SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X Quarterly Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 for
the Quarterly Period Ended September 30, 1999,
or
Transition report pursuant to 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 Registrant 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 registrant (1) has 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,
Common Stock ($5.00 par 1999
value) 1,749,345 Shares
<PAGE>
<TABLE>
Part I - FINANCIAL INFORMATION
Item 1 - Financial Statements
FIRST LEESPORT BANCORP, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED, CONDENSED BALANCE SHEETS
(Amounts in thousands)
<CAPTION> Sept 30 Dec 31
Assets 1999 1998
<S> <C> <C>
Cash and Due from Banks 5,241 6,019
Interest-bearing Deposits in Other 930 746
Banks
Total Cash and Balances Due from 6,171 6,765
Banks
Federal Funds Sold 0 650
Securities Available for Sale 68,599 72,625
Loans, Net of Unearned Income 250,937 195,287
Less: Allowance for Loan Losses -2,838 -2,129
Net Loans 248,099 193,158
Bank Premises and Equipment 7,265 6,398
Other Real Estate Owned 135 360
Accrued Interest Receivable and 10,637 9,989
Other Assets
Total Assets 340,906 289,945
Liabilities
Deposits:
Non-interest Bearing 28,918 26,053
Interest Bearing 236,234 203,390
Total Deposits 265,152 229,443
Federal Funds Purchased and
Securites Sold 18,955 5,509
Under Agreements to Repurchase
Short-term Debt 11,000 6,700
Long-term Debt 16,000 16,000
Accrued Interest Payable 1,327 1,148
Other Liabilities 2,328 3,320
Total Liabilities 314,762 262,120
Stockholders' Equity
Common Stock, $5.00 Par Value per
Share;
Authorized 10,000,000 shares, 8,789 8,789
Issued 1,749,345 Shares
Surplus 3,760 3,760
Retained Earnings 15,207 14,629
Accumulated Other Comprehensive -1,494 765
Income (Loss)
Treasury Stock; 8,629 Shares at -118 -118
Cost
Total Stockholders' Equity 26,144 27,825
Total Liabilities and 340,906 289,945
Stockholders' Equity
<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
1999 1998 1999 1998
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest & Fees on 4,867 3,451 13,306 10,307
Loans
Interest on Securities:
Taxable 927 901 2,700 2,442
Tax-Exempt 211 205 652 606
Interest on Federal 9 0 50 94
Funds Sold
TOTAL INTEREST INCOME 6,014 4,557 16,708 13,449
INTEREST EXPENSE
Interest on Deposits 2,603 2,262 7,344 6,282
Interest on Borrowed 588 131 1,567 596
Funds
TOTAL INTEREST EXPENSE 3,191 2,393 8,911 6,878
NET INTEREST INCOME 2,823 2,164 7,797 6,571
Provision for Loan 505 150 1,000 407
Losses
Net Interest Income
after the Provision for 2,318 2,014 6,797 6,164
Loan Losses
OTHER INCOME
Customer Service Fees 118 94 347 258
Mortgage Banking 65 75 150 405
Activites
Commissions on 820 0 2,516 0
Insurance Sales
Other Income 144 115 445 253
Realized Gain on Sale 2 0 42 32
of Securities
TOTAL OTHER INCOME 1,149 284 3,500 948
OTHER EXPENSES
Salaries and Benefits 1,755 945 4,448 2,883
Occupancy Expense 202 156 552 462
Furniture and Equipment 177 145 536 417
Expense
Computer Services 338 135 655 493
Restructuring Costs 270 0 270 0
Merger-related Expenses 544 0 544 0
Other Operating 360 443 1,940 1,597
Expenses
TOTAL OTHER EXPENSES 3,646 1,824 8,945 5,852
Income (Loss) Before -179 474 1,352 1,260
Income Taxes
Federal Income Taxes -74 117 318 241
NET INCOME (LOSS) -105 357 1,034 1,019
EARNINGS PER SHARE DATA
Averages Shares 1,749,3 1,676,0 1,749,345 1,675,9
Outstanding 45 61 46
Basic Earnings Per -0.06 0.21 0.59 0.61
Share
Diluted Earnings Per -0.06 0.21 0.53 0.61
Share
<FN>
The accompanying notes are an integral part of these
condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
FIRST LEESPORT BANCORP, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in thousands)
<CAPTION> Nine Months
Ended Sept 30
1999 1998
<S> <C> <C>
Net Income 1,034 1,019
Other Comprehensive Income
(Loss), net of tax:
Unrealized gains (losses) on
Securities arising during the -2,231 376
period, net of tax expense
(benefit):
1999 - ($1,477); 1998 - $245
Less: Reclassification
adjustments
For gains included in net
income, -28 -21
Net of tax expense
(benefit):
1999 - $14; 1998 - $11
Other Comprehensive Income -2,259 355
Comprehensive Income (Loss) -1,225 1,374
<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
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Income 1,034 1,019
Provision for loan losses 1,000 407
Provision for depreciation and 428 372
amortization
Net amortization (accretion) of
securities premiums and discounts 34 26
