UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20552
FORM 10 - QSB
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X QUARTERLY REPORT UNDER SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE
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OF 1934
For the quarterly period ended June 30, 2001
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TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
------ ACT
For the transition period from to
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Commission File Number 0-32623
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Nittany Financial Corp.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2925762
(State or other jurisdiction of incorporation (IRS Employer Identification No.)
or organization)
116 E. College Avenue, State College, Pennsylvania 16801
(Address of principal executive offices)
(814) 234 - 7320
(Registrant's telephone number, including area code)
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 such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date:
Class: Common Stock, par value $.10 per share
Outstanding at a August 9, 2001: 803,865
NITTANY FINANCIAL CORP.
INDEX
Page
Number
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet (Unaudited) as of 3
June 30, 2001 and December 31, 2000
Consolidated Statement of Income (Unaudited)
for the Six Months ended June 30, 2001 and 2000 4
Consolidated Statement of Income (Unaudited) 5
for the Three Months ended June 31, 2001 and 2000
Consolidated Statement of Changes in Stockholders' Equity (Unaudited) 6
Consolidated Statement of Cash Flows (Unaudited)
for the Six Months ended June 30, 2001 and 2000 7
Notes to Unaudited Consolidated Financial Statements 8 - 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10 - 14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Default Upon Senior Securities 15
Item 4. Submissions of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8 - K 15
SIGNATURES 16
NITTANY FINANCIAL CORP.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
June 30, December 31,
2001 2000
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ASSETS
Cash and due from banks $ 252,848 $ 411,553
Interest-bearing deposits with other banks 13,202,360 3,821,851
Investment securities available for sale 10,598,499 14,849,794
Investment securities held to maturity (market
value of $7,820,897 and $4,523,173) 7,798,691 4,536,734
Loans receivable (net of allowance for loan losses
of $419,135 and $343,673) 51,938,551 43,416,301
Premises and equipment 1,122,634 358,854
Federal Home Loan Bank stock 530,000 530,000
Intangible assets 823,157 846,707
Accrued interest and other assets 517,423 648,568
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TOTAL ASSETS $ 86,784,163 $ 69,420,362
================== =================
LIABILITIES
Deposits:
Noninterest-bearing demand $ 3,369,131 $ 3,905,448
Interest-bearing demand 9,698,890 8,941,842
Money market 13,998,291 15,021,369
Savings 23,205,173 6,351,164
Time 19,346,953 19,655,028
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Total deposits 69,618,438 53,874,851
Loans Payable 1,075,000 -
Short-term borrowings 2,919,672 2,000,000
FHLB advances 5,908,329 6,600,000
Accrued interest payable and other liabilities 567,658 585,939
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TOTAL LIABILITIES 80,089,097 63,060,790
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STOCKHOLDER'S EQUITY
Serial perferred stock, no par value; 5,000,000 shares - -
authorized, none issued
Common stock, $.10 par value, 10,000,000 shares
authorized; 803,865 and 780,312 issued and outstanding 80,386 78,031
Additional paid-in capital 7,823,919 7,652,275
Retained deficit (1,170,512) (1,221,659)
Accumulated other comprehensive loss (38,727) (149,075)
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TOTAL STOCKHOLDERS' EQUITY 6,695,066 6,359,572
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 86,784,163 $ 69,420,362
================== =================
See accompanying notes to the unaudited consolidated financial statements.
3
NITTANY FINANCIAL CORP.
