FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
--------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________
Commission file number 33-24649
--------
ATCORP, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-2911209
- ------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8000 Sagemore Drive, Marlton, New Jersey 08053
----------------------------------------------
(Address of principal executive offices)
(zip code)
(609) 983-4000
--------------
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former 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 (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____
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes____No____
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding as of
Class March 31, 1996
------ --------------
Common Stock, par value $5.00 per share 771,750
ATCORP, INC. AND SUBSIDIARIES
-----------------------------
INDEX
-----
Part I: Financial Information Page
Item 1: Financial Statements:
Consolidated Balance Sheets -
March 31, 1996 (unaudited) and
December 31, 1995 3
Consolidated Statements of Income -
Three Months Ended March 31, 1996
and 1995 (unaudited) 4
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1996
and 1995 (unaudited) 5
Notes to Consolidated Financial Statements
(unaudited) 6
Item 2: Management's Discussion and Analysis
of Financial Condition and Results
of Operations 7
Part II: Other Information
Item 6: Exhibits and Reports on Form 8-K 9
Signatures 10
Part I -- Financial Information
ATCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
March 31, December 31,
ASSETS 1996 1995
---------- ------------
CASH AND DUE FROM BANKS ...................................................... $ 4,645 $ 4,865
FEDERAL FUNDS SOLD ........................................................... 960 775
Interest-bearing deposits with other banks ................................... 300 124
INVESTMENT SECURITIES
Held to maturity (market value of
$250 in 1996 and $250 in 1995) ............................................. 250 250
Available for sale (cost of $69,302 in
1996 and $49,266 in 1995) .................................................. 69,590 50,087
--------- -------
69,840 50,337
LOANS HELD FOR SALE .......................................................... 959 1,467
LOANS ........................................................................ 107,731 96,129
Less-- Allowance for loan losses ........................................... (1,253) (1,283)
--------- -------
Net loans ........................................................... 107,437 94,846
Bank Premises & Equipment, net ............................................... 2,931 2,950
Accrued Interest Receivable .................................................. 1,904 1,610
Other Assets ................................................................. 1,006 801
--------- -------
TOTAL ASSETS .................................................. $ 189,023 157,775
========= =======
LIABILITIES AND
SHAREHOLDERS' EQUITY
DEPOSITS
Demand ..................................................................... 20,162 19,812
Interest-bearing demand .................................................... 47,381 46,355
Savings .................................................................... 21,161 21,155
Certificates of deposit over $100,000 ...................................... 22,208 8,495
Other time deposits ........................................................ 60,506 49,477
--------- -------
TOTAL DEPOSITS ................................................. 171,418 145,294
Borrowed Funds ............................................................... 5,000 --
Accrued Interest Payable ..................................................... 829 521
Other Liabilities ............................................................ 1,333 1,492
--------- -------
Total Liabilities ............................................ 178,580 147,307
SHAREHOLDERS' EQUITY
Preferred stock, $5 par value per share;
1,000,000 shares authorized, none
issued and outstanding ..................................................... -- --
Common stock, $5 par value per share;
2,000,000 shares authorized, 780,266
issued and 771,750 outstanding in 1996
and 1995 ................................................................... 3,902 3,902
ADDITIONAL PAID-IN CAPITAL ................................................... 3,804 3,804
RETAINED EARNINGS ............................................................ 2,592 2,265
NET UNREALIZED HOLDING GAIN
(LOSS) ON SECURITIES ....................................................... 190 542
TREASURY STOCK, at cost (8,516 shares) ....................................... (45) (45)
Total shareholders' equity ................................................. 10,443 10,468
--------- -------
Total liabilities and shareholders' equity ................................. $ 189,023 $ 157,775
========= =========
The accompanying notes are an integral part of these statements.
ATCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
Three Months Ended
March 31,
1996 1995
---- ----
INTEREST INCOME
Interest and fees on loans .......................................... $ 2,382 $ 1,697
Interest on federal funds sold ...................................... 7 82
Interest on interest-bearing deposits ............................... 12 1
Interest on investment securities-taxable ........................... 852 498
Interest on investment securities-tax exempt ........................ 84 55
------- -------
Total interest income .......................................... 3,337 2,333
INTEREST EXPENSE
Interest on deposits ................................................ 1,493 962
Interest on other borrowed funds .................................... 96 5
------- -------
Total interest expense ......................................... 1,589 967
------- -------
Net interest income ................................................. 1,748 1,366
PROVISION FOR LOAN LOSSES ............................................. -- 60
------- -------
Net interest income after provision for loan
losses ............................................................. 1,748 1,306
------- -------
NONINTEREST OPERATING INCOME
Service charges, commissions and fees ............................... 125 109
Securities gains (losses) ........................................... 2 (36)
Gain on sale of loans ............................................... --
Other income ........................................................ 57 62
------- -------
Total noninterest operating income ............................. 184 135
------- -------
NONINTEREST OPERATING EXPENSE
Salaries and employee benefits ...................................... 722 612
Occupancy expense ................................................... 190 127
Furniture and equipment expense ..................................... 124 81
Professional fees ................................................... 59 94
F.D.I.C. assessment ................................................. -- 57
Other expense ....................................................... 386 285
------- -------
Total noninterest operating expense ............................. 1,481 1,256
Income before income taxes ...................................... 451 185
INCOME TAXES .......................................................... 124 46
------- -------
NET INCOME ............................................................ $ 327 $ 139
======= =======
EARNINGS PER SHARE .................................................... $ 0.42 $ 0.18
======= =======
The accompanying notes are an integral part of these statements.
ATCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended
March 31,
1995 1994
--------- ---------
(in thousands)
CASH FLOW FROM OPERATING ACTIVITIES:
Net income .............................................................. $ 327 $ 139
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization ................................ 158 93
Provision for loan losses .................................... (30) 63
Provision for deferred taxes ................................. 13 35
Increase (decrease) in interest receivable ................... (288) 34
Increase in other assets ..................................... (185) (36)
Increase (decrease) in accrued expenses
and other liabilities ....................................... 10 (394)
Increase in interest payable ................................. 308 64
Loss (gain) on sale of securities available for sale ......... (2) 32
-------- --------
Total adjustments ............................................ (16) (110)
-------- --------
Net cash provided by operating activities ......................... 311 29
-------- --------
CASH FLOW FROM INVESTING ACTIVITIES:
Decrease (increase) in deposits with other banks ............. 793 (321)
Purchases of investment securities ........................... (24,823) (12,198)
Proceeds from sales of securities available for sale ......... 3,868 8,774
Proceeds from maturities of investments ...................... 1,034 236
Purchases of premises and equipment .......................... (96) (68)
Increase in loans ............................................ (12,060) (5,898)
Increase in other real estate ................................ -- (51)
-------- --------
Net cash used in investing activities ............................. (31,284) (9,526)
-------- --------
CASH FLOW FROM FINANCING ACTIVITIES:
Net increase (decrease) in savings and
demand deposit accounts ..................................... 1,196 (4,048)
Net increase in time certificates of deposit ................. 24,742 13,934
Net increase in borrowed funds ............................... 5,000 --
-------- --------
Net cash provided by financing activities ......................... 30,938 9,886
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ........................... (35) 390
CASH AND CASH EQUIVALENTS, AT BEGINNING OF PERIOD .............................. 5,640 9,474
-------- --------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD .................................... $ 5,605 $ 9,864
======== ========
The accompanying notes are an integral part of these statements.
NOTE A - Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared pursuant to the instructions to Form 10-Q and Rule 10-1 of Regulation
S-X. Accordingly, they do not include all of the information and notes required
by generally accepted accounting principles for complete financial statements.
In the opinion of Management, all adjustments, including normal recurring
accruals, considered necessary for a fair presentation have been included. All
adjustments made to the unaudited financial statements were of a normal
recurring nature. Operating results for the three month period ended March 31,
1996 are not necessarily indicative of the results that may be expected for the
year ending December 31, 1996. For further information, refer to the
consolidated financial statements and notes thereto included in the annual
report for the year ended December 31, 1995.
NOTE B - Earnings Per Share
Earnings per share are based upon the average number of shares
outstanding and are adjusted retroactively for the stock dividend of 5 shares
for every 100 shares held which was paid February 26, 1996. The average number
of shares outstanding amounted to 771,750 in the three month periods ended in
March 31, 1996 and March 31, 1995, respectively.
