UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
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 1-13793
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NORTHEAST PENNSYLVANIA FINANCIAL CORP.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
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DELAWARE 06-1504091
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(State or other jurisdiction of incorporation or organization) (I.R.S. Employer
Identification No.)
12 E. BROAD STREET, HAZLETON, PENNSYLVANIA 18201
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(Address of principal executive offices) (Zip Code)
(570) 459-3700
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(Registrant's telephone number, including area code)
Not Applicable
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Former name, former address and former fiscal year,
if changes since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No __
APPLICABLE ONLY TO CORPORATE ISSUERS.
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: The Registrant had
5,308,149 shares of Common Stock outstanding as of May 9, 2000.
<PAGE>
TABLE OF CONTENTS
Item
No.
Page
Number
PART I - CONSOLIDATED FINANCIAL INFORMATION
Item 1 CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Financial Condition
March 31, 2000 (unaudited) and September 30, 1999............ 1
Consolidated Statements of Operations for the Three Months Ended
March 31, 2000 and 1999 (unaudited).......................... 2
Consolidated Statement of Comprehensive Income for the Three Months
Ended March 31, 2000 and 1999 (unaudited).................... 3
Consolidated Statements of Operations for the Six Months Ended
March 31, 2000 and 1999 (unaudited).......................... 4
Consolidated Statement of Comprehensive Income for the Six Months
Ended March 31, 2000 and 1999 (unaudited).................... 5
Consolidated Statements of Changes in Equity for the Years Ended
September 30, 1999, 1998 and 1997 and the Six Months Ended
March 31, 2000 (unaudited)................................... 6
Consolidated Statements of Cash Flows for the Six Months Ended
March 31, 2000 and 1999(unaudited)........................... 7-8
Notes to Consolidated Financial Statements (unaudited)....... 9-12
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 13-19
Item 3 Quantitative and Qualitative Disclosures about Market Risk... 20
Part II - OTHER INFORMATION
1 Legal Proceedings............................................ 21
2 Changes in Securities and Use of Proceeds.................... 21
3 Defaults Upon Senior Securities.............................. 21
4 Submission of Matters to a Vote of Security Holders.......... 21-22
5 Other Information............................................ 22
6 Exhibits and Reports on Form 8 - K........................... 22
Signatures
<PAGE>
Northeast Pennsylvania Financial Corp.
Consolidated Statements of Financial Condition
March 31, 2000 (unaudited) and September 30, 1999
(in thousands)
<TABLE>
March 31, September 30,
2000 1999
---- ----
Assets (unaudited)
<S> <C> <C>
Cash and cash equivalents $4,158 $ 4,177
Securities available-for-sale 197,278 189,835
Securities held-to-maturity (estimated fair value of $27,804 at
March 2000 and $28,315 at September 1999) 31,333 30,332
Loans (less allowance for loan losses $3,322 for March 2000 and
$2,924 for September 1999) 409,888 364,190
Accrued interest receivable 5,572 4,769
Assets acquired through foreclosure 282 98
Property and equipment, net 9,655 9,868
Other assets 11,410 8,956
------ -----
Total assets $669,576 $ 612,225
======== =========
Liabilities and Equity
Deposits $372,850 $ 375,983
Federal Home Loan Bank advances 220,970 155,980
Other borrowings 405 524
Advances from borrowers for taxes and insurance 987 1,040
Accrued interest payable 1,815 1,317
Other liabilities 1,014 1,905
----- -----
Total liabilities 598,041 536,749
------- -------
Preferred stock ($.01 par value; 2,000,000 authorized shares; 0
shares issued) - -
Common stock ($.01 par value; 16,000,000 authorized shares;
6,427,350 shares issued) 64 64
Additional paid-in capital 62,173 62,119
Common stock acquired by stock benefit plans (6,653) (7,066)
Retained earnings - substantially restricted 32,322 30,818
Accumulated other comprehensive loss (4,571) (2,874)
Treasury stock, at cost (1,058,901 shares at March 2000 (11,800) (7,585)
and 626,667 at September 1999) -------- -------
Total equity 71,535 75,476
------ ------
Total liabilities and equity $669,576 $ 612,225
======== =========
</TABLE>
-1-
<PAGE>
Northeast Pennsylvania Financial Corp.
Consolidated Statements of Operations
For the Three Months Ended March 31, 2000 and 1999 (unaudited)
(in thousands, except per share data)
<TABLE>
For the Three Months Ended
March 31,
2000 1999
---- ----
(unaudited)
<S> <C> <C>
Interest Income:
Loans $7,577 $ 5,805
Mortgage-related securities 923 1,093
Investment securities:
Taxable 1,805 1,274
Non-taxable 857 803
--- ---
Total interest income 11,162 8,975
Interest Expense:
Deposits 3,693 3,294
Federal Home Loan Bank advances and other 2,763 1,350
----- -----
Total interest expense 6,456 4,644
Net interest income 4,706 4,331
Provision for loan losses 238 135
--- ---
Net interest income after provision for loan losses 4,468 4,196
Non-interest Income:
Service charges and other fees 271 194
Other income 107 97
Insurance premium income 47 78
Gain (loss) on sale of:
Real estate owned (73) (15)
Loans 5 15
Available-for-sale securities 1 (1)
- ---
Total non-interest income 358 368
Non-interest Expense:
Salaries and net employee benefits 1,911 1,844
Occupancy costs 506 423
Data processing 139 117
Professional fees 144 204
Federal Home Loan Bank service charges 160 96
Other 693 552
--- ---
Total non-interest expense 3,553 3,236
Income before income taxes 1,273 1,328
Income taxes 174 255
--- ---
Net income $1,099 $1,073
====== ======
Earnings per share- basic $0.23 $0.19
===== =====
Earnings per share- diluted $0.22 $.019
===== =====
</TABLE>
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<PAGE>
Northeast Pennsylvania Financial Corp.
