UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended December 31, 1998
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 0-2353
MYSTIC FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 04-3401049
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
60 HIGH STREET
MEDFORD, MASSACHUSETTS 02155
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (781) 395-2800
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 February 11, 1999, 2,573,555 shares of the registrant's common stock
were outstanding .
MYSTIC FINANCIAL, INC. AND SUBSIDIARY
INDEX
PART I FINANCIAL INFORMATION Page
Item 1 Financial Statements:
Consolidated Balance Sheets - December 31, 1998
and June 30, 1998 1
Consolidated Statements of Income - Three and Six Months
Months Ended December 31, 1998 and 1997 2
Consolidated Statement of Changes in Stockholders'
Equity-Six Months Ended December 31, 1998 and 1997 3
Consolidated Statements of Cash Flows - Six Months
Ended December 31, 1998 and 1997 4
Notes to Unaudited Consolidated Financial Statements -
December 31, 1998 5
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3 Quantitative and Qualitative Disclosures About
Market Risk 24
PART II OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security Holders 24
Item 6 Exhibits and Reports on Form 8-K 24
SIGNATURES 25
Mystic Financial, Inc. and Subsidiary
Part I - Financial Information
Item 1 - Financial Statements
Consolidated Balance Sheets
(In Thousands)
<TABLE>
<CAPTION>
December 31, June 30,
1998 1998
------------ --------
(Unaudited)
<S> <C> <C>
Assets
Cash and due from banks $ 7,763 $ 7,626
Federal funds sold 16,312 16,773
Short-term investments 14,182 1,580
----------------------
Total cash and cash equivalents 38,257 25,979
Securities available for sale, at fair value 15,797 14,749
Securities held to maturity, at amortized cost 4,503 12,006
Federal Home Loan Bank stock, at cost 1,005 997
Loans, net of allowance for loan losses of
$1,311 and $1,236, respectively 143,087 138,593
Mortgage loans held for sale - 80
Bank premises and equipment, net 2,783 2,559
Real estate held for investment, net 1,757 1,785
Accrued interest receivable 1,016 1,099
Due from Co-operative Central Bank 929 929
Other assets 328 273
----------------------
$209,462 $199,049
======================
Liabilities and Stockholders' Equity
Deposits $152,822 $144,766
Federal Home Loan Bank borrowings 20,092 16,505
Mortgagors' escrow accounts 675 481
Accrued interest payable 344 288
Accrued expenses and other liabilities 273 882
----------------------
Total liabilities 174,206 162,922
----------------------
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000
shares authorized none issued - -
Common stock $.01 par value, 5,000,000
shares authorized, 2,711,125 shares issued 27 27
Additional paid-in capital 25,710 25,710
Retained earnings 13,733 13,173
----------------------
39,470 38,910
Treasury Stock, at cost - 137,570 and
2,120 shares at December 31, 1998 and
June 30, 1998, respectively (1,988) (21)
Accumulated other comprehensive income 649 432
Loan due from ESOP (2,875) (3,194)
----------------------
Total stockholders' equity 35,256 36,127
----------------------
$209,462 $199,049
======================
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
Mystic Financial, Inc. and Subsidiaries
Part I - Financial Information
Item 1 - Financial Statements
Consolidated Statements of Income
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------- --------------------
December December December December
31, 1998 31, 1997 31, 1998 31, 1997
-------- -------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C>
Interest and dividend income:
Interest and fees on loans $2,811 $2,491 $5,584 $4,886
Interest and dividends on investment securities 294 276 642 570
Other interest 243 170 447 266
------------------------------------------
Total interest and dividend income 3,348 2,937 6,673 5,722
------------------------------------------
Interest expense:
Deposits 1,219 1,252 2,448 2,488
Federal Home Loan Bank borrowings 277 180 530 335
------------------------------------------
Total interest expense 1,496 1,432 2,978 2,823
------------------------------------------
Net interest income 1,852 1,505 3,695 2,899
Provision for loan losses 30 80 90 150
------------------------------------------
Net interest income, after provision for loan losses 1,822 1,425 3,605 2,749
------------------------------------------
Other income:
Customer service fees 134 135 269 262
Gain on sales of mortgage loans 80 16 89 23
Gain/ (Loss) on sales of securities available
for sale, net - (3) 61 138
Co-operative Central Bank Share Insurance Fund
Special Dividend 51 49 51 49
Miscellaneous 55 6 93 76
------------------------------------------
Total other income 320 203 563 548
------------------------------------------
Operating expenses:
Salaries and employee benefits 810 765 1,646 1,422
Occupancy and equipment expenses 118 95 233 246
Data processing expenses 78 65 149 124
Other general and administrative expenses 455 308 774 511
------------------------------------------
Total operating expenses 1,461 1,233 2,802 2,303
------------------------------------------
Income before income taxes 681 395 1,366 994
Provision for income taxes 272 159 542 403
------------------------------------------
Net income $ 409 $ 236 $ 824 $ 591
==========================================
Earnings per share - basic and diluted $ .16 N/A $ .32 N/A
====== ======
Weighted 2,574 N/A 2,602 N/A
====== ======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
Mystic Financial, Inc. and Subsidiary
Part I - Financial Information
Item 1 - Financial Statements
Consolidated Statements of Changes in Stockholders' Equity
Six Months Ended December 31, 1998 and 1997
(In Thousands)
<TABLE>
<CAPTION>
Accumulated
Additional Other Total
Comprehensive Common Paid-in Retained Treasury Comprehensive Loan Due Stockholders'
Income Stock Capital Earnings Stock Income From ESOP Equity
------------- ------ ---------- -------- -------- ------------- --------- -------------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1998 $27 $25,710 $13,173 $ (21) $432 $(3,194) $36,127
Net income $ 824 - - 824 - - - 824
Change in net unrealized
gain on securities available
for sale, net of tax effects 217 - - - - 217 - 217
------
Comprehensive income $1,041
======
Dividend paid ($.10 per share) - - (264) - - - (264)
Purchase of treasury stock - - - (1,967) - - (1,967)
Decrease in loan due from ESOP - - - - 319 319
---------------------------------------------------------------------------------
Balance at December 31, 1998 $27 $25,710 $13,733 $(1,988) $649 $(2,875) $35,256
=================================================================================
Balance at June 30, 1997 $ - $ - $11,761 $ - $179 $ - $11,940
Net income $ 591 - - 591 - - - 591
Change in net unrealized
gain on securities available
for sale, net of tax effects 81 - - - - 81 - 81
------
Comprehensive income $ 672
====== ---------------------------------------------------------------------------------
