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 June 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
----------------------------------------------
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 August 6, 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, June 30, 1996 3
Consolidated Statements of Income
Three months ended June 30, 1996 and 1995
and Six months ended June 30, 1996 and 1995 4
Consolidated Statement of Cash Flows
Six months ended June 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)
June 30,
1996
-----------
ASSETS
Cash and due from banks $ 8,311
Interest-bearing deposits in other banks 125
Mortgage loans held for sale 355
Investment securities:
Available for sale 11,979
Held to maturity (market value $11,531) 11,547
Loans (net of unearned income of $36) 131,327
Less allowance for loan losses 1,160
-----------
Net loans 130,167
Premises and equipment 3,586
Accrued interest and other assets 2,519
-----------
Total assets $ 168,589
===========
LIABILITIES
Deposits:
Noninterest-bearing demand $ 23,155
Interest-bearing demand 17,440
Savings 17,925
Money market 20,094
Time 65,132
-----------
Total deposits 143,746
Short term borrowings 4,100
Long-term debt 935
Accrued interest and other liabilities 729
-----------
Total liabilities 149,510
-----------
STOCKHOLDERS' EQUITY
Common stock (par value $0.25; authorized
12,000,000 shares, 1,378,124 issued) 345
Surplus 10,676
Retained earnings 8,150
Net unrealized loss on securities (92)
-----------
Total stockholders' equity 19,079
-----------
Total liabilities and
stockholders' equity $ 168,589
===========
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>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
----- ----- ----- -----
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $ 2,945 $ 2,740 $ 5,837 $ 5,360
Interest-bearing deposits in other
banks 3 2 5 5
Federal funds sold 19 52 51 72
Interest on investment securities:
Taxable 130 112 277 237
Exempt from federal income tax 173 128 348 261
Dividends 11 15 23 25
--------- --------- --------- ----------
Total interest income 3,281 3,049 6,541 5,960
--------- --------- -------- ----------
INTEREST EXPENSE
Deposits 1,284 1,177 2,654 2,184
Borrowed funds 21 17 48 39
--------- --------- -------- ----------
Total interest expense 1,305 1,194 2,702 2,223
--------- --------- -------- ----------
NET INTEREST INCOME 1,976 1,855 3,839 3,737
Provision for loan losses 50 37 100 75
--------- --------- -------- ----------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 1,926 1,818 3,739 3,662
--------- --------- -------- ----------
OTHER INCOME
Service charges on deposit accounts 121 136 247 252
Trust department income 13 10 22 31
Net loss on sales of loans (16) (2) (16) (10)
Other income 86 68 153 147
--------- --------- -------- ----------
Total other income 204 212 406 420
--------- --------- -------- ----------
OTHER EXPENSE
Salaries and employee benefits 571 524 1,138 1,095
Occupancy expense, net 100 99 207 195
Furniture and equipment expense 153 113 289 218
Data processing expense 47 52 92 105
FDIC Insurance - 72 1 145
Stationery, printing and supplies 28 31 67 63
Pennsylvania shares tax 41 33 82 67
Other 243 227 485 418
--------- --------- -------- ----------
Total other expense 1,183 1,151 2,361 2,306
--------- --------- -------- ----------
Income before income taxes 947 879 1,784 1,776
Income tax expense 273 266 511 531
--------- --------- -------- ----------
NET INCOME $ 674 $ 613 $ 1,273 $ 1,245
========= ========= ========= ==========
PER SHARE DATA
Average shares for the period 1,378,124 1,378,214 1,378,124 1,378,124
Earnings per share $ 0.49 $ 0.44 $ 0.92 $ 0.90
Dividends paid $ 0.28 $ 0.23 $ 0.28 $ 0.23
</TABLE>
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.
