1
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, 1996.
------------------------------
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 1,657,793 shares of common stock, par value $5, outstanding as
of September 30, 1996.
2
EMPIRE BANC CORPORATION
CONSOLIDATED BALANCE SHEET
(In thousands, except share data) September 30 December 31 September 30
1996 1995 1995
ASSETS
Cash and due from banks $ 16,403 $ 13,858 $ 13,905
Federal funds sold -- 8,000 7,100
-------- -------- --------
Cash and cash equivalents 16,403 21,858 21,005
Investment securities
Available for sale - (fair value) 34,466 29,579 32,633
Held to maturity 38,212 36,483 35,872
(fair value: 1996-$38,340,
$36,946 and $36,051 in 1995)
Mortgage-backed securities
Available for sale - (fair value) 27,518 18,250 8,029
Held to maturity (fair value: 9/30/95-$560) -- -- 557
Loans 268,031 259,102 253,096
Less: allowance for loan losses (3,692) (3,200) (3,200)
- -----------------------------------------------------------------------------------------
Net loans 264,339 255,902 249,896
- -----------------------------------------------------------------------------------------
Premises and equipment, net 3,919 3,623 3,692
Other real estate 5 280 4
Accrued interest receivable and other assets 6,982 6,451 7,322
- -----------------------------------------------------------------------------------------
Total assets $391,844 $372,426 $359,010
=========================================================================================
LIABILITIES
Deposits
Non-interest-bearing $ 49,778 $ 46,702 $ 45,513
Interest-bearing 286,762 272,838 267,793
- -----------------------------------------------------------------------------------------
Total deposits 336,540 319,540 313,306
- -----------------------------------------------------------------------------------------
Federal Home Loan Bank advances 17,000 17,000 12,000
Accrued expense and other liabilities 6,607 5,881 4,798
-------- -------- --------
Total liabilities 360,147 342,421 330,104
- -----------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Preferred stock-$1 par value,
2,000,000 shares authorized, none outstanding
Common stock-$5 par value, 5,000,000 shares authorized,
shares outstanding: 9/30/96- 1,657,793; 12/31/95-
1,648,767; 9/30/95- 1,312,802 8,703 8,244 8,205
Paid-in-capital 12,210 9,377 9,208
Retained earnings 10,781 12,050 11,364
Net unrealized gain on securities, net of tax 3 334 129
-------- -------- --------
Total shareholders' equity 31,697 30,005 28,906
- -----------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $391,844 $372,426 $359,010
=========================================================================================
See notes to consolidated financial statements.
3
EMPIRE BANC CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except share data) Quarter Ending Year to Date
September 30 September 30
1996 1995 1996 1995
INTEREST INCOME
Loans, including fees $ 6,140 $ 6,036 $18,302 $17,552
Taxable securities
Available for sale 957 607 2,572 1,595
Held to maturity 466 435 1,350 1,266
Tax-exempt securities-held to maturity 66 48 177 144
Federal funds sold 161 166 351 455
- ----------------------------------------------------------------------------------------
Total interest income 7,790 7,292 22,752 21,012
- ----------------------------------------------------------------------------------------
INTEREST EXPENSE
Deposits 3,332 3,158 9,693 9,193
Federal funds purchased -- -- 20 1
Federal Home Loan Bank advances 252 216 743 586
------ ------ ------ ------
Total interest expense 3,584 3,374 10,456 9,780
- ----------------------------------------------------------------------------------------
Net interest income 4,206 3,918 12,296 11,232
- ----------------------------------------------------------------------------------------
Provision for loan losses 416 266 877 625
Net interest income after ------ ------ ------ ------
provision for loan losses 3,790 3,652 11,419 10,607
NON-INTEREST INCOME
Mortgage sales and servicing 408 342 1,061 761
Service charges on deposit accounts 326 323 953 978
Trust income 515 440 1,555 1,338
Other service charges and fees 155 161 393 359
Other income 95 73 288 255
Security gains(losses) -- -- -- (5)
------ ------ ------ ------
Total non-interest income 1,499 1,339 4,250 3,686
------ ------ ------ ------
NON-INTEREST EXPENSE
Salaries and employee benefits 2,116 2,133 6,426 5,701
Occupancy 258 254 777 756
Furniture and equipment 188 207 612 632
Other 963 820 2,883 2,814
------ ------ ------ ------
Total non-interest expense 3,525 3,414 10,698 9,903
------ ------ ------ ------
Income before federal income taxes 1,764 1,577 4,971 4,390
Federal income taxes 583 515 1,643 1,432
- ----------------------------------------------------------------------------------------
Net income $ 1,181 $ 1,062 $ 3,328 $ 2,958
========================================================================================
Earnings per share * $ .63 $ .57 $ 1.78 $ 1.61
Average shares outstanding * 1,873,314 1,848,749 1,871,402 1,836,579
* reflects 5% stock dividend payable November 1996.
