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EX-31.1 - EX-31.1 - Embassy Bancorp, Inc.emyb-20150930xex311.htm
EX-31.2 - EX-31.2 - Embassy Bancorp, Inc.emyb-20150930xex312.htm
EX-32 - EX-32 - Embassy Bancorp, Inc.emyb-20150930xex32.htm

 

 

 

 

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 SEPTEMBER 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 November 6, 2015

($1.00 Par Value)

      7,383,794

 

  (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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

December 31,

ASSETS

2015

 

2014

 

(In Thousands, Except Share Data)

Cash and due from banks

$

15,087 

 

$

14,779 

Interest bearing demand deposits with banks

 

1,514 

 

 

611 

Federal funds sold

 

1,000 

 

 

1,000 

Cash and Cash Equivalents

 

17,601 

 

 

16,390 

Interest bearing time deposits

 

 -

 

 

250 

Securities available for sale

 

79,655 

 

 

77,197 

Restricted investment in bank stock

 

2,939 

 

 

784 

Loans receivable, net of allowance for loan losses of $5,964 in 2015; $5,614 in 2014

 

679,065 

 

 

604,967 

Premises and equipment, net of accumulated depreciation

 

1,462 

 

 

1,515 

Bank owned life insurance

 

12,188 

 

 

11,938 

Accrued interest receivable

 

1,653 

 

 

1,599 

Other real estate owned

 

1,405 

 

 

1,106 

Other assets

 

3,601 

 

 

3,348 

Total Assets

$

799,569 

 

$

719,094 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

Liabilities:

 

 

 

 

 

Deposits:

 

 

 

 

 

Non-interest bearing

$

83,172 

 

$

68,467 

Interest bearing

 

550,855 

 

 

543,201 

Total Deposits

 

634,027 

 

 

611,668 

Securities sold under agreements to repurchase

 

32,761 

 

 

30,304 

Short-term borrowings

 

56,420 

 

 

9,000 

Long-term borrowings

 

5,038 

 

 

1,900 

Accrued interest payable

 

430 

 

 

349 

Other liabilities

 

4,631 

 

 

4,541 

Total Liabilities

 

733,307 

 

 

657,762 

Stockholders' Equity:

 

 

 

 

 

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

 

 

 

 

 

2015 issued 7,383,794 shares; outstanding 7,383,794 shares;

 

 

 

 

 

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

 

7,384 

 

 

7,358 

Surplus

 

24,308 

 

 

24,024 

Retained earnings

 

33,240 

 

 

28,485 

Accumulated other comprehensive income

 

1,330 

 

 

1,465 

Total Stockholders' Equity

 

66,262 

 

 

61,332 

Total Liabilities and Stockholders' Equity

$

799,569 

 

$

719,094 

 

 

 

 

See notes to consolidated financial statements.

3

 


 

Embassy Bancorp, Inc.                                                                                                                          

 

Consolidated Statements of Income (Unaudited) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2015

 

2014

 

2015

 

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In Thousands, Except Per Share Data)

 

INTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans receivable, including fees

 

$

6,736 

 

$

6,058 

 

$

19,363 

 

$

17,781 

 

Securities, taxable

 

 

198 

 

 

184 

 

 

612 

 

 

575 

 

Securities, non-taxable

 

 

296 

 

 

332 

 

 

903 

 

 

949 

 

Federal funds sold, and other

 

 

25 

 

 

19 

 

 

89 

 

 

56 

 

Interest on time deposits

 

 

 -

 

 

 

 

 

 

10 

 

Total Interest Income

 

 

7,255 

 

 

6,594 

 

 

20,968 

 

 

19,371 

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

732 

 

 

694 

 

 

2,099 

 

 

2,010 

 

Securities sold under agreements to repurchase

 

 

 

 

 

 

13 

 

 

13 

 

Short-term borrowings

 

 

53 

 

 

 

 

96 

 

 

 

Long-term borrowings

 

 

25 

 

 

65 

 

 

93 

 

 

207 

 

Total Interest Expense

 

 

814 

 

 

768 

 

 

2,301 

 

 

2,237 

 

Net Interest Income

 

 

6,441 

 

 

5,826 

 

 

18,667 

 

 

17,134 

 

PROVISION FOR LOAN LOSSES

 

 

270 

 

 

40 

 

 

412 

 

 

250 

 

Net Interest Income after
   Provision for Loan Losses

 

 

6,171 

 

 

5,786 

 

 

18,255 

 

 

16,884 

 

OTHER INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit card processing fees

 

 

424 

 

 

362 

 

 

1,199 

 

