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 March 31, 2000,
or
( ) Transition report pursuant to Section 13 or 15(d)
of the Exchange Act for the Transition Period
from _________________ to _________________.
No. 0-14555
(Commission File Number)
FIRST LEESPORT BANCORP, INC.
(Exact name of Registrant as specified in its charter)
PENNSYLVANIA 23-2354007
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) 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.
Number of Shares Outstanding
as of May 1, 2000
COMMON STOCK ($5.00 Par Value) 1,849,845
(Title of Class (Outstanding Shares)
First Leesport Bancorp, Inc. (the "Company") may from time
to time make written or oral "forward-looking statements,"
including statements contained in the Company's filings with the
Securities and Exchange Commission (including this Quarterly
Report on Form 10-Q and the exhibits hereto and thereto), in its
reports to stockholders and in other communications by the
Company, which are made in good faith by the Company pursuant to
the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995.
These forward-looking statements include statements with
respect to the Company's beliefs, plans, objectives, goals,
expectations, anticipations, estimates and intentions, that are
subject to significant risks and uncertainties, and are subject
to change based on various factors (some of which are beyond the
Company's control). The words "may," "could," "should,"
"would," "believe," "anticipate," "estimate," "expect,"
"intend," "plan" and similar expressions are intended to
identify forward-looking statements. The following factors,
among others, could cause the Company's financial performance to
differ materially from the plans, objectives, expectations,
estimates and intentions expressed in such forward-looking
statements: the strength of the United States economy in
general and the strength of the local economies in which the
Company conducts operations; the effects of, and changes in,
trade, monetary and fiscal policies and laws, including interest
rate policies of the Board of Governors of the Federal Reserve
System; inflation, interest rate, market and monetary
fluctuations; the timely development of and acceptance of new
products and services of the Company and the perceived overall
value of these products and services by users, including the
features, pricing and quality compared to competitors' products
and services; the willingness of users to substitute
competitors' products and services for the Company's products
and services; the success of the Company in gaining regulatory
approval of its products and services, when required; the impact
of changes in financial services' laws and regulations
(including laws concerning taxes, banking, securities and
insurance); technological changes; acquisitions; changes in
consumer spending and saving habits; and the success of the
Company at managing the risks involved in the foregoing.
The Company cautions that the foregoing list of important
factors is not exclusive. The Company does not undertake to
update any forward-looking statement, whether written or oral,
that may be made from time to time by or on behalf of the
Company.
Part I - FINANCIAL INFORMATION
Item 1 - Financial Statements
FIRST LEESPORT BANCORP, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED, CONDENSED BALANCE SHEETS
(Amounts in thousands)
<TABLE>
<CAPTION>
March 31 Dec 31
ASSETS 2000 1999
<S> <C> <C>
Cash and Due from Banks $8,320 $15,376
Interest-bearing Deposits in Other Banks 568 489
Total Cash and Balances Due from Banks 8,888 15,865
Federal Funds Sold 140 0
Securities Available for Sale 78,793 72,165
Loans, Net of Unearned Income 263,192 253,194
Less: Allowance for Loan Losses (3,090) (2,954)
Net Loans 260,102 250,240
Bank Premises and Equipment 7,808 7,599
Other Real Estate Owned 161 150
Accrued Interest Receivable
and Other Assets 17,007 12,599
TOTAL ASSETS $372,899 $358,618
======== ========
LIABILITIES:
DEPOSITS:
Non-interest Bearing $31,403 $30,941
Interest Bearing 243,327 238,403
TOTAL DEPOSITS 274,730 269,344
Federal Funds Purchased and
Securities Sold Under Agreements
to Repurchase 31,125 28,175
Long-term Debt 32,285 31,000
Mandatory Redeemable Capital Securities
Of Subsidiary Trust 5,000 0
Accrued Interest Payable 1,410 1,675
Other Liabilities 2,383 2,822
TOTAL LIABILITIES 346,933 333,016
Stockholders' Equity
Common Stock, $5.00 Par Value per Share;
Authorized 10,000,000 shares,
Issued 1,858,474 Shares 9,292 9,295
Surplus 4,991 4,988
Retained Earnings 13,877 13,571
Accumulated Other Comprehensive
Income (Loss) (2,076) (2,134)
Treasury Stock; 8,629 Shares at Cost (118) (118)
TOTAL STOCKHOLDERS' EQUITY 25,966 25,602
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $372,899 $358,618
</TABLE>
The accompanying notes are an integral part of these condensed
financial statements.
