FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1996
Commission file number: 33-66014
FNB Financial Corporation
(Exact name of registrant as specified in its charter)
Commonwealth of Pennsylvania 23-2466821
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 Lincoln Way West, McConnellsburg, PA 17233
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: 717/485-3123
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 (or
for shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at June 30, 1996
(Common stock, $0.63 par value) 400,000
FNB FINANCIAL CORPORATION
INDEX
Page
PART I - FINANCIAL INFORMATION
Condensed consolidated balance sheets -
June 30, 1996 and December 31, 1995 5
Condensed consolidated statements of income -
Three months ended June 30, 1996 and 1995 6
Condensed consolidated statements of income -
Six months ended June 30, 1996 and 1995 7
Condensed consolidated statements of cash flows -
Six months ended June 30, 1996 and 1995 8
Notes to condensed consolidated financial
statements 9-11
Table #1 - Schedule of held to maturity and
available for sale investment activity for the
period January 1, 1996 through June 30, 1996 12
Table #2 - Schedule of gross unrealized gains and
unrealized losses within the held to maturity and
available for sale investment portfolios by
investment type 13
Management's discussion and analysis of financial
condition and results of operations 14-17
PART II - OTHER INFORMATION 19
Signatures 20
PART I - FINANCIAL INFORMATION
FNB FINANCIAL CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<S> <C> <C>
June 30, December 31,
1996 1995
ASSETS: (unaudited) (audited*)
Cash and Due from banks $ 2,286,674 $ 2,633,762
Interest-bearing deposits with banks 418,033 418,473
Marketable Debt Securities
Held-to-maturity (Market value - 1996:
$5,408,858 and 1995: $5,402,945) 5,431,677 5,401,263
Available-for-sale 27,043,214 26,234,019
Marketable Equity Securities
Available for Sale 121,400 101,880
Federal Reserve, Atlantic Central Banker's Bank
and Federal Home Loan Bank Stock 383,700 370,000
Federal Funds Sold 1,479,000 477,000
Loans, net of unearned discount &
Allowance for loan losses 52,939,128 52,793,865
Bank buildings, equipment, furniture &
fixtures, net 2,746,904 2,086,560
Accrued interest receivable 701,982 647,921
Deferred income tax charges 147,239 0
Other real estate owned 365,192 395,752
Intangible Assets 229,074 255,506
Other assets 185,685 105,141
Total Assets $94,478,902 $91,921,142
========== ==========
LIABILITIES :
Deposits:
Demand deposits $ 8,125,958 $ 7,778,115
Savings deposits 24,833,363 23,955,468
Time certificates 50,210,079 48,942,142
Other time deposits 442,697 240,562
Total deposits $83,612,097 $80,916,287
Accrued interest payable & other liabilities 688,703 764,901
Deferred income taxes 0 19,490
Accrued dividends payable 68,000 92,000
Total Liabilities $84,368,800 $81,792,678
STOCKHOLDERS' EQUITY:
Capital stock, Common, par value $0.63;
6,000,000 shares authorized; 400,000
outstanding $ 252,000 $ 252,000
Additional paid-in capital 1,789,833 1,789,833
Retained earnings 8,284,288 7,979,001
Net unrealized gain/(loss) on Available-for-sale
securities, net of tax effects (216,019) 107,630
Total Stockholders' Equity $10,110,102 $10,128,464
Total Liabilities & Stockholders' Equity $94,478,902 $91,921,142
========== ==========
</TABLE>
*Condensed from audited financial statements.
The accompanying notes are an integral part of these condensed
financial statements.
FNB FINANCIAL CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended June 30, 1996 and 1995
(UNAUDITED)
<TABLE>
<S> <C> <C>
1996
1995
Interest & Dividend Income
Interest & fees on loans $1,176,773
$1,135,129
Interest on investment securities:
U.S. Treasury Securities 13,153
6,474
Obligations of other U.S.
