SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- ----------------------
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d)
of The Securities Exchange Act of 1934
For Quarter Ended JUNE 30, 1996 Commission File Number 33-43386
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HARDWICK HOLDING COMPANY
- ------------------------------------------------------
(Exact name of registrant as specified in its charter)
GEORGIA 58-1408388
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
One Hardwick Square, P.O. Box 1367, Dalton, GA. 30722-1367
- ----------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (706) 217-3950
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Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities 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__
----
Number of shares of common stock outstanding at JUNE 30, 1996
4,009,875 Shares
- ----------------<PAGE>
HARDWICK HOLDING COMPANY AND SUBSIDIARIES
INDEX
Page No.
PART I- FINANCIAL INFORMATION
Consolidated Statements of Financial
Position at June 30, 1996 and
December 31, 1995 3
Consolidated Statements of Income
for the Three Months Ended June 30,
1996 and 1995 4
Consolidated Statements of Income
for the Six Months Ended June 30,
1996 and 1995 5
Consolidated Statements of Cash Flows
for the Six Months Ended June 30,
1996 and 1995 6-7
Notes to Unaudited Consolidated Financial Statements 8-9
Management's Discussion and Analysis of
Financial Position and Results of Operations 10-15
PART II- OTHER INFORMATION 16
SIGNATURES 19
2
<PAGE>
HARDWICK HOLDING COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In thousands)
<TABLE>
<CAPTION>
June 30, December
1996 31, 1995
------------------------
(unaudited)
-----------
<S> <C> <C>
Cash and due from banks $ 29,011 $ 31,171
Federal funds sold 4,000 11,100
---------- --------
Total cash and cash equivalents 33,011 42,271
Investment securities, available-for-sale 117,495 135,206
Loans, net 254,839 239,189
Premises and equipment, net 15,734 16,410
Assets under capital lease, net 712 817
Accrued interest receivable 3,743 3,674
Excess of cost over fair value of
subsidiaries acquired, net of amortization 5,654 5,961
Other assets 2,342 1,289
---------- --------
Total assets $ 433,530 $444,817
========== ========
Liabilities and Stockholders' Equity
Deposits-
Noninterest-bearing $ 92,750 $ 84,104
Interest-bearing 288,322 305,847
---------- --------
Total deposits 381,072 389,951
Fed funds purchased and securities sold under agreements to repurchase 1,164 3,536
Other borrowed funds 344 381
Note payable to bank 1,100 250
Capital lease obligation 758 844
Other liabilities 3,750 3,025
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Total liabilities 388,188 397,987
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Commitments and contingencies (Notes 2 and 4)
Stockholders' equity-
Common stock, $.50 par value, 10,000,000 shares authorized,
4,125,141 shares issued; 4,009,875 and 4,066,478 shares
outstanding at June 30,1996 and December 31,1995, respectively 2,063 2,063
Additional paid-in capital 20,233 20,233
Retained earnings 26,490 25,284
Unrealized losses on securities available-for-sale (1,157) 421
Less treasury stock, at cost, 115,266 and 58,663 shares at June 30,
1996 and December 31, 1995, respectively
Less deferred compensation from restricted stock plan (211) (223)
--------- --------
Total stockholders' equity 45,342 46,830
--------- --------
Total liabilities and stockholders' equity $ 433,530 $444,817
========= ========
</TABLE>
(See notes to consolidated financial statements.)
