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, 1997
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, 1997
(Common stock, $0.63 par value) 400,000
FNB FINANCIAL CORPORATION
INDEX
Page
PART I - FINANCIAL INFORMATION
Condensed consolidated balance sheets -
June 30, 1997 and December 31, 1996 5
Condensed consolidated statements of income -
Three months ended June 30, 1997 and 1996 6
Condensed consolidated statements of income -
Six months ended June 30, 1997 and 1996 7
Condensed consolidated statements of cash flows -
Six months ended June 30, 1997 and 1996 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, 1997 through June 30, 1997 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,
1997 1996
ASSETS: (unaudited) (audited*)
Cash and Due from banks $ 4,429,266 $ 2,473,315
Interest-bearing deposits with banks 317,459 327,276
Marketable Debt Securities
Held-to-maturity (Market value - 1997:
$3,972,434 and 1996: $4,567,903) 3,961,345 4,559,739
Available-for-sale 27,267,730 28,755,272
Marketable Equity Securities
Available for Sale 124,020 115,640
Federal Reserve, Atlantic Central Banker's Bank
and Federal Home Loan Bank Stock 389,600 383,700
Federal Funds Sold 2,132,000 1,239,000
Loans, net of unearned discount &
Allowance for loan losses 56,591,051 56,259,929
Bank buildings, equipment, furniture &
fixtures, net 3,168,107 3,107,960
Accrued interest receivable 624,720 675,180
Deferred income tax charges 0 6,548
Other real estate owned 369,028 318,992
Intangible Assets 183,298 210,588
Other assets 190,282 210,933
Total Assets $99,747,906 $98,644,072
========== ==========
LIABILITIES :
Deposits:
Demand deposits $ 8,411,313 $ 9,249,700
Savings deposits 26,797,063 26,674,628
Time certificates 52,180,345 50,957,962
Other time deposits 480,943 251,678
Total deposits $87,869,664 $87,133,968
Accrued interest payable & other liabilities 723,057 708,072
Deferred income taxes 14,989 0
Accrued dividends payable 72,000 100,000
Total Liabilities $88,679,710 $87,942,040
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 8,952,540 8,628,183
Net unrealized gain/(loss) on Available-for-sale
securities, net of tax effects 73,823 32,016
Total Stockholders' Equity $11,068,196 $10,702,032
Total Liabilities & Stockholders' Equity $99,747,906 $98,644,072
========== ==========
</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, 1997 and 1996
(UNAUDITED)
<TABLE>
<S> <C> <C>
1997
1996
Interest & Dividend Income
Interest & fees on loans $1,318,651
$1,176,773
Interest on investment securities:
U.S. Treasury Securities 11,061
13,153
Obligations of other U.S.
Government Agencies 358,468
344,122
Obligations of State & Political
Subdivisions 105,837
117,297
Interest on deposits with banks 4,930
9,421
Dividends on Equity Securities 6,446
6,361
Interest on federal funds sold 43,473
28,568
Total Interest & Dividend Income 1,848,866
1,695,695
Interest Expense
Interest on deposits 951,038
920,870
Net interest income 951,038
774,825
Provision for loan losses 43,500
37,500
Net interest income after
Provision for loan losses 854,328
737,325
Other income
Service charges on deposit accounts 18,268
15,947
Other service charges, collection &
exchange charges, commissions
and fees 51,969
43,131
Other income 40,593
13,386
Net Securities gains/(losses) 95
0
Total other income 110,925
72,464
Other expenses 650,028
541,253
Income before income taxes 315,225
268,536
Applicable income taxes 69,011
56,150
Net income $246,214
$212,386
=======
=======
Earnings per share of Common Stock:
Net income per share $0.62
$0.53
Cash dividend declared per share $0.18
$0.17
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, 1997 and 1996
(UNAUDITED)
<TABLE>
<S> <C> <C>
1997
1996
Interest & Dividend Income
Interest & fees on loans $2,589,431
$2,352,627
Interest on investment securities:
U.S. Treasury Securities 22,130
28,896
Obligations of other U.S.
