0001449794-15-000020.txt : 20150812 0001449794-15-000020.hdr.sgml : 20150812 20150812114409 ACCESSION NUMBER: 0001449794-15-000020 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20150630 FILED AS OF DATE: 20150812 DATE AS OF CHANGE: 20150812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Embassy Bancorp, Inc. CENTRAL INDEX KEY: 0001449794 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 263339011 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-53528 FILM NUMBER: 151046050 BUSINESS ADDRESS: STREET 1: 100 GATEWAY DRIVE STREET 2: SUITE 100 CITY: BETHLEHEM STATE: PA ZIP: 18017 BUSINESS PHONE: 610-882-8800 MAIL ADDRESS: STREET 1: 100 GATEWAY DRIVE STREET 2: SUITE 100 CITY: BETHLEHEM STATE: PA ZIP: 18017 10-Q 1 emyb-20150630x10q.htm 10-Q EMYB-2015_0630 10Q Q2

 

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2015 OR

 

 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________________ TO __________________

 

Commission file number 000-53528

 

 

 

Embassy Bancorp, Inc.

(Exact name of registrant as specified in its charter)

 

 

Pennsylvania

26-3339011

(State of incorporation)

(I.R.S. Employer Identification No.)

 

 

One Hundred Gateway Drive, Suite 100

Bethlehem, PA

 

18017

(Address of principal executive offices)

(Zip Code)

 

 

(610) 882-8800

(Registrant’s Telephone Number)

 

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 for such shorter period that the registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days. Yes   No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes   No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer 

Accelerated filer

Non-accelerated filer  (Do not check if a smaller reporting company) 

Smaller reporting company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 or the Exchange Act.)  Yes  No

 

Indicate the number of shares outstanding of each of the registrant’s classes of common equity, as of the latest practicable date:

 

 

 

 

COMMON STOCK

 

 

Number of shares outstanding as of August 7, 2015

($1.00 Par Value)

      7,366,874

 

  (Title Class)

(Outstanding Shares)

 

 

 

 


 

Embassy Bancorp, Inc.                                                                                                                          

 

 

Table of Contents

 

 

 

Part I – Financial Information 

 

 

Item 1 – Financial Statements 

 

Consolidated Balance Sheets (Unaudited) 

Consolidated Statements of Income (Unaudited) 

Consolidated Statements of Comprehensive Income (Unaudited) 

Consolidated Statements of Stockholders’ Equity (Unaudited) 

Consolidated Statements of Cash Flows (Unaudited) 

Notes to Consolidated Financial Statements (Unaudited) 

 

 

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations 

28 

 

 

Item 3 – Quantitative and Qualitative Disclosures About Market Risk 

38 

 

 

Item 4 – Controls and Procedures 

38 

 

 

Part II - Other Information 

39 

 

 

Item 1 - Legal Proceedings 

39 

 

 

Item 1A - Risk Factors 

39 

 

 

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds 

39 

 

 

Item 3 - Defaults Upon Senior Securities 

39 

 

 

Item 4 – Mine Safety Disclosures 

39 

 

 

Item 5 - Other Information 

39 

 

 

Item 6 - Exhibits 

40 

 

   

 

   

 

   

 

2

 


 

Embassy Bancorp, Inc.                                                                                                                          

 

Part I – Financial Information

 

Item 1 – Financial Statements

 

Consolidated Balance Sheets (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30,

 

December 31,

ASSETS

2015

 

2014

 

(In Thousands, Except Share Data)

Cash and due from banks

$

15,446 

 

$

14,779 

Interest bearing demand deposits with banks

 

10 

 

 

611 

Federal funds sold

 

 -

 

 

1,000 

Cash and Cash Equivalents

 

15,456 

 

 

16,390 

Interest bearing time deposits

 

250 

 

 

250 

Securities available for sale

 

83,727 

 

 

77,197 

Restricted investment in bank stock

 

2,512 

 

 

784 

Loans receivable, net of allowance for loan losses of $5,700 in 2015; $5,614 in 2014

 

651,066 

 

 

