<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to _________________
Commission File Number 1-14577
SECURITY OF PENNSYLVANIA FINANCIAL CORP.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 23-2980576
- --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization Identification No.)
31 W. Broad Street, Hazleton, Pennsylvania 18201
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(570) 454-0824
- --------------------------------------------------------------------------------
(Issuer's telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changes since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes X No
----- -----
Yes X No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: the Issuer had 1,587,000 shares
of common stock, par value $0.01 per share, outstanding as of May 11, 1999.
<PAGE> 2
SECURITY OF PENNSYLVANIA FINANCIAL CORP.
FORM 10-QSB
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet at
March 31, 1999 and June 30,1998 (unaudited)...........................1
Consolidated Income Statement and Statement of
Comprehensive Income for the Three and Nine
Months Ended March 31, 1999 and 1998 (unaudited)......................2
Consolidated Statement of Cash Flows for the Nine Months Ended
March 31, 1999 and 1998 ..............................................4
Notes to Consolidated Financial Statements............................5
Item 2. Management's Discussion and Analysis .................................6
PART II: OTHER INFORMATION
Item 1. Legal Proceedings....................................................12
Item 2. Changes in Securities and Use of Proceeds............................12
Item 3. Defaults Upon Senior Securities......................................12
Item 4. Submission of Matters to a Vote of Security Holders..................12
Item 5. Other Information....................................................12
Item 6. Exhibits and Reports on Form 8-K.....................................12
SIGNATURES ..................................................................13
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
--------------------
SECURITY OF PENNSYLVANIA FINANCIAL CORP.
CONSOLIDATED BALANCE SHEET
MARCH 31, 1999 (UNAUDITED) AND JUNE 30, 1998
(In thousands)
<TABLE>
<CAPTION>
AT AT
MARCH 31, June 30,
1999 1998
---------- ---------
(UNAUDITED)
<S> <C> <C>
Assets:
Cash and cash equivalents...................... $ 16,605 $ 11,858
Held-to-maturity securities
(fair value of $21,503 on 3/31/99 and 20,807
in 6/30/98) 19,466 20,783
Available for sale securities.................. 14,643 7,900
Loans (less allowance for loan loss of $436 in
3/31/99 And $496 in 6/30/98)................ 69,891 69,211
Property and equipment, net.................... 1,291 1,364
Other assets................................... 1,732 874
-------- --------
Total assets................................. $123,628 $111,990
======== ========
Liabilities and Equity:
Deposits....................................... $100,518 $102,604
Accrued interest payable and other
liabilities.................................. 421 156
-------- --------
Total liabilities............................ 100,939 102,760
-------- --------
Common Stock ($.01 par value; 6,000,000
authorized shares, 1,587,000 shares issued.. 16
Additional paid-in capital..................... 14,868 --
Unearned ESOP Shares........................... (1,270)
Retained earnings - substantially restricted... 9,331 9,361
Accumulated other comprehensive income......... (256) (131)
-------- --------
Total equity................................. 22,689 9,230
-------- --------
Total liabilities and equity................. $123,628 $111,990
======== ========
</TABLE>
1
<PAGE> 4
SECURITY OF PENNSYLVANIA FINANCIAL CORP.
CONSOLIDATED INCOME AND COMPREHENSIVE INCOME STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND MARCH 31, 1998
(in thousands, except per share data)
<TABLE>
<CAPTION>
MARCH 31, March 31,
1999 1998
---------- ----------
(UNAUDITED)
<S> <C> <C>
Interest income:
Loans............................................ $1,323 $1,330
Interest and dividends on securities.......... 450 341
Interest-bearing deposits with banks.......... 213 228
------ ------
Total interest income........................ 1,986 1,899
Interest expense:
Deposits......................................... 986 1,065
Net interest income.............................. 1,000 834
Provision for loan losses........................ 10 71
------ ------
Net interest income after provision for
loan losses..................................... 990 763
Noninterest income:
Other loan fees and service charges.............. 85 59
Gain (loss) on sale of other real estate owned
and other assets........................... (29) (54)
---- ----
Total noninterest income..................... 56 5
Noninterest Expense:
Salaries and net employee benefits............... 349 303
Occupancy costs.................................. 83 56
Other Noninterest Expense........................ 290 228
------ ------
Total noninterest expense.......................... 722 587
Income (loss) before provision for income taxes 324 181
Income tax provision (benefit) 77 85
-- --
Net income 247 96
Inc rease (decrease) in unrealized losses available
for sale securities (126) (9)
----- ---
Comprehensive income (loss) $121 $ 87
=== ==
Common stock outstanding 1,587,000 N/A
Earnings per share - net income $.16 N/A
</TABLE>
2
<PAGE> 5
SECURITY OF PENNSYLVANIA FINANCIAL CORP.
