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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 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 1-13605
EFC BANCORP, INC.
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(Exact name of registrant as specified in its charter)
Delaware 36-4193304
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1695 Larkin Avenue, Elgin, Illinois 60123
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(Address of principal executive offices) (Zip Code)
(847) 741-3900
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(Registrant's telephone number, including area code)
Not Applicable
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Former name, former address and former fiscal year, if changes since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
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APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: 7,491,434
shares of common stock, par value $0.01 per share, were outstanding as
of November 13, 1998.
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EFC Bancorp, Inc.
Form 10-Q
For the Quarter Ended September 30, 1998
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at
September 30, 1998 and December 31, 1997. . . . . . . . . . . . . . ..1
Consolidated Statements of Income - For the Three
Months Ended September 30, 1998 and 1997 and the
Nine Months Ended September 30, 1998 and 1997 . . . . . . . . . . . . 2
Consolidated Statements of Cash Flows - For the
Nine Months Ended September 30, 1998 and 1997 . . . . . . . . . . . ..3
Notes to Consolidated Financial Statements. . . . . . . . . . . . . ..4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. . . . . . . . . . . . . . . . . . . ..7
Item 3. Quantitative and Qualitative Disclosures About Market Risk . . .16
PART II: OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . .17
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . .17
Item 2. Changes in Securities and Use of Proceeds. . . . . . . . . . . .17
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . . . .17
Item 4. Submission of Matters to a Vote of Security Holders. . . . . . .17
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . . . .17
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . .17
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
<PAGE>
PART I. FINANCIAL INFORMATION
EFC BANCORP, INC.
SEPTEMBER 30, 1998
Item 1. FINANCIAL STATEMENTS.
EFC BANCORP, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, 1998 (unaudited) and December 31, 1997
<TABLE>
<CAPTION>
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September 30 December 31
-------------------------------
Assets 1998 1997
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<S> <C> <C>
Cash and cash equivalents:
On hand and in banks $ 2,475,481 1,965,164
Interest bearing deposits with financial institutions 20,547,598 8,133,390
Loans receivable, net 298,679,514 246,695,479
Mortgage-backed securities available-for-sale, at fair value 18,884,761 20,163,460
Investment securities available-for-sale, at fair value 63,627,037 45,483,665
Foreclosed real estate 1,168,305 98,652
Stock in Federal Home Loan Bank of Chicago, at cost 2,600,000 2,051,000
Accrued interest receivable 2,114,559 1,101,172
Office properties and equipment, net 6,539,067 5,389,546
Other assets 402,712 781,159
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Total assets $417,039,034 331,862,687
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Liabilities and Stockholders' Equity
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Liabilities:
Deposits $263,871,339 270,013,430
Borrowed money 52,000,000 24,000,000
Advance payments by borrowers for taxes and insurance 357,435 423,996
Income taxes payable - 1,595,540
Accrued expenses and other liabilities 5,354,376 3,599,980
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Total liabilities 321,583,150 299,632,946
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Stockholders' Equity:
Common stock, par value $.01 per share, authorized 25,000,000 shares;
issued and outstanding 7,491,434 and 0 shares, respectively 74,914 -
Additional paid-in capital 72,694,412 -
Retained Earnings, substantially restricted 30,905,544 31,493,996
Unearned ESOP obligation (8,961,298) -
Accumulated other comprehensive income 742,312 735,745
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Total stockholders' equity 95,455,884 32,229,741
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Commitments and contingencies - -
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Total liabilities and stockholders' equity $417,039,034 331,862,687
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</TABLE>
See accompanying notes to consolidated financial statements.
1
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EFC BANCORP, INC.
AND SUBSIDIARIES
Consolidated Statement of Income (unaudited)
For the three months ended September 30, 1998 and 1997
and the nine months ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
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Three months ended Nine months ended
September 30, September 30,
1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Interest income:
Loans secured by real estate $5,325,534 4,778,510 15,243,582 14,168,028
Other loans 306,462 233,041 851,424 660,250
Mortgage-backed securities available-for-sale 317,379 342,998 969,913 1,070,017
Investment securities and mutual funds
available-for-sale 1,316,265 865,536 3,880,034 2,432,759
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Total interest income 7,265,640 6,220,085 20,944,953 18,331,054
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Interest expense:
Deposits 2,942,624 3,015,884 8,933,320 8,757,631
Borrowed money 600,180 350,712 1,512,010 1,091,594
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Total interest expense 3,542,804 3,366,596 10,445,330 9,849,225
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Net interest income before provision for loan losses 3,722,836 2,853,489 10,499,623 8,481,829
Provision for loan losses 84,000 176,649 194,000 194,649
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Net interest income after provision for loan losses 3,638,836 2,676,840 10,305,623 8,287,180
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Noninterest income:
Service fees 193,383 154,754 499,427 436,576
Real estate and insurance commissions 26,706 59,852 63,290 127,267
Gain on sale of foreclosed real estate - - - 7,915
Gain on sale of securities - - 11,814 -
Other 35,924 5,715 52,989 29,721
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Total noninterest income 256,013 220,321 627,520 601,479
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Noninterest expense:
Compensation and benefits 1,223,125 955,261 3,384,297 2,795,685
Office building, net 76,658 70,580 243,227 238,627
Depreciation and repairs 181,187 144,804 525,383 436,125
Data processing 88,435 77,391 298,584 227,891
Federal insurance premium 30,030 40,486 113,165 121,702
NOW account operating expenses 65,753 58,996 192,404 174,969
Foundation contribution - - 5,549,210 -
Other 689,526 516,201 1,832,371 1,532,334
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Total noninterest expense 2,354,714 1,863,719 12,138,641 5,527,333
