<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10 - Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997.
|_| 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 33-98380
---------------------------------------------------------
METROPOLITAN FINANCIAL CORP.
- -------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Ohio 34-1109469
- ----------------------------------- ------------------------
(State or Other Jurisdiction (I.R.S. Employer
Incorporation or Organization) Identification No.)
6001 Landerhaven Drive Mayfield Heights, Ohio 44124
- -------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(216) 646-1111
- -------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
------ -----
As of May 13, 1997, there were 3,525,635 shares of the Registrant's Common Stock
issued and outstanding.
1
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METROPOLITAN FINANCIAL CORP.
FORM 10-Q
QUARTER ENDED MARCH 31, 1997
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
<S> <C>
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements:
Consolidated Statements of Financial Condition as of
March 31, 1997 and December 31, 1996 ...................... 3
Consolidated Statements of Operations for the three
months ended March 31, 1997 and 1996 ...................... 4
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 1997 and 1996................. 6
Notes to Consolidated Financial Statements ................ 7-13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ................. 14-26
PART II.OTHER INFORMATION . .................................... 27
SIGNATURES .................................................... 28
</TABLE>
2
<PAGE> 3
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
METROPOLITAN FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)
March 31, December 31,
1997 1996
-------- --------
(In Thousands)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 17,085 $ 16,522
Securities available for sale (Note 3) 6,696 13,174
Mortgage-backed securities (Note 3) 70,045 56,672
Loans held for sale 9,960 8,973
Loans receivable, net (Note 4) 663,864 637,493
Federal Home Loan Bank stock, at cost 4,057 3,989
Accrued interest receivable 4,952 4,791
Premises and equipment, net 11,961 11,332
Real estate owned, net 1,589 177
Cost in excess of fair value of net
assets acquired 3,184 3,239
Cost of loan servicing rights (Note 5) 7,646 8,051
Prepaid expenses and other assets 6,015 4,663
-------- --------
Total assets $807,054 $769,076
======== ========
LIABILITIES
Deposits $658,949 $622,105
Other borrowings (Note 6) 102,174 101,874
Accrued interest payable 2,850 4,120
Official checks 3,676 3,882
Other liabilities 8,625 6,851
-------- --------
Total liabilities 776,274 738,832
-------- --------
SHAREHOLDERS' EQUITY
Common stock, no par value, 10,000,000
shares authorized, 3,525,635 shares
issued and outstanding
Additional paid-in capital 11,101 11,101
Retained earnings 19,678 18,467
Unrealized gain on securities available
for sale, net of tax 1 676
-------- --------
Total shareholders' equity 30,780 30,244
-------- --------
Total liabilities & shareholders'
equity $807,054 $769,076
======== ========
</TABLE>
See notes to consolidated financial statements.
3
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<TABLE>
<CAPTION>
METROPOLITAN FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Dollars in Thousands, except per share data)
March 31, March 31,
1997 1996
-------- -------
INTEREST INCOME
<S> <C> <C>
Interest and fees on loans $14,861 $11,456
Interest on mortgage-backed securities 1,010 614
Interest and dividends on other investments 252 248
------- -------
Total interest income 16,123 12,318
------- ------
INTEREST EXPENSE
Interest on deposits 7,930 6,547
Interest on other borrowings 1,755 1,086
------- -------
Total interest expense 9,685 7,633
------- -------
NET INTEREST INCOME 6,438 4,685
Provision for loan losses 585 307
------- -------
Net interest income after provision
for loan losses 5,853 4,378
------- -------
Non-interest income
Loan servicing income, net 295 314
Gain on sale of loans 66 103
Loan option income 48 108
Gain on sale of securities, net 89 -
Other operating income 428 397
------- -------
Total non-interest income 926 922
------- -------
Non-interest expense
Salaries and related personnel cost 2,677 2,049
Occupancy and equipment expense 692 572
Federal deposit insurance premiums 140 309
Data processing expense 143 148
Marketing expense 131 126
State franchise taxes 155 118
Amortization of intangibles 66 55
Other operating expenses 863 756
------- -------
Total non-interest expense 4,867 4,133
------- -------
</TABLE>
4
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<TABLE>
<CAPTION>
METROPOLITAN FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Dollars in Thousands, except per share data)
March 31, March 31,
1997 1996
------- -------
<S> <C> <C>
INCOME BEFORE INCOME TAXES 1,912 1,167
Provision for income taxes 701 451
------- -------
NET INCOME $ 1,211 $ 716
======= =======
Earnings per share $ 0.34 $ 0.23
======= =======
Weighted average shares outstanding 3,525,635 3,125,635
========= =========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
<TABLE>
<CAPTION>
METROPOLITAN FINANCIAL CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
March 31, March 31,
1997 1996
--------- --------
(In Thousands)
<S> <C> <C>
NET CASH PROVIDED BY (USED
FOR) OPERATING ACTIVITIES $ 769 $ (7,098)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of securities available for sale (5,029) (4,092)
Proceeds from sale of securities available
for sale 11,330 9,261
Disbursement of loan proceeds (51,898) (59,037)
Purchases of loans (17,546) (20,980)
Proceeds from loan repayments 35,470 26,069
Purchase of mortgage-backed securities
available for sale (10,574) -
Proceeds from mortgage-backed security
principal repayments and maturities 1,823 1,666
Proceeds from sale of real estate owned - 39
Purchase of premises and equipment (897) (694)
Purchase of FHLB stock - (62)
Premium paid for credit card relationships (10) -
Purchase of mortgage loan servicing rights (1) (157)
--------- --------
Net cash used for investing activities (37,332) (47,987)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposit accounts 36,826 36,281
Proceeds from borrowings 120,956 41,500
Repayment of borrowings (120,656) (26,500)
--------- --------
Net cash provided by financing
activities 37,126 51,281
--------- --------
Net change in cash and cash equivalents 563 (3,804)
Cash and cash equivalent at beginning
of period 16,522 18,170
--------- --------
Cash and cash equivalents at end
of period $ 17,085 $ 14,366
========= ========
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $10,955 $ 8,708
Income taxes - -
Transfer from loans receivable to
real estate owned 1,412 -
Loans securitized 5,393 -
</TABLE>
See notes to consolidated financial statements.
