FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from ____________to ______________
Commission File Number: 000-26499
STEELTON BANCORP, INC.
----------------------
Pennsylvania 25-1830745
--------------------------- -----------------------
(State of Incorporation) (IRS Employer I.D. No.)
51 South Front Street
Steelton, PA 17113
----------------------------------------
(Address of principal executive offices)
(717) 939-1966
-----------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (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 or No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock ($0.10 par value): 342,850 shares as of October 31, 2000.
Transitional small business disclosure format:
Yes x No
--- ---
<PAGE>
STEELTON BANCORP, INC. AND SUBSIDIARY
STEELTON, PENNSYLVANIA
INDEX PAGE
----- ----
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Statements of Condition - as of September 30, 2000 (unaudited)
and December 31, 1999 (audited) 3
Consolidated Statements of Income - for the three
months and nine months ended September 30, 2000 and 1999 (unaudited) 4
Consolidated Statements of Comprehensive Income - for the three months
and ninemonths ended September 30, 2000 and 1999 (unaudited) 6
Consolidated Statements of Changes in Stockholders' Equity - for the
nine months ended September 30, 2000 (unaudited) 6
Consolidated Statements of Cash Flows - for the nine months ended
September 30, 2000 and 1999 7
Notes to Consolidated Financial Statements 8
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
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
2
<PAGE>
PART I. ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
September 30, December 31,
2000 1999
ASSETS (UNAUDITED) (AUDITED)
--------------------------------------------------------------------------------
<S> <C> <C>
Cash and due from banks $ 326,244 $ 1,617,768
Interest bearing deposits with banks 946,171 1,670,023
--------------------------------------------------------------------------------
Cash and cash equivalents 1,272,415 3,287,791
Investment securities available
for sale 10,118,884 10,252,585
Investment securities held to
maturity(fair values
2000-$5,389,510; 1999-$5,459,556) 5,495,588 5,756,786
Loans receivable, net 39,632,356 32,027,255
Premises and equipment 1,282,747 1,212,927
Federal Home Loan Bank stock 1,030,700 691,800
Other assets 1,791,843 666,227
--------------------------------------------------------------------------------
TOTAL ASSETS $ 60,624,533 $ 53,895,371
--------------------------------------------------------------------------------
LIABILITIES
--------------------------------------------------------------------------------
Deposits $ 34,273,720 $ 33,266,127
Advances from borrowers for insurance and taxes 129,005 232,508
FHLB borrowings 19,069,168 13,334,745
Other liabilities 581,705 289,913
--------------------------------------------------------------------------------
TOTAL LIABILITIES 54,053,598 47,123,293
--------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------
Preferred stock: no par value, authorized
2,000,000 shares; none issued or outstanding - -
Common stock: $0.10 par value,
authorized 8,000,000; issued
385,000 - 2000 and 1999 38,500 38,500
Additional paid-in capital 3,459,710 3,457,015
Retained earnings 4,043,323 3,863,701
Restricted stock plan (152,475) -
Unearned compensation ESOP (277,200) (308,000)
Treasury stock at cost - 2000: 26,750 shares (314,167) -
Accumulated other comprehensive(loss) (226,756) (279,138)
--------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 6,570,935 6,772,078
--------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 60,624,533 $ 53,895,371
--------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the unaudited consolidated
financial statements.
3
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Three Months Ended
September 30,
2000 1999
--------------------------------------------------------------------------------
<S> <C> <C>
INTEREST INCOME
--------------------------------------------------------------------------------
Loans $ 803,645 $ 555,439
Investment securities 255,697 228,318
Other interest earning assets 34,544 43,833
--------------------------------------------------------------------------------
1,093,886 827,590
--------------------------------------------------------------------------------
INTEREST EXPENSE
--------------------------------------------------------------------------------
Deposits 404,728 331,898
FHLB borrowings 299,213 148,942
--------------------------------------------------------------------------------
703,941 480,840
--------------------------------------------------------------------------------
NET INTEREST INCOME 389,945 346,750
Provision for loan losses 3,000 -
--------------------------------------------------------------------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 386,945 346,750
--------------------------------------------------------------------------------
NONINTEREST INCOME
--------------------------------------------------------------------------------
Fees and service charges 36,333 48,742
Other income 30,071 15,491
--------------------------------------------------------------------------------
66,404 64,233
NONINTEREST EXPENSE
--------------------------------------------------------------------------------
Salaries and employee benefits 203,257 159,362
Occupancy expense 25,529 24,790
Furniture and equipment expense 40,749 48,602
Advertising 15,424 3,847
Other expense 96,933 83,335
--------------------------------------------------------------------------------
381,892 319,936
--------------------------------------------------------------------------------
Income before income taxes 71,457 91,047
Income tax expense 20,878 28,661
--------------------------------------------------------------------------------
NET INCOME $ 50,579 $ 62,386
--------------------------------------------------------------------------------
PER SHARE DATA
--------------------------------------------------------------------------------
Net income:
Basic $ .16 $ .18
Diluted $ .15 $ .18
Dividends $ - $ -
--------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the unaudited consolidated
financial statements.