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Income (loss) before income taxes 1,540,135 1,033,442 (1,205,498) 3,361,326
Income tax expense (benefit) 470,454 351,184 (617,047) 1,143,591
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Net income (loss) $1,069,681 682,258 (588,451) 2,217,735
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Earnings (loss) per share (basic and diluted) $ 0.15 n/a (0.20) n/a
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</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
EFC BANCORP, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows (unaudited)
For the nine months ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
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1998 1997
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<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(588,451) 2,217,735
Adjustment to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Amortization of premiums and discounts, net 78,166 (25,297)
Provision for loan losses 194,000 194,649
Depreciation of office properties and equipment 362,793 275,553
Gain on sale of foreclosed real estate - (7,915)
Gain on sale of investment securities (11,814) -
Decrease (increase) in accrued interest receivable and other assets, net (634,940) (100,377)
Increase in income taxes payable, accrued expenses
and other liabilities, net 10,003 511,715
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (590,243) 3,066,063
- --------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Net increase in loans receivable (45,043,199) (2,935,132)
Purchases of loans receivable (7,134,836) (239,000)
Purchases of mortgage-backed securities available-for-sale (4,549,273) (2,092,886)
Principal payments on mortgage-backed securities available-for-sale 5,652,028 5,052,742
Maturities of investment securities available-for-sale 20,460,496 11,134,688
Proceeds from the sale of investment securities available-for-sale 2,011,814 -
Purchases of investment securities available-for-sale (40,417,232) (16,903,143)
Purchases of office properties and equipment (1,512,314) (977,981)
Purchases of stock in the Federal Home Loan Bank of Chicago (549,000) -
Net increase in foreclosed real estate (1,069,653) -
Proceeds from the sale of foreclosed real estate - 74,716
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Net cash used in investing activities (72,151,169) (6,885,996)
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Cash flows from financing activities:
Proceeds from the issuance of common stock 72,769,326 -
Purchase of common stock by ESOP (8,961,298) -
Net increase (decrease) in deposits (6,142,091) 10,454,432
Proceeds from borrowed money 34,000,000 49,000,000
Repayments on borrowed money (6,000,000) (54,000,000)
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 85,665,937 5,454,432
- --------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 12,924,525 1,634,499
Cash and cash equivalents at beginning of period 10,098,554 10,953,010
- --------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $23,023,079 12,587,509
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
Item 1. FINANCIAL STATEMENTS, CONTINUED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
EFC BANCORP, INC.
Note 1: BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements
include the accounts of EFC Bancorp, Inc. (the Company) and its wholly-owned
subsidiary, Elgin Financial Savings Bank (the Bank) and its wholly-owned
subsidiary, Fox Valley Service Corp.
In the opinion of the management of the Company, the accompanying
consolidated financial statements include all normal recurring adjustments
necessary for a fair presentation of the financial position and results of
operations for the periods presented. All significant intercompany
transactions have been eliminated in consolidation. Certain information and
footnote disclosures normally included in financial statements presented in
accordance with generally accepted accounting principles have been condensed
or omitted. The results of operations for the interim periods are not
necessarily indicative of the results to be expected for the full year. It is
suggested that the accompanying unaudited consolidated financial statements
be read in conjunction with the Company's 1997 Annual Report on Form 10-K.
Currently, other than investing in various securities, the Company does not
directly transact any material business other than through the Bank.
Accordingly, the discussion herein addresses the operations of the Company as
they are conducted through the Bank.
Note 2: COMPREHENSIVE INCOME
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 130, REPORTING COMPREHENSIVE INCOME, which
is effective for fiscal years beginning after December 15, 1997. This
statement established standards for reporting and displaying comprehensive
income and its components (revenue, expenses, gains and losses) in a full set
of general purpose financial statements. The Company adopted SFAS No.130 on
January 1, 1998. The Company's comprehensive income for the three and nine
month periods ended September 30, are as follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) $ 1,069,681 682,258 ( 588,451) 2,217,735
Other comprehensive income (loss), net of tax:
Unrealized holding gain (losses) on
securities arising during the period 267,785 89,922 ( 876) ( 7,385)
Less:
reclassification adjustment
for net gain realized in net income - - ( 7,443) -
----------- -------- ----------- ----------
Comprehensive income (loss) $ 1,337,466 772,180 ( 581,884) 2,210,350
----------- -------- ----------- ----------
----------- -------- ----------- ----------
</TABLE>
4
<PAGE>
There were no sales of investment securities during the nine months ended
September 30, 1997. During the second quarter of 1998 the sale of investment
securities resulted in a gain of $11,814 ($7,443 net of tax effect).
Note 3: CONVERSION TO STOCK FORM OF OWNERSHIP
On August 12, 1997, the Board of Directors adopted a Plan of
Conversion, as amended (the Plan) pursuant to which the Bank converted from a
state chartered savings bank to a state chartered stock savings bank.
On April 3, 1998, the Savings Bank completed the conversion and
EFC Bancorp, Inc. completed the issuance and sale of 6,936,513 shares of its
own common stock (the Transaction), at a price of $10.00 per share, through
an initial public offering (IPO), with the Savings Bank's members receiving
all of the shares. The stock of the Bank was issued to a holding company, EFC
Bancorp, Inc. (the Company) formed in connection with the conversion. The
Company also contributed 554,921 shares of its common stock, from authorized,
but unissued shares, to a charitable foundation (the Foundation) immediately
following the conversion. The Company received gross proceeds from the
Transaction of $69,365,130, before the reduction from gross proceeds of
$2,145,000 for IPO related expenses, which were initially deferred. On the
date of the Transaction, $12,490,054 of deposits and $56,875,076 of
nondepository stock subscription funds were transferred to stockholder's
equity and $37,258,531 of nondepository stock subscription funds were
subsequently returned to subscribers; also subsequent to the Transaction, the
ESOP purchased, through a $8,961,298 loan from the Company, 599,314 shares of
common stock on the open market.
