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 September 30, 1998
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 November 1, 1998
Common Stock ($5.00 par value) 1,191,371 Shares
<PAGE>
<TABLE>
Part I - FINANCIAL INFORMATION
FIRST LEESPORT BANCORP, INC. AND SUBSIDIARY
UNAUDITED, CONSOLIDATED, CONDENSED BALANCE SHEETS
(Amounts in thousands)
<CAPTION>
Sept 30 Dec. 31
ASSETS 1998 1997
______ ______
<S> <C> <C>
Cash and Due from Banks $ 5,039 $ 5,456
Interest-bearing Deposits in Other Banks 258 100
______ ______
Total Cash and Balances Due from Banks 5,297 5,556
Federal Funds Sold 3,343 0
Securities Available for Sale 51,621 38,346
Loans, Net of Unearned Income 148,219 129,779
Less: Allowance for Loan Losses (1,712) (1,483)
_______ _______
Net Loans 146,507 128,296
Bank Premises and Equipment, Net 5,179 3,844
Accrued Interest Receivable and Other Assets 4,440 4,223
_______ _______
Total Assets 216,387 180,265
LIABILITIES
Deposits:
Non-interest Bearing $ 20,163 $ 18,466
Interest Bearing 153,598 130,033
_______ _______
Total Deposits 173,761 148,499
Federal Funds Purchased 0 3,814
Short-term Borrowings 5,000 8,000
Long-term Debt 17,500 0
Accrued Interest Payable and Other Liabilities 1,450 1,789
_______ _______
Total Liabilities 197,711 162,102
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 3,003 3,000
Retained Earnings 9,068 8,850
Net Unrealized Appreciation on
Securities Available for Sale, Net of Taxes 723 434
Treasury Stock, 1998 - 8,629; 1997 - 8,829
Shares at Cost (118) (121)
_______ _______
Total Stockholders' Equity 18,676 18,163
_______ _______
Total Liabilities and Stockholders' Equity 216,387 180,265
<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 Nine Months
Ended Sept 30 Ended Sept 30
1998 1997 1998 1997
_______ _______ _______ _______
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest & Fees on Loans $ 2,965 $ 2,641 $ 8,512 $ 7,564
Interest on Federal Funds Sold 8 0 45 14
Interest on Securities:
Taxable 622 500 1,620 1,499
Tax-exempt 140 142 416 437
_____ _____ ______ _____
TOTAL INTEREST INCOME 3,735 3,283 10,593 9,514
INTEREST EXPENSE
Interest on Deposits 1,778 1,430 4,991 4,146
Interest on Borrowed Funds 282 165 596 345
_____ _____ _____ _____
TOTAL INTEREST EXPENSE 2,060 1,595 5,587 4,491
_____ _____ _____ _____
NET INTEREST INCOME 1,675 1,688 5,006 5,023
Provision for Loan Losses 140 130 385 390
Net Interest Income after _____ _____ _____ _____
Provision for Loan Losses 1,535 1,558 4,621 4,633
OTHER INCOME
Customer Service Fees 70 74 188 218
Mortgage Banking Activities 75 25 261 140
Other Income 113 109 358 279
Realized Gain on Sale of Securities 0 0 32 5
_____ _____ _____ _____
TOTAL OTHER INCOME 258 208 839 642
OTHER EXPENSES
Salaries and Benefits 737 682 2,217 1,980
Occupancy Expense 121 105 368 319
Furniture and Equipment Expense 114 74 313 213
Advertising and Marketing Expenses 68 98 286 254
Computer Services 49 74 227 218
Other Operating Expenses 352 337 1,208 1,003
_____ _____ _____ _____
TOTAL OTHER EXPENSES 1,441 1,370 4,619 3,987
_____ _____ _____ _____
Income Before Income Taxes 352 396 841 1,288
Federal Income Taxes 77 91 158 303
_____ _____ _____ _____
NET INCOME 275 305 683 985
EARNINGS PER SHARE DATA
Based on Average Shares Outstanding 1,191,371 1,191,248
1,191,171 1,191,171
Basic Earnings per Share 0.23 0.26 0.57 0.83
Dividends 0.13 0.13 0.26 0.26
<FN>
The accompanying notes are an integral part of these condensed financial
statements.
