QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
[X] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the period ended June 30, 1998.
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 001-13819
MegaBank Financial Corporation
(Exact name of registrant as specified in its charter)
Colorado 84-0949755
(State or other jurisdiction of (I.R.S. Employer
incorporation or Identification
organization) Number)
8100 E. Arapahoe Road, Suite 214, Englewood, Colorado 80112
(Address of principal executive offices) (Zip code)
(303) 740-2265
(Registrant's telephone number)
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.
[X] Yes [ ]No
At August 10, 1998, there were 213,578 shares of the registrant's
common stock, no par value, outstanding.
Transitional Small Business Disclosure Format
[ ] Yes [X] No
</PAGE>
<PAGE>
MEGABANK FINANCIAL CORPORATION
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements 3
Item 2. Management's Discussion and
Analysis of Financial Condition
And Results of Operations 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
</PAGE>
<PAGE>
<TABLE>
MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
June 30, December 31,
1998 1997
(Unaudited)
<S> <C> <C>
ASSETS
Cash and due from banks $ 10,540 $ 9,910
Interest-bearing deposits 582 1,470
Federal funds sold 16,915 1,775
Investment securities
available for sale 16,212 13,999
Loans 147,416 126,087
Less allowance for loan losses (2,306) (2,083)
___________ ___________
145,110 124,004
Bank premises, leasehold
improvements and equipment, net 7,349 4,799
Accrued interest receivable 1,043 898
Deferred tax asset 683 636
Preferred securities issuance
costs, net 740 235
Other 219 134
___________ ___________
Total assets $ 199,393 $ 157,880
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Demand, non-interest
bearing $ 53,305 $ 42,515
Demand, interest bearing 71,641 56,339
Savings 5,477 4,562
Time, $100,000 and over 10,078 10,141
Other time 31,233 28,321
___________ ___________
Total deposits 171,734 141,878
Federal Home Loan Bank
borrowings - 1,423
Securities sold under
agreement to repurchase 1,253 -
Income taxes payable 188 132
Accrued interest payable 372 152
Note payable - 2,000
Other 532 717
___________ ___________
Total liabilities 174,079 146,302
Company obligated manditorily
redeemable preferred
securities of subsidiary
trust holding solely Junior
Subordinated Debentures 12,000 -
Shareholders' equity
Preferred stock; no par value,
10,000,000 shares authorized,
none issued - -
Common stock; no par value,
50,000,000 shares authorized,
213,578 shares issues and
outstanding 1,961 1,961
Retained earnings 11,293 9,578
Accumulated other
comprehensive income 60 39
___________ ___________
Total shareholders' equity 13,314 11,578
___________ ___________
Total liabilities and
shareholders' equity $ 199,393 $ 157,880
=========== ===========
The accompanying notes are an integral part of these statements.
</TABLE>
</PAGE>
<PAGE>
<TABLE>
MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Six months ended June 30, 1998 and 1997 (Unaudited)
(Dollars in thousands, except per share data)
<CAPTION>
Three Months Six Months
Ended Ended
June 30, June 30,
1998 1997 1998 1997
________ ________ ________ ________
<S> <C> <C> <C> <C>
Interest income
Loans, including fees $ 4,380 $ 3,321 $ 8,282 $ 6,406
Taxable investment 70 69 142 137
securities
Nontaxable investment
securities 187 138 374 276
Funds sold 201 223 307 310
Other interest 53 7 88 16
________ ________ ________ ________
Total interest income 4,891 3,758 9,193 7,145
Interest expense
Deposits 1,400 1,187 2,665 2,159
Borrowed funds 11 36 84 94
Trust preferred securities 269 - 418 -
Notes payable - 42 19 91
________ ________ ________ ________
Total interest expense 1,680 1,265 3,186 2,344
________ ________ ________ ________
Net interest income 3,211 2,493 6,007 4,801
Provision for loan losses 130 100 220 250
________ ________ ________ ________
Net interest income after
provision for loan 3,081 2,393 5,787 4,551
losses
Other income
Service charges on deposit
accounts 221 84 249 169
Gain on sale of investment
securities - - 25 -
Other income 20 33 188 159
________ ________ ________ ________
Total other income 241 117 462 328
Other expenses
Salaries and employee
benefits 1,008 737 1,904 1,432
Occupancy expenses of
premises 202 161 387 318
Furniture and equipment
expense 114 65 229 128
Other expenses 481 437 1,180 1,090
________ ________ ________ ________
Total other expenses 1,805 1,400 3,700 2,968
________ ________ ________ ________
Income before income
taxes 1,517 1,110 2,549 1,911
Income tax expense 485 373 834 653
________ ________ ________ ________
Net income 1,032 737 1,715 1,258
Other comprehensive income, net
of tax
Unrealized gains (losses) on
investment securities
available for sale 24 15 21 (2)
________ ________ ________ ________
Comprehensive income 1,056 752 1,736 1,256
======== ======== ======== ========
Income per share
Basic earnings per share 4.83 3.45 8.03 5.89
======== ======== ======== ========
Common shares outstanding 213,578 213,578 213,578 213,578
======== ======== ======== ========
The accompanying notes are an integral part of these statements.