604,967 

Premises and equipment, net of accumulated depreciation

 

1,491 

 

 

1,515 

Bank owned life insurance

 

12,127 

 

 

11,938 

Accrued interest receivable

 

1,638 

 

 

1,599 

Other real estate owned

 

1,201 

 

 

1,106 

Other assets

 

3,596 

 

 

3,348 

Total Assets

$

773,064 

 

$

719,094 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

Liabilities:

 

 

 

 

 

Deposits:

 

 

 

 

 

Non-interest bearing

$

75,714 

 

$

68,467 

Interest bearing

 

543,378 

 

 

543,201 

Total Deposits

 

619,092 

 

 

611,668 

Securities sold under agreements to repurchase

 

33,795 

 

 

30,304 

Short-term borrowings

 

44,440 

 

 

9,000 

Long-term borrowings

 

6,355 

 

 

1,900 

Accrued interest payable

 

337 

 

 

349 

Other liabilities

 

5,149 

 

 

4,541 

Total Liabilities

 

709,168 

 

 

657,762 

Stockholders' Equity:

 

 

 

 

 

Common stock, $1 par value; authorized 20,000,000 shares;

 

 

 

 

 

2015 issued 7,366,874 shares; outstanding 7,366,874 shares;

 

 

 

 

 

2014 issued 7,357,752 shares; outstanding 7,357,752 shares

 

7,367 

 

 

7,358 

Surplus

 

24,136 

 

 

24,024 

Retained earnings

 

31,368 

 

 

28,485 

Accumulated other comprehensive income

 

1,025 

 

 

1,465 

Total Stockholders' Equity

 

63,896 

 

 

61,332 

Total Liabilities and Stockholders' Equity

$

773,064 

 

$

719,094 

 

 

 

 

See notes to consolidated financial statements.

3

 


 

Embassy Bancorp, Inc.                                                                                                                          

 

Consolidated Statements of Income (Unaudited) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2015

 

2014

 

2015

 

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In Thousands, Except Per Share Data)

 

INTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans receivable, including fees

 

$

6,332 

 

$

5,939 

 

$

12,627 

 

$

11,723 

 

Securities, taxable

 

 

207 

 

 

195 

 

 

414 

 

 

391 

 

Securities, non-taxable

 

 

304 

 

 

334 

 

 

607 

 

 

617 

 

Federal funds sold, and other

 

 

15 

 

 

18 

 

 

64 

 

 

37 

 

Interest on time deposits

 

 

 

 

 

 

 

 

 

Total Interest Income

 

 

6,859 

 

 

6,491 

 

 

13,713 

 

 

12,777 

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

694 

 

 

674 

 

 

1,367 

 

 

1,316 

 

Securities sold under agreements to repurchase

 

 

 

 

 

 

 

 

 

Short-term borrowings

 

 

28 

 

 

 -

 

 

43 

 

 

 

Long-term borrowings

 

 

33 

 

 

69 

 

 

68 

 

 

142 

 

Total Interest Expense

 

 

760 

 

 

748 

 

 

1,487 

 

 

1,469 

 

Net Interest Income

 

 

6,099 

 

 

5,743 

 

 

12,226 

 

 

11,308 

 

PROVISION FOR LOAN LOSSES

 

 

120 

 

 

105 

 

 

142 

 

 

210 

 

Net Interest Income after
   Provision for Loan Losses

 

 

5,979 

 

 

5,638 

 

 

12,084 

 

 

11,098 

 

OTHER INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit card processing fees

 

 

412 

 

 

356 

 

 

775 

 

 

689 

 

Other service fees

 

 

173 

 

 

169 

 

 

332 

 

 

320 

 

Bank owned life insurance

 

 

91 

 

 

54 

 

 

189 

 

 

121 

 

Gain on sale of securities, net

 

 

 -

 

 

 -

 

 

139 

 

 

31 

 

Profit (loss) on sale of other real estate owned

 

 

 

 

(9)

 

 

 

 

(3)

 

Impairment on other real estate owned

 

 

 -

 

 

 -

 