Balance at December 31, 1997 $ - $ - $12,352 $ - $260 $ - $12,612
=================================================================================
</TABLE>
See accompanying notes to unaudited consolidated financial statements
Mystic Financial, Inc. and Subsidiary
Part I - Financial Information
Item 1 - Financial Statements
Consolidated Statements of Cash Flows
(In Thousands)
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
December 31, 1998 December 31, 1997
----------------- -----------------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 824 $ 591
Adjustments to reconcile net income to net
cash provided (used) by operating
activities:
Provision for loan losses 90 150
Net amortization of securities 19 -
Gain on sales of securities available
for sale (61) (138)
Gain on sale of loans (89) -
Amortization of loan due ESOP 319 -
Depreciation expense 166 170
Net change in mortgage loans held for sale 80 (688)
(Increase) decrease in accrued interest
receivable 83 (67)
Increase in other assets (173) (378)
Increase in accrued interest payable 56 63
Decrease in accrued expenses and
other liabilities (609) (56)
-----------------------------
Net cash provided (used) by operating
activities 705 (353)
-----------------------------
Cash flows from investing activities:
Maturities of securities held to maturity 7,500 1,003
Sales of securities available for sale 1,097 2,296
Purchase of securities available for sale (1,765) (922)
Purchase of Federal Home Loan Bank Stock (8) -
Loans originated, net of payments received (12,315) (8,523)
Proceeds from sale of loans 7,820 -
Purchases of banking premises and equipment (362) (88)
-----------------------------
Net cash used by investing activities 1,967 (6,234)
-----------------------------
Cash flows from financing activities:
Net increase in deposits 8,056 43,959
Proceeds from borrowings 3,600 20,054
Repayment of borrowings (13) (16,068)
Net increase in mortgagors' escrow accounts 194 140
Dividends paid (264) -
Purchase of treasury stock (1,967) -
-----------------------------
Net cash provided by financing
activities 9,606 48,085
-----------------------------
Net change in cash and cash equivalents 12,278 41,498
Cash and cash equivalents at beginning of
period 25,979 6,225
-----------------------------
Cash and cash equivalents at end of period $ 38,257 $ 47,723
=============================
Supplemental cash flow information:
Interest paid $ 2,922 $ 2,760
Income taxes paid 813 417
</TABLE>
See accompanying notes to unaudited consolidated financial statements
Mystic Financial, Inc. and Subsidiary
Part I - Financial Information
Item 1 - Financial Statements
Notes to Unaudited Consolidated Financial Statements
December 31, 1998
1) Basis of Presentation and Consolidation
The unaudited consolidated interim financial statements of Mystic Financial,
Inc. and subsidiary ("Mystic" or the "Company") presented herein should be
read in conjunction with the consolidated financial statements for the year
ended June 30, 1998, included in the annual report on Form 10-K of Mystic
Financial, Inc., the holding company for Medford Co-operative Bank (the
"Bank"). The operating results for the period ended December 31, 1998 are
those of the Bank and Company. Mystic had not issued any stock and had not
conducted any business other than that of an organizational nature until
January 8, 1998 when Mystic became the Bank's holding company in connection
with the Bank's conversion from mutual to stock form. Operating results
prior to January 8, 1998 include only the Bank and not the Company.
The unaudited consolidated interim financial statements herein have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
In the opinion of management, the consolidated financial statements reflect
all adjustments (consisting solely of normal recurring accruals) necessary
for a fair presentation of such information. Interim results are not
necessarily indicative of results to be expected for the entire year.
2) Commitments and Contingencies
At December 31, 1998, the Bank had outstanding commitments to originate
loans amounting to approximately $9.1 million, and unadvanced funds on
construction loans and lines of credit amounting to approximately $294,000
and $7.0 million, respectively.
3) Stock Conversion
The Bank is a Massachusetts chartered stock co-operative bank founded in
1886. The Bank converted from a mutual institution on January 8, 1998.
Mystic Financial, Inc. ("Mystic" or the "Company") has been organized at the
direction of the Board of Directors of the Bank and has acquired all of the
capital stock of the Bank. The simultaneous conversion of the Bank to stock
form, the issuance of the Bank's stock to the Company and the offer and sale
of the common stock by the Company are herein referred to as the
"Conversion."
The Company issued 2,711,125 shares at an initial offering price of $10.00
per share on January 8, 1998 raising gross proceeds of $27,111,250 and
began trading on the Nasdaq National Market under the symbol "MYST" on
January 9, 1998. Net proceeds of the initial offering were approximately
$25.7 million. On January 8, 1998, the Company loaned approximately $3.2
million to the Company's Employee Stock Ownership Plan to fund its purchase
of 216,890 shares of common stock of the Company in open-market purchases
following completion of the Conversion.
4) Earnings Per Share
Earnings per share for the three and six months ended December 31, 1998 were
$.16 and $.32, respectively on a basic and diluted basis. Earnings per
share data is not presented for the three and six months ended December 31,
1997 since there were no outstanding shares of common stock until the
Conversion on January 8, 1998.
5) Stock Repurchase
On July 30, 1998, the Company's Board of Directors adopted a stock
repurchase program authorizing the Company to repurchase up to 135,450 or 5%
of its outstanding shares of common stock. On August 6, 1998, the Company
completed the repurchase program acquiring 135,450 shares at a cost of
approximately $1,967,000.
6) Recent Accounting Pronouncement
On June 1997, FASB issued SFAS No. 130, "Reporting Comprehensive Income,"
effective for fiscal years beginning after December 15, 1997. Accounting
principles generally require that recognized revenue, expenses, gains and
losses be included in net income. Certain FASB statements, however, require
entities to report specific changes in assets and liabilities, such as
unrealized gains and losses on available-for-sale securities, as a separate
component of the equity section of the consolidated balance sheet. Such
items, along with net income, are components of comprehensive income. SFAS
No. 130 requires that all items of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. Additionally, SFAS No. 130 requires that the
accumulated balance of other comprehensive income be displayed separately
from retained earnings and additional paid-in capital in the equity section
of the consolidated balance sheet. The Company adopted these disclosure
requirements in the quarter ending September 30, 1998.