</TABLE>
</PAGE>
<PAGE>
<TABLE>
MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30, 1998 and 1997 (Unaudited)
(Dollars in thousands)
<CAPTION>
Six months ended
June 30,
1998 1997
_________ _________
(Unaudited)
<S> <C> <C>
Cash flows from operating activities
Net income $ 1,715 $ 1,258
Adjustments to reconcile net income to net
cash provided by operating activities
Provision for loan losses 220 250
Depreciation and amortization of fixed
assets 233 114
Amortization of preferred securities
issuance costs 10 -
Net discount accretion on investment
securities (12) (11)
FHLB stock dividend (14) (10)
Gain on sale of investment securities
available for sale (25) -
Deferred income taxes (65) (64)
Changes in deferrals and accruals
Accrued interest receivable (145) (129)
Accrued interest payable 220 44
Other, net (214) 226
_________ _________
Net cash provided by operating
activities 1,923 1,678
Cash flows from investing activities
Net (increase) in federal funds sold (15,140) (13,125)
Net (increase) decrease in interest-bearing
deposits 888 (1,133)
Purchase of securities available for sale (3,479) (534)
Proceeds from maturities of investment
securities available for sale 750 2,000
Proceeds from sales of securities available
for sale 606 -
Net (increase) in loans (21,326) (14,190)
Expenditures for bank premises and equipment (2,783) (1,192)
_________ _________
Net cash used in investing activities (40,484) (28,174)
Cash flows from financing activities
Net increase in deposits 29,856 30,363
Net (decrease) in advances from
Federal Home Loan Bank (1,423) (484)
Net increase in securities sold
under repurchase agreements 1,253 -
Proceeds from trust preferred securities 12,000 -
Trust preferred securities issuance costs (495) -
Principal payments on notes payable (2,000) (628)
_________ _________
Net cash provided by financing
activities 39,191 29,251
_________ _________
Net increase in cash and due from banks 630 2,755
Cash and due from banks at beginning of period 9,910 9,130
_________ _________
Cash and due from banks at end of period $ 10,540 $ 11,885
========= =========
Supplemental disclosures of cash flow
information
Cash paid year to date for:
Interest expense $ 2,955 $ 2,301
Income taxes 854 746
The accompanying notes are an integral part of these statements.
</TABLE>
</PAGE>
<PAGE>
MEGABANK FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six months ended June 30, 1998 and 1997
(Unaudited)
1. Unaudited Financial Statements
The accompanying unaudited interim financial statements have been
prepared in accordance with the instructions for Form 10-QSB and
do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. All adjustments that are, in the opinion of
management, of a normal recurring nature necessary to a fair
statement of results for the interim periods presented have been
made. The results of operations for such interim periods are not
necessarily indicative of results of operations for a full year.
The statements should be read in conjunction with the summary of
significant accounting policies and notes to consolidated
financial statements included in the prospectus of the Company
dated February 3, 1998, SEC File Nos. 333-42189 and 333-42191.
In the opinion of management, the accompanying financial
statements contain all adjustments necessary to present fairly
the financial position of the Company at June 30, 1998, and the
results of operations and cash flows for the periods ended June
30, 1998 and 1997.
