Pennsylvania
|
000-53297
|
51-0661129
|
(State
or Other Jurisdiction of Incorporation)
|
(Commission
File Number)
|
(IRS
Employer Identification No)
|
31
E. Main St., Ephrata, PA
|
17522-0457
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant’s
telephone number, including area code
|
(717) 733-4181
|
Former
name, former address, and former fiscal year, if changed since last
report
|
Not Applicable
|
Large
Accelerated filer o
|
Accelerated
filer o
|
Non-accelerated
filer ý (Do
not check if a smaller reporting company)
|
Smaller
reporting company o
|
3
|
|
4
|
|
5
|
|
6
|
|
7-9
|
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10-32
|
|
33-35
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35
|
|
35
|
|
36
|
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36
|
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36
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36
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36
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36
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36
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37
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38
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39
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PART
I. FINANCIAL INFORMATION
|
||||||||||||
Item
1. Financial Statements
|
||||||||||||
The
Ephrata National Bank
|
||||||||||||
Balance Sheets (Unaudited)
|
||||||||||||
June
30,
|
December
31,
|
June
30,
|
||||||||||
2008
|
2007
|
2007
|
||||||||||
(Dollars
in thousands, except share data)
|
$ | $ |
$
|
|||||||||
ASSETS
|
||||||||||||
Cash
and due from banks
|
17,197 | 17,201 | 14,077 | |||||||||
Intererest-bearing
deposits in other banks
|
160 | 96 | 226 | |||||||||
Federal
funds sold
|
2,870 | - | 6,500 | |||||||||
Total
cash and cash equivalents
|
20,227 | 17,297 | 20,803 | |||||||||
Securities
available for sale (at fair value)
|
231,021 | 192,960 | 186,327 | |||||||||
Loans
held for sale
|
611 | 365 | 247 | |||||||||
Loans
(net of unearned income)
|
386,174 | 384,999 | 375,554 | |||||||||
Less:
Allowance for loan losses
|
4,033 | 3,682 | 3,539 | |||||||||
Net
loans
|
382,141 | 381,317 | 372,015 | |||||||||
Premises
and equipment
|
18,311 | 17,810 | 17,309 | |||||||||
Regulatory
stock
|
4,767 | 4,111 | 4,126 | |||||||||
Bank
owned life insurance
|
14,207 | 13,871 | 10,805 | |||||||||
Other
assets
|
7,267 | 6,031 | 6,711 | |||||||||
Total
assets
|
678,552 | 633,762 | 618,343 | |||||||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||||||
Liabilities:
|
||||||||||||
Deposits:
|
||||||||||||
Noninterest-bearing
|
111,715 | 107,839 | 99,575 | |||||||||
Interest-bearing
|
397,395 | 370,887 | 371,664 | |||||||||
Total
deposits
|
509,110 | 478,726 | 471,239 | |||||||||
Short-term
borrowings
|
- | 100 | - | |||||||||
Long-term
debt
|
97,000 | 82,000 | 77,500 | |||||||||
Other
liabilities
|
4,308 | 4,114 | 4,206 | |||||||||
Total
liabilities
|
610,418 | 564,940 | 552,945 | |||||||||
Stockholders'
equity:
|
||||||||||||
Common
stock, par value $0.20;
|
||||||||||||
Shares: Authorized
12,000,000
|
||||||||||||
Issued and
Outstanding 2,869,557
|
||||||||||||
(3,000,000
Issued and 2,861,854 and 2,855,428 Outstanding
|
||||||||||||
as
of 12-31-07 and 6-30-07)
|
574 | 600 | 600 | |||||||||
Capital
surplus
|
4,457 | 4,502 | 4,520 | |||||||||
Retained
Earnings
|
65,211 | 68,158 | 66,831 | |||||||||
Accumulated
other comprehensive loss, net of tax
|
(2,108 | ) | (181 | ) | (2,098 | ) | ||||||
Less: (Treasury
shares at cost 138,146 shares
|
||||||||||||
as
of 12-31-07 and 144,572 shares as of 6-30-07)
|
- | (4,257 | ) | (4,455 | ) | |||||||
Total
stockholders' equity
|
68,134 | 68,822 | 65,398 | |||||||||
Total
liabilities and stockholders' equity
|
678,552 | 633,762 | 618,343 | |||||||||
See
Unaudited Notes to the Interim Financial Statements
|
The
Ephrata National Bank
|
||||||||||||||||
Statement
of Income (Unaudited)
|
||||||||||||||||
Periods
Ended June 30, 2008 and 2007
|
||||||||||||||||
Three
Months
|
Six
Months
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
(Dollars
in thousands, except share data)
|
$
|
$
|
$
|
$
|
||||||||||||
Interest
and dividend income:
|
||||||||||||||||
Interest
and fees on loans
|
5,899 | 6,155 | 11,955 | 12,106 | ||||||||||||
Interest
on securities available for sale
|