Consolidated Statements of Comprehensive Income
For the Three Months Ended March 31, 2000 and 1999 (unaudited)
(in thousands, except per share data)
<TABLE>
For the Three Months Ended
March 31,
2000 1999
---- ----
(unaudited)
<S> <C> <C>
Net Income $1,099 $1,073
====== ======
Other comprehensive income (loss), net of tax
Unrealized gains (losses) on securities:
Unrealized holding losses arising during the period (613) (811)
Less: Reclassification adjustment for gains (losses)
included in net income 1 (1)
- ---
Other comprehensive loss $(614) $ (810)
Comprehensive income $485 $ 263
==== =====
</TABLE>
-3-
<PAGE>
Northeast Pennsylvania Financial Corp.
Consolidated Statements of Operations
For the Six Months Ended March 31, 2000 and 1999 (unaudited)
(in thousands, except per share data)
<TABLE>
For the Six Months Ended
March 31,
2000 1999
---- ----
(unaudited)
<S> <C> <C>
Interest Income:
Loans $14,867 $11,548
Mortgage-related securities 1,836 2,297
Investment securities:
Taxable 3,454 2,638
Non-Taxable 1,734 1,460
----- -----
Total interest income 21,891 17,943
Interest Expense:
Deposits 7,459 6,610
Federal Home Loan Bank advances and other 5,002 2,670
----- -----
Total interest expense 12,461 9,280
Net interest income 9,430 8,663
Provision for loan losses 443 183
--- ---
Net interest income after provision for loan losses 8,987 8,480
Non-interest Income:
Service charges and other fees 586 411
Other Income 214 182
Insurance premium income 106 123
Gain (loss) on the sale of:
Real estate owned (113) (30)
Loans 14 35
Available-for-sale securities (13) 33
Other - (1)
- ---
Total non-interest incom 794 753
Non-interest Expense:
Salaries and net employee benefits 3,878 3,560
Occupancy costs 975 842
Data processing 260 242
Professional fees 302 427
Federal Home Loan Bank and other service charges 325 193
Other 1,459 1,076
----- -----
Total non-interest expense 7,199 6,340
Income before income taxes 2,582 2,893
Income taxes 337 642
--- ---
Net income $ 2,245 $2,251
===== ======
Earnings per share- basic $0.45 $0.39
===== =====
Earnings per share- diluted $0.43 $0.38
===== =====
</TABLE>
-4-
<PAGE>
Northeast Pennsylvania Financial Corp.
Consolidated Statements of Comprehensive Income
For the Six Months Ended March 31, 2000 and 1999 (unaudited)
(in thousands, except per share data)
<TABLE>
For the Six Months Ended
March 31,
2000 1999
---- ----
(unaudited)
<S> <C> <C>
Net Income $2,245 $2,251
====== ======
Other comprehensive income (loss), net of tax
Unrealized gains (losses) on securities:
Unrealized holding losses arising during the period (1,705) (1,092)
Less: Reclassification adjustment for gains (losses)
included in net income (8) 22
--- -------
Other comprehensive loss $(1,697) $ (1,114)
Comprehensive income $548 $ 1,137
==== =======
</TABLE>
-5-
<PAGE>
Northeast Pennsylvania Financial Corp.
Consolidated Statements of Changes in Equity
For the Three Years Ended September 30, 1999,1998 and 1997
and the Six Months Ended March 31, 2000 (unaudited)
(in thousands)
<TABLE>
Common Stock Accumulated
Additional Acquired by Other
Common Paid In stock benefit Retained Comprehensive Treasury Total
Stock Capital plans Earnings income(loss) Stock Equity
----- ------- ----- -------- ------------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance September 30, 1996 $ - $ - $ - $ 25,874 $ 253 $- $ 26,127
Net changes in gains (losses) on
securities available for sale, net of tax 1,030 1,030
Net Income 1,381 1,381
------- ------- ------- -------- --------- ------ --------
Balance September 30, 1997 $ - $ - $ - $ 27,255 $ 1,283 $- $ 28,538
Issuance of Common Stock ($.01 par value;
16,000,000 authorized shares;
6,427,350 shares issued) 64 64
Additional paid-in Capital 61,959 61,959
Unearned Employee Stock Ownership
Plan (ESOP) shares (5,142) (5,142)
ESOP shares committed to be released 124 343 467
Net changes in gains (losses) on
securities available for sale, net of tax 1,595 1,595
Net loss (47) (47)
------- ------- ------- -------- --------- ------ --------
Balance September 30, 1998 $ 64 $62,083 $(4,799) $ 27,208 $ 2,878 $- $ 87,434
Unearned stock awards (3,312) (3,312)
ESOP shares committed to be released 77 557 634
Stock awards (41) 488 447
Net changes in gains (losses) on
securities available for sale, net of tax (5,752) (5,752)
Treasury stock at cost, (626,667 shares) (7,585) (7,585)
Cash dividend paid (955) (955)
Net income 4,565 4,565
------- ------- ------- -------- --------- ------- --------
Balance September 30, 1999 $ 64 $62,119 $(7,066) $ 30,818 $ (2,874) $(7,585) $ 75,476
ESOP shares committed to be released 80 107 187
Stock awards (26) 306 280
Net changes in losses on
securities available-for-sale, net of tax (1,697) (1,697)
Treasury stock at cost, (432,234 shares) (4,215) (4,215)
Cash dividend paid (741) (741)
Net income 2,245 2,245
------- ------- -------- -------- --------- -------- -------
Balance, March 31, 2000 $ 64 $62,173 $(6,653) $ 32,322 $ (4,571) $(11,800) $71,535
======= ======= ======== ======== ========= ========= =======
</TABLE>
-6-
<PAGE>
Northeast Pennsylvania Financial Corp.