</TABLE>
<PAGE>
<TABLE>
FIRST LEESPORT BANCORP, INC. AND SUBSIDIARY
UNAUDITED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in thousands)
<CAPTION>
Nine Months Ended
Sept 30,
1998 1997
_____ _____
<S> <C> <C>
Net Income $ 683 $ 985
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities
Arising during the period, net of tax
Expense (benefit) 1998 - $105; 1997 - $47. 310 139
Less: Reclassification adjustments for
Gains included in net income net of tax
Expense (benefit) 1998 - $11; 1997 - $2. (21) (3)
____ ____
Other comprehensive income 289 139
____ ____
Comprehensive income $ 972 $ 1,124
<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>
Nine Months Ended
Sept 30,
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 683 $ 985
Provision for loan losses 385 390
Provision for depreciation and amortization 316 203
Net amortization (accretion) of securities
premiums and discounts 14 6
Realized gain on sale of securities (32) (5)
Loans originated for sale (15,332) (2,857)
Proceeds from sales of loans 15,593 2,717
(Gain) on sales of loans (261) (140)
(Increase) Decrease in accrued interest receivable
and other assets (217) (55)
Increase (Decrease) in accrued interest payable
and other liabilities (339) (566)
_____ _____
NET CASH PROVIDED BY OPERATING ACTIVITIES 549 823
CASH FLOWS FROM INVESTING ACTIVITIES
Available-for-sale securities:
Proceeds from principal repayments and maturities
of securities 8,061 8,011
Proceeds from sales of securities 1,008 0
Purchase of securities (22,161) (7,890)
Net decrease in federal funds sold (3,343) 448
Loans made to customers, net of repayments (18,211) (15,584)
Purchases of bank premises and equipment (1,651) (497)
______ ______
NET CASH USED IN INVESTING ACTIVITIES (36,297) (15,512)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 25,262 6,015
Net decrease in federal funds purchased (3,814) 5,167
Net repayments of short-term borrowings (3,000) 3,000
Proceeds from long-term debt 17,500 0
Dividends paid (465) (464)
Issuance of Treasury Stock 6 0
_____ ______
NET CASH PROVIDED BY FINANCING ACTIVITIES 35,489 13,718
Decrease in cash and cash equivalents (259) (971)
Cash and cash equivalents: Beginning 5,556 5,199
_____ _____
Ending 5,297 4,228
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS:
Interest paid $ 5,551 $ 4,532
Income taxes paid 329 450
<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. All
significant intercompany accounts and transactions have been eliminated.
2. The results of operations for the nine-month period ended September
30, 1998 are not necessarily indicative of the results to be expected for
the full year.
3. The Financial Accounting Standards Board issued Statement No. 130,
"Reporting Comprehensive Income", in June 1997. The Company adopted the
provisions of the new standard in the first quarter of 1998. In
accordance with the Statement, prior year financial statements have been
reclassified in order to be consistent with the current year
presentation. The only comprehensive income item that the company
presently has is unrealized gains (losses) on securities available for
sale.
4. There were no loans held for sale at September 30, 1998
5. The Financial Accounting Standards Board issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities", in June
1998. The effect of adopting the provisions of this Statement is not
expected to have a material impact on the Company's financial position or
results of operations.
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Financial Condition
The Company's total assets increased to $216,387,000 through September
30, 1998, up $36,122,000 or 20.0% from $180,265,000 at December 31, 1997.
Growth in resources was driven primarily by increases in net loans,
investment securities, and federal funds sold. Increases in these three
categories accounted for over 95.0% of the total increase.
Cash and cash equivalents, including interest bearing balances due from
other institutions decreased by $259,000 or 4.7% from $5,556,000 at
December 31, 1997 to $5,297,000 at September 30, 1998. This decrease was
realized by reducing cash levels throughout the Bank, and actually
occurred during a time when the Bank opened two new branches. These
branches, the Hamburg Office and the Breezy Corner Office, both in Berks
County, Pennsylvania, were opened in February and September,
respectively. An additional office, the Bern Township Office is currently
under construction and is expected to be open for business during the
second quarter of 1999.
While the Bank's branch network is being expanded the array of products
and services being offered to its customers is also continuing to
increase. During the year, additional deposit products were developed as
well as non-traditional banking services. In conjunction with the opening
of the Hamburg Office noted above, the Bank introduced its "Leesport
Indexed Money Fund" account which has a rate that is tied to the 91-day
U.S. Treasury Bill. This account offers an extremely attractive rate for
immediately available funds.