The Bank established a liquidation account, as of the date of
conversion, in the amount of $31,024,068, equal to its retained earnings as
of the date of the latest consolidated statement of financial condition
appearing in the final prospectus. The Liquidation Account is established to
provide a limited priority claim on the assets of the Bank to qualifying
pre-conversion depositors (Eligible and Supplemental Eligible Account
Holders) who continue to maintain deposits in the Bank after conversion. In
the unlikely event of a complete liquidation of the Bank, and only in such
event, each Eligible Account Holder and Supplemental Eligible Account Holder
would then receive from the Liquidation Account a liquidation distribution
based on his proportionate share of the then total remaining qualifying
deposits.
The Company established a Foundation in connection with the
conversion. The amount of shares the Company contributed to the Foundation
equaled 8.0% of the total amount of common stock sold in the Conversion. The
Foundation was formed as a complement to the Bank's existing community
activities and is dedicated to community activities and the promotion of
charitable causes.
The Foundation submitted a request to the Internal Revenue
Service to be recognized as a tax-exempt organization and will likely be
classified as a private foundation. The contribution of common stock to the
Foundation by the Company will be tax deductible, subject to an annual
limitation based on 10% of the Company's annual taxable income. The Company,
however, will
5
<PAGE>
be able to carry forward any unused portion of the deduction for five years
following the contribution. The Company recognized a $5,549,000 expense for
the full amount of the contribution, offset in part by the $2,053,000
corresponding tax benefit, during the second quarter of 1998.
Subsequent to the conversion, the Bank may not declare or pay
cash dividends on or repurchase any of its shares of common stock if the
effect thereof would cause stockholders' equity to be reduced below
applicable regulatory capital maintenance requirements or if such declaration
and payment would otherwise violate regulatory requirements or would reduce
the bank's capital level below the amount then required for the
aforementioned Liquidation Account. Also, capital distribution regulations
limit the Bank's ability to make capital distributions which include
dividends, stock redemptions or repurchases, cash-out mergers, interest
payments on certain convertible debt and other transactions charged to the
capital account based on their capital level and supervisory condition.
Federal regulations also preclude any repurchase of the stock of the Bank or
its holding company for one year after conversion except where compelling and
valid business reasons are established and approved by the FDIC.
Note 4: EARNINGS PER SHARE
During the third quarter of 1998, the Company adopted Statement
of Financial Accounting Standards No. 128, EARNING PER SHARE (SFAS No. 128).
This Statement became effective for financial statements issued for periods
ending after December 15, 1997. Under the provisions of SFAS No. 128, primary
and fully diluted earnings per share were replaced with basic and diluted
earnings per share. Basic earnings per share is calculated by dividing net
income by the weighted average number of common shares outstanding. Diluted
earnings per share is calculated by dividing net income by the weighted
average number of shares adjusted for the dilutive effect of outstanding
stock options. ESOP shares are only considered outstanding for earnings per
share calculations when they are committed to be released. As of September 30,
1998, the Company does not have any outstanding stock options. See
"Subsequent Event"section for approval of the EFC Bancorp, Inc. Stock Based
Incentive Plan on October 27, 1998. Earnings per share of common stock for
the nine month period ended September 30, 1998 has been determined by
dividing net loss from April 3, 1998 (date of initial public offering)
through September 30, 1998 by the weighted average number of shares of common
stock outstanding. Earnings per share information for the prior year periods
ended September 30, 1997 cannot be computed as the Company did not issue
common stock until April 3, 1998.
Presented below are the calculations for basic and diluted earnings per share:
<TABLE>
<CAPTION>
Three Months April 3,
Ended Through
September 30, September 30,
Basic: 1998 1998
- ----- ------------ -------------
<S> <C> <C>
Net income (loss) $ 1,069,681 $( 1,409,363)
Weighted average shares outstanding 6,914,241 6,914,241
Basic earnings (loss) per share $ .15 $ ( .20)
--- ---
--- ---
</TABLE>
6
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<TABLE>
<CAPTION>
Three Months April 3,
Ended Through
September 30, September 30,
Diluted: 1998 1998
- ------- ------------ -------------
<S> <C> <C>
Net income (loss) $1,069,681 $ ( 1,409,363)
Weighted average shares outstanding 6,914,241 6,914,241
Effect of dilutive stock options outstanding - -
------------ --------------
Diluted weighted average shares outstanding 6,914,241 6,914,241
Diluted earnings (loss) per share $ .15 $ ( .20)
--- ---
--- ---
</TABLE>
PART I: FINANCIAL INFORMATION
EFC BANCORP, INC.
SEPTEMBER 30, 1998
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following analysis discusses changes in the financial condition at
September 30, 1998 and results of operations for the three and nine months
ended September 30, 1998, and should be read in conjunction with the Bank's
Consolidated Financial Statements and the notes thereto, appearing in Part I,
Item 1 of this document.
FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. The Company intends
such forward-looking statements to be covered by the safe harbor provisions
for forward-looking statements contained in the Private Securities Reform Act
of 1995, and is including this statement for purposes of these safe harbor
provisions. Forward-looking statements, which are based on certain
assumptions and describe future plans, strategies and expectations of the
Company, are generally identified by use of the words "believe," "expect,"
"intend," "anticipate," "estimate," "project," or similar expressions. The
Company's ability to predict results or the actual effect of future plans or
strategies is inherently uncertain. Factors which could have a material
adverse effect on the operations of the Company and the subsidiaries include,
but are not limited to, changes in: interest rates, general economic
conditions, legislative/regulatory changes, monetary and fiscal policies of
the U.S. Government, including policies of the U.S. Treasury and the Federal
Reserve Board, the quality or composition of the loan or investment
portfolios, demand for loan products, deposit flows, competition, demand for
financial services in the Company's market area and accounting principles and
guidelines. These risks and uncertainties should be considered in evaluating
forward-looking statements and undue reliance should not be placed on such
statements. Further information concerning the Company and its business,
including additional factors that could materially affect the Company's
financial results, is included in the Company's filings with the SEC.
7
<PAGE>
The Company does not undertake - and specifically disclaims 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.
COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
Total assets at September 30, 1998 were $417.0 million, which
represented an increase of $85.1 million, or 25.6%, compared to $331.9
million at December 31, 1997. The change in assets was primarily due to an
increase in loans receivable, cash and cash equivalents and investment
securities. Loans receivable, net increased by $52.0 million, or 21.1% , to
$298.7 million at September 30, 1998 as compared to $246.7 million at
December 31, 1997. The increase in loans receivable was attributable to loan
originations exceeding repayments in a favorable decreasing rate environment
during the quarter. Cash and cash equivalents increased by $12.9 million to
$23.0 million at September 30, 1998 as compared to $10.1 million at December 31,
1997. Investment securities increased by $18.1 million, or 39.8%, to $63.6
million at September 30, 1998 as compared to $45.5 million at December 31,
1997. The increase in cash and cash equivalents and investment securities was
directly related to the proceeds generated by the recent stock conversion.
The growth in total assets was funded by increases in borrowed money and the
aforementioned proceeds generated in the stock conversion. Borrowed money,
representing FHLB advances, increased by $28.0 million to $52.0 million at
September 30, 1998 as compared to $24.0 million at December 31, 1997.
Stockholders' equity increased by $63.2 million to $95.4 million at
September 30, 1998 as compared to $32.2 million at December 31, 1997. This
increase resulted from the stock conversion as previously noted.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998
AND 1997
GENERAL. The Company's net income increased $388,000, to $1.1 million
for the three months ended September 30, 1998, from $682,000 for the three
months ended September 30, 1997. This increase in net income is primarily
attributable to a $962,000 increase in net interest income offset by a
$491,000 increase in noninterest expense.
INTEREST INCOME. Interest income increased $1.0 million, or 16.8%, to
$7.3 million for the three months ended September 30, 1998, compared with the
same period in 1997. This increase resulted from a combination of an increase
in average interest-earning assets, which increased by $75.9 million, or
23.6%, to $397.0 million for the three months ended September 30, 1998 from
$321.1 million for the comparable period in 1997 and a decrease in average
yield. Mortgage loan interest income increased by $547,000 for the three
months ended September 30, 1998. The average balance of mortgage loans
increased $45.4 million, and loan yield decreased by 55 basis points from
8.19% to 7.64%. Interest income from investment securities and mortgage
backed securities increased by $307,000 for the three months ended
September 30, 1998, compared with the same period in 1997. This increase
resulted from a combination of an increase in average balance of $20.9
million and a 30 basis point decrease in yield. Interest income on short term
8
<PAGE>
deposits increased by $113,000 as a result of increases in yield and average
balance. The yield on short term deposits increased by 159 basis points. The
related average balance increased by $5.3 million to $19.0 million for the
three months ended September 30, 1998, as compared to $13.7 million for the
three months ended September 30, 1997. Overall, the average yield on
interest-earning assets decreased by 43 basis points to 7.32% for the three
months ended September 30, 1998 from 7.75% for the three months ended
September 30, 1997.
INTEREST EXPENSE. Interest expense increased by $176,000, or 5.2%, to
$3.5 million for the three months ended September 30, 1998, from $3.4 million
for the three months ended September 30, 1997. This increase resulted from
the combination of an increase in the average balance of interest-bearing
liabilities, offset by an overall decrease in the average rate paid on those
interest- bearing liabilities. The average balance of interest-bearing
liabilities increased by $17.1 million, or 6.2%, to $296.3 million at
September 30, 1998 from $279.2 million at September 30, 1997. This change
reflects a $4.2 million decrease in the deposit accounts, offset by a $21.3
million increase attributable to advances from the FHLB-Chicago. The average
rate paid on combined deposits and borrowed money decreased by 4 basis points
to 4.78% for the three months ended September 30, 1998 from 4.82% for the
three months ended September 30, 1997.
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES. Net interest
income before provision for loan losses increased $869,000, or 30.5%, to $3.7
million for the three months ended September 30, 1998 from $2.9 million for
the comparable period in 1997. This increase was primarily attributable to a
$58.6 million increase in average interest-earning assets in excess of
average interest-bearing liabilities to $100.6 million for the three months
ended September 30, 1998 from $42.0 million for the same period in 1997.
Interest rate spread decreased by 38 basis points from 2.92% for the three
months ended September 30, 1997 to 2.54% for the three months ended
September 30, 1998.
PROVISION FOR LOAN LOSSES. The Bank's provision for loan losses
decreased by $93,000, to $84,000 for the three months ended September 30,
1998 from $177,000 in 1997. At September 30, 1998 and 1997, non-performing
loans totaled $767,000 and $2.1 million, respectively. At September 30, 1998
and 1997, the balance of the allowance for loan losses totaled $1.3 million
and $1.0 million, respectively. At September 30, 1998, the ratio of the
allowance for loan losses to non-performing loans was 167.7% compared to
47.7% at September 30, 1997. The ratio of the allowance to total loans was
0.43% and 0.41%, at September 30, 1998 and 1997, respectively. The ratio of
the allowance to nonperforming assets was 66.46% and 45.65%, at September 30,
1998 and 1997, respectively. There were no charge-offs for the three months
ended September 30, 1998 and 1997. Management periodically calculates an
allowance sufficiency analysis based upon the portfolio composition, asset
classifications, loan-to-value ratios, potential impairments in the loan
portfolio, and other factors. Management believes that the provision for loan
losses and the allowance for loan losses are currently reasonable and
adequate to cover any potential losses reasonably expected in the existing
loan portfolio. While management estimates loan losses using the best
available information, no assurance can be given that future additions to the
allowance will not be necessary based on changes in economic and real estate
market conditions, further information obtained regarding problem loans,
identification of additional problem loans and other
9
<PAGE>
factors, both within and outside of management's control.