<PAGE>
Slippery Rock Financial Corporation and Subsidiary
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited - $ in 000)
Six Months Ended
June 30,
1996 1995
----- -----
OPERATING ACTIVITIES
Net income $ 1,273 $ 1,245
Adjustments to reconcile net
income to net cash provided by
operating activities:
Provision for loan losses 100 75
Depreciation and amortization 277 234
Deferred taxes 35 86
Origination of loans held for sale (500) (2,235)
Proceeds of sales of loans held for sale 1,722 1,972
Loss on sale of loans 16 10
(Increase) decrease in accrued interest
receivable (73) 1
(Decrease) increase in accrued interest
payable (1) 87
Other, net (330) (476)
--------- ---------
Net cash provided by operating activities 2,519 999
--------- ---------
INVESTING ACTIVITIES
Investment securities available for sale:
Repayments 762 397
Purchases (576) (202)
Investment securities held to maturity:
Repayments 1,847 1,437
Purchases - (189)
Increase in loans, net (8,605) (5,906)
Purchase of premises and equipment (156) (479)
Other investing activities - (73)
--------- ---------
Net cash used by investing activities (6,728) (5,015)
--------- ---------
FINANCING ACTIVITIES
Increase in deposits, net 3,082 4,820
Increase in short term borrowings 4,100 -
Payments on short term borrowings (1,300) -
Payments on borrowed funds (4) (3)
Cash dividends paid (379) (314)
--------- ---------
Net cash provided by financing
activities 5,499 4,503
--------- ---------
Increase in cash and cash equivalents 1,290 487
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 7,047 10,394
--------- ---------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 8,337 $ 10,881
========= =========
Cash payment for interest $ 2,703 $ 2,136
Cash payments for income taxes $ 484 $ 462
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 - STOCK SPLIT AND DIVIDEND INFORMATION
During the first quarter of 1996, the Board of Directors of the Corporation
approved an increase in the number of shares authorized from 1,000,000 to
3,000,000 shares.
In addition, at the April 9, 1996 meeting, the Board also approved a
four for one split of the Company's common stock. Par value of the stock
decreased from $1.00 to $0.25 per share. Shareholders of record on June 3,
1996 received three additional shares for each share owned as of that date.
The additional shares were distributed on June 28, 1996. The Board also
authorized a cash dividend of $1.10 ($0.275 after the effect of the stock
split) per share. The cash dividend also had a record date of June 3,
1996 and was paid June 28, 1996. Total shares outstanding after the split
were 1,378,124. Earnings per share data for 1995 have been restated for
the effects of the stock split. Also, as a result of the stock split, the
number of authorized shares has increased to 12,000,000.
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 June 30, 1996 and 1995
- - -----------------------------------------------------------
Total interest income of $3,281,000 for the three month period ended June
30, 1996 compares to $3,049,000 for the same three month period in 1995, an
increase of $232,000 or 7.6%. The overall increase in total interest
income is attributed to an increase in interest and fees on loans of
$205,000 and to an increase in interest income on investment securities of
$63,000. Interest on federal funds sold of $19,000 at June 30, 1996
compares to $52,000 for the three month period ended June 30, 1995, a
decrease of $33,000. 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 due to a credit extension to a local
water and sewer authority. The increase in investment income is due to an
increase in available for sale securities. The decline in income from
federal funds sold is due to a reduction in volume. Total net loans at
June 30, 1996 were $130,167,000, an increase of $13.2 million or
11.3% from $116,996,000 at June 30, 1995. Available for sale securities
at June 30, 1996 of $11,979,000, represent an increase of $5.7 million from
$6,268,000 at June 30, 1995. Federal funds sold declined from a level of
$5.2 million at June 30, 1995 to zero at June 30, 1996. The decline in
overnight funds sold of $5.2 million, in conjunction with a net deposit
increase of $9.6 million was used to fund the net increases in loans and
available for sale securities.
Total interest expense of $1,305,000 for the three month period ending June
30, 1996 represents an increase of $111,000 from the $1,194,000 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 $9.6 million or 7.2% from a level of
$134,142,000 at June 30, 1995 to $143,746,000 at June 30, 1996. The
Company's money market product had the largest increase with growth of $6.5
million or 48.4%. The increase in the money market product can be
attributed to the tiered interest rate product offered in 1995. The
product was divided into three separate tiers, each paying a different
interest rate. Consumers were offered an attractive savings instrument
which paid competitive market rates. The Company's overall cost of funds
at June 30, 1996 was 4.58%, an increase of 48 basis points from a level of
4.10% at June 30, 1995.
Net interest income of $1,976,000 for the three months ended June 30, 1996
compares to $1,855,000 for the same three month period in 1995, an increase
of $121,000.
Total other income for the three month period ended June 30, 1996 of
$204,000 compares to $212,000 for the three month period ended June 30,
1995, a decrease of $8,000. The decrease is derived primarily from a
decrease in service charges on deposit accounts and to net losses on loan
sales.
