<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1996
------------------
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------- ---------------
Commission file Number: 0-21720
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SLIPPERY ROCK FINANCIAL CORPORATION
(Exact Name of small business issuer as specified in its charter)
PENNSYLVANIA 25 - 1674381
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
100 South Main Street
Slippery Rock, Pennsylvania 16057 - 1245
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (412) 794-2210
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),and (2) has been
subject to such filing requirement for the past 90 days. YES [X] NO [ ]
As of November 5, 1996, there were 1,378,124 shares outstanding of the
issuer's class of common stock.
<PAGE>
Slippery Rock Financial Corporation
INDEX TO QUARTERLY REPORT ON FORM 10-QSB
Part I Financial Information Page
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheet, September 30, 1996 3
Consolidated Statements of Income
Three months ended September 30, 1996 and 1995
and Nine months ended September 30, 1996 and 1995 4
Consolidated Statement of Cash Flows
Nine months ended September 30, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Part II Other Information 12
Signatures 13
<PAGE>
Slippery Rock Financial Corporation and Subsidiary
CONSOLIDATED BALANCE SHEET
(Unaudited - $ in 000)
September 30,
1996
------------
ASSETS
Cash and due from banks $ 9,598
Interest-bearing deposits in other banks 663
Mortgage loans held for sale 1,988
Federal funds sold 5,400
Investment securities:
Available for sale 20,773
Held to maturity (market value $10,955) 10,943
Loans (net of unearned income of $25) 135,771
Less allowance for loan losses 1,173
------------
Net loans 134,598
Premises and equipment 3,732
Accrued interest and other assets 4,759
------------
Total assets $ 192,454
============
LIABILITIES
Deposits:
Noninterest-bearing demand $ 26,704
Interest-bearing demand 22,854
Savings 18,986
Money market 26,156
Time 76,142
------------
Total deposits 170,842
Short term borrowings -
Long-term debt 933
Accrued interest and other liabilities 801
------------
Total liabilities 172,576
------------
STOCKHOLDERS' EQUITY
Common stock (par value $0.25; authorized
12,000,000 shares, 1,378,124 issued) 345
Surplus 10,676
Retained earnings 8,845
Net unrealized gain on securities 12
------------
Total stockholders' equity 19,878
------------
Total liabilities and stockholders' equity $ 192,454
============
See accompanying notes to the consolidated financial statements.
<PAGE>
Slippery Rock Financial Corporation and Subsidiary
CONSOLIDATED STATEMENT OF INCOME
(Unaudited - $ in 000 except per share amounts)
<TABLE>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<CAPTION>
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $ 3,056 $ 2,837 $ 8,893 $ 8,197
Interest-bearing deposits in other banks 3 3 8 8
Federal funds sold 82 142 133 214
Interest on investment securities:
Taxable 152 109 429 346
Exempt from federal income tax 221 127 569 388
Dividends 12 13 35 38
----------- ----------- ----------- -----------
Total interest income 3,526 3,231 10,067 9,191
----------- ----------- ----------- -----------
INTEREST EXPENSE
Deposits 1,385 1,290 4,039 3,474
Borrowed funds 104 17 152 56
----------- ----------- ----------- -----------
Total interest expense 1,489 1,307 4,191 3,530
----------- ----------- ----------- -----------
NET INTEREST INCOME 2,037 1,924 5,876 5,661
Provision for loan losses 50 63 150 138
----------- ----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 1,987 1,861 5,726 5,523
----------- ----------- ----------- -----------
OTHER INCOME
Service charges on deposit accounts 121 139 368 391
Trust department income 12 13 34 44
Net gain (loss) on sales of loans (6) 27 (22) 17
Other income 86 79 239 226
----------- ----------- ----------- -----------
Total other income 213 258 619 678
----------- ----------- ----------- -----------
OTHER EXPENSE
Salaries and employee benefits 595 544 1,733 1,639
Occupancy expense, net 98 94 305 289
Furniture and equipment expense 152 133 441 351
Data processing expense 47 38 139 143
FDIC Insurance 1 (9) 2 136
Stationery, printing and supplies 42 39 109 102
Pennsylvania shares tax 41 37 123 104
Other 273 316 758 734
----------- ----------- ----------- -----------
Total other expense 1,249 1,192 3,610 3,498
----------- ----------- ----------- -----------
Income before income taxes 951 927 2,735 2,703
Income tax expense 256 277 767 808
----------- ----------- ----------- -----------
NET INCOME $ 695 $ 650 $ 1,968 $ 1,895
=========== =========== =========== ===========
PER SHARE DATA
Average shares for the period 1,378,124 1,378,124 1,378,124 1,378,124
Earnings per share $ 0.50 $ 0.47 $ 1.43 $ 1.38
Dividends paid $ 0.28 $ 0.23 $ 0.28 $ 0.23
Per share amounts for 1995 have been restated for a 10% stock dividend paid
December 28, 1995 and for the effects of a four for one stock split on
June 28, 1996.
