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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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, Pennsylvania 17815
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (570) 784-4400
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par
value $1.25 per share.
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 past 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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting and non-voting equity held by
non-affiliates of the Registrant based on the average of the bid and asked
prices of $17.63 at February 29, 2000, was $24,095,873.
As of February 29, 2000, the Registrant had outstanding 1,366,754
shares of its common stock, par value $1.25 per share.
DOCUMENTS INCORPORATED BY REFERENCE
In addition, portions of the Annual Report to stockholders of the
Registrant for the year ended December 31, 1999, are incorporated by reference
in Part II of this Annual Report.
Page 1 of 74
Exhibit Index on Page 29
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CCFNB BANCORP, INC.
FORM 10-K
INDEX
<TABLE>
<CAPTION>
Part Page
- ---- ----
<S> <C>
Item 1. Business........................................................................ 3
Item 2. Properties...................................................................... 19
Item 3. Legal Proceedings............................................................... 19
Item 4. Submission of Matters to a Vote of Security Holders............................. Not Applicable
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters....................................................................... 19
Item 6. Selected Financial Data......................................................... 20
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operation...................................................... 20
Item 7A. Quantitative and Qualitative Disclosure About Market Risk....................... 20
Item 8. Financial Statements and Supplementary Data..................................... 24
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure...................................................... Not Applicable
Part III
Item 10. Directors and Executive Officers of the Registrant.............................. 20
Item 11. Executive Compensation.......................................................... 21
Item 12. Security Ownership of Certain Beneficial Owners and Management.................. 25
Item 13. Certain Relationships and Related Transactions.................................. 26
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K................. 26
Signatures ................................................................................ 27
Index to Exhibits............................................................................. 29
</TABLE>
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CCFNB BANCORP, INC.
FORM 10-K
PART I
ITEM 1. BUSINESS
GENERAL
We are a registered bank holding company and Pennsylvania business corporation
and are headquartered in Bloomsburg, Pennsylvania. We have one wholly-owned
subsidiary which is Columbia County Farmers National Bank or referred to as the
Bank. Our business consists of the management and supervision of the Bank. Our
principal source of income is dividends paid by the Bank. At December 31, 1999,
we had approximately:
o $196 million in total assets;
o $134 million in loans;
o $139 million in deposits; and
o $23 million in stockholders' equity.
The Bank is a national banking association and member of the Federal Reserve
System whose deposits are insured by the Bank Insurance Fund of the FDIC. The
Bank is a full-service commercial bank providing a range of services and
products, including time and demand deposit accounts, consumer, commercial and
mortgage loans to individuals and small to medium-sized business in its
Northcentral Pennsylvania market area. The Bank operates also a full-service
trust department. At December 31, 1999, the Bank had six branch banking offices
which are located in the Pennsylvania county of Columbia.
We consider our branch banking offices to be a single operating segment, because
these branches have similar:
o economic characteristics,
o products and services,
o operating processes,
o delivery system,
o customer buses, and
o regulatory oversight.
We have not operated any other reportable operating segments in the 3-year
period ended December 31, 1999.
As of December 31, 1999, we had 84 employees on a full-time equivalent basis.
The Company and the Bank are not parties to any collective bargaining agreement
and employee relations are considered to be good.
SUPERVISION AND REGULATION
The following discussion sets forth the material elements of the regulatory
framework applicable to us and the Bank and provides certain specific
information. This regulatory framework is primarily intended for the protection
of investors in our common stock, depositors at the Bank and the Bank Insurance
Fund that insures bank deposits. To the extent that the following information
describes statutory and regulatory provisions, it is qualified by reference to
those provisions. A change in the statutes, regulations or regulatory policies
applicable to us or the Bank may have a material effect on our business.
INTERCOMPANY TRANSACTIONS
Various governmental requirements, including Sections 23A and 23B of the Federal
Reserve Act, limit borrowings by us from the Bank and also limit various other
transactions between us and the Bank. For example, Section 23A
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of the Federal Reserve Act limits to no more than ten percent of its total
capital the aggregate outstanding amount of the Bank's loans and other "covered
transactions" with any particular non-bank affiliate and limits to no more than
20 percent of its total capital the aggregate outstanding amount of the Bank's
covered transactions with all of its affiliates. At December 31, 1999,
approximately $4.6 million was available for loans to us from the Bank. Section
23A of the Federal Reserve Act also generally requires that the Bank's loans to
its non-bank affiliates be secured, and Section 23B of the Federal Reserve Act
generally requires that the Bank's transactions with its non-bank affiliates be
on arm's-length terms. Also, we and the Bank are prohibited from engaging in
certain "tie-in" arrangements in connection with extensions of credit or
provision of property or services.
SUPERVISORY AGENCIES
As a national bank and member of the Federal Reserve System, the Bank is subject
to primary supervision, regulation, and examination by the Office of the
Comptroller of the Currency and secondary regulation by the FDIC. The Bank is
subject to extensive statutes and regulations that significantly affect its
business and activities. The Bank must file reports with its regulators
concerning its activities and financial condition and obtain regulatory approval
to enter into certain transactions. The Bank is also subject to periodic
examinations by its regulators to ascertain compliance with various regulatory
requirements. Other applicable statutes and regulations relate to insurance of
deposits, allowable investments, loans, leases, acceptance of deposits, trust
activities, mergers, consolidations, payment of dividends, capital requirements,
reserves against deposits, establishment of branches and certain other
facilities, limitations on loans to one borrower and loans to affiliated
persons, activities of subsidiaries and other aspects of the business of banks.
Recent federal legislation has instructed federal agencies to adopt standards or
guidelines governing banks' internal controls, information systems, loan
documentation, credit underwriting, interest rate exposure, asset growth,
compensation and benefits, asset quality, earnings and stock valuation, and
other matters. Legislation adopted in 1994 gives the federal banking agencies
greater flexibility in implementing standards on asset quality, earnings, and
stock valuation. Regulatory authorities have broad flexibility to initiate
proceedings designed to prohibit banks from engaging in unsafe and unsound
banking practices.
We and the Bank are also affected by various other governmental requirements and
regulations, general economic conditions, and the fiscal and monetary policies
of the federal government and the Federal Reserve Board. The monetary policies
of the Federal Reserve Board influence to a significant extent the overall
growth of loans, leases, investments, deposits, interest rates charged on loans,
and interest rates paid on deposits. The nature and impact of future changes in
monetary policies are often not predictable.
We are subject to the jurisdiction of the SEC for matters relating to the
offering and sale of our securities. We are also subject to the SEC's rules and
regulations relating to periodic reporting, insider trader reports and proxy
solicitation materials. Our common stock is not listed for quotation of prices
on The NASDAQ Stock Market. However, daily bid and asked price quotations are
maintained on the interdealer electronic bulletin board system.
SUPPORT OF THE BANK
Under current Federal Reserve Board policy, we are expected to act as a source
of financial and managerial strength to the Bank by standing ready to use
available resources to provide adequate capital funds to the Bank during periods
of financial adversity and by maintaining the financial flexibility and
capital-raising capacity to obtain additional resources for assisting the Bank.
The support expected by the Federal Reserve Board may be required at times when
we may not have the resources or inclination to provide it.
If a default occurred with respect to the Bank, any capital loans to the Bank
from us would be subordinate in right of payment to payment of the Bank
depositors and certain of its other obligations.
LIABILITY OF COMMONLY CONTROLLED BANKS
The Bank can be held liable for any loss incurred, or reasonably expected to be
incurred, by the FDIC in connection with:
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o the default of a commonly controlled FDIC-insured depository
institution or
o any assistance provided by the FDIC to a commonly controlled
FDIC-insured depository institution in danger of default.
"Default" generally is defined as the appointment of a conservator or receiver,
and "in danger of default" generally is defined as the existence of certain
conditions indicating that a default is likely to occur in the absence of
regulatory assistance.
DEPOSITOR PREFERENCE STATUTE
In the "liquidation or other resolution" of the Bank by any receiver, federal
legislation provides that deposits and certain claims for administrative
expenses and employee compensation against the Bank are afforded a priority over
the general unsecured claims against the Bank, including federal funds and
letters of credit.
ALLOWANCE FOR LOAN LOSSES
There are certain risks inherent in making all loans. These risks include
interest rate changes over the time period in which loans may be repaid, risks
resulting from changes in our Northcentral Pennsylvania area economy, risks
inherent in dealing with individual borrowers, and, in the case of a loan backed
by collateral, risks resulting from uncertainties about the future value of the
collateral.
Commercial loans and commercial real estate loans comprised 40% of our total
consolidated loans as of December 31, 1999. Commercial loans are typically
larger than residential real estate loans and consumer loans. Because our loan
portfolio contains a significant number of commercial loans and commercial real
estate loans with relatively large balances, the deterioration of one or a few
of these loans may cause a significant increase in nonperforming loans. An
increase in nonperforming loans could result in a loss of earnings from these
loans, an increase in the provision for loan losses and loan charge offs.
We maintain an allowance for loan losses to absorb any loan losses based on,
among other things, our historical experience, an evaluation of economic
conditions, and regular reviews of any delinquencies and loan portfolio quality.
We cannot assure you that charge-offs in future periods will not exceed the
allowance for loan losses or that additional increases in the allowance for loan
losses will not be required. Additions to the allowance for loan losses would
result in a decrease in our net income and, possibly, our capital.
In evaluating our allowance for loan losses, we divide our loans into the
following categories:
o commercial,
o real estate mortgages,
o consumer, and
o unallocated.
We evaluate some loans as a group and some individually. We use the following
criteria in choosing loans to be evaluated individually:
o by industry group,
o by risk profile, and
o by past due status.
After our evaluation of these loans, we allocate portions of our allowance for
loan losses to categories of loans based upon the following considerations:
o historical trends,
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o economic conditions, and
o any known deterioration.
We use a self-correcting mechanism to reduce differences between estimated and
actual losses. We will, on a quarterly basis, weight our loss experience among
the various categories and reallocate the allowance for loan losses.
For a more in-depth presentation of our allowance for loan losses and the
components of this allowance, please refer to Item 7 of this report under
Management's Discussion and Analysis of Financial Condition and Results of
Operations as well as footnote 4 at Exhibit 13 to this report.
CAPITAL REQUIREMENTS
We are subject to risk-based capital requirements and guidelines imposed by the
Federal Reserve Board, which are substantially similar to the capital
requirements and guidelines imposed by the Comptroller of the Currency on the
Bank. For this purpose, a bank's or bank holding company's assets and certain
specified off-balance sheet commitments are assigned to four risk categories,
each weighted differently based on the level of credit risk that is ascribed to
those assets or commitments. In addition, risk-weighted assets are adjusted for
low-level recourse and market-risk equivalent assets. A bank's or bank holding
company's capital, in turn, includes the following tiers:
o core ("Tier 1") capital, which includes common equity,
non-cumulative perpetual preferred stock, a limited amount of
cumulative perpetual preferred stock, and minority interests
in equity accounts of consolidated subsidiaries, less
goodwill, certain identifiable intangible assets, and certain
other assets; and
o supplementary ("Tier 2") capital, which includes, among other
items, perpetual preferred stock not meeting the Tier 1
definition, mandatory convertible securities, subordinated
debt and allowances for loan and lease losses, subject to
certain limitations, less certain required deductions.
We, like other bank holding companies, are required to maintain Tier 1 and
"Total Capital" (the sum of Tier 1 and Tier 2 capital, less certain deductions)
equal to at least four percent and eight percent of their total risk-weighted
assets (including certain off-balance sheet items, such as unused lending
commitments and standby letters of credit), respectively. At December 31, 1999,
we met both requirements, with Tier 1 and Total Capital equal to 17.94 percent
and 18.68 percent of total risk-weighted assets.
The Federal Reserve Board has adopted rules to incorporate market and interest
rate risk components into their risk-based capital standards. Amendments to the
risk-based capital requirements, incorporating market risk, became effective
January 1, 1998. Under the new market-risk requirements, capital will be
allocated to support the amount of market risk related to a financial
institution's ongoing trading activities.
The Federal Reserve Board also requires bank holding companies to maintain a
minimum "Leverage Ratio" (Tier 1 capital to adjusted total assets) of three
percent if the bank holding company has the highest regulatory rating and meets
certain other requirements, or of three percent plus an additional cushion of at
least one to two percentage points if the bank holding company does not meet
these requirements. At December 31, 1999, our leverage ratio was 12.94 percent.
The Federal Reserve Board may set capital requirements higher than the minimums
noted above for holding companies whose circumstances warrant it. For example,
bank holding companies experiencing or anticipating significant growth may be
expected to maintain strong capital positions substantially above the minimum
supervisory levels without significant reliance on intangible assets.
Furthermore, the Federal Reserve Board has indicated that it will consider a
"Tangible Tier 1 Leverage Ratio" (deducting all intangibles) and other indicia
of capital strength in evaluating proposals for expansion or new activities or
when a bank holding company faces unusual or abnormal risk. The Federal Reserve
Board has not advised us of any specific minimum leverage ratio applicable to
it.
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The Bank is subject to similar risk-based capital and leverage requirements
adopted by the Comptroller of the Currency. The Bank was in compliance with the
applicable minimum capital requirements as of December 31, 1999. The Comptroller
of the Currency has not advised the Bank of any specific minimum leverage ratio
applicable to it.
Failure to meet capital requirements could subject the Bank to a variety of
enforcement remedies, including the termination of deposit insurance by the
FDIC, and to certain restrictions on its business. The Federal Deposit Insurance
Corporation Improvements Act of 1991 ("FDICIA"), among other things, identifies
five capital categories for insured banks - well capitalized, adequately
capitalized, undercapitalized, significantly undercapitalized, and critically
undercapitalized - and requires federal bank regulatory agencies to implement
systems for "prompt corrective action" for insured banks that do not meet
minimum capital requirements based on these categories. The FDICIA imposed
progressively more restrictive constraints on operations, management, and
capital distributions, depending on the category in which an institution is
classified. Unless a bank is well capitalized, it is subject to restrictions on
its ability to offer brokered deposits, on "pass-through" insurance coverage for
certain of its accounts, and on certain other aspects of its operations. FDICIA
generally prohibits a bank from paying any dividend or making any capital
distribution or paying any management fee to its holding company if the bank
would thereafter be undercapitalized. An undercapitalized bank is subject to
regulatory monitoring and may be required to divest itself of or liquidate
subsidiaries. Holding companies of such institutions may be required to divest
themselves of such institutions or divest themselves of or liquidate other
affiliates. An undercapitalized bank must develop a capital restoration plan,
and its parent bank holding company must guarantee the bank's compliance with
the plan up to the lesser of five percent of the bank's assets at the time it
became undercapitalized or the amount needed to comply with the plan. Critically
undercapitalized institutions are prohibited from making payments of principal
and interest on subordinated debt and are generally subject to the mandatory
appointment of a conservator or receiver.
Rules adopted by the Comptroller of the Currency under FDICIA provide that a
national bank is deemed to be well capitalized if the bank has a total
risk-based capital ratio of ten percent or greater, a Tier 1 risk-based capital
ratio of six percent or greater, and a leverage ratio of five percent or greater
and the institution is not subject to a written agreement, order, capital
directive, or prompt corrective action directive to meet and maintain a specific
level of any capital measure. As of December 31, 1999, the Bank was
well-capitalized, based on the prompt corrective action ratios and guidelines
described above. It should be noted, however, that a bank's capital category is
determined solely for the purpose of applying the Comptroller of the Currency's
prompt corrective action regulations, and that the capital category may not
constitute an accurate representation of the bank's overall financial condition
or prospects.
BROKERED DEPOSITS
Under FDIC regulations, no FDIC-insured bank can accept brokered deposits unless
it (1) is well capitalized, or (2) is adequately capitalized and receives a
waiver from the FDIC. In addition, these regulations prohibit any bank that is
not well capitalized from paying an interest rate on brokered deposits in excess
of three-quarters of one percentage point over certain prevailing market rates.
As of December 31, 1999, the Bank held no brokered deposits.
DIVIDEND RESTRICTIONS
We are a legal entity separate and district from the Bank. In general, under
Pennsylvania law, we cannot pay a cash dividend if such payment would render us
insolvent. Our revenues consist primarily of dividends paid by the Bank. The
National Bank Act limits the amount of dividends the Bank can pay to us without
regulatory approval. The Bank may declare and pay dividends to us to the lesser
of:
o the level of undivided profits, and
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o absent regulatory approval, an amount not in excess of net
income combined with retained net income for the preceding two
years.
At December 31, 1999, approximately $2 million was available for payment of
dividends to us.
In addition, federal bank regulatory authorities have authority to prohibit the
Bank from engaging in an unsafe or unsound practice in conducting its business.
Depending upon the financial condition of the bank in question, the payment of
dividends could be deemed to constitute an unsafe or unsound practice. The
ability of the Bank to pay dividends in the future is currently influenced, and
could be further influenced, by bank regulatory policies and capital guidelines.
DEPOSIT INSURANCE ASSESSMENTS
The deposits of the Bank are insured up to regulatory limits by the FDIC and,
accordingly, are subject to deposit insurance assessments to maintain the Bank
Insurance Fund ("BIF") administered by the FDIC. The FDIC has adopted
regulations establishing a permanent risk-related deposit insurance assessment
system. Under this system, the FDIC places each insured bank in one of nine risk
categories based on the bank's capitalization and supervisory evaluations
provided to the FDIC by the institution's primary federal regulator. An insured
bank's insurance assessment rate is then determined by the risk category in
which it is classified by the FDIC.
In the light of the recent favorable financial situation of the federal deposit
insurance funds and the recent low number of depository institution failures,
effective January 1, 1997 the annual insurance premiums on bank deposits insured
by the BIF vary between $0.00 per $100 of deposits for banks classified in the
highest capital and supervisory evaluation categories to $0.27 per $100 of
deposits for banks classified in the lowest capital and supervisory evaluation
categories. BIF assessment rates are subject to semi-annual adjustment by the
FDIC within a range of up to five basis points without public comment. The FDIC
also possesses authority to impose special assessments from time to time.
The Deposit Insurance Funds Act provides for assessments to be imposed on
insured depository institutions with respect to deposits insured by the BIF (in
addition to assessments currently imposed on depository institutions with
respect to BIF-insured deposits) to pay for the cost of Financing Corporation
("FICO") funding. The FDIC established the FICO assessment rates effective for
the fourth quarter 1999 at approximately $0.012 per $100 annually for
BIF-assessable deposits. The FICO assessments are adjusted quarterly to reflect
changes in the assessment bases of the FDIC insurance funds and do not vary
depending upon a depository institution's capitalization or supervisory
evaluations. In 1999, the Bank paid FICO assessments of $15,866.
INTERSTATE BANKING AND BRANCHING
Under the Riegle-Neal Interstate Banking and Branching Efficiency Act
("Riegle-Neal"), subject to certain concentration limits and other requirements:
o bank holding companies, such as we, are permitted to acquire
banks and bank holding companies located in any state;
o any bank that is a subsidiary of a bank holding company is
permitted to receive deposits, renew time deposits, close
loans, service loans, and receive loan payments as an agent
for any other depository institution subsidiary of that bank
holding company; and
o banks are permitted to acquire branch offices outside their
home states by merging with out-of-state banks, purchasing
branches in other states, and establishing de novo branch
offices in other states.
The ability of banks to acquire branch offices through purchase or opening of
other branches is contingent, however, on the host state having adopted
legislation "opting in" to those provisions of Riegle-Neal. In addition, the
ability of a bank to merge with a bank located in another state is contingent on
the host state not having adopted
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legislation "opting out" of that provision of Riegle-Neal. Pennsylvania has
opted in to all of these provisions upon the condition that another host state
has similar or reciprocal requirements as in Pennsylvania.
As of the date of this report, we are not contemplating any interstate
acquisitions of a bank or a branch office.
CONTROL ACQUISITIONS
The Change in Bank Control Act prohibits a person or group of persons from
acquiring "control" of a bank holding company, unless the Federal Reserve Board
has been notified and has not objected to the transaction. Under a rebuttable
presumption established by the Federal Reserve Board, the acquisition of ten
percent or more of a class of voting stock of a bank holding company with a
class of securities registered under Section 12 of the Exchange Act, such as we,
would, under the circumstances set forth in the presumption, constitute
acquisition of control of the bank holding company.
In addition, a company is required to obtain the approval of the Federal Reserve
Board under the Bank Holding Company Act before acquiring 25 percent (five
percent in the case of an acquirer that is a bank holding company) or more of
any class of outstanding common stock of a bank holding company, such as we, or
otherwise obtaining control or a "controlling influence" over that bank holding
company.
PERMITTED NON-BANKING ACTIVITIES
The Federal Reserve Board permits us or our subsidiaries to engage in nonbanking
activities so closely related to banking or managing or controlling banks as to
be a proper incident thereto. While the types of permissible activities are
subject to change by the Federal Reserve Board, the principal nonbanking
activities that presently may be conducted by a bank holding company or its
subsidiary without prior approval of the Federal Reserve Board are:
o Extending credit and servicing loans. Making, acquiring,
brokering, or servicing loans or other extensions of credit
(including factoring, issuing letters of credit and accepting
drafts) for the company's account or for the account of
others.
o Activities related to extending credit. Any activity usual in
connection with making, acquiring, brokering or servicing
loans or other extensions of credit, as determined by the
Federal Reserve Board. The Federal Reserve Board has
determined that the following activities are usual in
connection with making, acquiring, brokering or servicing
loans or other extensions of credit:
- Real estate and personal property appraising.
Performing appraisals of real estate and tangible and
intangible personal property, including securities.
- Arranging commercial real estate equity financing.
Acting as intermediary for the financing of
commercial or industrial income-producing real estate
by arranging for the transfer of the title, control,
and risk of such a real estate project to one or more
investors, if the bank holding company and its
affiliates do not have an interest in, or participate
in managing or developing, a real estate project for
which it arranges equity financing, and do not
promote or sponsor the development of the property.
- Check-guaranty services. Authorizing a subscribing
merchant to accept personal checks tendered by the
merchant's customers in payment for goods and
services, and purchasing from the merchant validly
authorized checks that are subsequently dishonored.
- Collection agency services. Collecting overdue
accounts receivable, either retail or commercial.
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- Credit bureau services. Maintaining information
related to the credit history of consumers and
providing the information to a credit grantor who is
considering a borrower's application for credit or
who has extended credit to the borrower.