Consolidated Statement of Cash Flows
For the Six Months Ended March 31, 2000 and 1999 (unaudited)
(in thousands)
<TABLE>
<S> <C> <C>
For the Six Months Ended
March 31,
2000 1999
---- ----
Operating Activities: (unaudited)
Net Income $2,245 $ 2,251
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for REO loss 40 10
Provision for loan losses 443 183
Depreciation 560 398
Deferred income tax provision 932 141
ESOP expense 187 332
Stock award expense 280 -
Amortization and accretion on:
Held-to-maturity securities 2 28
Available-for-sale securities 13 171
Amortization of deferred loan fees (99) (230)
(Gain) loss on sale of:
Assets acquired through foreclosure 113 30
Loans (14) (35)
Available-for-sale securities 13 (33)
Gain (loss) on disposal of property and equipment - 1
Changes in assets and liabilities:
Increase in accrued interest receivable (803) (5)
Increase in other assets (2,289) (94)
Increase (decrease) in accrued interest payable 498 (66)
Decrease in accrued income taxes payable (1,380) (467)
Increase in other liabilities 489 651
--- ---
Net cash provided by operating activities 1,230 3,266
Investing Activities:
Net increase in loans (47,421) (36,344)
Proceeds from sale of:
Available-for-sale securities 5,313 5,769
Assets acquired through foreclosure 112 116
Loans 923 6,601
Proceeds from repayments of held-to-maturity securities 2 16,953
Proceeds from repayments of available-for-sale securities 3,793 39,770
Proceeds from disposal of fixed assets - 67
Purchase of:
Held-to-maturity securities (1,005) (13,558)
Available-for-sale securities (16,123) (55,728)
Office properties and equipment (347) (782)
Federal Home Loan Bank stock (3,225) (1,075)
------- -------
Net cash used in investing activities (57,978) (38,211)
Financing Activities:
Net increase (decrease) in deposit accounts (3,133) 20,509
Net increase in Federal Home Loan Bank short-term advances 15,000 6,500
Borrowings of Federal Home Loan Bank long-term advances 50,000 15,000
Repayments of Federal Home Loan Bank long-term advances (10) (9)
Net increase (decrease) in advances from borrowers for taxes and insurance (53) 320
</TABLE>
-7-
<PAGE>
Northeast Pennsylvania Financial Corp.
Consolidated Statement of Cash Flows
For the Six Months Ended March 31, 2000 and 1999 (unaudited)
(in thousands)
<TABLE>
For the Six Months Ended
March 31,
2000 1999
---- ----
(unaudited)
<S> <C> <C>
Net decrease in other borrowings (119) (547)
Purchase of common stock for stock incentive plan - (3,312)
Purchase of treasury stock (4,215) (4,062)
Cash dividend on common stock (741) (321)
----- -----
Net cash provided by financing activities 56,729 34,078
Decrease in cash and cash equivalents (19) (867)
Cash and cash equivalents, beginning of year 4,177 3,053
----- -----
Cash and cash equivalents, end of year $4,158 $ 2,186
====== =======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $11,963 $ 9,346
======= =======
Income taxes $807 $ 947
==== =====
Supplemental disclosure - non-cash information:
Transfer from loans to real estate owned $449 $ 94
==== ====
Net change in unrealized losses on securities
Available-for-sale, net of tax $(1,697) $ (1,114)
======== =========
</TABLE>
-8-
<PAGE>
Northeast Pennsylvania Financial Corp.
Notes to Consolidated Financial Statements (unaudited)
1. Summary of Significant Accounting Policies
Basis of Financial Statements Presentation
The accompanying consolidated financial statements were prepared in
accordance with instructions to Form 10-Q, and therefore, do not
include information or footnotes necessary for a complete presentation
of financial position, results of operations and cash flows in
conformity with generally accepted accounting principles. However, all
normal recurring adjustments which, in the opinion of management, are
necessary for a fair presentation of the financial statements, have
been included. These financial statements should be read in conjunction
with the audited financial statements and the notes thereto included in
the Company's Annual Report for the period ended September 30, 1999.
The results for the six months ended March 31, 2000 are not necessarily
indicative of the results that may be expected for the year ended
September 30, 2000.
Business
Northeast Pennsylvania Financial Corp. (the "Company") is the holding
company for First Federal Bank. The Company's principal subsidiary,
First Federal Bank, serves Northeastern and Central Pennsylvania
through thirteen full service office locations and a loan production
office. The Bank provides a wide range of banking services to
individual and corporate customers. The Company and the Bank are
subject to competition from other financial institutions and other
companies that provide financial services. The Company and the Bank are
subject to the regulations of certain federal agencies and undergo
periodic examinations by those regulatory authorities.
Principles of Consolidation and Presentation
The accompanying financial statements of the Company include the
accounts of First Federal Bank, Abstractors, Inc., Northeast
Pennsylvania Trust Co. and FIDACO, Inc.. First Federal Bank, Northeast
Pennsylvania Trust Co., and Abstractors, Inc., are wholly-owned
subsidiaries of Northeast Pennsylvania Financial Corp. Abstractors,
Inc. is a title insurance agency. Northeast Pennsylvania Trust Co.
offers trust, estate and asset management services and products. All
material inter-company balances and transactions have been eliminated
in consolidation. Prior period amounts are reclassified, when
necessary, to conform with the current year's presentation. FIDACO,
Inc. is an inactive subsidiary of First Federal Bank and its only major
asset is an investment in Hazleton Community Development Corporation.
Earnings per Share
Earnings per share (EPS), basic and diluted, were $0.23 and $0.22,
respectively, for the three months ended March 31, 2000 compared to
$0.19, basic and diluted for the three months ended March 31, 1999, and
$0.45 and $0.43, respectively, for the six months ended March 31, 2000,
compared to $0.39 and $0.38, respectively, for the six months ended
March 31, 1999.
-9-
<PAGE>
The following table presents the reconciliation of the numerators and
denominators of the basic and diluted EPS computations.