See accompanying notes to the consolidated financial statements.
</TABLE>
<PAGE>
Slippery Rock Financial Corporation and Subsidiary
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited - $ in 000)
Nine Months Ended
September 30,
1996 1995
-------- --------
OPERATING ACTIVITIES
Net income $ 1,968 $ 1,895
Adjustments to reconcile net
income to net cash provided by
operating activities:
Provision for loan losses 150 138
Depreciation and amortization 437 360
Deferred taxes 23 78
Origination of loans held for sale (3,663) (3,651)
Proceeds of sales of loans held for sale 3,246 2,797
Loss (gain) on sale of loans 22 (17)
Increase in accrued interest receivable (242) (35)
(Decrease) increase in accrued interest payable (10) 166
Other, net (285) (241)
-------- --------
Net cash provided by operating activities 1,646 1,490
-------- --------
INVESTING ACTIVITIES
Investment securities available for sale:
Repayments 2,493 571
Purchases (10,944) (451)
Investment securities held to maturity:
Repayments 4,179 2,141
Purchases (1,730) (698)
Increase in loans, net (13,087) (6,687)
Purchase of premises and equipment (237) (885)
Net proceeds from branch acquisition 17,456 -
Other investing activities - (23)
-------- --------
Net cash used by investing activities (1,870) (6,032)
-------- --------
FINANCING ACTIVITIES
Increase in deposits, net 10,424 10,027
Increase in short term borrowings 13,110 -
Payments on short term borrowings (14,410) -
Payments on borrowed funds (6) (5)
Cash dividends paid (379) (313)
-------- --------
Net cash provided by financing activities 8,739 9,709
-------- --------
Increase in cash and cash equivalents 8,515 5,167
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 7,047 10,394
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 15,562 $ 15,561
======== ========
Cash payments for interest $ 4,201 $ 3,364
Cash payments for income taxes $ 710 $ 652
See accompanying notes to the consolidated financial statements.
<PAGE>
Slippery Rock Financial Corporation and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-QSB and, therefore, do
not necessarily include all information which would be included in audited
financial statements. The information furnished reflects all normal recurring
adjustments which are, in the opinion of management, necessary for fair
statement of the results of the period. The results of operations for the
interim periods are not necessarily indicative of the results to be expected
for the full year.
NOTE 2 - DIVIDEND INFORMATION
At the October 22, 1996 meeting, the Board of Directors of Slippery Rock
Financial Corporation authorized a semi-annual cash dividend of $0.30 per
share payable on December 30, 1996 to shareholders of record on November 15,
1996. The December cash dividend brings the total dividend distribution for
1996 to $0.575 per share. The Company's stock is traded in the over the
counter market, and is listed on the NASDAQ Electronic Bulletin Board System
under the symbol "SRCK".
NOTE 3 - ACCOUNTING PRONOUNCEMENT
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 122, "Accounting for Mortgage Servicing Rights."
Statement No. 122 amends Statement No. 65 to require the recognition as
separate assets the rights to service mortgage loans for others however those
servicing rights are acquired. This statement also requires the assessment of
capitalized mortgage servicing rights for impairment to be based on the
current fair value of those rights.
The Company does participate in the secondary mortgage market by selling fixed
rate, residential mortgages to the Federal Home Mortgage Corporation ("Freddie
Mac") and currently maintains the servicing of the sold loans. The adoption
of Statement No. 122 does not have a material effect on the Company's
financial position or results of operations.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Comparison of the Three Months Ended September 30, 1996 and 1995
- ----------------------------------------------------------------
Total interest income of $3,526,000 for the three month period ended September
30, 1996 compares to $3,231,000 for the same three month period in 1995, an
increase of $295,000 or 9.1%. The overall increase in total interest income
is attributed to an increase in interest and fees on loans of $219,000 and to
an increase in interest income on investment securities of $136,000.
