<PAGE>
United States
Securities and Exchange Commission
Washington, D.C. 20549
----------------------
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934, for the quarter 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 000-23557
MECH Financial, Inc.
(Exact name of registrant as specified in its charter)
Connecticut 06-1500984
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
100 Pearl Street
Hartford, Connecticut 06103
(Address of principal executive offices) (Zip code)
(860) 293-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(b) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes [X] No [ ]
Common Stock Par Value $.01 Per Share
5,155,113 Outstanding (as of March 31, 2000)
<PAGE>
Table of Contents
-----------------
<TABLE>
<CAPTION>
Part I. Item 1. Financial Information Page
<S> <C> <C>
A. Consolidated Statements of Condition as of March 31, 2000 and 1
December 31, 1999
B. Consolidated Statements of Operations for the Three Month Periods 2
Ended March 31, 2000 and March 31, 1999
C. Consolidated Statements of Changes in Stockholders' Equity for the Three 3
Month Periods Ended March 31, 2000 and March 31, 1999
D. Consolidated Statements of Cash Flows for the Three Month Periods Ended 4
March 31, 2000 and March 31, 1999
E. Notes to Consolidated Financial Statements 6
Part I. Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 13
Part I. Item 3. Quantitative and Qualitative Disclosures About Market Risk 19
Part II. Other Information 19
Signatures 21
Exhibit 22
</TABLE>
<PAGE>
MECH Financial, Inc. and Subsidiaries
Consolidated Statements of Condition (unaudited)
<TABLE>
<CAPTION>
(dollars in thousands) March 31, 2000 December 31, 1999
-------------------- -----------------------
<S> <C> <C>
ASSETS
Cash and due from banks:
Non-interest-bearing deposits and cash $ 25,643 $ 29,440
Short-term investments 1,060 760
----------- -----------
Cash and cash equivalents 26,703 30,200
Investments:
Available-for-sale, at market value 214,781 226,027
Held-to-maturity (market value at March 31, 2000 - $64,525;
at December 31, 1999 - $65,949) 67,765 68,719
Federal Home Loan Bank stock, at cost 19,287 17,745
Loans, net 736,670 741,722
Bank premises and equipment 3,656 3,880
Accrued interest receivable 5,771 5,571
Foreclosed real estate owned 389 298
Cash surrender value life insurance 17,904 17,694
Goodwill 613 643
Other assets 6,757 7,194
----------- -----------
$ 1,100,296 $ 1,119,693
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 638,615 $ 641,764
Federal funds purchased - 34,000
Other borrowings 353,985 342,985
Mortgage escrow 4,322 1,792
Other liabilities 6,024 5,221
----------- -----------
Total liabilities 1,002,946 1,025,762
----------- -----------
Stockholders' Equity:
Preferred stock - par value $.01; 1,000,000 shares
authorized, none issued - -
Common stock - par value $.01; 15,000,000 shares
authorized; 5,442,271 issued at March 31, 2000 and
5,331,763 issued at December 31, 1999 54 53
Additional paid in capital 54,943 52,676
Retained earnings 57,039 54,847
Accumulated other comprehensive loss (5,868) (4,850)
Less: Treasury stock, at cost, 263,158 shares at March 31, 2000,
262,394 shares at December 31, 1999 (8,578) (8,555)
Less: Unallocated ESOP shares (24,000 shares at March 31, 2000
and December 31, 1999) (240) (240)
----------- -----------
Total stockholders' equity 97,350 93,931
----------- -----------
$ 1,100,296 $ 1,119,693
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
1
<PAGE>
MECH Financial, Inc. and Subsidiaries
Consolidated Statements of Operations (unaudited)
<TABLE>
<CAPTION>
(in thousands except for earnings per share) For the three months ended
March 31, 2000 March 31, 1999
-------------------- --------------------
<S> <C> <C>
Interest income:
Interest and fees on loans $ 13,899 $ 12,738
Interest and dividends on investment securities:
Interest on debt securities 4,430 4,386
Dividends on equity securities 360 232
-------- --------
4,790 4,618
Other interest income 298 326
-------- --------
Total interest income 18,987 17,682
-------- --------
Interest expense:
Interest on deposits:
Savings deposits 809 754
Time deposits 4,097 4,862
-------- --------
Total interest on deposits 4,906 5,616
Interest on federal funds purchased 180 -
Interest on other borrowings 5,143 3,242
-------- --------
Total interest expense 10,229 8,858
-------- --------
Net interest income 8,758 8,824
Provision for loan losses - -
-------- --------
Net interest income after provision for loan losses 8,758 8,824
-------- --------
Other income:
Investment brokerage services commissions 726 604
Service charges on deposit accounts 697 687
Appreciation of cash surrender value life insurance 241 228
Loan servicing and other fees 123 142
Income from investment in Real Estate Partnership - 13
Gain on sale of headquarters building owned by
the Real Estate Partnership - 2,096
Net gain on calls / sales of investment securities - 5
Net gain on sales of loans 3 3
Other 268 274
-------- --------
Total other income 2,058 4,052
-------- --------
Other expenses:
Salaries, commissions and employee benefits 3,736 3,283
Occupancy 774 775
Data processing 316 313
Furniture and equipment 216 245
Advertising 153 251
Communications 137 138
Legal and accounting 135 145
Operation of foreclosed real estate owned 20 103
Write-downs and net losses on sale
of foreclosed real estate owned - -
Amortization of goodwill 29 29
Other 564 696
-------- --------
Total other expenses 6,080 5,978
-------- --------
Income before income taxes and extraordinary item 4,736 6,898
Income tax expense 1,529 2,317
-------- --------
Income before extraordinary item 3,207 4,581
Extraordinary item, early extinguishment of
borrowings, net of tax (Note 6) - (435)
-------- --------
Net income $ 3,207 $ 4,146
======== ========
Earnings per share:
Basic:
Income before extraordinary item $ 0.63 $ 0.90
Extraordinary item $ - $ (0.09)
Net income $ 0.63 $ 0.81
