FORM 10-QSB
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT UNDER 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 1-13691
Bay State Bancorp, Inc.
(Exact name of small business issuer as specified in its charter)
Delaware 04-3398630
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
1299 Beacon Street, Brookline, Massachusetts 02446
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (617) 739-9500
Check whether the issuer (1) filed all reports required to be filed by
section 13 or 15(d) of the Exchange Act during the past 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 [_]
The number of shares of common stock outstanding of each of the issuer's classes
of common stock, as of November 7, 1998 was 2,535,232.
Transitional Small Business Disclosure Format Yes [_] No [X]
<PAGE>
<TABLE>
<CAPTION>
BAY STATE BANCORP, INC. AND SUBSIDIARIES
INDEX
<S> <C>
PART I - FINANCIAL INFORMATION..................................................................................1
Item 1 - Financial Statements.................................................................................1
Consolidated Balance Sheets - September 30, 1998 and March 31, 1998 ........................................1
Consolidated Income Statements - Three and six months ended September 30, 1998 and 1997.....................2
Consolidated Statements of Cash Flows - Six months ended September 30, 1998 and 1997........................3
Consolidated Statements of Changes in Stockholders' Equity - Six months ended September 30, 1998............4
Notes to Consolidated Financial Statements for the Period Ended September 30, 1998..........................5
Item 2 - Management's Discussion and Analysis or Plan of Operation............................................6
PART II - OTHER INFORMATION....................................................................................19
Item 1 - Legal Proceedings...................................................................................19
Item 2 - Changes in Securities and use of proceeds...........................................................20
Item 3 - Defaults Upon Senior Securities.....................................................................20
Item 4 - Submission of Matters to a Vote of Security Holders.................................................20
Item 5 - Other Information...................................................................................20
Item 6 - Exhibits and Reports on Form 8-K....................................................................20
SIGNATURES...................................................................................................22
EXHIBITS.....................................................................................................23
Computation of per share earnings - Exhibit 11.............................................................23
Financial Data Schedule - Exhibit 27.......................................................................24
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Bay State Bancorp, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
September 30, March 31,
1998 1998
--------- ---------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and due from banks $ 3,201 $ 3,513
Short-term investments 10,500 46,000
Investment and mortgage-backed securities
Available-for-sale (amortized cost of $23,531 and $5,391) 23,744 6,523
Held to maturity (market value of $1,664 and $4,274) 1,621 4,272
Mortgage loans held for sale 236 822
Loans receivable, net 257,284 224,928
Stock in Federal Home Loan Bank of Boston 1,873 1,873
Accrued interest receivable 1,580 1,260
Premises and equipment, net 2,589 2,581
Deferred tax asset, net 2,380 2,065
Other assets 1,384 1,454
--------- ---------
Total assets $ 306,392 $ 295,291
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 206,429 $ 207,780
Federal Home Loan Bank Advances 31,500 20,000
Other borrowed funds 2,336 2,176
Accrued expenses and other liabilities 2,038 1,761
--------- ---------
Total liabilities 242,303 231,717
--------- ---------
Stockholders' equity:
Common stock, par value $.01 per share, issued
and outstanding 2,535,232 shares 25 25
Additional paid-in capital 49,194 49,194
Retained earnings 18,460 17,340
Net unrealized gain on investments available for sale 61 666
Less: Unearned ESOP shares (3,651) (3,651)
--------- ---------
Total stockholders' equity 64,089 63,574
--------- ---------
Total liabilities and stockholders' equity $ 306,392 $ 295,291
========= =========
Equity-to-asset ratio 20.92% 21.53%
Book value per share $ 27.24 $ 27.02
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
Page 1
<PAGE>
Bay State Bancorp, Inc. and Subsidiaries
Consolidated Income Statements
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
September 30, September 30,
------------------- -------------------
1998 1997 1998 1997
------- ------- ------- -------
Unaudited Unaudited
--------- ---------
<S> <C> <C> <C> <C>
Interest income:
Loans $ 4,998 $ 4,470 $ 9,650 $ 8,685
Investments 367 275 606 552
Other interest 177 14 704 37
------- ------- ------- -------
Total interest income 5,542 4,759 10,960 9,274
------- ------- ------- -------
Interest expense:
Deposits 2,248 2,216 4,490 4,366
Borrowed funds 246 304 462 544
------- ------- ------- -------
Total interest expense 2,494 2,520 4,952 4,910
------- ------- ------- -------
Net interest income before provision for loan losses 3,048 2,239 6,008 4,364
Provision for loan losses 100 444 150 444
------- ------- ------- -------
Net interest income after provision for loan losses 2,948 1,795 5,858 3,920
------- ------- ------- -------
Non-interest income:
Service charges on deposit accounts 70 65 132 135
Gain on sale of loans 16 2 28 5
Gain on sale of other real estate owned -- -- -- 19
------- ------- ------- -------
Total non-interest income 86 67 160 159
------- ------- ------- -------
Income before non-interest expense and income taxes 3,034 1,862 6,018 4,079
------- ------- ------- -------
Non-interest expense:
Salaries and employee benefits 1,142 866 2,331 1,718
Equipment Expense 175 160 331 317
Occupancy Expense 86 60 166 123
Federal deposit insurance premiums 32 32 63 62
Advertising 55 46 101 88
Data processing 65 55 122 110
Other 451 183 959 471
------- ------- ------- -------
Total non-interest expense 2,006 1,402 4,073 2,889
------- ------- ------- -------
Income before income taxes 1,028 460 1,945 1,190
Income tax expense 422 196 825 492
------- ------- ------- -------
Net income $ 606 $ 264 $ 1,120 $ 698
======= ======= ======= =======
Comprehensive net income $ 0 $ 869 $ 515 $ 862
