<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 June 30, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
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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 August 7, 1997, there were 1,378,124 shares outstanding of the issuer's
class of common stock.
Page 1
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Slippery Rock Financial Corporation
INDEX TO QUARTERLY REPORT ON FORM 10-QSB
Page
----
Part I Financial Information
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheet, June 30, 1997 3
Consolidated Statements of Income
Three months ended June 30, 1997 and 1996
and Six months ended June 30, 1997 and 1996 4
Consolidated Statement of Cash Flows
Six months ended June 30, 1997 and 1996 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 11
Signatures 13
2
<PAGE>
Slippery Rock Financial Corporation and Subsidiary
CONSOLIDATED BALANCE SHEET
(Unaudited - $ in 000)
June 30,
1997
----------
ASSETS
Cash and due from banks $ 11,787
Interest-bearing deposits in other banks 340
Mortgage loans held for sale 544
Investment securities:
Available for sale 14,695
Held to maturity (market value $10,782) 10,747
Loans (net of unearned income of $6) 148,050
Less allowance for loan losses 1,214
----------
Net loans 146,836
Premises and equipment 3,461
Accrued interest and other assets 4,469
----------
Total assets $ 192,879
==========
LIABILITIES
Deposits:
Noninterest-bearing demand $ 26,925
Interest-bearing demand 21,376
Savings 18,843
Money market 22,800
Time 80,140
----------
Total deposits 170,084
Long-term debt 749
Accrued interest and other liabilities 889
----------
Total liabilities 171,722
----------
STOCKHOLDERS' EQUITY
Common stock (par value $0.25; authorized
12,000,000 shares, 1,378,124 issued) 345
Surplus 10,676
Retained earnings 10,132
Net unrealized gain on securities 4
----------
Total stockholders' equity 21,157
----------
Total liabilities and
stockholders' equity $ 192,879
==========
See accompanying notes to the consolidated financial statements.
Page 3
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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,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $ 3,276 $ 2,945 $ 6,465 $ 5,837
Interest-bearing deposits in other banks 2 3 5 5
Federal funds sold 44 19 65 51
Interest on investment securities:
Taxable 176 130 354 277
Exempt from federal income tax 170 173 459 348
Dividends 15 11 27 23
--------- --------- --------- ---------
Total interest income 3,683 3,281 7,375 6,541
--------- --------- --------- ---------
INTEREST EXPENSE
Deposits 1,540 1,284 3,095 2,654
Borrowed funds 12 21 53 48
--------- --------- --------- ---------
Total interest expense 1,552 1,305 3,148 2,702
--------- --------- --------- ---------
NET INTEREST INCOME 2,131 1,976 4,227 3,839
Provision for loan losses 50 50 100 100
--------- --------- --------- ---------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 2,081 1,926 4,127 3,739
--------- --------- --------- ---------
OTHER INCOME
Service charges on deposit accounts 127 121 247 247
Trust department income 21 13 32 22
Net loss on sales of loans (27) (16) (13) (16)
Net gain (loss) on sales of investments 13 - (15) -
Other income 90 86 168 153
--------- --------- --------- ---------
Total other income 224 204 419 406
--------- --------- --------- ---------
OTHER EXPENSE
Salaries and employee benefits 617 571 1,264 1,138
Occupancy expense, net 87 100 187 207
Furniture and equipment expense 158 153 317 289
Data processing expense 41 47 79 92
Stationery, printing and supplies 45 28 74 67
Pennsylvania shares tax 45 41 91 82
Other 348 243 630 486
--------- --------- --------- ---------
Total other expense 1,341 1,183 2,642 2,361
--------- --------- --------- ---------
Income before income taxes 964 947 1,904 1,784
Income tax expense 267 273 493 511
--------- --------- --------- ---------
NET INCOME $ 697 $ 674 $ 1,411 $ 1,273
========= ========= ========= =========
PER SHARE DATA
Average shares for the period 1,378,124 1,378,124 1,378,124 1,378,124
Earnings per share $ 0.51 $ 0.49 $ 1.02 $ 0.92
Dividends paid $ 0.15 $ - $ 0.30 $ 0.28
</TABLE>
See accompanying notes to the consolidated financial statements.