Government Agencies 344,122
241,219
Obligations of State & Political
Subdivisions 117,297
98,152
Interest on deposits with banks 9,421
10,203
Dividends on Equity Securities 6,361
6,392
Interest on federal funds sold 28,568
35,399
Total Interest & Dividend Income 1,695,695
1,532,968
Interest Expense
Interest on deposits 920,870
780,351
Net interest income 774,825
752,617
Provision for loan losses 37,500
22,674
Net interest income after
Provision for loan losses 737,325
729,943
Other income
Service charges on deposit accounts 15,947
16,459
Other service charges, collection &
exchange charges, commissions
and fees 43,131
43,561
Other income 13,386
5,977
Net Securities gains/(losses) 0
0
Total other income 72,464
65,997
Other expenses 541,253
485,011
Income before income taxes 268,536
310,929
Applicable income taxes 56,150
72,956
Net income $212,386
$237,973
=======
=======
Earnings per share of Common Stock:
Net income per share $0.53
$0.59
Cash dividend declared per share $0.17
$0.18
Weighted average number of shares outstanding 400,000
400,000
</TABLE>
The accompanying notes are an integral part of these condensed
financial statements.
FNB FINANCIAL CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Six Months Ended June 30, 1996 and 1995
(UNAUDITED)
<TABLE>
<S> <C> <C>
1996
1995
Interest & Dividend Income
Interest & fees on loans $2,352,627
$2,223,948
Interest on investment securities:
U.S. Treasury Securities 28,896
23,377
Obligations of other U.S.
Government Agencies 653,356
472,557
Obligations of State & Political
Subdivisions 237,186
185,721
Interest on deposits with banks 20,439
20,490
Dividends on Equity Securities 12,540
12,559
Interest on federal funds sold 75,186
50,535
Total Interest & Dividend Income 3,380,230
2,989,187
Interest Expense
Interest on deposits 1,856,846
1,493,749
Net interest income 1,523,384
1,495,438
Provision for loan losses 45,000
25,674
Net interest income after
Provision for loan losses 1,478,384
1,469,764
Other income
Service charges on deposit accounts 31,383
33,030
Other service charges, collection &
exchange charges, commissions
and fees 84,114
84,504
Other income 19,822
13,201
Net Securities gains/(losses) (3,843)
(3,364)
Total other income 131,476
127,371
Other expenses 1,059,866
955,044
Income before income taxes 549,994
642,091
Applicable income taxes 108,705
150,270
Net income $441,289
$491,821
=======
=======
Earnings per share of Common Stock:
Net income per share $1.10
$1.23
Cash dividend declared per share $0.34
$0.35
Weighted average number of shares outstanding 400,000
400,000
</TABLE>
The accompanying notes are an integral part of these condensed
financial statements.
FNB FINANCIAL CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 1996 and 1995
<TABLE>
<S> <C> <C>
(UNAUDITED)
1996 1995
Cash flows from operating activities:
Net income $ 441,289 $ 491,821
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation & amortization 85,686 61,857
Provision for loan losses 45,000 25,674
Net (gain)/loss on sales of
investments 3,843
3,364
(Increase) decrease in accrued
interest receivable (54,061)
(45,313)
Increase (decrease) in accrued
interest payable and
other liabilities (76,198) 13,947
Other (net) (81,243)
(45,383)
Net cash provided (used)by operating
activities 364,316 505,967
Cash flows from investing activities:
Net (increase) decrease in interest-
bearing deposits with banks 440
18,071
Purchases of Held-to-maturity
securities (100,000)
(1,973,010)
Purchases of Available-for-sale
securities (5,862,451)
(98,078)
Proceeds from sales of Available-for-
sale securities 0 196,469
Proceeds from maturities of Held-to-
maturity securities 69,586 181,839
Proceeds from maturities of Available-
for-sale securities 4,539,513 1,541,506
Purchases of marketable equity securities 0
(25,000)
Net (increase) decrease in loans (199,353)
(1,543,744)
Proceeds from sale of Other real
estate owned 39,000 21,500
Purchases of bank premises &
equipment (net) (718,249)
(16,996)
Purchase of other bank stock (13,700)
(30,500)
Net cash provided (used) by investing
activities (2,245,214)
(1,727,943)
Cash flows from financing activities:
Net increase (decrease) in deposits 2,695,810
696,654
Cash dividends paid (160,000)
(156,000)
Net cash provided (used) by financing
activities 2,535,810
(540,654)
Net increase (decrease) in cash & cash
equivalents 654,912
681,322
Cash & cash equivalents, beginning balance 3,110,762 4,629,079
Cash & cash equivalents, ending balance $3,765,674 $3,947,757
========= =========
Supplemental disclosure of cash flows information
Cash paid during the year for:
Interest $1,698,571 $1,423,201
Income taxes 206,688 50,920
Supplemental schedule of noncash investing &
financing activities
Unrealized loss on Available-for-sale
securities (327,302) (125,344)
Deferred income tax on unrealized loss on
available-for-sale securities 111,283 42,617
Accrued dividends payable 68,000 72,000
Other real estate acquired in
settlement of loans 59,090 89,524
Loan advanced for sale of other real
estate owned 50,000 29,983
</TABLE>
The accompanying notes are an integral part of these condensed
financial statements.