======= ======= ======= =======
Weighted average common and common equivalent shares
outstanding 2,352,696 n/a 2,352,696 n/a
========= =========
Basic earnings per share $ 0.26 n/a $ 0.48 n/a
====== ======
Diluted earnings per share $ 0.26 n/a $ 0.48 n/a
====== ======
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
Page 2
<PAGE>
Bay State Bancorp, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Net cash flows from operating activities: Six months ended September 30,
------------------------------
1998 1997
-------- --------
Unaudited
---------
<S> <C> <C>
Net income $ 1,120 $ 698
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses 150 444
Net decrease in mortgage loans held-for-sale 586 --
Gain on sale of mortgage loans (28) (5)
Depreciation and amortization 138 107
Increase (decrease) in deferred loan origination fees (282) 5
Amortization of securities, net of accretion 3 4
Gain on sale of other real estate owned -- (19)
Increase in accrued interest receivable (320) (87)
Deferred tax (benefit) expense -- (169)
Increase in income taxes payable -- 212
Increase in accrued expenses -- 110
Increase in other assets -- (138)
(Increase) decrease in prepaid expenses 70 (112)
Decrease in thrift fund -- 96
Increase (decrease) in other liabilities 277 (19)
-------- --------
Net cash provided by operating activities 1,714 1,127
-------- --------
Cash flows from investing activities:
Proceeds from sales of other real estate owned -- 272
Proceeds from maturities of held-to-maturity securities 2,648 393
Proceeds from maturities of available-for-sale securities 1,000 --
Purchases of available-for-sale securities (19,141) (69)
Distribution to Rabbi Trust -- (697)
Net increase in loans (32,196) (12,948)
Recoveries of previously charged-off loans -- 18
Capital expenditures (146) (567)
-------- --------
Net cash used in investing activities (47,835) (13,598)
-------- --------
Cash flows from financing activities:
Net increase (decrease) in deposits (1,351) 5,102
Repayment of advances from the Federal Home Loan Bank (5,000) (34,000)
Advances from the Federal Home Loan Bank 16,500 42,000
Net increase in other borrowed funds 160 421
-------- --------
Net cash provided by financing activities 10,309 13,523
-------- --------
Net increase (decrease) in cash and cash equivalents (35,812) 1,052
Cash and cash equivalents at beginning of period 49,513 3,617
-------- --------
Cash and cash equivalents at end of period $ 13,701 $ 4,669
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 4,957 $ 4,910
Taxes 690 518
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
Page 3
<PAGE>
Bay State Bancorp, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
(In thousands)
<TABLE>
<CAPTION>
Additional Net Unearned Total
Common Paid-in Retained Unrealized ESOP Stockholders'
Stock Capital Earnings Gain shares Equity
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1997 $ -- $ -- $ 19,091 $ 383 $ -- $ 19,474
Net loss -- -- (1,751) -- -- (1,751)
Stock issued pursuant to initial common
stock offering 23 45,245 -- -- -- 45,268
Issuance of 187,795 shares of common stock
to The Bay State Federal Savings
Charitable Foundation 2 3,754 -- -- -- 3,756
Common stock acquired by ESOP -- -- -- -- (4,056) (4,056)
Reduction in unearned ESOP shares charged
to expense -- -- -- -- 405 405
Appreciation in fair value of unearned ESOP
shares charged to expense -- 195 -- -- -- 195
Change in net unrealized gain on
investments available for sale -- -- -- 283 -- 283
-------- -------- -------- -------- -------- --------
Balance at March 31, 1998 25 49,194 17,340 666 (3,651) 63,574
Net income -- -- 1,120 -- -- 1,120
Change in net unrealized gain on
investments available for sale -- -- -- (605) -- (605)
-------- -------- -------- -------- -------- --------
Balance at September 30, 1998 (Unaudited) $ 25 $ 49,194 $ 18,460 $ 61 $ (3,651) $ 64,089
======== ======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
Page 4
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED September 30, 1998
(1) Organization
Bay State Bancorp, Inc. ("Company" or "Bay State") was incorporated under
the laws of Delaware in October 1997 for the purpose of serving as the holding
company of Bay State Federal Savings Bank ("Bank") as part of the Bank's
conversion from a mutual form of organization to a stock form of organization
(the "Conversion"). The Company is a savings and loan holding company and is
subject to regulation by the Office of Thrift Supervision ("OTS"), the Federal
Deposit Insurance Corporation ("FDIC") and the Securities and Exchange
Commission ("SEC"). The Conversion, completed on March 29, 1998, resulted in the
Company issuing an aggregate 2,535,232 shares of its common stock, par value
$.01 per share, at a price of $20 per share, of which 2,347,437 shares were
issued in a subscription offering and 187,795 shares were issued to The Bay
State Federal Savings Charitable Foundation (the "Foundation), established by
the Bank. Prior to the Conversion, Bay State had not engaged in any material
operations.
(2) Accounting Principles
The accompanying unaudited consolidated financial statements of Bay State
Bancorp, Inc. have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-QSB and of Regulation S-B. Accordingly, the financial
statements do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of a normal recurring
nature) considered necessary for a fair presentation have been included.
Operating results for the three and six months ended September 30, 1998 are not
necessarily indicative of the results that may be expected for the current
fiscal year.
For further information, refer to the consolidated financial statements
included in the Company's annual report and Form 10-KSB for the period ended
March 31, 1998, and form 10-QSB for the period ended June 30, 1998, filed with
the Securities and Exchange Commission.
(3) Stock Based Incentive Plan
The Company has established a trust to purchase 101,409 shares of common
stock for the purpose of funding the 1998 Stock Based Incentive Plan ("Plan").
The Plan was approved by shareholders' at the September 29, 1998 Annual Meeting.
As of November 7, 1998, the trust had purchased 101,409 shares at a cost of
$2,270,000. The purchase of these shares has the effect of reducing the book
value by $0.97 per share.
(4) Stock Repurchase Program
On October 30, 1998 the Company announced it had received approval from the
OTS to repurchase up to 5% of the Company's outstanding common stock, or 126,762
shares. The Company intends to purchase the shares in open market transactions
as market conditions allow.