Government Agencies 728,419
653,356
Obligations of State & Political
Subdivisions 212,576
237,186
Interest on deposits with banks 8,817
20,439
Dividends on Equity Securities 13,887
12,540
Interest on federal funds sold 62,235
75,186
Total Interest & Dividend Income 3,637,495
3,380,230
Interest Expense
Interest on deposits 1,878,301
1,856,846
Interest on FHLB Advances 559
0
Total Interest Expense 1,878,860
1,856,846
Net interest income 1,758,635
1,523,384
Provision for loan losses 52,500
45,000
Net interest income after
Provision for loan losses 1,706,135
1,478,384
Other income
Service charges on deposit accounts 32,996
31,383
Other service charges, collection &
exchange charges, commissions
and fees 98,058
84,114
Other income 50,678
19,822
Net Securities gains/(losses) 95
(3,843)
Total other income 181,827
131,476
Other expenses 1,305,788
1,059,866
Income before income taxes 582,174
549,994
Applicable income taxes 117,818
108,705
Net income $464,356
$441,289
=======
=======
Earnings per share of Common Stock:
Net income per share $1.16
$1.10
Cash dividend declared per share $0.35
$0.34
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, 1997 and 1996
<TABLE>
<S> <C> <C>
(UNAUDITED)
1997 1996
Cash flows from operating activities:
Net income $ 464,356 $ 441,289
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation & amortization 138,012 85,686
Provision for loan losses 52,500 45,000
Net (gain)/loss on sales of
investments 95
3,843
(Increase) decrease in accrued
interest receivable 50,460
(54,061)
Increase (decrease) in accrued
interest payable and
other liabilities 14,985
(76,198)
Other (net) 20,414
(81,243)
Net cash provided (used)by operating
activities 741,822 364,316
Cash flows from investing activities:
Net (increase) decrease in interest-
bearing deposits with banks 9,817
440
Purchases of Held-to-maturity
securities (151,662)
(100,000)
Purchases of Available-for-sale
securities (1,875,375)
(5,862,451)
Proceeds from sales of Available-for-
sale securities 709,447 0
Proceeds from maturities of Held-to-
maturity securities 750,056 69,586
Proceeds from maturities of Available-
for-sale securities 2,714,409 4,539,513
Purchases of marketable equity securities (5,880) 0
Net (increase) decrease in loans (443,933)
(199,353)
Proceeds from sale of Other real
estate owned 10,075 39,000
Purchases of bank premises &
equipment (net) (170,621)
(718,249)
Purchase of other bank stock (5,900)
(13,700)
Net cash provided (used) by investing
activities 1,540,433
(2,245,214)
Cash flows from financing activities:
Net increase (decrease) in deposits 735,696
2,695,810
Cash dividends paid (168,000)
(160,000)
Net cash provided (used) by financing
activities 567,696
2,535,810)
Net increase (decrease) in cash & cash
equivalents 2,848,951
654,912
Cash & cash equivalents, beginning balance 3,712,315 3,110,762
Cash & cash equivalents, ending balance $6,561,266 $3,765,674
========= =========
Supplemental disclosure of cash flows information
Cash paid during the year for:
Interest $1,876,388 $1,698,571
Income taxes 38,924 206,688
Supplemental schedule of noncash investing &
financing activities
Unrealized gain (loss) on Available-for-sale
securities 111,853 (327,302)
Deferred income tax asset (liability) on
unrealized gain or loss on
available-for-sale securities (38,030) 111,283
Accrued dividends payable 72,000 68,000
Other real estate acquired in
settlement of loans 59,311 59,090
Loan advanced for sale of other real
estate owned 0 50,000
</TABLE>
The accompanying notes are an integral part of these condensed
financial statements.
FNB FINANCIAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The financial information presented at and for the six
months ended June 30, 1997 and June 30, 1996 is unaudited.
