U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
X Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934 for
the Quarterly Period Ended March 31, 1997,
or
Transition Report Under Section 13 or
15(d) of the Exchange Act for the
Transition Period from _________________
to _________________.
Commission file number 0-14555
FIRST LEESPORT BANCORP, INC.
(Exact name of Small Business Issuer as specified in its charter)
PENNSYLVANIA
(State or other jurisdiction of
incorporation or organization)
23-2354007
(I.R.S. Employer
Identification No.)
133 North Centre Avenue
Leesport, Pennsylvania 19533
(Address of principal executive offices) (Zip Code)
(610) 926-2161
(Registrant's telephone number, including area code)
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 [ ]
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.
Class Outstanding at April 1, 1997
Common Stock ($5.00 par value) 1,191,171 Shares
<PAGE>
<TABLE>
Part I - FINANCIAL INFORMATION
FIRST LEESPORT BANCORP, INC. AND SUBSIDIARY
UNAUDITED, CONSOLIDATED, CONDENSED BALANCE SHEETS
(Amounts in thousands)
<CAPTION>
Mar.31 Dec. 31
ASSETS 1997 1996
<S> <C> <C>
Cash and Due from Banks $ 4,875 $ 5,087
Interest-bearing Balances 55 112
Total Cash and Balances Due from Banks 4,930 5,199
Federal Funds Sold 686 448
Securities Available for Sale 40,498 39,690
Loans, Net of Unearned Income 112,512 110,878
Less: Allowance for Loan Losses (1,220) (1,105)
Net Loans 111,292 109,773
Bank Premises and Equipment 3,168 3,328
Other Real Estate Owned 128 162
Accrued Interest Receivable and Other Assets 3,645 3,423
Total Assets 164,347 162,023
LIABILITIES
Demand Deposits, Non-interest Bearing $ 17,638 $ 16,937
Demand Deposits, Interest Bearing 27,722 28,003
NOW, Money Market, and Savings Deposits 25,149 24,051
Time Deposits, $100,000 and over 3,203 2,789
Time Deposits 66,839 65,757
Total Deposits 140,551 137,537
Federal Funds Purchased 0 700
Other Borrowed Funds 5,000 5,000
Accrued Interest Payable 708 803
Other Liabilities 1,077 862
Total Liabilities 147,336 144,902
STOCKHOLDERS' EQUITY
Common Stock, $5.00 Par Value per Share; Authorized 2,000,000
Shares, Issued 1,200,000 Shares. $ 6,000 $ 6,000
Surplus 3,000 3,000
Retained Earnings 8,218 8,021
Net Unrealized (Depreciation) Appreciation on Securities
Available for Sale, Net of Taxes (86) 221
Treasury Stock, 8,829 Shares at Cost (121) (121)
Total Stockholders' Equity 17,011 17,121
Total Liabilities and Stockholders' Equity 164,347 162,023
<FN>
The accompanying notes are an integral part of these condensed financial
statements.
</TABLE>
<PAGE>
<TABLE>
FIRST LEESPORT BANCORP, INC. AND SUBSIDIARY
UNAUDITED, CONSOLIDATED, CONDENSED STATEMENTS OF INCOME
(Amounts in thousands, except per share data)
<CAPTION>
Three Months
Ended Mar.31
1997 1996
<S> <C> <C>
INTEREST INCOME
Interest & Fees on Loans $ 2,444 $ 2,453
Interest on Federal Funds Sold 7 9
Interest on Securities:
Taxable Securities 474 392
State and Municipal Bonds 148 165
_____ _____
TOTAL INTEREST INCOME 3,073 3,019
INTEREST EXPENSE
Interest on Deposits 1,330 1,321
Interest on Borrowed Funds 76 18
_____ _____
TOTAL INTEREST EXPENSE 1,406 1,339
_____ _____
NET INTEREST INCOME 1,667 1,680
Provision for Loan Losses 140 82
Net Interest Income after _____ _____
Provision for Loan Losses 1,527 1,598
OTHER INCOME
Customer Service Fees 70 77
Other Income 140 64
___ ___
TOTAL OTHER INCOME 210 141
OTHER EXPENSES
Salaries and Benefits 642 584
Occupancy Expense 118 103
Furniture and Equipment Expense 67 75
Computer Services 72 73
Other Operating Expenses 370 335
_____ _____
TOTAL OTHER EXPENSES 1,269 1,170
_____ _____
Income Before Income Taxes 468 569
Federal Income Taxes 117 142
_____ _____
NET INCOME 351 427
PER SHARE DATA
Based on Average Shares Outstanding 1,191,171 1,191,171
Net Income 0.29 0.36
Dividends 0.13 0.12
<FN>
The accompanying notes are an integral part of these condensed financial
statements.