See notes to consolidated financial statements.
4
EMPIRE BANC CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands) Year to Date September 30
1996 1995
OPERATING ACTIVITIES
Net income $ 3,328 $ 2,958
Adjustments to reconcile net income to net
cash from operating activities:
Depreciation and amortization 537 579
Provision for loan losses 877 625
Net (increase) in mortgages held for sale (1,435) (1,150)
Net loss on securities available for sale -- 5
Net amortization/accretion on securities 285 341
Change in:
Interest receivable (87) (374)
Interest payable 58 176
Other, net 666 (691)
------ ------
Total adjustments 901 (489)
- ------------------------------------------------------------------------------------------
Net cash from operating activities 4,229 2,469
- ------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Securities available for sale:
Proceeds from sales -- 1,995
Proceeds from maturities 15,672 7,424
Purchases (30,507) (17,900)
Securities held to maturity: -- --
Proceeds from maturities 12,073 12,698
Purchases (13,908) (16,453)
Loans granted net of repayments (7,879) (8,688)
Premises and equipment expenditures (833) (332)
- ------------------------------------------------------------------------------------------
Net cash from investing activities (25,382) (21,256)
- ------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net increase in deposits 17,000 15,317
Cash dividends paid (1,486) (1,304)
Federal Home Loan Bank advances -- 4,000
Issuance of common stock 184 152
- ------------------------------------------------------------------------------------------
Net cash from financing activities 15,698 18,165
- ------------------------------------------------------------------------------------------
Net change in cash and cash equivalents (5,455) (622)
- ------------------------------------------------------------------------------------------
Cash and cash equivalents
Beginning of year 21,858 21,627
------- -------
End of period $16,403 $21,005
==========================================================================================
Cash paid during the year for: Interest $10,398 $ 9,604
Income taxes 1,825 1,740
- ------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
5
EMPIRE BANC CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
- -------------------------------------------------------------------------------------------
(In thousands) 1996 1995
- -------------------------------------------------------------------------------------------
Balance January 1 $30,005 $26,332
Net income 3,328 2,958
Common stock issued 184 152
Dividends declared (1,489) (1,176)
Change in net unrealized gain (loss) on
securities available for sale, net of tax (331) 640
- -------------------------------------------------------------------------------------------
Balance September 30 $31,697 $28,906
- -------------------------------------------------------------------------------------------
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, 1995.
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 Earnings per share of common stock is computed by dividing net
income by the weighted average number of common stock and common stock
equivalents outstanding during the period. Common stock equivalents
consist of common stock issuable under the assumed exercise of stock
options granted under the Corporation's stock option plan, using the
treasury stock method.
NOTE-3 During the nine month period ended September 30, 1996, there
were no sales or transfers of available-for-sale or held-to-maturity
securities. The change in net unrealized holding gains or losses on
available-for-sale securities for the current quarter is $183,000 and
year to date is ($331,000).