- Asset management, servicing, and collection
activities. Engaging under contract with a third
party in asset management, servicing, and collection
of assets of a type that an insured depository
institution may originate and own, if the company
does not engage in real property management or real
estate brokerage services as part of these services.
- Acquiring debt in default. Acquiring debt that is in
default at the time of acquisition under certain
conditions.
- Real estate settlement servicing. Providing real
estate settlement services.
o Leasing personal or real property. Leasing personal or real
property or acting as agent, broker, or adviser in leasing
such property under certain conditions.
o Operating nonbank depository institutions:
- Industrial banking. Owning, controlling, or operating
an industrial bank, Morris Plan bank, or industrial
loan company, so long as the institution is not a
bank.
- Operating savings association. Owning, controlling or
operating a savings association, if the savings
association engages only in deposit-taking
activities, lending, and other activities that are
permissible for bank holding companies.
o Trust company functions. Performing functions or activities
that may be performed by a trust company (including activities
of a fiduciary, agency, or custodial nature), in the manner
authorized by federal or state law, so long as the company is
not a bank for purposes of the Bank Holding Company Act.
o Financial and investment advisory activities. Acting as
investment or financial advisor to any person, including
(without, in any way, limiting the foregoing):
- Serving as investment adviser (as defined in section
2(a)(20) of the Investment Company Act of 1940, 15
U.S.C. 80a-2(a)(20)), to an investment company
registered under that act, including sponsoring,
organizing, and managing a closed-end investment
company;
- Furnishing general economic information and advice,
general economic statistical forecasting services,
and industry studies;
- Providing advice in connection with mergers,
acquisitions, divestitures, investments, joint
ventures, leveraged buyouts, recapitalizations,
capital structurings, financing transactions and
similar transactions, and conducting financial
feasibility studies;
- Providing information, statistical forecasting, and
advice with respect to any transaction in foreign
exchange, swaps, and similar transactions,
commodities, and any forward contract, option,
future, option on a future, and similar instruments;
- Providing educational courses, and instructional
materials to consumers on individual financial
management matters; and
- Providing tax-planning and tax-preparation services
to any person.
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o Agency transactional services for customer investments:
- Securities brokerage. Providing securities brokerage
services (including securities clearing and/or
securities execution services on an exchange),
whether alone or in combination with investment
advisory services, and incidental activities
(including related securities credit activities and
custodial services), if the securities brokerage
services are restricted to buying and selling
securities solely as agent for the account of
customers and do not include securities underwriting
or dealing.
- Riskless principal transactions. Buying and selling
in the secondary market all types of securities on
the order of customers as a "riskless principal" to
the extent of engaging in a transaction in which the
company, after receiving an order to buy (or sell) a
security from a customer, purchases (or sells) the
security for its own account to offset a
contemporaneous sale to (or purchase from) the
customer. This does not include:
(A) Selling bank-ineligible securities at the order
of a customer that is the issuer of the securities, or selling
bank-ineligible securities in any transaction where the
company has a contractual agreement to place the securities as
agent of the issuer; or
(B) Acting as a riskless principal in any transaction
involving a bank-ineligible security for which the company or
any of its affiliates acts as underwriter (during the period
of the underwriting or for 30 days thereafter) or dealer.
- Private placement services. Acting as agent for the
private placement of securities in accordance with
the requirements of the Securities Act of 1933 ("1933
Act") and the rules of the Securities and Exchange
Commission, if the company engaged in the activity
does not purchase or repurchase for its own account
the securities being placed, or hold in inventory
unsold portions of issues of these securities.
- Futures commission merchant. Acting as a futures
commission merchant ("FCM") for unaffiliated persons
in the execution, clearance, or execution and
clearance of any futures contract and option on a
futures contract traded on an exchange in the United
States or abroad under certain conditions.
- Other transactional services. Providing to customers
as agent transactional services with respect to swaps
and similar transactions.
o Investment transactions as principal:
- Underwriting and dealing in government obligations
and money market instruments. Underwriting and
dealing in obligations of the United States, general
obligations of states and their political
subdivisions, and other obligations that state member
banks of the Federal Reserve System may be authorized
to underwrite and deal in under 12 U.S.C. 24 and 335,
including banker's acceptances and certificates of
deposit, under the same limitations as would be
applicable if the activity were performed by the bank
holding company's subsidiary member banks or its
subsidiary nonmember banks as if they were member
banks.
- Investing and trading activities. Engaging as
principal in:
(A) Foreign exchange;
-11-
<PAGE> 12
(B) Forward contracts, options, futures, options on
futures, swaps, and similar contracts, whether traded on
exchanges or not, based on any rate, price, financial asset
(including gold, silver, platinum, palladium, copper, or any
other metal approved by the Board), nonfinancial asset, or
group of assets, other than a bank-ineligible security under
certain conditions.
(C) Forward contracts, options, futures, options on
futures, swaps, and similar contracts, whether traded on
exchanges or not, based on an index of a rate, a price, or the
value of any financial asset, nonfinancial asset, or group of
assets, if the contract requires such settlement.
- Buying and selling bullion, and related activities.
Buying, selling and storing bars, rounds, bullion,
and coins of gold, silver, platinum, palladium,
copper, and any other metal approved by the Federal
Reserve Board, for the company's own account and the
account of others, and providing incidental services
such as arranging for storage, safe custody,
assaying, and shipment.
o Management consulting and counseling activities:
- Management consulting. Providing management
consulting advice under certain conditions.
- Employee benefits consulting services. Providing
consulting services to employee benefit, compensation
and insurance plans, including designing plans,
assisting in the implementation of plans, providing
administrative services to plans, and developing
employee communication programs for plans.
- Career counseling services. Providing career
counseling services to:
(A) A financial organization and individuals
currently employed by, or recently displaced from, a financial
organization;
(B) Individuals who are seeking employment at a
financial organization; and
(C) Individuals who are currently employed in or who
seek positions in the finance, accounting, and audit
departments of any company.
o Support services:
- Courier services. Providing courier services for:
(A) Checks, commercial papers, documents, and written
instruments (excluding currency or bearer-type negotiable
instruments) that are exchanged among banks and financial
institutions; and
(B) Audit and accounting media of a banking or
financial nature and other business records and documents used
in processing such media.
(ii) Printing and selling MICR-encoded items. Printing and
selling checks and related documents, including corporate image checks,
cash tickets, voucher checks, deposit slips, savings withdrawal
packages, and other forms that require Magnetic Ink Character
Recognition ("MICR") encoding.
-12-
<PAGE> 13
o Insurance agency and underwriting:
- Credit insurance. Acting as principal, agent, or
broker for insurance (including home mortgage
redemption insurance) that is:
(A) Directly related to an extension of credit by the
bank holding company or any of its subsidiaries; and
(B) Limited to ensuring the repayment of the
outstanding balance due on the extension of credit in the
event of the death, disability, or involuntary unemployment of
the debtor.
- Finance company subsidiary. Acting as agent or broker
for insurance directly related to an extension of
credit by a finance company that is a subsidiary of a
bank holding company under certain conditions.
- Engaging in any general insurance agency activities.
o Community development activities:
- Financing and investment activities. Making equity
and debt investments in corporations or projects
designed primarily to promote community welfare, such
as the economic rehabilitation and development of
low-income areas by providing housing, services, or
jobs for residents.
- Advisory activities. Providing advisory and related
services for programs designed primarily to promote
community welfare.
o Money orders, savings bonds, and traveler's checks. The
issuance and sale at retail of money orders and similar
consumer-type payment instruments; the sale of U.S. savings
bonds; and the issuance and sale of traveler's checks.
o Data processing. Providing data processing and data processing
and data transmission services, facilities (including data
processing and data transmission hardware, software,
documentation, or operating personnel), data bases, advice,
and access to such services, facilities, or data bases by any
technological means under certain conditions.
COMMUNITY REINVESTMENT ACT
The Community Reinvestment Act of 1977, as amended (the "CRA"), and the
regulations promulgated to implement the CRA are designed to create a system for
bank regulatory agencies to evaluate a depository institution's record in
meeting the credit needs of its community. CRA regulations establish tests for
evaluating both small and large depository institutions' investment in the
community. A "small bank" is defined as a bank which has total assets of less
than $250 million and is independent or is an affiliate of a holding company
with less than $1 billion in assets. There are streamlined procedures for
evaluating small banks and the frequency of CRA examinations will occur less
often based upon a bank's CRA rating. A large retail institution is one which
does not meet the "small bank" definition. A large retail institution can be
evaluated under one of two tests: (1) a three-part test evaluating the
institution's lending, service and investment performance; or (2) a "strategic
plan" designed by the institution with community involvement and approved by the
appropriate federal bank regulator. A large institution must choose one of these
options under which, to be examined. In addition, the CRA regulations include
separate rules regarding the manner in which "wholesale banks" and "limited
purpose banks" will be evaluated for compliance.
-13-
<PAGE> 14
For the purposes of the CRA regulations, the Bank is deemed to be a "small
bank," based upon financial information as of December 31, 1999. The Bank will
be examined under the streamlined procedures. The Bank received a "satisfactory"
CRA rating in its last CRA examination which was held in 1997.
CONCENTRATION
We are not dependent for deposits nor exposed by loan concentrations to a single
customer or to a small group of customers the loss of any one or more of which
would have a materially adverse effect on our financial condition.
FINANCIAL SERVICES MODERNIZATION
On November 12, 1999, the President signed into law the Gramm-Leach-Bliley Act
(the "Act") which will, in general, take effect on March 11, 2000. The Act
contains some of the most far-reaching changes governing the operations of
companies doing business in the financial services industry. The Act eliminates
the restrictions placed on the activities of banks and bank holding companies.
By creating two new structures - financial holding companies and financial
subsidiaries - we and the Bank will be allowed to provide a wider array of
financial services and products that were reserved only for insurance companies
and securities firms. In addition, we can now affiliate with an insurance
company and a securities firm.
We would qualify to elect to become a financial holding company. This election
is made to the Federal Reserve Board. A financial holding company has authority
to engage in activities referred to as "financial activities" that are not
permitted to bank holding companies. A financial holding company may also
affiliate with companies that are engaged in financial activities. A "financial
activity" is an activity that does not pose a safety and soundness risk and is:
o financial in nature,
o incidental to an activity that is financial in nature, or
o complimentary to a financial activity.
The Act lists certain activities as financial in nature:
o Lending, investing or safeguarding money or securities;
o Underwriting insurance or annuities, or acting as an insurance
or annuity principal, agent or broker;
o Providing financial or investment advice;
o Issuing or selling interests in pools of assets that a bank
could hold;
o Underwriting, dealing in or making markets in securities;
o Engaging in any activity that the Federal Reserve Board found
before the Act to be related closely to banking (See the
section in this report entitled "Permitted Non-banking
Activities");
o Engaging within the United States in any activity that a bank
holding company could engage in outside of the country, if the
Federal Reserve Board determined before the Act that the
activity was usual in connection with banking or other
financial operations internationally;
o Merchant banking - acquiring or controlling ownership
interests in an entity engaged in impermissible activities,
if: the interests are not held by a depository institution;
the interests are held by a securities affiliate or an
investment advisory affiliate of an insurance company as part
of underwriting, merchant or investment banking activity; the
interests are held long enough to enable their sale in a
manner consistent with the financial viability of such an
activity; and we do not control the entity except to the
extent necessary to obtain a reasonable return on the
investment; or
o Insurance portfolio investing - acquiring or controlling
ownership interests in an entity engaged in impermissible
activities, if: the interests are not held by a depository
institution; the interests are held by an insurance or annuity
company; the interests represent investments made in the
ordinary course of business in accordance with state law; and
we do not control the entity except to the extent necessary to
obtain a reasonable return on the investment.
-14-
<PAGE> 15
The Act instructs the Federal Reserve Board to adopt a regulation or order
defining certain additional activities as financial in nature, to the extent
they are consistent with the purposes of the Act. These are:
o Lending, exchanging, transferring, investing for others or
safeguarding financial assets other than money or securities;
o Providing any method of transferring financial assets; and
o Arranging, effecting or facilitating financial transactions
for third parties.
Other activities also may be decided by the Federal Reserve Board to be
financial in nature or incidental to a financial activity if they meet specified
criteria. The Federal Reserve Board is instructed to consider the purposes of
the Act and the Bank Holding Company Act; changes in the market in which
financial holding companies compete; changes in the technology used to deliver
financial services; and whether the proposed activity is necessary or
appropriate to allow a financial holding company and its affiliates to compete
effectively, deliver services efficiently and offer services through the most
advanced technological means available.
The Act gives national banks authority to use "financial subsidiaries" to engage
in financial activities. This authority has some limitations. A financial
subsidiary of the Bank may not, as a principal:
o underwrite insurance or annuities;
o engage in real estate development or investment;
o engage in merchant banking; or
o engage in insurance portfolio investment activities.
A bank's investment in a financial subsidiary will affect the way it calculates
its capital. The bank must deduct from its assets and stockholders' equity the
total of its investments in financial subsidiaries. Moreover, a bank must
present its financial information in two ways: in accordance with generally
accepted accounting principles, and, separately, in a manner that reflects the
segregation of the bank's investments in financial subsidiaries.
As of the date of this report, we have not considered whether to elect to become
a financial holding company, or to engage in any financial activities, or to
establish any financial subsidiaries for the Bank.
PRIVACY
The Act creates a minimum federal standard of privacy. A state can impose a
greater or more restrictive standard of privacy than the Act. There is
established a mechanism to protect the confidentiality of a customer's
non-public personal financial information. The Act requires the Bank to disclose
to a consumer or customer its policies to protect the confidentiality and
security of nonpublic personal information and to alert the consumer or customer
that he or she may opt out of any sharing of such information with any
affiliated or non-affiliated third party. This notice must be given initially,
and on an annual basis if the consumer becomes a customer.
The term consumer is different from the term customer. A consumer means an
individual who obtains or has obtained a financial product or service from the
Bank that is to be used primarily for personal, family or household purposes or
that individual's representative. A customer of the Bank is an individual with a
continuous relationship with the Bank. The federal bank regulatory agencies
issued proposed regulations which give several examples of a consumer and
customer relationship:
o An individual who applies to the Bank for credit for personal,
family or household purposes is a consumer of a financial
service, regardless of whether the credit is extended;
o An individual who provides nonpublic personal information to
the Bank in order to obtain a determination about whether he
or she may qualify for a loan to be used primarily for
personal, family, or household purposes is a consumer of a
financial service, regardless of whether the loan is extended
by the Bank or another financial institution.
-15-
<PAGE> 16
o An individual who provides nonpublic personal information to
the Bank in connection with obtaining or seeking to obtain
financial, investment or economic advisory services is a
consumer regardless of whether the Bank establishes an ongoing
advisory relationship.
o An individual who negotiates a workout with the Bank for a
loan that the Bank owns is a consumer regardless of whether
the Bank originally extended the loan to the individual.
o An individual who has a loan from the Bank is the Bank's
consumer even if the Bank:
- Hires an agent to collect on the loan;
- Sells the rights to service the loan; or
- Bought the loan from the financial institution that
originated the loan.
o An individual is not the Bank's consumer solely because the
Bank processes information about the individual on behalf of a
financial institution that extended the loan to the
individual.
On the other hand, several examples of a customer follow:
o A consumer has a continuing relationship with the Bank if the
consumer:
- Has a deposit, credit, trust or investment account
with the Bank;
- Purchases an insurance product from the Bank;
- Holds an investment product through the Bank;
- Enters into an agreement or understanding with the
Bank whereby the Bank undertakes to arrange or broker
a home mortgage loan for the consumer;
- Has a loan that the Bank services where the Bank owns
the servicing rights;
- Enters into a lease of personal property with the
Bank; or
- Obtains financial, investment, or economic advisory
services from the Bank for a fee.
o A consumer does not, however, have a continuing relationship
with the Bank and therefore is not a customer, if:
- The consumer only obtains a financial product or
service in an isolated transaction, such as
withdrawing cash from the Bank's ATM or purchasing a
cashier's check or money order;
- The Bank sells the consumer's loan and does not
retain the rights to service the loan; or
- The Bank sells the consumer airline tickets, travel
insurance or traveler's checks in an isolated
transaction.
In general, the Bank cannot disclose to a nonaffiliated third party any
nonpublic personal information of its customers unless the Bank provides its
customer with a notice that includes:
o the policies and practices of the Bank with regard to:
- disclosing nonpublic information to nonaffiliated
third parties;
- the categories of persons to whom the information is
or may be disclosed; and
- the policy for disclosure to former customers;
o categories of nonpublic information that are collected by the
Bank;
o the policies that the Bank maintains to protect the
confidentiality and security of nonpublic personal
information; and
o the disclosure, if required, under the Fair Credit Reporting
Act.
The Act sets forth a new requirement that this notice to a consumer or customer
must be in clear and conspicuous or "plain English" language and presentation.
The proposed regulations give several examples of the rules to follow in
drafting these notices:
o The Bank makes its notice reasonably understandable if, the
Bank:
- Presents the information contained in the notice in
clear, concise sentences, paragraphs and sections;
- Uses short explanatory sentences and bullet lists,
whenever possible;
- Uses definite, concrete, everyday words and active
voice, whenever possible;
- Avoids multiple negatives;
-16-
<PAGE> 17
- Avoids legal and highly technical business
terminology; and
- Avoids boilerplate explanations that are imprecise
and readily subject to different interpretations.
o The Bank designs its notice to call attention to the nature
and significance of the information contained in the notice
if, to the extent applicable, the Bank:
- Uses a plain-language heading to call attention to
the notice;
- Uses a typeface and type size that are easy to read;
and
- Provides wide margins and ample line spacing.
o If the Bank provides a notice on the same form as another
notice or other documents, the Bank designs its notice to call
attention to the nature and significance of the information
contained in the notice if the Bank uses:
- Larger type size(s), boldface or italics in the
text;
- Wider margins and line spacing in the notice; or
- Shading or sidebars to highlight the notice, whenever
possible.
The Act creates certain exceptions to the prohibition on disclosure of nonpublic
personal information of customers. Some of these exceptions are:
o with the consent of the customer;
o to effect, administer or enforce a transaction requested or
authorized by the customer;
o the servicing or processing of a financial product or service
requested or authorized by the customer;
o the maintaining or servicing of the customer's account with
the Bank or with another entity as part of a private label
credit card program;
o disclosure to persons holding a legal or beneficial interest
relating to the customer or to persons acting in a fiduciary
or representative capacity on behalf of the customer;
o providing information to insurance rate advisory
organizations, guaranty funds or agencies, rating agencies,
persons assessing the Bank's compliance with industry
standards and the Bank's attorneys, accountants and auditors;
and
o disclosure permitted under other laws, such as the Right to
Financial Privacy Act, to law enforcement agencies or under
local and state laws.
The Bank cannot disclose an account number or similar form of access code for a
credit card account, deposit account or transaction account of a customer to any
non-affiliated third party for use in telemarketing, direct mail marketing or
other marketing through electronic mail to the customer.
THE BANK
The Bank's legal headquarters are located at 232 East Street, Bloomsburg,
Columbia County, Pennsylvania 17815. The Bank is a locally-owned and managed
community bank that seeks to provide personal attention and professional
financial assistance to its customers. The Bank serves the needs of individuals
and small - and medium-sized businesses. The Bank's business philosophy includes
offering direct access to its President and other officers and providing
friendly, informed and courteous service, local and timely decision making,
flexible and reasonable operating procedures and consistently-applied credit
policies.
The Bank solicits small and medium-sized businesses located primarily with in
the Bank's market area that typically borrow in the $25,000 to $1.0 million
range. In the event that certain loan requests may exceed the Bank's lending
limit to any one customer, the Bank seeks to arrange such loans on a
participation basis with other financial institutions.
-17-
<PAGE> 18
MARKETING AREA
The Bank's primary market area is Columbia County, a 484 square mile area
located in Northcentral Pennsylvania with a population of approximately 63,200
based on 1990 census data. The Town of Bloomsburg is the County's largest
municipality and its center of industry and commerce. Bloomsburg has a
population of approximately 12,400 based on 1990 census data, and is the county
seat. Berwick, located on the eastern boundary of the County, is the second
largest municipality, with a 1990 population of approximately 11,000. The Bank
currently serves its market area through six branch offices located in
Bloomsburg, Benton, Lightstreet, Millville, Orangeville and South Centre,
Columbia County.
The Bank competes with eight other depository institutions in Columbia County.
The Bank's major competitors are: First National Bank of Berwick; PNC Bank,
N.A., the largest commercial bank headquartered in Pennsylvania; and First
Columbia Bank and Trust Company of Bloomsburg, Pennsylvania.
The Bank's extended market area includes the adjacent Pennsylvania counties of
Luzerne, Montour, Northumberland, Schuylkill and Sullivan.
FUTURE LEGISLATION
Various legislation, including proposals to substantially change the financial
institution regulatory system and to expand or contract the powers of banking
institutions and bank holding companies, is from time to time introduced in the
Congress. This legislation may change banking statutes and our operating
environment in substantial and unpredictable ways. If enacted, such legislation
could increase or decrease the cost of doing business, limit or expand
permissible activities or affect the competitive balance among banks, savings
associations, credit unions, and other financial institutions. We can not
accurately predict whether any of this potential legislation will ultimately be
enacted, and, if enacted, the ultimate effect that it, or implementing
regulations, would have upon our financial condition or results of operations.
-18-
<PAGE> 19
ITEM 2. PROPERTIES
Our corporate headquarters are located at 232 East Street, Bloomsburg,
Pennsylvania. We own this facility which has approximately 11,686 square feet.
The Bank's legal or registered office is also at 232 East Street, Bloomsburg,
Pennsylvania.
Our remaining banking centers, all of which we own, are described as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Approximate
Location Square Footage Use
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Orangeville, PA 2,259 Banking Services
- ---------------------------------------------------------------------------------------------
Benton, PA 4,672 Banking Services
- ---------------------------------------------------------------------------------------------
South Centre, PA 3,868 Banking Services
- ---------------------------------------------------------------------------------------------
Scott Township, PA 16,500 Banking Services, Corporate,
Credit and Operations
- ---------------------------------------------------------------------------------------------
Millville, PA 2,520 Banking Services
- ---------------------------------------------------------------------------------------------
</TABLE>
We consider our facilities to be suitable and adequate for our current and
immediate future purposes.
ITEM 3. LEGAL PROCEEDINGS
We and the Bank are not parties to any legal proceedings that could have any
significant effect upon our financial condition or income. In addition, we and
the Bank are not parties to any legal proceedings under federal and state
environmental laws.