Diluted:
Income before extraordinary item $ 0.62 $ 0.87
Extraordinary item $ - $ (0.08)
Net income $ 0.62 $ 0.79
Weighted average shares outstanding:
Basic 5,073 5,099
Diluted 5,214 5,251
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE>
Consolidated Statements of Changes in Stockholders' Equity
For the three months ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
Accumulated
Additional Other Unallocated
Common Paid in Retained Comprehensive Treasury ESOP
(in thousands) Stock Capital Earnings Income (Loss) Stock Shares Total
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 $ 53 $ 51,430 $ 44,205 $ 160 $ - $ (480) $ 95,368
Comprehensive income:
1999 net income - - 4,146 - - - 4,146
Net unrealized gains (losses) on
securities, net of
reclassification adjustment - - - (436) - - (436)
--------
Comprehensive income 3,710
--------
Treasury stock purchased (261,500 shares) - - - - (8,523) - (8,523)
Dividends paid ($0.15 per share) - - (796) - - - (796)
Exercise of stock options - 55 - - - - 55
-------- -------- -------- -------- -------- -------- --------
Balance at March 31, 1999 $ 53 $ 51,485 $ 47,555 $ (276) $ (8,523) $ (480) $ 89,814
======== ======== ======== ======== ======== ======== ========
Balance at December 31, 1999 $ 53 $ 52,676 $ 54,847 $ (4,850) $ (8,555) $ (240) $ 93,931
Comprehensive income:
2000 net income - - 3,207 - - - 3,207
Net unrealized gains (losses)
on securities, net of
reclassification adjustment - - - (1,018) - - (1,018)
--------
Comprehensive income 2,189
--------
Treasury stock purchased (764 shares) - - - - (23) - (23)
Dividends paid ($0.20 per share) - - (1,015) - - - (1,015)
Exercise of stock options 1 2,267 - - - - 2,268
-------- -------- -------- -------- -------- -------- --------
Balance at March 31, 2000 $ 54 $ 54,943 $ 57,039 $ (5,868) $ (8,578) $ (240) $ 97,350
======== ======== ======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
MECH Financial, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (unaudited)
<TABLE>
<CAPTION>
For the three months ended
(in thousands) March 31, 2000 March 31, 1999
-------------------- --------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,207 $ 4,146
--------- ---------
Adjustments to reconcile net income to cash provided by operating
activities:
Depreciation and amortization 224 256
Amortization of investment security premiums/discounts, net 8 (13)
Deferred loan costs, net of amortization 155 (239)
Net gain on sale of loans (3) (3)
Proceeds from loan sales 207 302
Originations of loans held for sale (204) (299)
Realized gains on available-for-sale securities - (5)
Increase in interest and dividend receivables (200) (688)
Income from investment in Real Estate Partnership - (13)
Gain on sale of Real Estate Partnership - (2,096)
Increase in cash surrender value life insurance (210) (199)
Increase (decrease) in other assets 1,011 (117)
Increase in other liabilities 803 238
--------- ---------
Total adjustments 1,791 (2,876)
--------- ---------
Net cash provided by operating activities 4,998 1,270
--------- ---------
Cash flows from investing activities:
Proceeds from principal payments on available-for-sale securities 9,907 18,255
Proceeds from principal payments on held-to-maturity securities 963 10,152
Proceeds from maturities and calls of available-for-sale securities - 3,000
Proceeds from maturities and calls of held-to-maturity securities - 6,000
Purchases of available-for-sale securities (256) (58,905)
Purchases of held-to-maturity securities - (14,189)
Purchases of Federal Home Loan Bank stock (1,542) (4,500)
Net originations and purchases of loans 4,699 (30,709)
Proceeds from sale of Real Estate Partnership - 15,610
Decrease in investment in Real Estate Partnership - 40
Proceeds from sale of foreclosed real estate owned 123 448
Purchases of bank premises and equipment - (73)
--------- ---------
Net cash provided by (used in) investing activities 13,894 (54,871)
--------- ---------
Cash flows from financing activities:
Net increase in demand deposits, money market and savings accounts 3,657 2,898
Net decrease in certificates of deposit (6,806) (19,664)
Net increase in mortgage escrow 2,530 2,309
Increase in FHLB borrowings 467,040 345,540
Repayments of FHLB borrowings (456,040) (268,540)
Increase in federal funds purchased 163,500 -
Repayments of federal funds purchased (197,500) -
Issuance of common stock 2,268 55
Dividends paid (1,015) (796)
Purchases of treasury stock (23) (8,523)
--------- ---------
Net cash provided by (used in) financing activities (22,389) 53,279
--------- ---------
Net decrease in cash and cash equivalents (3,497) (322)
--------- ---------
Cash and cash equivalents at beginning of period 30,200 21,987
--------- ---------
Cash and cash equivalents at end of period $ 26,703 $ 21,665
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
4
<PAGE>
MECH Financial, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (unaudited) (continued)
<TABLE>
<CAPTION>
For the three months ended
(in thousands) March 31, 2000 March 31, 1999
-------------------- --------------------
<S> <C> <C>
Non-cash investing and financing activities
Change in net unrealized gain (loss) on securities available-for-sale $(1,585) $ (753)
Change in net unrealized gain (loss) on securities held-to-maturity 6 27
Transfer of loans to foreclosed real estate owned 196 580
Supplemental disclosures of cash flow information
Income taxes paid - 50
Income tax refunds received 1,300 -
Interest paid 5,463 8,748
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
5
<PAGE>
MECH Financial, Inc.
Notes to Consolidated Financial Statements
Note 1 - Basis of Financial Statement Presentation
On December 1, 1999, the Company and Webster Financial Corporation ("Webster")
entered into an Agreement and Plan of Merger which provides for, among other
things, the acquisition of MECH by Webster through a stock-for-stock exchange.
