<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------
FORM 10-Q
/X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended June 30, 1995.
------------------------------
COMMISSION FILE NUMBER 0-15839
------------------------------
EMPIRE BANC CORPORATION
(Exact name of registrant as specified in its charter)
MICHIGAN
(State or other jurisdiction of incorporation or organization)
1227 E. FRONT STREET
TRAVERSE CITY, MICHIGAN
(Address of principal executive offices)
38-2727982
(IRS Employer Identification Number)
49686
(Zip code)
(616) 922-2111
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, address and fiscal year, if changed since last report)
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 Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
The number of shares outstanding of each of the issuer's classes of common
stock was 1,304,302 shares of common stock, par value $5, outstanding as of
June 30, 1995.
<PAGE> 2
EMPIRE BANC CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
(In thousands, except share data) June 30 December 31 June 30
1995 1994 1994
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 11,676 $ 14,527 $ 11,173
Federal funds sold 9,300 7,100 --
------ ------ ------
Cash and cash equivalents 20,976 21,627 11,173
Investment securities
Available for sale - (fair value) 28,604 28,145 28,135
Held to maturity
(fair value: 1995-$31,355,
$31,572 and $31,206 in 1994) 31,224 32,229 31,556
Mortgage-backed securities
Available for sale - (fair value) 6,227 3,187 2,710
Held to maturity (fair value: 1995-$598, 1994-$648) 596 670 --
Loans 253,495 243,583 231,883
Less: allowance for loan losses (3,000) (2,900) (2,750)
-------------------------------------------------------------------------------------------
Net loans 250,495 240,683 229,133
-------------------------------------------------------------------------------------------
Premises and equipment, net 3,789 3,939 4,021
Other real estate 74 53 835
Accrued interest receivable and other assets 6,081 6,418 6,456
-------------------------------------------------------------------------------------------
Total assets $348,066 $336,951 $314,019
LIABILITIES ======== ======== ========
Deposits
Non-interest-bearing $ 44,702 $ 44,150 $ 37,723
Interest-bearing 259,085 253,839 239,195
-------------------------------------------------------------------------------------------
Total deposits 303,787 297,989 276,918
-------------------------------------------------------------------------------------------
Federal Home Loan Bank advances 12,000 8,000 8,000
Accrued expense and other liabilities 4,236 4,630 3,755
-------------------------------------------------------------------------------------------
Total liabilities 320,023 310,619 288,673
SHAREHOLDERS' EQUITY
Preferred stock-$1 par value,
2,000,000 shares authorized, none outstanding
Common stock-$5 par value, 5,000,000 shares authorized,
shares outstanding: 1,304,302 6,521 6,521 6,521
Paid-in-capital 9,098 9,098 9,098
Retained earnings 12,337 11,224 10,049
Net unrealized gain (loss) on securities available for
sale, net of tax effect 87 (511) (322)
-------------------------------------------------------------------------------------------
Total shareholders' equity 28,043 26,332 25,346
-------- -------- --------
Total liabilities and shareholders' equity $348,066 $336,951 $314,019
======== ======== ========
See notes to consolidated financial statements.
