<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, 1996.
------------------------------
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)
49686-2928
(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 1,655,293 shares of common stock, par value $5, outstanding as
of June 30, 1996.
<PAGE> 2
EMPIRE BANC CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
(In thousands, except share data) June 30 December 31 June 30
1996 1995 1995
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 14,392 $ 13,858 $ 11,676
Federal funds sold 6,900 8,000 9,300
-------- -------- --------
Cash and cash equivalents 21,292 21,858 20,976
Investment securities
Available for sale - (fair value) 35,413 29,579 28,604
Held to maturity 31,552 36,483 31,224
(fair value: 1996-$31,630,
$36,946 and $31,355 in 1995)
Mortgage-backed securities
Available for sale - (fair value) 23,584 18,250 6,227
Held to maturity (fair value: 6/30/95-$598) -- -- 596
Loans 257,995 259,102 253,495
Less: allowance for loan losses (3,375) (3,200) (3,000)
- ----------------------------------------------------------------------------------------
Net loans 254,620 255,902 250,495
- ----------------------------------------------------------------------------------------
Premises and equipment, net 3,859 3,623 3,789
Other real estate 70 280 74
Accrued interest receivable and other assets 7,278 6,451 6,081
- ----------------------------------------------------------------------------------------
Total assets $377,668 $372,426 $348,066
========================================================================================
LIABILITIES
Deposits
Non-interest-bearing $ 46,910 $ 46,702 $ 44,702
Interest-bearing 276,768 272,838 259,085
- ----------------------------------------------------------------------------------------
Total deposits 323,678 319,540 303,787
- ----------------------------------------------------------------------------------------
Federal Home Loan Bank advances 17,000 17,000 12,000
Accrued expense and other liabilities 6,205 5,881 4,236
-------- -------- --------
Total liabilities 346,883 342,421 320,023
- ----------------------------------------------------------------------------------------
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: 6/30/96- 1,655,293; 12/31/95-
1,648,767; 6/30/95- 1,304,302 8,276 8,244 6,521
Paid-in-capital 9,484 9,377 9,098
Retained earnings 13,205 12,050 12,337
Net unrealized gain (loss) on securities, net of tax (180) 334 87
-------- -------- --------
Total shareholders' equity 30,785 30,005 28,043
- ----------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $377,668 $372,426 $348,066
========================================================================================
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
1996 1995 1996 1995
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $ 6,040 $ 5,864 $ 12,162 $ 11,516
Taxable securities
Available for sale 843 527 1,615 988
Held to maturity 426 413 884 831
Tax-exempt securities-held to maturity 51 47 111 96
Federal funds sold 124 177 190 289
- ----------------------------------------------------------------------------------------
Total interest income 7,484 7,028 14,962 13,720
- ----------------------------------------------------------------------------------------
INTEREST EXPENSE
Deposits 3,172 3,106 6,361 6,035
Federal funds purchased -- -- 20 1
Federal Home Loan Bank advances 250 213 491 370
------ ------ ------ ------
Total interest expense 3,422 3,319 6,872 6,406
- ----------------------------------------------------------------------------------------
Net interest income 4,062 3,709 8,090 7,314
- ----------------------------------------------------------------------------------------
Provision for loan losses 210 118 461 359
Net interest income after ------ ------ ------ -----
provision for loan losses 3,852 3,591 7,629 6,955
NON-INTEREST INCOME
Mortgage sales and servicing 337 210 653 419
Service charges on deposit accounts 322 330 627 655
Trust income 518 450 1,040 898