<TABLE>
Three months ended Six months ended
March 31, March 31,
2000 1999 2000 1999
---- ---- ---- ----
(unaudited)
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Basic:
Net Income $1,099 $1,073 $2,245 $2,251
====== ====== ====== ======
Weighted average shares outstanding 4,741,317 5,494,638 4,872,922 5,662,409
Plus: ESOP shares released
or committed to be released 109,266 53,562 102,839 50,348
------- ------ ------- ------
4,850,583 5,548,200 4,975,761 5,712,757
========= ========= ========= =========
Earnings per share - basic $0.23 $0.19 $0.45 $0.39
===== ===== ===== =====
Three months ended Six months ended
March 31, March 31,
2000 1999 2000 1999
---- ---- ---- ----
(unaudited)
(Dollars in thousands, except per share data)
Diluted:
Net Income $1,099 $1,073 $2,245 $2,251
====== ====== ====== ======
Basic weighted shares outstanding 4,850,583 5,548,200 4,975,761 5,712,757
Dilutive Instruments:
Dilutive effect of outstanding
stock options - - - -
Dilutive effect of stock awards 194,369 243,304 193,896 243,468
------- ------- ------- -------
5,044,952 5,791,504 5,169,657 5,956,225
========= ========= ========= =========
Earnings per share - diluted $0.22 $0.19 $0.43 $0.38
===== ===== ===== =====
</TABLE>
2. Recent Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which was subsequently amended in
July 1999 by SFAS No. 137, "Accounting for Derivative Instruments and
Hedging Activities-Deferral of the Effective Date of FASB Statement No.
133." This Statement established accounting and reporting standards for
derivative instruments, including certain derivative instruments
embedded in other contracts, (collectively referred to as derivatives)
and for hedging activities. It required that an entity recognize all
derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. The
accounting for changes in the fair value of a derivative depends on the
intended use of the derivative and the resulting designation. If
certain conditions are met, a derivative may
-10-
<PAGE>
be specifically designated as (a) a hedge of the exposure to changes in
the fair value of a recognized asset or liability or an unrecognized
firm commitment, (b) a hedge of the exposure to variable cash flows of
a forecasted transaction, or (c) a hedge of certain foreign currency
exposures. This Statement "as amended" becomes effective for fiscal
years beginning after December 15, 1999. Earlier adoption is permitted.
The Company adopted SFAS 133, prior to the issuance of SFAS 137, in its
fourth fiscal quarter of 1998, including its provision for the
potential reclassification of investments, resulting in a $56.2 million
transfer of securities from held to maturity to available for sale and
an increase of $597,000 of unrealized gains, net of taxes, on
securities available for sale. The adoption of this Statement did not
affect operating results of the Company.
3. Conversion to Stock Form of Ownership
The Company is a business corporation formed at the direction of the
Bank under the laws of Delaware on December 16, 1997. On March 31,
1998, the Company issued 6,427,350 shares, par value $.01 per share
(the "Common Stock"), including 514,188 shares to the Bank's Employee
Stock Ownership Plan and related trust ("ESOP") and a contribution of
476,100 shares of Common Stock to The First Federal Charitable
Foundation (the "Foundation"). The Conversion resulted in net proceeds
of $52.1 million, after expenses of $2.2 million.
The Bank established a liquidation account at the time of the
Conversion in an amount equal to the equity of the Bank as of the date
of its latest balance sheet date, September 30, 1997, contained in the
final Prospectus used in connection with the Conversion. In the
unlikely event of a complete liquidation of the Bank, (and only in such
an event), eligible depositors who continue to maintain accounts at the
Bank shall be entitled to receive a distribution from the liquidation
account. The amount of the liquidation account decreases to the extent
the balances of eligible deposits decrease. The liquidation account
approximated $10.7 million at September 30, 1999.
The Company may not declare nor pay dividends on its stock if such
declaration and payment would violate statutory or regulatory
requirements.
In addition to the 16,000,000 authorized shares of common stock, the
Company authorized 2,000,000 shares of preferred stock with a par value
of $0.01 per share (the "preferred stock"). The Board of Directors is
authorized, subject to any limitations by law, to provide for the
issuance of the shares of preferred stock in series, to establish from
time to time the number of shares to be included in each such series,
and to fix the designation, powers, preferences and rights of the
shares of each such series and any qualifications, limitations or
restriction thereof. As of March 31, 2000, there were no shares of
preferred stock issued.
-11-
<PAGE>
<TABLE>
4. Loans
Loans are summarized as follows: March 31, September 30,
2000 1999
---- ----
(unaudited)
(In thousands)
<S> <C> <C>
Real Estate loans:
One-to four-family $217,396 $196,885
Multiple family and commercial 27,420 31,497
Construction 10,046 3,983
------ -----
Total real estate loans 254,862 232,365
------- -------
Consumer Loans:
Home equity loans and lines of credit 72,017 70,118
Automobile 41,931 34,619
Education 3,412 2,796
Unsecured lines of credit 1,754 1,744
Other 7,331 5,571
----- -----
Total consumer loans 126,445 114,848
------- -------
Commercial loans 33,344 21,262
------ ------
Total loans 414,651 368,475
------- -------
Less:
Allowance for loan losses (3,322) (2,924)
Deferred loan origination fees (1,441) (1,361)
------- -------
Total loans, net $409,888 $364,190
======== ========
</TABLE>
<TABLE>
Allowance for loan losses is summarized as follows (in thousands):
For the six For the six
months ended For the year ended months ended
March 31, 2000 September 30, 1999 March 31, 1999
-------------- ------------------ --------------
(unaudited) (unaudited)
<S> <C> <C> <C>
Balance, beginning of period $2,924 $2,273 $2,273
Charge-offs (47) (101) (56)
Recoveries 2 5 2
Provision for loan losses 443 747 183
--- --- ---
Balance, end of period $3,322 $2,924 $2,402
====== ====== ======
</TABLE>
<TABLE>
5. Deposits
Deposits consist of the following major classifications (in thousands):
March 31, 2000 September 30, 1999
-------------- ------------------
(unaudited)
Percent Percent
Amount of Total Amount of Total
------------- ------------- -------------- ------------
<S> <C> <C> <C> <C>
Savings accounts (passbook, statement, clubs) $67,460 18.10% $69,667 18.53%
Money market accounts 21,398 5.70% 21,132 5.62%
Certificates of deposit less than $100,000 180,305 48.40% 185,790 49.41%
Certificates of deposit greater than $100,000(1) 45,797 12.30% 51,200 13.62%
NOW Accounts 38,102 10.20% 35,339 9.40%
Non-interest bearing deposits 19,788 5.30% 12,855 3.42%
------ ----- ------ -----
Total deposits at end of period $372,850 100.00% $375,983 100.00%
======== ======= ======== =======
</TABLE>
(1) Deposit balances in excess of $100,000 are not federally insured.
