<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 September 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 1,312,802 shares of common stock, par value $5, outstanding as of
September 30, 1995.
<PAGE> 2
EMPIRE BANC CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
(In thousands, except share data) September 30 December 31 September 30
1995 1994 1994
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 13,905 $ 14,527 $ 11,766
Federal funds sold 7,100 7,100 6,500
-------- -------- --------
Cash and cash equivalents 21,005 21,627 18,266
Investment securities
Available for sale - (fair value) 32,633 28,145 27,295
Held to maturity 35,872 32,229 34,617
(fair value: 1995-$36,051,
$31,572 and $34,234 in 1994)
Mortgage-backed securities
Available for sale - (fair value) 8,029 3,187 2,428
Held to maturity (fair value: 1995-$560,
$648 and $699 in 1994) 557 670 707
Loans 253,096 243,583 238,926
Less: allowance for loan losses (3,200) (2,900) (2,875)
- -----------------------------------------------------------------------------------------
Net loans 249,896 240,683 236,051
- -----------------------------------------------------------------------------------------
Premises and equipment, net 3,692 3,939 3,909
Other real estate 4 53 614
Accrued interest receivable and other assets 7,322 6,418 6,323
- -----------------------------------------------------------------------------------------
Total assets $359,010 $336,951 $330,210
=========================================================================================
LIABILITIES
Deposits
Non-interest-bearing $ 45,513 $ 44,150 $ 43,719
Interest-bearing 267,793 253,839 248,617
- -----------------------------------------------------------------------------------------
Total deposits 313,306 297,989 292,336
- -----------------------------------------------------------------------------------------
Federal Home Loan Bank advances 12,000 8,000 8,000
Accrued expense and other liabilities 4,798 4,630 3,909
-------- -------- --------
Total liabilities 330,104 310,619 304,245
- -----------------------------------------------------------------------------------------
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: 1995-1,312,802; 1994-1,304,302 8,205 6,521 6,521
Paid-in-capital 9,208 9,098 9,098
Retained earnings 11,364 11,224 10,678
Net unrealized gain (loss) on securities, net of tax 129 (511) (332)
-------- -------- --------
Total shareholders' equity 28,906 26,332 25,965
- -----------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $359,010 $336,951 $330,210
=========================================================================================
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
September 30 September 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $ 6,036 $ 5,239 $17,552 $14,759
Taxable securities
Available for sale 607 376 1,595 1,090
Held to maturity 435 352 1,266 1,035
Tax-exempt securities-held to maturity 48 55 144 189
Federal funds sold 166 72 455 162
------ ------ ------ ------
Total interest income 7,292 6,094 21,012 17,235
- -------------------------------------------------------------------------------------------
INTEREST EXPENSE
Deposits 3,158 2,409 9,193 6,818
Federal funds purchased -- -- 1 18
Federal Home Loan Bank advances 216 97 586 257
------ ------ ------ -----
Total interest expense 3,374 2,506 9,780 7,093
- -------------------------------------------------------------------------------------------
Net interest income 3,918 3,588 11,232 10,142
Provision for loan losses 266 268 625 573
Net interest income after ------ ------ ------ ------
provision for loan losses 3,652 3,320 10,607 9,569
- -------------------------------------------------------------------------------------------
NON-INTEREST INCOME
Mortgage sales and servicing 342 218 761 911
Service charges on deposit accounts 323 350 978 992
Trust income 440 329 1,338 1,140
Other service charges and fees 161 143 359 325
Other income 73 152 255 292
Security gains(losses) -- -- (5) 11
------ ------ ------ ------
Total non-interest income 1,339 1,192 3,686 3,671
- -------------------------------------------------------------------------------------------
NON-INTEREST EXPENSE
Salaries and employee benefits 2,133 1,778 5,701 5,162
Occupancy 254 234 756 717
Furniture and equipment 207 205 632 595
Other 820 865 2,814 2,773
------ ------ ------ ------
Total non-interest expense 3,414 3,082 9,903 9,247
- -------------------------------------------------------------------------------------------
Income before federal income taxes 1,577 1,430 4,390 3,993
Federal income taxes 515 475 1,432 1,307
- -------------------------------------------------------------------------------------------
Net income $ 1,062 $ 955 $ 2,958 $2,686
===========================================================================================
Earnings per share * $ .60 $ .55 $ 1.69 $ 1.54
Average shares * 1,760,352 1,751,078 1,749,003 1,745,516
* reflects a five-for-four stock split, effected in the form of a 25% stock dividend,
payable November 1995.
