and analysis that follows is directed
primarily at the performance of the Bank.
Overview
- --------
Total assets remained at $185.3 million at September 30, 1999 and December 31,
1998. Net income increased 8.7% through September 30, 1999 to $1,490,000 or
$1.08 per share, compared to $1,371,000 or $.99 per share for the same nine
month period ended September 30, 1998. Loans increased in 1999 by 5.0% to $124.5
million at September 30, 1999 from $118.6 million at December 31, 1998.
Results of Operations - For the Nine Months Ended September 30, 1999 and
September 30, 1998.
Net income is affected by five major components: net interest income or the
difference between interest income earned on loans and investments and interest
expense paid on deposits and borrowed funds; the provision for loan losses,
which is the amount charged against net interest income and added to the
allowance for loan losses to provide a reserve for potential future loan losses;
other non-interest income, which is made up of certain fees, gains and losses
from the sale of investment securities, trust department income and other items;
and other non-interest expenses, which consist primarily of salaries and
benefits, general overhead expenses, other operational expenses and income
taxes. Each of these major components is reviewed in more detail in the
following discussion.
Net income for the nine months ended September 30, 1999 was $1,490,000, or $1.08
per share, as compared to $1,371,000, or $.99 per share, for the comparable
period in 1998. A 6.8% increase in interest income on securities from $1,943,000
at September 30, 1998 to $2,075,000 at September 30, 1999 reflects an increase
of $132,000 coupled with 1% decrease on interest on loans from $7,216,000 at
September 30, 1998 to $7,150,000 at September 30, 1999 reflecting a $66,000
decrease in income or a net increase of $66,000 which accounts for the majority
of the increase of $60,000 in interest income.
Total interest expense decreased by .6% or $26,000. Non-interest income
increased $44,000 and non-interest expense decreased $43,000 reflecting a gain
of $87,000 for the nine month period ended September 30, 1999 and 1998.
The aforementioned factors account for the $173,000 favorable increase in income
before income taxes when comparing September 30, 1999 to September 30, 1998.
After giving effect for income taxes net income increased .9% or $119,000 for
the nine month period ending September 30, 1999 as compared to the same period
in 1998.
-8-
<PAGE> 11
Return on average assets and return on average equity were 1.07% and 8.57%,
respectively, for the nine months ended September 30, 1999, as compared to 1.03%
and 8.21%, respectively, for the comparable period in 1998.
Net Interest Income
- -------------------
For the nine months ended September 30, 1998 and 1999, net interest income was
$4.8 and $4.9 million respectively. The net interest margin reflected a decrease
to 3.94% for the nine months ended September 30, 1999 from 4.09% for the
comparable period in 1998. Average interest earning assets at September 30, 1999
increased by 5.6% over September 30, 1998.
Average loans outstanding increased from $116.4 million to $120.9 million or
3.9% for the nine months ended September 30, 1999, as compared to the nine
months ended September 30, 1998. The outstanding balance of loans at September
30, 1999, increased from $118.6 million at December 31, 1998 to $124.5 million
at September 30, 1999. A 1.0% decrease in income on loans from $7,216 million at
September 30, 1998 to $7,150 million at September 30, 1999 occurred even though
the loans increased during the period.
Shown below is a summary of past due and non-accrual loans:
<TABLE>
<CAPTION>
IN THOUSANDS OF DOLLARS
----------------------------
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
Past due and non-accrual:
<S> <C> <C>
Days 30 - 89......................................... $1,754 $1,063
Days 90 plus......................................... 293 415
Non-accrual.......................................... 156 537
------ ------
$2,203 $2,015
====== ======
</TABLE>
Past due and non-accrual loans increased to $2.2 million at September 30, 1999
from $2.0 million at December 31, 1998. These real estate delinquencies mainly
fall into the 60 day and below category. The increase specifically was
attributable entirely to real estate loans which become past due during the six
months which are fully secured by adequate real estate collateral.
