<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended SEPTEMBER 30, 1995
Commission file number 0-18166
STATE FINANCIAL SERVICES CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
WISCONSIN 39-1489983
--------- ----------
(State or other jurisdiction of (I.R.S. Employer identification No.)
incorporation or organization)
10708 WEST JANESVILLE ROAD, HALES CORNERS, WISCONSIN 53130
----------------------------------------------------------
(Address and Zip Code of principal executive offices)
Not applicable
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
(414) 425-1600
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No___
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of November 6, 1995, there were 2,207,807 shares of Registrant's $0.10 Par
Value Common Stock outstanding.
<PAGE> 2
FORM 10-Q
STATE FINANCIAL SERVICES CORPORATION
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page No.
<S> <C> <C>
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as of
September 30, 1995 and December 31, 1994 2
Consolidated Statements of Income for the
Three Months ended September 30, 1995 and 1994 3
Consolidated Statements of Income for the
Nine Months ended September 30, 1995 and 1994 4
Consolidated Statements of Cash Flows for the
Nine Months ended September 30, 1995 and 1994 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
<CAPTION>
PART II - OTHER INFORMATION
<S> <C>
Items 1-6 17
Signatures 18
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STATE FINANCIAL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 15,235,664 $ 11,195,006
Federal funds sold 15,012,013 4,001,864
Other short-term investments 0 1,000,000
------------ ------------
Cash and cash equivalents 30,247,677 16,196,870
Investment securities held to maturity
(Fair value: September 30, 1995 - $43,556,000
December 31, 1994 - $34,216,000) 43,282,222 34,901,412
Investment securities available for sale, at fair value 20,460,870 22,567,332
Loans 183,162,565 145,813,257
Less allowance for loan losses 2,735,209 1,982,941
------------ ------------
NET LOANS 180,427,356 143,830,316
Premises and equipment 4,982,182 4,434,350
Accrued interest receivable 1,991,964 1,436,468
Other assets 3,459,123 1,808,134
------------ ------------
$284,851,394 $225,174,882
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand $ 46,600,350 $ 46,782,692
Savings 72,174,213 66,365,935
Other time 125,324,559 84,252,537
------------ ------------
TOTAL DEPOSITS 244,099,122 197,401,164
Notes payable 1,076,387 115,364
Securities sold under agreements to repurchase 5,850,160 300,000
Accrued expenses and other liabilities 1,049,426 554,718
Accrued interest payable 1,123,606 634,742
------------ ------------
TOTAL LIABILITIES 253,198,701 199,005,988
Stockholders' equity:
Preferred stock, $1 par value;
authorized--100,000 shares; issued
and outstanding--none
Common stock, $0.10 par value;
authorized--10,000,000 shares
issued and outstanding--2,207,807
shares in 1995 and 1,985,678 in 1994 220,781 198,568
Capital surplus 21,310,088 18,030,527
Net unrealized holding loss on
securities available for sale (172,246) (708,361)
Retained earnings 10,818,963 9,215,542
Less: Guaranteed ESOP obligation (524,893) (567,382)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 31,652,693 26,168,894
------------ ------------
$284,851,394 $225,174,882
============ ============
</TABLE>
See notes to unaudited consolidated financial statements.
2
<PAGE> 4
STATE FINANCIAL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three months ended September 30,
1995 1994
---------- ----------
<S> <C> <C>
Interest income:
Loans, including fees $4,068,952 $3,120,282
Investment securities
Taxable 636,636 502,027
Tax-exempt 170,394 213,380
Federal funds sold 133,701 37,153
---------- ----------
TOTAL INTEREST INCOME 5,009,683 3,872,842
Interest expense:
Deposits 1,876,689 1,155,516
Notes payable and other borrowings 92,386 4,923
---------- ----------
TOTAL INTEREST EXPENSE 1,969,075 1,160,439
---------- ----------
NET INTEREST INCOME 3,040,608 2,712,403
Provision for loan losses 47,500 30,000
---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 2,993,108 2,682,403
Other income:
Service charges on deposit accounts 254,014 265,265
Merchant service fees 195,460 169,983
Building rent 50,966 60,201
ATM fees 51,901 58,410
Other 102,887 113,222
---------- ----------
655,228 667,081
Other expenses:
Salaries and employee benefits 1,075,234 944,912
Net occupancy expense 196,063 202,572
Equipment rentals, depreciation and
maintenance 212,533 211,097
Data processing 141,800 150,216
Legal and professional 74,003 73,388
Merchant service charges 166,155 145,496
Regulatory agency assessments (23,499) 109,948
ATM charges 49,276 50,148
Postage and courier 56,241 51,923
Office supplies 41,985 61,926
Advertising 59,823 59,000
Other 298,118 215,288
---------- ----------
2,347,732 2,275,914
---------- ----------
INCOME BEFORE INCOME TAXES 1,300,604 1,073,570
Income taxes 437,377 334,813
---------- ----------
NET INCOME $ 863,227 $ 738,757
========== ==========
Net income per common and common equivalent share $ 0.43 $ 0.38
Dividends per common share $ 0.12 $ 0.11
Weighted average common shares outstanding 1,992,417 1,936,074
</TABLE>
See notes to unaudited consolidated financial statements.