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
We had 757 stockholders of record including individual participants in security
position listings and 1,366,754 shares of common stock, par value of $1.25 per
share, the only authorized class of common stock, outstanding as of February 29,
2000. Our common stock trades under the symbol "CCFN." As of February 29, 2000,
six firms were identified on the interdealer electronic bulletin board system as
market makers in our common stock. The following information is reported by one
of our market makers: Tucker Anthony Cleary Gull of Lancaster, Pennsylvania.
These quotations represent prices between buyers and sellers and do not include
retail makeup, markdown or commission. They may not necessarily represent actual
transactions. The high and low closing sale prices and dividends per share of
our common stock for the four quarters of 1999 and 1998 are summarized in the
following table.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Dividends
1999: High Low Declared
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
First quarter 25.00 19.13 .116
- ----------------------------------------------------------------------------------------------------------------------
Second quarter 20.50 18.00 .130
- ----------------------------------------------------------------------------------------------------------------------
Third quarter 20.63 20.00 .130
- ----------------------------------------------------------------------------------------------------------------------
Fourth quarter 20.12 18.75 .130
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Dividends
1998: High Low Declared
- ----------------------------------------------------------------------------------------------------------------------
First quarter 26.25 23.00 .116
- ----------------------------------------------------------------------------------------------------------------------
Second quarter 30.50 27.00 .116
- ----------------------------------------------------------------------------------------------------------------------
Third quarter 31.00 28.00 .116
- ----------------------------------------------------------------------------------------------------------------------
Fourth quarter 25.75 25.00 .116
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 20
We have paid cash dividends since 1983. It is our present intention to continue
the dividend payment policy, although the payment of future dividends must
necessarily depend upon earnings, financial position, appropriate restrictions
under applicable law and other factors relevant at the time the Board of
Directors considers any declaration of dividends.
ITEM 6. SELECTED FINANCIAL DATA
The information called for by this item is filed at Exhibit 13 to this report
and is incorporated in its entirety by reference under this Item 6.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information called for by this item is filed at Exhibit 13 to this report
and is incorporated in its entirety by reference under this Item 7.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information called for by this item is filed at Exhibit 13 to this report
and is incorporated in its entirety by reference under this Item 7A.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our consolidated financial statements and notes to these statements are filed at
Exhibit 13 to this report and are incorporated in their entirety by reference
under this Item 8.
Our supplementary data is filed at Exhibit 13 to this report and is incorporated
in its entirety by reference under this Item 8.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
At February 29, 2000, we had nine directors.
Our directors are divided into three classes: three directors are in Class 1;
three directors are in Class 2; and three directors are in Class 3. Each
director holds office for a three-year term. The terms of the classes are
staggered, so that the term of office of one class expires each year.
The following information includes the age of each of our current directors and
those persons who have been nominated to become a director upon their election
at our 2000 annual meeting of stockholders. All of our current directors are
also nominees for director.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
NAME AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Don E. Bangs 68 Retired Owner - Insurance Agency 1985
- -------------------------------------------------------------------------------------------------------
Robert M. Brewington, Jr. 49 Automobile and Truck Dealer; and
School Bus Contractor 1996
- -------------------------------------------------------------------------------------------------------
Edward L. Campbell 61 Restauranteur; Christmas Tree
Dealer 1985
- -------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 21
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Edward R. Harding, Jr. 53 Attorney 1984
- -------------------------------------------------------------------------------------------------------
William F. Hess 66 Dairy Farmer 1983
- -------------------------------------------------------------------------------------------------------
Rodney B. Keller 49 Community Development Director
for an Electric Utility 2000
- -------------------------------------------------------------------------------------------------------
Willard H. Kile, Sr. 72 Real Estate Sales and Rentals 1983
- -------------------------------------------------------------------------------------------------------
Charles E. Long 64 Former Hardware/Masonry Products 1993
Wholesaler and Retailer
- -------------------------------------------------------------------------------------------------------
Paul E. Reichart 62 Commercial Banker 1983
- -------------------------------------------------------------------------------------------------------
</TABLE>
PRINCIPAL OFFICERS
Our principal officers are appointed by the Board of Directors and serve at the
will of the Board of Directors, subject to certain change in control agreements
discussed later in this report. The following information is presented for our
principal officers:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
EMPLOYEE
NAME & POSITION HELD SINCE SINCE AGE
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
William F. Hess
Chairman 1998 * 66
- ----------------------------------------------------------------------------------------
Paul E. Reichart
President and CEO 1985 1960 62
- ----------------------------------------------------------------------------------------
Don E. Bangs
Secretary 1993 * 68
- ----------------------------------------------------------------------------------------
Virginia D. Kocher
Treasurer 1991 1972 52
- ----------------------------------------------------------------------------------------
</TABLE>
* Not an employee of the Company and the Bank.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Executive officers and directors and "beneficial owners" of more than ten
percent of our common stock must file initial reports of ownership and reports
of changes in ownership with the SEC pursuant to Section 16(a).
We have reviewed the reports and written representations from the executive
officers and directors. Based on this review, we believe that all filing
requirements were met during 1999.
ITEM 11. EXECUTIVE COMPENSATION
This section of the report contains charts that show the amount of compensation
earned by our executive officers whose salary and bonus exceeded $100,000 for
1999. It also contains the performance graph comparing our performance relative
to a peer group and the report of our human resource committee explaining the
compensation philosophy for our most highly paid officers.
-21-
<PAGE> 22
SUMMARY COMPENSATION TABLE (1)
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
- ---------------------------------------------------------------------------------------------
OTHER ANNUAL ALL OTHER
SALARY BONUS COMPENSATION COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(2) ($)(3)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Paul E. Reichart 1999 90,895 23,653(4) 8,400 4,131
President and 1998 88,247 19,902(5) 8,800 3,542
Chief Executive 1997 85,677 27,239(6) 8,400 3,571
Officer
- ---------------------------------------------------------------------------------------------
</TABLE>
(1) From January 1, 1997 through December 31, 1999, the Company did not pay
any long-term compensation in the form of stock options, stock
appreciation rights, restricted stock or any other long-term
compensation, nor did it make any long-term incentive plan payments.
Accordingly, no such information is presented in the summary
compensation table set forth above. No such arrangements are currently
in effect
(2) Represents the payment of directors' fees by the Bank for the years
presented. Mr. Reichart did not receive perquisites and other personal
benefits, securities and property that totaled in the aggregate for the
years presented either $50,000 or 10% of the total of the amounts
reported under the salary and bonus columns. Therefore, the amounts for
such perquisites and other personal benefits, securities and property
are not reported..
(3) These figures represent annual term insurance premium payments on the
life of Mr. Reichart.
(4) Includes 9,977 as a life insurance premium payment for a deferred
compensation plan; $1,851 as a cash bonus representing 2% of base
salary; $4,941 as a contribution to the bank's profit sharing plan;
$1,350 representing 50% up to 3% matching contribution to Mr.
Reichart's 401K plan; $865 representing car expense; and $4,669
representing cafeteria plan benefits.
(5) Includes $5,364 as a life insurance premium payment for a deferred
compensation plan; $3,459 as a cash bonus representing 4% of base
salary; $4,455 as a contribution tot the bank's profit sharing plan;
$1,300 representing 50% up to 3% matching contribution to Mr.
Reichart's 401K plan; $854 representing car expense; and $4,488
representing cafeteria plan benefits.
(6) Includes $15,000 as a life insurance premium payment for a deferred
compensation plan; $5,978 as a contribution to the bank's profit
sharing plan; $1,285 representing 50% up to 3% matching contribution to
Mr. Reichart's 401K plan; $800 representing car expense; and $4,176
representing cafeteria plan benefits.
EXECUTIVE COMPENSATION
HUMAN RESOURCE COMMITTEE REPORT
Executive compensation for the officers of the Company and the Bank is
determined by the Human Resource Committee of the Company's Board of Directors.
Salaries and bonuses for the executive officers are reviewed annually. All
executive compensation is paid by the Bank to the applicable executive.
COMPENSATION PHILOSOPHY
Our executive compensation philosophy is designed to attract, retain, and
motivate the best managerial talent available in line with three central themes:
alignment, accountability, and attraction.
o Alignment with the long-term interests of our stockholders;
o Accountability for results by linking executives to the
Company and individual performance; and
o Attraction, motivation and retention of critical talent.
The Human Resource Committee annually conducts a full review of our executives
and their performance in determining compensation levels. For 1999, the Human
Resource Committee considered various qualitative and quantitative indicators of
the Company and individual performance in determining the level of compensation
for President and Chief Executive Officer and other executive officers. The
review included an evaluation of the Company's performance both on a short- and
long-term basis. This review included an analysis of quantitative measures, such
as Return on Equity. The Human Resource Committee considered also qualitative
measures such as leadership, experience, strategic direction, community
representation and social responsibility. The Human Resource Committee has been
sensitive to management's maintaining a balance between actions that foster
long-term value creation and short-term performance. In addition, the Human
Resource Committee evaluates total executive compensation in light of the
operational and financial performance and compensation practices of the
commercial banking industry in the Pennsylvania region.
-22-
<PAGE> 23
Base salaries are reviewed each year and generally adjusted relative to
individual performance and competitive salaries with the commercial banking
industry in the Pennsylvania region.
A base salary increase of 3% was made to all executives in 1999. Actual salaries
will continue to be set according to the scope of the responsibilities of each
executive officer's position.
DEFERRED COMPENSATION AGREEMENTS FOR EXECUTIVE OFFICERS
Paul E. Reichart has served as our and the Bank's President and Chief Executive
Officer since 1985. Mr. Reichart was named Vice Chairman in 1998. J. Jan Girton
has served as the Executive Vice President, Chief Operating Officer and
Assistant Secretary of the Bank since 1987. As a result of Messrs. Reichart's
and Girton's active involvement and experience in the affairs of the Bank, the
Bank has depended upon, and continues to depend upon, their continued
employment. The Bank does not maintain employment agreements or key man
insurance, other than the deferred compensation agreements described below, with
respect to Messrs. Reichart and Girton. In 1992, the Bank entered into
agreements with Paul E. Reichart, President and Chief Executive Officer of the
Company and the Bank, and J. Jan Girton, Executive Vice President, Chief
Operating Officer and Assistant Secretary of the Bank, to establish a
non-qualified deferred compensation plan for these officers.
Each officer is deferring compensation in order to participate in his deferred
compensation plan. If the officer continues to serve as an officer of the Bank
until he attains 65 years of age, the Bank has agreed to pay him 120 guaranteed
consecutive monthly payments commencing on the first day of the month following
the officer's 65th birthday. Each officer's guaranteed monthly payment is based
upon the future value of life insurance purchased with the compensation the
officer has deferred. If the officer attains 65 years of age but dies before
receiving all of the guaranteed monthly payments, then the Bank will make the
remaining payments to the officer's designated beneficiary or to the
representative of his estate. In the event that the officer dies while serving
as an officer, but prior to age 65 years of age, then the Bank will remit the
guaranteed monthly payments to the officer's designated beneficiary or to the
representative of his estate. The Bank has obtained life insurance (designating
the bank as the beneficiary) on the life of each participating officer in an
amount which is intended to cover the Bank's obligations under the deferred
compensation plan, based upon certain actuarial assumptions. In 1999, the Bank
accrued $4,255 as an expense for the deferred compensation plan.
SIX YEAR PERFORMANCE GRAPH
The following graph and table compare the cumulative total stockholder return on
our common stock during the six-year period ending on December 31, 1999, with
(i) the cumulative total return on the SNL Securities Corporation Performance
Index (1) for 35 publicly-traded banks with under $250 million in total assets
in the Middle Atlantic area (2), and (ii) the cumulative total return for all
United States stocks traded on the NASDAQ Stock market. The comparison assumes
the value of the investment in our common stock and each index was $100 on
December 31, 1994, and assumes further the reinvestment of dividends into the
applicable securities. The stockholder return shown on the graph and table below
is not necessarily indicative of future performance.
-23-
<PAGE> 24
<TABLE>
<CAPTION>
PERIOD ENDING
------------------------------------------------------------------------
Index 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CCFNB Bancorp, Incorporated 100.00 109.94 119.05 169.66 188.08 149.76
NASDAQ - Total US* 100.00 141.33 173.89 213.07 300.25 542.43
SNL <$250M Bank Asset-Size Index 100.00 140.62 177.67 289.92 275.60 242.00
</TABLE>
- ----------------------
(1) SNL Securities is a research and publishing firm specializing in the
collection and dissemination of data on the banking, thrift and
financial services industries.
(2) The Middle Atlantic area comprises the states of Delaware,
Pennsylvania, Maryland, New Jersey and New York, the District of
Columbia and Puerto Rico
-24-
<PAGE> 25
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This section describes how much stock our directors, executive officers own. It
also describes the persons or entities that own more than 5% of our voting
stock.
STOCK OWNED BY DIRECTORS, NOMINEES FOR DIRECTOR AND EXECUTIVE DIRECTORS
This table indicates the number of shares of common stock owned by the
directors, nominees for director and executive officers as of February 29, 2000.
The aggregate number of shares owned by all directors and executive officers is
5.33%. Unless otherwise noted, each individual has sole voting and investment
power for the shares indicated below.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
NAME OF INDIVIDUAL AMOUNT AND NATURE OF
OF IDENTITY OF GROUP BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Don E. Bangs 8,160.875 --
- ----------------------------------------------------------------------------------------------------------------------
Robert M. Brewington, Jr. 6,459.288 --
- ----------------------------------------------------------------------------------------------------------------------
Edward L. Campbell 6,195.375 --
- ----------------------------------------------------------------------------------------------------------------------
Elwood R. Harding, Jr. 15,407.742 1.13%
- ----------------------------------------------------------------------------------------------------------------------
William F. Hess 4,152.506 --
- ----------------------------------------------------------------------------------------------------------------------
Rodney B. Keller 150.000 --
- ----------------------------------------------------------------------------------------------------------------------
Willard H. Kile, Sr. 17,884.856 1.31%
- ----------------------------------------------------------------------------------------------------------------------
Virginia D. Kocher 391.000 --
- ----------------------------------------------------------------------------------------------------------------------
Charles E. Long 6,217.503 --
- ----------------------------------------------------------------------------------------------------------------------
Paul E. Reichart 7,765.000 --
- ----------------------------------------------------------------------------------------------------------------------
All Officers and Directors as a group
(9 Directors, 3 Nominees, 4 Officers,
10 persons in total) 72,784.145 5.33%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes shares held (a) directly, (b) jointly with spouse, (c)
individually by a spouse, (d) by the transfer agent in the
Corporation's dividend reinvestment account, and (e) in various trusts
VOTING STOCK OWNED BY "BENEFICIAL OWNER"
We know of no persons or entities who own beneficially more than five percent of
our common stock as of February 29, 2000.
-25-
<PAGE> 26
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We encourage our directors and executive officers to have banking and financial
transactions with the Bank. All of these transactions are made on comparable
terms and with similar interest rates as those prevailing for other customers.
The total consolidated loans made by the Bank at December 31, 1999, to its
directors and officers as a group, members of their immediate families and
companies in which they have a 10% or more ownership interest was $6,873,447
million or 28.8% of our total consolidated capital accounts. The largest amount
for all of these loans in 1999 was $6,873,447 million or 28.8% of our total
consolidated capital accounts. These loans did not involve more than the normal
risk of collectibility nor did they present other unfavorable features.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Our consolidated financial statements and notes to these statements
as well as the applicable reports of the independent certified public
accountants are filed at Exhibit 13 to this report and are incorporated in their
entirety by reference under this Item 14(a)1.
2. All schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes to these
statements.
3. The exhibits required by Item 601 of Regulation S-K are included
under Item 14(c) to this report.
(b) Reports on Form 8-K
We filed no current reports on Form 8-K during the quarter ended December 31,
1999.
(c) Exhibits required by Item 601 of Regulation S-K:
<TABLE>
<CAPTION>
Exhibit Number Referred to
Item 601 of Regulation SK Description of Exhibit
- --------------------------- ----------------------
<S> <C>
2 None.
3 None.
4 None.
9 None.
10 None.
11 None.
12 None.
13 Portions of the Annual Report to Stockholders for
Fiscal Year Ended December 31, 1999.
16 None.
18 None.
21 List of Subsidiaries of the Company.
22 None.
23 None.
24 None.
27 Financial Data Schedule.
99 SEC Guide 3 Financial Information.
</TABLE>
By order of the Board of Directors
-26-
<PAGE> 27
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
(Bancorp)
By: /s/ Paul E. Reichart Date: March 23, 2000
-------------------------------------------
Paul E. Reichart
President, Chief Executive Officer and
Vice Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
By: /s/ Don E. Bangs Date: March 23, 2000
-------------------------------------------
Don E. Bangs
Director and Secretary
By: /s/ Robert M. Brewington, Jr. Date: March 23, 2000
-------------------------------------------
Robert M. Brewington, Jr.
Director
By: /s/ Edward L. Campbell Date: March 23, 2000
-------------------------------------------
Edward L. Campbell
Director
By: /s/ Elwood R. Harding, Jr. Date: March 23, 2000
-------------------------------------------
Elwood R. Harding, Jr.
Director
By: /s/ William F. Hess Date: March 23, 2000
-------------------------------------------
William F. Hess
Director and Chairman of the Board
By: /s/ Rodney B. Keller Date: March 23, 2000
-------------------------------------------
Rodney B. Keller
Director
-27-
<PAGE> 28
By: /s/ Willard H. Kile, Sr. Date: March 23, 2000
-------------------------------------------
Willard H. Kile, Sr.
Director
By: /s/ Charles E. Long Date: March 23, 2000
-------------------------------------------
Charles E. Long
Director
By: /s/ Paul E. Reichart Date: March 23, 2000
-------------------------------------------
Paul E. Reichart
Director , President, Chief Executive Officer
and Vice Chairman of the Board
(Chief Executive Officer)
By: /s/ Virginia D. Kocher Date: March 23, 2000
-------------------------------------------
Virginia D. Kocher
Treasurer
(Principal Financial and Accounting Officer)
-28-
<PAGE> 29
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Item Number Description Page
----------- ----------- ----
<S> <C> <C>
13 Portions of the Annual Report to Stockholders for the
Fiscal Year Ended December 31, 1999......................... 30
21 List of Subsidiaries of the Company......................... 69
99 SEC Guide 3 Financial Information........................... 70
27 Financial Data Schedule..................................... 74
</TABLE>
-29-
<PAGE> 1
EXHIBIT 13
PORTIONS OF THE ANNUAL REPORT TO STOCKHOLDERS
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
-1-
<PAGE> 2
CCFNB BANCORP, INC.
AND SUBSIDIARY
1999 ANNUAL REPORT
-2-
<PAGE> 3
CCFNB BANCORP, INC. AND SUBSIDIARY
CCFNB Bancorp, Inc. (the "Corporation") is a registered bank holding
company and organized under the Pennsylvania business corporation law. The
assets are primarily those of its wholly owned subsidiary, the Columbia County
Farmers National Bank.
The Columbia County Farmers National Bank is a full service
nationally-chartered financial institution serving customers from six locations
in Columbia County; namely Orangeville, Bloomsburg, Benton, South Centre,
Millville and Lightstreet. The deposits of the Bank are insured by the FDIC to
the maximum extent provided by law.
A copy of the Corporation's Annual Report for the year ended December
31, 1999, on Form 10-K as filed with the SEC will be furnished without charge
upon written request to Mr. Paul E. Reichart, President and Chief Executive
Officer, Columbia County Farmers National Bank, 232 East Street, Bloomsburg,
Pennsylvania 17815.
