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: JUNE 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:
883,116 SHARES OF COMMON STOCK
TOWER BANCORP INC.
INDEX
PAGE NO.
PART I - FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEET 3
JUNE 30, 1998 AND DECEMBER 31, 1997
CONSOLIDATED STATEMENT OF INCOME 4
THREE MONTHS ENDED JUNE 30, 1998 AND 1997
CONSOLIDATED STATEMENT OF INCOME 5
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
CONSOLIDATED STATEMENT OF CASH FLOWS 6
SIX MONTHS ENDED JUNE 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 06-30-98 12-31-97
CASH AND DUE FROM BANKS $3,039 $4,311
INTEREST BEARING BALANCES WITH BANKS 6,519 6,029
FEDERAL FUNDS SOLD 0 0
INVESTMENT ACCOUNT SECURITIES:
1 OBLIGATIONS OF STATES AND POLITICAL 7,705 10,260
SUBDIVISONS (FAIR VALUE $7883, $8424)
2 OBLIGATIONS OF STATES AND POLSUBDIVISIONS 3,672 0
2 US TREASURY SECURITIES 499 599
2 US GOVT AGENCIES AND CORPORATIONS 18,373 21,798
2 OTHER SECURITIES AND EQUITY SEC 10,162 8,093
UNREALIZED GAIN (LOSS) 1,673 1,468
LOANS: 111,217 104,451
LESS: UNEARNED INCOME OF LOANS (197) (201)
RESERVE FOR POSSIBLE LOAN LOSSES (1,882) (1,850)
BANK PREMISES, EQUIP,FURNITURE & FIXTURES 2,670 2,669
REAL ESTATE OWNED OTHER THAN BANK PREMISES 121 121
ACCRUED INTEREST RECEIVABLE 984 993
DEFERRED INCOME TAXES 658 246
OTHER ASSETS 1,191 1,318
TOTAL ASSETS $166,404 $160,305
======= =======
LIABILITIES AND CAPITAL
DEPOSITS IN DOMESTIC OFFICES:
DEMAND $11,731 $9,624
SAVINGS 64,349 62,038
TIME 57,830 61,095
LIABILITIES FOR BORROWED MONEY 8,501 2,212
FEDERAL FUNDS PURCHASED 0 2,769
ACCRUED INTEREST PAYABLE 383 424
ACCRUED FEDERAL INCOME TAXES 482 450
OTHER LIABILITIES 1,262 1,260
TOTAL LIABILITIES $144,538 $139,872
----------- -----------
EQUITY CAPITAL
CAPITAL STOCK:
COMMON STOCK:
AUTHORIZED 5,000,000 SHARES:
848,180 SHARES ISSUED - 1997
890,050 SHARES ISSUED - 1998 $2,225 $2,225
SURPLUS 6,696 6,699
UNDIVIDED PROFITS 12,052 10,811
NET UNREALIZED (LOSS) ON MARKETABLE SEC 1,104 969
LESS: COST OF TREASURY STOCK (211) (271)
TOTAL EQUITY CAPITAL $21,866 $20,433
TOTAL LIABILITIES AND CAPITAL $166,404 $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 6-30-98 6-30-97
INTEREST AND FEES ON LOANS $2,397,115 $2,267,776
INTEREST ON INVESTMENT SECURITIES:
HELD TO MATURITY 82,398 117,407
AVAILABLE FOR SALE 498,543 491,846
INTEREST ON FED FUNDS SOLD 12,219 30,647
INTEREST ON DEPOSITS WITH BANKS 81,778 35,456
$3,072,053 $2,943,132
INTEREST EXPENSE
INTEREST ON DEPOSITS 1,236,003 1,238,857
INTEREST ON FED FUNDS PURCHASED AND
SECURITIES SOLD UNDER REPO AGREEMENTS 22,364 7,351
INTEREST ON BORROWED MONEY 33,723 7,368
$1,292,090 $1,253,576
NET INTEREST INCOME $1,779,963 $1,689,556
PROVISION FOR LOAN LOSSES 0 0
NET INTEREST INCOME AFTER PROV FOR LL $1,779,963 $1,689,556
OTHER INCOME:
TRUST DEPARTMENT INCOME $100,551 $83,990
SERVICE CHARGES ON DEPOSIT ACCOUNTS 90,137 80,632
OTHER SERVICE CHARGES 27,942 21,616
OTHER OPERATING INCOME 152,662 1,500
INVESTMENT SECURITIES GAINS(LOSSES) 181,524 48,304
$552,816 $236,042
OTHER EXPENSES:
SALARIES, WAGES AND OTHER BENEFITS $600,341 $546,276
OCCUPANCY EXPENSE OF BANK PREMISES 68,532 69,541
FURNITURE AND FIXTURE EXPENSE 127,235 88,176
OTHER OPERATING EXPENSES 562,464 389,662
$1,358,572 $1,093,655
INCOME BEFORE TAXES $974,207 $831,943
APPLICABLE INCOME TAXES 288,800 242,000
NET INCOME $685,407 $589,943
======= =======
COMMON SHARE DATE:
NET INCOME PER SHARE $0.77 $0.70
NUMBER OF SHARES OUTSTANDING 890,050 845,129
THE NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL
PART OF THESE STATEMENTS.
