<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE QUARTER ENDED SEPTEMBER 30, 1998
SEC Exchange Act No. 000-23601
---------
Pathfinder Bancorp, Inc.
------------------------------------------------
(Exact name of bank as specified in its charter)
New York
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(State or jurisdiction of incorporation or organization)
16-1540137
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(I.R.S. Employer Identification Number)
214 W. 1st Street
Oswego, New York 13126
- --------------------------------------- ----------
(Address of principal executive office) (Zip Code)
Bank's telephone number, including area code: (315) 343-0057
--------------
Not Applicable
------------------------------------------
(Former name, former address and former
fiscal year, if changed since last report)
Indicate by check mark whether the Bank (1) has filed all reports required
to be filed by Section 13 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 ______
---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: There were 2,779,999 shares
of the Company's common stock outstanding as of November 10, 1998.
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PATHFINDER BANCORP, INC.
INDEX
<TABLE>
<CAPTION>
PART 1 FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
<S> <C> <C>
. Consolidated Balance Sheets 1
. Consolidated Statements of Income 2
. Consolidated Statements of Shareholders' Equity 3
. Consolidated Statements of Cash Flows 4, 5
. Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 7 - 15
Condition and Results of Operations
PART II OTHER INFORMATION 16
SIGNATURES
</TABLE>
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PATHFINDER BANCORP, INC.
CONSOLIDATED STATEMENTS OF CONDITION
September 30, 1998 (unaudited) and December 31, 1997
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
------
Cash and due from banks $ 4,668,149 $ 4,334,072
Federal funds sold -- --
------------ ------------
Total cash and cash equivalents 4,668,149 4,334,072
Investment securities 44,475,330 56,821,317
Mortgage loans held-for-sale 2,757,178 1,547,354
Loans:
Real Estate 114,413,620 110,416,494
Consumer and other 11,126,293 10,763,277
------------ ------------
Total loans 125,539,913 121,179,771
Less: Allowance for loan losses 879,161 827,521
Unearned discounts and origination fees 233,032 314,322
------------ ------------
Loans Receivable, net 124,427,720 120,037,928
Premises and equipment 4,362,839 3,720,270
Accrued interest receivable 1,290,324 1,443,175
Other real estate 1,185,687 766,619
Intangible assets 3,368,060 3,604,876
Other assets 5,075,903 4,494,775
------------ ------------
$191,611,190 $196,770,386
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Deposits:
Interest bearing $147,870,274 $144,754,879
Non-interest bearing 8,548,393 7,644,262
------------ ------------
Total deposits 156,418,667 152,399,141
Borrowed funds 10,200,000 18,242,000
Note payable - ESPOP 388,275 430,126
Other liabilities 2,216,873 2,116,384
------------ ------------
Total liabilities 169,223,815 173,187,651
Shareholders' equity: (1)
Common stock, par value $.10 per share; authorized 9,900,000
shares; 2,874,999 shares issued and outstanding 287,500 287,500
Additional paid in capital 7,597,051 7,643,084
Retained earnings 17,721,626 17,156,415
Unearned stock based compensation (1,531,536) (1,836,250)
Unearned ESOP shares (363,116) (411,050)
Accumulated other comprehensive income 911,430 743,036
Treasury stock, at cost; 138,625 shares (2,235,580) --
------------ ------------
Total shareholders' equity 22,387,375 23,582,735
------------ ------------
$191,611,190 $196,770,386
============ ============
</TABLE>
(1) December 31, 1997 amounts reflect impact of reorganization for Pathfinder
Bancorp, Inc. and the retroactive effect of the 3 for 2 split declared on
January 13, 1998 and paid on February 5, 1998
The accompanying notes are an integral part of the financial statements
1
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PATHFINDER BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
For the three months and nine months ended
September 30, 1998 and September 30, 1997
(unaudited)
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
---------------------------- ------------------------------
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans $2,714,167 $2,527,898 $8,152,218 $ 7,426,811
Interest and dividends on investments:
U.S. Treasury and agencies 35,123 101,451 171,806 309,496
State and political subdivisions 78,307 94,932 257,306 277,123
Corporate 219,957 377,179 792,835 1,136,813
Marketable equity securities 26,864 49,063 76,149 70,893
Mortgage-backed 322,532 399,775 1,034,776 1,175,129
Federal funds sold and interest-bearing deposits 74,740 40,067 112,115 165,827
---------- ---------- ----------- -----------
Total interest income 3,471,690 3,590,365 10,597,205 10,562,082
INTEREST EXPENSE:
Interest on deposits 1,576,295 1,590,827 4,647,020 4,732,368
Interest on borrowed funds 184,435 149,158 665,171 373,962
---------- ---------- ----------- -----------
Total interest expense 1,760,730 1,739,985 5,312,191 5,106,330
---------- ---------- ----------- -----------
Net interest income 1,710,960 1,850,380 5,285,014 5,455,752
Provision for loan losses 110,462 57,539 251,003 184,890
---------- ---------- ----------- -----------
Net interest income after provision for loan losses 1,600,498 1,792,841 5,034,011 5,270,862
---------- ---------- ----------- -----------
OTHER INCOME:
Service charges on deposit accounts 145,156 123,228 384,388 373,860
Mortgage servicing fees 10,148 9,865 34,145 33,004
Net gain (loss) on securities and loan sales (11,295) 74,996 258,750 247,049
Other charges, commission and fees 87,090 96,761 264,392 369,616
---------- ---------- ----------- -----------
Total other income 231,099 304,850 941,675 1,023,529
---------- ---------- ----------- -----------
OTHER EXPENSES:
Salaries and employee benefits (a) 790,301 645,873 2,326,966 1,874,892
Building occupancy 148,757 163,348 470,251 501,915
Data processing expenses 111,385 101,628 336,344 281,764
Professional and other services 87,134 163,683 405,502 426,995
Deposit insurance premiums 7,821 7,318 27,867 24,936
Amortization of intangible asset (b) 78,939 78,939 236,827 236,817
Other expenses 290,851 245,263 815,562 652,254
---------- ---------- ----------- -----------
Total other expenses 1,515,188 1,406,053 4,609,309 3,999,573
---------- ---------- ----------- -----------
Income before income taxes 316,409 691,638 1,366,377 2,294,818
Provision for income taxes (c) 86,334 212,133 390,824 678,097
---------- ---------- ----------- -----------
Net income $ 230,075 $ 479,505 $ 975,553 $ 1,616,721
---------- ---------- ----------- -----------
Other comprehensive income, net of tax:
Unrealized gains on securities: 36,948 144,853 197,015 180,604
Unrealized holding gains arising during period
Less: reclassification adjustment for gains included in
net income -- -- (28,621) --
---------- ---------- ----------- -----------
Comprehensive income $ 267,023 $ 624,358 $ 1,143,947 $ 1,797,325
========== ========== =========== ===========
Earnings per share - basic $ .08 $ .17 $ . 35 $ .57
========== ========== =========== ===========
Earnings per share - diluted $ .08 $ .17 $ .34 $ .57
========== ========== =========== ===========
</TABLE>
(a) includes non-cash expenses for stock based compensation plans of $147,000
and $32,000 for the three month period ended September 30, 1998 and 1997,
respectively, and $467,000 and $77,000 for the nine month period ended
September 30, 1998 and 1997, respectively.