7) Investment Securities
The following table sets forth the Company's investment securities at the
dates indicated.
<TABLE>
<CAPTION>
December 31, 1998 June 30, 1998
-------------------- --------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
--------- ----- --------- -----
(In Thousands)
<S> <C> <C> <C> <C>
Securities Available for Sale:
U.S. Government & Federal
Agency Obligations $12,290 $12,350 $11,540 $11,527
Marketable equity securities 2,507 3,447 2,544 3,222
----------------------------------------------
Total $14,797 $15,797 $14,084 $14,749
==============================================
Securities held to maturity:
U.S. Government & Federal
Agency Obligations $ 1,999 $ 2,011 $ 9,498 $ 9,510
Other bonds & obligations 2,504 2,516 2,508 2,520
----------------------------------------------
Total $ 4,503 $ 4,527 $12,006 $12,030
==============================================
</TABLE>
8) Loans
The following table presents selected data relating to the composition of
the Company's loan portfolio by type of loan on the dates indicated.
<TABLE>
<CAPTION>
December 31, 1998 June 30, 1998
-------------------- --------------------
Amount Percent Amount Percent
------ ------- ------ -------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Residential mortgage loans $106,467 74.4% $106,412 76.8%
Commercial real estate loans 27,985 19.5 24,475 17.7
Commercial loans 5,431 3.8 4,579 3.3
Consumer loans 1,746 1.2 1,787 1.3
Home equity loans 1,509 1.1 1,716 1.2
Construction loans 1,560 1.1 1,260 0.9
---------------------------------------------
Total loans 144,698 101.1 140,229 101.2
Less
Deferred loan origination fees 6 - 17 -
Unadvanced principal 294 0.2 383 0.3
Allowance for loan losses 1,311 0.9 1,236 0.9
---------------------------------------------
$143,087 100.0% $138,593 100.0%
=============================================
</TABLE>
9) Allowance for Loan Losses
The following table analyzes activity in the Company's allowance for loan
losses for the periods indicated.
<TABLE>
<CAPTION>
Six Six
Months Ended Months Ended
December 31, 1998 December 31, 1997
----------------- -----------------
(Dollars in Thousands)
<S> <C> <C>
Average loans, net $140,910 $119,378
=============================
Period-end net loans $143,087 $122,941
=============================
Allowance for loan losses at
beginning of period $ 1,236 $ 977
Provision for loan losses 90 150
Plus recoveries 2 12
Loans charged-off (17) (1)
-----------------------------
Allowance for loan losses at end
of period $ 1,311 $ 1,138
=============================
Non-performing loans $ 2 $ 361
=============================
Ratios
Allowance for loan losses to
period end net loans 0.92% 0.93%
Allowance for loan losses to
non-performing loans - 315.24%
Net charge-offs (recoveries) to
average loans, net 0.02% (0.02)%
</TABLE>
10) Deposits and Borrowed Funds
The following tables set forth the various types of deposit accounts at the
Company and the balances in these accounts as well as the borrowings of the
Company at the dates indicated.
<TABLE>
<CAPTION>
December 31, 1998 June 30, 1998
-------------------- --------------------
Deposits: Amount Percent Amount Percent
------ ------- ------ -------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Savings deposits $ 40,509 26.5% $40,460 28.0%
NOW accounts 28,616 18.7 34,208 23.6
Money market deposits 6,656 4.4 6,256 4.3
Demand deposits 7,182 4.7 6,603 4.6
Certificates of deposits 69,859 45.7 57,239 39.5
--------------------------------------------
Total deposits $152,822 100.0% $144,766 100.0%
============================================
Borrowed Funds:
Advances from Federal Home
Loan Bank of Boston:
Maturities less than one year $ 2,300 11.4% $ 1,125 6.8%
Maturities greater than one
year 17,792 88.6 15,380 93.2
---------------------------------------------
Total borrowed funds $ 20,092 100.0% $ 16,505 100.0%
=============================================
</TABLE>
Mystic Financial Inc. and Subsidiary
Part I - Financial Information
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
December 31, 1998
General
Medford Co-operative Bank (the "Bank") completed its conversion from a
mutual to a stock institution and was simultaneously acquired by Mystic
Financial, Inc. ("Mystic" or the "Company") on January 8, 1998. The
following discussion and analysis should be read in conjunction with the
consolidated financial statements and related notes thereto included within
this report.
The Private Securities Litigation Reform Act of 1995 contains safe
harbor provisions regarding forward-looking statements. When used in this
discussion, the words "believes", "anticipates", "contemplates", "expects",
and similar expressions are intended to identify forward-looking statements.
Such statements are subject to certain risks and uncertainties which could
cause actual results to differ materially from those projected. Those risks
and uncertainties include changes in interest rates generally and changes in
real estate values and other economic conditions in eastern Massachusetts,
the Bank's principal market area. The Company undertakes no obligation to
publicly release the results of any revisions to those forward-looking
statements which may be made to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events.
Additional information on potential factors which could affect the Company's
financial results are included in the Annual Report on Form 10-K of Mystic.
The Company's profitability depends primarily on its net interest
income, which is the difference between the interest income it earns on its
loans and investment portfolio and its cost of funds, which consists mainly of
interest paid on deposits and on borrowings from the Federal Home Loan Bank
of Boston. Net interest income is affected by the relative amounts of
interest-earning assets and interest-bearing liabilities and the interest
rates earned or paid on these balances. When interest-earning assets
approximate or exceed interest-bearing liabilities, any positive interest
rate spread will generate net interest income.
The Company's profitability is also affected by the level of other
income and operating expenses. Other income consists primarily of service
fees, loan servicing and other loan fees, and gains on sales of investment
securities available for sale. Operating expenses consist of salaries and
benefits, occupancy related expenses, and other general operating expenses.
The operations of the Company, and banking institutions in general, are
significantly influenced by general economic conditions and related monetary
and fiscal policies of the financial institution's regulatory agencies.
Deposit flows and the cost of funds are influenced by interest rates on
competing investments and general market rates of interest. Lending
activities are affected by the demand for real estate financing and other
types of loans, which in turn are affected by the interest rates at which
such financing may be offered and other factors affecting loan demand and
the availability of funds.