Interest on federal funds sold of $82,000 at September 30, 1996 compares to
$142,000 for the three month period ended September 30, 1995, a decrease of
$60,000. The increase in interest and fees on loans is due primarily to
increased volume in the loan portfolio, principally due to an increase in
loans secured by first lien, 1- 4 family residential property and to an
increase in tax free loans. The increase in the 1-4 family portfolio
resulted from general demand within the marketplace for those types of loans
and not as the result of any solicitation on the Bank's part to increase that
particular product. The tax free loan portfolio increased $3.0 million as a
result of two loans, one to the local municipal authority and the other for a
capital expansion project at a local university. The increase in investment
income is due to volume increases in available for sale securities, which was
funded with proceeds from the Harrisville, Pennsylvania branch acquisition.
The Bank purchased approximately $19.7 million in deposits, as well as the
land, building and equipment of the former Mellon Bank, N. A. office on
August 19, 1996.
Total net loans at September 30, 1996 were $134,598,000, an increase of
$16.8 million of 14.2% from $117,842,000 at September 30, 1995. Available
for sale securities at September 30, 1996 of $20,773,000, represents an
increase of $14.4 million from $6,376,000 at September 30, 1995.
Total interest expense of $1,489,000 for the three month period ending
September 30, 1996 represents an increase of $182,000 from the $1,307,000
reported for the same three month period in 1995. The increase in interest
expense is due to increases in volume and to a general rise in the Bank's
overall cost of funds.
Overall, total deposits increased $31.5 million or 22.6% from a level of
$139,349,000 at September 30, 1995 to $170,842,000 at September 30, 1996.
Exclusive of the branch acquisition, total deposits of $150,912 000 at
September 30, 1996 represents an increase of $11. 6 million or 8.3% from 1995.
Although each of the various deposit products reflect net increases relative
to September 30, 1995 levels, the money market product had the largest volume
increase with growth of $11.5 million or 78.1%. In an effort to minimize any
deposit run-off and to attract new depositors, the Bank began offering a
tiered money market product during the fourth quarter of 1995. Three separate
tiers were established, each paying a competitive rate of return based on the
dollar levels maintained in the account. The growth in the product and the
general shift within the Bank's deposit mix into the money market product is
evidence of the consumers' preference for a liquid , high yield investment
instrument. In addition, the Bank also ran promotional offers on its one year
and eighteen month time certificates. As anticipated, both the establishment
of the tiered money market product and the promotional offers on time
certificates increased the Bank's cost of funds. The Company's overall cost
of funds at September 30, 1996 was 4.54%, an increase of 27 basis points from
a level of 4.27% at September 30, 1995.
Net interest income of $2,037,000 for the three months ended September 30,
1996 compares to $1,924,000 for the same three month period in 1995, an
increase of $113,000.
Total other income for the three month period ended September 30, 1996 of
$213,000 compares to $258,000 for the three month period ended September 30,
1995, a decrease of $45,000. The decrease is derived from a reduction in
service charges on deposit accounts of $18,000 and to net losses on loan
sales. Deposit account service charges declined due to a reduction in the
number of non-sufficient funds ("NSF") items. Sales of 1-4 family, fixed
rate, residential mortgages of $798,000 during the third quarter of 1995
generated a net gain of $27,000, while sales of $1.5 million during the third
quarter of 1996 generated net losses of $6,000.
Total other expense of $1,249,000 for the three months ended September 30,
1996 compares to $1,192,000 for the same three month period in 1995. This
represents an increase of $57,000. Equipment expense of $152,000 for the
three month period ended September 30, 1996 represents an increase of $19,000
from the $133,000 reported for the same three month period in 1995. The
increase in equipment expenses (primarily depreciation) is attributed to the
Prospect, Pennsylvania branch office renovations and the check imaging system
projects that were recorded in the third quarter of 1995. Salary and employee
benefits of $595,000 for the three month period ended September 30, 1996
represents an increase of $51,000 from the same three month period in 1995.
Total miscellaneous expenses of $273,000 for the three month period ended
September 30, 1996 represents a reduction of $43,000 from the $316,000
reported for the three month period ended September 30, 1995. The reduction
is due to a loss on the disbandonment of equipment recorded during the third
quarter of 1995 as part of the check imaging system that the Bank began using.
Increases in salary and benefits, as well as all remaining expenses are
generally thought to be normal and recurring in nature.
<PAGE>
Net income for the three month period ended September 30, 1996 was $695,000,
an increase of $45,000 from the $650,000 reported for the three month period
ended September 30, 1995. Earnings per share for the three month period
ended September 30, 1996 were $0.50, an increase of $0.03 from $0.47 per share
earned during the same three month period in 1995.
