<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB/A
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: SEPTEMBER 30, 1995
COMMISSION FILE NUMBER: 0-17007
ExecuFirst Bancorp, Inc.
------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania #23-2486815
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(State or other jurisdiction of IRS Employer Identification
incorporation or organization) Number
1513 Walnut Street, Philadelphia, Pennsylvania 19102
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(Address of principal executive offices)(Zip code)
215-564-3300
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(Registrant's telephone number, including area code)
N/A
---
(Former name, former address and former 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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
filing requirements for the past 90 days.
YES X NO
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APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the Issuer's
classes of common stock, as of the latest practicable date.
1,226,057 shares of Issuer's Common Stock, par value
$.01 per share, issued and outstanding as of January 15, 1996
Page 1 of 24
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PART I - FINANCIAL INFORMATION
Item 1: FINANCIAL STATEMENTS
See Annex "A"
2
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Item 2:
ITEM 2 IS HEREBY AMENDED IN ITS ENTIREY BY INSERTION OF THE FOLLOWING:
Management's Discussion and Analysis of Financial
Condition and Results of Operations
__________________________________________________________________
ExecuFirst Bancorp, Inc. (the "Company") and its wholly owned subsidiary,
First Executive Bank (the "Bank") commenced banking operations in November,
1988. The Bank conducts its principal banking activities through its offices at
1513 Walnut Street, Philadelphia, PA and its branch office in the interior lobby
of the Pepper Pavilion, Graduate Hospital, 19th and Lombard Streets,
Philadelphia, PA.
CAPITAL RESOURCES:
During the nine months ended September 30, 1995, the Company reported net
income of $306,307. After reflecting unrealized gains on securities "available
for sale," in accordance with Financial Accounting Standards Board Statement 115
in the amount of $107,748, total Shareholders' Equity increased to $7,606,510
from $6,513,867 at year-end 1994. Total Shareholders' Equity was $7,481,697 at
June 30, 1995.
The Company's ratio of Tier I Capital to total Risk-Weighted Assets
increased to 9.33% as of September 30, 1995 from 9.00% as of December 31, 1994
and decreased from 9.90% as of June 30, 1995. The Company's ratio of Tier I
Leverage Capital to total average quarterly assets was 6.51% compared to 6.56%
as of December 31, 1994 and 6.76% as of June 30, 1995.
REGULATORY CAPITAL REQUIREMENTS:
The following table presents the Bank's capital ratios at September 30, 1995:
Tier I Capital $7,492,000
Tier II Capital 1,004,000
---------
Total Capital $8,496,000
Total Average Quarterly Assets $115,150,000
Total Risk-Weighted Assets(1) 80,311,000
Tier I Risk-Based Capital Ratio(2) 9.33%
Required Tier I Risk-Based Capital Ratio 4.00%
Excess Tier I Risk-Based Capital Ratio 5.33%
Total Risk-Based Capital Ratio(3) 10.58%
Required Total Risk-Based Capital Ratio 8.00%
-----
Excess Total Risk-Based Capital Ratio 2.58%
Tier I Leverage Ratio(4) 6.51%
3
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Required Tier I Leverage Ratio 4.00%
-----
Excess Tier I Leverage Ratio 2.51%
__________________________________________________________________________
(1) Includes off-balance sheet items at credit-equivalent values.
(2) Tier I Risk-Based Capital Ratio is defined as the ratio of Tier I
Capital to Total Risk-Weighted Assets.
(3) Total Risk-Based Capital Ratio is defined as the ratio of Tier I and
Tier II Capital to Total Risk-Weighted Assets.
(4) Tier I Leverage Ratio is defined as the ratio of Tier I Capital to
Total Average Quarterly Assets.
The Bank's ability to maintain the required level of capital is
substantially dependent upon the success of the Bank's capital and business
plans, the impact of future economic events on the Bank's loan customers, the
Bank's ability to manage its interest rate risk and control its growth and other
operating expenses.
In addition to the above minimum capital requirements, effective on
December 19, 1992, the Federal Reserve Bank implemented a statutory requirement
that federal banking regulators take specified "prompt corrective action" when
an insured institution's capital level falls below certain levels. The rule
defines five capital categories based on several of the above capital ratios.
The Bank currently exceeds the levels required for a bank to be classified as
"well capitalized". However, the Federal Reserve Bank may consider other
criteria when determining such classifications that could result in a
downgrading in such classifications.
LIQUIDITY:
The Bank's target and actual liquidity levels are determined and managed
based on Management's comparison of the maturities and marketability of the
Bank's interest-earning assets with its projected future maturities of deposits
and other liabilities. As of September 30, 1995, the Bank maintained $13.4
million in cash and cash equivalents in the form of cash and due from banks
(after reserve requirements) and overnight federal funds sold. This represented
10.8% of the total assets at September 30, 1995 as compared to 14.1% and 9.5% at
June 30, 1995, and December 31, 1994, respectively. Of the Bank's investment
securities, approximately $11.4 million are pledged to secure public funds
deposits and, therefore, are not available for liquidity purposes.