Page 5
<PAGE>
Item 2 - Management's Discussion and Analysis or Plan of Operation
General
Bay State Bancorp, Inc., a savings and loan holding company, was
incorporated under the laws of Delaware in October 1997 for the purpose of
serving as the holding company of Bay State Federal Savings Bank as part of the
Bank's conversion from a mutual to stock form of organization. Bay State Federal
Savings Bank is a federally chartered savings bank and is subject to regulation
by the Office of Thrift Supervision.
The Bank has five full service retail banking offices located in Norfolk
and Suffolk counties, Massachusetts. Through these offices, the Bank offers a
full range of retail and commercial banking products and services and conducts
other business as allowable for federally chartered banks. The Banks' lending
operations focus on, residential first mortgages, commercial real estate loans,
residential construction loans, home equity lines of credit, and consumer loans.
The Bank's business activities are concentrated in Eastern Massachusetts.
All retail banking activity is conducted through the banking offices. Lending
operations, particularly loan originations, are conducted from the retail
offices and at the point of sale. Neither the Company and the Bank nor any of
their subsidiaries conduct business on a national or international basis.
The operating results of the Company depend primarily on its net interest
and dividend income, which is the difference between (i) interest and dividend
income on earnings assets, primarily loans and investment securities and (ii)
interest expense on interest bearing liabilities, which consist of deposits and
borrowings. Results of operations are also affected by the provision for loan
losses, the level of non-interest income, including deposit and loan fees, gains
on sales of assets, operating expenses and income taxes.
Comparison of Financial Condition at September 30, 1998 and March 31, 1998
Total assets at September 30, 1998 were $306.4 million, compared to $295.3
million at March 31, 1998, an increase of 3.8%. Loans receivable increased $32.4
million, or 14.4%, primarily in 1-4 family residential mortgages, which were
originated and purchased, and to a lesser extent, multi-family residential and
commercial real estate loans. The increase in total assets was funded from a net
reduction of $20.9 million, or 36.8%, in short-term investments and investment
securities and an increase of $11.5 million, or 57.5%, in Federal Home Loan Bank
borrowings.
Total equity was $64.1 million, or 20.92% of total assets at September 30,
1998, an increase of $515,000, or 0.81%, from the $63.6 million, or 21.53% of
total assets at March 31, 1998. The Company's book value per share at September
30, 1998 was $27.24, or $26.27, after adjusting for the shares purchased for the
Company's 1998 Stock Based Incentive Plan.
Page 6
<PAGE>
Investments
Short-term investments of $10.5 million at September 30, 1998, consisted
solely of overnight deposits in the Federal Home Loan Bank of Boston, a decrease
of $35.5 million, or 77.2%, from the $46.0 million at March 31, 1998. Investment
securities increased $14.6 million, or 135.2%, primarily in short term agencies
and common and trust preferred equities. The net decrease in investments of
$20.9 million was used to fund loan growth.
As a result of the instability of the financial markets during the period,
and the corresponding impact on the market value of the investments classified
as available-for-sale, a $61,000 net unrealized gain was recognized as an
increase to equity at September 30, 1998, compared to an unrealized gain of
$666,000 at March 31, 1998.
The tables below show the investment securities portfolios for the periods
presented:
The amortized cost and estimated market values of investments
available-for-sale were:
September 30, 1998 March 31, 1998
------------------ ------------------
Estimated Estimated
Amortized market Amortized market
cost value cost value
------- ------- ------- -------
Investment securities (In thousands)
Marketable equity securities $ 9,376 $ 9,529 $ 5,391 $ 6,523
Trust preferred equity securities 2,901 2,876 -- --
Corporate bonds and notes 756 752 -- --
Preferred stocks 1,500 1,545 -- --
Government agency securities 8,998 9,042 -- --
------- ------- ------- -------
$23,531 $23,744 $ 5,391 $ 6,523
======= ======= ======= =======
The amortized cost and estimated market values of investments
held-to-maturity were:
September 30, 1998 March 31, 1998
------------------ ------------------
Estimated Estimated
Amortized market Amortized market
cost value cost value
------- ------- ------- -------
Investment securities (In thousands)
Government agency securities $ -- $ -- $2,001 $1,999
Mortgage-backed securities 1,621 1,664 2,271 2,275
------ ------ ------ ------
$1,621 $1,664 $4,272 $4,274
====== ====== ====== ======
Page 7
<PAGE>
Loans
During the first six months of the fiscal year, loans receivable increased
by $32.4 million, or 14.39%, as detailed below:
September 30, % of total March 31, % of total
1998 loans 1998 loans
-------- -------- -------- --------
Mortgage loans: (Dollars in thousands)
Residential 1 - 4 family $168,346 64.74% $157,240 68.99%
Equity lines 4,625 1.78 4,028 1.77
Residential multi-family 30,279 11.64 22,411 9.83
Commercial real estate 44,549 17.13 35,468 15.56
Construction and development 5,125 1.97 5,287 2.32
-------- -------- -------- --------
Total mortgage loans 252,924 97.26 224,434 98.47
Commercial loans 1,911 0.73 43 0.02
Other loans 5,210 2.01 3,434 1.51
-------- -------- -------- --------
Total loans 260,045 100.00% 227,911 100.00%
======== ========
Deduct:
Allowance for loan losses 2,573 2,513
Deferred loan fees 188 470
-------- --------
Net loans receivable $257,284 $224,928
======== ========
The Banks' primary lending focus is real estate lending. At September 30,
1998, residential, commercial real estate and construction and development loans
represented 97.3% of total loans, compared to 98.5% at March 31, 1998.
At September 30, 1998 loans serviced for investors was $18.0 million
compared to $15.6 million at March 31, 1998.
Asset Quality
At September 30, 1998 non-performing assets totaled $1.7 million, a
decrease of $564,000, or 24.75%, from $2.3 million at March 31, 1998.
Non-performing assets consist of all loans that are delinquent 90 days or more.
The Bank had no other real estate owned at September 30, 1998 or March 31, 1998.
At September 30, 1998, non-performing assets represented 0.56% of total assets
and 0.67% of loans receivable, compared to 0.77% and 1.00%, respectively, at
March 31, 1998. The decrease in non-performing assets was primarily in
one-to-four family and multi-family residential mortgages as the result of the
payoff of certain loans.
