SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED: SEPTEMBER 30, 1997
COMMISSION FILE NUMBER: 2-89573
EXACT NAME OF REGISTRANT: TOWER BANCORP INC.
STATE OF INCORPORATION: PENNSYLVANIA
I.R.S. EMPLOYER IDENTIFICATION NO. 25-1445946
ADDRESS OF PRINCIPAL OFFICE: CENTER SQUARE, GREENCASTLE
PENNSYLVANIA 17225
TELEPHONE NUMBER: (717) 597-2137
FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED
SINCE LAST REPORT: NOT APPLICABLE
INDICATED BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL
REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR
FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE
SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS
FOR THE PAST 90 DAYS.
YES X NO
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S
CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE:
890,050 SHARES OF COMMON STOCK, PAR VALUE OF TWO DOLLARS AND FIFTY
CENTS ($2.50), OUTSTANDING AS OF SEPTEMBER 30, 1997.
INDEX TO EXHIBITS IS ON PAGE 8
1
TOWER BANCORP INC.
INDEX
PAGE NO.
PART I - FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996 3
CONSOLIDATED STATEMENT OF INCOME
THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 4
CONSOLIDATED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 5
CONSOLIDATED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 8
PART II - OTHER INFORMATION
ITEM 6 - INDEX TO EXHIBITS AND REPORTS ON
FORM 8-K 9
SIGNATURES 10
EXHIBITS 11-12
2
TOWER BANCORP INC. CONSOLIDATED BALANCE SHEET
(000'S OMITED) 09-30-97 12-31-96
ASSETS
CASH AND DUE FROM BANKS 4,508 3,034
INTEREST BEARING BALANCES WITH BANKS 5,834 4,071
FEDERAL FUNDS SOLD 299 0
INVESTMENT ACCOUNT SECURITIES:
1 OBLIGATIONS OF STATE AND POLITICAL 8,357 9,170
SUBDIVISIONS (FAIR VALUE $9713)
2 OBLIGATIONS OF STATE AND POLITICAL 1,599 0
2 US TREASURY SECURITIES 710 698
2 US GOVT AGENCIES AND CORPORATIONS 22,506 21,893
2 OTHER SECURITIES AND EQUITY SEC 7,551 6,359
UNREALIZED GAIN (LOSS) 459 (25)
LOANS: 103,402 100,830
LESS: UNEARNED INCOME OF LOANS (202) (211)
RESERVE FOR POSSIBLE LOAN LOSSES (1,918) (1,947)
BANK PREMISES, EQUIP, FURNITURE & FIXTURES 2,087 1,628
REAL ESTATE OWNED OTHER THAN BANK PREMISES 121 238
ACCRUED INTEREST RECEIVABLE 1,058 948
DEFERRED INCOME TAXES 807 629
OTHER ASSETS 795 1,358
------- -------
TOTAL ASSETS 157,973 148,673
======= =======
LIABILITIES AND CAPITAL
DEPOSITS IN DOMESTIC OFFICES:
DEMAND 11,198 7,959
SAVINGS 62,176 54,490
TIME 61,576 64,155
LIABILITIES FOR BORROWED MONEY 1,598 1,866
FEDERAL FUNDS PURCHASED 0 865
ACCRUED INTEREST PAYABLE 420 409
ACCRUED FEDERAL INCOME TAXES 785 0
OTHER LIABILITIES 396 1,225
------- -------
TOTAL LIABILITIES 138,149 130,969
------- -------
EQUITY CAPITAL
CAPITAL STOCK:
COMMON STOCK: PAR VALUE $2.50
AUTHORIZED 5,000,000 SHARES:
890,050 SHARES ISSUED - 1997 2,225 2,120
842,374 SHARES ISSUED - 1996
SURPLUS 6,697 5,357
UNDIVIDED PROFITS 10,654 10,236
NET UNREALIZED (LOSS) GAIN ON MARKETABLE SEC 459 236
LESS: COST OF TREASURY STOCK (211) (245)
------- -------
TOTAL EQUITY CAPITAL 19,824 17,704
------- -------
TOTAL LIABILITIES AND CAPITAL 157,973 148,673
======= =======
THE NOTES TO FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THESE STATEMENTS. ABOVE 1=
HELD TO MATURITY, 2=AVAILABLE FOR SALE.
TOWER BANCORP INC.