</TABLE>
<PAGE> 3
EMPIRE BANC CORPORATION
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
(In thousands, except share data) Quarter Ending Year to Date
June 30 June 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $ 5,864 $ 4,988 $11,516 $ 9,520
Taxable securities
Available for sale 527 368 988 714
Held to maturity 413 340 831 683
Tax-exempt securities - held to maturity 47 59 96 134
Federal funds sold 177 20 289 90
-----------------------------------------------------------------------------
Total interest income 7,028 5,775 13,720 11,141
INTEREST EXPENSE
Deposits 3,106 2,224 6,035 4,409
Federal funds purchased -- 18 1 18
Federal Home Loan Bank advances 213 97 370 160
-----------------------------------------------------------------------------
Total interest expense 3,319 2,339 6,406 4,587
----- ----- ----- -----
Net interest income 3,709 3,436 7,314 6,554
Provision for loan losses 118 244 359 305
----- ----- ----- -----
Net interest income after
provision for loan losses 3,591 3,192 6,955 6,249
NON-INTEREST INCOME
Mortgage sales and servicing 210 293 419 693
Service charges on deposit accounts 330 335 655 642
Trust income 450 393 898 811
Other service charges and fees 111 99 198 182
Other income 92 68 182 140
Security gains(losses) (5) -- (5) 11
-----------------------------------------------------------------------------
Total non-interest income 1,188 1,188 2,347 2,479
----- ----- ----- -----
NON-INTEREST EXPENSE
Salaries and employee benefits 1,844 1,678 3,568 3,384
Occupancy 253 234 502 483
Furniture and equipment 214 202 425 390
Other 1,023 947 1,994 1,908
-----------------------------------------------------------------------------
Total non-interest expense 3,334 3,061 6,489 6,165
----- ----- ----- -----
Income before federal income taxes 1,445 1,319 2,813 2,563
Federal income taxes 472 433 917 832
-----------------------------------------------------------------------------
Net income $ 973 $ 886 $ 1,896 $ 1,731
====== ====== ====== ======
Earnings per share $ .70 $ .63 $ 1.36 $ 1.24
Average shares 1,397,262 1,396,637 1,394,108 1,393,595
------------------------------------------------------------------------------
See notes to consolidated financial statements.
</TABLE>
<PAGE> 4
EMPIRE BANC CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
(In thousands) Year to Date June 30
1995 1994
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,896 $ 1,731
Adjustments to reconcile net income to net
cash from operating activities:
Depreciation and amortization 383 366
Provision for loan losses 359 305
Net (increase) decrease in mortgages held for sale (1,598) 1,365
Net losses (gains) on securities available for sale 5 (10)
Net amortization/accretion on securities 237 539
Change in:
Interest receivable (133) (272)
Interest payable 119 64
Other, net (241) (217)
------ ------
Total adjustments (869) 2,140
-------------------------------------------------------------------------------------------
Net cash from operating activities 1,027 3,871
-------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Securities available for sale:
Proceeds from sales 3,005 1,010
Proceeds from maturities 4,345 2,909
Purchases (10,039) (7,388)
Securities held to maturity:
Proceeds from maturities 9,824 17,175
Purchases (8,892) (11,293)
Loans granted net of repayments (8,573) (15,057)
Premises and equipment expenditures (233) (215)
-------------------------------------------------------------------------------------------
Net cash from investing activities (10,563) (12,859)
-------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net increase (decrease) in deposits 5,798 (2,623)
Cash dividends paid (913) (650)
Federal Home Bank advances 4,000 3,000
Issuance of common stock -- 84
-------------------------------------------------------------------------------------------
Net cash from financing activities 8,885 (189)
-------------------------------------------------------------------------------------------
Net change in cash and cash equivalents (651) (9,177)
Cash and cash equivalents
Beginning of year 21,627 20,350
------- -------
End of period $20,976 $11,173
======= =======
Cash paid during the year for: Interest $ 6,286 $ 4,651
Income taxes 1,160 1,013
</TABLE>
See notes to consolidated financial statements.
<PAGE> 5
EMPIRE BANC CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
(In thousands) 1995 1994
<S> <C> <C>
-------------------------------------------------------------------------------------------
Balance January 1 $26,332 $24,504
Net income 1,896 1,731
Common stock issued -- 84
Dividends declared (783) (651)
Net change in security valuation 598 (322)
-------------------------------------------------------------------------------------------
Balance June 30 $28,043 $25,346
-------------------------------------------------------------------------------------------
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note-1 The consolidated financial statements include the accounts of Empire
Banc Corporation and its wholly-owned subsidiary, Empire National Bank, after
elimination of significant inter-company transactions and accounts. The
statements have been prepared by management without audit by independent
certified public accountants. However, these statements reflect all
adjustments (consisting of normal recurring accruals) and disclosures which
are, in the opinion of management, necessary for a fair presentation of the
results for the interim periods presented and should be read in conjunction
with the notes to financial statements included in the Empire Banc
Corporation's Form 10-K for the year ended December 31, 1994.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission.