Other service charges and fees 124 111 238 198
Other income 91 92 193 182
Security gains(losses) -- (5) -- (5)
------ ------ ------ ------
Total non-interest income 1,392 1,188 2,751 2,347
------ ------ ------ ------
NON-INTEREST EXPENSE
Salaries and employee benefits 2,156 1,844 4,310 3,568
Occupancy 256 253 519 502
Furniture and equipment 204 214 424 425
Other 975 1,023 1,920 1,994
------ ------ ------ ------
Total non-interest expense 3,591 3,334 7,173 6,489
------ ------ ------ ------
Income before federal income taxes 1,653 1,445 3,207 2,813
Federal income taxes 549 472 1,060 917
- ----------------------------------------------------------------------------------------
Net income $ 1,104 $ 973 $ 2,147 $ 1,896
========================================================================================
Earnings per share $ .62 $ .56 $ 1.21 $ 1.09
Average shares outstanding 1,783,565 1,746,577 1,780,128 1,743,328
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
1996 1995
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,147 $ 1,896
Adjustments to reconcile net income to net
cash from operating activities:
Depreciation and amortization 373 383
Provision for loan losses 461 359
Net (increase) in mortgages held for sale (1,825) (1,598)
Net loss on securities available for sale -- 5
Net amortization/accretion on securities 224 237
Change in:
Interest receivable (186) (133)
Interest payable 1 119
Other, net 155 (241)
------ ------
Total adjustments (795) (869)
- ------------------------------------------------------------------------------------------
Net cash from operating activities 1,350 1,027
- ------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Securities available for sale:
Proceeds from sales -- 3,005
Proceeds from maturities 13,579 4,345
Purchases (25,665) (10,039)
Securities held to maturity:
Proceeds from maturities 7,800 9,824
Purchases (2,954) (8,892)
Loans granted net of repayments 2,646 (8,573)
Premises and equipment expenditures (609) (233)
- ------------------------------------------------------------------------------------------
Net cash from investing activities (5,203) (10,563)
- ------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net increase in deposits 4,138 5,798
Cash dividends paid (989) (913)
Federal Home Loan Bank advances -- 4,000
Issuance of common stock 138 --
- ------------------------------------------------------------------------------------------
Net cash from financing activities 3,287 8,885
- ------------------------------------------------------------------------------------------
Net change in cash and cash equivalents (566) (651)
- ------------------------------------------------------------------------------------------
Cash and cash equivalents
Beginning of year 21,858 21,627
------- -------
End of period $21,292 $20,976
==========================================================================================
Cash paid during the year for: Interest $ 6,871 $ 6,286
Income taxes 1,175 1,160
- ------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
</TABLE>
<PAGE> 5
EMPIRE BANC CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
(In thousands) 1996 1995
<S> <C> <C>
- -------------------------------------------------------------------------------------------
Balance January 1 $30,005 $26,332
Net income 2,147 1,896
Common stock issued 138 --
Dividends declared (991) (783)
Net change in security valuation (514) 598
- -------------------------------------------------------------------------------------------
Balance June 30 $30,785 $28,043
- -------------------------------------------------------------------------------------------
</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, 1995.
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 six month period ended June 30, 1996, there were
no sales or transfers of available-for-sale or held-to-maturity
securities. The change in net unrealized holding gains or losses on
available-for-sale securities for the current quarter is $229,000 and
year to date is $514,000.