CONSOLIDATED SELECTED FINANCIAL DATA
(In thousands of dollars, except per share data and ratios)
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
EARNINGS
<S> <C> <C> <C>
Interest income............................................ $ 12,669 $ 12,444 $ 12,487
Interest expense........................................... 6,099 6,072 5,976
Provision for loan losses.................................. 78 78 60
Investment securities gains................................ 39 64 57
Net income................................................. $ 2,039 $ 1,902 $ 2,025
PER SHARE
Net income................................................. $ 1.48 $ 1.38 $ 1.47
Cash dividends............................................. .51 .46 .46
BALANCES AT DECEMBER 31
Assets..................................................... $196,122 $185,258 $173,866
Investment securities...................................... 49,104 48,151 43,862
Net loans.................................................. 133,438 117,604 118,144
Deposits................................................... 138,606 137,679 127,719
Stockholders' equity....................................... 23,047 23,480 22,105
RATIOS
Return on average assets................................... 1.09% 1.07% 1.18%
Return on average equity................................... 8.91% 8.54% 9.79%
Dividend payout ratio...................................... 34.23% 33.59% 31.65%
</TABLE>
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
Message to shareholders.............................................................................. 1
Consolidated balance sheets.......................................................................... 2
Consolidated statements of income.................................................................... 3
Consolidated statements of stockholders' equity...................................................... 4
Consolidated statements of cash flows................................................................ 5
Notes to consolidated financial statements........................................................... 6-20
Report of Independent Certified Public Accountants................................................... 21
Management's discussion and analysis of financial condition and results of operations................ 22-36
</TABLE>
-3-
<PAGE> 4
CCFNB BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
ASSETS
Cash and due from banks..................................................... 5,855,083 5,104,807
Interest-bearing deposits with other banks.................................. 216,734 6,381,236
Federal funds sold.......................................................... 0 1,000,000
Investment securities:
Securities Available-for-Sale.......................................... 48,903,638 47,586,027
Securities to be Held-to-Maturity (estimated
fair value 1999, $200,138; 1998, $569,076)............................. 200,000 565,000
Loans, net of unearned income............................................... 134,422,848 118,558,382
Allowance for loan losses................................................... 985,165 954,516
------------ ------------
Net loans.............................................................. $133,437,683 $117,603,866
Premises and equipment...................................................... 5,273,947 5,649,537
Other real estate owned..................................................... 0 23,989
Accrued interest receivable................................................. 1,002,517 831,914
Other assets................................................................ 1,232,221 511,256
------------ ------------
TOTAL ASSETS........................................................... $196,121,823 $185,257,632
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Non-interest bearing................................................... $ 13,672,023 $ 13,315,596
Interest bearing....................................................... 124,933,614 124,363,740
------------ ------------
Total Deposits..................................................... $138,605,637 $137,679,336
Short-term borrowings....................................................... 30,880,378 20,418,105
Long-term borrowings........................................................ 2,343,744 2,290,703
Accrued interest and other expenses......................................... 1,230,972 1,176,107
Other liabilities........................................................... 13,963 213,669
------------ ------------
TOTAL LIABILITIES.................................................. $173,074,694 $161,777,920
------------ ------------
STOCKHOLDERS' EQUITY
Common stock, par value $1.25 per share; authorized
5,000,000 shares; issued 1,367,651 shares 1999;
1,382,433 shares 1998............................................... $ 1,709,564 $ 1,728,041
Surplus..................................................................... 5,483,515 5,849,157
Retained earnings........................................................... 17,013,997 15,670,223
Accumulated other comprehensive income...................................... (1,159,947) 447,551
Less: Treasury stock at cost, 6,976 shares 1998............................. 0 (215,260)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY......................................... $ 23,047,129 $ 23,479,712
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY......................... $196,121,823 $185,257,632
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-4-
<PAGE> 5
CCFNB BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans.................................... $ 9,707,599 $ 9,584,559 $ 9,823,607
Interest and dividends on investment securities:
Taxable.................................................. 2,021,448 1,867,265 1,812,883
Tax-exempt............................................... 689,029 656,654 513,112
Dividends................................................ 80,687 74,118 61,572
Federal funds sold............................................ 38,880 32,336 124,019
Deposits in other banks....................................... 131,729 229,324 151,586
----------- ----------- -----------
TOTAL INTEREST INCOME................................ $12,669,368 $12,444,256 $12,486,779
----------- ----------- -----------
INTEREST EXPENSE
Deposits ..................................................... $ 4,953,724 $ 4,910,321 $ 4,911,541
Short-term borrowings......................................... 1,014,511 1,046,161 1,048,645
Long-term borrowings.......................................... 130,408 115,143 16,035
----------- ----------- -----------
TOTAL INTEREST EXPENSE............................... $ 6,098,643 $ 6,071,625 $ 5,976,221
----------- ----------- -----------
Net interest income........................................... $ 6,570,725 $ 6,372,631 $ 6,510,558
Provision for loan losses..................................... 78,000 78,000 60,000
----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES...................................... $ 6,492,725 $ 6,294,631 $ 6,450,558
----------- ----------- -----------
NON-INTEREST INCOME
Service charges and fees...................................... $ 611,625 $ 579,338 $ 523,050
Trust department.............................................. 189,271 143,838 103,189
Other......................................................... 210,247 193,479 132,283
Investment securities gains, net.............................. 38,707 64,419 57,326
----------- ----------- -----------
TOTAL NON-INTEREST INCOME............................ $ 1,049,850 $ 981,074 $ 815,848
----------- ----------- -----------
NON-INTEREST EXPENSE
Salaries...................................................... $ 1,905,185 $ 1,885,446 $ 1,817,389
Pensions and other employee benefits.......................... 629,957 563,266 522,388
Occupancy, net................................................ 338,684 334,072 375,379
Equipment..................................................... 597,073 556,302 420,271
Other......................................................... 1,347,700 1,399,941 1,356,706
----------- ----------- -----------
TOTAL NON-INTEREST EXPENSE........................... $ 4,818,599 $ 4,739,027 $ 4,492,133
----------- ----------- -----------
Income before income taxes.................................... $ 2,723,976 $ 2,536,678 $ 2,774,273
Income tax expense............................................ 684,739 634,278 748,777
----------- ----------- -----------
NET INCOME........................................... $ 2,039,237 $ 1,902,400 $ 2,025,496
=========== =========== ===========
PER SHARE DATA
Net income.................................................... $ 1.48 $ 1.38 $ 1.47
----------- ----------- -----------
Cash dividends................................................ $ .51 $ .46 $ .46
----------- ----------- -----------
Weighted average shares outstanding........................... 1,375,572 1,378,339 1,381,800
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-5-
<PAGE> 6
CCFNB BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
Accumulated
Other
Common Comprehensive Retained Comprehensive Treasury
Stock Surplus Income Earnings Income (Loss) Stock Total
----- ------- ------- -------- ------------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996............. $1,727,139 $5,838,453 $13,022,498 $ 68,791 $ 0 $20,656,881
Comprehensive income;
Net income........................... 0 0 $ 2,025,496 2,025,496 0 0 2,025,496
Change in net unrealized gain on
investment securities
available-for-sale, net of
reclassification adjustment and
tax effects...................... 0 0 73,210 0 73,210 0 73,210
-----------
Total comprehensive income $ 2,098,706
===========
Issuance of 6,814 shares of common stock
under dividend reinvestment and
stock purchase plans................. 8,517 130,543 0 0 0 139,060
Purchase of 7,275 shares of treasury
stock................................ 0 0 0 0 (148,770) (148,770)
Retirement of 6,092 shares of treasury
stock ............................... (7,615) (114,608) 0 0 122,223 0
Cash dividends $.46 per share............ 0 0 (641,064) 0 0 (641,064)
---------- ---------- ----------- ----------- --------- -----------
BALANCE AT DECEMBER 31, 1997............. $1,728,041 $5,854,388 $14,406,930 $ 142,001 $ (26,547) $22,104,813
Comprehensive income:
Net income........................... 0 0 $ 1,902,400 1,902,400 0 0 1,902,400
Change in net unrealized gain on
investment securities
available-for-sale, net of
reclassification adjustment and
tax effects...................... 0 0 305,550 0 305,550 0 305,550
-----------
Total comprehensive income $ 2,207,950
===========
Issuance of 5,013 shares of common stock
under dividend reinvestment and stock
purchase plans....................... 6,266 135,224 0 0 0 141,490
Sale of 453 shares of treasury stock..... 0 (66) 0 0 9,747 9,681
Purchase of 11,259 shares of treasury
stock ............................... 0 0 0 0 (345,115) (345,115)
Retirement of 5,013 shares of treasury
stock ............................... (6,266) (140,389) 0 0 146,655 0
Cash dividends $.46 per share............ 0 0 (639,107) 0 0 (639,107)
---------- ---------- ----------- ----------- --------- -----------
BALANCE AT DECEMBER 31, 1998............. $1,728,041 $5,849,157 $15,670,223 $ 447,551 $(215,260) $23,479,712
Comprehensive income :
Net income........................... 0 0 $ 2,039,237 2,039,237 0 0 2,039,237
Change in net unrealized gain (loss)
on investment securities
available-for-sale, net of
reclassification adjustment
and tax effects.................. 0 0 (1,607,498) 0 (1,607,498) 0 (1,607,498)
-----------
Total comprehensive income $ 431,739
===========
Issuance of 7,345 shares of common stock
under dividend reinvestment and stock
purchase plans....................... 9,181 139,401 0 0 0 148,582
Sale of 549 shares of treasury stock..... 0 (4,809) 0 0 17,843 13,034
Purchase of 15,700 shares of treasury
stock ............................... 0 0 0 0 (330,475) (330,475)
Retirement of 22,127 shares of treasury
stock ............................... (27,658) (500,234) 0 0 527,892 0
Cash dividends $.51 per share............ 0 0 (695,463) 0 0 (695,463)
---------- ---------- ----------- ----------- --------- -----------
BALANCE AT DECEMBER 31, 1999............. $1,709,564 $5,483,515 $17,013,997 $(1,159,947) $ 0 $23,047,129
========== ========== =========== =========== ========= ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-6-
<PAGE> 7
CCFNB BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income ...................................................................... $ 2,039,237 $ 1,902,400 $ 2,025,496
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses.................................................... 78,000 78,000 60,000
Depreciation and amortization................................................ 515,511 516,947 373,307
Premium amortization on investment securities................................ 72,948 92,031 21,995
Discount accretion on investment securities.................................. (22,631) (38,746) (27,084)
Deferred income taxes (benefit).............................................. 18,469 (14,828) 20,331
(Gain) on sales of investment securities Available-for-Sale.................. (38,707) (64,419) (57,326)
(Gain) on sale of premises and equipment..................................... 0 0 (1,623)
Loss on impairment of bank premises.......................................... 0 0 20,000
(Gain) on sale of other real estate.......................................... (1,285) 0 0
(Increase) decreases in accrued interest receivable.......................... (170,603) 105,783 27,234
(Increase) in other assets - net............................................. (87,181) (51,899) (96,013)
Increase in accrued interest and other expenses.............................. 54,865 35,367 82,773
Increase (decrease) in other liabilities - net............................... (19,504) (23,808) 36,826
------------ ------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES ............................ $ 2,439,119 $ 2,536,828 $ 2,485,916
------------ ------------ ------------
INVESTMENT ACTIVITIES
Purchase of investment securities Available-for-Sale................................. $(16,063,486) $(38,178,221) $(25,177,358)
Proceeds from sales, maturities and redemption of investment securities
Available-for-Sale............................................................... 12,294,313 34,204,431 18,647,390
Proceeds from maturities and redemption of investment securities
Held-to-Maturity................................................................. 365,000 155,000 250,000
Net (increase) decrease in loans..................................................... (15,979,778) 437,824 (3,524,606)
Purchases of premises and equipment.................................................. (139,921) (1,020,309) (266,185)
Proceeds from sale of premises and equipment......................................... 0 0 22,850
Proceeds from sale of other real estate.............................................. 93,234 0 0
------------ ------------ ------------
NET CASH (USED) IN INVESTING ACTIVITIES............................... $(19,430,638) $ (4,401,275) $(10,047,909)
------------ ------------ ------------
FINANCING ACTIVITIES
Net increase (decrease) in deposits.................................................. $ 926,301 $ 9,960,227 $ (3,680,927)
Net increase (decrease) in short-term borrowings..................................... 10,462,273 (1,944,400) 5,708,524
Proceeds from long-term borrowings 61,560 2,071,628 225,000
Repayment of long-term borrowings.................................................... (8,519) (220,712) (82,199)
Proceeds from sale of treasury stock................................................. 13,034 9,681 0
Acquisition of treasury stock........................................................ (330,475) (345,115) (148,770)
Proceeds from issuance of common stock............................................... 148,582 141,490 139,060
Cash dividends paid.................................................................. (695,463) (639,107) (641,064)
------------ ------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES............................. $ 10,577,293 $ 9,033,692 $ 1,519,624
------------ ------------ ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS...................... $ (6,414,226) $ 7,169,245 $ (6,042,369)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR....................................... 12,486,043 5,316,798 11,359,167
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR......................................... $ 6,071,817 $ 12,486,043 $ 5,316,798
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest ...................................................................... $ 6,054,137 $ 6,059,842 $ 5,984,797
Income taxes..................................................................... $ 680,106 $ 606,446 $ 795,855
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-7-
<PAGE> 8
CCFNB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of CCFNB Bancorp, Inc. and
Subsidiary (the "Corporation") are in accordance with generally accepted
accounting principles and conform to common practices within the banking
industry. The more significant policies follow:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of CCFNB
Bancorp, Inc. and its wholly owned subsidiary, Columbia County Farmers National
Bank (the "Bank"). All significant inter-company balances and transactions have
been eliminated in consolidation.
NATURE OF OPERATIONS & LINES OF BUSINESS
The Corporation provides full banking services, including trust
services, through the Bank, to individuals and corporate customers. The Bank has
six offices covering an area of approximately 484 square miles in Northeastern
Pennsylvania. The Corporation and its banking subsidiary are subject to
regulation of the Office of the Comptroller of the Currency, The Federal Deposit
Insurance Corporation and the Federal Reserve Bank of Philadelphia.
Gathering deposits and making loans are the major lines of business.
The deposits are mainly deposits of individuals and small businesses and the
loans are mainly real estate loans covering primary residences and small
business enterprises. The trust services, under the name of CCFNB and Co.,
include administration of various estates, pension plans, self-directed IRA's
and other services. A third-party brokerage arrangement, Invest, is also
resident in the main branch, namely Bloomsburg. This Invest Financial Service
offers a full line of stocks, bonds and other non-insured financial services.
USE OF ESTIMATES
The preparation of these consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
these consolidated financial statements and the reported amounts of income and
expenses during the reporting periods. Actual results could differ from those
estimates.
INVESTMENT SECURITIES
The Corporation classifies its investment securities as either
"Held-to-Maturity" or "Available-for-Sale" at the time of purchase. Debt
securities are classified as Held-to-Maturity when the Corporation has the
ability and positive intent to hold the securities to maturity. Investment
securities Held-to-Maturity are carried at cost adjusted for amortization of
premiums and accretion of discounts to maturity.
Debt securities not classified as Held-to-Maturity and equity
securities included in the Available-for-Sale category, are carried at fair
value, and the amount of any unrealized gain or loss net of the effect of
deferred income taxes is reported as other comprehensive income in the
Consolidated Statement of Stockholders' Equity. Management's decision to sell
Available-for-Sale securities is based on changes in economic conditions
controlling the sources and uses of funds, terms, availability of and yield of
alternative investments, interest rate risk, and the need for liquidity.
The cost of debt securities classified as Held-to-Maturity or
Available-for-Sale is adjusted for amortization of premiums and accretion of
discounts to maturity. Such amortization and accretion, as well as interest and
dividends, is included in interest income from investments. Realized gains and
losses are included in net investment securities gains. The cost of investment
securities sold, redeemed or matured is based on the specific identification
method.
-8-
<PAGE> 9
LOANS
Loans are stated at their outstanding principal balances, net of
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.
Non-Accrual Loans - Generally, a loan is classified as non-accrual,
with the accrual of interest on such a loan 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 with those
payments generally applied to principal. Non-accrual 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 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.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated depreciation
computed principally on the straight-line method over the estimated useful lives
of the assets. Maintenance and minor repairs are charged to operations as
incurred. The cost and accumulated depreciation of the premises and equipment
retired or sold are eliminated from the property accounts at the time of
retirement or sale, and the resulting gain or loss is reflected in current
operations.
OTHER REAL ESTATE OWNED
Other real estate owned is comprised of property acquired through a
foreclosure proceeding or acceptance of a deed-in-lieu of foreclosure and loans
classified as in-substance foreclosure. In accordance with Statement of
Financial Accounting Standards (SFAS) No. 114, a loan is classified as
in-substance foreclosure when the Corporation has taken possession of the
collateral regardless of whether formal foreclosure proceedings take place.
Other real estate owned is recorded at fair value at the date of foreclosure,
establishing a new cost basis. After foreclosure, valuations are periodically
performed by management, and the real estate is carried at the lower of (1) cost
or (2) fair value minus estimated costs to sell. Income and expenses from
operations of other real estate owned and changes in the valuation allowance are
included in loss on other real estate owned.
-9-
<PAGE> 10
INCOME TAXES
The provision for income taxes is based on the results of operations,
adjusted primarily for tax-exempt income. Certain items of income and expense
are reported in different periods for financial reporting and tax return
purposes. Deferred tax assets and liabilities are determined based on the
differences between the consolidated financial statement and income tax bases of
assets and liabilities measured by using the enacted tax rates and laws expected
to be in effect when the timing differences are expected to reverse. Deferred
tax expense or benefit is based on the difference between deferred tax asset or
liability from period to period.
PER SHARE DATA
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings
Per Share", requires dual presentation of basic and diluted earnings per share.
Basic earnings per share is calculated by dividing net income by the weighted
average number of shares of common stock outstanding at the end of each period.
Diluted earnings per share is calculated by increasing the denominator for the
assumed conversion of all potentially dilutive securities. The Corporation does
not have any securities which have or will have a dilutive effect, accordingly,
basic and diluted per share data is the same.
CASH FLOW INFORMATION
For purposes of reporting consolidated cash flows, cash and cash
equivalents include cash on hand and due from banks, interest-bearing deposits
in other banks and federal funds sold. The Corporation considers cash classified
as interest-bearing deposits with other banks as a cash equivalent because they
are represented by cash accounts essentially on a demand basis. Federal funds
are also included as a cash equivalent because they are generally purchased and
sold for one-day periods.
TRUST ASSETS AND INCOME
Property held by the Corporation in a fiduciary or agency capacity for
its customers is not included in the accompanying consolidated financial
statements because such items are not assets of the Corporation. Trust
Department income is recognized on a cash basis and is not materially different
than if it was reported on an accrual basis.
RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards (SFAS) No. 133 (as amended
by SFAS No. 137), "Accounting for Derivative Instruments and Hedging
Activities", becomes effective for financial reporting periods beginning after
June 15, 2000. SFAS No. 133 requires fair value accounting for all stand-alone
derivatives and many derivatives embedded in other instruments and contracts.
Since the Corporation does not enter into transactions involving derivatives
described in the standard and does not engage in hedging activities, the
standard is not expected to have a significant impact on the Corporation's
consolidated financial condition or results of operations.
RECLASSIFICATION
Certain amounts in the consolidated financial statements of the prior
years have been reclassified to conform with presentation used in the 1999
consolidated financial statements. Such reclassifications had no effect on the
Corporation's consolidated financial condition or net income.
2. RESTRICTED CASH BALANCES
The Bank is required to maintain average reserve balances with the
Federal Reserve Bank. The amount required at December 31, 1999 was $866,000 and
was satisfied by vault cash. Additionally, as compensation for check clearing
and other services, compensating balances are required to be maintained with the
Federal Reserve Bank and other correspondent banks. At December 31, 1999, these
balances were $692,137.
-10-
<PAGE> 11
3. INVESTMENT SECURITIES
The amortized cost, related estimated fair value, and unrealized gains
and losses for investment securities classified as "Available-for-Sale" or
"Held-to-Maturity" were as follows at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
Available-for-Sale Securities
-----------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
December 31, 1999: Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
Obligations of U.S. Government Corporations and
Agencies:
Mortgage-backed................................... $18,188,852 $ 0 $ 593,937 $17,594,915
Other............................................. 16,016,468 0 533,679 15,482,789
Obligations of state and political subdivisions........... 15,024,908 38,708 613,619 14,449,997
Equity securities......................................... 1,437,293 2,587 63,943 1,375,937
------------------------------------------------------------------
Total .................................................. $50,667,521 $41,295 $1,805,178 $48,903,638
==================================================================
</TABLE>
<TABLE>
<CAPTION>
Held-to-Maturity Securities
---------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
December 31, 1999: Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
Obligations of state and political subdivisions........... $200,000 $138 $ 0 $200,138
==================================================================
</TABLE>
<TABLE>
<CAPTION>
Available-for-Sale Securities
-----------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
December 31, 1998: Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
Obligations of U.S. Government Corporations and
Agencies:
Mortgage-backed................................... $22,137,279 $270,995 $ 6,406 $22,401,868
Other............................................. 9,777,510 4,875 0 9,782,385
Obligations of state and political subdivisions........... 13,606,379 423,379 0 14,029,758
Equity securities......................................... 1,388,780 0 16,764 1,372,016
------------------------------------------------------------------
Total .................................................. $46,909,948 $699,249 $23,170 $47,586,027
==================================================================
</TABLE>
<TABLE>
<CAPTION>
Held-to-Maturity Securities
---------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
December 31, 1998: Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
Obligations of state and political subdivisions........... $565,000 $4,076 $ 0 $569,076
==================================================================
</TABLE>
Securities Available-for-Sale with an aggregate fair value of
$29,137,371 in 1999 and $29,787,808 in 1998, respectively, were pledged to
secure public funds, trust funds, securities sold under agreements to repurchase
and other balances of $22,971,729 in 1999 and $24,797,741 in 1998, respectively,
as required by law.
-11-
<PAGE> 12
The amortized cost and estimated fair value of debt securities, by
expected maturity, are shown below at December 31, 1999. Expected maturities
will differ from contractual maturities, because some borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
Held-to-Maturity Available-for-Sale
---------------- ------------------
Estimated Estimated
Amortized Fair Amortized Fair
Cost Value Cost Value
---- ----- ---- -----
<S> <C> <C> <C> <C>
Due in one year or less.................................. $200,000 $200,138 $ 1,913,854 $ 1,848,418
Due after one year through five years.................... 0 0 29,226,022 28,405,545
Due after five years through ten years................... 0 0 6,002,404 5,751,707
Due after ten years...................................... 0 0 13,525,241 12,897,968
--------------------------------------------------------
Total.................................................... $200,000 $200,138 $50,667,521 $48,903,638
========================================================
</TABLE>
The Bank holds stock in the Federal Home Loan Bank of Pittsburgh
(FHLB). The Bank must hold this FHLB stock as long as it remains a member of the
FHLB System. The Bank does not anticipate that it will discontinue its FHLB
membership and therefore, the investment in this FHLB stock in the amounts of
$889,000 and $864,000 in 1999 and 1998, respectively are classified as equity
securities.
The quality rating of all obligations of state and political
subdivisions were "A" or higher, as rated by Moody's or Standard and Poors. The
only exceptions were local issues which were not rated, but were secured by the
full faith and credit obligations of the communities that issued these
securities. All of the state and political subdivision investments were actively
traded in a liquid market.
Proceeds from sale of investments in debt and equity securities
classified as Available-for-Sale during 1999, 1998 and 1997 were $12,294,313,
$34,204,431 and $18,647,390, respectively. Gross gains realized on these sales
were $38,707, $64,419 and $57,935, respectively. Gross losses on these sales
were $609 in 1997. There were no gross losses on the 1999 and 1998 sales.
Proceeds from maturities and redemptions of investments in debt
securities classified as Held-to-Maturity during 1999, 1998 and 1997 were
$365,000, $155,000 and $250,000 respectively. There were no gross gains or
losses on these sales during 1999, 1998 and 1997, respectively.
4. LOANS
Major classifications of loans at December 31, 1999 and 1998 consisted
of:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Commercial.................................................................................... $ 15,558,953 $ 8,991,476
Tax-exempt.................................................................................... 2,123,921 2,512,335
Lease finance receivables..................................................................... 173,148 19,935
Real estate - construction.................................................................... 2,508,697 1,278,041
Real estate................................................................................... 102,108,189 96,741,691
Personal ..................................................................................... 12,562,141 9,460,832
----------------------------
Total gross loans............................................................................. $135,035,049 $119,004,310
Less: Unearned discount....................................................................... 583,878 376,371
Unamortized loan fees, net of costs.................................................. 28,323 69,557
----------------------------
Loans, net of unearned income................................................................. $134,422,848 $118,558,382
============================
</TABLE>
Non-accrual loans at December 31, 1999, 1998 and 1997 were $198,840,
$536,640 and $69,368, respectively. The gross interest that would have been
recorded if these loans had been current in accordance with their original terms
and the amounts actually recorded in income were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Gross interest due under terms................................................... $16,089 $55,411 $3,846
Amount included in income........................................................ 0 9,609 0
-----------------------------------
Interest income not recognized................................................... $16,089 $45,802 $3,846
</TABLE>
-12-
<PAGE> 13
At December 31, 1999 and 1998 the recorded investment in loans that are
considered to be impaired as defined by SFAS No. 114 was $14,883 and $28,355,
respectively. No additional charge to operations was required to provide for the
impaired loans since the total allowance for loan losses is estimated by
management to be adequate to provide for the loan loss allowance required by
SFAS No. 114 along with any other potential losses. The average recorded
investment in impaired loans during the years ended December 31, 1999 and 1998
was approximately $23,784 and $17,721, respectively.
