<PAGE>
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, 1997 Commission File Number 33-43386
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
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 JULY 13, 1997
4,021,496 Shares
----------------<PAGE>
HARDWICK HOLDING COMPANY AND SUBSIDIARIES
INDEX
Page No.
PART I- FINANCIAL INFORMATION
Consolidated Statements of Financial
Position at June 30, 1997 and
December 31, 1996 3
Consolidated Statements of Income
for the Three Months Ended June 30,
1997 and 1996 4
Consolidated Statements of Income
for the Six Months Ended June 30,
1997 and 1996 5
Consolidated Statements of Cash Flows
for the Six Months Ended June 30,
1997 and 1996 6-7
Notes to Unaudited Consolidated Financial Statements 8-10
Management's Discussion and Analysis of
Financial Position and Results of Operations 11-17
PART II- OTHER INFORMATION 18
SIGNATURES 19
2
<PAGE>
HARDWICK HOLDING COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Dollars in thousands, except share amounts)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
----------- ------------
(unaudited)
<S> <C> <C>
Assets
Cash and due from banks $ 23,718 $ 26,797
Federal funds sold 12,548 7,000
--------- ------------
Total cash and cash equivalents 36,266 33,797
Investment securities, available-for-sale 121,516 120,166
Loans, net 282,652 271,470
Premises and equipment, net 14,494 15,114
Assets under capital lease, net 516 614
Accrued interest receivable 4,130 3,865
Excess of cost over fair value of
subsidiaries acquired, net of amortization 5,039 5,346
Other assets 2,095 1,689
--------- ------------
Total assets $ 466,708 $ 452,061
========= ============
Liabilities and Stockholders' Equity
Deposits-
Noninterest-bearing $ 88,732 $ 85,567
Interest-bearing 315,589 308,373
--------- -----------
Total deposits 404,321 393,940
Securities sold under agreements to repurchase 6,610 5,927
Other borrowed funds 269 306
Note payable to bank 900 0
Capital lease obligation 570 668
Other liabilities 4,704 4,243
--------- -----------
Total liabilities 417,374 405,084
--------- -----------
Commitments and contingencies (Notes 2 and 4)
Stockholders' equity-
Common stock, $.50 par value, 10,000,000 shares authorized,
4,161,141 and 4,125,141 shares issued; 4,021,496 and
3,999,229 shares outstanding at June 30,1997 and
December 31,1996, respectively 2,081 2,063
Additional paid-in capital 20,936 20,233
Retained earnings 29,599 26,845
Unrealized gains on securities available-for-sale net of tax 159 324
Less treasury stock, at cost, 139,645 and 125,912 shares at June 30,
1997 and December 31, 1996, respectively
Less deferred compensation from restricted stock plan (877) (199)
--------- -----------
Total stockholders' equity 49,334 46,977
--------- -----------
Total liabilities and stockholders' equity $ 466,708 $ 452,061
========= ===========
</TABLE>
(See notes to consolidated financial statements.)
3<PAGE>
HARDWICK HOLDING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Three Months Ended
--------------------------
June 30, June 30,
1997 1996
--------------------------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 6,706 $ 6,104
Interest on investment securities-
Taxable 1,514 1,342
Nontaxable 295 408
Interest on fed funds sold 152 80
-------- --------
Total interest income 8,667 7,934
-------- --------
INTEREST EXPENSE:
Interest on deposits 3,496 3,162
Interest on securities sold under agreements to repurchase 49 29
Interest on other borrowed funds 11 8
Interest on note payable and capital lease obligations 29 24
-------- --------
Total interest expense 3,585 3,223
-------- --------
NET INTEREST INCOME BEFORE PROVISION FOR LOAN
LOAN LOSSES 5,082 4,711
(REVERSAL OF) PROVISION FOR LOAN LOSSES (125) 37
-------- --------
NET INTEREST INCOME 5,207 4,674
-------- --------
NONINTEREST INCOME:
Service charges on deposit accounts 676 563
Securities (losses) gains, net (9) 38
Other noninterest income 435 419
-------- --------
Total noninterest income 1,102 1,020
-------- --------
NONINTEREST EXPENSE:
Salaries and employee benefits 2,146 1,980
Net occupancy expense 811 819
Other noninterest expense 1,524 1,472
-------- --------
Total noninterest expense 4,481 4,271
-------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES 1,828 1,423
PROVISION FOR INCOME TAXES 618 432
-------- --------
NET INCOME $ 1,210 $ 991
======== ========
NET INCOME PER SHARE $ 0.30 $ 0.25
======== ========
</TABLE>
(See notes to consolidated financial statements.)