NOTE C - Statement No. 115 "Accounting for Certain Investments in Debt and
Equity Securities"
SFAS No. 115 requires that securities "available for sale" be carried
at fair value with valuation adjustments (after tax) included in a separate
component of shareholders' equity. The Corporation adopted SFAS 115 as of
January 1, 1994.
Debt securities acquired as investments that are intended to be "held
to maturity" are stated at cost adjusted for amortization of premiums and
accretion of discounts using the level yield method. Those securities that are
designated as available for sale for liquidity purposes are carried at fair
market value and the net unrealized gain or loss is reported as a separate
component of shareholders equity, net of tax, until realized. Realized
securities gains and losses are calculated for each transaction and recorded as
they may occur.
The amortized cost and estimated values of investment securities as of
March 31, 1996 are as follows:
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
HELD TO MATURITY COST GAINS LOSSES VALUE
- ---------------------------------------------------------------------------------------------------
Debt securities issued by foreign
governments ............... 250 -- -- $ 250
- ---------------------------------------------------------------------------------------------------
TOTALS .................... $ 250 $ -- $ -- $ 250
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
AVAILABLE FOR SALE COST GAINS LOSSES VALUE
- ---------------------------------------------------------------------------------------------------
U.S. Treasury Securities............ $ 10,034 $ 95 $ (7) $ 10,122
U.S. Agency Securities.............. 8,301 29 (49) 8,281
Obligations of States &
Political subdivisions .......... 6,995 104 (10) 7,089
Corporate debt securities .......... 4,590 80 (39) 4,631
Mortgage-backed securities ......... 12,076 78 (108) 12,046
SBA Pools .......................... 25,516 162 (59) 25,619
Equity securities .................. 1,790 12 -- 1,802
- ---------------------------------------------------------------------------------------------------
TOTALS .................... $ 69,302 $ 560 $ (272) $ 69,590
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
The following analysis by the management of the Company summarizes the
significant changes in the results of operations presented in the consolidated
statements of income for the three months ended March 31, 1996 and 1995, and
presents an analysis of the financial condition of the Company at March 31,
1996. The financial statements and accompanying notes included in the Company's
December 31, 1995 Annual Report on Form 10-K should be read in conjunction with
this analysis.
Results of Operations for the Three Months ended March 31, 1996 and 1995
- ------------------------------------------------------------------------
Interest income increased $1,004,000 from $2,333,000 in the first three
months of 1995 to $3,337,000 in the first quarter of 1996 or 43%. This increase
was a result of an increase in interest and fees on loans of $685,000 (40%), a
decrease in interest on federal funds sold of $75,000, an increase in interest
on deposits with other bank's of $11,000, an increase in interest on taxable
securities of $354,000 (71%), and an increase in interest on tax-exempt
securities of $29,000. The decrease in interest on Federal funds sold was the
result of increased use of funds for loans and investments.
Increases in investments and loans were from increased deposits and borrowed
funds.
Interest expense on deposits increased $531,000 from $962,000 in the
first three months of 1995 to $1,493,000 in the first quarter of 1996 or 55%.
Interest expense on borrowed funds increased $91,000 during the first three
months of 1996 from $5,000 during the same period in 1995. The increase in
interest on deposits in 1996 relates to growth in certificates of deposit which
pay slightly higher rates than savings instruments and similar certificates
offered locally. Net interest income increased $382,000 or 28% which is slightly
more than one third of the improvement in interest income as a result of the
higher cost of funds.
The provision for loan losses decreased $60,000 from the first quarter
of 1995 as no provision was required in the first three months of 1996. The
analysis of the allowance for loan losses conducted at the end of the first
quarter of 1996 does indicate that a provision will be necessary in the second
quarter as a result of two factors. Although growth in the portfolio has been
largely in SBA loans, the majority of which is guaranteed, normal loan growth in
traditional products has begun to accelerate. In addition, we experienced net
recoveries in 1995 which we do not expect under normal conditions. Management
continues to review the Bank's loan portfolio and analyze the allowance for
possible loan losses on a quarterly basis and believes that the allowance is
adequate.
Noninterest operating income increased $49,000 or 36% from $135,000 in
the first three months of 1995 to $184,000 in the first quarter of 1996. Of this
increase, $16,000 represented an increase in service charges, commissions and
fees, $38,000 represented an increase to gains from losses on the sale of
securities, and $5,000 represented a decrease in other income.