3
<PAGE> 5
STATE FINANCIAL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended September 30,
1995 1994
-------------- -------------
<S> <C> <C>
Interest income:
Loans, including fees $11,373,618 $ 8,832,503
Investment securities
Taxable 1,825,568 1,576,003
Tax-exempt 496,692 611,655
Federal funds sold 154,439 151,111
----------- -----------
TOTAL INTEREST INCOME 13,850,317 11,171,272
Interest expense:
Deposits 4,891,368 3,486,733
Notes payable and other borrowings 233,883 15,068
----------- -----------
TOTAL INTEREST EXPENSE 5,125,251 3,501,801
----------- -----------
NET INTEREST INCOME 8,725,066 7,669,471
Provision for loan losses 137,500 90,000
----------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 8,587,566 7,579,471
Other income:
Service charges on deposit accounts 744,428 806,153
Merchant service fees 524,893 438,916
Building rent 171,885 180,074
ATM fees 152,652 154,543
Other 262,120 268,169
----------- -----------
1,855,978 1,847,855
Other expenses:
Salaries and employee benefits 3,097,916 2,770,889
Net occupancy expense 593,999 606,105
Equipment rentals, depreciation and
maintenance 611,330 669,510
Data processing 410,448 474,421
Legal and professional 219,931 191,272
Merchant service charges 460,327 372,644
Regulatory agency assessments 195,776 333,035
ATM charges 139,107 160,588
Postage and courier 159,784 151,594
Office supplies 128,506 160,505
Advertising 173,232 177,060
Other 802,426 698,548
----------- -----------
6,992,782 6,766,171
----------- -----------
INCOME BEFORE INCOME TAXES 3,450,762 2,661,155
Income taxes 1,139,679 799,791
----------- -----------
NET INCOME $ 2,311,083 $ 1,861,364
=========== ===========
Net income per common and common equivalent share $ 1.18 $ 0.96
Dividends per common share $ 0.35 $ 0.31
Weighted average common shares outstanding 1,960,642 1,933,412
</TABLE>
See notes to unaudited consolidated financial statements.
4
<PAGE> 6
STATE FINANCIAL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended September 30,
1995 1994
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,311,083 $ 1,861,364
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 137,500 90,000
Provision for depreciation 363,054 433,200
Amortization of investment security
premiums and accretion of discounts-net 61,754 122,784
Amortization of goodwill 30,892 22,283
Amortization of branch acquisition premium 22,249 22,249
Increase in interest receivable (317,151) (192,942)
Increase (decrease) in interest payable 357,166 (14,568)
Other 82,096 113,380
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,048,643 2,457,750
INVESTING ACTIVITIES
Purchases of investment securities (8,993,168) (9,153,670)
Maturities of investment securities 10,250,260 8,917,091
Purchases of securities available for sale (1,438,715) (6,093,441)
Maturities of securities available for sale 5,182,891 7,593,939
Net increase in loans (12,301,006) (8,954,422)
Purchases of premises and equipment (225,425) (268,454)
Business acquisitions (net of cash and cash equivalents
acquired of $2,427,440 in 1995)
Loans (24,433,534) -0-
Investment securities - held-to-maturity (9,686,714) -0-
Investment securities - available-for-sale (839,402) -0-
Premises and equipment (685,461) -0-
Goodwill (1,446,346) -0-
Deposits 33,044,661 -0-
Other (net) (226,958) -0-
------------ ------------
NET CASH USED BY INVESTING ACTIVITIES (11,798,917) (7,958,957)
FINANCING ACTIVITIES
Increase (decrease) in deposits 13,653,297 (6,623,242)
Increase (decrease) in notes payable 961,023 (93,182)
Decrease in guaranteed ESOP obligation 42,489 47,125
Net proceeds from securities sold under agreement to repurchase 5,550,160 300,000
Cash dividends (707,663) (604,454)
Issuance of common stock in acquisition 3,237,404 -0-
Proceeds from exercise of stock options 64,371 76,609
------------ ------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 22,801,081 (6,897,144)
------------ ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 14,050,807 (12,398,351)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 16,196,870 29,678,573
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 30,247,677 $ 17,280,222
============ ============
Supplemental information:
Taxes paid $ 1,219,747 $ 741,776
Interest paid 4,768,085 3,516,369
</TABLE>
See notes to unaudited consolidated financial statements.
5
<PAGE> 7
STATE FINANCIAL SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include
the accounts of State Financial Services Corporation (the "Company") and its
subsidiaries, State Financial Bank and WBAC, Inc. State Financial Bank also
includes the accounts of its wholly owned subsidiaries, Hales Corners
Development Corporation and Hales Corners Investment Corporation. WBAC, Inc.
also includes the accounts of its wholly owned subsidiary, Waterford Bank. All
significant intercompany balances and transactions have been eliminated.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they 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 normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the nine month
period ending September 30, 1995 are not necessarily indicative of the results
that may be expected for the year ended December 31, 1995. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report to stockholders for the year
ended December 31, 1994.
NOTE B--ACQUISITION OF WATERFORD BANCSHARES, INC.
On August 24, 1995, the Company completed its acquisition of Waterford
Bancshares, Inc. ("Bancshares") Bancshares was the parent bank holding company
of Waterford Bank, Waterford Wisconsin. Pursuant to the Agreement and Plan of
Merger, Bancshares was merged into the Company's wholly owned subsidiary, WBAC,
Inc., ("WBAC") which has become the resultant owner of Waterford Bank
("Waterford"). In connection with the acquisition, the Company issued 214,871
shares of its common stock with a value of $3,237,000 (net of acquisitions
costs to date totalling $85,000), $1,061,844 in two year installment notes, and
paid $2,260,401 in cash in exchange for the outstanding common stock of
Bancshares. The acquisition was accounted for using purchase accounting.
WBAC's consolidated financial condition has been included in the Company's
Consolidated Balance Sheet as of September 30, 1995 and WBAC's consolidated
results of operation have been reflected in the Company's Consolidated
Statements of Income beginning as of the acquisition date. The effects of the
acquisition, along with the exercise of 240 officer stock options in the third
quarter of 1995, brings the total number of the Company's common shares
outstanding at September 30, 1995 to 2,207,807.