6
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METROPOLITAN FINANCIAL CORP.
Notes to Consolidated Financial Statements (Unaudited)
1. BASIS OF PRESENTATION
The consolidated financial statements of Metropolitan Financial Corp.
("Metropolitan" or "Corporation") include the accounts of the Corporation and
the accounts of its wholly-owned subsidiaries MetroCapital Corporation and
Metropolitan Savings Bank of Cleveland (the "Bank"), and its wholly-owned
subsidiaries, Kimberly Construction Company, Incorporated, and Metropolitan
Savings Service Corporation, and its wholly-owned subsidiary Metropolitan
Securities Corporation. All significant intercompany transactions have been
eliminated. In the opinion of management, the accompanying unaudited financial
statements include all adjustments (consisting only of normal recurring
accruals) which the Corporation considers necessary for a fair presentation of
(a) the results of operations for the three months ended March 31, 1997 and
1996, (b) the financial condition at March 31, 1997 and December 31, 1996; and
(c) the statement of cash flows for the three month periods ended March 31, 1997
and 1996. The results of operations for the three month period ended March 31,
1997 are not necessarily indicative of the results that may be expected for a
full year. The annual report for Metropolitan for the year ended December 31,
1996 contains consolidated financial statements and related notes which should
be read in conjunction with the accompanying consolidated financial statements.
2. ACCOUNTING POLICIES
SECURITIES: Securities classified as held to maturity are those that management
has the positive intent and ability to hold to maturity. Securities held to
maturity are stated at cost, adjusted for amortization of premiums and accretion
of discounts.
Securities classified as available for sale are those that management intends to
sell or that could be sold for liquidity, investment management, or similar
reasons, even if there is not a present intention for such sale. Securities
available for sale are carried at fair value with unrealized gains and losses
included as a separate component of shareholders' equity, net of tax. Gains or
losses on dispositions are based on net proceeds and the adjusted carrying
amount of securities sold, using the specific identification method.
LOANS: Loans held for investment are stated at the principal amount outstanding
adjusted for amortization of premium and accretion of discount using the
interest method. Sales of loans are dependent upon various factors, including
interest rate movements, deposit flows, the availability and attractiveness of
other sources of funds, loan demand by borrowers, and liquidity and capital
requirements. At March 31, 1997 and December 31, 1996, management had the intent
and the Bank had the ability to hold all loans being held for investment
purposes for the
7
<PAGE> 8
foreseeable future. Gains and losses on the sale of loans are determined by the
identified loan method and are reflected in operations at the time of sale.
ALLOWANCE FOR LOSSES ON LOANS: An allowance for losses on loans is maintained
because some loans may not be repaid in full. Increases to the allowance are
recorded by a provision for loan losses charged to expense. Estimating the risk
of loss and the amount of loss on any loan is necessarily subjective.
Accordingly, the allowance is maintained by management at a level considered
adequate to cover possible losses that are currently anticipated based on past
loss experience, general economic conditions, information about specific
borrower situations including their financial position and collateral values,
the status of impaired loans, and other factors and estimates which are subject
to change over time. While management may periodically allocate portions of the
allowance for specific problem loans, the whole allowance is available for any
loan charge-offs that occur. A loan is charged off against the allowance by
management as a loss when deemed uncollectible, although collection efforts
continue and future recoveries may occur.
Loans which are considered to be impaired are reduced to the present value of
expected future cash flows or to the fair value of collateral, by allocating a
portion of the allowance for losses on loans to such loans. If these allocations
cause the allowance for losses on loans to require an increase, such increase is
reported as a provision for loan losses. As allowed, management excludes all
consumer loans and residential single family loans with balances less than
$200,000 from classification as impaired.
A loan is classified as non-accrual when collectability is in doubt (this is
generally when the borrower is 90 days past due on contractual principal or
interest payments or when a determination is made to classify a loan as
impaired). When a loan is placed on non-accrual status, unpaid interest is
reversed. Income is subsequently recognized only to the extent that cash
payments are received. Loans are returned to accrual status when, in
management's judgment, the borrower has the ability and intent to make periodic
principal and interest payments (this generally requires that the loan be
brought current in accordance with its original contractual terms.)
EARNINGS PER SHARE: In connection with the initial public offering of stock
completed in October, 1996, the Board of Directors approved a 3,125,635-for-one
stock split, effected in the form of a stock dividend during October, 1996. All
per share information has been retroactively adjusted to reflect the effect of
the stock dividend.