FIRST LEESPORT BANCORP, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED, CONDENSED STATEMENTS OF INCOME
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31, 2000 March 31, 1999
<S> <C> <C>
INTEREST INCOME
Interest & Fees on Loans $5,128 $4,023
Interest on Securities:
Taxable 940 893
Tax-Exempt 263 219
Interest on Federal Funds Sold 18 10
TOTAL INTEREST INCOME 6,349 5,145
INTEREST EXPENSE
Interest on Deposits 2,764 2,292
Interest on Borrowed Funds 942 456
TOTAL INTEREST EXPENSE 3,706 2,748
NET INTEREST INCOME 2,643 2,397
Provision for Loan Losses 237 247
Net Interest Income after the
Provision for Loan Losses 2,406 2,150
OTHER INCOME
Customer Service Fees 123 109
Mortgage Banking Activities 64 42
Commissions on Insurance Sales 916 825
Other Income 648 148
Realized Gain on Sale of Securities 5 1
TOTAL OTHER INCOME 1,756 1,125
OTHER EXPENSES
Salaries and Benefits 1,813 1,331
Occupancy Expense 229 171
Furniture and Equipment Expense 193 177
Computer Services 255 131
Other Operating Expenses 946 739
TOTAL OTHER EXPENSES 3,436 2,549
Income Before Income Taxes 726 726
Federal Income Taxes 143 168
NET INCOME $583 $558
EARNINGS PER SHARE DATA
Averages Shares Outstanding 1,849,845 1,836,812
Basic Earnings Per Share $0.32 $0.30
Diluted Earnings Per Share 0.32 0.30
Cash Dividends Paid Per Share 0.15 0.124
The accompanying notes are an integral part of these condensed
financial statements.
FIRST LEESPORT BANCORP, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED, STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in thousands)
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
March 31, 2000 March 31, 1999
<S> <C> <C>
Net Income $583 $558
Other Comprehensive Income (Loss),
net of tax:
Unrealized gains (losses) on
Securities arising during the period,
net of tax expense (benefit):
2000 - $20; 1999 - ($261) 38 (484)
Less: Reclassification adjustments
For gains included in net income,
Net of tax expense (benefit): 0 0
2000 - 0; 1999 - 0
Other Comprehensive Income (Loss) 38 (484)
Comprehensive Income $621 $74
The accompanying notes are an integral part of these condensed
financial statements.
FIRST LEESPORT BANCORP, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Amounts in thousands, except per share data)
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
March 31, 2000 March 31, 1999
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $583 $558
Provision for loan losses 237 247
Provision for depreciation and amortization 183 147
Net amortization (accretion) of
securities premiums and discounts (16) (20)
Realized gain on sale of securities (5) (1)
Loans originated for sale (1,854) 0
Proceeds from sales of loans 1,861 0
Increase in accrued interest
receivable and other assets (4,107) (626)
Decrease in accrued interest
payable and other liabilities (1,287) (934)
NET CASH PROVIDED BY OPERATING ACTIVITIES ($4,405) ($629)
CASH FLOWS FROM INVESTING ACTIVITIES:
Available for sale securities:
Proceeds from principal repayments
and maturities of securities $ 787 $ 5,362
Net increase in federal funds sold 140 1,342
Proceeds from sales of securities 599 0
Purchase of securities (8,052) (7,032)
Loans made to customers, net of repayments (9,998) (17,017)
Purchases of bank premises and equipment (392) (549)
NET CASH USED IN INVESTING ACTIVITIES ($16,916) ($17,894)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 5,386 11,347
Net increase (decrease) in federal funds
purchased and repurchase agreements 2,950 1,287
Net repayments of short-term borrowings 0 (4,200)
Proceeds from long-term debt 1,285 13,500
Proceeds from issuance of capital securities 5,000 0
Dividends paid (277) (228)
NET CASH PROVIDED BY FINANCING ACTIVITIES $14,344 $21,706
Increase (decrease) in cash and cash equivalents ($6,977) $3,183
Cash and cash equivalents:
Beginning $15,865 $6,765
Ending $8,888 $9,948
</TABLE>
The accompanying notes are an integral part of these condensed
financial statements.