Because the results of operations are so closely related to and responsive
to changes in economic conditions, the results for any interim period are
not necessarily indicative of the results that can be expected for the
entire year.
Note-2 Earnings per share of common stock is computed by dividing net
income by the weighted average number of common shares and common stock
equivalents outstanding during the period. Common stock equivalents
consist of common stock issuable under the assumed exercise of stock
options granted under the Corporation's stock option plan, using the
treasury stock method.
Note-3 During the six month period ended June 30, 1995, the proceeds from
sales of available-for-sale securities were $3,005,000 with gross realized
losses of $4,600 from these sales. Net unrealized holding gains on
available-for-sale securities for the current quarter are $280,000 and
year-to-date are $598,000.
<PAGE> 6
NET INTEREST INCOME
AVERAGE BALANCES, INTEREST INCOME/EXPENSE, AVERAGE RATES
<TABLE>
<CAPTION>
Quarter Ending June 30, 1995 1994
--------------------------- ---------------------------
Average Average
(Fully taxable equivalent, Balance Interest Rate Balance Interest Rate
in thousands) --------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans, including fees*,** $246,648 $ 5,866 9.54% $225,888 $ 4,989 8.86%
Securities - taxable 65,009 941 5.79% 60,997 708 4.65%
- tax-exempt* 3,096 68 8.81% 4,029 86 8.48%
-------- ------- -------- -------
Total securities 68,105 1,009 5.86% 65,026 794 4.83%
Federal funds sold 11,891 177 5.87% 2,086 20 3.65%
-------- ------- -------- -------
Total earning assets 326,644 7,052 8.66% 293,000 5,803 7.94%
Cash and due from banks 11,307 11,081
Other assets 9,348 10,776
-------- --------
Total assets $347,299 $314,857
======== ========
LIABILITIES AND EQUITY
CDs over $100,000 $ 8,728 135 6.12% $ 10,245 96 3.72%
Savings & interest checking 60,123 338 2.25% 64,257 341 2.13%
Money market deposits 74,233 842 4.55% 61,527 450 2.93%
Consumer CDs 120,135 1,791 5.98% 102,940 1,337 5.21%
-------- ------- -------- -------
Total interest-bearing
deposits 263,219 3,106 4.73% 238,969 2,224 3.73%
Federal funds purchased 31 1 6.37% 1,789 18 4.15%
FHLB advances 12,000 212 7.09% 8,000 97 4.82%
-------- ------- -------- -------
Total interest-bearing
sources 275,250 3,319 4.84% 248,758 2,339 3.77%
-------- ------- -------- -------
Demand deposits 39,990 37,105
Other liabilities 4,561 3,746
Shareholders' equity 27,498 25,248
-------- --------
Total liabilities
and equity $347,299 $314,857
======== ========
Net interest spread (FTE) 3.82% 4.17%
===== =====
Net interest income (FTE) $ 3,733 $ 3,464
======= =======
Net interest margin (FTE) 4.58% 4.74%
===== =====
</TABLE>
* Interest income on tax-exempt securities and certain tax-exempt
loans have been adjusted to tax-equivalent basis.