||||||||||||||||
Taxable
|
2,077 | 1,424 | 3,858 | 2,854 | ||||||||||||
Tax-exempt
|
600 | 677 | 1,246 | 1,377 | ||||||||||||
Interest
on federal funds sold
|
14 | 68 | 25 | 100 | ||||||||||||
Interest
on deposits at other banks
|
1 | 3 | 3 | 6 | ||||||||||||
Dividend
income
|
77 | 92 | 166 | 185 | ||||||||||||
Total
interest and dividend income
|
8,668 | 8,419 | 17,253 | 16,628 | ||||||||||||
Interest
expense:
|
||||||||||||||||
Interest
on deposits
|
2,615 | 2,780 | 5,378 | 5,536 | ||||||||||||
Interest
on short-term borrowings
|
8 | 6 | 20 | 45 | ||||||||||||
Interest
on long-term debt
|
1,018 | 860 | 1,995 | 1,643 | ||||||||||||
Total
interest expense
|
3,641 | 3,646 | 7,393 | 7,224 | ||||||||||||
Net
interest income
|
5,027 | 4,773 | 9,860 | 9,404 | ||||||||||||
Provision
for loan losses
|
150 | 162 | 349 | 1,236 | ||||||||||||
Net
interest income after provision for loan losses
|
4,877 | 4,611 | 9,511 | 8,168 | ||||||||||||
Other
income:
|
||||||||||||||||
Trust
and investment services income
|
261 | 241 | 535 | 491 | ||||||||||||
Service
fees
|
452 | 431 | 883 | 821 | ||||||||||||
Commissions
|
338 | 275 | 644 | 527 | ||||||||||||
Gains
(losses) on securities transactions, net
|
86 | (2 | ) | 112 | (2 | ) | ||||||||||
Gains
on sale of mortgages
|
37 | 41 | 75 | 61 | ||||||||||||
Earnings
on bank owned life insurance
|
156 | 92 | 303 | 175 | ||||||||||||
Other
|
33 | 97 | 167 | 217 | ||||||||||||
Total
other income
|
1,363 | 1,175 | 2,719 | 2,290 | ||||||||||||
Operating
expenses:
|
||||||||||||||||
Salaries
and employee benefits
|
2,607 | 2,379 | 5,245 | 4,763 | ||||||||||||
Occupancy
|
306 | 278 | 608 | 574 | ||||||||||||
Equipment
|
237 | 225 | 469 | 456 | ||||||||||||
Advertising
& marketing
|
86 | 154 | 167 | 255 | ||||||||||||
Computer
software & data processing
|
369 | 353 | 757 | 716 | ||||||||||||
Bank
shares tax
|
225 | 114 | 364 | 224 | ||||||||||||
Professional
services
|
352 | 260 | 606 | 517 | ||||||||||||
Other
|
410 | 545 | 780 | 937 | ||||||||||||
Total
operating expenses
|
4,592 | 4,308 | 8,996 | 8,442 | ||||||||||||
Income
before income taxes
|
1,648 | 1,478 | 3,234 | 2,016 | ||||||||||||
Provision
for federal income taxes
|
220 | 167 | 411 | 23 | ||||||||||||
Net
income
|
1,428 | 1,311 | 2,823 | 1,993 | ||||||||||||
Earnings
per share of common stock
|
0.50 | 0.46 | 0.99 | 0.70 | ||||||||||||
Cash
dividends paid per share
|
0.31 | 0.30 | 0.62 | 0.60 | ||||||||||||
Weighted
average shares outstanding
|
2,865,735 | 2,853,045 | 2,863,989 | 2,851,588 | ||||||||||||
See
Unaudited Notes to the Interim Financial Statements
|
The
Ephrata National Bank
|
||||||||||||||||
Statement
of Comprehensive
Income (Unaudited)
|
||||||||||||||||
Periods
Ended June 30, 2008 and 2007
|
||||||||||||||||
Three
Months
|
Six
Months
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
(Dollars
in thousands)
|
$ |
$
|
$
|
$
|
||||||||||||
Net
income
|
1,428 | 1,311 | 2,823 | 1,993 | ||||||||||||
Other
comprehensive loss arising during the period
|
(3,713 | ) | (2,117 | ) | (3,033 | ) | (1,539 | ) | ||||||||
Reclassification
adjustment for (gains) losses realized in income
|
(86 | ) | 2 | (112 | ) | 2 | ||||||||||
Other
comprehensive loss before tax
|
(3,627 | ) | (2,119 | ) | (2,921 | ) | (1,541 | ) | ||||||||
Income
tax benefit related to comprehensive loss
|
(1,233 | ) | (720 | ) | (993 | ) | (524 | ) | ||||||||
Other
comprehensive loss
|
(2,394 | ) | (1,399 | ) | (1,928 | ) | (1,017 | ) | ||||||||
Comprehensive
income (loss)
|
(966 | ) | (88 | ) | 895 | 976 |
The
Ephrata National Bank
|
||||||||
Statement
of Cash Flows (Unaudited)
|
||||||||
Periods
Ended June 30, 2008 and 2007
|
||||||||
Six
Months
|
||||||||
2008
|
2007
|
|||||||
(DOLLARS
IN THOUSANDS)
|
$
|
$
|
||||||
Cash
flows from operating activities:
|
||||||||
Net
income
|
2,823 | 1,993 | ||||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
Net
amortization of securities and loan fees
|
168 | 263 | ||||||
(Increase)
decrease in interest receivable
|
(161 | ) | (65 | ) | ||||
Increase
in interest payable
|
55 | 67 | ||||||
Provision
for loan losses
|
349 | 1,236 | ||||||
(Gains)
losses on securities transactions, net
|
(112 | ) | 2 | |||||
Gains
on sale of mortgages
|
(75 | ) | (61 | ) | ||||
Loans
originated for sale
|
(1,161 | ) | (292 | ) | ||||
Proceeds
from sales of loans
|
990 | 630 | ||||||
Earnings