FIRST LEESPORT BANCORP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000
1. The reviewed financial statements contained herein have been
prepared in accordance with the instructions to Form 10-Q of
Regulation S-X. In the opinion of management such
information reflects all adjustments (including normal
recurring adjustments) necessary for a fair presentation 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, 2000 are not necessarily indicative of the results
to be expected for the full year.
3. For further information, refer to the Consolidated Financial
Statements and Footnotes included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1999.
4. Basic earnings per share represents income available to
shareholders divided by the weighted-average number of
common shares outstanding during the period. Diluted
earnings per share reflects additional common shares that
would have been outstanding if dilutive potential common
shares (stock options) had been issued, as well as any
adjustments to income that would result from the assumed
issuance. The effect of stock options was not dilutive for
all periods presented. The Company paid a 5% stock dividend
on January 15, 2000. All prior period per share data has
been restated to reflect the effect of this stock dividend.
5. On July 1, 1999 the Company completed the acquisition of
Merchants of Shenandoah Ban-Corp, a single-bank holding
company for Merchants Bank of Pennsylvania. This
acquisition was treated as a pooling of interests for
financial accounting purposes. The consolidated financial
statements give retroactive effect to the merger. The
consolidated statement of income and the consolidated
statement of cash flows for the period ended March 31, 1999
are presented as if the combining companies had been
consolidated for that period.
6. On October 1, 1999, the Registrant acquired Johnson
Financial Group, Inc. ("JFG"), a registered investment
advisor. The Registrant issued a total of 13,379 shares of
its common stock (adjusted for the 5% stock dividend
effected in January 2000) 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. This acquisition was
treated as a purchase for financial accounting purposes.
7. In the ordinary course of business, the Company enters into
off-balance sheet financial instruments consisting of
commitments to extend credit, letters of credit and
commitments to sell loans. Such financial instruments are
recorded in the consolidated balance sheets when they become
receivable or payable.
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 Shenandoah Ban-Corp on
July 1, 1999 which was accounted for under the pooling of
interests method of accounting.
Results of Operations
Three months ended March 31, 2000 compared to the three
months ended March 31, 1999.
Net income for the Company for the three months ended
March 31, 2000 was $583,000 an increase of 4.5% over the
$558,000 for the three months ended March 31, 1999. Basic and
diluted earnings per share were $.32 in 2000 compared to $.30
for the first quarter of 1999. Net income excluding
amortization of goodwill was $658,000 for the first quarter of
2000 and $610,000 for the first quarter of 1999.
The improvement in net income for the first quarter of 2000
included a one-time gain of $245,000 from the sale of a Bank-
owned financial services facility. This financial services
facility will be relocated to a nearby site in the near future.