At December 31, 1999, there were no significant commitments to lend
additional funds with respect to non-accrual and restructured loans.
Changes in the allowance for loan losses for the years ended December
31, 1999, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Balance, beginning of year....................................................... $954,516 $900,889 $ 910,711
Provision charged to operations.................................................. 78,000 78,000 60,000
Loans charged-off................................................................ (99,951) (83,140) (102,474)
Recoveries....................................................................... 52,600 58,767 32,652
------------------------------------
Balance, end of year............................................................. $985,165 $954,516 $ 900,889
====================================
</TABLE>
5. PREMISES AND EQUIPMENT
A summary of premises and equipment at December 31, 1999 and 1998
follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Land............................................................................................. $ 567,939 $ 567,939
Buildings and improvements....................................................................... 4,492,242 4,490,372
Furniture and equipment.......................................................................... 3,286,291 3,148,240
------------------------
$8,346,472 $8,206,551
Less: Accumulated depreciation.................................................................. 3,072,525 2,557,014
------------------------
$5,273,947 $5,649,537
</TABLE>
Depreciation amounted to $515,511 for 1999, $516,947 for 1998 and
$373,307 for 1997.
In accordance with SFAS No. 121, impairment losses were recognized in
the amounts of $20,000 in 1997 due to a writedown of a temporary branch building
to estimated net realizable value. Such loss is reflected in occupancy expense
in the accompanying consolidated financial statements. The temporary building
was replaced by a permanent structure.
6. DEPOSITS
Major classifications of deposits at December 31, 1999 and 1998
consisted of:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Demand - non-interest bearing.................................................................. $ 13,672,023 $ 13,315,596
Demand - interest bearing...................................................................... 20,906,204 22,452,236
Savings........................................................................................ 31,991,101 33,493,560
Time $100,000 and over......................................................................... 16,176,300 11,988,742
Other time..................................................................................... 55,860,009 56,429,202
----------------------------
$138,605,637 $137,679,336
============================
</TABLE>
The following is a schedule reflecting remaining maturities of time
deposits of $100,000 and over at December 31, 1999:
<TABLE>
<S> <C>
2000.......................................................................................................... $11,460,000
2001.......................................................................................................... 1,167,000
2002.......................................................................................................... 2,252,000
2003.......................................................................................................... 838,000
2004 and thereafter........................................................................................... 459,000
-----------
Total......................................................................................................... $16,176,000
===========
</TABLE>
Interest expense related to time deposits of $100,000 or more was $821,424 in
1999, $672,469 in 1998 and $674,683 in 1997.
-13-
<PAGE> 14
7. SHORT-TERM BORROWINGS
Federal funds purchased, securities sold under agreements to
repurchase, and Federal Home Loan Bank advances generally represented overnight
or less than 30-day borrowings. U.S. Treasury tax and loan notes for collections
made by the Bank were payable on demand. Short-term borrowings consisted of the
following at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
---- ----
Maximum Maximum
Ending Average Month End Average Ending Average Month End Average
Balance Balance Balance Rate Balance Balance Balance Rates
------- ------- ------- ---- ------- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Federal funds purchased and
securities sold under
agreements to repurchase......... $17,696,906 $18,971,808 $21,099,786 4.73% $20,225,777 $20,149,603 $23,003,016 5.06%
Federal Home Loan Bank............... 12,325,000 1,709,164 12,325,000 5.65% 0 5,342 0 3.62%
U.S. Treasury tax and loan notes..... 858,472 450,989 1,000,000 4.68% 192,328 486,931 1,000,000 5.38%
------------------------------------------------------------------------------------------
Total................................ $30,880,378 $21,131,961 $34,424,786 4.81% $20,418,105 $20,641,876 $24,003,016 5.07%
==========================================================================================
</TABLE>
8. LONG-TERM BORROWINGS
Long-term borrowings consisted of the following due Federal Home Loan
Bank at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Loan in the original amount of $2,000,000 for a 10 year term with a 5 year put. Interest only
is payable monthly @ 5.48% with a floating rate option at the end of 5 years. Principal
balances outstanding....................................................................... $2,000,000 $2,000,000
Loan in the original amount of $225,000 for a 10 year term requiring monthly payments
of $1,627 including interest at 6.12%, maturing in 2007 with a final payment due
of $146,690. Principal balances outstanding............................................... 212,234 219,075
Loan in the original amount of $72,000 for a 30 year term requiring monthly payments
of $425 including interest at 5.856%. Principal balances outstanding....................... 70,617 71,628
Loan in the original amount of $29,160 for a 20 year term requiring monthly payments
of $179 including interest at 5.50%. Principal balances outstanding........................ 28,696 0
Loan in the original amount of $32,400 for a 20 year term requiring monthly payments
of $199 including interest at 5.50%. Principal balances outstanding........................ 32,197 0
-------------------------
Total.......................................................................................... $2,343,744 $2,290,703
=========================
</TABLE>
At December 31, 1999 the annual maturities of long-term debt were as
follows: $8,899 in 2000, $9,448 in 2001, $10,032 in 2002, $10,651 in 2003,
$11,309 in 2004 and $2,293,405 thereafter.
9. COMPREHENSIVE INCOME
The Corporation adopted Statement of Financial Accounting Standards
(SFAS) No. 130, "Reporting Comprehensive Income", as of January 1, 1998.
Accounting principles generally require that recognized revenue, expenses, gains
and losses be included in consolidated net income. Although certain changes in
assets and liabilities, such as unrealized gains and losses on
Available-for-Sale investment securities, are reported as a separate component
of consolidated stockholders' equity, such items, along with consolidated net
income, are components of comprehensive income. The adoption of SFAS No. 130 had
no effect on the Corporation's consolidated net income or stockholders' equity.
The components of other comprehensive income and related tax effects
are as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Unrealized holding gains (losses) on Available-for-Sale investment
securities.................................................................. $(2,401,246) $ 523,257 $170,328
Less reclassification adjustment for gains realized in income................... 38,707 64,419 57,326
----------------------------------------
Net unrealized gains (losses)................................................... $(2,439,953) $ 458,838 $113,002
Tax effects..................................................................... 832,455 (153,288) (39,792)
Net of tax amount............................................................... $(1,607,498) $ 305,550 $ 73,210
========================================
</TABLE>
-14-
<PAGE> 15
10. STOCKHOLDERS' EQUITY AND STOCK PURCHASE PLANS
The Amended Articles of Incorporation contain a provision that permits
the Corporation to issue warrants for the purchase of shares of common stock,
par value $1.25 per share (the "Common Stock"), at below market prices in the
event any person or entity acquires 25% or more of the Common Stock.
The Corporation offers employees a stock purchase plan. The maximum
number of shares of the Common Stock to be issued under this plan shall be
20,000. In addition, the Corporation may choose to purchase shares on the open
market to facilitate this plan. A participating employee may annually elect
deductions of at least 1% of base pay, but not more than 10% of base pay, to
cover purchases of shares under this plan. A participating employee shall be
deemed to have been granted an option to purchase a number of shares of the
Common Stock equal to the annual aggregate amount of payroll deductions elected
by the employee divided by 90% of the fair market value of Common Stock on the
first day of January in each year. Stock issued to participating employees under
the plan for the most recent three year period was:
<TABLE>
<CAPTION>
Per Share
---------
Number Employees' Market
of Purchase Value
Date Issued Shares Price of Shares
----------- ------ ----- ---------
<S> <C> <C> <C>
1999................................................................... 549 $23,74 $26.38
1998................................................................... 453 $21.37 $23.75
1997................................................................... 435 $15.75 $17.50
</TABLE>
The Corporation also offers to its stockholders a Dividend Reinvestment
and Stock Purchase Plan. Under the plan the Corporation registered with the
Securities and Exchange Commission 500,000 shares of the Common Stock to be sold
pursuant to the plan. The price per share for purchases under this plan is
determined at each quarterly dividend payment date by the reported average mean
between the bid and asked prices in the over-the-counter market for 10
consecutive trading days preceding each quarterly dividend payment date.
Participation in this plan by Shareholders began in June 1995. Shares issued
under this plan for the most recent three year period was:
<TABLE>
<CAPTION>
Number of Total
Year Shares Proceeds
---- ------ --------
<S> <C> <C>
1999...................................................... 7,345 $148,582
1998...................................................... 5,013 $141,490
1997...................................................... 6,379 $132,209
</TABLE>
11. INCOME TAXES
The provision for income tax expense consisted of the following
components:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Current............................................................................ $666,270 $649,106 $728,446
Deferred (benefit)................................................................. 18,469 (14,828) 20,331
------------------------------------
TOTAL PROVISION FOR INCOME TAXES $684,739 $634,278 $748,777
====================================
</TABLE>
A reconciliation of income tax expense and the amounts which would have
been recorded based upon the statutory rate of 34% follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
Amount Rate Amount Rate Amount Rate
------ ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C>
Provision at statutory rate............................ $ 926,152 34.0% $ 862,471 34.0% $ 943,253 34.0%
Tax-exempt income...................................... (276,969) (10.1) (263,702) (10.4) (224,865) (8.1)
Non-deductible expenses................................ 40,087 1.4 30,509 1.2 35,817 1.3
Other, net............................................. (4,531) (.2) 5,000 .2 (5,428) (.2)
Actual federal income tax and rate..................... $ 684,739 25.1% $ 634,278 25.0% $ 748,777 27.0%
</TABLE>
-15-
<PAGE> 16
Income taxes applicable to realized security gains included in the
provision for income taxes totaled $13,160 in 1999, $21,902 in 1998 and $19,491
in 1997.
The net deferred tax asset (liability) recorded by the Corporation
consisted of the following tax effects of temporary timing differences at
December 31 1999, 1998 AND 1997:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Deferred tax assets:
Loan loss reserve.............................................................. $ 233,194 $ 222,774 $ 204,541
Deferred compensation.......................................................... 134,323 125,777 115,114
Contributions.................................................................. 3,400 6,068 6,018
Unrealized investment securities losses........................................ 603,937 0 0
-------------------------------------
TOTAL $ 974,854 $ 354,619 $ 325,673
=====================================
Deferred tax liabilities:
Loan fees and costs............................................................ $ (68,321) $ (60,860) $ (54,588)
Accretion...................................................................... (5,679) (5,072) (7,356)
Unrealized investment securities gains......................................... 0 (228,518) (75,230)
Depreciation................................................................... (267,070) (240,370) (230,240)
-------------------------------------
TOTAL $(341,070) $(534,820) $(367,414)
-------------------------------------
Net deferred tax asset (liability)................................................. $ 633,784 $(180,201) $ (41,741)
=====================================
</TABLE>
The above net deferred asset (liability) is included in other assets or
other liabilities on the consolidated balance sheets.
It is anticipated that all tax assets will be realized, accordingly, no
valuation allowance was provided.
12. BENEFIT AND DEFERRED COMPENSATION PLANS
The Bank maintains a 401K salary deferred profit sharing plan for the
benefit of its employees. Under the salary deferral component, employees may
elect to contribute up to 10% of their compensation with the possibility that
the Bank may make matching contributions to the plan. Under the profit sharing
component, contributions are made at the discretion of the Board of Directors.
Matching contributions amounted to $21,600, $20,961 and $18,266 for
1999, 1998 and 1997, respectively. Discretionary contributions amounted to
$93,191, $85,988 and $108,099 in 1999, 1998 and 1997, respectively.
DIRECTORS
The Bank entered into agreements with three directors to establish
non-qualified deferred compensation plans for each of these directors. These
plans are limited to four-year terms. The Bank may, however, enter into
subsequent similar plans with its directors. Each of the participating directors
is deferring the payment to himself of certain directors fees to which he is
entitled. Each director's future payment is based upon the cumulative amount of
deferred fees together with interest currently accruing thereon at the rate of
8% per annum, subject to change by the Board of Directors. The Bank has obtained
life insurance (designating the Bank as the beneficiary) on the lives of certain
directors in face amounts which are intended to cover the Bank's obligations and
related costs under the Director's Deferred Compensation Plan. As of December
31, 1999 and 1998, the net cash value of insurance policies was $216,001 and
$169,377, respectively, and the total accrued liability was $219,133 and
$205,997, respectively, relating to these directors' deferred compensation
agreements.
EXECUTIVE OFFICERS
The Bank entered into agreements with two executive officers to
establish non-qualified deferred compensation plans. Each officer is deferring
compensation in order to participate in this Deferred Compensation Plan. If the
officer continues to serve as an officer of the Bank until he attains sixty-five
(65) years of age, the Bank has agreed to pay him 120 guaranteed consecutive
monthly payments commencing on the first day of the month following the
officer's 65th birthday. Each officer's guaranteed monthly payment is based upon
the future value of life insurance purchased with the compensation the officer
has deferred. The Bank has obtained life insurance (designating the Bank as the
beneficiary) on the life of each participating officer in an amount which is
intended to cover the Bank's obligations under the Deferred Compensation Plan,
based upon certain actuarial assumptions. As of December 31, 1999 and 1998, the
net cash value of insurance policies was $184,533 and $164,629, respectively,
and the total accrued liability was $175,935 and $163,935, respectively,
relating to these executive officers' deferred compensation agreements.
The amounts of net cash values of insurance policies and total accrued
liabilities are included in other assets and accrued interest and other expense,
respectively, on the consolidated balance sheets.
-16-
<PAGE> 17
13. LEASE COMMITMENTS AND CONTINGENCIES
At December 31, 1999 the Bank was leasing some minor office equipment
under operating leases. In prior years the Bank contracted for outside data
processing service and related equipment which was discontinued in 1998 as a
result of the Bank's acquisition and implementation of its own in-house computer
system.
Rental expense under operating leases and contracted data processing
services for the years ended December 31, 1999, 1998 and 1997 were $5,690,
$71,928 and $170,398, respectively.
In the normal course of business, there were various pending legal
actions and proceedings which were not reflected in the consolidated financial
statements. In the opinion of management, the consolidated financial statements
have not and will not be affected materially by the outcome of such actions and
proceedings.
14. RELATED PARTY TRANSACTIONS
Certain directors and executive officers of the Corporation and the
Bank, as well as companies in which they are principal owners (i.e., at least
10%), were indebted to the Bank at December 31, 1999 and 1998. These loans were
made on substantially the same terms and conditions, including interest rates
and collateral, as those prevailing at the time for comparable transactions with
unrelated parties. A summary of the activity on the related party loans,
comprised of eight directors, six executive officers and their related
companies, consisted of the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Balance, beginning of year......................................................................... $1,553,845 $1,643,193
Additions.......................................................................................... 778,963 761,586
Deductions......................................................................................... (750,956) (850,934)
--------------------------
Balance, end of year............................................................................... $1,581,852 $1,553,845
==========================
</TABLE>
The above loans represent funds drawn and outstanding at the date of
the accompanying consolidated financial statement. Commitments by the Bank to
related parties on lines of credit for 1999 and 1998 presented an additional
off-balance sheet risk to the extent of undisbursed funds in the amount of
$227,409 and $204,235, respectively, on the above loans. These loans did not
present more than the normal risk of collectibility nor present other
unfavorable features.
15. REGULATORY MATTERS
Dividends are paid by the Corporation to shareholders from its assets
which are mainly provided by dividends from the Bank. However, national banking
laws place certain restrictions on the amount of cash dividends allowed to be
paid by the Bank to the Corporation. Generally, the limitation provides that
dividend payments may not exceed the Bank's current year's retained income plus
retained net income for the preceding two years. Accordingly, in 2000, without
prior regulatory approval, the Bank may declare dividends to the Corporation in
the amount of $2,337,489 plus additional amounts equal to the net income earned
in 2000 for the period January 1, 2000, through the date of declaration, less
any dividends which may have already been paid in 2000. Regulations also limit
the amount of loans and advances from the Bank to the Corporation to 10% of
consolidated net assets.
The Corporation is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory - and possibly additional
discretionary - actions by regulators that, if undertaken, could have a direct
material effect on the Corporation's consolidated financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt corrective
action, the Corporation must meet specific capital guidelines that involve
quantitative measures of the Corporation's assets, liabilities, and certain
off-balance sheet items as calculated under regulatory accounting practices. The
Corporation's capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings, and other
factors. Management believes, as of December 31, 1999 and 1998, that the
Corporation and the Bank met all capital adequacy requirements to which they are
subject.
Quantitative measures established by regulation to ensure capital
adequacy require the Corporation to maintain minimum amounts and ratios (set
forth in the table below) of Total and Tier I Capital (as defined in the
regulations) to risk-weighted assets (as defined), and of Tier I Capital (as
defined) to average assets (as defined).
As of December 31, 1999, the most recent notification from the Office
of the Comptroller of the Currency categorized the Bank as well capitalized
under the regulatory framework for prompt corrective action. To be categorized
as well capitalized the Bank must maintain minimum total risk-based, Tier I
risk-based, and Tier I leverage ratios as set forth in the table. There are no
conditions or events since that notification that management believes have
changed the institution's category.
-17-
<PAGE> 18
The Bank's actual capital amounts (in thousands) and ratios are
presented in the following table:
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
------ ----------------- -----------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1999:
Total Capital
(To risk-weighted assets).................. $25,131 18.68% $10,766 8.00% $13,457 10.00%
Tier I Capital
(To risk-weighted assets).................. $24,146 17.94% $ 5,383 4.00% $ 8,047 6.00%
Tier I Capital
(To average assets)........................ $24,146 12.94% $ 7,464 4.00% $ 9,330 5.00%
As of December 31, 1998:
Total Capital
(To risk-weighted assets).................. $23,967 21.80% $ 8,796 8.00% $10,995 10.00%
Tier I Capital
(To risk-weighted assets).................. $23,012 20.93% $ 4,398 4.00% $ 6,597 6.00%
Tier I Capital
(To average assets)........................ $23,012 12.95% $ 7,106 4.00% $ 8,882 5.00%
</TABLE>
The Corporation's capital ratios are not materially different from
those of the Bank.
-18-
<PAGE> 19
16. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND
CONCENTRATIONS OF CREDIT RISK
The Corporation is a party to financial instruments with off-balance
sheet risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend credit,
standby letters of credit and commercial letters of credit. Those instruments
involve, to varying degrees, elements of credit and interest rate risk in excess
of the amount recognized in the consolidated balance sheets. The contract or
notional amounts of those instruments reflect the extent of involvement the
Corporation has in particular classes of financial instruments. The Corporation
does not engage in trading activities with respect to any of its financial
instruments with off-balance sheet risk.
The Corporation may require collateral or other security to support
financial instruments with off-balance sheet credit risk. The contract or
notional amounts at December 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit........................................................... $10,341,534 $10,928,888
Financial standby letters of credit.................................................... 639,471 713,754
Performance standby letters of credit.................................................. 10,700 235,000
Dealer floor plans..................................................................... 991,285 283,776
</TABLE>
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Because many of the commitments are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The Corporation evaluates each
customer's creditworthiness on a case-by-case basis. The amount of collateral
obtained, if deemed necessary by the Corporation upon extension of credit, is
based on management's credit evaluation of the counter-party. Collateral held
varies but may include accounts receivable, inventory, property, plant,
equipment and income-producing commercial properties.
Standby letters of credit and commercial letters of credit are
conditional commitments issued by the Corporation to guarantee the performance
of a customer to a third party. The credit risk involved in issuing letters of
credit is essentially the same as that involved in extending loan facilities to
customers. The Corporation holds collateral supporting those commitments for
which collateral is deemed necessary. The extent of collateral held for those
commitments at December 31, 1999 varied from 0 percent to 100 percent; the
average amount collateralized was 72.2 percent.
The Corporation's exposure to credit loss in the event of
nonperformance by the other party to the financial instrument for commitments to
extend credit and letters of credit is represented by the contractual notional
amount of those instruments. The Corporation uses the same credit policies in
making commitments and conditional obligations, as it does for on-balance sheet
instruments.
The Corporation granted commercial, consumer and residential loans to
customers within Pennsylvania. Of the total loan portfolio 78% was for real
estate loans, principally residential. It was the opinion of management that the
high concentration did not pose an adverse credit risk. Further, it was
management's opinion that the remainder of the loan portfolio was balanced and
diversified to the extent necessary to avoid any significant concentration of
credit.
17. FAIR VALUES OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards (SFAS) No. 107,
"Disclosures about Fair Value of Financial Instruments", requires disclosure of
fair value information about financial instruments, whether or not required to
be recognized in the consolidated balance sheet, for which it is practicable to
estimate such value. In cases where quoted market prices are not available, fair
values are based on estimates using present value or other valuation techniques.
These techniques are significantly affected by the assumptions used, including
the discount rate and estimates of future cash flows. Fair value estimates
derived through these techniques cannot be substantiated by comparison to
independent markets and, in many cases, could not be realized in immediate
settlement of the instrument. SFAS No. 107 excludes certain financial
instruments and all nonfinancial instruments from its disclosure requirements.
Accordingly, the aggregate fair value amounts presented do not represent the
underlying value of the Corporation.
The following methods and assumptions were used by the Corporation in
estimating its fair value disclosures for financial instruments:
CASH AND OTHER SHORT-TERM INSTRUMENTS
Cash and due from banks, interest bearing deposits with other
banks, and Federal Funds sold had carrying values which were a
reasonable estimate of fair value. Accordingly, fair values regarding
these instruments were provided by reference to carrying values
reflected on the consolidated balance sheets.
-19-
<PAGE> 20
INVESTMENT SECURITIES
The fair value of investment securities which included
mortgage backed securities were estimated based on bid prices published
in financial newspapers or bid quotations received from securities
dealers.
LOANS
Fair values were estimated for categories of loans with
similar financial characteristics. Loans were segregated by type such
as commercial, tax-exempt, real estate mortgages and consumer. For
estimation purposes, each loan category was further segmented into
fixed and adjustable rate interest terms and also into performing and
non-performing classifications.