Any loans classified for regulatory purposes as loss, doubtful, substandard, or
special mention that have not been disclosed under Industry Guide 3 do not (i)
represent or result from trends or uncertainties which management reasonably
expects will materially impact future operating results, liquidity, or capital
resources, or (ii) represent material credits about which management is aware of
any information which causes management to have serious doubts as to the ability
of such borrowers to comply with the loan repayment terms.
The Corporation adheres to principles provided by Financial Accounting Standards
Board Statement No. 114, "Accounting by Creditors for Impairment of a Loan" -
Refer to Note 5 above for other details.
-9-
<PAGE> 12
The following analysis provides a schedule of loan maturities/interest rate
sensitivities. This schedule presents a repricing and maturity analysis as
required by the FFIEC:
<TABLE>
<CAPTION>
IN THOUSANDS
OF DOLLARS
-------------
SEPTEMBER 30,
MATURITY AND REPRICING DATA FOR LOANS AND LEASES 1999
------------------------------------------------ -------------
Closed-end loans secured by first liens on 1-4 family residential
properties with a remaining maturity or repricing frequency of:
<S> <C>
(1) Three months or less........................................... $ 3,328
(2) Over three months through 12 months............................ 12,716
(3) Over one year through three years.............................. 26,826
(4) Over three years through five years............................ 4,715
(5) Over five years through 15 years............................... 7,890
(6) Over 15 years.................................................. 2,276
All loans and leases other than closed-end loans secured by first liens on
1-4 family residential properties with a remaining maturity or repricing
frequency of:
(1) Three months or less........................................... 16,353
(2) Over three months through 12 months............................ 9,665
(3) Over one year through three years.............................. 15,566
(4) Over three years through five years............................ 9,687
(5) Over five years through 15 years............................... 11,962
(6) Over 15 years.................................................. 3,946
--------
Sub-total....................................................... $124,930
Add: non-accrual loans not included above............................. 156
Less: unearned income................................................. 602
--------
Total Loans and Leases.......................................... $124,484
========
</TABLE>
Interest income from investment securities reflects a 6.8% increase comparing
$2,075,000 for the nine months ended September 30, 1999, and the $1,943,000 for
the comparable period of 1998. The average balance of investment securities for
the nine months ended September 30, 1999 increased 9.6% to $50.1 million,
compared to the $45.7 million for the same period of 1998.
Total interest expense decreased $26,000 or .6% for the first nine months of
1999, as compared to the first nine months of 1998.
Average short term borrowings decreased from $20.5 million at September 30, 1998
to $19.4 million at September 30, 1999. This decrease coupled with falling
interest rates through the first quarter of 1999 reflected a decrease of
$100,000 in interest on these borrowings. Conversely, interest on deposits
increased $53,000 when comparing September 30, 1999 to 1998. This increase was
attributable to rising interest rates during the most recent two quarters in
1999.
The following table sets forth, for the periods indicated, information
regarding: (1) the total dollar amount of interest income from interest-earning
assets and the resultant average yields; (2) the total dollar amount of interest
expense on interest-bearing liabilities and the resultant average cost; (3) net
interest income; (4) net interest margin; (5) tax equivalent net interest
income; and (6) tax equivalent net interest margin. Information is based on
average daily balances during the indicated periods.