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
Six Months Ended June 30,
2001 2000
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INTEREST AND DIVIDEND INCOME
Loans, including fees $ 1,930,343 $ 1,270,580
Investment securities 521,253 572,397
Interest-bearing deposits with other banks 146,471 64,877
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Total interest and dividend income 2,598,067 1,907,854
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INTEREST EXPENSE
Deposits 1,362,247 850,557
Borrowings 283,376 269,105
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Total interest expense 1,645,623 1,119,662
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NET INTEREST INCOME 952,444 788,192
Provision for loan losses 90,000 71,000
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NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 862,444 717,192
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NONINTEREST INCOME
Service fees on deposit accounts 153,915 105,137
Other income 41,485 21,119
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Total noninterest income 195,400 126,256
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NONINTEREST EXPENSE
Compensation and employee benefits 468,420 345,733
Occupancy and equipment 166,392 114,884
Professional fees 45,341 34,815
Data processing 109,327 83,971
Goodwill amortization 23,651 23,745
Stationery, printing, supplies, and postage 47,307 33,962
Other 146,259 123,895
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Total noninterest expense 1,006,697 761,005
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Income before income taxes 51,147 82,443
Income taxes - -
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NET INCOME $ 51,147 $ 82,443
================== =================
EARNINGS PER SHARE:
Basic $ $0.07 $ $0.12
Diuluted $0.06 $0.12
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 780,442 696,252
Diuluted 787,316 696,711
See accompanying notes to the unaudited consolidated financial statements.
4
NITTANY FINANCIAL CORP.
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
Three Months Ended June 30,
2001 2000
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INTEREST AND DIVIDEND INCOME
Loans, including fees $ 1,007,655 $ 688,686
Investment securities 225,221 287,973
Interest-bearing deposits with other banks 97,505 31,837
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Total interest and dividend income 1,330,381 1,008,496
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INTEREST EXPENSE
Deposits 716,845 453,105
Borrowings 141,474 138,891
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Total interest expense 858,319 591,996
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NET INTEREST INCOME 472,062 416,500
Provision for loan losses 49,500 38,000
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NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 422,562 378,500
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NONINTEREST INCOME
Service fees on deposit accounts 84,292 50,977
Other income 22,030 11,257
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Total noninterest income 106,322 62,234
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NONINTEREST EXPENSE
Compensation and employee benefits 246,515 177,275
Occupancy and equipment 80,992 58,270
Professional fees 23,857 20,867
Data processing 56,278 41,345
Goodwill amortization 11,941 11,873
Stationery, printing, supplies, and postage 23,442 17,481
Other 71,999 68,084
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Total noninterest expense 515,024 395,195
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Income before income taxes 13,860 45,539
Income taxes - -
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NET INCOME $ 13,860 $ 45,539
================== =================
EARNINGS PER SHARE:
Basic $ $0.02 $ $0.06
Diuluted $0.02 $0.06
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 780,571 709,389
Diuluted 787,155 709,389
See accompanying notes to the unaudited consolidated financial statements.
5
NITTANY FINANCIAL CORP.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
Accumulated
Other
Additional Compre- Total Compre-
Common Paid-in Retained hensive Stockholders' hensive
Stock Capital Deficit Loss Equity Income
---------- ------------- ------------ -------------- ----------------- ----------
Balance, December 31, 2000 $ 78,031 $ 7,652,275 $ (1,221,659) $ (149,075) $ 6,359,572
Net income 51,147 51,147 $ 51,147
Other comprehensive income:
Unrealized gain on available for
sale securities 110,348 110,348 110,348
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Comprehensive income $ 161,495
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Common stock issued, net 2,355 171,644 173,999
---------- ------------- ------------- -------------- --------------
Balance, June 30, 2001 $ 80,386 $ 7,823,919 $ (1,170,512) $ (38,727) $ 6,695,066
========== ============= ============= ============== ==============
See accompanying notes to the unaudited consolidated financial statements.
