<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, 1997
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, 1997, 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, 1997 3
Consolidated Statements of Income
Three months ended September 30, 1997 and 1996
and Nine months ended September 30, 1997 and 1996 4
Consolidated Statement of Cash Flows
Nine months ended September 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 13
Signatures 14
<PAGE>
Slippery Rock Financial Corporation and Subsidiary
CONSOLIDATED BALANCE SHEET
(Unaudited - $ in 000)
September 30,
1997
-----------
ASSETS
Cash and due from banks $ 8,320
Interest-bearing deposits in other banks 245
Mortgage loans held for sale 1,559
Federal funds sold 9,900
Investment securities:
Available for sale 14,534
Held to maturity (market value $9,333) 9,264
Loans (net of unearned income of $4) 152,716
Less allowance for loan losses 1,233
-----------
Net loans 151,483
Premises and equipment 3,507
Accrued interest and other assets 4,576
-----------
Total assets $ 203,388
===========
LIABILITIES
Deposits:
Noninterest-bearing demand $ 28,334
Interest-bearing demand 23,592
Savings 18,938
Money market 24,246
Time 84,615
-----------
Total deposits 179,725
Long-term debt 748
Accrued interest and other liabilities 1,118
-----------
Total liabilities 181,591
-----------
STOCKHOLDERS' EQUITY
Common stock (par value $0.25; authorized
12,000,000 shares, 1,378,124 issued) 345
Surplus 10,676
Retained earnings 10,725
Net unrealized gain on securities 51
-----------
Total stockholders' equity 21,797
-----------
Total liabilities and stockholders' equity $ 203,388
===========
See accompanying notes to the consolidated financial statements.
3
<PAGE>
Slippery Rock Financial Corporation and Subsidiary
CONSOLIDATED STATEMENT OF INCOME
(Unaudited - $ in 000 except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $ 3,382 $ 3,056 $ 9,847 $ 8,893
Interest-bearing deposits in other banks 2 3 7 8
Federal funds sold 130 82 195 133
Interest on investment securities:
Taxable 174 152 528 429
Exempt from federal income tax 149 221 608 569
Dividends 15 12 42 35
----------- ----------- ----------- -----------
Total interest income 3,852 3,526 11,227 10,067
----------- ----------- ----------- -----------
INTEREST EXPENSE
Deposits 1,645 1,385 4,740 4,039
Borrowed funds 12 104 65 152
----------- ----------- ----------- -----------
Total interest expense 1,657 1,489 4,805 4,191
----------- ----------- ----------- -----------
NET INTEREST INCOME 2,195 2,037 6,422 5,876
Provision for loan losses 50 50 150 150
----------- ----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 2,145 1,987 6,272 5,726
----------- ----------- ----------- -----------
OTHER INCOME
Service charges on deposit accounts 156 121 403 368
Trust department income 36 12 68 34
Net investment securities gain (losses) - - (15) -
Net gain on sales of loans 33 (6) 20 (22)
Other income 95 86 263 239
----------- ----------- ----------- -----------
Total other income 320 213 739 619
----------- ----------- ----------- -----------
OTHER EXPENSE
Salaries and employee benefits 666 595 1,930 1,733
Occupancy expense, net 84 98 271 305
Furniture and equipment expense 158 152 475 441
Data processing expense 48 47 127 139
FDIC Insurance 5 1 15 2
Stationery, printing and supplies 45 42 119 109
Pennsylvania shares tax 46 41 137 123
Other 281 273 901 758
----------- ----------- ----------- -----------
Total other expense 1,333 1,249 3,975 3,610
----------- ----------- ----------- -----------
Income before income taxes 1,132 951 3,036 2,735
Income tax expense 332 256 825 767
----------- ----------- ----------- -----------
NET INCOME $ 800 $ 695 $ 2,211 $ 1,968
=========== =========== =========== ===========
PER SHARE DATA
Average shares for the period 1,378,124 1,378,124 1,378,124 1,378,124
Earnings per share $ 0.58 $ 0.50 $ 1.60 $ 1.43
Dividends paid $ 0.15 $ - $ 0.45 $ 0.28
</TABLE>
See accompanying notes to the consolidated financial statements.
