UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
[ ] 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 0-24935
SERVICE BANCORP, INC.
(Exact name of registrant as specified in its charter)
Massachusetts 04-3430806
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification
Number)
81 Main Street,
Medway, Massachusetts 02053
(Address of principal executive offices) (Zip Code)
(508) 533-4343
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and
former fiscal year, if changed since last year.)
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 [ ]
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practical date.
At April 30, 1999, there were 1,712,630 shares of common stock outstanding,
par value $0.01 per share.
<PAGE>
SERVICE BANCORP, INC. AND SUBSIDIARY
FORM 10-QSB
Index
PART I FINANCIAL INFORMATION Page
- ------ --------------------- ----
Item 1. Financial Statements
Consolidated Balance Sheets
as of March 31, 1999 and June 30, 1998 1
Consolidated Statements of Income for the three
and nine months ended March 31, 1999 and 1998 2
Consolidated Statements of Changes in Stockholders' Equity
for the nine months ended March 31, 1999 and 1998 3
Consolidated Statements of Cash Flows for the nine months
ended March 31, 1999 and 1998 5
Notes to Unaudited Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
PART II OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 2. Changes in Securities 21
Item 3. Defaults upon Senior Securities 21
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 21
Signature Page 22
<PAGE>
SERVICE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS(Unaudited)
(Dollars in thousands, except for per share amounts)
March 31, June 30,
ASSETS 1999 1998
--------- ---------
Cash and due from banks $ 5,703 $ 4,452
Short-term investments 7,945 11,931
--------- ---------
Total cash and cash equivalents 13,648 16,383
Certificates of deposit 500 1,500
Securities available for sale 64,224 40,171
Federal Home Loan Bank stock, at cost 906 731
Loans 76,538 77,312
Less allowance for loan losses (643) (577)
--------- ---------
Loans, net 75,895 76,735
Banking premises and equipment, net 3,215 1,455
Accrued interest receivable 1,272 1,173
Other assets 763 804
--------- ---------
Total Assets $ 160,423 $ 138,952
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 123,815 $ 112,247
Federal Home Loan Bank advances 18,124 14,562
Due to broker -- 1,053
Other liabilities 1,101 967
--------- ---------
Total Liabilities 143,040 128,829
Stockholders' Equity:
Common stock,$.01 par value;12,000,000 shares
authorized, 1,712,630 issued and outstanding 17 --
Additional paid-in capital 7,449 --
Retained earnings 10,474 9,700
Accumulated other comprehensive income(loss) (13) 423
Unearned ESOP shares - 54,394 shares (544) --
--------- ---------
Total Stockholders' Equity 17,383 10,123
--------- ---------
Total Liabilities and Stockholders' Equity $ 160,423 $ 138,952
========= =========
See accompanying notes to unaudited consolidated financial statements.
1
<PAGE>
SERVICE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME(Unaudited)
(Dollars in thousands, except for per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------- -----------------------
3/31/99 3/31/98 3/31/99 3/31/98
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest and dividend income:
Interest and fees on loans $ 1,568 $ 1,536 $ 4,798 $ 4,531
Interest and dividends on securities
available for sale and FHLB stock 974 589 2,388 1,564
Interest on short-term investments
and certificates of deposit 46 83 387 214
---------- ---------- ---------- ----------
Total interest and dividend income 2,588 2,208 7,573 6,309
---------- ---------- ---------- ----------
Interest expense:
Interest on deposits 958 917 2,985 2,733
Interest on FHLB advances 182 143 567 239
---------- ---------- ---------- ----------
Total interest expense 1,140 1,060 3,552 2,972
---------- ---------- ---------- ----------
Net interest income 1,448 1,148 4,021 3,337
Provision for loan losses 30 75 80 75
---------- ---------- ---------- ----------
Net interest income, after provision for loan losses 1,418 1,073 3,941 3,262
---------- ---------- ---------- ----------
Other income:
Customer service fees 153 112 431 312
Gain on sales of securities available for sale, net 128 136 448 675
Gain on sales of loans 20 18 50 44
Miscellaneous 9 11 30 44
---------- ---------- ---------- ----------
Total other income 310 277 959 1,075
---------- ---------- ---------- ----------
Operating expenses:
Salaries and benefits 635 495 1,942 1,439
Occupancy and equipment expenses 271 223 742 627
Data processing expenses 101 106 262 250
Professional fees 76 62 174 116
Advertising expenses 44 33 119 89
Other general and administrative expenses 183 137 477 340
---------- ---------- ---------- ----------
Total operating expenses 1,310 1,056 3,716 2,861
---------- ---------- ---------- ----------
Income before income taxes 418 294 1,184 1,476
Provision for income taxes 141 107 410 521
---------- ---------- ---------- ----------
Net income $ 277 $ 187 $ 774 $ 955
========== ========== ========== ==========
Weighted average common shares
outstanding during the period 1,658,236 N/A N/A N/A
==========
Earnings per common share(Basic and Diluted) $ 0.17 N/A N/A N/A
==========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
2
<PAGE>
SERVICE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY(Unaudited)
NINE MONTHS ENDED MARCH 31, 1999 AND 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
Accumulated
Additional Other Unearned
Comprehensive Common Paid-in Retained Comprehensive ESOP
Income Stock Capital Earnings Income(Loss) Shares Total
-------- -------- -------- -------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1998 $ -- $ -- $ 9,700 $ 423 $ -- $ 10,123
Net proceeds from sale of
common stock 17 7,463 -- -- -- 7,480
Common stock acquired
by ESOP (64,394) -- -- -- -- (644) (644)
Common stock held by ESOP
committed to be released
(10,000 shares) -- (14) -- -- 100 86
Comprehensive Income
Net income $ 774 -- -- 774 -- -- 774
Change in net unrealized gain
on securities available for sale,
net of tax andreclassification
adjustment (436) -- -- -- (436) -- (436)
-------- -------- -------- -------- -------- -------- --------
Comprehensive income $ 338
========
Balance at March 31, 1999 $ 17 $ 7,449 $ 10,474 ($ 13) ($ 544) $ 17,383
