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, 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 May 1, 1998
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 1998 1997
______ ______
<S> <C> <C>
Cash and Due from Banks $ 4,745 $ 5,456
Interest-bearing Deposits in Other Banks 41 100
______ ______
Total Cash and Balances Due from Banks 4,786 5,556
Federal Funds Sold 3,290 0
Securities Available for Sale 37,079 38,346
Loans, Net of Unearned Income 133,432 129,779
Less: Allowance for Loan Losses (1,555) (1,483)
_______ _______
Net Loans 131,877 128,296
Bank Premises and Equipment, Net 4,041 3,844
Other Real Estate Owned 135 182
Accrued Interest Receivable and Other Assets 4,020 4,041
_______ _______
Total Assets 185,228 180,265
LIABILITIES
Deposits:
Non-interest Bearing $ 21,615 $ 18,466
Interest Bearing 137,844 130,033
_______ _______
Total Deposits 159,459 148,499
Federal Funds Purchased 0 3,814
Short-term Borrowings 5,000 8,000
Accrued Interest Payable 793 892
Other Liabilities 1,854 897
_______ _______
Total Liabilities 167,106 162,102
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 3,000 3,000
Retained Earnings 8,893 8,850
Net Unrealized Appreciation on
Securities Available for Sale, Net of Taxes 350 434
Treasury Stock, 8,829 Shares at Cost (121) (121)
_______ _______
Total Stockholders' Equity 18,122 18,163
_______ _______
Total Liabilities and Stockholders' Equity 185,228 180,265
<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
Ended Mar.31
1998 1997
______ ______
<S> <C> <C>
INTEREST INCOME
Interest & Fees on Loans $ 2,660 $ 2,444
Interest on Federal Funds Sold 22 7
Interest on Securities:
Taxable 412 474
Tax-exempt 137 148
_____ _____
TOTAL INTEREST INCOME 3,231 3,073
INTEREST EXPENSE
Interest on Deposits 1,539 1,330
Interest on Borrowed Funds 105 76
_____ _____
TOTAL INTEREST EXPENSE 1,644 1,406
_____ _____
NET INTEREST INCOME 1,587 1,667
Provision for Loan Losses 90 140
Net Interest Income after _____ _____
Provision for Loan Losses 1,497 1,527
OTHER INCOME
Customer Service Fees 61 70
Mortgage Banking Activities 79 103
Other Income 101 37
Realized Gain on Sale of Securities 32 0
___ ___
TOTAL OTHER INCOME 273 210
OTHER EXPENSES
Salaries and Benefits 770 642
Occupancy Expense 117 118
Furniture and Equipment Expense 95 67
Computer Services 115 72
Other Operating Expenses 441 370
_____ _____
TOTAL OTHER EXPENSES 1,538 1,269
_____ _____
Income Before Income Taxes 232 468
Federal Income Taxes 33 117
_____ _____
NET INCOME 199 351
EARNINGS PER SHARE DATA
Based on Average Shares Outstanding 1,191,171 1,191,171
Basic Earnings per Share $ 0.17 $ 0.29
Dividends $ 0.13 $ 0.13
<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>
Three Months Ended
March 31,
1998 1997
_____ _____
<S> <C> <C>
Net Income $ 199 $ 351
Other comprehensive income, net of tax:
Unrealized (losses) on securities
Arising during the period, net of tax
1998 - $43; 1997 - $158. (63) (307)
Less: Reclassification adjustments for
Gains included in net income (21) 0
____ ____
Other comprehensive income (84) (307)
____ ____
Comprehensive income $ 115 $ 44
<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,
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 199 $ 351
Provision for loan losses 90 140
Provision for depreciation and amortization 96 67
Net amortization (accretion) of securities
premiums and discounts (5) 2
Realized gain on sale of securities (32) 0
Loans originated for sale (3,741) (852)
Proceeds from sales of loans 3,809 945
(Gain) on sales of loans (68) (93)
(Increase) Decrease in accrued interest receivable
and other assets 68 (60)
Increase (Decrease) in accrued interest payable
and other liabilities 858 120
______ _____
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,206 527
CASH FLOWS FROM INVESTING ACTIVITIES
Available-for-sale securities:
Proceeds from principal repayments and maturities
of securities 2,408 1,527
Proceeds from sales of securities 1,008 0
Purchase of securities (2,243) (2,541)
Net (Increase) decrease in federal funds sold (3,290) (238)
Loans made to customers, net of principal collected(3,653) (1,634)
Purchases of bank premises and equipment (197) (69)
______ ______
NET CASH USED IN INVESTING ACTIVITIES (5,967) (2,955)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 10,960 3,014
Net decrease in federal funds purchased (3,814) (700)
Net repayments of short-term borrowings (3,000) 0
Proceeds from long-term debt 0 0
Dividends paid (155) (155)
______ _____
NET CASH PROVIDED BY FINANCING ACTIVITIES 3,991 2,159
______ _____
Decrease in cash and cash equivalents (770) (269)
Cash and cash equivalents: Beginning 5,556 5,199
Ending 4,786 4,930
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS:
Interest paid $ 1,743 $ 1,501
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. All
significant intercompany accounts and transactions have been eliminated.
