-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, M4zAPqglL6EaY08vvowgIKWytet/S2jJqPXwRPlXJo2gyP/C2ejkJx5bYKpe6oay LS6O34OdbWyrLL67SWAO2A== 0000810830-98-000005.txt : 19981116 0000810830-98-000005.hdr.sgml : 19981116 ACCESSION NUMBER: 0000810830-98-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EMPIRE BANC CORP CENTRAL INDEX KEY: 0000810830 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 382727982 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-15839 FILM NUMBER: 98747906 BUSINESS ADDRESS: STREET 1: 1227 FRONT STREET CITY: TRAVERSE CITY STATE: MI ZIP: 49686 BUSINESS PHONE: 6169225864 MAIL ADDRESS: STREET 1: 1227 E FRONT ST CITY: TRAVERSE STATE: MI ZIP: 49684 10-Q 1 QUARTERLY REPORT FOR QUARTER ENDING 09/30/98 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------------------- FORM 10-Q /X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 1998. Commission file number 0-15839 EMPIRE BANC CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) Michigan -------------------------------------------------------------- (State or other jurisdiction of incorporation or organization) 1227 E. Front Street Traverse City, Michigan ---------------------------------------- (Address of principal executive offices) 38-2727982 ------------------------------------ (IRS Employer Identification Number) 49686-2928 ---------- (Zip code) (616) 922-2111 ---------------------------------------------------- (Registrant's telephone number, including area code) Not applicable -------------------------------------------------------------------- (Former name, address and fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No The number of shares outstanding of each of the issuer's classes of common stock was 2,957,398 shares of common stock, no par value, outstanding as of September 30, 1998. 2 Empire Banc Corporation - Consolidated Balance Sheet
(In thousands, except share data) September 30 December 31 September 30 1998 1997 1997 Assets Cash and due from banks $ 18,604 $ 25,433 $ 18,126 Federal funds sold 14,300 6,800 6,700 -------- -------- - -------- Cash and cash equivalents 32,904 32,233 24,826 Securities Available for sale, at fair value 56,921 42,183 38,762 Held to maturity 39,590 32,979 31,544 (fair value: 9/30/98-$40,221, 12/31/97-$33,234,9/30/97-$31,783) Mortgage-backed securities Available for sale, at fair value 21,998 23,592 26,128 Loans 315,227 302,469 297,409 Less: allowance for loan losses (4,650) (4,125) (3,800) -------- -------- - -------- Net loans 310,577 298,344 293,609 Premises and equipment, net 5,643 4,985 4,484 Other real estate 187 177 - -- Accrued income and other assets 9,136 8,460 6,910 -------- -------- - -------- Total assets $476,956 $442,953 $426,263 ======== ======== ======== Liabilities Deposits Non-interest-bearing $ 62,329 $ 62,492 $ 56,488 Interest-bearing 349,255 324,178 315,268 -------- -------- - -------- Total deposits 411,584 386,670 371,756 Federal Home Loan Bank advances 17,000 12,000 12,000 Accrued expense and other liabilities 8,630 8,084 7,416 -------- -------- - -------- Total liabilities 437,214 406,754 391,172 Shareholders' equity Preferred stock-$1 par value, 2,000,000 shares authorized, none outstanding Common stock-no par value, 5,000,000 shares authorized, shares outstanding: 9/30/98-2,957,398; 12/31/97-2,914,622; 9/30/97-2,900,014 30,258 29,525 21,396 Retained earnings 8,489 6,321 13,371 Net unrealized gain on securities, net of tax 995 353 324 -------- -------- - -------- Total shareholders' equity 39,742 36,199 35,091 -------- -------- - -------- Total liabilities and shareholders' equity $476,956 $442,953 $426,263 ======== ======== ======== See accompanying notes.