-10-
<PAGE> 13
Average Balance Sheet and Rate Analysis
- ---------------------------------------
(Dollars in Thousands)
<TABLE>
<CAPTION>
SEPTEMBER 1999 SEPTEMBER 1998
-------------- --------------
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE(1) EXPENSE(2) RATE BALANCE(1) EXPENSE(2) RATE
---------- --------------- ---------- ---------- ----
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest bearing deposits with other financial
institutions ...................................... $ 3,596 $ 129 4.78% $ 3,736 $ 154 5.50%
Investment securities:
U.S. government securities ........................ 34,528 1,508 5.82% 31,043 1,384 5.94%
State and municipal obligations (3) ............... 14,183 507 7.22% 12,921 483 7.55%
Other securities .................................. 1,382 60 5.79% 1,712 76 5.92%
--------- ------ ---- ---------- ------ ----
Total Investment Securities ......................... $ 50,093 $2,075 5.52% $ 45,676 $1,943 5.67%
Federal funds sold .................................. 1,103 39 4.71% 495 20 5.39%
Consumer ............................................ 10,316 640 8.27% 9,109 616 9.02%
Dealer floor plan ................................... 2,572 153 7.93% 2,014 132 8.74%
Mortgage ............................................ 98,226 5,767 7.83% 97,548 5,955 8.14%
Commercial .......................................... 7,492 500 8.90% 5,812 427 9.80%
Tax free (3) ........................................ 2,277 90 7.98% 1,919 86 9.05%
--------- ------ ---- ---------- ------ ----
Total loans ......................................... $ 120,883 $7,150 7.89% $ 116,402 $7,216 8.27%
Total interest earning assets ....................... 175,675 9,393 7.13% 166,309 9,333 7.48%
--------- ------ ---- ---------- ------ ----
Reserve for loan losses ............................. $ (986) $ (925)
Cash and due from banks ............................. 1,683 1,931
Other assets ........................................ 9,137 9,294
--------- ----------
Total assets ........................................ $ 185,509 $ 176,609
========= ==========
LIABILITIES AND CAPITAL:
SUPER NOW deposits .................................. $ 21,867 $ 221 1.35% $ 20,067 $ 265 1.76%
IRA's under $100,000 ................................ 8,335 308 4.93% 7,975 307 5.13%
Money market deposits ............................... 11,018 228 2.76% 11,870 258 2.90%
Savings deposits .................................... 21,901 418 2.54% 20,751 404 2.60%
Time deposits including IRA's over $100,000 ......... 13,631 587 5.74% 10,871 486 5.96%
Other time deposits under $100,000 .................. 48,879 1,945 5.31% 46,825 1,934 5.51%
--------- ------ ---- ---------- ------ ----
Total interest bearing deposits ..................... $ 125,631 $3,707 3.93% $ 118,359 $3,654 4.12%
--------- ------ ---- ---------- ------ ----
U.S. treasury short-term borrowings ................. 447 15 4.47% 504 21 5.56%
Short-term borrowings - other ....................... 34 2 7.84% 7 0 0.00%
Long-term borrowings ................................ 2,315 97 5.59% 1,926 72 4.98%
Repurchase agreements ............................... 19,423 683 4.69% 20,453 783 5.10%
--------- ------ ---- ---------- ------ ----
Total interest bearing liabilities .................. $ 147,850 $4,504 4.06% $ 141,249 $4,530 4.28%
--------- ------ ---- ---------- ------ ----
Demand deposits ..................................... $ 13,165 $ 11,784
Other liabilities ................................... 1,317 1,304
Stockholders' equity ................................ 23,177 22,272
--------- ----------
Total liabilities and capital ....................... $ 185,509 $ 176,609
========= ==========
NET INTEREST INCOME/NET INTEREST MARGIN (4) ......... $4,889 3.71% $4,803 3.85%
====== ==== ====== ====
TAX EQUIVALENT NET INTEREST INCOME/
NET INTEREST MARGIN (5) ............................ $5,196 3.94% $5,096 4.09%
====== ==== ====== ====
(1) Average volume information was computed using daily averages.
(2) Interest on loans includes fee income.
(3) Yield on tax-exempt obligation has been computed on a tax-equivalent basis.
(4) Net interest margin is computed by dividing net interest income by total
interest earning assets.
(5) Interest and yield are presented on a tax-equivalent basis using 34%
for 1999 and 1998.