Contemporaneous with the completion of the acquisition, Mechanics Savings Bank,
a wholly-owned subsidiary of MECH, will merge with and into Webster Bank, a
wholly-owned subsidiary of Webster. The Agreement provides that shareholders of
MECH will receive 1.52 shares of Webster common stock for each share of MECH
common stock. The transaction is designed to be a tax-free exchange to the
holders of MECH common stock and is to be accounted for as a purchase
transaction. The Boards of Directors of MECH and Webster expect the transaction
to close in the second quarter of 2000.
The accompanying unaudited consolidated financial statements include the
accounts of MECH Financial, Inc. and its wholly-owned subsidiary, Mechanics
Savings Bank. Mechanics Savings Bank and its wholly-owned subsidiaries include
Mech Corporation, Mech Two Corporation, Mech Three Corporation, Eighty Pearl
Street Corporation, Mechanics Investment Services, Inc. and Mechanics Mortgage
Company ("MMC"). Effective April 18, 2000, the Company dissolved Mech
Corporation, Mech Two Corporation, Mech Three Corporation and Eighty Pearl
Street Corporation in preparation for the pending merger. These subsidiaries had
been dormant for at least one year prior to the dissolution.
MMC was formed to take advantage of a recent change in the Connecticut tax
statutes. The State of Connecticut enacted tax law changes in May 1998, allowing
for the formation of Passive Investment Companies by financial institutions.
This new legislation exempts certain Passive Investment Companies from state
income taxation in Connecticut, as well as exempting from taxation the dividends
paid from a Passive Investment Company to a related financial institution. The
law permits the Bank to contribute certain mortgage assets to its Passive
Investment Company so as to achieve the tax benefits. The Bank qualifies as a
financial institution under the new statute and formed MMC, as a Passive
Investment Company, in 1998. The legislation is effective for tax years
beginning on or after January 1, 1999. The formation of MMC is expected to
reduce the Company's state income tax expense.
The condensed consolidated financial statements have been prepared in accordance
with generally accepted accounting principles and with the instructions to Form
10-Q. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's 1999 Annual Report on
Form 10-K.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Dollars are presented in thousands, except for per share data, in the following
footnotes.
6
<PAGE>
Note 2 - Investments
The amortized cost and market values as of March 31, 2000 of available-for-sale
securities were as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
United States Government obligations $ 14,996 $ - $ 1,104 $ 13,892
Debt securities issued by foreign governments 100 - - 100
Corporate debt securities 2,997 - 105 2,892
Mortgage-backed securities 184,452 174 6,337 178,289
Marketable equity securities 3,181 46 599 2,628
Mutual funds 17,437 8 465 16,980
---------- ---------- ---------- ---------
$ 223,163 $ 228 $ 8,610 $ 214,781
========== ========== ========== =========
</TABLE>
The amortized cost and market values as of December 31, 1999 of
available-for-sale securities were as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
United States Government obligations $ 14,996 $ - $ 889 $ 14,107
Debt securities issued by foreign governments 100 - - 100
Corporate debt securities 2,997 - 70 2,927
Mortgage-backed securities 194,368 220 5,021 189,567
Marketable equity securities 3,182 44 613 2,613
Mutual funds 17,181 1 469 16,713
---------- ---------- ---------- ---------
$ 232,824 $ 265 $ 7,062 $ 226,027
========== ========== ========== =========
</TABLE>
The amortized cost and market values as of March 31, 2000 of held-to-maturity
securities were as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
United States Government $ 27,000 $ - $ 1,999 $ 25,001
Debt securities issued by foreign governments 250 - - 250
Corporate debt securities 1,000 - 220 780
Mortgage-backed securities 39,515 214 1,235 38,494
---------- ---------- ---------- ---------
$ 67,765 $ 214 $ 3,454 $ 64,525
========== ========== ========== =========
</TABLE>
7
<PAGE>
The amortized cost and market values as of December 31, 1999 of held-to-maturity
securities were as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
United States Government $ 27,000 $ - $ 1,883 $ 25,117
Debt securities issued by foreign governments 250 - - 250
Corporate debt securities 1,000 - 208 792
Mortgage-backed securities 40,469 300 979 39,790
--------- ---------- ---------- ---------
$ 68,719 $ 300 $ 3,070 $ 65,949
========= ========== ========== =========
</TABLE>
Note 3 - Allowance for Loan Losses
Changes in the allowance for loan losses were as follows:
For the three months ending
March 31, March 31,
2000 1999
---------- ---------
Balance at beginning of year $ 11,035 $ 12,301
Provision for loan losses - -
Loan charge-offs (339) (624)
Loan recoveries 117 177
---------- ---------
Balance $ 10,813 $ 11,854
========== =========
Note 4 - Non-Performing Assets
The components of non-performing assets were as follows:
March 31, 2000 December 31, 1999
-------------- -----------------
Non-accrual loans $ 2,207 $ 1,992
Accruing loans past due > 90 days - -
-------------- -----------------
Total non-performing loans 2,207 1,992
Foreclosed real estate owned 389 298
-------------- -----------------
Total non-performing assets $ 2,596 $ 2,290
============== =================
Non-performing assets as a
percentage of total assets 0.24% 0.20%
============== =================
Non-performing assets as a
percentage of gross loans and
foreclosed real estate owned 0.35% 0.30%
============== =================
Allowance for loan losses
as a percentage of
non-performing loans 489.94% 553.97%
============== =================
8
<PAGE>
Note 5 - Investment in Real Estate Partnership
The Bank's subsidiary, Eighty Pearl Street Corporation owns 50% of Pearl Street
Associates Limited Partnership. This partnership previously owned (see below)
the building at 100 Pearl Street, Hartford, CT which houses the Bank's banking
and corporate offices.
During the first quarter of 1999, the Real Estate Partnership sold the building
at 100 Pearl Street to New Boston Limited Partnership, an independent third
party. Eighty Pearl Street Corporation received proceeds of $15.70 million and
recognized a $2.10 million gain on the sale. The Bank will continue to occupy
its banking and office space at 100 Pearl Street under a long-term lease.