Page 8
<PAGE>
The composition of non-performing assets, which consist solely of
non-performing loans for the periods presented was:
September 30, March 31,
1998 1997 1998
------ ------ ------
(Dollars in thousands)
Non-accrual loans:
One-to-four-family $ 678 $1,229 $1,258
Multi-family 281 -- 254
Commercial real estate 740 -- 739
Construction and development -- -- --
Equity lines -- 38 --
Other 16 2 28
------ ------ ------
$1,715 $1,269 $2,279
====== ====== ======
Non-performing assets as a percentage of:
Loans receivable 0.67% 0.58% 1.00%
Total assets 0.56 0.51 0.77
The following represents the activity in the allowance for loan losses for
the six months ended September 30, 1998:
(In thousands)
Balance at March 31, 1998 $ 2,513
Provision for loan losses 150
Losses charged to allowance 90
Recoveries --
-------
Balance at September 30, 1998 $ 2,573
=======
The Bank continually reviews its delinquency position, underwriting and
appraisal procedures, charge-off experience and current real estate market
conditions with respect to its entire loan portfolio. While management uses the
best information available in establishing the allowance, future adjustments may
be necessary if economic conditions differ from the assumptions used in making
the current evaluation.
Page 9
<PAGE>
Deposits and Borrowed Funds
Deposits decreased slightly during the six month period as detailed
below:
September 30, % of total March 31, % of total
1998 deposits 1998 deposits
-------- -------- -------- --------
(Dollars in thousands)
Regular savings accounts $ 27,464 13.30% $ 32,216 15.51%
NOW accounts 20,570 9.96 22,989 11.06
Money market accounts 48,756 23.62 42,440 20.43
Non-interest bearing deposits 885 0.44 485 0.23
-------- -------- -------- --------
97,675 47.32 98,130 47.23
Term deposits 108,754 52.68 109,650 52.77
-------- -------- -------- --------
Total deposits $206,429 100.00% $207,780 100.00%
======== ======== ======== ========
During the period, FHLB advances increased $11.5 million, or 57.5%, as the
Bank took advantage of attractive pricing to fund asset growth.
Comparison of Operating Results for the three months ended September 30, 1998
and 1997
Results of Operations
Consolidated net income for the three months ended September 30, 1998
totaled $606,000, or $0.26 per share, compared to $264,000 for the same period
last year. This represents an increase of 129.55% in earnings. Due to the recent
Conversion, the earnings per share numbers for the prior period are not
applicable. The increase in earnings was directly attributable to an increase in
net interest income and a lower loan loss provision offset by an increase in
operating expenses. The increase in net interest income is directly attributable
to the increased level of interest-earning assets funded by the Conversion
proceeds and an increased level of borrowed funds.
Interest Income
Interest income for the three months ended September 30, 1998 increased
$783,000, or 16.5%, to $5.5 million, compared to $4.8 million for the same
period last year. The increase in interest income was primarily due to an
increase in the average balance of interest-earning assets, partially offset by
a decrease in the yield on interest-earning assets. The average balance of
interest-earning assets increased from $235.9 million for the quarter ended
September 30, 1997 to $280.8 million for the quarter ended September 30, 1998,
an increase of $44.2 million, or 18.7%. The increase in the average balance of
interest-earning assets was primarily a net result of an increase in the average
balance of short-term investments and investment securities of $20.6 million, or
135.5%, an increase in loans, net, and mortgage-loans held for sale of $25.4
million or 11.7% and a decrease in mortgage-backed and mortgage related
securities of $1.2 million, or 39.6%. The yield on interest-earning assets
decreased 18 basis points to 7.89%.
Interest Expense
Interest expense for the three months ended September 30, 1998 decreased
$26,000, or 1.0%, to $2,494,000, compared to $2,520,000 for the same period last
year. The decrease in interest expense was the net result of a $2.4
Page 10
<PAGE>
million, or 1.1%, increase in the average balance of interest-bearing
liabilities which increased from $220.9 million for the three months ended
September 30, 1997 to $223.3 million for the three months ended September 30,
1998, offset by a decrease of 9 basis points in the cost of funds to 4.56%. The
increase in the average balance of interest-bearing liabilities was primarily a
result of an increase in the average balance of deposits of $4.2 million, or
2.1% offset by a decrease in the average balance of FHLB advances of $1.8
million, or 8.5%.
Net interest income
The table below shows the average balance sheet, the interest earned and
paid on interest-earning assets and interest-bearing liabilities and the
resulting net interest spread and margin for the periods presented.