6
NET INTEREST INCOME
AVERAGE BALANCES, INTEREST INCOME/EXPENSE, AVERAGE RATES
Quarter Ending September 30, 1996 1995
--------------------------- -----------------------------
Average Average
(Fully taxable equivalent, Balance Interest Rate Balance Interest Rate
in thousands) --------------------------- -----------------------------
ASSETS
Loans, including fees*,** $260,182 $ 6,144 9.39% $250,153 $ 6,040 9.58%
Securities - taxable 90,312 1,424 6.31 69,336 1,041 6.01
- tax-exempt* 5,320 93 7.03 3,310 71 8.55
-------- -------- -------- -------
Total securities 95,632 1,517 6.21 72,646 1,112 5.99
Federal funds sold 12,181 161 5.17 11,369 166 5.71
-------- -------- -------- -------
Total earning assets/
interest income 367,995 7,822 8.46 334,168 7,318 8.69
Cash and due from banks 14,393 12,506
Other assets 9,093 9,635
-------- --------
Total assets $391,481 $356,309
======== ========
LIABILITIES AND EQUITY
CDs over $100,000 $ 11,531 148 5.02 $ 8,243 127 6.02
Savings & interest checking 63,769 349 2.18 60,885 347 2.26
Money market deposits 78,749 819 4.14 74,514 824 4.39
Consumer CDs 132,207 2,016 6.07 122,261 1,860 6.04
-------- ------ -------- ------
Total 286,256 3,332 4.63 265,903 3,158 4.71
Federal funds purchased -- -- -- 10 -- 6.59
FHLB advances 17,000 252 5.90 12,000 216 7.14
-------- ------ -------- ------
Total interest-bearing
funds/interest expense 303,256 3,584 4.70 277,913 3,374 4.82
-------- ------ -------- ------
Demand deposits 50,638 45,415
Other liabilities 6,410 4,510
Shareholders' equity 31,177 28,471
-------- --------
Total $391,481 $356,309
======== ========
Net interest spread (FTE) 3.76% 3.87%
==== ====
Net interest income (FTE) $4,238 $3,944
====== ======
Net interest margin (FTE) 4.58% 4.68%
==== ====
* Interest income on tax-exempt securities and certain tax-exempt
loans have been adjusted to tax-equivalent basis.
** Non-accrual loans are excluded.
7
NET INTEREST INCOME
AVERAGE BALANCES, INTEREST INCOME/EXPENSE, AVERAGE RATES
Year to Date September 30, 1996 1995
--------------------------- -----------------------------
Average Average
(Fully taxable equivalent, Balance Interest Rate Balance Interest Rate
in thousands) --------------------------- -----------------------------
ASSETS
Loans, including fees*,** $256,694 $ 18,313 9.53% $246,678 $ 17,563 9.52%
Securities - taxable 84,756 3,923 6.17 66,144 2,861 5.77
- tax-exempt* 4,659 255 7.30 3,221 210 8.71
-------- -------- -------- -------
Total securities 89,415 4,178 6.14 69,365 3,071 5.79
Federal funds sold 8,890 351 5.19 10,384 455 5.78
-------- -------- -------- -------
Total earning assets/
interest income 354,999 22,842 8.60 326,427 21,089 8.64
Cash and due from banks 12,895 11,693
Other assets 9,202 9,368
-------- --------
Total assets $377,096 $347,488
======== ========
LIABILITIES AND EQUITY
CDs over $100,000 $ 11,718 473 5.31 $ 10,233 461 5.94
Savings & interest checking 61,666 1,005 2.18 60,587 1,025 2.26
Money market deposits 75,647 2,345 4.14 72,448 2,413 4.45
Consumer CDs 129,203 5,870 6.07 119,200 5,294 5.94
-------- ------ -------- ------
Total 278,234 9,693 4.65 262,468 9,193 4.68
Federal funds purchased 462 20 5.77 26 1 6.20
FHLB advances 16,617 743 5.97 11,150 586 7.02
-------- ------ -------- ------
Total interest-bearing
funds/interest expense 295,313 10,456 4.73 273,644 9,780 4.78
-------- ------ -------- ------
Demand deposits 45,015 41,921
Other liabilities 6,021 4,379
Shareholders' equity 30,747 27,544
-------- --------
Total $377,096 $347,488
======== ========
Net interest spread (FTE) 3.87% 3.86%
==== ====
Net interest income (FTE) $12,386 $11,309
======= =======
Net interest margin (FTE) 4.66% 4.63%
==== ====
* Interest income on tax-exempt securities and certain tax-exempt
loans have been adjusted to tax-equivalent basis.