4
<PAGE>
Slippery Rock Financial Corporation and Subsidiary
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited - $ in 000)
Nine Months Ended
September 30,
1997 1996
----------- -----------
OPERATING ACTIVITIES
Net income $ 2,211 $ 1,968
Adjustments to reconcile net
income to net cash provided by
operating activities:
Provision for loan losses 150 150
Depreciation and amortization 579 437
Deferred taxes 76 23
Origination of loans held for sale (6,659) (3,663)
Proceeds of sales of loans held for sale 6,416 3,246
Loss (gain) on sale of loans (20) 22
Loss on sale of investment securities 15 -
Decrease (increase) in accrued interest receivable 110 (242)
Increase (decrease) in accrued interest payable 172 (10)
Other, net 6 (285)
----------- -----------
Net cash provided by operating activities 3,056 1,646
----------- -----------
INVESTING ACTIVITIES
Decrease in interest-bearing deposits
in other banks, net 99 -
Investment securities available for sale:
Proceeds from sales 11,522 -
Repayments 728 2,493
Purchases (651) (10,944)
Investment securities held to maturity:
Repayments 2,090 4,179
Purchases (324) (1,730)
Increase in loans, net (11,438) (13,087)
Purchase of premises and equipment (180) (237)
Net proceeds from branch acquisition 3,220 17,456
Other investing activities 135 -
----------- -----------
Net cash provided by (used for)
investing activities 5,201 (1,870)
----------- -----------
FINANCING ACTIVITIES
Increase in deposits, net 11,165 10,424
Decrease in short term borrowings (9,000) (1,300)
Payments on borrowed funds (6) (6)
Cash dividends paid (621) (379)
----------- -----------
Net cash provided by financing activities 1,538 8,739
----------- -----------
Increase in cash and cash equivalents 9,795 8,515
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 8,670 7,047
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 18,465 $ 15,562
=========== ===========
Cash payments for interest $ 4,633 $ 4,201
Cash payments for income taxes $ 633 $ 710
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 - 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
required 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.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Comparison of the Three Months Ended September 30, 1997 and 1996
- ----------------------------------------------------------------
Total interest income of $3,852,000 for the three month period ended
September 30, 1997 compared to $3,526,000 for the same three month period in
1996, an increase of $326,000 or 9.25%. The overall increase in total
interest income is attributed to an increase in interest and fees on loans of
$326,000. Interest and fees on loans increased during the period due to
volume increases within the loan portfolio. Average net loans during the
three month period ended September 30, 1997 was $149.0 million, an increase of
$15.5 million or 11.7% from the $133.5 million reported for the same three
month period ended September 30, 1996. The growth was spread among all major
loan products without any marketing solicitations on management's part to
attract lending activity. An increase in income from federal funds sold of
$48,000 for the three month period ended September 30, 1997 was offset by net
reductions in income from investment securities of $48,000. These items were
also brought about by volume fluctuations within the investment portfolio and
daily federal funds sold.
Total interest expense of $1.7 million for the three month period ended
September 30, 1997 represented an increase from the $1.5 million reported for
the three month period ended September 30, 1996. The increase is due to
volume increases in interest bearing deposits. Average interest bearing
deposits for the three month period ended September 30, 1997 were $148.3
million an increase of $17.0 million from the $131.3 million for the three
month period ended September 30, 1996. Exclusive of the Harrisville branch
acquisition, which occurred in August of 1996, total average interest bearing
deposits increased $6.4 million or 5.25%.
Overall, quarterly average total deposits increased $20.3 million or 13.1%
from a level of $155.3 million for the three month period ended September 30,
1996 to $175.6 million for the three month period ended September 30, 1997.
Although averages for each of the various deposit products reflect net
increases relative to September 30, 1996 quarterly averages, time certificates
had the most significant growth with a net increase of $12.9 million or 18.5%.
Net interest income of $2,195,000 for the three months ended September 30,
1997 compared to $2,037,000 for the same three month period in 1996, an
increase of $158,000 or 7.8%.
Total other income for the three month period ended September 30, 1997 of
$320,000 compared to $213,000 for the three month period ended September 30,
1996, an increase of $107,000. The increase is derived from an increase in
service charges on deposit accounts of $35,000 due to volume and price
restructurings, an increase in trust fee income of $24,000 due to one-time fee
assessments made during the three month period ended September 30, 1997 and to
an increase in net gains recorded on loan sales of $39,000. Sales of fixed
rate, residential mortgages to the Federal Home Loan Mortgage Corporation
("Freddie Mac") of $1.7 million during the three month period ended September
30, 1997 generated net gains of $33,000, while sales during the three month
period ended September 30, 1996 generated net losses of $6,000.
Total other expense of $1,333,000 for the three months ended September 30,
1997 compared to $1,249,000 for the same three month period in 1996. This
represents an increase of $84,000. An increase in salary and employee
benefits of $71,000, brought about by normal annual salary increases and to
staff additions resulting from the Harrisville branch acquisition, was offset
by a reduction in net occupancy expense of $14,000, which resulted from a
reduction in depreciation expense, were the primary contributors to the
overall increase in other expenses.
Net income for the three month period ended September 30, 1997 was $800,000,
an increase of $105,000 from the $695,000 reported for the three month period
ended September 30, 1996. Earnings per share for the three month period
ended September 30, 1997 were $0.58, an increase of $0.08 from $0.50 per share
earned during the same three month period in 1996.