In addition to those factors previously disclosed by the Company and
Bank and those factors identified elsewhere herein, the following factors
could cause actual results to differ materially from such forward-looking
statements: continued pricing pressures on loan and deposit products,
actions of competitors, changes in economic conditions, the extent and
timing of actions of the Federal Reserve Board, customer disintermediation,
customers' acceptance of the Bank's products and services, the extent and
timing of legislative and regulatory actions and reforms, and the ability of
the Company and Bank to effectively deploy the capital it raised in its
initial offering.
Average Balances, Interest and Average Yields
The following tables set forth certain information relating to the
Company's average balance sheet and reflect the interest earned on assets and
interest cost of liabilities for the periods indicated and the average yields
earned and rates paid for the periods indicated. Such yields and costs are
derived by dividing income or expense by the average monthly balances of
assets and liabilities, respectively, for the periods presented. Average
balances are derived from daily balances. Loans on nonaccrual status are
included in the average balances of loans shown in the tables. The
investment securities in the following tables are presented at amortized cost.
MYSTIC FINANCIAL, INC. AND SUBSIDIARY
AVERAGE BALANCES, INTEREST AND AVERAGE YIELDS
THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
Three Months Ended December 31, 1998 Three Months Ended December 31, 1997
------------------------------------ ------------------------------------
Average Interest Yield/ Average Interest Yield/
Balance Income/Expense Rate Balance Income/Expense Rate
------- -------------- ------ ------- -------------- ------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Total loans, net $142,007 $2,811 7.92% $121,425 $2,491 8.21%
Investments 21,687 294 5.42% 20,324 276 5.43%
Other earning assets 20,020 243 4.86% 11,865 170 5.73%
-------- ------ -------- ------
Total interest-earning
assets 183,714 3,348 7.29% 153,614 2,937 7.65%
------ ------
Cash and due from banks 3,936 3,150
Other assets 6,193 6,085
-------- --------
Total assets $193,843 $162,849
======== ========
INTEREST-BEARING LIABILITIES:
Regular and other deposits $ 40,544 250 2.47% $ 46,786 306 2.62%
Now accounts 23,588 94 1.59% 20,696 84 1.62%
Money market deposits 6,381 39 2.44% 6,669 44 2.64%
Certificates of deposit 61,541 836 5.43% 58,366 818 5.61%
------- ------ -------- ------
Total interest-bearing
deposits 132,054 1,219 3.69% 132,517 1,252 3.78%
FHLB borrowings 18,624 277 5.95% 11,523 180 6.25%
-------- ------ -------- ------
Total interest-bearing
liabilities 150,678 1,496 3.97% 144,040 1,432 3.98%
------ ------
Demand deposit accounts 7,170 5,551
Other liabilities 1,267 1,003
-------- --------
Total liabilities 159,115 150,594
Stockholders' equity 34,728 12,255
-------- --------
Total liabilities and
stockholders' equity $193,843 $162,849
======== ========
Net interest income $1,852 $1,505
====== ======
Interest rate spread 3.32% 3.67%
Net interest margin 4.03% 3.92%
Interest earning assets/
interest-bearing liabilities 1.22x 1.07x
</TABLE>
MYSTIC FINANCIAL, INC. AND SUBSIDIARY
AVERAGE BALANCES, INTEREST AND AVERAGE YIELDS
SIX MONTHS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
Six Months Ended December 31, 1998 Six Months Ended December 31, 1997
---------------------------------- ----------------------------------
Average Interest Yield/ Average Interest Yield/
Balance Income/Expense Rate Balance Income/Expense Rate
------- -------------- ------ ------- -------------- ------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Total loans, net $140,910 $5,584 7.93% $119,378 $4,886 8.19%
Investments 23,400 642 5.49% 20,276 570 5.62%
Other earning assets 17,691 447 5.05% 9,710 266 5.48%
-------- ------ -------- ------
Total interest-earning
assets 182,001 6,673 7.33% 149,364 5,722 7.66%
------ ------
Cash and due from banks 3,767 2,924
Other assets 6,188 5,990
-------- --------
Total assets $191,956 $158,278
======== ========
INTEREST-BEARING LIABILITIES:
Regular and other deposits $ 40,912 525 2.57% $ 43,815 537 2.45%
Now accounts 23,133 184 1.59% 19,896 170 1.71%
Money market deposits 6,426 81 2.52% 6,595 87 2.64%
Certificates of deposit 60,520 1,658 5.48% 58,682 1,694 5.77%
-------- ------ -------- ------
Total interest-bearing
deposits 130,991 2,448 3.74% 128,988 2,488 3.86%
FHLB borrowings 17,612 530 6.02% 10,711 335 6.26%
-------- ------ -------- ------
Total interest-bearing
liabilities 148,603 2,978 4.01% 139,699 2,823 4.04%
------ ------
Demand deposit accounts 7,133 5,533
Other liabilities 1,164 920
-------- --------
Total liabilities 156,900 146,152
Stockholders' equity 35,056 12,126
-------- --------
Total liabilities and
stockholders' equity $191,956 $158,278
======== ========
Net interest income $3,695 $2,899
====== ======
Interest rate spread 3.32% 3.62%
Net interest margin 4.06% 3.88%
Interest earning assets/
interest-bearing liabilities 1.22x 1.07x
</TABLE>
Rate/Volume Analysis
The following table sets forth certain information regarding changes
in interest income and interest expense of the Company for the periods
indicated. For each category of interest-earning asset and interest-bearing
liability, information is provided on changes attributable to: (i) changes
in volume (changes in volume multiplied by old rate); and (ii) changes in
rates (change in rate multiplied by old volume). Changes in rate-volume
(changes in rate multiplied by the changes in volume) are allocated between
changes in rate and changes in volume.