6
NITTANY FINANCIAL CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Six Months Ended June 30,
2001 2000
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OPERATING ACTIVITIES
Net income $ 51,147 $ 82,443
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 90,000 71,000
Depreciation, amortization, and accretion, net 98,421 53,821
Decrease (increase) in accrued interest receivable 68,885 (72,617)
Increase in accrued interest payable (89,158) (165,972)
Other, net 133,137 3,167
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Net cash provided by (used for) operating activities 352,432 (28,158)
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INVESTING ACTIVITIES
Investment securities available for sale:
Maturities and repayments 4,351,291 442,237
Investment securities held to maturity:
Purchases (4,563,109) -
Maturities and repayments 1,297,921 89,906
Net increase in loans receivable (8,616,466) (7,883,490)
Purchase of premises and equipment (820,852) (7,575)
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Net cash used for investing activities (8,351,215) (7,358,922)
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FINANCING ACTIVITIES
Net increase in deposits 15,743,587 5,289,866
Increase in short-term borrowings 919,672 -
Proceeds from loans payable 1,075,000 -
Repayments of long-term FHLB advances (691,671) -
Net proceeds from the sale of common stock 173,999 581,379
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Net cash provided by financing activities 17,220,587 5,871,245
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Increase (decrease) in cash and cash equivalents 9,221,804 (1,515,835)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 4,233,404 3,057,875
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CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 13,455,208 $ 1,542,040
================== =================
SUPPLEMENTAL CASH FLOW DISCLOSURE Cash paid during the period for:
Interest on deposits and borrowings $ 1,734,781 $ 1,285,634
Income taxes 650 -
See accompanying notes to the unaudited consolidated financial statements.
7
NITTANY FINANCIAL CORP
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statements of Nittany Financial Corp. (the "Company")
includes its wholly-owned subsidiaries, Nittany Bank (the "Bank") and Nittany
Asset Management, Inc. All significant intercompany items have been eliminated.
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 that would be included in audited financial
statements. The information furnished reflects all adjustments that are, in the
opinion of management, necessary for a fair statement of the results of
operations. All such adjustments are of a normal recurring nature. The results
of operations for the six months ended June 30, 2001 are not necessarily
indicative of the results to be expected for the fiscal year ended December 31,
2001 or any other future interim period.
These statements should be read in conjunction with the consolidated financial
statements and related notes for the year ended December 31, 2000, which are
incorporated by reference in the Company's Annual Report on Form 10-KSB.
NOTE 2 - EARNINGS PER SHARE
The Company provides dual presentation of Basic and Diluted earnings per share.
Basic earnings per share utilizes net income as reported as the numerator and
the actual average shares outstanding as the denominator. Diluted earnings per
share includes any dilutive effects of options, warrants, and convertible
securities. For the six-months ended June 30, 2001 and 2000, the diluted number
of shares outstanding from employee stock options was 6,874 and 459,
respectively. For the three-months ended June 30, 2001, the diluted number of
shares outstanding from employee stock options was 6,584. There were no dilutive
shares of common stock for the three-months ended June 30, 2000.
NOTE 3 - COMPREHENSIVE INCOME
The components of comprehensive income consist exclusively of unrealized gains
and losses on available for sale securities. For the six months ended June 30,
2001, this activity is shown under the heading Comprehensive Income as presented
in the Consolidated Statement of Changes in Stockholders' Equity. For the
three-months ended June 30, 2001, comprehensive income totaled $23,119. For the
three and six-months ended June 30, 2000, comprehensive income totaled $16,139
and $53,600.
8
NOTE 4 - LOANS PAYABLE
In June 2001, the Company entered into short-term loan agreements of $1,075,000
with certain members of the Board of Directors. The agreements stipulate an
annual interest rate of 6.50% which shall accrue and, along with principal, not
be payable until the completion of the sale of a sufficient amount of common
stock in the offering, which in no event will be later than December 31, 2001.
NOTE 5 - COMMON STOCK OFFERING
On June 12, 2001, the Company commenced an additional common stock offering to
sell up to 210,000 shares of its common stock at $9.50 per share. A registration
statement was filed covering 250,000 shares, if the demand for the shares is
sufficient. The offering is not underwritten and is not subject to the sale of
any minimum number or dollar amount of shares. The offering will terminate no
later than December 31, 2001. On June 29, 2001, 23,553 shares were issued with
net proceeds from the issuance amounting to approximately $174,000. On July 31,
2001, the Company realized additional net proceeds of $932,783 from the issuance
of 100,893 shares. The Company has used $174,000 or 14.7 percent, of the total
proceeds for additional capitalization of the Bank, and $920,000 for repayment
of loans payable to certain members of the Board of Directors.