Total other expense of $1,183,000 for the three months ended June 30, 1996
compares to $1,151,000 for the same three month period in 1995. This
represents an increase of $32,000. Equipment expense of $153,000 at June
30, 1996 represents an increase of $40,000 from the $113,000 reported at
June 30, 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 $571,000 for the three month
period ended June 30, 1996 represents an increase of $47,000 from the same
three month period in 1995. The increase in salary and benefits, as well
as all remaining expenses are generally thought to be normal and recurring
in nature.
Deposit insurance expense of $500 for the three month period ended June
30, 1996 compares to $72,000 for the three month period ended June 30,
1995, a decrease of $71,500. As a result of actions taken by the Federal
Deposit Insurance Corporation ("FDIC"), the Bank's deposit insurance
premium under the Bank Insurance Fund ("BIF") was reduced from 23 cents per
one hundred dollars of insured deposits for the first six months of 1995
to the FDIC "de-minimus" of $2,000 per year in 1996. Because the Savings
Association Insurance Fund ("SAIF"), the fund that insures savings
institutions, has not attained its funding requirements, various pieces of
legislation have been considered that would allow for a special, one time
premium assessment to institutions insured by both BIF and SAIF. Although
legislative action is anticipated regarding this issue, the timing and
extent has yet to be determined.
Net income for the three month period ended June 30, 1996 was $674,000, an
increase of $61,000 from the $613,000 reported at June 30, 1995. Earnings
per share for the three month period ended June 30, 1996 were $0.49, an
increase of $0.04 from $0.44 per share earned during the same three month
period in 1995.
<PAGE>
Comparison of the Six Months Ended June 30, 1996 and 1995
- - ---------------------------------------------------------
Total interest income of $6,541,000 for the six month period ended June 30,
1996 compares to $5,960,000 for the same six month period in 1995, an
increase of $581,000 or 9.7%. 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 $477,000 and to an increase in interest
income on investment securities of $127,000. Interest on federal funds
sold of $51,000 at June 30, 1996 compares to $72,000 for the three month
period ended June 30, 1995, a decrease of $21,000. The variances are due
to the volume fluctuations discussed above.
Total interest expense of $2,702,000 for the six month period ended June
30, 1996 represents an increase of $479,000 from the $2,223,000 reported
for the same six month period in 1995. The increase in interest expense is
attributed to volume increases. Total deposits of $143,746,000 at June 30,
1996 represents an increase of $9.6 million or 7.2% from the $134,142,000
reported at June 30 1995. The money market product had the largest
increase with growth of $6.6 million or 48.4%. 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.
Net interest income of $3,839,000 at June 30, 1996 compares to $3,737,000
at June 30, 1995, an increase of $102,000. As a result of the deposit
volume increases and deposits repricing, the Bank's cost of funds increased
from a level of 4.10% at June 30, 1995 to a level of 4.58% at June 30,
1996. The increase in the cost of funds reduced the net interest margin
from 5.68% at June 30, 1995 to 5.43% at June 30, 1996.
The provision for loan losses for the six months ended June 30, 1996 of
$100,000 represents an increase of $25,000 from the $75,000 reported for
the same six 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 $406,000 for the six months ended June 30, 1996
compares to $420,000 for the same six month period in 1995, a decline of
$14,000. Declines in service fees on deposit accounts of $5,000 due to
volume activity, and a decline in trust service fee income of $9,000 due to
several one-time fee assessments in 1995 are the major contributors to that
decline.
Total other expense of $2,361,000 at June 30,1996 compares to $2,306,000 at
June 30, 1995, an increase of $55,000 or 2.4%. Equipment expense of
$289,000 for the six months ended June 30,1996 compares to $218,000 for the
six months ended June 30, 1995, an increase of $71,000. The increase is
due to the branch office remodeling and computer system enhancements
discussed earlier. Deposit insurance premiums for the six months ended
June 30, 1996 of $1,000 compares to $145,000 for the six months ended June
30, 1995. The decline is due to the reduction in FDIC premium charges
discussed in the three month comparison. All other increases in other
expenses are thought to be normal and recurring in nature.
Net income for the six month period ended June 30, 1996 of $1,273,000 or
$0.92 per share compares to $1,245,000 or $0.90 per share for the same six
month period ended June 30, 1995. This represents an increase of $28,000
or $0.02 per share.
