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, 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:
883,116 SHARES OF COMMON STOCK
TOWER BANCORP INC.
INDEX
PAGE NO.
PART I - FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEET 3
MARCH 31, 1999 AND DECEMBER 31, 1998
CONSOLIDATED STATEMENT OF INCOME 4
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
CONSOLIDATED STATEMENT OF CASH FLOWS 5
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
CONSOLICATED STATEMENT OF COMPREHENSIVE INCOME 6
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
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 03-31-99 12-31-98
CASH AND DUE FROM BANKS $4,741 $5,114
INTEREST BEARING BALANCES WITH BANKS 6,197 6,199
FEDERAL FUNDS SOLD 188 0
INVESTMENT ACCOUNT SECURITIES:
2 OBLIGATIONS OF STATES AND POLITICAL 11,719 11,471
SUBDIVISONS
2 US TREASURY SECURITIES 299 399
2 US GOVT AGENCIES AND CORPORATIONS 24,752 21,584
2 OTHER SECURITIES AND EQUITY SEC 14,399 13,931
UNREALIZED GAIN (LOSS) 787 1,132
LOANS: 123,446 123,921
LESS: UNEARNED INCOME OF LOANS (196) (190)
RESERVE FOR POSSIBLE LOAN LOSSES (1,863) (1,890)
BANK PREMISES, EQUIP,FURNITURE & FIXTURES 3,698 3,360
REAL ESTATE OWNED OTHER THAN BANK PREMISES 121 121
ACCRUED INTEREST RECEIVABLE 1,031 984
DEFERRED INCOME TAXES 725 179
OTHER ASSETS 1,360 1,020
TOTAL ASSETS $191,404 $187,335
======= =======
LIABILITIES AND CAPITAL
DEPOSITS IN DOMESTIC OFFICES:
DEMAND $10,502 $11,346
SAVINGS 76,306 69,281
TIME 61,747 61,839
LIABILITIES FOR BORROWED MONEY 17,691 18,131
FEDERAL FUNDS PURCHASED 0 2,366
ACCRUED INTEREST PAYABLE 395 401
ACCRUED FEDERAL INCOME TAXES 226 0
OTHER LIABILITIES 1,646 1,419
TOTAL LIABILITIES $168,513 $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 6,705 6,705
UNDIVIDED PROFITS 13,655 12,969
NET UNREALIZED (LOSS) ON MARKETABLE SEC 787 1,074
LESS: COST OF TREASURY STOCK (481) (421)
TOTAL EQUITY CAPITAL $22,891 $22,552
TOTAL LIABILITIES AND CAPITAL $191,404 $187,335
======= =======
THE NOTES TO FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THESE STATEMENTS.
TOWER BANCORP INC.
CONSOLIDATED STATEMENT OF INCOME
THREE MONTHS ENDED
INTEREST INCOME 3-31-99 3-31-98
INTEREST AND FEES ON LOANS $2,534,101 $2,314,230
INTEREST ON INVESTMENT SECURITIES
AVAILABLE FOR SALE 662,323 591,910
INTEREST ON FED FUNDS SOLD 969 16,066
INTEREST ON DEPOSITS WITH BANKS 90,253 97,222
$3,287,646 $3,019,428
INTEREST EXPENSE
INTEREST ON DEPOSITS 1,238,654 1,258,730
INTEREST ON FED FUNDS PURCHASED AND
SECURITIES SOLD UNDER REPO AGREEMENTS 9,304 14,554
INTEREST ON BORROWED MONEY 192,537 28,107
$1,440,495 $1,301,391
NET INTEREST INCOME $1,847,151 $1,718,037
PROVISION FOR LOAN LOSSES 0 0
NET INTEREST INCOME AFTER PROV FOR LL $1,847,151 $1,718,037
OTHER INCOME:
TRUST DEPARTMENT INCOME $156,508 $134,948
SERVICE CHARGES ON DEPOSIT ACCOUNTS 76,723 83,147
OTHER SERVICE CHARGES 17,393 22,000
OTHER OPERATING INCOME 23,080 4,147
INVESTMENT SECURITIES GAINS(LOSSES) 286,876 360,329
$560,580 $604,571
OTHER EXPENSES:
SALARIES, WAGES AND OTHER BENEFITS $704,062 $584,577
OCCUPANCY EXPENSE OF BANK PREMISES 82,994 70,113
FURNITURE AND FIXTURE EXPENSE 112,482 105,115
OTHER OPERATING EXPENSES 527,372 460,577
$1,426,910 $1,220,382
INCOME BEFORE TAXES $980,821 $1,102,226
APPLICABLE INCOME TAXES 294,500 335,400
NET INCOME $686,321 $776,826
======= =======
COMMON SHARE DATE:
NET INCOME PER SHARE $0.39 $0.44
NUMBER OF SHARES OUTSTANDING 1,763,480 1,763,480
THE NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL
PART OF THESE STATEMENTS.