======== ======== ======== ======== ======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE>
SERVICE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY(Unaudited)
NINE MONTHS ENDED MARCH 31, 1999 AND 1998(Concluded)
(Dollars in thousands)
<TABLE>
<CAPTION>
Accumulated
Additional Other Unearned
Comprehensive Common Paid-in Retained Comprehensive ESOP
Income Stock Capital Earnings Income(Loss) Shares Total
-------- -------- -------- -------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1997 $ -- $ -- $ 8,499 $ 196 $ -- $ 8,695
Comprehensive Income:
Net income $ 955 -- -- 955 -- -- 955
Change in net unrealized gain
on securities available for sale,
net of tax andreclassification
adjustment 240 -- -- -- 240 -- 240
-------- -------- -------- -------- -------- -------- --------
Comprehensive income $ 1,195
========
Balance at March 31, 1998 $ -- $ -- $ 9,454 $ 436 $ -- $ 9,890
======== ======== ======== ======== ======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE>
SERVICE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)
(Dollars in thousands)
Nine Months Ended
March 31,
---------------------
1999 1998
-------- --------
Cash flows from operating activities:
Net income $ 774 $ 955
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses 80 75
Gain on sales of securities available for
sale, net (448) (675)
Net amortization of securities
available for sale 25 338
Depreciation and amortization expense 287 259
Increase in accrued interest receivable (99) (172)
Deferred tax benefit (32) 3
Loans originated for sale (5,809) (5,379)
Principal balance of loans sold 5,809 5,379
Other, net 384 (12)
-------- --------
Net cash provided by operating activities 971 771
-------- --------
Cash flows from investing activities:
Maturity of certificates of deposit 1,000
Purchase of certificates of deposit (1,000)
Proceeds from sales of securities
available for sale 1,229 3,611
Proceeds from maturities of and
principal payments on securities
available for sale 10,474 7,319
Purchase of securities available for sale (37,059) (27,919)
Net decrease (increase) in loans 760 (5,512)
Purchase of FHLB stock (175) (185)
Proceeds from other real estate owned -- 217
Purchase of banking premises and equipment (2,047) (366)
-------- --------
Net cash used by investing activities (25,818) (23,835)
-------- --------
Cash flows from financing activities:
Net increase in deposits 11,568 15,159
Proceeds from Federal Home Loan Bank
advances 7,047 12,000
Repayment of Federal Home Loan Bank
advances (3,485) (2,218)
Purchase of common stock for ESOP (644) --
Release of common stock held by ESOP 100 --
Increase in mortgagors' escrow deposits 46 120
Net proceeds from issuance of common stock 7,480 --
-------- --------
Net cash provided by financing activities 22,112 25,061
-------- --------
Net change in cash and cash equivalents (2,735) 1,997
Cash and cash equivalents at beginning of period 16,383 9,129
-------- --------
Cash and cash equivalents at end of period $ 13,648 $ 11,126
======== ========
See accompanying notes to unaudited consolidated financial statements.
5
<PAGE>
SERVICE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)(Concluded)
(Dollars in thousands)
Nine Months Ended
March 31,
---------------------
1999 1998
-------- --------
Supplementary information:
Interest paid on deposits $2,987 $2,733
Interest paid on Federal Home Loan
Bank advances 568 196
Income taxes paid 439 541
Decrease in due to broker 1,053 272
See accompanying notes to unaudited consolidated financial statements.
6
<PAGE>
SERVICE BANCORP, INC. AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
Nine Months Ended March 31, 1999 and 1998
(1) Basis of Presentation and Consolidation
The accompanying unaudited consolidated financial statements include the
accounts of Service Bancorp, Inc. (the "Company") and its wholly-owned
subsidiary, Summit Bank (the "Bank"), and the Bank's wholly-owned subsidiaries,
Medway Securities Corp. and Franklin Village Security Corp., which engage solely
in the purchase and sale of investment securities. All significant intercompany
balances and transactions have been eliminated in consolidation.
These financial statements have been prepared in accordance with generally
accepted accounting principles ("GAAP") for interim financial information and
the instructions for Form 10-QSB and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by GAAP for
complete financial statements. In the opinion of management, all adjustments
(consisting only of normal recurring accruals) necessary for a fair presentation
have been included. Interim results are not necessarily indicative of the
results that may be expected for the entire year.
(2) Reorganization and Stock Offering
The Company is a Massachusetts corporation that was organized in August, 1998 at
the direction of the Board of Directors of the Bank and the Board of Trustees of
Service Bancorp, MHC (the "MHC"), the mutual holding company parent of the Bank,
for the purpose of owning all of the outstanding capital stock of the Bank. The
Company offered for sale 47% of the shares of its outstanding common stock in a
public offering to eligible depositors, employees, and members of the general
public (the "Offering"). The remaining 53% of the Company's shares of common
stock were issued to the MHC. The Offering was completed on October 7, 1998.
Prior to that date, the Company had no assets or liabilities.
Completion of the Offering resulted in the issuance of 1,712,630 shares of
common stock, 907,694 shares of which were issued to the MHC and 804,936 shares
of which were sold to eligible depositors, employees, and the general public at
$10.00 per share. The Company began trading on the OTC Bulletin Board under the
symbol "SERC" on October 7, 1998. Costs related to the Offering (primarily
marketing fees paid to an underwriting firm, professional fees, registration
fees, and printing and mailing costs) aggregated $569,000. These costs together
with funds loaned to purchase shares for the Bank's Employee Stock Ownership
Plan (the "ESOP") were deducted to arrive at net proceeds of $6.8 million. The
Company contributed 50% of the net proceeds of the Offering to the Bank for
general corporate use. On October 7, 1998, the Company loaned approximately
$644,000 to the ESOP to fund its purchase of 64,394 shares of common stock of
the Company.