On a pro forma basis, the pro forma net income and net income per
common and common equivalent share for the three and nine month periods ended
September 30, 1995 and September 30, 1994, after giving effect to the
Bancshares' acquisition as if it had occurred on January 1, 1994 would be as
follows:
<TABLE>
<CAPTION>
Nine months ended Three months ended
September 30, September 30,
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income $2,420,975 $1,940,166 $ 861,514 $ 784,621
Net income per common and
common equivalent share 1.12 0.90 0.40 0.36
</TABLE>
6
<PAGE> 8
NOTE C--ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN
Beginning in 1995, the Company adopted Financial Accounting Standards
Board Statement No. 114, "Accounting by Creditors for Impairment of a Loan".
Under the new standard, the 1995 allowance for loan losses related to loans
that are identified for evaluation in accordance with Statement No. 114 is
mainly based on the fair value of the collateral for certain collateral
dependent loans. Prior to 1995, the allowance for loan losses related to these
loans was based on undiscounted cash flows or the fair value of the collateral
for collateral dependent loans. The effect of this change on State Financial
Bank was immaterial. This evaluation is inherently subjective as it requires
material estimates involving the amounts and timing of future cash flows
expected to be received on impaired loans that may be susceptible to
significant change.
7
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CHANGES IN FINANCIAL CONDITION
At September 30, 1995, total assets were $284,851,000 compared to
$225,175,000 at December 31, 1994. The acquisition of Waterford added
$39,923,000 to the Company's consolidated asset base as of the date of
acquisition (August 24, 1995). To fund the acquisition, the Company issued
214,871 shares of common stock with a value of $3,237,000 (net of acquisition
costs to date totalling $85,000), $1,062,000 in two year installment notes, and
cash payouts of $2,260,000. The Company's asset growth exclusive of Waterford
($19,753,000) came primarily from deposit growth ($13,653,000), substantially
all of which occurred in the third quarter of 1995, and proceeds from
securities sold under agreement to repurchase ($5,550,000).
The deposit increase primarily funded the Company's increase in cash
and cash equivalents since year end 1994. The composition of the Company's
deposit portfolio continues to concentrate in time deposits (consisting of
certificates of deposit, individual retirement accounts, and money market
accounts). In the first nine months of 1995, time deposits increased
$41,072,000 in total and $22,195,000 exclusive of the additional Waterford
deposits. The growth, exclusive of Waterford, was primarily due to growth in
money market balances resulting from continued deposit attraction to the
Company's new money market index account introduced in October 1994 and
increases in certificates of deposits due to the Company's attractive rates
offered on special nine and eighteen month terms. Increases in time deposits
were offset by contraction in savings and demand deposits exclusive of the
additional Waterford deposits. Total savings deposits increased $5,808,000
through September 30, 1995. However, Waterford added $10,844,000 to the
Company's consolidated savings balances. Exclusive of Waterford, savings
decreased $5,036,000 as depositors continue to redeploy balances from savings
into time deposits to take advantage of higher interest rates offered in those
categories. Demand deposits declined $182,000 in total and $3,505,000
exclusive of Waterford due to cyclical contraction in demand balances.
The Company continues to experience strong loan demand. Net loan
growth of $12,301,000, exclusive of the loans acquired with Waterford, was
primarily funded by net maturities of available-for-sale and held-to-maturity
investment securities ($5,001,000), and sales of securities sold under
agreement to repurchase ($5,550,000).
Net cash provided by operating activities of $3,049,000 provided
funding for the loan growth ($1,750,000) not covered by the aforementioned
sources with the remainder used primarily to fund shareholder dividends of
$708,000, purchases of premises and equipment of $225,000, and the remaining
increase in cash and cash equivalents not funded through deposit growth.
ASSET QUALITY
At September 30, 1995, non-performing assets increased $1.5 million as
compared to June 30, 1995 due to the inclusion of Waterford's non-performing
assets ($346,000 at September 30, 1995) for the first time in the Company's
consolidated reports and net increases in non-performing loans at State
Financial Bank during the third quarter of 1995 primarily related to two
credits totalling $1,030,000 placed on nonaccrual status during the quarter.
With the non-performing loan increases, the percentage of non-performing loans
to total loans increased to 1.37% and non-performing assets to total assets
increased to 1.06% at September 30, 1995.
At September 30, 1995, there were no loans where available information
would suggest that such loans were likely to be later included as nonaccrual,
past due or restructured with the exception of two loans to unrelated borrowers
totalling approximately $250,000 which could be placed on nonaccrual status
during the third quarter. Based upon currently available information, the
Company does not expect to incur any loss as a result of the liquidation of
these loans, if necessary.
8
<PAGE> 10
The following table summarizes non-performing assets on the dates
indicated (dollars in thousands).