3
<PAGE>
HARDWICK HOLDING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Three Months Ended
----------------------------------
June 30, June 30,
1996 1995
----------------------------------
<S> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 6,104 $ 5,944
Interest on investment securities-
Taxable 1,342 1,353
Nontaxable 408 394
Interest on fed funds sold 80 156
---------- ---------
Total interest income 7,934 7,847
---------- ---------
INTEREST EXPENSE:
Interest on deposits 3,162 2,876
Interest on securities sold under agreements to repurchase 29 276
Interest on other borrowed funds 8 76
Interest on note payable and capital lease obligations 24 34
---------- ---------
Total interest expense 3,223 3,262
---------- ---------
NET INTEREST INCOME BEFORE PROVISION FOR LOAN
LOAN LOSSES 4,711 4,585
PROVISION FOR LOAN LOSSES 37 0
---------- ---------
NET INTEREST INCOME 4,674 4,585
---------- ---------
NONINTEREST INCOME:
Service charges on deposit accounts 563 618
Securities gains, net 38 1
Other noninterest income 419 308
---------- ---------
Total noninterest income 1,020 927
NONINTEREST EXPENSE:
Salaries and employee benefits 1,980 2,180
Net occupancy expense 819 967
Other noninterest expense 1,472 1,520
---------- ---------
Total noninterest expense 4,271 4,667
---------- ---------
INCOME BEFORE PROVISION FOR INCOME TAXES 1,423 845
PROVISION FOR INCOME TAXES 432 204
---------- ---------
NET INCOME $ 991 $ 641
========== =========
NET INCOME PER SHARE $ 0.25 $ 0.16
========== =========
</TABLE>
(See notes to consolidated financial statements.)
4
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Six Months Ended
--------------------------
June 30, June 30,
1996 1995
--------------------------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 12,059 $ 11,568
Interest on investment securities-
Taxable 2,706 2,819
Nontaxable 832 794
Interest on fed funds sold 193 220
-------- ---------
Total interest income 15,790 15,401
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INTEREST EXPENSE:
Interest on deposits 6,428 5,506
Interest on securities sold under agreements to repurchase 62 540
Interest on other borrowed funds 15 107
Interest on note payable and capital lease obligations 41 65
-------- ---------
Total interest expense 6,546 6,218
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NET INTEREST INCOME BEFORE PROVISION FOR LOAN
LOAN LOSSES 9,244 9,183
PROVISION FOR LOAN LOSSES 75 0
-------- ---------
NET INTEREST INCOME 9,169 9,183
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NONINTEREST INCOME:
Service charges on deposit accounts 1,144 1,221
Securities gains, net 10 5
Other noninterest income 963 710
-------- ---------
Total noninterest income 2,117 1,936
NONINTEREST EXPENSE:
Salaries and employee benefits 4,015 4,365
Net occupancy expense 1,686 1,849
Other noninterest expense 2,821 2,755
-------- ---------
Total noninterest expense 8,522 8,969
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INCOME BEFORE PROVISION FOR INCOME TAXES 2,764 2,150
PROVISION FOR INCOME TAXES 830 536
-------- ---------
NET INCOME $ 1,934 $ 1,614
======== =========
NET INCOME PER SHARE $ 0.48 $ 0.39
======== =========
</TABLE>
(See notes to consolidated financial statements.)
5
<PAGE>
HARDWICK HOLDING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
1996 1995
-------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,934 $ 1,614
Adjustments to reconcile net income to net cash provided by operating activities
Provision for loan losses 75 0
Provision for depreciation and amortization 1,258 1,301
Loss on disposition of premises and equipment 6 0
Accretion of investment security discounts 59 (9)
Deferred income tax provision (benefit) 103 (16)
Securities (gains), net (10) (5)
(Increase) decrease in accrued interest receivable (69) 358
Increase in other assets (259) (77)
Increase in other liabilities 568 812
--------- --------
Net cash provided by operating activities 3,665 3,978
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of investment securities available-for-sale 21,632 5,358
Proceeds from maturities of investment securities held-to-maturity 0 13,058
Proceeds from sales of investment securities available-for-sale 12,065 5,000
Purchases of investment securities available-for-sale (18,461) (5,513)
Purchases of investment securities held-to-maturity 0 (925)
Net cash flows from loans originated and principal collected on loans (15,650) (12,749)
Proceeds from disposal of premises and equipment 29 0
Purchases of premises and equipment (400) (1,129)
--------- --------
Net cash (used in) provided by investing activities (785) 3,100
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in demand deposits, NOW accounts, and savings accounts (3,982) (11,757)
Net cash flows from sales and maturities of certificates of deposit (4,897) 8,334
Net decrease in fed funds purchased and securities sold
under agreement to repurchase (2,372) (55)