Realized gain on sale of -42 -32
securities
Loans originated for sale -5,585 -15,332
Proceeds from sales of loans 5,587 15,593
(Increase) Decrease in accrued
interest receivable and other -648 68
assets
Increase (Decrease) in accrued
interest payable and other -891 -447
liabilities
NET CASH PROVIDED BY OPERATING 917 1,674
ACTIVITIES
CASH FLOWS FROM INVESTING
ACTIVITIES:
Available for sale securities:
Proceeds from principal
repayments and maturities of 15,295 13,436
securities
Net decrease in federal funds -650 -3,011
sold
Proceeds from sales of securities 9,283 1,103
Purchase of securities -20,192 -30570
Loans made to customers, net of -55,650 -19,145
repayments
Purchases of bank premises and -1,295 -1,597
equipment
NET CASH USED IN INVESTING -54,209 39,784
ACTIVITIES
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net increase in deposits 35,709 23,694
Net increase (decrease) in
federal funds purchased and 13,446 -598
repurchase agreements
Net borrowings (repayments) of
short-term borrowings 4,300 -500
Proceeds from long-term debt 0 15,000
Dividends paid -757 -515
Issuance of Treasury Stock 0 6
NET CASH PROVIDED BY FINANCING 52,698 37,087
ACTIVITIES
Increase (decrease) in cash and -594 -1,023
cash equivalents
Cash and cash equivalents: 6,765 7,221
Beginning
6,171 8,244
Ending
SUPPLEMENTAL DISCLOSURES OF CASH
FLOWS:
Interest paid 7,286 6,878
Income taxes paid 425 365
<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, 1999 are not necessarily indicative of
the results to be expected for the full year.
3. On July 1, 1999 the Company completed the acquisition of
Merchants Bancorp of Shenandoah, a single-bank holding
company for Merchants Bank of Pennsylvania. This acquisition
is being treated as a pooling for financial accounting
purposes.
Merchants Bank is a $60,000,000 bank with two full-service
offices, one in Shenandoah, Pennsylvania, and one in Drums,
Pennsylvania. A third office outside of Hazleton,
Pennsylvania is under construction and is expected to open in
December of 1999. A fourth site has been purchased in
Hazleton and a full-service branch will be opened there
during the second quarter of 2000. Merchants Bank is state-
chartered institution and will retain its separate banking
charter for the immediate future.
The costs of acquiring Merchants Bank, including legal and
professional expenses, system conversion costs, and
investment banking activities amounted to $544,000 before
income tax considerations. In addition to the consolidation,
the reorganization of the banks resulted in three retirement
packages and their associated costs. These transactions added
$240,000 to the acquisition costs noted above. The after tax
cost of these merger, conversion, and reorganization expenses
amounted to $649,000. These costs were expensed during the
third quarter of 1999.
4. On October 1, 1999, the Registrant acquired Johnson
Financial Group, Inc. ("JFG"), a registered investment
advisor. The Registrant issued a total of 12,742 shares of
its common stock to the four individual shareholders of JFG
in exchange for all of the outstanding capital stock of JFG.
Shares of common stock of the Registrant issued in the
transaction were issued in reliance upon the exemption from
registration contained in Section 4(2) of the Securities Act
of 1933, as amended, and are "restricted securities" within
the meaning of Rule 144 under such Act. On October 1, 1999,
the Registrant also acquired KRJ & Associates, an affiliate
of JFG. No shares of common stock of the Registrant were
issued in connection with the acquisition of KRJ &
Associates.
<PAGE>
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
In addition to historical information, this report contains
forward-looking statements. The forward-looking statements
contained herein are subject to certain risks and
uncertainties that could cause actual results to differ
materially from those projected in the forward-looking
statements. Important factors that might cause such a
difference include, but are not limited to, changing economic
conditions in the Company's market area and increasing
interest rates. Readers are cautioned not to place undue
reliance on these forward-looking statements, which reflect
management's analysis only as of the date of this report. The
Company undertakes no obligation to publicly revise or update
these forward-looking statements to reflect events or
circumstances that arise after the date of this report.