The following are the key ratios for the Company as of
March 31:
Three Months Ended
March 31
2000 1999
Return on average assets .64% .74%
Return on average
stockholders' equity 9.03% 8.40%
Dividend payout ratio 47.55% 41.34%
Average stockholders' equity
to average assets 7.12% 8.86%
Net Interest Income
Net interest income is a primary source of revenue for the
Company. Net interest income results from the difference
between the interest and fees earned on loans and investments
and the interest paid on deposits to customers and other non-
deposit sources of funds, such as repurchase agreements and
short and long-term borrowed funds. Net interest margin is the
difference between the gross (tax-effected) yield on earning
assets and the cost of interest bearing funds as a percentage of
earning assets. All discussion of net interest income is on a
fully taxable equivalent basis.
Net interest income for the Company for the three months
ended March 31, 2000 was $2.812 million, an increase of 11.7%
compared to the first quarter of 1999. The net interest margin
for the three months ended March 31, 2000 was 3.37% compared to
3.62% for the first three months of 1999. Average interest
earning assets for the three months ended March 31, 2000 were
$334.8 million, a $55.7 million or 20.0% increase over the
average earning assets for the first quarter of 1999. The
average yield on earning assets in 2000 was 7.78%, an increase
of 20 basis points compared to the first quarter of 1999.
Average loans outstanding increased by 28.1% or $57.1 million
over the same period of 1999. The category of loans that
increased most substantially compared to the previous year was
commercial loans, which increased by $52.2 million or 76%
compared to the average balance outstanding for the first
quarter of 1999.
The increase in the yield on average earning assets from
the 1999 period to 2000 was offset by the increase in the
average cost of interest-bearing deposits, which increased from
4.46%% in 1999 to 4.61% in 2000, and the increase in the rate
paid on borrowed funds which increased from 5.34% in 1999 to
6.06% in 2000. Average interest bearing liabilities increased
by $62.2 million or 25.8% from the 1999 first quarter to the
2000 first quarter. Average total deposits increased by $38.9
million or 16.7% from the first quarter of 1999, average short-
term borrowings increased by $21.3 million, and average long-
term debt outstanding increased by $6.5 million.
The following are the key net interest margin ratios:
Three Months Ended
March 31
2000 1999
Yield on average earning assets 7.78% 7.58%
Cost of supporting liabilities 4.44% 3.96%
Net interest margin 3.37% 3.62%
Provision and Allowance for Loan Losses
The provision for loan losses for the three months ended
March 31, 2000 was $237,000 compared to $247,000 for the three
months ended March 31, 1999. The Company performs a review of
the credit quality of its loan portfolio on a quarterly basis to
determine the adequacy of the allowance for loan losses. The
allowance is an amount that management believes to be adequate
to provide for losses that can be reasonably anticipated.
Management's periodic evaluation of the adequacy of the
allowance is based on past loss experience, known and inherent
risks in the portfolio, adverse situations that may affect the
borrower's ability to repay, the estimated value of any
underlying collateral, composition of the loan portfolio,
current economic conditions, and other relevant factors. This
evaluation is inherently subjective as it requires material
estimates that may be susceptible to change. At March 31, 2000
there was a total of $140,000 of the allowance that was
unallocated to specific outstanding balances compared to
$344,000 at December 31, 1999.
The following table shows the activity in the Company's
allowance for loan losses:
<TABLE>
<CAPTION>
Three Months Ended
March 31, 2000 March 31, 1999
(Amounts in thousands)
<S> <C> <C>
Loans outstanding at end of period
(net of unearned income) $263,192 $212,757
Average balance of loans outstanding
during the period 260,116 203,045
Balance of allowance for loan losses,
beginning of period 2,954 2,129
Loans charged-off:
Commercial, financial and agricultural 67 134
Real estate - mortgage 38 28
Consumer 24 70
Total loans charged-off 129 232
Recoveries of loans previously charged-off
Commercial, financial and agricultural (2) (21)
Real estate - mortgage (2) ( 1)
Consumer (24) ( 8)
Total recoveries (28) (30)
Net loans charged-off 101 202
Provision for loan losses 237 247
Balance, end of period $ 3,090 $ 2,174
Net charge-offs to average loans .04% .10%
Allowance for loan losses to loans outstanding 1.17% 1.02%
</TABLE>
The following table summarizes the Company's non-performing
assets:
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
(Amounts in thousands)
<S> <C> <C>
Non-accrual loans
Real estate - mortgage $ 760 $ 797
Consumer 22 0
Commercial, financial and agricultural 1,060 1,192
Total 1,842 1,989
Loans past due 90 days or more and still accruing interest
Real estate - mortgage 136 363
Consumer 46 86
Commercial, financial and agricultural 1,206 226
Total 1,388 675
Troubled debt restructurings 1,064 1,084
Total non-performing loans 4,294 3,748
Other real estate owned 161 150
Total non-performing assets $4,455 $3,898
Non-performing loans to total loans 1.63% 1.48%
Non-performing assets to total loans plus OREO 1.69% 1.54%
</TABLE>
Other Income
Other income for the three months ended March 31, 2000
totaled $1.756 million, an increase of $631,000 compared to the
three-month period ended March 31, 1999. Included in the
results for the 2000 period is a one-time gain on sale of Bank-
owned real estate. A gain of $245,000 was recognized upon sale
of a Bank financial services facility whose operations will be
relocated to a nearby site.
The Company also recognized approximately $225,000 of
commission and fee income from its broker and investment
advisory subsidiary, a revenue source that was not included in
the Company's results for the same period of last year. The
fees and commissions from the Company's insurance operations
increased by $91,000 or 11% to $916,000 in the first quarter of
2000.
Other Expense
Other expense for the three months ended March 31, 2000 was
$3.44 million compared to $2.54 million for the three months
ended March 31, 1999. Salary and benefits expense for the first
quarter of 2000 increased from $1.33 million in the first
quarter of 1999 to $1.81 million in 2000. This increase from
the 1999 period resulted from the addition of 29 full-time
equivalent employees or a 21% increase in staff since March 31,
1999, and a 4% overall merit increase applied to base salaries
during the past twelve months. The addition of the investment
subsidiary caused an addition of 7 full-time equivalent
employees and a $129,000 addition to salary and benefits
expense. The remaining additions to staff have been made to
establish the infrastructure to effectively manage the Company
going forward.
Occupancy and equipment expense for the first quarter of
2000 was $422,000, a $74,000 or 21% increase over the first
three months of 1999. This increase was attributable primarily
to the addition of two new financial service centers opened
during 1999. Expenses related to the holding of other real
estate owned totaled $108,000 for 2000 compared to $71,600 for
the first quarter of 1999. The 2000 expense includes write-
downs of two specific properties totaling approximately $70,000.
Increases in computer services and marketing expenses, and
the additional goodwill amortization resulting from the
acquisition of the Company's investment subsidiary in
October 1999 also contributed to the increase in other expense
during the first quarter of 2000. Goodwill amortization of
$75,000 was recorded in 2000 compared to $52,000 in the first
quarter of 1999.
Federal Income Taxes
The effective federal income tax rate for the Company for
the three months ended March 31, 2000 was 19.7% compared to
23.1% for the first quarter of 1999. The effective tax rate for
2000 was lower than the rate for the first quarter of 1999 as a
result of an increased amount of non-taxable interest income and
an increase in tax-advantaged income from increases in the cash
surrender values and insurance proceeds from bank-owned life
insurance assets.
Financial Condition
The total assets of the Company at March 31, 2000 were $373
million, an increase of approximately $14 million since
December 31, 1999, and an annualized rate of growth of 16% for
the first quarter of 2000. Total loans also increased at an
annual growth rate of 16% during the quarter, growing by
approximately $10 million since December 31, 1999. A
significant portion of the growth in loans occurred in the
commercial loan portion of the portfolio. The increase in loan
balances was funded by an increase of $5.4 million in deposits
since December 31, 1999, an 8% annual growth rate, and an
increase of approximately $5 million in overnight funds
purchased. An additional $7 million of funds were made
available as the result of the reduction of cash balances that
were maintained at December 31, 1999 for the purpose of
supporting potential cash demands of the Y2K event. In
retrospect, very little additional cash was required for Y2K-
related withdrawals and the Company returned excess balances to
the Federal Reserve Bank in early January 2000.
Capital Resources
Federal bank regulatory agencies have established certain
capital-related criteria that must be met by banks and bank
holding companies. The measurements that incorporate the
varying degrees of risk contained in the Banks' balance sheets
and exposure to off-balance sheet commitments were established
to provide a framework for comparing different institutions.
The Company is not aware of any pending recommendations by
regulatory authorities that would have a material impact on the
Company's capital, resources, or liquidity if they were
implemented, nor is the Company under any agreements with any
regulatory authorities.
The adequacy of the Company's capital is reviewed on an
ongoing basis with regard to size, composition and quality of
the Company's resources. An adequate capital base is important
for continued growth and expansion in addition to providing an
added protection against unexpected losses.
On March 23, 2000, the Company established First Leesport
Capital Trust I, in which the Company owns all of the common
equity. The Trust issued $5 million of mandatory redeemable
capital securities. These debentures are the sole asset of the
Trust. These securities must be redeemed in March 2030 and may
be redeemed earlier in the event that the interest expense
becomes non-deductible for federal income tax purposes or if the
treatment of these securities is no longer qualified as Tier I
capital for the Company. The securities carry an interest rate
of 10.875%.
An important indicator in the banking industry is the
leverage ratio, defined as the ratio of Tier I capital less
intangible assets, to average quarterly assets less intangible
assets. The leverage ratio at March 31, 2000 was 7.97% compared
to 6.61% at December 31, 1999. The increase in this ratio
resulted primarily from the issuance of $5 million of mandatory
redeemable capital securities and, to a much lesser extent, from
normally retained earnings. The mandatory redeemable securities
are included for regulatory purposes as Tier I capital with
certain limiting restrictions. At March 31, 2000 the entire
amount of these securities was allowable to be included as
Tier I capital for the Company. For both periods, the capital
ratios were above minimum regulatory guidelines.
As required by federal banking regulatory authorities,
guidelines have been adopted to measure capital adequacy. Under
the guidelines, certain minimum ratios are required for core
capital and total capital as a percentage of risk-weighted
assets and other off-balance sheet instruments. For the
Company, Tier 1 capital consists of common stockholders' equity
plus mandatory redeemable capital securities less intangible
assets, and Tier II capital includes Tier I capital plus the
allowable portion of the allowance for loan losses, currently
limited to 1.25% of risk-weighted assets. By regulatory
guidelines, the separate component of equity for unrealized
appreciation or depreciation on available for sale securities is
excluded from Tier I and Tier II capital.
The following table sets forth the Company's capital
ratios:
The Company's and the Banks' actual capital amounts and
ratios are presented below.
