<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 March 31, 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
March 31, 1995.
<PAGE> 2
EMPIRE BANC CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
(In thousands, except share data) March 31 December 31 March 31
1995 1994 1994
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 11,628 $ 14,527 $ 9,588
Federal funds sold 15,800 7,100 5,000
------ ------ ------
Cash and cash equivalents 27,428 21,627 14,588
Securities available for sale - (fair value) 32,201 31,332 31,055
Securities held to maturity
(Fair value: 1995-$33,578,
$32,220 and $35,780 in 1994) 33.830 32,899 35,891
Loans 243,456 243,583 220,072
Less: allowance for loan losses (2,975) (2,900) (2,630)
- - - - -------------------------------------------------------------------------------------------
Net loans 240,481 240,683 217,442
- - - - -------------------------------------------------------------------------------------------
Premises and equipment, net 3,851 3,939 4,136
Other real estate 70 53 936
Accrued interest receivable and other assets 6,374 6,418 6,571
- - - - -------------------------------------------------------------------------------------------
Total assets $344,235 $336,951 $310,619
======== ======== ========
- - - - -------------------------------------------------------------------------------------------
LIABILITIES
Deposits
Non-interest-bearing $ 39,427 $ 44,150 $ 35,420
Interest-bearing 261,194 253,839 238,304
- - - - -------------------------------------------------------------------------------------------
Total deposits 300,621 297,989 273,724
- - - - -------------------------------------------------------------------------------------------
Federal Home Loan Bank advances 12,000 8,000 8,000
Accrued expense and other liabilities 4,432 4,630 4,035
- - - - -------------------------------------------------------------------------------------------
Total liabilities 317,053 310,619 285,759
- - - - -------------------------------------------------------------------------------------------
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: 3/31/95 & 12/31/94 - 1,304,302,
3/31/94 - 1,299,302 6,521 6,521 6,496
Paid-in-capital 9,098 9,098 9,039
Retained earnings 11,756 11,224 9,488
Security valuation (193) (511) (163)
- - - - -------------------------------------------------------------------------------------------
Total shareholders' equity 27,182 26,332 24,860
-------- -------- --------
Total liabilities and shareholders' equity $334,235 $336,951 $310,619
======== ======== ========
See notes to consolidated financial statements.
</TABLE>
<PAGE> 3
EMPIRE BANC CORPORATION
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
(In thousands, except share data) Year to Date
March 31
1995 1994
<S> <C> <C>
INTEREST INCOME
Loans, including fees $5,652 $4,532
Taxable securities
Available for sale 461 346
Held to maturity 418 343
Tax-exempt securities - held to maturity 49 76
Federal funds sold 112 70
- - - - ----------------------------------------------------------------
Total interest income 6,692 5,367
INTEREST EXPENSE
Deposits 2,929 2,185
Federal funds purchased 1 ---
Federal Home Loan Bank advances 157 63
- - - - ----------------------------------------------------------------
Total interest expense 3,087 2,248
----- -----
Net interest income 3,605 3,119
Provision for loan losses 241 61
----- -----
Net interest income after
provision for loan losses 3,364 3,058
NON-INTEREST INCOME
Mortgage sales and servicing 209 400
Service charges on deposit accounts 325 307
Trust income 448 418
Other service charges and fees 87 83
Other income 90 72
Security gains(losses) --- 11
- - - - ----------------------------------------------------------------
Total non-interest income 1,159 1,291
----- -----
NON-INTEREST EXPENSE
Salaries and employee benefits 1,724 1,706
Occupancy 249 249
Furniture and equipment 211 187
Other 971 962
- - - - ----------------------------------------------------------------
Total non-interest expense 3,155 3,104
----- -----
Income before federal income taxes 1,368 1,245
Federal income taxes 445 400
- - - - ----------------------------------------------------------------
Net income $ 923 $ 845
====== ======
Earnings per share $ .66 $ .61
Average shares 1,390,954 1,390,554
- - - - ----------------------------------------------------------------
See notes to consolidated financial statements.