Additionally, the Bank has established two collateralized lines of credit
of $15 million and $.5 million, respectively, to assist in managing the Bank's
liquidity position. No amounts were outstanding on either of these facilities
as of September 30, 1995.
Both liquidity and interest sensitivity are managed by the Finance
Committee of the Bank's Board of Directors. This Committee's primary objective
is to oversee and assist Management in various financial aspects of the Bank's
activities including asset/liability management.
INVESTMENT SECURITIES:
Effective January 1, 1994, the Bank adopted Statement of Financial
Accounting Standards (SFAS) ("Statement") No. 115, "Accounting for Certain
Investments in Debt
4
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and Equity Securities." The Statement requires certain investments to be
classified under one of the following categories: "held- to-maturity" and
accounted for at historical cost, adjusted for accretion of discounts and
amortization of premiums; "available-for-sale" and accounted for at fair market
value, with unrealized gains and losses reported as a separate component of
shareholders' equity; or "trading" and accounted for at fair market value, with
unrealized gains and losses reported as a component of net income. The Bank
does not hold trading securities.
At September 30, 1995, the Bank has also identified investment
securities that will be held for indefinite periods of time, including
securities that will be used as part of the Bank's asset/liability management
strategy and that may be sold in response to changes in interest rates,
prepayments and similar factors. The securities are classified as "available-
for-sale". During the third quarter, in order to increase the flexibility of
asset/liability management, the Bank reclassified certain securities with a book
value of approximately $7,654,000 and unrealized gains of approximately $60,000
from the "held-to-maturity" classification to the "available-for-sale"
classification. Available-for-sale securities consist of U.S. Government
Treasury, U.S. Government Agency, and Other Securities with book and market
values of $8,482,000, $25,616,000, and $1,256,000 respectively, as of September
30, 1995. Accordingly, the net unrealized gain on securities available-for-
sale, as of this date, was $108,000.
The following table represents the carrying and estimated fair values of
Investment Securities at September 30, 1995.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
GROSS GROSS
UNREALIZED UNREALIZED
AVAILABLE-FOR-SALE ($000) COST GAIN LOSS FAIR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury $8,482 $69 $0 $8,551
U.S. Government Agencies 25,616 40 1 25,655
Other 1,256 0 0 1,256
- --------------------------------------------------------------------------------
TOTAL AVAILABLE-FOR-SALE $35,354 $109 $1 $35,462
- --------------------------------------------------------------------------------
</TABLE>
INTEREST RATE SENSITIVITY:
The possible effect upon the Company and the Bank of any future rise in
interest rates is believed by Management to be minimal, since the Bank has the
ability to respond to any such changes by quickly raising rates on many of its
interest-earning assets, which are comprised chiefly of federal funds sold and
prime-rate based commercial loans. However, a decrease in interest rates
generally could have an effect on the Bank, due to a timing difference in
repricing the Bank's liabilities, primarily certificates of deposit, and its
interest-earning assets noted above. As of September 30, 1995, 17% of the
Bank's time deposits were to mature and be repriceable within three months of
such date, and an additional 26% were to be repriceable within three to six
months.
5
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The Bank has the ability to reprice 20% of its total deposits, reflecting
Money Market, NOW and Savings accounts, on a weekly basis. Accordingly, since a
significant amount of the Bank's present liabilities can be repriced in the
relative short-term, Management believes that the effect resulting from a
decrease in interest rates would be minimal. As of September 30, 1995 and
December 31, 1994, 26% and 39% of the Bank's interest-bearing deposits,
respectively, were repriceable within three months and 26% and 13% from three to
six months. The cumulative 12-month Interest Rate Sensitivity Gap at September
30, 1995 was a negative 6.8% compared to a positive 13.4% at December 31, 1994.
This shift, at September 30, 1995, is the result of a $21 million increase in
certificates of deposit maturing in one year or less. In addition, the Bank has
increased its portfolio of fixed rate investment securities.
INTEREST SENSITIVITY ANALYSIS AT SEPTEMBER 30, 1995 ($000)
<TABLE>
<CAPTION>
RATE MATURITY PERIOD
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1-90 91-180 181-365 1-5 5 YRS.&
DAYS DAYS DAYS YEARS OVER TOTAL
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<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS
Time deposits $0 $990 $0 $0 $0 $990
Investment securities (a) 8,906 3,487 4,170 9,538 9,253 35,354
Federal funds sold 9,275 0 0 0 0 9,275
Loans 48,416 512 672 19,857 4,146 73,603
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Total 66,597 4,989 4,842 29,395 13,399 119,222
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FUNDING SOURCES
NOW accounts (b) 2,535 0 0 1,268 1,268 5,070
Money Market (b) 8,242 0 0 4,122 4,122 16,485
Savings (b) 802 0 0 401 401 1,604
Time Deposits 13,195 25,189 34,526 965 0 73,875
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Total 24,773 25,189 34,526 6,755 5,791 97,033
Period Gap 41,825 (20,200) (29,684) 22,640 7,609 22,189
Cumulative GAP $41,825 $21,625 ($8,060) $14,580 $22,189
------------------------------------------------------------------
</TABLE>
NOTES TO INTEREST SENSITIVITY ANALYSIS:
(a) Callable securities are reported at their contractual maturity dates.