on bank owned life insurance
|
(303 | ) | (175 | ) | ||||
Losses
on sale of other real estate owned
|
6 | - | ||||||
Depreciation
of premises and equipment and amortization of software
|
573 | 570 | ||||||
Deferred
income tax benefit
|
(376 | ) | (212 | ) | ||||
Other
assets and other liabilities, net
|
311 | 71 | ||||||
Net
cash provided by operating activities
|
3,087 | 4,027 | ||||||
Cash
flows from investing activities:
|
||||||||
Securities
available for sale:
|
||||||||
Proceeds
from maturities, calls, and repayments
|
35,174 | 9,942 | ||||||
Proceeds
from sales
|
7,793 | 576 | ||||||
Purchases
|
(84,028 | ) | (7,113 | ) | ||||
Proceeds
from sale of other real estate owned
|
150 | 0 | ||||||
Purchase
of regulatory bank stock
|
(656 | ) | (464 | ) | ||||
Redemptions
of regulatory bank stock
|
0 | 455 | ||||||
Purchase
of bank owned life insurance
|
(33 | ) | (2,339 | ) | ||||
Net
increase in loans
|
(1,150 | ) | (10,478 | ) | ||||
Purchase
of premises and equipment
|
(1,021 | ) | (955 | ) | ||||
Purchase
of computer software
|
(85 | ) | (58 | ) | ||||
Net
cash used in investing activities
|
(43,856 | ) | (10,434 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Net
increase in demand deposits, NOW and savings accounts
|
13,587 | 8,346 | ||||||
Net
increase (decrease) in time deposits
|
16,796 | (6,366 | ) | |||||
Net
decrease in short term borrowings
|
(100 | ) | (1,200 | ) | ||||
Proceeds
from long-term debt
|
15,000 | 11,500 | ||||||
Dividends
paid
|
(1,776 | ) | (1,711 | ) | ||||
Treasury
stock sold & common stock issued
|
192 | 174 | ||||||
Net
cash provided by financing activities
|
43,699 | 10,743 | ||||||
Net
increase in cash and cash equivalents
|
2,930 | 4,336 | ||||||
Cash
and cash equivalents at beginning of year
|
17,297 | 16,467 | ||||||
Cash
and cash equivalents at end of period
|
20,227 | 20,803 | ||||||
Supplemental
disclosures of cash flow information:
|
||||||||
Interest
paid
|
7,338 | 7,157 | ||||||
Income
taxes paid
|
600 | 325 | ||||||
See
Unaudited Notes to the Interim Financial Statements
|
Dollars
in Thousands
|
Quoted
Prices in
Active
Markets for
Identical
Assets
(Level
1)
|
Significant
Other
Observable
Inputs
(Level 2)
|
Balance
as of
June
30, 2008
|
|||||||||
Securities
available-for-sale
|
$ | 2,763 | $ | 228,259 | $ | 231,022 |
3.
|
Commitments
and Contingent Liabilities
|
·
|
Monetary
and interest rate policies of the Federal Reserve Board
(“FRB”)
|
·
|
Economic
conditions
|
·
|
Political
changes and their impact on new laws and
regulations
|
·
|
Competitive
forces
|
·
|
Management’s
ability to manage credit risk, liquidity risk, interest rate risk, and
fair value risk
|
·
|
Operation,
legal, and reputation risk
|
·
|
Incorrect
analysis of risk or unsuccessful strategies or implementation of
strategies designed to mitigate
risks
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
30,
|
June
30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Return
on Average Assets
|
0.86 | % | 0.85 | % | 0.86 | % | 0.66 | % | ||||||||
Return
on Average Equity
|
8.30 | % | 7.99 | % | 8.17 | % | 6.11 | % |
|
·
|
Net
interest income
|
|
·
|
Provision
for loan losses
|
|
·
|
Non-interest
income
|
|
·
|
Non-interest
expenses
|
|
·
|
Provision
for income taxes
|
|
·
|
The
rates charged on interest-earning assets and paid on interest-bearing
liabilities
|
|
·
|
The
average balance of interest-earning assets and interest-bearing
liabilities
|
Net
Interest Earnings
|
||||||||||||||||
(Dollars
in thousands)
|
||||||||||||||||
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
30,
|
June
30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
$
|
$
|
$
|
$
|
|||||||||||||
Total
interest income
|
8,668 | 8,419 | 17,253 | 16,628 | ||||||||||||
Total
interest expense
|
3,641 | 3,646 | 7,393 | 7,224 | ||||||||||||
Net
interest income
|
5,027 | 4,773 | 9,860 | 9,404 | ||||||||||||
Tax
equivalent adjustment
|
427 | 428 | 872 | 896 | ||||||||||||
Net
interest earnings
|
||||||||||||||||
(fully
taxable equivalent)
|
5,454 | 5,201 | 10,732 | 10,300 |
COMPARATIVE
AVERAGE BALANCE SHEETS AND NET INTEREST INCOME
|
||||||||||||||||||||||||
(Dollars
in thousands)
|
||||||||||||||||||||||||
For
the Three Months Ended June 30,
|
||||||||||||||||||||||||
2008
|
2007
|
|||||||||||||||||||||||
(c)
|
(c)
|
|||||||||||||||||||||||
Average
|
Annualized
|
Average
|
Annualized
|