3 Empire Banc Corporation - Consolidated Statement of Income
(In thousands, except share data) Quarter Ending Year to Date September 30 September 30 1998 1997 1998 1997 Interest income Loans, including fees $ 7,343 $ 6,950 $ 21,506 $ 19,887 Taxable securities 1,615 1,453 4,558 4,266 Tax-exempt securities 67 60 190 182 Federal funds sold 305 106 624 174 ------- ------- ------ - - ------ Total interest income 9,330 8,569 26,878 24,509 Interest expense Deposits 3,985 3,685 11,488 10,575 Federal funds purchased -- 1 8 37 Federal Home Loan Bank advances 259 176 737 543 ------- ------- ------- - - ------- Total interest expense 4,244 3,862 12,233 11,155 ------- ------- ------- - - ------- Net interest income 5,086 4,707 14,645 13,354 Provision for loan losses 552 188 917 981 ------- ------- ------- - - ------- Net interest income after provision for loan losses 4,534 4,519 13,728 12,373 Non-interest income Mortgage sales and servicing 650 456 2,141 1.178 Service charges on deposit accounts 368 380 1,094 1,056 Trust income 684 672 2,181 1,964 Other service charges and fees 225 228 574 497 Other income 89 91 317 264 Security gains(losses) 138 -- 138 (6) ------- ------- ------- - - ------ Total non-interest income 2,154 1,827 6,445 4,953 Non-interest expense Salaries and employee benefits 2,593 2,805 8,854 7,199 Premises & equipment 585 508 1,673 1,457 Other 1,130 996 3,149 2,995 ------- ------- ------ - - ------ Total non-interest expense 4,308 4,309 13,676 11,651 ------- ------- ------ - - ------ Income before federal income taxes 2,380 2,037 6,497 5,675 Federal income taxes 797 676 2,160 1,881 ------- ------- ------ - - ------ Net income $ 1,583 $ 1,361 $ 4,337 $ 3,794 ======= ======= ======= ======= - ---------------------------------------------------------------------------- - ------------ Earnings per share $ .53 $ .47 $ 1.47 $ 1.31 Diluted earnings per share .50 .44 1.37 1.22 Average share outstanding 2,967,391 2,906,220 2,957,770 2,898,175 Diluted average shares outstanding 3,168,733 3,128,096 3,163,202 3,120,711 - ---------------------------------------------------------------------------- - ------------ See accompanying notes.
4 Empire Banc Corporation - Consolidated Statement of Comprehensive Income
Quarter Ending Year to Date September 30 September 30 (in thousands) 1998 1997 1998 1997 - ---------------------------------------------------------------------------- - ------------ Net income $ 1,583 $ 1,361 $ 4,337 $ 3,794 Other Comprehensive income, net of tax: Unrealized gains/(losses) on available for sale securities arising during period 725 192 733 146 Reclassification adjustment for amounts realized on security sales included in net income (91) -- (91) 4 ------- ------- ------ - - ------- Comprehensive income $ 2,217 $ 1,553 $ 4,979 $ 3,944 ======= ======= ======= ======= - ---------------------------------------------------------------------------- - ------------ See accompanying notes.
5 Empire Banc Corporation - Consolidated Statement of Cash Flows
Year to Date September 30 (in thousands) 1998 1997 Operating activities Net income $ 4,337 $ 3,794 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization 683 527 Provision for loan losses 917 981 Mortgage loans originated for sale (98,643) (40,647) Sale of mortgage loans 98,789 37,842 Net realized (gain) loss on securities (138) 6 Net amortization/accretion on securities (21) 91 Change in: Deferred taxes -- 281 Interest receivable (358) 70 Interest payable 70 106 Other assets (328) (342) Other liabilities 615 1,014 ------- - ------- Total adjustments 1,586 (71) ------- - ------- Net cash from operating activities 5,923 3,723 Investing activities Securities available for sale Proceeds from sales 144 992 Proceeds from maturities 19,098 11,220 Purchases (31,318) (15,146) Securities held to maturity Proceeds from sales -- 1,986 Proceeds from maturities 18,422 7,261 Purchases (24,970) (4,039) Loans granted net of repayments (13,296) (26,128) Premises and equipment expenditures (1,341) (1,026) ------- - ------- Net cash from investing activities (33,261) (21,880) Financing activities Net increase in deposits 24,914 27,402 Net decrease in federal funds purchased -- (5,500) Cash dividends paid (1,373) (1,838) Federal Home Loan Bank advances 5,000 - -- Issuance of common stock 205 316 ------- - ------- Net cash from financing activities 28,009 20,380 ------- - ------- Net change in cash and cash equivalents 671 2,223 Beginning cash and cash equivalents 32,233 22,603 ------- - ------- Ending cash and cash equivalents $32,904 24,826 ======= ======= - ---------------------------------------------------------------------------- - -------------- Interest paid $12,163 $11,049 Income taxes paid 2,154 1,997 - ---------------------------------------------------------------------------- - -------------- See accompany notes.
