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, 1999
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
JUNE 30, 1999 AND DECEMBER 31, 1998
CONSOLIDATED STATEMENT OF INCOME 4
THREE MONTHS ENDED JUNE 30, 1999 AND 1998
CONSOLIDATED STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 1999 AND 1998 5
CONSOLIDATED STATEMENT OF CASH FLOWS 6
THREE MONTHS ENDED JUNE 30, 1999 AND 1998
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL 9
CONDITION AND RESULTS OF OPERATIONS
PART II - OTHER INFORMATION
ITEM 6 - INDEX TO EXHIBITS AND REPORTS ON FORM 8-K 10
SIGNATURES 11
EXHIBITS
TOWER BANCORP INC. CONSOLIDATED BALANCE SHEET
ASSETS 06-30-99 12-31-98
CASH AND DUE FROM BANKS $4,226 $5,114
INTEREST BEARING BALANCES WITH BANKS 5,538 6,199
FEDERAL FUNDS SOLD 5,368 0
INVESTMENT ACCOUNT SECURITIES:
2 OBLIGATIONS OF STATES AND POLITICAL 11,925 11,471
SUBDIVISONS
2 US TREASURY SECURITIES 299 399
2 US GOVT AGENCIES AND CORPORATIONS 24,608 21,584
2 OTHER SECURITIES AND EQUITY SEC 13,992 13,931
UNREALIZED GAIN (LOSS) -79 1,132
LOANS: 124,662 123,921
LESS: UNEARNED INCOME OF LOANS (212) (190)
RESERVE FOR POSSIBLE LOAN LOSSES (1,785) (1,890)
BANK PREMISES, EQUIP,FURNITURE & FIXTURES 3,653 3,360
REAL ESTATE OWNED OTHER THAN BANK PREMISES 0 121
ACCRUED INTEREST RECEIVABLE 1,054 984
DEFERRED INCOME TAXES 287 179
OTHER ASSETS 5,010 1,020
TOTAL ASSETS $198,546 $187,335
======= =======
LIABILITIES AND CAPITAL
DEPOSITS IN DOMESTIC OFFICES:
DEMAND $13,218 $11,346
SAVINGS 83,045 69,281
TIME 60,078 61,839
LIABILITIES FOR BORROWED MONEY 17,718 18,131
FEDERAL FUNDS PURCHASED 0 2,366
ACCRUED INTEREST PAYABLE 365 401
ACCRUED FEDERAL INCOME TAXES 420 0
OTHER LIABILITIES 1,220 1,419
TOTAL LIABILITIES $176,064 $164,783
----------- -----------
EQUITY CAPITAL
CAPITAL STOCK:
COMMON STOCK:
AUTHORIZED 5,000,000 SHARES:
1,780,100 SHARES ISSUED - 1999 $2,225 $2,225
1,780,100 SHARES ISSUED - 1998
SURPLUS 6,707 6,705
UNDIVIDED PROFITS 14,088 12,969
NET UNREALIZED (LOSS) ON MARKETABLE SEC (52) 1,074
LESS: COST OF TREASURY STOCK (486) (421)
TOTAL EQUITY CAPITAL $22,482 $22,552
TOTAL LIABILITIES AND CAPITAL $198,546 $187,335
======= =======
THE NOTES TO FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THESE STATEMENTS.
3
TOWER BANCORP INC.