|||||||||||||||||||||
Balance
|
Interest
|
Yield/Rate
|
Balance
|
Interest
|
Yield/Rate
|
|||||||||||||||||||
$ |
$
|
%
|
$
|
$
|
%
|
|||||||||||||||||||
ASSETS
|
||||||||||||||||||||||||
Interest
earning assets:
|
||||||||||||||||||||||||
Federal
funds sold and interest
|
||||||||||||||||||||||||
on
deposits at other banks
|
2,826 | 15 | 2.18 | 5,342 | 71 | 5.36 | ||||||||||||||||||
Securities
available for sale:
|
||||||||||||||||||||||||
Taxable
|
170,059 | 2,123 | 4.99 | 127,329 | 1,478 | 4.64 | ||||||||||||||||||
Tax-exempt
|
54,877 | 877 | 6.39 | 63,738 | 987 | 6.20 | ||||||||||||||||||
Total
securities (d)
|
224,936 | 3,000 | 5.34 | 191,067 | 2,465 | 5.16 | ||||||||||||||||||
Loans
(a)
|
388,017 | 6,038 | 6.24 | 374,972 | 6,250 | 6.68 | ||||||||||||||||||
Regulatory
stock
|
4,680 | 42 | 3.58 | 4,260 | 61 | 5.69 | ||||||||||||||||||
Total
interest earning assets
|
620,459 | 9,095 | 5.87 | 575,641 | 8,847 | 6.15 | ||||||||||||||||||
Non-interest
earning assets (d)
|
49,153 | 41,832 | ||||||||||||||||||||||
Total
assets
|
669,612 | 617,473 | ||||||||||||||||||||||
LIABILITIES
&
|
||||||||||||||||||||||||
STOCKHOLDERS'
EQUITY
|
||||||||||||||||||||||||
Interest
bearing liabilities:
|
||||||||||||||||||||||||
Demand
deposits
|
100,070 | 302 | 1.22 | 94,860 | 430 | 1.82 | ||||||||||||||||||
Savings
deposits
|
73,499 | 75 | 0.41 | 70,054 | 89 | 0.51 | ||||||||||||||||||
Time
deposits
|
218,474 | 2,238 | 4.12 | 207,292 | 2,262 | 4.38 | ||||||||||||||||||
Borrowed
funds
|
97,697 | 1,026 | 4.23 | 77,374 | 865 | 4.49 | ||||||||||||||||||
Total
interest bearing liabilities
|
489,740 | 3,641 | 2.99 | 449,580 | 3,646 | 3.25 | ||||||||||||||||||
Non-interest
bearing liabilities:
|
||||||||||||||||||||||||
Demand
deposits
|
105,698 | 96,923 | ||||||||||||||||||||||
Other
|
4,970 | 5,119 | ||||||||||||||||||||||
Total
liabilities
|
600,408 | 551,622 | ||||||||||||||||||||||
Stockholders'
equity
|
69,204 | 65,851 | ||||||||||||||||||||||
Total
liabilities & stockholders' equity
|
669,612 | 617,473 | ||||||||||||||||||||||
Net
interest income (FTE)
|
5,454 | 5,201 | ||||||||||||||||||||||
Net
interest spread (b)
|
2.88 | 2.90 | ||||||||||||||||||||||
Effect
of non-interest
|
||||||||||||||||||||||||
bearing
funds
|
0.63 | 0.71 | ||||||||||||||||||||||
Net
yield on interest earning assets (c)
|
|
3.51 | 3.61 |
(a)
Includes balances of nonaccrual loans and the recognition of any related
interest income. The quarter to date average balances include
net deferred loan fees and costs of ($317,000) as of June 30, 2008,
and ($353,000) as of June 30, 2007. Such fees and
costs recognized through income and included in the interest amounts
totaled $10,000 in 2008 and $23,000 in
2007.
|
(b)
Net interest spread is the arithmetic difference between the yield on
interest earning assets and the rate paid on interest
bearing liabilities.
|
(c)
Net yield, also referred to as net interest margin, is computed by
dividing net interest income (FTE) by total interest
|
(d)
Securities recorded at amortized cost. Unrealized holding gains
and losses are included in non-interest earning
assets.
|
COMPARATIVE
AVERAGE BALANCE SHEETS AND NET INTEREST INCOME
|
||||||||||||||||||||||||
(Dollars
in thousands)
|
||||||||||||||||||||||||
For
the Six Months Ended June 30,
|
||||||||||||||||||||||||
2008
|
2007
|
|||||||||||||||||||||||
(c)
|
(c)
|
|||||||||||||||||||||||
Average
|
Annualized
|
Average
|
Annualized
|
|||||||||||||||||||||
Balance
|
Interest
|
Yield/Rate
|
Balance
|
Interest
|
Yield/Rate
|
|||||||||||||||||||
$
|
$
|
%
|
$
|
$
|
%
|
|||||||||||||||||||
ASSETS
|
||||||||||||||||||||||||
Interest
earning assets:
|
||||||||||||||||||||||||
Federal
funds sold and interest
|
||||||||||||||||||||||||
on
deposits at other banks
|
2,313 | 28 | 2.47 | 4,136 | 107 | 5.22 | ||||||||||||||||||
Securities
available for sale:
|
||||||||||||||||||||||||
Taxable
|
158,564 | 3,945 | 4.98 | 127,618 | 2,964 | 4.65 | ||||||||||||||||||
Tax-exempt
|
56,590 | 1,822 | 6.53 | 63,901 | 2,009 | 6.29 | ||||||||||||||||||
Total
securities (d)
|
215,154 | 5,767 | 5.36 | 191,519 | 4,973 | 5.20 | ||||||||||||||||||
Loans
(a)
|
387,087 | 12,235 | 6.34 | 371,334 | 12,323 | 6.66 | ||||||||||||||||||
Regulatory
stock
|
4,553 | 95 | 4.17 | 4,191 | 121 | 5.79 | ||||||||||||||||||
Total
interest earning assets
|