CONSOLIDATED INCOME AND COMPREHENSIVE INCOME STATEMENTS
FOR THE NINE MONTHS ENDED MARCH 31, 1999 AND MARCH 31, 1998
(in thousands, except per share data)
<TABLE>
<CAPTION>
March 31, March 31,
1999 1998
---------- ----------
(unaudited) (unaudited)
<S> <C> <C>
Interest income:
Loans............................................ $3,929 $3,988
Interest and dividends on securities.......... 1,061 1,071
Interest-bearing deposits with banks.......... 768 661
------ ------
Total interest income...................... 5,758 5,728
Interest expense:
Deposits......................................... 3,137 3,179
Net interest income.............................. 2,621 2,549
Provision for loan losses........................ 65 144
------ ------
Net interest income after provision for loan
losses......................................... 2,556 2,405
Noninterest income:
Other loan fees and service charges.............. 230 198
Gain (loss) on sale of: Real estate owned and
other assets.................................. (119) (17)
----- ----
Total noninterest income..................... 111 181
Noninterest expense:
Salaries and net employee benefits............... 1,028 979
Occupancy costs.................................. 219 170
Other noninterest expense........................ 1,505 649
------ ------
Total noninterest expense.................... 2,751 1,798
Income (Loss) before provision for income taxes.... (84) 788
Income tax provision (benefit)..................... (53) 330
------ ------
Net Income (loss).................................. (31) 458
Increase (decrease) in unrealized losses
available for sale securities.................... (125) 43
------ --
Comprehensive income (loss)........................ $(156) $ 501
====== ======
Common stock outstanding N/A N/A
Earnings per share - net income N/A N/A
</TABLE>
3
<PAGE> 6
SECURITY OF PENNSYLVANIA FINANCIAL CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR NINE MONTHS ENDED MARCH 31, 1999 AND 1998 (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
March 31, March 31,
1999 1998
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss).................................. $ (31) $ 458
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses and foreclosed real
estate........................................... 65 66
Amortization and accretion on investment
securities....................................... 1,735 (4,186)
Depreciation and amortization...................... 113 77
Deferred income taxes.............................. -- --
(Gain) Loss on sale of:
Real estate acquired through foreclosure......... 200 66
Securities....................................... -- (63)
Change in assets and liabilities:
Accrued interest receivable...................... (1) 27
Other assets..................................... (2,080) (637)
Accrued interest payable and other liabilities... 275 81
Net cash provided by operating activities.......... $ 276 $(4,111)
INVESTMENT ACTIVITIES:
Purchase of held-to-maturity securities............ $(1,500) $ --
Purchase of available-for-sale securities.......... (10,925) (1,250)
Proceeds from the call of held-to-maturity
securities....................................... 6,935 2,741
Proceeds from maturities and principal paydowns on
available-for-sale securities.................... 600 4,750
Proceeds from principal paydowns of held-to-maturity
securities....................................... 715 784
Loans made to customers, net of principal
collected........................................ 499 (4,811)
Acquisition of office premises and equipment....... 113 45
Proceeds from sale of foreclosed real estate....... (166) 260
------ -----
Net cash used in investing activities.............. $(1,729) $ 3,019
======== =======
FINANCING ACTIVITIES:
Net increase (decrease) in deposit accounts........ $(2,086) $ 2,669
Net increase (decrease) in advances from borrowers
for taxes and insurance.......................... (10) (103)
Net proceeds from issuance of common stock......... 16,145 --
------ ------
Net cash provided by financing activities.......... $14,049 $ 2,566
------- --------
Increase (decrease) by cash and equivalents........ 4,747 1,650
Cash and equivalents - beginning of period......... 11,858 9,034
------ -----
Cash and equivalents - end of period............... $16,605 $ 10,684
======= ========
Supplemental Disclosure of Cash Flow Information:
Interest paid on deposits........................ $ 3,137 $ 3,179
Income taxes paid................................ $ (65) $ 330
Supplemental Disclosure of Non-Cash Information:
Transfer from loans to real estate owned......... $ 50 $ 321
</TABLE>
4
<PAGE> 7
SECURITY OF PENNSYLVANIA FINANCIAL CORP.
Notes to Consolidated Financial Statements
(1) Organization
------------
Security of Pennsylvania Financial Corp. (the Company") was incorporated
under the laws of Delaware in August 1998 for the purpose of serving as the
holding company of Security Savings Association of Hazleton (the "Association")
as part of the Association's conversion from the mutual to stock form of
organization (the "Conversion"). The Company is a savings and loan holding
company and is subject to regulation by the Office of Thrift Supervision, the
Federal Deposit Insurance Corporation and the Securities and Exchange
Commission. The Conversion, completed on December 30, 1998 resulted in the
Company issuing an aggregate of 1,587,000 shares of its common stock, par value
$.01 per share, at a price of $10 per share, of which 1,511,617 shares were
issued in a subscription offering and 75,383 shares were issued and sold to
Security Savings Charitable Foundation. Prior to the Conversion, the Company had
not engaged in any material operations.
(2) Accounting Principles
---------------------
The accompanying unaudited financial statements of Security of
Pennsylvania Financial Corp. have been prepared in accordance with generally
accepted accounting principles for interim financial information and with
instructions to Form 10-QSB and of Regulation S-B. Accordingly, the financial
statements do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of a normal recurring
nature) considered necessary for a fair presentation have been included.
Operating results for the three and nine months ended March 31, 1999 are not
necessarily indicative of the results that may be expected for the current
fiscal year.
For further information, refer to the consolidated financial statements
included in the Company's offering prospectus prepared in connection with the
Conversion filed with the Securities and Exchange Commission.
5
<PAGE> 5
Item 2. Management's Discussion and Analysis.
------------------------------------
The following analysis discusses changes in the financial condition and
results of operations at and for the three and nine months ended March 31, 1999,
and should be read in conjunction with the Bank's Consolidated Financial
Statements and the notes thereto, appearing in Part I, Item 1 of this document.
FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Company intends such
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Reform Act of
1995, and is including this statement for purposes of these safe harbor
provisions. Forward -looking statements, which are based on certain assumptions
and describe future plans, strategies and expectations of the Company, are
generally identified by use of the words "believe," "expect," "intend,"
"anticipate," "estimate," "project," or similar expressions. The Company's
ability to predict results or the actual effect of future plans or strategies is
inherently uncertain. Factors which could have a material adverse effect on the
operations of the Company and the subsidiaries include, but are not limited to,
changes in: interest rates, general economic conditions, legislative/regulatory
changes, monetary and fiscal policies of the U.S. Government, including policies
of the U.S. Treasury and the Federal Reserve Board, the quality or composition
of the loan or investment portfolios, demand for loan products, deposit flows,
competition, demand for financial services in the Company's market area and
accounting principles and guidelines. These risks and uncertainties should be
considered in evaluating forward-looking statements and undue reliance should
not be placed on such statements. Further information concerning the Company and
its business, including additional factors that could materially affect the
Company's financial results, is included in the Company's filings with the SEC.
The Company does not undertake - and specifically disclaims any obligation
- - to publicly release the result of any revisions which may be made to any
forward-looking statements to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events.
GENERAL
Security of Pennsylvania Financial Corp. (the "Company") is the holding
company for Security Savings Association of Hazleton (the "Association"), a
Pennsylvania chartered capital stock savings association. The Association's
results of operations are dependent primarily on net interest income, which is
the difference between the income earned on its loan and investment portfolios
and its cost of funds, consisting of the interest paid on deposits and
borrowings. Results of operations are also affected by the Association's
provision for loan losses, loan and security sales activities, service charges
and other fee income, and non-interest expense. The Association's non-interest
expense principally consists of compensation and employee benefits, office
occupancy and equipment expense, federal deposit insurance premiums, data
processing, advertising and business
6
<PAGE> 9
promotion and other expenses. Results of operations are also significantly
affected by general economic and competitive conditions, particularly changes in
interest rates, government policies and actions of regulatory authorities.
MANAGEMENT STRATEGY
The Association's operating strategy has been that of a community-based
banking institution, offering a wide variety of savings products to its retail
customers, while concentrating on residential and consumer lending and, to a
lesser extent, multi-family and commercial real estate and construction lending.
Additionally, as of February 1999, the Association has opened a commercial loan
department and expects to expand its services in that area. It is expected that
these loans will provide a higher spread in the lending portfolio. In order to
promote long-term financial strength and profitability, the Association's
operating strategy has focused on: (i) maintaining strong asset quality by
originating primarily one- to four-family mortgage loans and home equity loans
and lines of credit secured by residential real estate located in its market
area; (ii) managing its interest rate risk within the context of its significant
fixed-rate one- to four-family mortgage lending activity; (iii) providing
products and delivery systems directed at the needs and expectations of its
customer base, including taking advantage of technological advances when
appropriate; and (iv) maintaining a strong regulatory capital position.
COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 1999 AND JUNE 30, 1998
Total assets at March 31, 1999 increased $11.6 million, or 10.4%, compared
to June 30, 1998. The increase was primarily due to the sale of the Company's
common stock in the Company's initial public offering in December 1998. During
the same period, deposits declined $2.1 million or 2.0%, due to withdrawals by
depositors purchasing stock in the initial public offering. Increased
competition in the marketplace, a low interest rate environment and a strong
stock market also contributed to the decrease.
The use of the proceeds from the initial public offering resulted in a
$5.4 million increase in investment securities and a $5.0 million increase in
money market investments (included in cash and cash equivalents) on March 31,
1999 compared to June 30, 1998. Loans increased $680,000 or 1.0% at March 31,
1999 compared to June 30, 1998.
Total equity increased $13.5 million from June 30, 1998, primarily due to
the influx of capital from the conversion to stock form of ownership in December
1998.
7
<PAGE> 10
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 1999
AND 1998
Net income for the quarter increased $151,000 or 157% compared to the
third quarter last year. Earnings per share were 16 cents. Based on annualized
earnings, return on assets for the quarter was .78% as compared to .36% last
year. Return on equity for three months ended March 31, 1999 was 4.37% compared
to 7.17% for three months ended March 31, 1998 as the higher level of capital
from the initial public offering affected the Company's ability to prudently
deploy such capital.
Net interest income during the period increased $166,000 or 19.9%.
Interest income rose 4.6% or $87,000, primarily, from increased revenue on
investment securities. Lower interest rates resulted in interest expense
declining $79,000 or 7.4%.
The provision for loan losses decreased $61,000 during the quarter ended
March 31, 1999 compared to the third quarter last year. On March 31, 1999 the
allowance for loan loss was .62% of loans compared to .69% on March 31, 1998.
The allowance account and resulting provision for loan losses are reviewed
periodically by management and the Board of Directors taking into consideration
the make-up of the loan portfolio, level of non-performing loans, charge-offs,
loan commitments, lines of credit and general economic conditions in the
company's market area. Management's analysis at March 31, 1999 indicated that
the reduced provision was appropriate to maintain an adequate level of reserves.
Noninterest income increased $51,000 primarily due to an increase in loan
fees and a reduction in the loss on the sale of other real estate. Noninterest
expense increased $135,000 or 23.0% when compared to last year. The increase was
primarily caused by a $46,000 increase in salaries and employee benefits. Merit
raises and increased staff contributed to the increase in salaries. The increase
was also attributable to a $27,000 increase in occupancy costs and a $26,000
increase in foreclosed real estate and other expenses. Price increases for
services were a major factor for the rise in occupancy and other expenses.