9
<PAGE>
Note 6 - Borrowings
Advances from the Federal Home Loan Bank of Boston ("FHLB") and the repayment
schedule were as follows:
<TABLE>
<CAPTION>
Maturity Date Interest Rate March 31, 2000 December 31, 1999
------------- ------------- -------------- -----------------
<S> <C> <C> <C>
January 14, 2000 5.79% $ - $ 30,000
January 26, 2000 6.17 - 25,000
February 2, 2000 5.91 - 10,000
February 4, 2000 5.72 - 30,000
February 7, 2000 6.03 - 7,000
February 16, 2000 5.12 - 20,000
March 24, 2000 5.82 - 28,000
April 5, 2000 5.90 20,000 -
April 12, 2000 5.95 10,000 -
April 14, 2000 6.03 25,000 -
April 19, 2000 6.08 6,000 -
April 26, 2000 6.13 20,000 -
June 7, 2000 4.85 10,000 10,000
June 7, 2000 6.03 10,000 -
July 12, 2000 6.03 20,000 -
July 26, 2000 6.03 25,000 -
August 16, 2000 6.13 35,000 -
September 27, 2000 6.37 20,000 -
February 27, 2001 5.71 7,000 7,000
June 25, 2001 5.97 30,000 30,000
December 17, 2001 5.95 10,000 10,000
March 12, 2003 5.78 8,745 8,745
March 21, 2003 ** 4.99 - 20,000
November 3, 2004 * 5.80 10,000 10,000
November 8, 2004 * 5.44 30,000 30,000
April 21, 2006* 4.85 20,000 20,000
May 8, 2008 * 5.52 10,000 10,000
June 4, 2008 * 5.52 10,000 10,000
October 6, 2008 * 4.49 7,000 7,000
April 8, 2013 * 5.49 10,000 10,000
March 24, 2014 ** 3.99% - 10,000
-------- --------
$353,745 $342,745
======== ========
</TABLE>
* initial call dates ranging from April 2000 to April 2003
** called
During the first quarter of 1999, the Bank prepaid a $20,000 FHLB
advance scheduled to mature October 20, 2000 that carried an interest rate of
6.24% which resulted in a $432 prepayment penalty. In addition, the Bank prepaid
a $10,000 FHLB advance scheduled to mature on October 20, 2000 that carried an
interest rate of 6.21% and incurred a $223 prepayment penalty. Due to these
prepayment penalties, the Company reported a $435 extraordinary item, which is
net of $220 in taxes, due to the early extinguishment of borrowings during the
first quarter of 1999. This reduced earnings per share by $0.09 and $0.08 on a
basic and diluted basis, respectively. During the first quarter of 1999, the
Bank took advantage of fluctuations in interest rates and restructured its
borrowing portfolio accordingly.
10
<PAGE>
The Bank has access to a pre-approved line of credit up to approximately $15,000
and the capacity to borrow in excess of 40% of the Bank's total assets. In
accordance with an agreement with the FHLB, the Bank is required to maintain
qualified collateral, as defined in the FHLB Statement of Credit Policy, free
and clear of liens, pledges and encumbrances as collateral for the advances.
The Employee Stock Ownership Plan ("ESOP") borrowed $1,200 to purchase 120,000
shares of the Bank's stock for the ESOP in conjunction with the Bank's
conversion from a Connecticut-chartered mutual savings bank to a
Connecticut-chartered capital stock savings bank, completed on June 25, 1996.
The shares in the ESOP were converted into shares of MECH Financial, Inc. on
January 1, 1998. At March 31, 2000 and December 31, 1999, this borrowing had an
outstanding balance of $240. The loan's final principal payment is due on
December 31, 2000. The loan carries an interest rate equal to the prime rate.
The Bank has fully guaranteed this borrowing.
Note 7 - Earnings Per Share
Earnings per share is computed based upon the weighted average number of shares
of common stock and common stock equivalents (if dilutive) outstanding during
the periods presented. Common stock equivalents consist of stock options granted
under the 1996 Director and Officer Stock Option Plans. The option exercise
price for the options granted is the market price at the time of the grant.
The weighted average shares outstanding totaled 5,072,701 and 5,099,172 for the
quarters ended March 31, 2000 and 1999, respectively. The effect of dilutive
stock options was 141,334 and 151,704 shares for the quarters ended March 31,
2000 and 1999, respectively.
Note 8 - Recent Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). This statement established
accounting and reporting standards for derivative instruments, including certain
derivative instruments imbedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. The accounting for changes in the fair
value of a derivative depends on the intended use of the derivative and the
resulting designation.
Under this statement, an entity that elects to apply hedge accounting is
required to establish at the inception of the hedge the method it will use for
assessing the effectiveness of the hedging derivative and the measurement
approach for determining the ineffective aspect of the hedge. Those methods must
be consistent with the entity's approach to managing risk.
This statement amends SFAS No. 52 "Foreign Currency Translation" and SFAS No.
107, "Disclosures about Fair Value of Financial Instruments". This statement
superseded SFAS No. 80, "Accounting for Futures Contracts", SFAS No. 105,
"Disclosure Information about Financial Instruments with Off-balance Sheet Risk
and Financial Instruments with Concentrations of Credit Risk" and SFAS No. 119,
"Disclosure about Derivative Financial Instruments and Fair Value of Financial
Instruments".
As amended by SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of Statement 133", SFAS 133 is
effective for all fiscal quarters of fiscal years beginning after June 15, 2000.
Initial application of this statement should be as of the beginning of an
entity's fiscal quarter; on that date, hedging relationships must be designated
anew and documented pursuant to the provisions of this statement. Early adoption
is permitted, however, retroactive application is prohibited. The adoption of
SFAS 133 is not expected to have a material impact for the Company.
11
<PAGE>
Note 9 - Comprehensive Income
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income"
("SFAS No. 130"). SFAS No. 130 establishes standards for reporting and display
of comprehensive income and its components (such as changes in net unrealized
gain (loss) on securities). Comprehensive income includes net income and any
change in net equity of a business enterprise during a period from non-owner
sources that bypass the income statement. The purpose of reporting comprehensive
income is to report a measure of all changes in equity of an enterprise that
result from recognized transactions and other economic events of the period
other than transactions with owners in their capacity as owners. The Company's
one source of other comprehensive income is the net unrealized gain (loss) on
securities.