2. The results of operations for the three-month period ended March 31,
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 March 31, 1998.
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Financial Condition
The Company's assets increased by 2.8% between December 31, 1997 and
March 31, 1998, growing by $4,963,000 to $185,228,000 from $180,265,000.
Net loan growth comprised $3,581,000 of this increase as the Company
continues to focus on growing the Bank's total resources primarily
through loan growth.
During the period, the Bank opened a temporary facility in Hamburg, Berks
County, Pennsylvania while a permanent facility was being constructed.
The permanent facility, which will include an automated teller machine
and drive-up services is scheduled to open during May 1998.
Net commercial loans increased from $44,658,000 at December 31, 1997 to
$47,015,000 at March 31, 1998 as the Bank retains these loans within its
portfolio. This growth, $2,357,000, provides approximately two-thirds of
the total net growth in the loan portfolio as the majority of mortgages
originated were sold shortly thereafter. Between December 31, 1997 and
March 31, 1998, $3,741,000 of mortgages were sold into the secondary
market.
The investment portfolio decreased from $38,346,000 at December 31, 1997
to $37,079,000 at March 31, 1998, a decrease of $1,267,000 or 3.3%. Of
this decrease, $976,000 was due to the sale of some corporate securities
out of the portfolio. Many of the securities that matured or were called
during the period were replaced with similar amounts of purchased
securities, primarily callable agency securities and adjustable mortgage-
backed securities.
Federal funds sold increased from December 31, 1997 to March 31, 1998 as
increases in deposit balances provided excess liquidity for the Bank.
Bank premises and equipment increased by $197,000 or 5.1% between
December 31, 1997 and March 31, 1998 growing from $3,844,000 to
$4,041,000. Much of this increase came from costs associated with
building the new facility in Hamburg. The Bank also installed a bank-wide
computer network during the period, and the costs associated with this
project are also included in this total.
Total deposits increased by $10,960,000 or 7.4% growing from $148,499,000
at December 31, 1997 to $159,459,000 at March 31, 1998. Much of this
growth can be attributed to new product promotions including an account
tied to the U.S. Treasury Bill index. In addition, the opening of the
temporary facility contributed to the overall increase in deposits,
including the $3,149,000 or 17.1% increase in non-interest bearing demand
deposits.
The increase in deposits allowed the Bank to repay some of the borrowed
funds that it obtained throughout 1997. At December 31, 1997, these
borrowings totaled $11,814,000. By March 31, 1998, the balances
outstanding amounted to $5,000,000, a decrease of $6,814,000. The Bank
will continue to borrow funds as it deems prudent to provide for
liquidity needs and loan demand.
Total stockholders' equity decreased between December 31, 1997 and March
31, 1998 primarily due to a decrease of $84,000 in the net unrealized
appreciation on securities available for sale. This amount, which is
largely dependent on economic conditions and market activity, decreased
from $434,000 at December 31, 1997 to $350,000 at March 31, 1998. At
March 31, 1998, stockholders' equity equaled $18,122,000 compared with
$18,163,000 at December 31, 1997, a decrease of $41,000 or 0.2%.
Results of Operations
Three Month Periods Ended March 31, 1998 and 1997
Total interest income increased from $3,073,000 for the three months
ended March 31, 1997 compared to $3,231,000 for the three months ended
March 31, 1998, an increase of $158,000 or 5.1%. Increased interest and
fees on loans contributed $216,000 toward this amount while interest on
securities and federal funds sold decreased by $58,000 between the two
periods. The change in interest income earned on loans is due to an
increase in the loan portfolio, while a decline in yields on investment
securities attributed to the aforementioned decrease.
Total interest expense increased from $1,406,000 for the first three
months of 1997 compared to $1,644,000 for the first three months of 1998,
an increase of $238,000 or 16.9%. Interest on deposit accounts increased
by $209,000 representing almost 90% of this total.
The overall cost of deposits increased from 4.38% for the first three
months of 1997 to 4.61% for the first three months of 1998. Net interest
income decreased by $80,000 or 4.8% from $1,667,000 for the first three
months of 1997 to $1,587,000 for the first three months of 1998.