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3. SECURITIES
The amortized cost, gross unrealized gains and losses and fair values of
investment securities available for sale at March 31, 1997 and December 31, 1996
are as follows (In Thousands):
<TABLE>
<CAPTION>
March 31, 1997
-------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ----
<S> <C> <C> <C> <C>
Mutual funds $ 1,784 $ 1,784
FNMA note 5,003 $ (91) 4,912
------- -------- --------- ------
Total investment securities 6,787 (91) 6,696
------- -------- --------- ------
Mortgage-backed securities 69,952 $ 557 (464) 70,045
------- -------- --------- ------
Totals $ 76,739 $ 557 $ (555) $76,741
======= ======== ========= ======
<CAPTION>
December 31, 1996
------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ----
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 6,094 $ 40 $ (69) $ 6,065
Mutual funds 2,009 2,009
FNMA preferred stock 5,000 100 5,100
------- -------- --------- ------
Total investment securities 13,103 140 (69) 13,174
------- -------- --------- ------
Mortgage-backed securities 55,719 954 (1) 56,672
------- -------- --------- ------
Totals $ 68,822 $ 1,094 $ (70) $69,846
======= ======== ========= ======
</TABLE>
4. LOANS RECEIVABLE
The composition of the loan portfolio at March 31, 1997 and December 31, 1996 is
as follows (In Thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- ------------
<S> <C> <C>
Real estate loans
Construction loans
Residential single family $ 68,646 $ 61,735
Commercial 8,006 9,825
Loans in process (31,666) (31,758)
--------- ---------
Construction loans, net 44,986 39,802
Permanent loans
Residential single family 115,327 114,758
Residential apartments 286,890 276,545
Commercial 133,956 135,635
Other 180 137
--------- ---------
Total real estate loans 581,339 566,877
Consumer loans 54,986 54,179
Business and other loans 35,538 23,508
--------- ---------
Total loans 671,863 644,564
Discounts on loans (629) (560)
Deferred loan fees (2,730) (2,336)
Allowance for losses on loans (4,640) (4,175)
--------- ---------
$ 663,864 $ 637,493
========= =========
</TABLE>
9
<PAGE> 10
Activity in the allowance for losses on loans for the periods ended March 31,
1997 and 1996 is as follows (In Thousands):
<TABLE>
<CAPTION>
March 31, March 31,
1997 1996
--------- ---------
<S> <C> <C>
Balance at the beginning of the period $ 4,175 $ 2,765
Provision for loan losses 585 307
Net charge-offs (120) (6)
--------- ---------
Balance at the end of the period $ 4,640 $ 3,066
======== ========
</TABLE>
Management analyzes loans on an individual basis and considers a loan to be
impaired when it is probable that all principal and interest amounts will not be
collected according to the terms of the contract. Information regarding impaired
loans at March 31, 1997 and December 31, 1996 is as follows (In Thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- ---------
<S> <C> <C>
Balance of impaired loans $ 843 $ 3,495
Less portion for which no allowance
for losses on loans is allocated 525 2,774
------ ------
Portion of impaired loans for which
an allowance for loan losses is
allocated $ 318 $ 721
======= =======
Portion of allowance for losses on
loans allocated to the impaired
loan balance $ 65 $ 241
======= =======
</TABLE>
Information regarding impaired loans is as follows for the three months ended
March 31, 1997 and the year ended December 31, 1996 (In Thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- ---------
<S> <C> <C>
Average investment in impaired loans
during the period $ 1,839 $ 4,220
Interest income recognized during
impairment 9 48
Interest income recognized on a cash
basis during the period 9 48
</TABLE>
10
<PAGE> 11
5. LOAN SERVICING
Mortgage loans serviced for others are not included in the accompanying
consolidated statements of financial condition. The unpaid principal balances of
these loans at March 31, 1997 and December 31, 1996 are summarized as follows
(In Thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- ------------
<S> <C> <C>
Mortgage loans underlying pass-through
securities
FNMA $ 128,593 $ 134,568
Mortgage loan portfolios serviced for
FHLMC 692,920 713,290
FNMA 217,711 219,295
Other 34,462 35,362
---------- ----------
Total loans serviced for others $1,073,686 $1,102,515
========== ==========
</TABLE>
Custodial balances maintained in connection with the foregoing loan servicing
were approximately $15,506,000 and $12,895,000 at March 31, 1997 and December
31, 1996, respectively.
The following is an analysis of the changes in cost of loan servicing rights for
the periods ended March 31, 1997 and 1996 (In Thousands):
<TABLE>
<CAPTION>
March 31, March 31,
1997 1996
--------- ---------
<S> <C> <C>
Balance at the beginning of the period $ 8,051 $ 9,130
Acquired or originated 83 249
Amortization (488) (538)
-------- --------
Balance at the end of the period $ 7,646 $ 8,841
======== ========
</TABLE>
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<PAGE> 12
6. OTHER BORROWINGS
Other borrowings consisted of the following at March 31, 1997 and December 31,
1996 (In Thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- ------------
<S> <C> <C>
Federal Home Loan Bank advances
(5.5% and 5.5% at March 31, 1997
and December 31, 1996, respectively) $ 54,000 $ 59,500
Reverse Repurchase Agreements (5.5%
and 5.6% at March 31, 1997 and
December 31, 1996, respectively) 29,300 23,500
Subordinated debt maturing December 31,
2001 (10% fixed rate) 4,874 4,874
Subordinated debt maturing January 1,
2005 (9.625% fixed rate) 14,000 14,000
-------- --------
Total $102,174 $101,874
======== ========
</TABLE>
Federal Home Loan Bank ("FHLB") advances are collateralized by FHLB
stock and first mortgage loans with an aggregate carrying value of $81,000,000
and $89,250,000 at March 31,1997 and December 31, 1996, respectively.
At March 31, 1997, scheduled payments on Federal Home Loan Bank
advances and reverse repurchase agreements are as follows (In Thousands):
<TABLE>
<CAPTION>
Year Weighted Average
Ended Amount Interest Rate
----- ------ -------------
<S> <C> <C> <C>
1997 $42,300 5.49%
1998 15,000 5.40
1999 23,000 5.55
2001 3,000 6.15
-------
$83,300 5.51
=======
</TABLE>
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7. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Bank can be a party to financial instruments with off-balance sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial commitments include commitments to make loans. The Bank's
exposure to credit loss in the event of nonperformance by the other party to the
financial instrument for commitments to make loans is represented by the
contractual amount of these instruments. The Bank follows the same credit policy
to make such commitments as is followed for those loans recorded in the
financial statements.
As of March 31, 1997, the Bank had fixed and variable rate commitments to
originate and/or purchase loans (at market rates) of approximately $20,640,000
and $54,349,000, respectively. Metropolitan's commitments to originate and
purchase loans are for loans with rates ranging from 6.5% to 16% and commitments
periods up to one year. In addition, the bank has firm commitments to sell loans
totalling $1,799,000 and optional commitments to sell loans totalling
$8,765,000.