NONINTEREST INCOME. Noninterest income totaled $256,000 and $220,000
for the three months ended September 30, 1998 and 1997, respectively. The
increase in noninterest income is primarily attributable to a $38,000
increase in service fee income to $193,000 for the three months ended
September 30, 1998 from $155,000 for the comparable period in 1997 and a
$30,000 increase in other income to $36,000 for the three months ended
September 30, 1998 from $6,000 for the three months ended September 30, 1997.
These increases are offset by a $33,000 decrease in insurance commissions to
$27,000 for the three months ended September 30, 1998 from $60,000 for the
three months ended September 30, 1997.
NONINTEREST EXPENSE. Noninterest expense increased by $491,000, to $2.4
million for the three months ended September 30, 1998 from $1.9 million for
the comparable period in 1997. Compensation and benefits increased by
$268,000, or 28.0%, to $1.2 million for the three months ended September 30,
1998 compared to $955,000 for the three months ended September 30, 1997. This
increase was primarily due to a combination of annual salary increases, the
addition of staff and the adoption of an Employee Stock Ownership Plan which
was established in connection with the conversion. On October 27, 1998, the
Company adopted a stock based employee benefit plan. It is likely that salary
and benefit expense will increase in future quarters as a result of the
adoption of this plan. See "Subsequent Event" section for further discussion.
All other operating expenses, including advertising, marketing, insurance,
postage, communications, data processing and other office expense increased
by a combined $223,000, or 19.7%, to $1.1 million for the three months ended
September 30, 1998 compared to $908,000 for 1997. Of this increase, $79,000
is related to expense incurred on foreclosed real estate and $88,000 is
related to legal expenses. Management continues to emphasize the importance
of expense management and control in order to continue to provide expanded
banking services to a growing market base.
INCOME TAX EXPENSE. Income tax expense totaled $470,000 for the three
months ended September 30, 1998 compared to $351,000 for the comparable
period in 1997. The increase in the provision for income taxes was the result
of a combination of an increase in income before income tax expense and a
decrease in the effective income tax rate. The effective income tax rate
decreased to 30.5% for the three months ended September 30, 1998 from 34.0%
for the three months ended September 30, 1997. Income before income tax
expense increased by $507,000, to $1.5 million for the three months ended
September 30, 1998 from $1.0 million for the same period in 1997.
COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
AND 1997
GENERAL. The Company's net income decreased $2.8 million, to a
$588,000 loss for the nine months ended September 30, 1998, from $2.2 million
of income for the nine months ended September 30, 1997. The decrease is
directly attributable to the establishment and funding of the Foundation. On
April 3, 1998, the Company completed its conversion to the stock form of
ownership. As part of the conversion the Company established the Foundation
with a one-time
10
<PAGE>
$5.5 million non-recurring pre-tax donation ($3.5 million after tax). This
donation was funded with authorized but unissued common stock immediately
following the conversion. This contribution amounted to 8.0% of the common
stock sold. Net income of the Company, excluding the one-time, non-recurring
contribution to the Foundation, amounted to $2.9 million for the nine months
ended September 30, 1998.
INTEREST INCOME. Interest income increased $2.6 million, or 14.3%, to
$20.9 million for the nine months ended September 30, 1998, compared with the
same period in 1997. This increase resulted from a combination of an increase
in average interest-earning assets, which increased by $68.0 million, or
21.5%, to $385.0 million for the nine months ended September 30, 1998 from
$317.0 million for the comparable period in 1997, offset by a decrease in
average yield. Mortgage loan interest income increased by $1.0 million for
the nine months ended September 30, 1998. The average balance of mortgage
loans increased $28.0 million, and loan yield decreased by 31 basis points
from 8.09% to 7.78%. Interest income from investment securities and mortgage
backed securities increased by $756,000 for the nine months ended September
30, 1998, compared with the same period in 1997. This increase resulted from
a combination of an increase in average balance of $17.7 million offset by a
33 basis point decrease in yield. Interest income on short term deposits
increased by $580,000 as a result of increases in yield and average balance.
The yield on short term deposits increased by 85 basis points. The related
average balance increased by $19.1 million to $30.6 million for the nine
months ended September 30, 1998, as compared to $11.5 million for the nine
months ended September 30, 1997. This increase is directly related to the
stock subscription proceeds received in March, 1998. Overall, the average
yield on interest-earning assets decreased by 46 basis points to 7.25% for
the nine months ended September 30, 1998 from 7.71% for the nine months ended
September 30, 1997.
INTEREST EXPENSE. Interest expense increased by $596,000, or 6.1%, to
$10.4 million for the nine months ended September 30, 1998, from $9.8 million
for the nine months ended September 30, 1997. This increase resulted from the
combination of an increase in the average balance of interest-bearing
liabilities, offset by an overall decrease in the average rate paid on those
interest-bearing liabilities. The average balance of interest-bearing
liabilities increased by $19.0 million, or 6.9%, to $295.5 million at
September 30, 1998 from $276.5 million at September 30, 1997. This change
reflects a $6.3 million increase in the deposit accounts, with the remaining
$12.7 million increase attributable to advances from the FHLB-Chicago. The
average rate paid on combined deposits and borrowed money decreased by 4
basis points to 4.71% for the nine months ended September 30, 1998 from 4.75%
for the nine months ended September 30, 1997.
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES. Net interest
income before provision for loan losses increased $2.0 million, or 23.8%, to
$10.5 million for the nine months ended September 30, 1998 from $8.5 million
for the comparable period in 1997. This increase was primarily attributable
to a $49.0 million increase in average interest-earning assets in excess of
average interest-bearing liabilities to $89.5 million for the nine months
ended September 30, 1998 from $40.5 million for the same period in 1997.
Interest rate spread decreased by 42 basis points from 2.96% for the nine
months ended September 30, 1997 to 2.54% for the nine months ended
September 30, 1998.