609,107 | 18,125 | 5.96 | 571,180 | 17,524 | 6.15 | ||||||||||||||||||
Non-interest
earning assets (d)
|
48,762 | 40,823 | ||||||||||||||||||||||
Total
assets
|
657,869 | 612,003 | ||||||||||||||||||||||
LIABILITIES
&
|
||||||||||||||||||||||||
STOCKHOLDERS'
EQUITY
|
||||||||||||||||||||||||
Interest
bearing liabilities:
|
||||||||||||||||||||||||
Demand
deposits
|
100,523 | 680 | 1.36 | 92,598 | 845 | 1.84 | ||||||||||||||||||
Savings
deposits
|
70,990 | 161 | 0.46 | 69,243 | 200 | 0.58 | ||||||||||||||||||
Time
deposits
|
214,962 | 4,537 | 4.25 | 208,252 | 4,491 | 4.35 | ||||||||||||||||||
Borrowed
funds
|
94,177 | 2,015 | 4.30 | 76,106 | 1,688 | 4.47 | ||||||||||||||||||
Total
interest bearing liabilities
|
480,652 | 7,393 | 3.09 | 446,199 | 7,224 | 3.26 | ||||||||||||||||||
Non-interest
bearing liabilities:
|
||||||||||||||||||||||||
Demand
deposits
|
102,797 | 94,908 | ||||||||||||||||||||||
Other
|
4,956 | 5,060 | ||||||||||||||||||||||
Total
liabilities
|
588,405 | 546,167 | ||||||||||||||||||||||
Stockholders'
equity
|
69,464 | 65,836 | ||||||||||||||||||||||
Total
liabilities & stockholders' equity
|
657,869 | 612,003 | ||||||||||||||||||||||
Net
interest income (FTE)
|
10,732 | 10,300 | ||||||||||||||||||||||
Net
interest spread (b)
|
2.87 | 2.89 | ||||||||||||||||||||||
Effect
of non-interest
|
||||||||||||||||||||||||
bearing
funds
|
0.65 | 0.71 | ||||||||||||||||||||||
Net
yield on interest earning assets (c)
|
|
3.52 | 3.60 |
(a)
Includes balances of nonaccrual loans and the recognition of any related
interest income. Year to date average balances include
net deferred loan fees and costs of ($321,000) as of June 30, 2008,
and ($373,000) as of June 30, 2007. Such fees and
costs recognized through income and included in the interest amounts
totaled $23,000 in 2008 and $40,000 in
2007.
|
|
(b)
Net interest spread is the arithmetic difference between the yield on
interest earning assets and the rate paid on interest
bearing liabilities.
|
|
(c)
Net yield, also referred to as net interest margin, is computed by
dividing net interest income (FTE) by total interest earning
assets.
|
|
(d)
Securities recorded at amortized cost. Unrealized holding gains
and losses are included in non-interest earning
assets.
|
|
·
|
Historical
loan loss experience
|
|
·
|
Loan
portfolio characteristics
|
|
·
|
Current
economic conditions
|
|
·
|
Volume
of delinquent and non-performing
loans
|
OTHER
INCOME
|
||||||||||||||||
(DOLLARS
IN THOUSANDS)
|
||||||||||||||||
Three
Months Ended June 30,
|
Increase
(Decrease)
|
|||||||||||||||
2008
|
2007
|
|||||||||||||||
$
|
$
|
$
|
%
|
|||||||||||||
Trust
and investment services
|
261 | 241 | 20 | 8.3 | ||||||||||||
Service
charges on deposit accounts
|
308 | 311 | (3 | ) | (1.0 | ) | ||||||||||
Other
service charges and fees
|
144 | 120 | 24 | 20.0 | ||||||||||||
Commissions
|
338 | 275 | 63 | 22.9 | ||||||||||||
Gains
(losses) on securities transactions
|
86 | (2 | ) | 88 | +100.0 | |||||||||||
Gain
on sale of mortgages
|
37 | 41 | (4 | ) | (9.8 | ) | ||||||||||
Earnings
on bank owned life insurance
|
156 | 92 | 64 | 69.6 | ||||||||||||
Other
miscellaneous income
|
33 | 97 | (64 | ) | (66.0 | ) | ||||||||||
Total
other income
|
1,363 | 1,175 | 188 | 16.0 |
OTHER
INCOME
|
||||||||||||||||
(DOLLARS
IN THOUSANDS)
|
||||||||||||||||
Six
Months Ended June 30,
|
Increase
(Decrease)
|
|||||||||||||||
2008
|
2007
|
|||||||||||||||
$
|
$
|
$
|
%
|
|||||||||||||
Trust
and investment services
|
535 | 491 | 44 | 9.0 | ||||||||||||
Service
charges on deposit accounts
|
615 | 581 | 34 | 5.9 | ||||||||||||
Other
service charges and fees
|
267 | 240 | 27 | 11.3 | ||||||||||||
Commissions
|
645 | 527 | 118 | 22.4 | ||||||||||||
Gains
(losses) on securities transactions
|
112 | (2 | ) | 114 | +100.0 | |||||||||||
Gain
on sale of mortgages
|
75 | 61 | 14 | 23.0 | ||||||||||||
Earnings
on bank owned life insurance
|
303 | 175 | 128 | 73.1 | ||||||||||||
Other
miscellaneous income
|
167 | 217 | (50 | ) | (23.0 | ) | ||||||||||
Total
other income
|
2,719 | 2,290 | 429 | 18.7 |
OPERATING
EXPENSES
|
||||||||||||||||
(DOLLARS
IN THOUSANDS)
|
||||||||||||||||
Three
Months Ended June 30,
|
Increase
(Decrease)
|
|||||||||||||||
2008
|
2007
|
|||||||||||||||
$
|
$
|
$
|
%
|
|||||||||||||
Salaries
and employee benefits
|
2,607 | 2,379 | 228 | 9.6 | ||||||||||||
Occupancy
expenses
|
306 | 278 | 28 | 10.1 | ||||||||||||