4<PAGE>
HARDWICK HOLDING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Six Months Ended
------------------------
June 30, June 30,
1997 1996
--------------------------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 13,178 $ 12,059
Interest on investment securities-
Taxable 2,820 2,706
Nontaxable 599 832
Interest on fed funds sold 310 193
-------- --------
Total interest income 16,907 15,790
-------- --------
INTEREST EXPENSE:
Interest on deposits 6,810 6,428
Interest on securities sold under agreements to repurchase 105 62
Interest on other borrowed funds 12 15
Interest on note payable and capital lease obligations 40 41
-------- --------
Total interest expense 6,967 6,546
-------- --------
NET INTEREST INCOME BEFORE PROVISION FOR LOAN
LOAN LOSSES 9,940 9,244
PROVISION FOR LOAN LOSSES 375 75
-------- --------
NET INTEREST INCOME 9,565 9,169
-------- --------
NONINTEREST INCOME:
Service charges on deposit accounts 1,326 1,144
Securities gains, net 20 10
Other noninterest income 3,174 963
-------- --------
Total noninterest income 4,520 2,117
NONINTEREST EXPENSE:
Salaries and employee benefits 4,311 4,015
Net occupancy expense 1,609 1,686
Other noninterest expense 3,148 2,821
-------- --------
Total noninterest expense 9,068 8,522
-------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES 5,017 2,764
PROVISION FOR INCOME TAXES 1,539 830
-------- --------
NET INCOME $ 3,478 $ 1,934
======== ========
NET INCOME PER SHARE $ 0.87 $ 0.48
======== ========
(See notes to consolidated financial statements.)
5
<PAGE>
HARDWICK HOLDING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
</TABLE>
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
1997 1996
------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,478 $ 1,934
Adjustments to reconcile net income to net cash provided by operating activities
Provision for loan losses 375 75
Provision for depreciation and amortization 1,270 1,258
Loss on disposition of premises and equipment 191 6
Accretion of investment security discounts (52) 59
Deferred income tax (benefit) provision (179) 103
Securities gains, net (20) (10)
Increase in accrued interest receivable (265) (69)
Increase in other assets (406) (259)
Increase in other liabilities 461 568
-------- --------
Net cash provided by operating activities 4,853 3,665
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of investment securities available-for-sale 9,688 21,632
Proceeds from sales of investment securities available-for-sale 17,511 12,065
Purchases of investment securities available-for-sale (28,770) (18,461)
Net cash flows from loans originated and principal collected on loans (11,557) (15,650)
Proceeds from disposal of premises and equipment 14 29
Purchases of premises and equipment (342) (400)
-------- --------
Net cash used in investing activities (13,456) (785)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in demand deposits, NOW accounts, and savings accounts (7,627) (3,982)
Net cash flows from sales and maturities of certificates of deposit 18,008 (4,897)
Net increase (decrease) in fed funds purchased and securities sold
under agreement to repurchase 683 (2,372)
Decrease in other borrowed funds (37) (37)
Proceeds from note payable to bank 900 1,100
Payments on note payable to bank and capital lease obligations (98) (337)
Purchase of treasury stock, at cost (275) (1,128)
Payments of cash dividends (482) (487)
-------- --------
Net cash provided by (used in) financing activities $ 11,072 $ (12,140)
-------- --------
</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,
------------------------
1997 1996
------------------------
<S> <C> <C>
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 2,469 $ (9,260)
CASH AND CASH EQUIVALENTS, beginning of period 33,797 42,271
--------- --------
CASH AND CASH EQUIVALENTS, end of period $ 36,266 $ 33,011
========= ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for Interest $ 6,059 $ 5,317
========= ========
Cash paid during the period for income taxes $ 1,662 495
========= ========
Noncash transactions during the period ended:
Transfer of premises and equipment to other assets $ - $ 211
========= ========
Increase in deferred compensation from issue of restricted stock $ 720 $ -
========= ========
</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)
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,
1997 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
8
<PAGE>
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 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, 1997, were approximately $80,896,000. 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 $1,520,000 outstanding at June 30, 1997.