 

(42)

 

 

(9)

 

Total Other Income

 

 

677 

 

 

570 

 

 

1,400 

 

 

1,149 

 

OTHER EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

1,717 

 

 

1,804 

 

 

3,459 

 

 

3,600 

 

Occupancy and equipment

 

 

594 

 

 

615 

 

 

1,223 

 

 

1,244 

 

Data processing

 

 

444 

 

 

320 

 

 

803 

 

 

625 

 

Credit card processing

 

 

393 

 

 

318 

 

 

747 

 

 

619 

 

Advertising and promotion

 

 

381 

 

 

280 

 

 

673 

 

 

530 

 

Professional fees

 

 

133 

 

 

144 

 

 

255 

 

 

264 

 

FDIC insurance

 

 

78 

 

 

98 

 

 

165 

 

 

198 

 

Insurance

 

 

13 

 

 

14 

 

 

27 

 

 

27 

 

Loan & real estate

 

 

82 

 

 

45 

 

 

126 

 

 

106 

 

Charitable contributions

 

 

142 

 

 

127 

 

 

351 

 

 

321 

 

Other real estate owned expenses

 

 

 

 

10 

 

 

40 

 

 

17 

 

Other

 

 

341 

 

 

286 

 

 

559 

 

 

501 

 

Total Other Expenses

 

 

4,322 

 

 

4,061 

 

 

8,428 

 

 

8,052 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before Income Taxes

 

 

2,334 

 

 

2,147 

 

 

5,056 

 

 

4,195 

 

INCOME TAX EXPENSE

 

 

656 

 

 

599 

 

 

1,437 

 

 

1,175 

 

Net Income

 

$

1,678 

 

$

1,548 

 

$

3,619 

 

$

3,020 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BASIC EARNINGS PER SHARE

 

$

0.23 

 

$

0.21 

 

$

0.49 

 

$

0.41 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DILUTED EARNINGS PER SHARE

 

$

0.23 

 

$

0.21 

 

$

0.49 

 

$

0.41 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DIVIDENDS PER SHARE

 

$

0.10 

 

$

0.06 

 

$

0.10 

 

$

0.06 

 

 

See notes to consolidated financial statements

 

4

 


 

Embassy Bancorp, Inc.                                                                                                                          

 

Consolidated Statements of Comprehensive Income (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

(In Thousands)

Net Income

$

 

 

1,678 

 

$

 

 

1,548 

Change in Accumulated Other Comprehensive Income:

 

 

 

 

 

 

 

 

 

Unrealized holding (loss) gain on securities available for sale

 

(865)

 

 

 

 

722 

 

 

Less: reclassification adjustment for realized gains

 

 -

 

 

 

 

 -

 

 

 

 

(865)

 

 

 

 

722 

 

 

Income tax effect

 

294 

 

 

 

 

(245)

 

 

Net unrealized (loss) gain

 

(571)

 

 

 

 

477 

 

 

Other comprehensive (loss) gain, net of tax

 

 

 

(571)

 

 

 

 

477 

Comprehensive Income

$

 

 

1,107 

 

$

 

 

2,025 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

(In Thousands)

 

 

 

 

 

 

 

 

 

 

Net Income

$

 

 

3,619 

 

$

 

 

3,020 

Change in Accumulated Other Comprehensive Income:

 

 

 

 

 

 

 

 

 

Unrealized holding (loss) gain on securities available for sale

 

(527)

 

 

 

 

1,152 

 

 

Less: reclassification adjustment for realized gains

 

(139)

 

 

 

 

(31)

 

 

 

 

(666)

 

 

 

 

1,121 

 

 

Income tax effect

 

226 

 

 

 

 

(381)

 

 

Net unrealized (loss) gain

 

(440)

 

 

 

 

740 

 

 

Other comprehensive (loss) gain, net of tax

 

 

 

(440)

 

 

 

 

740 

Comprehensive Income

$

 

 

3,179 

 

$

 

 

3,760 

 

See notes to consolidated financial statements.