The fair value of each category of performing loans was
calculated by discounting future cash flows using the current rates at
which similar loans would be made to borrowers with similar credit
ratings and for the same remaining maturities.
Fair value for non-performing loans was based on management's
estimate of future cash flows discounted using a rate commensurate with
the risk associated with the estimated future cash flows. The
assumptions used by management were judgmentally determined using
specific borrower information.
DEPOSITS
Under SFAS No. 107, the fair value of deposits with no stated
maturity, such as Demand Deposits, Savings Accounts, and Money Market
Accounts, was equal to the amount payable on demand at December 31,
1999 and 1998.
Fair values for fixed rate Certificates of Deposit were
estimated using a discounted cash flow calculation that applied
interest rates currently being offered on certificates to a schedule of
aggregated expected monthly maturities on time deposits.
SHORT-TERM BORROWINGS
The carrying amounts of federal funds purchased and securities
sold under agreements to repurchase and other short-term borrowings
approximated their fair values.
-20-
<PAGE> 21
LONG-TERM BORROWINGS
The fair values of long-term borrowings, other than
capitalized leases, are estimated using discounted cash flow analyses
based on the Corporation's incremental borrowing rate for similar
instruments. The carrying amounts of capitalized leases approximated
their fair values, because the incremental borrowing rate used in the
carrying amount calculation was at the market rate.
COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT
Management estimated that there were no material differences
between the notional amount and the estimated fair value of those
off-balance sheet items, because they were primarily composed of
unfunded loan commitments which were generally priced at market value
at the time of funding.
At December 31, 1999 and 1998, the carrying values and
estimated fair values of financial instruments are presented in the
table below:
<TABLE>
<CAPTION>
1999 1998
---- ----
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Financial Assets:
Cash and short-term investments................ $ 6,071,817 $ 6,071,817 $12,486,043 $ 12,486,043
Investment securities.......................... 49,103,638 49,103,776 48,151,027 48,155,103
Loans:
Commercial..................................... 15,558,953 15,558,953 8,991,476 8,991,476
Tax-exempt..................................... 2,123,921 2,116,905 2,512,335 2,541,052
Qualified municipal leases..................... 173,148 173,148 19,935 19,935
Real estate - construction..................... 2,508,697 2,479,613 1,278,041 1,272,324
Real estate.................................... 102,108,189 101,287,915 96,741,690 97,034,525
Personal....................................... 12,562,141 12,217,198 9,460,832 9,298,772
-------------------------------------------------------------------
Gross loans.................................... $135,035,049 $133,833,732 $119,004,309 $119,158,084
Less: Unearned discount....................... 583,878 0 376,370 0
Unamortized loan fees, net of costs........ 28,323 0 69,557 0
-------------------------------------------------------------------
Loans, net of unearned income.............. $134,422,848 133,833,732 $118,558,382 $119,158,084
Less allowance for losses.................. 985,165 0 954,516 0
-------------------------------------------------------------------
Net loans...................................... $133,437,683 $133,833,732 $117,603,866 $119,158,084
=================================================== ===============
Financial Liabilities:
Deposits:
Demand - non-interest bearing.............. $ 13,672,023 $ 13,672,023 $ 13,315,596 $ 13,315,596
Demand - interest bearing.................. 20,906,204 20,906,204 22,452,236 22,452,236
Savings.................................... 31,991,101 31,991,101 33,493,560 33,493,560
Time - $100,000 and over................... 16,176,300 16,252,443 11,988,742 12,177,705
Other time................................. 55,860,009 55,833,285 56,429,202 57,131,868
Total Deposits.......................... $138,605,637 138,655,056 $137,679,336 $138,570,965
Short-Term Borrowings.............................. $ 30,880,378 $ 30,880,378 $ 20,418,105 $ 20,418,105
Long-Term Borrowings............................... 2,343,744 2,199,996 2,290,703 2,373,493
Off-Balance Sheet Assets (Liabilities):
Commitments to extend credit................... 10,341,534 10,928,888
Standby letters of credit...................... 639,471 713,754
Performance standby letters of credit.......... 10,700 235,000
Dealer floor plans............................. 991,285 283,776
</TABLE>
-21-
<PAGE> 22
18. PARENT COMPANY FINANCIAL INFORMATION
Condensed financial information for CCFNB Bancorp, Inc. (Parent Company
only) was as follows:
<TABLE>
<CAPTION>
BALANCE SHEETS December 31,
- -------------- ------------
Assets 1999 1998
---- ----
<S> <C> <C>
Cash in subsidiary Bank.................................................................... $ 66,870 $ 293,362
Investment in subsidiary................................................................... 22,730,575 22,910,536
Investment in other equity securities...................................................... 236,023 256,055
Prepayments and other assets............................................................... 25,957 8,284
Receivable from subsidiary................................................................. 17,974 55,981
---------------------------
Total Assets........................................................................... $23,077,399 $23,524,218
===========================
Liabilities and Stockholders' Equity
Accrued expenses and other liabilities..................................................... $ 30,270 $ 44,506
---------------------------
Total Liabilities...................................................................... $ 30,270 $ 44,506
---------------------------
Stockholders' Equity
Common stock............................................................................... $ 1,709,564 $ 1,728,041
Surplus.................................................................................... 5,483,515 5,849,157
Retained earnings.......................................................................... 17,013,997 15,670,223
Unrealized gain (loss) on investment securities Available-for-Sale......................... (1,159,947) 447,551
Less treasury stock at cost................................................................ 0 (215,260)
---------------------------
Total Stockholders' Equity............................................................. $23,047,129 $23,479,712
---------------------------
Total Liabilities and Stockholders' Equity............................................. $23,077,399 $23,524,218
===========================
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF INCOME Years Ended December 31,
- -------------------- ------------------------
Income 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Dividends from subsidiary bank............................................... $ 697,859 $1,001,449 $ 637,610
Dividends - other ........................................................... 7,837 6,027 980
Interest..................................................................... 8,243 5,451 17,724
------------------------------------------
Total Income............................................................. $ 713,939 $1,012,927 $ 656,314
Operating Expenses............................................................... 110,264 66,470 62,071
------------------------------------------
Income Before Taxes and Equity in Undistributed
Net Income of Subsidiary................................................. $ 603,675 $ 946,457 $ 594,243
Applicable income tax (benefit).................................................. (33,888) (20,128) (14,978)
------------------------------------------
Income Before Equity in Undistributed Net Income
of Subsidiary............................................................ $ 637,563 $ 966,585 $ 609,221
Equity in undistributed income of subsidiary..................................... 1,401,674 935,815 1,416,275
------------------------------------------
Net Income................................................................... $ 2,039,237 $1,902,400 $ 2,025,496
==========================================
STATEMENTS OF CASH FLOWS
- ------------------------
Operating Activities
Net Income....................................................................... $ 2,039,237 $1,902,400 $ 2,025,496
Adjustments to reconcile net income to net cash provided by
operating activities:
Equity in undistributed net income of subsidiary......................... (1,401,674) (935,815) (1,416,275)
Decrease in prepaid expenses and other assets............................ 0 0 14,235
(Increase) decrease in receivable from subsidiary........................ 38,007 (41,730) 96,055
Increase (decrease) in income taxes and accrued expenses
Payable.................................................................. (14,236) 31,809 (56,557)
------------------------------------------
Net Cash Provided By Operating Activities................................ $ 661,334 $ 956,664 $ 662,954
------------------------------------------
Investing Activities
Purchase of equity securities.................................................... $ (23,504) $ (78,387) $ (198,075)
Investment in subsidiary......................................................... 0 0 (143,703)
------------------------------------------
Net Cash (Used) in Investing Activities.................................. $ (23,504) $ (78,387) $ (341,778)
------------------------------------------
Financing Activities
Proceeds from sale of treasury stock............................................. $ 13,034 $ 9,681 $ 0
Acquisition of treasury stock.................................................... (330,475) (345,115) (148,770)
Proceeds from issuance of common stock........................................... 148,582 141,490 139,060
Cash dividends................................................................... (695,463) (639,107) (641,064)
------------------------------------------
Net Cash (Used) By Financing Activities.................................. $ (864,322) $ (833,051) $ (650,774)
------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents......................... $ (226,492) $ 45,226 $ (329,598)
Cash and Cash Equivalents at Beginning of Year................................... 293,362 248,136 577,734
------------------------------------------
Cash and Cash Equivalents at End of Year................................. $ 66,870 $ 293,362 $ 248,136
==========================================
</TABLE>
-22-
<PAGE> 23
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders of CCFNB Bancorp, Inc.
We have audited the accompanying consolidated balance sheets of CCFNB Bancorp,
Inc. and Subsidiary as of December 31, 1999 and 1998, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 1999. These consolidated
financial statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of CCFNB
Bancorp, Inc. and Subsidiary as of December 31, 1999 and 1998, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999 in conformity with generally
accepted accounting principles.
J.H. Williams & Co., LLP
Kingston, Pennsylvania
January 18, 2000
-23-
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CCFNB BANCORP, INC.
SELECTED CONSOLIDATED FINANCIAL SUMMARY
NOT COVERED BY REPORT OF INDEPENDENT ACCOUNTANTS
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total interest income............................ $ 12,669 $ 12,444 $ 12,487 $ 11,844 $ 11,466
Total interest expense........................... 6,099 6,072 5,976 5,588 5,557
-------- -------- -------- -------- --------
Net interest income.............................. $ 6,570 6,372 6,511 6,256 5,909
Provision for possible loan losses............... 78 78 60 80 42
Other operating income........................... 1,050 981 815 762 693
Other operating expenses......................... 4,818 4,739 4,492 4,450 4,374
Federal income taxes............................. 685 634 749 664 561
-------- -------- -------- -------- --------
Net income....................................... $ 2,039 $ 1,902 $ 2,025 $ 1,824 $ 1,625
======== ======== ======== ======== ========
PER SHARE DATA:
Earnings per share (1)........................... $ 1.48 $ 1.38 $ 1.47 $ 1.33 $ 1.19
Cash dividends declared per share................ $ 0.51 $ 0.46 $ 0.46 $ 0.45 $ 0.45
Book value per share............................. $ 16.85 $ 17.03 $ 15.68 $ 14.95 $ 13.99
Average shares outstanding....................... 1,375,572 1,378,339 1,381,800 1,375,875 1,367,595
BALANCE SHEET DATA:
Total assets..................................... $196,122 $185,258 $173,866 $170,086 $162,066
Total loans...................................... $134,423 $118,558 $119,045 $115,590 $111,832
Total securities................................. $ 49,104 $ 48,151 $ 43,862 $ 37,407 $ 40,384
Total deposits................................... $138,606 $137,679 $127,719 $131,400 $128,985
FHLB advances - long-term........................ $ 2,344 $ 2,291 $ 225 $ 0 $ 0
Total stockholders' equity....................... $ 23,047 $ 23,480 $ 22,105 $ 20,657 $ 19,512
PERFORMANCE RATIOS:
Return on average assets......................... 1.09% 1.07% 1.18% 1.11% 1.03%
Return on average stockholders' equity........... 8.91% 8.54% 9.79% 9.35% 8.99%
Net interest margin (2).......................... 3.96% 4.05% 4.23% 4.24% 4.15%
Total non-interest expense as a percentage of
average assets................................ 2.58% 2.67% 2.62% 2.70% 2.77%
ASSET QUALITY RATIOS:
Allowance for possible loan losses as a
percentage of loans, net......................... 0.73% 0.81% 0.76% 0.79% 0.82%
Allowance for possible loan losses as a
percentage of non-performing loans (3)........ 264.83% 100.32% 129.27% 208.00% 222.00%
Non-performing loans as a percentage of total
loans, net ................................... 0.28% 0.81% 0.59% 0.38% 0.37%
Non-performing assets as a percentage of
total assets (4) ............................. 0.19% 0.51% 0.40% 0.26% 0.25%
Net charge-offs as a percentage of average
net loans .................................... 0.04% 2.11% 0.06% 0.07% 0.07%
LIQUIDITY AND CAPITAL RATIOS:
Equity to assets ................................ 11.75% 12.53% 12.09% 11.86% 11.44%
Tier 1 Capital to risk-weighted assets (5)....... 17.94% 20.93% 20.98% 20.58% 28.21%
Leverage ratio (5)(6)............................ 12.94% 12.95% 12.57% 12.23% 12.39%
Total capital to risk-weighted assets (5)........ 18.68% 21.80% 21.84% 21.49% 29.46%
Dividend payout ratio............................ 34.09% 33.59% 31.65% 33.95% 37.88%
</TABLE>
- --------------------
(1) Based upon average shares and common share equivalents outstanding.
(2) Represents net interest income as a percentage of average total
interest-earning assets, calculated on a tax-equivalent basis.
(3) Non-performing loans are comprised of (i) loans which are on a
non-accrual basis, (ii) accruing loans that are 90 days or more past
due, and (iii) restructured loans. Non-performing assets are comprised
of non-performing loans and foreclosed real estate (assets acquired in
foreclosure), if applicable.
(4) Based upon average balances for the respective periods.
(5) Based on the Federal Reserve Bank's risk-based capital guidelines, as
applicable to the Corporation. The Bank is subject to similar
requirements imposed by the Office of the Comptroller of the Currency
(the "OCC").
(6) The leverage ratio is defined as the ratio of Tier 1 Capital to average
total assets less intangible assets, if applicable.
-24-
<PAGE> 25
The following discussion and analysis should be read in conjunction
with the detailed information and financial statements, including notes thereto,
included elsewhere in this report. The consolidated financial condition and
results of operations of the Corporation are essentially those of its
subsidiary, the Bank. Therefore, the analysis that follows is directed to the
performance of the Bank.
-25-
<PAGE> 26
FACTORS THAT MAY AFFECT FUTURE RESULTS
General. Banking is affected, directly and indirectly, by local,
domestic and international economic and political conditions, and by government
monetary and fiscal policies. Conditions such as inflation, recession,
unemployment, volatile interest rates, tight money supply, real estate values,
international conflicts and other factors beyond the control of the Corporation
may adversely affect the future results of operations of the Corporation.
Management does not expect any one particular factor to affect the Corporation's
results of operations. A downward trend in several areas, however, including
real estate, construction and consumer spending, could have an adverse impact on
the Corporation's ability to maintain or increase profitability. Therefore,
there is no assurance that the Corporation will be able to continue their
current rates of income and growth.
Interest Rates. The Corporation's earnings depend, to a large extent,
upon net interest income, which is primarily influenced by the relationship
between its cost of funds (deposits and borrowings) and the yield on its
interest-earning assets (loans and investments). This relationship, known as the
net interest spread, is subject to fluctuation and is affected by regulatory,
economic and competitive factors which influence interest rates, the volume,
rate and mix of interest-earning assets and interest-bearing liabilities, and
the level of non-performing assets. As part of its interest rate risk management
strategy comprised of interest rate risk, mortgage risk, and deposit pricing
risk components, management seeks to control its exposure to interest rate
changes by managing the maturity and repricing characteristics of
interest-earning assets and interest-bearing liabilities.
As of December 31, 1999, total interest-earning assets maturing or
repricing within one year were less than total interest-bearing liabilities
maturing or repricing in the same period by $19,098,000, representing a
cumulative one year interest rate sensitivity gap as a percentage of total
assets of negative 9.74%. This condition suggests that the yield on the
Corporation's interest-earning assets should adjust to changes in market
interest rate at a slower rate than the cost of the Corporation's
interest-bearing liabilities. Consequently, the Corporation's net interest
income could decrease during periods of rising interest rates. See "Interest
Rate Sensitivity".
Local Economic Conditions. The success of the Corporation is dependent,
to a certain extent, upon the general economic conditions in the geographic
market served. Although the Corporation expects that economic conditions will
continue to be favorable in this market, no assurance can be given that these
economic conditions will continue. Adverse changes in economic conditions in the
geographic market that the Corporation serves would likely impair its ability to
collect loans and could otherwise have a material adverse effect on the results
of operations and financial condition of the Corporation.
-26-
<PAGE> 27
Competition. The Banking industry is highly competitive, with rapid
changes in product delivery systems and in consolidation of service providers.
Many of the Corporation's competitors are bigger than the Corporation in terms
of assets and have substantially greater technical, marketing and financial
resources. Because of their size, many of these competitors can (and do) offer
products and services that the Corporation does not offer. The Corporation is
constantly striving to meet the convenience and needs of its customers and to
enlarge its customer base. No assurance can be given that these efforts will be
successful in maintaining and expanding the Corporation's customer base.
RESULTS OF OPERATIONS
The Corporation's net income increased 7.20% to $2,039,000 for 1999,
compared to $1,902,000 for 1998. Earnings per common share for the current year
were $1.48 compared to $1.38 per common share in 1998. Earnings per share are
dependent on the weighted average number of shares outstanding. Several factors
accounted for the net decrease in the weighted average number of shares
outstanding of 1,375,572, 1,378,339 and 1,381,800 for 1999, 1998 and 1997,
respectively. These factors were the effect of dividend reinvestment and
employees stock option plans and purchase and retirement of treasury stock which
includes the Corporation's strategy begun in the latter part of 1999 to purchase
up to ten percent of the Corporation's common shares in open market purchases.
Loans increased 13.38% throughout 1999 to $134,423,000 from
$118,558,000 in 1998. Return on average assets ("ROA") increased to 1.09% for
1999 compared to 1.07% for 1998. The return on average equity ("ROE") increased
to 8.91% for 1999 compared to 8.54% for 1998.
Tax-equivalent net interest income increased 3.22% to $6,987,000 in
1999 from $6,769,000 in 1998. Average earning assets increased 5.53% in 1999
from $167,320,000 in 1998 to $176,576,000 in 1999. This increased net interest
income is a result of changes in strategies in the loan and security area
experienced during the past year. Along with the increase in interest earning
assets net interest income also increased 3.15% from $6,295,000 in 1998 to
$6,493,000 in 1999.
TABLE OF NON-INTEREST INCOME
(Dollars in Thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Service charges and fees ........................................................ $ 612 $579 $523
Trust department income.......................................................... 189 144 103
Investment securities gains - net................................................ 39 64 57
Other ........................................................................... 210 194 132
----------------------------- ----
Total non-interest income........................................................ $1,050 $981 $815
==================================
</TABLE>
Total non-interest income increased 7.03% during 1999 from $981,000 in
1998 to $1,050,000 in 1999. Trust income increased 31.25% from $144,000 in 1998
to $189,000 in 1999. Service fees and charges increased from $579,000 in 1998 to
$612,000 in 1999 or 5.70%. Other income also increased 8.25% from $194,000 in
1998 to $210,000 in 1999. Conversely, gain on sale of investment securities
decreased from $64,000 in 1998 to $39,000 in 1999, or 39.06%. Included in other
non-interest income is net income from the Invest program, a third party
brokerage and advisory service under the supervision of the Bank, of $14,000,
compared to $15,000 in 1998.
-27-
<PAGE> 28
TABLE OF NON-INTEREST EXPENSE
(Dollars in Thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Salaries and wages .............................................................. $1,905 $1,886 $1,817
Employee benefits................................................................ 630 563 523
Net occupancy expense............................................................ 339 334 375
Furniture and equipment expense.................................................. 597 556 420
Other expense.................................................................... 1,348 1,400 1,357
-----------------------------------
Total non-interest expense $4,819 $4,739 $4,492
===================================
</TABLE>
Total non-interest expense increased to $4,819,000 in 1999 from
$4,739,000 in 1998 or 1.69%. A 3.51% increase in salaries and benefits was
attributable mainly to normal merit and cost of living increases and increased
benefit costs. Furniture and equipment expense increased 7.37% from $556,000 in
1998 to $597,000 in 1999 as a result of increased depreciation and maintenance
contracts on equipment resulting from the conversion of data processing services
from a third party provider to an in-house computer system during the second
quarter 1998, with 1999 being the first full year of this additional expense.
A key factor in measuring non-interest expense is to express this
non-interest expense as a percentage of average total assets. In 1999, the
percentage improved to 2.58% from 2.67% in 1998.
Credit quality remains high and delinquencies manageable, therefore the
provision for loan losses for 1999 remained at $78,000 the same as 1998.
NET INTEREST INCOME
Tax-equivalent net interest income for 1999 equaled $6,988,000 compared
to $6,764,000 in 1998, an increase of 3.31%. The decrease in the overall net
interest margin from 4.04% in 1998 to 3.96% in 1999 is a result of the declining
interest rates, specifically in the loans, with adjustable rate mortgage
repricing downward throughout most of 1999. Interest income at $12,669,000 in
1999 increased from $12,444,000 in 1998 or 1.81%. Interest expense increased to
$6,099,000 in 1999 from $6,072,000 in 1998 or a .44% increase. The "squeeze" in
the net interest spread is an ongoing contributing factor in the current banking
climate and continues to be a challenge into the new millennium.
Average cost of funds improved for 1999 at 3.94% compared to 4.12% for
1998. Conversely, yield on average interest-earning assets was 7.18% for 1999
down from 7.55% in 1998.
TAX-EQUIVALENT NET INTEREST INCOME
(Dollars in Thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Interest income .......................................................... $12,669 $12,444 $12,487
Interest expense.......................................................... 6,099 6,072 5,976
--------------------------------------
Net interest income....................................................... $ 6,570 $ 6,372 $ 6,511
Tax-equivalent adjustment................................................. 417 397 342
--------------------------------------
Net interest income (fully taxable equivalent)............................ $ 6,987 $ 6,769 $ 6,853
======================================
</TABLE>
The net interest margin, which is the total tax-equivalent net interest
income as a percentage of total average interest-earning assets, decreased in
1999 to 3.96% compared to 4.04% in 1998, a decrease of 8 basis points. The
following Average Balance Sheet and Rate Analysis table presents the average
assets, actual income or expense and the average yield on assets, liabilities
and stockholders' equity for the years 1999, 1998 and 1997.