(3) "RECENT ACCOUNTING PRONOUNCEMENTS"
The Financial Accounting Standards Board ("FASB") has issued SFAS
No. 128, "Earnings Per Share" and SFAS No. 129, "Disclosure of
Information About Capital Structure". These standards are
effective for reporting periods ending after December 15, 1997.
The adoption by the Company will not have a significant effect on
the Company's financial condition or results of operations.
The FASB has issued SFAS No. 130, "Reporting Comprehensive
Income"; and SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information". These standards are
effective for financial statements for periods beginning after
Decmeber 15, 1997. The adoption by the Company will not have a
significant effect on the Company's financial condition or
results of operations.
(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.
9
<PAGE>
(5) EARNINGS PER SHARE
Earnings per share is calculated on the basis of weighted average
number of shares outstanding, which was 4,013,498 for the six
month period ended June 30, 1997 and 4,062,313 for the six month
period ended June 30, 1996.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
POSITION AND RESULTS OF OPERATIONS
FINANCIAL POSITION
- ------------------
Total assets increased by approximately $14,647,000 from
approximately $452,061,000 at December 31, 1996, to approximately
$466,708,000 at June 30, 1997. The principal fluctuations were
in federal funds sold and loans. Federal funds sold increased by
approximately $5,548,000 from approximately $7,000,000 at
December 31, 1996 to approximately $12,548,000 at June 30, 1997,
an increase of 79.3%. Loans increased approximately $11,182,000
from approximately $271,470,000 at December 31, 1996, to
approximately $282,652,000 at June 30, 1997, an increase of 4.1%.
The increase was partially offset by a decrease in cash and due
from banks of approximately $3,079,000 from approximately
$26,797,000 at December 31, 1996, to approximately $23,718,000 at
June 30, 1997. HHC's cash and cash equivalents reflected a net
increase of approximately $2,469,000 or 7.3% for the six month
period ended June 30, 1997.
Savings and other interest-bearing deposit accounts increased
approximately $7,216,000 or 2.3% during the six-months ended June
30, 1997, to approximately $315,589,000. It is management's
opinion that HHC maintains competitive deposit rates while
exercising prudent strategies in competing with local
institutions. Average rates paid on deposits for the current
period were approximately 4.4% relatively unchanged from the same
period in the preceding year.
At June 30, 1997, HHC's financial position continued to reflect
strong equity and liquidity, with an equity to assets ratio of
10.6%. At June 30, 1997, 59% of HHC's loans were in real estate
loans (including mortgage and construction loans), 17% in
commercial loans (including agricultural loans), 14% in consumer
loans (including credit cards) and other loans were 10%. HHC's
loan to deposit ratio was 71% at June 30, 1997, and 48% of all
deposits were invested in time certificates of deposit.
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,
1997 approximately $269,000 was outstanding under the Federal
Home Loan Bank lines of credit.
The following table represents the changes in consolidated
stockholders' equity for the six-months ended June 30, 1997:
11<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Balance, December 31, 1996 $ 46,977,000
Net income 3,478,000
Change in unrealized gains (losses) on securities available-for-sale,
net of tax (165,000)
Purchase of treasury stock (275,000)
Amortization of deferred compensation-restricted stock plan 42,000
Dividends declared (723,000)
------------
Balance, June 30, 1997 $ 49,334,000
============
</TABLE>
RESULTS OF OPERATIONS
- ---------------------
For the three-months ended June 30, 1997 and 1996:
NET INTEREST INCOME
Net interest income after provision for loan losses for the
three-month period ended June 30, 1997 was approximately
$5,207,000 which was $533,000 or 11.4% greater than the
$4,674,000 for the same period the year before. The net interest
income for the current period contained a reversal of loan loss
provision of approximately $125,000 compared with $37,000
provision for the previous year. Total interest income increased
by approximately $733,000 or 9.2% while total interest expense
increased approximately $362,000 or 11.2% for the three month
period ended June 30, 1997, as compared to the comparable three-
months ended in the previous year.