4
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Nine Months Ended
September 30,
2000 1999
--------------------------------------------------------------------------------
<S> <C> <C>
INTEREST INCOME
--------------------------------------------------------------------------------
Loans $2,209,995 $1,663,969
Investment securities 770,791 546,052
Other interest earning assets 111,800 128,863
--------------------------------------------------------------------------------
3,092,586 2,338,884
--------------------------------------------------------------------------------
INTEREST EXPENSE
--------------------------------------------------------------------------------
Deposits 1,141,251 986,476
FHLB borrowings 766,346 404,260
--------------------------------------------------------------------------------
1,907,597 1,390,736
--------------------------------------------------------------------------------
NET INTEREST INCOME 1,184,989 948,148
Provision for loan losses 4,000 2,000
--------------------------------------------------------------------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,180,989 946,148
--------------------------------------------------------------------------------
NONINTEREST INCOME
--------------------------------------------------------------------------------
Fees and service charges 120,898 121,872
Other income 65,819 37,171
--------------------------------------------------------------------------------
186,717 159,043
NONINTEREST EXPENSE
--------------------------------------------------------------------------------
Salaries and employee benefits 572,171 453,180
Occupancy expense 76,025 71,971
Furniture and equipment expense 122,255 148,045
Advertising 43,067 28,616
Other expense 264,795 214,333
--------------------------------------------------------------------------------
1,078,313 916,145
--------------------------------------------------------------------------------
Income before income taxes 289,393 189,046
Income tax expense 83,961 60,981
--------------------------------------------------------------------------------
NET INCOME $ 205,432 $ 128,065
--------------------------------------------------------------------------------
PER SHARE DATA
--------------------------------------------------------------------------------
Net income:
Basic $ .61 $ .18
Diluted $ .59 $ .18
Dividends $ .08 $ --
--------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the unaudited consolidated
financial statements.
5
<PAGE>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income $ 50,579 $ 62,386 $ 205,432 $ 128,065
Other comprehensive income (loss):
Unrealized gains(losses) on
securities available for sale 91,570 (146,646) 87,303 (259,884)
Income tax benefit (expense) (24,733) 50,590 (29,921) 89,091
--------- --------- --------- ---------
Comprehensive income (loss) $ 117,416 $ (33,670) $ 262,814 $ (42,728)
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the unaudited consolidated
financial statements.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
Accumulated
Other
Compre- Total
Additional Restricted Unearned hensive Stock-
Common Paid-in Retained Stock ESOP Income Treasury holders'
Stock Capital Earnings Plan Shares (Loss) Stock Equity
---------- ------------ -------- ----------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1999 $38,500 $3,457,015 $3,863,701 $ - $(308,000) $(279,138) $ - $6,772,078
Stock purchased for restricted
stock plan (171,345) (171,345)
Earned portion of restricted
stock plan - - - 18,870 - - - 18,870
Treasury stock purchased - - - - - - (314,167) (314,167)
Net income - - 205,432 - - - - 205,432
Dividends declared - - (25,810) - - - - (25,810)
ESOP shares committed for
release - 2,695 - - 30,800 - - 33,495
Net change in unrealized
losses on securities
available for sale, net of
deferred income tax benefit - - - - - 52,382 - 52,382
------- ---------- ----------- --------- ---------- ----------- --------- -----------
Balance - September 30, 2000 $38,500 $3,459,710 $4,043,323 $(152,475) $(277,200) $(226,756) $(314,167) $6,570,935
======= ========== ========== ========= ========= ========= ========= ==========
</TABLE>
The accompanying notes are an integral part of the unaudited consolidated
financial statements.