** Non-accrual loans are excluded.
<PAGE> 7
NET INTEREST INCOME
AVERAGE BALANCES, INTEREST INCOME/EXPENSE, AVERAGE RATES
<TABLE>
<CAPTION>
Year to Date June 30, 1995 1994
-------------------------- ---------------------------
Average Average
(Fully taxable equivalent, Balance Interest Rate Balance Interest Rate
in thousands) --------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans, including fees*,** $244,912 $11,522 9.49% $220,520 $ 9,522 8.08%
Securities - taxable 64,522 1,819 5.64% 60,336 1,397 4.63%
- tax-exempt* 3,176 140 8.80% 5,192 196 7.54%
-------- ------- -------- -------
Total securities 67,698 1,959 5.79% 65,528 1,593 4.84%
Federal funds sold 9,883 289 5.82% 5,634 90 3.16%
-------- ------- -------- -------
Total earning assets 322,493 13,770 8.61% 291,682 11,205 7.75%
Cash and due from banks 11,279 10,837
Other assets 9,246 11,253
-------- --------
Total assets $343,018 $313,772
======== ========
LIABILITIES AND EQUITY
CDs over $100,000 $ 11,245 334 5.91% $ 11,047 195 3.51%
Savings & interest checking 60,435 678 2.26% 63,983 670 2.11%
Money market deposits 71,397 1,589 4.49% 62,407 882 2.85%
Consumer CDs 117,645 3,434 5.89% 102,718 2,662 5.23%
-------- ------- -------- -------
Total interest-bearing
deposits 260,722 6,035 4.67% 240,155 4,409 3.70%
Federal funds purchased 34 1 6.14% 900 18 4.15%
FHLB advances 10,718 370 6.96% 6,989 160 4.60%
-------- ------- -------- -------
Total interest-bearing
sources 271,474 6,406 4.76% 248,044 4,587 3.73%
-------- ------- -------- -------
Demand deposits 40,145 36,817
Other liabilities 4,325 3,890
Shareholders' equity 27,074 25,021
-------- --------
Total liabilities
and equity $343,018 $313,772
======== ========
Net interest spread (FTE) 3.85% 4.02%
===== =====
Net interest income (FTE) $ 7,364 $ 6,618
======= =======
Net interest margin (FTE) 4.60% 4.58%
===== =====
</TABLE>
* Interest income on tax-exempt securities and certain tax-exempt
loans have been adjusted to tax-equivalent basis.
** Non-accrual loans are excluded.
<PAGE> 8
EMPIRE BANC CORPORATION
FINANCIAL REVIEW
SECOND QUARTER 1995 COMPARED WITH SECOND QUARTER 1994
SUMMARY
Empire Banc Corporation's second quarter earnings were $973,000, a 9.8%
increase from 1994 second quarter income of $886,000. Earnings per
share increased from $.63 per share in 1994 to $.70 in 1995. The return
on assets was 1.12%, comparable to the second quarter of 1994. The return
on equity was 14.15% for the quarter versus 14.04% in 1994.
Net interest income, on a fully taxable equivalent (FTE) basis, was
$3.7 million, a 7.8% increase from the year-ago quarter, reflecting a
$33.6 million increase in average earning assets. The net interest margin
earned for the second quarter was 4.58% versus 4.74% in 1994. Non-interest
income remained unchanged in the quarter-to-quarter comparison, while non-
interest expenses increased $273,000, or 8.9%.
<TABLE>
<CAPTION>
NET INTEREST INCOME
Quarter Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------
Interest income $7,028 $5,775 $13,720 $11,141
Taxable equivalent adjustment 24 28 50 64
------ ------ ------- -------
Interest income (FTE) 7,052 5,803 13,770 11,205
Interest expense 3,319 2,339 6,406 4,587
------ ------ ------- -------
Net interest income (FTE) $3,733 $3,464 $7,364 $ 6,618
====== ====== ======= =======
Increase (decrease) due to change in:
Volume $ 330 $ 339 $ 625 $ 673
Rate (61) (80) 121 (410)
------ ------ ------- -------
Total $ 269 $ 259 $ 746 $ 263
====== ====== ======= =======
</TABLE>
<PAGE> 9
Second quarter net interest income, on a fully taxable equivalent basis,
was $3,733,000, a $269,000 increase from the second quarter of 1994.
Average earning assets increased $33.6 million as the loan portfolio
increased $20.8 million for the quarter. The investment portfolio
showed a $3.1 million increase and the bank's investment in overnight
funds increased on average $9.8 million, to account for the change.
Total interest income (FTE) for the quarter increased $1.2 million
between the two periods and the average rate earned increased 72 basis
points to average 8.66%. Total interest expense increased $980,000, and
the average rate paid increased 107 basis points (bp) to 4.84%.
Average loans totaled $247 million for the quarter, increasing 9.2%
from the 1994 second quarter. Loans secured by real estate totaled
$175 million at June 30, 1995, increasing $30 million from June 1994.