The following is a comparative schedule of non-interest expense for the
three months ended March 31:
<TABLE>
<CAPTION>
[Dollars in thousands) Change
1999 1998 $ %
-------------- ---
<S> <C> <C> <C> <C>
Salaries and employee benefits $ 349 303 46 15.2
Occupancy costs 83 56 27 48.2
Data processing 45 35 10 28.6
Foreclosed real estate 40 14 26 185.7
F.D.I.C. insurance 15 15 0 0
All other 190 164 26 15.9
---------------
Total $ 722 587 135 23.0
=== === ===
</TABLE>
8
<PAGE> 11
COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED MARCH 31, 1999
AND 1998
A net loss of $31,000 was reported for the nine month period compared to
net income of $458,000 for the same period last year. The loss was due to a one
time charge of $753,000 relating to the funding of Security Savings Charitable
Foundation established in connection with the Association's conversion to stock
form. If adjusted for the one time charge, net income would have approximated
$503,000. Using the adjusted net income return on assets would have been .57%
compared to .58% last year and return on equity would have been 4.20% compared
to 7.17% last year. Return on equity for the current period was negatively
affected by the need to effectively deploy the influx of capital from the
initial public offering.
Net interest income for the nine month period ended March 31, 1999
increased $72,000 or 2.8%. Interest income increased $30,000, primarily due to a
$107,000 increase in income from interest-bearing deposits in banks, offset by a
$59,000 decrease in income from loans. The level of investment securities rose
due to the investment of funds from the initial public offering. Loan income
declined as a moderate increase in volume did not offset the effect of a lower
interest rate environment. Interest expense declined $42,000 due primarily to
lower interest rates.
The provision for loan losses declined $79,000 when compared to the same
period last year. The provision is evaluated by management and the Board of
Directors periodically based on the make-up of the loan portfolio, level of
non-performing loans, charge-offs, loan commitments, lines of credit and general
economic conditions in the marketplace. Management's analysis at this time
indicated that the Association could decrease the loss reserve and still
maintain a more than adequate level of reserves.
Non interest income declined $70,000 in the quarter ended March 31, 1999
compared to the same period ended March 31, 1998 due to a $108,000 increase in
the loss on sale of other real estate owned. Loan fees and other service charges
increased $32,000, primarily because of increased volume. Non-interest expense
increased $953,000, primarily due to the one time charge of $753,000 to form the
Foundation. If adjusted for the one time charge, non interest expense would have
increased $200,000 or 11.1%. A $49,000 increase in both salaries and benefits
and occupancy costs together with a $61,000 increase in foreclosed real estate
expenses were the primary reasons for the increase.
The following is a schedule of non-interest expense for the nine months
ended March 31.
<TABLE>
<CAPTION>
[Dollars in thousands) Change
1999 1998 $ %
-------------- ---
<S> <C> <C> <C> <C>
Salaries and employee benefits $ 1,028 979 49 5.0
Occupancy costs 219 170 49 28.8
Data processing 119 103 16 15.5
Foreclosed real estate 112 51 61 119.6
F.D.I.C. Insurance 45 46 (1) 2.2
All other 1,228 449 779 173.5
-------------------
Total 2,751 1,798 953 53.0
===== ===== === ====
</TABLE>
9
<PAGE> 12
LIQUIDITY AND CAPITAL RESOURCES
The following discussion refers to the Company's wholly owned subsidiary,
the Association. The Association's primary sources of funds are deposits,
principal and interest payments on loans, mortgage-backed and investment
securities. The Association uses the funds generated to support its lending and
investment activities. While maturities and scheduled amortization of loans are
predictable sources of funds, deposit flows, mortgage prepayments and the
exercise of call features are greatly influenced by general interest rates,
economic conditions and competition. The Association has continued to maintain
the required levels of liquid assets as defined by OTS regulations. This
requirement of the OTS, which may be varied at the direction of the OTS
depending upon economic conditions and deposit flows, is based upon a percentage
of deposits and short-term borrowings. The Association's currently required
liquidity ratio is 4.0%. At March 31, 1999 and 1998, the Association's liquidity
ratios were 30.3% and 21.2%, respectively.
At March 31, 1999, the Association exceeded all of its regulatory capital
requirements with a tangible capital level of $15.6 million, or 13.3% of total
adjusted assets, which is above the required level of 3.0%; core capital of
$15.6 million, or 13.3% of total adjusted assets, which is above the required
level of 4.0%; and risk-based capital of $16.1 million, or 30.9% of
risk-weighted assets, which is above the required level of 8.0%.
The Association has other sources of liquidity if a need for additional
funds arises, including Federal Home Loan Bank ("FHLB") advances. At March 31,
1999, the Association did not have any advances outstanding from the FHLB, but
has an overall borrowing capacity from the FHLB of $51.3 million.
The Association's most liquid assets are cash and due from banks,
interest-bearing deposits with banks and its investment and mortgage-related
securities available-for-sale. The levels of these assets are dependent on the
Association's operating, financing, lending and investing activities during any
given period. At March 31, 1999, cash and due from banks, interest-bearing
deposits with banks and investment securities available for sale totaled $31.2
million, or 25.3% of total assets.
At March 31, 1999, the Association had commitments to originate loans and
unused outstanding lines of credit and un-disbursed proceeds of construction
mortgages totaling $4.1 million. The Association anticipates that it will have
sufficient funds available to meet its current loan origination commitments.
Certificate accounts, which are scheduled to mature in less than one year from
March 31, 1999, totaled $33.8 million. The Association expects that
substantially all of the maturing certificate accounts will be retained by the
Association at maturity.
The initial impact of the Conversion on the liquidity and capital
resources of the Company was significant as it substantially increased the cash
assets of the Company and Association, and the capital base of both. At March
31, 1999, the Association had total equity, determined in accordance with
generally accepted accounting principles, of $22.6 million, or 18.3% of total
assets. The Association's regulatory tangible capital at March 31, 1999 was
13.3% of assets. An institution with a ratio of tangible capital to total assets
of greater than or equal to 5% is considered to be "well-capitalized" pursuant
to OTS regulations.