(b) Reflects managerial assumptions regarding expected repricing or maturity
behavior of various products.
RESULTS OF OPERATIONS:
For the nine months ended September 30, 1995, the Bank's total assets
increased 18% to approximately $123.8 million from $105.1 million at December
31, 1994. For the quarter ended September 30, 1995, total assets increased 14%
from $108.5 million at June 30, 1995. The recent increase in total assets is in
line with the Bank's strategic plan, which calls for higher volumes of earning
assets to offset the Bank's current level of operating expenses. The growth was
6
<PAGE>
accomplished by way of a successful marketing campaign aimed at retaining
existing customers as well as attracting new customers into targeted deposit
products, primarily certificate of deposits.
As of September 30, 1995, net loans totaled $72.4 million representing
a decline of $1.4 million compared to $73.8 million at December 31, 1994, as
repayments of outstanding loans exceeded new loan originations. This
compared to a decline of $6.8 million during the period ended September 30,
1994. Net loans, during the quarter ended September 30, 1995 increased $3.9
million from $68.5 million for the quarter ended June 30, 1995.
Total deposits grew $17.6 million to $114.8 million during the nine
months ended September 30, 1995. This compared to an increase of $2.3
million during the period ended September 30, 1994. There have been changes
in the deposit mix from December 31, 1994 to September 30, 1995.
Non-interest bearing demand accounts have increased by $1.6 million while
Now, Money Market and Savings accounts have declined by $1.2 million and $3.5
million, respectively. Time deposits increased $20.8 million during this same
period. Total deposits for the quarter ended September 30, 1995 grew by
$15.0 million. Increases in time deposits accounted for $11.5 million of
this growth.
DEPOSIT BREAKDOWN TABLE
SEPTEMBER 30, 1995
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($000)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995
1994
% OF % OF
TYPE OF ACCOUNT BALANCE TOTAL BALANCE TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Demand: non-interest bearing 17,817 16% 16,217 17%
Demand: interest bearing 5,069 4% 6,304 6%
Money Market 16,485 14% 19,867 20%
Savings 1,603 1% 1,709 2%
Time deposits under $100,000 55,967 49% 35,332 36%
Time deposits over $100,000 17,909 16% 17,781 18%
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Total deposits 114,850 100% 97,210 100%
</TABLE>
7
<PAGE>
The Company's net income for the quarter ended September 30, 1995, was
$56,015, or approximately $.05 per share of common stock, compared to a net loss
of $851,373, or approximately ($.69) per share of common stock, during the
comparable quarter of 1994. For the nine months ended September 30, 1995, net
income was $306,307, or approximately $.25 per share of common stock, compared
to a net loss of $519,792, or approximately ($.42) per share of common stock, in
the comparable period of 1994. The net loss in 1994 was primarily the result of
provisions for loan losses of $1,047,573 associated with losses resulting from
the bankruptcy of two significant borrowers.
Net interest income, the difference between interest earned on loans and
other investments and the interest paid on deposits and borrowings, decreased to
$1,202,304 in the quarter ended September 30, 1995, from $1,279,867 in the
quarter ended September 30, 1994. Net interest income for the nine months ended
September 30,1995 increased to $3,847,209 compared to $3,524,945 in the
comparable period of 1994. While the Company's net interest income for the nine
months ended September 30, 1995, was approximately 9% higher than during the
comparable period of 1994, the Company's non-interest expenses were
approximately 7% lower during the same period. Included in such non-interest
expenses are provisions for loan losses, salaries and employee benefits,
occupancy expenses, professional fee expenses, and other operating expenses,
each of which is more fully described below.
Management believes that profitable operations in the future will be
contingent on both external and internal factors. Internal factors include
Management's ability to (i) attract additional deposits to allow further
expansion of the Bank's loan and investment programs; (ii) make accurate credit
analyses upon origination of loans; (iii) deal expeditiously and efficiently
with non-performing assets; and (iv) control or reduce non-interest expenses.
Management has increased its emphasis on business development through the hiring
of additional lending staff and targeting the Bank's niche market segment of
small businesses and professionals. Additionally, media advertising is employed
to obtain deposit funding required to support the increases in loan production.
The utilization of internal loan review and workout activities in conjunction
with the strengthening of credit standards has facilitated the identification
and disposition of problem loans.
External factors, over which the Company has little or no control, include
the interest rate environment and the strength or weakness in the local economy.
Management believes that the general economy in its market area will not
experience a decline to any material extent in the near term. Interest rate
changes are caused, in part, by the actions of the Federal Reserve Bank and
cannot be predicted in advance with any certainty.
Interest and fees on loans was $1,720,249, or 72% of total interest income,
for the quarter ended September 30, 1995 compared with $1,766,461, or 86% of
total interest income reported during the comparable quarter of 1994. For the
nine
8
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months ended September 30, 1995, interest and fees on loans increased to
$5,233,040, or 75% of total interest income, from $4,991,440, or 86% of total
interest income, in the comparable period of 1994. This increase, on an absolute
dollar basis, was due to the higher interest rate environment during most of
1995. On a percentage basis, this decline is attributable to the decline in
total loans as a percentage of total earning assets during the period.