The following table represents the components and the related tax effects
allocated to other comprehensive income for the first quarter of 2000:
<TABLE>
<CAPTION>
Before Tax Net of
Tax (Expense) Tax
Amount Benefit Amount
------------ ------------ -----------
<S> <C> <C> <C>
Net unrealized gains (losses) on securities
arising during the period $(1,585) $ 563 $(1,022)
Accretion of unrealized loss on securities
transferred from available-for-sale to
held-to-maturity 6 (2) 4
------------ ------------ -----------
Net unrealized gains (losses) on securities $(1,579) $ 561 $(1,018)
============ ============ ===========
</TABLE>
The following table represents components and the related tax effects allocated
to other comprehensive income for the first quarter of 1999:
<TABLE>
<CAPTION>
Before Tax Net of
Tax (Expense) Tax
Amount Benefit Amount
----------- ------------ -----------
<S> <C> <C> <C>
Net unrealized gains (losses) on securities
arising during the period $ (753) $ 301 $ (452)
Accretion of unrealized loss on securities
transferred from available-for-sale to
held-to-maturity 27 (11) 16
----------- ------------ -----------
Net unrealized gains (losses) on securities $ (726) $ 290 $ (436)
=========== ============ ===========
</TABLE>
Note 10 - Stockholders' Equity
During the first quarter of 1999, the Company announced a stock repurchase
program. The program authorized the Company to repurchase up to 5% of its issued
and outstanding common stock at prevailing market prices in negotiated and/or
open market purchases. During the first quarter of 1999, the Company completed
the program and purchased 261,500 shares of common stock at a cost of $8.52
million. Since this repurchase program, the Company's treasury stock has
increased due to shares tendered in connection with the exercise of stock
options. At March 31, 2000, there were 263,158 shares of treasury stock.
On April 18, 2000, the Company declared a quarterly dividend of $0.20 per share
on its common stock. The dividend will be paid on May 12, 2000 to shareholders
of record on May 1, 2000.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The statements in the following discussions and analysis concerning future
results, performance, expectations, or intentions are forward-looking
statements. Actual results, performance, or developments may differ materially
from forward-looking statements as a result of known or unknown risks,
uncertainties and other factors.
Overview
On December 1, 1999, the Company and Webster entered into an Agreement and Plan
of Merger which provides for, among other things, the acquisition of MECH by
Webster through a stock-for-stock exchange. Contemporaneous with the completion
of the acquisition, Mechanics Savings Bank, a wholly-owned subsidiary of MECH,
will merge with and into Webster Bank, a wholly-owned subsidiary of Webster. The
Agreement provides that shareholders of MECH will receive 1.52 shares of Webster
common stock for each share of MECH common stock. The transaction is designed to
be a tax-free exchange to the holders of MECH common stock and is to be
accounted for as a purchase transaction. The Boards of Directors of MECH and
Webster expect the transaction to close in the second quarter of 2000.
The Company reported net income of $3.21 million for the first quarter ended
March 31, 2000 compared to $4.15 million for the same period in 1999. During the
first quarter of 1999, the Real Estate Partnership (50% owned by a Bank
subsidiary) sold its interest in 100 Pearl Street in Hartford, CT which houses
the Bank's banking and corporate offices to New Boston Limited Partnership, an
independent third party. The subsidiary received proceeds of $15.70 million and
recognized a $2.10 million gain on the sale. The Bank will continue to occupy
its banking and office space at 100 Pearl Street under a long-term lease.
Financial Condition
Total assets as of March 31, 2000 were $1,100.30 million representing a decrease
of $19.39 million or 1.7% from $1,119.69 million at December 31, 1999. The
Company's Tier 1 leverage ratio was 9.16% at March 31, 2000 compared to 8.75% at
December 31, 1999. The Company's total risk-based capital ratio was 15.56% at
March 31, 2000 compared to 14.82% at December 31, 1999.
Cash and cash equivalents decreased from $30.20 million at December 31, 1999 to
$26.70 million at March 31, 2000. At December 31, 1999, the Company retained
additional currency in preparation for the century day change. The Company
continues to efficiently manage cash and cash equivalents to balance the need
for liquidity with the need for increased yields.
Investment securities decreased $12.20 million or 4.1% from $294.75 million at
December 31, 1999 to $282.55 million at March 31, 2000 primarily due to a
decrease in the mortgage-backed securities portfolio of $12.23 million. At March
31, 2000, the Company held $67.77 million in securities classified as
held-to-maturity in accordance with Statement of Financial Accounting Standards
No. 115 "Accounting for Certain Investments in Debt and Equity Securities".
Due to increased FHLB borrowings, the Company was required to purchase
additional shares of stock totaling $1.54 million from the FHLB during the first
three months of 2000. The Company believes that these shares provide above
average dividend yields for the risk characteristics of such investments.
Net loans decreased $5.05 million or 0.7% from $741.72 million at December 31,
1999 to $736.67 million at March 31, 2000. The majority of the decrease came
from a $5.25 million decrease in loans secured by one- to four-family real
estate. The allowance for loan losses totaled $10.81 million at March 31, 2000
compared to $11.04 million at December 31, 1999. There was no provision for loan
losses recorded during
13
<PAGE>
the three months ended March 31, 2000 and net charge-offs totaled $222,000. The
allowance for loan losses as a percentage of non-performing loans was 553.97%
and 489.94% at December 31, 1999 and March 31, 2000, respectively.
Foreclosed real estate owned increased from $298,000 at December 31, 1999 to
$389,000 at March 31, 2000. The Company sold five properties totaling $123,000
during the three months ended March 31, 2000. There were no write-downs and net
losses on sale of foreclosed real estate owned for the first three months of
2000 and 1999.