10
<PAGE> 13
YEAR 2000 COMPLIANCE
As the year 2000 approaches, an important business issue has emerged
regarding how existing application software programs and operating systems can
accommodate this date value. Many existing application software products were
designed to accommodate only two-digits. For example, "96" is stored on the
system and represents 1996. The Association relies significantly on an outside
service bureau for its data processing. While the Association has not received
any guarantee from the outside service bureau that the bureau will be Year 2000
compliant, the service bureau has completed its assessment of its Year 2000
compliance and resolved all identified problems. The Association's service
bureau completed its proxy testing of their system and the Association has
conducted on-line testing at each of its offices on February 14, 1999. No
problems were encountered during testing. The Association has completed its
inventory and assessment and has completed upgrading its internal system to
handle the Year 2000 problem. The cost to the Association for the internal
system upgrade, not including staff time, has been less than $50,000. There can
be no assurances, however, that the performance by the Association and its
service bureau will be effective to remedy all potential problems. To the extent
the Company's systems are not fully Year 2000 compliant, there can be no
assurance that potential systems interruptions or the cost necessary to update
software would not have a materially adverse effect on the Company's business,
financial condition, results of operations and business prospects. The
Association has prepared a contingency plan in the event there are any system
interruptions, in which the Association will resort to a manual method for
handling customer transactions. Any Year 2000 failure on the part of the
Association's customers could result in additional expense or loss to the
Association. The Association plans to work with its customers to address any
potential Year 2000 problems.
RECENT ACCOUNTING PRONOUNCEMENTS
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. In June
1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" ("SFAS No. 133"). SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. In
connection with the implementation of SFAS No. 133, the Association may transfer
debt securities classified as held-to-maturity to the available-for-sale
category. Such a transfer will not call into question the Association's
intention to hold other debt to maturity in the future. SFAS No. 133 is
effective for financial statements for periods beginning after June 15, 1999.
Management has not yet determined the impact, if any, of this statement on the
Association. Management plans to adopt SFAS No. 133 during its fiscal year
ending June 30, 1999 in order to use the special provision allowing the transfer
of debt securities classified as held-to-maturity to the available-for-sale
category. Management has not identified which securities might be transferred to
the available-for-sale category; and, as a result, is not able to determine
whether such transfer could have a material impact on its financial condition.
If the Association had transferred all of its held-to-maturity securities to
available-for-sale securities as of March 31, 1999, its shareholders' equity
would have decreased by approximately $35,324.
11
<PAGE> 14
PART II: OTHER INFORMATION
Item 1: Legal Proceedings
-----------------
The Company is not involved in any pending legal proceedings other
than routine legal proceedings occurring in the ordinary course of business.
Such routine legal proceedings, in the aggregate, are believed by management to
be immaterial to the Company's financial condition or the results of operation.
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
None
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
2.1 Amended Plan of Conversion (including the Stock Articles of
Incorporation and Bylaws of Security Savings Association of
Hazleton)*
3.1 Certificate of Incorporation of Security of Pennsylvania
Financial Corp.*
3.2 Bylaws of Security of Pennsylvania Financial Corp.*
10.1 Change in Control Agreement between Security Savings
Association of Hazleton and Jan Pasdon.
27.0 Financial Data Schedule
*Incorporated by reference into this document from the Exhibits to the
Registration Statement in Form SB-2, and any amendments thereto, Registration
No. 333-63271.
(b) Reports on Form 8-K:
None
12
<PAGE> 15
SIGNATURES
In accordance with the requirements of the Exchange Act, the issuer caused
this report to be signed on its behalf by the undersigned hereunto duly
authorized.
SECURITY OF PENNSYLVANIA FINANCIAL CORP.
Dated: May 12, 1999 By: /s/ Richard C. Laubach
-------------------------
Richard C. Laubach
President and Chief Executive Officer
(principal executive officer)
Dated: May 12, 1999 By: /s/ David P. Marchetti, Sr.
-----------------------------
David P. Marchetti, Sr.
ChiefFinancial Officer and Treasurer
(Principal financial and accounting
officer)
13
<PAGE> 1
SECURITY SAVINGS ASSOCIATION OF HAZLETON
THREE-YEAR CHANGE IN CONTROL AGREEMENT
This AGREEMENT is made effective as of February 1, 1999, by and between
Security Savings Association of Hazleton (the "Association"), a
Pennsylvania-chartered savings institution, with its principal administrative
office at 31 W. Broad Street, Hazleton, PA 18201, Jan Pasdon ("Executive"), and
Security of Pennsylvania Financial Corp. (the "Holding Company"), a corporation
organized under the laws of the State of Delaware which is the holding company
of the Association.
WHEREAS, the Association recognizes the substantial contribution Executive
has made to the Association and wishes to protect Executive's position therewith
for the period provided in this Agreement; and
WHEREAS, Executive has agreed to serve in the employ of the Association.
NOW, THEREFORE, in consideration of the contribution and responsibilities
of Executive, and upon the other terms and conditions hereinafter provided, the
parties hereto agree as follows:
1. TERM OF AGREEMENT.
-----------------
The term of this Security Savings Association of Hazleton Change in
Control Agreement (the "Agreement") shall be deemed to have commenced as of the
date first above written and shall continue for a period of thirty-six (36) full
calendar months thereafter. Commencing on the first anniversary date of this
Agreement and continuing at each anniversary date thereafter, the Board of
Directors of the Association ("Board") may extend the Agreement for an
additional year. The Board will review the Agreement and Executive's performance
annually for purposes of determining whether to extend the Agreement, and the
results thereof shall be included in the minutes of the Board's meeting.