Financial Condition
- - -------------------
Total assets increased $6,578,000 or 4.1% from December 31, 1995. An
increase in net loans of $8,581,000 was offset by net maturities and
payback on investment securities of $1.8 million and a reduction in
mortgage loans held for sale of $1.2 million. Total deposits of
$143,746,000 at June 30, 1996 represents an increase of $3.1 million or
2.2% from $140,663,000 at December 31, 1995. Increases in the money
market product of $2.8 million, savings of $1.5 million and non-interest
demand of $1.5 million were offset by declines in certificates of deposit
of $1.7 million and interest-bearing demand of $1.0 million. Short term
borrowings, which represent short term advances from the Federal Home
Loan Bank ("FHLB"), were $4.1 million at June 30, 1996, which represents
an increase of $2.8 million from $1.3 million at December 31, 1995.
<PAGE>
In addition, as part of a purchasing strategy of investment securities
available for sale, management advanced an additional $9.0 million on lines
with the FHLB in July 1996. The plan allows management to take advantage
of what it believes are favorable yields in the bond market and locking in
interest rate spreads. All advances would then be paid off in August at
the conversion of the branch acquisition discussed below.
The Bank entered into an agreement to acquire certain deposit liabilities
of the Harrisville, Pennsylvania office of Mellon Bank, N. A. in a
transaction which will be recorded as a branch purchase. The Bank will
assume deposit liabilities of approximately $22 million and acquire the
land, building and equipment. The acquisition, is expected to be completed
on August 19, 1996. Management views the Harrisville community to be a
natural extension of the Bank's market. Although the Bank currently has a
presence in the market, management plans to increase that presence by using
the proceeds from the purchase to increase loan volumes there. Although
long term goals use the proceeds from the purchase to fund lending
activities, short term plans allow for any funds not initially used in
lending to be used to purchase available for sale securities with staggered
maturities to fulfill future loan needs.
At June 30, 1996, the Bank serviced approximately $17.4 million in sold
fixed rate mortgages. In April, the Bank sold $1.7 million to the Federal
Home Loan Mortgage Corporation ("Freddie Mac"), which generated a net loss
of $16,000. The Bank does anticipate the sale of an additional $500,000
during the third 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.
Given the source of liquidity that the branch acquisition provides and that
loan yields provide the greatest return of any of the Bank's earning
assets, management anticipates that the need for liquidity provided by the
selling of fixed rate mortgages on the secondary market will decline.
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 June 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 June 30, 1996:
Actual
--------------- Minimum
Amount Ratio Ratio
------ ----- -----
Tier 1 risk - based capital $ 19,171 15.75% 4.00%
Total risk - based capital 20,331 16.71 8.00
Leverage capital 19,171 11.64 3.00
As the above table illustrates, all regulatory capital requirements have
been complied with at June 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 4.7% of total assets as of June 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
90.1% at June 30, 1996, as compared to 87.5% at December 31, 1995. The
increase was brought about by volume activity. 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 June 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 six month period ended June 30, 1996,
indicates an increase in cash and cash equivalents of $1,290,000. Funding
sources during the six month period ended June 30, 1996 included: a net
increase in deposits of $3.1 million, an increase in short term borrowings
of $4.1 million, proceeds from the maturity and repayment of investments
securities of $2.6 million and proceeds from the sale of fixed rate
mortgages of $1.7 million. Uses of cash during the period included: a net
increase in loans of $8.6 million, payments on short term borrowings of
$1.3 million, purchases of available for sale securities of $576,000 and
the payment of cash dividends of $379,000. Cash and cash equivalents
totaled $8.3 million at June 30, 1996.
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:
Jun Mar Dec Sept Jun
1996 1996 1995 1995 1995
---- ---- ---- ---- ----
(dollars in thousands)
Non-performing and restructured loans
Loans past due 90 days
or more $ 16 $ 74 $ 87 $ 120 $ 84
Non-accrual loans 99 1,019 783 757 808
Restructured loans 803 - - - -
------- ------ ------- ------- ------
Total non-performing
and restructured loans 918 1,093 870 877 892
------- ------ ------- ------- ------
Other non-performing assets
Other real estate owned 135 149 149 362 500
Repossessed assets 14 14 24 25 16
------- ------ ------- ------- ------
Total other non-performing
assets 149 163 173 387 516
------- ------ ------- ------- ------
Total non-performing
assets $ 1,067 $ 1,256 $ 1,043 $ 1,264 $ 1,408
======= ======= ======= ======= =======
Non-performing and
restructured loans
as a percentage of
total loans (1) 0.70 % 0.88 % 0.71 % 0.74 % 0.76 %
Non-performing assets and
restructured loans as a
percentage of total loans
and other non-performing
assets and restructured
loans (1) 0.81 % 1.02 % 0.85 % 1.06 % 1.19 %
(1) Excludes loans held for sale.