Information presented at December 31, 1996, 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, 1997, through
June 30, 1997, 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>
1997 1996
Allowance for loan losses beginning of the year $405,612
$405,000
Loans charged-off during the year:
Real estate mortgages 3,785
51,090
Installment loans 11,231
5,712
Commercial & all other 3,313
3,766
Total charge-offs 18,329
60,568
Recoveries of loans previously charged-off:
Real estate mortgages 507
0
Installment loans 4,531
6,177
Commercial & all other 416
481
Total recoveries 5,454
6,658
Net loans charged-off (recovered) 12,875
53,910
Provision for loan losses charged to operations 52,500
45,000
Allowance for loan losses, June 30 $445,236
$396,090
======== ========
</TABLE>
The following table shows the principal balance of nonaccrual loans
as of June 30, 1997:
<TABLE>
<S> <C>
Nonaccrual loans $ 703,085.66
==========
Interest income that would have been
accrued at original contract rates $ 33,755.42
Amount recognized as interest income 15,692.22
Foregone revenue $ 18,063.20
=========
</TABLE>
NOTE 7 - COMMITMENTS
Fort Loudon Office Renovation/Expansion
As of June 30, 1997, the Board of Directors has committed to
an expansion project for the Fort Loudon Branch Office. This
project was approved by the Board on August 28, 1996. This
renovation/expansion will increase the size of the office,
improve customer access and add one lane drive up facility.
Management estimates total expenditures related to this
project including additional equipment purchases will be
approximately $200,000.
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, 1997 THROUGH JUNE 30, 1997
<TABLE>
<S> <C> <C> <C>
HELD TO AVAILABLE TOTAL
MATURITY FOR SALE INVESTMENT
PORTFOLIO PORTFOLIO PORTFOLIO
BEGINNING BALANCE 1/1/97 $4,559,739 $28,737,883 $33,297,622
PURCHASES 151,662 1,875,375 2,027,037
PROCEEDS FROM SALES 0 709,447 709,447
NET LOSSES/(GAINS) 0 95 95
MATURITIES/CALLS PAYDOWNS/
PREMIUM AMORTIZATION/DISCOUNT
ACCRETION 750,056 2,714,409 3,464,465
ENDING BALANCE 6/30/97 $3,961,345 $27,189,497 $31,150,842
========= ========== ==========
</TABLE>
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, 1997
<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
499,851 501,190 1,339 0
U.S. GOVERNMENT TREASURIES 0 0 0 0
99,135 98,940 0 (195)
U.S. GOVERNMENT AGENCIES 0 0 0 0
8,337,803 8,368,157 30,354 0
U.S. GOVERNMENT AGENCIES 0 0 0 0
7,097,462 7,025,600 0 (71,862)
SBA GUARANTEED LOAN POOL
CERTIFICATES 316,152 318,900 2,748 0
2,763,000 2,814,953 51,953 0
SBA GUARANTEED LOAN POOL
CERTIFICATES 1,270,241 1,263,968 0 (6,273)
302,587 301,515 0 (1,072)
MORTGAGE-BACKED SECURITIES 0 0 0 0
941,533 958,638 17,105 0
MORTGAGE-BACKED SECURITIES 0 0 0 0
485,517 483,619 0 (1,898)
SECURITIES ISSUED BY STATES
& POLITICAL SUBDIVISIONS IN
THE U.S. 1,844,974 1,860,703 15,729 0
4,571,250 4,637,633 66,383 0
SECURITIES ISSUED BY STATES
& POLITICAL SUBDIVISIONS IN
THE U.S. 529,978 528,863 0 (1,115)
2,091,358 2,077,485 0 (13,873)
MARKETABLE EQUITY SECURITIES 0 0 0 0
90,400 124,020 33,620 0
FEDERAL RESERVE BANK STOCK,
ATLANTIC CENTRAL BANKERS BANK
STOCK AND FEDERAL HOME LOAN
BANK STOCK 0 0 0 0
389,600 389,600 0 0
GRAND TOTALS 3,961,345 3,972,434 18,477 (7,388)
27,669,497 27,781,350 200,754 (88,900)
========= ========= ====== ======
========== ========== ======= =======
</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 1997 was $464,356 compared
to $441,289 for the same period in 1996. This represents an
increase of $23,067 or 5.23%. Net income on an adjusted per share
basis for the first six months of 1997 was $1.16 per share, a
decrease of $0.06 from the $1.10 per share for the six months ended
June 30, 1996.