Comparison of the Nine Months Ended September 30, 1996 and 1995
- ---------------------------------------------------------------
Total interest income of $10,067,000 for the nine month period ended September
30, 1996 compares to $9,191,000 for the same nine month period in 1995, an
increase of $876,000 or 9.5%. As in the three month comparison, the overall
increase in total interest income is attributed to an increase in interest and
fees on loans of $696,000 and to an increase in interest income on investment
securities of $261,000. Interest on federal funds sold of $133,000 at
September 30, 1996 compares to $214,000 for the nine month period ended
September 30, 1995, a decrease of $81,000. The variances are due to the
volume fluctuations discussed earlier in the three month comparison.
Total interest expense of $4,191,000 for the nine month period ended September
30, 1996 represents an increase of $661,000 from the $3,530,000 reported for
the same nine month period in 1995. The increase in interest expense is
attributed to deposit growth and to the volume increases brought about by the
branch acquisition. In addition, the Bank experienced a shift in deposit
composition. The increases and shift in deposit composition were brought
about by those items previously discussed in the three month comparison.
Net interest income of $5,876,000 at September 30, 1996 compares to $5,661,000
at September 30, 1995, an increase of $215,000. As a result of the deposit
volume increases and the deposit repricings, the Bank's cost of funds
increased from a level of 4.27% at September 30, 1995 to a level of 4.54% at
September 30, 1996. The increase in the cost of funds reduced the net
interest margin from 5.64% at September 30, 1995 to 5.33% at September 30,
1996.
The provision for loan losses for the nine months ended September 30, 1996 of
$150,000 represents an increase of $12,000 from the $138,000 reported for the
same nine month period in 1995. The increase is a result of volume increases
in the loan portfolio and not due to any trends in delinquencies or
charge-offs.
Total other income of $619,000 for the nine months ended September 30, 1996
compares to $678,000 for the same nine month period in 1995, a decline of
$59,000. Declines in service fees on deposit accounts of $23,000 due to NSF
volume activity, a decline in trust service fee income of $10,000 due to
several one-time fee assessments in 1995, and a net reduction of $39,000 on
gains and losses on loan sales are the major contributors to that decline.
Total other expense of $3,610,000 at September 30,1996 compares to $3,498,000
at September 30, 1995, an increase of $112,000 or 3.2%. Equipment expense of
$441,000 for the nine months ended September 30,1996 compares to $351,000 for
the nine months ended September 30, 1995, an increase of $90,000. The
increase is due to increased depreciation for the Prospect, Pennsylvania
branch office renovations and the check imaging system projects that were
recorded during the third quarter of 1995. Deposit insurance premiums for the
nine months ended September 30, 1996 of $2,000 compares to $136,000 for the
nine months ended September 30, 1995. The decline is due to the reduction in
FDIC premium charges throughout 1996.
For the first six months of 1995, the Bank paid FDIC insurance premiums at a
rate of $0.23 per one hundred dollars of insurable deposits. In June of 1995,
the FDIC had determined that the Bank Insurance Fund ("BIF"), the fund that
insures commercial banks (such as The First National Bank of Slippery Rock)
had attained its Congressionally mandated target. FDIC then issued a refund
of pre-paid insurance premiums and reduced the insurance premium assessed to
well capitalized BIF institutions to the "de-minimus" of $2,000 per year.
Because the Savings Insurance Fund ("SAIF"), the fund that insures savings
institutions, had not yet met its funding requirements, no action was taken
regarding the premium assessed to savings institutions, which created a
disparity in operational costs within the financial services industry. On
September 30, 1996, as part of the fiscal 1997 federal budget, legislative
action established a one-time fee assessment to savings institutions of 65.7
cents per one hundred dollars of SAIF insurable deposits to bring the SAIF
fund to full capitalization. In addition, the insurance premium charged to
SAIF insured institutions was reduce to 6.44 cents for years 1997 through
1999. The insurance premium charged to BIF insured institutions was increased
to 1.29 cents per one hundred dollars of insurable deposits for the same time
period. In the year 2000, both BIF and SAIF insured institutions would begin
paying deposits insurance premiums of 2.43 cents. Management does not view
the payment of the 1.29 cent deposit insurance premium to have a significant
impact upon future earnings.