6
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
Nine Months Ended
September 30,
2000 1999
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 205,432 $ 128,065
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses 4,000 2,000
Depreciation 56,308 83,004
Net accretion of investment security discounts 11,777 16,840
ESOP and restricted stock plan expense 67,082 --
(Increase)decrease in interest receivable and other assets (121,803) 15,827
Increase in interest payable and other liabilities 224,710 215,885
---------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 447,506 461,621
---------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Available for sale securities:
Proceeds from sales 527,507 --
Proceeds from maturities 515,383 1,005,246
Purchases (780,624) (7,999,701)
Held to maturity securities:
Maturities and repayments 252,590 802,721
Purchases -- (1,478,575)
Net increase in loans (7,609,101) (1,790,608)
Purchases of premises and equipment (126,128) (170,187)
Purchases of Federal Home Loan Bank Stock (338,900) (57,600)
Purchase of bank-owned life insurance (1,000,000) --
---------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (8,559,273) (9,688,704)
---------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Net increase in deposits 1,007,593 2,413,401
Net decrease in advances from borrowers (103,503) (75,030)
Proceeds from FHLB borrowings 16,000,000 11,764,247
Repayments of FHLB borrowings (10,265,577) (9,078,761)
Issuance of common stock -- 3,187,515
Purchase of treasury stock (314,167) --
Purchase of stock for restricted stock plan (171,345) --
Payment of dividends (56,610) --
---------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 6,096,391 8,211,372
DECREASE IN CASH AND CASH EQUIVALENTS (2,015,376) (1,015,711)
Cash and cash equivalents at beginning of period 3,287,791 2,387,592
---------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,272,415 $ 1,371,881
---------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the unaudited consolidated
financial statements.
7
<PAGE>
Notes To Consolidated Financial Statements
------------------------------------------
Note 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements were prepared in
accordance with accounting principles generally accepted in the United States
for interim financial information and instructions for the Form 10-QSB and Item
310(b) of Regulation S-B. Accordingly, these statements do not include all of
the information and footnotes required by accounting principles generally
accepted in the United States. However, in the opinion of management, all
adjustments necessary for a fair presentation have been included and such
adjustments were of a normal recurring nature.
Operating results for the nine-month period ended September 30, 2000 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2000 or any other period.
Note 2 - MUTUAL TO STOCK CONVERSION
On July 8, 1999, the Bank completed its mutual to stock conversion (the
"Conversion"). In connection with the Conversion, Steelton Bancorp, Inc., a
Pennsylvania chartered corporation, sold 385,000 shares of its common stock in a
subscription offering at $10.00 per share. Upon completion of these
transactions, the Bank became the wholly owned subsidiary of Steelton Bancorp,
Inc. and changed its name from Mechanics Savings and Loan, FSA to Mechanics
Savings Bank.
The common stock of the Company began trading on the Electronic Bulletin Board
under the symbol "SELO" on July 9, 1999.
Note 3 - RECENT ACCOUNTING PRONOUNCEMENTS
In the third quarter of 2000, the Financial Accounting Standards Board(FASB)
issued Statement 140, "Accounting for Transfers of Financial Assets", an
amendment of FASB Statement No. 125. This statement is effective for transfers
of financial assets occurring after March 31, 2001, applied prospectively;
effective for disclosures about securitizations and for reclassification and
disclosure about collateral in financial statements for fiscal years ending
after December 15, 2000. Adoption of this statement is not expected to have a
material impact on the Company's financial condition or results of operations.
Note 4 - EARNINGS PER COMMON SHARE
Basic net income per common share for the three months and nine months ended
September 30, 2000 is calculated by dividing net income by the weighted average
number of
shares of common stock outstanding for the period. Diluted net income per share
is calculated by adjusting the number of shares of common stock outstanding to
include the effect of stock options, if dilutive, generally, using the treasury
stock method.
Basic net income per common share for the three and nine months ended September
30, 1999 was calculated by dividing net income for the period from the date of
conversion to September 30, 1999 of $62,386 by the weighted average common
shares outstanding for that same period of 354,200. The company did not have
potentially dilutive securities in the period ended September 30, 1999.