Interest on federal funds sold was $206,284, or 9% of total interest
income, during the quarter ended September 30, 1995, compared to $90,141, or 4%
of total interest income reported in the comparable quarter of 1994. For the
nine months ended September 30, 1995, interest on federal funds sold increased
to $492,718, or 7% of total interest income, from $274,492, or 5% in the nine
months ended September 30, 1994. This increase was due, in part, to higher
prevailing interest rates as well as larger average balances of federal funds
outstanding during the period. Interest on investments and time deposits due
from other banks was $447,415 or 19% of total interest income in the quarter
ended September 30, 1995, compared to $198,889, or 10% of total interest income
reported during the comparable quarter of 1994. For the nine months ended
September 30, 1995, interest on investments and time deposits due from other
banks increased to $1,216,440, or 18% of total interest income, from $538,425,
or 9% in the nine months ended September 30, 1994. This was due to lower than
expected loan demand which resulted in a shift of excess liquidity into
investment securities.
Non-interest income is comprised of dividends received on the Bank's
Federal Reserve Bank stock owned by virtue of its membership in the Federal
Reserve System, as well as charges on deposit accounts, plus or minus any gains
or losses on sales of securities. Such non-interest income increased to
$100,526 for the quarter ended September 30, 1995, compared to $36,013 for the
quarter ended September 30, 1994. For the nine months ended September 30, 1995,
non-interest income was $297,689 compared to $99,440 for the same period in
1994. This increase was due to gains on the sale of investment securities as
well as higher levels of service fee income.
Interest expense for the quarter ended September 30, 1995 was $1,171,644 or
48% of total expenses compared to $775,624 or 26% for the quarter ended
September 30, 1994. Such increase is attributable to the increase in prevailing
interest rate levels in 1995 compared to 1994 and shifts in the Bank's deposit
mix from lower costing demand and NOW products to more expensive time deposits.
For the nine months ended September 30, 1995, interest expense was $3,094,989,
or 45% of total expenses, compared to $2,279,412, or 35% of total expenses, for
the nine months ended September 30, 1994.
The Company's largest non-interest expense, other than the provisions for
potential loan losses, is salaries and employee benefits, which totaled
$544,402, or approximately 23% of total expenses, in the quarter ended September
30, 1995, compared to $448,809, or approximately 15% of total expenses, in the
quarter
9
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ended September 30, 1994. Salaries and employee benefits totaled $1,646,639, or
approximately 24% of total expenses, in the nine months ended September 30,
1995, compared to $1,238,875, or approximately 19% of total expenses, in the
nine months ended September 30, 1994. The year-to-year increase of $407,764 is
due primarily to substantially lower loan origination costs resulting from
reduced new loan activity, in 1995 compared to the same period in 1994. New
staff additions and costs associated with a separation agreement for a former
employee also contributed to this increase.
Occupancy expense consists primarily of rent expense for the lease of the
Company's principal offices. Occupancy expenses were $111,533 for the quarter
ended September 30, 1995, or 5% of total expenses, compared to $138,886, or 5%
of total expenses, for the comparable quarter of 1994. Occupancy expenses were
$334,013, or approximately 5% of total expenses, in the nine months ended
September 30, 1995, compared to $397,182, or approximately 6% of total expenses,
for the nine months ended September 30, 1994. This decrease was attributable to
nominal decreases in maintenance and repair costs versus the comparable period
in 1994.
Professional fee expenses during the quarter ended September 30, 1995
were $133,300, or 6% of total expenses, compared to $150,220, or 5% of total
expenses, for the quarter ended September 30, 1994. For the nine months
ended September 30, 1995, professional fee expenses were $345,230, or 5% of
total expenses, compared to $285,798, or 4% of total expenses, in the
comparable period of 1994. The year-to-year increase of $59,432 primarily
reflects higher legal expenses, incurred late in 1994 and early 1995,
attributable to collection efforts related to the Bank's non-performing loans.
Other operating expenses during the quarter ended September 30, 1995 were
$382,580, or 16% of total expenses, compared to $426,538, or 15% of total
expenses, for the quarter ended September 30, 1994. For the nine months ended
September 30, 1995, other operating expenses were $1,147,709, or 17% of total
expenses, compared to $1,174,749, or 18% of total expenses, in the comparable
period of 1994. Major components of this category include data processing,
printing and supplies, advertising, travel and entertainment, fidelity insurance
premiums, and Federal Deposit Insurance premiums. The year-to-year decrease of
$27,040 primarily reflects lower FDIC deposit insurance premiums during 1995.
ALLOWANCE FOR LOAN LOSSES:
Management has followed a policy of increasing its reserve for potential
loan losses by 1.00% of net new loans receivable. Based on numerous factors
including, but not limited to, the Bank's existing loan portfolio, the size of
its reserve for potential loan losses, results of regularly scheduled bank
regulatory field examinations, and Management's internal loan review decisions,
the Bank may make additions to the reserve for potential loan losses other than
the percentage
10
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additions made in the ordinary course of business. Additionally, the Board of
Directors reviews reserve adequacy on a quarterly basis. Management believes
that the allowance for loan losses is reasonable and adequate to cover any known
losses and any losses reasonably expected in the portfolio.