<PAGE> 6
NET INTEREST INCOME
AVERAGE BALANCES, INTEREST INCOME/EXPENSE, AVERAGE RATES
<TABLE>
<CAPTION>
Quarter Ending June 30, 1996 1995
--------------------------- -----------------------------
Average Average
(Fully taxable equivalent, Balance Interest Rate Balance Interest Rate
in thousands) --------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans, including fees*,** $254,408 $ 6,044 9.56% $246,648 $ 5,866 9.54%
Securities - taxable 82,755 1,268 6.13 65,009 941 5.79
- tax-exempt* 4,000 75 7.52 3,096 68 8.81
-------- -------- -------- -------
Total securities 86,755 1,343 6.13 68,105 1,009 5.86
Federal funds sold 9,526 125 5.18 11,891 177 5.87
-------- -------- -------- -------
Total earning assets/
interest income 350,689 7,512 8.62 326,644 7,052 8.66
Cash and due from banks 12,651 11,307
Other assets 9,055 9,348
-------- --------
Total assets $372,395 $347,299
======== ========
LIABILITIES AND EQUITY
CDs over $100,000 $ 12,315 161 5.19 $ 8,728 135 6.12
Savings & interest checking 60,826 330 2.18 60,123 338 2.25
Money market deposits 73,009 742 4.09 74,233 842 4.55
Consumer CDs 128,876 1,939 6.05 120,135 1,791 5.98
-------- ------ -------- ------
Total 275,026 3,172 4.64 263,219 3,106 4.73
Federal funds purchased -- -- -- 31 1 6.37
FHLB advances 17,000 250 5.91 12,000 212 7.09
-------- ------ -------- ------
Total interest-bearing
funds/interest expense 292,026 3,422 4.71 275,250 3,319 4.84
-------- ------ -------- ------
Demand deposits 43,804 39,990
Other liabilities 5,859 4,561
Shareholders' equity 30,706 27,498
-------- --------
Total $372,395 $347,299
======== ========
Net interest spread (FTE) 3.90% 3.82%
==== ====
Net interest income (FTE) $4,090 $3,733
====== ======
Net interest margin (FTE) 4.69% 4.58%
==== ====
* 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 June 30, 1996 1995
--------------------------- -----------------------------
Average Average
(Fully taxable equivalent, Balance Interest Rate Balance Interest Rate
in thousands) --------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans, including fees*,** $254,931 $ 12,170 9.60% $244,912 $ 11,522 9.49%
Securities - taxable 81,948 2,498 6.10 64,522 1,819 5.64
- tax-exempt* 4,324 162 7.47 3,176 140 8.80
-------- -------- -------- -------
Total securities 86,272 2,660 6.10 67,698 1,959 5.79
Federal funds sold 7,227 190 5.21 9,883 289 5.82
-------- -------- -------- -------
Total earning assets/
interest income 348,430 15,020 8.67 322,493 13,770 8.61
Cash and due from banks 12,137 11,279
Other assets 9,266 9,246
-------- --------
Total assets $369,833 $343,018
======== ========
LIABILITIES AND EQUITY
CDs over $100,000 $ 11,812 325 5.45 $ 11,245 334 5.91
Savings & interest checking 60,603 656 2.18 60,435 678 2.26
Money market deposits 74,079 1,526 4.14 71,397 1,589 4.49
Consumer CDs 127,685 3,854 6.07 117,645 3,434 5.89
-------- ------ -------- ------
Total 274,179 6,361 4.67 260,722 6,035 4.67
Federal funds purchased 696 20 5.77 34 1 6.14
FHLB advances 16,423 491 6.01 10,718 370 6.96
-------- ------ -------- ------
Total interest-bearing
funds/interest expense 291,298 6,872 4.74 271,474 6,406 4.76
-------- ------ -------- ------
Demand deposits 42,174 40,145
Other liabilities 5,830 4,325
Shareholders' equity 30,531 27,074
-------- --------
Total $369,833 $343,018
======== ========
Net interest spread (FTE) 3.93% 3.85%
==== ====
Net interest income (FTE) $8,148 $7,364
====== ======
Net interest margin (FTE) 4.70% 4.60%
==== ====
* 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
SECOND QUARTER 1996
COMPARED WITH
SECOND QUARTER 1995
SUMMARY
Empire Banc Corporation's second quarter earnings were $1,104,000, a
13.5% increase over 1995 second quarter results. Second quarter earnings
per share increased from $.56 per share in 1995 to $.62 in 1996. The
return on assets was 1.19% for the quarter versus 1.12% for the same
period in 1995. The return on equity was 14.38% compared to 14.15% in
the prior year quarter.