FNB FINANCIAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The financial information presented at and for the six
months ended June 30, 1996 and June 30, 1995 is unaudited.
Information presented at December 31, 1995, is condensed from
audited year-end financial statements. However, this
unaudited information reflects all adjustments, consisting
solely of normal recurring adjustments, that are, in the
opinion of management, necessary for a fair presentation of
the financial position, results of operations and cash
flows for the interim period.
NOTE 2 - PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
the corporation and its wholly-owned subsidiary, The First
National Bank of McConnellsburg. All significant
intercompany transactions and accounts have been
eliminated.
NOTE 3 - CASH FLOWS
For purposes of the statements of cash flows, the corporation
has defined cash and cash equivalents as those amounts
included in the balance sheet captions "cash and due from
banks" and "federal funds sold". As permitted by Statement
of Financial Accounting Standards No. 104, the corporation
has elected to present the net increase or decrease in
deposits in banks, loans and time deposits in the statement
of cash flows.
NOTE 4 - FEDERAL INCOME TAXES
For financial reporting purposes the provision for loan
losses charged to operating expense is based on management's
judgement, whereas for federal income tax purposes, the
amount allowable under present tax law is deducted.
Additionally, certain expenses are charged to operating
expense in the period the liability is incurred for financial
reporting purposes, whereas for federal income tax purposes,
these expenses are deducted when paid. As a result of these
timing differences, deferred taxes were computed after
reducing pre-tax accounting income for nontaxable municipal
and loan income.
NOTE 5 - INVESTMENTS
The activity within the held to maturity and available for
sale portfolios for the period January 1, 1996, through
June 30, 1996, is summarized in Table #1 on page 11. No
sales were conducted from securities contained within the held
to maturity portfolio.
The amortized cost and estimated market values of investments
by investment type and classification as available for sale or
held to maturity along with each portfolio's gross unrealized
gain or gross unrealized loss are contained in Table #2 on
page 12.
Management has purchased for the portfolio mortgage-backed
securities. The large portion of these securities have a
variable rate coupon and all have scheduled principal
payments. During periods of rising interest rates, payments
from variable rate mortgage-backed securities may accelerate
as prepayments of underlying mortgages occur as home-owners
refinance to a fixed rate while during periods of declining
interest rates, prepayments on high fixed rate mortgage-backed
securities may accelerate as home owners refinance to lower
rate mortgages. These prepayments cause yields on mortgage-
backed securities to fluctuate as larger payments of principal
necessitate the acceleration of premium amortization or
discount accretion. Due to the low dollar amount of mortgage-
backed securities in relation to the total portfolio,
management feels that interest rate risk and prepayment risks
associated with mortgage-backed securities will not have a
material impact on the financial condition of the Bank.
In regard to Collateralized Mortgage Obligations (CMOs), the
Bank presently has none of these types of investments in its
portfolio.