At March 31, 1997 and December 31, 1996, the Bank had outstanding options which
gave the holder the option to purchase certain loans at a specified price within
a specified time period. The Bank collected a non-refundable fee on each option
which is recognized as income at the time the transaction is complete. At March
31, 1997, loans with a carrying value of $8,765,000 were held for sale in
connection with outstanding purchase options. At December 31, 1996, loans with a
carrying value $6,409,841 were held for sale in connection with outstanding
purchase options. The options may be exercised at the carrying value for an
initial period. The option price escalates after the initial period until the
option expires.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The reported results of Metropolitan primarily reflect the operations of the
Bank. Metropolitan's results of operations are dependent on a variety of
factors, including the general interest rate environment, competitive conditions
in the industry, governmental policies and regulations and conditions in the
markets for financial assets. Like most financial institutions, the primary
contributor to Metropolitan's income is net interest income, the difference
between the interest Metropolitan earns on interest-earning assets, such as
loans and securities, and the interest Metropolitan pays on interest-bearing
liabilities, such as deposits and borrowings. Metropolitan's operations are also
affected by non-interest income, such as loan servicing fees and gains or losses
from sales of loans and securities. From time to time, Metropolitan engages in
certain transactions aimed at increasing its non-interest income such as loan
option income. Metropolitan's principal operating expenses, aside from interest
expense, consist of compensation and employee benefits, occupancy costs, federal
deposit insurance premiums, and other general and administrative expenses.
Average Balances and Yields. The following table presents, for the periods
indicated, the total dollar amount of interest income from average
interest-earning assets and the resultant yields, as well as the interest
expense on average interest-bearing liabilities, expressed both in dollar and
rates, and the net interest margin. Net interest margin refers to net interest
income divided by average total interest-earning assets and is influenced by the
level and relative mix of interest-earning assets and interest-bearing
liabilities. All average balances are daily average balances. Non-accruing loans
are considered in average loan balances. The average balances of mortgage-backed
securities available for sale are presented at historical cost.
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<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1997 1996
-------------------------------------------- --------------------------------------------
AVERAGE AVERAGE
BALANCE INTEREST RATE BALANCE INTEREST RATE
-------- ------- ---- -------- ------- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans receivable $673,275 $14,861 8.95% $522,200 $11,456 8.82%
Mortgage-backed
securities available for
sale 61,348 1,010 6.68 38,612 614 6.40
Other 17,234 252 5.93 17,113 248 5.83
-------- ------- -------- -------
Total interest-earning
assets 751,857 16,123 8.70 577,925 12,318 8.57
------- -------
Nonearning assets 37,648 41,858
-------- --------
Total assets $789,505 $619,783
======== ========
INTEREST-BEARING
LIABILITIES:
Deposits $606,144 7,930 5.31 $492,499 6,547 5.35
Other borrowings 109,776 1,755 6.48 61,622 1,086 7.09
-------- ------- -------- -------
Total interest-bearing
liabilities 715,920 9,685 5.49 554,121 7,633 5.54
------- -------
Noninterest-bearing
liabilities 43,073 36,554
Shareholders' equity 30,512 29,108
-------- --------
Total liabilities and
shareholders' equity $789,505 $619,783
======== ========
Net interest income and
interest rate spread $ 6,438 3.21% $4,685 3.03%
======= ==== ======= =====
Net interest margin 3.47% 3.26%
Average interest-earning
assets to average
interest-bearing
liabilities 105.02% 104.30%
======== ========
</TABLE>
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<PAGE> 16
Rate and Volume Variances. Net interest income is affected by changes in the
level of interest-earning assets and interest-bearing liabilities and changes in
yields earned on assets and rates paid on liabilities. The following table sets
forth, for the periods indicated, a summary of the changes in interest earned
and interest paid resulting from changes in average asset and liability balances
and changes in average rates. Changes attributable to the combined impact of
volume and rate have been allocated proportionately to change due to volume and
change due to rate.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1997 VS. 1996
INCREASE (DECREASE)
---------------------------------
(IN THOUSANDS)
Change Change
Total Due to Due to
Change Volume Rate
------ ------ ------
<S> <C> <C> <C>
INTEREST INCOME ON:
Loans receivable $3,405 $3,198 $ 207
Mortgage-backed securities 396 354 42
Other 4 1 3
------ ------ ------
Total interest income 3,805 $3,553 $ 252
------ ====== ======
INTEREST EXPENSE ON:
Deposits 1,383 $1,442 $ (59)
Other borrowings 669 830 (161)
------ ------ ------
Total interest expense 2,052 $2,272 $ (220)
------ ====== ======
Increase in net interest
income $1,753
======
</TABLE>
RESULTS OF OPERATIONS
Net Income. Net income for the quarter ended March 31, 1997 was $1.2 million as
compared to $716,000 for the same period in 1996. Net interest income increased
$1.8 million, or 37.4% in the quarter ended March 31, 1997 as compared to the
same period as 1996. The increase in net interest income was partially offset
by a 90.6% increase in provision for loan losses and a 17.8% increase in
non-interest expense in the quarter ended March 31, 1997 compared to the same
period in 1996.
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<PAGE> 17
Metropolitan's net interest margin increased 21 basis points to 3.47% for the
quarter ended March 31, 1997 as compared to 3.26% for the same period in 1996,
largely as a result of the increased yield on interest earning assets and
a decline in costs paid for deposits and borrowings.
Interest Income. Total interest income increased 30.9% to $16.1 million in the
quarter ended March 31, 1997 as compared to $12.3 million in 1996. This
increase primarily resulted from a 30.1% increase in average interest-earning
assets between the two periods. The average balance of loans increased $151.1
million which was a result of Metropolitan's consistent strategy of increasing
assets so long as quality loans with acceptable yield and term characteristics
are available. In addition, as a result of the generally higher interest rate
environment, the weighted average yield on interest-earning assets increased to
8.70% during the quarter ended March 31, 1997 as compared to 8.57% during the
same period in 1996.