<TABLE>
<CAPTION>
For the three months ended September 30, 1998 1997
------------------------------------- -------------------------------------
Interest Interest
Average income/ Yield/ Average income/ Yield/
balance expense rate balance expense rate
-------- -------- -------- -------- -------- --------
Assets (Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Short-term investments $ 12,010 $ 177 5.90% $ 922 $ 14 6.07%
Investment securities 23,835 336 5.64 14,276 227 6.36
Mortgage-backed and mortgage related
securities 1,779 31 6.97 2,944 48 6.52
Loans and mortgage loans held-for-sale 243,192 4,998 8.22 217,755 4,470 8.21
-------- -------- -------- --------
Total interest-earning assets 280,816 5,542 7.89 235,897 4,759 8.07
-------- --------
Non interest-earning assets 11,305 8,138
-------- --------
Total $292,121 $244,035
======== ========
Liabilities and Equity
Interest-bearing liabilities:
NOW accounts $ 21,316 94 1.76 $ 21,191 97 1.83
Regular savings accounts 27,153 166 2.45 29,549 183 2.48
Money market accounts 46,846 471 4.02 41,519 418 4.03
Certificate accounts 108,652 1,517 5.58 107,559 1,518 5.65
-------- -------- -------- --------
Total interest-bearing deposits 203,967 2,248 4.41 199,818 2,216 4.44
FHLB advances 19,337 246 4.98 21,125 304 5.69
-------- -------- -------- --------
Total interest-bearing liabilities 223,304 2,494 4.47 220,943 2,520 4.56
-------- --------
Demand deposits 610 150
Other liabilities 4,147 2,750
Equity 64,060 20,192
-------- --------
Total $292,121 $244,035
======== ========
Net interest income $ 3,048 $ 2,239
======== ========
Interest rate spread 3.43% 3.51%
======== ========
Net interest margin 4.18% 3.80%
======== ========
</TABLE>
Page 11
<PAGE>
The increase of $809,000 in net interest income is analyzed as follows:
Quarters ended September 30,
1998 vs. 1997
---------------------------------
Change due to Increase (Decrease)
---------------------------------
Volume Rate Net
----- ----- -----
(In thousands)
Interest income:
Loans $ 523 $ 5 $ 528
Investments 274 (19) 255
----- ----- -----
Total 797 (14) 783
----- ----- -----
Interest expense:
Deposits 58 (26) 32
Borrowings (23) (35) (58)
----- ----- -----
Total 35 (61) (26)
----- ----- -----
Net interest income $ 762 $ 47 $ 809
===== ===== =====
Provision for Loan Losses
The provision for loan losses totaled $100,000 for the quarter ended
September 30, 1998, compared to $444,000 for the same period last year. The
provision reflects the risks associated with the Banks' primary lending
objective to increase the overall loan portfolio. The allowance for loan losses
is maintained at an amount management considers adequate to cover estimated
losses on loans receivable which are deemed probable and estimable based on
information currently known to management. While management believes the Bank's
allowance for loan losses is sufficient to cover losses inherent in its loan
portfolio at this time, no assurances can be given that the Bank's level of
allowance for loan losses will be sufficient to cover future losses incurred by
the Bank, or that future adjustments to the allowance for loan losses will not
be necessary if economic and other conditions differ substantially from the
economic and other conditions analyzed by management to determine the current
level of the allowance for loan losses.
Non-interest income
Total non-interest income increased $19,000, or 28.3%, to $86,000. Other fees
and charges increased $5,000 from fees on transaction accounts. Gain on sale of
loans increased $14,000, or 700.0%, due to the increased level of sales over the
same period last year.
Non-interest expense
Salaries and benefits increased $276,000, or 31.9%, the result of $122,000
in compensation expense associated with the Employee Stock Ownership Plan
allocation, a general increase in salaries and benefits and an increase in the
number of employees over the same period last fiscal year. Occupancy and
equipment expenses increased $41,000, or 18.6%, primarily a result of the
increased level of depreciation on building and leasehold
Page 12
<PAGE>
improvements. Other expenses increased $268,000, or 146.5%, primarily as a
result of $117,000 in non-recurring expenses associated with the implementation
of certain developmental strategies as part of the strategic planning for the
future and approximately $35,000 associated with software upgrades for year 2000
compliance.
Income Taxes
Income taxes for the three months ended September 30, 1998 were $422,000 on
pretax income of $1,028,000, for an effective rate of 41.05%, compared to
$196,000 on pretax income of $460,000, for an effective rate of 42.61% for the
same period last year. The effective tax rate is different than the prior year
due to the non-deductibility of certain expenses and the reduction in the state
tax rate for banks.
Comparison of Operating Results for the six months ended September 30, 1998 and
1997
Results of Operations
Consolidated net income for the six months ended September 30, 1998 totaled
$1,120,000, or $0.48 per share, compared to $698,000 for the same period last
year. This represents an increase of 60.46% in earnings. Due to the recent
Conversion, the earnings per share numbers for the prior period are not
applicable. The increase in earnings was directly attributable to an increase in
net interest income and a lower loan loss provision offset by an increase in
operating expenses. The increase in net interest income is directly attributable
to the increased level of interest-earning assets funded by the Conversion
proceeds and an increased level of borrowed funds.
Interest Income
Interest income for the six months ended September 30, 1998 increased
$1,686,000, or 18.2%, to $11.0 million, compared to $9.3 million for the same
period last year. The increase in interest income was primarily due to an
increase in the average balance of interest-earning assets, partially offset by
a decrease in the yield on interest-earning assets. The average balance of
interest-earning assets increased from $228.5 million for the six months ended
September 30, 1997 to $279.1 million for the six months ended September 30,
1998, an increase of $50.6 million, or 22.2%. The increase in the average
balance of interest-earning assets was primarily the net result of an increase
in the average balance of short-term investments and investment securities of
$27.9 million, or 181.5%, an increase in loans, net and mortgage loans held for
sale, of $23.8 million or 11.3% and a decrease in mortgage-backed and mortgage
related securities of $1.1 million, or 35.7%. The yield on interest-earning
assets decreased 25 basis points to 7.85%.
Interest Expense
Interest expense for the six months ended September 30, 1998 increased
$42,000, or 1.0%, to $4,952,000, compared to $4,910,000 for the same period last
year. The increase in interest expense was primarily due to a $8.4 million, or
3.9%, increase in the average balance of interest-bearing liabilities which
increased from $213.7 million for the six months ended September 30, 1997 to
$222.1 million for the six months ended September 30, 1998, offset by a decrease
of 12 basis points in the cost of interest-bearing liabilities to 4.46%. The
increase in the average balance of interest-bearing liabilities was primarily a
result of an increase in the average balance of deposits of $8.5
Page 13
<PAGE>
million, or 4.4% and a decrease in the average balance of FHLB advances of $.1
million, or 0.6%.
Net interest income
The table below shows the average balance sheet, the interest earned and
paid on interest-earning assets and interest-bearing liabilities and the
resulting net interest spread and margin for the periods presented.