-12-
<PAGE>
Item 2 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
In addition to historical information, this 10-Q may include certain
forward-looking statements based on current management expectations. The
Company's actual results could differ materially from those management
expectations. Factors that could cause future results to vary from current
management expectations include, but are not limited to, general economic
conditions, legislative and regulatory changes, monetary and fiscal policies of
the federal government, changes in tax policies, rates and regulations of
federal, state and local tax authorities, changes in interest rates, deposit
flows, the cost of funds, demand for loan products, demand for financial
services, competition, changes in the quality or composition of the Bank's loan
and investment portfolios, changes in accounting principles, policies or
guidelines, and other economic, competitive, governmental and technological
factors affecting the Company's operations, markets, products, services and
prices. Further description of the risks and uncertainties to the business are
included in detail in Section B, Management Strategy; and Section D, Liquidity
and Capital Resources.
A. General
The Company is the holding company for First Federal Bank (the "Bank"), a
federally chartered capital stock savings bank regulated by the Office of Thrift
Supervision ("OTS"). The Company does not transact any material business other
than through the Bank and its other subsidiaries. The Bank's results of
operations are dependent primarily on net interest income, which is the
difference between the income earned on its loan and investment portfolios and
its cost of funds, consisting of the interest paid on deposits and borrowings.
Results of operations are also affected by the Bank's provision for loan losses,
loan and security sales, service charges and other fee income, and non-interest
expense. The Bank's non-interest expense principally consists of compensation
and employee benefits, office occupancy and equipment expense, professional
fees, federal deposit insurance premiums, data processing, and advertising and
business promotion expenses. Results of operations are also significantly
affected by general economic and competitive conditions, particularly changes in
interest rates, government policies and actions of regulatory authorities.
In June 1999, the Company received approval from the Pennsylvania Department of
Banking to form a trust company, Northeast Pennsylvania Trust Co. (the "Trust").
The Trust began operations in the first fiscal quarter of 2000. The Trust offers
current customers and potentially other financial institutions' customers trust,
estate and asset management services and products.
B. Management Strategy
The Bank's operating strategy is that of a community-based bank, offering a wide
variety of savings products to its retail customers, while concentrating on
residential and consumer lending and, to a lesser extent, construction lending
and small business and municipal commercial lending. In order to promote
long-term financial strength and profitability, the Bank's operating strategy
has focused on: (i) maintaining strong asset quality by originating one-to
four-family loans in its market area; (ii) increasing profitability by
emphasizing higher-yielding consumer and commercial loans; (iii) managing its
interest rate risk by emphasizing consumer and commercial loans, in addition to
shorter-term, fixed-rate, one-to four-family loans; limiting its retention of
newly-originated longer-term fixed-rate one-to four-family loans; soliciting
longer-
-13-
<PAGE>
term deposits; utilizing longer-term advances from the Federal Home Loan
Bank of Pittsburgh ("FHLB"); and investing in investment and mortgage-related
securities having shorter estimated durations; (iv) meeting the banking needs of
its customers through expanded products and improved delivery systems by taking
advantage of technological advances; and (v) maintaining a strong regulatory
capital position.
During the quarter the Bank continued to diversify and expand its loan products
to better serve its customer base by placing a greater emphasis on consumer
lending and commercial lending, primarily to small businesses and
municipalities. The Bank also entered into an agreement with BuildersFirst.com
(an internet based business-to-business portal offering construction mortgage
lending, financial services and other products to the independent homebuilder
industry) to purchase one to four family construction loans. These loans will be
underwritten according to the Bank's standards. To date no loans have been
purchased, but purchases are expected to commence in May. BuildersFirst.com will
provide an internet-based delivery and servicing system giving Northeast
Pennsylvania Financial Corp. a virtual management tool.
C. Non-Performing Assets
The following table presents information regarding the Bank's non-performing
assets at the dates indicated (dollars in thousands):
<TABLE>
March 31, September 30,
2000 1999
---- ----
(unaudited)
<S> <C> <C>
Non-performing assets:
Non-accrual loans $1,468 $1,371
Real estate owned and other repossessed assets 282 98
--- --
Total non-performing assets $1,750 $1,469
====== ======
Total non-performing loans as a percentage of total loans 0.36% 0.38%
Total non-performing assets as a percentage of total assets 0.26% 0.24%
</TABLE>
The increase in non-performing loans was due to a participation loan secured by
commercial real estate, which has been on the books of the Bank for
approximately seven years. The borrower is experiencing cash flow difficulty
arising from other facilities which they own. Management of the Bank is working
closely with the borrower in order to satisfactorily resolve the situation.
Subsequent to the end of the quarter the loan was brought current. Real estate
owned and other repossessed assets increased due to the higher outstanding loan
balances of indirect loans.
D. Liquidity and Capital Resources
The Bank's primary sources of funds on a long-term and short-term basis are
deposits, principal and interest payments on loans, mortgage-backed and
investment securities, and FHLB advances. The Bank uses the funds generated to
support its lending and investment activities as well as any other demands for
liquidity such as deposit outflows. While maturities and scheduled amortization
of loans are predictable sources of funds, deposit flows, mortgage prepayments
and the exercise of call features 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. 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 current required liquidity
ratio is 4.0%. At March 31, 2000 and 1999, the Bank's liquidity ratios were 4.6%
and 10.6%, respectively.
-14-
<PAGE>
At March 31, 2000, the Bank exceeded all of its regulatory capital requirements
with a tangible capital level of $58.9 million, or 8.9% of total adjusted
assets, which is above the required level of $9.9 million, or 1.5%; a core
capital level of $58.9 million, or 8.9% of total adjusted assets, which is above
the required level of $26.5 million, or 4.0%; and a risk-based capital of $63.2
million, or 17.4% of risk-weighted assets, which is above the required level of
$29.0 million, or 8.0%.
The Bank's most liquid assets are cash and cash equivalents and its investment
and mortgage-related securities available-for-sale. The levels of these assets
are dependent on the Bank's operating, financing, lending and investing
activities during any given period. At March 31, 2000, cash and cash equivalents
and investment and mortgage-related securities available-for-sale totaled $201.4
million, or 30.1% of total assets.