The provision for loan losses decreased to $90,000 for the quarter ended
March 31, 1998 compared with $140,000 for the quarter ended March 31,
1997, a decrease of $50,000 or 35.7%.
Total other income increased by $63,000 or 30.0% from $210,000 for the
first three months of 1997 to $273,000 for the first three months of
1998. Included within this increase is a decrease in the amount of
customer service fees of $9,000 between the two periods as the Bank began
offering free checking services during the first quarter of 1998. Also
included within the $63,000 increase is a gain on the sale of securities
of $32,000 during the first quarter of 1998.
Total other expenses increased by $269,000 or 21.2% from $1,269,000 for
the first three months of 1997 to $1,538,000 for the first three months
of 1998. Increases in salaries and benefits accounted for 47.6% of this
overall increase which was caused by the costs involved with expanding
the number of hours that the retail offices are open combined with the
cost of hiring additional workers for those offices. Salaries and
benefits increased by $128,000, or 19.9% from $642,000 for the first
quarter of 1997 to $770,000 for the first quarter of 1998.
The remaining other operating expense categories increased by $141,000 or
22.5%. This includes the cost of opening the temporary Hamburg facility,
data processing costs, and the costs of equipment installation and
depreciation related to the Bank's networked computer system.
Income before taxes decreased by 50.4% or $236,000 between the two
periods, decreasing from $468,000 for the first quarter of 1997 to
$232,000 for the first quarter of 1998. This decrease resulted in a
decrease of $84,000 in the amount of federal income taxes expensed during
the period. Net income for the first quarter of 1997 was $351,000 while
net income for the first quarter of 1998 was $199,000, resulting in a
decrease of $152,000 or 43.3%.
Expressed on a per share basis, net income decreased to $0.17 per share
for the first quarter of 1998 compared with $0.29 per share for the first
quarter of 1997. Dividends paid during the two periods remained steady 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 1999 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 expected to exceed $50,000, the Bank's investment in
hardware and software to address the problem may be substantially higher.
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 25% 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 $31,664,000
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 $ 41 $ 0 $ 0 $ 41
Federal Funds Sold 3,290 0 0 3,290
Securities 8,488 10,257 18,334 37,079
Net Loans 32,344 40,962 58,571 131,877
_______ _______ _______ ________
Total Interest Earning
Assets $44,163 $51,219 $76,905 $172,287
Interest Earning Liabilities:
Total Interest-Bearing
Deposits $ 96,271 $41,573 $ 0 $137,844
Other Borrowed Funds 5,000 0 0 5,000
________ _______ _______ ________
Total Interest Earning
Liabilities $101,271 $41,573 $ 0 $142,844
________ _______ _______ ________
Rate Sensitivity Gap $(57,108) $ 9,646 $76,905 $ 29,443
________ _______ _______ ________
<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 Mar.31, Dec. 31,
Minimum 1998 1997
<S> <C> <C> <C>
Tier I Capital to Risk-Adjusted Assets 4.00% 14.64% 14.69%
Total Capital to Risk-Adjusted Assets 8.00% 15.89% 15.94%
Leverage Ratio 3.00% 9.56% 9.72%
</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 10, 1998 meeting, declared a $.13 per share cash
dividend to be paid April 15, 1998 to holders of record on
April 1, 1998.
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, 1998 By John T. Connelly
John T. Connelly
President and
Chief Executive Officer
Dated: May 13, 1998 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-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 4745
<INT-BEARING-DEPOSITS> 41
<FED-FUNDS-SOLD> 3290
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 37079
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 133432
<ALLOWANCE> 1555
<TOTAL-ASSETS> 185228
<DEPOSITS> 159459
<SHORT-TERM> 5000
<LIABILITIES-OTHER> 2647
<LONG-TERM> 0
<COMMON> 6000
0
0
<OTHER-SE> 12122
<TOTAL-LIABILITIES-AND-EQUITY> 185228
<INTEREST-LOAN> 2660
<INTEREST-INVEST> 549
<INTEREST-OTHER> 22
<INTEREST-TOTAL> 3231
<INTEREST-DEPOSIT> 1539
<INTEREST-EXPENSE> 105
<INTEREST-INCOME-NET> 1587
<LOAN-LOSSES> 90
<SECURITIES-GAINS> 32
<EXPENSE-OTHER> 1538
<INCOME-PRETAX> 232
<INCOME-PRE-EXTRAORDINARY> 232
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 199
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
<YIELD-ACTUAL> 3.80
<LOANS-NON> 1453
<LOANS-PAST> 209
<LOANS-TROUBLED> 2269
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1483
<CHARGE-OFFS> 53
<RECOVERIES> 35
<ALLOWANCE-CLOSE> 1555
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1555
</TABLE>