8
<PAGE>
The number of shares utilized in the earnings per share calculations for the
three months ended September 30, 2000 were as follows:
Common shares - basic 320,103
Effect of dilutive stock options 12,747
-------
Common shares - diluted 332,850
=======
The number of shares utilized in the earnings per share calculations for the
nine months ended September 30, 2000 were as follows:
Common shares - basic 335,979
Effect of dilutive stock options 10,700
-------
Common shares - diluted 346,679
=======
Note 5 - RECLASSIFICATIONS
Certain amounts reported in prior periods have been reclassified to conform with
the September 30, 2000 presentation. These reclassifications did not impact the
Company's financial condition or results of operations.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
Forward-Looking Statements
--------------------------
The Company may from time to time make written or oral forward-looking
statements, including statements contained in the Company's filings with the
Securities and Exchange Commission (the "Commission") and its reports to
stockholders. Statements made in such documents, other than those concerning
historical information, should be considered forward-looking and subject to
various risks and uncertainties. Such forward-looking statements are made based
upon management's beliefs as well as assumptions made by, and information
currently available to, management pursuant to "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. The Company's actual results
may differ materially from the results anticipated in forward-looking statements
due to a variety of factors, including governmental monetary and fiscal
policies, deposit levels, loan demand, loan collateral values, securities
portfolio values, and interest rate risk management; the effects of competition
in the banking business from other savings and loan associations, commercial
banks, mortgage banking firms, consumer finance companies, credit unions,
securities brokerage firms, insurance companies, money market mutual funds and
other financial institutions operating in the Company's market area and
elsewhere, including institutions operating through the Internet; changes in
governmental regulations relating to the banking industry, including regulations
relating to branching and acquisitions; failure of assumptions underlying the
establishment of reserves for losses, including the value of collateral
underlying delinquent loans, and other factors. The Company cautions that such
factors are not exclusive. The Company does not undertake to update any
forward-looking statements that may be made from time to time by, or on behalf
of, the Company.
Comparison of Financial Condition at September 30, 2000 and December 31, 1999
-----------------------------------------------------------------------------
Total assets increased $6.7 million or 12% to $60.6 million at September 30,
2000 compared to December 31, 1999. Growth of $7.6 million or 24% occurred in
loans due to strong originations in the first half of the year. Other assets
increased by $1.0 million
9
<PAGE>
primarily due to the purchase of bank-owned life insurance in the second
quarter. Both loan growth and the purchase of life insurance contributed to a
decrease in cash and cash equivalents of $2.0 million.
Liabilities in total increased by $6.9 million or 15%, between December 31, 1999
and September 30, 2000. The increase was attributable to additional advances
from the Federal Home Loan Bank (the "FHLB") and a $1 million or 3% increase in
deposits. Stockholders' equity decreased by 3%, or $201,000 as the cost to
purchase stock for treasury and the restricted stock plan exceeded net income
for the nine month period.
Liquidity and Capital Resources
Sources of liquidity include funds derived through earnings, customer deposit
balances, loan repayments, maturities or sales of investment securities and FHLB
borrowings.
Office of Thrift Supervision ("OTS") capital regulations applicable to the Bank
require savings institutions to meet three capital standards: (1) tangible
capital equal to 1.5% of total adjusted assets, (2) a leverage ratio (core
capital) equal to at least 4% of total adjusted assets, and (3) a risk-based
capital requirement equal to 8.0% of total risk-weighted assets. In addition,
the OTS prompt corrective action regulation provides that a savings institution
that has a leverage capital ratio of less than 4% will be deemed to be
"undercapitalized" and may be subject to certain restrictions. The Bank was in
compliance with these requirements at September 30, 2000, with tangible, core
and risk based capital ratios of 9.43%, 9.43% and 19.42%, respectively.
Comparison of Operating Results for Three Months Ended September 30, 2000 and
--------------------------------------------------------------------------------
1999
----
Net income for the third quarter of 2000 declined 19% to $51,000, from $62,000
for the same quarter in 1999. Growth in net interest income and noninterest
income was offset by increased levels of noninterest expense and the provision
for loan losses.
Net interest income increased $43,000 or 12.5% as a result of a $266,000 or 32%
increase in interest income offset by $223,000 or 46% increase in interest
expense. The increase in interest income was attributable to a 21% increase in
interest earning assets which occurred from September 30, 1999 to September 30,
2000. Similarly, deposits and other interest bearing liabilities increased 25%
during the same time frame. This increase in interest bearing liabilities,
coupled with higher interest rates, contributed to the 46% increase in interest
expense.
The provision for loan losses was $3,000 for the third quarter of 2000. No
expense was recorded for the same quarter in 1999. The increased expense was
responsive to loan growth and the risk inherent in the loan portfolio. Refer to
the loan quality section for additional information.
Noninterest income increased $2,000 or 3% when comparing the third quarter of
2000 to the same quarter of 1999 as a decline in fees and service charges was
offset by increased other income. The decline in fees and service charges was
attributable to lower loan closing charges as the Bank cut back in lending
during the third quarter of 2000. The increase in other income related primarily
to the bank-owned life insurance purchased in the second quarter of 2000.
Noninterest expenses increased $62,000 or 19% in the third quarter of 2000
compared with the same quarter in 1999. The majority of the increase occurred in
salaries and benefits due to the adoption of an ESOP, restricted stock awards,
increased health insurance, merit increases and a 7% increase in the number of
full-time equivalent employees from September 30, 1999 to September 30, 2000.