The Bank also expanded its array of Individual Retirement Account
products to include Roth IRA certificates of deposit as well as market-
based savings products. These efforts at increasing the Bank's deposit
base at an accelerated rate have helped contribute to the growth noted
above.
The Company announced its intentions to acquire a local insurance agency
as a subsidiary of the Bank to facilitate the Bank's expansion into non-
traditional financial services and products. The pending acquisition of
Essick & Barr, Inc. will have an immediate impact on the Bank's financial
performance as well. This transaction is expected to be completed during
the fourth quarter of 1998.
During the third quarter, the Bank also announced its plans to offer
equipment leasing financing through a third party, discount brokerage
services through an IBAA-endorsed third party, and is planning to make an
accounts receivable financing program available early in the fourth
quarter.
Federal funds sold and investment securities increased by $16,618,000 or
43.3% between December 31, 1997 and September 30, 1998, growing from
$38,346,000 to $54,964,000 between the two dates. Investments have
primarily been in U.S. Agency-type securities, and pooled-mortgage
securities, as yields on U.S. Treasury Notes have fallen dramatically
during the period.
Growth in net loans was realized even while increasing the number of
mortgages sold into the secondary market. Between December 31, 1997 and
September 30, 1998, sold loans, net of repayments, increased by
$11,989,000 or 47.1% growing to $37,438,000 from $25,449,000. Recent
downward movements in interest rates have caused a number of borrowers to
consider refinancing their loans. With the amount of servicing rights
tied to the above sold loans, approximately $275,000, management is
reviewing the various alternatives available to mitigate the accelerated
amortization due to increased prepayment speeds.
The allowance for possible loan losses is managed at a level deemed
adequate by management. At September 30, 1998, the allowance totaled
$1,712,000 compared with $1,483,000 at December 31, 1997. As a percentage
of total loans, the allowance represented 1.15% at September 30, 1998
compared with 1.14% at December 31, 1997.
Bank premises and equipment increased by $1,335,000 or 34.7% from
$3,844,000 at December 31, 1997 to $5,179,000 at September 30, 1998.
Increases came from the opening of two new branch offices, one of which
is leased, and the installation of a bank-wide computer network early in
1998. With the exception of the Bern Township Office presently under
construction, which is expected to cost approximately $750,000, and the
acquisition of Essick & Barr, Inc., there are no additional major capital
expenditures planned for the rest of 1998.
Total deposits increased by $25,262,000 or 17.0% between December 31,
1997 and September 30, 1998, growing from $148,499,000 to $173,761,000
between the two dates. While management is satisfied with the level of
deposit growth, only $1,697,000 of that growth is in non-interest bearing
demand deposits. Demand deposits increased by $1,697,000 or 9.2% growing
from $18,466,000 at December 31, 1997 to $20,163,000 at September 30,
1998. Accelerated deposit growth was targeted by management to coincide
with the expanded retail banking facilities.
Interest bearing deposits, including the new Indexed Money Fund Accounts
noted above, increased by $23,565,000 or 18.0% between the two dates,
growing from $130,033,000 to $153,598,000. The Bank's net interest margin
has fallen to 4.00% through September 30, 1998.
To fund the growth in assets in excess of deposit growth, the Bank
borrowed funds from the Federal Home Loan Bank of Pittsburgh. These
borrowings, which totaled $22,500,000 at September 30, 1998, were
increased by $10,686,000 from $11,814,000 at December 31, 1997. Much of
this debt was used to fund specific investment security purchases with
resulting spreads in excess of 100 basis points.
Stockholders' Equity increased by $513,000 or 2.8% between December 31,
1997 and September 30, 1998. Net income in excess of dividends paid
contributed $218,000 to this total, while increases in unrealized gains
on available for sale securities contributed $289,000 to the total.
The Company's capital position remains very strong. At September 30,
1998, the Company's total capital to risk-adjusted assets ratio is 14.4%
and its leverage ratio is 8.6%. The regulatory minimums for these two
ratios are 8.0% and 3.0%, respectively.