NOTE 6 - RECENT ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 141, Business Combinations, effective for
all business combinations initiated after June 30, 2001, as well as all business
combinations accounted for by the purchase method that are completed after June
30, 2001. The new statement requires that the purchase method of accounting be
used for all business combinations and prohibits the use of the
pooling-of-interests method. The adoption of Statement No. 141 is not expected
to have a material affect on the Company's financial position or results of
operations.
In July 2001, the FASB issued Statement of Financial Accounting Standards No.
142, Goodwill and Other Intangible Assets, effective for fiscal years beginning
after December 15, 2001. The new statement changes the accounting for goodwill
from an amortization method to an impairment-only approach. Thus, amortization
of goodwill, including goodwill recorded in past business combinations, will
cease upon adoption of this Statement. Management in currently reviewing the
effect this Statement will have on the Company's financial position and results
of operations. At June 30, 2001, the Company had approximately $823,000 of
intangible assets from branch acquisitions.
9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
Overview
Our business is conducted principally through Nittany Bank. Nittany
Bank provides a full range of banking services with an emphasis on residential
and commercial and real estate lending, consumer lending, commercial lending and
retail deposits. At June 30, 2001, we had consolidated assets of $86.8 million,
loans receivable, net of $51.9 million, deposits of $69.6 million, and
stockholders' equity of $6.7 million. Due to an increase in non-interest
expenses which more than offset the increase in net interest income, net income
declined for the three and six months ended June 30, 2001 as compared to the
same 2000 periods. Net income for the three months ended June 30, 2001 declined
$32,000 to $14,000 from $46,000 for the same 2000 period. Net income for the six
months ended June 30, 2001 declined $31,000 to $51,000 from $82,000 for the same
2000 period. Although Nittany Bank experienced dramatic growth during this
period, net interest income for the current three and six month periods rose
moderately due to a decrease in the net interest rate spread (the difference
between the interest rate earned on assets and the interest rate paid on
liabilities) as a result of a business strategy implemented by Nittany Bank, as
discussed below. For the three and six months ended June 30, 2001, net interest
rate spreads declined to 2.49% and 2.64%, respectively, from 3.14% and 3.07%,
respectively, for the same 2000 periods.
During the last six months of fiscal 2000, management and the Board of
Directors of Nittany Bank introduced a 5% savings account and 3% checking
account , which during the current quarter was heavily marketed in our primary
market area. As a result of a general decrease in market interest rates and
several decreases in interest rates by the Federal Reserve Board during the past
several months, the rates paid by Nittany Bank on its deposits are significantly
higher than the market rates paid by other financial institutions and investment
companies. The introduction and marketing of the high-yielding savings and
checking accounts has resulted in a significant increase in asset size by our
obtaining new customers, core deposit accounts and banking relationships.
However, the decrease in the market yields on loans and investments during this
same period, has resulted in a decrease in our interest margin or yield, which
is the difference in the interest rates received on the bank's assets and the
net interest rates paid on the bank's liabilities. We have intentionally
accepted a decrease in current net income in order to take advantage of the low
market interest rates to expand Nittany Bank's asset size and core business.
Nittany Bank has the ability to quickly increase net interest income by lowering
the interest rates on its savings and checking accounts. We believe that the
long-term benefits of increasing our customer base and core business will
enhance Nittany Bank's net income and franchise value in the long term.
On June 2, 2001, we commenced an additional common stock offering to
sell up to 210,000 shares of our common stock at $9.50 per share. We have filed
a registration statement covering 250,000 shares. If we find that demand for the
shares is sufficient, we may sell some or all of the additional 40,000 shares.
The offering is not underwritten and is not subject to the sale of any minimum
number or dollar amount of shares. The offering will terminate no later than
December 31, 2001. On June 29, 2001, we sold and issued 23,553 shares increasing
our
10
outstanding common shares to 803,865 shares. The aggregate net proceeds from the
offering of approximately $174,000 was contributed as capital to Nittany Bank.
At July 31, 2001, we sold and issued an additional 100,893 shares
increasing our outstanding common shares to 124,446 shares. The aggregate net
proceeds from the offering at July 31, 2001were approximately $934,0000 of which
$920,000 was used to pay off loan payables due to certain members of our board
of directors.