The consolidated financial statements include the accounts of the
Company's respective subsidiaries. All material intercompany
transactions have been eliminated.
2. Nature of Operations
MegaBank Financial Corporation (the "Company") was founded in
1984 with the objective of building a banking franchise in the
Denver, Colorado metropolitan area that would deliver a broad
based package of products and services to businesses and
individuals. The Company's banking subsidiary, MegaBank of
Arapahoe (the "Bank"), was organized in 1983. Since the advent
of branch banking in Colorado in 1993, the Bank has opened six
additional banking locations throughout the Denver area. Four
more branches are in the planning and construction phases; one of
which is scheduled to open in August 1998.
3. Offering of Trust Preferred Securities by MB Capital I
On February 9, 1998 the Company and its wholly-owned subsidiary,
MB Capital I (the "Trust"), completed the sale of $12.0 million
of 8.75% Cumulative Trust Preferred Securities of the Trust. Net
proceeds were approximately $11.2 million after payment of sales
commissions and other offering costs, and were invested in Junior
Subordinated Debentures maturing February 9, 2028, issued by the
Company to the Trust in connection with the public offering.
Interest on the Junior Subordinated Debentures will be paid by
the Company to the Trust, will be the sole revenues of the Trust
</PAGE>
<PAGE>
and the source for distributions by the Trust to the holders of
the Trust Preferred Securities.
For financial reporting purposes, the Trust is treated as a
subsidiary of the Company, and accordingly, the accounts of the
Trust are included in the consolidated financial statements of
the Company. The Trust Preferred Securities are presented as a
separate line item in the consolidated balance sheet under the
caption "Company obligated mandatorily redeemable preferred
securities of subsidiary trust holding solely Junior Subordinated
Debentures." For financial reporting purposes, the Company
records distributions payable on the Trust Preferred Securities
as interest expense in the consolidated statements of income.
The Junior Subordinated Debentures are unsecured and rank junior
and are subordinate to all senior debt of the Company and
constitute a full and unconditional guarantee on a subordinated
basis by the Company of the obligations of the Trust under the
Preferred Securities.
4. Accounting Changes
Comprehensive Income
The Company adopted Financial Accounting Standards Board
Statement No. 130, "Reporting Comprehensive Income" (SFAS No.
130), effective January 1, 1998. SFAS No. 130 establishes
standards for reporting comprehensive income and its components
(revenues, expenses, gains and losses). Components of
comprehensive income are net income and all other non-owner
changes in equity. The Statement requires that an enterprise (a)
classify items of other comprehensive income by their nature in a
financial statement and (b) display the accumulated balance of
other comprehensive income separately from retained earnings and
additional paid-in capital in the equity section of a statement
of financial position. Reclassification of financial statements
for earlier periods provided for comparative purposes is
required. Amounts formerly presented in Shareholders' Equity as
"Unrealized gains on securities available for sale, net of
taxes", are now reflected as "Accumulated other comprehensive
income".
Operating Segments
The Company adopted Financial Accounting Standards Board
Statement No. 131, Disclosures About Segments of an Enterprise
and Related Information, (SFAS No. 131) effective January 1,
1998. This statement established standards for reporting
information about segments in annual and interim financial
statements. SFAS No. 131 introduces a new model for segment
reporting called the "management approach." The management
approach is based on the way the chief operating decision-maker
organizes segments within the company for making operating
decisions and assessing performance. Reportable segments are
based on products and services, geography, legal structure,
management structure and any other in which management
disaggregates a company. Based on the "management approach"
model, the Company has determined that its business is comprised
of a single operating segment and that SFAS No. 131 therefore has
no impact on its financial statements.
</PAGE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Overview
It is presumed that readers of these interim financial statements
have read or have access to the Management's Discussion and
Analysis of Financial Condition and Results of Operations for the
year ended December 31, 1996, included in the Company's
Prospectus dated February 3, 1998, SEC File Nos. 333-42189 and
333-42191. The following discussion of the financial condition
and results of operation of the Company should be read in
conjunction with the unaudited consolidated financial statements
of the Company included elsewhere herein.