The financial statements have been restated to reflect the
impact of the acquisition of Merchants of Pennsylvania
Bancorp on July 1, 1999 which was accounted for under the
pooling of interests method of accounting.
On July 1, 1999 the Company completed the acquisition of
Merchants Bancorp of Shenandoah, a single-bank holding
company for Merchants Bank of Pennsylvania. This acquisition
is being treated as a pooling for financial accounting
purposes.
Merchants Bank is a $60,000,000 bank with two full-service
offices, one in Shenandoah, Pennsylvania, and one in Drums,
Pennsylvania. A third office outside of Hazleton,
Pennsylvania is under construction and is expected to open in
December of 1999. A fourth site has been purchased in
Hazleton and a full-service branch will be opened there
during the second quarter of 2000. Merchants Bank is state-
chartered institution and will retain its separate banking
charter for the immediate future.
The costs of acquiring Merchants Bank, including legal and
professional expenses, system conversion costs, and
investment banking activities amounted to $544,000 before
income tax considerations. In addition to the consolidation,
the reorganization of the banks resulted in three retirement
packages and their associated costs. These transactions added
$240,000 to the acquisition costs noted above. The after tax
cost of these merger, conversion, and reorganization expenses
amounted to $649,000. These costs were expensed during the
third quarter of 1999.
Financial Condition
The Company's total resources increased to $340,906,000 at
September 30, 1999, an increase of $50,961,000 or 17.6% over
the total of $289,945,000 at December 31, 1998.
Cash and balances due from banks decreased from $6,765,000 at
December 31, 1998 to $6,171,000 at September 30, 1999, a
decrease of (8.8%). As the Company approaches year-end 1999
and the potential for Year 2000 withdrawals increases,
additional cash reserves will be provided to ensure adequate
customer service and available cash. The Company does not
anticipate any major operational problems associated with the
Year 2000 but prudence requires these additional cash
reserves be maintained.
Increases in net loans provided virtually all of this growth
as these balances increased by $54,941,000 or 28.4% between
the two dates growing from $193,158,000 at December 31, 1998
to $248,099,000 at September 30, 1999. As a result of this
outstanding rate of growth, the allowance for loan losses was
increased to $2,838,000 through September 30, 1999, an
increase, net of any charge-offs or recoveries, of $709,000
or 33.3% from $2,129,000 at December 31, 1998. Management
continuously evaluates the adequacy of the allowance for loan
losses.
Commercial loans, consisting of small to medium-sized
business loans, provided the majority of the growth within
the portfolio with a smaller amount being attributed to
personal loans, primarily home equity loans. Growth in
mortgage loans was reduced by selling selected loan
originations into the secondary market. This action provides
a method of helping to reduce the Company's long-term
interest rate risk position.
The investment portfolio provided funding for the above loan
growth, with total securities decreasing to $68,599,000 at
September 30, 1999 from $72,625,000 at December 31, 1998, a
decrease of $4,026,000 or (5.5%). The Company's securities
are all classified as available for sale and require an
adjustment for market values. With general economic
conditions and interest rates where they are, the difference
between the amortized cost of investment securities and their
actual market value was ($2,241,000) at September 30, 1999
compared with $1,148,000 at December 31, 1998. The after tax
affect on the Company's total capital was ($1,494,000) at
September 30, 1999 compared with $765,000 at December 31,
1998.
Total deposits increased by $35,709,000 or 15.6% from
$229,443,000 at December 31, 1998 to $265,152,000 at
September 30, 1999. The majority of this increase,
$32,844,000 resulted from increases in interest-bearing
deposits including certificates of deposit.
With the increase in loans exceeding the increase in
deposits, alternative sources of funding were utilized to
provide the necessary liquidity. Federal funds purchased and
securities sold under agreements to repurchase increased by
$13,446,000 or 153.0% from $5,509,000 at December 31, 1998 to
$18,955,000 at September 30, 1999. Other borrowed funds and
long-term debt increased to $27,000,000 at September 30,
1999 from $22,700,000 at December 31, 1998, an increase of
$4,300,000 or 18.9%.
The Company's total equity prior to the adjustment for other
comprehensive income, totaled $27,648,000 at September 30,
1999, an increase of $588,000 or 2.0% over the total of
$27,060,000 at December 31, 1998. The impact of the
adjustment for other comprehensive income resulting from
changes in the market value of the Company's available for
sale securities, was significant, decreasing from an increase
of $765,000 at December 31, 1998 to a decrease of
($1,494,000) at September 30, 1999.