NOTE 6 - ALLOWANCE FOR LOAN LOSSES
Activity in the allowance for loan losses is summarized as
follows:
<TABLE>
<S> <C> <C>
1996 1995
Allowance for loan losses beginning of the year $405,000
$405,036
Loans charged-off during the year:
Real estate mortgages 51,090
2,517
Installment loans 5,712
48,062
Commercial & all other 3,766
9,168
Total charge-offs 60,568
59,747
Recoveries of loans previously charged-off:
Real estate mortgages 0
460
Installment loans 6,177
15,192
Commercial & all other 481
81
Total recoveries 6,658
15,733
Net loans charged-off (recovered) 53,910
44,014
Provision for loan losses charged to operations 45,000
25,674
Allowance for loan losses, March 31 $396,090
$386,696
======== ========
</TABLE>
The following table shows the principal balance of nonaccrual loans
as of June 30, 1996:
<TABLE>
<S> <C>
Nonaccrual loans $ 404,970.62
==========
Interest income that would have been
accrued at original contract rates $ 19,705.06
Amount recognized as interest income 7,998.32
Foregone revenue $ 11,706.74
=========
</TABLE>
NOTE 7 - COMMITMENTS
Main Office Renovation/Expansion
As of June 30, 1996, the Board of Directors has committed to
an expansion project for its main office facilities.
Demolition, design, and construction costs of $1,547,776 were
incurred as of June 30,1996. These expenditures are included
in the June 30, 1996 financial statements under the balance
sheet caption "Bank building, equipment, furniture and
fixtures, net." Management estimates total expenditures
related to this project including additional equipment
purchases will be approximately $1,750,000.
NOTE 8 - OTHER COMMITMENTS
In the normal course of business, the bank makes various
commitments and incurs certain contingent liabilities which
are not reflected in the accompanying financial statements.
These commitments include various guarantees and commitments
to extend credit. The bank does not anticipate any losses
as a result of these transactions.
TABLE #1
SCHEDULE OF HELD TO MATURITY AND AVAILABLE FOR SALE
DEBT SECURITY PORTFOLIOS
TRANSACTION SUMMARY
FOR THE PERIOD JANUARY 1, 1996 THROUGH JUNE 30, 1996
<TABLE>
<S> <C> <C> <C>
HELD TO AVAILABLE TOTAL
MATURITY FOR SALE INVESTMENT
PORTFOLIO PORTFOLIO PORTFOLIO
BEGINNING BALANCE 1/1/96 $5,401,263 $26,088,301 $31,489,564
PURCHASES 100,000 5,862,451 5,962,451
NET LOSSES (1) 0 3,843 3,843
MATURITIES/CALLS PAYDOWNS/
PREMIUM AMORTIZATION/DISCOUNT
ACCRETION 69,586 4,539,513 4,609,099
ENDING BALANCE 6/30/96 $5,431,677 $27,407,396 $32,839,073
========= ========== ==========
</TABLE>
NOTE (1): THE SECURITY LOSSES ARE THE RESULT OF PREMIUM REMAINING
ON AFS SECURITIES WHICH HAD BEEN CALLED DURING THE FIRST
QUARTER.
TABLE #2
SCHEDULE OF UNREALIZED GAINS AND UNREALIZED LOSSES
WITHIN THE HELD TO MATURITY AND AVAILABLE FOR SALE
INVESTMENT PORTFOLIOS BY INVESTMENT TYPE
JUNE 30, 1996
<TABLE>
<S> <C> <C> <C> <C> <C>
<C> <C> <C>
HELD TO HELD TO HELD TO HELD TO
AVAILABLE AVAILABLE AVAILABLE AVAILABLE
MATURITY MATURITY MATURITY MATURITY FOR
SALE FOR SALE FOR SALE FOR SALE
BOOK MARKET UNREALIZED UNREALIZED BOOK
MARKET UNREALIZED UNREALIZED
SECURITY PORTFOLIO VALUE VALUE GAIN LOSS
VALUE VALUE GAIN LOSS
U.S. GOVERNMENT TREASURIES 0 0 0 0
0 0 0 0
U.S. GOVERNMENT TREASURIES 0 0 0 0
751,132 747,595 0 (3,537)
U.S. GOVERNMENT AGENCIES 0 0 0 0
1,000,461 1,007,940 7,479 0
U.S. GOVERNMENT AGENCIES 0 0 0 0
12,804,497 12,463,798 0 (340,700)
SBA GUARANTEED LOAN POOL
CERTIFICATES 306,433 306,433 0 0
3,527,907 3,604,746 76,839 0
SBA GUARANTEED LOAN POOL
CERTIFICATES 1,438,855 1,422,569 0 (16,286)
734,531 732,811 0 (1,720)
MORTGAGE-BACKED SECURITIES 0 0 0 0
722,295 735,711 13,416 0
MORTGAGE-BACKED SECURITIES 0 0 0 0
1,232,186 1,216,550 0 (15,636)
SECURITIES ISSUED BY STATES
& POLITICAL SUBDIVISIONS IN
THE U.S. 865,539 875,846 11,307 0
1,540,727 1,574,662 33,935 0
SECURITIES ISSUED BY STATES
& POLITICAL SUBDIVISIONS IN
THE U.S. 2,821,850 2,804,010 0 (17,840)
5,093,660 4,959,402 0 (134,258)
MARKETABLE EQUITY SECURITIES 0 0 0 0
84,520 121,400 36,880 0
FEDERAL RESERVE BANK STOCK,
