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: MARCH 31, 1998
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 NU;MBER: (717)597-2137
FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT:
NOT APPLICABLE
INDICATE BY CHECKMARK 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:
883,116 SHARES OF COMMON STOCK
TOWER BANCORP INC.
INDEX
PAGE NO.
PART I - FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEET 3
MARCH 31, 1998 AND DECEMBER 31, 1997
CONSOLIDATED STATEMENT OF INCOME 4
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 5
CONSOLIDATED STATEMENT OF CHANGES IN CASH FLOWS 6
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL 8
CONDITION AND RESULTS OF OPERATIONS
PART II - OTHER INFORMATION
ITEM 6 - INDEX TO EXHIBITS AND REPORTS ON FORM 8-K 9
SIGNATURES 10
EXHIBITS 11-12
TOWER BANCORP INC. CONSOLIDATED BALANCE SHEET
ASSETS 03-31-98 03-31-97
CASH AND DUE FROM BANKS $3,442 $4,490
INTEREST BEARING BALANCES WITH BANKS 6,319 4,153
FEDERAL FUNDS SOLD 5,636 1,160
INVESTMENT ACCOUNT SECURITIES:
1 OBLIGATIONS OF STATES AND POLITICAL 7,839 9,157
SUBDIVISONS (FAIR VALUE $8036, $8272)
2 OBLIGATIONS OF STATES AND POLSUBDIVISIONS 2,952
2 US TREASURY SECURITIES 499 698
2 US GOVT AGENCIES AND CORPORATIONS 19,422 21,374
2 OTHER SECURITIES AND EQUITY SEC 9,150 6,786
UNREALIZED GAIN (LOSS) 1,631 145
LOANS: 105,160 102,434
LESS: UNEARNED INCOME OF LOANS (197) (207)
RESERVE FOR POSSIBLE LOAN LOSSES (1,864) (1,944)
BANK PREMISES, EQUIP,FURNITURE & FIXTURES 2,703 2,008
REAL ESTATE OWNED OTHER THAN BANK PREMISES 121 121
ACCRUED INTEREST RECEIVABLE 996 953
DEFERRED INCOME TAXES 652 851
OTHER ASSETS 1,272 900
TOTAL ASSETS $165,733 $153,079
======= =======
LIABILITIES AND CAPITAL
DEPOSITS IN DOMESTIC OFFICES:
DEMAND $11,874 $9,007
SAVINGS 68,659 60,903
TIME 59,859 62,139
LIABILITIES FOR BORROWED MONEY 1,636 862
FEDERAL FUNDS PURCHASED 0 0
ACCRUED INTEREST PAYABLE 416 401
ACCRUED FEDERAL INCOME TAXES 225 156
OTHER LIABILITIES 1,761 1,329
TOTAL LIABILITIES $144,430 $134,797
----------- -----------
EQUITY CAPITAL
CAPITAL STOCK:
COMMON STOCK: PAR VALUE $2.50
AUTHORIZED 1,000,000 SHARES:
890,050 SHARES ISSUED - 1998
848,180 SHARES ISSUED - 1997 $2,225 $2,120
SURPLUS 6,696 5,357
UNDIVIDED PROFITS 11,588 10,951
NET UNREALIZED (LOSS) ON MARKETABLE SEC 1,077 96
LESS: COST OF TREASURY STOCK (283) (242)
TOTAL EQUITY CAPITAL $21,303 $18,282
TOTAL LIABILITIES AND CAPITAL $165,733 $153,,079
======= =======
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 3-31-98 3-31-97
INTEREST AND FEES ON LOANS $2,314,230 $2,282,195
INTEREST ON INVESTMENT SECURITIES:
HELD TO MATURITY 101,188 118,360
AVAILABLE FOR SALE 490,722 454,422
INTEREST ON FED FUNDS SOLD 16,066 3,681
INTEREST ON DEPOSITS WITH BANKS 97,222 59,120
$3,019,428 $2,917,778
INTEREST EXPENSE
INTEREST ON DEPOSITS 1,258,730 1,223,463
INTEREST ON FED FUNDS PURCHASED AND
SECURITIES SOLD UNDER REPO AGREEMENTS 14,554 13,716
INTEREST ON BORROWED MONEY 28,107 18,659
$1,301,391 $1,255,838
NET INTEREST INCOME $1,718,037 $1,661,940
PROVISION FOR LOAN LOSSES 0 0
NET INTEREST INCOME AFTER PROV FOR LL $1,718,037 $1,661,940
OTHER INCOME:
TRUST DEPARTMENT INCOME $134,948 $83,046
SERVICE CHARGES ON DEPOSIT ACCOUNTS 83,147 77,340
OTHER SERVICE CHARGES 22,000 23,433
OTHER OPERATING INCOME 4,147 12,287
INVESTMENT SECURITIES GAINS(LOSSES) 360,329 237,667
$604,571 $433,773
OTHER EXPENSES:
SALARIES, WAGES AND OTHER BENEFITS $584,577 $534,975
OCCUPANCY EXPENSE OF BANK PREMISES 70,113 69,740
FURNITURE AND FIXTURE EXPENSE 105,115 81,555
OTHER OPERATING EXPENSES 460,575 401,285
$1,220,380 $1,087,555
INCOME BEFORE TAXES $1,102,228 $1,008,158
APPLICABLE INCOME TAXES 325,400 293,000
NET INCOME $776,828 $715,158
======= =======
COMMON SHARE DATE:
NET INCOME PER SHARE $0.88 $0.81
NUMBER OF SHARES OUTSTANDING 883,116 883,116
THE NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL
PART OF THESE STATEMENTS.