Equipment
expenses
|
237 | 225 | 12 | 5.3 | ||||||||||||
Advertising
& marketing expenses
|
86 | 154 | (68 | ) | (44.2 | ) | ||||||||||
Computer
software & data
|
||||||||||||||||
processing
expenses
|
369 | 353 | 16 | 4.5 | ||||||||||||
Bank
shares tax
|
225 | 114 | 111 | 97.4 | ||||||||||||
Professional
services
|
352 | 260 | 92 | 35.4 | ||||||||||||
Other
operating expenses
|
410 | 545 | (135 | ) | (24.8 | ) | ||||||||||
Total
Operating Expenses
|
4,592 | 4,308 | 284 | 6.6 |
OPERATING
EXPENSES
|
||||||||||||||||
(DOLLARS
IN THOUSANDS)
|
||||||||||||||||
Six
Months Ended June 30,
|
Increase
(Decrease)
|
|||||||||||||||
2008
|
2007
|
|||||||||||||||
$
|
$
|
$
|
%
|
|||||||||||||
Salaries
and employee benefits
|
5,245 | 4,763 | 482 | 10.1 | ||||||||||||
Occupancy
expenses
|
608 | 574 | 34 | 5.9 | ||||||||||||
Equipment
expenses
|
469 | 456 | 13 | 2.9 | ||||||||||||
Advertising
& marketing expenses
|
167 | 255 | (88 | ) | (34.5 | ) | ||||||||||
Computer
software & data
|
||||||||||||||||
processing
expenses
|
757 | 716 | 41 | 5.7 | ||||||||||||
Bank
shares tax
|
364 | 224 | 140 | 62.5 | ||||||||||||
Professional
services
|
606 | 517 | 89 | 17.2 | ||||||||||||
Other
operating expenses
|
780 | 937 | (157 | ) | (16.8 | ) | ||||||||||
Total
Operating Expenses
|
8,996 | 8,442 | 554 | 6.6 |
|
·
|
Depreciation
of bank buildings
|
|
·
|
Real
estate taxes and property insurance
|
|
·
|
Utilities
|
|
·
|
Building
repair and maintenance
|
|
·
|
Postage
|
|
·
|
FDIC
insurance assessment
|
|
·
|
OCC
assessment
|
|
·
|
General
insurance
|
|
·
|
Director
fees and expense
|
|
·
|
General
supplies
|
|
·
|
Charitable
contributions
|
|
·
|
Delinquent
loan expenses
|
SECURITIES
PORTFOLIO
|
||||||||||||||||||||||||
(DOLLARS
IN THOUSANDS)
|
||||||||||||||||||||||||
Period
Ending
|
||||||||||||||||||||||||
June
30, 2008
|
December
31, 2007
|
June
30, 2007
|
||||||||||||||||||||||
$
|
%
|
$
|
%
|
$
|
%
|
|||||||||||||||||||
U.S.
treasuries & governmental agencies
|
53,158 | 23.0 | 47,599 | 24.7 | 45,458 | 24.4 | ||||||||||||||||||
Mortgage-backed
securities
|
51,635 | 22.4 | 33,097 | 17.1 | 27,230 | 14.6 | ||||||||||||||||||
Collateralized
mortgage obligations
|
37,043 | 16.0 | 36,833 | 19.1 | 32,214 | 17.3 | ||||||||||||||||||
Private
label collateralized mortgage obligations
|
18,045 | 7.8 | 0 | 0.0 | 0 | 0.0 | ||||||||||||||||||
Corporate
debt securities
|
12,885 | 5.6 | 11,507 | 6.0 | 10,449 | 5.6 | ||||||||||||||||||
Obligations
of states and political subdivisions
|
54,351 | 23.5 | 60,422 | 31.3 | 62,648 | 33.6 | ||||||||||||||||||
Equity
securities
|
3,904 | 1.7 | 3,502 | 1.8 | 8,328 | 4.5 | ||||||||||||||||||
Total
securities
|
231,021 | 100.0 | 192,960 | 100.0 | 186,327 | 100.0 |
|
·
|
Performance
of the various instruments
|
|
·
|
Direction
of interest rates
|
|
·
|
Slope
of the yield curve
|
|
·
|
ALCO
positions as to liquidity, interest rate risk, and net portfolio
value
|
|
·
|
State
of the economy and credit risk
|
|
·
|
Current
tax position
|
|
·
|
a
stable and reliable cash flow for
liquidity
|
|
·
|
sufficient
protection against credit risk with AAA rated
security
|
|
·
|
strong
income compared to other debt
securities
|
LOANS
BY MAJOR CATEGORY
|
||||||||||||
(DOLLARS
IN THOUSANDS)
|
||||||||||||
June
30,
|
December
31,
|
June
30,
|
||||||||||
2008
|
2007
|
2007
|
||||||||||
$
|
$
|
$
|
||||||||||
Real
Estate
|
||||||||||||
Residential
(a)
|
160,456 | 150,996 | 148,249 | |||||||||
Commercial
|
128,835 | 131,297 | 126,910 | |||||||||
Construction
|
15,836 | 16,960 | 14,453 | |||||||||
Commercial
|
70,458 | 75,172 | 75,044 | |||||||||
Consumer
|
10,907 | 10,896 | 11,222 | |||||||||
386,492 | 385,321 | 375,878 | ||||||||||
Less:
|
||||||||||||
Deferred
loan fees, net
|
318 | 322 | 324 | |||||||||
Allowance
for loan losses
|
4,033 | 3,682 | 3,539 | |||||||||
Total
net loans
|
382,141 | 381,317 | 372,015 |
(a)
|
Residential
real estate loans do not include mortgage loans sold to and serviced for
Fannie Mae. These loans
totaled $10,470,000 as June 30, 2008, $9,975,000 as of December 31,
2007, and $9,197,000 as of June 30, 2007.
|
|
|
·
|
Non-accrual
loans
|
|
·
|
Loans
past due 90 days or more and still
accruing
|
|
·
|
Troubled
debt restructurings
|
|
·
|
Other
real estate owned
|
NON-PERFORMING
ASSETS
|
||||||||||||
(DOLLARS
IN THOUSANDS)
|
||||||||||||
June
30,
|
Dec.