The Bank has other sources of liquidity if a need for additional funds arises,
including FHLB advances. At March 31, 2000, the Bank had $221.0 million in
advances outstanding from the FHLB, and had an overall borrowing capacity from
the FHLB of $282.9 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.
At March 31, 2000, the Bank had commitments to originate and purchase loans and
unused outstanding lines of credit and undisbursed proceeds of construction
mortgages totaling $37.9 million. The Bank anticipates that it will have
sufficient funds available to meet these commitments. Certificate accounts,
including Individual Retirement Account ("IRA") and KEOGH accounts, which are
scheduled to mature in less than one year from March 31, 2000, totaled $148.0
million. The Bank expects that substantially all of the maturing certificate
accounts, with the exception of jumbo certificates of deposit (balances greater
than $100,000), will be retained by the Bank at maturity. At March 31, 2000, the
Bank had $31.8 million in jumbo certificates, the majority of which are deposits
from local school districts and municipalities.
At March 31, 2000, the Bank had total equity, determined in accordance with
generally accepted accounting principles, of $56.4 million, or 8.6%, of total
assets, which approximated the Bank's regulatory tangible capital at that date
of 8.9% of assets. An institution with a ratio of tangible capital to total
assets of greater than or equal to 5% is considered to be "well-capitalized"
pursuant to OTS regulations.
E. Comparison of Financial Condition at March 31, 2000 and September 30, 1999
Total assets increased $57.4 million from $612.2 million at September 30, 1999
to $669.6 million at March 31, 2000. The growth in assets was primarily due to
increases in loans receivable and investment securities, which were funded by
increases in FHLB advances.
Securities classified as available-for-sale securities increased $7.5 million,
from $189.8 million at September 30, 1999 to $197.3 million at March 31, 2000.
The increase was primarily attributable to the effect of security purchases, net
of unrealized gain/loss on available-for-sale securities.
Loans increased $45.7 million to $409.9 million at March 31, 2000. This was
primarily due to a $20.5 million increase in one-to four-family real estate
loans, as a result of loan purchases from
-15-
<PAGE>
other financial institutions. Commercial loans increased $12.1 million due
to the business development efforts of the commercial loan officers. Automobile
loans increased $7.3 million primarily due to increased direct and indirect auto
loan originations. Construction loans increased $6.1 million as a result of
marketing efforts combined with competitive pricing of products. The majority of
the loan originations and purchases for this quarter and the past several
quarters were adjustable or floating rate loans. These loans will assist in the
management of interest rate risk as they will be adjusting over the next several
quarters, which should increase their yield to the Bank.
Other assets increased $2.5 million to $11.4 million at March 31, 2000. This
change was primarily due to a $2.0 million investment in the preferred stock of
BuildersFirst.com. Also contributing to the change was a $462,000 increase in
deferred income taxes.
FHLB advances increased $65.0 million from $156.0 million at September 30, 1999
to $221.0 million at March 31, 2000. This was a result of management's
utilization of FHLB borrowings to fund asset growth. FHLB borrowings have been
invested at yields higher than the cost of the borrowed funds thereby increasing
net interest income.
Total equity decreased $3.9 million to $71.5 million at March 31, 2000. This
decrease in equity resulted primarily from a repurchase of 289,334 shares of
common stock at a cost of $4.2 million. Also contributing to this decline was a
$1.7 million increase in unrealized losses on securities reflected in
accumulated other comprehensive loss. These decreases were partially offset by
net income of $2.2 million for the period.
F. Comparison of Operating Results for the Three Months ended March 31, 2000
and March 31, 1999
General. The Company had net income of $1.1 million for the three months ended
March 31, 2000 and for the three months ended March 31, 1999.
Interest Income. Total interest income increased $2.2 million, or 24.4%, from
$9.0 million for the three months ended March 31, 1999 to $11.2 million for the
three months ended March 31, 2000. This was primarily due to a $102.9 million,
or 19.8%, increase in the average balance of interest earning assets. An
increase in the weighted average yield on interest earning assets was due to
rising interest rates and more adjustable rate loans. Specifically, interest
income on loans increased $1.8 million, or 30.5%, from $5.8 million for the
period ending March 31, 1999 to $7.6 million. This was due to a $979,000
increase of interest income on real estate loans, due to a $55.1 million
increase in the average balance of these loans. Interest income on consumer
loans increased $793,000 due to a $35.8 million increase in the average balance
of such loans. Interest income on investment securities increased $585,000 to
$2.7 million for the three months ended March 31, 2000 primarily due to a $22.9
million increase in the average balance of such securities.
Interest Expense. Interest expense increased $1.8 million, or 39.0%, from $4.6
million to $6.4 million for the three months ended March 31, 1999 and March 31,
2000, respectively. The increase in interest expense was primarily the result of
a $91.6 million increase in the average balance of FHLB advances and other
borrowings, which increased from $105.7 million at March 31, 1999 to $197.3
million at March 31, 2000, as well as a 45 basis point increase in the weighted
average rate paid on those borrowings from 5.18% to 5.63% for the three months
ended March 31, 1999 and March 31, 2000, respectively. The increase in FHLB
advances
-16-
<PAGE>
reflects management's determination to utilize FHLB advances to fund asset
growth. The increase in interest expense also resulted from increased interest
expense on certificates of deposit, which was the result of a $21.6 million
increase in the average balance of certificates of deposit.
Provision for Loan Losses. The Bank's provision for loan losses for the three
months ended March 31, 2000 was $238,000 compared to $135,000 for the three
months ended March 31, 1999. The increase in the provision was a result of the
$26.9 million increase in outstanding loan balances in the first quarter. The
provision for loan losses increases the allowance for loan losses. The allowance
is maintained at a level that management considers adequate to provide for
estimated losses based upon an evaluation of known and inherent risks in the
loan portfolio. Loan losses, other than those incurred on loans held for sale,
are charged directly against the allowance and recoveries on previously
charged-off loans are added to the allowance. Management's evaluation is based
upon, among other things, delinquency trends, the volume of non-performing
loans, prior loss experience of the portfolio, current economic conditions, and
other relevant factors. Although management believes it has used the best
information available to it in making such determinations, and that the
allowance for loan losses is adequate, future adjustments to the allowance may
be necessary, and net income may be adversely affected if circumstances differ
substantially from the assumptions used in determining the level of the
allowance. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the Bank's allowance for losses
on loans. Such agencies may require the Bank to recognize additions to the
allowance based on their judgments about information available to them at the
time of their examination.