Interest Expense. Total interest expense increased 26.9% to $9.7 million for the
quarter ended March 31, 1997 as compared to $7.6 million for the same period
in 1996. Interest expense increased generally due to a higher average balance
of interest-bearing liabilities outstanding which was only partially offset by
a lower cost of funds. The average balance of interest-bearing liabilities
increased $161.8 million, or 29.2%, from March 31, 1996 to March 31, 1997 in
order to fund the growth of interest-earning assets discussed above.
Metropolitan's cost of funds decreased to 5.49% in the quarter ended March
31, 1997 as compared to 5.54% in the same period in 1996. This decrease is due
to the changing mix of interest-bearing liabilities.
Provision for Loan Losses. The provision for loan losses increased 90.6% to
$585,000 in the quarter ended March 31, 1997 as compared to $307,000 in the
same period in 1996. The increase was related to the increase in total loans
and management's estimate of the adequacy of the allowance for losses on loans.
Total loans, including loans held for sale, increased $27.4 million to $673.8
million at March 31, 1997 from $646.5 million at December 31, 1996. The
allowance for losses on loans at March 31, 1997 was $4.6 million or 0.68% of
total loans as compared to $4.2 million, or 0.64% of total loans, at December
31, 1996 while net charge-offs were $120,000 during the quarter, or 0.07% of
average loans on an annualized basis. Management's estimate of the adequacy of
the allowance for losses on loans is based upon an analysis of such factors as
historical loan loss experience, the status of impaired loans, economic
conditions affecting real estate markets, regulatory considerations, and other
matters.
17
<PAGE> 18
Non-Interest Income. Total non-interest income increased slightly to $926,000 in
the quarter ended March 31, 1997 as compared to $922,000 in the same period in
1996. The following table sets forth Metropolitan's non-interest income for the
periods indicated:
<TABLE>
<CAPTION>
Three Months ended March 31,
1997 1996
------- -------
(In Thousands)
<S> <C> <C>
Loan servicing income, net $ 295 $ 314
Gain on sale of loans 66 103
Loan option income 48 108
Gain on sale of securities, net 89 -
Other 428 397
------- -------
Total $ 926 $ 922
======= =======
</TABLE>
Net loan servicing income decreased slightly in the quarter ended March 31, 1997
to $295,000 as compared to $314,000 for the same period in 1996. This decrease
was due to the normal runoff experienced in the loan portfolio over the past
year. Metropolitan remains committed to this business and continues to evaluate
new acquisitions. Metropolitan will only acquire the rights to service
portfolios where the loan characteristics and pricing are consistent with
management's long-term profitability objectives.
Gain on sale of loans was $66,000 in the quarter ended March 31, 1997 as
compared to $103,000 for the same period in 1996. This income was dependent upon
both the amount of loans sold, secondary market pricing, and the value allocated
to mortgage servicing rights, and these variables in turn were directly affected
by prevailing interest rates. The proceeds from sale of loans decreased $2.1
million to $9.1 million during the quarter ended March 31, 1997 as compared to
$11.2 million in the same period of 1996.
Loan option income was $48,000 in the quarter ended March 31, 1997 compared to
$108,000 for the same period in 1996. This income was dependent upon the amount
of loans for which options were written and the price negotiated, both of which
are affected by market conditions. In these transactions Metropolitan purchased
loans and sold nonrefundable options to a third party to purchase these same
loans at a later date.
Net gain on sale of securities in the quarter ended March 31, 1997 was $89,000.
This gain was the result of the sale of Federal National Mortgage Association
("FNMA") preferred stock and the sale of $6.0 million of lower yielding
securities in the liquidity portfolio which were immediately replaced with
higher yielding securities that also qualify for liquidity.
Other income increased $31,000 to $428,000 in the quarter ended March
18
<PAGE> 19
31, 1997 as compared to $397,000 for the same period in 1996. This increase was
primarily the result of income on investment services and rental income at
retail sales office locations.
Non-Interest Expense. Total non-interest expense increased 17.8% to $4.9 million
in the quarter ended March 31, 1997 as compared to $4.1 million for the same
period in 1996. The following table sets forth Metropolitan's non-interest
expense for the periods indicated:
<TABLE>
<CAPTION>
Three Months ended March 31,
1997 1996
---- ----
(In Thousands)
<S> <C> <C>
Salaries and related personnel costs $ 2,677 $ 2,049
Occupancy and equipment expense 692 572
Federal deposit insurance premiums 140 309
Data processing expense 143 148
Marketing expense 131 126
State franchise taxes 155 118
Amortization of intangibles 66 55
Other operating expenses 863 756
------- -------
Total $ 4,867 $ 4,133
======= =======
</TABLE>
Personnel related expenses increased $628,000, which represented 85.6% of the
increase in the quarter ended March 31, 1997 over the same period in 1996. The
increase was primarily a result of having one additional full service retail
sales office open in the 1997 period, incentive payments for loan production,
and the effects of merit increases over the two time periods. Occupancy costs
increased $120,000 in the quarter ended March 31, 1997 over 1996, generally as a
result of the additional full service retail sales office. Federal deposit
insurance premium expense decreased $169,000 from the prior year first quarter
as a result of the reductions in assessment rates made possible by the
recapitalization of the Savings Association Insurance Fund which occurred in
September, 1996. Other operating expenses increased $107,000 in 1997 over the
same period in 1996, primarily as a result of increases in legal and accounting
fees, REO expense, and credit card fees.
Provision for Income Taxes. The provision for income taxes increased 55.4% to
$701,000 in the quarter ended March 31, 1997 as compared to $451,000 in the same
period in 1996. The effective tax rate was 36.7% for the quarter ended March 31,
1997 and 38.6% for the same period in 1996. The lower effective tax rate in the
1997 period occurred largely because expenses which are not deductible for tax
purposes, such as premium payments for a key man life insurance policy and
amortization of intangibles, are anticipated to be smaller in relationship to
total income in 1997.