(Decrease) increase in other borrowed funds (37) 4,419
Proceeds from note payable to bank 1,100 0
Payments on note payable to bank and capital lease obligations (337) (136)
Purchase of treasury stock, at cost (1,128) (122)
Proceeds from exercise of stock options 0 75
Payments of cash dividends (487) (411)
--------- --------
Net cash (used in) provided by financing activities $(12,140) $ 347
--------- --------
</TABLE>
6
<PAGE>
HARDWICK HOLDING COMPANY
& SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS-(Continued)
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
------------------------
1996 1995
-------------------------
<S> <C> <C>
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS $ (9,260) $ 7,425
CASH AND CASH EQUIVALENTS, beginning of period 42,271 29,221
--------- --------
CASH AND CASH EQUIVALENTS, end of period $ 33,011 $ 36,646
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: ========= ========
Cash paid during the period for Interest $ 5,893 $ 5,317
========= ========
Cash paid during the period for income taxes $ 495 $ 450
========= ========
Noncash transactions during the period ended:
Transfer of premises and equipment to other assets $ 211 $ 0
========= ========
Issuance of treasury stock for deferred compensation plan $ 0 $ 240
========= ========
Addition to assets under capital leases financed by capital lease obligations $ 0 $ 980
========= ========
Transfer from loans to other real estate owned $ 0 $ 80
========= ========
</TABLE>
(See notes to consolidated financial statements.)
7
<PAGE>
HARDWICK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of Hardwick Holding Company (HHC) and its wholly owned
subsidiaries, Hardwick Bank and Trust Company (HBT), Hardwick Service
Corporation (HSC), and First National Bank of Northwest Georgia (FNBNWG),
collectively referred to as the "Company". All significant intercompany
balances and transactions have been eliminated.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates, although, in the opinion of management, such differences would
not be significant.
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting only of normal
recurring adjustments) necessary for fair statement of the consolidated
financial position and the results of operations of the Company for the
interim periods. The results of operations for the six month period
ended June 30, 1996 are not necessarily indicative of the results which
may be expected for the entire year.
(2) FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Company is a participant in financial instruments with off-balance-
sheet risk. These instruments are entered into in the normal course of
business to meet the financing needs of its customers and to reduce the
Company's own exposure to fluctuations in interest rates. These
financial instruments include commitments to extend credit and standby
letters of credit. These instruments involve, to varying degrees,
elements of credit and interest rate risk in excess of the amount
recognized in the consolidated balance sheets. The contract amounts of
these instruments reflect the extent of involvement the Company has in
particular classes of financial instruments.
The Company's exposure to credit loss in the event of nonperformance by
the counterparty to the financial instrument for commitments to extend
credit and standby letters of credit is represented by the contractual
amount of these instruments. The Company uses the same credit and
collateral policies in making commitments and conditional obligations as
it does for on-balance-sheet instruments.
HBT and FNBNWG grant various types of loans and financial instruments to
customers within their respective market areas (primarily Northwest
Georgia). Although the Company has a diversified loan portfolio, a
significant portion of the Company's loans originate from customers that
are directly or indirectly related to the carpet industry. Notably,
approximately 40% of the work force in the Company's market area is
employed by companies directly related to the carpet industry. Adverse
economic trends in the carpet industry could impair these customers'
ability to repay their obligations and result unfavorably on the results
8<PAGE>
of operations of the Company.
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the commitments
are expected to expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements. Total
commitments to extend credit at June 30, 1996, were approximately
$81,378,000. HBT and FNBNWG evaluate each customer's creditworthiness on
a case-by-case basis. The amount of collateral obtained, if deemed
necessary by HBT and FNBNWG, upon extension of credit is based on
management's credit evaluation of the customers. Collateral held varies
but may include accounts receivable, inventory, property, plant and
equipment, residential real estate, and income-producing commercial
properties.