The current quarter's results reflect the impact of an increase of nearly
10% in net interest income, attributable to a 7% increase in average
earning assets and an improved net interest margin. Quarterly average
increases for loans of $7.8 million or 3%, and securities of $18.7 million
or 27%, have been fueled by deposit increases of $15.6 million or 5% and
Federal Home Loan Bank advances of $5 million. Asset quality remained
strong during the second quarter of 1996 with net loan losses comparable
to 1995 and significant reductions in total non-performing assets.
Non-interest income increased 17% in the quarter-to-quarter comparison
with substantial increases in fees earned in the mortgage and trust
operations, while non-interest expense increased 8%.
Shareholders' equity has increased 9.8% during the last twelve months to
$30.8 million improving book value per share to $18.60 from the $17.20
at June 30, 1995.
<PAGE> 9
<TABLE>
<CAPTION>
NET INTEREST INCOME
- -----------------------------------------------------------------------------------------
Quarter Ending Six Months Ending
June 30 June 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
Interest income $7,484 $7,028 $14,962 $13,720
Taxable equivalent adjustment 28 24 58 50
------ ------ ------- -------
Interest income (FTE) 7,512 7,052 15,020 13,770
Interest expense 3,422 3,319 6,872 6,406
------ ------ ------- -------
Net interest income (FTE) $4,090 $3,733 $ 8,148 $ 7,364
====== ====== ======= =======
Increase (decrease) due to change in:
Volume $ 273 $ 330 $ 441 $ 625
Rate 84 (61) 343 121
------ ------ ------- -------
Total $ 357 $ 269 $ 784 $ 746
====== ====== ======= =======
- -----------------------------------------------------------------------------------------
</TABLE>
Second quarter net interest income on a fully taxable equivalent ("FTE")
basis was $4.1 million, an 9.6% increase from the $3.7 million earned
in the year ago quarter. Average earning assets increased 7.4% or
$24 million while net interest margin, the other principal determinant
of net interest income, increased from 4.58% to 4.69% in the current
quarter.
In the quarterly comparison from a year-ago, changes in the loan portfolio
include growth in the commercial portfolio of 7.2% or $7.8 million, and
mortgage portfolio growth of 11% or $6.3 million which were offset by a
decline in average consumer loans of 4.5% or $3.4 million. The average
rate earned on the loan portfolio was 9.56%, comparable to the prior year
quarter.
Securities on average grew $18.7 million or 27.4% in the quarter to
quarter comparison while the rate earned increased 27 basis points ("bp")
to average 6.13% for the quarter. Average overnight funds sold decreased
$2.4 million or 19.9% and the rate earned declined 69 bp from the prior
year's first quarter.
Funding for the earning asset growth came mainly from the $16.8 million
or 6.1% growth in interest bearing funds and the $3.8 million or 9.5%
increase in non-interest bearing demand deposits. Certificates of
deposits grew $8.7 million, CDs over $100,000 were up $3.6 million
and Federal Home Loan Bank advances increased $5 million. The average
rate paid on interest bearing funds decreased 13 bp to 4.71% for the
second quarter of 1996. Non-interest bearing funds supporting earning
assets increased 14.1% or $7.3 million compared to the second quarter of
1995.
<PAGE> 10
<TABLE>
<CAPTION>
NON-INTEREST INCOME Quarter Ending Six Months Ending
June 30 June 30
Increase (decrease) Increase (decrease)
Amount % Amount %
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------
(In thousands)
Mortgage sales and servicing $ 127 60% $ 234 56%
Service charges on deposit accounts (8) (2) (28) (4)
Trust income 68 15 142 16
Other service charges and fees 13 12 40 20
Other income 4 5 16 9
------ ---- ------ ----
$ 204 17% $ 404 17%
====== ==== ====== ====
</TABLE>
Non-interest income for the second quarter totaled $1.4 million, a $204,000
or 17% increase from the second quarter of 1995. Mortgage sales and
servicing income increased significantly from the prior year principally
from higher loan volume and the adoption in July 1995 of Accounting
Standard No. 122, on accounting for mortgage servicing rights. For
servicing retained, SFAS 122 requires capitalizing the cost of these rights
and accounts for $88,000 of the quarterly change. Income from trust
activities continued its steady growth pattern, with an 18% increase in
trust assets fueling fee income growth.