Yields on interest-bearing assets averaged 8.4% for the current
period compared to 8.2% for the same period the year before.
Total average interest-bearing assets increased by approximately
$8,853,000 or 2.2% for the current period when compared with the
three-months ended June 30, 1996. Average loans for the three-
months ended June 30, 1997, increased approximately $13,951,000
or 5.4% more than the average loans for the three-months ended
June 30, 1996. The average yield on loans for the three-months
ended June 30, 1997, was 9.5%, which is relatively unchanged from
the three-months ended June 30, 1996.
Earnings from the loan portfolio have also been adversely
effected by the Company's level of nonperforming assets.
Nonaccrual loans and accruing loans contractually past due ninety
days or more were approximately $1,229,000 at June 30, 1997, as
compared to approximately $1,000,000 at December 31, 1996,
representing an increase of approximately $229,000 or 22.9%. At
present management does not foresee an increasing trend
occurring.
Nonaccrual loans have increased approximately $125,000 or 27.8%
for the three month period ended June 30, 1997, to approximately
$574,000 compared to approximately $449,000 at December 31, 1996.
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 $31,000 during the three
month period ended June 30, 1997. Nonaccrual loan interest
collected and reported in the three month period ended June 30,
1997, was approximately $12,000.
12<PAGE>
Rates paid on interest-bearing liabilities averaged 4.4% for the
three-months ended June 30, 1997, compared with 4.3% for the
three-months ended June 30, 1996. Rates paid in the current three
month period on average have remained relatively the same as
rates paid on average for the year ended December 31, 1996.
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
slightly during the remainder of the year.
NONINTEREST INCOME
Total other noninterest income increased approximately $82,000
for the three-months ended June 30, 1997, as compared with the
three-months ended June 30, 1996. The increase is primarily due
to an increase in service charges on deposits of approximately
$113,000; an increase in other noninterest income of
approximately $16,000; while being partially offset by a net loss
on sale of securities of approximately $9,000 compared with a net
gain of approximately $38,000 in the same period a year ago.
NONINTEREST EXPENSES
Total noninterest expenses increased by approximately $210,000,
or 4.9% for the three-months ended June 30, 1997, as compared to
the same period ended in the preceding year. The increase is due
principally to increases of approximately $166,000 in salary and
employee benefits and of approximately $52,000 in other expense.
The increase was partially offset by a decrease in net occupancy
expense of approximately $8,000 The increase in salary and
employee benefits is due principally to general rate increases
and the increase in the cost of providing the Company's health
care plan. The increase in other expense was primarily due to
credit card expenses of approximately $33,000 while other
miscellaneous expenses accounted for the remaining $19,000 of the
increase.
13
<PAGE>
INCOME TAX PROVISION
The effective tax rates reported for the three-months ended June
30, 1997 and 1996, were 33.8% and 30.4%, respectively.
RESULTS OF OPERATIONS
- ---------------------
For the six-months ended June 30, 1997 and 1996:
NET INTEREST INCOME
Net interest income after provision for loan losses for the six-
month period ended June 30, 1997 was approximately $9,565,000
which was approximately $396,000 or 4.3% greater than the
$9,169,000 for the same period the year before. Total interest
income increased by approximately $1,117,000 or 7.1% while total
interest expense increased approximately $421,000 or 6.4% for the
six-month period ended June 30, 1997 as compared to the six-
months ended in the previous year. There was approximately
$375,000 in provisions for loan losses for the current period as
compared with approximately $75,000 in the six-month period
ended June 30, 1996.