** Non-accrual loans are excluded.
8
EMPIRE BANC CORPORATION
FINANCIAL REVIEW
THIRD QUARTER 1996
COMPARED WITH
THIRD QUARTER 1995
SUMMARY
Empire Banc Corporation's third quarter earnings were $1,181,000, a
11.2% increase over 1995 third quarter results. Third quarter earnings
per share increased from $.57 per share in 1995 to $.63 in 1996. The
return on assets was 1.21% for the quarter versus 1.19% for the same
period in 1995. The return on equity was 15.15% compared to 14.92% in
the prior year quarter.
The current quarter's results reflect the impact of an increase from the
third quarter of 1995 of $288,000, or 7% in net interest income,
attributable to a 10% increase in average earning assets. Quarterly
average increases for loans of $10.0 million or 4%, and securities of
$23.0 million or 32%, have been fueled by deposit increases of $25.6
million or 8% and Federal Home Loan Bank advances of $5 million. The
quarterly provision for loan losses increased $150,000 in comparision
with the third quarter of 1995 primarily due to increased additions to
the allowance for loan losses. Non-performing assets have declined from
1.09% of total loans in September of 1995 to .50% of loans September of
1996.
Non-interest income increased $160,000, or 12% in the quarter-to-quarter
comparison with substantial increases in fees earned in the mortgage and
trust operations, while non-interest expense increased $111,000, or 3%.
Shareholders' equity has increased almost 10% during the last twelve
months to $31.7 million improving book value per share to $18.21 from
the $16.78 in September 1995.
9
NET INTEREST INCOME
- -----------------------------------------------------------------------------------------
Quarter Ending Nine Months Ending
September 30 September 30
1996 1995 1996 1995
- -----------------------------------------------------------------------------------------
Interest income $7,790 $7,292 $22,752 $21,012
Taxable equivalent adjustment 32 26 90 77
------ ------ ------- -------
Interest income (FTE) 7,822 7,318 22,842 21,089
Interest expense 3,584 3,374 10,456 9,780
------ ------ ------- -------
Net interest income (FTE) $4,238 $3,944 $12,386 $11,309
====== ====== ======= =======
Increase (decrease) due to change in:
Volume $ 245 $ 250 $ 734 $ 904
Rate 49 80 343 173
------ ------ ------- -------
Total $ 294 $ 330 $ 1,077 $ 1,077
====== ====== ======= =======
- -----------------------------------------------------------------------------------------
Third quarter net interest income on a fully taxable equivalent ("FTE")
basis was $4.2 million, an 7.5% increase from the $3.9 million earned
in the year ago quarter. Average earning assets increased 10.1% or
$34 million while net interest margin, the other principal determinant
of net interest income, decreased from 4.68% to 4.58% in the current
quarter.
In the quarterly comparison from a year-ago, changes in the loan portfolio
include growth in the commercial portfolio of 5.8% or $6.6 million, and
mortgage portfolio growth of 8.2% or $5.1 million which were offset by a
decline in average consumer loans of 2.1% or $1.6 million. The average
rate earned on the loan portfolio was 9.39%, decreasing 19 basis points
("bp") from the prior year quarter following general economic trends.