The Bank recorded a charge to earnings of $75,000 during the quarter
ended September 30, 1995 compared to a charge of $1,002,800 in the quarter
ended September 30, 1994. The decline in the provision is the result of an
overall reduction in non-performing assets as well as recoveries occurring in
the third quarter of 1995. For the nine months ended September 30, 1995,
the provision for loan loss was $365,000, compared to $1,047,573 for the
comparable period in 1994. As a result of this provision for potential loan
losses, and following certain recoveries (net of charge-offs) credited to the
reserve for potential loan losses as detailed below, the Bank's aggregate
reserve for potential loan losses decreased to $1,237,151 from $1,355,935 at
December 31, 1994 and increased from $1,008,062 at June 30, 1995. Listed
below is an analysis of the loan loss reserve account:
ALLOWANCE FOR LOAN LOSSES
ROLLFORWARD
SEPTEMBER 30, 1995
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<TABLE>
<S> <C>
BALANCE AT DECEMBER 31, 1994 $ 1,355,935
Charge-offs (during the nine-month
period ending September 30, 1995):
Commercial loans 515,317
Real estate mortgages 137,127
Installment 3,472
Total charge-offs (during the nine-month
period ending September 30, 1995): 655,916
Recoveries 172,132
Additions charged to operations 365,000
---------------
BALANCE AT SEPTEMBER 30, 1995 $ 1,237,151
---------------
</TABLE>
As of September 30, 1995, the Bank had loans outstanding placed in a non-
accrual status totaling approximately $998,000, compared to $2,074,000 at
December 31, 1994. The current balance of non-performing loans represents
11
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commercial credits with no individual balance exceeding $241,381. The amount of
interest income recorded on non-accrual loans totaled $259,423 for the nine
months ended September 30, 1995. Management is actively pursuing the collection
of these loans. It is uncertain as to the amount of any potential loss that may
be incurred in connection with the remaining non-accrual loans. The Company has
a policy of placing on non-accrual status any loan for which payment of either
principal or interest, on a contractual basis, is not received or is unlikely to
be received for a period of 90 days. Such loans include those classified by
either the Bank or its regulators such that collection of the full amount of
principal and interest are considered doubtful. Also placed on non-accrual
status is any loan, held by a borrower, which has filed, or has had filed
against it, a petition in bankruptcy. At September 30, 1995, the Bank owned
one foreclosed property with a total book value of $84,000. There have been no
sales of foreclosed properties since September 30, 1994.
Listed below is a schedule of gross loans receivable at September 30, 1995.
The loans are categorized based on bank regulatory requirements, which
categorizations are not necessarily indicative of the actual type or purpose of
the loan.
The majority of the loans receivable earn interest at rates that vary
overnight with changes in the Bank's prime rate. Other loans receivable earn
interest at rates that are fixed at a specific spread over the rate being paid
on certificates of deposit either pledged as collateral on the loans or placed
in the Bank for funding purposes. Approximately $20,629,000 in loans receivable
are comprised of fixed rate loans that will mature in the next five years.
LOAN BREAKDOWN TABLE
SEPTEMBER 30, 1995
------------------
($000)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
% of % of
Loan Type Balance Total Balance Total
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LOANS COLLATERALIZED BY REAL ESTATE:
One-to-four family residential $ 25,138 34.15% $ 21,632 28.79%
Residential mortgages held for sale 256 0.35% 297 0.40%
Multi-family residential 1,986 2.70% 2,371 3.16%
12
<PAGE>
<S> <C> <C> <C> <C>
Commercial and other 10,892 14.80% 10,382 13.82%
--------------------------------------------------------------
TOTAL LOANS COLLATERALIZED BY REAL ESTATE $ 38,272 52.00% $ 34,682 46.17%
--------------------------------------------------------------
COMMERCIAL BUSINESS LOANS 29,957 40.70% 36,623 48.75%
OTHER LOANS 5,374 7.30% 3,820 5.08%
--------------------------------------------------------------
TOTAL LOANS $ 73,603 100.00% $ 75,125 100.00%
--------------------------------------------------------------
</TABLE>
Since its founding, the Bank's primary focus has been to service the
borrowing and deposit needs of professionals, primarily in the medical and legal
fields, with a secondary focus on small businesses and commercial real estate
investors. Many of the loans made to all of these categories of customers have
been secured by real estate, as set forth on the above chart.
Of the approximately $25,000,000 at September 30, 1995, in loans secured
by "one-to-four residential' properties only $4,200,000 represents
traditional residential mortgages. The remainder includes loans made to
investors who own small rental properties or business loans secured by liens,
often junior liens, on the residences of the principals. The risk associated
with business loans secured by liens on residential properties lie more in
the success or failure of those businesses rather than the real estate
market, although the value of the collateral is affected by real estate
values. Generally, housing prices in the Bank's market area fell during the
late 1980's and early 1990's, but recently have remained relatively stable.