CONSOLIDATED STATEMENT OF INCOME
THREE MONTHS ENDED
INTEREST INCOME 6-30-99 6-30-98
INTEREST AND FEES ON LOANS $2,557,731 $2,397,115
INTEREST ON INVESTMENT SECURITIES
AVAILABLE FOR SALE 686,524 580,941
INTEREST ON FED FUNDS SOLD 41,622 12,219
INTEREST ON DEPOSITS WITH BANKS 95,541 81,778
$3,381,418 $3,072,053
INTEREST EXPENSE
INTEREST ON DEPOSITS 1,272,625 1,236,003
INTEREST ON FED FUNDS PURCHASED AND
SECURITIES SOLD UNDER REPO AGREEMENTS 0 22,364
INTEREST ON BORROWED MONEY 303,914 33,723
$1,576,539 $1,292,090
NET INTEREST INCOME $1,804,879 $1,779,963
PROVISION FOR LOAN LOSSES 0 0
NET INTEREST INCOME AFTER PROV FOR LL $1,804,879 $1,779,963
OTHER INCOME:
TRUST DEPARTMENT INCOME $98,992 $100,551
SERVICE CHARGES ON DEPOSIT ACCOUNTS 94,905 90,137
OTHER SERVICE CHARGES 17,602 27,942
OTHER OPERATING INCOME 69,431 152,662
INVESTMENT SECURITIES GAINS(LOSSES) 550,412 181,524
$831,342 $552,816
OTHER EXPENSES:
SALARIES, WAGES AND OTHER BENEFITS $740,565 $600,341
OCCUPANCY EXPENSE OF BANK PREMISES 73,640 68,532
FURNITURE AND FIXTURE EXPENSE 113,924 127,235
OTHER OPERATING EXPENSES 709,167 562,464
$1,637,296 $1,358,572
INCOME BEFORE TAXES $998,925 $974,207
APPLICABLE INCOME TAXES 300,700 288,800
NET INCOME $698,225 $685,407
======= =======
COMMON SHARE DATE:
NET INCOME PER SHARE $0.39 $0.39
NUMBER OF SHARES OUTSTANDING 1,780,100 1,780,100
THE NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL
PART OF THESE STATEMENTS.
4
TOWER BANCORP INC.
CONSOLIDATED STATEMENT OF INCOME
SIX MONTHS ENDED
INTEREST INCOME 06-30-99 06-30-98
INTEREST AND FEES ON LOANS $5,091,832 $4,711,346
INTEREST ON INVESTMENT SECURITIES:
AVAILABLE FOR SALE 1,348,847 1,172,851
INTEREST ON FED FUNDS SOLD 42,591 28,285
INTEREST ON DEPOSITS WITH BANKS 185,794 179,000
$6,669,064 $6,091,482
INTEREST EXPENSE
INTEREST ON DEPOSITS 2,511,279 2,494,733
INTEREST ON FED FUNDS PURCHASED AND 9,304 36,918
SECURITIES SOLD UNDER REPO AGREEMENTS
INTEREST ON BORROWED MONEY 496,451 61,830
$3,017,034 $2,593,481
NET INTEREST INCOME $3,652,030 $3,498,001
PROVISION FOR LOAN LOSSES 0 1
NET INTEREST INCOME AFTER PROV FOR LL $3,652,030 $3,498,000
OTHER INCOME:
TRUST DEPARTMENT INCOME $255,500 $235,500
SERVICE CHARGES ON DEPOSIT ACCOUNTS 171,628 173,284
OTHER SERVICE CHARGES 34,995 49,942
OTHER OPERATING INCOME 92,511 156,809
INVESTMENT SECURITIES GAINS(LOSSES) 837,288 541,853
1,391,922 1,157,388
OTHER EXPENSES:
SALARIES, WAGES AND OTHER BENEFITS $1,444,627 $1,184,919
OCCUPANCY EXPENSE OF BANK PREMISES 156,634 138,645
FURNITURE AND FIXTURE EXPENSE 226,406 232,350
OTHER OPERATING EXPENSES 1,236,539 1,023,039
$3,064,206 $2,578,953
INCOME BEFORE TAXES $1,979,746 $2,076,435
APPLICABLE INCOME TAXES 595,200 614,201
NET INCOME 1,384,546 1,462,234
COMMON SHARE DATA:
NET INCOME PER SHARE $0.78 $0.82
CASH DIVIDENDS DECLARED PER SHARE $0.15 $0.12
NUMBER OF SHARES OUTSTANDING 1,780,100 1,780,100
THE NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE
STATEMENTS.