CONSOLIDATED STATEMENT OF INCOME
THREE MONTHS ENDED
INTEREST INCOME 09-30-97 09-30-96
- ---------- ------- -------
INTEREST AND FEES ON LOANS 2,320,209 2,199,333
INTEREST ON INVESTMENT SECURITIES 539,871 510,043
INTEREST ON FED FUNDS SOLD 32,037 8,575
INTEREST ON DEPOSITS WITH BANKS 144,424 61,890
------- -------
3,036,541 2,779,841
INTEREST EXPENSE
- ----------
INTEREST ON DEPOSITS 1,294,616 1,183,012
INTEREST ON FED FUNDS PURCHASED 0 9,279
INTEREST ON BORROWED MONEY 24,968 23,316
------- -------
1,319,584 1,215,607
------- -------
NET INTEREST INCOME 1,716,957 1,564,234
PROVISION FOR LOAN LOSSES 0 0
------- -------
NET INTEREST INCOME AFTER PROV FOR LL 1,716,957 1,564,234
OTHER INCOME:
TRUST DEPARTMENT INCOME 90,768 86,446
SERVICE CHARGES ON DEPOSIT ACCOUNTS 88,431 76,505
OTHER SERVICE CHARGES 9,547 25,323
OTHER OPERATING INCOME 17,924 (3,390)
INVESTMENT SECURITIES GAINS(LOSSES) 231,176 108,146
------- -------
437,846 293,030
------- -------
OTHER EXPENSES:
SALARIES, WAGES AND OTHER BENEFITS 544,521 503,444
OCCUPANCY EXPENSE OF BANK PREMISES 68,923 67,912
FURNITURE AND FIXTURE EXPENSE 89,071 80,146
OTHER OPERATING EXPENSES 371,401 342,153
------- -------
1,073,916 993,655
------- -------
INCOME BEFORE TAXES 1,080,887 863,609
APPLICABLE INCOME TAXES 316,000 251,563
------- -------
NET INCOME 764,887 612,046
======== =======
COMMON SHARE DATA:
NET INCOME PER SHARE 0.86 0.73
CASH DIVIDENDS DECLARED PER SHARE 0.20 0.20
NUMBER OF SHARES OUTSTANDING 890,050 842,374
THE NOTES TO FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THESE STATEMENTS
4
TOWER BANCORP INC.
CONSOLIDATED STATEMENT OF INCOME
NINE MONTHS ENDED
INTEREST INCOME 09-30-97 09-30-96
INTEREST AND FEES ON LOANS 6,870,180 6,606,693
INTEREST ON INVESTMENT SECURITIES 1,721,906 1,513,608
INTEREST ON FED FUNDS SOLD 66,665 12,987
INTEREST ON DEPOSITS WITH BANKS 239,000 186,001
-------- --------
8,897,751 8,319,289
INTEREST EXPENSE
INTEREST ON DEPOSITS 3,756,936 3,534,631
INTEREST ON FED FUNDS PURCHASED 15,270 34,230
INTEREST ON BORROWED MONEY 56,792 49,499
-------- --------
3,828,998 3,618,360
-------- --------
NET INTEREST INCOME 5,068,753 4,700,929
PROVISION FOR LOAN LOSSED 0 0
-------- --------
NET INTEREST INCOME AFTER PROV FOR LL 5,068,753 4,700,929
OTHER INCOME:
TRUST DEPARTMENT INCOME 257,804 218,630
SERVICE CHARGES ON DEPOSIT ACCOUNTS 246,403 226,382
OTHER SERVICE CHARGES 54,296 66,291
OTHER OPERATING INCOME 31,711 13,600
INVESTMENT SECURITIES GAINS (LOSSES) 517,147 223,176
-------- --------
1,107,361 748,079
-------- --------
OTHER EXPENSES:
SALARIES, WAGES AND OTHER BENEFITS 1,625,772 1,492,403
OCCUPANCY EXPENSE OF BANK PREMISES 208,204 205,785
FURNITURE AND FIXTURE EXPENSE 258,802 239,523
OTHER OPERATING EXPENSES 1,162,348 1,019,924
-------- --------
3,255,126 2,957,635
-------- --------
INCOME BEFORE TAXES 2,920,988 2,491,373
APPLICABLE INCOME TAXES 851,000 700,563
-------- --------
NET INCOME 2,069,988 1,790,810
======== ========
COMMON SHARE DATE:
NET INCOME PER SHARE 2.34 2.13
CASH DIVIDENDS DECLARED PER SHARE .22 .20