31,
|
June
30,
|
||||||||||
2008
|
2007
|
2007
|
||||||||||
$
|
$
|
$
|
||||||||||
Non-accrual
loans
|
683 | 425 | - | |||||||||
Loans
past due 90 days or more and still accruing
|
632 | 498 | 510 | |||||||||
Troubled
debt restructurings
|
24 | - | - | |||||||||
Total
non-performing loans
|
1,339 | 923 | 510 | |||||||||
Other
real estate owned
|
520 | 675 | 581 | |||||||||
Total
non-performing assets
|
1,859 | 1,598 | 1,091 | |||||||||
Non-performing
assets to net loans
|
0.49 | % | 0.42 | % | 0.29 | % |
|
·
|
Charge-off
of loans considered not recoverable
|
|
·
|
Recovery
of loans previously charged off
|
|
·
|
Provision
for loan loss
|
ALLOWANCE
FOR LOAN LOSSES
|
||||||||
(DOLLARS
IN THOUSANDS)
|
||||||||
Six
Months Ended
|
||||||||
June
30,
|
||||||||
2008
|
2007
|
|||||||
$
|
$
|
|||||||
Balance
at January 1,
|
3,682 | 3,244 | ||||||
Loans
charged off:
|
||||||||
Real
estate
|
- | - | ||||||
Commercial
and industrial
|
25 | 891 | ||||||
Consumer
|
46 | 87 | ||||||
Total
charged off
|
71 | 978 | ||||||
Recoveries
of loans previously charged off:
|
||||||||
Real
estate
|
- | - | ||||||
Commercial
and industrial
|
58 | 8 | ||||||
Consumer
|
15 | 29 | ||||||
Total
recovered
|
73 | 37 | ||||||
Net
loans charged off
|
(2 | ) | 941 | |||||
Provision
charged to operating expense
|
349 | 1,236 | ||||||
Balance
at June 30,
|
4,033 | 3,539 | ||||||
Net
charge-offs (reserves) as a %
|
||||||||
of
average total loans outstanding
|
0.00 | % | 0.25 | % | ||||
Allowance
at end of period as a % of total loans
|
1.04 | % | 0.94 | % |
DEPOSITS
BY MAJOR CLASSIFICATION
|
||||||||||||
(DOLLARS
IN THOUSANDS)
|
||||||||||||
June
30,
|
December
31,
|
June
30,
|
||||||||||
2008
|
2007
|
2007
|
||||||||||
$
|
$
|
$
|
||||||||||
Non-interest
bearing demand deposits
|
111,715 | 107,839 | 99,575 | |||||||||
NOW
accounts
|
66,755 | 61,345 | 59,200 | |||||||||
Money
market deposit accounts
|
35,871 | 39,474 | 38,918 | |||||||||
Savings
deposits
|
75,249 | 67,344 | 70,769 | |||||||||
Time
deposits
|
212,174 | 193,880 | 193,772 | |||||||||
Brokered
time deposits
|
7,346 | 8,844 | 9,005 | |||||||||
Total
deposits
|
509,110 | 478,726 | 471,239 |
|
·
|
Convenience
and service provided
|
|
·
|
Fees
|
|
·
|
Permanence
of the institution
|
|
·
|
Possible
risks associated with other investment
opportunities
|
|
·
|
Current
rates paid on deposits compared to competitor
rates
|
Regulatory
Capital Ratios
|
Capital
Ratios
|
Regulatory
Requirements
|
||||||||||||||
As
of
|
As
of
|
|||||||||||||||
June
30,
|
June
30,
|
Adequately
|
Well
|
|||||||||||||
2008
|
2007
|
Capitalized
|
Capitalized
|
|||||||||||||
Total
Capital to Risk-Weighted Assets
|
17.0 | % | 17.0 | % | 8.0 | % | 10.0 | % | ||||||||
Tier
I Capital to Risk-Weighted Assets
|
16.1 | % | 16.1 | % | 4.0 | % | 6.0 | % | ||||||||
Tier
I Capital to Average Assets
|
10.4 | % | 10.9 | % | 4.0 | % | 5.0 | % |
OFF-BALANCE
SHEET ARRANGEMENTS
|
||||
(DOLLARS
IN THOUSANDS)
|
||||
June
30,
|
||||
2008
|
||||
$
|
||||
Commitments
to extend credit:
|
||||
Revolving
home equity
|
14,341 | |||
Construction
loans
|
13,506 | |||
Real
estate loans
|
6,886 | |||
Business
loans
|
44,197 | |||
Consumer
loans
|
3,595 | |||
Other
|
2,857 | |||
Standby
letters of credit
|
14,070 | |||
Total
|
99,452 |
|
·
|
Credit
risk
|
|
·
|
Liquidity
risk
|
|
·
|
Interest
rate risk
|
|
·
|
Deposits
|
|
·
|
Loan
repayments
|
|
·
|
Maturities
and sales of securities
|
|
·
|
Short-term
borrowings from correspondent banks
|
|
·
|
Borrowings
from FHLB
|
|
·
|
Repurchase
agreements
|
|
·
|
Brokered
Certificates of Deposit
|
|
·
|
Current
earnings
|
|
·
|
Changes
in net interest income
|
|
·
|
Changes
in net portfolio value
|
|
·
|
Projected
interest rates
|
|
·
|
Timing
of interest rate changes
|
|
·
|
Prepayment
speeds on the loans held and mortgage backed
securities
|
|
·
|
Anticipated
calls on financial instruments with call
options
|
|
·
|
Deposit
and loan balance fluctuations
|
|
·
|
Economic
conditions
|
|
·
|
Consumer
reaction to interest rate changes
|
|
·
|
Increasing
the amount of prime based lending
|
|
·
|
Pricing
to encourage short term loans
|
|
·
|
Reducing
the length of the Bank’s securities
portfolio
|
|
·
|
Promoting
core deposits such as checking and savings, which function to lengthen
liabilities
|
|
·
|
Increasing
long-term fixed rate borrowings or borrowings with lock out
periods
|
|
·
|
Pricing
time deposits to encourage longer
terms
|
(a)
|
An
annual meeting of shareholders of the Bank was held April 15,
2008.