See notes to consolidated financial statements.
</TABLE>
<PAGE> 4
EMPIRE BANC CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
(In thousands) Year to date September 30
1995 1994
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,958 $ 2,686
Adjustments to reconcile net income to net
cash from operating activities:
Depreciation and amortization 579 552
Provision for loan losses 625 573
Net (increase) in mortgages held for sale (1,150) (1,410)
Net losses (gains) on securities available for sale 5 (11)
Net amortization/accretion on securities 341 771
Change in:
Interest receivable (374) (333)
Interest payable 176 84
Other, net (691) 335
------ ------
Total adjustments (489) 561
- ------------------------------------------------------------------------------------------
Net cash from operating activities 2,469 3,247
- ------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Securities available for sale:
Proceeds from sales 1,995 1,010
Proceeds from maturities 7,424 3,914
Purchases (17,900) (7,388)
Securities held to maturity:
Proceeds from maturities 12,698 17,497
Purchases (16,453) (15,513)
Loans granted net of repayments (8,688) (19,465)
Premises and equipment expenditures (332) (289)
- ------------------------------------------------------------------------------------------
Net cash from investing activities (21,256) (20,234)
- ------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net increase in deposits 15,317 12,795
Cash dividends paid (1,304) (976)
Federal Home Bank advances 4,000 3,000
Issuance of common stock 152 84
- ------------------------------------------------------------------------------------------
Net cash from financing activities 18,165 14,903
- ------------------------------------------------------------------------------------------
Net change in cash and cash equivalents (622) (2,084)
- -------------------------------------------------------------------------------------------
Cash and cash equivalents
Beginning of year 21,627 20,350
------- -------
End of period $21,005 $18,266
==========================================================================================
Cash paid during the year for: Interest $ 9,604 $ 7,009
Income taxes 1,740 1,613
See notes to consolidated financial statements.
</TABLE>
<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 2,958 2,686
Common stock issued 152 84
Dividends declared (1,176) (977)
Net change in security valuation 640 (332)
- -------------------------------------------------------------------------------------------
Balance September 30 $28,906 $25,965
- -------------------------------------------------------------------------------------------
</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
Corporations 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 stock 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 nine month period ended September 30, 1995, the proceeds
from sales of available-for-sale securities were $1,995,000 with gross
realized losses of $4,600 from these sales. Net unrealized holding gains on
available-for-sale securities for the current quarter are $42,000 and year-
to-date are $640,000.