Page 4
<PAGE>
Slippery Rock Financial Corporation and Subsidiary
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited - $ in 000)
Six Months Ended
June 30,
1997 1996
--------- ---------
OPERATING ACTIVITIES
Net income $ 1,411 $ 1,273
Adjustments to reconcile net
income to net cash provided by
operating activities:
Provision for loan losses 100 100
Depreciation and amortization 388 277
Deferred taxes 76 35
Origination of loans held for sale (3,913) (500)
Proceeds from sales of loans held for sale 4,652 1,722
Loss on sale of loans 13 16
Loss on sale of investment securities 15 -
(Increase) decrease in accrued
interest receivable 74 (73)
(Decrease) increase in accrued interest payable 48 (1)
Other, net (57) (330)
--------- ---------
Net cash provided by operating activities 2,807 2,519
--------- ---------
INVESTING ACTIVITIES
Investment securities available for sale:
Proceeds from sales 11,522 -
Repayments 499 762
Purchases (651) (576)
Investment securities held to maturity:
Repayments 516 1,847
Purchases (224) -
Increase in loans, net (6,950) (8,605)
Purchase of premises and equipment (88) (156)
Other investing activities 41 -
--------- ---------
Net cash provided by (used for)
investing activities 4,665 (6,728)
--------- ---------
FINANCING ACTIVITIES
Increase in deposits, net 5,304 3,082
Increase in short term borrowings - 4,100
Payments on short term borrowings (9,000) (1,300)
Payments on borrowed funds (4) (4)
Cash dividends paid (414) (379)
--------- ---------
Net cash provided by (used for)
financing activities (4,114) 5,499
--------- ---------
Increase in cash and cash
equivalents 3,358 1,290
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 8,670 7,047
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 12,028 $ 8,337
========= =========
Cash payment for interest $ 3,099 $ 2,703
Cash payments for income taxes $ 356 $ 484
See accompanying notes to the consolidated financial statements.
5
<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 - ACCOUNTING PRONOUNCEMENT
- ---------------------------------
Effective January 1, 1997, the Company adopted Statement of Financial
Accounting Standards No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities." This statement requires
that, after a transfer of financial assets, an entity recognized the financial
and servicing assets it controls and the liabilities it has incurred,
derecognizes financial assets when control has been surrendered, and
derecognizes liabilities when extinguished. This statement provides
consistent standards of distinguishing transfers of financial assets that are
sales from transfers that are secured borrowings.
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. Management
does not anticipate the adoption of Statement No. 125 to have a material
effect on the Company's financial position or results of operations.
NOTE 3 - PENDING ACCOUNTING STANDARDS
- -------------------------------------
On March 3, 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 128, "Earnings Per Share." Statement No.
128 will become effective for the Company beginning in 1998. This statement
re-defines the standards for computing earnings per share (EPS) previously
found in Accounting Principles Board Opinion No. 15, Earnings Per Share.
Statement No. 128 establishes new standards for computing and presenting EPS
and requires dual presentation of "basic" and "diluted" EPS on the face of the
income statement for all entities with complex capital structures. Under
Statement No. 128, basic EPS is to be computed based upon income available to
common shareholders and the weighted average number of common shares
outstanding for the period. Diluted EPS is to reflect the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the Company. Statement No. 128 also
requires the restatement of all prior-period EPS data presented. The Company
will adopt Statement No. 128 on December 31, 1997 and based on current
estimates, does not believe the effect of adoption will have a significant
impact on the Company's financial position or results of operation.
In July 1997, the Financial Accounting Standards Board issued statement of
Financial Accounting Standard No. 130, "Reporting Comprehensive Income."
Statement No. 130 establishes standards for reporting and presentation of
comprehensive income and its components (revenues, expenses, gains, and
losses) in a full set of general-purpose financial statements. It requires
that all items that are required to be recognized under accounting standards
as components of comprehensive income be reported in a financial statement
that is presented with the same prominence as other financial statements.
SFAS No. 130 requires that companies (i) classify items of other comprehensive
income by their nature in a financial statement and (ii) display the
accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of the statement
of financial condition. SFAS No. 130 is effective for fiscal years beginning
after December 15, 1997. Reclassification of financial statements for earlier
periods provided for comprehensive purposes is required.
