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, 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 NUMBER: (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:
1,780,100 SHARES OF COMMON STOCK
TOWER BANCORP INC.
INDEX
PAGE NO.
PART I - FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEET 3
SEPTEMBER30, 1998 AND DECEMBER 31, 1997
CONSOLIDATED STATEMENT OF INCOME 4
THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
CONSOLIDATED STATEMENT OF INCOME 5
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
CONSOLIDATED STATEMENT OF CASH FLOWS 6
NINE MONTHS ENDED SEPTEMBER 30, 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 09-30-98 12-31-97
CASH AND DUE FROM BANKS $3,651 $4,311
INTEREST BEARING BALANCES WITH BANKS 6,298 6,029
FEDERAL FUNDS SOLD 1,938 0
INVESTMENT ACCOUNT SECURITIES:
1 OBLIGATIONS OF STATES AND POLITICAL 0 10,260
SUBDIVISONS (FAIR VALUE $8424)
2 OBLIGATIONS OF STATES AND POLSUBDIVISIONS 10,514 0
2 US TREASURY SECURITIES 499 599
2 US GOVT AGENCIES AND CORPORATIONS 15,483 21,798
2 OTHER SECURITIES AND EQUITY SEC 12,390 8,093
UNREALIZED GAIN (LOSS) 1,768 1,468
LOANS: 111,202 104,451
LESS: UNEARNED INCOME OF LOANS (181) (201)
RESERVE FOR POSSIBLE LOAN LOSSES (1,898) (1,850)
BANK PREMISES, EQUIP,FURNITURE & FIXTURES 2,985 2,669
REAL ESTATE OWNED OTHER THAN BANK PREMISES 121 121
ACCRUED INTEREST RECEIVABLE 949 993
DEFERRED INCOME TAXES 543 246
OTHER ASSETS 1,335 1,318
TOTAL ASSETS $173,597 $160,305
======= =======
LIABILITIES AND CAPITAL
DEPOSITS IN DOMESTIC OFFICES:
DEMAND $15,521 $9,624
SAVINGS 65,987 62,038
TIME 59,363 61,095
LIABILITIES FOR BORROWED MONEY 7,883 2,212
FEDERAL FUNDS PURCHASED 0 2,769
ACCRUED INTEREST PAYABLE 406 424
ACCRUED FEDERAL INCOME TAXES 946 450
OTHER LIABILITIES 821 1,260
TOTAL LIABILITIES $150,927 $139,872
----------- -----------
EQUITY CAPITAL
CAPITAL STOCK:
COMMON STOCK:
AUTHORIZED 5,000,000 SHARES:
1,780,100 SHARES ISSUED - 1998 $2,225 $2,225
SURPLUS 6,699 6,699
UNDIVIDED PROFITS 12,848 10,811
NET UNREALIZED (LOSS) ON MARKETABLE SEC 1,167 969
LESS: COST OF TREASURY STOCK (269) (271)
TOTAL EQUITY CAPITAL $20,670 $20,433
TOTAL LIABILITIES AND CAPITAL $173,597 $160,305
======= =======
THE NOTES TO FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THESE STATEMENTS.
TOWER BANCORP INC.