 

 

5

 


 

Embassy Bancorp, Inc.                                                                                                                          

 

Consolidated Statements of Stockholders’ Equity (Unaudited)

 

Six Months Ended June 30, 2015 and 2014 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

Surplus

 

Retained Earnings

 

Accumulated Other Comprehensive Income

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In Thousands, Except Share and Per Share Data)

BALANCE - DECEMBER 31, 2013

$

7,324 

 

$

23,671 

 

$

22,520 

 

$

540 

 

$

54,055 

Net income

 

 -

 

 

 -

 

 

3,020 

 

 

 -

 

 

3,020 

Other comprehensive income, net of tax

 

 -

 

 

 -

 

 

 -

 

 

740 

 

 

740 

Dividend declared, $.06 per share

 

 -

 

 

 -

 

 

(440)

 

 

 -

 

 

(440)

Compensation expense recognized on 
   stock options

 

 -

 

 

48 

 

 

 -

 

 

 -

 

 

48 

Common stock grants to directors,
   10,209 shares

 

10 

 

 

67 

 

 

 -

 

 

 -

 

 

77 

BALANCE - JUNE 30, 2014

$

7,334 

 

$

23,786 

 

$

25,100 

 

$

1,280 

 

$

57,500 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE - DECEMBER 31, 2014

$

7,358 

 

$

24,024 

 

$

28,485 

 

$

1,465 

 

$

61,332 

Net income

 

 -

 

 

 -

 

 

3,619 

 

 

 -

 

 

3,619 

Other comprehensive loss, net of tax

 

 -

 

 

 -

 

 

 -

 

 

(440)

 

 

(440)

Dividend declared, $.10 per share

 

 -

 

 

 -

 

 

(736)

 

 

 -

 

 

(736)

Compensation expense recognized on 
   stock options

 

 -

 

 

25 

 

 

 -

 

 

 -

 

 

25 

Common stock grants to directors,
   9,122 shares

 

 

 

87 

 

 

 -

 

 

 -

 

 

96 

BALANCE - JUNE 30, 2015

$

7,367 

 

$

24,136 

 

$

31,368 

 

$

1,025 

 

$

63,896 

 

See notes to consolidated financial statements.

 

 

6

 


 

Embassy Bancorp, Inc.                                                                                                                          

 

Consolidated Statements of Cash Flows (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

 

2015

 

2014

 

 

 

 

 

 

 

(In Thousands)

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

Net income

$

3,619 

 

$

3,020 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Provision for loan losses

 

142 

 

 

210 

Amortization (accretion) of deferred loan costs

 

12 

 

 

(1)

Depreciation and amortization

 

306 

 

 

340 

Net amortization of investment security premiums and discounts

 

105 

 

 

81 

Stock compensation expense

 

25 

 

 

48 

Net realized (gain) loss on sale of other real estate owned

 

(7)

 

 

Impairment on other real estate owned

 

42 

 

 

Income on bank owned life insurance

 

(189)

 

 

(121)

Net realized gain on sale of securities available for sale

 

(139)

 

 

(31)

Increase in accrued interest receivable

 

(39)

 

 

(59)

Increase in other assets

 

(22)

 

 

(338)

(Decrease) increase in accrued interest payable

 

(12)

 

 

86 

(Decrease) increase in other liabilities

 

(20)

 

 

648 

Net Cash Provided by Operating Activities

 

3,823 

 

 

3,895 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

Purchases of securities available for sale

 

(13,869)

 

 

(13,799)

Maturities, calls and principal repayments of securities available for sale

 

981 

 

 

2,509 

Proceeds from sales of securities available for sale

 

5,726 

 

 

528 

Net increase in loans

 

(46,448)

 

 

(20,225)

Net redemption (purchases) of restricted investment in bank stock

 

(1,728)

 

 

772 

Net maturities of interest bearing time deposits

 

 -

 

 

492 

Proceeds from sale of other real estate owned

 

53 

 

 

46 

Purchases of premises and equipment

 

(282)

 

 

(82)

Net Cash Used in Investing Activities

 

(55,567)

 

 