11
<PAGE>
PROVISION FOR LOAN LOSSES. The Bank's provision for loan losses totaled
$194,000 for the nine months ended September 30, 1998 compared to $195,000 in
1997. At September 30, 1998 and 1997, non-performing loans totaled $767,000
and $2.1 million, respectively. At September 30, 1998 and 1997, the balance
of the Allowance for loan losses totaled $1.3 million and $1.0 million,
respectively. At September 30, 1998, the ratio of the allowance for loan
losses to non-performing loans was 167.7% compared to 47.7% at September 30,
1997. The ratio of the allowance to total loans was 0.43% and 0.41%, at
September 30, 1998 and 1997, respectively. The ratio of the allowance to
nonperforming assets was 66.46% and 45.65%, at September 30, 1998 and 1997,
respectively. There were no charge-offs for the nine months ended September 30,
1997. Charge-offs for the nine months ended September 30, 1998 amounted to
$34,000. Management periodically calculates an allowance sufficiency analysis
based upon the portfolio composition, asset classifications, loan-to-value
ratios, potential impairments in the loan portfolio, and other factors.
Management believes that the provision for loan losses and the allowance for
loan losses are currently reasonable and adequate to cover any potential
losses reasonably expected in the existing loan portfolio. While management
estimates loan losses using the best available information, no assurance can
be given that future additions to the allowance will not be necessary based
on changes in economic and real estate market conditions, further information
obtained regarding problem loans, identification of additional problem loans
and other factors, both within and outside of management's control.
NONINTEREST INCOME. Noninterest income totaled $628,000 and $601,000
for the nine months ended September 30, 1998 and 1997, respectively. Service
fee income increased $62,000 to $499,000 for the nine months ended
September 30, 1998 from $437,000 for the comparable period in 1997. This was
offset by a $64,000 decrease in insurance commissions to $63,000 for the nine
months ended September 30, 1998 from $127,000 for the nine months ended
September 30, 1997. Gains on sale of investment securities totaled $12,000
for the nine months ended September 30, 1998, there were no gains in 1997.
NONINTEREST EXPENSE. Noninterest expense increased by $6.6 million, to
$12.1 million for the nine months ended September 30, 1998 from $5.5 million
for the comparable period in 1997. On April 3, 1998 the Company completed its
conversion to the stock form of ownership. As part of the conversion the
Company established the Foundation with a one-time $5.5 million non-recurring
pre-tax donation. This donation was funded with authorized but unissued
common stock immediately following the conversion. This contribution amounted
to 8.0% of the common stock sold. Compensation and benefits increased by
$589,000, or 21.1%, to $3.4 million for the nine months ended September 30,
1998 compared to $2.8 million for the nine months ended September 30, 1997.
This increase was primarily due to a combination of annual salary increases,
the addition of staff and the adoption of an Employee Stock Ownership Plan
which was established in connection with the conversion. On October 27, 1998,
the Company adopted a stock based employee benefit plan. See "Subsequent
Event" section for further discussion. It is likely that salary and benefit
expense will increase in future quarters as a result of the adoption of this
plan. All other operating expenses, including advertising, marketing,
insurance, postage, communications, data processing and other office expense
increased by a combined $473,000, or 17.3%, to $3.2 million for the nine
months ended September 30, 1998 compared to $2.7 million for the comparable
period in 1997. Of this increase, $79,000 is related to expense incurred on
12
<PAGE>
foreclosed real estate and $142,000 is related to legal expenses. Management
continues to emphasize the importance of expense management and control in
order to continue to provide expanded banking services to a growing market
base.
INCOME TAX EXPENSE. Income tax expense (benefit) totaled ($617,000) for
the nine months ended September 30, 1998 compared to $1.1 million for the
comparable period in 1997. The decrease in the provision for income taxes was
the result of a decrease in pretax income of $4.6 million, to a loss of $1.2
million for the nine months ended September 30, 1998 from $3.4 million for
the same period in 1997. This decrease is primarily attributable to the
one-time non-recurring $5.5 million donation made to establish the Foundation.
LIQUIDITY AND CAPITAL RESOURCES
On August 12, 1997, the Board of Directors adopted a Plan of Conversion,
as amended (the Plan) pursuant to which the Bank converted from a state
chartered savings bank to a state chartered stock savings bank.
On April 3, 1998, the Savings Bank completed the conversion and EFC
Bancorp, Inc. completed the issuance and sale of 6,936,513 shares of its own
common stock (the Transaction), at a price of $10.00 per share, through an
initial public offering (IPO), with the Savings Bank's members receiving all
of the shares. The stock of the Bank was issued to a holding company, EFC
Bancorp, Inc. (the Company) formed in connection with the conversion. The
Company also contributed 554,921 shares of its common stock, from authorized,
but unissued shares, to a charitable foundation (the Foundation) immediately
following the conversion. The Company received gross proceeds from the
Transaction of $69,365,130, before the reduction from gross proceeds of
$2,145,000 for IPO related expenses, which were initially deferred. On the
date of the Transaction, $12,490,054 of deposits and $56,875,076 of
nondepository stock subscription funds were transferred to stockholder's
equity and $37,258,531 of nondepository stock subscription funds were
subsequently returned to subscribers; also subsequent to the Transaction, the
ESOP purchased, through a $8,961,298 loan from the Company, 599,314 shares of
common stock on the open market.
The Bank's primary sources of funds are savings deposits, proceeds from
the principal and interest payments on loans and proceeds from the maturation
of securities and, to a lesser extent, borrowings from FHLB-Chicago. While
maturities and scheduled amortization of loans and securities are
predictable sources of funds, deposit outflows and mortgage prepayments are
greatly influenced by general interest rates, economic conditions and
competition.
The primary investing activities of the Bank are the origination of
residential one-to-four-family loans and, to a lesser extent multi-family and
commercial real estate, construction and land, commercial and consumer loans
and the purchase of mortgage-backed and mortgage-related securities. Deposit
flows are affected by the level of interest rates, the interest rates and
products offered by the local competitors, the Bank and other factors.
13
<PAGE>
The Bank's most liquid assets are cash and interest-bearing demand
accounts. The levels of these assets are dependent on the Bank's operating,
financing, lending and investing activities during any given period. At
September 30, 1998, cash and interest-bearing demand accounts totaled $23.0
million, or 5.5% of total assets.