Results of Operations
Three-Month Periods Ended September 30, 1999 and 1998
The Company realized a loss of $105,000 during the three
month period ended September 30, 1999 as a result of the
merger, conversion, and reorganization costs associated with
the acquisition of Merchants of Pennsylvania Bancorp.
Excluding these costs, the Company earned $544,000 compared
to $357,000 during the same period in 1998.
Total interest income for the three months ended September
30, 1999 amounted to $6,014,000 compared with $4,557,000 for
the three months ended September 30, 1998, an increase of
$1,457,000 or 31.9%. Within this total, interest and fees on
loans increased to $4,867,000 from $3,451,000, an increase of
$1,416,000 or 41.0%. The Bank's focus on increased lending
activity resulted in this increase.
Total interest expense, including interest on borrowed funds
increased by $798,000 or 33.3% between the third quarter of
1998 and the third quarter of 1999 growing from $2,393,000 to
$3,191,000. Efforts to reduce the overall cost of funds
resulted in a reduced level of deposit growth during the
quarter, and to supplement the Bank's funding needs
additional borrowings from the Federal Home Loan Bank were
required.
Net interest income increased by $659,000 or 30.4% as a
result of the above changes, growing from $2,164,000 for the
three months ended September 30, 1998 to $2,823,000 for the
same period in 1999.
The provision for loan losses increased by $355,000 or 236.7%
between the third quarter of 1998 and the third quarter of
1999, growing from $150,000 to $505,000 between the periods.
The resulting net interest income after the provision for
loan losses increased to $2,318,000 from $2,014,000 between
the two periods.
Total other income, impacted significantly by income from the
sales of insurance, increased by $865,000 or 304.6% growing
from $284,000 for the third quarter of 1998 to $1,149,000 for
the third quarter of 1999. Customer service fees increased by
$24,000 from $94,000 for the third quarter of 1998 to
$118,000 for the same period in 1999, an increase of 25.5% as
the Bank continues to focus on improving its overall
financial performance.
Total other expenses, including costs associated with the
Company's insurance agency, increased by $1,822,000 or 99.9%
between the three month period ended September 30, 1998 and
the three month period ended September 30, 1999, growing from
$1,824,000 to $3,646,000 respectively. Contributing
significantly to this increase were the costs of the merger
and resulting conversion of Merchants Bank of Pennsylvania
which amounted to $814,000.
Salaries and benefits increased by $810,000 and resulted in
an increase to $1,755,000 from $945,000 between the two
periods. Occupancy expenses, impacted by the opening of the
new Bern Township Office by The First National Bank of
Leesport, increased to $202,000 during the third quarter of
1999 compared with $156,000 during the same period in 1998,
an increase of $46,000 or 29.5%. During the same period in
1998, the Bank opened its Breezy Corner Office in
Ruscumbmanor Township, Berks County, Pennsylvania. The Breezy
Corner Office is a leased facility in comparison to the Bern
Township Office which is owned by the bank.
Income (loss) before income taxes decreased to ($179,000)
from $474,000 between the third quarter of 1998 and the third
quarter of 1999, a decrease of $653,000 or 137.8%, and
resulted in decreased federal income taxes during the period.
Federal income tax expense (benefit) decreased to $74,000
from $117,000 between the quarters ended September 30, 1998
and 1999.
The net loss during the third quarter of 1999 amounted to
($105,000) representing a decrease of $462,000 or 129.4% from
the third quarter of 1998. Basic earnings (loss) per share
decreased to ($0.06) per share for the third quarter of 1999
compared with $0.21 per share for the third quarter of 1998.
Nine-Month Periods Ended September 30, 1999 and 1998
Total interest income for the nine months ended September 30,
1999 increased to $16,708,000 from $13,449,000 for the same
period in 1998, an increase of $3,259,000 or 24.2%.
Contributing significantly to this improvement was the
extraordinary growth in the loan portfolio noted above.
Interest and fees on loans increased by $2,999,000 or 29.1%
growing from $10,307,000 for the nine months ended September
30, 1998 to $13,306,000 for the same period in 1999.
During the nine months ended September 30, 1999,
approximately $4,000,000 of investment securities were sold
and replaced. This transaction was designed to reduce
prepayment risk from the portfolio, as many of the securities
that were sold were callable agency securities and pre-
refunded municipal securities.