</TABLE>
<PAGE> 4
EMPIRE BANC CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
(In thousands) Year to date March 31
1995 1994
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 923 $ 845
Adjustments to reconcile net income to net
cash from operating activities:
Depreciation and amortization 192 181
Provision for loan losses 241 61
Net (increase) decrease in mortgages held for sale (61) (331)
Net gains on securities available for sale --- (10)
Net amortization/accretion on securities 127 281
Net gain on called securities --- (1)
Change in:
Interest receivable (63) (250)
Interest payable 78 41
Other, net (219) (218)
------ ------
Total adjustments 295 (246)
- - - - -------------------------------------------------------------------------------------------
Net cash from operating activities 1,218 599
- - - - -------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Securities available for sale:
Proceeds from sales --- 1,010
Proceeds from maturities 3,138 1,039
Purchases (3,582) (5,371)
Securities held to maturity:
Proceeds from maturities 3,462 11,007
Purchases (4,463) (9,318)
Loans granted net of repayments 22 (1,440)
Premises and equipment expenditures (104) (145)
- - - - -------------------------------------------------------------------------------------------
Net cash from investing activities (1,527) (3,218)
- - - - -------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net increase (decrease) in deposits 2,632 (5,817)
Cash dividends paid (522) (326)
Federal Home Bank advances 4,000 3,000
- - - - -------------------------------------------------------------------------------------------
Net cash from financing activities 6,110 (3,143)
- - - - -------------------------------------------------------------------------------------------
Net change in cash and cash equivalents 5,801 (5,762)
Cash and cash equivalents
Beginning of year 21,627 20,350
------- -------
End of period $27,428 $14,588
======= =======
Cash paid during the year for: Interest $ 3,008 $ 2,289
Income taxes --- ---
</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 923 845
Dividends declared (391) (326)
Net change in security valuation 318 (163)
- - - - -------------------------------------------------------------------------------------------
Balance March 31 $27,182 $24,860
- - - - -------------------------------------------------------------------------------------------
</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 three month period ended March 31, 1995, there were no
sales or transfers of available-for-sale or held-to-maturity securities.
The change in net unrealized holding gain or loss on available-for-sale
securities for the current quarter is $318,000.
<PAGE> 6
NET INTEREST INCOME
AVERAGE BALANCES, INTEREST INCOME/EXPENSE, AVERAGE RATES
<TABLE>
<CAPTION>
Quarter ending March 31
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*,** $243,156 $ 5,655 9.43% $215,093 $ 4,533 8.55%
Securities - taxable 64,029 879 5.49% 59,669 689 4.62%
- tax-exempt* 3,257 71 8.78% 6,369 110 6.93%
-------- ------- -------- -------
Total securities 67,286 950 5.65% 66,038 799 4.84%
Federal funds sold 7,853 113 5.75% 9,222 70 3.05%
-------- ------- -------- -------
Total earning assets 318,295 6,718 8.56% 290,353 5,402 7.55%
Cash and due from banks 11,252 10,590
Other assets 9,129 11,733
-------- --------
Total assets $338,676 $312,676
======== ========
LIABILITIES AND EQUITY
CDs over $100,000 $ 13,790 199 5.85% $ 11,857 99 3.31%
Savings & interest checking 60,750 340 2.27% 63,707 329 2.09%
Money market deposits 68,530 747 4.42% 63,297 432 2.77%
Consumer CDs 115,126 1,643 5.79% 102,494 1,325 5.25%
-------- ------- -------- -------
Total interest-bearing
deposits 258,196 2,929 4.60% 241,355 2,185 3.67%
FHLB advances 9,460 158 6.78% 5,967 63 4.31%
-------- ------- -------- -------
Total interest-bearing
sources 267,656 3,087 4.68% 247,322 2,248 3.69%
-------- ------- -------- -------
Demand deposits 39,990 36,524
Other liabilities 4,384 3,934
Shareholders' equity 26,646 24,896
-------- --------
TOTAL LIABILITIES
AND EQUITY $338,676 $312,676
======== ========
Net interest spread (FTE) 3.88% 3.86%
===== =====
Net interest income (FTE) $ 3,631 $ 3,154
======= =======
Net interest margin (FTE) 4.63% 4.41%
===== =====
</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
EMPIRE BANC CORPORATION
FINANCIAL REVIEW
FIRST QUARTER 1995 COMPARED WITH FIRST QUARTER 1994
SUMMARY
Empire Banc Corporation's first quarter earnings were $923,000, a 9.2%
increase from 1994 first quarter income of $845,000. Earnings per
share increased from $.61 per share in 1994 to $.66 in 1995. The return
on assets was 1.09%, comparable to the first quarter of 1994. The return
on equity was 13.86% for the quarter versus 13.58% in 1994.