</TABLE>
<PAGE>
<TABLE>
FIRST LEESPORT BANCORP, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Amounts in thousands, except per share data)
<CAPTION>
Three Months Ended
March 31,
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 351 $ 427
Provision for loan losses 140 82
Provision for depreciation and amortization 67 75
Net amortization of security premiums and discounts 2 (5)
Loans originated for sale (852) 0
Proceeds from sales of loans 945 0
(Gain) Loss on sales of loans (93) 0
(Increase) Decrease in accrued interest receivable
and other assets (60) 214
Increase (Decrease) in accrued interest payable
and other liabilities 120 (363)
_____ _____
NET CASH PROVIDED BY OPERATING ACTIVITIES 527 430
CASH FLOWS FROM INVESTING ACTIVITIES
Available-for-sale securities:
Proceeds from maturities of securities 1,527 3,045
Proceeds from sales of securities 0 0
Purchase of securities (2,541) (3,868)
Net (Increase) decrease in federal funds sold (238) 601
Loans made to customers, net of principal collected (1,634) (3,673)
Purchases of bank premises and equipment (69) (70)
_____ _____
NET CASH (USED IN) INVESTING ACTIVITIES (2,955) (3,965)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits 3,014 2,220
Net increase (decrease) in federal funds purchased (700) 1,166
Net increase (decrease) in other borrowed funds 0 500
Proceeds from long-term debt 0 (1,000)
Dividends paid (155) (143)
_____ _____
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 2,159 2,743
_____ _____
Increase (decrease) in cash and cash equivalents (269) (792)
_____ _____
Cash and cash equivalents: Beginning 5,199 5,043
_____ _____
Ending 4,930 4,251
_____ _____
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS:
Interest paid $ 1,501 $ 1,426
Income taxes paid 0 0
<FN>
The accompanying notes are an integral part of these condensed financial
statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. The financial information included herein is unaudited, however, such
information reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
statement of the results for the interim periods.
2. The results of operations for the three-month period ended March 31, 1997
are not necessarily indicative of the results to be expected for the full
year.
3. Recently Issued FASB Statements:
In 1997, the FASB issued Statement No. 128, "Earnings Per Share" and Statement
No. 129, "Disclosure of Information about Capital Structure." Both Statements
are effective for periods ending after December 15, 1997. Statement No. 128
is designed to simplify the computation of earnings per share and will require
disclosure of "basic earnings per share" and, if applicable, "diluted earnings
per share." Earlier application is not permitted for Statement No 128 and it
will require restatement of all prior period earnings per share data when
adopted. The Statement is not expected to materially impact the reported
earnings per share of the Company.
The adoption of Statement No. 129 will have no impact on the Company.
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Financial Condition
The Company's assets increased by 1.4% or $2,324,000 from December 31, 1996 to
March 31, 1997, growing from $162,023,000 to $164,347,000. With a renewed
focus on growth for the Bank, the 1.4% growth for the first quarter was
disappointing. Net loans increased by $1,519,000 representing 65% of that
increase. Investment securities increased by $808,000 and accounted for the
remaining growth in assets.
Cash and balances due from correspondent banks decreased by $269,000 or 5.2%
falling from $5,199,000 at December 31, 1996 to $4,930,000 at March 31, 1997.
Within this category, interest-bearing balances at banks also decreased,
shrinking by $57,000 between the two dates. Although these balances do
represent the most liquid types of funds available to the Bank, they generally
yield little or no interest income. With this in mind, the Bank intends to
keep cash balances to a minimum.
Federal funds sold increased by $238,000 between the two dates and amounted to
$686,000 at March 31, 1997. From a liquidity standpoint, Federal Funds Sold
are almost as liquid as cash, and do a higher level of return for the Bank
than cash.
Loans, net of the allowance for loan losses and mortgages sold into the
secondary market, represent the highest yielding assets for the Bank, and are,
therefore, the primary focus for the Bank's growth. The relatively slow growth
of loans through the first quarter attest to the high level of competition
within the Bank's primary market area, Berks County, Pennsylvania.
Commercial loans increased by $2,507,000 or 7.6% from December 31, 1996 to
March 31, 1997, however, each of the other major categories of loans decreased
between the two dates. Mortgages decreased by $552,000 while installments and
other types of loans decreased by a combined $322,000. The net change to the
allowance for loan losses provided the difference in net loans.
Investment securities, yielding rates slightly lower than loans, were used to
maximize those funds available after satisfying loan commitments. The increase
of $808,000 within the investment portfolio, resulted from increased U.S.
Government Agency securities, primarily Federal Home Loan Bank bonds. With
call dates on many of these securities spread over the next two years, the
Bank maintains a high degree of liquidity while improving yields over Federal
Funds Sold.
Deposits increased by $3,014,000 or 2.2% from $137,537,000 at December 31,
1996 to $140,551,000 at March 31, 1997. Total time deposits increased by
$1,496,000 representing 50% of the deposit growth, while savings deposits
increased by $1,098,000. Interest-bearing demand deposits decreased slightly,
$282,000, between December 31, 1996 and March 31, 1997 and non-interest-
bearing demand deposits increased by $701,000.
As the Bank continues to review its deposit products, additional types of
deposits will be identified. With asset growth projected at approximately 15%
for 1997, deposit growth will be a critical factor. Those funds not available
through deposit growth will come from borrowings at various correspondent
institutions, including the Federal Home Loan Bank of Pittsburgh.
Federal funds purchased, which amounted to $700,000 at December 31, 1996 were
repaid during the first quarter of 1997. A term borrowing from the Federal
Home Loan Bank of Pittsburgh in the amount of $5,000,000 matures in May of
1997.
<PAGE>
Stockholders' Equity decreased between December 31, 1996 and March 31, 1997 as
the decrease in the market value of the Bank's investment portfolio combined
with dividends paid to more than offset net income for the first quarter. At
the end of March 1997, total stockholders' equity amounted to $17,011,000
compared with $17,121,000 at December 31, 1996. In spite of this overall
decrease, the Bank's capital ratio remained in excess of 10%. In addition, the
Bank's total risk-based capital ratio still exceeds 17%.
Results of Operations
Three Month Periods Ended March 31, 1997 and 1996
Total interest income for the first quarter of 1997 was $54,000 higher than
the same period in 1996. This increase in income, however, was more than
offset by increased interest expense and the provision for loan losses
resulting in a decrease in net interest income after the provision of $71,000,
a decline of 4.4%. Net interest income for the first three months of 1997 was
$1,527,000 compared with $1,598,000 for the first three months of 1996.
Total interest income increased from $3,019,000 to $3,073,000 between the
first quarter of 1996 and the first quarter of 1997. Interest and fees on
loans remained relatively stable with only a $9,000 variance while interest on
investment securities increased by $64,000 between the two periods.
Overall yields on earning assets decreased from 8.28% for the first quarter of
1996 compared with 8.03% for the first quarter of 1997. Within this total, the
overall yield on loans decreased from 9.17% to 8.72% while the yield on
investment securities actually increased from 5.82% to 6.16%.
Interest expense increased from $1,339,000 for the first quarter of 1996 to
$1,406,000 for the first quarter of 1997. Within this total interest on
deposits remained relatively stable with only a $9,000 variance while interest
on other borrowed funds, including federal funds purchased, increased by
$58,000 between the two periods.
The overall cost of funds for the Bank decreased slightly between the two
periods, falling from 4.46% for the first quarter of 1996 to 4.42% for the
first quarter of 1997. Net interest income, absent any adjustments for income
taxes, as a percentage of earning assets, decreased from 4.61% for the first
quarter of 1996 to 4.36% for the first quarter of 1997.
Other income increased from $141,000 for the first three months of 1996 to
$210,000 for the first three months of 1997, an increase of $69,000 or 48.9%.
Included within this increase were net gains on sales of loans of $93,000.
Total other expenses increased by $99,000 or 8.5% from $1,170,000 for the
first quarter of 1996 compared with $1,269,000 for the first quarter of 1997.
Within this total, salaries and benefits increased by $58,000 or 9.9% from
$584,000 to $642,000. Total full-time equivalent employees increased between
these two periods from 76 to 80 as a result of the Company's reorganization
begun late in 1996.
Occupancy, furniture, and equipment expenses, together, increased by $7,000
between the two periods. Management expects these expenses to increase
dramatically throughout the rest of 1997 as investments in facilities and
technology necessary to facilitate growth are made.
Income before income taxes decreased by $101,000 or 17.8% from $569,000 for
the first three months of 1996 to $468,000 for the first three months of 1997.
The associated income tax expense decreased by 17.6% from $142,000 to $117,000
for the two periods, respectively. The effective tax rates for the two periods
was 25%, due principally to the effects of tax-exempt income.
<PAGE>
Net income declined to $351,000 for the first quarter of 1997 from $427,000
for the first quarter of 1996, a decrease of $76,000 or 17.8%. Net income per
share declined to $0.29 from $0.36 between the two periods. Dividends paid
over the two periods were $0.13 per share and $0.12 per share, respectively.
Liquidity and Interest Rate Sensitivity
The banking industry has been required to adapt to an environment in which
interest rates have been volatile and deposit deregulation has provided
customers with the opportunity to invest in liquid, interest rate-sensitive
deposits. The banking industry has adapted to this environment by utilizing a
process known as asset/liability management.