6 Empire Banc Corporation - Consolidated Statement of Changes in Shareholders' Equity
(In thousands) 1998 1997 - ---------------------------------------------------------------------------- - --------------- Balance January 1 $36,199 $32,673 Net income 4,337 3,793 Common stock issued 733 316 Dividends declared (2,169) (1,842) Net change in security valuation 642 150 ------- - ------- Balance September 30 $39,742 $35,091 ======= ======= - ---------------------------------------------------------------------------- - ---------------
Notes to Consolidated Financial Statements Note-1 The consolidated financial statements include the accounts of Empire Banc Corporation and its wholly-owned subsidiary, Empire National Bank, after elimination of significant inter-company transactions and accounts. The statements have been prepared by management without audit by independent certified public accountants. However, these statements reflect all adjustments (consisting of normal recurring accruals) and disclosures which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented and should be read in conjunction with the notes to financial statements included in the Empire Banc Corporation's Form 10-K for the year ended December 31, 1997. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. Because the results of operations are so closely related to and responsive to changes in economic conditions, the results for any interim period are not necessarily indicative of the results that can be expected for the entire year. Note-2 Under a new accounting standard, comprehensive income is now reported for all periods. Comprehensive income includes both net income and other comprehensive income. Other comprehensive income includes the change in unrealized gains and losses on securities available for sale. Note-3 As of December 31, 1997, the Corporation's common stock had a par value of $5 and 5,000,000 share were authorized. In the second quarter of 1998 the par value of common stock was changed from $5 to no par by the Corporation's Board of Directors. 7 Note-4 Earnings per share is based on weighted-average common and contingently issuable shares outstanding. Diluted earnings per share further assumes the dilutive effect of additional common shares issuable under stock options. All per share data is restated for the 3 for 2 stock split in the second quarter of 1998. A reconciliation of earnings per share and diluted earnings per share is presented below: Nine Months Ending September 30, 1998 1997 - ---------------------------------------------------------------- Net income (in thousands) $ 4,337 $ 3,794 ======= ======= Earnings per share Shares Average common shares outstanding 2,948,548 2,892,583 Average contingently issuable shares 9,222 5,592 --------- --------- 2,957,770 2,898,175 ========= ========= Earnings per share $ 1.47 $ 1.31 ====== ====== Diluted earnings per share Shares Average shares outstanding, per above 2,957,770 2,898,175 Effect of stock options 205,432 222,536 --------- --------- 3,163,202 3,120,711 ========= ========= Diluted earnings per share $ 1.37 $ 1.22 ====== ====== - ---------------------------------------------------------------- 8 Management's Discussion and Analysis Summary Empire Banc Corporation's 1998 third quarter earnings were $1,583,000, a 16% increase over 1997 third quarter results. Diluted earnings per share increased from $.44 per share in 1997 to $.50 in 1998. The return on assets was 1.34% for the quarter versus 1.29% in 1997. The return on equity was 16.39% compared to 15.75% in the third quarter 1997. Net income for the nine months ended September 30, 1998 was $4,337,000 or $1.37 per share compared to the $3,794,000 or $1.22 per share earned in the first three quarters of 1997, a 14% increase in earnings. Return on average assets for the first nine months was 1.28%, as compared to 1.24% in the previous year. The return on average equity was 15.30%, in comparison to the 15.03% earned in the first nine months of 1997. The 1998 performance was achieved with significant growth in total revenues of 15% over the first nine months of 1997. Net interest income grew 10% as a result of the growth in average earning assets. The continuing favorable interest rate environment in 1998 has led to record home lending resulting in an 82% increase in revenues from