(3) Earnings per Share
Earnings per share is based on the weighted average number of shares outstanding
during the period beginning January 1, 1999 through March 31, 1999. The
Company's "basic" and "diluted" earnings per share computations are identical as
there are no common stock equivalents. Earnings per share is not presented for
periods prior to January 1, 1999 since the Company completed its Offering on
October 7, 1998 and, accordingly, such data would not be meaningful.
(4) Other Comprehensive Income
The Company adopted Financial Accounting Standards Board Statement No. 130,
"Reporting Comprehensive Income" (SFAS No. 130), effective January 1, 1998. SFAS
No. 130 established
7
<PAGE>
SERVICE BANCORP, INC. AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
Nine Months Ended March 31, 1999 and 1998
standards for reporting comprehensive income and its components (revenue,
expenses, gains and losses). The Statement requires that an enterprise (a)
classify items of other comprehensive income by their nature in a financial
statement and (b) display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the equity
section of a statement of financial position. Reclassification of financial
statements for earlier periods provided for comparative purposes is required.
The Company adopted this disclosure requirement in the quarter ended September
30, 1998.
(5) Commitments
At March 31, 1999, the Company had outstanding commitments to originate loans of
$5.8 million, $4.2 million of which were commercial real estate loans. Unused
lines of credit available to customers amounted to $6.5 million, $6.0 million of
which were equity lines of credit.
(6) Securities Available for Sale
The following table sets forth the Company's securities available for sale at
the dates indicated.
March 31, 1999 June 30, 1998
------------------- -------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
-------- ------- --------- -------
(Dollars in thousands)
Federal agency obligations $41,896 $41,860 $27,502 $27,668
Mortgage-backed securities 9,974 9,875 5,977 5,980
Other debt securities 9,388 9,388 2,253 2,252
------- ------- ------- -------
Total debt securities 61,258 61,123 35,732 35,900
Marketable equity securities 2,985 3,101 3,785 4,271
------- ------- ------- -------
Total securities $64,243 $64,224 $39,517 $40,171
======= ======= ======= =======
8
<PAGE>
SERVICE BANCORP, INC. AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
Nine Months Ended March 31, 1999 and 1998
(7) Loans
The following table presents data relating to the composition of the Company's
loan portfolio by type of loan on the dates indicated. Dollars listed below are
in thousands.
March 31, 1999 June 30, 1998
---------------------- -------------------
Amount Percent Amount Percent
------ ------- ------ -------
Real estate loans:
Residential $ 41,350 53.99% $ 48,574 62.76%
Commercial 19,111 24.95 12,856 16.61
Construction 2,820 3.68 4,743 6.13
----------------------- ----------------------
Total real estate loans 63,281 82.63 66,173 85.50
Other loans:
Consumer loans:
Collateral 593 0.77 786 1.02
Home equity 4,173 5.45 4,514 5.83
Other 1,608 2.10 1,704 2.20
----------------------- ----------------------
Total consumer loans 6,374 8.32 7,004 9.05
Commercial business loans 6,931 9.05 4,217 5.45
----------------------- ----------------------
Total other loans 13,305 17.37 11,221 14.50
----------------------- ----------------------
Total loans 76,586 100.00% 77,394 100.00%
======== ========
Net deferred loan fees (53) (102)
Deferred premium 5 20
Allowance for loan losses (643) (577)
-------- --------
Total loans, net $ 75,895 $ 76,735
======== ========
(8) Deposits and Borrowed Funds
The following tables indicate types and balances in deposit accounts on dates
indicated. Dollars listed below are in thousands.
March 31, 1999 June 30, 1998
----------------- -----------------
Amount Percent Amount Percent
-------- ------- -------- -------
Demand $ 11,499 9.29% $ 10,597 9.44%
NOW 19,864 16.04 17,891 15.94
Money market deposits 9,857 7.96 9,162 8.16
Regular and other savings 23,664 19.11 23,112 20.59
-------- ------ -------- ------
Total non-certificate accounts 64,884 52.40 60,762 54.13
Term certificates 58,931 47.60 51,485 45.87
-------- ------ -------- ------
Total deposits $123,815 100.00% $112,247 100.00%
======== ====== ======== ======
9
<PAGE>
SERVICE BANCORP, INC. AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
Nine Months Ended March 31, 1999 and 1998
The following is a list of maturities for advances from the Federal Home Loan
Bank of Boston (the "FHLB") for the dates indicated. Dollars listed below are in
thousands.
March 31, 1999 June 30, 1998
---------------- -----------------
Amount Percent Amount Percent
------ ------- ------ -------
Maturities less than one year $ 347 1.86% $ 2,058 14.13%
Maturities greater than one year 17,777 98.14 12,504 85.87
------- ------ ------- ------
Total borrowed funds $18,124 100.00% $14,562 100.00%
======= ====== ======= ======
10
<PAGE>
SERVICE BANCORP, INC. AND SUBSIDIARY
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
General
The Company completed its stock offering on October 7, 1998. The Company
offered for sale 47% of the shares of its common stock to eligible depositors,
employees, and members of the general public. The remaining 53% of the Company's
shares of common stock were issued to its parent, Service Bancorp, MHC, a
state-chartered mutual holding company incorporated in Massachusetts. Prior to
that date, the Company had no assets or liabilities. Its principal activities
since that date through March 31, 1999 have been to complete the Offering,
contribute 50% of the net proceeds of the Offering to the Bank and use the
remaining 50% of the net proceeds to acquire short-term investments and fund a
loan to the Bank's employee stock ownership plan ("ESOP").
This quarterly report on Form 10-QSB contains forward-looking statements.