Interest expense, including interest on borrowed funds,
increased to $8,911,000 for the first nine months of 1999
from $6,878,000 for the same period in 1998, an increase of
$2,033,000 or 29.6%.
Net interest income, a key component of the Bank's net
income, increased by $1,226,000 or 18.7% for the first nine
months of 1999 compared with the first nine months of 1998,
growing from $6,571,000 to $7,797,000. The Bank's focus on
growing the loan portfolio while controlling interest costs,
resulted in this dramatic improvement.
The accelerated loan growth, however, did not come without a
price. The provision for loan losses for the first nine
months of 1999 was increased by $593,000 or 145.7% from the
first nine months of 1998. Management is funding the
allowance for loan losses at a significantly higher rate than
in 1998 and has already provided $1,000,000 during 1999. In
addition, the Bank continues to focus on loan quality and the
continuing credit review process.
Net interest income after the provision for loan losses
increased by $633,000 or 10.3% growing from $6,164,000 to
$6,797,000 between the nine month periods ended September 30,
1998 and 1999.
Total other income increased dramatically, due to the
addition of commissions on insurance sales generated by the
company's insurance agency subsidiary, Essick & Barr. These
commissions generated $2,516,000 in income during the first
nine months of 1999. Absent this income, total other income
remained stable. Increases in customer service fees and other
income offset a decrease in fees from mortgage banking
activities. The Bank continues to review its position
relative to customer service fees and is keenly aware of the
need to generate additional fee income to supplement its net
interest margin.
Total other expenses increased to $8,945,000 for the first
nine months of 1999 from $5,852,000 for the first nine months
of 1998, an increase of $3,093,000 or 52.9%. For the first
nine months of 1998, salaries and benefits amounted to
$2,883,000 and for the first nine months of 1999, salaries
and benefits amounted to $4,448,000, an increase of
$1,565,000 representing 54.3%. The Essick & Barr Insurance
acquisition in December of 1998 provided much of this
increase as total salaries and benefits from that subsidiary
for the first nine months of 1999 amounted to $1,371,000.
These costs were not reflected in the 1998 data.
Income before taxes increased to $1,352,000 from $1,260,000
between the first nine months of 1998 and 1999, an increase
of $92,000 or 7.3%. The associated increase in federal income
taxes resulted in tax expenses of $318,000 for the first nine
months of 1999 compared with $241,000 for the first nine
months of 1998.
Net income improved by $15,000 or 1.5% between the two
periods growing from $1,019,000 for the first nine months of
1998 to $1,034,000 for the first nine months of 1999. Net
income on a per share basis was $0.59 per share for the nine
months ended September 30, 1999 compared with $0.61 per share
for the nine months ended September 30, 1998. Fully diluted
earnings per share was $0.53 per share for the nine months
ended September 30, 1999 compared to $0.61 per share for the
nine months ended September 30, 1998.
Year 2000
The Company's subsidiaries have completed their
identification and testing processes associated with
preparing for the Year 2000. This testing involved
establishing test accounts and duplicate processing
environments.
Each subsidiary completed its testing independently and for
those systems impacted by consolidation and/or conversion,
separate testing processes were established, and completed.
The various Year 2000 committees which were involved in these
testing processes were charged with assessing the impact of
the Year 2000 problem, identifying affected equipment,
systems, and processes, identifying and resolving any of the
identified problems, and testing the solutions.
During the process, the First National Bank of Leesport
worked very closely with its data processing provider, Bisys,
of Cherry Hill, New Jersey, to identify and resolve potential
problems associated with the date change. Essick & Barr
Insurance also completed its testing during the period.
Merchants Bank of Pennsylvania was converted to the Bisys
system during the weekend of October 22, 23, and 24, 1999,
and is now Year 2000 compliant following that conversion.
Subsidiary systems that were not included in the Bisys
conversion were tested separately by Merchants personnel.
Communications with customers and the general public have
been on-going, and training, planning, and monitoring
responses and inquiries will continue throughout the
remainder of 1999. For the entire year of 1999, the Company
anticipates spending approximately $35,000 in conjunction
with these Year 2000 preparations. An additional investment
of $25,000 in equipment replacement will also be included
throughout 1999.
Trust Preferred
The Company's board of directors approved the issuance of a
trust preferred security as a means of increasing the
Company's available funding, leveraging ability, and capital
ratios. This security, which will be issued in the amount of
$10,000,000 will be accomplished by means of a pooled, blind
trust offering to be coordinated by Saloman, Smith Barney and
is expected to settle in early December. The Company intends
to leverage this amount by approximately $30,000,000 through
the purchase of U.S. Government Agency securities, Mortgage-
backed securities, and State and Municipal securities to
neutralize the cost of the issuance.