the origination, sales and servicing of mortgage loans. The increase in mortgage revenues, coupled with an 11% increase in trust revenues, resulted in a 30% increase in non-interest income. As a result of these increased activity levels, non-interest expense increased 17% for the same period. In measuring asset quality, net loan losses were .17% of average loans for the first nine months of 1998 and non-performing assets were .51% of loans at September 30, 1998. The allowance for loan losses increased $850,000 during the last twelve months and was 1.48% of loans at September 30, 1998. Total assets have increased $51 million, or 12%, during the last twelve months and total $477 million at September 30, 1998, Total deposits grew 11% to $412 million and total loans increased 6% to $315 million during the same period. Total shareholders' equity increased over 13% since September 1997 to total $39.7 million at September 30, 1998, improving book value per share to $13.44 from the $12.10 at September 30, 1997. In the second quarter of 1998 a three for two stock split was declared and paid to shareholders. 9 Quantitative and qualitative disclosures about market risk There have been no material changes in the nine months ended September 30, 1998. Year 2000 issue The Corporation has a comprehensive written Year 2000 plan approved by the Board of Directors and a Year 2000 management committee overseeing the efforts. The plan includes all the facets of our business from the physical plant and equipment issues through all of our computer hardware and software, and major customers. The Corporation uses major external third party vendors to the banking industry for the mainframe and all personal computer hardware and software. These well known, national third party providers for the mission critical systems have provided written assurances that they are Year 2000 ready and their systems have been fully tested. The Corporation does not use any custom programmed software. Another area under review are systems which utilize embedded microchips, such as in heating, air conditioning, security and other related systems. Vendors for these systems have been contacted to evaluate their Year 2000 compliance and assess any potential risk. While the Corporation's current UNISYS mainframe hardware and software is Year 2000 compliant, a new system is scheduled to be installed during the first quarter of 1999, substantially increasing the capacity and efficiency of operations. This new system will allow the testing of this banking software from Information Technology, Inc. during the installation of the hardware, without any disruption to daily processing and customer service. All testing will be completed by June 30, 1999 within the FFIEC published guidelines and no disruption in service due to a Year 2000 issue is anticipated. We have addressed the financial implications of preparing for the Year 2000. The readiness of the software used for mission critical systems is included in the cost of our normal maintenance of those systems and we do not expect any additional charges. Some minor hardware replacements will be needed. Those expenditures will be less than $50,000. The staffing needed to complete the testing and implementation plan has been identified and is available. Other new software installations over the next 15 months will be restricted to assure that we can complete our Year 2000 plan. Since mission critical systems are Year 2000 compliant, system failure that would require a new provider and a conversion to a new system is not expected. During the second quarter of 1999, business resumption plans will be developed as testing is completed. The detail and depth of those plans will depend on results of the final tests and our resulting risk assessment. Major loan and deposit customers have been surveyed to evaluate the level of Year 2000 planning and readiness and to assess any potential risk. The Board of Directors, executive management team and the Office of the Comptroller of the Currency are updated on a quarterly basis. We do not anticipate any material affect on our financial performance because of the systematic approach we have used to prepare Empire Banc Corporation for the Year 2000 date change. 10