<PAGE> 6
NET INTEREST INCOME
AVERAGE BALANCES, INTEREST INCOME/EXPENSE, AVERAGE RATES
<TABLE>
<CAPTION>
Quarter Ending September 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*,** $250,153 $ 6,040 9.58% $234,381 $ 5,239 8.87%
Securities - taxable 69,336 1,041 6.01% 60,398 728 4.82%
- tax-exempt* 3,310 71 8.55% 3,649 81 8.89%
-------- -------- -------- -------
Total securities 72,646 1,112 5.99% 64,047 809 4.94%
Federal funds sold 11,369 166 5.71% 6,532 72 4.34%
-------- -------- -------- -------
Total earning assets 334,168 7,318 8.69% 304,960 6,120 7.96%
Cash and due from banks 12,506 12,791
Other assets 9,635 9,407
-------- --------
Total assets $356,309 $327,158
======== ========
LIABILITIES AND EQUITY
CDs over $100,000 $ 8,243 127 6.02% $ 11,398 127 4.36%
Savings & interest checking 60,885 347 2.26% 66,206 373 2.23%
Money market deposits 74,514 824 4.39% 63,391 514 3.22%
Consumer CDs 122,261 1,860 6.04% 105,266 1,395 5.26%
-------- ------ -------- ------
Total interest-bearing
deposits 265,903 3,158 4.71% 246,261 2,409 3.88%
Federal funds purchased 10 -- 6.59% -- --
FHLB advances 12,000 216 7.14% 8,000 97 4.82%
-------- ------ -------- ------
Total interest-bearing
sources 277,913 3,374 4.82% 254,261 2,506 3.91%
-------- ------ -------- ------
Demand deposits 45,415 43,264
Other liabilities 4,510 3,963
Shareholders' equity 28,471 25,670
-------- --------
Total $356,309 $327,158
======== ========
Net interest spread (FTE) 3.87% 4.05%
===== =====
Net interest income (FTE) $3,944 $3,614
====== ======
Net interest margin (FTE) 4.68% 4.70%
===== =====
* Interest income on tax-exempt securities and certain tax-exempt
loans have been adjusted to tax-equivalent basis.
** Non-accrual loans are excluded.
</TABLE>
<PAGE> 7
NET INTEREST INCOME
AVERAGE BALANCES, INTEREST INCOME/EXPENSE, AVERAGE RATES
<TABLE>
<CAPTION>
Year to Date September 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*,** $246,678 $ 17,563 9.52% $225,191 $ 14,761 8.76%
Securities - taxable 66,144 2,861 5.77% 60,357 2,125 4.70%
- tax-exempt* 3,221 210 8.71% 4,672 277 7.90%
-------- -------- -------- -------
Total securities 69,365 3,071 5.79% 65,029 2,402 4.87%
Federal funds sold 10,384 455 5.78% 5,937 162 3.60%
-------- -------- -------- -------
Total earning assets 326,427 21,089 8.64% 296,157 17,325 7.82%
Cash and due from banks 11,693 11,495
Other assets 9,368 10,631
-------- --------
Total assets $347,488 $318,283
======== ========
LIABILITIES AND EQUITY
CDs over $100,000 $ 10,233 461 5.94% $ 11,165 322 3.80%
Savings & interest checking 60,587 1,025 2.26% 64,732 1,043 2.15%
Money market deposits 72,448 2,413 4.45% 62,739 1,396 2.97%
Consumer CDs 119,200 5,294 5.94% 103,577 4,057 5.24%
-------- ------ -------- ------
Total interest-bearing
deposits 262,468 9,193 4.68% 242,213 6,818 3.76%
Federal funds purchased 26 1 6.20% 596 18 4.15%
FHLB advances 11,150 586 7.02% 7,330 257 4.68%
-------- ------ -------- ------
Total interest-bearing
sources 273,644 9,780 4.78% 250,139 7,093 3.79%
-------- ------ -------- ------
Demand deposits 41,921 38,989
Other liabilities 4,379 3,916
Shareholders' equity 27,544 25,239
-------- --------
Total $347,488 $318,283
======== ========
Net interest spread (FTE) 3.86% 4.03%
===== =====
Net interest income (FTE) $11,309 $10,232
======= =======
Net interest margin (FTE) 4.63% 4.62%
===== =====
* Interest income on tax-exempt securities and certain tax-exempt
loans have been adjusted to tax-equivalent basis.
** Non-accrual loans are excluded.
</TABLE>
<PAGE> 8
EMPIRE BANC CORPORATION
FINANCIAL REVIEW
THIRD QUARTER 1995
COMPARED WITH
THIRD QUARTER 1994
SUMMARY
Empire Banc Corporation's third quarter earnings were $1,062,000, an
11.2% increase from 1994 third quarter income of $955,000. Earnings per
share increased from $.55 per share in 1994 to $.60 in 1995. The return
on assets was 1.19% for the quarter versus 1.17% in 1994. The return on
equity was 14.92% compared to 14.88% in the prior year quarter.
