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 December 31, 1999
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.|X| Yes |_| No
The number of shares of common stock outstanding of each of the issuer's classes
of common stock, as of February 11, 1999 was 2,021,946.
Transitional Small Business Disclosure Format |_| Yes |X| No
<PAGE>
BAY STATE BANCORP, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<S> <C>
PART I - FINANCIAL INFORMATION ................................................................... 1
Item 1 - Consolidated Financial Statements ..................................................... 1
Consolidated Balance Sheets - December 31, 1999 (unaudited) and March 31, 1999 ............... 1
Consolidated Income Statements - Three and nine months ended December 31, 1999 and 1998
(unaudited) .................................................................................. 2
Consolidated Statements of Cash Flows - Nine months ended December 31, 1999 and 1998
(unaudited) .................................................................................. 3
Consolidated Statements of Changes in Stockholders' Equity - Nine months ended
December 31, 1999 (unaudited) ................................................................ 4
Notes to Consolidated Financial Statements for the Period Ended December 31, 1999 ............ 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 ................................................................. 19
Item 3 - Defaults Upon Senior Securities ....................................................... 19
Item 4 - Submission of Matters to a Vote of Security Holders ................................... 19
Item 5 - Other Information ..................................................................... 19
Item 6 - Exhibits and Reports on Form 8-K ...................................................... 19
SIGNATURES ..................................................................................... 20
EXHIBITS ....................................................................................... 21
Computation of per share earnings - Exhibit 11 ............................................... 21
Financial Data Schedule - Exhibit 27 ......................................................... 22
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Bay State Bancorp, Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
December 31, March 31,
1999 1999
--------- ---------
ASSETS (Unaudited)
<S> <C> <C>
Cash and due from banks $ 5,711 $ 3,738
Short-term investments 1,098 6,369
Investment in available-for-sale securities (at fair value) 33,093 24,350
Investments in held-to-maturity securities (fair values of $595 as 596 956
of December 31, 1999 and $978 as of March 31, 1999)
Stock in Federal Home Loan Bank of Boston 7,798 3,850
Mortgage loans held-for-sale -- 321
Loans receivable, net 382,612 304,372
Accrued interest receivable 2,317 1,920
Premises and equipment, net 2,827 2,564
Deferred tax asset, net 3,279 2,728
Investment in bank owned life insurance 7,784 6,054
Other assets 2,839 2,182
--------- ---------
Total assets $ 449,954 $ 359,404
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 222,622 $ 216,397
Federal Home Loan Bank Advances 154,403 76,751
Other borrowed funds 13,078 3,240
Accrued expenses and other liabilities 3,974 2,718
--------- ---------
Total liabilities $ 394,077 $ 299,106
--------- ---------
Stockholders' equity:
Common stock, par value $.01 per share,
2,535,232 shares issued 25 25
Additional paid-in capital 49,228 49,277
Retained earnings 20,985 19,463
Accumulated other comprehensive income (940) 45
Less: Unearned ESOP shares (3,232) (3,232)
Unearned 1998 Stock-Based Incentive Plan (1,756) (2,173)
Treasury stock, 387,586 and 126,762 shares (8,433) (3,107)
--------- ---------
Total stockholders' equity 55,877 60,298
--------- ---------
Total liabilities and stockholders' equity $ 449,954 $ 359,404
========= =========
Equity-to-asset ratio 12.42% 16.78%
Book value per share
$ 28.19 $ 26.88
</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 Nine months ended
December 31, December 31,
-------------------------- --------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
Interest income: Unaudited Unaudited
--------- ---------
<S> <C> <C> <C> <C>
Loans $ 7,364 $ 5,551 $ 20,431 $ 15,201
Investments 728 500 2,051 1,809
---------- ---------- ---------- ----------
Total interest income 8,092 6,051 22,482 17,010
---------- ---------- ---------- ----------
Interest expense:
Deposits 2,243 2,199 6,530 6,689
Borrowed funds 2,141 580 5,174 1,042
---------- ---------- ---------- ----------
Total interest expense 4,384 2,779 11,704 7,731
---------- ---------- ---------- ----------
Net interest income before provision for loan losses 3,708 3,272 10,778 9,279
Provision for loan losses 200 260 650 410
---------- ---------- ---------- ----------
Net interest income after provision for loan losses 3,508 3,012 10,128 8,869
---------- ---------- ---------- ----------
Non-interest income:
Service charges on deposit accounts 69 70 211 202
Gain on sale of loans 1 17 7 46
Other income 115 -- 301 --
---------- ---------- ---------- ----------
Total non-interest income 185 87 519 248