Non-performing assets totaled $2.60 million at March 31, 2000 compared to $2.29
million at December 31, 1999. Charge-offs on non-performing loans reduced
non-performing assets by $339,000. Sales of foreclosed real estate owned
accounted for an additional $123,000 of the reductions. There were other
reductions of non-performing assets of $702,000 due to payoffs, payments and
loans returning to accrual status. These reductions were offset by $1.47 million
in additions to non-performing assets since December 31, 1999. Non-performing
assets as a percentage of total assets was 0.20% at December 31, 1999 and 0.24%
at March 31, 2000. Non-performing assets as a percentage of total loans and
foreclosed real estate owned was 0.30% at December 31, 1999 and 0.35% at March
31, 2000.
Deposits decreased 0.5% from $641.76 million at December 31, 1999 to $638.62
million at March 31, 2000. There was an overall decrease in certificates of
deposit of $6.81 million, demand deposits of $1.95 million and money market
passbook accounts of $1.07 million which were partially offset by a $6.54
million increase in money market checking.
During the quarter, the Company repaid its $34.0 million in federal funds
purchased. Borrowings from the FHLB increased $11.00 million from December 31,
1999 to March 31, 2000. The Company's $353.75 million of FHLB advances carry a
weighted average rate of 5.81% and have a weighted average contractual maturity
of 2.2 years. At December 31, 1999, FHLB advances totaled $342.75 million and
carried a weighted average rate of 5.54% and a weighted average contractual
maturity of 2.9 years. In addition, $97.00 million or 27.4% of the FHLB
borrowings at March 31, 2000 were callable and had call dates ranging from April
2000 to April 2003.
Liquidity
The Company's liquidity is dependent on dividends provided by the Bank.
Connecticut banking laws limit the amount of annual dividends that the Bank may
pay to an amount no greater than the Bank's net profit for the then current
year, plus the Bank's retained net profit for the prior two years, unless
specifically approved by the Banking Commissioner ("net profit" is defined as
the remainder of all earnings from current operations). The Bank is also
prohibited from paying a cash dividend if the effect thereof would reduce its
capital accounts below minimum regulatory requirements or below the amount
required to be maintained in the liquidation account.
The Bank manages its liquidity position to ensure that there is sufficient
funding available at all times to meet both anticipated and unanticipated
deposit withdrawals, new loan originations, securities purchases and other
operating cash outflows. The Bank monitors its liquidity in accordance with
guidelines established under its asset/liability management policy and
applicable regulatory requirements. On a monthly basis, management monitors the
Bank's liquidity position by analyzing the amount of securities available for
repurchase agreements, the Bank's borrowing capacity at the FHLB, the expected
level of cash flows from loans and mortgage-backed securities, the expected
prepayments from loans and mortgage-backed securities, and the Bank's levels of
cash and short-term investments. At March 31, 2000, management believes its
current liquidity level is sufficient to meet normal operating needs.
14
<PAGE>
Asset/Liability Management
The Company's objective in managing interest rate risk is to produce a high and
stable net interest margin in varying interest rate environments while
maintaining the flexibility to take advantage of opportunities that may arise
from the fluctuations of interest rates. The Company's exposure to interest rate
risk is managed strategically through the use of balance sheet simulation.
The Company models its forecasted balance sheet using interest rate ramps,
shocks and a most likely interest rate scenario over a 24 month time horizon. In
accordance with its funds management policy, the Company measures its interest
rate sensitivity by ramping interest rates in one hundred basis point increments
from -400 to +400 basis points from the current rate environment. From this 800
basis point grid, the asset/liability committee selects the most likely 400
basis point interest rate range based on the current interest rate environment,
as well as other economic factors. The Company will accept equal to or less than
a 10% change in net interest income over the next 12 months within the selected
400 basis point band. At March 31, 2000, the Company was within its policy
guideline, and the Company believes its level of interest rate sensitivity was
appropriate.
Capital Resources
At March 31, 2000, the Company's stockholders' equity totaled $97.35 million
representing a 3.6% increase from the $93.93 million in capital at December 31,
1999. At March 31, 2000, the Company had a Tier 1 leverage capital ratio of
9.16% and a total risk-based capital ratio of 15.56%. The Company's Tier 1
leverage capital ratio was 8.75% and its total risk-based capital ratio was
14.82% at December 31, 1999.
As of December 31, 1999 and March 31, 2000, the Company meets all capital
adequacy requirements to which it is subject and was classified, as of its most
recent notification, as "well capitalized". The Company believes its current
capital is adequate to support operations and anticipated future growth.
Results of Operations
For the quarters ended March 31, 2000 and 1999
For the quarter ended March 31, 2000, the Company reported net income of $3.21
million or $0.62 per diluted share compared to $4.15 million or $0.79 per
diluted share for the same period in 1999. During the first quarter of 1999, the
Real Estate Partnership (50% owned by a Bank subsidiary) sold its interest in
100 Pearl Street in Hartford, CT which houses the Bank's banking and corporate
offices and recognized a $2.10 million gain on the sale. Also during the first
quarter of 1999, the Company prepaid $30.00 million in FHLB advances which
resulted in a $435,000 extraordinary item, net of $220,000 in taxes due to the
early extinguishment of debt.
Net Interest Income
Net interest income totaled $8.76 million for the three months ended March 31,
2000 compared to $8.82 million for the same period in 1999, representing a
$66,000 decrease. The net interest margin decreased from 3.66% for the quarter
ended March 31, 1999 to 3.33% for the same period in 2000. Average
interest-earning assets increased $80.47 million while average interest-bearing
liabilities increased $62.62 million. Average net loans and investment
securities increased $74.39 million and $8.82 million, respectively.
Mortgage-backed securities were the main reasons for the increase in average
investment securities. Average net loans increased primarily due to a $45.38
million increase in one- to four-family mortgages, a $15.62 million increase in
commercial real estate mortgages and a $8.76 million increase in consumer loans.
Average borrowings increased $125.51 million from quarter to quarter which was
partially offset by a $62.89 million decrease in average deposits.