<TABLE>
<CAPTION>
Three Months Ended December 31,
1998 vs 1997
Increase (decrease)
-------------------------------
Due to
-------------------
Rate Volume Total
---- ------ -----
(In Thousands)
<S> <C> <C> <C>
Interest and dividend income:
Loans, net $ (90) $ 410 $ 320
Investments - 18 18
Other earning assets (29) 102 73
------------------------------
Total (119) 530 411
------------------------------
Interest expense:
Deposits (30) (3) (33)
Borrowed funds (9) 106 97
------------------------------
Total (39) 103 64
------------------------------
Change in net interest income $ (80) $ 427 $ 347
==============================
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended December 31,
1998 vs. 1997
Increase (decrease)
-----------------------------
Due to
------------------
Rate Volume Total
---- ------ -----
(In Thousands)
<S> <C> <C> <C>
Interest and dividend income:
Loans, net $ (159) $ 857 $ 698
Investments (14) 72
Other earning assets (22) 203 181
------------------------------
Total (195) 1,146 951
------------------------------
Interest expense:
Deposits (79) 39 (40)
Borrowed funds (13) 208 195
------------------------------
(92) 247 155
------------------------------
Change in net interest income $ (103) $ 899 $ 796
==============================
</TABLE>
Financial Condition and Results of Operations
Comparison of Financial Condition at December 31, 1998 and June 30, 1998
The Company's total assets amounted to $209.5 million at December 31,
1998 compared to $199.0 million at June 30, 1998, an increase of $10.4
million or 5.2%. The increase in total assets is a result of an increase in
cash and cash equivalents and continued loan growth, partially offset by a
decrease in investment securities. The increase in total assets is
principally due to an increase in deposit accounts and Federal Home Loan
Bank borrowings.
Cash and cash equivalents increased to $38.3 million at December 31,
1998 from $26.0 million at June 30, 1998, an increase of $12.3 million or
47.3%. Cash and cash equivalents are volatile due to the Company's large
deposit relationship with a law firm which maintains short-term deposits in
real estate conveyancing accounts and has significant fluctuations in its
deposit account balances. The decrease in investment securities of $6.5
million or 24.1% to $20.3 million at December 31, 1998 from $26.8 million at
June 30, 1998 also caused cash and cash equivalents to increase as the
Company maintained a higher level of liquidity.
Net loans increased by $4.5 million or 3.2% to $143.1 million or 68.3%
of total assets at December 31, 1998 as compared to $138.6 million or 69.6%
of total assets at June 30, 1998 as the Company continued its emphasis on
originating and retaining residential mortgage loans and commercial and
commercial real estate loans.
Total deposits increased by $8.1 million or 5.6% to $152.8 million at
December 31, 1998 from $144.8 million at June 30, 1998 as a result of an
increase in certificates of deposit due to a promotion associated with the
opening of a new branch office in late November 1998 in Lexington,
Massachusetts, partially offset by a decrease in NOW accounts attributable
to volatile balances in mortgage conveyancing escrow accounts maintained by
law firms. Total borrowings increased by $3.6 million to $20.1 million at
December 31, 1998 from $16.5 million at June 30, 1998. The Company's
continued use of borrowed funds reflects additional funding used to fund
larger commercial real estate loans, generally those exceeding $1.0 million,
with matching funds from the Federal Home Loan Bank of Boston ("FHLBB") to
reduce interest rate risk. In addition, the Company has match-funded $5.0
million of 30-year fixed-rate residential mortgage loans held for portfolio.
The retention of these loans is helping the Company leverage the capital it
raised in the conversion.
Stockholders' equity decreased by $871,000 to $35.3 million at
December 31, 1998 from $36.1 million at June 30, 1998 as a result of the
repurchase of 135,450 shares of common stock held in treasury at a cost of
$2.0 million, and dividends paid of $264,000, offset by net income of
$824,000 a decrease in the loan due from the Employeee Stock Ownership Plan
due to the first annual repayment of principal of $319,000, and an increase
in the net unrealized gain on securities available for sale of $217,000.
Comparison of the Operating Results for the Three and Six Months Ended
December 31, 1998 and 1997
Net Income. Net income was $409,000 and $824,000 for the three and
six months ended December 31, 1998, respectively, compared to $236,000 and
$591,000 for the three and six months ended December 31, 1997, respectively.
Return on average assets was .84% and .86% for the three and six months
ended December 31, 1998, respectively, compared to .58% and .75% for the
three and six months ended December 31, 1997, respectively. Return on
average equity was 4.71% and 4.70% for the three and six months ended
December 31, 1998, respectively, compared to 7.70% and 9.75% for the three
and six months ended December 31, 1997, respectively. The increase in the
return on average assets and the decrease in the return on average equity
are primarily due to the conversion.
The increase in net income for the three months ended December 31,
1998 compared to the three months ended December 31, 1997 was attributable
to an increase in net interest income of $347,000, an increase in other
income of $117,000, and a decrease of $50,000 in provision for loan losses,
which were partially offset by an increase in operating expenses of $228,000
and an increase in the provision for income taxes of $113,000. The increase
in net income for the six months ended December 31, 1998 compared to the six
months ended December 31, 1997 was attributable to an increase in net
interest income of $796,000, an increase in other income of $15,000, and a
decrease of $60,000 in provision for loan losses, which were partially
offset by an increase in operating expenses of $499,000 and an increase in
the provision for income taxes of $139,000.
Interest Income. Total interest and dividend income increased by
$411,000 or 14.0% to $3.3 million for the three months ended December 31,
1998 from $2.9 million for the three months ended December 31, 1997. The
increase in interest income was a result of a higher level of loans,
investment securities, and other earning assets resulting from the
deployment of proceeds of the Conversion. The average balance of net loans
for the three months ended December 31, 1998 was $142.0 million compared to
$121.4 million for the three months ended December 31, 1997. The average
yield on net loans was 7.92% for the three months ended December 31, 1998
compared to 8.21% for the three months ended December 31, 1997.
The average balance of investment securities for the three months
ended December 31, 1998 was $21.7 million compared to $20.3 million for the
three months ended December 31, 1997. The average yield on investment
securities was 5.42% for the three months ended December 31, 1998 compared
to 5.43% for the three months ended December 31, 1997. The average balance
of other earning assets for the three months ended December 31, 1998 was
$20.0 million compared to $11.9 million for the three months ended December
31, 1997. The average yield on other earning assets was 4.86% for the three
months ended December 31, 1998 compared to 5.73% for the three months ended
December 31, 1997. The decrease in the average yield on net loans,
investment securities, and other earning assets reflects the general decline
in market interest rates since the prior period.
Total interest and dividend income increased by $951,000 or 16.6% to
$6.7 million for the six months ended December 31, 1998 from $5.7 million
for the six months ended December 31, 1997. The increase in interest income
was a result of a higher level of loans, investment securities, and other
earning assets resulting from the deployment of proceeds of the Conversion.