The average rate earned on the loan portfolio increased 68 bp to 9.54%
in the quarterly comparison. Average outstanding investment securities
increased $3.1 million in the quarter to quarter comparison to average
$68.1 million and the rate earned increased 103 bp to 5.86%. Funds sold
increased on average $9.8 million and the rate earned 222 bp more in the
quarterly comparison from the prior year.
Average interest bearing deposits increased $24.3 million to $263.2 million
for the second quarter of 1995. Increases in average money market deposits
of $12.7 million and consumer CDs of $17.2 million were offset by decreases
in savings and interest checking of $4.1 million and CDs over $100,000 of
$1.5 million. Following general economic interest rate changes, interest-
bearing deposits averaged 100 bp more in 1995 rising to an average 4.73%
for the quarter. Consumer CDs increased 77 bp, money market deposits 162
bp, savings and interest checking 12 bp, and CDs over $100,000 240 bp to
account for the increase. Funding from additional Federal Home Loan Bank
advances increased on average $4 million from the second quarter of 1994
and the rate increased 227 bp to 7.09%. Purchases of overnight funds
decreased $1.8 million between the two quarters. Demand deposits averaged
$2.9 million more in 1995 versus the 1994 second quarter. Average non-
interest bearing funds supporting earning assets increased $7.2 million
from last year's levels for the same quarter.
<PAGE> 10
AVERAGE EARNING ASSETS- NET INTEREST MARGIN
<TABLE>
<CAPTION>
Quarter Ended Quarter Ended
June 30, 1995 June 30, 1994
Balance Rate Balance Rate
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------
Daily average balances (in thousands)
Average rates earned and paid (fully taxable equivalent basis)
Average interest-earning assets $326,644 8.66% $293,000 7.94%
======== ========
Interest-bearing liabilities 275,250 4.84% 248,758 3.77%
Noninterest-bearing sources of funds 51,394 -- 44,242 --
-------- ---- -------- ----
Total supporting liabilities $326,644 4.08% $293,000 3.20%
======== ==== ======== ====
Net interest margin (related to average
interest-earning assets) 4.58% 4.74%
==== ====
</TABLE>
<TABLE>
<CAPTION>
Year to Date Year to Date
June 30, 1995 June 30, 1994
Balance Rate Balance Rate
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------
Daily average balances (in thousands)
Average rates earned and paid (fully taxable equivalent basis)
Average interest-earning assets $322,493 8.61% $291,682 7.75%
======== ========
Interest-bearing liabilities 271,474 4.76% 248,044 3.73%
Noninterest-bearing sources of funds 51,019 -- 43,638 --
-------- ---- -------- ----
Total supporting liabilities $322,493 4.01% $291,682 3.17%
======== ==== ======== ====
Net interest margin (related to average
interest-earning assets) 4.60% 4.58%
==== ====
</TABLE>
<PAGE> 11
<TABLE>
<CAPTION>
NON-INTEREST INCOME
Quarter Ended Six Months Ended
June 30 June 30
Increase (decrease) Increase (decrease)
Amount % Amount %
<S> <C> <C> <C> <C>
----------------------------------------------------------------------------------------
(In thousands)
Mortgage sales and servicing $ (83) (28)% $ (274) (40)%
Service charges on deposit accounts (5) (1) 13 2
Trust income 57 15 87 11
Other service charges and fees 12 12 16 5
Other income 24 35 42 30
Security gains (losses) (5) 100 (16) (152)
------ ---- ------ ----
$ 0 0% $ (132) (5)%
====== ==== ====== ====
</TABLE>
Non-interest income for the second quarters of 1995 and 1994 was $1,188,000.
Increases in trust fee income, service charges and other income were offset
by reductions in income related to decreased mortgage lending activity in
the quarter to quarter comparison.