2. CHANGE IN CONTROL.
-----------------
(a) If a Change in Control (as defined herein) has occurred or the Board
has determined that a Change in Control has occurred, Executive shall be
entitled to the benefits provided in Section 3 upon his subsequent termination
of employment at any time during the term of this Agreement due to (i)
Executive's dismissal, or (ii) Executive's voluntary resignation following any
demotion, loss of title, office or significant authority or responsibility,
reduction in the annual compensation or material reduction in benefits or
relocation of his principal place of employment by more than 25 miles from its
location immediately prior to the Change in Control, unless such termination is
because of his death or Termination for Cause (as defined herein).
<PAGE> 2
(b) For purposes of this Plan, a "Change in Control" of the Association or
Holding Company shall mean an event of a nature that: (i) would be required to
be reported in response to Item 1 of the Current Report on Form 8-K, as in
effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (the "Exchange Act"); or (ii) results in a Change in
Control of the Association or the Holding Company within the meaning of the Home
Owners' Loan Act of 1933, as amended, the Federal Deposit Insurance Act, or the
Rules and Regulations promulgated by the Office of Thrift Supervision ("OTS")
(or its predecessor agency), as in effect on the date hereof (provided, that in
applying the definition of change in control as set forth under the Rules and
Regulations of the OTS, the Board shall substitute its judgment for that of the
OTS); or (iii) without limitation such a Change in Control shall be deemed to
have occurred at such time as (A) any "person" (as the term is used in Sections
13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Association or the Holding Company representing 25% or more of
the Association's or the Holding Company's outstanding voting securities or
right to acquire such securities except for any voting securities of the
Association purchased by the Holding Company in connection with the conversion
of the Association to the stock form and any voting securities purchased by any
employee benefit plan of the Association or the Holding Company, or (B)
individuals who constitute the Board on the date hereof (the "Incumbent Board")
cease for any reason to constitute at least a majority thereof, provided that
any person becoming a director subsequent to the date hereof whose election was
approved by a vote of at least three-quarters of the directors comprising the
Incumbent Board, or whose nomination for election by the Holding Company's
stockholders was approved by the same Nominating Committee serving under an
Incumbent Board, shall be, for purposes of this clause (B), considered as though
he were a member of the Incumbent Board, or (C) a plan of reorganization,
merger, consolidation, sale of all or substantially all the assets of the
Association or the Holding Company or similar transaction occurs in which the
Association or Holding Company is not the resulting entity; provided, however,
that such an event listed above will be deemed to have occurred or to have been
effectuated upon the receipt of all required regulatory approvals not including
the lapse of any statutory periods.
(c) Executive shall not have the right to receive termination benefits
pursuant to Section 3 hereof upon Termination for Cause. The term "Termination
for Cause" shall mean termination because of Executive's personal dishonesty,
incompetence, willful misconduct, any breach of fiduciary duty involving
personal profit, intentional failure to perform stated duties, willful violation
of any law, rule, or regulation (other than traffic violations or similar
offenses) or final cease-and-desist order, or material breach of any provision
of this Agreement. Notwithstanding the foregoing, Executive shall not be deemed
to have been Terminated for Cause unless and until there shall have been
delivered to him a Notice of Termination which shall include a copy of a
resolution duly adopted by the affirmative vote of not less than a majority of
the Board of Directors of the Association at a meeting of the Board called and
held for that purpose (after reasonable notice to Executive and an opportunity
for him, together with counsel, to be heard before the Board), finding that in
the good faith opinion of the Board, Executive's conduct justified a finding of
Termination for Cause and specifying the particulars thereof in detail.
Executive shall not have the right to receive compensation or other benefits for
2
<PAGE> 3
any period after the Date of Termination for Cause. During the period beginning
on the date of the Notice of Termination for Cause pursuant to Section 4 hereof
through the Date of Termination for Cause, stock options and related limited
rights granted to Executive under any stock option plan shall not be exercisable
nor shall any unvested awards granted to Executive under any stock benefit plan
of the Association, the Company or any subsidiary or affiliate thereof, vest. At
the Date of Termination for Cause, such stock options and related limited rights
and any such unvested awards shall become null and void and shall not be
exercisable by or delivered to Executive at any time subsequent to such
Termination for Cause.
3. TERMINATION BENEFITS.
--------------------
(a) Upon the occurrence of a Change in Control, followed at any time
during the term of this Agreement by termination of the Executive's employment
due to: (1) Executive's dismissal or (2) Executive's voluntary termination
pursuant to Section 2(a), unless such termination is due to Termination for
Cause, the Association and the Holding Company shall pay Executive, or in the
event of his subsequent death, his beneficiary or beneficiaries, or his estate,
as the case may be, a sum equal to three (3) times Executive's average annual
compensation for the five most recent taxable years that Executive has been
employed by the Association or such lesser number of years in the event that
Executive shall have been employed by the Association for less than five years.
Such average annual compensation shall include Base Salary, commissions,
bonuses, contributions on Executive's behalf to any pension and/or profit
sharing plan, severance payments, retirement payments, directors or committee
fees, fringe benefits paid or to be paid to the Executive in any such year and
payment of any expense items without accountability or business purpose or that
do not meet the Internal Revenue Service requirements for deductibility by the
Association; provided however, that any payment under this provision and
subsection 3(b) below shall not exceed three (3) times the Executive's average
annual compensation. At the election of Executive, which election is to be made
prior to a Change in Control, such payment shall be made in a lump sum. In the
event that no election is made, payment to Executive will be made on a monthly
basis in approximately equal installments during the remaining term of this
Agreement.