Adequate liquidity means the ability to obtain sufficient cash to meet all
current and projected needs promptly and at a reasonable cost. These needs
include deposit withdrawal, liability runoff and increased loan demand. The
principal sources of liquidity are cash and due from banks, money market
investments, and all unpledged investment securities maturing within one
year. Maturing loans and loan payments are another source of liquidity. The
Bank can also package and sell residential mortgage loans in the secondary
market. Other sources of liquidity are the federal funds market, term
borrowings from the Federal Home Loan Banking System, and the discount window
of the Federal Reserve Banking System. In view of all factors involved, the
Banks's management believes that liquidity is being maintained at an adequate
level.
Asset/liability management is intended to provide for adequate liquidity and
interest rate sensitivity by matching interest rate-sensitive assets and
liabilities and coordinating maturities on assets and liabilities.
Approximately 27% of the commercial loan portfolio is sensitive to interest
rate changes. Other loans are written for relatively short terms and, except
for the majority of residential mortgage loans, provide for a readjustment of
the interest rate at specified times during the term of the loan. In
addition, interest rates offered for all types of deposit instruments are
reviewed weekly and are established on a basis consistent with funding needs
and maintaining a desirable spread between cost and return. The Bank does not
utilize repurchase agreements, reverse repurchase agreements, interest rate
swaps, or other derivative products in its asset/liability management
practices at this time.
The Bank's one-year interest sensitivity gap is negative $57,349,000
representing a larger pool of repricing deposits than earning assets. In a
rising rate environment, the cost to maintain this pool of funds will rise
resulting in a smaller net interest margin.
<PAGE>
<TABLE>
The following table shows the repricing periods of interest earning assets and
interest bearing liabilities as of March 31, 1997:
INTEREST RATE SENSITIVITY
(Amounts in thousands)
<CAPTION>
Repricing Period
Within One Year to Over
One Year Five Years Five Years Total
<S> <C> <C> <C> <C>
Assets
Interest-bearing Balances $ 55 $ 0 $ 0 $ 55
Federal Funds Sold 686 0 0 686
Securities 11,428 21,655 7,415 40,498
Net Loans 34,847 23,620 52,825 111,292
______ ______ ______ _______
Total $ 47,016 $ 45,275 $ 60,240 $152,531
Liabilities
Total Interest-Bearing
Deposits $ 99,365 $ 23,548 $ 0 $122,913
Other Borrowed Funds 5,000 0 0 5,000
______ ______ ______ _______
Total $104,365 $ 23,548 $ 0 $127,913
______ ______ ______ ______
Rate Sensitivity Gap $(57,349) $ 21,727 $ 60,240 $ 24,618
______ ______ ______ ______
<FN>
</TABLE>
Capital Adequacy
The following table provides information about the capital of the Bank as it
relates to regulatory minimums as of selected Balance Sheet dates:
<TABLE>
<CAPTION>
Actual
Regulatory Mar.31, Dec. 31,
Minimum 1997 1996
<S> <C> <C> <C>
Tier I Capital to Risk-Adjusted Assets 4.00% 16.47% 16.50%
Total Capital to Risk-Adjusted Assets 8.00% 17.65% 17.59%
Leverage Ratio 3.00% 10.45% 10.35%
</TABLE>
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
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
The Board of Directors of First Leesport Bancorp, Inc. at its
March 11, 1997 meeting, declared a $.13 per share cash dividend to
be paid April 15, 1997 to holders of record on April 1, 1997.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
FIRST LEESPORT BANCORP, INC.
(Registrant)
Dated: May 13, 1997 By John T. Connelly
John T. Connelly
President and
Chief Executive Officer
Dated: May 13, 1997 By Frederick P. Henrich
Frederick P. Henrich
Treasurer and
Chief Accounting Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 4875
<INT-BEARING-DEPOSITS> 55
<FED-FUNDS-SOLD> 686
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 40498
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 112512
<ALLOWANCE> 1220
<TOTAL-ASSETS> 164347
<DEPOSITS> 140551
<SHORT-TERM> 5708
<LIABILITIES-OTHER> 1077
<LONG-TERM> 0
<COMMON> 6000
0
0
<OTHER-SE> 11011
<TOTAL-LIABILITIES-AND-EQUITY> 164347
<INTEREST-LOAN> 2444
<INTEREST-INVEST> 622
<INTEREST-OTHER> 7
<INTEREST-TOTAL> 3073
<INTEREST-DEPOSIT> 1330
<INTEREST-EXPENSE> 1406
<INTEREST-INCOME-NET> 1667
<LOAN-LOSSES> 140
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1269
<INCOME-PRETAX> 468
<INCOME-PRE-EXTRAORDINARY> 351
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 351
<EPS-PRIMARY> .29
<EPS-DILUTED> .29
<YIELD-ACTUAL> 4.45
<LOANS-NON> 769
<LOANS-PAST> 615
<LOANS-TROUBLED> 1665
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1106
<CHARGE-OFFS> 40
<RECOVERIES> 14
<ALLOWANCE-CLOSE> 1220
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1220
</TABLE>