<TABLE>
<CAPTION>
NON-INTEREST EXPENSE
Quarter Ended Six Months Ended
June 30 June 30
Increase (decrease) Increase (decrease)
Amount % Amount %
<S> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------
(In thousands)
Salaries and employee benefits $ 166 10% $ 184 5%
Occupancy 19 8 19 4
Equipment 12 6 35 9
Other 76 8 86 5
------ ---- ------ ----
$ 273 9% $ 324 5%
====== ==== ====== ====
</TABLE>
Non-interest expenses for the second quarter totaled $3,334,000, an
increase of $273,000 or 9% from the second quarter of 1994. Employment
related expenses increased $166,000, or 10%, a result of higher compensation
and benefit costs. Other expenses increased $76,000 or 8% attributable
primarily to increases in costs associated with non-earning loans and other
professional fees.
<PAGE> 12
ASSET QUALITY
<TABLE>
<CAPTION>
NON-PERFORMING ASSETS
6/30/95 12/31/94 6/30/94
------- -------- -------
<S> <C> <C> <C>
(In Thousands)
Non-accrual loans $1,991 $1,228 $1,363
Renegotiated loans 802 644 650
------ ------ ------
Total non-performing loans 2,793 1,872 2,013
Other real estate 74 53 835
------ ------ ------
Total non-performing assets $2,867 $1,925 $2,848
====== ====== ======
Non-performing assets as a percent of total loans 1.13% .79% 1.23%
Accruing loans 90 days or more past due $ 77 $ 128 $ 269
</TABLE>
Total non-performing assets at June 30, 1995 increased $19,000 or 1% from
June of 1994, as increases in non-accrual and renegotiated loans of $628,000
and $152,000, respectively, were offset by decreases in other real estate
owned of $761,000. Non-accrual loans have increased $763,000 and renegotiated
loans $158,000 during 1995, substantially accounting for the $942,000 change in
total non-performing assets this year. Loans identified as potential problem
loans totaled $2,510,000 at June 30, 1995, $2,736,000 at December 31, 1994
and $2,926,000 at June 30, 1994.
<PAGE> 13
<TABLE>
<CAPTION>
ALLOWANCE FOR LOAN LOSSES
Quarter Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------
(In thousands)
Balance, beginning of period $ 2,975 $ 2,630 $ 2,900 $ 2,630
Charge-offs 134 147 341 232
Recoveries 41 23 82 47
------- ------- ------- ------
Net charge-offs 93 124 259 185
Provision charged to operations 118 244 359 305
------- ------- -------
Balance, June 30 $ 3,000 $ 2,750 $ 3,000 $ 2,750
======= ======= ======= =======
6/30/95 12/31/94 6/30/94
------- -------- -------
Net loan losses as a percent of average loans .21% .23% .17%
Allowance for loan losses as a percent of end
of period loans 1.18% 1.19% 1.19%
</TABLE>
Net charge-offs were $93,000 for the current quarter, increasing net charge-offs
on a year-to-date basis to $259,000 compared to $185,000 in the 1994 period.
Net charge-offs have been primarily attributable to indirect consumer lending
in both periods. At June 30, 1995, the allowance for loan losses was $3.0
million, equal to 1.18% of total loans outstanding, compared to the $2.75
million or 1.19% of total loans one year ago.
<PAGE> 14
INVESTMENT SECURITIES
The following is a summary of investment securities, held-to-maturity and
available-for-sale, at June 30, 1995.
<TABLE>
<CAPTION>
Held-to-maturity
Unrealized
Cost Gain Loss Fair Value
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------
US Government and agency $22,881 $ 118 $ 95 $22,904
State and Municipal 3,801 91 2 3,890
Other 4,542 38 19 4,561
------- ------- ------- -------
Total $31,224 $ 247 $ 116 $31,355
======= ======= ======= =======
Mortgage-backed $ 596 $ 2 $ -- $ 598
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Available-for-sale
Unrealized
Cost Gain Loss Fair Value
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------------
US Government and agency $26,724 $ 199 $ 183 $26,740
Other 1,792 72 -- 1,864
------- ------- ------- -------
Total $28,516 $ 271 $ 183 $28,604
======= ======= ======= =======
Mortgage-backed $ 6,184 $ 94 $ 51 $ 6,227
======= ======= ======= =======
</TABLE>
<PAGE> 15
SHAREHOLDERS' EQUITY AND CAPITAL RESOURCES
Total equity at June 30, 1995 was $28.0 million, compared to $26.3
million and $25.3 million at December 31, 1994 and June 30, 1994,
respectively. The Corporation declared $391,000, or $.30 per share, in
dividends for the second quarter of 1995 as compared to $326,000, or $.25
per share in the second quarter of 1994.