For this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, the words "believe", "anticipates", "plans", "expects" and
similar expressions are intended to identify forward-looking statements. There
are a number of important factors that could cause the Company's actual results
to differ materially from those contemplated by such forward-looking statements.
These important factors include, without limitation, the Bank's continued
ability to originate quality loans, fluctuation in interest rates, real estate
conditions in the Bank's lending areas, general and local economic conditions,
the Bank's continued ability to attract and retain deposits, the Company's
ability to control costs, new accounting pronouncements, and changing regulatory
requirements. The Company undertakes no obligation to publicly release the
results of any revisions to those forward-looking statements which may be made
to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
Comparison of Financial Condition at March 31, 1999 and June 30, 1998
Assets increased by $21.4 million, or 15.5%, from $139.0 million at June
30, 1998 to $160.4 million at March 31, 1999. The increase was attributable
primarily to the completion of the Company's Offering on October 7, 1998 and
growth in deposits and borrowings between these two dates. Net proceeds from the
Offering amounted to $6.8 million, while deposits increased $11.6 million, or
10.3%, from $112.2 million to $123.8 million. In addition, total borrowings
increased $3.5 million, or 24.5%, from $14.6 million to $18.1 million over the
same timeframe.
Short-term investments (federal funds sold and overnight funds) decreased
by $4.0 million, or 33.4%, from $11.9 million at June 30, 1998 to $7.9 million
at March 31, 1999 as the Company began to deploy these lower-yielding liquid
funds into higher-yielding longer term investments. These short-term funds,
together with the proceeds from the Offering were invested in federal agency
obligations, mortgage-backed securities, and other debt securities, with
callable features or monthly payback amortization. Accordingly, federal agency
obligations, mortgage-backed securities, and other debt securities increased
$14.2 million, or 51.3%, $3.9 million, or 66.9%, and $7.1 million, or 316.7%,
respectively.
Net loans declined $840,000, or 1.1% from June 30, 1998 to March 31, 1999.
The loan composition within this portfolio shifted from residential to
commercial lending products. Commercial real estate and other commercial loans
increased from $12.9 million and $4.2 million at June 30, 1998 to $19.1 million
and $6.9 million, respectively, at March 31, 1999 reflecting growth of $6.3
million, or 48.7% and $2.7 million, or 64.4%, respectively. The Bank has
increased its emphasis on the commercial loan portfolio in
11
<PAGE>
SERVICE BANCORP, INC. AND SUBSIDIARY
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation(Continued)
an effort to maintain and improve its interest rate spread. Conversely, despite
the increase in residential loan originations from 1998 to 1999, an increase in
the loan payoff amounts within the residential and construction loan portfolios
over the previous period was the primary reason for the decline in these
portfolios. An decline in mortgage lending rates between 1998 and 1999 and
increased lending competition within our lending area primarily caused this
increase in the loan payoff amounts. Residential mortgage loans decreased $7.2
million, or 14.9% from $48.6 million at June 30, 1998 to $41.4 million at March
31, 1999, while construction loans decreased $1.9 million, or 40.5%, from $4.7
million to $2.8 million.
Deposits increased $11.6 million, or 10.3% from June 30, 1998 and March 31,
1999. Term certificates and non-certificate accounts increased $7.5 million, or
14.5%, and $4.1 million, or 6.7%, respectively, during this timeframe. In
addition, borrowings increased $3.6 million, or 24.5%, over this same period,
the proceeds of which were used to fund the purchase of primarily
mortgage-backed securities which had similar or more favorable rates and terms
than the current originations within the Bank's mortgage portfolio.
Stockholders' equity increased from $10.1 million, or 7.29% of total assets
at June 30, 1998 to $17.4 million, or 10.84% of total assets at March 31, 1999.
The increase resulted primarily from the net proceeds from the Offering and net
income earned. Unrealized gains(losses) on securities available for sale are
reported as accumulated other comprehensive income and between June 30, 1998 and
March 31, 1999, the change amounted to $436,000.
Non-Performing Assets and Allowance for Loan Losses
The following indicates the non-performing assets and related allowance for
loan loss ratios at the dates indicated.
March 31, June 30,
1999 1998
---------- ----------
(Dollars in thousands)
Non-accrual loans:
One-to-four family real estate loans $ 319 $ 205
Commercial loans 80 84
Consumer loans 13 --
---------- ----------
Total non-accrual loans 412 289
Other real estate owned -- --
---------- ----------
Total non-performing assets $ 412 $ 289
========== ==========
Allowance for loan losses $ 643 $ 577
========== ==========
12
<PAGE>
SERVICE BANCORP, INC. AND SUBSIDIARY
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation(Continued)
March 31, June 30,
1999 1998
---------- ----------
Allowance for loan losses as a percent
of total loans, net 0.85% 0.75%
========== ==========
Allowance for loan losses as a percent
of non-accrual loans 156.07% 199.65%
========== ==========
Non-accrual loans as a percent of
total loans, net 0.54% 0.38%
========== ==========
Non-performing assets as a percent of
total assets 0.26% 0.21%
========== ==========
During the nine months ended March 31, 1999, $80,000 was added to the loan loss
provision due to the growth of the commercial loan portfolio because commercial
loans present a greater than the residential loans. During this period, there
were $21,000 in loan charge-offs and $7,000 in recoveries from previously
charged-off loans.
While management believes that, based on information currently available,
the allowance for loan losses is sufficient to cover losses in the Bank's loan
portfolio at this time, no assurances can be given that the level of the
allowance will be sufficient to cover future loan losses or that future
adjustments to the allowance will not be necessary if economic and/or other
conditions differ substantially from the economic and other conditions
considered by management in evaluating the adequacy of the current level of the
allowance.