<TABLE>
<CAPTION>
Sep. 30 Jun. 30 Mar. 31 Dec. 31 Sep. 30
1995 1995 1995 1994 1994
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans . . . . . . . . . . . . . . $ 2,514 $ 1,162 $ 1,314 $ 1,311 $ 1,897
Accruing loans past due 90 days or more . . . 4 2 0 5 18
Restructured loans . . . . . . . . . . . . . 0 0 0 0 0
-------------------------------------------------------------------
Total non-performing and restructured loans 2,518 1,164 1,314 1,316 1,915
-------------------------------------------------------------------
Other real estate owned . . . . . . . . . . . 489 317 219 219 0
-------------------------------------------------------------------
Total non-performing assets . . . . . . . . . $ 3,007 $ 1,481 $ 1,533 $ 1,535 $ 1,915
===================================================================
Ratios:
Non-performing loans to total loans . . . . 1.37% 0.74% 0.86% 0.90% 1.38%
Allowance to non-performing loans . . . . . 108.62 172.68 154.49 150.68 108.15
Non-performing assets to total assets . . . 1.06 0.63 0.68 0.68 0.87
===================================================================
</TABLE>
When, in the opinion of management, serious doubt exists as to the
collectibility of a loan, the loan is placed on nonaccrual status. At the time
a loan is classified as nonaccrual, interest income accrued in the current year
is reversed and interest income accrued in the prior year is charged to the
allowance for loan losses. With the exception of credit cards, the Company
does not recognize income on loans past due 90 days or more.
ALLOWANCE FOR LOAN LOSSES
Management maintains the allowance for loan losses (the "Allowance")
at a level considered adequate to provide for future loan losses. The
Allowance is increased by provisions charged to earnings and is reduced by
charge-offs, net of recoveries. At September 30, 1995, the Allowance was
$2,735,000, an increase of $752,000 from the balance at December 31, 1994. The
majority of this increase was due to the addition of Waterford's allowance
($735,000) as part of the acquisition. The remaining change was primarily due
to the amount of loan loss provisions exceeding net charge-offs through the
first nine months of 1995. In 1995, management increased the amount of monthly
loan loss provisions charged to earnings to reflect the increased level of
outstanding loans.
The determination of Allowance adequacy is determined quarterly based
upon an evaluation of the Company's loan portfolio by the internal loan review
officer and management. These evaluations consider a variety of factors,
including, but not limited to, general economic conditions, loan portfolio size
and composition, previous loss experience, the borrower's financial condition,
collateral adequacy, the level of non-performing loans, and management's
estimation of future losses. As a percentage of loans, the Allowance was 1.49%
at September 30, 1995 compared to 1.36% at December 31, 1994. Based upon its
analyses, management considers the Allowance adequate to recognize the risk
inherent in the Company's loan portfolio at September 30, 1995.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
9
<PAGE> 11
The following table sets forth an analysis of the Company's Allowance
and actual loss experience for the periods indicated (dollars in thousands):
<TABLE>
<CAPTION>
Nine months
ended Year ended
September 30, Dec. 31, 1994
1995
------------------------------------------
<S> <C> <C> <C> <C>
Balance at beginning of period . . . . . . . . $ 1,983 $ 2,084
Charge-offs:
Commercial . . . . . . . . . . . . . . . . . 15 115
Real estate . . . . . . . . . . . . . . . . 111 59
Installment . . . . . . . . . . . . . . . . 50 68
Other . . . . . . . . . . . . . . . . . . . 32 38
------------------------------------------
Total charge-offs . . . . . . . . . . . . . 208 280
------------------------------------------
Recoveries:
Commercial . . . . . . . . . . . . . . . . . 57 18
Real estate . . . . . . . . . . . . . . . . 0 0
Installment . . . . . . . . . . . . . . . . 25 24
Other . . . . . . . . . . . . . . . . . . . 6 17
------------------------------------------
Total recoveries . . . . . . . . . . . . . . 88 59
------------------------------------------
Net charge-offs . . . . . . . . . . . . . . . . 120 221
Balance of Waterford's allowance
at date of acquisition . . . . . . . . . . . 735 n/a
Additions charged to operations . . . . . . . . 137 120
------------------------------------------
Balance at end of period $ 2,735 $ 1,983
==========================================
Ratios:
Net charge-offs to
average loans outstanding(1) . . . . . . . 0.10% 0.16%
Net charge-offs to total allowance(1) . . . . 5.85 11.14
Allowance to period end
loans outstanding . . . . . . . . . . . . 1.49 1.36
==========================================
1. Annualized
</TABLE>
RESULTS OF OPERATION - COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1995
AND 1994
GENERAL
The Company reported net income of $863,000 for the quarter ended
September 30, 1995, an increase of $124,000 or 16.8% from the $739,000
reported for the comparable quarter in 1994. The Company's third quarter
results continue to benefit from improvements in net interest income as a
result of the continued increase in outstanding loans, and additionally
benefitted from the reductions granted by the Federal Deposit Insurance
Corporation ("FDIC") in deposit insurance premiums in the third quarter. Third
quarter 1995's results are the first to include consolidated amounts from WBAC
and its subsidiary Waterford. Under purchase accounting, consolidated
operating results from WBAC have been included from the date of acquisition
(August 24, 1995) through the end of the period.
