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, 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
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
CONSOLIDATED STATEMENT OF INCOME 4
THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
CONSOLIDATED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 5
CONSOLIDATED STATEMENT OF CASH FLOWS 6
NINE MONTHS ENDED SEPTEMBER 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 09-30-99 12-31-98
CASH AND DUE FROM BANKS $4,323 $5,114
INTEREST BEARING BALANCES WITH BANKS 5,824 6,199
FEDERAL FUNDS SOLD 0 0
INVESTMENT ACCOUNT SECURITIES:
2 OBLIGATIONS OF STATES AND POLITICAL 14,868 11,471
SUBDIVISONS
2 US TREASURY SECURITIES 299 399
2 US GOVT AGENCIES AND CORPORATIONS 26,267 21,584
2 OTHER SECURITIES AND EQUITY SEC 15,704 13,931
UNREALIZED GAIN (LOSS) (1,342) 1,132
LOANS: 131,655 123,921
LESS: UNEARNED INCOME OF LOANS (237) (190)
RESERVE FOR POSSIBLE LOAN LOSSES (1,741) (1,890)
BANK PREMISES, EQUIP,FURNITURE & FIXTURES 3,611 3,360
REAL ESTATE OWNED OTHER THAN BANK PREMISES 0 121
ACCRUED INTEREST RECEIVABLE 1,123 984
DEFERRED INCOME TAXES 1,508
OTHER ASSETS 3,354 1,020
TOTAL ASSETS $205,216 $187,335
======= =======
LIABILITIES AND CAPITAL
DEPOSITS IN DOMESTIC OFFICES:
DEMAND $12,032 $11,346
SAVINGS 84,869 69,281
TIME 61,692 61,839
LIABILITIES FOR BORROWED MONEY 21,977 18,131
FEDERAL FUNDS PURCHASED 0 2,366
ACCRUED INTEREST PAYABLE 376 401
ACCRUED FEDERAL INCOME TAXES 963 0
OTHER LIABILITIES 1,132 1,419
TOTAL LIABILITIES $183,041 $164,783
----------- -----------
EQUITY CAPITAL
CAPITAL STOCK:
COMMON STOCK:
AUTHORIZED 5,000,000 SHARES:
1,780,100 SHARES ISSUED - 1999 $2,225 $2,225
SURPLUS 6,707 6,705
UNDIVIDED PROFITS 14,066 12,969
NET UNREALIZED (LOSS) ON MARKETABLE SEC (267) 1,074
LESS: COST OF TREASURY STOCK (556) (421)
TOTAL EQUITY CAPITAL $22,175 $22,552
TOTAL LIABILITIES AND CAPITAL $205,216 $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 9-30-99 9-30-98
INTEREST AND FEES ON LOANS $2,822,982 $2,529,067
INTEREST ON INVESTMENT SECURITIES 553,578 522,899
INTEREST ON FED FUNDS SOLD 39,544 749
INTEREST ON DEPOSITS WITH BANKS 53,918 90,481
$3,470,022 $3,143,196
INTEREST EXPENSE
INTEREST ON DEPOSITS 1,297,395 1,237,958
INTEREST ON FED FUNDS PURCHASED 2,678 691
INTEREST ON BORROWED MONEY 249,024 132,228
$1,549,097 $1,370,877
NET INTEREST INCOME $1,920,925 $1,772,319
PROVISION FOR LOAN LOSSES 0 0
NET INTEREST INCOME AFTER PROV FOR LL $1,920,925 $1,772,319
OTHER INCOME:
TRUST DEPARTMENT INCOME $152,207 $135,199
SERVICE CHARGES ON DEPOSIT ACCOUNTS 106,137 85,344
OTHER SERVICE CHARGES 33,419 34,016
OTHER OPERATING INCOME 94,548 46,528
INVESTMENT SECURITIES GAINS(LOSSES) 431,050 337,687
$817,361 $638,774
OTHER EXPENSES:
SALARIES, WAGES AND OTHER BENEFITS $739,895 $626,437
OCCUPANCY EXPENSE OF BANK PREMISES 64,981 66,008
FURNITURE AND FIXTURE EXPENSE 112,495 113,628
OTHER OPERATING EXPENSES 592,970 476,135
$1,510,341 $1,282,208
INCOME BEFORE TAXES $1,227,945 1,128,885
APPLICABLE INCOME TAXES 368,100 331,400
NET INCOME $859,845 $797,485
======= =======
COMMON SHARE DATE:
NET INCOME PER SHARE $1.28 $1.28
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.
4
TOWER BANCORP INC.