ATLANTIC CENTRAL BANKERS BANK
STOCK AND FEDERAL HOME LOAN
BANK STOCK 0 0 0 0
383,700 383,700 0 0
GRAND TOTALS 5,431,677 5,408,858 11,307 (34,126)
27,875,616 27,548,314 168,548 (495,850)
========= ========= ====== ======
========== ========== ======= =======
</TABLE>
CLASSIFICATION OF HELD TO MATURITY AND AVAILABLE FOR SALE
SECURITIES
Due to the implementation of FAS 115, management has segregated
securities as Held to Maturity, Available for Sale or Trading
securities. At the implementation of FAS 115 on January 1, 1994,
management determined that no securities were Trading securities;
that tax-free municipal with maturity dates less than the year 2000
were classified as Held to maturity securities due to management's
intention to hold these securities for tax planning purposes; and
that all other securities were classified as Available for Sale
securities due to management's intention to hold these securities
for liquidity planning purposes. Purchases of tax-free municipals
with maturities of 5 years or less made following implementation of
FAS 115 are classified as Held to Maturity securities with all
other purchase Available for Sale; however, management may decide
on a case-by-case basis that a security may be either classified as
Held to Maturity or Available for Sale depending upon the reasons
for purchase. Held to Maturity classifications are typically used
for securities purchased specifically for interest rate management
or tax-planning purposes while Available for Sale classifications
are typically used for liquidity planning purposes.
FNB FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Net income for the first six months of 1996 was $441,289 compared
to $491,821 for the same period in 1995. This represents a
decrease of $50,532 or 10.27%. Net income on an adjusted per share
basis for the first six months of 1996 was $1.10 per share, a
decrease of $0.13 from the $1.23 per share for the six months ended
June 30, 1995.
Total interest and dividend income for the first six months of 1996
was $3,380,230 compared to $2,989,187 for the six months ended June
30, 1995, representing an increase of $391,043. This increase is
a result of both slightly higher yields on investments in the
Bank's security portfolio and on adjustable rate loans which have
repriced to higher interest rates and on a general increase in the
balance of earning assets. However, since December 31, 1995, net
loans have only increased $145,263 or .28% while the book value of
investment debt securities have increased $1,349,509 and federal
funds sold have increased $1,002,000. This increase in loans, the
Bank's highest yielding interest-earning asset, and subsequent
increases in the lower yielding assets of investments and federal
funds sold have contributed to the decrease in the Bank's interest
income for the first six months of 1996.
During the last quarter of 1995 and the first quarter of 1996,
interest rates on loans, adjustable rate investments and federal
funds sold decreased due to decreases in short-term interest rates
by the Federal Reserve Board. Since the first quarter of 1996,
interest rates have begun to increase. During the first quarter,
several investment securities with call features were called by the
issuer resulting in the loss of higher interest earning assets. At
the same time, management was decreasing deposit rates but not at
the same pace as that of earning assets. The result combined with
the aforementioned increase in loans and increase in investments
and federal funds sold have resulted in a decrease in the bank's
net interest margin and interest spread during the first and second
quarters of 1996. Management anticipates the increase in interest
rates on loans and investments and the retention of deposit rates
at lower levels will result in the average interest rates earned on
assets to increase during the next few earning periods while
maturing liabilities will be repriced to lower interest rates
thereby creating a slight increase in interest spreads and net
interest margins.