"Multi-family residential, Commercial and other" loans primarily represent
loans made to real estate investors and/or developers. This market suffered
dramatic declines in value during the late 1980's and early 1990's, but has
shown signs of stability in recent years. The degree of recovery, however, is
dependent on the type of property and its location. The Bank has strengthened
its ability to analyze and service such loans, and intends to continue its
penetration of this market, which it believes to be under-served, with a
resultant expectation of satisfactory interest rates, fees, and deposits.
Underwriting of such loans will continue to be performed in a conservative
manner.
"Commercial business loans" include loans to professionals and other
businesses NOT secured by real estate. $9,900,000 million of such loans were
secured
13
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by liquid collateral as of September 30, 1995. Another $8,300,000 million were
unsecured, made to borrowers considered to be of sufficient strength to merit
unsecured financing. The remaining amount primarily includes loans secured by
business assets, such as accounts receivable, inventory and/or equipment. The
risk in business loans is general a function of local market and industry
conditions, with any collateral serving as the secondary source of repayment.
The Bank intends to continue its focus on professionals while expanding its
commercial real estate and small business efforts. Additionally, in a further
attempt to diversify its portfolio and increase its market penetration, the Bank
has begun to emphasize consumer lending. All such plans are highly dependent
upon the strength of the economic recovery in the Bank's market area, as well as
the specific industries on which it focuses.
Item 6: EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
Item 6 is hereby amended in its entirety as follows:
(a) Exhibits:
2.1 Agreement & Plan of Merger by and between ExecuFirst
Bancorp, Inc. and Republic Bancorporation, Inc. dated
November 17, 1995
27. Restated Financial Data Schedule
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Issuer has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Execufirst Bancorp, Inc.
/S/ Zvi H. Muscal
-------------------------------
Zvi H. Muscal, President, Chief
Executive Officer
/S/ David J. Torpey
--------------------------------
David J. Torpey, Vice President,
Chief Financial Officer
Dated: January 17, 1996
15
<PAGE>
ANNEX "A"
16
<PAGE>
ANNEX A IS HEREBY AMENDED IN ITS ENTIRETY BY INSERTION OF THE FOLLOWING
FINANCIAL STATEMENTS:
EXECUFIRST BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31,
1995 1994
(UNAUDITED) (AUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CASH AND DUE FROM BANKS $3,722,609 $3,168,634
INTEREST-BEARING DEPOSITS WITH BANKS 990,000 0
SECURITIES AVAILABLE FOR SALE, AT FAIR VALUE
(AMORTIZED COST OF $35,354,337 AND
$15,573,340 RESPECTIVELY) 35,462,085 14,894,754
SECURITIES HELD TO MATURITY, AT AMORTIZED
COST (FAIR VALUE OF $0 AND $6,248,170
RESPECTIVELY) 0 6,341,505
FEDERAL FUNDS SOLD 9,275,000 5,250,000
LOANS 73,603,110 75,124,783
LESS ALLOWANCES (1,237,151) (1,355,935)
------------ ------------
LOANS, NET 72,365,959 73,768,848
BANK PREMISES AND EQUIPMENT, NET 289,109 221,432
OTHER REAL ESTATE OWNED-NET 84,000 100,000
ACCRUED INTEREST RECEIVABLE AND OTHER ASSETS 1,618,138 1,319,482
------------ ------------
TOTAL ASSETS $123,806,900 $105,064,655
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
DEPOSITS:
Demand: non-interest bearing 17,816,815 16,217,323
Demand: interest-bearing 5,069,386 6,304,341
Money market & savings 18,087,324 21,574,278
Time deposits 55,967,131 35,332,792
Time deposits over $100,000 17,909,157 17,780,919
------------ ------------
TOTAL DEPOSITS 114,849,813 97,209,653
ACCRUED EXPENSES AND OTHER LIABILITIES 1,387,577 1,341,135
------------ ------------
TOTAL LIABILITIES $116,237,390 $98,550,788
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value;
10,000,000 shares authorized; none
issued
Common stock, $.01; 20,000,000 shares
17
<PAGE>
<CAPTION>
<S> <C> <C>
authorized; issued and outstanding
1,226,057 shares 12,260 12,260
Capital in excess of par 11,483,018 11,483,018
Deficit (3,996,516) (4,302,825)
Unrealized gain (loss) on securities
available for sale 70,748 (678,586)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 7,569,510 6,513,867
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $123,806,900 $105,064,655
------------ ------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18
<PAGE>
EXECUFIRST BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
THREE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $1,720,249 $1,766,461
Interest on Federal funds sold 206,284 90,141
Interest on time deposits due from banks 26,779 0
Interest on investments 420,636 198,889
------------ ------------
Total interest income 2,373,948 2,055,491
Interest expense, deposits 1,171,644 775,624
------------ ------------
Net interest income 1,202,304 1,279,867
------------ ------------
Provision for loan losses 75,000 1,002,800
------------ ------------
Net interest income after provision for
loan losses 1,127,304 277,067
OTHER INCOME:
Gain (loss) on sale of securities 0 0
Dividend income 4,836 4,836
Service Fees 95,690 31,177
Total other income 100,526 36,013