---------- ---------- ---------- ----------
Income before non-interest expense and income taxes 3,693 3,099 10,647 9,117
---------- ---------- ---------- ----------
Non-interest expense:
Salaries and employee benefits 1,660 1,448 4,864 3,780
Occupancy and equipment expense 291 253 835 750
Federal deposit insurance premiums 33 32 97 95
Advertising 150 62 291 162
Data processing 69 63 200 185
Other expenses 375 316 1,299 1,275
---------- ---------- ---------- ----------
Total non-interest expense 2,578 2,174 7,586 6,247
---------- ---------- ---------- ----------
Income before income taxes 1,115 925 3,061 2,870
Income tax expense 392 378 1,081 1,203
---------- ---------- ---------- ----------
Net income $ 723 $ 547 $ 1,980 $ 1,667
========== ========== ========== ==========
Comprehensive net income $ 526 $ 714 $ 995 $ 1,229
========== ========== ========== ==========
Weighted average common and common equivalent shares
outstanding 2,089,515 2,317,682 2,136,773 2,340,982
========== ========== ========== ==========
Basic earnings per share $ 0.35 $ 0.24 $ 0.93 $ 0.71
========== ========== ========== ==========
Diluted earnings per share $ 0.35 $ 0.23 $ 0.93 $ 0.71
========== ========== ========== ==========
</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
(Dollars in thousands)
<TABLE>
<CAPTION>
Nine months ended December 31,
------------------------------
1999 1998
--------- ---------
(Unaudited)
<S> <C> <C>
Net cash flows from operating activities:
Net income $ 1,980 $ 1,667
Adjustments to reconcile net income to net cash provided by operating activities:
Earned stock based incentive plan 368 --
Provision for possible loan losses 650 410
Net decrease (increase) in mortgage loans held-for-sale 321 (822)
(Gain) loss on sale of loans 7 (46)
Depreciation and amortization 237 232
Amortization of securities, net of accretion (150) 6
Amortization of loan fees and discounts (34) (235)
Increase in accrued interest receivable (397) (454)
Increase in prepaid expense and other assets (518) (3,801)
Increase in other liabilities 1,255 676
--------- ---------
Net cash provided by (used in) operating activities 3,719 (2,367)
--------- ---------
Net cash flows from investing activities:
Maturities and principal repayments on investments held to maturity 358 2,969
Maturities and principal repayments on investments available for sale 12,821 5,217
Purchase of investments available for sale (22,948) (25,391)
Purchase of Federal Home Loan Bank of Boston Stock (3,948) (1,367)
Distribution to Rabbi Trust (138) (400)
Investment in bank owned life insurance (1,730) --
Net increase in loans (78,863) (56,858)
Capital expenditures (500) (258)
--------- ---------
Net cash used in investing activities (94,948) (76,088)
--------- ---------
Net cash flows from financing activities:
Net deposit activity 6,225 5,387
Proceeds of borrowings 220,113 49,965
Repayment of borrowings (142,461) (5,516)
Net increase in other borrowed funds 9,838 2,464
Purchase of stock for stock-based incentive plans -- (2,269)
Dividend on common stock (458) --
Purchase of treasury stock (5,326) (3,107)
--------- ---------
Net cash provided by financing activities 87,931 46,924
--------- ---------
Net decrease in cash and cash equivalents: (3,298) (31,531)
Cash and cash equivalents at beginning of period 10,107 49,513
--------- ---------
Cash and cash equivalents at end of period $ 6,809 $ 17,982
========= =========
Supplemental disclosure of cash flow information:
Cash paid during period for:
Interest $ 11,682 $ 7,730
Income taxes $ 1,349 $ 1,089
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
Bay State Bancorp, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
(In thousands)
<TABLE>
<CAPTION>
Unearned Total
Additional Accumulated Other Unearned Stock-based Stock-
Common Paid-in Retained Comprehensive ESOP Treasury Incentive holders'
Stock Capital Earnings Income Shares Stock Plan Shares Equity
-------------------------------------------------------------------------------------------
<S> <C> <C> <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
Net Change in unrealized gain
on available for sale securities -- -- -- 283 -- -- -- 283
-------------------------------------------------------------------------------------------
Balance at March 31, 1998 25 49,194 17,340 666 (3,651) -- -- 63,574
Net Income -- -- 2,234 -- -- -- -- --
Net change in unrealized gain
on available for sale
securities, net of -- -- -- (621) -- -- -- --
tax effect
Comprehensive income -- -- -- -- -- -- -- 1,613
Purchase of treasury stock,
126,762 shares -- -- -- -- -- (3,107) -- (3,107)
Dividends paid, $0.05 per
share -- -- (111) -- -- -- -- (111)
Reduction in unearned ESOP
shares charged to expense -- -- -- -- 419 -- -- 419
Appreciation in fair value of
unearned ESOP shares
charged to expense -- 95 -- -- -- -- -- 95
Common stock acquired for
stock-based Incentive plans -- -- -- -- -- -- (2,269) (2,269)
Issuance of stock incentive
plan shares -- (12) -- -- -- -- 96 84
-------------------------------------------------------------------------------------------
Balance at March 31, 1999 $ 25 $ 49,277 $ 19,463 $ 45 $ (3,232) $ (3,107) $ (2,173) 60,298
Net Income -- -- 1,980 -- -- -- -- --
Net change in unrealized gain
on available for sale