On July 6, 2001, Nittany Bank added a new executive officer to its team
to help bolster its lending activities. This new officer has 17 years of
commercial lending experience.
Comparison of Financial Condition
Asset growth for the period continued to remain strong. Total assets
increased $17,364,000 to $86,784,000 at June 30, 2001 from $69,420,000 at
December 31, 2000. Additionally, the growth in assets for the quarter ended June
30, 2001 represented an increase of $15,349,000 from March 31, 2001.
Cash and cash equivalents increased $9,222,000 to $13,455,000 at June
30, 2001 as compared to $4,233,000 December 31, 2000. For the quarter ended June
30, 2001, cash and cash equivalents represented an increase of $7,115,000 from
March 31, 2001. The increase in cash and cash equivalents resulted from
temporary fluctuations with interest-bearing deposits with other banks due to
the timing of customer activity.
Investment securities held to maturity increased $3,262,000 to
$7,799,000 at June 30, 2001 from $4,537,000 at December 31, 2000. During the
June 30, 2001 quarter, we purchased $4,563,000 of mortgage-backed securities
which were partially funded by $1,298,000 of proceeds received from principal
repayments and maturities.
Loans receivable, net increased $8,523,000 to $51,939,000 at June 30,
2001 from $43,416,000 at December 31, 2000. For the quarter ended June 30, 2001,
loans receivable, net increased $5,595,000 from March 31, 2001. Of such increase
in loans receivable, net for the quarter ended June 30, 2001, residential and
consumer loans increased approximately $3,043,000 and $1,687,000, respectively.
The growth in commercial real estate and commercial loans represented an
aggregate increase of $3,236,000 from December 31, 2000. The increase in loans
receivable, net resulted from the economic health of our market area and the
strategic, service- oriented marketing approach taken by management to meet the
lending needs of the area. As of June 30, 2001, we had additional commitments to
fund loan demand of $9,735,000 of which approximately $2,156,000 relates to
commercial and commercial real estate.
The allowance for loans is increased by provisions for loan losses,
which is charged against earnings, and is reduced by charge-offs and increased
by recoveries. At June 30, 2001, our allowance for loan losses increased $75,000
to $419,000 from $344,000 at December 31, 2000. This increase was primarily due
to the growth of commercial real estate loans and the commercial loan
portfolios. The increased allowance resulted from a loan loss provision for the
six months
11
ended June 30, 2001 of $90,000, offset by loan chargeoffs of $15,000. For the
quarter ended June 30, 2001, we added $50,000 to the allowance, which was offset
by $4,000 of loan chargeoffs.
The additions to the allowance for loan losses are based upon a
determination by management that it believes is appropriate. Due to our lack of
historical experience since we are newly formed, management bases its
determination upon such factors as the volume and type of loans that we
originate, the amount and trends relating to our delinquent and non-performing
loans, regulatory policies, general economic conditions and other factors
relating to the collectibility of loans in our portfolio. Although we maintain
our allowance for loan losses at a level that we consider to be adequate to
provide for the inherent risk of loss in our loan portfolio, there can be no
assurance that additional losses will not be required in future periods.
Total deposits increased $15,743,000 to $69,618,000 at June 30, 2001
from $53,875,000 at December 31, 2000. For the quarter ended June 30, 2001,
interest bearing demand increased $1,748,000 and savings increased $13,312,000
from March 31, 2001. Additionally, our sweep account program, which offers us an
alternative funding vehicle to higher fixed term deposit products, resulted in
an overall increase in short-term borrowings of $920,000 at June 30, 2001
compared to December 31, 2000.
During the quarter, we increased our borrowings $1,075,000 through
short term loan payables due to certain members of our board of directors. These
funds were contributed to Nittany Bank to maintain its Tier I capital to average
assets ratio requirement of 8.0%. With the proceeds of the stock sales in July,
$920,000 of such notes were paid off on July 31, 2001.