Net Interest Income Quarter Ending Nine Months Ending September 30 September 30 1998 1997 1998 1997 - ---------------------------------------------------------------------------- - ------ Interest income $9,330 $8,569 $26,878 $24,509 Taxable equivalent adjustment 36 34 106 96 ------ ------ ------- - - ------ Interest income (TE) 9,366 8,603 26,984 24,605 Interest expense 4,244 3,862 12,233 11,155 ------ ------ ------- - - ------ Net interest income (TE) $5,122 $4,741 $14,751 $13,450 ====== ====== ======= ======= Increase (decrease) due to change in: Volume $ 459 $ 481 $ 1,337 $ 1,260 Rate (78) 22 (36) (196) ------ ------ ------- - - ------ Total $ 381 $ 503 $ 1,301 $ 1,064 ====== ====== ======= ======= - ---------------------------------------------------------------------------- - ------
Third quarter net interest income on a taxable equivalent ("TE") basis was $5.1 million, an 8% increase from the $4.7 million earned in the year ago quarter. Average earning assets increased 12% or $48 million while the net interest margin decreased from 4.77% to 4.60% in the quarter to quarter comparison. Incremental funding for the earning asset growth came mainly from the $30 million or 10% growth in interest bearing deposits. The average rate paid on interest bearing funds was 4.71%, 4 bp less than the third quarter of 1997. Non-interest bearing funds supporting earning assets increased 17% or $12 million compared to last year's third quarter. Net interest income (FTE) has increased $1.3 million, or 10% to $14.8 million for the first nine months of 1998 as average earning assets increased $41 million from 1997. The year to date net interest margin is 4.67% for 1998, compared to the 4.72% recorded in the first nine months of 1997. The year to date average rate earned on assets at 8.54% is 9 bp less than last year and the average rate paid on interest-bearing funds of 4.72% is 1 bp less than the prior year. Average outstanding loans have increased $21 million, securities $9 million and overnight funds sold $11 million from 1997. Total deposits have increased on average $36 million from 1997 and average $390 million for the first nine months of 1998. Average Money market deposits have grown by $16 million, consumer CDs $5 million and savings and interest-checking accounts by $7 million from 1997. Funding from Federal Home Loan Bank advances has increased on average $4 million. 11 Net Interest Income Average Balances, Interest Income/Expense, Average Rates
Quarter Ending September 30, 1998 1997 - ---------------------------------------------------------------------------- - -------------- Average Average (Taxable equivalent, Balance Interest Rate Balance Interest Rate in thousands) --------------------------- --------------- - -------------- Assets Loans, including fees*,** $309,889 $7,349 9.41% $291,543 $6,956 9.47% Securities Taxable 104,548 1,615 6.18 90,238 1,453 6.44 Tax-exempt* 5,556 97 6.85 4,986 88 7.07 -------- ------ -------- - - ----- Total 110,213 1,712 6.21 95,224 1,541 6.47 Federal funds sold 22,006 305 5.42 7,622 106 5.43 -------- ------ -------- - - ----- Total earning assets\ interest income 442,108 9,366 8.41% 394,389 8,603 8.65% Cash and due from banks 18,998 16,038 Other assets 12,492 11,483 -------- -------- Total $473,598 $421,910 ======== ======== Liabilities and Equity CDs over $100,000 $ 11,744 154 5.13% $ 11,191 153 5.34% Savings & interest checking 71,649 400 2.22 64,535 368 2.26 Money market deposits 118,061 1,333 4.48 100,774 1,128 4.44 Consumer CDs 139,383 2,098 5.97 133,882 2,036 6.03 -------- ------ -------- - - ----- Total 340,837 3,985 4.64 310,382 3,685 4.71 Federal funds purchased 9 -- 5.75 70 1 5.87 FHLB advances 17,000 259 6.04 12,000 176 5.83 -------- ------ -------- - - ----- Total interest-bearing funds/interest expense 357,846 4,244 4.71% 322,452 3,862 4.75% -------- ------ -------- - - ----- Demand deposits 70,020 57,936 Other liabilities 7,088 6,949 Shareholders' equity 38,644 34,573 -------- -------- Total $473,598 $421,910 ======== ======== Net interest spread (TE) 3.70% 3.90% ==== ==== Net interest income (TE) $5,122 $4,741 ====== ====== Net interest margin (TE) 4.60% 4.77% ==== ==== - ---------------------------------------------------------------------------- - -------------- * Interest income on tax-exempt securities and certain tax-exempt loans has been adjusted to a tax-equivalent basis. ** Non-accrual loans are excluded.