<PAGE>
Net income for the nine month period ended September 30, 1996 of $1,968,000 or
$1.43 per share compares to $1,895,000 or $1.38 per share for the same nine
month period ended September 30, 1995. This represents an increase of
$73,000 or $0.05 per share.
Financial Condition
- -------------------
Total assets increased $30,443,000 or 18.8% from December 31, 1995, or
$10,504,000 or 6.5% excluding the branch acquisition. An increase in net
loans of $13.0 million, a net increase in investments available for sale of
$8.4 million and an increases in federal funds sold of $4.8 million were
offset by net maturities and payback of investment securities of $2.5 million.
Total deposits of $170,842,000 at September 30, 1996 represents an increase
of $30.2 million or 21.5% from $140,663,000 at December 31, 1995. Excluding
the branch acquisition, total deposits increased $10,240,000 or 7.3% from
December 31, 1995. Short term borrowings, which represent short term
advances from the Federal Home Loan Bank ("FHLB"), were zero at
September 30, 1996, which represents a decrease of $1.3 million from
December 31, 1995.
At September 30, 1996, the Bank serviced approximately $18.6 million in sold
fixed rate mortgages. In 1996, the Bank sold $3.2 million to the Federal
Home Loan Mortgage Corporation ("Freddie Mac"), which generated net losses of
$22,000. The Bank does anticipate the sale of an additional $2.0 million
during the fourth quarter of 1996.
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 122, "Accounting for Mortgage Servicing Rights."
Statement No. 122 amends Statement No. 65 to require the recognition as
separate assets the rights to service mortgage loans for others however those
servicing rights are acquired. This statement also requires the assessment of
capitalized mortgage servicing rights for impairment to be based on the
current fair value of those rights. Management believes that the sale of
fixed rate, residential mortgages does not have a material effect upon the
financial statements of the Company.
Management does anticipate future sales of fixed rate mortgages; however, the
extent to which the Bank participates in the secondary market will be
dependent upon demand for fixed rate mortgages in the market place, liquidity
needs of the Bank and interest rate risk exposure. Management will continue
to obtain the necessary documentation to allow the loans to be sold in the
secondary market, so that if liquidity or market conditions dictate,
management will be able to respond to these conditions.
At September 30, 1996, management has calculated and monitored risk-based and
leverage capital ratios in order to assess compliance with regulatory
guidelines. The following schedule presents certain regulatory capital ratio
requirements along with the Company's position at September 30, 1996:
Actual Minimum
Amount Ratio Ratio
-------- ------- -------
Tier 1 risk - based capital $ 17,788 13.73 % 4.00 %
Total risk - based capital 18,961 14.63 8.00
Leverage capital 18,961 9.90 3.00
As the above table illustrates, all regulatory capital requirements have been
complied with at September 30, 1996.
LIQUIDITY
The principal functions of the Bank's asset/liability management program are
to provide adequate liquidity and to monitor interest rate sensitivity.
Liquidity represents the ability to meet the cash flow requirements of both
depositors and customers requesting bank credit. Asset liquidity is provided
by repayments and the management of maturity distributions for loans and
securities. An important aspect of asset liquidity lies in maintaining
adequate levels of adjustable rate, short term, or relatively risk free
interest earning assets. One measure that the Bank uses to monitor
liquidity is the liquidity ratio which assesses the relationship between
certain earning assets, customer deposits and short-term interest bearing
liabilities. This ratio was 6.5% of total assets as of September 30, 1996
compared to 4.8% at December 31, 1995. Management views this ratio to be at
an adequate level.
<PAGE>
Management also monitors its liquidity by the net loans to deposits ratio.
The net loans (including loans held for sale) to deposits ratio was at 79.9%
at September 30, 1996, as compared to 87.5% at December 31, 1995. The
decrease was brought about by the increase in deposits as a result of the
branch acquisition. The subsidiary Bank continues to maintain a line of
credit available from the Federal Home Loan Bank ("FHLB") as an additional
source of liquidity. The primary purpose of the line is as a source of
matched funding for large dollar Bank credits. At September 30, 1996, the
Bank continued to have two such borrowings totaling $898,000. In addition to
the line of credit, the Bank also has access to FHLB's Flex Line as an
additional source of short-term liquidity.
The Statement of Cash Flows, for the nine month period ended September 30,
1996, indicates an increase in cash and cash equivalents of $8,515,000. Net
cash proceeds from the branch acquisition of $17.5 million, a net increase in
deposits of $10.4 million and short term borrowings of $13.1 million all
provided sources of funds to the Bank. Those funds were used for the
purchase of available for sale securities of $10.9 million, the purchase of
investment securities held to maturity of $1.7 million, a net increase in
loans of $13.1 million and the payment on borrowed funds of $14.4 million.