Short-term market interest rates averaged 52 bp less in the third quarter
of 1996 versus the same quarter of 1995.
Securities on average grew $23 million or 31.6% in the quarter to
quarter comparison while the rate earned increased 22 basis points to
average 6.21% for the quarter. Average overnight funds sold averaged
$12.2 million, comparable to the prior year's third quarter, while the
rate earned declined 54 bp.
Funding for the earning asset growth came mainly from the $25.3 million
or 9.1% growth in interest bearing funds and the $5.2 million or 11.5%
increase in non-interest bearing demand deposits. Certificates of
deposits and CDs over $100,000 increased by $9.9 million and $3.3 million
respectively. Savings and interest checking accounts were up $2.9
million, money market deposits grew $4.2 million, and Federal Home Loan
Bank advances increased $5 million from last year's quarter. The average
rate paid on interest bearing funds decreased 12 bp to 4.70% for the
third quarter of 1996. Non-interest bearing funds supporting earning
assets increased 15.1% or $8.5 million compared to the third quarter of
1995.
10
NON-INTEREST INCOME Quarter Ending Nine Months Ending
September 30 September 30
Increase (decrease) Increase (decrease)
Amount % Amount %
- ----------------------------------------------------------------------------------
(In thousands)
Mortgage sales and servicing $ 66 19% $ 300 40%
Service charges on deposit accounts 3 1 (25) (3)
Trust income 75 17 217 16
Other service charges and fees (6) (4) 34 9
Other income 22 30 38 15
------ ---- ------ ----
$ 160 12% $ 564 15%
====== ==== ====== ====
Non-interest income for the third quarter totaled $1.5 million, a $160,000
or 12% increase from the third quarter of 1995. Mortgage sales and
servicing income increased significantly from the prior year principally
from higher loan volume and the adoption in July 1995 of Accounting
Standard No. 122, on accounting for mortgage servicing rights. For
servicing retained, SFAS 122 requires capitalizing the cost of these rights
and accounts for $200,000 of the year-to-date change. Income from trust
activities continued its steady growth pattern, with a 19% increase in
trust assets fueling fee income growth. Other income's increase from the
prior year quarter resulted primarily from additional fees earned through
PrimeVest Financial Services, Inc.
NON-INTEREST EXPENSE Quarter Ending Nine Months Ending
September 30 September 30
Increase (decrease) Increase (decrease)
Amount % Amount %
- ----------------------------------------------------------------------------------
(In thousands)
Salaries and employee benefits $ (17) (1)% $ 725 13%
Occupancy 4 2 21 3
Furniture and equipment (19) (9) (20) (3)
Other 143 17 69 2
------ ---- ------ ----
$ 111 3% $ 795 8%
====== ==== ====== ====
Non-interest expenses for the third quarter totaled $3.5 million, an
increase of $111,000, or 3%, from the third quarter of 1995.
Furniture and equipment costs were lower primarily due to a $22,000
or 28% decrease in computer depreciation expense. Other expense increased
due to additional costs associated with non-earning loans, and higher
activity based expenses including volume related loan fees and postage.
11
ASSET QUALITY
NON-PERFORMING ASSETS
9/30/96 12/31/95 9/30/95
------- -------- -------
(In thousands)
Non-accrual loans $ 732 $ 867 $1,719
Renegotiated loans 596 606 1,039
------ ------ ------
Total non-performing loans 1,328 1,473 2,758
Other real estate 5 280 4
------ ------ ------
Total non-performing assets $1,333 $1,753 $2,762
====== ====== ======
Non-performing assets as a percent of total loans .50% .68% 1.09%
Accruing loans 90 days or more past due $ 13 $ 72 $ 106
Total non-performing assets at September 30, 1996 decreased $1.4 million
or 52% from September 1995, with decreases in non-accrual and renegotiated
loans of $987,000 and $443,000, respectively. Potential problem loans,
which are closely monitored by management, have increased from $2.7
million, or 1.1% of loans, at September 30, 1995, to $5.0 million, or
1.9% of loans at September 30, 1996. This increase is centered in one
long-term credit relationship.