The average balance of net loans for the six months ended December 31, 1998
was $140.9 million compared to $119.4 million for the six months ended
December 31, 1997. The average yield on net loans was 7.93% for the six
months ended December 31, 1998 compared to 8.19% for the six months ended
December 31, 1997.
The average balance of investment securities for the six months ended
December 31, 1998 was $23.4 million compared to $20.3 million for the six
months ended December 31, 1997. The average yield on investment securities
was 5.49% for the six months ended December 31, 1998 compared to 5.62% for
the six months ended December 31, 1997. The average balance of other
earning assets for the six months ended December 31, 1998 was $17.7 million
compared to $9.7 million for the six months ended December 31, 1997. The
average yield on other earning assets was 5.05% for the six months ended
December 31, 1998 compared to 5.48% for the six months ended December 31,
1997. The decrease in the average yield on net loans, investment
securities, and other earning assets reflects the general decline in market
interest rates since the prior period.
Interest Expense. Total interest expense increased by $64,000 or 4.5%
to $1.5 million for the three months ended December 31, 1998 from $1.4
million for the three months ended December 31, 1997. Interest expense
increased primarily due to the increase in FHLBB borrowings. The Company's
continued use of borrowed funds reflects additional funding used to fund
larger commercial real estate loans, generally those exceeding $1.0 million,
with matching funds from the FHLBB to reduce interest rate risk. In
addition, the Company has match-funded $5.0 million of 30-year fixed-rate
residential mortgage loans held for portfolio with borrowings of various
maturities.
Average interest-bearing deposits decreased by $463,000 or 0.4% to
$132.1 million while the average rate decreased nine basis points to 3.69%
from 3.78% for the three months ended December 31, 1998. Average interest-
bearing deposits were abnormally high during the three months ended December
31, 1997 because they included deposits received by the Bank as stock
subscription deposits. Average borrowings increased by $7.1 million to
$18.6 million for the three months ended December 31, 1998 from $11.5
million while the average rate decreased 30 basis points to 5.95% from 6.25%
for the three months ended December 31, 1997.
Total interest expense increased by $155,000 or 5.5% to $3.0 million
for the six months ended December 31, 1998 from $2.8 million for the six
months ended December 31, 1997. Interest expense increased primarily due to
the increase in FHLBB borrowings. The Company's continued use of borrowed
funds reflects additional funding used to fund larger commercial real estate
loans, generally those exceeding $1.0 million, with matching funds from the
FHLBB to reduce interest rate risk. In addition, the Company has match-
funded $5.0 million of 30-year fixed-rate residential mortgage loans held
for portfolio with borrowings of various maturities.
Average interest-bearing deposits increased by $2.0 million or 1.6% to
$131.0 million while the average rate decreased 12 basis points to 3.74%
from 3.86% for the six months ended December 31, 1998. Average borrowings
increased by $6.9 million to $17.6 million for the six months ended December
31, 1998 from $10.7 million while the average rate decreased 24 basis points
to 6.02% from 6.26% for the six months ended December 31, 1997.
Net Interest Income. Net interest income for the three months ended
December 31, 1998 was $1.9 million as compared to $1.5 million for the three
months ended December 31, 1997. The $347,000 or 23.1% increase can be
attributed to a combination of the $411,000 increase in interest and
dividend income and the $64,000 increase in interest expense on deposits and
borrowed funds. The average yield on interest earning assets decreased 36
basis points to 7.29% for the three months ended December 31, 1998 from
7.65% for the three months ended December 31, 1997, while the average cost
on interest-bearing liabilities decreased by one basis point to 3.97% for
the three months ended December 31, 1998 from 3.98% for the three months
ended December 31, 1997. As a result, the interest rate spread decreased to
3.32% for the three months ended December 31, 1998 from 3.67% for the three
months ended December 31, 1997. The interest rate spread also declined due
to the receipt of net conversion proceeds which have been invested in cash
and cash equivalents and investment securities at interest rates lower than
the Company's average yield on loans.
Net interest income for the six months ended December 31, 1998 was
$3.7 million as compared to $2.9 million for the six months ended December
31, 1997. The $796,000 or 27.5% increase can be attributed to a combination
of the $951,000 increase in interest and dividend income and the $155,000
increase in interest expense on deposits and borrowed funds. The average
yield on interest earning assets decreased 33 basis points to 7.33% for the
six months ended December 31, 1998 from 7.66% for the six months ended
December 31, 1997, while the average cost on interest-bearing liabilities
decreased by three basis points to 4.01% for the six months ended December
31, 1998 from 4.04% for the six months ended December 31, 1997. As a
result, the interest rate spread decreased to 3.32% for the six months ended
December 31, 1998 from 3.62% for the six months ended December 31, 1997.
The interest rate spread also declined due to the receipt of net conversion
proceeds which have been invested in cash and cash equivalents and
investment securities at interest rates lower than the Company's average
yield on loans.
Provision for Loan Losses. The provision for loan losses for the
three and six months ended December 31, 1998 was $30,000 and $90,000,
respectively, compared to $80,000 and $150,000 for the three and six months
ended December 31, 1997, respectively. This decrease reflects the decrease
in non-performing loans at December 31, 1998 compared to December 31, 1997.
At December 31, 1998, the balance of the allowance for loan losses was
$1,311,000 or .92% of net loans. During the six months ended December 31,
1998, $17,000 was charged against the allowance for loan losses while $2,000
in recoveries was credited to the allowance for loan losses. At December
31, 1997, the balance of the allowance for loan losses was $1,138,000 or
.93% of net loans. During the six months ended December 31, 1997, $1,000
was charged against the allowance for loan losses while $12,000 in
recoveries was credited to the allowance for loan losses.
Other Income. Other income was $320,000 for the three months ended
December 31, 1998 compared to $203,000 for the three months ended December
31, 1997. The $117,000 increase was primarily the result of a $64,000
increase in the gain on the sales of mortgage loans and an increase in
miscellaneous income of $49,000. Other income was $563,000 for the six
months ended December 31, 1998 compared to $548,000 for the six months ended
December 31, 1997. The $15,000 increase was primarily the result of a
$66,000 increase in the gain on the sales of mortgage loans and an increase
in miscellaneous income of $17,000, offset by a decrease in the gain on the
sales of investment securities of $77,000.