<TABLE>
<CAPTION>
For the six months ended September 30, 1998 1997
------------------------------------- -------------------------------------
Interest Interest
Average income/ Yield/ Average income/ Yield/
balance expense rate balance expense rate
-------- -------- -------- -------- -------- --------
Assets (Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Short-term investments $ 24,411 $ 704 5.77% $ 1,358 $ 37 5.43%
Investment securities 18,921 539 5.70 14,036 447 6.35
Mortgage-backed and mortgage related
securities 1,936 67 6.92 3,011 105 6.95
Loans, net and mortgage loan held-
for-sale 233,843 9,650 8.25 210,062 8,685 8.25
-------- -------- -------- --------
Total interest-earning assets 279,111 10,960 7.85 228,467 9,274 8.10
-------- --------
Non interest-earning assets 11,799 6,826
-------- --------
Total $290,910 $235,293
======== ========
Liabilities and Equity
Interest-bearing liabilities:
NOW accounts $ 21,546 188 1.75 $ 20,649 190 1.84
Regular savings accounts 27,890 340 2.44 29,273 367 2.50
Money market accounts 42,709 921 4.31 39,523 803 4.05
Certificate accounts 111,534 3,041 5.45 105,715 3,006 5.67
-------- -------- -------- --------
Total interest-bearing deposits 203,679 4,490 4.41 195,160 4,366 4.46
FHLB advances 18,419 462 4.93 18,536 544 5.85
-------- -------- -------- --------
Total interest-bearing liabilities 222,098 4,952 4.46 213,696 4,910 4.58
-------- --------
Demand deposits 554 88
Other liabilities 4,303 2,037
Equity 63,955 19,472
-------- --------
Total $290,910 $235,293
======== ========
Net interest income $ 6,008 $ 4,364
======== ========
Interest rate spread 3.39% 3.52%
======== ========
Net interest margin 4.16% 3.81%
======== ========
</TABLE>
Page 14
<PAGE>
The increase of $1,644,000 in net interest income is analyzed as follows:
Six months ended September 30,
1998 vs. 1997
---------------------------------
Change due to Increase (Decrease)
---------------------------------
Volume Rate Net
------- ------- -------
(In thousands)
Interest income:
Loans $ 962 $ 3 $ 965
Investment securities 757 (36) 721
------- ------- -------
Total 1,719 (33) 1,686
------- ------- -------
Interest expense:
Deposits 180 (56) 124
Borrowings (3) (79) (82)
------- ------- -------
Total 177 (135) 42
------- ------- -------
Net interest income $ 1,542 $ 102 $ 1,644
======= ======= =======
Provision for Loan Losses
The provision for loan losses totaled $150,000 for the six months ended
September 30, 1998, compared to $444,000 for the same period last year. The
reduction in provision for loan losses from the previous year is attributable to
the classification of certain purchased loans that had been acquired in the
merger with another financial institution. These loans were identified and
classified accordingly, as a result an increase in the level of reserves was
recognized in conjunction with the classification of the loans.
Non-interest income
Total non-interest income totaled $160,000 compared to $159,000 for the same
period last year. Other fees and charges decreased $3,000 from the reduced level
of fees collected on transaction accounts. Gain on sale of loans increased
$23,000, or 460.0%, due to the increased level of loans sold over the same
period last year. During the six months ended September 30,1997, the company
recognized income of $19,000 from the sale of other real estate owned; there was
no such income for the same period this year.
Non-interest expense
Salaries and benefits increased $613,000, or 35.7%, the result of $269,000
in compensation expense associated with the Employee Stock Ownership Plan
allocation, a general increase in salaries and benefits and an increase in the
number of employees over the same period last fiscal year. Occupancy and
equipment expenses increased $57,000, or 13.0%, primarily a result of the
increased level of depreciation on building and leasehold improvements. Other
expenses increased $488,000, or 103.6%, primarily as a result of $305,000 in
non-recurring expenses associated with the implementation of certain
developmental strategies as part of the strategic planning for
Page 15
<PAGE>
the future and approximately $35,000 associated with software upgrades for year
2000 compliance.
Income Taxes
Income taxes for the six months ended September 30, 1998 were $825,000 on
pretax income of $1,945,000, for an effective rate of 42.42%, compared to
$492,000 on pretax income of $1,190,000, for an effective rate of 41.34% for the
same period last year. The effective tax rate is different than the prior year
due to the non-deductibility of certain expenses and the reduction in the state
tax rate for banks.
Capital Adequacy
The Company and its subsidiary Bank are subject to various regulatory
capital requirements administered by the federal banking agencies. Failure to
meet minimum capital requirements can initiate certain mandatory - and possibly
additional discretionary - actions by regulators that, if undertaken, could have
a direct material effect on the Company's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Company and the Bank must meet specific capital guidelines that involve
quantitative measures of their assets, liabilities and certain off-balance-sheet
items as calculated under regulatory accounting practices. Their capital amounts
and classification are also subject to qualitative judgments by the regulators
about components, risk weighting and other factors.
At September 30, 1998 the Company's capital ratio was 20.92% of total
assets. The Bank at September 30, 1998 had total capital of 13.54% and risk
based capital of 24.74% (unaudited), as compared to 14.09% and 26.23%
(unaudited) at June 30, 1998.
The FDIC sets minimum leverage ratios for each insured institution
depending upon its CAMELS rating. Banks with the highest ratings are required to
carry a 3.0% leverage ratio, with less highly rated institutions required to
have minimum ratios at least 1.0% to 2.0% greater. Additionally, the FDIC has
risk-based capital regulations. Under these requirements, banks must have a
minimum risk-based capital rate of 8.00%.
At September 30, 1998 the Company and the Bank met all the capital adequacy
requirements to which they are subject. As of September 30, 1998, the most
recent notification from the Office of Thrift Supervision categorized the Bank
as "well capitalized" under the regulatory framework for prompt corrective
action.
Asset/Liability Management
The principal objective of the Bank's interest rate risk management
function is to evaluate the interest rate risk included in certain balance sheet
accounts, determine the appropriate level of risk given the Bank's business
strategy, operating environment, capital and liquidity requirements and
performance objectives and manage the risk consistent with the Board of
Directors' approved guidelines. Through such management, the Bank seeks to
reduce the vulnerability of its operations to changes in interest rates.