TOWER BANCORP INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(unaudited)
THREE THREE
MONTHS MONTHS
3/31/98 3/31/97
STATEMENT OF INCOME
INCOME FROM OPERATIONS BEFORE TAX 1,102,226 1,008,158
INCOME TAX EXPENSE (325,400) (293,000)
NET INCOME 776,826 715,158
STATEMENT OF COMPREHENSIVE INCOME
NET INCOME 776,826 715,158
UNREALIZED GAINS (LOSSES) FOR PERIOD 108,000 (140,000)
OTHER COMPREHENSIVE INCOME 0 0
COMPREHENSIVE INCOME 884,826 575,158
CONSOLIDATED STATEMENT OF CASH FLOWS
PERIOD PERIOD
(,000 OMITTED) ENDED ENDED
3-31-98 3-31-97
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $777 $715
ADJ TO RECONCILE NET INC TO NET CASH
DEPRECIATION AND AMORTIZATION 91 66
PROVISION FOR LOAN LOSSES 0 0
GAIN ON SALE OF INVESTMENT SECURITIES 360 238
LOSS ON DISPOSAL OF EQUIPMENT 0 0
PROVISION FOR DEFERRED TAXES 199 (222)
(INCREASE) IN OTHER ASSETS (372) 458
(INCREASE) IN INTEREST RECEIVABLE (43) (5)
INCREASE IN INTEREST PAYABLE 15 (8)
(DECREASE) IN ACCRUED INCOME TAXES 69 156
(DECREASE) IN OTHER LIABILITIES 432 104
OTHER, NET 396 (455)
NET CASH PROFIDED BY OPERATING ACTIVITIES 1,924 1,047
CASH FLOWS FROM INVESTING ACTIVITIES:
LOANS (NET) (2,726) (1,597)
PURCHASES OF BANK PREMISES, EQUIPMENT, FURN
& FIX (695) (380)
SALES OF OTHER REAL ESTATE 0 117
INT BEARING BALANCES WITH BANKS (2,166) (82)
SECURITIES(NET) (1,847) (65)
NET CASH (USED) BY INVESTING ACTIIVITIES (7,434) (2,007)
CASH FLOWS FROM FINANCING ACTIVITIES:
NET INCREASE IN DEMAND AND SAVINGS DEPOSITS 10,623 7,461
CERTIFICATES OF DEPOSIT (NET) (2,280) (2,016)
NET CHANGE IN FED FUNDS (4,476) (2,025)
DEBT (NET) 774 (1,004)
PROCEEDS FROM SALE OF CAPITAL STOCK 0 0
CASH DIVIDENDS PAID 0 0
NET CASH PROVIDED BY FINANCING ACTIVITIES: 4,641 2,416
NET INCREASE IN CASH AND CASH EQUIVALENTS (869) 1,456
CASH AND CASH EQUIVALENTS AT BEGINNING OF YR 4,311 3,034
CASH AND CASH EQUIVALENTS AT END OF QUARTER 3,442 4,490
====== =====
THE NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL
PART OF THESE STATEMENTS.
TOWER BANCORP INC.