securities, net of tax effect -- -- -- (985) -- -- -- --
Comprehensive income -- -- -- -- -- -- -- 995
Purchase of treasury stock,
260,824 shares -- -- -- -- -- (5,326) -- (5,326)
Dividends paid, $0.20 per
share -- -- (458) -- -- -- -- (458)
Issuance of stock incentive
plan shares -- (49) -- -- -- -- 417 368
-------------------------------------------------------------------------------------------
Balance at December 31, 1999
(Unaudited) $ 25 $ 49,228 $ 20,905 $ (940) $ (3,232) $ (8,433) $ (1,756) $ 55,877
===========================================================================================
</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 DECEMBER 31, 1999
(1) Organization
Bay State Bancorp, Inc. (the "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 (the "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 (the
"OTS"), the Federal Deposit Insurance Corporation (the "FDIC") and the
Securities and Exchange Commission (the "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. 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 nine months ended December 31, 1999 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, 1999, and Form 10-QSB for the periods ended June 30, 1999 and
September 30, 1999, filed with the Securities and Exchange Commission.
(3) Stock Repurchase Program
During the quarter ended December 31, 1999, the Company completed the
repurchase of 5% of its outstanding common stock, or 114,402 shares, at an
average price of $19.45 per share. This third repurchase program reduced the
Company's outstanding shares to 2,173,644. Also, on December 21, 1999 the
company announced that it had requested and received approval from the OTS to
purchase an additional 10%, or 217,364, of its outstanding common stock. Subject
to provisions established by the OTS, this repurchase program must be completed
by March 28, 2000. Upon completion of this repurchase the company will have
repurchased approximately 25% of its common stock since becoming a public
company in March of 1998. As of February 11, 2000 the company had repurchased
151,698 shares of the 10% repurchase program, at an average price of $18.75.
Page 5
<PAGE>
Item 2 - Management's Discussion and Analysis or Plan of Operation
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 filing with the SEC.
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.
General
Bay State, 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 the Bank as part of the Bank's conversion from a mutual to stock form
of organization. The Bank is a federally chartered savings bank and is subject
to regulation by the OTS.
The Bank's business activities are concentrated in Eastern Massachusetts
through six 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 Bank primarily makes residential
first mortgages, commercial and multi-family real estate loans and to a lesser
extent home equity lines of credit, consumer loans and residential construction
loans. Lending operations, particularly loan originations are conducted from the
retail offices and at the point of sale. Neither the Company nor 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 earning 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.
Page 6
<PAGE>
Comparison of Financial Condition at December 31, 1999 and March 31, 1999
Total assets at December 31, 1999 were $450.0 million, compared to $359.4
million at March 31, 1999, an increase of 25.2%. Loans receivable increased
$78.2 million, or 25.7%, primarily in multi-family residential and commercial
real estate loans and to a lesser extent 1-4 family residential mortgages, which
were originated and purchased. The increase in assets was funded from an
increase of $77.7 million, or 101.2%, in Federal Home Loan Bank advances, an
increase in Other Borrowed Funds totaling $9.8 million, or 303.6% and an
increase in deposits of $6.2 million, or 2.9%.
Total stockholder's equity was $55.9 million, or 12.42% of total assets, at
December 31, 1999, a decrease of $4.4 million, or 7.3%, from the $60.3 million,
or 16.8% of total assets, at March 31, 1999. The change in equity was the result
of the net income for the period, offset by a reduction in capital from the
completion of a 5% stock repurchase program during the period and the reduction
in the market value of investment securities classified as available for sale.
The Company's book value per share at December 31, 1999 was $28.19, compared to
$26.88 at March 31, 1999.
Investments
Short-term investments of $1.1 million at December 31, 1999, consisted of
overnight deposits in the Federal Home Loan Bank of Boston and the Bank
Investment Fund, a decrease of $5.3 million, or 82.8%, from the $6.4 million at
March 31, 1999. Investment securities increased $8.4 million, or 33.2%,
primarily in investment securities available for sale and mortgage-backed
securities. The net increase in total investments was $3.1 million.
The Company's investment portfolio at December 31, 1999 reflects a $940,000
net unrealized loss on available-for-sale securities, compared to an unrealized
gain of $45,000 at March 31, 1999.
The tables below show the investment securities portfolios at the periods
presented: The amortized cost and fair value of investments available-for-sale.