12
ALLOWANCE FOR LOAN LOSSES
Quarter Ending Nine Months Ending
September 30 September 30
1996 1995 1996 1995
- --------------------------------------------------------------------------------------
(In thousands)
Balance, beginning of period $ 3,375 $ 3,000 $ 3,200 $ 2,900
Charge-offs 154 140 530 481
Recoveries 55 74 145 156
------- ------- -------- -------
Net charge-offs 99 66 385 325
Provision charged to operations 416 266 877 625
------- ------- -------- -------
Balance, September 30 $ 3,692 $ 3,200 $ 3,692 $ 3,200
======= ======= ======== =======
- -------------------------------------------------------------------------------------------
9/30/96 12/31/95 9/30/95
------- -------- -------
Net loan losses as a percent of average loans .20% .18% .17%
Allowance for loan losses as a percent of end
of period loans 1.38% 1.24% 1.26%
- -------------------------------------------------------------------------------------------
The provision for loan losses increased primarily due to increased
additions to the allowance for loan losses. Net loan losses through
September 1996 were .20% of loans, compared to .17% for the first nine
months of 1995. We have increased the allowance for loan losses by
$492,000 since September 1995 principally due to the increase in potential
problem loans. The allowance for loan losses at September 30, 1996 was
1.38% of total loans compared to 1.24% and 1.26%, at December 31, 1995 and
September 30, 1995, respectively.
Under accounting guidance regarding impaired loans, at September 30, 1996
there was $951,000 outstanding in impaired loans with $678,000 for which
an allowance for credit losses is allocated. Impaired loans totaled
$1.43 million and $2.21 million at December 31, 1995 and September 30,
1995, respectively.
13
INVESTMENT SECURITIES
The following is a summary of investment securities, held-to-maturity and
available-for-sale, at September 30, 1996.
Held-to-maturity
Unrealized
Cost Gain Loss Fair Value
- ------------------------------------------------------------------------------------------
US Government and agency $19,462 $ 84 $ 5 $19,541
State and municipal 7,798 68 16 7,850
Other 10,952 33 36 10,949
------- ----- ----- -------
Total $38,212 $ 185 $ 57 $38,340
======= ===== ===== =======
Available-for-sale
Unrealized
Cost Gain Loss Fair Value
- ------------------------------------------------------------------------------------------
US Government and agency $32,077 $ 107 $ 156 $32,028
Other 2,330 108 -- 2,438
------- ---- ----- -------
Total $34,407 $ 215 $ 156 $34,466
======= ===== ===== =======
Mortgage-backed $27,572 $ 93 $ 147 $27,518
======= ===== ===== =======
14
SHAREHOLDERS' EQUITY AND CAPITAL RESOURCES
Total equity at September 30, 1996 was $31.7 million, compared to $30.0
million and $28.9 million at December 31, 1995 and September 30, 1995,
respectively. In the third quarter of 1996 a 5% stock dividend was
declared, payable November 1996. In addition the reqular quarterly cash
dividend of $.30 per share was maintained. Total dividends for 1996 are
$.86 per share, a 25% increase over the first nine months of 1995.
The following is a summary of risk-based capital ratios:
9/30/96 12/31/95 9/30/95
-------- -------- --------
Tier 1 capital $ 31,287 $ 29,234 $ 28,330
Tier 2 capital 3,411 3,200 3,126
-------- -------- --------
Total qualifying capital $ 34,698 $ 32,434 $ 31,456
======== ======== ========
Risk adjusted assets $272,639 $260,163 $250,088
======== ======== ========
Well Capitalized
Standards
----------------
Tier 1 leverage ratio 5% 8.00% 8.06% 7.96%
Tier 1 risk-based capital 6% 11.48% 11.24% 11.33%
Total risk-based capital 10% 12.73% 12.47% 12.58%
Risk-based capital ratios continue to be well above the guidelines
established for well-capitalized institutions, which is the highest
capital standard.