Net interest income, on a fully taxable equivalent (FTE) basis, was
$3.6 million, a 15.1% increase from the year-ago quarter, reflecting
a $27.9 million increase in average earning assets and a 22 basis
point increase in net interest margin. Non-interest income decreased
$132,000, or 10.2%, due primarily to decreased mortgage lending
activity, in the quarterly comparison from the prior year. Non-interest
expenses increased $51,000, or 1.6% in the quarter to quarter comparison.
<TABLE>
<CAPTION>
NET INTEREST INCOME
Quarter Ending
March 31
1995 1994
<S> <C> <C>
- - - - -----------------------------------------------------------------
Interest income $6,692 $5,367
Taxable equivalent adjustment 26 35
------ ------
Interest income (FTE) 6,718 5,402
Interest expense 3,087 2,248
------ ------
Net interest income (FTE) $3,631 $3,154
====== ======
Increase (decrease) due to change in:
Volume $ 362 $ 330
Rate 115 (326)
------ ------
Total $ 477 $ 4
====== ======
</TABLE>
<PAGE> 8
First quarter net interest income, on a fully taxable equivalent basis,
was $3,631,000, a $477,000 increase from the first quarter of 1994.
Average earning assets increased $27.9 million as the loan portfolio
increased $28.1 million for the quarter. The investment portfolio
showed a $1.2 million increase and the bank's investment in overnight
funds decreased on average $1.4 million, to account for the change.
Total interest income (FTE) for the quarter increased $1.3 million
between the two periods and the average rate earned increased 101 basis
points to 8.56%. Total interest expense increased $839,000, and the
average rate paid increased 99 basis points to 4.68%.
Average loans totaled $243 million for the quarter, increasing 13.0%
from the 1994 first quarter. Loans secured by real estate totaled
$166 million at March 31, 1995, increasing $26 million from March 1994.
The average rate earned on the loan portfolio increased 9 basis points
to 9.43% in the quarterly comparison. Average outstanding investment
securities increased $1.2 million in the quarter to quarter comparison to
average $67.3 million and the rate earned increased 81 basis points to
5.65%.
Average interest bearing deposits increased $16.8 million to $258.2 million
in the first quarter of 1995. Increases in money market deposits of $5.2
million, CDs over $100,000 of $1.9 million and consumer CDs of $12.6 million
were offset by decreases in savings and interest checking of $3.0 million.
Funding from additional Federal Home Loan Bank advances increased on average
$3.5 million from the first quarter of 1994. Demand deposits averaged $3.5
million more in 1995 versus the 1994 first quarter. Average non-interest
bearing funds supporting earning assets increased $7.6 million from last
year's levels for the quarter.
<TABLE>
<CAPTION>
AVERAGE EARNING ASSETS- NET INTEREST MARGIN
Quarter Ending Quarter Ending
March 31, 1995 March 31, 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 $318,295 8.56% $290,353 7.55%
======== ========
Interest-bearing liabilities 267,656 4.68 247,322 3.69
Noninterest-bearing sources of funds 50,639 -- 43,031 --
-------- --------
Total supporting liabilities $318,295 3.93% $290,353 3.14%
======== ========
Net interest margin (related to average
interest-earning assets) 4.63% 4.41%
==== ====
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
NON-INTEREST INCOME
Quarter Ending
March 31
Increase (decrease)
Amount %
<S> <C> <C>
- - - - ----------------------------------------------------------------
(In thousands)
Mortgage sales and servicing $ (191) (48)%
Service charges on deposit accounts 18 6
Trust income 30 7
Other service charges and fees 4 5
Other income 7 8
------ ----
$ (132) (10)%
====== ====
</TABLE>
Non-interest income for the first quarter of 1995 was $1,159,000, a
$132,000 decrease or 10.2% from the first quarter of 1994. Increases
in deposit account related fees and trust 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 Ending
March 31
Increase (decrease)
Amount %
<S> <C> <C>
- - - - -----------------------------------------------------------------
(In thousands)
Salaries and employee benefits $ 18 1%
Occupancy -- --
Equipment 24 13
Other 9 1
------ ----
$ 51 2%
====== ====
</TABLE>
Non-interest expenses for the first quarter totaled $3,155,000, an
increase of $51,000 or 2% from the first quarter of 1994. Equipment
related expenses increased $24,000, or 13%, primarily due to costs
associated with data processing activity.