------------ ------------
Income before other expenses 1,227,830 313,080
OTHER EXPENSES:
Salaries, wages and employee benefits 544,402 448,809
Occupancy expenses 111,533 138,886
Professional fees 133,300 150,220
Other operating expenses 382,580 426,538
------------ ------------
Total other expenses 1,171,815 1,164,453
------------ ------------
NET INCOME (LOSS) $56,015 ($851,373)
------------ ------------
NET INCOME (LOSS) PER COMMON SHARE $0.05 ($0.69)
------------ ------------
WEIGHTED AVERAGE NUMBER OF SHARES 1,226,057 1,226,057
------------ ------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
19
<PAGE>
EXECUFIRST BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
NINE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $5,233,040 $4,991,440
Interest on Federal funds sold 492,718 274,492
Interest on time deposits due from banks 68,683 0
Interest on investments 1,147,757 538,425
------------ ------------
Total interest income 6,942,198 5,804,357
Interest expense, deposits 3,094,989 2,279,412
------------ ------------
Net interest income 3,847,209 3,524,945
------------ ------------
Provision for loan losses 365,000 1,047,573
------------ ------------
Net interest income after provision for
loan losses 3,482,209 2,477,372
OTHER INCOME:
Gain (loss) on sale of securities 74,756 (2,727)
Dividend income 14,508 14,508
Service Fees 208,425 87,659
------------ ------------
Total other income 297,689 99,440
------------ ------------
Income before other expenses 3,779,898 2,576,812
OTHER EXPENSES:
Salaries, wages and employee benefits 1,646,639 1,238,875
Occupancy expenses 334,013 397,182
Professional fees 345,230 285,798
Other operating expenses 1,147,709 1,174,749
------------ ------------
Total other expenses 3,473,591 3,096,604
------------ ------------
NET INCOME (LOSS) $306,307 ($519,792)
------------ ------------
NET INCOME (LOSS) PER COMMON SHARE $0.25 ($0.42)
------------ ------------
WEIGHTED AVERAGE NUMBER OF SHARES 1,226,057 1,226,057
------------ ------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
20
<PAGE>
EXECUFIRST BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30,
INCREASE (DECREASE) IN CASH AND DUE FROM BANKS
<TABLE>
<CAPTION>
1995 1994
------------ --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $306,307 ($519,792)
Adjustments to reconcile net income to
net cash used in operating activities:
Provision for loan losses 365,000 1,047,573
Depreciation and Amortization 89,743 56,603
(Gain)/loss on sale of other real estate
owned 62,152
Write-down of other real estate owned 16,000
(Gain)/loss on sale of securities (74,756) 2,727
Change in assets and liabilities:
(Increase) in accrued interest receivable
and other assets (298,655) (398,262)
Increase (decrease) in accrued expenses
and other liabilities 9,443 62,071
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES 413,082 313,072
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in time deposits
with other banks (990,000)
(Increase)/decrease in Federal Funds sold (4,025,000) 6,525,000
Purchase of investment securities (13,846,765)
Purchase of securities available for sale (16,824,033)
Purchase of securities held to maturity (6,317,154)
Proceeds from sales and maturities of
securities 8,676,735
Principal receipts on securities 1,016,290
Net (increase)/decrease in loans 1,037,889 5,786,520
Premises and equipment expenditures (73,994) (24,957)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (17,499,267) (1,560,202)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand, money
market and savings deposits (3,122,417) 5,610,234
Net increase (decrease) in other time
deposits 20,762,577 (3,314,980)
Proceeds from sale of other real estate
owned 142,357
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 17,640,160 2,437,611
------------ ------------
Increase/(decrease) in cash and due from banks 553,975 1,190,481
21
<PAGE>
<CAPTION>
<S> <C> <C>
Cash and due from banks, beginning of year 3,168,634 2,370,734
------------ ------------
Cash and due from banks, end of period $3,722,609 $3,561,215
------------ ------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
22
<PAGE>
EXECUFIRST BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
1. In the opinion of ExecuFirst Bancorp, Inc., the accompanying unaudited
financial statements contain all adjustments (including normal recurring
accruals) necessary to present fairly the financial position as of September 30,
1995 and 1994, and the results of operations and cash flows for the three (3)
and nine (9) months then ended.
2. Results of operations for the three (3) and nine (9) months ended
September 30, 1995 are not necessarily indicative of the results to be expected
for the full year.
3. Net income per share of common stock is based upon the weighted average
number of shares outstanding during the periods, 1,226,057 shares.
4. PENNSYLVANIA SHARES TAX:
Effective July 1, 1989, Pennsylvania enacted legislation creating the
bank shares tax and a new bank tax credit allowing a one-time tax credit for
banks chartered after January 1, 1979. The maximum amount of the credit that
can be used in any year is limited to 80% of the tax liability, First
Executive Bank's tax liability was reduced by an aggregate credit of
approximately $605,000 for the years 1989 through 1991.