See the "Consolidated Statement of Cash Flows" in the Unaudited
Consolidated Financial Statements included in this Form 10-Q for the sources
and uses of cash flows for operating, investing and financing activities for
the nine months ended September 30, 1998 and 1997.
At September 30, 1998, the Bank exceeded all of its regulatory capital
requirements. The following is a summary of the Bank's regulatory capital
ratios at September 30, 1998:
Total Capital to Total Assets........................... 17.38%
Total Capital to Risk-Weighted Assets................... 29.01%
Tier I Leverage Ratio................................... 16.71%
Tier I to Risk-Weighted Assets.......................... 28.46%
At September 30, 1998, the Company had a Total Capital to Total Assets ratio
of 22.89%.
SUBSEQUENT EVENT
Subsequent to September 30, 1998, on October 27, 1998, the stockholders
of the Company approved the EFC Bancorp, Inc. Stock-Based Incentive Plan
(Incentive Plan). The Incentive Plan authorizes the granting of options to
purchase Common Stock of the Company (Options), awards of shares of Common
Stock (Stock Awards) and certain related rights (Awards). The maximum number
of shares of Common Stock reserved for Awards under the Incentive Plan is
1,048,800 shares, consisting of 749,143 shares reserved for Options and
299,657 shares reserved for Stock Awards.
YEAR 2000
With the new millennium approaching, organizations are examining their
computer systems to ensure they are year 2000 compliant. The issue, in simple
terms, is that many existing computer programs use only two digits to
identify a year in the date field. These programs were designed without
considering the impact of the upcoming change in the century. As the century
is implied in the date, on January 1, 2000, computers that are not year 2000
compliant will assume the year is 1900. Systems that calculate, compare, or
sort using the incorrect date will cause erroneous results, ranging from
system malfunctions to incorrect or incomplete transaction processing. If not
remedied, potential risks include business interruption or shutdown,
financial loss, reputation loss, and legal liability. The Bank primarily
utilizes a third party vendor and such vendor's proprietary software to
process its electronic data. The third party data processor vendor is nearing
completion of their process for the modification, upgrade or replacement of
its
14
<PAGE>
computer software applications and systems as necessary to accommodate the
"year 2000" dating changes.
The Bank has undertaken a company wide initiative to address the year
2000 issue. Using the guidelines set forth in the Federal Financial
Institutions Examination Council (FFIEC) Interagency Statement, YEAR 2000
PROJECT MANAGEMENT AWARENESS, the Company has developed a comprehensive
action plan to prepare , as necessary, computer systems and facilities. As
part of the action plan the Board of Directors approved the formation of a
Year 2000 Steering committee. The Year 2000 Steering committee consists of
representatives of the data processing, lending, savings, operations,
accounting and compliance areas. The members of this committee have primary
responsibility for the fulfillment of the Bank's Year 2000 commitment.
The Bank has completed the assessment stage of the action plan. As part
of this stage an inventory of all software and hardware used internally and
at the third party service bureau was performed and documented, including
operational hardware categorized as non-IT (information technologies)
systems. After inventorying all systems the Bank performed a risk assessment
to determine whether system components were compliant. The risk assessment
process was used to generate an Inventory Risk Analysis Matrix (IRAM) of both
hardware and software. The IRAM is being used as a guide for the renovation
and validation stages of the action plan.
The renovation and validation stages of the action plan are currently in
process and are scheduled to be completed by early 1999. Testing of internal
systems and applications will be coordinated during these stages. Members of
the Year 2000 Steering committee will coordinate the testing and follow up
validation of testing.
The Bank will focus on developing appropriate policies or risk
mitigation actions to address Year 2000 related failures prior to the
millennium. The Bank is in the process of developing a contingency plan to
accomplish this end. The plan will identify risk sensitive issues and provide
the necessary solutions. The failure of external parties to resolve their own
Year 2000 issues in a timely manner could result in financial risk to the
Company. The contingency plan will also address these potential failures
where the risk to the Company can be identified and is considered significant.
The total external cost to prepare for the Year 2000 are estimated to be
in range between $40,000 and $80,000. This level of cost is not considered
material to operations of the Company.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 131, DISCLOSURE ABOUT SEGMENT OF AN
ENTERPRISE AND RELATED INFORMATION (SFAS No. 131) which establishes standards
for the way that public business enterprises report information about
operating segments in annual financial statements. This Statement requires
that those enterprises report selected information about operating segments
in interim financial reports issued to shareholders. This Statement
supercedes FASB No. 14
15
<PAGE>
FINANCIAL REPORTING FOR SEGMENTS OF A BUSINESS ENTERPRISE. Operating segments
are components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker
in deciding how to allocate resources and in assessing performance. The
Company adopted the Statement on January 1, 1998 and is not expected to have
a material impact on the Company.
In February 1998, the Financial Accounting Standards Board issued
Statement No. 132, EMPLOYERS' DISCLOSURES ABOUT PENSION AND OTHER POST
RETIREMENT BENEFITS - AN AMENDMENT OF FASB STATEMENTS NO. 87, 88, AND 106.
This Statement revises employers' disclosures about pension and other
post-retirement benefit plans, but does not change the measurement or
recognition of these plans. It standardizes the disclosure requirements to
the extent practicable, requires additional information on changes in the
benefit obligations and fair values of plan assets that will facilitate
financial analysis and eliminates certain disclosures that are no longer as
useful as they were when Statements 87, 88, and 106 were issued. This
Statement is effective for fiscal years beginning after December 15, 1997.
The Company adopted the Statement on January 1, 1998 and the disclosure
requirements applicable to the Company's 1998 consolidated financial
statements are not expected to have a material impact on the Company's
financial position or results of operations.