Comparison of Operating Results for the Three Months Ended March 31, 1999 and
1998
General
Operating results are primarily dependent on the Bank's net interest
income, which is the difference between the interest earned on the Bank's
earning assets (short-term investments, loans, and investment securities) and
the interest paid on deposits and borrowings. Operating results are also
affected by provisions for loan losses, the level of income from non-interest
sources such as fees and sales of investment securities and other assets,
operating expenses and income taxes. Operating results are also significantly
affected by general economic conditions, particularly changes in interest rates,
as well as government policies and actions of regulatory authorities.
Net income for the three months ended March 31, 1999 was $277,000 as
compared to $187,000 for the three month period ended March 31, 1998, an
increase of $90,000, or 48.1%. This increase was primarily attributable to
increases of $300,000 and $33,000, respectively, in net interest income and
other income as well as a $45,000 decrease in the provision for loan losses,
which were partially offset by an increase of $254,000 in total operating
expenses.
13
<PAGE>
SERVICE BANCORP, INC. AND SUBSIDIARY
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation(Continued)
The Bank's interest rate spread (the difference between yields earned on
earning assets and rates paid on deposits and borrowings) declined slightly from
3.53% for the three months ended March 31, 1998 to 3.52% for the three months
ended March 31, 1999. During the same period, interest rate margin (net interest
income divided by average earning assets) increased from 3.99% to 4.07%. The
interest rate margin indicates that in addition to interest-bearing liabilities,
demand deposits and capital serve as a source of funding for earning assets. The
interest rate spread for the three months ended March 31, 1999 improved from
3.29% for the three month period ended December 31, 1998 as the Bank reinvested
the net proceeds of $6.8 million from the Offering into longer-term, higher
yielding commercial loans and corporate and federal agency bonds. The Bank's
objective is for continued growth as new retail branches are expected to open
within the next three months. While core-based deposit growth will be
emphasized, past experience indicates that such growth is achieved through a
greater increase in the higher cost retail certificates than the lower-cost core
deposits. While the Bank will be seeking ways to reinvest these new deposit
dollars in higher-yielding loan products, initially the interest rate spread
could decline as funds are invested in shorter-term lower yielding investments.
The interest rate spread and margin for the periods indicated are as
follows:
Three months ended
March 31,
----------------------
1999 1998
------- -------
Weighted average yield earned on:
Short-term investments 4.83% 7.06%
Investments 6.28 6.02
Total loans, net 8.22 8.60
------- -------
All earning assets 7.28 7.66
Weighted average rate paid on:
Deposits 3.59 3.99
Borrowed funds 5.03 5.37
------- -------
All interest-bearing liabilities 3.76 4.13
------- -------
Weighted average rate spread 3.52% 3.53%
======= =======
Net interest margin 4.07% 3.99%
======= =======
Earnings per share data for the three months ended March 31, 1999 was $0.17
for both "Basic" and "Diluted" calculations. Earnings per share is not presented
for the three months ended March 31, 1998 because the Company became a publicly
owned entity on October 7, 1998 and accordingly, did not have shares outstanding
throughout any of the periods presented prior to that date.
14
<PAGE>
SERVICE BANCORP, INC. AND SUBSIDIARY
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation(Continued)
Interest and Dividend Income
Total interest and dividend income increased by $380,000, or 17.2%, from
$2.2 million for the three months ended March 31, 1998 to $2.6 million for the
comparable period in 1999. This increase was primarily attributable to a $26.9
million, or 23.3%, increase in average earning assets between the two periods,
which was partially offset by a 38 basis point decline in the yield on earning
assets. The average balances in net loans increased $4.8 million, or 6.8%, while
total loan yield declined by 38 basis points to 8.22%. This loan yield decline
was primarily attributable to the fact that the residential loan portfolio has
experienced larger than normal principal payoffs as borrowers sought to
refinance their loans at lower rates. In addition, commercial loans are being
impacted by current market conditions and the pricing for new commercial loan
originations were driven down by the loan pricing of the Bank's competition. If
interest rates continue to decline, the yields on new loan originations and
existing loans with prime and index-based rates could be adversely affected.
The average investment portfolio balance increased $22.9 million or 58.3%
over this same timeframe and its portfolio yield has improved by 26 basis points
to 6.28%. The Bank decided to invest in federal agency and corporate obligations
with longer maturities and higher yields in order to improve the interest rate
margin while not sacrificing the interest rate profile objectives of the
Asset-Liability ("ALCO") management process discussed later. The average balance
in short-term investments declined $838,000, or 18.0%, between periods and the
portfolio yield declined 2.23% as the Bank reinvested the maturity proceeds from
these investments into longer-maturing and higher-yielding investments and
loans.
Interest Expense
Interest expense on deposits increased $41,000, or 4.5%, from $917,000 for
the three months ended March 31, 1998, to $958,000 for the three months ended
March 31, 1999. This increase was attributable to a $14.9 million, or 16.2%,
increase in average interest-bearing deposit balances between periods, which was
partially offset by a reduction in deposit rates over the same period from 3.99%
to 3.59%. The decrease in deposit interest rates was primarily due the declining
interest rate environment between the two periods.
The Bank increased its use of borrowings from the FHLB as part of its
management of interest rate risk. Average balances in these advances were $14.5
million during the three months ended March 31, 1999, an increase of $3.8
million, or 36.0% from the three months ended March 31, 1998. Over this same
timeframe, average borrowing rates declined from 5.37% to 5.03%. These
borrowings were used in many cases to fund the purchase of investment securities
where the yield and matching maturing terms favorably affected the net income
and ALCO management performance of the Bank.
Other Income
Total other income increased $33,000, or 11.9%, from $277,000 for the three
months ended March 31, 1998 to $310,000 for the same period in 1999. Customer
service fees increased by $41,000, from $112,000 to $153,000, because of the
increase in Visa Debit card and ATM surcharge fees between periods. The gain on
sale of securities available for sale declined $8,000, from$136,000 to $128,000
between the periods. Marketable equity securities are held by the Bank primarily
for capital appreciation and not for trading purposes.