Page 6
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Comparison of the Three Months Ended June 30, 1997 and 1996
- -----------------------------------------------------------
Total interest income of $3,683,000 for the three month period ended June 30,
1997 compares to $3,281,000 for the same three month period in 1996, an
increase of $402,000 or 12.25%. The overall increase in total interest income
is attributed to an increase in interest and fees on loans of $331,000 and to
an increase in interest income on investment securities of $48,000. The
increase in interest and fees on loans is due primarily to increased volume in
the loan portfolio. Total net loans at June 30, 1997 were $146,836,000, an
increase of $16.7 million or 12.8% from $130,167,000 at June 30, 1996. In
general, the growth within the loan portfolio is spread out among all loan
products. The most significant increase, however, occurred in the 1-4 family,
first lien, real estate area which grew $6.2 million or 13.3% from their level
of $46.3 million at June 30, 1996. The increase in investment income was due
to an increase in securities available for sale. Available for sale
securities were purchased during the second and third quarter of 1996 with
proceeds from the Harrisville, PA branch acquisition. Available for sale
securities were subsequently sold during the first and second quarters of
1997. Investment securities available for sale at June 30, 1997 were
$14,695,000 an increase of $2.7 million or 22.7% from $11,979,000 at June 30,
1996. Investments available for sale at March 31, 1997 were $20,868,000.
Total interest expense of $1,552,000 for the three month period ending June
30, 1997 represents an increase of $247,000 from the $1,305,000 reported for
the same three month period in 1996. The increase in interest expense is due
to increases in deposit volumes due to the branch acquisition and normal
growth within existing deposit products. Overall, total deposits increased
$26.3 million or 18.3% from a level of $143,746,000 at June 30, 1996 to
$170,084,000 at June 30, 1997. The branch acquisition, referred to above,
represents approximately $20.1 million of the overall growth. While all
deposit products reflect net increases when compared to June 1996, time
certificates had the largest increase with growth of $15 million or 23%. The
Bank's cost of funds at June 30, 1997 was 4.35%, down from a level of 4.48% at
June 30, 1996.
Net interest income of $2,131,000 for the three months ended June 30, 1997
compares to $1,976,000 for the same three month period in 1996, an increase of
$155,000.
Total other income for the three month period ended June 30, 1997 of $224,000
compared to $204,000 for the three month period ended June 30, 1996, an
increase of $20,000. Increases in service fees on deposit accounts of $6,000,
an increase in trust fees of $8,000 and net gains on the sale of investment
securities available for sale of $13,000 were offset by net losses of $11,000
on the sale of fixed rate, 1-4 family residential mortgages.
Total other expense of $1,341,000 for the three months ended June 30, 1997
compares to $1,183,000 for the same three month period in 1996. This
represents an increase of $158,000 or 13.4%. Net increases in salaries and
employee benefits expense of $46,000 and miscellaneous expense of $100,000
were the major contributors to the overall increase. The increase in salary
and employee benefits is attributed to normal annual salary increases and
additional expenses pertaining to the Harrisville branch acquisition. The net
increase in miscellaneous expense is derived principally from amortization
expense of the premium paid for the branch acquisition. Amortization expense
at June 30, 1997 for the intangible totaled $98,000. With the exception of
these items, all increases in other expense were brought about by those items
that are generally thought to be normal and recurring in nature.
Net income for the three month period ended June 30, 1997 was $697,000, an
increase of $23,000 from the $674,000 reported at June 30, 1996. Earnings per
share for the three month period ended June 30, 1997 were $0.51, an increase
of $0.02 from $0.49 per share earned during the same three month period in
1996.
Comparison of the Six Months Ended June 30, 1997 and 1996
- ---------------------------------------------------------
Total interest income of $7,375,000 for the six month period ended June 30,
1997 compared to $6,541,000 for the same six month period in 1996, an increase
of $834,000 or 12.75%. 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 $628,000 and to an increase in interest income on investment
securities of $127,000. The variances are due to the volume fluctuations
discussed above.
Total interest expense of $3,148,000 for the six month period ended June 30,
1997 represents an increase of $446,000 from the $2,702,000 reported for the
same six month period in 1996. The increase in interest expense is attributed
to the volume increases discussed earlier in the three month comparison.