10
<PAGE> 12
NET INTEREST INCOME
The following table sets forth average balances, related interest
income and expenses, and effective interest yields and rates for the three
months ended September 30, 1995 and September 30, 1994 (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994
----------------------------- ------------------------------
Average Yield/ Average Yield/
Balance Interest Rate(4) Balance Interest Rate(4)
------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans (1,2,3) . . . . . . . . . . . . . . . . . $ 167,254 $ 4,085 9.69% $ 138,342 $ 3,137 9.00%
Taxable investment securities . . . . . . . . . 45,768 637 5.52 40,097 502 4.97
Tax-exempt investment securities (3) . . . . . 14,227 258 7.19 19,257 323 6.65
Federal funds sold . . . . . . . . . . . . . . 9,315 134 5.71 3,311 37 4.43
------------------------------- -----------------------------
Total interest-earning assets . . . . . . . . . . 236,564 5,114 8.58 201,007 3,999 7.89
Non-interest-earning assets:
Cash and due from banks . . . . . . . . . . . . 10,995 12,506
Premises and equipment, net . . . . . . . . . . 4,443 4,567
Other assets . . . . . . . . . . . . . . . . . 4,031 3,251
Less: Allowance for loan losses . . . . . . . . . (2,317) (2,078)
--------- ----------
TOTAL $ 253,716 $ 219,253
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
NOW and money market accounts . . . . . . . . . $ 68,645 $ 691 3.99% $ 52,100 $ 310 2.36%
Savings deposits . . . . . . . . . . . . . . . 42,435 296 2.77 52,638 334 2.52
Time deposits . . . . . . . . . . . . . . . . . 60,507 890 5.84 47,046 512 4.31
Notes payable . . . . . . . . . . . . . . . . . 127 2 6.83 0 0 0
Mortgage payable . . . . . . . . . . . . . . . 65 2 12.21 154 4 10.33
Securities sold under
agreement to repurchase . . . . . . . . . . . 6,274 88 5.56 104 1 3.81
------------------------------- -----------------------------
Total interest-bearing liabilities . . . . . . . 178,053 1,969 4.39 152,042 1,161 3.03
------------------------------- -----------------------------
Non-interest-bearing liabilities:
Demand deposits . . . . . . . . . . . . . . . . 44,148 40,613
Other . . . . . . . . . . . . . . . . . . . . . 2,645 1,020
--------- ----------
Total liabilities . . . . . . . . . . . . . . . . 224,846 193,675
--------- ----------
Stockholders' equity . . . . . . . . . . . . . . 28,870 25,578
--------- ----------
TOTAL . . . . . . . . . . . . . . . . . . . . . . $ 253,716 $ 219,253
========= ==========
Net interest earning and interest rate spread . . $ 3,145 4.19% $ 2,838 4.86%
================ ================
Net yield on interest-earning assets . . . . . . 5.27% 5.60%
======= ======
</TABLE>
- -------------------------------
1. For the purposes of these computations, nonaccrual loans are included
in the daily average loan amounts outstanding.
2. Interest earned on loans includes loan fees (which are not material
in amount) and interest income which has been received from borrowers
whose loans were removed from nonaccrual during the period indicated.
3. Taxable-equivalent adjustments are made in calculating interest income
and yields using a 34% rate for all years presented.
4. Annualized
For the quarter ended September 30, 1995, the Company reported
taxable-equivalent net interest income of $3,145,000, an increase of $307,000
or 10.8% from the $2,838,000 reported for the quarter ended September 30, 1994.
The increase was due to an increase of $1,115,000 in taxable-equivalent total
interest income offset by an increase of $808,000 in total interest expense.
The improvement in taxable-equivalent net interest income in the third quarter
of 1995 was primarily the result of volume increases in the level of
outstanding interest-earning assets offset by higher funding costs resulting
from the changing composition of the Company's interest-bearing liabilities
between the two
11
<PAGE> 13
periods. As a result of the aforementioned changes, the Company's
taxable-equivalent yield on interest-earning assets (net interest margin)
declined to 5.27% for the quarter ended September 30, 1995 from 5.60% for the
third quarter of 1994.
The increase of $1,115,000 in taxable-equivalent total interest income
was primarily the result of a 17.7% increase in the level of average
interest-earning assets outstanding for the quarter ended September 30, 1995
over the comparable quarter in 1994, the employment of a greater percentage of
interest-earning assets in loans, and the repricing of the Company's
interest-earning assets into the generally higher interest rate market over the
preceding twelve months. Average loans, which historically are the Company's
highest yielding asset category, increased $28,912,000 or 20.9% for the quarter
ended September 30, 1995 compared to the third quarter of 1994 with $10,269,000
of this increase due to the inclusion of Waterford in 1995. With this
increase, average loans represent 70.7% of interest-earning assets in the third
quarter of 1995 compared to 68.8% for the third quarter of 1994. In
addition, the Company's fixed loans tended to upwardly reprice over the
preceding twelve months which helped to improve the third quarter 1995
taxable-equivalent loan yield to 9.69% from 9.00% for the third quarter of
1994. With these improvements, the overall taxable-equivalent yield on all
interest-earning assets increased to 8.58% for the quarter ended September 30,
1995 compared to 7.89% for the quarter ended September 30, 1994.
These interest income improvements were offset by an increase in the
average cost of interest-bearing liabilities due to the general increase in
deposit interest rates over the preceding twelve months, a greater percentage
of the Company's deposit base in time deposits and money market accounts, and
increases in the average level of outstanding securities sold under agreement
to repurchase ("Repurchase Agreements") in the third quarter of 1995. As
interest rates have increased, depositors have moved balances from lower
yielding savings instruments to higher yielding time deposits and money market
accounts. For the quarter ended September 30, 1995, average time deposits, NOW
and money market accounts accounted for 72.5% of average outstanding
interest-bearing liabilities compared to 65.2% for the quarter ended September
30, 1994. Interest expense also increased as a result of additional interest
expense associated with the $6,170,000 increase in the average level of
outstanding Repurchase Agreements in the third quarter of 1995 and resulted in
$87,000 of additional interest expense during the period. The Company's
Repurchase Agreements are primarily generated through local municipalities
desirous of additional security on their balances exceeding the level of FDIC
insurance coverage. As a result of the aforementioned changes, the cost of the
Company's interest- bearing liabilities increased to 4.39% for the quarter
ended September 30, 1995 compared to 3.03% for the quarter ended September 30,
1994.
PROVISION FOR LOAN LOSSES
The provision for loan losses increased $17,500 in the third quarter
of 1995 compared to the third quarter of 1994 primarily due to increased
monthly provisions at State Financial Bank to reflect the bank's general
increase in the level of loans outstanding.