15
<PAGE>
SERVICE BANCORP, INC. AND SUBSIDIARY
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation(Continued)
Operating Expense
Total operating expense increased $254,000, or 24.1 %, from $1.1 million
for the three months ended March 31, 1998 to $1.3 million for the three months
ended March 31, 1999. Between the two periods, salaries and benefits and
occupancy and equipment expenses increased $140,000, or 28.3%, and $48,000, or
21.5% respectively. No other individual expense category increased materially
between periods. Much of the increase in expense was attributed to the Company's
asset growth as management added staff and incurred costs to service the full
range of retail and loan products added to the Bank's product lines. Despite the
increase in expenses , the ratio of operating expenses to average assets
declined slightly from 3.47% for the three months ended March 31, 1998 to 3.46%
for the 1999 period.
Income Taxes
The effective income tax rate was 33.7% and 36.4% for the three months
ended March 31, 1999 and 1998, respectively. The effective tax rates are below
the statutory combined state and federal income tax rates because the Bank's two
security corporations purchase investment securities to take advantage of the
lower state tax rate afforded these types of entities.
Comparison of Operating Results for the Nine Months Ended March 31, 1999 and
1998
General
Net income for the nine months ended March 31, 1999 was $774,000 as
compared to $955,000 for the nine months ended March 31, 1998, a decrease of
$181,000, or 19.0 %. This decrease was primarily attributable to an increase of
$855,000 in operating expenses and a decrease on $116,000 in other income
between periods, which were partially offset by an increase of $684,000 in net
interest income over 1998.
Interest rate spread and interest rate margin declined from 3.71% and
4.15%, respectively, for the nine months ended March 31, 1998 to 3.37% and
3.89%, respectively, for the nine months ended March 31, 1999. The decline was
primarily attributable to lower yields in all earning assets offset in part by
lower rates on deposits and borrowings.
16
<PAGE>
SERVICE BANCORP, INC. AND SUBSIDIARY
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation(Continued)
The interest rate spread and margin for the periods indicated are as
follows:
Nine months ended
March 31,
----------------------
1999 1998
------- -------
Weighted average yield earned on:
Short-term investments 5.02% 5.40%
Investments 6.13% 6.45%
Total loans, net 8.47% 8.67%
------- -------
All earning assets 7.33% 7.85%
Weighted average rate paid on:
Deposits 3.79% 4.05%
Borrowed funds 5.23% 5.62%
------- -------
All interest-bearing liabilities 3.96% 4.14%
------- -------
Weighted average rate spread 3.37% 3.71%
======= =======
Net interest margin 3.89% 4.15%
======= =======
Earnings per share data was not calculated for the nine months ended March 31,
1999 because the Company did not issue stock until October 7, 1998. Any
presentation of this data would, therefore, not be meaningful.
Interest and Dividend Income
Total interest and dividend income increased by $1.3 million, or 20.0%,
from $6.3 million for the nine months ended March 31, 1998 to $7.6 million for
the comparable period in 1999. This increase in interest income was primarily
attributable to a $30.6 million, or 28.6%, increase in average earning assets
between the two periods, which was partially offset by a decline in yield on
earning assets of 52 basis points to 7.33%. The average balances in short-term
investments, investment securities, and net loans increased $5.9 million, $18.8
million, and $5.9 million, respectively, while their comparable yields declined
over the same timeframe.
The reduction of earning asset yields is a reflection of the declining
interest rate environment over the past year as loan payoffs, callable
investment proceeds, and net Offering proceeds have been redeployed in lower
yielding short-term investments and investments.
Interest Expense
Interest expense on deposits and borrowings was $3.6 million for the nine
months ended March 31, 1999, an increase of $580,000, or 19.5%, from $3.0
million, for the nine months ended March 31, 1998. This increase was
attributable to a $15.0 million, or 16.6%, increase in average deposit balances
between periods, which was partially offset by a reduction in deposit rates over
the same period from 4.05% to 3.79%. This decrease in deposit interest rates was
primarily due the declining interest rate environment.
17
<PAGE>
SERVICE BANCORP, INC. AND SUBSIDIARY
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation(Continued)
between the two periods.
The Bank increased its use of borrowings from the FHLB as part of its
management of interest rate risk. Average balances in these advances were $14.4
million during the nine months ended March 31, 1999, an increase of $8.8
million, or 155.7% from the nine months ended March 31, 1998. Over this same
timeframe, average borrowing rates declined from 5.62% to 5.23%.
Other Income
Total other income decreased $116,000, or 10.8%, from $1.1 million for the
nine months ended March 31, 1998 to $959,000 for the same period in 1999. This
decrease was caused primarily by a $227,000 decrease in the gain on sale of
securities available for sale from $675,000 for the nine months ended March 31,
1998 to $448,000 for the current period. This was partially offset by an
increase in customer service fees of $119,000, or 38.1% over the same timeframe,
which was primarily due to increases in Visa Debit card and ATM surcharge fee
income.
Operating Expense
Total operating expense increased $855,000, or 29.9%, from $2.9 million for
the nine months ended March 31, 1998 to $3.7 million for the nine months ended
March 31, 1999. Between the two periods, salaries and benefits, occupancy and
equipment expenses, advertising expenses, and professional fees increased
$503,000, or 35.0%; $115,000, or 18.3%; $30,000, or 33.7%; and, $58,000, or
50.0%, respectively. Much of the increase was attributed to asset growth as
management added staff and incurred costs to service the full range of retail
and loan products added to the Bank's product lines. Included in the salaries
and benefits amount is $112,000 in ESOP compensation expenses incurred during
the nine months ended March 31, 1999. No such expense was incurred in the
comparable period in 1998 as the Company implemented the ESOP in October, 1998.
The ratio of operating expenses to average assets increased slightly from 3.34%
for the nine months ended March 31, 1998 to 3.38% for the comparable period in
1999.