Page 7
<PAGE>
Net interest income of $4,227,000 at June 30, 1997 compared to $3,839,000 at
June 30, 1996, an increase of $388,000. The Bank's cost of funds decreased
from a level of 4.48% at June 30, 1996 to a level of 4.35% at June 30, 1997.
Despite the overall reduction in the Bank's cost of funds, its net interest
margin, (the ratio of net interest income divided by average earning assets)
decreased during the period. Net interest margin at June 30, 1997 was 5.07%,
down 22 basis points from its level of 5.29% at June 30, 1996. The reduction
is due to a reduction in the yield on earning assets which declined from 8.84%
at June 30, 1996 to 8.60% at June 30, 1997. The reduction in yield is
believed to be derived from a shift within the components of earning assets
brought on by the branch acquisition. The Bank used funds from the branch
purchase to increase investment portfolio volumes until needed for loan
production. The lower yielding (relative to those of loans) investments
reduced the Bank's overall yield on earning assets. Further evidence of the
shift in the composition in earning assets can be determined by the Bank's net
loans (including loans held for sale) to deposits ratio. Not only is this
ratio one tool for measuring the Bank's liquidity, but it also is indicative
of the Bank's earning asset mix. The ratio determines what percentage of
deposit dollars are used to fund loan production, which produces the highest
yield. The net loans to deposits ratio at June 30, 1997 was 86.6%, down 4.15%
from 90.8% at June 30, 1996.
Total other income of $419,000 for the six months ended June 30, 1997 compares
to $406,000 for the same six month period in 1996, an increase of $13,000.
Increases in trust service charges of $10,000 and $15,000 in miscellaneous
income were offset by net losses on the sale of investments of $15,000.
Facing the potential for a rising interest environment, management sold
approximately $11.5 million of available for sale securities for general
liquidity purposes during the latter part of the first quarter of 1997 and
early second quarter 1997.
Total other expense of $2,642,000 at June 30,1997 compares to $2,361,000 at
June 30, 1996, an increase of $281,000 or 11.9%. Salary and wage expense of
$1,264,000 at June 30, 1997 compared to $1,138,000 at June 30, 1996 an
increase of $126,000 or 11.1%. The increase is due to increase personnel
costs associated with the branch acquisition and normal annual salary
increases. Miscellaneous expense of $620,000 at June 30, 1997 compared to
$485,000 at June 30, 1996 an increase of $135,000 or 27.8%. The increase is
due to the intangible amortization expense for the Harrisville branch
acquisition discussed earlier in the three month comparison.
Net income for the six month period ended June 30, 1997 of $1,411,000 or $1.02
per share compared to $1,273,000 or $0.92 per share for the same six month
period ended June 30, 1996. This represents an increase of $138,000 or $0.10
per share.
Dividends paid during the six month period ended June 30, 1997 were $0.30 per
share, an increase of $0.02 per share from the $0.28 per share paid during the
same six month period in 1996.
Financial Condition
- -------------------
Total assets decreased $2,834,000 or 1.4% from December 31, 1996. An
increase in net loans of $6.9 million was offset by a net reduction in
investment securities available for sale of $11.6 million. The Bank sold
primarily tax-free, state and municipal obligations as part of its
asset/liability and interest rate risk management program in response to an
increase in market interest rates in March. Proceeds from the sale were used
for general liquidity purposes, which included deposit liability activity as
well as the funding of loans and loans held for sale. Total deposits of
$170,084,000 at June 30, 1997 represented an increase of $5.3 million or 3.2%
from $164,779,000 at December 31, 1996.
At June 30, 1997, the Bank serviced approximately $24 million in sold fixed
rate mortgages. In July, the Bank sold $544,000 to the Federal Home Loan
Mortgage Corporation ("Freddie Mac"), which generated a net gain of $12,000.
Management will continue to obtain the necessary documentation to allow 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.
Effective January 1, 1997, the Company adopted Statement of Financial
Accounting Standards No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities." This statement requires
that, after a transfer of financial assets, an entity recognizes the financial
and servicing assets it controls and the liabilities it has incurred,
derecognizes financial assets when control has been surrendered, and
derecognizes liabilities when extinguished. This statement provides
consistent standards of distinguishing transfers of financial assets that are
sales from transfers that are secured borrowings. Management does not
anticipate the adoption of Statement No. 125 to have a material effect on the
Company's financial position or results of operations.