12 Net Interest Income Average Balances, Interest Income/Expense, Average Rates
Year to date September 30, 1998 1997 - ---------------------------------------------------------------------------- - -------------- Average Average (Taxable equivalent, Balance Interest Rate Balance Interest Rate in thousands) --------------------------- --------------- - -------------- Assets Loans, including fees*,** $304,509 $21,528 9.45% $283,283 $19,902 9.39% Securities Taxable 97,502 4,558 6.23 88,672 4,266 6.41 Tax-exempt* 5,227 274 6.99 4,928 263 7.13 -------- ------- -------- -- - ----- Total 102,729 4,832 6.27 93,600 4,529 6.45 Federal funds sold 15,194 624 5.42 4,276 174 5.37 -------- ------- -------- -- - ----- Total earning assets\ interest income 422,432 26,984 8.54% 381,159 24,605 8.63% Cash and due from banks 17,831 14,537 Other assets 12,171 11,219 -------- -------- Total $452,434 $406,915 ======== ======== Liabilities and Equity CDs over $100,000 $ 10,689 417 5.15% $ 10,810 428 5.22% Savings & interest checking 70,966 1,186 2.23 63,745 1,053 2.21 Money market deposits 109,290 3,647 4.46 93,438 3,037 4.35 Consumer CDs 138,897 6,238 6.01 134,279 6,057 6.03 -------- ------- -------- -- - ----- Total 329,842 11,488 4.66 302,272 10,575 4.67 Federal funds purchased 179 8 5.85 870 37 5.65 FHLB advances 16,341 737 6.03 12,293 543 5.91 -------- ------- -------- -- - ----- Total interest-bearing funds/interest expense 346,362 12,233 4.72% 315,435 11,155 4.73% -------- ------- -------- -- - ----- Demand deposits 59,788 51,203 Other liabilities 8,498 6,525 Shareholders' equity 37,786 33,652 -------- -------- Total $452,434 $406,915 ======== ======== Net interest spread (TE) 3.82% 3.90% ==== ==== Net interest income (TE) $14,751 $13,450 ======= ======= Net interest margin (TE) 4.67% 4.72% ==== ==== - ---------------------------------------------------------------------------- - -------------- * Interest income on tax-exempt securities and certain tax-exempt loans has been adjusted to a tax-equivalent basis. ** Non-accrual loans are excluded.
13
Non-Interest Income Quarter Ending Nine Months Ending September 30 September 30 Increase (decrease) Increase (decrease) Amount % Amount % - ---------------------------------------------------------------------------- - - (In thousands) Mortgage sales and servicing $ 194 43% $ 963 82% Service charges on deposit accounts (12) (3) 38 4 Trust income 12 2 217 11 Other service charges and fees (3) (1) 77 15 Other income (2) (2) 53 20 Securities (losses) gains 138 -- 144 -- ----- --- ------ --- $ 327 18% $1,492 30% ===== === ====== === - ---------------------------------------------------------------------------- - -
Non-interest income for the third quarter totaled $2.2 million, a $327,000 or 18% increase from the third quarter of 1997. The recent rate environment has led to record mortgage loan activity in 1998, resulting in a 43% increase in mortgage related fee income for the quarter. A security gain of $138,000 was recorded for the quarter. Non-interest income has grown $1.5 million, or 30%, for the first nine months of 1998 over last year. This growth was due mainly to the $963,000, or 82% increase in mortgage related fee income. In addition trust income has grown $217,000, or 11% from the prior year. Consumer credit insurance, automated teller machine fees and revenue from non deposit investment products also showed favorable increases from the prior year. 14
Non-Interest Expense Quarter Ending Nine Months Ending September 30 September 30 Increase (decrease) Increase (decrease) Amount % Amount % - ---------------------------------------------------------------------------- - - (In thousands) Salaries and employee benefits $ (212) (8)% $1,655 23% Premises & equipment 77 15 216 15 Other 134 13 154 5 ------ ---- ------ ---- $ (1) --% $2,025 17% ====== ==== ====== ==== - ---------------------------------------------------------------------------- - -