<TABLE>
<CAPTION>
NON-INTEREST EXPENSE Quarter Ending Six Months Ending
June 30 June 30
Increase (decrease) Increase (decrease)
Amount % Amount %
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------
(In thousands)
Salaries and employee benefits $ 312 17% $ 742 21%
Occupancy 3 1 17 3
Furniture and equipment (10) (5) (1) -
Other (48) (5) (74) (4)
------ ---- ------ ----
$ 257 8% $ 684 11%
====== ==== ====== ====
</TABLE>
Non-interest expenses for the second quarter totaled $3.6 million, an
increase of $257,000, or 8%, from the second quarter of 1995. Personnel
expense increases reflect volume related commission expense and
provision for employee profit sharing incentive awards. The decrease in
other expense was principally influenced by the reduction in the FDIC
insurance assessment and reduction in non-earning loan expense offset by
volume related loan fees.
<PAGE> 11
ASSET QUALITY
<TABLE>
<CAPTION>
NON-PERFORMING ASSETS
6/30/96 12/31/95 6/30/95
------- -------- -------
<S> <C> <C> <C>
(In thousands)
Non-accrual loans $ 822 $ 867 $1,991
Renegotiated loans 600 606 802
------ ------ ------
Total non-performing loans 1,422 1,473 2,793
Other real estate 70 280 74
------ ------ ------
Total non-performing assets $1,492 $1,753 $2,867
====== ====== ======
Non-performing assets as a percent of total loans .58% .68% 1.13%
Accruing loans 90 days or more past due $ 518 $ 72 $ 77
</TABLE>
Total non-performing assets at June 30, 1996 decreased $1,375,000 or 48%
from June of 1995, with decreases in non-accrual and renegotiated loans of
$1,169,000 and $202,000, respectively. Loans identified as potential
problem loans totaled $3,401,000 at June 30, 1996, $3,213,000 at December
31, 1995 and $2,510,000 at June 30, 1995.
<PAGE> 12
<TABLE>
<CAPTION>
ALLOWANCE FOR LOAN LOSSES
Quarter Ending Six Months Ending
June 30 June 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------
(In thousands)
Balance, beginning of period $ 3,300 $ 2,975 $ 3,200 $ 2,900
Charge-offs 189 134 376 341
Recoveries 54 41 90 82
------- ------- -------- -------
Net charge-offs 135 93 286 259
Provision charged to operations 210 118 461 359
------- ------- -------- -------
Balance, June 30 $ 3,375 $ 3,000 $ 3,375 $ 3,000
======= ======= ======== =======
- -------------------------------------------------------------------------------------------
6/30/96 12/31/95 6/30/95
------- -------- -------
Net loan losses as a percent of average loans .22% .18% .21%
Allowance for loan losses as a percent of end
of period loans 1.31% 1.24% 1.18%
- -------------------------------------------------------------------------------------------
</TABLE>
The provision for loan losses increased primarily due to increased
additions to the allowance for loan losses. The allowance for loan losses
has increased $375,000 over the last twelve months and was 1.31% of total
loans as of June 30, 1996 compared to 1.18% one year ago.
Under accounting guidance regarding impaired loans, at June 30, 1996 there
was $1.41 million outstanding in impaired loans with $1.15 million for
which an allowance for credit losses is allocated. Impaired loans totaled
$1.43 million and $2.27 million at December 31, 1995 and June 30, 1995,
respectively.
<PAGE> 13
INVESTMENT SECURITIES
The following is a summary of investment securities, held-to-maturity and
available-for-sale, at June 30, 1996.