CONSOLIDATED STATEMENT OF INCOME
THREE MONTHS ENDED
INTEREST INCOME 9-30-98 9-30-97
INTEREST AND FEES ON LOANS $2,529,067 $2,320,209
INTEREST ON INVESTMENT SECURITIES 522,899 639,295
INTEREST ON FED FUNDS SOLD 749 32,337
INTEREST ON DEPOSITS WITH BANKS 90,481 45,000
$3,143,196 $3,036,841
INTEREST EXPENSE
INTEREST ON DEPOSITS 1,237,958 1,294,616
INTEREST ON FED FUNDS PURCHASED 691 0
INTEREST ON BORROWED MONEY 132,228 24,968
$1,370,877 $1,319,584
NET INTEREST INCOME $1,772,319 $1,717,257
PROVISION FOR LOAN LOSSES 0 0
NET INTEREST INCOME AFTER PROV FOR LL $1,772,319 $1,717,257
OTHER INCOME:
TRUST DEPARTMENT INCOME $135,199 $90,766
SERVICE CHARGES ON DEPOSIT ACCOUNTS 85,344 88,431
OTHER SERVICE CHARGES 34,016 9,547
OTHER OPERATING INCOME 46,528 17,924
INVESTMENT SECURITIES GAINS(LOSSES) 337,687 231,176
$638,774 $437,846
OTHER EXPENSES:
SALARIES, WAGES AND OTHER BENEFITS $626,437 $544,521
OCCUPANCY EXPENSE OF BANK PREMISES 66,008 68,923
FURNITURE AND FIXTURE EXPENSE 113,628 89,071
OTHER OPERATING EXPENSES 476,135 371,401
$1,282,208 $1,073,916
INCOME BEFORE TAXES $1,128,885 $1,081,187
APPLICABLE INCOME TAXES 331,400 316,000
NET INCOME $797,485 $765,187
======= =======
COMMON SHARE DATE:
NET INCOME PER SHARE $1.28 $0.86
CASH DIVIDENDS DECLARED PER SHARE $0.12 $0.20
NUMBER OF SHARES OUTSTANDING 1,780,000 890,050
THE NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL
PART OF THESE STATEMENTS.
TOWER BANCORP INC.
CONSOLIDATED STATEMENT OF INCOME
NINE MONTHS ENDED
INTEREST INCOME 9-30-98 9-30-97
INTEREST AND FEES ON LOANS $7,240,412 $6,870,180
INTEREST ON INVESTMENT SECURITIES 1,695,750 1,821,330
INTEREST ON FED FUNDS SOLD 29,034 66,665
INTEREST ON DEPOSITS WITH BANKS 269,481 139,576
$9,234,677 $8,897,751
INTEREST EXPENSE
INTEREST ON DEPOSITS 3,732,691 3,756,936
INTEREST ON FED FUNDS PURCHASED 37,609 15,270
INTEREST ON BORROWED MONEY 194,058 56,792
$3,964,358 $3,828,998
NET INTEREST INCOME $3,270,319 $5,068,753
PROVISION FOR LOAN LOSSES 0 0
NET INTEREST INCOME AFTER PROV FOR LL $5,270,319 $5,068,753
OTHER INCOME:
TRUST DEPARTMENT INCOME $370,698 $257,804
SERVICE CHARGES ON DEPOSIT ACCOUNTS 258,628 246,403
OTHER SERVICE CHARGES 83,961 54,296
OTHER OPERATING INCOME 203,334 31,711
INVESTMENT SECURITIES GAINS (LOSSES) 879,540 517,147
$1,796,161 $1,107,361
OTHER EXPENSES:
SALARIES, WAGES AND OTHER BENEFITS $1,811,355 $1,625,772
OCCUPANCY EXPENSE OF BANK PREMISES 204,653 208,204
FURNITURE AND FIXTURE EXPENSE 345,978 258,802
OTHER OPERATING EXPENSES 1,499,174 1,162,348
$3,861,160 $3,255,126
INCOME BEFORE TAXES $3,205,320 $2,920,988
APPLICABLE INCOME TAXES 945,600 851,000
NET INCOME $2,259,720 $2,069,988
COMMON SHARE DATA:
NET INCOME PER SHARE $1.28 $1.17
CASH DIVIDENDS DECLARED PER SHARE $0.13 $0.11
NUMBER OF SHARES OUTSTANDING 1,769,535 1,769,535
THE NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL
PART OF THESE STATEMENTS.