Noninterest operating expense increased $225,000 from $1,256,000 in the
first quarter of 1995 to $1,481,000 in the first three months of 1996 or 18%.
Salaries and benefits increased $110,000 from $612,000 in the first three months
of 1995 to $722,000 in the first three months of 1996 or 18% which was due to an
increase in staff for the new Cherry Hill office and normal salary increases for
existing personnel which averaged approximately 5% over the past year. Occupancy
expense increased $63,000 to $190,000 in the first quarter of 1996 from $127,000
in the first three months of 1995 due to costs of Cherry Hill and increased
maintenance due to higher than normal snow removal costs. Furniture & equipment
expense increased $43,000 from $81,000 in the first quarter of 1995 to $124,000
in 1996 as a result of depreciation on new furniture and equipment for Cherry
Hill and Marlton together with increased maintenance of older equipment in
operations and the branches. Professional fees decreased $35,000 as a result of
fewer loan collection efforts. FDIC assessment decreased $57,000 as a result of
the insurance fund becoming fully restored, Other expense increased $101,000
from $285,000 in the first quarter of 1995 to $386,000 in the first quarter of
1996. The major components of the increase in other expense were $26,000 in
advertising and public relations, $23,000 in advisory fees for network and
consulting projects, $19,000 in stationery and supplies representing increased
paper costs and volume, $12,000 in EDP supplies representing volume impact on
microfilm, printer ribbons and paper, $6,000 in processing costs at
correspondents, $5,000 in postage costs as well as small increases in many other
categories, many of which increase with growth in assets.
With the improved net interest margin, and increased noninterest income
and also increases in noninterest operating expense, income before income taxes
increased $266,000 or 144% from $185,000 in the first quarter of 1995 to
$451,000 in the first quarter of 1996.
The Company's provision for Federal and State income taxes for the
quarter is approximately 27% of income before taxes reflecting permanent timing
differences and tax exempt income.
Net income for the first quarter of 1996 was $327,000 compared with
$139,000 for the first quarter of 1995. Expressed on a per share basis, the
Company earned $0.42 per share in the first quarter of 1996 compared with
earnings of $0.18 per share in the first three months of 1995.
FINANCIAL CONDITION
Management believes that the financial condition of the Company has
improved over the past year. Interest margins have improved. Nonperforming
assets have been reduced. The Bank continues to be well capitalized. Loan demand
has continued strong but very rate competitive. The local economy continues to
improve at a modest pace. Deposit rates increased substantially in 1995 which
has put pressure on net interest margin. However, these rates have stabilized
for the moment. This provided us an opportunity to match rate sensitive assets
with rate sensitive liabilities before any new rate trend develops.
Asset quality improved slightly since the end of 1995 with classified
loans at 1.25% of total loans at the end of the first quarter compared with
1.99% at December 31, 1995.
The allowance for possible loan losses decreased $30,000 from
$1,283,000 at December 31, 1995 to $1,253,000 at March 31, 1996 after no
recoveries and losses of $30,000 for the first quarter. The allowance for loan
losses was 1.16% of gross loans at March 31, 1996 compared with 1.33% of gross
loans at December 31, 1995. This is consistent with the Bank's peers.
Overall capital adequacy remained stable during the quarter. Based upon
the risk based capital requirements of risk based capital of 8.00%, Tier I
capital of 4.00% and leverage ratio of 4.00%, the Bank was in excess of all of
these minimum requirements. At March 31, 1996 the Bank had total risk based
capital ratio of 10.89%, Tier I capital of 9.68% and a leverage ratio of 5.84%.
Part II--Other Information
Item 6. Exhibits and Reports of Form 8-K
--------------------------------
a. Exhibits--None
b. Reports on Form 8-K
There were no reports filed on Form 8-K for the
three months ended March 31, 1996.
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.
ATCORP, INC.
------------
(Registrant)
May 15, 1996 (s) Marc L. Reitzes
----------------------------------
Date Marc L. Reitzes
Chairman & Chief Executive Officer
May 15, 1996 (s) Stewart A. Collin
----------------------------------
Date Stewart A. Collins
Senior Vice President, Secretary/
Treasurer (Principal Accounting
Officer)