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
CONSOLIDATEDD FINANCIAL POSITION AS OF MARCH 31, 1998 AND DECEMBER 31, 1997,
AND THE RESULTS OF
ITS OPERATIONS FOR THE THREE MONTH PERIODS ENDED MARCH 31, 1998 AND 1997, AND
THE CHANGES IN
CONSOLIDATED FINANCIAL POSITION FOR THESE PERIODS THEN ENDED.
THE RESULTS OF OPERATIONS FOR THESE PERIODS ARE NOT NECESSARILY INDICATIVE
OF THE RESULTS
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.
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.
THE BANK'S INTEREST RATE SPREAD HAS DECREASED APPROXIMATELY 9 BASIS POINTS
COMPARED TO THE
SAME PERIOD IN 1997. OTHER INCOME INCREASED BY NEARLY 40% AS THE RESULT OF
SECURITY GAINS
TAKEN IN TOWER'S CORPORATE STOCK PORTFOLIO AND INCREASES IN TRUST INCOME.
NET INCOME
INCREASED BY $62,000 OR 8.62%.
THE BANK HAS MADE SIGNIFICANT INVESTMENTS IN TECHNOLOGY AND FIXED ASSETS .
OCCUPANCY AND
FURNITURE AND FIXTURE EXPENSES INCREASED BY $23,000. THE ADDITION OF LAN AND
WAN TECHNOLOGY
POSITIONS THE BANK TO TAKE ADVANTAGE OF A NUMBER OF OPERATING EFFICIENCIES AND
MORE
IMPORTANTLY HAS ENHANCED THE DELIVERY OF PRODUCT TO ITS CUSTOMERS. THE
INSTALLATION ALSO
HELPED TO DEAL WITH YEAR 2000 ISSUES. TOWER IS ON SCHEDULE WITH ITS YEAR
2000 PLAN WHICH HAS
BEEN REVIEWED BY THE OCC.
THE BANK HAS NOT MADE A LOAN LOSS PROVISION IN AS IT MAINTAINS A RATIO TO TOTAL
LOANS OF 1.78%.
ANTICIPATED LOSSES ARE WELL BELOW THE CURRENT RESERVE BALANCE. CLASSIFIED AND
NON ACCRUAL
LOANS CONTINUE TO DECREASE AS A PERCENTAGE OF TOTAL LOANS. THE BANK HAD NET
RECOVERIES OF
$15,000 IN THE FIRST QUARTER.
TOWER MAINTAINS A CAPITAL RATIO OF 12.85% AND A RISK BASED RATIO OF (TIER 1)
16.39%.
MANAGEMENT HAS DETERMINED THE BANK'S INTEREST RATE RISK TO BE MODERATE AND IN
LINE WITH ITS
PEERS. INTEREST RATE RISK IS CONTINUALLY MONITORED AND REASSESSED.
LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY REPRESENTS THE ABILITY OF THE BANK TO ACCOMMODATE DECREASES IN
DEPOSITS AND FUND
INCREASES TO THE LOAN PORTFOLIO. THE BANK'S SOURCES OF LIQUIDITY CAME FROM
SHORT-TERM
MATURITIES OF US GOVERNMENTS AGENCIES, MUNICIPALS AND OTHER SECURITIES.
ADDITIONALLY THE
BANK RECEIVED CASH FLOWS FROM IT'S CMO PORTFOLIO. THE BANK HAS UTILIZED ITS
FLEXLINE AT THE
FHLB HELP FUND SOME SHORT TERM GROWTH.
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
ITEM 601 OF REGULATIONS 8-K OF 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
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)
----------------------------------------
JEFF B. SHANK, PRESIDENT, CEO
(PRINCIPAL EXECUTIVE OFFICER AND
PRINCIPAL FINANCIAL OFFICER)
DATE:
- ----------------------
--------------------------------------
DONALD F CHLEBOWSKI JR., TREASURER
(PRINCIPAL ACCOUNTING OFFICER)
DATE:
- ----------------------
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
Page 10 of 13
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<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 3,442
<INT-BEARING-DEPOSITS> 6,319
<FED-FUNDS-SOLD> 5,636
<TRADING-ASSETS> 0
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<INVESTMENTS-CARRYING> 7,839
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<LOANS> 105,160
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<TOTAL-ASSETS> 165,733
<DEPOSITS> 140,392
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0
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<COMMON> 2,225
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<LOANS-NON> 457
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