Net interest income, on a fully taxable equivalent (FTE) basis, was $3.9
million, a 9.13% increase from the year-ago quarter, reflecting a $29.2
million increase in average earning assets. The net interest margin earned
for for the third quarter was 4.68% versus 4.70% in 1994. Non-interest
income increased $147,000, or 12.33% in the quarter-to-quarter comparison,
while non-interest expenses increased $332,000, or 10.77%.
<TABLE>
<CAPTION>
NET INTEREST INCOME
Quarter Ended Nine Months Ended
September 30 September 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
Interest income $7,292 $6,094 $21,012 $17,235
Taxable equivalent adjustment 26 26 77 90
------ ------ ------- -------
Interest income (FTE) 7,318 6,120 21,089 17,325
Interest expense 3,374 2,506 9,780 7,093
------ ------ ------- -------
Net interest income (FTE) $3,944 $3,614 $11,309 $10,232
====== ====== ======= =======
Increase (decrease) due to change in:
Volume $ 250 $ 359 $ 904 $ 1,032
Rate 80 (19) 173 (429)
------ ------ ------- -------
Total $ 330 $ 340 $ 1,077 $ 603
====== ====== ======= =======
</TABLE>
<PAGE> 9
Third quarter net interest income, on a fully taxable equivalent basis,
was $3,944,000, a $330,000 increase from the third quarter of 1994.
Average earning assets increased $29.2 million as the loan portfolio
increased $15.8 million for the quarter. The investment portfolio showed
an $8.6 million increase and the bank's investment in overnight funds
increased on average $4.8 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 73 basis points to
average 8.69%. Total interest expense increased $868,000, and the average
rate paid increased 91 basis points (bp) to 4.82%.
Average loans totaled $250 million for the quarter, increasing 6.7% from
the 1994 third quarter. Growth in loans secured by real estate and
commercial loans has been offset by declines in consumer loan outstandings
from 1994. The average rate earned on the loan portfolio increased 71 bp
to 9.58% in the quarterly comparison. Average outstanding investment
securities increased $8.6 million in the quarter to quarter comparison
to average $72.6 million and the rate earned increased 105 bp to 5.99%.
Funds sold increased on average $4.8 million and the rate earned improved
137 bp more in the quarterly comparison from the prior year.
Average interest-bearing deposits increased $19.6 million to $265.9 million
for the third quarter of 1995. Increases in average money market deposits
of $11.1 million and consumer CDs of $17.0 million were offset by decreases
in savings and interest checking of $5.3 million and CDs over $100,000 of
$3.2 million. Following general economic interest rate changes, interest
bearing deposits averaged 83 bp more in 1995 rising to an average 4.71% for
the quarter. Consumer CDs increased 78 bp, money market deposits 117 bp
and CDs over $100,000 166 bp to account for the increase. Funding from
additional Federal Home Loan Bank advances increased on average $4 million
from the third quarter of 1994 and the rate increased 232 bp to 7.14%.
Demand deposits averaged $2.2 million more in 1995 versus the 1994 third
quarter. Average non-interest bearing funds supporting earning assets
increased $5.6 million from last year's levels for the same quarter.