Standby letters of credit are conditional commitments issued by HBT and
FNBNWG to guarantee the performance of a customer to a third party.
Those guarantees are primarily issued to support public and private
borrowing arrangements, including commercial paper, bond financing and
similar transactions. The credit risk involved in issuing letters of
credit is essentially the same as that involved in extending loan
facilities to customers. The collateral varies but may include accounts
receivable, inventory, property, plant and equipment and residential real
estate for those commitments for which collateral is deemed necessary.
The Company had irrevocable standby letters of credit of approximately
$1,581,000 outstanding at June 30, 1996.
(3) LONG-LIVED ASSETS
Effective January 1, 1996, the Company adopted Statements of Accounting
Standards No. 121 (FAS 121) Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of. The adoption of this
standard did not have a significant impact on the financial condition or
results of operations of the Company.
(4) CONTINGENCIES
The Company is involved in litigation and other legal proceedings arising
in the course of its normal business activities. Although the ultimate
outcome of these matters cannot be determined at this time, it is the
opinion of management that none of these matters, when resolved, will
have a significant effect on the Company's financial condition or results
of operations.
(5) EARNINGS PER SHARE
Earnings per share is calculated on the basis of weighted average number
of shares outstanding, which was 4,062,313 for the six month period ended
June 30, 1996 and 4,072,562 for the six month period ended June 30, 1995.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
POSITION AND RESULTS OF OPERATIONS
FINANCIAL POSITION
- ------------------
Total assets decreased by approximately $11,287,000 from approximately
$444,817,000 at December 31, 1995, to approximately $433,530,000 at June
30, 1996. The principal fluctuations were in loans, investment
securities and federal funds sold. Federal funds sold decreased
approximately $7,100,000 from approximately $11,100,000 at December 31,
1995, to approximately $4,000,000 at June 30, 1996. Investment securities
decreased approximately $17,711,000 to approximately $117,495,000 at June
30, 1996, from approximately $135,206,000 at December 31, 1995. The
decreases in federal funds sold and investment securities were partially
offset by an increase in net loans of approximately $15,650,000 or 6.54%
from approximately $239,189,000 at December 31, 1995, to approximately
$254,839,000 at June 30, 1996. HHC's cash and cash equivalents reflected
a net decrease of approximately $9,260,000 or 22.0% for the six month
period ended June 30, 1996.
Savings and other interest-bearing deposit accounts decreased
approximately $17,525,000 or 5.7% during the six-months ended June 30,
1996, to approximately $288,322,000. It is management's opinion that HHC
maintains competitive deposit rates while exercising prudent strategies
in competing with local institutions. Although rates paid on deposit
accounts have increased during the six-months ended June 30, 1996, HHC
has maintained its investment strategies and has not raised rates paid on
interest bearing deposits at the rate of increase as other institutions
in its market area. Average rates paid on deposits for the current
period were approximately 4.3% compared to 3.4% for the same period in
the preceding year.
At June 30, 1996, HHC's financial position continued to reflect strong
equity and liquidity, with an equity to assets ratio of 10.5%. At June
30, 1996, 56% of HHC's loans were in real estate loans (including
mortgage and construction loans), 20% in commercial loans (including
agricultural loans), 15% in consumer loans (including credit cards) and
other loans were 9%. HHC's loan to deposit ratio was 67% at June 30,
1996, and 44% of all deposits were invested in time deposits.
In the event of higher than anticipated requirements related to loan
commitments or deposit withdrawals, HHC's bank subsidiaries maintain
federal funds lines with regional banks. Also, the bank subsidiaries of
the Company have become members of the Federal Home Loan Bank and have
credit lines to draw from. At June 30, 1996 approximately $344,000 was
outstanding under the Federal Home Loan Bank lines of credit.