(b) represents the non-cash amortization of premium paid on deposits acquired
(c) includes the tax benefit associated with the realization of non-cash
expenses of $68,000 and $33,000 for the three month period ended September
30, 1998 and 1997, respectively, and $211,000 and $94,000 for the nine
month period ended September 30, 1998 and 1997, respectively.
2
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PATHFINDER BANCORP, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1998
(unaudited)
<TABLE>
<CAPTION>
Accum.
Common Stock Add'l Unearned Other
-------------------- Paid in Retained Stock-Based Compr.
Shares Amount Capital Earnings Compensation Income
--------- -------- ---------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 2,874,999 $287,500 $7,643,084 $17,156,415 $(1,836,250) $743,036
Net Income 975,553
Other comprehensive income, net of tax
Unrealized gains on securities, net
of reclassification adjustment
Comprehensive income
ESOP shares earned 113,631
Treasury stock purchased
Stock awards granted (159,664)
Stock based compensation earned 304,714
Change in unrealized net appreciation
on investment securities 168,394
Dividends declared (410,342)
--------- -------- ---------- ----------- ----------- --------
Balance, September 30, 1998 2,874,999 $287,500 $7,597,051 $17,721,626 $(1,531,536) $911,430
========= ======== ========== =========== =========== ========
Unearned
ESOP Treasury
Shares Stock Total
--------- ------------ -----------
Balance, December 31, 1997 $(411,050) $ - $23,582,735
Net Income 975,553
Other comprehensive income, net of tax
Unrealized gains on securities, net
of reclassification adjustment
Comprehensive income
ESOP shares earned 47,934 161,565
Treasury stock purchased (2,395,244) (2,395,244)
Stock awards granted 159,664 0
Stock based compensation earned 304,714
Change in unrealized net appreciation on
investment securities 168,394
Dividends declared (410,342)
--------- ----------- -----------
Balance, September 30, 1998 $(363,116) $(2,235,580) $22,387,375
========= =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements
3
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PATHFINDER BANCORP, INC.
STATEMENTS OF CASH FLOW
September 30, 1998 and September 30, 1997
(unaudited)
<TABLE>
<CAPTION>
September 30, September 30,
1998 1997
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 975,553 $ 1,616,721
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan, investment and other real estate losses 251,003 184,890
Deferred compensation 152,484 128,869
ESOP shares earned 161,565 77,196
Stock based compensation earned 304,714 --
Deferred income taxes -- (126,808)
Realized (gain) loss on sale of:
Real estate acquired through foreclosure 13,303 --
Loans (3,196) --
Available-for-sale securities (205,709) (247,049)
Depreciation 167,545 184,706
Amortization of intangibles 236,817 236,817
Net amortization of premiums and discounts on
investment securities (29,272) 54,146
Decrease (increase) in interest receivable 152,851 (200,509)
(Increase) decrease in other assets (520,195) 128,663
(Decrease) in other liabilities (277,016) (172,511)
------------ ----------
Net cash provided by operating activities 1,380,447 1,865,131
------------ ----------
INVESTING ACTIVITIES:
Purchase of investment securities available for sale (3,405,778) (8,132,250)
Proceeds from maturities and principle reductions of
investment securities held to maturity 3,770,000 1,250,000
Proceeds from maturities and principle reductions of
investment securities available for sale 12,056,283 5,105,114
Proceeds from sale of:
Real estate acquired through foreclosure 333,761 464,018
Loans 6,723,836 --
Available-for-sale securities 420,129 792,354
Net increase in loans (13,054,549) (6,191,407)
Purchase of premises and equipment (810,114) (415,614)
Increase in surrender value of life insurance (110,779) (169,321)
Other investing activities (232,997) --
------------ ----------
Net cash provided by (used in) investing activities 5,689,792 (7,297,106)
------------ ----------
</TABLE>
4
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STATEMENT OF CASH FLOWS
(continued)
<TABLE>
<CAPTION>
September 30, September 30,
1998 1997
------------ ------------
<S> <C> <C>
FINANCING ACTIVITIES:
Net increase (decrease) in demand deposits, NOW accounts
savings accounts, money market deposit accounts
and escrow deposits $ 2,081,495 $(4,047,702)
Net increase in time deposits 1,938,030 1,129,368
Net repayments of short term borrowings (8,042,000) --
Proceeds from short term borrowings -- 4,300,000
Repayments of borrowings (41,850) (41,850)
Cash dividends (276,593) (354,690)
Treasury stock acquired (2,395,244) --
----------- ------------
Net cash (used in) provided by financing activities (6,736,162) 985,126
Decrease in cash and cash equivalents 334,077 (4,446,849)
Cash and cash equivalents at beginning of period 4,334,072 8,352,959
----------- ------------
Cash and cash equivalents at end of period $ 4,668,149 $ 3,906,110
=========== ============
CASH PAID DURING THE PERIOD FOR:
Interest $ 5,407,043 $ 5,021,295
Income taxes 451,000 799,868
NON-CASH INVESTING ACTIVITY:
Transfer of loans to other real estate $ 533,135 $ 323,087
Change in unrealized depreciation in securities available for sale 280,657 301,007
NON-CASH FINANCING ACTIVITY:
Dividends declared and unpaid $133,749 $ 130,792
</TABLE>
The accompanying notes are an integral part of the financial statements
5
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PATHFINDER BANCORP, INC.