<PAGE> 10
AVERAGE EARNING ASSETS- NET INTEREST MARGIN
<TABLE>
<CAPTION>
Quarter Ended Quarter Ended
September 30, 1995 September 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 $334,168 8.69% $304,960 7.96%
======== ========
Interest-bearing liabilities 277,913 4.82% 254,261 3.91%
Noninterest-bearing sources of funds 56,255 -- 50,699 --
-------- ---- -------- ----
Total supporting liabilities $334,168 4.01% $304,960 3.26%
======== ==== ======== ====
Net interest margin (related to average
interest-earning assets) 4.68% 4.70%
==== ====
</TABLE>
<TABLE>
<CAPTION>
Year to Date Year to Date
September 30, 1995 September 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 $326,427 8.64% $296,157 7.82%
======== ========
Interest-bearing liabilities 273,644 4.78% 250,139 3.79%
Noninterest-bearing sources of funds 52,783 -- 46,018 --
-------- ---- -------- ----
Total supporting liabilities $326,427 4.01% $296,157 3.20%
======== ==== ======== ====
Net interest margin (related to average
interest-earning assets) 4.63% 4.62%
==== ====
</TABLE>
<PAGE> 11
<TABLE>
<CAPTION>
NON-INTEREST INCOME Quarter Ended Nine Months Ended
September 30 September 30
Increase (decrease) Increase (decrease)
Amount % Amount %
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
(In thousands)
Mortgage sales and servicing $ 124 57% $ (150) (16)%
Service charges on deposit accounts (27) (8) (14) (1)
Trust income 111 34 198 17
Other service charges and fees 18 13 34 10
Other income (79) (52) (48) (16)
Security gains(losses) -- -- (5) (100)
------ ---- ------ ----
$ 147 12% $ 15 .4%
====== ==== ====== ====
</TABLE>
Non-interest income for the third quarter of 1995 was $1,339,000, a
$147,000 or 12% increase from the third quarter of 1994. The Financial
Accounting Standards Board statement, SFAS 122, "Accounting for Mortgage
Servicing Rights," was adopted in the third quarter of 1995. This statement
provides that the fair value of servicing rights on originated and sold
mortgage loans shall be recognized at the time of the sale of the loan. This
amounted to $75,000 additional mortgage origination fees in the third quarter
of 1995. Income from fiduciary activities continued its steady growth
pattern, fueled by new asset growth. Other income's decline from the prior
year results from net gains from the sale of other real estate property
recorded in 1994.
<TABLE>
<CAPTION>
NON-INTEREST EXPENSE Quarter Ended Nine Months Ended
September 30 September 30
Increase (decrease) Increase (decrease)
Amount % Amount %
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
(In thousands)
Salaries and employee benefits $ 355 20% $ 539 10%
Occupancy 20 9 39 5
Furniture and equipment 2 1 37 6
Other (45) (5) 41 1
------ ---- ------ ----
$ 332 11% $ 656 7%
====== ==== ====== ====
</TABLE>
Non-interest expenses for the third quarter totaled $3,414,000, an increase
of $332,000, or 11%, from the third quarter of 1994. Employment related
expenses increased $355,000 or 20%, a result of higher compensation and
benefit costs. Other expenses decreased $45,000 or 5%, influenced by the
Federal Deposit Insurance Corporation's reduction in its assessment rate on
deposit accounts, resulting in an expense savings of $173,000 in the third
quarter. Offsetting this decrease were increases in costs associated with
non-earning loans and other professional fees.
<PAGE> 12
ASSET QUALITY
<TABLE>
<CAPTION>
NON-PERFORMING ASSETS
9/30/95 12/31/94 9/30/94
------- -------- -------
<S> <C> <C> <C>
(In thousands)
Non-accrual loans $1,719 $1,228 $1,280
Renegotiated loans 1,039 644 647
------ ------ ------
Total non-performing loans 2,758 1,872 1,927
Other real estate 4 53 614
------ ------ ------
Total non-performing assets $2,762 $1,925 $2,541
====== ====== ======
Non-performing assets as a percent of total loans 1.09% .79% .83%
Accruing loans 90 days or more past due $ 106 $ 128 $ 64
</TABLE>
Total non-performing assets at September 30, 1995 increased $221,000 or 9% from
September of 1994, as increases in non-accrual and renegotiated loans of
$439,000 and $392,000, respectively, were offset by decreases in other real
estate owned of $610,000. Non-accrual loans have increased $491,000, and
renegotiated loans $395,000 during 1995, substantially accounting for the
$837,000 change in total non-performing assets this year. Loans identified
as potential problem loans totaled $2,652,000 at September 30, 1995,
$2,736,000 at December 31, 1994 and $2,425,000 at September 30, 1994.