Page 8
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On April 11, 1997, the Bank entered into an agreement to acquire certain
deposit liabilities and loan asset accounts of the Slippery Rock, Pennsylvania
office of First Western Bank, F.S.B. in a transaction which will be recorded
as a branch purchase. The Bank will assume deposit liabilities of
approximately $4.4 million and acquire the land, building and equipment. The
acquisition has received preliminary regulatory approval and is expected to
be completed in August 1997. Management believes that the branch acquisition
will benefit the Bank by further increasing its market share in the Slippery
Rock community.
At June 30, 1997, 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, 1997:
Actual
----------------- Minimum
Amount Ratio Ratio
-------- ------ -------
Tier 1 risk - based capital $ 19,223 14.14% 4.00%
Total risk - based capital 20,437 15.04 8.00
Leverage capital 19,223 10.17 3.00
As the above table illustrates, all regulatory capital requirements have been
complied with at June 30, 1997. Management does not believe that the branch
acquisition will have any significant impact upon these rations, which will
continue to exceed all regulatory requirements.
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 5.9% of total assets as of June 30, 1997
compared to 3.7% at December 31, 1996. The increase is due to higher balance
levels in cash and balances held with correspondent banks and to an increase
in investment securities that mature within one year from the report date
relative to those positions at December 31, 1996. Management views this ratio
to be at an adequate level.
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 86.6%
at June 30, 1997 as compared to 87.5% at December 31, 1996 and 90.8% at June
30, 1996. The decrease from June 1996 was brought about by deposit volume
activity due to the Harrisville branch acquisition.
The Bank's liquidity plan allows for the use of long-term advances or short-
term lines of credit with the Federal Home Loan Bank ("FHLB") as a source of
funds. Borrowing from the FHLB not only provides a source of liquidity for
the Company, but also serves as a tool to reduce interest rate risk as well.
The Company may structure borrowings from FHLB to match those of customer
credit requests, and therefore, lock in interest rate spreads over the lives
of the loans. At June 30, 1997, the Company continued to have one such
matched funding loan outstanding totaling $720,000.
The Company continues to also have short-term borrowing availability through
FHLB which are of two types, "RepoPlus" advances and "Flexline." "RepoPlus"
advances are short-term borrowings maturing within one year, bear a fixed rate
of interest and are subject to prepayment penalty. "Flexline" advances also
mature within one year and bear a variable rate of interest that reprices
daily. There are no repayment penalties for these borrowings. There were no
advances outstanding for either of these products at June 30, 1997.
In addition to borrowing from the FHLB as a source for liquidity, as mentioned
earlier, the Company also continued activity in the secondary mortgage market.
Specifically, the Company continues to sell fixed rate residential real estate
mortgages to Freddie Mac. The sales to Freddie Mac not only provided an
opportunity for the Bank to remain competitive in the market place, by
allowing it to offer a fixed rate mortgage product, but also provides an
additional source of liquidity. Loan sales on the secondary market also
provides management an additional tool to use in managing interest rate risk
exposure within the balance sheet.
Page 9
<PAGE>
The Statement of Cash Flows, for the six month period ended June 30, 1997,
indicates an increase in cash and cash equivalents of $3.4 million. Funding
sources during the six month period ended June 30, 1997 included: a net
increase in deposits of $5.3 million, proceeds from the sale of investment
securities available for sale of $11.5 million and proceeds from the sale of
fixed rate mortgages of $4.6 million. Uses of cash during the period
included: a net increase in loans of $6.9 million, payments on short term
borrowings of $9.0 million, purchases of available for sale securities of
$651,000 and the payment of cash dividends of $414,000. Cash and cash
equivalents totaled $12.0 million at June 30, 1997.