The allowance for loan losses at June 30, 1996, totaled $1,160,000 or 0.88%
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 $100,000
for the six months ended June 30, 1996 and $75,000 for the six months ended
June 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 June 30, 1996, the Company had impaired and restructured loans of
$803,000, 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 $949,000. 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, $510,000 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 $918,000 at June 30,
1996, a decrease of $175,000 from their level of $1.1 million at
March 31, 1996. Non-performing and restructured loans as a percent of
total loans were 0.70% at June 30, 1996 as compared to 0.88% at March 31,
1996 and 0.76% at June 30, 1995. The decline is due to the loan
restructurings that occurred during the quarter.
Other real estate owned at June 30, 1996 was $135,000, a decrease of
$14,000 from March 31, 1995 as a result of the sale of a single parcel of
real estate. Management believes that the remaining parcels, which were
acquired through foreclosure activities in 1995, will sell within a
reasonable time period. Management believes none of the non-performing
assets, including other real estate owned, at June 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
The annual meeting of shareholders of Slippery Rock Financial
corporation took place on April 16, 1996. The following two (2)
matters were voted upon:
1) Election of the four (4) persons listed in CLASS I of the Proxy
Statement dated March 25, 1996 whose terms expire in 1999.
CLASS I Directors:
Mr. John W. Conway
Mr. William D. Kingery
Mr. William J. McDanel
Mr. Charles C. Stoops, Jr.
2) Whatever other business may be brought before the meeting or any
adjournment thereof.
Continuing CLASS III directors whose terms expire in 1998 are:
Mr. Grady W. Cooper
Mr. Robert E. Gregg
Mr. Sylvan. P. Snyder
Mr. Kenneth D. Wimer
Continuing CLASS II directors whose terms expire in 1997 are:
Mr. Robert M. Greenberger
Mr. Paul M. Montgomery
Mr. William C. Sonntag
Mr. Norman P. Sundell
The following table presents the results of the vote tabulation:
Votes Votes
Issue Description For Against
----- ----------- ----- -------
1 Election of CLASS I Directors
Mr. John W. Conway 294,820 174
Mr. William D. Kingery 294,576 251
Mr. William J. McDanel 281,236 13,758
Mr. Charles C. Stoops, Jr. 282,309 12,685
2 No other issues were brought before the meeting.
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: August 6, 1996 By: /s/ William C. Sonntag
William C. Sonntag,
President & CEO
Date: August 6, 1996 By: /s/ Mark A. Volponi
Mark A. Volponi,
Treasurer
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<CASH> 8,311
<INT-BEARING-DEPOSITS> 125
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 11,979
<INVESTMENTS-CARRYING> 11,547
<INVESTMENTS-MARKET> 11,531
<LOANS> 131,682
<ALLOWANCE> 1,160
<TOTAL-ASSETS> 168,589
<DEPOSITS> 143,746
<SHORT-TERM> 4,100
<LIABILITIES-OTHER> 729
<LONG-TERM> 935
0
0
<COMMON> 345
<OTHER-SE> 18,734
<TOTAL-LIABILITIES-AND-EQUITY> 168,589
<INTEREST-LOAN> 5,837
<INTEREST-INVEST> 648
<INTEREST-OTHER> 56
<INTEREST-TOTAL> 6,541
<INTEREST-DEPOSIT> 2,654
<INTEREST-EXPENSE> 2,702
<INTEREST-INCOME-NET> 3,839
<LOAN-LOSSES> 100
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,361
<INCOME-PRETAX> 1,784
<INCOME-PRE-EXTRAORDINARY> 1,784
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,273
<EPS-PRIMARY> 0.92
<EPS-DILUTED> 0.92
<YIELD-ACTUAL> 0
<LOANS-NON> 99
<LOANS-PAST> 16
<LOANS-TROUBLED> 803
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,098
<CHARGE-OFFS> 56
<RECOVERIES> 18
<ALLOWANCE-CLOSE> 1,160
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