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 into 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 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 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
interst 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 coast and return. The Bank does not
use reverse repurchase agreements, interest rate swaps, or
other derivative products in its asset/liability management
practices at this time.
<PAGE>
<TABLE>
The following table shows the repricing periods of interest
earning assets and interest bearing liabilities as of
September 30, 1999:
INTEREST RATE SENSITIVITY
(Amounts in thousands)
<CAPTION> Reprici Period
ng
Within One Over
Year to
One Five Five Total
Year Years Years
<S> <C> <C> <C> <C>
Interest Earning
Assets:
Interest-bearing 522 0 0 522
balances
Federal funds sold 678 0 0 678
Securities 11,305 7,686 49,608 68,599
Net loans 89,029 31,091 127,979 248,099
Total Interest Earning 101,534 38,777 177,587 317,898
Assets
Interest Earning
Liabilities:
Total interest-bearing 142,805 93,429 0 236,234
deposits
Other borrowed funds 17,600 9,500 12,500 39,600
Total Interest Earning 160,405 102,929 12,500 275,834
Liabilities
Rate Sensitivity Gap -58,871 -64,152 165,087 42,064
<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
Regulator Sept 30 Dec 31
y
Minimum 1999 1998
<S> <C> <C> <C>
Tier I Capital to Risk- 4.00% 10.79% 13.52%
Adjusted Assets
Total Capital to Risk- 8.00% 11.97% 14.56%
Adjusted Assets
Leverage Ratio 3.00% 7.67% 9.60%
</TABLE>
<PAGE>
Item 3 - Quantitative and Qualitative Disclosures about
Market Risk
There have been no material changes in the Company's
assessment of its sensitivity to market risk since its
presentation in the 1998 annual report on Form 10-KSB filed
with the SEC.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
5. None
6. None
7. On October 1, 1999, the Registrant acquired Johnson
Financial Group, Inc. ("JFG"), a registered investment
advisor. The Registrant issued a total of 12,742 shares of
its common stock to the four individual shareholders of JFG
in exchange for all of the outstanding capital stock of JFG.
Shares of common stock of the Registrant issued in the
transaction were issued in reliance upon the exemption from
registration contained in Section 4(2) of the Securities Act
of 1933, as amended, and are "restricted securities" within
the meaning of Rule 144 under such Act. On October 1, 1999,
the Registrant also acquired KRJ & Associates, an affiliate
of JFG. No shares of common stock of the Registrant were
issued in connection with the acquisition of KRJ &
Associates.
8. 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 21 , 1999 meeting declared a $0.145
per share
cash dividend to be paid October 15, 1999 to
holders of record
on October 1, 1999.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K.
Add Merchants Form 8-K section..
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: November 15, 1999 By Raymond H.
Melcher, Jr.
President and Chief Executive Officer
Dated: November 15,1999 By 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-2
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 5241
<INT-BEARING-DEPOSITS> 930
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 68599
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 250937
<ALLOWANCE> 2838
<TOTAL-ASSETS> 340906
<DEPOSITS> 265152
<SHORT-TERM> 11000
<LIABILITIES-OTHER> 3655
<LONG-TERM> 16000
<COMMON> 8789
0
0
<OTHER-SE> 17355
<TOTAL-LIABILITIES-AND-EQUITY> 340906
<INTEREST-LOAN> 13306
<INTEREST-INVEST> 3352
<INTEREST-OTHER> 50
<INTEREST-TOTAL> 16708
<INTEREST-DEPOSIT> 7344
<INTEREST-EXPENSE> 8911
<INTEREST-INCOME-NET> 7797
<LOAN-LOSSES> 1000
<SECURITIES-GAINS> 42
<EXPENSE-OTHER> 8945
<INCOME-PRETAX> 1352
<INCOME-PRE-EXTRAORDINARY> 1034
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1034
<EPS-BASIC> 0.59
<EPS-DILUTED> 0.53
<YIELD-ACTUAL> 3.58
<LOANS-NON> 1649
<LOANS-PAST> 1211
<LOANS-TROUBLED> 2376
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2129
<CHARGE-OFFS> 392
<RECOVERIES> 101
<ALLOWANCE-CLOSE> 2838
<ALLOWANCE-DOMESTIC> 1611
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1227