Total interest and dividend income for the first six months of 1997
was $3,637,495 compared to $3,380,230 for the six months ended June
30, 1996, representing an increase of $257,265. This increase is
a result of both higher yields on investments and an increase in
the average balances of loans in the loan portfolio. Since June
30, 1996, net loans have increased $3,651,923 or 6.90%. This
increase combined with an slight decrease in the yield on the loan
portfolio from 9.25% for the first six months of 1996 to 9.15% for
the first six months in 1997 resulted in an increase of loan
interest income in the amount of $236,804. The book value of
investment debt securities has decreased $1,688,231 since June 30,
1996; however, interest income on these securities increased
$43,687 as a result of an increase in the yield on these securities
from 6.50% for the first six months of 1996 to 6.70% for the first
six months of 1997.
During the first quarter of 1997, short-term interest rates were
increased 0.25% by the Federal Reserve Board. Since that increase,
interest rates have remained relatively the same. As a result of
this stable interest rate environment in which interest rates are
not anticipated to increase, 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 has
increased deposit rates only slightly but not at the same pace as
that of earning assets. The result, combined with the
aforementioned increase in loans and increase in investment yield,
has been an increase in the bank's net interest margin and interest
spread during the first and second quarters of 1997. Management
anticipates the increase in interest rates on loans and investments
and the retention of deposit rates at lower levels will result in
a slight increase in interest spreads and net interest margins.
Interest expense for the six months ended June 30, 1997, was
$1,878,860, an increase of $22,014 over the $1,856,846 incurred for
the same period in 1996. This very small increase is due to the
retention of deposits rates at lower levels. Total deposit volume
increased $4,257,567 or 5.09% since June 30, 1996. This increase
is the result of a $1,970,266 or 3.92% increase in time
certificates of deposit due to movement of funds from lower
yielding savings accounts and other financial institutions.
Savings accounts increased $1,963,700 or 7.91% while non-interest
bearing demand deposit accounts increased $285,355 or 3.51% from
June 30, 1996. Although the volumes of deposits in both time
deposits and savings accounts have increased, the cost of these
deposits has decreased from the same period in 1996. The cost of
total interest bearing deposits for the first six months of 1997
was 4.80% compared to 4.94% for the same period in 1996. This
decrease in cost of deposits and increase in volume of interest
bearing deposits resulted in the $22,014 increase in interest
expense as discussed earlier.
The tax-adjusted net interest margin has increased 37 basis points
to 4.21% for the first six months of 1997 from that of the first
six months of 1996 which was 3.84%. This increase occurred due to
an increase in the yield on earning assets while the cost of
interest bearing liabilities has decreased. The tax-equivalent
yield on earning assets for the first six months of 1997 increased
.33% to 8.39% from 8.06% for the same period in 1996 while the cost
of interest-bearing liabilities decreased .14% to 4.80% from 4.94%
for the same period in 1996. This decrease in cost of
interest-bearing liabilities and increase in yield on earning
assets has
resulted in an increase in the net interest margin. Management
anticipates to continue to concentrate on the retention and
improvement of the net interest margin at this higher level
throughout the year and has taken steps to improve it by decreasing
rates on money market accounts.
Total noninterest income increased $50,351 due primarily to a
$31,211 gain on the sale of the Bank's portfolio of student loans
on June 19 and a $10,000 increase in the commission received on the
disability and life insurance written on consumer installment and
mortgage loans over the same period in 1996. Operating expenses
for the period ended June 30, 1997, were $1,305,788, a $245,922
increase from the operating expenses incurred for the same period
in 1996 of $1,059,866. This increase is due to 1) increases in
employee wages and benefits of $104,898, a result of an increase in
wage rates, an increase in the number of employees due to the
opening of the Hancock Community Bank in November 1996 which
increased personnel by six employees and an increase in employee
participation in the Company's retirement plan and health insurance
plans; 2) an increase in the cost of fixed assets in the amount of
$60,261 due to increased utility bills, depreciation, insurance and
taxes as a result of the completed renovation/expansion of the main
office facility in September 1996 and the opening of Hancock
Community Bank in November 1996; 3) an increase in the
Promotion/Advertising expenses of the Bank in the amount of $22,049
over 1996 due to increased promotional/advertising campaigns; and
4) an $8,400 increase in communications expenses due to computer
connection fees of Hancock Community Bank; a $6,400 increase in
professional fees due to appraisal costs of the main office; a
$6,000 increase in regulatory assessments due to FDIC charges for
FICO Bond interest; and a $9,500 increase in professional
development expenses due to increased costs of conventions,
seminars, and other banking related education.