<TABLE>
<CAPTION>
The following is a summary of risk-based capital ratios:
6/30/95 12/31/94 6/30/94
-------- -------- --------
<S> <C> <C> <C>
Tier 1 capital $ 27,499 $ 26,366 $ 24,849
Tier 2 capital 3,000 2,900 2,750
-------- -------- --------
Total qualifying capital $ 30,499 $ 29,266 $ 27,599
======== ======== ========
Risk adjusted assets $250,892 $243,591 $232,959
======== ======== ========
Tier 1 leverage ratio 7.92% 7.93% 7.90%
Tier 1 risk-based capital 10.96% 10.82% 10.67%
Total risk-based capital 12.16% 12.01% 11.85%
</TABLE>
<PAGE> 16
------------------------------------------------------------------------
Six Months Ended June 30, 1995
Compared with 1994
------------------------------------------------------------------------
Net income for the six months ended June 30, 1995 was $1,896,000 or
$1.36 per share compared to the $1,731,000 or $1.24 per share earned in
the same period of 1994, a 9.5% increase. Return on average assets for
the first six months was 1.11%, comparable to the previous year. The
return on average equity was 14.0%, compared to 13.8% in 1994.
Net interest income (FTE) increased $746,000, or 11.3% to $7.4
million for the first six months of 1995 as average earning assets
increased $30.8 million from 1994. The year to date net interest margin
was 4.60% for 1995 compared to 4.58% earned in the first six months of
1994. Interest income increased $2.6 million and interest expense increased
$1.8 million for the six month comparison from 1995 to 1994. The yield on
earning assets increased 86 basis points (bp) to 8.61% and the rate paid
on interest bearing deposits increased 97 bp to 4.67%. The average rate
earned on loans increased 141 bp to 9.49% and the security portfolio has
earned 95 bp more, averaging 5.79% in 1995. Funds sold have earned 266 bp
more or 5.82% during 1995. Increases in rates paid on deposits in 1995 over
1994 include: 66 bp increase in consumer CD funding to 5.89%, a 164 bp
increase in the cost of money market deposits, to average 4.49%, a 15 bp
increase in savings and interest checking rates to 2.26% and a 240 bp increase
in CDs over $100,000 to average 5.91% in 1995. Average outstanding loans
increased $24.4 million, average outstanding investment securities increased
$2.2 million, and average overnight funds sold increased $4.2 million from
the prior year. Growth of $14.9 million of average outstanding consumer CDs
and $9 million in money market deposits were offset by a decline in average
outstanding savings and interest checking deposits of $3.5 million. Funding
from additional Federal Home Loan Bank advances increased on average $3.7
million and the rate paid increased 236 bp to 6.96% in 1995. Purchases of
overnight funds decreased $886,000 in the year to year comparison and the rate
paid increased 199 bp to average 6.14%. Total interest bearing funds increased
$23.4 million to average $271.5 million for the first six months of 1995.
The provision for loan losses was $359,000 and net loan charge-offs
were $259,000 for the first six months of 1995 compared to a provision of
$305,000 and net charge-offs of $185,000 in 1994.
Non-interest income decreased $132,000, or 5%, for the first six months
of 1995, mainly due to the $274,000 or 40% decrease in fees earned from the
origination and sale of mortgage loans, reflecting a lower volume of lending
activity. Offsetting this decrease were increases in deposit account related
fees of $13,000, trust income of $87,000, and other income of $42,000. Non-
interest expense increased $324,000, or 5%, in 1995 from the comparable prior
period. Expenses associated with personnel costs have increased $184,000, or
5%, in 1995. Equipment and occupancy expenses increased $54,000, or 6%. Other
costs increased a total of $86,000, or 5%, primarily attributable to increased
expenses associated with non-earning loans.