(29,759)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

Net increase in deposits

 

7,424 

 

 

37,263 

Net increase (decrease) in securities sold under agreements to repurchase

 

3,491 

 

 

(661)

Increase (decrease) in short-term borrowed funds

 

35,440 

 

 

(10,000)

Proceeds from long-term borrowed funds

 

5,455 

 

 

 

Payments of long-term borrowed funds

 

(1,000)

 

 

(500)

Net Cash Provided by Financing Activities

 

50,810 

 

 

26,102 

Net (Decrease) Increase in Cash and Cash Equivalents

 

(934)

 

 

238 

CASH AND CASH EQUIVALENTS - BEGINNING

 

16,390 

 

 

17,831 

CASH AND CASH EQUIVALENTS - ENDING

$

15,456 

 

$

18,069 

 

 

 

 

 

 

SUPPLEMENTARY CASH FLOWS INFORMATION

 

 

 

 

 

Interest paid

$

1,500 

 

$

1,383 

 

 

 

 

 

 

Income taxes paid

$

1,560 

 

$

1,180 

 

 

 

 

 

 

Other real estate sold through bank financing

$

 -

 

$

58 

 

 

 

 

 

 

Other real estate acquired in settlement of loans

$

195 

 

$

 -

 

See notes to consolidated financial statements.

 

7

 


 

Embassy Bancorp, Inc.                                                                                                                          

 

Notes to Consolidated Financial Statements (Unaudited)

 

Note 1 – Basis of Presentation

 

Embassy Bancorp, Inc. (the “Company”) is a Pennsylvania corporation organized in 2008 and registered as a bank holding company pursuant to the Bank Holding Company Act of 1956, as amended (the “BHC Act”). The Company was formed for purposes of acquiring Embassy Bank For The Lehigh Valley (the “Bank”) in connection with the reorganization of the Bank into a bank holding company structure, which was consummated on November 11, 2008. Accordingly, the Company owns all of the capital stock of the Bank, giving the organization more flexibility in meeting its capital needs as the Company continues to grow. Embassy Holdings, LLC (the “LLC”) is a wholly-owned subsidiary of the Bank organized to engage in the holding of property acquired by the Bank in satisfaction of debts previously contracted.  As such, the consolidated financial statements contained herein include the accounts of the Company, the Bank and the LLC. All significant intercompany transactions and balances have been eliminated.

 

The Bank, which is the Company’s principal operating subsidiary, was originally incorporated as a Pennsylvania bank on May 11, 2001 and opened its doors on November 6, 2001. It was formed by a group of local business persons and professionals with significant prior experience in community banking in the Lehigh Valley area of Pennsylvania, the Bank’s primary market area.

 

The accompanying unaudited financial statements have been prepared in accordance with United States of America generally accepted accounting principles (“US GAAP”) for interim financial information and in accordance with instructions for Form 10-Q and Rule 10-01 of the Securities and Exchange Commission Regulation S-X. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015.

 

The consolidated financial statements presented in this report should be read in conjunction with the audited consolidated financial statements and the accompanying notes for the year ended December 31, 2014, included in the Company’s Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 30, 2015.

 

In preparing these consolidated financial statements, the Company evaluated the events and transactions that occurred after June 30, 2015 through the date these consolidated financial statements were issued.

 

Certain amounts in the 2014 financial statements may have been reclassified to conform to 2015 presentation. These reclassifications had no effect on 2014 net income.

 

 

Note 2 - Summary of Significant Accounting Policies

 

The significant accounting policies of the Company as applied in the interim financial statements presented are substantially the same as those followed on an annual basis as presented in the Company’s Form 10-K for the year ended December 31, 2014.

 

Note 3 – Stockholders’ Equity

 

On November 11, 2008, the Company consummated its acquisition of Embassy Bank For The Lehigh Valley pursuant to a Plan of Merger and Reorganization dated April 18, 2008, pursuant to which the Bank was reorganized into a bank holding company structure. At the effective time of the reorganization, each share of common stock of Embassy Bank For The Lehigh Valley issued and outstanding was automatically converted into one share of Company common stock. The issuance of Company common stock in connection with the reorganization was exempt from registration pursuant to Section 3(a)(12) of the Securities Act of 1933, as amended.