TOWER BANCORP INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
NINE MONTH NINE MONTH
(,000 OMITTED) ENDED ENDED
9-30-98 9-30-97
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $2,260 $2,070
ADJ TO RECONCILE NET CASH:
DEPRECIATION AND AMORTIZATION 282 193
PROVISION FOR LOAN LOSSES 48 (29)
LOSS ON DISPOSAL OF EQUIPMENT 0 0
PROVISION FOR DEFERRED TAXES (297) (178)
(INCREASE) IN OTHER ASSETS (17) 563
(INCREASE) IN INTEREST RECEIVABLE 44 (110)
INCREASE IN INTEREST PAYABLE (18) 11
(DECREASE) IN ACCRUED INCOME TAXES 496 785
(DECREASE) IN OTHER LIABILITIES (439) (829)
OTHER, NET (404) 418
NET CASH PROFIDED BY OPERATING ACTIVITIES 1,955 2,894
CASH FLOWS FROM INVESTING ACTIVITIES:
LOANS (NET) (12,751) (2,581)
PURCHASES OF BANK PREMISES, EQUIPMENT, FURN
& FIX (316) (459)
SALES OF OTHER REAL ESTATE 0 117
INT BEARING BALANCES WITH BANKS (NET) (269) (1,763)
SECURITIES(NET) 1,864 (3,087)
NET CASH (USED) BY INVESTING ACTIVITIES (11,472) (7,773)
CASH FLOWS FROM FINANCING ACTIVITIES:
NET INCREASE IN DEMAND AND SAVINGS DEPOSITS 9,846 10,558
CERTIFICATES OF DEPOSIT (NET) (1,732) (2,579)
NET CHANGE IN FED FUNDS (1,938) (299)
DEBT (NET) 2,902 (1,133)
PROCEEDS FROM SALE OF CAPITAL STOCK 0 0
CASH DIVIDENDS PAID (221) (194)
NET CASH PROVIDED BY FINANCING ACTIVITIES: 8,857 6,353
NET INCREASE IN CASH AND CASH EQUIVALENTS (660) 1,474
CASH AND CASH EQUIVALENTS AT BEGINNING OF YR 4,311 3,034
CASH AND CASH EQUIVALENTS AT END OF QUARTER 3,651 4,508
====== =====
THE NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL
PART OF THESE STATEMENTS.
TOWER BANCORP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE (1) 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 SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997, AND THE
RESULTS OF ITS
OPERATIONS FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 1998 AND
1997, AND THE
CHANGES IN CONSOLIDATED FINANCIAL POSITION FOR THESE PERIODS THEN ENDED.
THE RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1998 AND 1997
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.
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 4.00% AND 3.21% FOR THE NINE AND THREE MONTH
PERIODS ENDED 9-30-
98 COMPARED TO THE SAME PERIODS IN 1997. NET INCOME INCREASED BY 9.17% AND
4.22% FOR THE SAME
PERIODS. TRUST AND MUTUAL FUND INCOME WAS UP 44% FOR THE FIRST NINE MONTHS
OF 1998. OTHER
INCOME INCREASED SIGNIFICANTLY DUE TO THE RECOVERY OF A PREVIOUSLY CHARGED OF
COMMERCIAL
LOAN. INVESTMENT GAINS WERE UP BY 70% OVER LAST YEAR.
THE BANK HAS NOT MADE A LOAN LOSS PROVISION IN 1998 AS IT MAINTAINS A RATIO
TO TOTAL LOANS OF
1.62%. ANTICIPATED LOSSES FALL WELL BELOW THE CURRENT RESERVE BALANCE. THE
BANK HAS
EXPERIENCED AN INSIGNIFICANT LEVEL OF CHARGED OFF LOANS THUS FAR IN 1998.
THE BANK MAINTAINS A CAPITAL RATIO OF 9.67% AND A RISK BASED CAPITAL RATIO
OF 15.27% AS OF 9-30-98.
THE DEMAND FOR TOWER STOCK REMAINS STRONG. IT APPEARS THAT THE HOLDING CO.
WILL MEET OR
EXCEED PROJECTED EARNINGS AND GROWTH FOR 1998.
THE BANK CONTINUES TO MAKE PROGRESS RELATIVE TO Y2K. TESTING OF CRITICAL
APPLICATIONS HAVE
BEGUN AND ARE SCHEDULED TO BE COMPLETED BY THE SECOND QUARTER OF 1999. THE
BANK HAS BEEN
EXAMINED ON THREE OCCASIONS BY THE OCC.
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
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. IN ADDITION,
THE BANK BORROWED FIVE MILLION DOLLARS FROM THE FHLB TO AID IN FUNDING THE
LOAN PORTFOLIO.
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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 3,651
<INT-BEARING-DEPOSITS> 6,298
<FED-FUNDS-SOLD> 1,938
<TRADING-ASSETS> 0
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<DEPOSITS> 140,871
<SHORT-TERM> 7,883
<LIABILITIES-OTHER> 2,173
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0
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<COMMON> 2,225
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<LOANS-NON> 448
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