TOWER BANCORP INC.
CONSOLIDATED STATEMENT OF INCOME
SIX MONTHS ENDED
INTEREST INCOME 6-30-98 6-30-97
INTEREST AND FEES ON LOANS $4,711,345 $4,549,971
INTEREST ON INVESTMENT SECURITIES:
HELD TO MATURITY 183,586 235,767
AVAILABLE FOR SALE 989,265 946,268
INTEREST ON FED FUNDS SOLD 28,285 34,328
INTEREST ON DEPOSITS WITH BANKS 179,000 94,576
$6,091,481 $5,860,910
INTEREST EXPENSE
INTEREST ON DEPOSITS 2,494,733 2,462,320
INTEREST ON FED FUNDS PURCHASED AND 36,918 15,270
SECURITIES SOLD UNDER REPO AGREEMENTS
INTEREST ON BORROWED MONEY 61,830 31,824
$2,593,481 $2,509,414
NET INTEREST INCOME $3,498,000 $3,351,496
PROVISION FOR LOAN LOSSES 0 0
NET INTEREST INCOME AFTER PROV FOR LL $3,498,000 $3,351,496
OTHER INCOME:
TRUST DEPARTMENT INCOME $235,499 $167,036
SERVICE CHARGES ON DEPOSIT ACCOUNTS 173,284 157,972
OTHER SERVICE CHARGES 49,942 45,049
OTHER OPERATING INCOME 156,809 13,787
INVESTMENT SECURITIES GAINS (LOSSES) 541,853 285,971
$1,157,387 $669,815
OTHER EXPENSES:
SALARIES, WAGES AND OTHER BENEFITS $1,184,918 $1,081,251
OCCUPANCY EXPENSE OF BANK PREMISES 138,645 139,281
FURNITURE AND FIXTURE EXPENSE 232,350 169,731
OTHER OPERATING EXPENSES 1,023,039 790,947
$2,578,952 $2,181,210
INCOME BEFORE TAXES $2,076,435 $1,840,101
APPLICABLE INCOME TAXES 614,200 535,000
NET INCOME $1,462,235 $1,305,101
COMMON SHARE DATA:
NET INCOME PER SHARE $1.74 $1.54
CASH DIVIDENDS DECLARED PER SHARE $0.20 $0.36
NUMBER OF SHARES OUTSTANDING 890,050 845,129
THE NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL
PART OF THESE STATEMENTS.
TOWER BANCORP INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
SIX MONTH SIX MONTH
(,000 OMITTED) ENDED ENDED
6-30-98 6-30-97
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $1,462 $1,305
ADJ TO RECONCILE NET INC TO NET CASH PROV/OPERATING ACCT.
DEPRECIATION AND AMORTIZATION 188 130
PROVISION FOR LOAN LOSSES 0 0
GAIN ON SALE OF INVESTMENT SECURITIES 0 286
LOSS ON DISPOSAL OF EQUIPMENT 0 0
PROVISION FOR DEFERRED TAXES (412) 180
(INCREASE) IN OTHER ASSETS 127 (289)
(INCREASE) IN INTEREST RECEIVABLE 9 (19)
INCREASE IN INTEREST PAYABLE (41) (9)
(DECREASE) IN ACCRUED INCOME TAXES 32 450
(DECREASE) IN OTHER LIABILITIES 2 (426)
OTHER, NET (58) (23)
NET CASH PROFIDED BY OPERATING ACTIVITIES 1,309 1,585
CASH FLOWS FROM INVESTING ACTIVITIES:
LOANS (NET) (6,738) (1,796)
PURCHASES OF BANK PREMISES, EQUIPMENT, FURN
& FIX 1 (492)
SALES OF OTHER REAL ESTATE 0 117
INT BEARING BALANCES WITH BANKS (490) 853
INVESTMENT SECURITIES(NET) 134 (3,714)
NET CASH (USED) BY INVESTING ACTIVITIES (7,093) (5,032)
CASH FLOWS FROM FINANCING ACTIVITIES:
NET INCREASE IN DEMAND AND SAVINGS DEPOSITS 4,418 9,706
CERTIFICATES OF DEPOSIT (NET) (3,265) (1,973)
NET CHANGE IN FED FUNDS (2,769) (1,578)
DEBT (NET) 6,289 (947)
PROCEEDS FROM SALE OF CAPITAL STOCK 60 139
CASH DIVIDENDS PAID (221) (194)
NET CASH PROVIDED BY FINANCING ACTIVITIES: 4,512 5,153
NET INCREASE IN CASH AND CASH EQUIVALENTS (1,272) 1,706
CASH AND CASH EQUIVALENTS AT BEGINNING OF YR 4,311 3,034
CASH AND CASH EQUIVALENTS AT END OF QUARTER 3,039 4,740
====== =====
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 JUNE 30, 1998 AND DECEMBER 31, 1997,
AND THE RESULTS OF ITS
OPERATIONS FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1998 AND
JUNE 30, 1997, AND THE
CHANGES IN CONSOLIDATED FINANCIAL POSITION FOR THESE PERIODS THEN ENDED.