 

Note 4 – Stock Incentive Plan

 

At the Company’s annual meeting on June 16, 2010, the shareholders approved the Embassy Bancorp, Inc. 2010 Stock Incentive Plan (the “SIP”).  The SIP authorizes the Board of Directors, or a committee authorized by the Board of Directors, to award a stock based incentive to (i) designated officers (including officers who are directors) and other designated employees at the Company and its subsidiaries, and (ii) non-employee members of the Board of Directors and advisors and consultants to the Company and its subsidiaries.  The Board of Directors believes that the SIP will encourage the designated participants to contribute materially to the growth of the Company. The SIP provides for stock based incentives in the form of incentive stock options as provided in Section 422 of the Internal Revenue Code of 1986, non-qualified stock options, stock appreciation rights, restricted stock and deferred stock awards.  The term of the option, the amount of time for the option to vest after grant, if any, and other terms and limitations will be determined at the time of grant. Options granted under the SIP may not have an exercise period that is more than ten years from the time the option is granted. 

8

 


 

Embassy Bancorp, Inc.                                                                                                                          

 

Notes to Consolidated Financial Statements (Unaudited)

 

 

At inception, the aggregate number of shares available for issuance under the SIP was 500,000. The SIP provides for appropriate adjustments in the number and kind of shares available for grant or subject to outstanding awards under the SIP to avoid dilution in the event of merger, stock splits, stock dividends or other changes in the capitalization of the Company. The SIP expires on June 15, 2020. There were no awards granted under the SIP for the years ended December 31, 2011 and 2010. In January 2015 and 2014, February 2013 and 2012, the Company granted 9,122, 10,209, 8,764, and 7,992 shares of restricted stock, respectively, to certain members of its Board of Directors as compensation for their service in 2014, 2013, 2012 and 2011, respectively, in accordance with the Company’s Non-employee Directors Compensation program adopted in October of 2010. Such compensation was accrued for as of December 31, 2014, 2013, 2012 and 2011. In January 2014, February 2013 and 2012, the Company also granted stock options to purchase 29,663, 29,742 and 52,611 shares of stock to certain executive officers in accordance with their respective employment agreements. No stock options were granted in the six months ended June 30, 2015. Stock compensation expense related to the options granted was $10 thousand and $25 thousand for the three and six months ended June 30, 2015, respectively, and $24 thousand and $48 thousand for the three and six months ended June 30, 2014, respectively.  At June 30, 2015, approximately $48 thousand of unrecognized cost related to stock options granted in 2014 and 2013 will be recognized over the next 1.55 and 0.65 years, respectively.  The fair value of the options granted in 2014, 2013 and 2012 was determined with the following weighted average assumptions: dividend yield of 0%, risk free interest rate of 2.30%, 1.34% and 1.43%, respectively, expected life of 6.0 years, 6.0 years and 7.5 years, respectively, and expected volatility of 28.93%, 28.79% and 31.10%, respectively.  The weighted average fair value of options granted in 2014, 2013 and 2012 was $2.46 per share, $2.14 per share and $2.56 per share, respectively.  At June 30, 2015, there were 351,897 shares available for issuance under the SIP.

 

Note 5 – Other Comprehensive Income (Loss)

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities, are reported as a separate component of the equity section of the balance sheet, such items, along with net income, are components of comprehensive income (loss).