Non-interest Income. Non-interest income decreased $10,000 from $368,000 to
$358,000 for the three months ended March 31, 2000. The decrease in non-interest
income was primarily due to a $58,000 increase in loss on real estate owned.
Also contributing to the decrease was a $31,000 decrease in insurance premium
income. Offsetting the decreases was a $77,000, or 39.7%, increase in service
charges and other fees resulting from increased customer activity on the various
deposit and loan accounts.
Non-interest Expense. Total non-interest expense increased from $3.2 million to
$3.6 million for the three months ended March 31, 1999 and March 31, 2000,
respectively. Other non-interest expense increased $141,000, or 25.5%, primarily
due to increased marketing of deposit and loan products and amortization of
goodwill from the purchase of the Danville branch. Occupancy costs increased
$83,000 due to branch expansion. Salaries and employee benefits increased
$67,000 as a result of additional staffing for 3 new branches added since March
31, 1999.
Income Taxes. The Company had an income tax provision of $174,000 for the three
months ended March 31, 2000, compared to a provision of $255,000 for the three
months ended March 31, 1999 resulting in effective tax rates of 13.7%, and
19.2%, for the three months ended March 31, 2000, and March 31, 1999,
respectively. The decrease in income tax expense was attributable to the
decrease in income before taxes, as well as, the decline in the effective tax
rate, which was the result of increased tax-free income.
-17-
<PAGE>
G. Comparison of Operating Results for the Six Months ended March 31, 2000
and March 31, 1999.
General. The Company reported net income of $2.25 million for the six months
ended March 31, 2000 and for the six months ended March 31, 1999.
Interest Income. Total interest income increased $4.0 million, or 22.0%, from
$17.9 million to $21.9 million for the six months ended March 31, 2000. This was
primarily due to a $98.5 million, or 19.2%, increase in the average balance of
interest earning assets. Specifically, interest income on loans increased $3.3
million from $11.6 million for the six month period ending March 31, 1999 to
$14.9 million. This was due to a $1.7 million increase in interest income on
real estate loans, due to a $50.9 million increase in the average balance of
these loans. Interest income on consumer loans increased $1.4 million due to a
$34.1 million increase on the average balance of these loans. Interest income on
commercial loans increased $185,000 due to a $9.3 million increase in the
average balance of these loans. Interest income on investment securities
increased $1.1 million to $5.2 million for the six months ended March 31, 2000
primarily due to a $23.5 million increase in the average balance of such
securities.
Interest Expense. Interest expense increased $3.2 million, or 34.3%, from $9.3
million to $12.5 million for the six months ended March 31, 1999 and March 31,
2000, respectively. The increase in interest expense was primarily the result of
a $77.7 million increase in the average balance of FHLB advances, which
increased from $102.8 million at March 31, 1999 to $180.5 million at March 31,
2000, as well as an increase in the weighted average rate paid on such
borrowings from 5.21% at March 31, 1999 to 5.54% at March 31, 2000. The increase
in FHLB advances reflects management's determination to utilize FHLB advances to
fund asset growth. This increase in interest expense was also due to an overall
increase in interest expense on deposits primarily due to a $30.0 million, or
14.6%, rise in the average balance of certificate accounts and $9.0 million, or
18.4% rise in the average balance of interest-bearing checking accounts.
Provision for Loan Losses. The Bank's provision for loan losses for the six
months ended March 31, 2000 was $443,000 compared to $183,000 for the six months
ended March 31, 1999. The increase in the provision was a result of the $45.7
million increase in outstanding loan balances from September 1999 to March 2000.
The provision for loan losses increases the allowance for loan losses. The
allowance is maintained at a level that management considers adequate to provide
for estimated losses based upon an evaluation of known and inherent risks in the
loan portfolio. Loan losses, other than those incurred on loans held for sale,
are charged directly against the allowance and recoveries on previously
charged-off loans are added to the allowance. Management's evaluation is based
upon, among other things, delinquency trends, the volume of non-performing
loans, prior loss experience of the portfolio, current economic conditions, and
other relevant factors. Although management believes it has used the best
information available to it in making such determinations, and that the
allowance for loan losses is adequate, future adjustments to the allowance may
be necessary, and net income may be adversely affected if circumstances differ
substantially from the assumptions used in determining the level of the
allowance. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the Bank's allowance for losses
on loans. Such agencies may require the Bank to recognize additions to the
allowance based on their judgements about information available to them at the
time of their examination.
-18-
<PAGE>
Non-interest income. The Company experienced a $41,000 increase in non-interest
income from $753,000 to $794,000 for the six months ended March 31, 1999 and
March 31, 2000. The increase in the year to date non-interest income was
primarily the result of a $175,000 increase in service charges and other fees
due to increased customer activity on various deposit and loan accounts. This
was offset by an $83,000 increase in the loss on the sale of repossessed assets,
which occurred in the second fiscal quarter and a loss of $53,000 from the
operations of Northeast Pennsylvania Trust Co. for the first six months.
Non-interest expense. Total non-interest expense increased $859,000, or 13.5%,
from $6.3 million to $7.2 million for the six months ended March 31, 2000. Other
non-interest expense increased $383,000, or 35.6%. This increase is partly due
to $164,000 amortization of goodwill associated with branch and subsidiary
acquisitions. Rising advertising and general operating costs also contributed to
the increase. There was also an increase in salary and benefit expense of
$318,000, or 8.9%, primarily due to the addition of staffing since March 31,
1999. Occupancy costs increased $133,000 due to branch expansion.
Income taxes. The Company had income tax expense of $337,000 for the six months
ended March 31, 1999, compared to an expense of $642,000 for the six months
ended March 31, 1999, resulting in an effective tax rate of 13.1%, and 22.2%,
for the six months ended March 31, 2000, and March 31, 1999, respectively. The
decrease in income tax expense was attributable to the decrease in income before
taxes for the six months ended March 31, 2000, as well as, the decline in the
effective tax rate, which was the result of increased tax-free income.