Results of Operations
Net interest income was $5.8 million for the six months ended
June 30, 1998, an increase of $1.2 million from $4.6 million for
the same period in 1997. Net interest income for the three
months ended June 30, 1998 and 1997 was $3.1 million and $2.4
million, respectively. Interest income for the six months ended
June 30, 1998 and 1997 was $9.2 million and $7.1 million,
respectively, and $4.9 million compared to $3.8 million for the
three month period ended June 30, 1998 and 1997, respectively.
The increase was due to higher balances of interest earning
assets. Interest expense for the same six month period was $3.2
million in 1998 compared to $2.3 million in 1997 and the three
month period ended June 30, was $1.7 million in 1998 compared to
$1.3 million in 1997. Additional interest bearing deposits
contributed to the increase in interest expense, as well as the
additional interest expense of the Trust Preferred Securities
offering discussed elsewhere herein. Other income generated in
the first two quarters of 1998 increased to approximately
$462,000 as compared to $328,000 for the first two quarters of
1997, and $241,000 and $117,000 for the three months ended June
30, 1998 and 1997, respectively. This overall increase is
attributable primarily to additional fee income, and to a lesser
extent, to a one-time gain on sale of equity securities. Other
expenses in the first half of 1998 were $3.7 million as compared
to $3.0 million for the same period the previous year. Other
expenses in the three months ended June 30, 1998 were $1.8
million as compared to $1.4 million for the three months ended
June 30, 1997. An increase in other expenses is primarily due to
additional employee and occupancy expense required by branch
expansion and internal growth.
In the six months ended June 30, 1998, the Company generated net
income after provisions for income tax of $1.7 million compared
to $1.3 million for the same period last year and $1.0 million
compared to $0.7 million for the three months ended June 30, 1998
and 1997, respectively. This improvement is attributable to the
overall growth of the Bank. Total assets of the Company were
approximately $199 million and $149 million at June 30, 1998 and
1997, respectively.
On February 9, 1998 the Company and its wholly-owned subsidiary,
MB Capital I (the "Trust"), completed the sale of $12.0 million
of 8.75% Cumulative Trust Preferred Securities of the Trust. Net
</PAGE>
<PAGE>
proceeds were approximately $11.2 million after payment of sales
commissions and other offering costs, and were invested in Junior
Subordinated Debentures issued by the Company to the Trust in
connection with the public offering. Interest on the Junior
Subordinated Debentures will be paid by the Company to the Trust,
will be the sole revenues of the Trust and the source for
distributions by the Trust to the holders of the Trust Preferred
Securities.
Net increases in loans were $21.3 million and $14.2 million
during the six months ended June 30, 1998 and 1997, respectively
and $17.8 million and $5.8 million for the three months ended
June 30, 1998 and 1997, respectively. It is important to note
that this was a net increase. Actual origination of new loans
was approximately $143.8 million for the first six months of 1998
as compared to $88.4 million during the same period in 1997.
Net increases in deposits remained the same at approximately
$30.0 million for the six months ended June 30, 1998 and 1997.
Although the net increase remained the same as the previous year,
total deposits were approximately $171.7 million at June 30, 1998
as compared to $135.0 million at June 30, 1997.
Analysis of Allowance for Loan Losses. The allowance for loan
losses represents management's recognition of the risks of
extending credit and its evaluation of the quality of the loan
portfolio. The allowance is maintained at a level considered
adequate to provide for anticipated loan losses based on
management's assessment of various factors affecting the loan
portfolio. The allowance is increased by additional charges to
operating income and reduced by loans charged off, net of
recoveries.
The following table sets forth information regarding changes in
the allowance for loan losses of the Company for the period
indicated.
<TABLE>
<CAPTION>
For The Six Months Ended
June 30, 1998
(Dollars in thousands)
<S> <C>
Average total loans $134,100
Total loans at end of period $147,416
Allowance at beginning of period $2,083
Charge-offs:
Construction -
Commercial and industrial (2)
Installment -
Mortgage -
Other (1)
Total charge-offs (3)
</TABLE>
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1998
(Dollars in thousands)
<S> <C>
Recoveries:
Construction -
Commercial and industrial 3
Installment 3
Mortgage -
Other -
Total recoveries 6
Net (charge-offs) recoveries 3
Provisions for loan losses 220
Allowance at end of period $ 2,306
<S> <C>
Ratio of net (charge-offs) recoveries
to average loans 0.002%
Allowance to total loans at end of period 1.56%
Allowance to nonperforming loans 168.24%
</TABLE>
The Company's lending personnel are responsible for continuous
monitoring of the quality of loan portfolios. The loan
portfolios are also monitored and examined by the Company loan
review personnel. The allowance for loan losses is based
primarily on management's estimates of possible loan losses from
the foregoing processes and historical experience. These
estimates involve ongoing judgments and may be adjusted over time
depending on economic conditions and changing historical
experience.