Yields on interest-bearing assets averaged 8.4% for the current
period compared with 8.1% from the same period the year before.
Total average interest-bearing assets increased by approximately
$7,572,000 or 1.9% for the current period when compared with the
six-months ended June 30, 1996. Average loans for the six-months
ended June 30, 1997 increased approximately $17,341,000 or 6.8%
more than the average loans for the six-months ended June 30,
1996. The average yield on loans for the six-months ended June
30, 1997 was 9.5% relatively unchanged from the six-months ended
June 30, 1996.
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 $34,000 during the six-
month period ended June 30, 1997. Nonaccrual loan interest
collected and reported in the six-month period ended June 30,
1997, was approximately $12,000.
Rates paid on interest-bearing liabilities averaged 4.4% for the
six-months ended June 30, 1997 compared with 4.3% for the six-
months ended June 30, 1996. 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, 1996. 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 slightly during
the remainder of the year.
14<PAGE>
NONINTEREST INCOME
Total noninterest income increased approximately $2,403,000 for
the six-months ended June 30, 1997, as compared with the six-
months ended June 30, 1996. The increase is primarily due to a
settlement of litigation with a vendor of approximately
$2,127,000 which was included in other noninterest income
Service charges on deposits increased by approximately $182,000.
There was a change in net gains from sales and calls of
investment securities held available-for-sale of approximately
$10,000. The other noninterest income increase was due
principally to an increase in credit life commissions of
approximately $38,000; other fee income of approximately $26,000
and an increase in trust income of approximately $20,000.
NONINTEREST EXPENSES
Total noninterest expenses increased by approximately $546,000,
or 6.4% for the six- months ended June 30, 1997, as compared to
the same period ended in the preceding year. The increase is due
principally to increases of approximately $296,000 in salary and
employee benefits and approximately $327,000 in other expense.
The increase was partially offset by a decrease in net occupancy
expense of approximately $77,000 The increase in salary and
employee benefits is due principally to general rate increases
and the increase in the cost of providing the Company's health
care plan. The increase in other expense was made up of
approximately $191,000 in losses on disposition of fixed assets,
credit card fee expense of approximately $62,000, outside data
processing of approximately $39,000 and advertising of
approximately $21,000, and other miscellaneous expenses had a net
increase of approximately $14,000.
INCOME TAX PROVISION
The effective tax rates reported for the six-months ended June
30, 1997 and 1996 were 30.7% and 30.0%, respectively.
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.
15<PAGE>
For the six-months ended June 30, 1997, cash and cash equivalents
increased approximately $2,469,000 or 7.3% from December 31,
1996. Operating and financiang activities provided cash and cash
equivalents of approximately $4,853,000 and $11,072,000
respectively while investing activities used approximately
$13,456,000. Net income of approximately $3,478,000, provision
for loan losses of approximately $375,000; depreciation and
amortization not requiring the use of cash of approximately
$1,270,000, losses on disposition of premises and equipment of
approximately $191,000 and an increase in other liabilities of
approximately $461,000 were the principal sources of funds
provided from operating activities while being partially offset
by an increase in other assets of approximately $406,000 and a
deferred tax benefit of approximately $179,000.
Funds provided by financing activities were principally from
proceeds from net cash flows from sales and maturities of
certificates of deposit of approximately $18,008,000; net
increase in fed funds sold and repurchase agreements of
approximately $683,000 and proceeds from a note payable to bank
of approximately $900,000. Funds provided were partially offset
by net decreases in NOW accounts, demand deposits and savings
accounts of approximately $7,627,000, purchases of treasury stock
of approximately $275,000 and payments of dividends of
approximately $482,000.
The cash used in investing activities was principally due to
purchases of investment securities available-for-sale of
approximately $28,770,000; net cash flows from loans originated
and principal collected on loans of approximately $11,557,000 and
purchases of premises and equipment of approximately $342,000.
Investing activities providing funds were proceeds from the
maturities and calls of investment securities available-for-sale
of approximately $9,688,000 and sales of investments securities
available-for-sale of approximately $17,511,000.