-19-
<PAGE>
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of March 31, 2000, there have been no material changes in
the quantitative and qualitative disclosures about market
risks presented in the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1999.
-20-
<PAGE>
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not involved in any pending legal proceedings
other than routine legal proceedings occurring in the ordinary
course of business. Such routine legal proceedings, in the
aggregate, are believed by management to be immaterial to the
Company's financial condition or results of operation.
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
Rider 21 A
The Annual Meeting of Stockholders of the Company was held on
January 26, 2000. The results of the vote were as follows:
1. The following individuals were elected as directors,
each for a three-year term:
<TABLE>
<S> <C> <C>
VOTES FOR VOTES WITHHELD
--------- --------------
Paul L. Conard 4,541,854 390,713
John P. Lavelle 4,528,813 403,754
Michael J. Leib 4,567,159 365,408
</TABLE>
<TABLE>
2. The amendments to the Northeast Pennsylvania
Financial Corp. 1998 Stock-Based Incentive Plan were
ratified by stockholders by the following vote:
<S> <C> <C> <C>
FOR AGAINST ABSTAIN BROKER NON-VOTES
--- ------- ------- ----------------
3,073,616 670,491 41,707 1,146,753
3. The Northeast Pennsylvania Financial Corp. 2000 Stock
Option Plan was approved by stockholders by the
following vote:
FOR AGAINST ABSTAIN BROKER NON-VOTES
--- ------- ------- ----------------
2,821,290 923,666 40,858 1,146,753
</TABLE>
-21-
<PAGE>
4. The appointment of KPMG LLP as independent auditors of
Northeast Pennsylvania Financial Corp. for the fiscal
year ended September 30, 2000 was ratified by the
stockholders by the following vote:
<TABLE>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C>
4,867,332 48,409 16,826
</TABLE>
Item 5. Other information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
3.1 Certificate of Incorporation of Northeast Pennsylvania
Financial Corp.*
3.2 Bylaws of Northeast Pennsylvania Financial Corp.*
4.0 Form of Stock Certificate of Northeast Pennsylvania Financial
Corp.*
10.1 Northeast Pennsylvania Financial Corp. 1998 Stock-Based
Incentive Plan**
10.2 Northeast Pennsylvania Financial Corp. 2000 Stock Based
Option Plan**
11.0 Statement regarding Computation of Per Share Earnings (See
Notes to Consolidated Financial Statements)
27.0 Financial Data Schedule (submitted only with filing in
electronic format)
* Incorporated herein by reference into this document from the
Exhibits to Form S-1, Registration Statement, and any amendments
thereto, Registration No. 333-43281.
** Incorporated herein by reference into this document from the proxy
statement for the 2000 Annual Meeting of Shareholders filed on
December 17, 1999.
(B) Reports on Form 8-K
On February 2, 2000, the Company filed an 8-K to announce it had
received regulatory clearance to repurchase 10% of its outstanding
shares. The press release announcing the receipt of regulatory
clearance was filed by Exhibit.
On February 23, 2000, the Company filed an 8-K to announce that it had
completed its repurchase of an additional 10% of its outstanding
shares. The press release making this announcement was filed by
exhibit.
-22-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NORTHEAST PENNSYLVANIA
FINANCIAL CORP.
Date: By: /s/ E. Lee Beard
E. Lee Beard
President and Chief Executive
Officer
Date: By: /s/ Patrick J. Owens, Jr.
Patrick J. Owens, Jr.
Vice President and Chief Financial Officer
<PAGE>
Exhibit Index
-------------
27.0 Financial Data Schedule (submitted only with filing in electronic format)
-1-
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary information extracted from the form 10-Q and
is qualified in its entirety by reference to the unaudited financial
statements contained therein.
</LEGEND>
<CIK> 0001050996
<NAME> Northeast Pennsylvania Financial Corp.
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Sep-30-2000
<PERIOD-START> Oct-01-1999
<PERIOD-END> Mar-31-2000
<EXCHANGE-RATE> 1
<CASH> (1,066)
<INT-BEARING-DEPOSITS> 5,224
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 197,278
<INVESTMENTS-CARRYING> 31,333
<INVESTMENTS-MARKET> 27,804
<LOANS> 409,888
<ALLOWANCE> 3,322
<TOTAL-ASSETS> 669,576
<DEPOSITS> 372,850
<SHORT-TERM> 39,905
<LIABILITIES-OTHER> 3,816
<LONG-TERM> 181,470
0
0
<COMMON> 64
<OTHER-SE> 71,471
<TOTAL-LIABILITIES-AND-EQUITY> 669,576
<INTEREST-LOAN> 14,867
<INTEREST-INVEST> 5,188
<INTEREST-OTHER> 1,836
<INTEREST-TOTAL> 21,891
<INTEREST-DEPOSIT> 7,459
<INTEREST-EXPENSE> 12,461
<INTEREST-INCOME-NET> 9,430
<LOAN-LOSSES> 443
<SECURITIES-GAINS> (13)
<EXPENSE-OTHER> 7,199
<INCOME-PRETAX> 2,582
<INCOME-PRE-EXTRAORDINARY> 2,582
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,245
<EPS-BASIC> 0.45
<EPS-DILUTED> 0.43
<YIELD-ACTUAL> 7.48
<LOANS-NON> 1,468
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,924
<CHARGE-OFFS> (47)
<RECOVERIES> 2
<ALLOWANCE-CLOSE> 3,322 <F1>
<ALLOWANCE-DOMESTIC> 2,660
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 662 <F2>
<FN>
1. Allowance for loan loss at end of period includes an increase in the
allowance through the provision for loan losses.
2. All unallocated is for domestic loans.
</FN>
</TABLE>