Comparison of the Nine Months Ended September 30, 1997 and 1996
- ---------------------------------------------------------------
Total interest income of $11,227,000 for the nine month period ended
September 30, 1997 compared to $10,067,000 for the same nine month period in
1996, an increase of $1,160,000 or 11.5%. The overall increase in total
interest income is attributed to an increase in interest and fees on loans of
$954,000, an increase in income on investment securities of $145,000 and an
increase in interest on federal funds sold of $62,000. As in the three month
comparison, the increases in each of these areas are principally brought about
by average volume increases. Average total net loans for the nine month
period September 30, 1997 of $145.9 million represents an increase of $17.5
million from the $128.4 million reported for the nine month period ended
September 30, 1996. Average total investments at September 30, 1997 were
$29.0 million, a net increase of $3.0 million from $26.0 million at September
30, 1996. Average daily federal funds sold of $4.9 million for the nine month
period ended September 30, 1997 represented an increase of $1.4 million from
the $3.5 million reported for the nine month period ended September 30, 1996.
7
<PAGE>
Total interest expense of $4,805,000 for the nine month period ended September
30, 1997 represents an increase of $614,000 from the $4,191,000 reported for
the same nine month period in 1996. The increase in interest expense is
attributed to deposit growth and to the volume increases brought about by the
Harrisville branch acquisition. Average interest bearing deposits for the
nine months ended September 30, 1997 were $145.8 million, an increase of $21.7
million from $124.1 million for the nine months ended September 30, 1996. As
in the three month comparison, average total time certificates of deposit had
the most significant increase during the period with growth of $12.5 million.
Total other income of $739,000 for the nine months ended September 30, 1997
compared to $619,000 for the same nine month period in 1996, an increase of
$120,000. Increases in service charges on deposit accounts of $35,000, an
increase of $34,000 in trust department income and an increase in net gains
recorded on loan sales of $42,000 were brought about by those items previously
discussed in the three month comparison.
Total other expense of $3,975,000 for the nine month period ended
September 30, 1997 represented an increase of $365,000 from the $3,610,000
reported for the same nine month period in 1996. The primary contributors to
that increase were an increase in salary and wage expense of $197,000 and to
an increase in other expense of $143,000. The increase in salary and wages
was due to normal annual increases in salary and to staff additions resulting
from the Harrisville branch acquisition. The increase in other expense is
attributed to an increase in amortization expense of $134,000 which represents
increased amortization of the intangible asset also resulting from the
Harrisville branch acquisition.
Net income for the nine month period ended September 30, 1997 of $2,211,000 or
$1.60 per share compared to $1,968,000 or $1.43 per share for the same nine
month period ended September 30, 1996. This represented an increase of
$243,000 or $0.17 per share.
Financial Condition
- -------------------
Total assets at September 30, 1997 were $203,388,000, an increase of
$7,674,000 or 3.9% from December 31, 1996. An increase in net loans of $11.3
million or 8.12%, and an increase in federal funds sold of $9.9 million were
offset by net reductions of investment securities available for sale of $11.7
million, which resulted from investment sales in March and April of 1997, and
net payback of investment securities of $1.8 million.
Total deposits of $179,725,000 at September 30, 1997 represented an increase
of $14.9 million or 9.1% from $164,779,000 at December 31, 1996. While all
deposit products increased relative to their position at December 31, 1996,
time deposits had the most significant increase with growth of $7.5 million or
9.7% during the period. Non-interest checking followed with a net increase of
$3.6 million or 14.5% and interest bearing checking had a net increase of $2.9
million or 14.0%.
On August 18, 1997, the Bank acquired the Slippery Rock office of First
Western Bank, F.S.B. in a transaction which was recorded as a branch purchase.
The Bank acquired $3.8 million in deposit liabilities and approximately
$151,000 in loan receivables. In addition, the Bank acquired the land,
building and certain equipment. The branch facility was closed and the
deposit and loan accounts were absorbed into the Bank's main office location
which is located less than a block away from the acquired branch. The balance
sheet at September 30, 1997 includes those items pertaining to the branch
acquisition including the intangible asset reflecting the premium paid. The
identifiable portion of the premium is being amortized over a seven year
period, while the goodwill portion acquired is being amortized over a fifteen
year period.
8
<PAGE>
At September 30, 1997, the Bank serviced approximately $24.7 million in sold
fixed rate mortgages. In 1997, the Bank sold $6.4 million to the Federal
Home Loan Mortgage Corporation ("Freddie Mac"), which generated net gains of
$20,000. The Bank does anticipate the sale of an additional $1.5 million
during the fourth quarter of 1997.
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.