The Bank monitors its interest rate risk as such risk relates to its
operating strategies. The Bank's Board of Directors has established an
Asset/Liability Committee, responsible for reviewing its asset/liability
policies and
Page 16
<PAGE>
interest rate risk position, which meets on a monthly basis and reports trends
and interest rate risk position to the Board of Directors on a quarterly basis.
The extent of the movement of interest rates is an uncertainty that could have a
negative impact on the earnings of the Bank.
In recent years, the Bank has primarily utilized the following strategies
to manage interest rate risk: (i) emphasizing the origination and purchase of
adjustable-rate loans; (ii) investing primarily in short-term U.S. Government
securities or mortgage-backed and mortgage-related securities with shorter
estimated maturities; (iii) utilizing FHLB advances to better structure the
maturities of its interest rate sensitive liabilities; and (iv) to a
substantially lesser extent, selling in the secondary market longer-term
fixed-rate mortgage loans originated while generally retaining the servicing
rights on such loans.
As part of its interest rate risk analysis, the Bank uses an interest rate
sensitivity model which generates estimates of the change in the Bank's net
portfolio value ("NPV") over a range of interest rate scenarios and which is
prepared by the OTS on a quarterly basis. NPV is the present value of expected
cash flows from assets, liabilities and off-balance sheet contracts. The NPV
ratio, under any interest rate scenario, is defined as the NPV in that scenario
divided by the market value of assets in the same scenario. The OTS produces
such analysis using its own model, based upon data submitted on the Bank's
quarterly Thrift Financial Reports, including estimated loan prepayment rates,
reinvestment rates and deposit decay rates. The following table sets forth the
Bank's NPV as of June 30, 1998 (the latest NPV analysis prepared by the OTS), as
calculated by the OTS.
Change in
Interest Rates in
Basis Points Net Portfolio Value NPV as % of Portfolio
(Rate Shock) Value of Assets
NPV
Amount $ Change % Change Ratio Change(1)
---------------------------------------------------------------
(Dollars in thousands)
400 $36,101 $(6,168) (15)% 13.16% (173)
300 38,478 (3,791) (9) 13.86 (103)
200 40,430 (1,839) (4) 14.42 (47)
100 41,772 (497) (1) 14.79 (10)
Static 42,269 -- -- 14.89 --
(100) 42,921 652 2 15.04 15
(200) 43,341 1,072 3 15.12 23
(300) 44,851 2,582 6 15.52 62
(400) 46,694 4,425 10 16.00 111
(1) Expressed in basis points.
Liquidity
The Bank's primary sources of funds are deposits, principal and interest
payments on loans, mortgage-backed and investment securities and FHLB advances.
While maturities and scheduled amortization of loans are predictable sources of
funds, deposit flows and mortgage prepayments are greatly influenced by general
interest rates, economic conditions and competition. The Bank has continued to
maintain the required levels of liquid assets as defined by
Page 17
<PAGE>
OTS regulations. This requirement of the OTS, which may be varied at the
direction of the OTS depending upon economic conditions and deposit flows, is
based upon a percentage of deposits and short-term borrowings. The Bank's
currently required liquidity ratio is 4%. At September 30, 1998 the Bank's
liquidity ratio was 10.71%. Management's strategy is to maintain liquidity as
close as possible to the minimum regulatory requirement and to invest any excess
liquidity in higher yielding interest-earning assets. The Bank manages its
liquidity position and demands for funding primarily by investing excess funds
in short-term investments and utilizing FHLB advances in periods when the Bank's
demands for liquidity exceed funding from deposit inflows.
The Bank's most liquid assets are cash and cash equivalents and securities.
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 cash equivalents and securities totaled $39.1 million, or 12.75% of
total assets.
The Bank has other sources of liquidity if a need for additional funds
arises, including FHLB advances. At September 30, 1998, the Bank had $31.5
million in advances outstanding from the FHLB, and at September 30, 1998, had an
additional overall borrowing capacity from the FHLB of $135.3 million. Depending
on market conditions, the pricing of deposit products and FHLB advances, the
Bank may continue to rely on FHLB borrowings to fund asset growth.
Year 2000 Compliance
As the year 2000 approaches, an important business issue has emerged
regarding how existing application software programs and operating systems can
accommodate this date value. In addressing the year 2000 the Company has broken
down the process into four steps: assessment, correction/replacement, testing
and implementation.
The Company has completed the assessment phase. During this phase the
Company identified all potential programs and applications that could be
effected which were date sensitive. The Company has also included the various
utility companies that it uses for assessment as to their readiness for year
2000. This assessment included all hardware and software applications as well as
vendor identification. The various applications identified were then prioritized
in consideration of their overall importance of use to the Company.
Correspondence was sent to all vendors inquiring into there applications year
2000 compliance. For a number of applications the correction, testing and vendor
certification and implementation has been completed.
The most critical applications to the Company are the software to process
all loan and deposit accounts and transactions, the internal accounting system
and utility companies for the various facility locations. The Bank utilizes a
third-party vendor for processing the primary banking applications and does not
have any proprietary or self developed software. In addition, the Bank also uses
third-party vendor application software for all ancillary computer applications,
specifically general ledger and accounting systems. The third-party vendor for
the Bank's banking applications is in the process of modifying and upgrading its
computer applications to ensure Year 2000 compliance. The Bank has completed the
first phase of testing and is in the process of completing the second phase of
testing. At the current time it is anticipated that the system will be compliant
and implemented by June 30, 1999. It is expected that the Company's accounting
software and applications will be year 2000 compliant by the end of 1998.
Page 18
<PAGE>
For all other applications the Company is continuing to ensure compliance
by continuing to follow up with vendors for year 2000 certification. At this
point in time the Company remains in the correction/replacement, testing and
implementation phases of the process.
The Company is also in the process of creating a contingency plan to deal
with any unforeseen events that could occur which would have a negative impact
on the day to day operations of the Company. The plan is expected to be
completed by March 31, 1999. The plan will address how to deal with the lack of
utilities and support systems.