10
<PAGE>
The following table represents the changes in consolidated stockholders'
equity for the six-months ended June 30, 1996:
<TABLE>
<CAPTION>
<S> <C>
Balance, December 31, 1995 $ 46,830,000
Net income 1,934,000
Change in unrealized gain on securities available- for-sale, net (1,578,000)
Purchase of treasury stock (1,128,000)
Amortization of deferred compensation-restricted stock plan 12,000
Cash dividends declared (728,000)
-------------
Balance, June 30, 1996 $ 45,342,000
=============
</TABLE>
RESULTS OF OPERATIONS
- ---------------------
For the three-months ended June 30, 1996 and 1995:
NET INTEREST INCOME
Net interest income after provision for loan losses for the three-month
period ended June 30, 1996 was approximately $4,674,000 which was $89,000
or 1.9% more than the $4,585,000 for the same period the year before.
Total interest income increased by approximately $87,000 or 1.1% while
total interest expense decreased approximately $39,000 or 1.2% for the
three month period ended June 30, 1996, as compared to the three-months
ended in the previous year. Approximately $37,000 was provided for loan
losses during the three month period ended June 30, 1996.
Yields on interest-bearing assets averaged 8.2% for the current period
compared to 8.3% for the same period the year before. Total average
interest-bearing assets increased by approximately $11,835,000 or 3.1%
for the current period when compared with the three-months ended June 30,
1995. Average loans for the three-months ended June 30, 1996, increased
approximately $17,715,000 or 7.4% more than the average loans for the
three-months ended June 30, 1995. The average yield on loans for the
three-months ended June 30, 1996, was 9.5%, down approximately .4% from
the 9.9% for the three-months ended June 30, 1995.
Rates paid on interest-bearing liabilities averaged 4.3% for the three-
months ended June 30, 1996 compared with 4.4% for the three-months ended
June 30, 1995. Rates paid in the current three month period on average
are relatively the same as the rates paid on average for the year ended
December 31, 1995. Management's liability pricing strategies include
competitive deposit rates with increased awareness of cash flow needs
within the balance sheet. Management anticipates rates to increase
during the remainder of the year.
OTHER NONINTEREST INCOME
Total other noninterest income increased approximately $93,000 or 10%
for the three-months ended June 30, 1996, as compared with the three-
months ended June 30, 1995. The increase is primarily due to an increase
in other noninterest income of approximately $111,000 and net securities
gains of approximately $37,000, which was partially offset by a decrease
of approximately $55,000 in service charges on deposits. The other
noninterest income increase was approximately $13,000, $12,000, 11,000,
$75,000, $40,000 in credit life commissions, other fees, trust income,
recoveries of previously written off other real estate and credit cards,
respectively, which were partially offset by a decrease of approximately
$40,000 in printed check charges.
11<PAGE>
OTHER NONINTEREST EXPENSES
Total noninterest expenses decreased by approximately $396,000, or 8.5%
for the three-months ended June 30, 1996, as compared to the same period
ended in the preceding year. The decrease is due principally to the
decreases of approximately $200,000 in salary and employee benefits,
approximately $148,000 in occupancy expense and approximately $48,000 is
other noninterest expense. The decrease in salary and employee benefits
is due principally to the reduction in the number of employees. The
Company had approximately 228 full time equivalent employees at June 30,
1996, compared with approximately 251 full time equivalent employees at
June 30, 1995. The decrease in occupancy is primarily related to a
decrease in repairs and maintenance due to the low cost of the new
electronic data systems. The other noninterest expense decrease was
principally due to the reduction in FDIC fees of approximately $197,000
and other noninterest expenses of approximately $14,000, while being
partially offset by increases in data processing, office supplies and
postage, cash and check losses, travel and entertainment and other
noninterest expense of approximately $70,000, $44,000, $18,000, and
$31,000 respectively.
INCOME TAX PROVISION
The effective tax rates reported for the three-months ended June 30, 1996
and 1995, were 30.4% and 24.1%, respectively.