<TABLE>
<CAPTION>
December 31, 1999 March 31, 1999
---------------------- ----------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
------- ------- ------- -------
(In thousands)
<S> <C> <C> <C> <C>
Investment securities
Marketable equity securities $ 9,755 $ 9,490 $ 9,525 $ 9,737
Mortgage-backed securities 18,167 17,706 5,371 5,391
Trust preferred equity securities -- -- 2,506 2,521
Corporate bonds and notes 495 476 1,247 1,234
Preferred stocks 4,002 3,447 1,500 1,460
Government agency securities 2,010 1,974 4,000 4,007
------- ------- ------- -------
Total $34,429 $33,093 $24,149 $24,350
======= ======= ======= =======
</TABLE>
Page 7
<PAGE>
The amortized cost and estimated market values of investments
held-to-maturity were:
<TABLE>
<CAPTION>
December 31, 1999 March 31, 1999
----------------- --------------
Amortized Fair Amortized Fair
Cost Value Cost Value
---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C>
Investment securities
Mortgage-backed and mortgage-related securities $596 $595 $956 $978
---- ---- ---- ----
Total Mortgage-backed and mortgage related
Securities $596 $595 $956 $978
==== ==== ==== ====
</TABLE>
Loans
During the first nine months of the fiscal year, net loans receivable
increased by $78.2 million, or 25.7%, as detailed below:
<TABLE>
<CAPTION>
December 31, % of total March 31, % of total
1999 Loans 1999 Loans
-------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Mortgage loans:
Residential 1 - 4 family $196,210 50.49% $168,786 54.62%
Multi-family 77,294 19.89 57,744 18.69
Commercial real estate 91,895 23.64 67,806 21.94
Construction and development 10,276 2.64 5,494 1.78
-------- -------- -------- --------
Total mortgage loans 375,675 96.66 299,830 97.03
-------- -------- -------- --------
Commercial loans 225 0.06 500 0.16
-------- -------- -------- --------
Consumer loans:
Equity lines 8,198 2.11 5,156 1.67
Other consumer loans 4,547 1.17 3,535 1.14
-------- -------- -------- --------
Total loans 388,645 100.00% 309,021 100.00%
======== ========
Deduct:
Allowance for loan loss 3,691 3,027
Undisbursed proceeds of construction
and development loans in process 2,178 1,424
Deferred loan fees 164 198
-------- --------
Net loans receivable $382,612 $304,372
======== ========
</TABLE>
At December 31, 1999 loans serviced for others was $23.2 million compared
to $22.6 million at March 31, 1999.
Page 8
<PAGE>
Asset Quality
At December 31, 1999 non-performing assets totaled $1.8 million, a
decrease of $200,000, or 8.4%, from $2.0 million at March 31, 1999.
Non-performing assets consist of all loans that are delinquent 90 days or more.
The Bank had no other real estate owned at December 31, 1999 or March 31, 1999.
At December 31, 1999, non-performing assets represented 0.40% of total assets
and 0.47% of loans receivable net, compared to 0.55% and 0.64%, respectively, at
March 31, 1999. The decrease in non-performing assets was primarily the result
of certain, previously non-performing loans being brought current and the
repayment of two delinquent loans.
The composition of non-performing assets, which consist solely of
non-performing loans for the periods presented was:
December 31, March 31,
1999 1998 1999
------ ------ ------
(Dollars in thousands)
Non-accrual loans:
One-to-four-family $ 915 $ 862 $ 862
Multi-family -- 280 280
Commercial real estate 792 742 745
Construction and development -- -- --
Equity lines 65 -- 65
Other 28 14 12
------ ------ ------
$1,800 $1,898 $1,964
====== ====== ======
Non-performing assets as a percentage of:
Loans receivable, net 0.47% 0.89% 0.64%
Total assets 0.40 0.80 0.55
The following represents the activity in the allowance for loan losses for
the nine months ended December 31, 1999:
(In thousands)
Balance at March 31, 1999 $ 3,027
Provision for loan losses 650
Losses charged to allowance (1)
Recoveries 15
-------
Balance at December 31, 1999 $ 3,691
=======
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 increased slightly during the nine month period ending December
31, 1999, as detailed below:
December 31, % of total March 31, % of total
1999 deposits 1999 deposits
-------- -------- -------- --------
(Dollars in thousands)
Regular savings accounts $ 25,095 11.27% $ 27,460 12.70%
NOW accounts 22,035 9.90 24,155 11.16
Money market accounts 59,402 26.68 54,305 25.09
Non-interest bearing deposits 2,049 0.92 867 0.40
-------- ------ -------- ------
108,581 48.77 106,787 49.35
Term deposits 114,041 51.23 109,610 50.65
-------- ------ -------- ------
Total deposits $222,622 100.00% $216,397 100.00%
======== ====== ======== ======
During the period, FHLB advances increased $77.6 million, or 101.1%, as the
Bank took advantage of competitive pricing to fund asset growth.