Additionally, advertising expense and "other" showed marked increases due to
expanded promotions, legal, printing and audit costs. Furniture and equipment
expense declined as 1999 included costs associated with Year 2000 readiness.
Income tax expense declined in the third quarter of 2000 when compared to the
same period in 1999 as a result of a lower level of income before taxes. Tax
expense recorded during this
10
<PAGE>
period of 2000 resulted in an effective tax rate of 29.2% compared to 31.5% in
1999. The slight reduction is attributable to non-taxed income from bank-owned
life insurance.
Comparison of Operating Results for Nine Months Ended September 30, 2000 and
--------------------------------------------------------------------------------
1999
----
Net income year to date in 2000 reached $205,000 and reflected 60% improvement
over 1999. Growth in net interest income and noninterest sources of revenue was
offset by increases in noninterest expense.
Net interest income increased $237,000 or 25% as a result of a $754,000 or 32%
increase in interest income offset by a $517,000 or 37% increase in interest
expense. The increase in interest income was attributable to both loan and
investment growth. Similarly, interest expense was impacted by growth in
deposits and FHLB borrowings as well as higher interest rates. The Company's
funding costs were impacted by the increasing interest rate environment to a
greater extent than its earning asset yields as most of the loan portfolio is at
fixed interest rates.
The provision for loan losses was $4,000 year to date in 2000 compared with
$2,000 in 1999. The increased expense was in response to loan growth and the
risk inherent in the loan portfolio. Refer to the loan quality section for
additional information.
Noninterest income increased $28,000 or 17% year to date in 2000 compared to the
same period in 1999. A decline in loan closing charges coupled with an increase
in service charges on deposits resulted in a stable level of fee and service
charge income. Other income increased $29,000 due to increased cash surrender
value of bank-owned life insurance purchased in the second quarter of 2000 and
due to expanded rental of Company owned premises.
Noninterest expenses increased $162,000 or 18% year to date in 2000 compared
with 1999. The majority of the increase occurred in salaries and benefits due to
increased staffing, merit increases, increased health insurance costs, issuance
of restricted stock awards and ESOP expense. Additionally, advertising expense
and "other" showed marked increases due to expanded promotions, legal, printing
and audit costs. Furniture and equipment expense declined as 1999 included costs
associated with year 2000 readiness.
Income tax expense increased in 2000 due to a higher level of pre-tax income
year to date. Tax expense recorded during this period of 2000 resulted in an
effective tax rate of 29.0% compared to 32.3% in 1999. The slight reduction is
attributable to non-taxed income from bank-owned life insurance.
Loan Quality
------------
The Company's allowance for loan losses was $151,000 or .38% of loans
outstanding at September 30,2000, compared with $168,000 or .52% at December 31,
1999. The following table provides a comparison of risk elements at September
30, 2000 to the balances at the end of 1999.
September 30, December 31,
2000 1999
------------- ------------
Nonaccrual loans $389 $527
Loans 90 days or more past due 4 -
---- ----
Total risk elements $393 $527
Ratio to period end loans .99% 1.64%
---- ----
An allowance for loan losses is maintained through a provision for loan losses
based on management's periodic evaluation of the general level of loan
delinquency, the level of risk by type of loan, and general economic conditions.
This evaluation is inherently subjective. In management's opinion, the allowance
for loan losses at September 30, 2000 is adequate to absorb potential losses in
the current portfolio.
11
<PAGE>
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
From time to time, the Company and its subsidiary may be a party to
various legal proceedings incident to its or their business. At September 30,
2000, there were no legal proceedings to which the Company or its subsidiary was
a party, or to which of any of their property was subject, which were expected
by management to result in a material loss.
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
--------------------------------
(b) Reports on Form 8-K
During the quarter ended September 30, 2000, the Company filed a
Current Report on Form 8-K dated September 20, 2000 (Items 4 and 7) to report a
change in the Company's certifying accountant. The Company filed amendments to
that Current Report on Form 8-K on October 6, 2000 and October 11, 2000.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STEELTON BANCORP, INC.
Date: November 14, 2000 By: /s/Harold E. Stremmel
-------------------------------------
Harold E. Stremmel
President and Chief Executive Officer
(Principal Executive Officer)
Date: November 14, 2000 By: /s/Shannon Aylesworth
-------------------------------------
Shannon Aylesworth
Chief Financial Officer
(Principal Accounting Officer)