The components of other comprehensive income (loss), both before tax and net of tax, are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

 

2015

 

2014

 

 

(In Thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Before

 

Tax

 

Net of

 

Before

 

Tax

 

Net of

 

 

Tax

 

Effect

 

Tax

 

Tax

 

Effect

 

Tax

Change in accumulated other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding (losses) gains on securities
   available for sale

 

$

(865)

 

$

294 

 

$

(571)

 

$

722 

 

$

(245)

 

$

477 

Reclassification adjustments for gains on securities
   transactions included in net income (A),(B)

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Total other comprehensive (loss) income

 

$

(865)

 

$

294 

 

$

(571)

 

$

722 

 

$

(245)

 

$

477 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

 

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In Thousands)

 

 

Before

 

Tax

 

Net of

 

Before

 

Tax

 

Net of

 

 

Tax

 

Effect

 

Tax

 

Tax

 

Effect

 

Tax

Change in accumulated other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding (losses) gains on securities
   available for sale

 

$

(527)

 

$

179 

 

$

(348)

 

$

1,152 

 

$

(391)

 

$

761 

Reclassification adjustments for gains on securities
   transactions included in net income (A),(B)

 

 

(139)

 

 

47 

 

 

(92)

 

 

(31)

 

 

10 

 

 

(21)

Total other comprehensive (loss) income

 

$

(666)

 

$

226 

 

$

(440)

 

$

1,121 

 

$

(381)

 

$

740 

 

A.

Realized gains on securities transactions included in gain on sales of securities, net, in the accompanying Consolidated Statements of Income.

B.

Tax effect included in income tax expense in the accompanying Consolidated Statements of Income.

 

9

 


 

Embassy Bancorp, Inc.                                                                                                                          

 

Notes to Consolidated Financial Statements (Unaudited)

 

 

There were no realized gains on securities available-for-sale for the three months ended June 30, 2015 and 2014.  A summary of the realized gains on securities available for sale, net of tax, for the six months ended June 30, 2015 and 2014 is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

 

 

 

2015

 

 

2014

 

 

 

 

 

 

 

 

 

 

(In Thousands)

Securities available for sale:

 

 

 

 

 

 

Realized gains on securities transactions

 

$

(139)

 

$

(31)

Income taxes

 

 

47 

 

 

10 

Net of tax

 

$

(92)

 

$

(21)

 

A summary of the accumulated other comprehensive income, net of tax, is as follows:

 

 

 

 

 

 

 

Securities

 

 

Available

 

 

for Sale

Three Months Ended June 30, 2015 and 2014

 

(In Thousands)

Balance March 31, 2015

 

$

1,596 

Other comprehensive loss before reclassifications

 

 

(571)

Amounts reclassified from accumulated other
   comprehensive income

 

 

 -

Net other comprehensive loss during the period

 

 

(571)

Balance June 30, 2015

 

$

1,025 

 

 

 

 

Balance March 31, 2014

 

$

803 

Other comprehensive income before reclassifications

 

 

477 

Amounts reclassified from accumulated other
   comprehensive income

 

 

 -

Net other comprehensive income during the period

 

 

477 

Balance June 30, 2014

 

$

1,280 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2015 and 2014

 

 

 

Balance January 1, 2015

 

$

1,465 

Other comprehensive loss before reclassifications

 

 

(348)

Amounts reclassified from accumulated other
   comprehensive income

 

 

(92)

Net other comprehensive loss during the period

 

 

(440)

Balance June 30, 2015

 

$

1,025 

 

 

 

 

Balance January 1, 2014

 

$

540 

Other comprehensive income before reclassifications

 

 

761 

Amounts reclassified from accumulated other
   comprehensive income

 

 

(21)

Net other comprehensive income during the period

 

 

740 

Balance June 30, 2014

 

$

1,280 

 

 

 

 

 

 

 

 

10

 


 

Embassy Bancorp, Inc.                                                                                                                          

 

Notes to Consolidated Financial Statements (Unaudited)

 

 

Note 6 – Basic and Diluted Earnings per Share

 

Basic earnings per share represents income available to common stockholders divided by the weighted-average number of common shares outstanding during the period, as adjusted for stock dividends and splits. Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustments to income that would result from the assumed issuance. Potential common shares that may be issued by the Company relate solely to outstanding stock options and are determined using the treasury stock method.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars In Thousands, Except Per Share Data)

 

 

Net income

 

$

1,678 

 

$

1,548 

 

$

3,619 

 

$

3,020 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

7,367 

 

 

7,333 

 

 

7,366 

 

 

7,332 

 

 