Comparison of Operating Results for the Three Months ended December 31, 1999 and
1998
General
Consolidated net income for the three months ended December 31, 1999
totaled $723,000, or $0.35 per share, compared to $547,000, or $0.24 per share,
for the same period last year. This represents an increase of $176,000, or
32.2%, in net income and a $0.11 or 45.8% increase in earnings per share.
Interest Income
Interest income for the three months ended December 31, 1999 increased $2.0
million, or 33.7%, to $8.1 million, compared to $6.1 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, increased from $316.3 million
for the quarter ended December 31, 1998 to $420.1 million for the quarter ended
December 31, 1999, an increase of $103.8 million, or 32.8%. The increase in the
average balance of interest-earning assets was primarily a net result of an
increase in the average balance of loans, net of $94.0 million, or 33.7%, and an
increase in mortgage-backed and mortgage related securities of $15.0 million, or
276.8%. The yield on interest-earning assets increased 6 basis points to 7.71%.
Interest Expense
Interest expense for the three months ended December 31, 1999 increased
$1.6 million, or 57.8%, to $4.4 million compared to $2.8 million for the same
period last year. The increase in interest expense was the net result of a
$120.6 million, or 47.1%, increase in the average balance of interest-bearing
liabilities which increased from $256.0 million for the three months ended
December 31, 1998 to $376.6 million for the three months ended December 31,
1999, offset by a increase of 32 basis points in the cost of funds to 4.66%. The
increase in the average balance of interest-bearing liabilities was primarily a
result of an increase in the average balance of deposits of $14.7 million, or
7.1% and the average balance of FHLB advances and other borrowings of $105.9
million, or 216.9%.
Page 10
<PAGE>
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 December 31, 1999 1998
-------------------------------- ----------------------------------
Interest Interest
Average income/ Yield/ Average income/ Yield/
balance expense rate balance expense rate
------- ------- ---- ------- ------- ----
<S> <C> <C> <C> <C> <C> <C>
Assets (Dollars in thousands)
Interest-earning assets:
Short-term investments $ 1,055 $ 14 5.31% $ 9,718 $ 102 4.20%
Investment securities 25,274 370 5.86 21,813 321 5.89
Mortgage backed & related securities 20,447 344 6.73 5,426 77 5.68
Loans and mortgage loans held-for-sale 373,283 7,364 7.89 279,309 5,551 7.95
-------- -------- -------- --------
Total interest-earning assets 420,059 8,092 7.71 316,266 6,051 7.65
-------- --------
Non interest-earning assets 25,528 7,278
-------- --------
Total $445,587 $323,544
======== ========
Liabilities and Equity
Interest-bearing liabilities:
NOW accounts $ 23,043 $ 65 1.13% $ 22,451 76 1.35
Regular savings accounts 24,693 125 2.02 26,664 137 2.06
Money market accounts 59,187 570 3.85 49,561 483 3.90
Certificate accounts 114,911 1,483 5.16 108,474 1,503 5.54
-------- -------- -------- --------
Total interest-bearing deposits 221,834 2,243 4.04 207,150 2,199 4.25
-------- -------- -------- --------
FHLB advances 144,547 1,999 5.43 48,830 580 4.75
Other Borrowings 10,169 142 5.58 -- -- --
-------- -------- -------- -------- --------
Total interest-bearing liabilities 376,550 4,384 4.66 255,980 2,779 4.34
-------- --------
Demand deposits 1,884 715
Other liabilities 9,691 4,878
Equity 57,462 61,971
-------- --------
Total $445,587 $323,544
======== ========
Net interest income $ 3,708 $ 3,272
======== ========
Interest rate spread 3.05% 3.31%
======== ========
Net interest margin 3.53% 4.14%
======== ========
</TABLE>
Page 11
<PAGE>
The Following table presents the effects of changing rates and volumes on
the interest income and interest expense of the Company. The rate column shows
the effects attributable to changes in rate (changes in rate multiplied by prior
volume). The volume column shows the effects attributable to changes in volume
(changes in volume multiplied by prior rate). The net column represents the sum
of the prior columns.