CAPITAL RESOURCES
HHC and its subsidiary banks are subject to a minimum Tier 1
capital to risk-weighted assets ratio of 4% and a total capital
(Tier 1 plus Tier 2) to risk-weighted assets ratio of 8%. 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 3%. 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.
The following tables represent HHC's regulatory capital position
at June 30, 1997:
16<PAGE>
<TABLE>
<CAPTION>
Risk Based Capital Ratios: Amount Ratio
--------- ------
<S> <C> <C>
Tier 1 Capital $ 44,136 12.69%
Tier 1 Capital minimum requirement $ 13,914 4.00%
-------- ------
Excess $ 30,222 8.69%
======== ======
Total Capital $ 48,517 13.95%
Total Capital minimum requirement $ 27,828 8.00%
-------- ------
Excess $ 20,689 5.95%
======== ======
Risk adjusted assets net of goodwill and
excess loan loss allowance $ 347,848
Leverage Ratio:
Tier 1 Capital to adjusted total assets
("Leverage Ratio") $ 44,136 9.65%
Minimum leverage requirement $ 13,727 3.00%
-------- ------
Excess $ 30,409 6.65%
======== ======
Average total assets, net of goodwill <F1> $ 457,579
<FN>
<F1> Average total assets, net of goodwill for the three-months
ended June 30, 1997.
</FN>
</TABLE>
HHC is a legal entity separate and distinct from the Banks. Most
of the revenues of HHC result from dividends paid to it by the
Banks. There are statutory and regulatory requirements
applicable to the payment of dividends by the subsidiary banks as
well as by HHC to its shareholders. HHC paid cash dividends of
$241,000 or $.06 per share in the first quarter of 1997, that had
been declared at December 31, 1996. HHC paid $241,000 or $.06
per share in cash dividends during the second quarter of 1997
that had been declared at March 31, 1997 and at June 30, 1997,
HHC declared $482,000 or $.12 per share in cash dividends to its
common shareholders for the third quarter of 1997 which was paid
on July 19, 1997.
17
<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 1997 Annual Meeting of
Stockholders was held on April 21, 1997.
(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 787,019
Shares voted in person in favor 2,963,682
Shares voted in person against 0
Shares voted by proxy against 563
Shares abstained from voting 0
---------
Total shares represented 3,751,264
---------
ITEM 5. OTHER INFORMATION - None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit 27-Financial Data Schedule (for SEC use only).
(b) Form 8-K - None.
18
<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 11, 1997 By: /s/ Michael Robinson
Michael Robinson
Executive Vice President,
Chief Financial Officer
(Principal Financial Officer
and Duly Authorized Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000787465
<NAME> HARDWICK HOLDING COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 23,693
<INT-BEARING-DEPOSITS> 25
<FED-FUNDS-SOLD> 12,548
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 121,516
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 289,670
<ALLOWANCE> 7,018
<TOTAL-ASSETS> 466,708
<DEPOSITS> 404,321
<SHORT-TERM> 7,510
<LIABILITIES-OTHER> 4,701
<LONG-TERM> 839
0
0
<COMMON> 2,081
<OTHER-SE> 47,253
<TOTAL-LIABILITIES-AND-EQUITY> 466,708
<INTEREST-LOAN> 13,178
<INTEREST-INVEST> 3,729
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 16,907
<INTEREST-DEPOSIT> 6,810
<INTEREST-EXPENSE> 157
<INTEREST-INCOME-NET> 9,940
<LOAN-LOSSES> 375
<SECURITIES-GAINS> 20
<EXPENSE-OTHER> 9,068
<INCOME-PRETAX> 5,017
<INCOME-PRE-EXTRAORDINARY> 5,017
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,478
<EPS-PRIMARY> .87
<EPS-DILUTED> 0
<YIELD-ACTUAL> 8.40
<LOANS-NON> 574
<LOANS-PAST> 655
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 6,778
<CHARGE-OFFS> 319
<RECOVERIES> 184
<ALLOWANCE-CLOSE> 7,018
<ALLOWANCE-DOMESTIC> 7,018
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