RESULTS OF OPERATIONS
- ---------------------
For the six-months ended June 30, 1996 and 1995:
NET INTEREST INCOME
Net interest income after provision for loan losses for the six-month
period ended June 30, 1996 was approximately $9,169,000 which was
approximately $14,000 or .2% less than the $9,183,000 for the same period
the year before. Total interest income increased by approximately
$389,000 or 2.5% while total interest expense increased approximately
$328,000 or 5.3% for the six-month period ended June 30, 1996 as compared
to the six-months ended in the previous year. There was approximately
$75,000 in provisions for loan losses for current period as compared with
none in the six-month period ended June 30, 1995.
Yields on interest-bearing assets averaged 8.1% for the current period
relatively unchanged from the same period the year before. Total average
interest-bearing assets increased by approximately $11,181,000 or 3% for
the current period when compared with the six-months ended June 30, 1995.
Average loans for the six-months ended June 30, 1996 increased
approximately $14,647,000 or 6.1% more than the average loans for the
six-months ended June 30, 1995. The average yield on loans for the six-
months ended June 30, 1996 was 9.5% compared with 9.6% for the six-months
ended June 30, 1995.
Earnings from the loan portfolio have also been adversely affected by the
Company's level of nonperforming assets. Nonaccrual loans and accruing
loans contractually past due ninety days or more were $774,000 at June
30, 1996 as compared to $708,000 at December 31, 1995, representing an
increase of approximately $66,000 or 9.3%. There was no other real
estate at June 30, 1996.
12<PAGE>
Nonaccrual loans have increased approximately $46,000 or 9.1% for the
six-month period ended June 30, 1996 to approximately $553,000 compared
to approximately $507,000 at December 31, 1995. Interest accruals on
nonaccrual loans are recorded only when they are fully current with
respect to interest and principal and when in the judgment of management,
the loans are estimated to be fully collectible as to both principal and
interest. Interest income on nonaccrual loans which would have been
reported on an accrual basis amounted to approximately $33,000 during the
six-month period ended June 30, 1996. Nonaccrual loan interest collected
and reported in the six-month period ended June 30, 1996, was
approximately $17,000.
Rates paid on interest-bearing liabilities averaged 4.4% for the six-
months ended June 30, 1996 compared with 4.2% for the six-months ended
June 30, 1995. Rates paid in the current six-month period on average are
relatively the same as the rates paid on average for the year ended
December 31, 1995. Management's liability pricing strategies include
competitive deposit rates with increased awareness of cash flow needs
within the balance sheet. Management anticipates rates to increase
during the remainder of the year.
OTHER NONINTEREST INCOME
Total other income increased approximately $181,000 or 9.3% for the six-
months ended June 30, 1996, as compared with the six-months ended June
30, 1995. The increase is primarily due to a decrease in other non
interest income of approximately $253,000 and net gains on sales of
investment securities of approximately $5,000, which was partially offset
by a decrease in service charges on deposit accounts of approximately
$77,000. The increase in other noninterest income was approximately
$23,000, $35,000, $118,000, $75,000 and $5,000 in trust income, insurance
commissions, credit card fees, a recovery on other real estate previous
written down and other miscellaneous fees and income respectively; which,
were partially offset by a decrease of approximately $3,000 in printed
check charges.
OTHER NONINTEREST EXPENSES
Total noninterest expenses decreased by approximately $447,000, or 4.9%
for the six-months ended June 30, 1996, as compared to the same period
ended in the preceding year. The decrease is due principally to the
decrease of approximately $350,000 in salary and employee benefits, a
decrease of approximately $163,000 in net occupancy expense which was
partially offset by an increase of approximately $66,000 in other
noninterest expense. Salary and employee benefits decreased primarily as
a result of the reduction in the number of full time employees. Net
occupancy has decreased principally due to low cost of maintenance and
repairs on the new electronic data processing systems. The increase in
other noninterest expense was principally due to an increase in data
processing credit card expense, advertising, repossession expense, travel
and entertainment expense, cash short and check loss, and other noninterest
expense of approximately $175,000, $41,000, $27,000, $19,000, $43,000,
$43,000 and $113,000 respectively, while being offset partially by a
reduction in FDIC fees of approximately $395,000
INCOME TAX PROVISION
The effective tax rates reported for the six-months ended June 30, 1996
and 1995 were 30% and 25%, respectively.