<PAGE> 10
ASSET QUALITY-ALLOWANCE FOR LOAN LOSSES
Total non-performing assets declined $1,073,000 or 31%, with other real
estate being reduced by $866,000 and loans on non-accrual status down
$527,000 over the last twelve months. Net loan charge-offs for the current
quarter were $166,000 compared to the $61,000 in the first quarter of 1994.
The reserve for loan losses was $2,975,000 or 1.22% of total loans at
March 31, 1995, compared to the $2,630,000 or 1.20% of total loans at
March 31, 1994. Although the provision for loan losses increased over
the prior year due to increased loan losses, net loan losses were only
.27 percent of average loans for the three months ended March 31, 1995,
well within industry norms.
<TABLE>
<CAPTION>
NON-PERFORMING ASSETS
3/31/95 12/31/94 3/31/94
------- -------- -------
<S> <C> <C> <C>
(In Thousands)
Non-accrual loans $1,484 $1,228 $2,011
Renegotiated loans 804 644 484
------ ------ ------
Total non-performing loans 2,288 1,872 2,495
Other real estate 70 53 936
------ ------ ------
Total non-performing assets $2,358 $1,925 $3,431
====== ====== ======
Non-performing assets as
a percent of total loans .97% .79% 1.56%
Accruing loans 90 days or more past due $ 123 $ 128 $ 70
</TABLE>
INVESTMENT SECURITIES
The following is a summary of investment securities, held-to-maturity and
available-for-sale, at March 31, 1995.
<TABLE>
<CAPTION>
Held-to-maturity
Unrealized
Cost Gain Loss Fair Value
<S> <C> <C> <C> <C>
- - - - --------------------------------------------------------------------------------------------
US Government and agency $26,407 $ 26 $ 288 $26,145
State and Municipal 3,248 66 5 3,309
Mortgage-backed 633 --- 9 624
Other 3,542 5 47 3,500
------- ------- ------- -------
Total $33,830 $ 97 $ 349 $33,578
======= ======= ======= =======
</TABLE>
<PAGE> 11
<TABLE>
<CAPTION>
Available-for-sale
Unrealized
Cost Gain Loss Fair Value
<S> <C> <C> <C> <C>
- - - - ------------------------------------------------------------------------------------------
US Government and agency $26,480 $ 38 $ 375 $26,143
Mortgage-backed 4,220 33 50 4,203
Other 1,792 63 --- 1,855
------- ----- ----- -------
Total $32,492 $ 134 $ 425 $32,201
======= ===== ===== =======
</TABLE>
SHAREHOLDERS' EQUITY AND CAPITAL RESOURCES
Total equity at March 31, 1995 was $27.2 million, compared to $26.3
million and $24.9 million at December 31, 1994 and March 31, 1994,
respectively. The Corporation declared $391,000, or $.30 per share, in
dividends for the first quarter of 1995 as compared to $326,000, or $.25
per share in the first quarter of 1994.
<TABLE>
<CAPTION>
The following is a summary of risk-based capital ratios:
3/31/95 12/31/94 3/31/94
-------- -------- --------
<S> <C> <C> <C>
Tier 1 capital $ 26,908 $ 26,366 $ 24,353
Tier 2 capital 2,975 2,900 2,630
-------- -------- --------
Total qualifying capital $ 29,883 $ 29,266 $ 26,983
======== ======== ========
Risk adjusted assets $242,719 $243,591 $226,570
======== ======== ========
Tier 1 leverage ratio 7.94% 7.93% 7.80%
Tier 1 risk-based capital 11.09% 10.82% 10.75%
Total risk-based capital 12.31% 12.01% 11.91%
</TABLE>
<PAGE> 12
EMPIRE BANC CORPORATION
PART II - OTHER INFORMATION
Item 4. Submission of matters to a vote of security holders
None
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits - none
Bylaws of Empire Banc Corporation filed as Exhibit (3) to the
Registrant's Current Report Form 8-K dated January 26, 1995.
(b) Reports on Form 8-K
A Current Report on Form 8-K dated January 26, 1995 was filed
on February 1, 1995 reporting amendments to the Registrant's
Bylaws.
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: May 10, 1995 \s\ Robert L. Israel
--------------------------------------
Robert L. Israel
President & Chief Operating Officer
Date: May 10, 1995 \s\ William T. Fitzgerald, Jr.
--------------------------------------
William T. Fitzgerald, Jr.
Secretary, Treasurer & Chief Financial
Officer
</TABLE>