Income Taxes
The effective income tax rate was 34.6% and 35.3%, respectively, for the
nine months ended March 31, 1999 and 1998. The effective tax rates are below the
statutory combined state and federal income tax rates because the Bank's two
security corporations purchase investment securities to take advantage of the
lower state tax rate afforded these types of entities.
18
<PAGE>
SERVICE BANCORP, INC. AND SUBSIDIARY
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation(Continued)
Asset/Liability Management
A principal operating objective of the Bank is to produce stable earnings
by achieving a favorable interest rate spread that can be sustained during
fluctuations in prevailing interest rates. Since the Bank's principal
interest-earning assets generally have longer terms to maturity than its primary
source of funds, i.e., deposit liabilities, increases in general interest rates
will generally result in an increase in the Bank's cost of funds before the
yield on its asset portfolio adjusts upward. Financial institutions have
generally sought to reduce their exposure to adverse changes in interest rates
by attempting to achieve a closer match between the repricing periods of
interest rate sensitive assets and liabilities. Such matching, however, is
carefully monitored so as not to sacrifice net interest margin performance for
the perfect matching of these interest rate sensitive instruments. The Bank has
established an Asset/Liability Management Committee ("ALCO") made up of members
of senior management to assess the asset/liability mix and recommend strategies
that will enhance income while managing the Bank's vulnerability to changes in
interest rate. This committee meets regularly to discuss interest rate
conditions and potential product lines that would enhance the Bank's income
performance.
Certain strategies have been implemented to improve the match between
interest rate sensitive assets and liabilities. These strategies include, but
are not limited to: daily monitoring of the Bank's cash requirements,
originating adjustable and fixed rate mortgage loans, both residential and
commercial, for the Bank's own portfolio, managing the cost and structure of
deposits, and generally using the matched borrowings to fund specific purchases
of loan packages and large loan originations. Occasionally, management may
choose to deviate from specific matching of maturities of assets and
liabilities, if an attractive opportunity to enhance yield becomes available.
Quarterly, ALCO modeling is performed with the assistance of an outside
investment advisor which projects the Bank's financial performance over the next
twenty four months using loan and deposit projections, projections of changes in
interest rates, and anticipated changes in other income and operating expenses
to reveal the full impact of the Bank's operating strategies on financial
performance. The results of the ALCO process are reported to the Board at least
on a quarterly basis.
Liquidity and Capital Resources
The Bank's primary sources of funds consist of deposits, borrowings,
repayment and prepayment of loans, sales of loans and investments, maturities
and early calls of investments, and funds provided from operations. While
scheduled repayments of loans and maturities of investments are predictable
sources of funds, deposit flows and loan prepayments are greatly influenced by
the general level of interest rates, economic conditions, and competition. The
Bank uses its liquidity resources primarily to fund existing and future loan
commitments, to fund net deposit outflows, to invest in other interest-earning
assets, to maintain liquidity, and to pay operating expenses.
From time to time, the Bank utilizes advances from the FHLB primarily in
connection with its management of the interest rate sensitivity of its assets
and liabilities. Total advances outstanding at March 31, 1999 amounted to $18.1
million. The Bank's ability to borrow from the FHLB is dependent upon the amount
and type of collateral the Bank has to secure the loans. Such collateral
consists of, but is not limited to, one-to-four family owner-occupied
residential property, mortgage-backed securities guaranteed by the U.S.
government or a government agency, and funds on deposit with
19
<PAGE>
SERVICE BANCORP, INC. AND SUBSIDIARY
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation(Continued)
the FHLB. As of June 30, 1998, the end of the latest fiscal year, the Bank's
total borrowing capacity was $51 million.
A major portion of the Bank's liquidity consists of cash and cash
equivalents, short-term investments, U.S. Government and federal agency
obligations, mortgage-backed securities, and other debt securities. The level of
these assets is dependent upon the Bank's operating, lending, and financing
activities during any given period.
At March 31, 1999, the Bank had $5.8 million of outstanding commitments to
originate loans. The Bank anticipates that it will have sufficient funds
available to meet these commitments. Certificates of deposit, which are
scheduled to mature in one year or less, totaled $58.9 million at March 31,
1999. Based upon historical experience, management believes that a significant
portion of such deposits will remain with the Bank.
At March 31, 1999, the Company and the Bank exceeded all regulatory capital
requirements.
Year 2000 ("Y2K") Compliance
Changing from the year 1999 to 2000 has the potential to cause problems in
data processing and other data-sensitive systems, a problem known as the Year
2000 or Y2K dilemma. The Company uses computer systems to perform financial
calculations, track deposits and loan payments, transfer funds and make direct
deposits. The processing of the Company's loan and deposit transactions is
outsourced to a third-party data processing vendor. The Company is following a
comprehensive process to assure that such systems are ready for the year 2000
date change.
To become Y2K compliant, the Company is following a five-step process
mandated by the federal bank regulatory agencies. A description of each of the
steps and the status of the Company's efforts in completing the steps is as
follows:
Step 1. Awareness and Understanding of the Problem. The Company has formed
a Year 2000 team that has investigated the problem and its potential impact on
the Company's systems. An independent consulting firm has been engaged to assist
the Company's development of its approach to becoming Y2K compliant. This phase
also includes education of the Company's employees and customers about Y2K
issues. The awareness and understanding phase of this step has been completed.
Training and communication has taken place and will continue in 1999.
Step 2. Identification of All Potentially Affected Systems. This step has
included a review of all major information technology ("IT") and non-information
technology ("non-IT") systems to determine how they are affected by Y2K issues.
An inventory has been prepared of all vendors who render IT and non-IT services
to the Company. This step is considered complete.