Notes to Financial Statements
(1) Basis of Presentation
- -------------------------
The accompanying unaudited financial statements were prepared in accordance
with the instructions for Form 10-Q and Regulation S-X and, therefore, do
not include information for footnotes necessary for a complete presentation
of financial position, results of operations, and cash flows in conformity
with generally accepted accounting principles. The following material under
the heading "Management's Discussion and Analysis of Financial Condition
and Results of Operations" is written with the presumption that the users
of the interim financial statements have read, or have access to, the
Bank's latest audited financial statements and notes thereto, together with
Management's Discussion and Analysis of Financial Condition and Results of
Operations as of December 31, 1997 and for the three year period then
ended. Therefore, only material changes in financial condition and results
of operations are discussed in the remainder of part 1.
All adjustments (consisting of only normal recurring accruals) which, in
the opinion of management, are necessary for a fair presentation of the
financial statements have been included in the results of operations for
the three months and nine months ended September 30, 1998 and 1997.
Operating results for the three months and nine months ended September 30,
1998 are not necessarily indicative of the results that may be expected for
the year ending December 31, 1998.
(2) Earnings per Share
- ----------------------
Earnings per share are based on the weighted average number of common
shares outstanding during the period. For purposes of computing earnings
per share, only Employee Stock Option Plan ("ESOP") shares that have been
committed to be released are considered outstanding.
Earnings per share have been computed based upon net income for the three
months ended September 30, 1998 and 1997, using 2,754,088 and 2,799,924,
weighted average common shares outstanding, respectively. Year-to-date
earnings per share have been computed based upon net income for the nine
months ended September 30, 1998 and 1997 using 2,771,996 and 2,797,085
weighted average common shares.
(3) New Accounting Pronouncements
- ---------------------------------
Effective January 1, 1998, the Company adopted statement of Financial
Accounting Standards No. 130 "Reporting Comprehensive Income". This
pronouncement requires the Company to report the effects of unrealized
investment holding gains or losses on comprehensive income.
6
<PAGE>
Pathfinder Bancorp, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operation
General
On December 30, 1997, Oswego City Savings Bank completed its reorganization into
the mid-tier holding company form of mutual holding company ownership.
Throughout the Management's Discussion and Analysis the term, "the Company",
refers to the consolidated entity of Pathfinder Bancorp, Inc. and Oswego City
Savings Bank for the periods prior to December 30, 1997. At September 30, 1998,
Pathfinder Bancorp, Inc.'s only business was the 100% ownership of Oswego City
Savings Bank.
The Company's net income is primarily dependent on its net interest income,
which is the difference between interest income earned on its investments in
mortgage loans, investment securities and other loans, and its cost of funds
consisting of interest paid on deposits and borrowed funds. The Company's net
income also is affected by its provision for loan losses, as well as by the
amount of non interest income, including income from fees and service charges,
net gains and losses on sales of securities, and non interest expense such as
employee compensation and benefits, deposit insurance premiums, occupancy and
equipment costs, data processing and income taxes. Earnings of the Company also
are affected significantly by general economic and competitive conditions,
particularly changes in market interest rates, government policies and actions
of regulatory authorities, which events are beyond the control of the Company.
In particular, the general level of market rates tends to be highly cyclical.
Proposed Merger
- ---------------
On September 5, 1997, the Board of Directors of the Company, in conjunction with
the Board of Trustees of Oswego County Savings Bank ("County Savings"), a New
York State chartered mutual savings bank headquartered in Oswego, New York,
announced the adoption of a definitive merger agreement under which the banks
will be combined. The proposed transaction is subject to regulatory approval, as
well as approval of the shareholders of Pathfinder Bancorp, Inc.. On May 13,
1998, applications for the merger were filed with the Federal Deposit Insurance
Corporation, the Federal Reserve Bank, and the New York State Banking
Department. On September 21, 1998, a Form S-2 registration statement was filed
with the Securities Exchange Commission. As of September 30, 1998, Oswego County
Savings Bank had total assets of approximately $109.8 million, deposits of $95.8
million and net worth of $11.4 million. Upon completion of the proposed merger,
the Company's total assets and deposits will increase commensurately. Refer to
the "Recent Events" for additional information regarding the proposed merger.
Year 2000
- ---------
The Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. The Company's computer
programs that have date sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. Left unresolved, the year 2000 issue
could result in a system failure or miscalculations causing disruptions of
operations including, but not limited to, a temporary inability to process
transactions, calculate interest, or engage in similar normal business
activities. In early 1997, the Company formed a Year 2000 committee to address
the issues surrounding the problem. The committee has adopted a policy statement
and plan of action to identify, correct, test, and implement solutions to ensure
that the Company's systems are ready to process in the year 2000 and beyond. The
policy statement comprises three phases: the assessment phase, the renovation
phase, and the validation phase. During 1997, the Company completed its
assessment phase and has identified its computer and electronic software systems
that will require modification or replacement. The committee has
7
<PAGE>
determined that the required changes are minimal, and that such changes will
resolve the Company's Year 2000 computer systems issues. The committee has
segregated the issues between those that affect information technology ("IT")
and those that do not ("non-IT"). Testing for non-IT systems is 90% complete at
September 30, 1998. Testing and implementation of solutions for IT commenced in
September 1998 with a goal to be fully tested by December 31, 1998.
The Company will utilize both internal and external resources to program,
replace, and test the software for Year 2000 modifications. The Company is also
communicating with its third party data processing vendors, as well as its
significant suppliers and commercial customers, to determine the Company's
exposure should any of these parties fail to resolve their own significant Year
2000 issues. The committee is evaluating the risk from these third parties and,
where appropriate, will establish action plans to reduce or eliminate the risk.