Stockholder's equity increased $336,000 to $6,695,000 at June 30, 2001
from $6,359,000 at December 31, 2000, as a result of net income of $51,000, net
proceeds from the stock offering of $174,000 and a decline in accumulative other
comprehensive loss of $111,000. Accumulated other comprehensive loss decreased
as a result of changes in the net unrealized loss on investment securities
available for sale due to fluctuations in interest rates. Because of interest
rate volatility, accumulated other comprehensive loss could materially fluctuate
for each interim period and year- end period depending on economic and interest
rate conditions.
Results of Operations
Net income for the three months ended June 30, 2001 decreased $32,000
to $14,000 from $46,000 for the same 2000 period. Net income for the six months
ended June 30, 2001 decreased $31,000 to $51,000 from $82,000 for the same 2000
period. See "Overview"
Net interest income for the three months ended June 30, 2001 was
$472,000 as compared to $417,000 for the same 2000 period. Interest and dividend
income increased $322,000 to $1,330,000 for the three months ended June 30, 2001
from $1,008,000 for the same 2000 year period. Increased interest and dividend
income for the current three months ended June 30, 2001 was influenced primarily
by increases in interest earned on loans receivable of $319,000. The average
yield on interest earning assets decreased to 7.05% for the three-months ended
June 30, 2001 from 7.60% for the same period ended 2000. Average yield on loans
receivable remained
12
relatively unchanged for the three months ended June 30, 2001 as compared to the
same 2000 period.
Net interest income for six months ended June 30, 2001 increased
$164,000 to $952,000 from $788,000 for the same 2000 period. Interest and
dividend income increased $690,000 to $2,598,000 for the six months ended June
30, 2001 from $1,908,000 for the same 2000 period. As in the current three month
period, increased interest and dividend income was influenced primarily by
increases in interest earned on loans receivable of $660,000. The average yield
on interest earning assets declined to 7.23% for the six months ended June 30,
2001 from 7.43% for the same period ended 2000. With a significant increase in
commercial and commercial real estate lending, the yield on loans receivable
increased 15 basis points in 2001 as compared to 2000.
Interest expense for the three months ended June 30, 2001 increased
$266,000 to $858,000 from $592,000 for the same 2000 period and was influenced
primarily by an increase in interest expense on deposits of $264,000. Average
cost of fund for interest bearing liabilities remained relatively unchanged for
the three months ended June 30, 2001 as compared to the same 2000 period.
However, due to the increase in savings accounts for the current period, average
cost of funds for deposits increased 15 basis points for the current three month
2001 period as compared to the same 2000 period.
Interest expense for the six months ended June 30, 2001 increased
$526,000 to $1,646,000 from $1,120,000 for the same 2000 period and was
influenced mainly by an increase in interest expense on deposits of $512,000.
Average cost of fund for interest bearing liabilities also increased to 4.90%
for the six months ended June 30, 2001 from 4.77% for the same period ended
2000. Average cost of funds for deposits increased 31 basis points for the
current six -month period as compared to the same 2000 period.
Total noninterest income increased $44,000 and $69,000, respectively
for the current three and six months ended June 30, 2001. Noninterest income
items are primarily comprised of service charges and fees on deposit account
activity, along with fee income derived from asset management services and
related commissions. For the three and six months ended June 30, 2001, service
fees on deposit accounts increased $33,000 and $49,000 , respectively, and have
progressively increased during each quarter as the number of accounts and volume
of related transactions have increased. Additionally, for the three and six
months ended June 30, 2001, Nittany Asset Management contributed approximately
$19,000 and $33,000, respectively in commission and management fees, an increase
of $8,000 and $12,000, respectively over the same periods in 2000.
Total noninterest expenses increased $120,000 and $246,000 for the
three and six months ended June 30, 2001 as compared to the same period ended
2000. The increase in total noninterest expenses for the current period was
primarily related to operating a larger organization that resulted from the
opening of an additional branch during the third quarter of 2000, as well as the
related marketing efforts to increase visibility within the Company's market. On
April 24, 2000, Nittany Bank entered into a lease agreement for a new branch
office located in State College, which began operations on August 7, 2000.