OTHER INCOME
Total other income decreased $12,000 or 1.8% for the quarter ended
September 30, 1995 compared to the same period in 1994 due to decreases in
services charges on deposit accounts, building rent, ATM fees and other income
offset by improvements in income from merchant services. The $11,000 decrease
in service charges on deposit accounts was primarily due to volume reductions
in checks returned due to insufficient funds and accordingly the fees resulting
therefrom. Building rent income decreased $9,000 due to the Company utilizing
additional space which was previously leased to an external tenant. ATM fees
decreased $7,000 as one of the Company's automated teller machines was taken
out of service in 1995. Other income decreased $10,000 as the Company recorded
a gain on the sale of other real estate of $29,000 in third quarter 1994.
Exclusive of this unusual item, other income increased $19,000 in the third
quarter of 1995 over 1994. The Company began directly originating and selling
secondary market mortgage loans in the third quarter of 1995 which resulted in
gain from those sales totalling $12,000, accounting for the majority of this
improvement. Also improving was merchant services income, increasing $25,000
in the third quarter of 1995 due to volume and rate increases over the
preceding twelve months.
12
<PAGE> 14
OTHER EXPENSES
Total other expenses increased $72,000 or 3.2% for the three months
ended September 30, 1995 compared to the same period in 1994. Salaries and
employee benefits increased $130,000 (13.8%), due to the inclusion of
Waterford, annual salary adjustments, increases in medical insurance premiums,
and additional accruals to the Company's management incentive plan in the third
quarter of 1995 as compared to 1994. Expenses related to the Company's
merchant services program increased $21,000 due to an increased customer base
and rate increases from the Company's service provider. Other expenses
increased $83,000 in the third quarter of 1995 compared to 1994 due to
write-downs in the value of other real estate write-downs, the inclusion of
Waterford, and losses on fixed asset disposals. Offsetting these increases
were declines in regulatory agency assessments, net occupancy and equipment
expenses, data processing, and office supplies. In the third quarter of
1995, the FDIC reduced the amount assessed for deposit insurance and refunded
one third of the second quarter's excess assessment . As a result, regulatory
agency assessments decreased $133,000 for the quarter ended September 30, 1995
compared to the similar quarter in 1994. The $5,000 decline in net occupancy
and equipment expenses was primarily due to reduced depreciation expense
resulting from an increase in fully depreciated assets on the Company's books
over the preceding twelve months. Data processing expense declined $8,000 due
to rate reductions resulting from the Company's renegotiated contract in
mid-1994 with its service provider and increased efficiencies obtained from the
consolidation of the Company's banks in June 1994. The Company's third
quarter 1995 expense for office supplies decreased $20,000 due to the
realization of economies resulting from bank consolidation in 1994.
INCOME TAXES
Income taxes for the quarter ended September 30, 1995 increased
$103,000 over the third quarter of 1994. The increase in income tax expense
was the result of an increase of $227,000 in income before income taxes and a
reduction of $43,000 in tax-exempt income in the third quarter of 1995 as
compared to the third quarter of 1994.
RESULTS OF OPERATION - COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1995
AND 1994
GENERAL
For the nine months ended September 30, 1995, net income was
$2,311,000, an increase of $450,000 or 24.2% over the nine month ended
September 30, 1994. The year-to-date results were primarily impacted by the
Company's improved net interest income and FDIC insurance reductions.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
13
<PAGE> 15
NET INTEREST INCOME
The following table sets forth average balances, related interest
income and expenses, and effective interest yields and rates for the nine
months ended September 30, 1995 and September 30, 1994 (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994
-------------------------- -------------------------
Average Yield/ Average Yield/
Balance Interest Rate(4) Balance Interest Rate(4)
-------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans (1,2,3) . . . . . . . . . . . . . . . . . $156,993 $ 11,420 9.73% $134,280 $ 8,882 8.84%
Taxable investment securities . . . . . . . . . 43,856 1,826 5.57 43,004 1,576 4.90
Tax-exempt investment securities (3). . . . . . 14,157 753 7.11 19,231 927 6.44
Federal funds sold . . . . . . . . . . . . . . 3,573 154 5.76 5,531 151 3.65
-------------------------- -------------------------
Total interest-earning assets . . . . . . . . . . 218,579 14,153 8.66 202,046 11,536 7.63
Non-interest-earning assets:
Cash and due from banks . . . . . . . . . . . . 10,931 13,272
Premises and equipment, net . . . . . . . . . . 4,375 4,632
Other assets . . . . . . . . . . . . . . . . . 3,660 3,168
Less: Allowance for loan losses . . . . . . . . . (2,127) (2,074)
--------- ----------
TOTAL $ 235,418 $ 221,044
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
NOW and money market accounts . . . . . . . . . $ 62,806 $ 1,807 3.85% $ 52,501 $ 906 2.31%
Savings deposits . . . . . . . . . . . . . . . 41,893 860 2.74 52,884 993 2.51
Time deposits . . . . . . . . . . . . . . . . . 53,800 2,225 5.53 48,789 1,588 4.35
Notes payable . . . . . . . . . . . . . . . . . 43 2 6.83 0 0 0
Mortgage payable . . . . . . . . . . . . . . . 86 6 9.33 192 14 9.75
Federal funds purchased . . . . . . . . . . . . 571 27 6.32 0 0 0
Securities sold under
agreement to repurchase . . . . . . . . . . 4,697 198 5.64 35 1 3.82
-------------------------- -------------------------
Total interest-bearing liabilities . . . . . . . 163,896 5,125 4.18 154,401 3,502 3.03
-------------------------- -------------------------
Non-interest-bearing liabilities:
Demand deposits . . . . . . . . . . . . . . . . 42,206 40,141
Other . . . . . . . . . . . . . . . . . . . . . 1,648 1,186
--------- ----------
Total liabilities . . . . . . . . . . . . . . . . 207,750 195,728
--------- ----------
Stockholders' equity . . . . . . . . . . . . . . 27,668 25,316
--------- ----------
TOTAL . . . . . . . . . . . . . . . . . . . . . . $ 235,418 $ 221,044
========= ==========
Net interest earning and interest rate spread . . $ 9,028 4.48% $ 8,034 4.60%
================ ================
Net yield on interest-earning assets . . . . . . 5.52% 5.32%
====== ======
</TABLE>
- -------------------------------
1. For the purposes of these computations, nonaccrual loans are
included in the daily average loan amounts outstanding.