 

1,051 

 

Other service fees

 

 

172 

 

 

172 

 

 

504 

 

 

492 

 

Bank owned life insurance

 

 

86 

 

 

70 

 

 

275 

 

 

191 

 

Gain on sale of securities, net

 

 

26 

 

 

 -

 

 

165 

 

 

31 

 

Profit on sale of other real estate owned

 

 

 

 

 

 

14 

 

 

 

Impairment on other real estate owned

 

 

(62)

 

 

 -

 

 

(104)

 

 

(9)

 

Total Other Income

 

 

653 

 

 

611 

 

 

2,053 

 

 

1,760 

 

OTHER EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

1,684 

 

 

1,753 

 

 

5,143 

 

 

5,353 

 

Occupancy and equipment

 

 

597 

 

 

613 

 

 

1,820 

 

 

1,857 

 

Data processing

 

 

375 

 

 

322 

 

 

1,178 

 

 

947 

 

Credit card processing

 

 

405 

 

 

321 

 

 

1,152 

 

 

940 

 

Advertising and promotion

 

 

348 

 

 

277 

 

 

1,021 

 

 

807 

 

Professional fees

 

 

125 

 

 

127 

 

 

380 

 

 

391 

 

FDIC insurance

 

 

100 

 

 

92 

 

 

265 

 

 

290 

 

Insurance

 

 

13 

 

 

13 

 

 

40 

 

 

40 

 

Loan & real estate

 

 

71 

 

 

59 

 

 

197 

 

 

165 

 

Charitable contributions

 

 

143 

 

 

133 

 

 

494 

 

 

454 

 

Other real estate owned expenses

 

 

11 

 

 

66 

 

 

51 

 

 

83 

 

Other

 

 

314 

 

 

240 

 

 

873 

 

 

741 

 

Total Other Expenses

 

 

4,186 

 

 

4,016 

 

 

12,614 

 

 

12,068 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before Income Taxes

 

 

2,638 

 

 

2,381 

 

 

7,694 

 

 

6,576 

 

INCOME TAX EXPENSE

 

 

766 

 

 

672 

 

 

2,203 

 

 

1,847 

 

Net Income

 

$

1,872 

 

$

1,709 

 

$

5,491 

 

$

4,729 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BASIC EARNINGS PER SHARE

 

$

0.25 

 

$

0.23 

 

$

0.75 

 

$

0.64 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DILUTED EARNINGS PER SHARE

 

$

0.25 

 

$

0.23 

 

$

0.74 

 

$

0.64 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 September 30,

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

(In Thousands)

Net Income

$

 

 

1,872 

 

$

 

 

1,709 

Change in Accumulated Other Comprehensive Income:

 

 

 

 

 

 

 

 

 

Unrealized holding gain on securities available for sale

 

487 

 

 

 

 

174 

 

 

Less: reclassification adjustment for realized gains

 

(26)

 

 

 

 

 -

 

 

 

 

461 

 

 

 

 

174 

 

 

Income tax effect

 

(156)

 

 

 

 

(59)

 

 

Net unrealized gain

 

305 

 

 

 

 

115 

 

 

Other comprehensive gain, net of tax

 

 

 

305 

 

 

 

 

115 

Comprehensive Income

$

 

 

2,177 

 

$

 

 

1,824 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

(In Thousands)

 

 

 

 

 

 

 

 

 

 

Net Income

$

 

 

5,491 

 

$

 

 

4,729 

Change in Accumulated Other Comprehensive Income:

 

 

 

 

 

 

 

 

 

Unrealized holding (loss) gain on securities available for sale

 

(40)

 

 

 

 

1,326 

 

 

Less: reclassification adjustment for realized gains

 

(165)

 

 

 

 

(31)

 

 

 

 

(205)

 

 

 

 

1,295 

 

 

Income tax effect

 

70 

 

 

 

 

(440)

 

 

Net unrealized (loss) gain

 

(135)

 

 

 

 

855 

 

 

Other comprehensive (loss) gain, net of tax

 

 

 

(135)

 

 

 

 

855 

Comprehensive Income

$

 

 

5,356 

 

$

 

 

5,584 

 

See notes to consolidated financial statements.