Interest expense for the six months ended June 30, 1996, was
$1,856,846, an increase of $363,097 from the $1,493,749 incurred
for the same period in 1995. This increase is due to the
significant increase in total interest-bearing deposits as a result
of the purchase of the Fort Loudon Branch of Dauphin Deposit Bank
in November 1995. Total deposit volume increased $2,695,810 or
3.33% since December 31, 1995. This increase is the result of a
$1,267,937 or 2.59% increase in time certificates of deposit due to
movement of funds from lower yielding savings accounts and other
financial institutions. Savings accounts increased $877,895 or
3.66% while non-interest bearing demand deposit accounts increased
$347,843 or 4.47% from December 31, 1995. The increase in
interest-bearing time deposits contributed to an increase in
interest cost when compared to 1995.
The tax-adjusted net interest margin has decreased 37 basis points
to 3.84% for the first six months of 1996 from that of the first
six months of 1995 which was 4.21%. This decrease occurred due to
a increase in the cost of interest-bearing liabilities which
occurred throughout the 1995 year due to a general increase in the
cost of all deposits while the yield on earning assets increased
only slightly. The tax-equivalent yield on earning assets for the
first six months of 1996 decreased .02% to 8.06% from 8.08% for the
same period in 1995 while the cost of interest-bearing liabilities
increased .29% to 4.94% from 4.65% for the same period in 1995.
This increase in cost of interest-bearing liabilities has surpassed
that of the decrease in yield on earning assets resulting in a
decrease in net interest margin. Management anticipates to
continue to concentrate on the improvement of net interest margin
throughout the year and has taken steps to improve it by decreasing
rates on savings accounts by 25 basis points during the first
quarter and retaining the cost time deposits at lower levels.
Recent increases in interest rates on adjustable rate loans and
securities while higher cost time deposits have matured and been
repriced to lower yielding deposits have resulted in a gradual
increase in the net interest margin.
Total noninterest income increased $4,105 due primarily to the
recovery of prior year expenses. Operating expenses for the period
ended June 30, 1996, were $1,059,866, a $104,822 increase from the
operating expenses incurred for the same period in 1995 of
$955,044. This increase is due to 1) increases in employee wages
and benefits of $90,017 a result of an increase in wage rates, an
increase in the number of employees due to the purchase of the Fort
Loudon Branch which increased personnel by three employees, an
increase in employee participation in the Company's retirement plan
and a decrease in the deferral of loan origination costs associated
with SFAS 91; 2) an increase in the cost of fixed assets in the
amount of $21,444 due to increased utility bills, depreciation,
insurance and taxes as a result of the purchase of the Fort Loudon
Branch of Dauphin Deposit Bank in November 1995; and 3) an
additional new expense in 1996 of amortization of the premium on
deposits purchased at the Fort Loudon Office for which the first
six months of 1996 expense was $26,432. These increases were
offset by a decrease in other operating expenses of $43,730 due to
the reduction in FDIC insurance assessments. Management
anticipates the cost of fixed assets to increase significantly
during the third and fourth quarters of 1996 as the main office
construction comes to a close. Increased costs associated with
this construction will include additional depreciation, utility
billings, real estate insurance, real estate taxes and equipment
and maintenance costs. These costs will result in a decrease in
net income during the next several quarters.
The company's income tax provision for the first six months of 1996
was $108,705 as compared to $150,270 for the first six months of
1995. This decrease in the tax provision in the amount of $41,565
is due to an increase in tax-free income in relation to income
before income taxes. During the first six months of 1996 total
tax-free income was $321,813 or 58.51% of income before income
taxes compared to $257,930 or 40.17% of income before income taxes
for the same period in 1995.
Although the Company continues to operate with a marginal tax rate
of 34%, during the first quarter of 1996, the Company was subject
to the alternative minimum tax of 20% due to the increase in
tax-free income as highlighted earlier. The effective income tax
rate
for the first six months of 1996 was 19.76%, a decrease of 3.64%
from the effective tax rate for the first six months of 1995 of
23.40%. This decrease in the effective tax rate is primarily due
to the increase of tax-free interest income in relation to income
before income taxes.
Total assets as of June 30, 1996, were $94,478,902 an increase of
$2,557,760 over the period ending December 31, 1995, representing
an increase of 2.78%. Funding this increase in total assets was an
increase in total deposits of $2,695,810 or 3.33%. The increase in
deposits was the result of increased balances in time deposits of
$1,267,937, in savings account balances of $877,895 and in demand
deposits of $347,843 since December 31, 1995. Net loans as of June
30, 1996, were $52,939,128 compared to $52,793,865 as of December
31, 1995. The allowance for loan losses at the end of the six
months was $396,090 compared to $405,000 at year end 1995 and is
considered adequate, in management's judgement, to absorb possible
losses on existing loans. The provision for loan losses for the
first six months of 1996 was $45,000 compared to $25,674 for the
same period in 1995.
Total deposits were $83,612,097 as of June 30, 1996, compared to
$80,916,287 on December 31, 1995. This represents an increase of
$2,695,810 or 3.33% which reflects the activity as discussed
previously.
Total equity as of June 30, 1996, was $10,110,102, 10.70% of total
assets as compared to $10,128,464, 11.02% of total assets as of
December 31, 1995. This decrease in equity reflects a decrease in
market value of marketable securities which has resulted in a net
unrealized loss on available for sale securities, net of tax
effects of ($216,019), a $323,649 decrease from the December 31,
1995 net unrealized gain on available for sale securities, net of
tax effects of $107,630.
The Corporation has risk-based capital ratios exceeding regulatory
requirements. Risk-based capital guidelines require a minimum
ratio of 8.0%. At June 30, 1996, the risk-based capital ratio of
the Corporation was 20.62% while at December 31, 1995, the
risk-based capital ratio was 21.16%. The following table presents
the
risk-based capital ratios for the Corporation:
<TABLE>
<S> <C> <C>
June 30, Regulatory
1996 Minimum
Leverage Ratio 10.66% 3.00%
Risk-based capital ratios:
Tier I (core capital) 19.84% 4.00%
Total Capital
(Tier I and Tier II Capital) 20.62% 8.00%
</TABLE>
PART II - OTHER INFORMATION
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
None
Item 3 - Defaults Upon Senior Securities
Not Applicable
Item 4 - Submission of Matters to a Vote of Security Holders
None
Item 5 - Other Information
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.
/s/
(John C. Duffey, President
and Director of the Company and
President of the Bank)
(Duly Authorized Officer)
Date /s/
(Daniel E. Waltz, Treasurer
and Director of the Company and
Senior Vice President/CFO of
the Bank)
(Principal Financial &
Accounting Officer)
<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> 2,287
<INT-BEARING-DEPOSITS> 418
<FED-FUNDS-SOLD> 1,479
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 27,043
<INVESTMENTS-CARRYING> 5,432
<INVESTMENTS-MARKET> 5,409
<LOANS> 53,335
<ALLOWANCE> 396
<TOTAL-ASSETS> 94,479
<DEPOSITS> 83,612
<SHORT-TERM> 0
<LIABILITIES-OTHER> 757
<LONG-TERM> 0
<COMMON> 252
0
0
<OTHER-SE> 9,858
<TOTAL-LIABILITIES-AND-EQUITY> 94,479
<INTEREST-LOAN> 2,353
<INTEREST-INVEST> 932
<INTEREST-OTHER> 95
<INTEREST-TOTAL> 3,380
<INTEREST-DEPOSIT> 1,857
<INTEREST-EXPENSE> 1,857
<INTEREST-INCOME-NET> 1,523
<LOAN-LOSSES> 45
<SECURITIES-GAINS> (4)
<EXPENSE-OTHER> 1,060
<INCOME-PRETAX> 550
<INCOME-PRE-EXTRAORDINARY> 441
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 441
<EPS-PRIMARY> 1.10
<EPS-DILUTED> 1.10
<YIELD-ACTUAL> 3.84
<LOANS-NON> 405
<LOANS-PAST> 82
<LOANS-TROUBLED> 163
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 405
<CHARGE-OFFS> 61
<RECOVERIES> 7
<ALLOWANCE-CLOSE> 396
<ALLOWANCE-DOMESTIC> 396
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