Cash dividends paid through out the period ended September 30, 1996 were
$379,000.
Management is not aware of any conditions, including any regulatory
recommendations or requirements, which would adversely affect its liquidity or
ability to meet its funding needs in the normal course of business.
RISK ELEMENTS
The following schedule presents the non-performing assets for the last five
quarters:
Sept Jun Mar Dec Sept
1996 1996 1996 1995 1995
------ ------ ------ ------ ------
(dollars in thousands)
Non-performing and restructured loans
Loans past due 90 days or more $ 20 $ 16 $ 74 $ 87 $ 120
Non-accrual loans 386 99 1,019 783 757
Restructured loans 797 803 - - -
------ ------ ------ ------ ------
Total non-performing
and restructured loans 1,203 918 1,093 870 877
------ ------ ------ ------ ------
Other non-performing assets
Other real estate owned 136 135 149 149 362
Repossessed assets 30 14 14 24 25
------ ------ ------ ------ ------
Total other non-performing assets 166 149 163 173 387
------ ------ ------ ------ ------
Total non-performing assets $1,369 $1,067 $1,256 $1,043 $1,264
====== ====== ====== ====== ======
Non-performing and restructured
loans as a percentage of
total loans(1) 0.89% 0.70% 0.88% 0.71% 0.74%
Non-performing assets and
restructured loans as a
percentage of total loans
and other non-performing
assets and restructured loans(1) 1.01% 0.81% 1.02% 0.85% 1.06%
(1) Excludes loans held for sale.
The allowance for loan losses at September 30, 1996, totaled $1,173,000 or
0.85% of total loans (including loans held for sale) as compared to
$1,098,000 or 0.88% at December 31, 1995. Provisions for loan losses were
$150,000 for the nine months ended September 30, 1996 and $138,000 for the
nine months ended September 30, 1995.
<PAGE>
Management performs a quarterly evaluation of the allowance for loan losses.
The evaluation incorporates internal loan review, actual historical losses, as
well as any negative economic trends in the local market. The evaluation is
presented to and approved by the Board of Directors of the Bank. Management,
through the use of the quarterly evaluation, believes that the allowance is
maintained at an adequate level.
At September 30, 1996, the Company had impaired and restructured loans of
$797,000, which had a general reserve allocation of $120,000 against them.
There are no impaired loans without a reserve allocation. Average impaired
loans year to date were $831,000. A loan is considered impaired when, based
upon current information and events, it is probable that the Company will be
unable to collect all principal and interest amounts due according to
the contractual terms of the loan agreement. The accounts that
comprise the impaired and restructured loans are the same as originally
reported at December 31, 1995, no additional accounts have been added to the
impaired or restructured classifications during 1996.
Of the total impaired loans, $505,000 consisted of loans to a single borrower.
In May 1996, upon completion of the sale of a significant portion of the
borrowers business operations, the Bank restructured the borrower's account
to allow for the repayment of the debt from the remaining business operations.
Management does not consider any of the non-performing loans to pose any
significant risk to the capital position or future earnings of the Company.
Non-performing and restructured loans totaled $1,203,000 at September
30, 1996, an increase of $285,000 from their level of $918,000 at June
30, 1996. Non-performing and restructured loans as a percent of total loans
were 0.89% at September 30, 1996 as compared to 0.70% at June 30, 1996 and
0.74% at September 30, 1995.
Other real estate owned at September 30, 1996 was $136,000, unchanged from
June 30, 1996. The Bank continues to hold property, consisting primarily of
a single 1-4 family residence, resulting from foreclosure activities in third
quarter of 1995 and believes that the property will sell within a reasonable
time period. Management believes none of the non-performing assets, including
other real estate owned, at September 30, 1996, pose any significant risk to
the operations, liquidity or capital position of the Company.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
(none)
Item 2. Changes in Securities
(none)
Item 3. Defaults Upon Senior Securities
(none)
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
(none)
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Slippery Rock Financial Corporation
(Registrant)
Date: November 12, 1996 By: /s/ William C. Sonntag
----------------- ----------------------
William C. Sonntag,
President & CEO
Date: November 12, 1996 By: /s/ Mark A. Volponi
----------------- -------------------
Mark A. Volponi,
Treasurer
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