 

 

5

 


 

Embassy Bancorp, Inc.                                                                                                                          

 

Consolidated Statements of Stockholders’ Equity (Unaudited)

 

Nine Months Ended September 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

 

 -

 

 

 -

 

 

4,729 

 

 

 -

 

 

4,729 

Other comprehensive income, net of tax

 

 -

 

 

 -

 

 

 -

 

 

855 

 

 

855 

Dividend declared, $.06 per share

 

 -

 

 

 -

 

 

(440)

 

 

 -

 

 

(440)

Compensation expense recognized on 
   stock options

 

 -

 

 

73 

 

 

 -

 

 

 -

 

 

73 

Common stock grants to directors,
   10,209 shares

 

10 

 

 

67 

 

 

 -

 

 

 -

 

 

77 

Shares issued under Dividend Reinvestment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and Stock Purchase Plan, 14,706 shares

 

14 

 

 

115 

 

 

 -

 

 

 -

 

 

129 

BALANCE - SEPTEMBER 30, 2014

$

7,348 

 

$

23,926 

 

$

26,809 

 

$

1,395 

 

$

59,478 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE - DECEMBER 31, 2014

$

7,358 

 

$

24,024 

 

$

28,485 

 

$

1,465 

 

$

61,332 

Net income

 

 -

 

 

 -

 

 

5,491 

 

 

 -

 

 

5,491 

Other comprehensive loss, net of tax

 

 -

 

 

 -

 

 

 -

 

 

(135)

 

 

(135)

Dividend declared, $.10 per share

 

 -

 

 

 -

 

 

(736)

 

 

 -

 

 

(736)

Compensation expense recognized on 
   stock options

 

 -

 

 

34 

 

 

 -

 

 

 -

 

 

34 

Common stock grants to directors,
   9,122 shares

 

 

 

87 

 

 

 -

 

 

 -

 

 

96 

Shares issued under Dividend Reinvestment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and Stock Purchase Plan, 16,920 shares

 

17 

 

 

163 

 

 

 -

 

 

 -

 

 

180 

BALANCE - SEPTEMBER 30, 2015

$

7,384 

 

$

24,308 

 

$

33,240 

 

$

1,330 

 

$

66,262 

 

See notes to consolidated financial statements.

 

 

6

 


 

Embassy Bancorp, Inc.                                                                                                                          

 

Consolidated Statements of Cash Flows (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

2015

 

2014

 

 

 

 

 

 

 

(In Thousands)

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

Net income

$

5,491 

 

$

4,729 

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

 

 

 

 

 

Provision for loan losses

 

412 

 

 

250 

Amortization of deferred loan costs

 

29 

 

 

Depreciation and amortization

 

450 

 

 

495 

Net amortization of investment security premiums and discounts

 

163 

 

 

122 

Stock compensation expense

 

34 

 

 

73 

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

 

(14)

 

 

Impairment on other real estate owned

 

104 

 

 

Income on bank owned life insurance

 

(250)

 

 

(191)

Net realized gain on sale of securities available for sale

 

(165)

 

 

(31)

Increase in accrued interest receivable

 

(54)

 

 

(16)

Increase in other assets

 

(182)

 

 

(639)

Increase in accrued interest payable

 

81 

 

 

145 

Increase in other liabilities

 

204 

 

 

1,147 

Net Cash Provided by Operating Activities

 

6,303 

 

 

6,104 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

Purchases of securities available for sale

 

(18,956)

 

 

(13,799)

Maturities, calls and principal repayments of securities available for sale

 

5,552 

 

 

4,964 

Proceeds from sales of securities available for sale

 

10,742 

 

 

528 

Net increase in loans

 

(74,999)

 

 

(26,432)

Net (purchases) redemption of restricted investment in bank stock

 

(2,155)

 

 

147 

Net maturities of interest bearing time deposits

 

250 

 

 

1,572 

Purchase of bank owned life insurance

 

 -

 

 

(4,000)

Proceeds from sale of other real estate owned

 

53 

 

 

46 

Purchases of premises and equipment

 

(397)

 

 

(130)

Net Cash Used in Investing Activities

 

(79,910)

 

 

(37,104)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

Net increase in deposits

 

22,359 

 

 

36,150 

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

 

2,457 

 

 

(741)

Increase in short-term borrowed funds

 

47,420 

 

 

5,625 

Proceeds from long-term borrowed funds

 

6,000 

 

 

 -

Payments of long-term borrowed funds

 

(2,862)

 

 

(1,250)

Proceeds from Dividend Reinvestment Plan

 

180 

 

 

129 

Dividends paid

 

(736)

 

 

(440)

Net Cash Provided by Financing Activities

 

74,818 

 

 

39,473 

Net Increase in Cash and Cash Equivalents

 

1,211 

 

 

8,473 

CASH AND CASH EQUIVALENTS - BEGINNING

 

16,390 

 

 

17,831 

CASH AND CASH EQUIVALENTS - ENDING

$

17,601 

 