In June 1998, the Financial Accounting Standards Board issued Statement
No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. This
Statement standardizes the accounting for derivative instruments, including
certain derivative instruments imbedded in other contracts. Under the
standard, entities are required to carry all derivative instruments in the
statement of financial position at fair value. The accounting for the changes
in fair value of a derivative instrument depends on whether it has been
designated and qualifies as part of a hedging relationship and, if so, on the
reason for holding it. If certain conditions are met, entities may elect to
designate a derivative instrument as a hedge of exposures to changes in fair
values, cash flows, or foreign currencies. If hedge exposure is a fair value
exposure, the gain or loss on the derivative instrument is recognized in
earnings in the period of change together with the offsetting loss or gain on
the hedged item attributable to the risk being hedged. If the hedged exposure
is a cash flow exposure, the effective portion of the gain on the derivative
instrument is reported initially as a component of other comprehensive income
and subsequently reclassified into earnings when the forecasted transaction
affects earnings. Any amount excluded from the assessment of hedge
effectiveness as well as the ineffective portion of the gain or loss is
reported in earnings immediately. Accounting for foreign currency hedges is
similar to the accounting for fair value and cash flow hedges. If the
derivative instrument is not designated as a hedge, the gain or loss is
recognized in earnings in the period of change. The Company anticipates that
the adoption of this Statement will not have a material impact in the
Company's financial statements.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
There have been no material changes in information regarding
quantitative and qualitative disclosures about market risk from the
information presented as of December 31, 1997, in the 1997 Form 10-K, to
September 30, 1998.
16
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
None.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES.
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
A special meeting of the stockholders was held on October 27, 1998. The
following proposal was voted on by the stockholders:
<TABLE>
<CAPTION>
BROKER
PROPOSAL FOR AGAINST ABSTAIN NON-VOTES
- -------- --- ------- ------- ---------
<S> <C> <C> <C> <C>
1)Approval of the EFC Bancorp, Inc.
1998 Stock Based Incentive Plan 4,419,370 686,162 128,988 2,256,914
</TABLE>
Item 5. OTHER INFORMATION.
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K .
(a) Exhibits
11.0 Statement re: Computation of Per Share Earnings
27.0 Financial Data Schedule
(b) Reports on Form 8-K
None.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EFC BANCORP, INC.
Dated: NOVEMBER 13, 1998 By: /s/ Barrett J. O'Connor
----------------- -------------------------------------
Barrett J. O'Connor
President and Chief Executive Officer
(principal executive officer)
Dated: November 13, 1998 By: /s/ James J. Kovac
----------------- -------------------------------------
James J. Kovac
Senior Vice President and Chief
Financial Officer
(Principal financial and accounting officer)
18
<PAGE>
Exhibit 11.0 - Computation of Per Share Earnings
During the third quarter of 1998, the Company adopted Statement of
Financial Accounting Standards No. 128, EARNING PER SHARE (SFAS No. 128).
This Statement became effective for financial statements issued for periods
ending after December 15, 1997. Under the provisions of SFAS No. 128, primary
and fully diluted earnings per share were replaced with basic and diluted
earnings per share. Basic earnings per share is calculated by dividing net
income by the weighted average number of common shares outstanding. Diluted
earnings per share is calculated by dividing net income by the weighted
average number of shares adjusted for the dilutive effect of outstanding
stock options. ESOP shares are only considered outstanding for earnings per
share calculations when they are committed to be released. As of September 30,
1998, the Company does not have any outstanding stock options. See
"Subsequent Event"section for approval of the EFC Bancorp, Inc. Stock Based
Incentive Plan on October 27, 1998. Earnings per share of common stock for
the nine month period ended September 30, 1998 has been determined by
dividing net loss from April 3, 1998 (date of initial public offering)
through September 30, 1998 by the weighted average number of shares of common
stock outstanding. Earnings per share information for the prior year periods
ended September 30, 1997 cannot be computed as the Company did not issue
common stock until April 3, 1998.
Presented below are the calculations for basic and diluted earnings per share:
<TABLE>
<CAPTION>
Three Months April 3,
Ended Through
September 30, September 30,
Basic: 1998 1998
- ------ ------------- --------------
<S> <C> <C>
Net income (loss) $ 1,069,681 $ ( 1,409,363)
Weighted average shares outstanding 6,914,241 6,914,241
Basic earnings (loss) per share $ .15 $ ( .20)
--- ---
--- ---
Diluted:
- --------
Net income (loss) $ 1,069,681 $ ( 1,409,363)
Weighted average shares outstanding 6,914,241 6,914,241
Effect of dilutive stock options outstanding - -
Diluted weighted average shares outstanding 6,914,241 6,914,241
Diluted earnings (loss) per share $ .15 $ ( .20)
--- ---
--- ---
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,475
<INT-BEARING-DEPOSITS> 20,548
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 82,512
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 299,966
<ALLOWANCE> 1,286
<TOTAL-ASSETS> 417,039
<DEPOSITS> 263,871
<SHORT-TERM> 0
<LIABILITIES-OTHER> 5,712
<LONG-TERM> 52,000
0
0
<COMMON> 75
<OTHER-SE> 95,381
<TOTAL-LIABILITIES-AND-EQUITY> 417,039
<INTEREST-LOAN> 16,095
<INTEREST-INVEST> 4,850
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 20,945
<INTEREST-DEPOSIT> 8,933
<INTEREST-EXPENSE> 10,445
<INTEREST-INCOME-NET> 10,500
<LOAN-LOSSES> 194
<SECURITIES-GAINS> 12
<EXPENSE-OTHER> 12,139
<INCOME-PRETAX> (1,205)
<INCOME-PRE-EXTRAORDINARY> (1,205)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (588)
<EPS-PRIMARY> (.20)
<EPS-DILUTED> (.20)
<YIELD-ACTUAL> 7.25
<LOANS-NON> 767
<LOANS-PAST> 767
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,126
<CHARGE-OFFS> 34
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 1,286
<ALLOWANCE-DOMESTIC> 1,286
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 84
</TABLE>