In some cases, the Company will rely on third party information which may be
inaccurate and unverifiable. Should third party entities, including Federal and
State governments and agencies fail to resolve their own Year 2000 issues, an
adverse effect on the Company could result. The committee is also responsible
for the creation and maintenance of a contingency plan for all mission critical
system application functions by which the company would operate if remedial
action is insufficient. The contingency plan will also address operational
policies and procedures in the event of electrical power supply and/or telephone
service failures associated with the year 2000 issue. The expected completion
date of the contingency plan is December 31, 1998.
The costs of the remedial actions and the date on which the Company plans to
complete the Year 2000 modifications, are based on management's best estimates
and assumptions including the continued availability of third party services,
their modification plans, and other factors. Costs related to the Year 2000
issue will be expensed as they are incurred, except for the cost, if any for new
hardware or software that is purchased which will be capitalized and expensed in
conformity with generally accepted accounting principles. At September 30, 1998,
the costs the Company incurred to address the year 2000 issue have not been
significant. In connection with the Merger, the Company will incur costs to
integrate County Savings computer operations with the Company's computer system.
The computer and programming upgrades necessary to accommodate this integration
will incorporate Year 2000 compliance. Management of the Company estimates that
the costs to complete a comprehensive upgrade of computer operation including
the expanded capacity and modification to incorporate County Savings computer
operations will be $750,000, of which, $575,000 has been spent as of September
30, 1998. There can be no assurance that the Company's third party data service
providers will be able to satisfactorily address the year 2000 issue, or that
the cost of integrating County Savings computer system with the Company's, and
making sure that the integrated computer system is year 2000 compliant will not
exceed management's estimate.
This Quarterly Report contains certain "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such statements
are subject to certain risks and uncertainties, including, among other things,
changes in economic conditions in the Company's market area, changes in policies
by regulatory agencies, fluctuations in interest rates, demand for loans in the
Company's market areas and competition, that could cause actual results to
differ materially from historical earnings and those presently anticipated or
projected. The Company wishes to caution readers not to place undue reliance on
any such forward-looking statements, which speak only as of the date made. The
Company wishes to advise readers that the factors listed above could affect the
Company's financial performance and could cause the Company's actual results for
future periods to differ materially from any opinions or statements expressed
with respect to future periods in any current statements.
The Company does not undertake, and specifically declines any obligation, to
publicly release the result of any revisions which may be made to any
forward-looking statements to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events.
For other matters affecting the Company, Including events which may affect the
Company's operations and financial performance, see "Recent Events".
8
<PAGE>
The following discussion reviews the financial condition at September 30, 1998
and the results of operations of the Company for the three months and nine
months ended September 30, 1998.
FINANCIAL CONDITION
Assets
- ------
Total assets decreased approximately $5.2 million, or 2.6%, to $191.6 million at
September 30, 1998 from $196.8 million at December 31, 1997. The decrease in
total assets was primarily incurred as a result as reductions in the Company's
securities portfolio from maturities, calls and prepayment's were used to pay
down repurchase agreement borrowings. Total investment securities declined by
$12.3 million and borrowed funds were reduced by $8.0 million. Reductions in the
investment portfolio were also used to fund loan production. The decline in
asset base also reflects the lack of significant growth and economic development
in the Company's market area . For the nine months ended September 30, 1998,
loans receivable increased $4.4 million, or 3.6%, to $125.5 million from $121.2
at December 31, 1997. Mortgage loans held-for-sale increased approximately $1.2
million to $2.8 million from $1.5 million at December 31, 1997. The increase in
mortgage loans held-for-sale is net of loan sales of approximately $6.6 million.
Loan originations were principally funded from the re-deployment of maturing and
prepaid investment securities and principal repayments and prepayments on loans
held in the Company's portfolio. The demand for the Company's loan products
occurred principally on one to four family mortgage loans and commercial real
estate loans.
Investment securities decreased by approximately $12.3 million, or 21.7%, to
$44.5 million at September 30, 1998, from $56.8 million at December 31, 1997.
The decrease in investment securities is primarily the result of utilizing
maturing investment securities to fund loan originations and reduce short term
borrowings, primarily 90 day repurchase agreements. Non-earning assets increased
by $1.3 million, or 8.9%, at September 30, 1998 when compared to December 31,
1997. The increase in non-earning assets is principally due to increases in
premises and equipment, net of depreciation, of $642,000, other real estate
owned of $419,000, and other assets and accrued interest receivable of $428,000.
Liabilities
- -----------
Total liabilities decreased by $4.0 million, to $169.2 million at September 30,
1998 from $173.2 million at December 31, 1997. The decrease is primarily
attributable to a $8.0 million, or 44.1% reduction in borrowed funds, partially
offset by an increase in deposits of $4.0 million, or 2.6%. The decrease in
borrowed funds is principally the result of paydowns on repurchase agreements
collateralrized by mortgage-backed securities. The rapid prepayments on the
mortgage-backed securities lowered the collateralization levels of the
borrowings. The borrowed funds are part of a strategy to leverage the Company's
capital and provide incremental income through the use of wholesale deposits.
Additionally, proceeds from the securitzation and sale of pools of originated
loans was utilized to payoff $3.0 million in short-term borrowings used to help
fund the loan origination. The increased deposit levels consist mainly of
inflows into the Company's passbook savings accounts and non-interest bearing
checking accounts and interest credited on existing interest-bearing accounts.
The increases in these categories are primarily the result of deposits received
in association with commercial lending activities and increased penetration
within the existing retail customer base.
Liquidity and Capital Resources
- -------------------------------
Shareholders' equity decreased $1.2 million, or 5.1%, to $22.4 million at
September 30, 1998 from $23.6 million at December 31, 1997. The decrease in
shareholder's equity is primarily the result of the net acquisition of 138,625
shares of treasury stock as part of the Company's share repurchase program (see
"Recent Events") and to fund the Company's Management Retention Plan for a net
cost of approximately $2.2 million, combined with dividends declared of
$410,000. Partially offsetting the decreases in shareholder's equity were
increases resulting from net income totaling $976,000, ESOP and other stock-
based compensation earned of $312,000, and net unrealized holding gains on
investment securities arising during the period totaling $168,000.