|
|
(b)
- (c) Four matters were voted upon, as
follows:
|
|
(1)
|
The
shareholders approved the proposal to fix the number of directors to be
elected at nine, with 2,460,874 votes cast “For”, 39,513 votes cast
“Against”, 11,452 votes
“Abstained”.
|
|
(2)
|
The
shareholders approved the election of nine directors to serve for a
one-year term.
|
Votes
|
Votes
|
|||
Cast
|
Cast
|
|||
Director
|
“For”
|
“Withheld”
|
||
Paul
W. Brubaker
|
2,475,726
|
36,113
|
||
Aaron
L. Groff, Jr.
|
2,476,242
|
35,597
|
||
Willis
R. Lefever
|
2,483,242
|
28,597
|
||
Donald
Z. Musser
|
2,483,589
|
28,250
|
||
Bonnie
R. Sharp
|
2,484,335
|
27,504
|
||
J.
Harold Summers
|
2,483,019
|
28,820
|
||
Mark
C. Wagner
|
2,484,335
|
27,504
|
||
Paul
M. Zimmerman, Jr.
|
2,483,242
|
28,597
|
||
Thomas
H. Zinn
|
2,481,580
|
30,259
|
|
(3)
|
The
shareholders approved the adoption plan of reorganization and agreement
and plan of merger to form the holding company with 2,201,397 votes cast
“For,” 49, 683 votes cast “Against”, 5,919 votes cast “Abstained”, and
258,540 votes cast “Broker
Non-Votes”.
|
|
(4)
|
The
shareholders approved the proposal to adjourn or postpone the annual
meeting, if more time is needed to solicit additional votes, with
2,396,399 votes cast “For”, 61,331 votes cast “Against”, and 54,109 votes
cast for “Abstain.”
|
|
(d)
|
Nothing
to Report
|
Page
|
||
3
(i)
|
Articles
of Association of the Registrant, as amended
|
*
|
3
(ii)
|
By-Laws
of the Registrant, as amended
|
**
|
10.1
|
Form
of Deferred Income Agreement
|
40
|
10.2
|
2001
Employee Stock Purchase Plan
|
***
|
11
|
Statement
re computation of per share earnings
|
4
|
(Included
on page 4 herein)
|
||
31.1
|
Section
302 Chief Executive Officer Certification
|
44
|
31.2
|
Section
302 Principal Financial Officer Certification
|
45
|
32.1
|
Section
1350 Chief Executive Officer Certification
|
46
|
32.2
|
Section
1350 Principal Financial Officer Certification
|
47
|
|
*
|
Incorporated
herein by reference to Exhibit 3.1 of the Corporation’s Form 8-K12g3 filed
with the SEC on July 1, 2008.
|
|
**
|
Incorporated
herein by reference to Exhibit 3.2 of the Corporation’s Form 8-K filed
with the SEC on July 9, 2008.
|
***
|
Incorporated
herein by reference to Exhibit 99.1 of the Corporation’s Registration
Statement on Form S-8 filed with the SEC on July 9,
2008.
|
ENB FINANCIAL
CORP
|
||
(Registrant)
|
||
Dated: August
12, 2008
|
By
|
/s/ Aaron
L. Groff,
Jr.
|
Aaron
L. Groff, Jr.
|
||
Chairman
of the Board,
|
||
President
& CEO
|
||
Dated: August
12, 2008
|
By
|
/s/ Scott
E.
Lied
|
Scott
E. Lied, CPA
|
||
Senior
Vice President,
|
||
Chief
Financial Officer
|
Exhibit
No.
|
Description
|
Page
number
on
Manually
Signed
Original
|
3(i)
|
Articles
of Association of the Registrant, as amended. (Incorporated herein by
reference to the Form 8-K 12g3 filed with the SEC on July 1,
2008.)
|
|
3
(ii)
|
By-Laws
of the Registrant, as amended. (Incorporated herein by reference to the
Form 8-K filed with the SEC on July 9, 2008.)
|
|
10.1
|
Form
of Deferred Income Agreement. (Filed with this 10-Q)
|
Page
40
|
10.2
|
2001
Employee Stock Purchase Plan
|
|
11
|
Statement
re: Computation of Earnings Per Share as found on page 4 of Form 10-Q,
which is included herein.
|
Page
4
|
31.1
|
Section
302 Chief Executive Officer Certification (Required by Rule
13a-14(a)).
|
Page
44
|
31.2
|
Section
302 Principal Financial Officer Certification (Required by Rule
13a-14(a)).
|
Page
45
|
32.1
|
Section
1350 Chief Executive Officer Certification (Required by Rule
13a-14(b)).
|
Page
46
|
32.2
|
Section
1350 Principal Financial Officer Certification (Required by Rule
13a-14(b)).
|
Page
47
|