Step 3. Assessment and Planning. The Y2K team has completed its assessment
of which systems and equipment are most prone to placing the Company at risk if
they are not Y2K compliant. The project team has developed an inventory of
vendors, an inventory of actions to be taken, identification of the team members
responsible for completion of each action, a completion timetable, and project
tracking methodology. Significant vendors have been requested to advise the
Company in writing of their Y2K
20
<PAGE>
SERVICE BANCORP, INC. AND SUBSIDIARY
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation(Continued)
readiness, including actions to become compliant if they are not already
compliant. A plan has been developed to repair or replace systems and equipment
not currently Y2K compliant. This step is substantially complete. Responses from
certain vendors have not yet been received, but Y2K team members will contact
these vendors to ensure that all vendors respond regarding their Y2K compliance
on a timely manner.
Step 4. Correction and Testing. The Company's third party data processing
servicer as well as vendors who provide significant technology-related services
have modified their systems to become Y2K compliant. The Company has developed
scripts involving typical transactions to test the proper functioning of the
modified systems. It has also arranged for repair or replacement of equipment
programs affected by Y2K issues. All of the required testing has been completed
by the end of March, 1999. The monitoring of certain non-IT vendors will
continue into 1999.
Step 5. Implementation. This step includes the repair or replacement of
systems and computer equipment and the development of contingency plans. The
repair and replacement phase is substantially completed. Contingency plans on
how the Company would resume business if unanticipated problems arise from
non-performance by IT and non-IT vendors are being developed and are expected to
be completed by June 30, 1999, as dictated by the regulatory authorities.
The Company's efforts to become Y2K compliant are being monitored by its
federal banking regulators. Failure to be Y2K compliant could subject the
Company to formal supervisory or enforcement actions.
The Company expensed $30,000 for the nine months ended March 31, 1999, and
an additional $31,500 from January through June, 1998 for Y2K compliance needs.
It expects to incur additional costs throughout 1999 to become Y2K compliant,
but does not expect such costs to be material to the operating expenses of the
Company. Some of the costs are not expected to be incremental to the Company,
but rather represent new equipment and software that would otherwise be
purchased in the normal course of the Company's business. The Company is
monitoring Y2K compliance for each of its large borrowers and will adjust the
loan loss allowance accordingly if any Y2K noncompliance affects their ability
to fulfill the terms and conditions of any loan agreement. The Company presently
believes the Y2K issue will not pose significant operating problems for the
Company. However, if implementation and testing plans are not completed in a
satisfactory and timely manner, in particular by third parties on which the
Company is dependent, or other unforeseen problems arise, no assurance can be
given with respect to the cost or timing of such efforts or any potential
adverse effects on the Company's business, financial condition, or results of
operation.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company and its subsidiary are not involved in any litigation, nor is
the Company aware of any pending litigation, other than legal proceedings
incident to the business of the Company. Management Believes the results of any
current litigation would be immaterial to the consolidated financial condition
or results of operations of the Company.
21
<PAGE>
SERVICE BANCORP, INC. AND SUBSIDIARY
PART II - OTHER INFORMATION(Continued)
Item 2. Changes in Securities
The Company is a Massachusetts corporation that was organized in August,
1998 at the direction of the Board of Directors of the Bank and the Board of
Trustees of the MHC for the purpose of owning all of the capital stock of the
Bank. The Company offered for sale 47% of the shares of its common stock to
eligible depositors, employees, and members of the general public (the
"Offering"). The remaining 53% of the Company's shares of common stock were
issued to the MHC. The Offering was completed on October 7, 1998. Prior to that
date, the Company had no assets or liabilities.
Completion of the Offering resulted in the issuance of 1,712,630 shares of
common stock, 907,694 shares (53%) of which were issued to the MHC and 804,936
shares (47%) of which were sold to eligible depositors, employees, and the
general public at $10.00 per share. Costs related to the Offering (primarily
marketing fees paid to an underwriting firm, professional fees, registration
fees, and printing and mailing costs) aggregated $569,000. These costs together
with funds loaned to purchase shares for the ESOP were deducted to arrive at net
proceeds of $6.8 million. The Company contributed 50% of the net proceeds of the
Offering to the Bank for general corporate use. On October 7, 1998, the Company
loaned approximately $644,000 to the Company's Employee Stock Option Plan to
fund its purchase of 64,394 shares of common stock of the Company.
Item 3. Default Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
Exhibit 27 EDGAR financial data schedule.
There were no reports filed on Form 8-K.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SERVICE BANCORP, INC.
Date: May 12, 1999 By: /s/ Eugene G. Stone
-----------------------------
Eugene G. Stone
President and Chief Executive Officer
Date: May 12, 1999 By: /s/ Warren W. Chase, Jr.
-----------------------------
Warren W. Chase, Jr.
Vice President and Treasurer
23
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> MAR-31-1999
<CASH> 5,703
<INT-BEARING-DEPOSITS> 500
<FED-FUNDS-SOLD> 7,845
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 64,224
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 76,538
<ALLOWANCE> 643
<TOTAL-ASSETS> 160,423
<DEPOSITS> 123,815
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,101
<LONG-TERM> 18,124
17
0
<COMMON> 0
<OTHER-SE> 17,366
<TOTAL-LIABILITIES-AND-EQUITY> 160,423
<INTEREST-LOAN> 4,798
<INTEREST-INVEST> 2,388
<INTEREST-OTHER> 387
<INTEREST-TOTAL> 7,573
<INTEREST-DEPOSIT> 2,985
<INTEREST-EXPENSE> 3,552
<INTEREST-INCOME-NET> 4,021
<LOAN-LOSSES> 80
<SECURITIES-GAINS> 448
<EXPENSE-OTHER> 3,716
<INCOME-PRETAX> 1,184
<INCOME-PRE-EXTRAORDINARY> 1,184
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 774
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 7.33
<LOANS-NON> 412
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 577
<CHARGE-OFFS> 21
<RECOVERIES> 7
<ALLOWANCE-CLOSE> 643
<ALLOWANCE-DOMESTIC> 630
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 13
</TABLE>