15
<PAGE>
The following table sets forth certain information relating to the Company's
average interest-earning assets and interest-bearing liabilities and net
interest income for the quarters ended March 31, 2000 and 1999:
<TABLE>
<CAPTION>
Average Balances Income / Expense Yields
---------------------------- -------------------------- ----------------------------
Quarters ended March 31, Quarters ended March 31, Quarters ended March 31,
(in thousands) 2000 1999 2000 1999 2000 1999
---------- ---------- ------------ ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Loans, net $ 740,515 $ 666,157 $ 13,899 $ 12,738 7.55% 7.75%
Investment securities 315,270 306,455 5,048 4,880 6.44 6.46
Short-term investments 2,861 5,564 40 64 5.62 4.66
---------- ---------- ------------ ------------ -------------- ------------
Total interest-earning assets 1,058,646 978,176 18,987 17,682 7.21 7.33
Other assets 46,321 57,717
---------- ----------
Total assets $1,104,967 $1,035,893
========== ==========
Money market checking $ 48,459 $ 42,493 210 119 1.74 1.14
Money market savings 63,654 59,747 429 365 2.71 2.48
Savings and other 105,570 108,952 395 403 1.50 1.50
Certificates of deposit 328,382 397,767 3,872 4,729 4.74 4.82
---------- ---------- ------------ ------------ -------------- ------------
Total interest-bearing deposits 546,065 608,959 4,906 5,616 3.61 3.74
Federal funds purchased 12,363 - 180 - 5.86 n/a
Borrowings 362,855 249,709 5,143 3,242 5.70 5.27
---------- ---------- ------------ ------------ -------------- ------------
Total interest-bearing funds 921,283 858,668 10,229 8,858 4.47 4.18
Demand deposits 84,897 80,045
Other liabilities 3,818 5,307
Stockholders' equity 94,969 91,873
---------- ----------
Total liabilities and equity $1,104,967 $1,035,893
========== ==========
Net interest income $ 8,758 $ 8,824
============ ============
Spread on interest-bearing funds 2.74% 3.15%
Net interest margin 3.33% 3.66%
</TABLE>
16
<PAGE>
The following table presents the changes in interest and dividend income and the
changes in interest expense, attributable to changes in interest rates and
changes in volume of interest-earning assets and interest-bearing liabilities
during the periods indicated:
<TABLE>
<CAPTION>
Quarters ended March 31, 2000 versus 1999
Change in interest due to
---------------------------------------------------------------------
(in thousands) Volume Rate Vol/Rate Net
-------------- --------------- ------------- --------------
<S> <C> <C> <C> <C>
Loans, net $ 1,422 $ (235) $ (26) $ 1,161
Investment securities 140 27 1 168
Short-term investments (31) 14 (7) (24)
-------------- --------------- ------------- --------------
Total 1,531 (194) (32) 1,305
-------------- --------------- ------------- --------------
Money market checking 17 65 9 91
Money market savings 24 38 2 64
Savings and other (13) 5 - (8)
Certificates of deposit (825) (39) 7 (857)
Federal funds purchased 180 - - 180
Other borrowings 1,469 297 135 1,901
-------------- --------------- ------------- --------------
Total 852 366 153 1,371
-------------- --------------- ------------- --------------
Net change to interest income $ 679 $ (560) $ (185) $ (66)
============== =============== ============= ==============
</TABLE>
Interest Income
Interest income increased $1.31 million or 7.4% due primarily to increased
average volumes of net loans and investment securities of $74.36 million and
$8.82 million, respectively. Overall average yields decreased from 7.33% for the
first quarter of 1999 to 7.21% for the same period in 2000. This was primarily
due to a 20 basis point decrease in the average yields for net loans.
Interest Expense
Interest expense increased $1.37 million or 15.5% from the first quarter of 1999
to the same period in 2000. The increase was mainly due to higher average
balances of other borrowings which was partially offset by $62.89 million in
lower average balances of deposits. Overall average rates increased from 4.18%
for the first quarter of 1999 to 4.47% for the same period in 2000 mainly due to
higher rates on borrowings.
Provision for Loan Losses
There was no provision for loan losses during the first quarter of 2000 and
1999. The Company's percentage of allowance for loan losses to non-performing
loans was 489.94% at March 31, 2000 compared to 553.97% at December 31, 1999.
The Company's allowance for loan losses to gross loans was 1.47% at December 31,
1999 compared to 1.45% at March 31, 2000. On a quarterly basis, management
reviews the adequacy of the reserves in relation to the non-performing assets.
As of March 31, 2000, the reserve levels were deemed appropriate and no
provision was necessary.
17
<PAGE>
Other Income
The Company recorded $2.06 million in other income for the three months ended
March 31, 2000 compared to $4.05 million for the same period in 1999. The
following table shows the components of other income for the quarters ended
March 31, 2000 and 1999:
<TABLE>
<CAPTION>
(in thousands) For the quarters ended $ %
March 31, 2000 March 31, 1999 Change Change
-------------------- ------------------- ------------ -----------
<S> <C> <C> <C> <C>
Investment brokerage services commissions $ 726 $ 604 $ 122 20.20 %
Service charges on deposit accounts 697 687 10 1.46
Appreciation of cash surrender value life insurance 241 228 13 5.70
Loan servicing and other fees 123 142 (19) (13.38)
Income from investment in Real Estate Partnership - 13 (13) (100.00)
Gain on sale of headquarters building owned by
the Real Estate Partnership - 2,096 (2,096) (100.00)
Net gain on calls / sales of investment securities - 5 (5) (100.00)
Net gain on sales of loans 3 3 - n/a
Other 268 274 (6) (2.19)
-------------------- ------------------- ------------
Total other income $2,058 $4,052 $(1,994) (49.21)%
==================== =================== ============ ===========
</TABLE>
Investment brokerage services commissions increased primarily due to higher
investment advisory fees and commissions from transactional sales. Loan
servicing and other fees were lower due mainly to lower servicing fees. On
February 11, 1999, the Real Estate Partnership sold the headquarters building
which resulted in a gain of $2.10 million.