NUMBER OF SHARES OUTSTANDING 890,050 842,374
THE NOTES TO FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THESE STATEMENTS
5
TOWER BANCORP INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(,000 OMITTED) NINE MONTH NINE MONTH
ENDED ENDED
09-30-97 09-30-96
CASH FLOWS FROM OPERATING ACTIVITIES: ------- -------
NET INCOME 2,070 1,568
ADJ TO RECONCILE NET CASH
DEPRECIATION AND AMORTIZATION 193 134
PROVISION FOR LOAN LOSSES (29) 2
GAIN ON SALE OF INVESTMENT SECURITIES 517 223
LOSS ON DISPOSAL OF EQUIPMENT 0 0
PROVISION FOR DEFERRED TAXES (178) (241)
(INCREASE) IN OTHER ASSETS 563 (63)
(INCREASE) IN INTEREST RECEIVABLE (110) (36)
INCREASE IN INTEREST PAYABLE 11 23
(DECREASE) IN ACCRUED INCOME TAXES 785 698
(DECREASE) IN OTHER LIABILITIES (829) (817)
OTHER, NET (99) (280)
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,894 1,211
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
LOANS (NET) (2,581) (3,307)
PURCHASES OF BANK PREMISES, EQUIPMENT,
FURN & FIX (459) (270)
SALES OF OTHER REAL ESTATE 117 0
INT BEARING WITH BANKS (NET) (1,763) (991)
SECURITIES (NET) (3,087) (2,777)
------- -------
NET CASH (USED) BY INVESTING ACTIVITIES (7,773) (7,345)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
NET DECREASE IN DEMAND AND SAVINGS DEPOSITS 10,558 6,483
CD'S (NET) (2,579) 1,293
NET CHANGE IN FED FUNDS (299) (374)
DEBT (NET) (1,133) 479
PROCEEDS FROM SALE OF CAPITAL STOCK 0 0
CASH DIVIDENDS PAID (194) (168)
------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 6,353 7,713
------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,474 1,579
CASH AND CASH EQUIVALENTS AT BEGINNING OF YR 3,034 3,622
------- -------
CASH AND CASH EQUIVALENTS AT END OF QUARTER 4,508 5,201
======= =======
THE NOTES TO FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THESE STATEMENTS
6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE (1) TO BASIS OF PRESENTATION
IN THE OPINION OF MANAGEMENT, THE ACCOMPANYING UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS CONTAIN ALL ADJUSTMENTS NECESSARY TO PRESENT FAIRLY
TOWER BANCORP INC.'S CONSOLIDATED FINANCIAL POSITION AS OF SEPT. 30, 1997 AND
SEPTEMBER 30, 1996, AND THE RESULTS OF ITS OPERATIONS FOR THE THREE AND NINE
MONTH PERIODS ENDED SEPT. 30,1997 AND 1996, AND THE CHANGES IN CONSOLIDATED
FINANCIAL POSITION FOR THESE PERIODS THEN ENDED.
THE RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTH PERIODS ENDED
SEPT.30, 1997 AND 1996 ARE NOT NECESSARILY INDICATIVE OF THE RESULTS TO BE
EXPECTED FOR THE FULL YEAR.
NOTE (2) INCOME TAXES
INCOME TAX EXPENSE IS LESS THAN THE AMOUNT CALCULATED USING THE STATUTORY
TAX RATE PRIMARILY AS A RESULT OF TAX EXEMPT INCOME EARNED FROM STATE AND
MUNICIPAL SECURITIES AND LOANS.
NOTE (3) COMMITMENTS
IN THE NORMAL COURSE OF BUSINESS, THE BANK MAKES VARIOUS COMMITMENTS AND
INCURS CERTAIN CONTINGENT LIABILITIES WHICH ARE NOT REFLECTED IN THE
ACCOMPANYING FINANCIAL STATEMENTS. THESE COMMITMENTS INCLUDE VARIOUS
GUARANTEES AND COMMITMENTS TO EXTEND CREDIT AND THE BANK DOES NOT ANTICIPATE
ANY LOSSES AS A RESULT OF THESE TRANSACTIONS.