13
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Liquidity is achieved through the continual maturing of interest-earning
assets, as well as by investing in short term marketable securities.
Liquidity is also available through deposit growth, borrowing capacity,
loan sales and repayments of principal on loans and securities.
High levels of liquidity are normally obtained at a net interest cost due
to lower yields on short term, liquid earning assets and higher interest
expense usually associated with the extension of deposit maturities. The
trade-off of the level of desired liquidity versus its cost is evaluated
in determining the appropriate amount of liquidity at any one time.
For the six-months ended June 30, 1996, cash and cash equivalents
decreased approximately $9,260,000 or 22% from December 31, 1995.
Operating activities provided cash and cash equivalents of approximately
$3,665,000, while investing and financing activities used approximately
$785,000 and $12,140,000 respectively. Net income of approximately
$1,934,000, depreciation and amortization not requiring the use of cash
of approximately $1,258,000 and a decrease in other liabilities of
approximately $568,000 were the principal sources of funds provided from
operating activities while being partially offset by an increase in other
assets of approximately $259,000.
Funds used by investing activities were principally from net loans
originated of approximately $15,650,000, purchases of investment
securities available-for-sale of approximately $18,461,000 and purchases
of premises and equipment of approximately $400,000, while being
partially offset by maturities and sales of investment securities
available-for-sale of approximately $21,632,000 and $12,065,000
respectively.
The cash used by financing activities was principally due to the net
decrease in deposits of approximately $8,879,000, a net decrease in
federal funds purchased and securities sold under agreements to
repurchase of approximately $2,372,000, payments on notes payable and
capital lease obligations of approximately $337,000, purchase of treasury
stock of approximately $1,128,000 and dividends paid of approximately
$487,000. The cash used by financing was partially offset by proceeds
from a note payable to bank of approximately $1,100,000.
CAPITAL RESOURCES
HHC and its subsidiary banks are subject to a minimum Tier 1 capital to
risk-weighted assets ratio of 6% and a total capital (Tier 1 plus Tier 2)
to risk-weighted assets ratio of 10%. The Federal Reserve Board
("Board") has also established an additional capital adequacy guideline
referred to as the Tier 1 leverage ratio that measures the ratio of Tier
1 Capital to average quarterly assets. The most highly rated bank
holding companies will be required to maintain a minimum Tier 1 leverage
ratio of 5%. The required ratio will be based on the Board's assessment
of the individual bank holding company's asset quality, earnings
performance, interest-rate risk and liquidity. Bank holding companies
experiencing internal growth or making acquisitions will be expected to
maintain strong capital positions substantially above the minimum
supervisory levels without significant reliance on intangible assets.
14
<PAGE>
The following tables represent HHC's unaudited regulatory capital position at
June 30, 1996:
<TABLE>
<CAPTION>
Risk Based Capital Ratios: Amount Ratio
------------ -------
(thousands)
<S> <C> <C>
Tier 1 Capital $ 40,845 11.33%
Tier 1 Capital minimum $ 21,630 6.00%
requirement ----------- -------
Excess $ 19,215 5.33%
=========== =======
Total Capital $ 45,375 12.59%
Total Capital minimum requirement $ 36,050 10.00%
----------- -------
Excess $ 9,325 2.59%
=========== =======
Risk adjusted assets net of
goodwill and
excess loan loss allowance $ 360,503
Leverage Ratio:
Tier 1 Capital to adjusted total $ 40,845 9.53%
assets ("Leverage Ratio")
Minimum leverage requirement $ 21,429 5.00%
----------- ------
Excess $ 19,416 4.53%
=========== ======
Average total assets, net of $ 428,580
goodwill <F1>
<FN>
<F1>Average total assets, net of goodwill for the three-months
ended June 30, 1996.