</TABLE>
-11-
<PAGE> 14
Provision for Loan Losses
- -------------------------
The provision for loan losses is based on management's evaluation of the
allowance for loan losses in relation to the credit risk inherent in the loan
portfolio. In establishing the amount of the provision required, management
considers a variety of factors, including but not limited to, general economic
conditions, volumes of various types of loans, collateral adequacy and potential
losses from significant borrowers. On a monthly basis, the Board of Directors
and the Credit Administration Committee review information regarding specific
loans and the total loan portfolio in general in order to determine the amount
to be charged to the provision for loan losses.
For the nine month period ending September 30, 1999 and 1998, the provision for
loan losses was $59,000.
Non-Interest Income
- -------------------
The following table sets forth, for the periods indicated, the major components
of non-interest income:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------
1999 1998
---- ----
(Dollars in Thousands)
<S> <C> <C>
Service charges and fees.................................. $454 $447
Trust department income................................... 129 90
Investment securities gain - net.......................... 39 21
Invest income............................................. 75 76
Other..................................................... 87 106
---- ----
Total................................................ $784 $740
==== ====
</TABLE>
For the nine months ended September 30, 1999, total non-interest income
increased $44,000 to $784,000 compared with $740,000 for the nine months ended
September 30, 1998. The increase is generally the result of fee income increase
of $7,000 from $447,000 at September 30, 1998 to $454,000 at September 30, 1999
and trust department income increase of $39,000 as compared to the nine month
period ending September 30, 1998.
Non-Interest Expenses
- ---------------------
Generally, non-interest expense accounts for the cost of maintaining facilities,
providing salaries and necessary benefits to employees, and general operating
costs such as insurance, supplies, advertising, data processing services, taxes
and other related expenses. Some of the costs and expenses are variable while
others are fixed. To the extent possible, the Company utilizes budgets and
related measures to control variable expenses. The following table sets forth,
for the periods indicated, the major components of non-interest expenses:
-12-
<PAGE> 15
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------
1999 1998
---- ----
(Dollars in Thousands)
<S> <C> <C>
Salaries and wages....................................... $1,415 $1,421
Employee benefits........................................ 471 464
Net occupancy expense.................................... 259 251
Furniture and equipment expense.......................... 450 417
FDIC insurance........................................... 12 12
State shares tax......................................... 146 128
Other expense............................................ 868 971
------ ------
Total............................................... $3,621 $3,664
====== ======
</TABLE>
A net favorable decrease of $43,000 occurred when comparing September 30, 1999
total non-interest expense to September 30, 1998. No significant increase or
decrease occurred when comparing September 30, 1999 salaries and employee
benefits, the largest non-interest expense category.
An analysis of the more significant changes accounting for the net decrease in
non-interest expenses when comparing September 30, 1999 to September 30, 1998
follows: On the positive side, computer costs associated with in-house systems
and year 2000 compliance decreased $56,000, directors fees and expenses
decreased $17,000, credit card costs decreased $9,000 and costs associated with
branch operations and loans decreased $17,000. Conversely, shares tax increased
$18,000, furniture and equipment expense which is mainly depreciation and
equipment maintenance increased $33,000 and occupancy expense increased $8,000.
Capital
- -------
A major strength of a financial institution is a strong capital position. This
capital is very critical as it must provide growth, payment to stockholders, and
absorption of unforeseen losses. The federal regulators provide standards that
must be met. These standards measure "risk-adjusted" assets against different
categories of capital. The "risk-adjusted" assets reflect off balance sheet
items, such as commitments to make loans, and also place balance sheet assets on
a "risk" basis for collectibility. The adjusted assets are measured against Tier
I Capital and Total Qualifying Capital. Tier I Capital is common stockholders'
equity and Tier II Capital includes the allowance for loan losses. Allowance for
loan losses must be lower than or equal to common stockholders' equity to be
eligible for Total Qualifying Capital.