Operating Expenses. Operating expenses increased by $228,000 or 18.5%
to $1.5 million for the three months ended December 31, 1998 from $1.2
million for the three months ended December 31, 1997. Salaries and
employee benefits increased by $45,000. Of this amount, an increase of
$75,000 attributable to the Company's adoption of an Employee Stock
Ownership Plan ("ESOP") and $68,000 attributable to the adoption of
supplemental benefits for the Company's Chief Executive officer were offset
by reductions in staff salaries of $81,000 and other decreases of $22,000.
Salary and employee benefits also increased because of higher commission
payments to residential loan originators as a result of higher volumes of
lending activity. Occupancy and equipment expenses increased by $23,000 due
to the opening of a new branch office in late November 1998 in Lexington,
Massachusetts. An increase in other general and administrative expenses of
$147,000 was caused by higher professional fees and liability insurance
costs from operating as a publicly held stock institution and promotional
costs associated with the opening of the new Lexington office.
Operating expenses increased by $499,000 or 21.7% to $2.8 million for
the six months ended December 31, 1998 from $2.3 million for the six months
ended December 31, 1997. Salaries and employee benefits increased by
$224,000, of which $156,000 is attributable to the Company's adoption of an
Employee Stock Ownership Plan ("ESOP"). Salaries and employee benefits also
increased by $50,000 due to accruals for supplemental retirement benefits
and a Benefit Restoration Plan for the Company's Chief Executive Officer.
Salary and employee benefits also increased because of higher commission
payments to residential loan originators as a result of higher volumes of
lending activity. An increase in other general and administrative expenses
of $263,000 was caused by higher professional fees and liability insurance
costs from operating as a publicly held stock institution and promotional
costs associated with the opening of the Lexington office. Annual operating
expenses are also expected to increase in future periods due to the
increased cost of operating as a publicly held stock institution and the
ongoing operating costs of the new Lexington office.
Asset/Liability Management
A principal operating objective of the Company is to produce stable
earnings by achieving a favorable interest rate spread that can be sustained
during fluctuations in prevailing interest rates. Since the Company's
principal interest-earning assets have longer terms to maturity than its
primary source of funds, i.e. deposit liabilities, increases in general
interest rates will generally result in an increase in the Company's cost of
funds before the yield on its asset portfolio adjusts upward. Banking
institutions have generally sought to reduce their exposure to adverse
changes in interest rates by attempting to achieve a closer match between
the periods in which their interest-bearing liabilities and interest-earning
assets can be expected to reprice through the origination of adjustable-rate
mortgages and loans with shorter terms and the purchase of other shorter
term interest-earning assets.
The term "interest rate sensitivity" refers to those assets and
liabilities which mature and reprice periodically in response to
fluctuations in market rates and yields. Thrift institutions have
historically operated in a mismatched position with interest-sensitive
liabilities exceeding interest-sensitive assets in the short-term time
periods. As noted above, one of the principal goals of the Company's
asset/liability program is to more closely match the interest rate
sensitivity characteristics of the asset and liability portfolios.
In order to properly manage interest rate risk, the Board of Directors
has established an Asset/Liability Management Committee ("ALCO") made up of
members of management to monitor the difference between the Company's maturing
and repricing assets and liabilities and to develop and implement strategies
to decrease the "negative gap" between the two. The primary
responsibilities of the committee are to assess the Company's asset/liability
mix, recommend strategies to the Board that will enhance income while
managing the Company's vulnerability to changes in interest rates and report
to the Board the results of the strategies used.
Since the early 1980s, the Bank has stressed the origination of
adjustable-rate residential mortgage loans and adjustable-rate home equity
loans. Historically, the Bank attempts to sell fixed rate loans with terms
in excess of 15 years. Since 1995, the Company has also emphasized commercial
loans with short-term maturities or repricing intervals as well as
commercial real estate mortgages with short-term repricing intervals. In
addition, the Company has used borrowings from the FHLBB to match-fund the
maturity or repricing interval of several larger commercial real estate
mortgages.
In the future, in managing its interest rate sensitivity, the Bank
intends to continue to stress the origination of adjustable-rate mortgages
and loans with shorter maturities and the maintenance of a consistent level
of short-term securities.
Liquidity and Capital Resources
The Company's primary sources of funds consist of deposits,
borrowings, repayment and prepayment of loans, sales and participations of
loans, maturities of investments and interest-bearing deposits, and funds
provided from operations. While scheduled repayments of loans and
maturities of investment securities are predictable sources of funds,
deposit flows and loan prepayments are greatly influenced by the general
level of interest rates, economic conditions, and competition. The Company
uses its liquidity resources primarily to fund existing and future loan
commitments, to fund net deposit outflows, to invest in other interest-
earning assets, to maintain liquidity, and to meet operating expenses.
The Company is required to maintain adequate levels of liquid assets.
This guideline, which may be varied depending upon economic conditions and
deposit flows, is based upon a percentage of deposits and short-term
borrowings. The Company has historically maintained a level of liquid
assets in excess of regulatory requirements. The Company's liquidity ratio
at December 31, 1998 was 38.2%.
A major portion of the Company's liquidity consists of cash and cash
equivalents, short-term U.S. Government and Federal Agency obligations, and
corporate bonds. The level of these assets is dependent upon the Company's
operating, investing, lending and financing activities during any given
period.
Liquidity management is both a daily and long-term function of
management. If the Company requires funds beyond its ability to generate
them internally, the Company believes it could borrow additional funds from
the FHLBB. At December 31, 1998, the Company had borrowings of $20.1
million from the FHLBB.
At December 31, 1998, the Company had $9.1 million in outstanding
commitments to originate loans. The Company anticipates that it will have
sufficient funds available to meet its current loan origination commitments.
Certificates of deposit which are scheduled to mature in one year or less
totaled $45.3 million at December 31, 1998. Based upon historical
experience, management believes that a significant portion of such deposits
will remain with the Bank.
At December 31, 1998, the Company and the Bank exceeded all of their
regulatory capital requirements.