2. Interest earned on loans includes loan fees (which are not material in
amount) and interest income which has been received from borrowers
whose loans were removed from nonaccrual during the period indicated.
3. Taxable-equivalent adjustments are made in calculating interest income
and yields using a 34% rate for all years presented.
4. Annualized
For the nine months ended September 30, 1995, the Company reported
taxable-equivalent net interest income of $9,028,000, an increase of $994,000
or 12.4% from the $8,034,000 reported for the nine months ended September 30,
1994. The increase was due to an increase of $2,617,000 in taxable-equivalent
total interest income offset by an
14
<PAGE> 16
increase of $1,623,000 in total interest expense. The year-to-date increases
in taxable-equivalent interest income continue to outpace increases in interest
expense and as a result the Company continues to report period to period
comparative improvement in its taxable-equivalent yield on interest-earning
assets (net interest margin). For the nine months ended September 30, 1995,
the Company improved its net margin to 5.52% from 5.32% for the year-to-date
1994 results.
The $2,617,000 increase in taxable-equivalent total interest income
was primarily the result of a 8.2% increase in the level of average
interest-earning assets outstanding through the first nine months of 1995 over
the comparable period in 1994, the employment of a greater percentage of
interest-earning assets in loans, and repricing of the Company's
interest-earning assets. Through the first nine months of 1995, average loans
increased $22,713,000 or 16.9% over the level of average loans outstanding
through the first nine months of 1994 due to strong loan demand over the
preceding twelve months. The inclusion of Waterford in 1995 accounted for
$3,458,000 of this increase. Average loans account for 71.8% of the Company's
average interest-earning assets in 1995 compared to 66.5% in 1994. This
increase in outstanding average loans, combined with the repricing of these
loans into a higher interest rate environment and the recovery of $72,000 in
nonaccrual loan interest during the first quarter of 1995, resulted in a
$2,538,000 increase in loan interest income for the nine month period ended
September 30, 1995 over the first nine months of 1994. As a result of the
repricing of the Company's loans, the year-to-date average yield on the loan
portfolio was 9.73% through September 30, 1995 compared to 8.84% through
September 30, 1994. The improvement in loan interest, combined with yield
enhancements in the Company's investment portfolio due to investment maturities
repricing into the higher interest rate environment, have combined to improve
the Company's taxable-equivalent yield on interest-earning assets to 8.66% for
the nine months ended September 30, 1995 as compared to 7.63% for the
comparable 1994 period.
The Company's deposit portfolio has also been impacted by the
increased interest rate environment and as a result, total interest expense
increased $1,623,000 or 46.3% in the first nine months of 1995 as compared to
the first nine months of 1994. The increase in year-to-date interest expense
was primarily the result of changes in the composition of the Company's
interest-bearing liabilities and the repricing of its deposits into the
increased interest rate environment. Deposit interest expense increased
$1,405,000 or 40.3% to $4,892,000 for the nine months ended September 30, 1995
over the comparable 1994 period. This increase was primarily due to depositors
shifting balances into higher yielding money market and certificate of deposit
instruments from savings deposits as increases in market interest rates have
widened the spread between these deposit products. As a result of these
deposit composition changes, the Company's total cost of interest-bearing
deposits increased to 4.13% through the first nine months of 1995 compared to
3.02% for the first nine months of 1994. Average deposit growth of 2.81% and
the interest expense associated with the year-to-date funding cost of the
Repurchase Agreements outstanding during the year which were not in place
during 1994 also impacted the increase in total interest expense in 1995. The
combination of the aforementioned factors has increased the total cost of the
Company's interest-bearing liabilities to 4.18% for the first nine months of
1995 from 3.03% for the first nine months of 1994.
PROVISION FOR LOAN LOSSES
The provision for loan losses increased $47,500 through the first
nine months of 1995 compared to the first nine months of 1994 primarily due to
State Financial Bank's increased monthly provisions to reflect the general
increase in the level of loans outstanding.
OTHER INCOME
Other income increased $8,000 or 0.4% for the first nine months of
1995 over the first nine months of 1994. This increase was primarily the
result of an increase of $86,000 or 20.0% in merchant service fees due to rate
and volume increases over the preceding twelve months offset by a decrease of
$62,000 or 7.7% in service charges on deposit accounts. Year-to-date 1995
service charge income was primarily impacted by reduced business service
charges resulting from increases in the level of earnings credits provided to
business checking accounts due to the general increase in market interest rates
and from reduced fee income generated from checks returned for insufficient
funds due to volume reductions.