9
<PAGE>
The Company's primary sources of funds are deposits, amortization and prepayment
of loans and maturities of investment securities and other short-term
investments, earnings and funds provided from operations, and borrowings. While
scheduled principal repayments on loans are a relatively predictable source of
funds, deposit flows and loan prepayments are greatly influenced by general
interest rates, economic conditions, and competition. The Company manages the
pricing of deposits to maintain a desired deposit balance. In addition, the
Company invests excess funds in short-term interest-bearing instruments and
other assets, which provide liquidity to meet lending requirements. For
additional information about cash flows from the Company's operating, financing,
and investing activities, see Statements of Cash Flows included in the Financial
Statements. The Company adjusts its liquidity levels in order to meet funding
needs of deposit outflows, payment of real estate taxes on mortgage loans and
loan commitments. The Company also adjusts liquidity as appropriate to meet its
assets and liability management objectives.
Management of Market Risk - Interest Rate Risk
- ----------------------------------------------
The Company's most significant form of market risk is interest rate risk, as the
majority of the Company's assets and liabilities are sensitive to changes in
interest rates. The Company's mortgage loan portfolio, consisting primarily of
loans on residential real property located in Oswego County, is subject to risks
associated with the local economy. The Company's interest rate risk management
program focuses primarily on evaluating and managing the composition of the
Company's assets and liabilities in the context of various interest rate
scenarios. Factors beyond management's control, such as market interest rates
and competition, also have an impact on interest income and interest expense.
The extent to which such assets and liabilities are "interest rate sensitive"
can be measured by an institution's interest rate sensitivity "gap". An asset or
liability is said to be interest rate sensitive within a specific time period if
it will mature or reprice within that time period. The interest rate sensitivity
gap is defined as the difference between the amount of interest-earning assets
maturing or repricing within a specific time period and that amount of
interest-bearing liabilities maturing or repricing within that time period. A
gap is considered positive when the amount of interest rate sensitive assets
exceeds the amount of interest rate sensitive liabilities. A gap is considered
negative when the amount of interest rate sensitive liabilities exceeds the
amount of interest rate sensitive assets. During a period of rising interest
rates, a negative gap would tend to adversely affect net interest income while a
positive gap would tend to positively affect net interest income. Conversely,
during a period of falling interest rates, a negative gap would tend to
positively affect net interest income while a positive gap would tend to
adversely affect net interest income.
The Company does not maintain in its portfolio fixed interest rate loans with
terms exceeding 20 years. In addition, ARM loans are originated with terms that
provide that the interest rate on such loans cannot adjust below the initial
rate. Generally, the Company tends to fund longer term loans and mortgage-backed
securities with shorter term time deposits, repurchase agreements, and advances.
The impact of this asset/liability mix creates an inherent risk to earnings in a
rising interest rate environment. In a rising interest rate environment, the
Company's cost of shorter term deposits may rise faster than its earnings on
longer term loans and investments. Additionally, the prepayment of principal on
real estate loans and mortgage- backed securities tends to decrease as rates
rise, providing less available funds to invest in the higher rate environment.
Conversely, as interest rates decrease the prepayment of principal on
real-estate loans and mortgage-backed securities tends to increase, causing the
Company to invest funds in a lower rate environment. The potential impact on
earnings from this mismatch, is mitigated to a large extent by the size and
stability of the Company's savings accounts. Savings accounts have traditionally
provided a source of relatively low cost funding that have demonstrated
historically a low sensitivity to interest rate changes. The Company generally
matches a percentage of these, which are deemed core, against longer term loans
and investments. In addition, the Company has sought to extend the terms of its
time deposits. In this regard, the Company has on occasion offered certificates
of deposits with three and four year terms which allow depositors to make a
one-time election, at any time during the term of the certificate of deposit, to
adjust the rate of the certificate of deposit to the then prevailing rate for a
certificate of deposit with the same term. The Company has further sought to
reduce the term of a portion of its rate sensitive assets by originating one
year ARM loans, five year/one year ARM loans (mortgage loans which are fixed
rate for the first five years and adjustable annually thereafter), and by
maintaining a relatively short term investment securities
10
<PAGE>
(original maturities of three to five years) portfolio with staggered
maturities. The Company manages its interest rate sensitivity by monitoring
(through simulation and net present value techniques) the impact on it's GAP
position, net interest income, and the market value of portfolio equity to
changes in interest rates on its current and forecast mix of assets and
liabilities. The Company has an Asset-Liability Management Committee which is
responsible for reviewing the Company's assets and liability policies, setting
prices and terms on rate-sensitive products, and monitoring and measuring the
impact of interest rate changes on the Company's earnings. The Committee meets
monthly on a formal basis and reports to the Board of Directors on interest rate
risks and trends, as well as liquidity and capital ratios and requirements. The
Company does not have a targeted gap range, rather the Board of Directors has
set parameters of percentage change by which net interest margin and the market
value of portfolio equity are affected by changing interest rates. The Board and
management deem these measures to be a more significant and realistic means of
measuring interest rate risk. The results of these techniques are outlined below
the GAP table.
At September 30, 1998, the total interest bearing liabilities maturing or
repricing within one year exceeded total interest-earning assets maturing or
repricing in the same period by $11.6 million, representing a cumulative
one-year gap ratio of a negative 7.21%. Simulation and net present value
analysis demonstrate percentage changes to net interest income and net portfolio
value of a negative 8.89% and a negative 19.66%, respectively, in an upward 200
basis point parallel shift in the yield curve.
Results of Operations
- ---------------------
The Company had net income of approximately $230,000, and $480,000 for the three
months ended September 30, 1998, and 1997, respectively. Net income for the nine
months ended September 30, 1998 and 1997 amounted to $976,000 and $1.6 million,
respectively. The decrease in net income for the three months ended September
30, 1998, resulted primarily from decreases in net interest income of $139,000,
or 7.5%, and noninterest income of $74,000, or 24.2%, and increases in
provisions for loan losses of $53,000, or 92.0%, and operating expenses of
$109,000, or 7.8%, partially offset by a reduction in income tax provision of
$126,000.