15
- --------------------------------------------------------------------------
Nine Months Ended September 30, 1996
Compared with 1995
- --------------------------------------------------------------------------
Net income for the nine months ended September 30, 1996 is $3,328,000 or
$1.78 per share compared to the $2,958,000 or $1.61 per share earned in
the same period of 1995, a 12.5% increase. Return on average assets for
the first nine months was 1.18%, as compared to 1.14% in the previous year.
The return on average equity was 14.43%, in comparison to the 14.32% earned
in the first nine months of 1995.
Net interest income (FTE) has increased $1.1 million, or 9.5% to $12.4
million for the first nine months of 1996 as average earning assets
increased $28.6 million from 1995. The year to date net interest margin
is 4.66% for 1996 compared to 4.63% earned in the first nine months of
1995. The average rate earned on assets has decreased 4 basis points (bp)
to 8.60% and the average rate paid on interest-bearing funds has decreased
5 bp to average 4.73% in 1996. Average outstanding loans have increased
$10.0 million and securities $20.0 million from 1995. Total deposits have
increased $18.9 million, from 1995, to average $323.2 million
for the first nine months of 1996. Average outstanding consumer CDs grew
by $10.0 million while funding from additional Federal Home Loan Bank
advances increased on average $5.5 million.
The provision for loan losses was $877,000 and net loan charge-offs
were $385,000 for the first nine months of 1996 compared to a provision of
$625,000 and net charge-offs of $325,000 in 1995. The allowance for loan
losses has been increased by $492,000 over the last twelve months as
potential problem loans have increased to 1.9% of loans at September 30,
1996.
Non-interest income has increased $564,000, or 15%, for the first nine
months of 1996, mainly due to the $300,000 or 40% increase in fees earned
from the origination and sale of mortgage loans, and the $217,000 or 16%
increase in trust income. SFAS 122 on accounting for mortgage service
rights adopted in July 1995 accounts for $200,000 of the increase in fees
earned from the origination and sale of mortgage loans.
Non-interest expense increased $795,000, or 8% from the comparable prior
period, primarily attributable to increased personnel costs of $725,000
in 1996. These increased personnel expenses reflect higher benefit costs
related to the rise in the Corporation's stock price, provision for
employee profit sharing incentive award and volume related commissions.
Increases in non-interest expense have been offset by a reduction in FDIC
insurance assessments between the two periods. An additional liability in
1996 for the special assessment by the FDIC on deposits qualifying as part
of the Savings Association Insurance Fund, bring the total expense through
September to $175,000 versus the $325,000 recorded as of September 1995.
In the third quarter the Corporation declared a 5% stock dividend payable
to shareholders in November, 1996. In addition the regular quarterly
cash dividend of $.30 per share was maintained. Total cash dividends
for 1996 are $.86 per share, a 25% increase over the first nine months
of 1995.
16
Shareholders' equity has increased 9.7% from September 1995 and at $31.7
million for September of 1996, represents 8.1% of assets. Total risk-
based capital remains comparable to 1995 at 12.7%. Recorded in
shareholders' equity for the first nine months were net unrealized losses
of $331,000 in 1996 and net unrealized gains of $640,000 in 1995. Net
unrealized gain on securities as of September 30, 1996 and 1995 was $3,000
and $129,000, respectively. The unrealized gains and losses of the
investment portfolio are not expected to cause a material change in future
income or investment yields.
17
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 12, 1996
/s/ Robert L. Israel
--------------------------------------
Robert L. Israel
President and Chief Operating Officer
Date: November 12, 1996
/s/ William T. Fitzgerald, Jr.
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William T. Fitzgerald, Jr.
Secretary, Treasurer & Chief Financial Officer