Dilutive effect of potential common shares, stock options

 

 

33 

 

 

 

 

32 

 

 

 

 

Diluted weighted average common shares outstanding

 

 

7,400 

 

 

7,340 

 

 

7,398 

 

 

7,338 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

0.23 

 

$

0.21 

 

$

0.49 

 

$

0.41 

 

 

Diluted earnings per share

 

$

0.23 

 

$

0.21 

 

$

0.49 

 

$

0.41 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options of 9,122 and 94,752 for the three and six months ended June 30, 2015 and June 30, 2014, respectively, were not considered in computing diluted earnings per common share because they are not dilutive to earnings. 

 

Note 7 – Guarantees

 

The Company, through the Bank, does not issue any guarantees that would require liability recognition or disclosure, other than its standby letters of credit. Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Generally, all letters of credit, when issued, have expiration dates within one year. The credit risk involved in issuing letters of credit is essentially the same as those that are involved in extending loan facilities to customers. The Bank generally holds collateral and/or personal guarantees supporting these commitments. The Company had $4.2 million of standby letters of credit outstanding as of June 30, 2015. The approximate value of underlying collateral upon liquidation that would be expected to cover this maximum potential exposure was $4.1 million. Management does not consider the current amount of the liability as of June 30, 2015 for guarantees under standby letters of credit issued to be material.

11

 


 

Embassy Bancorp, Inc.                                                                                                                          

 

Notes to Consolidated Financial Statements (Unaudited)

 

Note 8 – Short-term and Long-term Borrowings

 

Securities sold under agreements to repurchase, federal funds purchased and Federal Home Loan Bank of Pittsburgh (“FHLB”) short term advances generally represent overnight or less than twelve month borrowings. Long term advances from the FHLB are for periods of twelve months or more and are generally less than sixty months. The Bank has an agreement with the FHLB which allows for borrowings up to a percentage of qualifying assets. At June 30, 2015, the Bank had a maximum borrowing capacity for short-term and long-term advances of approximately $370.5 million.  This borrowing capacity with the FHLB includes a line of credit of $150.0 million. Short-term loans outstanding with FHLB totaled $44.4 million as of June 30, 2015 and $9.0 million were outstanding as of December 31, 2014. The increase in short-term loans outstanding with the FHLB was primarily used to fund loan growth and investment security purchases. Long-term advances outstanding with FHLB totaled $5.5 million as of June 30, 2015 and no long-term advances were outstanding as of December 31, 2014. All FHLB borrowings are secured by qualifying assets of the Bank.

 

The Bank has a federal funds line of credit with the Atlantic Community Bankers Bank (“ACBB”) of approximately $10.0 million, of which none was outstanding at June 30, 2015 and December 31, 2014. Advances from this line are unsecured.

 

The Company has two lines of credit with Univest Bank and Trust Co. (“Univest”) totaling $10 million. As of June 30, 2015 and December 31, 2014, the outstanding balance was $900 thousand and $1.9 million, respectively. Advances from these lines of credit are secured by 833,333 shares of Bank common stock. Under the terms of the loan agreement, the Bank is required to remain well capitalized. The proceeds of the loan were primarily used for the holding company’s investment in the Bank, thus providing additional capital to support the Bank’s growth.

 

The components of long-term borrowings with the FHLB at June 30, 2015 are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2015

 

 

 

 

 

 

 

(Dollars in Thousands)

 

 

 

 

 

 

Maturity Date

Interest Rate

 

 

Outstanding

 

 

 

 

 

 

April 2016

0.26%

 

$

1,667 

 

 

 

 

 

 

April 2017

0.48%

 

 

917 

 

 

 

 

 

 

April 2018

0.69%

 

 

945 

 

 

 

 

 

 

April 2019

0.88%

 

 

959 

 

 

 

 

 

 

April 2020

1.06%

 

 

967 

 

 

 

 

 

 

Total Outstanding Borrowings

 

 

$

5,455 

 

 

 

 

The components of long-term borrowings with Univest at June 30, 2015 and December 31, 2014 are as follows: