U.S. Securities and Exchange Commission
WASHINGTON, D.C. 20549
FORM 10-QSB/A
Amendment No. 1
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ____________________ to ____________________
Commission file number 0-22288
Fidelity Bancorp, Inc.
----------------------
(Exact name of small business issuer as specified in its charter)
Pennsylvania 25-1705405
------------ ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization
1009 Perry Highway, Pittsburgh, Pennsylvania 15237
---------------------------------------------------
(Address of principal executive offices) (Zip code)
412-367-3300
------------
(Issuer's telephone number)
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes [ X ] No
[ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 1,973,987 shares, par value
$0.01, at July 31, 1998
Transitional Small Business Disclosure Format (Check one):
Yes [ ]; No [ X ].
<PAGE>
FIDELITY BANCORP, INC. AND SUBSIDIARIES
Index
Part I - Financial Information
Item 1. Financial Statements
Statements of Financial Condition as of September 30, 1997
and June 30, 1998 (Unaudited)
Statements of Income (Unaudited) for the Three and Nine Month Periods
Ended June 30, 1997 and 1998
Statements of Cash Flows (Unaudited) for the Nine Months Ended
June 30, 1997 and 1998
Statement of Changes in Stockholders' Equity (Unaudited) for the Nine
Months Ended June 30, 1997 and 1998
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Part II - Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
Part I - Financial Information
<TABLE>
<CAPTION>
FIDELITY BANCORP, INC. AND SUBSIDIARIES
Statements of Financial Condition
(in thousands)
June 30, September 30,
1998 1997
-------- --------
(Unaudited)
Assets
<S> <C> <C>
Cash and amounts due from depository institutions ......... $ 5,820 $ 3,731
Interest-earning demand deposits with other institutions .. 1,859 243
Investment securities held-to-maturity .................... 11,339 8,541
Investment securities available-for-sale .................. 46,760 44,573
Loans receivable, net (Notes 6 and 7) ..................... 206,494 182,869
Mortgage-backed securities, held-to-maturity .............. 23,872 34,065
Mortgage-backed securities available-for-sale ............. 82,950 93,851
Real estate owned, net .................................... 21 --
Federal Home Loan Bank stock - at cost .................... 5,050 4,885
Accrued interest receivable, net .......................... 2,572 2,415
Office premises and equipment, net ........................ 3,303 3,467
Deferred tax asset ........................................ 684 852
Prepaid expenses and sundry assets ........................ 5,456 1,472
-------- --------
Total Assets ....................................... $396,180 $380,964
======== ========
Liabilities and Net worth
Liabilities:
Savings deposits ....................................... $260,734 $244,192
Federal Home Loan Bank advances ........................ 90,000 96,700
Reverse repurchase agreements .......................... 2,202 1,183
Advance deposits by borrowers for
taxes and insurance ................................. 2,870 1,097
Accrued interest on savings and other deposits ......... 76 159
Accrued interest on trust preferred securities ......... 211 211
Accrued income taxes payable ........................... 215 204
Other accrued expenses and sundry liabilities .......... 1,540 1,087
Guaranteed preferred beneficial interest in
Company's debentures (Note 8) ...................... 10,250 10,250
-------- --------
Total Liabilities .................................. 368,098 355,083
-------- --------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIDELITY BANCORP, INC. AND SUBSIDIARIES
Statements of Financial Condition
(in thousands)
(continued)
June 30, September 30,
1998 1997
-------- --------
(Unaudited)
<S> <C> <C>
Stockholders' equity (Notes 4 and 5):
Common Stock, $0.01 par value per share,
10,000,000 shares authorized; 1,973,987 and
1,943,469 shares issued and outstanding, respectively 20 15
Additional paid-in capital ............................. 14,040 13,811
Retained earnings - substantially restricted ........... 13,427 11,822
Unrealized gain (loss) on securities available-for-sale 595 233
-------- --------
Total Stockholders' Equity ......................... 28,082 25,881
-------- --------
Total Liabilities and Stockholders' Equity ......... $396,180 $380,964
======== ========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
FIDELITY BANCORP, INC. AND SUBSIDIARIES
Statements of Income (Unaudited)
(in Thousands)
Three Months Ended Nine Months Ended
June 30, June 30,
-------------------- -------------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest income:
Loans ...................................... $ 4,231 $ 3,464 $12,175 $ 9,861
Mortgage-backed securities ................. 1,877 1,726 5,914 4,893
Investment securities:
Taxable ................................ 627 591 1,937 1,791
Tax-exempt ............................ 342 184 870 698
Deposits with other institutions ........... 12 2 44 7
------- ------- ------- -------
Total interest income ................... 7,089 5,967 20,940 17,250
------- ------- ------- -------
Interest expense:
Savings deposits ........................... 2,766 2,381 8,161 7,054
Guaranteed preferred beneficial interest
in subordinated debt (Note 8) ............. 256 137 768 137
Borrowed funds ............................. 1,351 914 4,056 2,587
------- ------- ------- -------
Total interest expense .................. 4,373 3,432 12,985 9,778
------- ------- ------- -------
Net interest income before provision
for loan losses ............................ 2,716 2,535 7,955 7,472
Provision for loan losses ..................... 90 130 315 365
------- ------- ------- -------
Net interest income after provision
for loan losses ............................ 2,626 2,405 7,640 7,107
------- ------- ------- -------
Other income:
Service fee income ......................... 29 21 93 57
Gain (loss) on sale of investment and
mortgage-backed securities, net ......... 60 6 68 27
Gain (loss) on sale of loans ............... (3) 11 6 16
Other operating income ..................... 230 184 674 530
------- ------- ------- -------
Total other income ...................... 316 222 841 630
------- ------- ------- -------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIDELITY BANCORP, INC. AND SUBSIDIARIES
Statements of Income (Unaudited)
(in Thousands)
(continued)
Three Months Ended Nine Months Ended
June 30, June 30,
-------------------- -------------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Operating expenses:
Compensation and employee benefits ......... 1,097 924 3,143 2,687
Occupancy and equipment expense ............ 167 151 467 439
Depreciation and amortization .............. 132 119 382 355
Federal insurance premiums ................. 39 38 115 76
(Gain) loss on real estate owned, net ...... 2 (16) 11 36
Amortization of intangibles ................ -- -- -- 44
Other operating expenses ................... 421 394 1,252 1,130
------- ------- ------- -------
Total operating expenses ................ 1,858 1,610 5,370 4,767
------- ------- ------- -------
Income before income tax provision ............ 1,084 1,017 3,111 2,970
Income tax provision .......................... 349 361 1,043 1,054
------- ------- ------- -------
Net income .................................... $ 735 $ 656 $ 2,068 $ 1,916
======= ======= ======= =======
Basic earnings per common share (Notes 3&4) ... $ 0.37 $ 0.34 $ 1.06 $ 1.00
======= ======= ======= =======
Diluted earnings per common share (Notes 3&4) $ 0.36 $ 0.33 $ 1.02 $ 0.97
======= ======= ======= =======
Dividends per common share (Note 4) ........... $ .09 $ .072 $ .234 $ .196
======= ======= ======= =======
</TABLE>
See accompanying notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
FIDELITY BANCORP, INC. AND SUBSIDIARIES
Statements of Cash Flows (Unaudited)
(in thousands)
Nine Months
Ended June 30,
----------------------
1998 1997
-------- --------
<S> <C> <C>
Operating Activities:
Net income ......................................................... $ 2,068 $ 1,916
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses ...................................... 315 365
Loss on real estate owned ...................................... 11 36
Depreciation and amortization .................................. 382 355
Deferred loan fee amortization ................................. (137) (123)
Amortization of investment and mortgage-backed securities
discounts/premiums, net ....................................... 315 234
Amortization of intangibles .................................... -- 44
Net (gain) loss on sale of investment securities ............... (186) (57)
Net (gain) loss on sale of mortgage-backed securities .......... 118 30
Net (gain) loss on sale of loans .............................. (6) (16)
Origination of loans held-for-sale ............................. (80) (552)
Proceeds from sale of loans held-for-sale ...................... 81 560
(Increase) decrease in interest receivable ..................... (157) (318)
(Increase) decrease in deferred tax asset ...................... 168 335
Increase (decrease) in accrued income taxes .................... 11 976
Increase (decrease) in interest payable ........................ (83) 71
SAIF assessment ................................................ -- (1,530)
Other changes, net ............................................. 3,835 (545)
-------- --------
Net cash provided (used) by operating activities ................ 6,655 1,781
-------- --------
Investing Activities:
Proceeds from sales of investment securities available-for-sale .... 16,322 15,192
Proceeds from maturities and principal repayments of
investment securities available-for-sale ........................ 2,005 2,000
Purchases of investment securities available-for-sale .............. (20,261) (8,011)
Proceeds from sales of mortgage-backed securities available-for-sale 40,145 8,588
Proceeds from maturities and principal repayments of mortgage-
backed securities available-for-sale ............................ 14,467 5,680
Purchases of mortgage-backed securities available-for-sale ......... (43,544) (38,895)
Proceeds from maturities and principal repayments of investment
securities held-to-maturity ..................................... 5,202 1,408
Purchases of investment securities held-to-maturity ................ (7,997) (2,625)
Purchases of mortgage-backed securities held-to-maturity ........... -- (5,053)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIDELITY BANCORP, INC. AND SUBSIDIARIES
Statements of Cash Flows (Unaudited)
(in thousands)
(continued)
Nine Months
Ended June 30,
----------------------
1998 1997
-------- --------
<S> <C> <C>
Proceeds from principal repayments of mortgage-backed
securities held-to-maturity ...................................... 10,054 3,763
Principal repayments on first mortgage loans ....................... 18,278 11,964
Principal repayments on other loans ................................ 24,690 15,345
First mortgage loans originated and disbursed ...................... (40,350) (25,867)
Other loans originated ............................................. (34,431) (27,459)
Proceeds from sale of other loans .................................. 460 319
Additions to office premises and equipment ......................... (235) (529)
Net purchases of FHLB Stock ........................................... (165) (1,359)
-------- --------
Net cash provided (used) by investing activities ...................... (15,360) (45,539)
-------- --------
Financing Activities:
Net increase (decrease) in savings deposits 16,542 4,360
Increase in advance payments by borrowers for taxes and insurance 1,773 1,412
Increase (decrease) in reverse repurchase agreements 1,019 971
FHLB advance repayments (861,715) (1,165,525)
FHLB advances 855,015 1,192,575
Cash dividends paid (459) (376)
Stock options exercised 150 266
Proceeds from sale of stock 84 57
Proceeds from guaranteed preferred beneficial interest in
subordinated debt 0 10,250
-------- --------
Net cash provided (used) by financing activities 12,409 43,990
-------- --------
Increase (decrease) in cash and cash equivalents 3,704 232
Cash and cash equivalents at beginning of period 3,975 4,762
-------- --------
Cash and cash equivalents at end of period $ 7,679 $ 4,994
======== ========
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Interest on deposits and other borrowings $ 12,970 $ 9,537
Income taxes $ 1,025 $ 78
--------- --------
Transfer of loan to REO $ 21 $ 120
--------- --------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
FIDELITY BANCORP, INC. AND SUBSIDIARIES
Statement of Changes in Stockholders' Equity
(in thousands)
Additional Unrealized Gain/
Common Paid-in Retained (Loss) on Securities
Stock Capital Earnings Available-for-Sale Total
----- ------- -------- ------------------ -----
<S> <C> <C> <C> <C> <C>
Balance at September 30, 1996 .......... $ 14 $ 10,437 $ 12,523 $ (1,196) $ 21,778
Net income ............................. 1,916 1,916
Cash dividends paid (4) .............. (375) (375)
10% stock dividend on common
stock ............................. 1 2,902 (2,903) -0-
Cash paid on stock dividend in lieu of
fractional shares ................. (1) (1)
Net change in unrealized gain
(loss) on securities available-
for-sale, net of taxes ............. 896 896
Sale of stock through Dividend
Reinvestment Plan .................. 57 57
Stock options exercised .............. $ 266 $ 266
-------- -------- -------- -------- --------
Balance at June 30, 1997 ............... $ 15 $ 13,662 $ 11,160 $ (300) $ 24,537
======== ======== ======== ======== ========
Balance at September 30, 1997 .......... $ 16 $ 13,810 $ 11,822 $ 233 $ 25,881
Net income ............................. 2,068 2,068
Cash dividends paid (4) .............. (459) (459)
5/4 Stock Split ...................... 4 (4) -0-
Cash paid on stock split in lieu of
fractional shares .................. (4) (4)
Net change in unrealized gain
(loss) on securities available-
for-sale, net of taxes ............. 362 362
Sale of stock through Dividend
Reinvestment Plan .................. 150 150
Stock options exercised .............. $ 84 $ 84
-------- -------- -------- -------- --------
Balance at June 30, 1998 ............... $ 20 $ 14,040 $ 13,427 $ 595 $ 28,082
======== ======== ======== ======== ========
</TABLE>
<PAGE>
FIDELITY BANCORP, INC. AND SUBSIDIARIES
Notes to Financial Statements
(Unaudited)
September 30, 1997 and June 30, 1998
(1) Consolidation
The audited and unaudited consolidated financial statements contained herein for
Fidelity Bancorp, Inc. (the "Company") include the accounts of Fidelity Bancorp,
Inc. and its wholly-owned subsidiaries, Fidelity Bank, PaSB (the "Bank") and FB
Capital Trust (the "Trust"). All significant inter-company balances and
transactions have been eliminated.
(2) Basis of Presentation
The accompanying consolidated financial statements were prepared in accordance
with instructions to Form 10-QSB, and therefore, do not include information or
footnotes necessary for a complete presentation of financial position, results
of operations and cash flows in conformity with generally accepted accounting
principles. However, all normal recurring adjustments which, in the opinion of
management, are necessary for a fair presentation of the financial statements,
have been included. These financial statements should be read in conjunction
with the audited financial statements and the accompanying notes thereto
included in the Company's Annual Report for the period ended September 30, 1997.
The results for the three and nine month periods ended June 30, 1998 are not
necessarily indicative of the results that may be expected for the fiscal year
ending September 30, 1998.
(3) Earnings Per Share
In February 1997, the Financial Accounting Standards Board ("FASB") issued FAS
No. 128, "Earnings per Share". FAS No. 128 provides revised reporting standards
for earnings per share ("EPS") and is effective for financial statement periods
ending after December 15, 1997. FAS No. 128 eliminates primary and fully diluted
EPS disclosures and adds new disclosures of basic and diluted EPS. Basic EPS
excludes dilution and is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the Company. The Company adopted FAS No. 128 as of December
31, 1997 and all prior period per share amounts have been restated. The
following table sets forth the computation of basic and diluted earnings per
share (amounts in thousands, except per share data):
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
----------------- ------------------
Numerator: 1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net income ........................... $ 735 $ 656 $2,068 $1,916
------ ------ ------ ------
Numerator for basic and
diluted earnings per share ....... $ 735 $ 656 $2,068 $1,916
------ ------ ------ ------
Denominator:
Denominator for basic earnings
per share - weighted average shares 1,970 1,931 1,959 1,912
Effect of dilutive securities:
Employee stock options ............ 77 62 71 62
------ ------ ------ ------
Denominator for diluted earnings
per share - weighted average
shares and assumed conversions .... 2,047 1,993 2,030 1,974
====== ====== ====== ======
Basic earnings per share ............. $ .37 $ .34 $ 1.06 $ 1.00
====== ====== ====== ======
Diluted earnings per share ........... $ .36 $ .33 $ 1.02 $ .97
====== ====== ====== ======
</TABLE>
(4) Per share amounts have been restated to give retroactive effect to the 10%
common stock dividend declared by the Company's Board of Directors and paid on
May 28, 1997, and the five for four stock split paid on March 31, 1998.
(5) Securities
The Company accounts for investments in debt and equity securities in accordance
with FAS No. 115, which requires that investments be classified as either: (1)
Securities Held-to- Maturity - reported at amortized cost, (2) Trading
Securities - reported at fair value, or (3) Securities Available-for-Sale -
reported at fair value. Unrealized gains and losses for trading securities are
reported in earnings while unrealized gains and losses for securities
available-for-sale are reported as a separate component of equity. Unrealized
gains of $595,000, net of tax, on investments classified as available-for-sale
are recorded as a separate component of equity at June 30, 1998.
<PAGE>
(6) Loans Receivable
Loans receivable are comprised of the following (dollar amounts in
thousands):
June 30, September 30,
1998 1997
--------- ---------
First mortgage loans:
Conventional:
1-4 family dwellings ....... 111,790 $ 97,698
Multi-family dwellings ..... 4,090 4,165
Commercial .......................... 21,610 19,976
Construction ........................ 14,400 7,614
--------- ---------
151,890 129,453
--------- ---------
Less:
Loans in process .................... (10,959) (3,695)
Unearned discounts and fees ......... (1,047) (912)
--------- ---------
139,884 124,846
--------- ---------
Installment loans:
Home equity ......................... 41,177 37,271
Mobile home loans ................... 19 68
Consumer loans ...................... 2,411 2,579
Other ............................... 4,183 3,163
--------- ---------
47,790 43,081
--------- ---------
Commercial loans:
Commercial business loans ........... 17,856 16,325
Lease loans ......................... 3,163 548
--------- ---------
21,019 16,873
--------- ---------
Less: Allowance for possible loan losses ..... (2,199) (1,931)
--------- ---------
Loans receivable, net ............... $ 206,494 $ 182,869
========= =========
(7) Changes in the allowance for loan losses for the nine months ended June 30,
1998 and 1997 are as follows (dollar amounts in thousands):
1998 1997
------- -------
Balance at beginning of the fiscal year ........ $ 1,931 $ 1,530
Provision for loan losses ...................... 315 365
Charge-offs .................................... (53) (117)
Recoveries ..................................... 6 22
------- -------
Balance at June 30, ............................ $ 2,199 $ 1,800
======= =======
<PAGE>
The provision for loan losses charged to expense is based upon past loan and
loss experience and an evaluation of potential losses in the current loan
portfolio, including the evaluation of impaired loans under FAS Nos. 114 and
118. A loan is considered to be impaired when, based upon current information
and events, it is probable that the Bank will be unable to collect all amounts
due according to the contractual terms of the loan. An insignificant shortfall
in payments does not necessarily result in a loan being identified as impaired.
For this purpose, delays less than 90 days are considered to be insignificant.
Impairment losses are included in the provision for loan losses. FAS Nos. 114
and 118 do not apply to large groups of smaller balance, homogeneous loans that
are collectively evaluated for impairment, except for those loans restructured
under a troubled debt restructuring. Loans collectively evaluated for impairment
include consumer loans and residential real estate loans, and are not included
in the following data.
At June 30, 1998, there are no loans that are considered to be impaired under
FAS No. 114. The average recorded investment in impaired loans during the nine
months ended June 30, 1998, was zero. For the nine months ended June 30, 1998,
the Company recognized no interest income on those impaired loans, using the
cash basis of income recognition.
(8) On May 13, 1997, the Trust, a statutory business trust created under
Delaware law that is a subsidiary of the Company, issued $10.25 million, 9.75%
Preferred Securities ("Preferred Securities") with a stated value and
liquidation preference of $10 per share. The Trust's obligations under the
Preferred Securities issued are fully and unconditionally guaranteed by the
Company. The proceeds from the sale of the Preferred Securities of the Trust
were utilized by the Trust to invest in $10.25 million of 9.75% Junior
Subordinated Debentures (the "Debentures") of the Company. The Debentures are
unsecured and rank subordinate and junior in right of payment to all
indebtedness, liabilities and obligations of the Company. The Debentures
represent the sole assets of the Trust. Interest on the Preferred Securities is
cumulative and payable quarterly in arrears. The Company has the right to
optionally redeem the Debentures prior to the maturity date of July 15, 2027, on
or after July 15, 2002, at 100% of the stated liquidation amount, plus accrued
and unpaid distributions, if any, to the redemption date. Under the occurrence
of certain events, the Company may redeem in whole, but not in part, the
Debentures prior to July 15, 2002. Proceeds from any redemption of the
Debentures would cause a mandatory redemption of the Preferred Securities and
the common securities having an aggregate liquidation amount equal to the
principal amount of the Debentures redeemed.
On July 17, 1997, on behalf of the Trust, the Company requested relief from the
Office of Chief Counsel of the Division of Corporation Finance of the Securities
and Exchange Commission, exempting the Trust from the reporting requirements of
the Securities Exchange Act of 1934. The Trust is a wholly-owned subsidiary of
the Company, has no independent operations and issued securities that contained
a full and unconditional guarantee of its parent, the Company. On January 29,
1998, the Company received notification from the Division exempting the Trust
from the reporting requirements.
<PAGE>
(9) The Company has adopted a plan to address Year 2000 data processing issues.
The plan includes the assessment of all internal systems, programs and data
processing applications as well as those provided to the Company by third-party
vendors. In addition, a program to ascertain the readiness of key customer
systems has been undertaken. The Company is utilizing both internal and external
resources for this project. A significant portion of the Company's data
processing software is provided by third-party vendors from which the Company
has received confirmation that they expect to be compliant with Year 2000 issues
on a timely basis. The Company is coordinating with third-party vendors to
perform testing of all significant applications. This testing is expected to be
substantially completed by December 31, 1998. The Company is also developing a
contingency plan that would be implemented should any applications or systems
fail to be Year 2000 compliant. However, based on representations from
third-party vendors, the Company believes all significant applications will be
compliant. The Company currently estimates that the cost to address these issues
will be approximately $300,000 to $400,000, but will not be material to the
Company's results of operations in any one quarter or fiscal year. This estimate
includes the cost, and resulting depreciation, of accelerating the replacement
of computer equipment that is currently fully depreciated, or would have been by
the year 2000, that would have been replaced in the ordinary course of business
over the next two years. Year 2000 remediation costs are not expected to have a
material adverse impact on the long-term results of operations, liquidity or
consolidated financial position of the Company.
<PAGE>
FIDELITY BANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Comparison of Financial Condition at September 30, 1997 and June 30, 1998
Total assets of the Bank increased $15.2 million or 4.0% to $396.2 million at
June 30, 1998 from $381.0 million at September 30, 1997. Significant changes in
individual categories were increases in loans receivable of $23.6 million,
investment securities held-to-maturity of $2.8 million, and investments
available-for-sale of $2.2 million, and decreases in mortgage-backed securities
held-to-maturity of $10.2 million and mortgage-backed securities
available-for-sale of $10.9 million.
Total liabilities of the Bank increased by $13.0 million or 3.7% to $368.1
million at June 30, 1998 from $355.1 million at September 30, 1997. The increase
reflects a $16.5 million increase in savings deposits, partially offset by a
decrease in Federal Home Loan Bank advances outstanding of $6.7 million.
Stockholders' equity increased $2.2 million or 8.5% to $28.1 million at June 30,
1998, compared to September 30, 1997. The net increase reflects net income for
the nine month period ended June 30, 1998 of $2.1 million, proceeds from stock
options exercised of $150,000, and proceeds from the Dividend Reinvestment Plan
of $84,000, as well as an increase in unrealized holding gains on securities
available-for-sale of $362,000 and common stock cash dividends paid of $459,000.
Non-Performing Assets
The following table sets forth information regarding non-accrual loans and real
estate owned by the Bank at the dates indicated. The Bank did not have any
accruing loans which were 90 days or more overdue or any loans which were
classified as troubled debt restructuring during the periods presented. (Dollar
amounts in thousands):
<TABLE>
<CAPTION>
June 30, September 30,
1998 1997
---- ----
<S> <C> <C>
Non-accrual residential real
estate loans (one-to-four-family) ................... $ 554 $ 94
Non-accrual construction, multi-family
residential and commercial real estate loans ........ -- 751
Non-accrual installment and
commercial business loans ........................... 90 271
------ ------
Total non-performing loans ............................ $ 644 $1,116
====== ======
Total non-performing loans as
a percent of net loans receivable ................... .31% .61%
====== ======
Total real estate owned,
net of related reserves ............................. $ 21 $ --
====== ======
Total non-performing loans and real estate
owned as a percent of total assets .................. .17% .29%
====== ======
</TABLE>
<PAGE>
Included in non-performing loans at June 30, 1998 are 15 single-family
residential real estate loans totaling $554,000, 27 installment loans totaling
$52,000, and two commercial business loans totaling $38,000. Of the 15
non-performing single-family residential real estate loans, the largest amounted
to $199,000.
The 27 installment loans total $52,000 and consist of various secured and
unsecured consumer loans and credit card loans. The largest loan is for $13,000.
The commercial business loans are for $10,000, which represents a bankruptcy
situation in which the bankruptcy trustee is continuing to make payments, and
for $28,000, which is partially guaranteed by the Small Business Administration.
At June 30, 1998, the Bank had an allowance for possible loan losses of $2.2
million or 1.06% of net loans receivable, as compared to an allowance of $1.9
million or 1.06% of net loans receivable at September 30, 1997. The allowance
for possible loan losses equals 341% of non-performing loans at June 30, 1998.
Management has evaluated these non-performing loans and the overall allowance
for possible loan losses and is satisfied that the allowance for possible losses
on loans at June 30, 1998 is adequate. In that regard, consideration was given
to the increase in the level of the allowance from September 30, 1997 to June
30, 1998, as well as the coverage of non-performing loans the allowance provides
at June 30, 1998.
Real estate owned at June 30, 1998 consists of one single-family residential
property located in Pittsburgh, Pennsylvania totaling $21,000. The property is
currently for sale and management believes that the carrying value of the
property at June 30, 1998 approximates the net realizable value of the property.
However, while management uses the best information available to make such
determinations, future adjustments may become necessary.
Comparison of Results of Operations
for the Three and Nine Months Ended June 30, 1998 and 1997
Net Income
Net income for the three months ended June 30, 1998 was $735,000 compared to
$656,000 for the same period in 1997, an increase of $79,000 or 12.1%. The
increase reflects an increase in net interest income of $181,000 or 7.1%, a
decrease in the provision for loan losses of $40,000 or 30.8%, an increase in
other income of $94,000 or 42.3% and a decrease in the provision for income
taxes of $12,000 or 3.3%. Partially offsetting these factors was an increase in
operating expenses of $248,000 or 15.4%.
Net income for the nine months ended June 30, 1998 was $2.1 million compared to
$1.9 million for the same period in 1997, an increase of $152,000 or 7.9%. The
increase reflects an increase in net interest income of $484,000 or 6.5%, a
decrease in the provision for loan losses of $50,000 or 13.7%, an increase in
other income of $210,000 or 33.4% and a decrease in the provision for income
taxes of $11,000 or 1.0%. Partially offsetting these factors was an increase in
operating expenses of $603,000 or 12.7%.
<PAGE>
Interest Rate Spread
The Bank's interest rate spread, the difference between yields on
interest-earning assets and the cost of funds, decreased to 2.77% in the three
months ended June 30, 1998 from 2.94% in the same period in 1997. The following
table shows the average yields earned on the Bank's interest-earning assets and
the average rates paid on its interest-bearing liabilities for the periods
indicated, the resulting interest rate spreads, and the net yields on
interest-earning assets.
<TABLE>
<CAPTION>
Three Months Ended June 30,
1998 1997
---- ----
Average yield on:
<S> <C> <C>
Mortgage loans .................................. 7.96% 8.05%
Mortgage-backed securities ...................... 6.39 6.27
Installment loans ............................... 8.63 8.50
Commercial business loans and leases ............ 9.71 9.20
Interest-earning deposits with other
institutions, investment securities,
and FHLB stock (1) ............................ 6.97 6.94
---- ----
Total interest-earning assets ................... 7.49 7.39
---- ----
Average rates paid on:
Savings deposits ................................ 4.23 4.06
Borrowed funds .................................. 5.91 5.68
---- ----
Total interest-bearing liabilities .............. 4.72 4.45
---- ----
Average interest rate spread ....................... 2.77% 2.94%
==== ====
Net yield on interest-earning assets ............... 2.96% 3.21%
==== ====
</TABLE>
(1) Interest income on tax free investments has been adjusted for federal income
tax purposes using a rate of 34%.
<PAGE>
The Bank's interest rate spread decreased to 2.72% in the nine months ended June
30, 1998 from 3.07% in the same period in fiscal 1997. The following table shows
the average yields earned on the Bank's interest-earning assets and the average
rates paid on its interest-bearing liabilities for the periods indicated, the
resulting interest rate spreads, and the net yields on interest-earning assets.
<TABLE>
<CAPTION>
Nine Months Ended June 30,
1998 1997
---- ----
Average yield on:
<S> <C> <C>
Mortgage loans .................................. 7.99% 8.03%
Mortgage-backed securities ...................... 6.46 6.28
Installment loans ............................... 8.43 8.29
Commercial business loans and leases ............ 9.97 9.72
Interest-earning deposits with other
institutions, investment securities,
and FHLB stock (1) ............................ 6.96 7.02
---- ----
Total interest-earning assets ................... 7.48 7.38
---- ----
Average rates paid on:
Savings deposits ................................ 4.25 4.03
Borrowed funds .................................. 5.97 5.28
---- ----
Total interest-bearing liabilities .............. 4.76 4.31
---- ----
Average interest rate spread ....................... 2.72% 3.07%
==== ====
Net yield on interest-earning assets ............... 2.92% 3.27%
==== ====
</TABLE>
(1) Interest income on tax free investments has been adjusted for federal income
tax purposes using a rate of 34%.
Interest Income
Interest on loans increased $767,000 or 22.1% to $4.2 million for the three
months ended June 30, 1998, compared to the same period in 1997. The increase is
attributable primarily to an increase in the average loan balance outstanding
during the 1998 period, as well as an increase in the yield earned on these
assets in the 1998 period as compared to the same period in 1997. The increase
in the average balance of the loan portfolio in the fiscal 1998 periods reflects
management's continued strategy of emphasizing and increasing loans.
Interest on loans increased $2.3 million or 23.5% to $12.2 million for the nine
months ended June 30, 1998, compared to the same period in 1997. The increase is
attributable primarily to an increase in the average loan balance outstanding
during the 1998 period, as well as an increase in the yield earned on these
assets in the fiscal 1998 period as compared to the same period in fiscal 1997.
<PAGE>
Interest on mortgage-backed securities increased $152,000 or 8.8% to $1.9
million and $1.0 million or 20.9% to $5.9 million for the three and nine month
periods ended June 30, 1998, respectively, as compared to the same periods in
1997. The increase for both the three and nine month periods primarily reflects
an increase in the average balance of mortgage-backed securities held in the
1998 periods, as well as an increase in the yield earned on the portfolio.
Interest on interest-earning deposits with other institutions and investment
securities increased $204,000 or 26.2% to $981,000 for the three month period
ended June 30, 1998, as compared to the same period in 1997. The increase
reflects an increase in the average balance of such securities and deposits, as
well as an increase in the yield earned on these investments. For the nine month
period ended June 30, 1998, interest on interest-earning deposits with other
institutions and investment securities increased $355,000 or 14.2% to $2.9
million, as compared to the same period in the prior year. The increase
primarily reflects an increase in the average balance of investments held in the
1998 period, partially offset by a lower yield earned on these investments.
Interest Expense
Interest on savings deposits increased $384,000 or 16.1% to $2.8 million and
$1.1 million or 15.7% to $8.2 million for the three and nine month periods ended
June 30, 1998, respectively, as compared to the same periods in fiscal 1997. The
increase for both the three and nine month periods in fiscal 1998 as compared to
fiscal 1997 reflects both an increase in the average balance of deposits, as
well as an increase in the average cost of deposits.
Interest on borrowed funds increased $437,000 or 47.8% to $1.4 million and $1.5
million or 56.8% to $4.1 million for the three and nine month periods ended June
30, 1998, respectively, as compared to the same periods in fiscal 1997. The
increases for both the three and nine month periods in fiscal 1998 as compared
to fiscal 1997 reflects both an increase in the average balance of funds
borrowed during the 1998 periods, as well as an increase in the average cost of
borrowing during the 1998 periods. The Bank continued to rely on wholesale
funding sources throughout fiscal 1998 as an additional way to fund growth.
These funding sources are primarily Federal Home Loan Bank of Pittsburgh
advances.
Interest on guaranteed preferred beneficial interest in subordinated debt
increased $119,000 or 86.8% to $256,000 and $631,000 or 460.5% to $768,000 for
the three and nine month periods ended June 30, 1998, compared to the same
periods in the prior year. As discussed more fully in Note 8, the Preferred
Securities were issued in May 1997.
Net Interest Income Before Provision for Loan Losses
The Bank's net interest income before provision for loan losses increased
$181,000 or 7.1% to $2.7 million for the three months ended June 30, 1998, as
compared to the same period in 1997, and increased $484,000 or 6.5% to $8.0
million for the nine months ended June 30, 1998, as compared to the same period
in fiscal 1997. The increase for both the three and nine month periods reflects
an increase in interest-earning assets in the fiscal 1998 periods, partially
offset by a decrease in the spread earned.
<PAGE>
Provision for Loan Losses
The provision for loan losses decreased $40,000 or 30.8% to $90,000 and $50,000
or 13.7% to $315,000 for the three and nine month periods ended June 30, 1998,
respectively, as compared to the same periods in fiscal 1997. The provision for
both years reflects management's evaluation of the loan portfolio, current
economic conditions, and other factors as described below. The allowance for
possible loan losses has increased from $1.8 million at June 30, 1997 to $2.2
million at June 30, 1998.
A monthly review is conducted by management to determine that the allowance for
possible loan losses is adequate to absorb estimated loan losses. In determining
the level of allowances for possible loan losses, consideration is given to
general economic conditions, the diversification and size of the loan portfolio,
historical loss experience, identified credit problems, delinquency levels and
the adequacy of collateral. Although management believes that the current
allowance for loan losses is adequate, future additions to the reserve may be
necessary due to changes in economic conditions. In addition, various regulatory
agencies review the adequacy of the allowance for loan losses as part of their
examination process and may require additions to the allowance based on their
judgment.
Other Income
Total non-interest or other income increased $94,000 or 42.3% to $316,000 and
$210,000 or 33.4% to $841,000 for the three and nine month periods ended June
30, 1998, respectively, as compared to the same periods in fiscal 1997.
Service fee income, which includes late charges on loans, fees for loans
serviced for others and other miscellaneous loan fees, increased $8,000 or 35.7%
to $29,000 and $36,000 or 62.6% to $92,000 for the three and nine month periods
ended June 30, 1998, respectively, as compared to the same periods in fiscal
1997. For the three month period the increase is primarily attributable to an
increase in late charges on mortgages, as well as the imposition of a late
charge fee on credit cards. For the nine month period, the increase is primarily
attributable to an increase in late charges on all loans, the imposition of a
late charge on credit cards, and the collection of a fee related to a program
whereby customers could skip their regular loan payment over the Christmas
holidays.
Gain on the sale of investment and mortgage-backed securities increased $54,000
or 836.4% to $60,000 and $41,000 or 153.6% to $68,000 for the three and nine
month periods ended June 30, 1998, respectively, as compared to the same periods
in 1997. All sales were made from the available-for-sale portfolio in the
periods and were done to reflect current economic conditions and asset/liability
management strategies, as well as changing market conditions.
Loss on sale of loans was $3,000 for the three month period ended June 30, 1998,
as compared to a gain of $11,000 in the same period in fiscal 1997. For the nine
month periods ended June 30, 1998 and 1997, the gain on sale of loans was $6,000
and $16,000, respectively. The Bank sells education loans to the Student Loan
Marketing Association ("SLMA"). Such sales generally result in some gain or loss
being realized and are done to reduce the Bank's position in these loans, which
are generally lower yielding and subject to extensive and costly government
regulation. The Bank does not intend to originate additional student loans for
its portfolio, except those that will be sold to and serviced by SLMA. Results
generally reflect the timing of such sales.
<PAGE>
Other operating income includes miscellaneous sources of income which consist
primarily of various fees related to checking accounts, fees from the sale of
cashiers checks and money orders, and safe deposit box rental income. Other
operating income increased $47,000 or 25.6% to $231,000 and $144,000 or 27.1% to
$674,000 for the three and nine month periods ended June 30, 1998, as compared
to the same periods in fiscal 1997. The increase for both the three and nine
month periods is primarily due to debit card fees and earnings on the cash
surrender value of life insurance policies on certain executive officers. In
addition, for the three month period ended June 30, 1998, a surcharge was
imposed on nonbank customers for the use of the Bank's automated teller
machines. Partially offsetting these increases in both the three and nine month
periods were decreased fees related to the sale of accident and health insurance
on loans and decreased fees on checks returned for non-sufficient funds.
Other Expenses
Total operating expenses increased $248,000 or 15.4% to $1.9 million and
$603,000 or 12.7% to $5.4 million for the three and nine month periods ended
June 30, 1998, respectively, as compared to the same period in fiscal 1997.
Compensation, payroll taxes and fringe benefits, the largest component of
operating expenses, increased $173,000 or 18.7% to $1.1 million and $456,000 or
17.0% to $3.1 million for the three and nine month periods ended June 30, 1998,
respectively, compared to the same periods in fiscal 1997. Factors contributing
to the increase for both periods were normal salary increases, resulting higher
payroll taxes, higher bonuses awarded in fiscal 1998, an increase in the number
of employees on the payroll, particularly professionals related to the lending
area and an increase in retirement and health care expenses. In addition, the
Bank plans to begin offering brokerage and insurance services in early July
1998, and additional staffing and personnel costs were incurred in the three
month period ended June 30, 1998, to establish this function.
Office occupancy and equipment expense increased $17,000 or 11.1% and $27,000 or
6.3% to $167,000 and $467,000 for the three and nine month periods ended June
30, 1998, respectively, compared to the same periods in fiscal 1997. In both the
three and nine month periods, increases in rent expense on the Company's new
loan center were partially offset by decreased equipment maintenance costs.
Depreciation and amortization increased $13,000 or 10.7% to $132,000 and $27,000
or 7.6% to $382,000 for the three and nine month periods ended June 30, 1998,
respectively, compared to the same periods in fiscal 1997. The results reflect
the purchase of new equipment, primarily for back room operations, as well as an
automatic teller machine for the Washington Road branch.
Federal insurance premiums increased $1,000 or 3.6% to $39,000 and $39,000 or
51.9% to $115,000 for the three and nine month periods ended June 30, 1998,
respectively, compared to the same periods in fiscal 1997. As a result of the
Deposit Insurance Funds Act of 1996 and the resulting payment of a one-time
special assessment in 1996, the Savings Association Insurance Fund was fully
capitalized to the level required by law. The FDIC then determined that, for the
quarter ended December 31, 1996, no deposit insurance premiums would be due from
many institutions, including the Bank. Thus there was no deposit insurance
expense for the three months ended December 31, 1996. For subsequent periods,
the amount of the premium is based on the average amount of deposits outstanding
and is currently approximately 6.10 basis points.
<PAGE>
Net loss on real estate owned was $1,000 for the three months ended June 30,
1998, as compared to a net gain of $16,000 in the comparable period in fiscal
1997. Net loss on real estate owned was $11,000 and $36,000 for the nine month
periods ended June 30, 1998 and 1997, respectively. Results for the periods
reflect the sale of property held as real estate owned. At June 30, 1998, the
Bank had one single family property valued at $21,000 classified as real estate
owned.
Amortization of intangibles was zero for the three month periods ended June 30,
1998 and 1997. Amortization was zero and $44,000 for the nine month periods
ended June 30, 1998 and 1997, respectively. The intangibles generated by the
three branch acquisitions that occurred in November 1991 were being amortized on
a straight-line basis over five years. These intangibles were fully amortized in
November 1996.
Other operating expenses, which consists of check processing costs, consulting
fees, legal and audit fees, advertising, bank charges, and other administrative
expenses, increased $27,000 or 6.7% to $421,000 and $122,000 or 10.8% to $1.3
million for the three and nine month periods ended June 30, 1998, respectively,
as compared to the same periods in fiscal 1997. Significant variations between
both the three and nine month periods in fiscal 1998, as compared to fiscal
1997, include increases in advertising, stationary and supplies, consulting
fees, and costs related to the introduction of a new credit card program.
Partially offsetting these increases was a decrease in legal expense.
Income Taxes
Income taxes decreased $12,000 or 3.3% to $349,000 and $11,000 or 1.0% to $1.0
million for the three and nine month periods ended June 30, 1998, respectively,
compared to the same periods in fiscal 1997. The decrease in taxes for both the
three and nine month periods results from a decrease in the effective tax rate
to 33.5% for both the three and nine month periods ended June 30, 1998,
respectively, as compared to 35.5% for the comparable periods in the prior year,
partially offset by an increase in taxable income in both fiscal 1998 periods.
The decreased effective tax rate primarily results from the Bank's increased
purchases of tax-free investments.
Capital Requirements
The Federal Reserve Board measures capital adequacy for bank holding companies
on the basis of a risk-based capital framework and a leverage ratio. The minimum
ratio of total risk-based capital to risk-weighted assets is 8%. At least half
of the total capital must be common stockholders' equity (not inclusive of net
unrealized gains and losses on available-for-sale securities) and perpetual
preferred stock, less goodwill and other nonqualifying intangible assets ("Tier
1 capital"). The remainder (i.e. , the "Tier 2 risk-based capital") may consist
of hybrid capital instruments, perpetual debt, term subordinated debt, other
preferred stock and a limited amount of the allowance for loan losses. At June
30, 1998, the Company had Tier 1 capital as a percentage of risk-weighted assets
of 16.8% and total risk-based capital as a percentage of risk-weighted assets of
18.3%.
In addition, the Federal Reserve Board has established minimum leverage ratio
guidelines for bank holding companies. These guidelines currently provide for a
minimum ratio or Tier 1 capital as a percentage of average total assets (the
"Leverage Ratio") of 3% for bank holding companies that meet certain criteria,
including that they maintain the highest regulatory rating. The minimum leverage
ratio for all other bank holding companies is 4%. At June 30, 1998, the Company
had a Leverage Ratio of 9.1%.
<PAGE>
The FDIC has issued regulations that require insured institutions, such as the
Bank, to maintain minimum levels of capital. In general, current regulations
require a leverage ratio of Tier 1 capital to average total assets of not less
than 3% for the most highly rated institutions and an additional 1% to 2% for
all other institutions. At June 30, 1998, the Bank complied with the minimum
leverage ratio having Tier 1 capital of 6.4% of average total assets, as
defined.
The Bank is also required to maintain a ratio of qualifying total capital to
risk-weighted assets and off-balance sheet items of a minimum of 8%. At June 30,
1998, the Bank's total capital to risk-weighted assets ratio calculated under
the FDIC capital requirement was 12.8%.
A reconciliation of Stockholders' Equity to Regulatory Capital is as follows:
Total Stockholder's equity at June 30, 1998 (1) ............ $25,433,082
Less: Unrealized securities gains .......................... 556,426
-----------
Tier 1 Capital at June 30, 1998 ............................ 24,876,656
Plus: Qualifying loan loss allowance ....................... 2,199,287
-----------
Total capital at June 30, 1998 ............................. $27,075,943
===========
(1) Represents equity capital of the Bank as reported to the FDIC and the
Pennsylvania Department of Banking on Form 032.
Liquidity
The Bank's primary sources of funds have historically consisted of deposits,
amortization and prepayments of outstanding loans, borrowings from the FHLB of
Pittsburgh and other sources, including sales of securities and, to a limited
extent, loans. At June 30, 1998, the total of approved loan commitments amounted
to $5.3 million. In addition, the Bank had $11.0 million of undisbursed loan
funds at that date. The amount of savings certificates which mature during the
next twelve months totals approximately $110.3 million, a substantial portion of
which management believes, on the basis of prior experience, will remain in the
Bank.
<PAGE>
Part II - Other Information
Item. 1 Legal Proceedings
The Bank is not involved in any pending legal proceedings other
than non-material legal proceedings undertaken in the ordinary
course of business.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
Not Applicable
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
None
<PAGE>
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.
FIDELITY BANK
Date: October 6, 1998 By: /s/ William L. Windisch
-----------------------
William L. Windisch
President and Chief Executive
Officer
Date: October 6, 1998 By: /s/ Richard G. Spencer
----------------------
Richard G. Spencer
Vice President and Chief
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 5,820
<INT-BEARING-DEPOSITS> 1,859
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 129,710
<INVESTMENTS-CARRYING> 35,211
<INVESTMENTS-MARKET> 35,378
<LOANS> 208,693
<ALLOWANCE> 2,199
<TOTAL-ASSETS> 396,180
<DEPOSITS> 260,734
<SHORT-TERM> 60,000
<LIABILITIES-OTHER> 4,912
<LONG-TERM> 42,452
0
0
<COMMON> 20
<OTHER-SE> 28,062
<TOTAL-LIABILITIES-AND-EQUITY> 396,180
<INTEREST-LOAN> 12,175
<INTEREST-INVEST> 8,721
<INTEREST-OTHER> 44
<INTEREST-TOTAL> 20,940
<INTEREST-DEPOSIT> 8,161
<INTEREST-EXPENSE> 12,985
<INTEREST-INCOME-NET> 7,955
<LOAN-LOSSES> 315
<SECURITIES-GAINS> 68
<EXPENSE-OTHER> 5,370
<INCOME-PRETAX> 3,111
<INCOME-PRE-EXTRAORDINARY> 3,111
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,068
<EPS-PRIMARY> 1.06
<EPS-DILUTED> 1.02
<YIELD-ACTUAL> 7.39
<LOANS-NON> 644
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,931
<CHARGE-OFFS> 53
<RECOVERIES> 6
<ALLOWANCE-CLOSE> 2,199
<ALLOWANCE-DOMESTIC> 2,199
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