The Company exceeds all minimum capital requirements as reflected in the
following table:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------ -----------------
MINIMUM MINIMUM
CALCULATED STANDARD CALCULATED STANDARD
RATIOS RATIOS RATIOS RATIOS
------ ------ ------ ------
Risk Based Ratios:
<S> <C> <C> <C> <C>
Tier I Capital to risk-weighted assets.. 20.91% 4.00% 20.43% 4.00%
Total Qualifying Capital to
risk-weighted assets.................. 21.76% 8.00% 21.80% 8.00%
</TABLE>
-13-
<PAGE> 16
Additionally, certain other ratios also provide capital analysis as follows:
<TABLE>
<CAPTION>
SEPTEMBER DECEMBER
30, 1999 31, 1998
--------- --------
<S> <C> <C>
Tier I Capital to average assets............................ 13.02% 12.95%
Tier II Capital to average assets........................... 13.55% 13.49%
</TABLE>
Management believes that the Bank's current capital position and
liquidity positions are strong and that its capital position is adequate
to support its operations.
Year 2000
- ---------
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Bank's
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices,
calculate correct accruals, or engage in similar normal business activities.
An assessment of the Bank's software and hardware has revealed those portions
which will be required to be modified or replaced in order to properly utilize
dates beyond December 31, 1999. The Bank presently believes that the Year 2000
is near resolution.
Another consideration for the imminent year 2000 readiness are embedded
microchip problems. These microchips could be in such items as water pumps,
sewage pumps, elevators, heat pumps, etc. A survey of all equipment containing
possible microchips has been conducted at all CCFNB locations. Plumbing and
heating vendors have been contacted as well as the telephone service providers.
"White papers" indicating Y2K readiness have been obtained from all providers.
Another consideration is the fact that there can be no guarantee that the
systems of other companies on which the Bank's systems rely will be timely
converted, or that a failure to convert by another company, or a conversion that
is incompatible with the Bank's systems, would not have a material adverse
effect on the Bank. Bancorp management is engaging in due diligence to assure
that these possibilities will not occur. The Bank has determined it has no
exposure to contingencies related to the Year 2000 Issue for its products
offered to its customers.
The Bank has utilized both internal and external resources to reprogram, or
replace, and test the software for Year 2000 modifications. The Bank has already
spent $323,000 and anticipates it will spend a total of $340,000 to complete the
Year 2000 project. These costs are considered manageable by the Bank and are
being funded through operating cash flows. The costs will not have a material
effect on the results of operations in 1999 or beyond.
The time-lines and costs are based on management's best estimates, which were
derived utilizing numerous assumptions of future events, including the continued
availability of certain resources, third party modification plans and other
factors. However, there can be no guarantee that these estimates will be
achieved and actual results could differ materially from those plans. Specific
factors that might cause such material differences include, but are not limited
to, the availability and cost of personnel trained in this area, the ability to
locate and correct all relevant computer codes and similar uncertainties.
-14-
<PAGE> 17
The Corporation and the Bank are aggressively addressing the Year 2000 Issue.
This issue is far-reaching in that it encompasses computer systems, microchips,
anything with time elements, and forces the Bank to ask each vendor, customer,
and third party provider if they are also ready for the millennium, which is
fast approaching.
A Senior Vice President has been given the responsibility for Y2K compliance. A
committee has been selected consisting of Board Members and Officers who have
been meeting for well over a year addressing this issue.
Letters have been sent to vendors requesting, in writing, their effort to be in
compliance with Y2K. A select group of commercial customers have been sent
letters and visited by management explaining the Y2K Issues and asking them to
be certain to address this very important issue. The Bank has also offered to
help with any questions. Notices have been placed in each Bank lobby alerting
the public to this issue. Also, verbiage has been placed on each deposit
statement concerning the Y2K Issue. Newspaper print ads and statement inserts
are planned for the last two quarters of 1999 to further communicate our
readiness to our customers.