Non-interest expenses for the third quarter totaled $4.3 million, unchanged from the third quarter of 1997. A reduction in expense of $212,000 in personnel expense was attributable to benefit costs related to the decrease in the Corporation's stock price, offset by increased other personnel related expense influenced by merit increases and activity based commissions. Increased premises and equipment expense for the quarter was related to costs associated with technology improvements. Other expense increases for the quarter were driven by activity based expenses. Non-interest expense increased $2 million or 17% from the comparable prior period, essentially due to higher costs associated with personnel related commission expense, activity based expenses and benefit costs related to the increase in the Corporation's stock price. Asset Quality
Non-Performing Assets 9/30/98 12/31/97 9/30/97 - --------------------------------------------------------------------------- (In thousands) Non-accrual loans $1,055 $ 893 $1,136 Renegotiated loans 369 210 112 ------ ------ ------ Total non-performing loans 1,424 1,103 1,248 Other real estate 187 177 -- ------ ------ ------ $1,611 $1,280 $1,248 ====== ====== ====== Non-performing assets as a percent of total loans .51% .42% .42% Accruing loans 90 days or more past due $ 167 $ 367 $ 478 - ---------------------------------------------------------------------------
Total non-performing assets at September 30, 1998 increased $363,000 or 29% from September of 1997. Loans identified as potential problem loans totaled $2.6 million at September 30, 1998, $1.5 million at December 31, 1997 and $2.4 million at September 30, 1997. 15
Allowance for Loan Losses Quarter Ending Nine Months Ending September 30 September 30 1998 1997 1998 1997 - --------------------------------------------------------------------------- (In thousands) Balance beginning of period $ 4,350 $ 4,075 $ 4,125 $ 3,525 Charge-offs 314 542 563 888 Recoveries 62 79 171 182 ------- ------- ------- ------- Net charge-offs 252 463 392 706 Provision charged to operations 552 188 917 981 ------- ------- ------- ------- Balance September 30 $ 4,650 $ 3,800 $ 4,650 $ 3,800 ======= ======= ======= ======= - --------------------------------------------------------------------------- 9/30/98 12/31/97 9/30/97 ------- -------- ------- Net loan losses as a percent of average loans .17% .30% .33% Allowance for loan losses as a percent of end of period loans 1.48% 1.36% 1.28% - ---------------------------------------------------------------------------
For the current quarter, net charge-offs decreased $211,000 from the same period in 1997. The allowance for loan losses has increased $850,000 over the last twelve months and was 1.48% of total loans and 288% of non-performing assets as of September 30, 1998. The increase in the allowance for loan losses is due to the growth in consumer and commercial loans. The provision for loan losses was $917,000 and net loan charge-offs were $392,000 for the first nine months of 1998 compared to a provision of $981,000 and net charge-offs of $706,000 in 1997. Net loan losses were .17% of average loans for 1998 versus .33% for the first nine months of 1997. Under accounting guidance regarding impaired loans, at September 30, 1998 there were $1.2 million in impaired loans with $350,000 for which an allowance for credit losses is allocated. Impaired loans totaled $874,000 and $1.0 million at December 31, 1997 and September 30, 1997. 16 Investment Securities
Held-to-maturity Unrealized Cost Gain Loss Fair Value - --------------------------------------------------------------------------- U.S. government and agency $ 5,529 $ 104 $ -- $ 5,633 Commercial paper 4,934 -- -- 4,934 State and municipal 11,070 296 -- 11,366 Corporate notes 18,057 231 -- 18,288 ------- ------ ----- ------- Total $39,590 $ 631 $ -- $40,221 ======= ====== ===== ======= - ---------------------------------------------------------------------------