Salary and benefits costs increased in connection with
13
the new branch office, as three full-time staff were hired. In addition,
occupancy and equipment expenses increased as well due to the new branch
operations. For the three and six months ended June 30, 2001, Nittany Asset
Management operations contributed approximately $15,000 and $32,000 ,
respectively of other operating expense, an increase of $1,000 and $4,000,
respectively, over the same periods in 2000.
Liquidity and Capital Resources
Our primary sources of funds are customer deposits, proceeds from
principal and interest payments on loans, proceeds from maturities, sales and
repayments of investment securities and FHLB advances. While maturities and
scheduled amortization of loans are a predictable source of funds, deposit flows
and mortgage prepayments are greatly influenced by general interest rates,
economic conditions and competition. Management monitors liquidity daily, and on
a monthly basis incorporates liquidity management into its asset/liability
management program.
Management monitors both the Company's and Nittany Bank's total
risk-based, tier I risk- based and tier I leverage capital ratios in order to
assess compliance with regulatory guidelines. At June 30, 2001, the Company and
Nittany Bank's total risk-based, tier I risk-based and tier I leverage ratios
were 13.6%, 12.7%,6.8% and 15.9%, 15.0 %, 8.1%, respectively.
14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in securities and use of proceeds
(b) Use of Proceeds from Registered Securities
(1) The effective date of the Form SB-2 was May 31, 2001,
and the Commission file number was 333-60252.
(2) The offering commenced on June 12, 2001.
(3) Not applicable.
(4) (i) The offering has not terminated. The offering is expected to
terminate on December 31, 2001.
(ii) The name of the managing underwriter: None
(iii) Common stock, par value $.10 per share was registered;
(iv) Amount registered - 250,000 shares
Aggregate price of offering amount registered - $2,375,000;
Amount sold - 223,754 on June 29, 2001;
(v) Expenses of the offering which were direct or indirect
payments to others;
Expense paid to and for underwriters: None
Other expenses - $49,754;
Total expenses - $49,754;
(vi) Net offering proceeds - $174,000;
(vii) Direct or indirect payments to affiliates:
Purchase outstanding stock of subsidiary bank - $174,000
(viii) Not applicable
Item 3. Defaults by the Company on its senior securities
None
Item 4. Submission of matters to a vote of security holders
The following represents the results of matters submitted to a vote
of the stockholders at the annual meeting held on May 18, 2001:
Election of a Director for term to expire in 2005:
Donald J. Musso was elected by the following vote:
For: 601,039
Votes Withheld: 3,410
Ratified amendment to the Nittany Financial Corp. 1998 Stock Option
Plan as described in the Proxy Statement for the Annual Meeting by the
following vote:
For: 523,614
Against 26,982
Votes Withheld: 7,100
S.R. Snodgrass A.C. was selected as the Company's independent auditors
for the fiscal year 2000 by the following vote:
For: 601,589
Against: 1,100
Votes Withheld: 1,760
Item 5. Other information
None
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are included in this Report or incorporated herein by
reference:
3(i) Amended Articles of Incorporation of Nittany Financial Corp. *
3(ii) Bylaws of Nittany Financial Corp. *
4 Specimen Stock Certificate of Nittany Financial Corp. *
10.1 Employment Agreement between the Bank and David Z. Richards *
10.2 Nittany Financial Corp. 1998 Stock Option Plan **
99.1 Independent Accountants Report
* Incorporated by reference to the identically numbered exhibit to the
registration statement on Form SB-2 (File No. 333-57277) declared effective
by the SEC on July 31, 1998.
** Incorporated by reference to the identically numbered exhibit to the
December 31, 1999 Form 10-KSB filed with the SEC on March 28, 2000.
(b) Reports on Form 8-K.
None
15
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned and hereunto duly authorized.
Nittany Financial Corp.
Date: August 13, 2001 By: /s/David Z. Richards
-------------------------------------
David Z. Richards
President and Chief Executive Officer
(Principal Accounting Officer)
16