ASSET QUALITY
Metropolitan's goal is to maintain the above average asset quality of its loan
portfolio through conservative lending policies and prudent
19
<PAGE> 20
underwriting. Detailed reviews of the loan portfolio are undertaken regularly to
identify potential problem loans or trends early and to provide for adequate
estimates of potential losses. In performing these reviews, Metropolitan's
management considers, among other things, current economic conditions, portfolio
characteristics, delinquency trends, and historical loss experiences.
Metropolitan normally considers loans to be non-performing when payments are 90
days or more past due or when the loan review analysis indicates that
repossession of the collateral may be necessary to satisfy the loan. In
addition, Metropolitan considers loans to be impaired when, in management's
opinion, it is probable that the borrower will be unable to meet the contractual
terms of the loan. When loans are classified as non-performing, an assessment is
made as to the collectability of the unpaid interest. Interest determined to be
uncollectible is reversed from interest income and future interest income is
recorded only if the loan principal and interest due is considered collectible
and is less than the estimated fair value of the underlying collateral.
The table below provides information concerning Metropolitan's non-performing
assets and the allowance for losses on loans at the dates indicated. All loans
classified by management as impaired were also classified as non-performing.
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---- ----
(Dollars in Thousands)
<S> <C> <C>
Non-accrual loans $2,486 $4,923
Loans past due greater than
90 days or impaired, still accruing 272 271
------ ------
Total non-performing loans 2,758 5,194
Real estate owned 1,589 177
------ ------
Total non-performing assets $4,347 $5,371
====== ======
Allowance for losses on loans $4,640 $4,175
====== ======
Non-performing loans to total loans 0.41% 0.80%
Non-performing assets to total assets 0.54% 0.70%
Net charge-offs to average loans 0.07%(1) 0.04%
Provision for loan losses to
average loans 0.35%(1) 0.28%
Allowance for losses on loans to
total non-performing loans at
end of period 106.74% 77.73%
Allowance for losses on loans to
total loans at end of period 0.68% 0.64%
(1) Annualized for comparative purposes.
</TABLE>
Non-performing assets at March 31, 1997 decreased $1.0 million, or 19.1% to $4.3
million as compared to $5.4 million at December 31, 1996. The decrease was
primarily due to the sale to a third party at a sheriff's
20
<PAGE> 21
sale of one retail strip shopping center at which time Metropolitan recovered
its investment in this loan. In addition, one retail strip shopping center was
acquired by deed-in-lieu of foreclosure, and therefore, included in real estate
owned at March 31, 1997, while at December 31, 1996, it had been classified as
a non-accrual loan. The fair value of the property was greater than the
carrying value at March 31, 1997.
Non-performing loans include $843,000 and $3.5 million at March 31, 1997 and
December 31, 1996, respectively, considered by management to be impaired. The
circumstances and trends associated with these loans have been included in
management's consideration of the adequacy of the allowance for losses on loans.
FINANCIAL CONDITION
Total assets amounted to $807.1 million at March 31, 1997, as compared to $769.1
million at December 31, 1996, an increase of $38.4 million, or 4.9%. The
increase in assets was funded with deposit growth of $36.8 million.
Securities available for sale decreased $6.5 million, or 49.2%, to $6.7 million.
The decline was primarily due to the sale of $6.0 million of U.S. Treasury notes
in the first quarter.
Mortgage-backed securities increased $13.4 million, or 23.6%, to $70.0 million
compared to December 31, 1996. The increase was due to the purchase of $10.4
million of Federal Home Loan Mortgage Corporation ("FHLMC") securities to meet
regulatory liquidity requirements and the securitization of $5.4 of originated
mortgage loans, also with FHLMC.
Loans receivable, including loans held for sale, increased $27.4 million, or
4.3% to $673.8 million. This increase was consistent with Metropolitan's overall
strategy of increasing assets while adhering to prudent underwriting standards
and preserving its adequately capitalized status.
Real estate owned increased from $177,000 to $1,589,000 from December 31, 1996
to March 31, 1997 as a result of the foreclosure of one retail strip shopping
center during the period.
Deposits totalled $658.9 million at March 31, 1997, an increase of $36.8
million, or 5.9%, over the balance at December 31, 1996. The increase resulted
from management's marketing efforts, continued growth at newer retail sales
offices, and increased custodial checking balances.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity. The term "liquidity" refers to Metropolitan's ability to
generate adequate amounts of cash to meet its needs, typically for
funding loan originations and purchases. Metropolitan's primary sources
21
<PAGE> 22
of internally generated funds are principal repayments and payoffs of loans
receivable, cash flows from operations and proceeds from sales of loans.
External sources of funds include increases in deposits, FHLB advances, and
reverse repurchase agreements.
While principal repayments and FHLB advances are fairly stable sources of funds,
deposit flows and loan prepayments are greatly influenced by prevailing interest
rates, economic conditions, and competition. Metropolitan regularly reviews cash
flow needed to fund its operations and believes that the aforementioned
resources are adequate for its foreseeable requirements.
The Bank is required by regulation to maintain a liquidity ratio (average daily
balance of liquid assets to average daily balance of net withdrawable accounts
and short-term borrowings) of 5%. The Bank's liquidity ratio for March 1997 was
5.87%. Historically, Metropolitan has maintained its liquidity close to the
required minimum since the yield available on qualifying investments is lower
than alternative uses of funds and is generally not at an attractive spread over
incremental cost of funds.
The Corporation's primary source of funds currently is dividends from the Bank,
which are subject to restrictions imposed by federal bank regulatory agencies.
The Corporation's primary use of funds is for interest payments on its existing
debt. At March 31, 1997, the Corporation, excluding the Bank, had cash and
readily convertible investments of $2.1 million.