5
TOWER BANCORP INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
SIX MONTHS SIX MONTHS
(,000 OMITTED) ENDED ENDED
6-30-99 6-30-98
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $1,385 1,463
ADJ TO RECONCILE NET INC TO NET CASH:
DEPRECIATION AND AMORTIZATION 180 188
PROVISION FOR LOAN LOSSES 0 0
LOSS ON DISPOSAL OF EQUIPMENT 0 0
PROVISION FOR DEFERRED TAXES (108) (412)
(INCREASE) IN OTHER ASSETS (3,990) 127
(INCREASE) IN INTEREST RECEIVABLE (70) 9
INCREASE IN INTEREST PAYABLE (36) (41)
(DECREASE) IN ACCRUED INCOME TAXES 420 32
(DECREASE) IN OTHER LIABILITIES (199) 2
OTHER, NET (159) (58)
NET CASH PROVIDED BY OPERATING ACTIVITIES (2,577) 1,310
CASH FLOWS FROM INVESTING ACTIVITIES:
LOANS (NET) (824) (6,738)
PURCHASES OF BANK PREMISES, EQUIPMENT, FURN
& FIX (293) 1
SALES OF OTHER REAL ESTATE 121 0
INT BEARING BALANCES WITH BANKS 661 (490)
INVESTMENT SECURITIES(NET) (8,807) 134
NET CASH (USED) BY INVESTING ACTIVITIES (9,142) (7,093)
CASH FLOWS FROM FINANCING ACTIVITIES:
NET (DECREASE) IN DEMAND AND SAVINGS DEPOSITS 15,636 4,418
CD'S (NET) (1,761) (3,265)
NET CHANGE IN FED FUNDS (2,366) (2,769)
DEBT (NET) (413) 6,289
PROCEEDS FROM SALE OF CAPITAL STOCK 0 60
CASH DIVIDENDS PAID (265) (221)
NET CASH PROVIDED BY FINANCING ACTIVITIES: 10,831 4,512
NET INCREASE IN CASH AND CASH EQUIVALENTS (888) (1,271)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YR 5,114 4,312
CASH AND CASH EQUIVALENTS AT END OF YEAR 4,226 3,040
====== =====
THE NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL
PART OF THESE STATEMENTS.
6
6
TOWER BANCORP INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(unaudited)
SIX SIX
MONTHS MONTHS
6-30-99 6-30-98
STATEMENT OF INCOME
INCOME FROM OPERATIONS BEFORE TAX 1,979,746 2,076,435
INCOME TAX EXPENSE (595,200) (614,200)
NET INCOME 1,384,546 1,462,235
STATEMENT OF COMPREHENSIVE INCOME
NET INCOME 1,384,546 1,462,235
UNREALIZED GAINS (LOSSES) FOR PERIOD (837,288) (285,971)
OTHER COMPREHENSIVE INCOME 0 0
COMPREHENSIVE INCOME 547,258 1,176,264
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, 1999 AND DECEMBER 31, 1998, AND THE RESULTS
OF ITS OPERATIONS FOR
THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1999 AND 1998, 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,
1999 AND 1998 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
OPERATING RESULTS
Net income for the period ended June 30, 1999 was down 5.31% as compared to
the same period in 1998. Net interest income was
increased by $154,000. Other expenses grew $251,000 more than did other
income during this period. Other expenses increased
primarily due to the addition of staff and other expenses associates with the
opening of the Waynesboro Branch office. This office
was opened in February.
In addition a rising rate environment coupled with narrowing spreads has had
a negative impact on earnings. Net interest spread has
decreased from 4.16% in June of 1998 to 3.83% in June of 1999.
For the fourth consecutive year the bank has not made a provision to the loan
loss reserve. Net charge-offs of $104,000 were
recognized during the first six months of 1999. The bank's delinquencies and
non accrual loans remain well below peer averages.
Through a detailed analysis of the loan portfolio management is not aware of
any deteriorating trends in the portfolio.
The bank is well prepared to face the new millenium. The Y2K committee has
spent the last 20 months insuring the bank's
compliance to regulations governing the date changed issue. The OCC has
examined the bank on 4 different occasions. The Phase II
exam was completed in May. All major renovations and testing have been
performed. The current emphasis is on testing the bank's
contingency plan and the continued analysis of the liquidity plan. Customer
education also continues to be a priority.
LIQUIDITY
Liquidity represents the ability of the bank to accommodate decreases in
deposits and increases in funding needs. The bank's
liquidity has been provided by maturities in the investment portfolio
increases in deposits, and short-term borrowings. The bank
maintains fed fund lines and revolving borrowing arrangements with its
correspondents. Long-term borrowing has been utilized to
take advantage of various arbitrage opportunities.
CAPITAL FUNDS
Internal capital generation has been the primary method utilized by Tower
Bancorp Inc. to increase its capital. Stockholder equity
stands at nearly 22.5 million. Tower maintains a capital ratio of 11.32%
and a risk based capital ratio of over 14%. Tower has
increased its dividends declared per share to 15 cents.
9
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
1
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
1
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<FISCAL-YEAR-END> DEC-31-1999
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<INT-BEARING-DEPOSITS> 5,538
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<TRADING-ASSETS> 0
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