Year 2000
The "Year 2000 Problem" centers on the inability of computer systems
to recognize the Year 2000. Many existing computer programs and systems
were originally programmed with six digit dates that provided only two
digits to identify the calendar year in the date field, without considering
the upcoming change in the century. With the impending millennium, these
programs and computers will recognize "00" as the year 1900 rather than the
Year 2000. Like most financial service providers, the Bank and its
operations may be significantly affected by the Year 2000 Problem due to the
nature of financial information. Software, hardware, and equipment both
within and outside the Bank's direct control and with whom the Bank
electronically or operationally interfaces (e.g. third party vendors
providing data processing, information system management, maintenance of
computer systems, and credit bureau information) are likely to be affected.
Furthermore, if computer systems are not adequately changed to identify the
Year 2000, many computer applications could fail or create erroneous
results. As a result, many calculations which rely on the date field
information, such as interest, payment or due dates and other operating
functions, will generate results which could be significantly misstated, and
the Bank could experience a temporary inability to process transactions,
send invoices or engage in similar normal business activities.
The Company and the Bank are utilizing both internal and external
resources to identify, correct or reprogram, and test the systems for the
Year 2000 compliance. It is anticipated that all reprogramming efforts were
nearly complete by December 31, 1998, allowing adequate time for testing.
To date, confirmations have been received from the Company's and the Bank's
primary data processing vendors that plans are being developed to address
processing of transactions in the year 2000. Although the Company cannot
currently estimate the extent to which any failure to process date
information correctly could have a material adverse effect on the Company's
business, operations or financial condition, management believes that, if
not adequately addressed, such delays, errors or failures could have a
significant adverse impact on the financial condition and results of
operation of the Company.
In addition, monitoring and managing the Year 2000 project will
result in additional direct and indirect costs to the Company and the Bank.
Direct costs include potential charges by third party software vendors for
product enhancements, costs involved in testing software products for
Year 2000 compliance, and any resulting costs for developing and
implementing contingency plans for critical software products which are not
enhanced. Indirect costs will principally consist of the time devoted by
existing employees in monitoring software vendor progress, testing
enhanced software products and implementing any necessary contingency plans.
The Company has spent approximately $56,000 on Year 2000 related costs to
date and estimates that it will spend an additional $100,000 for Year 2000
compliance. Both direct and indirect costs of addressing the Year 2000
Problem will be charged to earnings as incurred. The Company does not
believe that such costs will have a material effect on results of
operations. However, there can be no guarantee that the systems of other
companies on which the Company's systems rely will be timely converted, or
that a failure to convert by another company or a conversion that is
incompatible with the Company's systems, would not have a material adverse
effect on the Company. Although no independent analysis of the Company's
potential exposure has been obtained, the Company believes it has no
exposure to contingencies related to the Year 2000 Problem for the products
it has sold.
The costs of the project and the date on which the Company plans to
complete the Year 2000 modifications are based on management's best
estimates, which were derived utilizing numerous assumptions of future
events including the continued availability of certain resources, third
party modification plans and other factors. However, there can be no
guarantee that these estimates will be achieved and actual results could
differ materially from those plans. Specific factors that might cause such
material differences include, but are not limited to, the availability and
cost of personnel trained in this area, the ability to locate and correct
all relevant computer codes, and similar uncertainties. The Company has not
developed a contingency plan which would be implemented in the unlikely
event that it is not Year 2000 compliant. The Company will continue to
closely monitor the progress of its Year 2000 compliance plan and is in the
process of developing a Year 2000 contingency plan.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There has been no material change in market risk since June 30, 1998.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Shareholders ("Meeting") on
October 21, 1998. All of the proposals submitted to the shareholders at the
Meeting were approved. The proposals submitted to shareholders and the
tabulation of votes for each proposal is as follows:
1. Election of four candidates to the Board of Directors, three to
serve for a term of three years and one to serve a term of one
year.
The number of votes cast with respect to this matter was as follows:
<TABLE>
<CAPTION>
Nominee For Withheld Broker Non-Votes
- ------- --- -------- ----------------
<S> <C> <C> <C>
Lorraine P. Silva 2,051,772 23,562 94,652
John A. Hackett 2,050,512 24,822 94,652
Julie Bernardin 2,050,217 25,117 94,652
Frederick N. Dello Russo 2,048,412 26,922 94,652
</TABLE>
2. Ratification of the appointment of Wolf & Company, P.C. as
independent auditors for fiscal year ending June 30, 1999.
The number of votes cast with respect to this matter was as follows:
<TABLE>
<CAPTION>
For Against Abstained Broker Non-Votes
--- ------- --------- ----------------
<C> <C> <C> <C>
2,057,087 8,700 9,547 94,652
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MYSTIC FINANCIAL, INC.
Date: February 12, 1999 By: /s/ Robert H. Surabian
-------------------------------
Robert H. Surabian
President and Chief Executive
Officer
Date: February 12, 1999 By: /s/ Ralph W. Dunham
-------------------------------
Ralph W. Dunham
Executive Vice-President, Chief
Financial Officer, and Treasurer
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 7,763
<INT-BEARING-DEPOSITS> 14,182
<FED-FUNDS-SOLD> 16,312
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 15,797
<INVESTMENTS-CARRYING> 4,503
<INVESTMENTS-MARKET> 4,527
<LOANS> 144,398
<ALLOWANCE> 1,311
<TOTAL-ASSETS> 209,462
<DEPOSITS> 152,822
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,292
<LONG-TERM> 20,092
0
0
<COMMON> 27
<OTHER-SE> 35,229
<TOTAL-LIABILITIES-AND-EQUITY> 209,462
<INTEREST-LOAN> 5,584
<INTEREST-INVEST> 642
<INTEREST-OTHER> 447
<INTEREST-TOTAL> 6,673
<INTEREST-DEPOSIT> 2,448
<INTEREST-EXPENSE> 2,978
<INTEREST-INCOME-NET> 3,695
<LOAN-LOSSES> 90
<SECURITIES-GAINS> 61
<EXPENSE-OTHER> 2,802
<INCOME-PRETAX> 1,366
<INCOME-PRE-EXTRAORDINARY> 1,366
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 824
<EPS-PRIMARY> .32
<EPS-DILUTED> .32
<YIELD-ACTUAL> 4.06
<LOANS-NON> 2
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,236
<CHARGE-OFFS> 17
<RECOVERIES> 2
<ALLOWANCE-CLOSE> 1,311
<ALLOWANCE-DOMESTIC> 1,311
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