7
TOWER BANCORP INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THE FIRST NATIONAL BANK OF GREENCASTLE IS THE WHOLLY OWNED SUBSIDIARY OF
TOWER BANCORP INC. NET INTEREST INCOME INCREASED BY 15.59% AND 24.97% FOR
THE NINE AND THREE MONTH PERIODS ENDED 9-30-97 COMPARED TO THE SAME PERIODS
IN 1996. OTHER INCOME HAS INCREASED 48.03% DUE LARGELY TO HAVING TAKEN GAINS
IN THE EQUITY PORTFOLIO. IN ADDITION, INCOME FROM THE SALE OF MUTUAL FUNDS
WAS ALLOCATED TO TRUST INCOME. THESE AREAS HAVE ALSO SHOWN A SIGNIFICANT
INCREASE.
THE BANK HAS NOT MADE A LOAN LOSS PROVISION IN 1997 AS IT MAINTAINS A RATIO
TO TOTLA LOANS OF 1.97%. ANTICIPATED LOSSES FALL WELL BELOW THE CURRENT
REESERVE BALANCE. THE BANK HAS HAD NET CHARGEOFFS OF ONLY $28,000.
THE BANK MAINTAINS A CAPITAL RATIO OF 10.12% AND A RISK BASED CAPITAL RATIO
OF 16.97% AS OF 9-30-97.
THE DEMAND FOR TOWER STOCK REMAINS STRONG. IT APPEARS THAT THE HOLDING
COMPANY WILL MEET PROJECTED EARNINGS AND GROWTH FOR 1997.
LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY REPRESENTS THE ABILITY OF THE BANK TO ACCOMODATE DECREASES IN
DEPOSITS AND FUND INCREASES TO THE LOAN PORTFOLIO. THE BANK'S SOURCES OF
LIQUIDITY CAME FROM MATURITIES IN THE INVESTMENT PORTFOLIO AS WELL AS NORMAL
PRINCIPAL AND INTEREST PAYMENTS FROM THE LOAN AND MORTGAGE BACKED
PORTFOLIOS.
INCREASES IN THE DEPOSIT BASE ALSO PROVIDED LIQUIDITY.
8
PART II - OTHER INFORMATION
ITEM (1) LEGAL PROCEEDINGS.
NOT APPLICABLE.
ITEM (2) CHANGES IN SECURITIES.
NOT APPLICABLE.
ITEM (3) DEFAULTS UPON SENIOR SECURITIES.
NOT APPLICABLE.
ITEM (4) SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS.
NOT APPLICABLE.
ITEM (5) OTHER INFORMATION.
NOT APPLICABLE.
ITEM (6) INDEX TO EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS:
EXHIBIT NUMBER REFERRED TO DESCRIPTION OF
ITEM 601 OF REGULATIONS 8-K EXHIBIT
- ------------------ --------------
2 NONE
4 INSTRUMENT DEFINING RIGHTS
SECURITY HOLDERS
11 NONE
15 NONE
18 NONE
19 NONE
20 NONE
22 SUBSIDIARIES OF REGISTRANT
23 NONE
24 NONE
25 NONE
28 NONE
9
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
TOWER BANCORP INC.
(REGISTRANT)
DATE: ________________ JEFF B SHANK, PRESIDENT, CEO
(PRINCIPAL EXECUTIVE OFFICER AND
PRINCIPAL FINANCIAL OFFICER)
DATE: _______________ DONALD F. CHLEBOWSKI JR., TREASURER
(PRINCIPAL ACCOUNTING OFFICER)
PART II ITEM (6)
ITEM 601 - 22 SUBSIDIARIES OF REGISTRANT
*THE FIRST NATIONAL BANK OF GREENCASTLE
*NATIONAL BANK ORGANIZED IN PENNSYLVANIA
*BUSINESS NAME: THE FIRST NATIONAL BANK OF GREENCASTLE
*ANTRIM TOWER, PARTNERSHIP
10
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
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<INT-BEARING-DEPOSITS> 5,834
<FED-FUNDS-SOLD> 299
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 32,366
<INVESTMENTS-CARRYING> 8,357
<INVESTMENTS-MARKET> 8,531
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<ALLOWANCE> 1,918
<TOTAL-ASSETS> 157,973
<DEPOSITS> 134,950
<SHORT-TERM> 1,598
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