Quarters ended December 31,
1999 vs. 1998
-------------------------------------
Change due to Increase (Decrease)
-------------------------------------
Volume Rate Net
------ ------ ------
(In thousands)
Interest income:
Loans $1,854 $ (41) $1,813
Investments 180 48 228
------ ------ ------
Total 2,034 7 2,041
------ ------ ------
Interest expense:
Deposits 213 (169) 44
Borrowings 1,309 252 1,561
------ ------ ------
Total 1,522 83 1,605
------ ------ ------
Net interest income $ 512 $ (76) $ 436
====== ====== ======
Provision for Loan Losses
Provisions for possible loan losses are charged to operations to bring the
allowance for loan losses to a level considered by management to be adequate to
cover estimated losses on loans receivable which are deemed probable and
estimable based on information currently known to management. The provision for
possible loan losses totaled $200,000 for the quarter ended December 31, 1999,
compared to $260,000 for the same period last year. The provision reflects
management's analysis of the risks associated with the Banks' primary lending
objective to increase the overall loan portfolio. The level of provision is
reflective of the increase in the overall size and mix of the loan portfolio
during the period.
At December 31, 1999 and March 31, 1999, the allowance for loan losses was
$3.7 million and $3.0 million, respectively, which represents 205.1% of
non-performing loans and 0.96% of total loans at December 31, 1999 compared to
154.1% of non-performing loans and 0.98% of total loans at March 31, 1999.
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 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 $98,000, or 112.6%, to $185,000,
primarily due to the purchase of Bank Owned Life Insurance, the implementation
of the new debit card program and the new alternative investment services the
bank offers.
Page 12
<PAGE>
Non-interest expense
Total non-interest expense was $2.6 million for the quarter ended December
31, 1999, compared to $2.2 million for the same period last year, an increase of
18.6%. Total salaries and benefits increased $212,000, or 14.6% primarily a
result in a general increase in salaries and benefits due primarily to the
increased number of employees compared to the same quarter last year. Occupancy
and equipment expense totaled $291,000 compared to $253,000 for the same period
last year, an increase of 15.0%, primarily from the increased level of
depreciation on building and leasehold improvements. Advertising expense totaled
$150,000 compared to $62,000 for the same period last year, an increase of
141.9%, primarily as a result of the development and introduction of new deposit
products and retail services. Data processing expense increased $6,000, or 9.5%
as a result of the increased number of deposit accounts serviced and the
implementation of new retail deposit products. Other expenses increased $59,000,
or 18.7%, primarily as a result of increases in general expenses associated with
the normal course of business.
Income Taxes
Income taxes for the three months ended December 31, 1999 were $392,000 on
pretax income of $1.1 million, for an effective rate of 35.16%, compared to
$378,000 on pretax income of $925,000, for an effective rate of 40.86% for the
same period last year. The effective tax rate for the current period is lower
than the prior periods due to various tax planning strategies implemented by the
Company, specifically the purchase of non-taxable life insurance products and
the establishment of a Massachusetts securities corporation at the Bank level.
Comparison of Operating Results for the Nine Months ended December 31, 1999 and
1998
General
Consolidated net income for the nine months ended December 31, 1999 totaled
$1,980,000, or $0.93 per share, compared to $1,667,000, or $0.71 per share for
the same period last year. This represents an increase of $313,000 or 18.8%, in
net income, and a 31.0% increase in earnings per share, over the same period
last year.
Interest Income
Interest income for the nine months ended December 31, 1999 increased $5.5
million or 32.2%, to $22.5 million, compared to $17.0 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, which increased from
$291.5 million for the nine months ended December 31, 1998 to $392.8 million for
the nine months ended December 31, 1999, an increase of $101.3 million, or
34.8%. The increase in the average balance of interest-earning assets was
primarily the net result of an increase in the average balance of investment
securities of $4.5 million, or 22.5%, an increase in loans, net, of $97.7
million or 39.2%, an increase in mortgage backed and mortgage related securities
of $16.6 million or 536.1%, offset by a decrease in short term investments of
$17.5 million, or 89.7%. The yield on interest-earning assets decreased 15 basis
points to 7.63%.
Interest Expense
Interest expense for the nine months ended December 31, 1999 increased $4.0
million, or 51.4%, to $11.7 million, compared to $7.7 million for the same
period last year. The increase in interest expense was primarily due to a $114.2
million, or 48.9%, increase in the average balance of interest-bearing
liabilities which increased from $233.4 million for the nine months ended
December 31, 1998 to $347.6 million for the nine months ended
Page 13
<PAGE>
December 31, 1999, offset by an increase of 7 basis points in the cost of
interest-bearing liabilities to 4.49%. The increase in the average balance of
interest-bearing liabilities was primarily a result of an increase in the
average balance of deposits of $13.0 million, or 6.3% and an increase in the
average balance of FHLB advances and other borrowings of $101.2 million, or
354.4%.