The company's income tax provision for the first six months of 1997
was $117,818 as compared to $108,705 for the first six months of
1996. This increase in the tax provision in the amount of $9,113
is due to an decrease in tax-free income in relation to income
before income taxes. During the first six months of 1997 total
tax-free income was $258,922 or 44.48% of income before income
taxes compared to $321,813 or 58.51% of income before income taxes
for the same period in 1996.
Although the Company continues to operate with a marginal tax rate
of 34%, the effective income tax rate for the first six months of
1997 was 20.24%, an increase of 0.48% from the effective tax rate
for the first six months of 1996 of 19.76%. This increase in the
effective tax rate is primarily due to the decrease of tax-free
interest income in relation to income before income taxes.
Total assets as of June 30, 1997, were $99,747,906 an increase of
$1,103,834 over the period ending December 31, 1996, representing
an increase of 1.12%. Funding this increase in total assets was an
increase in total deposits of $735,696 or 0.84%. The increase in
deposits was the result of increased balances in time deposits of
$1,222,383 and in savings account balances of $122,435 which were
offset by a decrease in demand deposits of $838,387 since December
31, 1996. Net loans as of June 30, 1997, were $56,591,051 compared
to $56,259,929 as of December 31, 1996. The allowance for loan
losses at the end of the six months was $445,236 compared to
$405,612 at year end 1996 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
1997 was $52,500 compared to $45,000 for the same period in 1996.
Total deposits were $87,869,664 as of June 30, 1997, compared to
$87,133,968 on December 31, 1996. This represents an increase of
$735,696 or 0.84% which reflects the activity as discussed
previously.
Total equity as of June 30, 1997, was $11,068,196, 11.10% of total
assets as compared to $10,702,032, 10.85% of total assets as of
December 31, 1996. This increase in equity reflects the
reinvestment of earnings into the corporation.
The Corporation has risk-based capital ratios exceeding regulatory
requirements. Risk-based capital guidelines require a minimum
ratio of 8.0%. At June 30, 1997, the risk-based capital ratio of
the Corporation was 19.66% while at December 31, 1996, the
risk-based capital ratio was 20.05%. The following table presents
the
risk-based capital ratios for the Corporation:
<TABLE>
<S> <C> <C>
June 30, Regulatory
1997 Minimum
Leverage Ratio 10.84% 3.00%
Risk-based capital ratios:
Tier I (core capital) 18.94% 4.00%
Total Capital
(Tier I and Tier II Capital) 19.66% 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
(John C. Duffey, President
and Director of the Company and
President of the Bank)
(Duly Authorized Officer)
Date August 12, 1997 /s/Daniel E. Waltz
(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-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 4,429
<INT-BEARING-DEPOSITS> 317
<FED-FUNDS-SOLD> 2,132
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 27,268
<INVESTMENTS-CARRYING> 3,961
<INVESTMENTS-MARKET> 3,972
<LOANS> 57,036
<ALLOWANCE> 445
<TOTAL-ASSETS> 99,748
<DEPOSITS> 87,870
<SHORT-TERM> 0
<LIABILITIES-OTHER> 723
<LONG-TERM> 0
<COMMON> 252
0
0
<OTHER-SE> 10,816
<TOTAL-LIABILITIES-AND-EQUITY> 99,748
<INTEREST-LOAN> 2,589
<INTEREST-INVEST> 977
<INTEREST-OTHER> 71
<INTEREST-TOTAL> 3,637
<INTEREST-DEPOSIT> 1,878
<INTEREST-EXPENSE> 1,879
<INTEREST-INCOME-NET> 1,759
<LOAN-LOSSES> 53
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,306
<INCOME-PRETAX> 582
<INCOME-PRE-EXTRAORDINARY> 464
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 464
<EPS-PRIMARY> 1.16
<EPS-DILUTED> 1.16
<YIELD-ACTUAL> 4.21
<LOANS-NON> 703
<LOANS-PAST> 43
<LOANS-TROUBLED> 1
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 405
<CHARGE-OFFS> 18
<RECOVERIES> 5
<ALLOWANCE-CLOSE> 445
<ALLOWANCE-DOMESTIC> 445
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