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
1997 1997 1996 1996 1996
------- ------- ------- ------- -------
(dollars in thousands)
Non-performing and restructured loans
Loans past due 90 days or more $ 184 $ 112 $ 177 $ 20 $ 16
Non-accrual loans 1,101 1,091 798 386 99
Restructured loans 104 96 597 797 803
------- ------- ------- ------- -------
Total non-performing
and restructured loans 1,389 1,299 1,572 1,203 918
------- ------- ------- ------- -------
Other non-performing assets
Other real estate owned 169 179 221 136 135
Repossessed assets 5 15 24 30 14
------- ------- ------- ------- -------
Total other non-performing
assets 174 194 245 166 149
------- ------- ------- ------- -------
Total non-performing assets $ 1,563 $ 1,493 $ 1,817 $ 1,369 $ 1,067
======= ======= ======= ======= =======
Non-performing and
restructured loans as a
percentage of total loans(1) 0.94 % 0.91 % 1.11 % 0.89 % 0.70 %
Non-performing assets and
restructured loans as a
percentage of total loans
and other non-performing
assets and restructured
loans(1) 1.05 % 1.04 % 1.28 % 1.01 % 0.81 %
(1) Excludes loans held for sale.
The allowance for loan losses at June 30, 1997, totaled $1,214,000 or 0.82% of
total loans (including loans held for sale) as compared to $1,177,000 or
0.88% at December 31, 1996. Provisions for loan losses were $100,000 for
both six month periods ended June 30, 1997 and 1996.
Page 10
<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, 1997, the Company had impaired loans of $736,000 of which
$639,000 were restructured. All of the loans were restructured in 1996 and
were not complying with the restructured terms. The average investment in
impaired loans during the period ended June 30, 1997 was $736,000. Impaired
loans had a general loan loss reserve allocation of $110,000 at June 30, 1997.
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 impaired loans at June 30, 1997 continue to be comprised of the impaired
and restructured loans that were reported at December 31, 1996, no additional
accounts have been added to the impaired or restructured classifications
during 1997.
Non-performing loans totaled $1.4 million at June 30, 1997, an increase of
$100,000 from their level of $1.3 million at March 31, 1997. The increase is
due to an increase in loans past due 90 days or more of $72,000 during the
period. Non-performing loans as a percent of total loans were 0.94% at June
30, 1997 as compared to 0.91% at March 31, 1997 and 1.11% at December 31,
1996.
Other real estate owned at June 30, 1997 was $169,000, a decline of $51,000
from December 31, 1996. Management believes that the remaining parcels held
in other real estate owned will sell within a reasonable time period.
Management also believes none of the non-performing assets, including other
real estate owned, at June 30, 1997, pose any significant risk to the
operations, liquidity or capital position of the Company.
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 15, 1997. The following three (3) matters were voted upon:
1) Election of the four (4) persons listed in CLASS II of the Proxy Statement
dated March 21, 1997 whose terms expire in 2000.
CLASS II Directors:
Mr. Robert M. Greenberger
Mr. Paul M. Montgomery
Mr. William C. Sonntag
Mr. Norman P. Sundell
2) Approval of Employees Incentive Stock Option Plan
Page 11
<PAGE>
3) Approval of Non-Employee Directors Stock Option Plan
Continuing CLASS I directors whose terms expire in 1999 are:
Mr. John W. Conway
Mr. William D. Kingery
Mr. Charles C. Stoops, Jr.
Continuing CLASS III directors whose terms expire in 1998 are:
Mr. Grady W. Cooper
Mr. Robert E. Gregg
Mr. S. P. Snyder
Mr. Kenneth D. Wimer
The following table presents the results of the vote tabulation:
Votes Votes
Issue Description For Against
1 Election of CLASS II Directors
Mr. Robert M. Greenberger 1,052,145 27,833
Mr. Paul M. Montgomery 1,055,613 23,933
Mr. William C. Sonntag 1,055,605 23,933
Mr. Norman P. Sundell 1,055,173 24,365
2 Employees Incentive Stock Option Plan 1,038,893 37,535
3 Non-Employee Directors Stock Option Plan 984,910 63,308
Item 5. Other Information
(none)
Item 6. Exhibits and Reports on Form 8-K
(none)
Page 12
<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 7, 1997 By: /s/ William C. Sonntag
----------------- ----------------------
William C. Sonntag,
President & CEO
Date: August 7, 1997 By: /s/ Mark A. Volponi
----------------- ----------------------
Mark A. Volponi,
Treasurer
Page 13
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0
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