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>
1999 1998
----------------------------------- -----------------------------------
For the nine months ended December 31,
Interest Interest
Average income/ Yield/ Average Income/ Yield/
balance expense rate balance expense rate
-------- -------- ------ -------- -------- ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest-earning assets:
Short-term investments $ 2,011 $ 73 4.87% $ 19,514 $ 806 5.51%
Investment securities 24,363 1,055 5.77 19,885 860 5.77
Mortgage-backed and mortgage related
securities 19,719 923 6.24 3,100 143 6.15
Loans, net and mortgage loan
held-for-sale 346,703 20,431 7.86 248,997 15,201 8.14
-------- -------- -------- --------
Total interest-earning assets 392,796 22,482 7.63 291,496 17,010 7.78
-------- -------- -------- --------
Non interest-earning assets 24,822 10,292
-------- --------
Total $417,618 $301,788
======== ========
Liabilities and Equity
Interest-bearing liabilities:
NOW accounts $ 23,370 196 1.12% $ 21,848 264 1.61
Regular savings accounts 25,531 386 2.02 27,481 477 2.31
Money market accounts 58,468 1,681 3.83 44,993 1,404 4.16
Certificate accounts 110,470 4,267 5.15 110,514 4,544 5.48
-------- -------- -------- --------
Total interest-bearing deposits 217,839 6,530 4.00 204,836 6,689 4.35
Other Borrowings 6,598 278 5.62 -- -- --
FHLB advances 123,144 4,896 5.30 28,555 1,042 4.87
-------- -------- -------- --------
Total interest-bearing liabilities 347,581 11,704 4.49 233,391 7,731 4.42
-------- -------- -------- --------
Demand deposits 1,608 608
Other liabilities 10,222 4,495
Equity 58,207 63,294
-------- --------
Total $417,618 $301,788
======== ========
Net interest income $ 10,778 $ 9,279
======== ========
Interest rate spread 3.14% 3.36%
==== ====
Net interest margin 3.66% 3.62%
==== ====
</TABLE>
Page 14
<PAGE>
The Following table presents the effects of changing rates and volumes on
the interest income and interest expense of the Company. The rate column shows
the effects attributable to changes in rate (changes in rate multiplied by prior
volume). The volume column shows the effects attributable to changes in volume
(changes in volume multiplied by prior rate). The net column represents the sum
of the prior columns.
Nine months ended December 31,
1999 vs. 1998
-------------------------------------
Change due to Increase (Decrease)
-------------------------------------
Volume Rate Net
------- ------- -------
(In thousands)
Interest income:
Loans $ 5,737 $ (507) $ 5,230
Investment securities 324 (82) 242
------- ------- -------
Total 6,061 (589) 5,472
------- ------- -------
Interest expense:
Deposits 362 (521) (159)
Borrowings 3,753 379 4,132
------- ------- -------
Total 4,115 (142) 3,973
------- ------- -------
Net interest income $ 1,946 $ (447) $ 1,499
======= ======= =======
Provision for Loan Losses
The provision for loan losses totaled $650,000 for the nine months ended
December 31, 1999, compared to $410,000 for the same period last year. The level
of reserve provisions for the nine months ended December 31, 1999 was made after
an assessment of the composition of and growth in the loan portfolio. The
Company plans to add to the provision for loan losses to support any loan
portfolio expansion as considered necessary by management.
Non-interest income
Total non-interest income was $519,000 for the nine months ended December
31, 1999, compared to $248,000 for the same period last year, an increase of
$271,000 or 109.3%. Gain on sale of loans decreased $39,000 due to the decreased
level of loans sold over the same period last year. Other income increased
$301,000, primarily the result of income recognized on bank owned life insurance
policies purchased by the Bank and income recognized from the new alternative
investment services and insurance products being offered by the Bank.
Non-interest expense
Total non-interest expense was $7.6 million for the nine months ended
December 31, 1999, compared to $6.3 million for the same period last year, an
increase of $1.3 million or 21.4%. Total salaries and benefits increased $1.1
million, or 28.7%, the result of an increase of $484,000 in compensation expense
associated with the Company's stock-based benefit plans, and a general increase
in salaries and benefits due to the increase in the number of employees compared
to the same period last year. Occupancy and equipment expense totaled $835,000
compared to $750,000 for the same period last year, an increase of $85,000 or
11.3%, primarily from the increased
Page 15
<PAGE>
level of depreciation on building and leasehold improvements and expenses
associated with the additional purchases of furniture, fixtures and equipment.
Advertising expense increased $129,000, or 79.6%, primarily due to the expenses
associated with the introduction of new deposit and alternative investment
services now offered by the Bank.
Income Taxes
For the nine months ended December 31, 1999 income taxes of $1.1 million
were provided on net income before tax of $3.1 million for an effective rate of
35.32%, compared to $1.2 million on income before taxes of $2.9 million for an
effective rate of 41.92%, for the same period last year. The effective tax rate
for the current period is lower than the prior periods due to various tax
planning strategies implemented by the Company, specifically the purchase of
non-taxable life insurance products and the establishment of a Massachusetts
securities corporation at the Bank level.