State and federal regulatory agencies, as an integral part of
their examination process, review the Company's loans and its
allowance for loan losses. Management believes that the
Company's allowance for loan losses is adequate to cover
anticipated losses. There can be no assurance, however, that
management will not determine a need to increase the allowance
for loan losses or that regulators, when reviewing the Company's
loan portfolios in the future, will not require the Company to
increase such allowance, either of which could adversely affect
the Company's earnings. Further, there can be no assurance that
the Company's actual loan losses will not exceed its allowance
for loan losses.
Nonperforming loans. Nonperforming loans consist of loans 90
days or more delinquent and still accruing interest, nonaccrual
loans and restructured loans. When, in the opinion of
management, a reasonable doubt exists as to the collectibility of
interest, regardless of the delinquency status of a loan, the
accrual of interest income is discontinued and interest accrued
during the current year is reversed through a charge to current
</PAGE>
<PAGE>
year's earnings. While the loan is on nonaccrual status,
interest income is recognized only upon receipt and then only if,
in the judgment of management, there is no reasonable doubt as to
the collectibility of the principal balance. Loans 90 days or
more delinquent generally are changed to nonaccrual status unless
the loan is in the process of collection and management
determines that full collection of principal and accrued interest
is probable.
Restructured loans are those for which concessions, including the
reduction of interest rates below a rate otherwise available to
the borrower or the deferral of interest or principal, have been
granted due to the borrower's weakened financial condition.
Interest on restructured loans is accrued at the restructured
rates when it is anticipated that no loss of original principal
will occur. The Company did not have any restructured loans as
of June 30, 1998.
The following table sets forth information concerning the
nonperforming assets of the Company at the dates indicated:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
<S> <C> <C>
Nonaccrual loans $1,371 $1,604
Other loans 90 days past due - -
Other real estate - -
Total nonperforming loans $1,371 $1,604
<S> <C> <C>
Ratio of nonaccrual and other loans
90 days past due to total loans 0.96% 1.27%
Ratio of nonperforming assets to
total loans plus other real estate 0.96 1.27
Ratio of nonperforming assets to
total assets 0.69 1.02
Of the amount of nonaccrual loans as of June 30, 1998,
approximately $1.3 million is the Bank's portion of the five
related loans totaling approximately $4.0 million that are
subject to a Chapter 11 bankruptcy proceeding. The loans were
originated by the Bank and were made at various times during
1994, 1995 and 1996 in connection with a real estate development
on which the developer has constructed a residential building
assembly plant. The loans are secured by real estate,
certificates of deposit, as well as two personal guarantees from
the owners of the developer and a guarantee by a related limited
partnership, all three of which have substantial net worth.
Management believes that the Company is adequately collateralized
on these loans.
As of June 30, 1998, there were no significant balances of loans
excluded from nonperforming loans set forth above, where known
information about possible credit problems of borrowers caused
management to have serious doubts as to the ability of such
borrowers to comply with the present loan repayment terms and
which may result in such loans becoming nonperforming. Management
is not aware of any adverse trend relating to the Company's loan
portfolio.
</PAGE>
<PAGE>
Liquidity and Capital Resources
The Company has two basic sources of liquidity. The first is its
retail deposit market served by its banking offices. The Company
has increased core deposits through growth of its existing
deposits and through promotions directed at existing and
potential customers. Deposits increased to $171.7 million at
June 30, 1998 as compared to $135.0 million at June 30, 1997.