Results of Operations
Nine-Month Periods Ended September 30, 1998 and 1997
Net income for the nine months ended September 30, 1998 was $683,000
compared with $985,000 for the same period in 1997, a decrease of
$302,000 or 30.7%.
Total interest income increased 11.3% between the nine months ended
September 30, 1997 and September 30, 1998, growing by $1,079,000 from
$9,514,000 to $10,593,000. Of this total, $948,000 came from increased
interest and fees on loans. Interest on federal funds sold and total
interest on securities accounted for the remaining $131,000 in increased
interest income.
Interest expense increased by $1,096,000 between the two periods, an
increase of 24.4% from $4,491,000 for the nine months ended September 30,
1997 to $5,587,000 for the nine months ended September 30, 1998. Of this
increase, $251,000 came from increased interest expense on other borrowed
funds as a result of the increased borrowings from the Federal Home Loan
Bank.
Net interest income decreased by $17,000 or 0.3% between the two periods,
falling from $5,023,000 during the period in 1997 to $5,006,000 during
the period in 1998. Management's efforts to accelerate the Bank's growth
rate resulted in this flattening of the interest margin as the
competitive environment within Berks County required significantly higher
interest rates for deposit dollars.
A slightly lower provision for loan losses between the two periods,
$390,000 for the first nine months of 1997 compared with $385,000 for the
same period in 1998, resulted in a very small change in net interest
income after the provision. This category decreased by $12,000 or 0.3%
from $4,633,000 in 1997 to $4,621,000 in 1998.
Total other income increased by $197,000 or 30.7% between the two
periods, growing from $642,000 for the first nine months of 1997 to
$839,000 for the same period in 1998. Contributing to this increase,
mortgage-banking activities provided $121,000, while other income
increased by $79,000. Securities transactions early in 1998 provided
gains on sales of securities of $32,000 during 1998 compared with only
$5,000 during 1997. Offsetting this growth, customer service fees
decreased by $30,000 or 13.8% between the two periods, falling from
$218,000 for the nine months ended September 30, 1997 to $188,000 for the
nine months ended September 30, 1998. Contributing to this decrease was
an effort to promote free checking relationships and its corresponding
impact on service chargeable deposit relationships.
Total other expenses increased by $632,000 or 15.9% between the two
periods. Much of the growth in these expenses can be tied directly to the
investments in additional branch offices, supplies to stock those
offices, promotional efforts, staffing, and equipment.
Salaries and benefits increased by $237,000 or 12.0% from $1,980,000 to
$2,217,000 between the nine-month periods ended September 30, 1997 and
1998. In addition to the new branches noted above, an effort to expand
the Bank's retail operating hours resulted in additional salaries and
wages. This effort was discontinued during the third quarter.
Net occupancy expenses increased by $49,000 from $319,000 during the
period in 1997 to $368,000 in 1998, an increase of 15.4%. Equipment and
installation costs associated with the installation of a bank-wide
computer network during the first quarter of 1998 helped to increase the
furniture and equipment expense total as well. These expenses increased
by $100,000 between the nine months ended September 30, 1997 and 1998,
growing from $213,000 to $313,000, respectively.
Income before income taxes decreased by 34.7% or $447,000 from $1,288,000
to $841,000 between the two periods. The resulting decrease in income tax
expense of $145,000 resulted in a decrease in net income of $302,000 or
30.7%. Net income decreased to $683,000 from $985,000 between the nine
months ended September 30, 1998 and September 30, 1997, respectively.
Basic earnings per share declined from $0.83 per share for the period in
1997 compared with $0.57 per share for the same period in 1998. Dividends
paid per share remained stable at $0.39 per share for both periods.
Three-Month Periods Ended September 30, 1998 and 1997
Net income for the quarter ended September 30, 1998 was $275,000, a
decrease of $30,000 or 9.8% from the $305,000 earned during the third
quarter of 1997.
Total interest income increased by $452,000 or 13.8% for the quarter
ended September 30, 1998 growing from $3,283,000 to $3,735,000. Much of
this increase, $324,000 came from increased interest and fees on loans.
The increased levels of loan activity resulted in growth of 12.3% in
interest and fees growing from $2,641,000 for the third quarter of 1997
to $2,965,000 for the third quarter of 1998.
Interest on securities, both taxable and tax-exempt, along with interest
on federal funds sold, increased by $128,000 between the two periods.