Available-for-sale Unrealized Cost Gain Loss Fair Value - --------------------------------------------------------------------------- U.S. government and agency $50,392 $ 944 $ -- $51,336 Commercial paper 1,980 -- -- 1,980 State and municipal 1,042 39 -- 1,081 Equity 2,324 200 -- 2,524 ------- ----- ----- ------- Total $45,738 $1,183 $ -- $56,921 ======= ====== ===== ======= Mortgage-backed $21,674 $ 327 $ 3 $21,998 ======= ===== ===== ======= - ---------------------------------------------------------------------------
Security Sales Nine Months Ended 9/30/98 9/30/97 - ---------------------------------------------------------------- Available for Sale Proceeds $ 144,000 $ 992,000 Gains 138,000 -- Losses -- 7,000 Held to Maturity Proceeds -- 1,986,000 Gains -- 1,000 Losses -- -- - ----------------------------------------------------------------
17 Shareholders' Equity and Capital Resources Total equity at September 30, 1998 was $39.7 million, compared to $36.2 million and $35.1 million at December 31, 1997 and September 30, 1997. The Corporation declared $739,000, or $.25 per share, in dividends for the third quarter of 1998 as compared to $615,000, or $.21 per share in the third quarter of 1997. All per share amounts reflect the three for two stock split declared in the second quarter of 1998. Cash dividends for the first nine months of 1998 were $.73 per share, a 14 percent increase over the first three quarters of 1997. Recorded in stockholders' equity were unrealized gains of $642,000 during 1998 and unrealized losses of $150,000 in 1997. The unrealized gains and losses of the investment portfolio are not expected to cause a material change in future income or investment yields.
The following is a summary of risk-based capital amounts and ratios: Risk-based capital amounts (In thousands) Regulatory Capital Standards Well Capitalized Actual ----------------- ----------------------------- - --- 9/30/98 9/30/98 12/31/97 9/30/97 -------- -------- -------- ----- - --- Tier 1 leverage $ 23,645 $ 38,420 $ 35,489 $ 34,400 Tier 1 risk-based 20,776 38,420 35,489 34,400 Total risk-based 34,626 42,752 39,460 38,175 Risk-based calculated assets Risk-weighted assets 346,260 317,559 302,011 Quarterly average assets 472,903 437,768 421,408 Risk-based ratios Tier 1 leverage 5% 8.12% 8.11% 8.16% Tier 1 risk-based 6% 11.10% 11.18% 11.39% Total risk-based 10% 12.35% 12.43% 12.64%
- ---------------------------------------------------------------------------- - --- Risk-based capital ratios for the Corporation continue to be well above the guidelines established for well-capitalized institutions, which is the highest capital standard. 18 Empire Banc Corporation Part II - Other Information Item 4. Submission of matters to a vote of security holders (a) none Item 6. Exhibits and reports on Form 8-K (a) Exhibits - none (b) Reports on Form 8-K - none SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Empire Banc Corporation ----------------------- (Registrant) Date: November 13, 1998 /s/ James E. Dutmers, Jr. --------------------------------------- James E. Dutmers, Jr. Chairman and Chief Executive Officer Date: November 13, 1998 /s/ William T. Fitzgerald, Jr. --------------------------------------- William T. Fitzgerald, Jr. Secretary, Treasurer & Chief Financial Officer
EX-27 2
9 1,000 9-MOS DEC-31-1998 SEP-30-1998 18,455 149 14,300 0 78,919 39,590 40,221 315,227 4,650 476,956 411,584 3,000 8,630 14,000 0 0 30,258 9,484 476,956 21,506 4,748 624 26,878 11,488 12,233 14,645 917 0 13,676 6,497 6,497 0 0 4,337 1.47 1.37 4.67 1,055 167 367 2,601 4,125 563 171 4,650 4,650 0 2,417
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