15
<PAGE> 17
OTHER EXPENSES
For the first nine months of 1995, total other expenses increased
$227,000 or 3.4% over the first nine months of 1994. Salaries and employee
benefits increased $327,000 or 11.8% due to the inclusion of Waterford, annual
salary adjustments, increases in medical insurance premiums, and additional
accruals to the Company's management incentive plan in 1995. Expenses related
to the Company's merchant services program rose $88,000 in the first nine
months of 1995 due to an increased customer base and rate increases from the
service provider. Year-to-date legal and professional fees increased $29,000
through the first nine months of 1995 primarily due to fees incurred in the
first quarter associated with the Company's pending acquisition of Waterford
Bancshares, Inc. Other expenses increased $104,000 in the first nine months of
1995 due to the increased charge-offs from merchant accounts in the second
quarter, valuation adjustments on other real estate, and the inclusion of
Waterford. Offsetting these increases were decreases in regulatory agency
assessments, data processing, net occupancy and equipment expense, office
supplies, and ATM charges. Through the first nine months of 1995, regulatory
agency assessments decreased $137,000, data processing expense declined
$64,000, net occupancy and equipment expense decreased $70,000, and office
supplies decreased $32,000 due to the reasons previously discussed in the
comparison of the Company's third quarter results. ATM charges decreased
$21,000 due to rate reductions from the Company's service provider.
INCOME TAXES
Income taxes for the nine months ended September 30, 1995 increased
$340,000 as a result of the $790,000 increase in income before income taxes and
decrease of $115,000 in tax-exempt income as compared to the nine months ended
September 30, 1994.
LIQUIDITY
Liquidity management involves the ability to meet the cash flow
requirement of customers who may be either depositors wanting to withdraw funds
or borrowers needing assurance that sufficient funds will be available to meet
their credit needs. Liquid assets (including cash deposits with banks, and
federal funds sold) are maintained to meet customers needs. The Company had
liquid assets of $30,248,000 and $16,197,000 at September 30, 1995 and December
31, 1994, respectively.
CAPITAL RESOURCES
There are certain regulatory constraints which affect the Company's
level of capital. The following table sets forth these requirements and the
Company's ratios at September 30, 1995, including the Tier 1 leverage ratio,
the risk-based capital ratios based upon Tier 1 capital, and total risk-based
capital:
<TABLE>
<CAPTION>
Regulatory Regulatory
Minimum Well-capitalized
Actual Requirement Requirement
---------------- ----------------- -----------------
(dollars in thousands)
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Tier 1 leverage ratio $29,972 11.9% $7,556 3.0% $12,593 5.0%
Tier 1 risk-based capital ratio 29,972 16.3% 7,353 4.0% 11,030 6.0%
Risk-based capital ratio 32,275 17.6% 14,707 8.0% 18,383 10.0%
</TABLE>
The Company is pursuing a policy of continued asset growth which
requires the maintenance of appropriate ratios of capital to total assets. The
existing risk-based capital levels allow for additional asset growth without
further capital injection. It is the Company's desire to maintain its capital
position at or in excess of the definition of a "well-capitalized" institution.
The Company seeks to obtain additional capital growth through earnings
retention and a conservative dividend policy.
16
<PAGE> 18
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As of September 30, 1995, the Company is involved in various pending
legal proceedings consisting of ordinary routine litigation incidental to the
business of the Company. None of these proceedings is considered material,
either in part or in the aggregate, and are therefore not expected to have a
material adverse impact on the Company's financial condition, results of
operations, cash flows, and capital ratios.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
On September 6, 1995, the Company filed a report on Form 8-K in connection
with its acquisition of Waterford Bancshares, Inc. which was effective August
24, 1995.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
17
<PAGE> 19
SIGNATURES
Pursuant to the requirement 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.
STATE FINANCIAL SERVICES CORPORATION
(Registrant)
Date: November 6, 1995
-----------------
By /s/ Michael J. Falbo
--------------------------
Michael J. Falbo
President and Chief Executive Officer
Date: November 6, 1995
-----------------
By /s/ Michael A. Reindl
--------------------------
Michael A. Reindl
Vice President, Controller, and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 15,235,664
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 15,012,013
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 20,460,870
<INVESTMENTS-CARRYING> 43,282,222
<INVESTMENTS-MARKET> 43,556,000
<LOANS> 183,162,565
<ALLOWANCE> 2,735,209
<TOTAL-ASSETS> 284,851,394
<DEPOSITS> 244,099,122
<SHORT-TERM> 5,850,160
<LIABILITIES-OTHER> 2,173,032
<LONG-TERM> 1,076,387
<COMMON> 220,781
0
0
<OTHER-SE> 31,431,912
<TOTAL-LIABILITIES-AND-EQUITY> 284,851,394
<INTEREST-LOAN> 11,373,618
<INTEREST-INVEST> 2,322,260
<INTEREST-OTHER> 154,439
<INTEREST-TOTAL> 13,850,317
<INTEREST-DEPOSIT> 4,891,368
<INTEREST-EXPENSE> 5,125,251
<INTEREST-INCOME-NET> 8,725,066
<LOAN-LOSSES> 137,500
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 6,992,782
<INCOME-PRETAX> 3,450,762
<INCOME-PRE-EXTRAORDINARY> 2,311,083
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,311,083
<EPS-PRIMARY> 1.18
<EPS-DILUTED> 1.18
<YIELD-ACTUAL> 5.52
<LOANS-NON> 2,514,000
<LOANS-PAST> 4,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 250,000
<ALLOWANCE-OPEN> 1,982,941
<CHARGE-OFFS> 207,716
<RECOVERIES> 87,907
<ALLOWANCE-CLOSE> 2,735,209 <F1>
<ALLOWANCE-DOMESTIC> 2,735,209
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1>
Allowance for loan losses increased $734,577 in third quarter 1995 due to the
inclusion of the acquired allowance related to the Company's acquisition of
the former Waterford Bancshares, Inc.
</FN>
</TABLE>