Interest on deposits increased by $348,000 or 24.3% between the two
periods, and amounted to $1,778,000 for the third quarter of 1998
compared with $1,430,000 for the third quarter of 1997. In addition, the
higher levels of borrowed funds from the Federal Home Loan Bank resulted
in an increase in other interest paid of $117,000 or 70.9% between the
two periods. Other interest paid increased from $165,000 for the three
months ended September 30, 1997 to $282,000 for the same period in 1998.
Net interest income decreased slightly between the two quarters, falling
from $1,688,000 for the third quarter of 1997 to $1,675,000 for the third
quarter of 1998, a decrease of $13,000 or 0.8%. This decrease is a direct
result of the highly competitive market within which the Bank operates
and the Bank's desire to gain deposit growth as noted above.
The provision for possible loan losses was increased by $10,000 or 7.7%
between the two periods as management continues to monitor the level of
risk within the Bank's loan portfolio and allocate the allowance
accordingly. Management feels the level of the allowance is adequate at
this time. The provision for possible loan losses increased to $140,000
for the third quarter of 1998 from $130,000 for the third quarter of
1997.
Total other income increased by $50,000 or 24.0% between the third
quarter of 1997 and the third quarter of 1998, growing from $208,000 to
$258,000 respectively. Within this total, mortgage-banking activities
provided all of the growth, as a decrease in customer service fees was
offset by an increase in other income. Customer service fees were
impacted by a realignment of deposit products early in 1998, which
resulted in more competitive service charging processes. During the third
quarter, the Bank increased its ATM surcharge amount, which resulted in
the increase in other income.
Total other expenses increased by $71,000 or 5.2% between the third
quarter of 1997 and the third quarter of 1998 growing from $1,370,000 to
$1,441,000 respectively. Salaries and benefits increased by $55,000 or
8.1% between the two periods due primarily to staffing for the extended
hours program and the two new retail offices.
Net occupancy expenses and furniture and equipment expenses both
increased as a result of the expansion of facilities and the installation
of the bank-wide computer network. Occupancy expenses grew to $121,000
from $105,000 between the third quarters of 1998 and 1997, an increase of
$16,000 or 15.2%. In addition, furniture and equipment expense increased
by $40,000 or 54.1% between the two periods.
Advertising and marketing expenses for the third quarter decreased from
$98,000 for 1997 to $68,000 for 1998, a decrease of $30,000 or 30.6%.
Data processing expenses also decreased during the two periods as the
Bank began to take advantage of some incentive credits negotiated as part
of its data processing contract with Bisys, Inc.
Other expenses increased by $15,000 or 4.5% between the third quarter of
1997 and the third quarter of 1998, growing from $337,000 to $352,000
respectively.
Income before income taxes decreased by $44,000 or 11.1% between the
third quarter of 1997 and the third quarter of 1998, decreasing from
$396,000 to $352,000. This decrease resulted in a decrease of $14,000 or
15.4% in income tax expense between the two periods.
Basic earnings per share decreased by 9.9% from $0.26 per share for the
three months ended September 30, 1997 to $0.23 per share for the three
months ended September 30, 1998. Dividends paid per share remained
constant at $0.13 per share.
Year 2000
The Bank has established a Year 2000 committee to address the issues
associated with how computers store and process date information and how
that will be affected by the turn of the Century. The Committee consists
of individuals throughout the Bank and has been charged with assessing
the impact, identifying affected equipment, resolving problems, and
testing the solutions. A regulatory deadline of the end of 1998 has been
established for this process.
The Bank will also be working very closely with its data processing
provider, Bisys, of Cherry Hill, New Jersey, to integrate and test all
critical computer-based applications. While the estimated expense to the
Bank during 1998 is not expected to exceed $50,000, the Bank's investment
in hardware and software to address the problem may be substantially
higher.
One of the key processing components has already been scheduled for
replacement during October 1998 and will cost approximately $30,000 for
both hardware and software. Testing of all of the critical applications
has already begun and will continue throughout the fourth quarter of
1998. A contingency plan has been established in conjunction with Bisys
in the event that key components do not test accurately.
Minor, sub-applications have already been reviewed along with all of the
network hardware installed early in 1998. One software package was
replaced as part of that review at a cost of $20,000. Communications with
many loan customers have been established to ascertain what exposure the
Bank may realize in the event these customers are not ready for the year
2000. Additional communications with employees, customers, and the
general public are planned for deployment throughout the testing period
and beyond.