Metropolitan's liquidity, represented by cash equivalents, is a result of its
operating, investing, and financing activities. These activities are summarized
as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1997 1996
---- ----
<S> <C> <C>
Net cash provided by (used
for) operating activities $ 769 $ (7,098)
Net cash used for investing
activities (37,332) (47,987)
Net cash provided by
financing activities 37,126 51,281
--------- ---------
Net change in cash and
cash equivalents 563 (3,804)
Cash and cash equivalents
at beginning of period 16,522 18,170
--------- ---------
Cash and cash equivalents
at end of period $ 17,085 $ 14,366
========= =========
</TABLE>
Cash provided or used by operating activities is determined largely by changes
in the level of loans held for sale. The level of loans held for sale depends on
the level of loan originations and the time until an
22
<PAGE> 23
investor funds the purchase of the loan from the Bank.
Cash provided from investing activities consists primarily of principal payments
on loans and mortgage-backed securities. The level of these payments increases
and decreases depending on the size of the loan and mortgage-backed securities
portfolios and the general trend and level of interest rates, which influences
the level of refinancings and mortgage repayments. During the three months ended
March 31, 1997 and 1996, net cash was used in investing activities, primarily to
fund and purchase new loans.
Cash provided from financing activities consists primarily of increased deposits
but also includes wholesale borrowings like FHLB advances and reverse repurchase
agreements.
At March 31, 1997, $65.7 million, or 10.0%, of Metropolitan's deposits were in
the form of certificates of deposit of $100,000 and over. If a large number of
these certificates of deposits matured at approximately the same time and were
not renewed there could be an adverse effect on Metropolitan's liquidity.
Metropolitan monitors maturities to attempt to minimize the potential adverse
effect on liquidity.
Capital. The Office of Thrift Supervision ("OTS") imposes capital requirements
on savings associations. Savings associations are required to meet three minimum
capital standards: (i) a leverage requirement, (ii) a tangible capital
requirement, and (iii) a risk-based capital requirement. Such standards must be
no less stringent than those applicable to national banks. In addition, the OTS
is authorized to impose capital requirements in excess of these standards on
individual associations on a case-by-case basis.
The Bank's regulatory capital ratios at March 31, 1997 were in excess of the
capital requirements specified by OTS regulations as shown by the following
table (Dollars in Thousands):
<TABLE>
<CAPTION>
RISK-BASED
TANGIBLE CAPITAL CORE CAPITAL CAPITAL
---------------- ------------ ----------------
(DOLLARS IN THOUSANDS)
CAPITAL AMOUNT
<S> <C> <C> <C> <C> <C> <C>
Actual $43,578 5.44% $43,994 5.49% $47,563 8.41%
Required 12,016 1.50 32,059 4.00 44,995 8.00
------- ------- -------
Excess $31,562 3.94% $11,935 1.49% $ 2,568 0.41%
======= ======= =======
</TABLE>
Metropolitan anticipates that under the current regulations, the Bank
23
<PAGE> 24
will continue to meet its minimum capital requirements in the foreseeable
future. The Corporation maintains a $4.0 million line of credit with the
Huntington National Bank which it could access to make future contributions to
the capital of the Bank. At March 31, 1997, there was no outstanding balance
under the line of credit. However, events beyond the control of the Bank, such
as increased interest rates or a downturn in the economy, could adversely affect
future earnings and consequently, the ability of the Bank to meet its future
capital requirements.
ASSET/LIABILITY MANAGEMENT
Metropolitan, like other financial institutions, is subject to interest rate
risk to the extent that its interest-earning assets reprice differently than its
interest-bearing liabilities. The Bank's Asset and Liability Committee, which
includes representatives of senior management, monitors the level and relative
mix of its interest-earning assets and interest-bearing liabilities. The
principal strategy used by Metropolitan to manage interest rate risk has been to
build a portfolio of adjustable rate interest-earning assets.
The steps being taken by the Bank to manage interest rate risk include: (i) the
continuing to focus on originating and purchasing adjustable rate assets for
portfolio; (ii) the sale of fixed rate one- to four-family loans with servicing
retained; (iii) focusing on shortening the term of fixed rate lending by
increasing the percent of the fixed rate loan portfolio represented by consumer
loans; (iv) increasing business lending which will result in loans with
generally adjustable rates and shorter terms; (v) increasing the loan servicing
portfolio; (vi) emphasizing transaction account deposit products which are less
susceptible to repricing in a rising interest rate environment; (vii)
maintaining competitive pricing on longer term certificates of deposit; and
(viii) utilizing term advances and other borrowings rather than short-term
funds.
Presented below, as of March 31, 1997 and 1996, is an analysis of Metropolitan's
interest rate risk measured using Net Portfolio Value ("NPV") methodology.
Generally, NPV is the discounted present value of the difference between
incoming cash flows on interest-earning assets and outgoing cash flows on
interest-bearing and other liabilities. The table also contains the policy
limits set by the Board of Directors of the Bank established with consideration
of the dollar impact of various rate changes and the Bank's capital position.
24
<PAGE> 25
<TABLE>
<CAPTION>
MARCH 31, 1997 MARCH 31, 1996
-------------- --------------
CHANGES IN
INTEREST RATE BOARD LIMIT CHANGE IN % CHANGE CHANGE IN % CHANGE
(BASIS POINTS) % CHANGE NPV IN NPV NPV IN NPV
- -------------- -------- --- ------ --- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
+400 (75)% $(23,578) (38)% $(14,025) (27)%
+300 (50) (17,479) (28) (9,884) (19)
+200 (25) (11,292) (18) (6,054) (12)
+100 (10) (5,348) (9) (2,647) (5)
-100 (10) 4,449 7 2,737 5
-200 (25) 9,854 16 7,099 19
-300 (50) 18,942 31 13,528 26
-400 (75) 31,241 51 23,825 45
</TABLE>
As illustrated in the table, Metropolitan's NPV is unfavorably affected in the
rising rate scenarios. This occurs principally because the interest paid on
deposits would increase more rapidly than rates earned on assets because
deposits generally have shorter periods to repricing. In addition, the fixed
rate assets in portfolio will only reprice as the loans are repaid and new loans
at higher rates are made. Furthermore, even for the adjustable rate assets,
repricing may lag behind the rate change due to contractual time frames. At
March 31, 1997 and 1996, the Bank was within the Board established limits for
various changes in interest rates, however, the Bank's sensitivity to rising
rates at March 31, 1997 has increased slightly as compared to the same point in
time in 1996. The increased sensitivity was a result of:(i) the slightly higher
overall level of interest rates; (ii) the increased use of time deposits with 12
to 24 month terms to fund asset growth;(iii) the increase in one to four-family
residential ARMs in the loan portfolio which are fixed for three or five years
before they become annual adjustable rate loans (i.e., the 5/1 and 3/1 ARM
programs); and (iiii) the slight increase in the level of fixed rate loans in
the portfolio.