As a result of the decrease in net income between the comparative periods,
return on average assets and return on average shareholders' equity were .47%
and 4.11%, respectively, for the three months ended September 30, 1998 compared
to 1.00% and 8.52% for the third quarter of 1997.
Interest Income
- ---------------
Interest income totaled $3.5 million for the quarter ended September 30, 1998,
as compared to $3.6 million for the quarter ended September 30, 1997, a decrease
of $119,000, or 3.3%. The decrease resulted primarily from a decrease in the
yield on average interest-earning assets to 7.94% for the three months ended
September 30, 1998 from 8.26% in the prior year period, partially offset by an
increase of $884,000 million in average interest-earning assets. The yield
reduction is principally the result of mortgage loan originations at rates over
100 basis points below the weighted average coupon of the existing loan
portfolio which lowered the total portfolio yield, and the reinvestment of
security principal maturity's and prepayments at rates over 75 basis points less
than the existing portfolio yield. The decline in yield on investments and
mortgages was caused by a general decline in market interest rates. To
illustrate, the yield on 1 year and 30 year treasury bonds declined by 124 basis
points and 108 basis points, respectively from December 31, 1997 to September
30, 1998.
Interest income totaled $10.6 million for the nine months ended September 30, in
both 1998 and 1997. An increase of $2.2 million in average interest-earning
assets was offset by a decrease in the yield on average interest-earning assets
to 8.00% from 8.08%
Interest income on loans receivable totaled $2.7 million and $2.5 million for
the three months ended September 30, 1998 and 1997, respectively. The $186,000,
or 7.4%, increase resulted primarily from an increase in the average balance of
loans receivable of $12.6 million, partially offset by a decrease in the
11
<PAGE>
average yield on loans receivable to 8.57% from 8.87%. For the nine months ended
September 30, 1998 and 1997, interest income on loans receivable increased
$725,000, or 9.8%, to $8.2 million from $7.4 million. Average loans receivable
increased $12.8 million while the yield on average loans receivable decreased to
8.59% from 8.71% for the nine months ended September 30, 1998 compared to the
same period in 1997. The increase in the average balance in loans receivable was
primarily due to the origination of 15 and 30 year term one-to-four family fixed
rate mortgage loans held for sale to the secondary market and one-to-four family
adjustable rate mortgage loans retained in the Company's portfolio. The
origination of mortgage loans held for sale into the secondary market is part of
a new program begun by the Company in the fourth quarter of 1997. The
origination of adjustable rate mortgage loans is primarily comprised of "5/1
ARMS" which have interest rates which are fixed for the first five years and are
adjustable annually thereafter, and amortize over 30 years. To a lesser degree,
the Company also experienced an increase in the origination of commercial real
estate and business loans. The decrease in the yield on average loans receivable
was attributable to the lower rates charged on mortgage loans held for sale, the
initial rates charged on 5/1 ARMS, and the downward repricing of the one year
adjustable rate mortgage portfolio caused by the relatively lower interest rate
environment.
Interest income on the mortgage-backed securities portfolio decreased by
$77,000, or 19.3%, to $323,000 for the three months ended September 30, 1998,
from $400,000 for the three months ended September 30, 1997. The decrease in
interest income on mortgage-backed securities resulted generally from a decrease
in the average balance on mortgage-backed securities of $4.2 million and a
decrease in the average yield on mortgage-backed securities to 6.70% from 6.80%.
For the nine months ended September 30, 1998 and 1997, interest income on
mortgage-backed securities was $1.0 million and $1.2 million, respectively, a
decrease of $140,000, or 11.9%. The decrease in interest income resulted
primarily from a decrease of $2.4 million, or 10.3%, in the average balance of
mortgage-backed securities and a reduction in the average yield on
mortgage-backed securities to 6.62% from 6.74%. The decrease in the average
balance of mortgage- backed securities resulted from the scheduled amortization
and prepayments of principal on the underlying mortgage loans. Prepayments
accelerated during the third quarter of 1998 as the decline in interest rates on
new mortgages fostered significant refinancing activity. The cash flow from the
mortgage-backed securities portfolio was utilized to fund the origination of
loans by the Company. The decrease in the average yield on mortgage-backed
securities was the result of prepayments being more predominant on the higher
coupon collateral than on those mortgage loans with lower fixed rates.
Interest income on investment securities, on a tax equivalent basis, decreased
$267,000, or 40.5%, for the three months ended September 30, 1998 to $393,000
from $660,000 for the same period in 1997. The decrease resulted primarily from
a decrease in the average balance of investment securities of $11.3 million, as
well as, a decrease in the average yield on investment securities to 6.63% from
7.33% for the quarters ended September 30, 1998 and 1997, respectively. The
decrease in the average balance of investment securities resulted primarily from
the reinvestment of funds from maturing and called securities into loan
originations. The average yield on investment securities declined as higher
coupon securities purchased three to five years ago were either called due to
the lower interest rate environment or matured.
For the nine months ended September 30, 1998, interest income on investment
securities decreased $504,000, or 26.6%, to $1.4 million compared to $1.9
million for the same period in 1997. The decrease resulted primarily from a
decrease in the average balance of investment securities of $7.7 million, as
well as a decrease in the yield on average investments, on a tax equivalent
basis, to 6.66% from 7.10%.
Interest income on interest-earning deposits increased $35,000, or 87.5%, to
$75,000 from $40,000 for the three months ended September 30, 1998 and 1997,
respectively. The increase was primarily the result of an increase of $3.8
million in the average balance of interest-earning deposits, partially offset by
a reduction in the average yield on interest-earning deposits to 5.04% from
7.35%. For the nine months ended September 30, 1998 and 1997, interest income on
interest-earning deposits decreased $54,000, or 32.5%, to $112,000 compared to
$166,000 for the same period in 1997. The decrease in interest income on
interest- earning deposits was primarily the result of a $482,000 decrease in
the average balance of interest-earning deposits and a decrease in the average
yield on interest-earning deposits to 5.07% from 6.46%. The decrease in the
average balance on interest-earning deposits was primarily due to loan demand
exceeding
12
<PAGE>
deposit inflows and a strategy to maintain lower levels of federal funds sold
due to the availability of borrowings and a shortening in the maturity structure
of the investment portfolio. The decrease in the average yield on
interest-earning deposits was principally due the decrease in the federal funds
rate brought about by the general reduction in interest rates.