(b) Upon the occurrence of a Change in Control of the Association or the
Holding Company followed at any time during the term of this Agreement by
Executive's voluntary or involuntary termination of employment, other than for
Termination for Cause, the Association shall cause to be continued life, medical
and disability coverage substantially identical to the coverage maintained by
the Association or Holding Company for Executive prior to his severance, except
to the extent such coverage may be changed in its application to all Association
or Holding Company employees on a nondiscriminatory basis. Such coverage and
payments shall cease upon the expiration of thirty-six (36) full calendar months
from the Date of Termination.
(c) Notwithstanding the preceding paragraphs of this Section 3, in no
event shall the aggregate payments or benefits to be made or afforded to
Executive under said paragraphs (the "Termination Benefits") constitute an
"excess parachute payment" under Section 280G of the
3
<PAGE> 4
Code or any successor thereto, and in order to avoid such a result Termination
Benefits will be reduced, if necessary, to an amount (the "Non-Triggering
Amount"), the value of which is one dollar ($1.00) less than an amount equal to
three (3) times Executive's "base amount," as determined in accordance with said
Section 280G. The allocation of the reduction required hereby among the
Termination Benefits provided by the preceding paragraphs of this Section 3
shall be determined by Executive.
4. NOTICE OF TERMINATION.
---------------------
(a) Any purported termination by the Association or by Executive in
connection with a Change in Control shall be communicated by Notice of
Termination to the other party hereto. For purposes of this Agreement, a "Notice
of Termination" shall mean a written notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so indicated.
(b) "Date of Termination" shall mean the date specified in the Notice of
Termination (which, in the instance of Termination for Cause, shall not be less
than thirty (30) days from the date such Notice of Termination is given).
(c) If, within thirty (30) days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, the Date of Termination shall be the
date on which the dispute is finally determined, either by mutual written
agreement of the parties, by a binding arbitration award, or by a final
judgment, order or decree of a court of competent jurisdiction (the time for
appeal therefrom having expired and no appeal having been perfected) and
provided further that the Date of Termination shall be extended by a notice of
dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute in connection with a Change in
Control, in the event the Executive is terminated for reasons other than
Termination for Cause, the Association will continue to pay Executive his full
compensation in effect when the notice giving rise to the dispute was given
(including, but not limited to his annual salary) and continue him as a
participant in all compensation, benefit and insurance plans in which he was
participating when the notice of dispute was given, until the earlier of: (1)
the resolution of the dispute in accordance with this Agreement or (2) the
expiration of the remaining term of this Agreement as determined as of the Date
of Termination.
5. SOURCE OF PAYMENTS.
------------------
It is intended by the parties hereto that all payments provided in this
Agreement shall be paid in cash or check from the general funds of the
Association. Further, the Holding Company guarantees such payment and provision
of all amounts and benefits due hereunder to Executive and, if such amounts and
benefits due from the Association are not timely paid or provided by the
Association, such amounts and benefits shall be paid or provided by the Holding
Company.
4
<PAGE> 5
6. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFIT PLANS.
-----------------------------------------------------
This Agreement contains the entire understanding between the parties
hereto and supersedes any prior agreement between the Association and Executive,
except that this Agreement shall not affect or operate to reduce any benefit or
compensation inuring to Executive of a kind elsewhere provided. No provision of
this Agreement shall be interpreted to mean that Executive is subject to
receiving fewer benefits than those available to him without reference to this
Agreement.
Nothing in this Agreement shall confer upon Executive the right to
continue in the employ of Association or shall impose on the Association any
obligation to employ or retain Executive in its employ for any period.
7. NO ATTACHMENT.
-------------
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
Executive, the Association and their respective successors, heirs and assigns.
8. MODIFICATION AND WAIVER.
-----------------------
(a) This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
waiver or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future or as to any act other than that
specifically waived.
9. REQUIRED REGULATORY PROVISIONS.
------------------------------
(a) The board of directors may terminate Executive's employment at any
time, but any termination by the board of directors, other than Termination for
Cause, shall not prejudice Executive's right to compensation or other benefits
under this Agreement. Executive shall not have the right to receive compensation
or other benefits for any period after Termination for Cause as defined in
Section 2(c) hereinabove.
5
<PAGE> 6
(b) If Executive is suspended from office and/or temporarily prohibited
from participating in the conduct of the Association's affairs by a notice
served under Section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance Act (12
U.S.C. ss.1818(e)(3) or (g)(1)), the Association's obligations under this
contract shall be suspended as of the date of service, unless stayed by
appropriate proceedings. If the charges in the notice are dismissed, the
Association may in its discretion (i) pay Executive all or part of the
compensation withheld while their contract obligations were suspended and (ii)
reinstate (in whole or in part) any of the obligations which were suspended.
(c) If Executive is removed and/or permanently prohibited from
participating in the conduct of the Association's affairs by an order issued
under Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act (12 U.S.C.
ss.1818(c)(4) or (g)(1)), all obligations of the Association under this contract
shall terminate as of the effective date of the order, but vested rights of the
contracting parties shall not be affected.
(d) If the Association is in default as defined in Section 3(x)(1) of the
Federal Deposit Insurance Act, all obligations of the Association under this
contract shall terminate as of the date of default, but this paragraph shall not
affect any vested rights of the contracting parties.
(e) All obligations under this contract shall be terminated, except to the
extent determined that continuation of the contract is necessary for the
continued operation of the institution: (i) by the Director of the Office of
Thrift Supervision (or her designee) at the time the Federal Deposit Insurance
Corporation enters into an agreement to provide assistance to or on behalf of
the Association under the authority contained in Section 13(c) of the Federal
Deposit Insurance Act; or (ii) by the Director of the Office of Thrift
Supervision (or her designee) at the time the Director (or her designee)
approves a supervisory merger to resolve problems related to operation of the
Association or when the Association is determined by the Director to be in an
unsafe or unsound condition. Any rights of the parties that have already vested,
however, shall not be affected by such action.