As with any method of measuring interest rate risk, certain shortcomings are
inherent in the NPV approach. For example, although certain assets and
liabilities may have similar maturities or periods of repricing, they may react
in different degrees to changes in market interest rates. Also, as a result of
competition, the interest rates on certain assets and liabilities may fluctuate
in advance of changes in market interest rates, while interest rates on other
types of assets and liabilities may lag behind changes in market rates. Further,
in the event of a change in interest rates, expected rates of repayment on
assets and early withdrawal levels from certificates of deposit would likely
deviate from those scheduled. Despite its limitations, management considers NPV
the best method for monitoring interest rate risk since core repricing and
maturity relationships are very clearly seen. The clarity of the risk relations
is enhanced by the simplicity of the rate changes and the fact that all rates,
short-term and long-term, change by the same degree.
25
<PAGE> 26
ACCOUNTING DEVELOPMENTS
In March 1997, the Financial Accounting Standard Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 128, "Earnings
Per Share." SFAS No. 128 simplifies the calculation of earnings per
share ("EPS") by replacing primary EPS with basic EPS. Basic EPS
includes no dilution and is computed by dividing net income by weighted-
average shares outstanding. SFAS No. 128 is effective for financial
statements for both interim and annual periods ending after December 15,
1997. The Corporation expects SFAS No. 128 to have no effect on its
earnings per share calculation, other than changing terminology.
Effective January 1, 1997, Metropolitan adopted the provisions of SFAS
No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." SFAS No. 125 provides accounting and
reporting standards for transfers and servicing of financial assets and
extinguishment of liabilities based on a financial components approach
that focuses on control. SFAS No. 125 is effective for transfers and
servicing of financial assets and extinguishment of liabilities
occurring after December 31, 1996 applied prospectively. SFAS No. 125
supersedes SFAS No. 122, "Accounting for Mortgage Servicing Rights."
SFAS No. 125 expands the requirements of SFAS No. 122 by introducing the
concept of adequate compensation into the determination of the value of
the servicing assets. Adoption of SFAS No. 125 has not materially
effected the comparability of results among years.
26
<PAGE> 27
PART II. OTHER INFORMATION
Items 1-5 are not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
Exhibit
Number Description
------ -----------
3.1 Amended and Restated Articles of Incorporation of Metropolitan
(filed as Exhibit 2 to Metropolitan Form 8-A, filed October 15,
1996 and incorporated herein by reference).
3.2 Amended and Restated Code of Regulations of Metropolitan (filed as
Exhibit 3 to Metropolitan's Form 8-A filed October 15, 1996 and
incorporated herein by reference).
27 Financial Data Schedule (1)
b. Reports on Form 8-K - No reports on Form 8-K were filed by
Metropolitan during the first three months of 1997.
(1) Filed only in electronic format pursuant to item 601(b)(27)
of Regulation S-K.
27
<PAGE> 28
METROPOLITAN FINANCIAL CORP.
SIGNATURES
Pursuant to the requirements of Sections 13 and 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
METROPOLITAN FINANCIAL CORP.
By: /s/ David G. Lodge
--------------------------------------
David G. Lodge,
President and (principal
financial and accounting
officer)
Date: May 14, 1997
28
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM METROPOLITAN
FINANCIAL CORP. MARCH 31, 1997 FORM 10-Q, INCLUDING THE CONSOLIDATED STATEMENTS
OF FINANCIAL CONDITION, CONSOLIDATED STATEMENTS OF OPERATIONS, CONSOLIDATED
STATEMENTS OF CASH FLOWS, AND THE ACCOMPANYING NOTES AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 12,546
<INT-BEARING-DEPOSITS> 1,539
<FED-FUNDS-SOLD> 3,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 76,741
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 678,464
<ALLOWANCE> 4,640
<TOTAL-ASSETS> 807,054
<DEPOSITS> 658,949
<SHORT-TERM> 42,300
<LIABILITIES-OTHER> 15,151
<LONG-TERM> 59,874
<COMMON> 0
0
0
<OTHER-SE> 30,780
<TOTAL-LIABILITIES-AND-EQUITY> 807,054
<INTEREST-LOAN> 14,861
<INTEREST-INVEST> 1,262
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 16,123
<INTEREST-DEPOSIT> 7,930
<INTEREST-EXPENSE> 9,685
<INTEREST-INCOME-NET> 6,438
<LOAN-LOSSES> 585
<SECURITIES-GAINS> 89
<EXPENSE-OTHER> 4,867
<INCOME-PRETAX> 1,912
<INCOME-PRE-EXTRAORDINARY> 1,912
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,211
<EPS-PRIMARY> .34
<EPS-DILUTED> .34
<YIELD-ACTUAL> 3.47
<LOANS-NON> 2,486
<LOANS-PAST> 272
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 857
<ALLOWANCE-OPEN> 4,175
<CHARGE-OFFS> 123
<RECOVERIES> 3
<ALLOWANCE-CLOSE> 4,640
<ALLOWANCE-DOMESTIC> 4,640
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