Capital Adequacy
The Company and the 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 December 31, 1999, the Company's capital ratio was 12.42% of total
assets. The Bank at December 31, 1999 had total capital of 9.57% and risk based
capital of 16.71% (unaudited), as compared to 9.75% and 17.28% (unaudited) at
September 30, 1999.
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 December 31, 1999 the Company and the Bank met all the capital adequacy
requirements to which they are subject. As of December 31, 1999, 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
Page 16
<PAGE>
Directors has established an Asset/Liability Committee, responsible for
reviewing its asset/liability policies and 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 September 30, 1999 (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)
300 17,760 (17,253) (49) 4.48 (389)
200 24,118 (10,895) (31) 5.96 (240)
100 29,898 (5,116) (15) 7.26 (111)
Static 35,013 -- -- 8.36 --
(100) 39,008 3,994 11 9.19 83
(200) 37,783 2,770 8 8.90 53
(300) 41,716 6,703 19 9.69 133
(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 OTS regulations.
Page 17
<PAGE>
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 December 31, 1999 the Bank's liquidity ratio was
7.43%. 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 December 31, 1999,
cash and due from banks, short-term investments and securities totaled $40.5
million, or 9.0% of total assets.
The Bank has other sources of liquidity if a need for additional funds
arises, including FHLB advances. At December 31, 1999, the Bank had $154.4
million in advances outstanding from the FHLB, and at December 31, 1999, had an
additional overall borrowing capacity from the FHLB of $44.3 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
The century change over did not have an impact on the daily operations of
the bank.
Page 18
<PAGE>
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.
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
Not applicable
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 Amended and Restated Bylaws of Bay State Bancorp, Inc.
4.0 Stock Certificate of Bay State Bancorp, Inc. *
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 19
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Bay State Bancorp, Inc.
February 14, 1999 \s\ John F. Murphy
- ---------------------- --------------------------------------------
Date John F. Murphy
Chairman, President, and
Chief Executive Officer
(Principal Executive Officer)
February 14, 1999 \s\ Michael O. Gilles
- ---------------------- --------------------------------------------
Date Michael O. Gilles
Senior Vice President and
Chief Financial Officer
(Principal Accounting and Financial Officer)
Page 20
EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS
Three months ended
December 31,
----------------------------
1999 1998
---------- ----------
Net Income $ 723,000 $ 547,000
========== ==========
Average shares outstanding 2,089,515 2,317,682
========== ==========
Basic earnings per share $ 0.35 $ 0.24
========== ==========
Net Income $ 723,000 $ 547,000
========== ==========
Average shares outstanding 2,089,515 2,317,682
Net effect of dilutive stock options -- 39,720
---------- ----------
Total shares outstanding 2,089,515 2,357,402
========== ==========
Diluted earnings per share $ 0.35 $ 0.23
========== ==========
Nine months ended
December 31,
----------------------------
1999 1998
---------- ----------
Net Income $1,980,000 $1,667,000
========== ==========
Average shares outstanding 2,129,878 2,340,982
========== ==========
Basic earnings per share $ 0.93 $ 0.71
========== ==========
Net Income $1,980,000 $1,667,000
========== ==========
Average shares outstanding 2,129,878 2,340,982
Net effect of dilutive stock options 6,895 13,240
---------- ----------
Total shares outstanding 2,136,773 2,354,222
========== ==========
Diluted earnings per share $ 0.93 $ 0.71
========== ==========
Page 21
<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 NINE MONTHS ENDED
DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 5,711
<INT-BEARING-DEPOSITS> 98
<FED-FUNDS-SOLD> 1,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 33,093
<INVESTMENTS-CARRYING> 596
<INVESTMENTS-MARKET> 595
<LOANS> 382,612
<ALLOWANCE> 3,691
<TOTAL-ASSETS> 449,954
<DEPOSITS> 222,622
<SHORT-TERM> 167,481
<LIABILITIES-OTHER> 3,974
<LONG-TERM> 0
0
0
<COMMON> 25
<OTHER-SE> 55,852
<TOTAL-LIABILITIES-AND-EQUITY> 449,954
<INTEREST-LOAN> 20,431
<INTEREST-INVEST> 2,051
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 22,482
<INTEREST-DEPOSIT> 6,530
<INTEREST-EXPENSE> 5,174
<INTEREST-INCOME-NET> 10,778
<LOAN-LOSSES> 650
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 7,586
<INCOME-PRETAX> 3,061
<INCOME-PRE-EXTRAORDINARY> 3,061
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,980
<EPS-BASIC> 0.93
<EPS-DILUTED> 0.93
<YIELD-ACTUAL> 7.63
<LOANS-NON> 1,800
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,027
<CHARGE-OFFS> 1
<RECOVERIES> 15
<ALLOWANCE-CLOSE> 3,691
<ALLOWANCE-DOMESTIC> 3,691
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