THE RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 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 FOR THE BANK INCREASED 5.35% AND 4.37% FOR THE THREE
AND SIX MONTH PERIODS
ENDED JUNE 30, 1998, COMPARED TO THE SAME PERIODS IN 1997. THE BANK HAS
EXPERIENCED A 7% GROWTH
IN LOANS AND ONLY A 1% GROWTH IN DEPOSITS. SHORT TERM BORROWINGS FROM THE
FHLB HAVE BEEN
USED TO FUND LOAN GROWTH. THE BANK IS FORMULATING A STRATEGY FOR FUNDING
THE PORTFOLIO FOR
THE LONG RUN.
OTHER OPERATING INCOME INCREASED SIGNIFICANTLY DUE THE SETTLEMENT OF A
PROBLEM LOAN. THIS
LOAN HAS BEEN IN THE PROCESS OF COLLECTION FOR THE LAST TEN YEARS. THE
COLLECTION OF FEES AND
BACK INTEREST WERE PLACED IN OTHER INCOME SO THAT ACTUAL INTEREST INCOME
WOULD NOT BE
DISTORTED. OTHER EXPENSES INCREASED BY 18.23% AS COMPARED TO THE SIX MONTH
PERIOD IN 1997.
ADDITIONS TO FURNITURE AND FIXTURES EXPENSE ARE THE PRIMARY REASON.
THE BANK CONTINUES TO MAINTAIN NEARLY A 1.70% RESERVE RATIO. NET RECOVERIES
FOR THE YEAR
STAND AT $34,000. NO SIGNIFICANT LOAN LOSSES ARE ANTICIPATED. THE BANK'S
LEVERAGE AND TOTAL
RISK BASED CAPITAL RATIOS STAND AT 9.42% AND 15.46% RESPECTIVELY.
TOWER ANNOUNCED A TWO FOR ONE STOCK SPLIT IN JUNE, PAYABLE JULY OF 1998.
DEMAND FOR TOWER
STOCK REMAINS STRONG.
THE BANK HAS BROKEN GROUND FOR A NEW BRANCH TO BE LOCATED ON EAST MAIN ST.
IN WAYNESBORO,
PA. IT IS PROJECTED TO BE OPENED IN THE FIRST QUARTER OF 1999.
WITH THE YEAR 2000 JUST AROUND THE CORNER THE BANK HAS CONTINUED TO MAKE
PROGRESS WITH
REGARD TO ITS Y2K PLAN. BOTH THE OCC AND THE BANK'S EXTERNAL AUDITORS HAVE
REVIEWED THE
PLAN. THE BANK CURRENTLY HAS A WEB SITE UNDER CONSTRUCTION. IN THE NEAR
FUTURE
WWW.FNBGC.COM MAY BE ACCESSED.
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 LIQUIDITY HAS BEEN FUNDED BY
CASH FLOWS AND
MATURITIES FROM LOANS AND INVESTMENTS. ADDITIONAL LIQUIDITY WAS PROVIDED BY
BORROWINGS
FROM THE FHLB AND FED FUND LINES OF CREDIT.
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
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 3,039
<INT-BEARING-DEPOSITS> 6,519
<FED-FUNDS-SOLD> 0
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<INVESTMENTS-CARRYING> 7,705
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<ALLOWANCE> 1,882
<TOTAL-ASSETS> 166,404
<DEPOSITS> 133,910
<SHORT-TERM> 8,501
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<OTHER-SE> 19,641
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