-28-
<PAGE> 29
AVERAGE BALANCE SHEET AND RATE ANALYSIS
THREE YEARS ENDED DECEMBER 31,
(Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
Average Interest Average Average Interest Average Average Interest Average
Balance Inc./Exp Yd/Rate Balance Inc./Exp Yd/Rate Balance Inc./Exp Yd/Rate
------- -------- ------- ------- -------- ------- ------ -------- -------
ASSETS: (1) (2) (1) (2) (1) (2)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Bearing Deposits With Other
Financial Institutions............... $ 2,739 $ 132 4.82% $ 4,330 $ 229 5.29% $ 2,797 $ 152 5.43%
----------------------------------------------------------------------------------------
Investment Securities:
U.S. Government Securities........... $ 34,380 $ 2,021 5.88 $ 31,135 $ 1,838 5.90 $ 28,182 $ 1,726 6.12
State and Municipal
Obligations (3).................... 14,315 689 7.29 13,216 657 7.53 9,783 513 7.94
Other Securities..................... 1,132 81 7.16 1,527 103 6.75 2,342 149 6.36
----------------------------------------------------------------------------------------
Total Investment Securities.............. $ 49,827 $ 2,791 5.60% $ 45,878 $ 2,598 5.66% $ 40,307 $ 2,388 5.92%
----------------------------------------------------------------------------------------
Federal Funds Sold....................... $ 825 $ 39 4.73% $ 622 $ 32 5.14% $ 2,256 $ 124 5.50%
----------------------------------------------------------------------------------------
Consumer............................. 10,797 887 8.22 9,183 819 8.92 8,635 811 9.39
Dealer Floor Plan.................... 2,876 230 8.00 2,044 176 8.61 1,552 135 8.70
Mortgage............................. 99,473 7,771 7.81 97,387 7,897 8.11 97,822 8,121 8.30
Commercial........................... 7,768 700 9.01 5,954 579 9.72 6,212 608 9.79
Tax Free (3)......................... 2,271 119 7.94 1,922 114 8.99 2,550 148 8.79
----------------------------------------------------------------------------------------
Total Loans.............................. $123,185 $ 9,707 7.88% $116,490 $ 9,585 8.23% $116,771 $ 9,823 8.41%
----------------------------------------------------------------------------------------
Total Interest-Earning Assets............ $176,576 $12,669 7.18% $167,320 $12,444 7.44% $162,131 $12,487 7.70%
---------------- ---------------- -----------------
Reserve for Loan Losses.................. (990) (932) (918)
Cash and Due from Banks.................. 1,837 1,802 1,372
Other Assets............................. 9,174 9,284 8,574
-------- -------- --------
Total Assets............................. $186,597 $177,474 $171,159
======== ======== ========
LIABILITIES AND CAPITAL:
SUPER NOW Deposits....................... $ 21,717 $ 289 1.33% $ 20,255 $ 348 1.72% $ 19,735 $ 415 2.10%
IRA's under $100,000..................... 8,352 413 4.94 7,987 409 5.12 8,112 405 4.99
Money Market Deposits.................... 10,835 298 2.75 11,755 351 2.99 12,015 352 2.93
Savings Deposits......................... 21,895 559 2.55 20,771 538 2.59 21,498 575 2.67
Time Deposits including IRA's
over $100,000........................ 14,302 821 5.74 11,319 672 5.94 11,450 675 5.90
Other Time Deposits under $100,000 48,505 2,574 5.31 47,095 2,593 5.52 44,276 2,490 5.62
----------------------------------------------------------------------------------------
Total Interest-Bearing Deposits.......... $125,606 $ 4,954 3.94% $119,182 $ 4,911 4.12% $117,086 $ 4,912 4.20%
U.S. Treasury Short-Term Borrowings...... 454 21 4.63 488 26 5.33 585 30 5.13
Short-Term Borrowings - Other............ 1,709 97 5.68 5 0 0.00 9 0 0.00
Long-Term Borrowings..................... 2,323 130 5.60 2,017 115 5.70 254 16 6.30
Repurchase Agreements.................... 18,972 897 4.73 20,150 1,020 5.06 19,350 1,018 5.26
----------------------------------------------------------------------------------------
Total Interest-Bearing Liabilities....... $149,064 $ 6,099 4.09% $141,842 $ 6,072 4.28% $137,284 $ 5,976 4.35%
---------------- ---------------- -----------------
Demand Deposits.......................... 13,357 12,015 11,968
Other Liabilities........................ 1,302 1,353 1,217
Stockholders' Equity..................... 22,874 22,264 20,690
-------- -------- --------
Total Liabilities and Capital............ $186,597 $177,474 $171,159
======== ======== ========
NET INTEREST INCOME/NET INTEREST
MARGIN (4)........................... $ 6,570 3.72% $ 6,372 3.81% $ 6,511 4.02%
================ ================ =================
TAX-EQUIVALENT NET INTEREST INCOME/NET
INTEREST MARGIN (5)................... $ 6,987 3.96% $ 6,769 4.04% $ 6,853 4.23%
================ ================ =================
</TABLE>
(1) Average volume information was compared using daily (or monthly)
averages.
(2) Interest on loans includes fee income.
(3) Yield on tax-exempt obligations 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, 1998 & 1997.
-29-
<PAGE> 30
COMPONENTS OF NET INTEREST INCOME
To enhance the understanding of the effects of volumes (the average
balance of earning assets and costing liabilities) and average interest rate
fluctuations on the balance sheet as it pertains to net interest income, the
table below reflects these changes for 1999 versus 1998 and preceding two years:
TABLE OF NET INTEREST INCOME COMPONENTS ON A TAX-EQUIVALENT BASIS
For the twelve months ended December 31, 1999
(Dollars in thousands)
<TABLE>
<CAPTION>
1999 Versus 1998 1998 Versus 1997 1997 Versus 1996
---------------- ---------------- ----------------
Increase (Decrease) Increase (Decrease) Increase (Decrease)
Due to Changes In Due to Changes In Due to Changes In
----------------- ----------------- -----------------
Average Average Average Average Average Average
Volume Rate Total Volume Rate Total Volume Rate Total
------ ---- ----- ------ ---- ----- ------ ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Income:
Interest-Bearing Deposits with Other
Financial Institutions........... $(84) $ (20) $(104) $ 83 $ (4) $ 79 $ (3) $ 5 $ 2
U.S. Government Securities........... 191 (6) 185 181 (62) 119 85 0 85
State and Municipal Obligations...... 83 (32) 51 273 (40) 233 25 (13) 12
Other Securities..................... (27) 6 (21) (52) 9 (43) (42) (9) (51)
Federal Funds Sold................... 10 (3) 7 (90) (8) (98) 72 2 74
Consumer Loans....................... 144 (64) 80 51 (41) 10 15 12 27
Dealer Floor Plan.................... 72 (12) 60 43 (1) 42 102 0 102
Mortgage Loans(1).................... 169 (292) (123) (36) (186) (222) 194 153 347
Commercial Loans..................... 176 (42) 134 (25) (4) (29) (2) 6 4
Tax Free Loans....................... 31 (20) 11 (55) 5 (50) 65 0 65
---------------------------------------------------------------------------------------
Total Earning Assets................. $765 $(485) $ 280 $373 $(332) $ 41 $511 $156 $667
---------------------------------------------------------------------------------------
Interest Expense:
SUPER NOW Deposits................... $ 25 $ (79) $ (54) $ 11 $ (75) $ (64) $ (2) $(14) $(16)
IRA ................................. 19 (14) 5 (6) 11 5 6 (1) 5
Money Market Deposits................ (28) (28) (56) (8) 7 (1) (46) (4) (50)
Savings Deposits..................... 29 (8) 21 (19) (17) (36) (58) (14) (72)
Time Deposits over $100,000.......... 177 (23) 154 (8) 5 (3) 31 (5) 26
Other Time Deposits.................. 78 (99) (21) 158 (44) 114 157 17 174
U.S. Treasury - Short-Term
Borrowings ........................ (2) (3) (5) (5) 1 (4) 3 0 3
Long-Term Borrowings................. 17 (2) 15 111 (2) 109 (6) (3) (9)
Repurchase Agreements................ (60) (66) (126) 42 (39) 3 267 39 306
---------------------------------------------------------------------------------------
Total Interest-Bearing Deposits...... $255 $(322) $ (67) $276 $(153) $ 123 $352 $ 15 $367
---------------------------------------------------------------------------------------
NET INTEREST INCOME.................. $510 $(163) $ 347 $ 97 $(179) $ (82) $159 $141 $300
=======================================================================================
</TABLE>
(1) Includes non-accrual loans.
-30-
<PAGE> 31
FINANCIAL CONDITION
The Corporation's total consolidated assets at December 31, 1999 were
$196 million which represented an increase of $11 million or 5.95% over $185
million at December 31, 1998. The 1998 growth rate was 6.32% or $11 million.
Capital declined 2.13% for 1999 from $23.5 million in 1998 to $23.0
million in 1999. Adjustment for fair market value of securities was a negative
$1.2 million for 1999 compared to a positive $.5 million for 1998. Additionally,
a strategy to purchase up to 10% of the capital stock of CCFNB and retire it is
in place and resulted in common stock and surplus decreasing to $7.2 million in
1999 from $7.6 million in 1998 or a decrease of 5.26%.
Total average assets grew 5.65% from 1998 at $177 million to 1999 at
$187 million. Average earning assets grew 5.99% from 1998 at $167 million to
1999 at $177 million.
Loans grew 12.61% from $119 million at December 31, 1998 to $134
million at December 31, 1999. The overall mix also changed which is a positive
trend.
Core deposits declined 2.38% to $123 million at December 31, 1999 from
$126 million at December 31, 1998. Non-interest bearing deposits remained at $13
million.
The loan-to-deposit ratio is a key measurement of liquidity. The
loan-to-deposit ratio at CCFNB increased during 1999 to 96.40% compared to
86.23% in 1998.
It is management's opinion that the balance sheet mix and the interest
rate risk associates with the balance sheet is within manageable parameters.
Constant monitoring using asset/liability reports and interest rate risk
scenarios are in place along with quarterly asset/liability management meetings
on the committee level by the Board of Directors.
INVESTMENTS
(Dollars in thousands)
<TABLE>
<CAPTION>
Outstanding Balance at December 31,
-----------------------------------
1999 1998 1997
---- ---- ----
Available- Held-To Available- Held-To Available- Held-To
For-Sale Maturity For-Sale Maturity For-Sale Maturity
-------- -------- -------- -------- -------- --------
(2) (1) (2) (1) (2) (1)
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities............................. $ 0 $ 0 $ 0 $ 0 $ 2,997 $ 0
Federal Agency Obligations........................... 15,482 0 9,782 0 14,546 0
Mortgage-backed Securities........................... 17,595 0 22,402 0 14,450 0
Obligations of State and Political Subdivisions...... 14,451 200 14,030 565 9,459 720
Other Securities..................................... 1,376 0 1,372 0 1,690 0
------------------------------------------------------------ ----------
Total Investment Securities.......................... $48,904 $200 $47,586 $565 $ 43,142 $720
============================================================ ==========
</TABLE>
(1) Carried at amortized cost.
(2) Carried at estimated fair value.
The following table sets forth the maturity distribution of the
investment portfolio's Held-to-Maturity and Available-for-Sale securities, the
weighted average yield for each type of Held-to-Maturity and Available-for-Sale
securities and ranges of maturity at December 31, 1999. Yields are presented on
a tax-equivalent basis, are based upon carrying value and are weighted for the
scheduled maturity. At December 31, 1999 the Corporation's investment securities
portfolio had an average maturity of approximately 6.3 years.
-31-
<PAGE> 32
<TABLE>
<CAPTION>
(Dollars in Thousands)
After One After Five
Year But Years But
Within Within Within After
One Year Five Years Ten Years Ten Years Total
-------- ---------- --------- --------- -----
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HELD-TO-MATURITY SECURITIES AT
AMORTIZED COST
U.S. Treasury Securities............. $ 0 0.00% $ 0 0.00% $ 0 0.00% $ 0 0.00% $ 0 0.00%
Federal Agency Obligations........... 0 0.00% 0 0.00% 0 0.00% 0 0.00% 0 0.00%
Obligations of State and Political
Subdivisions....................... 200 6.74% 0 0.00% 0 0.00% 0 0.00% 200 6.74%
Other Securities..................... 0 0.00% 0 0.00% 0 0.00% 0 0.00% 0 0.00%
-----------------------------------------------------------------------------------
TOTAL $ 200 6.74% 0 0.00% 0 0.00% $ 0 0.00% $ 200 6.74%
AVAILABLE-FOR-SALE SECURITIES AT
FAIR VALUE
U.S. Treasury Securities............. $ 0 0.00% 0 0.00% 0 0.00% $ 0 0.00% $ 0 0.00%
Federal Agency Obligations........... 1,848 6.42% 27,320 6.06% 3,909 6.02% 0 0.00% 33,077 6.09%
Obligations of State and Political
Subdivisions....................... 0 0.00% 1,086 6.78% 1,843 7.31% 11,522 7.31% 14,451 7.28%
Other, including Equity Securities... 0 0.00% 0 0.00% 0 0.00% 1,376 5.99% 1,376 5.99%
-----------------------------------------------------------------------------------
TOTAL $1,848 6.42% $28,406 6.09% $5,752 6.42% $12,898 7.31% $48,904 6.44%
</TABLE>
Available-for-Sale securities are reported on the consolidated balance
sheets at fair value. The difference between market value and carrying cost
results in an increase or decrease, as the case may be, to consolidated
stockholders' equity after giving effect of deferred taxes or benefit. The
possibility of material price volatility in a rising interest rate environment
is offset by the availability to the Corporation of restructuring the portfolio
for gap positioning at any time through the securities classified as
available-for-sale. The decrease in consolidated stockholders' equity for the
year ended December 31, 1999 attributable to the fair value accounting for
Available-for-Sale securities was $1,608,000 resulting from a net unrealized
loss of $1,160,000 at December 31, 1999 compared to a net unrealized gain of
$448,000 at December 31, 1998.
One local municipal holding is placed in the Held-to-Maturity category.
This holding comprised .41% of the entire portfolio at December 31, 1999,
compared to several local holdings or 1.17% at December 31, 1998. The total at
December 31, 1999 was $200,000 and at December 31, 1998 was $565,000.
Available-for-Sale securities total $48,904,000 at year end 1999
compared to $47,586,000 at year end 1998 or an increase of 2.77%.
The mix of securities in the portfolio was 30.15% U.S. agencies, 37.21%
mortgage-backed securities, 29.83% municipal and 2.81% other. The Corporation
does not engage in derivative investment products.
LOANS
LOAN PORTFOLIO
LOANS OUTSTANDING
(Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Commercial....................................................................... $ 15,559 $ 8,991 $ 7,551
Tax-Exempt....................................................................... 2,124 2,512 2,591
Qualified Municipal Leases....................................................... 173 20 0
Real Estate - Construction....................................................... 2,509 1,278 637
Real Estate...................................................................... 102,108 96,742 99,780
Personal......................................................................... $ 12,562 $ 9,461 $ 8,907
---------------------------------------
$135,035 $119,004 $119,466
Unamortized Loan Fees, Net of Costs.............................................. 28 70 97
Unearned Discount................................................................ 584 376 324
---------------------------------------
Loans, Net....................................................................... $134,423 $118,558 $119,045
=======================================
</TABLE>
-32-
<PAGE> 33
Growth of 13.32% was experienced in the loan portfolio, from $118.6
million in 1998 to $134.4 million in 1999. The distribution of the loan
portfolio reflects 77.81% real estate loans, 11.57% commercial loans, 1.58% tax
exempt loans, .13% qualified municipal leases and 8.91% consumer loans. Variable
rate real estate loans were comprised of 67.90% with 3 year adjustable rate,
16.48% with 1 year adjustable rate and 15.62% with one day to 3 month adjustable
rates. Many three year and one year adjustable rate loans have weekly or
bi-weekly payments.
DEPOSITS AND BORROWED FUNDS
TABLE OF DISTRIBUTION OF AVERAGE DEPOSITS
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31,
------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Demand deposits.................................................................... $ 35,074 $ 32,270 $ 31,703
Savings deposits................................................................... 32,730 32,695 33,513
Time deposits...................................................................... 56,857 55,082 52,388
Certificates of deposit, $100,000 and over......................................... 14,302 11,319 11,450
---------------------------------------
Total.............................................................................. $138,963 $131,366 $129,054
=======================================
</TABLE>
TABLE OF MATURITY DISTIRBUTION OF TIME DEPOSITS OVER $100,000
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31,
------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Three months or less............................................................... $ 4,306 $ 1,994 $ 4,574
Over three months to six months.................................................... 2,513 651 3,665
Over six months to twelve months................................................... 4,641 3,656 2,914
Over twelve months................................................................. 4,716 5,688 308
--------------------------------------
Total.............................................................................. $16,176 $11,989 $11,461
======================================
</TABLE>
Total average deposits increased 6.11% from $131 million at year end
1998 to $139 million at year end 1999. Average savings deposits remained at $33
million at year end 1998 and 1999. Average time deposits increased 7.58% from
$66 million at year end 1998 to $71 million at year end 1999. Average
non-interest demand deposits increased to $13 million for 1999 from $12 million
for 1998. Average interest bearing NOW accounts increased from $20 million for
1998 to $22 million for 1999, a 10.00% increase.
Short-term borrowings, securities sold under agreements to repurchase
and day-to-day borrowings from the Federal Home Loan Bank, increased 55.00% from
$20 million at year end 1998 to $31 million at year end 1999. Treasury tax and
loan deposits held by the Corporation for the U.S. Treasury averaged $454,000
for 1999, one day borrowings averaged $1,709,000 for 1999 and repurchase
agreements averaged $18,972,000 for 1999. Long-term borrowings, namely
borrowings from the Federal Home Loan Bank of Pittsburgh averaged $2,323,000 for
1999.
NON-PERFORMING ASSETS
PAST DUE AND NON-ACCRUAL LOANS
(Dollars in thousands)
<TABLE>
<CAPTION>
Lease
Real Installment Financing
1999 Estate Loans Commercial Receivables Total
---- ------ ----- ---------- ----------- -----
<S> <C> <C> <C> <C> <C>
Days 30-89........................................... $503 $154 $0 $8 $ 665
Days 90 Plus......................................... 157 16 0 0 173
Non-accrual.......................................... 199 0 0 0 199
-------------------------------------------------------------------
Total................................................ $859 $170 $0 $8 $1,037
===================================================================
</TABLE>
-33-
<PAGE> 34
<TABLE>
<CAPTION>
Lease
Real Installment Financing
1998 Estate Loans Commercial Receivables Total
---- ------ ----- ---------- ----------- -----
<S> <C> <C> <C> <C> <C>
Days 30-89........................................... $ 865 $182 $16 $0 $1,063
Days 90 Plus......................................... 398 2 15 0 415
Non-accrual.......................................... 537 0 0 0 537
-------------------------------------------------------------------
Total................................................ $1,800 $184 $31 $0 $2,015
===================================================================
</TABLE>
<TABLE>
<CAPTION>
Lease
Real Installment Financing
1997 Estate Loans Commercial Receivables Total
---- ------ ----- ---------- ----------- -----
<S> <C> <C> <C> <C> <C>
Days 30-89........................................... $1,049 $232 $50 $0 $1,331
Days 90 Plus......................................... 586 13 29 0 628
Non-accrual.......................................... 69 0 0 0 69
--------------------------------------------------------------------
Total................................................ $1,704 $245 $79 $0 $2,028
====================================================================
</TABLE>
At year end 1999, loans 30-89 days past due totaled $665,000 compared
to $1,063,000 at year end 1998, a 37.44% decrease. Past due loans 90 days plus
total $173,000 at year end 1999 compared to $415,000 at year end 1998, a 58.31%
decrease. Non-accrual loans at year end 1999 totaled $199,000 compared to
$537,000 at year end 1998, a 62.94% decrease. Overall, past due and non-accrual
loans decreased 48.54% from $2,015,000 at year end 1998 to $1,037,000 at year
end 1999. During this same period of time the ratio of net charge-offs during
the period to average loans outstanding during the period was .04%. (See Summary
of Loan Loss Experience). Management does not consider these percentages to be
significant or material.
Loans were stated at their outstanding principal balances, net of any
deferred fees or costs, unearned income, and the allowance for loan losses.
Interest on loans was accrued on the principal amount outstanding, primarily on
the actual day basis. Non-renewable loan fees and certain direct costs were
deferred and amortized over the life of the loans using the interest method. The
amortization was reflected on an interest yield adjustment, and the deferred
portion of the net fees and costs was reflected as a part of the loan balance.
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 becomes 90 days past due or management has serious doubts
about further collectability of principal or interest, even though the loan may
be 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. Potential problem loans are identified by
management as part of its loan review process. 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 judgment as to collectability of principal.
ALLOWANCE FOR LOAN LOSSES AND RELATED PROVISION
(Dollars in Thousands)
<TABLE>
<CAPTION>
Outstanding Balance at December 31,
-----------------------------------
1999 1998 1997
---- ---- ----
% of Loans % of Loans % of Loans
in Category in Category in Category
to Total to Total to Total
Amount Loans Amount Loans Amount Loans
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Commercial.................................. $270 13% $202 10% $ 83 9%
Real estate mortgages....................... 341 78% 510 82% 516 84%
Consumer.................................... 88 9% 196 8% 119 7%
Unallocated................................. 286 N/A 47 N/A 183 N/A
--------------------------------------------------------------------
$985 100% $955 100% $901 100%
====================================================================
</TABLE>
-34-
<PAGE> 35
The allowance for loan losses was $985,000 at December 31, 1999,
compared to $955,000 at December 31, 1998. This allowance equaled .73% of total
loans, net of unearned income, at the end of 1999 compared to .81% at the end of
1998. This allowance was considered adequate based on delinquency trends and
actual loans written as it relates to the loan portfolio.
The loan loss reserve is analyzed quarterly and reviewed by the Board
of Directors. The assessment of the loan policies and procedures during 1999
revealed no anticipated loss on any loans considered "significant". No
concentration or apparent deterioration in classes of loans or pledged
collateral was evident. Monthly loan meetings with the Board Credit
Administration Committee provide a review of new loans, delinquent loans and
loan exceptions to determine compliance with policies.
The schedule below presents a history of actual charge-offs and
recoveries by category and related balances and ratios.