<TABLE>
<CAPTION>
To Be Well
For Capital Capitalized Under
Adequacy Prompt Corrective
Actual Purposes Action Provisions
Amount Ratio Amount Ratio Amount Ratio
(Amounts In Thousands)
<S> <C> <C> <C> <C> <C> <C>
As of March 31, 2000:
Total capital (to risk-weighted assets):
First Leesport Bancorp $31,928 12.96% $?20,100 ?8.00% $?25,120 ?10.00%
The First National Bank of Leesport 25,203 11.68 ?17,639 ?8.00 ?22,050 ?10.00
Merchants Bank of Pennsylvania 4,809 12.83 ? 2,999 ?8.00 ? 3,748 ?10.00
Tier I capital (to risk-weighted assets):
First Leesport Bancorp 28,838 11.70 ?10,048 ?4.00 ?15,072 ? 6.00
The First National Bank of Leesport 22,484 10.42 ? 8,817 ?4.00 ?13,226 ? 6.00
Merchants Bank of Pennsylvania 4,438 11.84 ? 1,499 ?4.00 ? 2,249 ? 6.00
Tier I capital (to average assets):
First Leesport Bancorp 28,838 7.97 ?14,657 ?4.00 ?18,321 ? 5.00
The First National Bank of Leesport 22,484 7.60 ?11,560 ?4.00 ?14,450 ? 5.00
Merchants Bank of Pennsylvania 4,438 7.00 ? 2,536 ?4.00 ? 3,170 ? 5.00
As of December 31, 1999:
Total capital (to risk-weighted assets):
First Leesport Bancorp $25,972 10.93% $?19,006 ?8.00% $?23,757 ?10.00%
The First National Bank of Leesport 20,719 10.25 ?16,453 ?8.00 ?20,566 ?10.00
Merchants Bank of Pennsylvania 4,317 11.56 ? 2,979 ?8.00 ? 3,724 ?10.00
Tier I capital (to risk-weighted assets):
First Leesport Bancorp 23,018 9.69 ? 9,503 ?4.00 ?14,254 ? 6.00
The First National Bank of Leesport 18,148 9.00 ? 8,226 ?4.00 ?12,340 ? 6.00
Merchants Bank of Pennsylvania 3,957 10.61 ? 1,490 ?4.00 ? 2,234 ? 6.00
Tier I capital (to average assets):
First Leesport Bancorp 23,018 6.61 ?13,933 ?4.00 ?17,417 ? 5.00
The First National Bank of Leesport 18,148 6.37 ?11,387 ?4.00 ?14,234 ? 5.00
Merchants Bank of Pennsylvania 3,957 6.42 ? 2,464 ?4.00 ? 3,080 ? 5.00
</TABLE>
Liquidity and Interest Rate Sensitivity
The banking industry has been required to adapt to an
environment in which interest rates may be volatile and in which
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 deposit generation, overnight federal
funds transactions with other financial institutions, investment
securities portfolio maturities and cash flows, and maturing
loans and loan payments. The Bank can also package and sell
residential mortgage loans into the secondary market. Other
sources of liquidity are term borrowings from the Federal Home
Loan Bank, and the discount window of the Federal Reserve Bank.
In view of all factors involved, the Bank's management believes
that liquidity is being maintained at an adequate level.
At March 31, 2000, the Company had a total of $63.4 million
or 17% of total assets in borrowed funds. These borrowings
included $22.2 million of overnight federal funds purchased,
$8.9 million of repurchase agreements with customers, and $32.3
million of term borrowing with the Federal Home Loan Bank having
final maturities ranging from October 2000 through December 2009
at interest rates from 4.72% to 9.00%. At March 31, 2000 the
Company had a maximum borrowing capacity with the Federal Home
Loan Bank of approximately $100 million.
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. With the exception of the
majority of residential mortgage loans, loans generally are
written having terms that 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 reverse
repurchase agreements, interest rate swaps, or other derivative
products in its asset/liability management practices at this
time.
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 1999 annual report on Form 10-K filed with
the SEC.
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 - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K - None
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 12, 2000 By /s/Raymond H. Melcher, Jr.
Raymond H. Melcher, Jr.
Chairman, President and Chief
Executive Officer
Dated: May 12, 2000 By /s/ Kurt A. Phillips
Kurt A. Phillips
Treasurer and Chief Accounting
Officer
20
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-2000
<CASH> 8320
<INT-BEARING-DEPOSITS> 568
<FED-FUNDS-SOLD> 140
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 78,917
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<LOANS> 263,192
<ALLOWANCE> 3,090
<TOTAL-ASSETS> 372,811
<DEPOSITS> 274,730
<SHORT-TERM> 31,125
<LIABILITIES-OTHER> 3,864
<LONG-TERM> 32,285
5,000
0
<COMMON> 9,295
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<NET-INCOME> 583
<EPS-BASIC> 0.32
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<LOANS-PAST> 1,388
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