The Company has expensed approximately $35,000 to replace and upgrade
existing software for year 2000 compliance. In addition the company will be
purchasing a new accounting system which will be year 2000 compliant; the cost
of this system will be approximately $75,000 and will be capitalized and
depreciated over its expected useful life. Additional expenses will be incurred
over the next year to meet year 2000 compliance, however, at this time these
expenses are not expected to be material in nature.
In the event that the Bank's third party vendor or its significant
suppliers or customers do not successfully and timely achieve year 2000
compliance, the Bank's business or operations could be adversely affected.
However, management believes that the Bank's own internal system, networks and
resources would allow the Bank to effectively operate and service its customers
in the event its significant vendors do not achieve satisfactory year 2000
compliance. In addition, if significant vendors failed to meet year 2000
operating requirements, the Bank intends to engage alternative vendors and
suppliers. While the Bank cannot estimate the costs and expenses associated with
hiring new vendors and suppliers, management believes that such costs would not
have a material impact on the Bank's earnings or results of operations.
Statements contained in this document, which are not historical facts, are
forward-looking statements as that term is defined in the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are subject to
risk and uncertainties, which could cause actual results to differ materially
from those currently anticipated due to a number of factors, which include, but
are not limited to, factors discussed in documents filed by the Company with the
Securities and Exchange Commission from time to time.
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
Neither the Company nor any of its subsidiaries is party to any pending
legal proceedings which are material other than routine litigation incidental to
their business activities.
Page 19
<PAGE>
Item 2 - Changes in Securities and Use of Proceeds
Not applicable.
Item 3 - Defaults Upon Senior Securities
Not applicable.
Item 4 - Submission of Matters to a Vote of Security Holders
On September 29, 1998, the Company held its Annual Meeting of Shareholders. At
that meeting the following items were brought before the shareholders for a vote
and the results were as indicated:
1. Election of Directors
For % Withhold %
--------- ---- ------ ---
Robert B. Cleary 2,236,946 97.8 49,626 2.2
Jerome R. Dangel 2,236,946 97.8 49,626 2.2
Kent T. Spellman 2,236,946 97.8 49,626 2.2
2. The approval of the Bay State Bancorp, Inc. 1998 Stock-Based Incentive Plan
For % Against % Abstain %
--------- ---- ------ --- ------ ---
1,607,813 93.9 85,497 5.0 18,657 1.1
3. The ratification of the appointment of Shatswell, MacLeod & Company, P.C. as
independent auditors for Bay State Bancorp, Inc. for the fiscal year ending
March 31, 1999.
For % Against % Abstain %
--------- ---- ------ --- ------ ---
2,259,107 98.8 9,253 0.4 18,212 0.8
Item 5 - Other Information
Not applicable.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Certificate of Incorporation of Bay State Bancorp, Inc. *
3.2 Bylaws of Bay State Bancorp, Inc. *
4.0 Stock Certificate of Bay State Bancorp, Inc. *
Page 20
<PAGE>
11.0 Computation of per share earnings (filed herewith)
27.0 Financial data schedule (filed herewith)
* Incorporated herein by reference from the exhibits to Form SB-2
registration as amended, Registration No. 333-40115
(b) Reports on Form 8-K
(i) None
Page 21
<PAGE>
SIGNATURES
Under 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
thereunto duly authorized.
Bay State Bancorp, Inc.
November 10, 1998 \s\ John F. Murphy
- ----------------- ----------------------------
Date John F. Murphy
Chairman, President, and
Chief Executive Officer
(Principal Executive Officer)
November 10, 1998 \s\ Michael O. Gilles
- ----------------- ----------------------------
Date Michael O. Gilles
Senior Vice President and
Chief Financial Officer
(Principal Accounting and Financial Officer)
Page 22
EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS
Three months ended
September 30,
------------------
1998 1997
---------- ---------
Net Income $ 606,000 $ 264,000
========== =========
Average shares outstanding 2,352,696 N/A
==========
Basic earnings per share $ 0.26 N/A
==========
Net Income $ 606,000 $ 264,000
========== =========
Average shares outstanding 2,352,696 N/A
Net effect of dilutive stock options -- N/A
----------
Total shares outstanding 2,352,696 N/A
==========
Diluted earnings per share $ 0.26 N/A
==========
Six months ended
September 30,
------------------
1998 1997
---------- ---------
Net Income $1,120,000 $ 698,000
========== =========
Average shares outstanding 2,352,696 N/A
==========
Basic earnings per share $ 0.48 N/A
==========
Net Income $1,120,000 $ 698,000
========== =========
Average shares outstanding 2,352,696 N/A
Net effect of dilutive stock options -- N/A
----------
Total shares outstanding 2,352,696 N/A
==========
Diluted earnings per share $ 0.48 N/A
==========
Page 23
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BAYSTATE BANCORP, INC. AT AND FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 3,201
<INT-BEARING-DEPOSITS> 206,429
<FED-FUNDS-SOLD> 10,500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 23,744
<INVESTMENTS-CARRYING> 1,621
<INVESTMENTS-MARKET> 1,664
<LOANS> 257,284
<ALLOWANCE> 2,573
<TOTAL-ASSETS> 306,392
<DEPOSITS> 206,429
<SHORT-TERM> 33,836
<LIABILITIES-OTHER> 2,038
<LONG-TERM> 0
0
0
<COMMON> 25
<OTHER-SE> 64,064
<TOTAL-LIABILITIES-AND-EQUITY> 306,392
<INTEREST-LOAN> 9,650
<INTEREST-INVEST> 606
<INTEREST-OTHER> 704
<INTEREST-TOTAL> 10,960
<INTEREST-DEPOSIT> 4,490
<INTEREST-EXPENSE> 462
<INTEREST-INCOME-NET> 6,008
<LOAN-LOSSES> 150
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,073
<INCOME-PRETAX> 1,945
<INCOME-PRE-EXTRAORDINARY> 1,945
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,120
<EPS-PRIMARY> 0.48
<EPS-DILUTED> 0.48
<YIELD-ACTUAL> 7.85
<LOANS-NON> 1,715
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,513
<CHARGE-OFFS> 90
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 2,573
<ALLOWANCE-DOMESTIC> 2,573
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