Interest Expense
- ----------------
Interest expense for the quarter ended September 30, 1998 increased by
approximately $21,000, or 1.2%, to 1.8 million when compared to the same quarter
for 1997. The increase in interest expense for the period was the result of a
$1.1 million increase in the average balance on interest-bearing liabilities, as
well as an increase on the average cost of interest-bearing liabilities to 4.38%
from 4.36%. For the nine months ended September 30, 1998, interest expense
increased $206,000, or 3.9%, to $5.3 million from $5.1 million for the same
period in 1997. The increase in interest expense for the period was the result
of a $4.6 million increase in the average balance on interest-bearing
liabilities, as well as an increase on the average cost of interest-bearing
liabilities to 4.36% from 4.32%. The increase in the average balance and average
cost on interest- bearing liabilities was principally the result of the use of
borrowed funds. For the nine months ended September 30, 1998 the average balance
of borrowed funds was $15.1 million and the average cost of the borrowed funds
was 5.85%. For the same period in 1997 the average balance of borrowed funds was
$8.4 million and the average cost of the borrowings was 5.92%. The borrowed
funds are comprised of repurchase agreements and term borrowing from the Federal
Home Loan Bank of New York. The borrowings are being utilized to help fund the
growth in the Company's loan portfolio and for the purchase of mortgage-backed
and investment securities.
Net Interest Income
- -------------------
Net interest income totaled $1.7 million for the three months ended September
30, 1998 and $1.9 million for the same period in 1997. Net interest income for
the quarter ended September 30, 1998 decreased $139,000, or 7.5%, compared to
the same period in the prior year. The decline in net interest income for the
quarter ended September 30, 1998 occurred because of a sharp decline in long and
intermediate term interest rates which resulted in a compression of the
Company's net interest rate spread. The yield on the 1 year and 30year treasury
bonds declined by 124 basis points and 108 basis points, respectively during the
nine months ended September 30, 1998, while interest rates on overnight funds
remained relatively stable resulting in a flattening of the yield curve. In such
an interest rate environment, the Company's yield on earning assets will tend to
decrease faster than the cost of interest bearing liabilities. This is evident
in the reduction of net interest rate spread to 3.56% for the quarter ended
September 30, 1998 from 3.90% at the end of the prior year period. Volume
increases, particularly in real estate loans, partially offset the decline in
net interest rate spread.
For the nine months ended September 30, 1998 and 1997, respectively, net
interest income was $5.3 million and $5.5 million, a decrease of $171,000, or
3.1%. The ratio of average interest earning assets to average interest-bearing
liabilities declined to 109.75% through September 30, 1998 from 111.51% for the
nine months ended September 30, 1997, while the net interest rate spread fell to
3.64% from 3.77% when comparing the nine months ended September 30, 1998 to the
same period in 1997.
Provision for Loan Losses
- -------------------------
The Company maintains an allowance for loan losses based upon a quarterly
evaluation of known and inherent risks in the loan portfolio, which includes a
review of the balances and composition of the loan portfolio as well as
analyzing the level of delinquencies in each segment of the loan portfolio. Loan
loss provisions are based upon management's estimate of the fair value of the
collateral and the Company's actual loss experience, as well as standards
applied by the FDIC. The Company established a provision for possible loan
losses for the three months ended September 30, 1998 of $110,000 as compared to
a provision of $58,000 for the three months ended September 30, 1997. For the
nine months ended September 30, 1998 and 1997, the provision for possible loan
losses was $251,000 and $185,000, respectively. The
13
<PAGE>
increase in provision for loan losses reflects higher net charge-offs for the
period as well as the increased risks associated with expanded commercial
lending. The Company's ratios of allowance for loan losses to total loans
receivable and to non-performing loans at September 30, 1998 was .69% and
58.41%, respectively.
Non-interest Income
- -------------------
Non-interest income consists of servicing income, fee income and gain (loss) on
sales of investment securities and other operating income. Non-interest income
decreased approximately $74,000, or 24.2%, to $231,000 for the three months
ended September 30, 1998 as compared to $305,000 for the prior year period. This
decrease is primarily attributable to a decrease of $86,000, or 115.1%, in net
securities gains and losses, and a $8,000 decrease in fees derived from
commissions on investment services, partially offset by a 22,000, or 17.8%
increase in deposit account service charges. The decrease in net securities
gains and losses results from a loss incurred in the mark to market recognition
of unrealized market value depreciation in the Company's investment in the IIMF
mutual fund. The decline in commissions on investment services results from a
lower volume of transactions in the Company's investment services unit for the
quarter ended September 30, 1998 when compared to the same period in 1997.
Non-interest income decreased approximately $82,000, or 8.0%, to $942,000 for
the nine months ended September 30, 1998 when compared to $1.0 million for the
same period in 1997. This decrease is primarily comprised of a decrease of
$105,000 in other commissions and fees, partially offset by an $11,000, or 2.8%,
increase in service charges on deposit accounts and a $12,000 increase in net
securities gains. The reduction in other commissions and fees is principally
caused by lower commissions from the Company's investment services unit of
$57,000, reduced increases of $40,000 in the Company's cash surrender value on
life insurance policies, and a recovery from prior period of approximately
$23,000. The net securities gains are derived from the recognition of unrealized
market value appreciation of the Company's investment in a mutual fund and the
sale of two general obligation municipal bonds. Increases in deposit account
service charges are the result of higher deposit levels and increased commercial
deposit activity.
Non-interest Expense
- --------------------
Non-interest expense increased $109,000, or 7.8%, to $1.5 million for the three
months ended September 30, 1998, as compared to the same period in 1997. This
increase was primarily attributable to a $144,000, or 22.4%, increase in
compensation and employee benefits, a $10,000, or 9.6%, increase in data
processing costs, and a $46,000 increase in other expenses, partially offset by
reduction of $15,000 in occupancy expense and $77,000 decrease in professional
services. The increase in salaries and employee benefits is principally due to
the amortization of stock based compensation plans which resulted in expense
recognition for the quarter of $147,000. The increase in data processing
expenses and other expenses is principally due to technological upgrades to
expand mainframe capacity and the installation of a wide area network. These
upgrades are essential in order for the Company to enhance its competitiveness
and prepare for the assimilation of Oswego County Savings Bank's operation as a
result of the impending merger.