(f) Any payments made to Executive pursuant to this Agreement, or
otherwise, are subject to and conditioned upon compliance with 12 U.S.C.
ss.1828(k) and any rules and regulations promulgated thereunder.
10. REINSTATEMENT OF BENEFITS UNDER SECTION 9(b).
--------------------------------------------
In the event Executive is suspended and/or temporarily prohibited from
participating in the conduct of the Association's affairs by a notice described
in Section 9(b) hereof (the "Notice") during the term of this Agreement and a
Change in Control, as defined herein, occurs, the Association will assume its
obligation to pay and Executive will be entitled to receive all of the
termination benefits provided for under Section 3 of this Agreement upon the
Association's receipt of a dismissal of charges in the Notice.
6
<PAGE> 7
11. SEVERABILITY.
------------
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.
12. HEADINGS FOR REFERENCE ONLY.
---------------------------
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement. In addition, references to the
masculine shall apply equally to the feminine.
13. GOVERNING LAW.
-------------
The validity, interpretation, performance, and enforcement of this
Agreement shall be governed by the laws of the State of Pennsylvania but only to
the extent not preempted by Federal law.
14. ARBITRATION.
-----------
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by Executive within fifty
(50) miles from the location of the Association's main office, in accordance
with the rules of the American Arbitration Association then in effect. Judgment
may be entered on the arbitrator's award in any court having jurisdiction;
provided, however, that Executive shall be entitled to seek specific performance
of his right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement, other
than in the case of a Termination for Cause.
15. PAYMENT OF COSTS AND LEGAL FEES.
-------------------------------
All reasonable costs and legal fees paid or incurred by Executive pursuant
to any dispute or question of interpretation relating to this Agreement shall be
paid or reimbursed by the Association (which payments are guaranteed by the
Holding Company pursuant to Section 5 hereof) if Executive is successful on the
merits pursuant to a legal judgment, arbitration or settlement.
16. INDEMNIFICATION.
---------------
(a) The Association shall provide Executive (including his heirs,
executors and administrators) with coverage under a standard directors' and
officers' liability insurance policy at its expense, and shall indemnify
Executive (and his heirs, executors and administrators) to the fullest extent
permitted under Pennsylvania law against all expenses and liabilities
7
<PAGE> 8
reasonably incurred by him in connection with or arising out of any action, suit
or proceeding in which he may be involved by reason of his having been a
director or officer of the Association (whether or not he continues to be a
director or officer at the time of incurring such expenses or liabilities), such
expenses and liabilities to include, but not be limited to, judgments, court
costs and attorneys' fees and the cost of reasonable settlements.
17. SUCCESSOR TO THE ASSOCIATION
----------------------------
The Association shall require any successor or assignee, whether direct or
indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Association, expressly and
unconditionally to assume and agree to perform the Association's obligations
under this Agreement, in the same manner and to the same extent that the
Association would be required to perform if no such succession or assignment had
taken place.
8
<PAGE> 9
SIGNATURES
IN WITNESS WHEREOF, Security Savings Association of Hazleton and Security
of Pennsylvania Financial Corp. have caused this Agreement to be executed by
their duly authorized officers, and Executive has signed this Agreement, on the
1st day of February, 1999.
ATTEST: SECURITY SAVINGS ASSOCIATION OF
HAZLETON
/s/ Nancy Latoff By: /s/ Richard Laubach
- --------------------------- ---------------------------------
Secretary For the Entire Board of Directors
SEAL
ATTEST: SECURITY OF PENNSYLVANIA FINANCIAL
CORP.
(Guarantor)
/s/ Nancy Latoff By: /s/ Richard Laubach
- --------------------------- ---------------------------------
Secretary For the Entire Board of Directors
SEAL
WITNESS:
/s/ Nancy Latoff /s/ Jan Pasdon
- ----------------------------- ----------------------------------
Secretary Jan Pasdon
9
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary information extracted from the Form 10-QSB
and is qualified in its entirety by reference to the unaudited financial
statements contained herein.
</LEGEND>
<CIK> 0001069880
<NAME> Security of Pennsylvania Financial Corp.
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 1,431
<INT-BEARING-DEPOSITS> 15,174
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 14,643
<INVESTMENTS-CARRYING> 19,466
<INVESTMENTS-MARKET> 21,503
<LOANS> 70,327
<ALLOWANCE> 436
<TOTAL-ASSETS> 123,628
<DEPOSITS> 100,518
<SHORT-TERM> 0
<LIABILITIES-OTHER> 421
<LONG-TERM> 0
0
0
<COMMON> 16
<OTHER-SE> 22,673
<TOTAL-LIABILITIES-AND-EQUITY> 123,628
<INTEREST-LOAN> 3,929
<INTEREST-INVEST> 1,061
<INTEREST-OTHER> 768
<INTEREST-TOTAL> 5,758
<INTEREST-DEPOSIT> 3,137
<INTEREST-EXPENSE> 3,137
<INTEREST-INCOME-NET> 2,621
<LOAN-LOSSES> 65
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,751
<INCOME-PRETAX> (84)
<INCOME-PRE-EXTRAORDINARY> (84)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (31)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 2.30
<LOANS-NON> 1,178
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 496
<CHARGE-OFFS> 135
<RECOVERIES> 10
<ALLOWANCE-CLOSE> 436
<ALLOWANCE-DOMESTIC> 436
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