<TABLE>
<CAPTION>
Held-to-maturity
Unrealized
Cost Gain Loss Fair Value
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------
US Government and agency $17,480 $ 68 $ 18 $17,530
State and municipal 6,302 68 28 6,342
Other 7,770 30 42 7,758
------- ----- ----- -------
Total $31,552 $ 166 $ 88 $31,630
======= ===== ===== =======
</TABLE>
<TABLE>
<CAPTION>
Available-for-sale
Unrealized
<S> Cost Gain Loss Fair Value
<C> <C> <C> <C>
- ------------------------------------------------------------------------------------------
US Government and agency $33,129 $ 91 $ 240 $32,980
Other 2,330 103 -- 2,433
------- ---- ----- -------
Total $35,459 $ 194 $ 240 $35,413
======= ===== ===== =======
Mortgage-backed $23,810 $ 82 $ 308 $23,584
======= ===== ===== =======
</TABLE>
<PAGE> 14
SHAREHOLDERS' EQUITY AND CAPITAL RESOURCES
Total equity at June 30, 1996 was $30.8 million, compared to $30.0
million and $28.0 million at December 31, 1995 and June 30, 1995,
respectively. The Corporation declared $497,000, or $.30 per share, in
dividends for the second quarter of 1996 as compared to $391,000, or $.24
per share in the second quarter of 1995.
<TABLE>
<CAPTION>
The following is a summary of risk-based capital ratios:
6/30/96 12/31/95 6/30/95
-------- -------- --------
<S> <C> <C> <C>
Tier 1 capital $ 30,548 $ 29,234 $ 27,499
Tier 2 capital 3,236 3,200 3,000
-------- -------- --------
Total qualifying capital $ 33,784 $ 32,434 $ 30,499
======== ======== ========
Risk adjusted assets $258,751 $260,163 $250,892
======== ======== ========
Tier 1 leverage ratio 8.21% 8.06% 7.92%
Tier 1 risk-based capital 11.81% 11.24% 10.96%
Total risk-based capital 13.06% 12.47% 12.16%
</TABLE>
Risk-based capital ratios improved during the quarter ended June 30, 1996
and continue to be well above the guidelines established for well-
capitalized institutions, which is the highest capital standard. Total
risk-based capital reached 13.1% at June 30, 1996 compared to the 12.2%
at June 30, 1995.
<PAGE> 15
- --------------------------------------------------------------------------
Six Months Ended June 30, 1996
Compared with 1995
- --------------------------------------------------------------------------
Net income for the six months ended June 30, 1996 was $2,147,000 or
$1.21 per share compared to the $1,896,000 or $1.09 per share earned in
the same period of 1995, a 13% increase. Return on average assets for
the first six months was 1.16%, as compared to 1.11% in the previous year.
The return on average equity was 14.06%, comparable to 1995.
Net interest income (FTE) increased $784,000, or 11% to $8.1 million for
the first six months of 1996 as average earning assets increased $25.9
million from 1995. The year to date net interest margin was 4.70% for
1996 compared to 4.60% earned in the first six months of 1995. Interest
income increased $1.2 million and interest expense increased $466,000 for
the six month comparison from 1996 to 1995. The average rate earned on
loans increased 11 basis points (bp) to 9.60% and the security portfolio
has earned 31 bp more, averaging 6.10% in 1996. Funds sold have earned 61
bp less or 5.21% during 1996. Average outstanding loans have increased
$10.0 million and securities $18.6 million from 1995. Total interest
bearing funds increased $19.8 million, from 1995, to average $291.3 million
for the first six months of 1996. Average outstanding consumer CDs grew
by $10.0 million while funding from additional Federal Home Loan Bank
advances increased on average $5.7 million. Rates paid on deposits in 1996
averaged 4.67% and were comparable to the prior year period.