<PAGE> 13
<TABLE>
<CAPTION>
ALLOWANCE FOR LOAN LOSSES
Quarter Ended Nine Months Ended
September 30 September 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------
(In thousands)
Balance, beginning of period $ 3,000 $ 2,750 $ 2,900 $ 2,630
Charge-offs 140 183 481 416
Recoveries 74 40 156 88
------- ------- ------- -------
Net charge-offs 66 143 325 328
Provision charged to operations 266 268 625 573
------- ------- ------- -------
Balance, September 30 $ 3,200 $ 2,875 $ 3,200 $ 2,875
======= ======= ======= =======
- ------------------------------------------------------------------------------------------
9/30/95 12/31/94 9/30/95
------- -------- -------
Net loan losses as a percent of average loans .17% .23% .19%
Allowance for loan losses as a percent of end
of period loans 1.26% 1.19% 1.20%
- ------------------------------------------------------------------------------------------
</TABLE>
Net charge-offs were $66,000 for the current quarter, increasing net charge-offs
on a year-to-date basis to $325,000, comparable to the 1994 period. Net
charge-offs have been primarily attributable to indirect consumer lending
in both periods. At September 30, 1995, the allowance for loan losses was
$3.2 million, equal to 1.26% of total loans outstanding, compared to the
$2.9 million or 1.20% 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 September 30, 1995.
<TABLE>
<CAPTION>
Held-to-maturity
Unrealized
Cost Gain Loss Fair Value
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------
US Government and agency $27,691 $ 138 $ 70 $27,759
State and municipal 4,145 94 1 4,238
Other 4,036 38 20 4,054
------- ----- ----- -------
Total $35,872 $ 270 $ 91 $36,051
======= ===== ===== =======
Mortgage-backed $ 557 $ 3 $ -- $ 560
======= ===== ===== =======
</TABLE>
<TABLE>
<CAPTION>
Available-for-sale
Unrealized
<S> Cost Gain Loss Fair Value
<C> <C> <C> <C>
- ------------------------------------------------------------------------------------------
US Government and agency $30,696 $ 201 $ 135 $30,762
Other 1,792 79 -- 1,871
------- ---- ----- -------
Total $32,488 $ 280 $ 135 $32,633
======= ===== ===== =======
Mortgage-backed $ 7,978 $ 87 $ 36 $ 8,029
======= ===== ===== =======
</TABLE>
<PAGE> 15
SHAREHOLDERS' EQUITY AND CAPITAL RESOURCES
Total equity at September 30, 1995 was $28.9 million, compared to $26.3
million and $26.0 million at December 31, 1994 and September 30, 1994,
respectively. The Corporation declared $394,000, or $.30 per share, in
dividends for the third quarter of 1995 as compared to $326,000, or $.25
per share in the third quarter of 1994. In addition, the Corporation
declared a 25% stock dividend, payable November 1995, in the third
quarter of 1995.
<TABLE>
<CAPTION>
The following is a summary of risk-based capital ratios:
9/30/95 12/31/94 9/30/94
-------- -------- -------
<S> <C> <C> <C>
Tier 1 capital $ 28,330 $ 26,366 $25,479
Tier 2 capital 3,126 2,900 2,875
-------- -------- -------
Total qualifying capital $ 31,456 $ 29,266 $28,354
======== ======== =======
Risk adjusted assets $250,088 $243,591 $242,745
======== ======== ========
Tier 1 leverage ratio 7.96% 7.93% 7.80%
Tier 1 risk-based capital 11.33% 10.82% 10.50%
Total risk-based capital 12.58% 12.01% 11.68%
</TABLE>
<PAGE> 16
NINE MONTHS ENDED SEPTEMBER 30, 1995
COMPARED WITH 1994
Net income for the nine months ended September 30, 1995 was $2,958,000
or $1.69 per share compared to the $2,686,000 or $1.54 per share earned
in the same period of 1994, a 10.1% increase. Return on average assets
for the first nine months was 1.14% comparable to the previous year. The
return on average equity was 14.32%, compared to 14.19% in 1994.