Subsequent to July 1989, several lawsuits were brought against the
Pennsylvania Department of Revenue requesting the new bank shares tax and new
bank tax credit be declared invalid. The Bank joined with a group of other
banks formed after January 1, 1979 to protect its interests. This group
retained counsel and actively asserted its position. During 1994, the
Commonwealth Court ruled that the amended bank shares tax was constitutional and
the new bank tax credit was unconstitutional. That ruling has been appealed to
the Pennsylvania Supreme Court.
In April 1995, the Pennsylvania Department of Revenue negotiated a
settlement with the bank group allowing in full the maximum amount of credits to
be applied to the tax liability.
However, the Pennsylvania Department of Revenue indicated that First
Executive Bank's liability, after the credits (primarily for 1989), is
approximately $114,000, representing a difference in treatment for certain
aspects of capital calculations. The Bank disputes this amount and is
currently appealing to the Board of Finance and Revenue. In the opinion of
the Bank's management, the outcome of this litigation will not have a
material adverse effect on the Company's financial
23
<PAGE>
position; however, it could have a material impact on the results of operations
of a subsequent quarter or year.
5. The FASB has issued SFAS No. 114, "Accounting by Creditors for Impairment
of Loans", which is effective for the Bank's fiscal year beginning January 1,
1995. SFAS No. 114 requires that specified impaired loans be measured based on
the present value of expected future cash flows discounted at the loan's
effective interest rate, the loan's market price or the fair value of the
collateral if the loan is collateral dependent. The impact of SFAS No. 114 upon
the results of operations of the Bank was not material.
6. INVESTMENT SECURITIES:
Effective January 1, 1994, the Bank adopted Statement of Financial
Accounting Standards (SFAS) ("Statement") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." The Statement requires certain
investments to be classified under one of the following categories: "held- to-
maturity" and accounted for at historical cost, adjusted for accretion of
discounts and amortization of premiums; "available-for-sale" and accounted for
at fair market value, with unrealized gains and losses reported as a separate
component of shareholders' equity; or "trading" and accounted for at fair market
value, with unrealized gains and losses reported as a component of net income.
The Bank does not hold trading securities.
At September 30, 1995, the Bank has also identified investment securities
that will be held for indefinite periods of time, including securities that will
be used as part of the Bank's asset/liability management strategy and that may
be sold in response to changes in interest rates, prepayments and similar
factors. The securities are classified as "available-for-sale". During the
third quarter, in order to increase the flexibility of asset/liability
management, the Bank reclassified certain securities with a book value of
approximately $7,654,000 and unrealized gains of approximately $60,000 from the
"held-to-maturity" classification to the "available-for-sale" classification.
Available-for-sale securities consist of U.S. Government Treasury, U.S.
Government Agency, and Other Securities with book and market values of
$8,482,000, $25,616,000, and $1,256,000 respectively, as of, September 30, 1995.
Accordingly, the net unrealized gain on securities available-for-sale, as of
this date, was $108,000.
24
<PAGE>
The following table represents the carrying and estimated fair values of
Investment Securities at September 30, 1995.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
GROSS GROSS
UNREALIZED UNREALIZED
AVAILABLE-FOR-SALE ($000) COST GAIN LOSS FAIR VALUE
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury $8,482 $69 $0 $8,551
U.S. Government Agencies 25,616 40 1 25,655
Other 1,256 0 0 1,256
- ------------------------------------------------------------------------------
TOTAL AVAILABLE-FOR-SALE $35,354 $109 $1 $35,462
- ------------------------------------------------------------------------------
</TABLE>
25
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 3,722,609
<INT-BEARING-DEPOSITS> 990,000
<FED-FUNDS-SOLD> 9,275,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 35,462,085
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 35,354,337
<LOANS> 73,603,110
<ALLOWANCE> (1,237,151)
<TOTAL-ASSETS> 123,806,900
<DEPOSITS> 114,849,813
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,387,577
<LONG-TERM> 0
0
0
<COMMON> 12,260
<OTHER-SE> 7,557,250
<TOTAL-LIABILITIES-AND-EQUITY> 7,569,510
<INTEREST-LOAN> 5,233,040
<INTEREST-INVEST> 1,147,757
<INTEREST-OTHER> 561,401
<INTEREST-TOTAL> 6,942,198
<INTEREST-DEPOSIT> 3,094,989
<INTEREST-EXPENSE> 3,094,989
<INTEREST-INCOME-NET> 3,847,209
<LOAN-LOSSES> 365,000
<SECURITIES-GAINS> 74,756
<EXPENSE-OTHER> 3,473,591
<INCOME-PRETAX> 306,307
<INCOME-PRE-EXTRAORDINARY> 306,307
<EXTRAORDINARY> 306,307
<CHANGES> 0
<NET-INCOME> 306,307
<EPS-PRIMARY> .25
<EPS-DILUTED> .25
<YIELD-ACTUAL> 3.88
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,008,062
<CHARGE-OFFS> 4,039
<RECOVERIES> 158,128
<ALLOWANCE-CLOSE> 1,237,151
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