The second source of the Company's liquidity is Federal Home Loan
Bank ("FHLB") advances and Company lines of credit. FHLB
advances are used regularly in the cash management function both
to fund a portion of the lending portfolio and to manage the day-
to-day fluctuations in liquidity resulting from needs of
depositors and borrowers. At June 30, 1998, the Company had
available $7.0 million of unused borrowing capacity from the FHLB
and $9.5 million from its other lenders. The Company anticipates
that it will continue to rely primarily upon customer deposits,
FHLB borrowings, other lending sources, loan repayments, loan
sales and retained earnings to provide liquidity, and will use
funds provided primarily to make loans and to purchase investment
securities.
The Trust Preferred Securities were structured to qualify as Tier
1 capital for the Company for regulatory capital purposes.
However, they cannot be used to constitute more than 25% of the
Company's total Tier 1 capital. Any future increases in other
elements of the Company's Tier 1 capital, including retained
earnings, should permit the Company to include greater portions
of the trust preferred securities proceeds in Tier 1 capital.
Based on risk-based capital guidelines of the Federal Reserve
Bank, a bank holding company is required to maintain a Tier 1
capital to risk-adjusted assets ratio of 4% and a total capital
to risk-adjusted assets ratio of 8%. At June 30, 1998, the
Company had a Tier 1 capital ratio of 10.69% and a total capital
ratio of 16.53%.
Year 2000 Considerations
A significant issue has emerged in the banking industry and for
the economy overall regarding how existing application software
programs and operating systems can accommodate the date value for
the year 2000. Implementation of the Company's plan to test in-
house and out-sourced software has been underway since the first
quarter of 1998. Testing of applications considered to be
"mission critical" are scheduled for completion by first quarter
of 1999. Total compliance for all systems is expected to be
complete by the third quarter of 1999. The financial impact to
the Company to ensure year 2000 compliance is not anticipated by
management to be material to the financial position, results of
operations or cash flow of the Company. The team for the plan is
responsible for the implementation of the plan and progress
reports to the Board on a quarterly basis until October 1998, and
on a monthly basis thereafter until the plan is completed.
Proposed Charter Conversion
The Company has applied to the Office of Thrift Supervision
("OTS"),Department of Treasury, to change its status to a savings
and loan holding company within the meaning of the Home Owners' Loan
</PAGE>
<PAGE>
Act of 1933 ("HOLA"), as amended. Under the proposal, the
Company will be registered with the OTS and subject to OTS
regulations, examinations, supervision and reporting
requirements. Conversely, the Company will no longer be a bank
holding company registered under the Bank Holding Company Act of
1956 and, therefore, the Company will no longer be subject to
regulation by the Board of Governors of the Federal Reserve
System. In addition, the Bank has applied to the OTS to convert
the Bank's charter from a state-chartered commercial bank to a
federal stock savings bank. Management believes that the Bank's
balance sheet is currently more reflective of a thrift than a
commercial bank because of the Bank's residential lending focus,
and that the flexibilities and opportunities with a thrift
charter are more in line with the long range plans of the Bank
than those that are available under its present charter. The
Company has been informed by the OTS that the applications are
deemed complete and will be automatically approved on August 22,
1998 absent further action by the OTS. The Company intends to
effect both of the conversions on or about September 1, 1998.
</PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits.
Exhibit 27 - Financial Data Schedule (filed
electronically only).
b. Reports on Form 8-K.
None.
</PAGE>
<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.
MEGABANK FINANCIAL CORPORATION
(Registrant )
/s/ Hiram J. Welton
Date: August 10, 1998 Hiram J. Welton
Treasurer
Chief Accounting Officer
</PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 10540
<INT-BEARING-DEPOSITS> 582
<FED-FUNDS-SOLD> 16915
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 147416
<ALLOWANCE> (2306)
<TOTAL-ASSETS> 199393
<DEPOSITS> 171734
<SHORT-TERM> 0
<LIABILITIES-OTHER> 14345
<LONG-TERM> 0
0
0
<COMMON> 1961
<OTHER-SE> 11353
<TOTAL-LIABILITIES-AND-EQUITY> 199393
<INTEREST-LOAN> 8282
<INTEREST-INVEST> 516
<INTEREST-OTHER> 395
<INTEREST-TOTAL> 9193
<INTEREST-DEPOSIT> 2665
<INTEREST-EXPENSE> 3186
<INTEREST-INCOME-NET> 6007
<LOAN-LOSSES> 220
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</TABLE>