For the nine months ended September 30, 1998, non-interest expense increased
$610,000, or 15.2%, to $4.6 million from $4.0 million for the nine months ended
September 30, 1997. This increase was primarily attributable to a $442,000, or
23.6%, increase in compensation and employee benefits, a $55,000 increase in
data processing costs, and a $163,000 increase in other expenses, partially
offset by expense reductions of $32,000 in occupancy expense and $21,000 in
professional services. The principal causes of these increases are the same as
those attributable to the third quarter explanations which are outlined above.
The amount of expense recognition associated with the Company's stock based
compensation plans amounted to $467,000 for the first three quarter of 1998.
The Company's efforts to prepare its data processing systems for the impact of
the Year 2000 were not a significant component of expense in the first three
quarters of 1998 and are not expected to materially impact earnings in the
future. For further information regarding the Company's efforts and costs
associated with the Year 2000 issue, see "General - Year 2000".
14
<PAGE>
Income Taxes
- ------------
Income taxes decreased approximately $126,000, or 59.3%, for the quarter ended
September 30, 1998 as compared to the same period in the prior year. This
decrease was directly attributable to a $375,000 decrease in the Company's
pretax income.
For the nine months ended September 30, 1998 and 1997, income tax expense was
$391,000 and $678,000, respectively.
RECENT EVENTS
Share Repurchase Program
- ------------------------
On August 21, 1998, the Company announced the adoption of a share repurchase
program to acquire up to 132,000 share of the Company's common stock, which
represents approximately 10% of the common stock held by minority shareholders
(shares not held by the mutual holding company parent). At September 30, 1998,
the Company had purchased 95,000 shares commensurate with the plan at an
aggregate cost of $1.4 million.
Pending Merger
- --------------
On May 14, 1998, the Company announced the filing of regulatory applications in
connection with the merger of Oswego County Savings into Oswego City Savings
Bank. As part of the merger, the Company will offer common stock in a
subscription offering to account holders of Oswego County Savings Bank as of
December 31, 1996 (eligible account holders) and others in accordance with a
Stock issuance Plan jointly adopted by the Company and Oswego County Savings
Bank. It was further announced that the boards of the two institutions have
agreed that commensurate with the merger, Oswego City Savings Bank will change
its name to Pathfinder Bank.
Reorganization
- --------------
On January 14, 1997, the Board of Directors adopted an Agreement and Plan of
Reorganization to reorganize the Bank and its existing mutual holding company
into a two-tier mutual holding company structure (the "Reorganization") with the
establishment of a Delaware chartered corporation as the stock holding company
parent of the Bank. Upon completion of the Reorganization, Pathfinder Bancorp,
MHC, the Bank's existing mutual holding company, will own a majority of the
common stock of the new stock holding company (Pathfinder Bancorp, Inc., which
will own 100% of the common stock of Oswego City Savings Bank). On December 30,
1997, the Reorganization was implemented pursuant to the Agreement and Plan of
Reorganization approved by the Bank's stockholders and regulatory authorities.
Pursuant to the Reorganization, each share of Bank common stock held by existing
stockholders of the Bank was exchanged for a share of common stock of Pathfinder
Bancorp, Inc.. The Reorganization of the Bank was structured as a tax-free
reorganization and accounted for in a manner similar to a pooling of interests.
Stock Split
- -----------
On January 13, 1998, the Board of Directors of Pathfinder Bancorp, Inc. declared
a three for two stock split in the form of a dividend on the holdings company's
outstanding common stock. The stock split was paid on February 5, 1998 to
shareholders of record as of January 26, 1998. The stock split has been applied
retroactively to the financial statements presented in this report.
15
<PAGE>
PART II - OTHER INFORMATION
LEGAL PROCEEDINGS
From time to time, the Bank is involved as a plaintiff or defendant in various
legal actions incident to its business. None of these actions individually or in
the aggregate is believed to be material to the financial condition of the Bank
CHANGES IN SECURITIES
On January 13,1998 the Board of Directors of Pathfinder Bancorp, Inc. declared a
three-for-two stock split in the form of a dividend on the Bank's outstanding
common stock. The stock split was paid on February 5, 1998 to shareholders of
record January 26, 1998.
DEFAULTS UPON SENIOR SECURITIES
Not applicable
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
OTHER INFORMATION
On June 8, 1998, the Board of Directors declared a $.05 cash dividend to
shareholders of record as of June 30, 1998, payable on July 15, 1998.
EXHIBITS AND REPORTS
None
16
<PAGE>
SIGNATURES
Under the requirements of the Securities Exchange Act of 1934, the bank has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
PATHFINDER BANCORP, INC.
Date: November 10, 1998 /s/ Chris C. Gagas
-------------------- ------------------------------------
Chris C. Gagas
Chairman, President,
Chief Executive Officer
Date: November 10, 1998 /s/ Thomas W. Schneider
-------------------- ------------------------------------
Thomas W. Schneider
Executive Vice President,
Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 4,668
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<ALLOWANCE> 879
<TOTAL-ASSETS> 191,611
<DEPOSITS> 156,419
<SHORT-TERM> 10,200
<LIABILITIES-OTHER> 2,217
<LONG-TERM> 388
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<COMMON> 288
<OTHER-SE> 22,100
<TOTAL-LIABILITIES-AND-EQUITY> 191,611
<INTEREST-LOAN> 8,152
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<INTEREST-TOTAL> 10,597
<INTEREST-DEPOSIT> 4,647
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<LOAN-LOSSES> 251
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<EXPENSE-OTHER> 4,609
<INCOME-PRETAX> 1,366
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<NET-INCOME> 976
<EPS-PRIMARY> .35
<EPS-DILUTED> .34
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<ALLOWANCE-OPEN> 828
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<INTEREST-TOTAL> 866
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