</FN>
</TABLE>
HHC is a legal entity separate and distinct from its wholly owned
subsidiaries HBT and FNBNWG. Most of the revenues of HHC result from
dividends paid to it by HBT and FNBNWG. There are statutory and
regulatory requirements applicable to the payment of dividends by HBT and
FNBNWG as well as by HHC to its shareholders. HHC declared approximately
$728,000, or $0.18 per share and had paid approximately $487,000, or
$0.12 per share in cash dividends to its common shareholders for the six-
months ended June 30, 1996. The dividend declared and unpaid of
approximately $241,000 or $0.06 per share at June 30, 1996, was paid on
July 19, 1996.
15
<PAGE>
HARDWICK HOLDING COMPANY AND SUBSIDIARIES
PART II
ITEM 1. LEGAL PROCEEDINGS
HHC is not aware of any material pending legal proceedings to which HHC
or any of its subsidiaries is a party or to which any of their property
is subject.
ITEM 2. CHANGES IN SECURITIES - None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES -None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS-
(a) Hardwick Holding Company 1996 Annual Meeting of Stockholders was
held on April 19, 1996.
(b) The following slate of directors was elected to serve the
current year term:
Thomas H. Bond Leon M. Ham III
James M. Boring, Jr. David J. Lance
Kenneth E. Boring Marshall R. Mauldin
W. R. Broaddus Norman McCoy
Robert M. Chandler Michael Robinson
Richard R. Cheatham
(c) No matters, other than the election of the above slate of
directors, were voted on at the annual meeting. A tabulation of votes
concerning the election of the above slate of directors is as follows:
Shares voted by proxy in favor 702,914
Shares voted in person in favor 2,948,005
Shares voted in person against 0
Shares abstained from voting 18,733
---------
Total shares represented 3,669,692
ITEM 5. OTHER INFORMATION -None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits. Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K. There were no reports on Form 8-K.
16
<PAGE>
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 duly authorized.
CORPORATION HARDWICK HOLDING COMPANY
- ----------- ------------------------
Date: August 9, 1996 By:/s/ Michael Robinson
--------------------
Michael Robinson
Executive Vice President,
Chief Financial Officer
(Principal Financial Officer
and Duly Authorized Officer)
17
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000787465
<NAME> HARDWICK HOLDING COMPANY
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 28,997
<INT-BEARING-DEPOSITS> 14
<FED-FUNDS-SOLD> 4,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 117,495
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 261,270
<ALLOWANCE> 6,431
<TOTAL-ASSETS> 433,530
<DEPOSITS> 381,072
<SHORT-TERM> 2,264
<LIABILITIES-OTHER> 3,750
<LONG-TERM> 1,102
0
0
<COMMON> 2,063
<OTHER-SE> 43,279
<TOTAL-LIABILITIES-AND-EQUITY> 433,530
<INTEREST-LOAN> 12,059
<INTEREST-INVEST> 3,731
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 15,790
<INTEREST-DEPOSIT> 6,428
<INTEREST-EXPENSE> 6,546
<INTEREST-INCOME-NET> 9,244
<LOAN-LOSSES> 75
<SECURITIES-GAINS> 10
<EXPENSE-OTHER> 8,522
<INCOME-PRETAX> 2,764
<INCOME-PRE-EXTRAORDINARY> 2,764
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,934
<EPS-PRIMARY> .48
<EPS-DILUTED> 0
<YIELD-ACTUAL> 8.11
<LOANS-NON> 553
<LOANS-PAST> 221
<LOANS-TROUBLED> 50
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 6,614
<CHARGE-OFFS> 548
<RECOVERIES> 290
<ALLOWANCE-CLOSE> 6,431
<ALLOWANCE-DOMESTIC> 6,431
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