Net interest income (FTE) increased $1,077,000, or 10.5%, to $11.3 million
for the first nine months of 1995 as average earning assets increased $30.3
million, or 10.2%, from 1994. The year to date net interest margin was 4.63%
for 1995 compared to 4.62% earned in the first nine months of 1994. Interest
income increased $3.8 million and interest expense increased $2.7 million
for the nine month comparison from 1995 to 1994.
The yield on earning assets increased 82 basis points (bp) to 8.64% and the
rate paid on interest bearing deposits increased 92 bp to 4.68%. The
average rate earned on loans increased 76 bp to 9.52% and the security
portfolio has earned 92 bp more, averaging 5.79% in 1995. Funds sold
have earned 218 bp more or 5.78% during 1995. Average outstanding loans
increased $21.5 million, average outstanding investment securities increased
$4.3 million, and average overnight funds sold increased $4.4 million from
the prior year.
Increases in rates paid on deposits in 1995 over 1994 include: 70 bp
increase in consumer CD funding to 5.94%, a 148 bp increase in the cost
of money market deposits to average 4.45%, a 11 bp increase in savings
and interest checking rates to 2.26% and a 214 bp increase in rates on CDs
over $100,000 to average 5.94% in 1995. Growth of $15.6 million of average
outstanding consumer CDs and $9.7 million in money market deposits was
offset by declines in average outstanding savings and interest checking
deposits of $4.1 million. Funding from additional Federal Home Loan Bank
advances increased on average $3.8 million and the rate paid increased
234 bp to 7.02% in 1995. Total interest bearing funds increased $23.6
million to average $273.6 million for the first nine months of 1995 and
the average rate paid increased 99 bp to 4.78%.
The provision for loan losses was $625,000 and net loan charge-offs were
were $325,000 for the first nine months of 1995 compared to a provision of
$573,000 and net charge-offs of $328,000 in 1994.
Non-interest income remained level with the prior year as continued excellent
growth in trust fees was offset by a 16 percent reduction in fees earned
from the origination and sale of residential mortgage loans. Non-interest
expense increased $656,000, or 7%, in 1995 from the comparable period.
Expenses associated with personnel costs have increased $539,000, or 10%,
in 1995. Increases in costs related to non-earning loans and other
professional fees were offset by reductions in FDIC insurance expense.
Total cash dividends for the first nine months of 1995 were $.72 per share
compared to $.60 per share in 1994, a 20% increase. Shareholders' equity has
increased 11.3% from September of 1995 and at $28.9 million for September of
1995 represents 8.1% of assets.
Recorded in stockholders' equity were unrealized gains, net of tax,
of $640,000 in 1995 and unrealized losses of $332,000 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.
(PAGE> 17
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
(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: November 13, 1995
\s\ James E. Dutmers, Jr.
--------------------------------------
James E. Dutmers, Jr.
Chairman and Chief Executive Officer
Date: November 13, 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 13,747
<INT-BEARING-DEPOSITS> 158
<FED-FUNDS-SOLD> 7,100
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 40,662
<INVESTMENTS-CARRYING> 36,611
<INVESTMENTS-MARKET> 36,429
<LOANS> 253,096
<ALLOWANCE> 3,200
<TOTAL-ASSETS> 359,010
<DEPOSITS> 313,306
<SHORT-TERM> 0
<LIABILITIES-OTHER> 4,798
<LONG-TERM> 12,000
<COMMON> 8,205
0
0
<OTHER-SE> 20,701
<TOTAL-LIABILITIES-AND-EQUITY> 359,010
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<INTEREST-INVEST> 3,005
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<LOANS-NON> 1,719
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</TABLE>