$

26,304 

 

 

 

 

 

 

SUPPLEMENTARY CASH FLOWS INFORMATION

 

 

 

 

 

Interest paid

$

2,221 

 

$

2,092 

Income taxes paid

$

2,311 

 

$

2,080 

Other real estate sold through bank financing

$

58 

 

$

57 

Deferral of gain from sale of other real estate sold through bank financing

$

56 

 

$

80 

Other real estate acquired in settlement of loans

$

518 

 

$

347 

 

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 nine months ended September 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 September 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 nine months ended September 30, 2015. Stock compensation expense related to the options granted was $10 thousand and $34 thousand for the three and nine months ended September 30, 2015 and $25 thousand and $73 thousand for the three and nine months ended September 30, 2014, respectively.  At September 30, 2015, approximately $38 thousand of unrecognized cost related to stock options granted in 2014 and 2013 will be recognized over the next 1.30 and 0.40 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 September 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 September 30,

 

 

2015

 

2014

 

 

(In Thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Before

 

Tax

 

Net of

 

Before

 

Tax

 

Net of

 

 

Tax

 

Effect

 

Tax

 

Tax

 

Effect

 

Tax

Change in accumulated other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains on securities
   available for sale

 

$

487 

 

$

(165)

 

$

322 

 

$

174 

 

$

(59)

 

$

115 

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

 

 

(26)

 

 

 

 

(17)

 

 

 -

 

 

 -

 

 

 -

Total other comprehensive income

 

$

461 

 

$

(156)

 

$

305 

 

$

174 

 

$

(59)

 

$

115 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 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

 

$

(40)

 

$

14 

 

$

(26)

 

$

1,326 

 

$

(450)

 

$

876 

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

 

 

(165)

 

 

56 

 

 

(109)

 

 

(31)

 

 

10 

 

 

(21)

Total other comprehensive (loss) income

 

$

(205)

 

$

70 

 

$

(135)

 

$

1,295 

 

$

(440)

 

$

855 

 

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)

 

A summary of the realized gains on securities available for sale, net of tax, for the three and nine months ended September 30, 2015 and 2014 are as follows:

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

 

 

 

 

 

 

 

 

(In Thousands)

Securities available for sale:

 

 

 

 

 

 

Realized gains on securities transactions

 

$

(26)

 

$

 -

Income taxes

 

 

 

 

 -

Net of tax

 

$

(17)

 

$

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

 

 

 

 

 

 

 

 

(In Thousands)

Securities available for sale:

 

 

 

 

 

 

Realized gains on securities transactions

 

$

(165)

 

$

(31)

Income taxes

 

 

56 

 

 

10 

Net of tax

 

$

(109)

 

$

(21)

 

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

 

 

 

 

 

 

 

Securities

 

 

Available

 

 

for Sale

Three Months Ended September 30, 2015 and 2014

 

(In Thousands)

Balance June 30, 2015

 

$

1,025 

Other comprehensive income before reclassifications

 

 

322 

Amounts reclassified from accumulated other
   comprehensive income

 

 

(17)

Net other comprehensive income during the period

 

 

305 

Balance September 30, 2015

 

$

1,330 

 

 

 

 

Balance June 30, 2014

 

$

1,280 

Other comprehensive income before reclassifications

 

 

115 

Amounts reclassified from accumulated other
   comprehensive income

 

 

 -

Net other comprehensive income during the period

 

 

115 

Balance September 30, 2014

 

$

1,395 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2015 and 2014

 

 

 

Balance January 1, 2015

 

$

1,465 

Other comprehensive loss before reclassifications

 

 

(26)

Amounts reclassified from accumulated other
   comprehensive income

 

 

(109)

Net other comprehensive loss during the period

 

 

(135)

Balance September 30, 2015

 

$

1,330 

 

 

 

 

Balance January 1, 2014

 

$

540 

Other comprehensive income before reclassifications

 

 

876 

Amounts reclassified from accumulated other
   comprehensive income

 

 

(21)

Net other comprehensive income during the period

 

 

855 

Balance September 30, 2014

 

$

1,395 

 

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 September 30,

 

Nine Months Ended September 30,

 

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars In Thousands, Except Per Share Data)

 

 

Net income

 

$

1,872 

 

$

1,709 

 

$

5,491 

 

$

4,729 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

7,367 

 

 

7,334 

 

 

7,366 

 

 

7,333 

 

 

Dilutive effect of potential common shares, stock options

 

 

32 

 

 

11 

 

 

31 

 

 

 

 

Diluted weighted average common shares outstanding