A time-line has been created for this project. All letters were mailed by March
15, 1998 and compliance letters were received by June 30, 1998. Compliance on
all levels is very near completion. Testing will continue until the Bank is
assured all critical systems are confirmed to be Y2K compliant.
Vendors and systems have been placed in priority order as to importance. All
third party vendors that are most crucial have communicated with us stating they
are Y2K compliant and testing on their systems is complete.
Our insurance carrier has been contacted and we are working closely with it to
prudently assess the Bank's needs and take the appropriate steps to protect the
Bank.
Contingency plans have been written on any systems that do not comply or are
questionable as to their compliance.
The Bank will be diligent in its quest for assurance of compliance and will
change vendors, if necessary, to ensure a smooth change to the millennium and
continuity of banking operations and profit growth.
Time lines have been established for December 30, 1999 - January 4, 2000 in all
areas. The usual three bank offices will open on Saturday, January 1, 2000, from
9:00 a.m. - 12:00 p.m.
Contingency plans for cash and additional insurance and borrowing capacity is in
place.
Customer reassurance is a major focus of marketing through 1999.
National bank examiners are reviewing all banks quarterly for their compliance
with these issues and the Corporation and the Bank welcome these reviews and any
assistance they will provide.
-15-
<PAGE> 18
PART II - Other Information:
Item 1. Legal Proceedings
Management and the Corporation's legal counsel are not aware of any litigation
that would have a material adverse effect on the consolidated financial position
of the Corporation. There are no proceedings pending other than the ordinary
routine litigation incident to the business of the Corporation and its
subsidiary, Columbia County Farmers National Bank. In addition, no material
proceedings are pending or are known to be threatened or contemplated against
the Corporation and the Bank by government authorities.
Item 2. Changes in Securities - Nothing to report.
Item 3. Defaults Upon Senior Securities - Nothing to report.
Item 4. Submission of Matters to a Vote of Security Holders - Nothing to report.
Item 5. Other Information - Nothing to report.
Item 6. Exhibits and Reports on Form 8-K
8-K filed September 13, 1999 reporting the following action: CCFNB Bancorp, Inc.
Announces Stock Buy Back Plan.
Bloomsburg, Pennsylvania, September 13, 1999 - CCFNB Bancorp's board of
directors has announced that it has authorized the company to purchase up to ten
percent or 137,800 shares in the aggregate of the company's common stock, in
open market purchases from time to time in the discretion of the company's
management to fund its dividend reinvestment plan.
CCFNB Bancorp intends to effect such purchases, if any, in compliance with the
Rule 10b-18 under the Securities Exchange Act of 1934.
-16-
<PAGE> 19
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.
CCFNB BANCORP, INC.
(Registrant)
By /s/ Paul E. Reichart
-----------------------
Paul E. Reichart
President & CEO
Date:
By /s/ Virginia D. Kocher
-------------------------
Virginia D. Kocher
Treasurer
Date: November 8, 1999
-17-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10-Q
6-30-99
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 6,769
<SECURITIES> 51,430
<RECEIVABLES> 123,235
<ALLOWANCES> 999
<INVENTORY> 0
<CURRENT-ASSETS> 180,435
<PP&E> 5,459
<DEPRECIATION> 0
<TOTAL-ASSETS> 185,894
<CURRENT-LIABILITIES> 102,777
<BONDS> 0
0
0
<COMMON> 1,728
<OTHER-SE> 21,389
<TOTAL-LIABILITY-AND-EQUITY> 185,894
<SALES> 6,195
<TOTAL-REVENUES> 6,718
<CGS> 2,466
<TOTAL-COSTS> 2,466
<OTHER-EXPENSES> 2,405
<LOSS-PROVISION> 39
<INTEREST-EXPENSE> 529
<INCOME-PRETAX> 1,279
<INCOME-TAX> 320
<INCOME-CONTINUING> 959
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 959
<EPS-BASIC> .70
<EPS-DILUTED> .70
</TABLE>