The provision for loan losses was $461,000 and net loan charge-offs
were $286,000 for the first six months of 1996 compared to a provision of
$359,000 and net charge-offs of $259,000 in 1995. Net loan losses remained
comparable for the two periods at .22 percent of average loans.
Non-interest income increased $404,000, or 17%, for the first six
months of 1996, mainly due to the $234,000 or 56% increase in fees earned
from the origination and sale of mortgage loans, and the $142,000 or 16%
increase in trust income. SFAS 122 on accounting for mortgage service
rights adopted in July 1995 accounts for $194,000 of the increase in fees
earned from the origination and sale of mortgage loans. Non-interest
expense increased $684,000, or 11% from the comparable prior period,
primarily attributable to increased personnel costs of $742,000, or 21%
in 1996. These increased personnel expenses reflect higher benefit costs
related to the rise in the Corporation's stock price, provision for
employee profit sharing incentive award and volume related commissions.
Total cash dividends for the first six months of 1996 were $.60 per
share compared to $.48 per share in 1995, a 25% increase. Shareholders'
equity increased 9.8% from June of 1995 and at $30.8 million for June of
1996, represents 8.2% of assets. Total risk-based capital has increased
from 12.16% in June of 1995 to 13.06%, June 1996.
Recorded in stockholders' equity were unrealized losses of $514,000
in 1996 and unrealized gains of $598,000 in 1995. The unrealized gains
and losses of the investment portfolio are not expected to cause a
material change in future income or investment yields.
<PAGE> 16
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 14, 1996.
(c) (1) Election of four (4) directors to serve until the annual
meeting of shareholders in 1999.
Withhold
For Authority Non-vote
--- --------- --------
Robert L. Israel
President and Chief
Operating Officer 1,495,833 456 152,804
William K. Kurtz
President, Kurtz
Music & Sound, Inc. 1,492,427 3,862 152,804
John M. Lockwood, Jr.
President and Chief
Executive Officer,
Munson Healthcare 1,492,427 3,862 152,804
Louis A. Smith
Smith, Johnson and
Brandt, Attorneys PC 1,494,384 1,905 152,804
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 12, 1996
\s\ James E. Dutmers, Jr.
--------------------------------------
James E. Dutmers, Jr.
Chairman and Chief Executive Officer
Date: August 12, 1996
\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-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 14,181
<INT-BEARING-DEPOSITS> 211
<FED-FUNDS-SOLD> 6,900
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 58,997
<INVESTMENTS-CARRYING> 31,552
<INVESTMENTS-MARKET> 31,630
<LOANS> 257,995
<ALLOWANCE> 3,375
<TOTAL-ASSETS> 377,668
<DEPOSITS> 323,678
<SHORT-TERM> 0
<LIABILITIES-OTHER> 6,205
<LONG-TERM> 17,000
<COMMON> 8,276
0
0
<OTHER-SE> 22,509
<TOTAL-LIABILITIES-AND-EQUITY> 377,668
<INTEREST-LOAN> 12,162
<INTEREST-INVEST> 2,610
<INTEREST-OTHER> 190
<INTEREST-TOTAL> 14,962
<INTEREST-DEPOSIT> 6,361
<INTEREST-EXPENSE> 6,872
<INTEREST-INCOME-NET> 8,090
<LOAN-LOSSES> 461
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 7,173
<INCOME-PRETAX> 3,207
<INCOME-PRE-EXTRAORDINARY> 3,207
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,147
<EPS-PRIMARY> 1.21
<EPS-DILUTED> 1.21
<YIELD-ACTUAL> 4.70
<LOANS-NON> 822
<LOANS-PAST> 518
<LOANS-TROUBLED> 600
<LOANS-PROBLEM> 3,401
<ALLOWANCE-OPEN> 3,200
<CHARGE-OFFS> 376
<RECOVERIES> 90
<ALLOWANCE-CLOSE> 3,375
<ALLOWANCE-DOMESTIC> 2,048
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,327
</TABLE>