Total cash dividends for the first six months of 1995 were $.60 per
share compared to $.50 per share in 1994, a 20% increase. Shareholders'
equity increased 10.6% from June of 1994 and at $28 million for June of
1995 represents 8.1% of assets.
<PAGE> 17
Recorded in stockholders' equity were unrealized gains, net of tax,
of $598,000 in 1995 and unrealized losses of $322,000 in 1994. The
unrealized gains and losses of the investment portfolio are not expected
to cause a material change in future income or investment yields.
EMPIRE BANC CORPORATION
PART II - OTHER INFORMATION
Item 4. Submission of matters to a vote of security holders
(a) Annual meeting of shareholders of Empire Banc Corporation
held May 16, 1995.
(c)(1) Election of four (4) directors to serve until the annual
meeting of shareholders in 1998.
Withhold
For Authority Non-vote
--- --------- --------
James E. Dutmers, Jr. 1,180,688 222 123,392
Chairman and Chief
Executive Officer,
Empire Banc Corporation
Empire National Bank
Michael H. Dennos
Retired Business Executive 1,173,816 7,094 123,392
Thomas G. McIntyre 1,180,688 222 123,392
Chairman, Passageways
Travel Service, Inc.
Ronald G. Reffitt, Sr. 1,177,004 3,906 123,392
President and Owner,
Peninsula Construction
Supply, Inc.
(2) Motion to approve the Empire Banc Corporation Deferred
Compensation and Stock Investment plan. Shareholder
votes: For-1,058,264, Against-31,256, Abstain-80,357.
Motion to amend the Company's Articles of Incorporation
to permit removal of directors only for cause and only by
the affirmative vote of holders of a majority of the shares
entitled to vote in the election of directors. Shareholder
votes: For-1,030,981, Against-31,094, Abstain-60,254.
Motion to amend the Articles to require that amendments
by the shareholders of certain provisions of the Company's
Bylaws described in the Proxy Statement be approved by the
affirmative vote of sixty-six and two-thirds percent (66 2/3%)
of the shares entitled to vote on the amendment. Shareholder
votes: For- 1,051,638, Against- 23,498, Abstain- 47,193.
<PAGE> 18
Motion to amend the Articles to allow amendment of certain
provisions of the Articles described in the Proxy Statement
with the approval of a majority of the shares entitled to
vote on the amendment. Shareholder votes: For-1,043,121,
Against- 39,381, Abstain- 39,827.
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits - none
(b) Reports on Form 8-K - 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.
EMPIRE BANC CORPORATION
-----------------------
(Registrant)
<TABLE>
<S> <C>
Date: August 10, 1995 \s\ James E. Dutmers, Jr.
--------------------------------------
James E. Dutmers, Jr.
Chairman and Chief Executive Officer
Date: August 10, 1995 \s\ William T. Fitzgerald, Jr.
--------------------------------------
William T. Fitzgerald, Jr.
Secretary, Treasurer & Chief Financial
Officer
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 11,550
<INT-BEARING-DEPOSITS> 126
<FED-FUNDS-SOLD> 9,300
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 34,831
<INVESTMENTS-CARRYING> 31,820
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<LOANS> 253,495
<ALLOWANCE> 3,000
<TOTAL-ASSETS> 348,066
<DEPOSITS> 303,787
<SHORT-TERM> 0
<LIABILITIES-OTHER> 4,236
<LONG-TERM> 12,000
<COMMON> 6,521
0
0
<OTHER-SE> 21,522
<TOTAL-LIABILITIES-AND-EQUITY> 348,066
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<INTEREST-INVEST> 1,915
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<EXPENSE-OTHER> 6,489
<INCOME-PRETAX> 2,813
<INCOME-PRE-EXTRAORDINARY> 2,813
<EXTRAORDINARY> 0
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<NET-INCOME> 1,896
<EPS-PRIMARY> 1.36
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<ALLOWANCE-CLOSE> 3,000
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</TABLE>