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, 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 September 30, 1997:
Actual Minimum
Amount Ratio Ratio
----------- ------- --------
Tier 1 risk-based capital $ 19,543 13.89 % 4.00 %
Total risk-based capital 20,776 14.76 8.00
Leverage capital 20,776 9.93 3.00
As the above table illustrates, all regulatory capital requirements have been
complied with at September 30, 1997.
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 9.4% of total assets as of September 30, 1997 compared to 3.7% at
December 31, 1996. The increase is due principally to an increase in daily
federal funds sold of $9.9 million. 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 85.1%
at September 30, 1997, as compared to 87.5% at December 31, 1996 and 79.9% at
September 30, 1996. The increase from September 1996 was due to an increase in
net loans which was funded by the branch acquisition during the third quarter
of 1996.
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 September 30, 1997, the Company continued to have
one such matched funding loan outstanding totaling $720,000.
9
<PAGE>
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 September 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.
The Statement of Cash Flows, for the nine month period ended September 30,
1997, indicates an increase in cash and cash equivalents of $9,795,000.
Funding sources during the nine month period ended September 30, 1997
included: a net increase in deposits of $11.2 million, proceeds from the sale
of investment securities available for sale of $11.5 million, proceeds from
the sale of fixed rate mortgages of $6.4 million and maturities and payback of
investments held to maturity of $2.1 million. In addition, net proceeds from
the purchase of the Slippery Rock office of First Western Bank, F.S.B provided
$3.2 million. Uses of cash during the period included: a net increase in
loans of $11.4 million, payments on short term borrowings of $9.0 million, and
the origination of loans held for sale of $6.7 million. Cash dividends paid
through the period ended September 30, 1997 totaled $621,000. Cash and cash
equivalents at September 30, 1997 totaled $18.5 million.
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.
10
<PAGE>
RISK ELEMENTS
- -------------
The following schedule presents the non-performing assets for the last five
quarters:
<TABLE>
<CAPTION>
Sept Jun Mar Dec Sept
1997 1997 1997 1996 1996
--------- --------- --------- --------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Non-performing and restructured loans
Loans past due 90 days or more $ 8 $ 184 $ 112 $ 177 $ 20
Non-accrual loans 1,288 1,101 1,091 798 386
Restructured loans - 104 96 597 797
--------- --------- --------- --------- ---------
Total non-performing
and restructured loans 1,296 1,389 1,299 1,572 1,203
--------- --------- --------- --------- ---------
Other non-performing assets
Other real estate owned 20 169 179 221 136
Repossessed assets 31 5 15 24 30
--------- --------- --------- --------- ---------
Total other non-performing
asets 51 174 194 245 166
--------- --------- --------- --------- ---------
Total non-performing assets $ 1,347 $ 1,563 $ 1,493 $ 1,817 $ 1,369
========= ========= ========= ========= =========
Non-performing and restructured loans
as a percentage of total loans(1) 0.85% 0.94% 0.91% 1.11% 0.89%
Non-performing assets and
restructured loans as a
percentage of total loans
and other non-performing
assets and restructured loans(1) 0.88% 1.05% 1.04% 1.28% 1.01%
</TABLE>
[FN]
(1) Excludes loans held for sale.
The allowance for loan losses at September 30, 1997, totaled $1,233,000 or
0.80% 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
$150,000 for both nine month periods ended September 30, 1997 and 1996.
11
<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, 1997, the Company continued to have impaired loans of
$736,000 of which $639,000 were restructured. All of the loans were
restructured in 1996 and, at September 30, 1997, were not complying with the
restructured terms. All of the impaired and restructured loans were also
classified as non-accrual at September 30, 1997. The average investment in
impaired loans during the period ended September 30, 1997 was $736,000.
Impaired loans had a general loan loss reserve allocation of $110,000. 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
impaired loans at September 30, 1997 continued 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 $1.3 million at September 30, 1997, a decrease of
$100,000 from their level of $1.4 million at June 30, 1997. The decrease is
due to a decrease in loans past due 90 days or more of $176,000 during the
period. Nonperforming loans as a percent of total loans were 0.85% at
September 30, 1997 as compared to 0.94% at June 30, 1997 and 1.11% at
December 31, 1996.
Other real estate owned at September 30, 1997 was $20,000, a decline of
$149,000 from June 30, 1997. The decline resulted from the disposition of
several pieces of property during the quarter. There were no additions to
other real estate owned during the three month period ended September 30,
1997. The remaining value reflects two land parcels that management
anticipates will sell during the fourth quarter of 1997. Management believes
none of the non-performing assets, including other real estate owned, at
September 30, 1997, pose any significant risk to the operations, liquidity or
capital position of the Company.
12
<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)
13
<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 7, 1997 By: /s/ William C. Sonntag
------------------------
William C. Sonntag
President & CEO
Date: November 7, 1997 By: /s/ Mark A. Volponi
------------------------
Mark A. Volponi
Treasurer
14
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