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 using 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. At September 30, 1998, the Bank had an additional $50,000,000 of
funding available from the Federal Home Loan Bank. In view of all factors
involved, the Bank'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 21% of the loan portfolio is sensitive to interest rate
changes and may reprice within the next year. 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 use
repurchase agreements, reverse repurchase agreements, interest rate
swaps, or other derivative products in its asset/liability management
practices at this time.
Investment securities are generally purchased with the intention of
holding all securities until maturity. Selected securities have call
features and represent a reinvestment exposure for the Bank in a falling
rate environment. Approximately 40% of the investment portfolio contains
call options and may be called at scheduled times throughout the next
five years.
The Bank's one-year interest sensitivity gap is negative $47,461,000
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, 1998:
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>
Interest Earning Assets:
Interest-bearing Balances $ 258 $ 0 $ 0 $ 258
Federal Funds Sold 3,343 0 0 3,343
Securities 9,292 8,108 34,221 51,621
Net Loans 50,774 25,853 69,880 146,507
_______ _______ _______ ________
Total Interest Earning
Assets $ 63,667 $ 33,961 $ 104,101 $ 201,729
Interest Earning Liabilities:
Total Interest-Bearing
Deposits $106,128 $ 47,470 $ 0 $ 153,598
Other Borrowed Funds 5,000 17,500 0 22,500
________ _______ ________ ________
Total Interest Earning
Liabilities $111,128 $ 64,970 $ 0 $ 176,098
________ _______ ________ ________
Rate Sensitivity Gap $(47,461) $(31,009) $ 104,101 $ 25,631
________ _______ ________ ________
<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 Actual
Regulatory Sept 30, Dec. 31,
Minimum 1998 1997
<S> <C> <C> <C>
Tier I Capital to Risk-Adjusted Assets 4.00% 13.19% 14.69%
Total Capital to Risk-Adjusted Assets 8.00% 14.44% 15.94%
Leverage Ratio 3.00% 8.61% 9.72%
</TABLE>
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in the Company's exposure to market
risk since December 31, 1997.
<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
Item 5. Other Information
The Board of Directors of First Leesport Bancorp, Inc. at its
September 8, 1998 meeting, declared a $.13 per share cash
dividend to be paid October 15, 1998 to holders of record on
October 1, 1998.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
The Bank announced the acquisition of Essick & Barr,
Inc. in a Form 8-K filed on September 17, 1998.
<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: November 12, 1998 By Raymond H. Melcher, Jr.
Raymond H. Melcher, Jr.
President and
Chief Executive Officer
Dated: November 12, 1998 By Frederick P. Henrich
Frederick P. Henrich
Treasurer and
Chief Accounting Officer
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> QTR-3
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 5039
<INT-BEARING-DEPOSITS> 258
<FED-FUNDS-SOLD> 3343
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 51621
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 148219
<ALLOWANCE> 1712
<TOTAL-ASSETS> 216387
<DEPOSITS> 173761
<SHORT-TERM> 5000
<LIABILITIES-OTHER> 1450
<LONG-TERM> 17500
<COMMON> 6000
0
0
<OTHER-SE> 12676
<TOTAL-LIABILITIES-AND-EQUITY> 216387
<INTEREST-LOAN> 8512
<INTEREST-INVEST> 2036
<INTEREST-OTHER> 45
<INTEREST-TOTAL> 10593
<INTEREST-DEPOSIT> 4991
<INTEREST-EXPENSE> 5587
<INTEREST-INCOME-NET> 5006
<LOAN-LOSSES> 385
<SECURITIES-GAINS> 32
<EXPENSE-OTHER> 4619
<INCOME-PRETAX> 841
<INCOME-PRE-EXTRAORDINARY> 841
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 683
<EPS-PRIMARY> 0.57
<EPS-DILUTED> 0.57
<YIELD-ACTUAL> 3.80
<LOANS-NON> 1194
<LOANS-PAST> 366
<LOANS-TROUBLED> 2500
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1483
<CHARGE-OFFS> 227
<RECOVERIES> 71
<ALLOWANCE-CLOSE> 1712
<ALLOWANCE-DOMESTIC> 972
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 740
</TABLE>