Other Expenses
Other expenses totaled $6.08 million for the three months ended March 31, 2000
compared to $5.98 million for the same period in 1999. The following table
details the significant components of other expenses for the periods presented:
<TABLE>
<CAPTION>
(in thousands) For the quarters ended $ %
March 31, 2000 March 31, 1999 Change Change
------------------ ------------------- ------------ -----------
<S> <C> <C> <C> <C>
Salaries, commissions and employee benefits $ 3,736 $ 3,283 $ 453 13.80 %
Occupancy 774 775 (1) (0.13)
Data processing 316 313 3 0.96
Furniture and equipment 216 245 (29) (11.84)
Advertising 153 251 (98) (39.04)
Communications 137 138 (1) (0.72)
Legal and accounting 135 145 (10) (6.90)
Operation of foreclosed real estate owned 20 103 (83) (80.58)
Amortization of goodwill 29 29 - n/a
Other 564 696 (132) (18.97)
------------------ ------------------- ------------
Total other expenses $ 6,080 $ 5,978 $ 102 1.71 %
================== =================== ============ ===========
</TABLE>
Salaries, commissions and employee benefits increased primarily due to lower
deferred expenses relating to loan originations and higher overall salaries.
Furniture and equipment was lower due to lower depreciation expense. Advertising
was lower due to a lower activity level in 2000. Operation of foreclosed real
estate owned expense were reduced due to lower expenses for one- to four-family
properties. Other expense was lower due to lower correspondent banking charges,
collection, consulting and seminar expenses and professional dues. In addition,
during the first quarter of 1999, there was a $42,000 upfront fee for the Year
2000 liquidity advance.
18
<PAGE>
Income Taxes
During the first quarter of 2000, the Company recorded tax expense of $1.53
million compared to $2.32 million for the first quarter of 1999. The effective
tax rates for the three months ended March 31, 2000 and 1999 were 32.3% and
33.6%, respectively.
Extraordinary Item
During the first quarter of 1999, the Bank prepaid a $20,000 FHLB advance
scheduled to mature October 20, 2000 that carried an interest rate of 6.24%
which resulted in a $432 prepayment penalty. In addition, the Bank prepaid a
$10,000 FHLB advance scheduled to mature on October 20, 2000 that carried and
interest rate of 6.21% and incurred a $223 prepayment penalty. Due to these
prepayment penalties, the Company reported a $435 extraordinary item, net of
$220 in taxes due to the early extinguishment of debt during the first quarter
of 1999. This reduced earnings per share by $0.09 and $0.08 on a basic and
diluted basis, respectively.
Part I. Item 3. Quantitative and Qualitative Disclosures About Market Risk
At March 31, 2000 based upon various earnings simulations, which include 100
basis point to 200 basis point increases and decreases in interest rates,
management has projected the effect on net interest income for the next twelve
months as follows:
Effect on Net Interest Income
------------------------------------
Shock Ramp
(in thousands) Scenario (a) Scenario (b)
---------------- -----------------
200 basis point increase in rates (c) $ (3,913) $ (1,910)
100 basis point increase in rates (d) (1,645) (989)
100 basis point decrease in rates (d) 1,462 809
200 basis point decrease in rates (c) 2,246 1,419
(a) Represents the dollar amount of change in net interest income caused by an
instantaneous repricing of market interest rates.
(b) Represents the dollar amount of change in net interest income caused by a
gradual repricing of market interest rates in equal monthly increments
throughout the next twelve months.
(c) No adjustments are made to the Bank's passbook rates. Money market rates are
shocked/ramped 50 basis points rather than 200 basis points.
(d) No adjustments are made to the Bank's passbook rates. Money market rates are
shocked/ramped 25 basis points, rather than 100 basis points.
Part II. Item 1. Legal Proceedings
none
Part II. Item 2. Changes in Securities and Use of Proceeds
none
Part II. Item 3. Defaults Upon Senior Securities
none
Part II Item 4. Submission of Matters to a Vote of Security Holders
none
19
<PAGE>
Part II Item 5. Other Information
none
Part II Item 6. Exhibits and Reports on Form 8-K
a) Exhibits:
The following exhibit is included herein:
27 - Financial Data Schedule
b) Reports on Form 8-K:
none
20
<PAGE>
Signatures
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MECH Financial, Inc.
Date: 5/15/00 /S/ EDGAR C. GERWIG
------- --------------------
Chairman, President and Chief Executive Officer
Date: 5/15/00 /S/ THOMAS M. WOOD
------- -------------------
Executive Vice President and Treasurer
Date: 5/15/00 /S/ BRIAN A. ORENSTEIN
------- -----------------------
Senior Vice President and Controller
21
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 25,643
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 1,060
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 214,781
<INVESTMENTS-CARRYING> 67,765
<INVESTMENTS-MARKET> 64,525
<LOANS> 747,483
<ALLOWANCE> (10,813)
<TOTAL-ASSETS> 1,100,296
<DEPOSITS> 638,615
<SHORT-TERM> 208,240
<LIABILITIES-OTHER> 10,346
<LONG-TERM> 145,745
0
0
<COMMON> 54
<OTHER-SE> 97,296
<TOTAL-LIABILITIES-AND-EQUITY> 1,100,296
<INTEREST-LOAN> 13,899
<INTEREST-INVEST> 4,790
<INTEREST-OTHER> 298
<INTEREST-TOTAL> 18,987
<INTEREST-DEPOSIT> 4,906
<INTEREST-EXPENSE> 10,229
<INTEREST-INCOME-NET> 8,758
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 6,080
<INCOME-PRETAX> 4,736
<INCOME-PRE-EXTRAORDINARY> 3,207
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,207
<EPS-BASIC> 0.63
<EPS-DILUTED> 0.62
<YIELD-ACTUAL> 7.21
<LOANS-NON> 2,207
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 11,652
<ALLOWANCE-OPEN> 11,035
<CHARGE-OFFS> 339
<RECOVERIES> 117
<ALLOWANCE-CLOSE> 10,813
<ALLOWANCE-DOMESTIC> 7,379
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 3,434
</TABLE>