TOWER BANCORP INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
PERIOD PERIOD
(,000 OMITTED) ENDED ENDED
3-31-99 3-31-98
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $686 $777
ADJ TO RECONCILE NET INC TO NET CASH:
DEPRECIATION AND AMORTIZATION 90 91
PROVISION FOR LOAN LOSSES 0 0
GAIN ON SALE OF INVESTMENT SECURITIES 287 360
LOSS ON DISPOSAL OF EQUIPMENT 0 0
PROVISION FOR DEFERRED TAXES (546) 199
(INCREASE) IN OTHER ASSETS (340) (372)
(INCREASE) IN INTEREST RECEIVABLE (47) (43)
INCREASE IN INTEREST PAYABLE (6) 15
(DECREASE) IN ACCRUED INCOME TAXES 226 69
(DECREASE) IN OTHER LIABILITIES 227 432
OTHER, NET 0 396
NET CASH PROVIDED BY OPERATING ACTIVITIES 577 1,924
CASH FLOWS FROM INVESTING ACTIVITIES:
LOANS (NET) 475 (2,726)
PURCHASES OF BANK PREMISES, EQUIPMENT, FURN
& FIX (338) (695)
SALES OF OTHER REAL ESTATE 0 0
INT BEARING BALANCES WITH BANKS 2 (2,166)
SECURITIES(NET) (2,700) (1,847)
NET CASH (USED) BY INVESTING ACTIVITIES (2,561) (7,434)
CASH FLOWS FROM FINANCING ACTIVITIES:
NET INCREASE IN DEMAND AND SAVINGS DEPOSITS 6,181 10,623
CERTIFICATES OF DEPOSIT (NET) (92) (2,280)
NET CHANGE IN FED FUNDS (2,366) (4,476)
DEBT (NET) (440) 774
PROCEEDS FROM SALE OF CAPITAL STOCK 0 0
CASH DIVIDENDS PAID 0 0
NET CASH PROVIDED BY FINANCING ACTIVITIES: 3,283 4,641
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,299 (869)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YR 3,442 4,311
CASH AND CASH EQUIVALENTS AT END OF QUARTER 4,741 3,442
====== =====
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
3-31-99 3-31-98
STATEMENT OF INCOME
INCOME FROM OPERATIONS BEFORE TAX 980,821 1,102,226
INCOME TAX EXPENSE (294,500) (325,400)
NET INCOME 686,321 776,826
STATEMENT OF COMPREHENSIVE INCOME
NET INCOME 686,321 776,826
UNREALIZED GAINS (LOSSES) FOR PERIOD (287,000) 108,000
OTHER COMPREHENSIVE INCOME 0 0
COMPREHENSIVE INCOME 399,321 884,826
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 MARCH 31, 1999 AND MARCH 31, 1998, AND THE RESULTS OF
ITS OPERATIONS FOR
THE THREE MONTH PERIOD ENDED MARCH 31, 1999 AND 1998, AND THE CHANGES IN
CONSOLIDATED FINANCIAL
POSITION FOR THESE PERIODS THEN ENDED.
THE RESULTS OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED MARCH 31, 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
THE FIRST NATIONAL BANK OF GREENCASTLE IS THE WHOLLY OWNED SUBSIDIARY OF
TOWER BANCORP INC.
FIRST NATIONAL BANK EXPERIENCED AN 11.65% DECREASE IN NET INCOME IN 1999
COMPARED TO THE SAME
PERIOD IN 1998. DECLINING INTEREST RATE SPREADS ARE THE PRIMARY REASON FOR
THE DECREASE. LOAN
AND INVESTMENT SPREADS HAVE DECREASED BY OVER THIRTY ONE BASIS POINTS.
THE BANK HAS MADE SIGNIFICANT INVESTMENTS IN TECHNOLOGY AND FIXED ASSETS.
OCCUPANCY AND
FURNITURE AND FIXTURE EXPENSES HAVE INCREASED BY 11%. 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 PRODUCTS TO OUR 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 DEPLOYED A NEW BRANCH IN THE WAYNESBORO MARKET. OTHER EXPENSES
WENT UP
NEARLY 17% AS THE RESULT OF INCREASED PERSONNEL COSTS AND OTHER OPERATING
EXPENSES.
THE BANK HAS NOT MADE A LOAN LOSS PROVISION IN AS IT MAINTAINS A RATIO TO
TOTAL LOANS OF 1.51%.
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
EXPERIENCED NET CHARGE
OFFS OF $27,000 IN THE FIRST QUARTER.
TOWER MAINTAINS A CAPITAL RATIO OF 11.95% AND A RISK BASED RATIO OF (TIER 1)
14.21%.
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'' 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
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<FISCAL-YEAR-END> DEC-31-1999
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