CONSOLIDATED STATEMENT OF INCOME
NINE MONTHS ENDED
INTEREST INCOME 09-30-99 09-30-98
INTEREST AND FEES ON LOANS $7,914,814 $7,240,412
INTEREST ON INVESTMENT SECURITIES: 1,902,425 1,695,750
INTEREST ON FED FUNDS SOLD 82,135 29,034
INTEREST ON DEPOSITS WITH BANKS 239,712 269,481
$10,139,086 9,234,677
INTEREST EXPENSE
INTEREST ON DEPOSITS 3,808,674 3,732,691
INTEREST ON FED FUNDS PURCHASED 11,982 37,609
INTEREST ON BORROWED MONEY 745,475 194,058
$4,566,131 $3,964,358
NET INTEREST INCOME $5,572,955 $5,270,319
PROVISION FOR LOAN LOSSES 0 0
NET INTEREST INCOME AFTER PROV FOR LL $5,572,955 $5,270,319
OTHER INCOME:
TRUST DEPARTMENT INCOME $407,707 $370,698
SERVICE CHARGES ON DEPOSIT ACCOUNTS 277,765 258,628
OTHER SERVICE CHARGES 68,414 83,961
OTHER OPERATING INCOME 187,059 203,334
INVESTMENT SECURITIES GAINS(LOSSES) 1,268,338 879,540
2,209,283 1,796,161
OTHER EXPENSES:
SALARIES, WAGES AND OTHER BENEFITS $2,184,522 $1,811,355
OCCUPANCY EXPENSE OF BANK PREMISES 221,615 204,653
FURNITURE AND FIXTURE EXPENSE 338,901 345,978
OTHER OPERATING EXPENSES 1,829,509 1,499,174
$4,574,547 $3,861,160
INCOME BEFORE TAXES $3,207,691 $3,205,320
APPLICABLE INCOME TAXES 963,300 945,600
NET INCOME 2,244,391 2,259,720
COMMON SHARE DATA:
NET INCOME PER SHARE $1.27 $1.28
CASH DIVIDENDS DECLARED PER SHARE $0.15 $0.13
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
NINE MONTHS NINE MONTHS
(,000 OMITTED) ENDED ENDED
9-30-99 9-30-98
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $2,244 2,070
ADJ TO RECONCILE NET INC TO NET CASH:
DEPRECIATION AND AMORTIZATION 339 193
PROVISION FOR LOAN LOSSES 0 (29)
LOSS ON DISPOSAL OF EQUIPMENT 0 0
PROVISION FOR DEFERRED TAXES (1,329) (178)
(INCREASE) IN OTHER ASSETS (2,334) 563
(INCREASE) IN INTEREST RECEIVABLE (139) (110)
INCREASE IN INTEREST PAYABLE (25) 11
(DECREASE) IN ACCRUED INCOME TAXES 963 785
(DECREASE) IN OTHER LIABILITIES (287) (829)
OTHER, NET (295) 418
NET CASH PROVIDED BY OPERATING ACTIVITIES (863) 2,894
CASH FLOWS FROM INVESTING ACTIVITIES:
LOANS (NET) (7,734) (2,581)
PURCHASES OF BANK PREMISES, EQUIPMENT, FURN
& FIX (251) (459)
SALES OF OTHER REAL ESTATE 121 117
INT BEARING BALANCES WITH BANKS 375 (1,763)
SECURITIES(NET) (9,753) (3,087)
NET CASH (USED) BY INVESTING ACTIVITIES (17,242) (7,773)
CASH FLOWS FROM FINANCING ACTIVITIES:
NET (DECREASE) IN DEMAND AND SAVINGS DEPOSITS 16,244 10,558
CD'S (NET) (147) (2,579)
NET CHANGE IN FED FUNDS (2,366) (299)
DEBT (NET) 3,846 (1,133)
PROCEEDS FROM SALE OF CAPITAL STOCK 0 0
CASH DIVIDENDS PAID (263) (194)
NET CASH PROVIDED BY FINANCING ACTIVITIES: 17,314 6,353
NET INCREASE IN CASH AND CASH EQUIVALENTS (791) 1,474
CASH AND CASH EQUIVALENTS AT BEGINNING OF YR 5,114 3,034
CASH AND CASH EQUIVALENTS AT END OF YEAR 4,323 4,500
====== =====
THE NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL
PART OF THESE STATEMENTS.
TOWER BANCORP INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(unaudited)
NINE NINE
MONTHS MONTHS
9-30-99 9-30-98
STATEMENT OF INCOME
INCOME FROM OPERATIONS BEFORE TAX 3,207,691 3,205,320
INCOME TAX EXPENSE (963,300) (945,600)
NET INCOME 2,244,391 2,259,720
STATEMENT OF COMPREHENSIVE INCOME
NET INCOME 2,244,391 2,259,720
UNREALIZED GAINS (LOSSES) FOR PERIOD (267,000) 1,167,000
OTHER COMPREHENSIVE INCOME 0 0
COMPREHENSIVE INCOME 1,977,391 3,426,720
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, 1999, AND THE
RESULTS OF ITS
OPERATIONS FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 1999 AND
1998, 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, 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 September 30, 1999 was down 1% as compared to
the same period in 1998. Net interest income was
increased by $302,000 or 6%. Other expenses grew $301,000 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 September of 1998 to 3.81% in September of 1999.
For the fourth consecutive year the bank has not made a provision to the
loan loss reserve. Net charge-offs of $158,000 were
recognized during the first nine 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 23 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 22.2 million. Tower maintains a capital ratio of 10.8% 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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