SUMMARY OF LOAN LOSS EXPERIENCE
(Dollars in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Loans outstanding at end of year $134,423 $118,558 $119,045
=====================================
Average loans outstanding............................................................ $123,185 $116,490 $116,771
=====================================
Allowance for loan losses:
Balance, beginning of year........................................................... $ 955 $ 901 $ 911
-------------------------------------
Loans Charged-off:
Commercial and industrial........................................................ (5) 0 (15)
Real estate mortgages............................................................ 0 (8) 0
Consumer......................................................................... (94) (75) (88)
Credit cards..................................................................... (1) 0 0
-------------------------------------
Total loans charged-off.............................................................. (100) (83) (103)
-------------------------------------
Recoveries:
Commercial and industrial........................................................ 8 3 0
Real estate mortgages............................................................ 0 8 0
Consumer......................................................................... 43 42 32
Lease financing receivables...................................................... 0 6 1
Credit cards..................................................................... 1 0 0
-------------------------------------
Total recoveries..................................................................... 52 59 33
-------------------------------------
Net loans charged-off................................................................ (48) (24) (70)
-------------------------------------
Provision charged to expense......................................................... 78 78 60
-------------------------------------
Balance, end of year $ 985 $ 955 $ 901
=====================================
Ratio of net charge-offs during the year to average loans
outstanding during year 0.04% 0.02% 0.06%
=====================================
</TABLE>
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 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 flow 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. See "Factors That May Affect Future
Results".
Moreover, no additions to the reserve for loan losses were required as
a result of an analysis of impaired loans, as defined under SFAS No. 114, since
the amount of impaired loans so determined was considered to be insignificant
and the existing reserve was more than adequate to provide for those impaired
loans.
-35-
<PAGE> 36
LIQUIDITY
Liquidity management is required to ensure that adequate funds will be
available to meet anticipated and unanticipated deposit withdrawals, debt
service payments, investment commitments, commercial and consumer loan demand,
and ongoing operating expenses. Funding sources include principal repayments on
loans, sales of assets, growth in core deposits, short and long-term borrowings,
investment securities maturing, loan prepayments and repurchase agreements.
Regular loan payments are a dependable source of funds, while the sale of
investment securities, deposit growth and loan prepayments are significantly
influenced by general economic conditions and the level of interest rates.
Liquidity is managed on a daily basis at the Corporation. Management
believes that the liquidity is sufficient to meet present and future financial
obligations and commitments on a timely basis. However, see "Factors That May
Affect Future Results".
At December 31, 1999, cash and cash equivalents totaled $6,071,817
compared to $12,486,043 at December 31, 1998. Changes in cash were measured by
changes in the three major classifications of cash flows known as operating,
investing and financing activities.
At December 31, 1999, net cash provided by operating activities equaled
$2,439,119 which consisted mainly of net income adjusted for non-cash items such
as depreciation, accruals on interest receivable, premiums on investment
securities and provision for loan losses.
Net cash used for investing activities totaled $19,430,638 which was
principally the result of a $15,979,778 increase in loans and a $3,404,173
excess of purchases of Available-for-Sale investment securities over the
proceeds on sale and redemption of Available-for-Sale and Held-to-Maturity
securities.
Net cash provided by financing activities totaled $10,577,293 and
consisted mostly of an increase in short-term borrowings of $10,462,273.
Dividends paid were $695,463.
CAPITAL RESOURCES
Capital continues to be a strength of the Corporation.
Capital is critical as it must provide growth, payment to shareholders,
and absorption of unforeseen losses. The federal regulators provide standards
that must be met. The Corporation is subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory - and possibly
additional discretionary - actions by regulators that, if undertaken, could have
a direct material impact on the Corporation's consolidated financial statements.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Corporation must meet specific capital guidelines that
involve quantitative measures of the Corporation's assets, liabilities, and
certain off-balance sheet items as calculated under regulatory accounting
practices. The Corporation's capital amounts and classification are also subject
to qualitative judgments by the regulators about components, risk weightings,
and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Corporation to maintain minimum amounts and ratios (set
forth in the following table) of Total and Tier I Capital (as defined in the
regulations) to risk-weighted assets (as defined), and of Tier I Capital (as
defined) to average assets (as defined).
-36-
<PAGE> 37
As of December 31, 1999, the most recent notification from the Office
of the Comptroller of the Currency categorized the Bank as well capitalized
under the regulatory framework for prompt corrective action. To be categorized
as well capitalized the Bank must maintain minimum total risk-based, Tier I
risk-based, and Tier I leverage ratios as set forth in the Table. There are no
conditions or events since that notification that management believes have
changed the institution's category.
The Bank's actual capital amounts are ratios in the following table:
<TABLE>
<CAPTION>
To be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
------ ----------------- -----------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1999:
Total Capital
(To risk-weighted assets)....................... $25,131 18.68% $10,766 8.00% $13,457 10.00%
Tier I Capital
(To risk-weighted assets)....................... $24,146 17.94% $ 5,383 4.00% $ 8,047 6.00%
Tier I Capital
(To average assets)............................. $24,146 12.94% $ 7,464 4.00% $ 9,330 5.00%
As of December 31, 1998:
Total Capital
(To risk-weighted assets)....................... $23,967 21.80% $ 8,796 8.00% $10,995 10.00%
Tier I Capital
(To risk-weighted assets)....................... $23,012 20.93% $ 4,398 4.00% $ 6,597 6.00%
Tier I Capital
(To average assets)............................. $23,012 12.95% $ 7,106 4.00% $ 8,882 5.00%
</TABLE>
The Corporation's capital ratios are not materially different from
those of the Bank.
Dividend payouts are restricted by the Pennsylvania Business
Corporation Law of 1988, as amended (the "BCL"). The BCL operates generally to
preclude dividend payments if the effect thereof would render the Corporation
unable to meet its obligations as they become due. As a practical matter, the
Corporation's payment of dividends is contingent upon its ability to obtain
funding in the form of dividends from the Bank. Payment of dividends to the
Corporation by the Bank is subject to the restrictions set forth in the National
Bank Act. Generally, the National Bank Act would permit the Bank to declare
dividends in 2000 of approximately $2,337,489 plus additional amounts equal to
the net income earned in 2000 for the period January 1, 2000 through the date of
declaration, less any dividends which may be paid in 2000.
Common stock issued by the Corporation is traded on a limited basis in
the local over-the-counter market using the symbol CCFN. The bid prices below
are actual transactions and reflect information from one of the Corporation's
market-makers. The prices do not necessarily reflect any dealer or retail
markup, markdown or commission:
<TABLE>
<CAPTION>
1999 1998
---- ----
Quarterly Quarterly
Highest Lowest Dividend Highest Lowest Dividend
------- ------ -------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Fourth quarter........................... $20.12 $18.75 $0.130 $25.75 $25.00 $0.116
Third quarter............................ $20.63 $20.00 $0.130 $31.00 $28.00 $0.116
Second quarter........................... $20.50 $18.00 $0.130 $30.50 $27.00 $0.116
First quarter............................ $25.00 $19.13 $0.116 $26.25 $23.00 $0.116
</TABLE>
-37-
<PAGE> 38
INTEREST RATE RISK MANAGEMENT
Interest rate risk management involves managing the extent to which
interest-sensitive assets and interest-sensitive liabilities are matched.
Interest rate sensitivity is the relationship between market interest rates and
earnings volatility due to the repricing characteristics of assets and
liabilities. The Bank's net interest income is affected by changes in the level
of market interest rates. In order to maintain consistent earnings performance,
the Bank seeks to manage, to the extent possible, the repricing characteristics
of its assets and liabilities.
One major objective of the Bank when managing the rate sensitivity of
its assets and liabilities is to stabilize net interest income. The management
of and authority to assume interest rate risk is the responsibility of the
Bank's Asset/Liability Committee ("ALCO"), which is comprised of senior
management and Board members. ALCO meets quarterly to monitor the ratio of
interest sensitive assets to interest sensitive liabilities. The process to
review interest rate risk management is a regular part of management of the
Bank. Consistent policies and practices of measuring and reporting interest rate
risk exposure, particularly regarding the treatment of noncontractual assets and
liabilities, are in effect. In addition, there is an annual process to review
the interest rate risk policy with the Board of Directors which includes limits
on the impact to earnings from shifts in interest rates.
The ratio between assets and liabilities repricing in specific time
intervals is referred to as an interest rate sensitivity gap. Interest rate
sensitivity gaps can be managed to take advantage of the slope of the yield
curve as well as forecasted changes in the level of interest rate changes.
To manage the interest sensitivity position, an asset/liability model
called "gap analysis" is used to monitor the difference in the volume of the
Bank's interest sensitive assets and liabilities that mature or reprice within
given periods. A positive gap (asset sensitive) indicates that more assets
reprice during a given period compared to liabilities, while a negative gap
(liability sensitive) has the opposite effect. The Bank employs computerized net
interest income simulation modeling to assist in quantifying interest rate risk
exposure. This process measures and quantifies the impact on net interest income
through varying interest rate changes and balance sheet compositions. The use of
this model assists the ALCO to gauge the effects of the interest rate changes on
interest sensitive assets and liabilities in order to determine what impact
these rate changes will have upon the net interest spread.
STATEMENT OF INTEREST SENSITIVITY GAP
(Dollars in thousands)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
> 90 Days
90 Days But 1 to 5 5 to 10 > 10
Or Less < 1 Year Years Years Years Total
------- -------- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Short-term investments........................................... 217 0 0 0 0 $ 217
Securities Available-for-Sale (1)................................ 2,153 7,535 31,600 5,752 1,864 48,904
Securities Held-to-Maturity (1).................................. 200 0 0 0 0 200
Loans (1)........................................................ 30,996 35,847 61,879 1,900 3,801 134,423
-----------------------------------------------------------
Rate Sensitive Assets........................................ $ 33,566 43,382 93,479 7,652 5,665 $183,744
-----------------------------------------------------------
Deposits:
Interest-bearing demand deposits (2)............................. $ 3,137 $ 3,137 $14,640 0 0 $ 20,914
Savings (2)...................................................... 4,799 4,799 22,393 0 0 31,991
Time............................................................. 13,444 33,539 25,061 0 0 72,044
Borrowed funds................................................... 29,033 1,847 0 0 0 30,880
Long-term debt................................................... 2 5 2,041 148 148 2,344
Shareholders' equity............................................. 576 1,728 9,219 5,762 5,762 23,047
-----------------------------------------------------------
Rate Sensitive Liabilities and Shareholders' Equity.......... $ 50,991 $ 45,055 $73,354 $5,910 $5,910 $181,220
-----------------------------------------------------------
Interest Sensitivity Gap......................................... $(17,425) $ (1,673) $20,125 $1,742 $ (245) $ 2,524
Cumulative Gap................................................... $(17,425) $(19,098) $ 1,027 $2,769 $2,524
</TABLE>
(1) Investments and loans are included at the earlier of repricing or
maturity adjusted for the effects of prepayments.
(2) Interest bearing demand and savings accounts are included based on
historical experience and managements' judgment about the behavior of
these deposits in changing interest rate environments.
-38-
<PAGE> 39
At December 31, 1999 the Corporation's cumulative gap positions and the
potential earnings change resulting from a 200 basis point change in rates were
within the internal risk management guidelines.
Upon reviewing the current interest sensitivity scenario, increasing
interest rates could negatively affect net income because the Bank is
liability-sensitive. In a declining interest rate environment, net income could
be positively affected because more liabilities than assets will reprice during
a given period.
Certain shortcomings are inherent in the method of analysis presented
in the above table. Although certain assets and liabilities may have similar
maturities or periods of repricing, they may react in different degrees to
changes in market interest rates. The interest rates on certain types of assets
and liabilities may fluctuate in advance of changes in market interest rates,
while interest rates on other types of assets and liabilities may lag behind
changes in market interest rates. Certain assets, such as adjustable-rate
mortgages, have features which restrict changes in interest rates on a
short-term basis and over the life of the asset. In the event of a change in
interest rates, prepayment and early withdrawal levels may deviate significantly
from those assumed in calculating the table. The ability of many borrowers to
service their adjustable-rate debt may decrease in the event of an interest rate
increase.
The following table provides information about the Corporation's
financial instruments. The table presents the financial instruments including
the expected cash flow over the next five years. In addition the average
interest rate is shown for each period presented. The table also includes the
fair market value for each category of financial instruments as of December 31,
1999. This presentation differs from the above gap report primarily due to
presenting the financial instruments based on a contractual maturity as opposed
to a repricing scenario as reflected in the above gap report.
PRINCIPAL / NOTIONAL AMOUNTS MATURING IN:
(Dollars in millions)
<TABLE>
<CAPTION>
Fair
There- Value
2000 2001 2002 2003 2004 after Total 12-31-99
---- ---- ---- ---- ---- ----- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Rate sensitive assets:
Fixed interest loans (1) $14,375 $ 6,442 $ 5,396 $3,984 $3,136 $ 8,947 $42,280 $41,862
Average interest rate 8.11% 8.38% 8.16% 7.93% 7.96% 7.88%
Variable interest rate loans (2) $37,058 $27,542 $24,458 $2,072 $1,013 $ 0 $92,143 $92,143
Average interest rate 7.79% 7.11% 7.16% 7.36% 7.98% 0.00%
Fixed interest rate securities (1) $ 5,518 $ 6,646 $ 4,467 $4,034 $6,585 $16,178 $43,428 $43,304
Average interest rate 6.45% 6.50% 6.57% 6.64% 6.75% 7.16%
Variable interest rate securities (1) $ 0 $ 0 $ 0 $ 0 $ 0 $ 5,676 $ 5,676 $ 5,676
Average interest rate 0.00% 0.00% 0.00% 0.00% 0.00% 6.46%
Other interest-bearing assets $ 217 $ 0 $ 0 $ 0 $ 0 $ 0 $ 217 $ 217
Average interest rate 6.19% 0.00% 0.00% 0.00% 0.00% 0.00%
Rate sensitive liabilities:
Non-interest-bearing checking (2) $ 3,826 $ 2,460 $ 2,460 $2,460 $2,459 $ 0 $13,665 $13,665
Average interest rate 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Savings & interest-bearing checking (2) $12,027 $ 7,732 $ 7,732 $7,732 $7,732 $ 0 $42,955 $42,955
Average interest rate 1.97% 1.97% 1.97% 1.97% 1.97% 0.00%
Money market accounts (2) $ 3,980 $ 2,985 $ 2,985 $ 0 $ 0 $ 0 $ 9,950 $ 9,950
Average interest rate 2.76% 2.76% 2.76% 0.00% 0.00% 0.00%
Time deposits (under $100,000) $31,093 $14,034 $ 6,558 $2,932 $1,251 $ 0 $55,868 $55,833
Average interest rate 5.22% 5.47% 5.64% 5.75% 5.04% 0.00%
Time deposits (over 100,000) $11,460 $ 1,167 $ 2,252 $ 838 $ 459 $ 0 $16,176 $16,252
Average interest rate 5.69% 5.96% 6.14% 6.16% 5.73% 0.00%
Fixed interest rate borrowings $ 9 $ 9 $ 10 $ 11 $ 11 $ 2,294 $ 2,344 $ 2,344
Average interest rate 5.60% 5.60% 5.60% 5.60% 5.60% 5.60%
Variable interest rate borrowings $28,880 $ 0 $ 0 $ 0 $2,000 $ 0 $30,880 $30,880
Average interest rate 4.73% 0.00% 0.00% 0.00% 5.55% 0.00%
</TABLE>
(1) Investments and loans are included at contractual maturity.
(2) Non interest-bearing checking, interest-bearing checking, savings and
money market accounts are reflecting historical experience and
management's judgment about the duration of these deposits.
-39-
<PAGE> 1
EXHIBIT 21
LIST OF SUBSIDIARIES OF THE COMPANY
Direct Subsidiary: Columbia County Farmers National Bank, chartered
under the laws of the United States of America, a
national banking association.
<PAGE> 1
EXHIBIT 99
CCFNB BANCORP, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollar Amounts in Thousands)
The following table sets forth the composition of CCFNB's loan
portrolio as of the date indicated:
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Commercial $ 15,559 $ 8,991 $ 7,551 $ 7,957 $ 5,990
Tax Exempt 2,124 2,512 2,591 2,064 1,520
Qualified Municipal Leases 173 20 0 35 131
Real Estate-Construction 2,509 1,278 637 660 941
Real Estate 102,108 96,742 99,780 96,439 95,293
Personal 12,562 9,461 8,524 8,447 8,058
Credit Cards 0 0 383 441 447
- - --- --- ---
$135,035 $119,004 $119,466 $116,043 $112,380
Unamortized Loan Fees net of Costs 28 70 97 129 188
Unearned Discount 584 376 324 324 360
--- --- --- --- ---
Loans, Net $134,423 $118,558 $119,045 $115,590 $111,832
-------- -------- -------- -------- --------
</TABLE>
Tbe following table presents the percentage distribution of loans by
category as of the date indicated:
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Commercial 11.57% 7.56% 6.32% 6.85% 5.33%
Tax Exempt 1.58% 2.11% 2.17% 1.78% 1.35%
Qualified Municipal Leases 0.13% 0.02% 0.00% 0.03% 0.11%
Real Estate-Construction 1.87% 1.07% 0.53% 0.57% 0.84%
Real Estate 75.94% 81.29% 83.52% 83.11% 84.80%
Personal 8.91% 7.95% 7.14% 7.28% 7.17%
Credit Cards 0.00% 0.00% 0.32% 0.38% 0.40%
------ ------ ------ ------ ------
Total Loans 100.00% 100.00% 100.00% 100.00% 100.00%
</TABLE>
-1-
<PAGE> 2
The following table shows the maturity of loans in the specified categories
of CCFNB's loan portfolio at December 31, 1999, and the amount of such loans
with pretdetermined fixed rates or with floating or adjustable rates:
<TABLE>
<CAPTION>
December 31, 1999
Maturing Maturing
Maturing After After Maturing
In One One Year Five Years After
Year Through Through Ten
Or Less Five Years Ten Years Years Total
------- ---------- --------- ----- -----
<S> <C> <C> <C> <C> <C>
Commercial, Tax Exempt, Qualified Municipal
Leases, Real Estate, Personal and Credit
Card Loans $14,118 $22,414 $27,780 $67,602 $131,914
Real Estate-Construction Loans 2,509 0 0 0 2,509
----- - - - -----
Total $16,627 $22,414 $27,780 $67,602 $134,423
------- ------- ------- ------- --------
Amount of Such Loans with:
Predetermined Fixed Rates $14,375 $18,958 $ 4,728 $ 3,801 $ 41,862
Floating or Adjustable Rates 2,252 3,456 23,052 63,801 92,561
------- ------- ------- ------- --------
Total $16,627 $22,414 $27,780 $67,602 $134,423
------- ------- ------- ------- --------
</TABLE>
-2-
<PAGE> 3
The following table presents a summary of CCFNB's loan loss experience as
of the dates indicated:
<TABLE>
<CAPTION>
For The Years Ended December 31,
--------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Loans Outstanding at End of Period $134,423 $118,558 $119,045 $115,590 $111,832
Average Loans Outstanding During the Period $123,185 $116,490 $116,771 $112,341 $110,980
Allowance for Loan Losses:
Balance, Beginning of Period $ 955 $ 901 $ 911 $ 912 $ 943
Loans Charged Off:
Commercial and Industrial (5) 0 (15) (19) (65)
Real Estate Mortgages 0 (8) 0 0 0
Consumer (94) (63) (84) (118) (38)
Lease Financing Receivables 0 0 0 0 0
Credit Cards (1) (12) (4) (8) (4)
-------- -------- -------- -------- --------
Total Loans Charged Off (100) (83) (103) (145) (107)
Recoveries:
Commercial and Industrial 8 3 0 17 13
Real Estate Mortgages 0 8 0 0 0
Consumer 43 34 29 41 6
Lease Financing Receivables 0 6 1 3 12
Credit Cards 1 8 3 3 3
-------- -------- -------- -------- --------
Total Recoveries: 52 59 33 64 34
-------- -------- -------- -------- --------
Net Loans Charged Off (48) (24) (70) (81) (73)
-------- -------- -------- -------- --------
Provision for Loan Losses 78 78 60 80 42
-------- -------- -------- -------- --------
Balance, End of Pierod $ 985 $ 955 $ 901 $ 911 $ 912
-------- -------- -------- -------- --------
Net Loans Charged Off During the Period
as a Oercebt if /average Loans
Outstanding During the Period 0.04% 0.02% 0.06% 0.07% 0.07%
</TABLE>
-3-
<PAGE> 4
The following table presents an allocation of CCFNB's allowance for loan
losses as to indicated categories as of the dates indicated:
<TABLE>
<CAPTION>
For The Years Ended December 31,
--------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Commercial $270 $202 $ 83 $ 79 $ 73
Real Estate Mortgages 341 510 516 500 513
Consumer 88 196 99 96 53
Credit Cards 0 0 20 20 25
Lease Financing Receivables 0 0 0 0 2
Unallocated 286 47 183 216 246
--- -- --- --- ---
Total $985 $955 $901 $911 $912
</TABLE>
The following table presents a summary of CCFNB's nonaccrual, restructured
and past due loans as of the date indicated:
<TABLE>
<CAPTION>
For The Years Ended December 31,
--------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Nonaccrual, Restructured and Past Due Loans:
Nonaccrual Loans $ 199 $ 537 $ 69 $ 109 $ 13
Restructured Loans on Accrual Status 0 0 0 0 0
Accrual Loans Past Due 90 Days or More 157 415 586 329 397
------- ------- ------ ------ ------
Total Nonaccrual, Restructured and Past
Due Loans $ 356 $ 952 $ 655 $ 438 $ 410
Other Real Estate $ 0 $ 0 $ 0 $ 0 $ 0
Interest Income That Would Have Been
Recorded Under Original Terms $16,089 $55,411 $6,846 $9,849 $2,266
Interst Income Recorded During the Period $ 0 $ 9,609 $ 0 $ 0 $ 111
</TABLE>
-4-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 4,088
<SECURITIES> 50,188
<RECEIVABLES> 126,698
<ALLOWANCES> 980
<INVENTORY> 0
<CURRENT-ASSETS> 179,994
<PP&E> 5,332
<DEPRECIATION> 0
<TOTAL-ASSETS> 185,326
<CURRENT-LIABILITIES> 162,138
<BONDS> 0
0
0
<COMMON> 1,725
<OTHER-SE> 21,463
<TOTAL-LIABILITY-AND-EQUITY> 185,326
<SALES> 9,393
<TOTAL-REVENUES> 10,177
<CGS> 3,707
<TOTAL-COSTS> 3,707
<OTHER-EXPENSES> 3,621
<LOSS-PROVISION> 59
<INTEREST-EXPENSE> 797
<INCOME-PRETAX> 1,993
<INCOME-TAX> 503
<INCOME-CONTINUING> 1,490
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,490
<EPS-BASIC> $1.08
<EPS-DILUTED> $1.08
</TABLE>
