UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
HOME FEDERAL CORPORATION
(Exact name of Registrant as specified in its charter)
Maryland 0-16463 52-1636831
State of Incorporation Commission I.R.S. Employer
File Number I.D. Number
122-128 West Washington Street, Hagerstown, Maryland 21740
(Address of Principal Executive Office)
Registrant's telephone number: (301) 733-6300
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO [ ]
Number of Shares of Common Stock Outstanding
as of April 30, 1996: 2,519,010 Shares
<PAGE>
HOME FEDERAL CORPORATION AND SUBSIDIARIES
INDEX
PAGE
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements
Report on Review by Independent Certified Public
Accountants. . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Financial Condition as of
March 31, 1996 (Unaudited) and December 31, 1995 . . . . . . 4
Consolidated Statements of Changes in Stockholders'
Equity for the Three Months Ended March 31, 1996
(Unaudited) and the Year Ended December 31, 1995 . . . . . . 5
Consolidated Statements of Operation for the Three
Months Ended March 31, 1996 and 1995 (Unaudited) . . . . . . 6
Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 1996 and 1995 (Unaudited) . . . . . . 8
Notes to Consolidated Financial Statements (Unaudited) . . . .10
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations for the Three
Months Ended March 31, 1996 . . . . . . . . . . . . . . . . .15
PART II: OTHER INFORMATION
Item 1: Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . .21
Item 2: Changes in Securities. . . . . . . . . . . . . . . . . . . . .21
Item 3: Defaults Upon Senior Securities. . . . . . . . . . . . . . . .21
Item 4: Submission of Matters to a Vote of Security Holders. . . . . .21
Item 5: Other Information. . . . . . . . . . . . . . . . . . . . . . .21
Item 6: Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . .21
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . .21
<PAGE>
INDEPENDENT ACCOUNTANT'S REPORT
The Board of Directors
Home Federal Corporation
We have reviewed the accompanying consolidated statement of financial
condition of Home Federal Corporation and Subsidiaries (Corporation) as of
March 31, 1996 and the related consolidated statement of changes in
stockholders' equity for the three months ended March 31, 1996 and the
consolidated statements of operation for the three months ended March 31, 1996
and 1995 and consolidated statements of cash flows for the three months ended
March 31, 1996 and 1995. These financial statements are the responsibility of
the Corporation's management.
We conducted our reviews in accordance with standards established by
the American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the consolidated
financial statements taken as a whole. Accordingly, we do not express such
an opinion.
Based on our reviews, we are not aware of any material modifications
that should be made to the accompanying consolidated financial statements for
them to be in conformity with generally accepted accounting principles.
/s/ Smith Elliott Kearns & Company
SMITH ELLIOTT KEARNS & COMPANY
Hagerstown, Maryland
May 2, 1996
<PAGE>
<TABLE>
HOME FEDERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
March 31, December 31,
1996 1995
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash $ 6,019,585 $ 5,083,293
Short-term interest-bearing deposits 4,138,640 7,343,565
Federal funds sold 29,701 28,449
Investment securities (approximate market
value of $1,000,729 in 1996) 1,000,729 --
Mortgage-backed securities available for sale
(at approximate market value) 7,523,157 17,373,035
Mortgage-backed securities (approximate market
value of $42,331,449 in 1996, and $29,979,853
in 1995) 42,827,308 29,748,031
Loans receivable, net 138,318,892 137,262,694
Real estate owned held for sale, net 5,316,474 7,075,233
Federal Home Loan Bank of Atlanta stock 1,450,000 1,500,000
Office properties and equipment, net 4,156,462 4,107,500
Prepaid expenses and other assets 4,229,905 3,382,948
Deferred tax assets, net 1,673,000 1,710,000
------------ ------------
TOTAL ASSETS $216,683,853 $214,614,748
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Savings accounts $167,989,191 $163,663,302
Advances from the Federal Home Loan Bank
of Atlanta 27,131,569 30,156,927
Advances by borrowers for taxes and insurance 855,650 581,437
Other liabilities 2,034,617 1,831,180
------------ ------------
TOTAL LIABILITIES $198,011,027 $196,232,846
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock, $.10 par value, authorized
5,000,000 shares (None issued) $ - $ -
Common stock, $1.00 par value, authorized
10,000,000 shares, issued and outstanding
2,519,010 shares in 1996 and 1995 2,519,010 2,519,010
Additional paid-in capital 7,903,106 7,903,106
Unrealized loss on mortgage-backed securities
available for sale, net (168,618) (175,378)
Retained income-substantially restricted 8,419,328 8,135,164
------------ ------------
TOTAL STOCKHOLDERS' EQUITY $ 18,672,826 $ 18,381,902
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $216,683,853 $214,614,748
============ ============
<FN>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
</TABLE>
<TABLE>
HOME FEDERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<CAPTION>
Unrealized Retained
Gain(Loss)on Income- Total
Additional Securities Substant- Stock-
Common Paid-in Available ially holders
Stock Capital for Sale,net Restricted Equity
---------- ---------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
Balance,
December 31,
1994 $2,519,010 $7,903,106 $(1,531,298) $5,808,807 $14,699,625
Unrealized
gain on
mortgaged-
backed
securities
available
for sale, net 1,355,920 1,355,920
Dividends paid
and declared (201,521) (201,521)
Net Income,
1995 2,527,878 2,527,878
---------- ---------- --------- ---------- -----------
Balance December
31, 1995 $2,519,010 $ 7,903,106 $(175,378) $ 8,135,164 $ 18,381,902
Unrealized gain
on mortgaged-
backed
securities 6,760 6,760
Dividends paid
and declared (100,760) (100,760)
Net Income,
1996 384,924 384,924
---------- ---------- --------- ---------- -----------
Balance, March
31, 1996
(Unaudited) $2,519,010 $7,903,106 $(168,618) $8,419,328 $18,672,826
========== ========== ========= ========== ===========
<FN>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
</TABLE>
<TABLE>
HOME FEDERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATION (UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
-----------------------
1996 1995
---- ----
<S> <C> <C>
INTEREST INCOME
Interest on loans receivable $3,171,023 $3,075,515
Interest on mortgage-backed securities 735,199 610,064
Interest or dividends on investment securities 27,708 123,838
Other interest income 118,954 48,449
----------- -----------
Total Interest Income $4,052,884 $3,857,866
----------- -----------
INTEREST EXPENSE
Interest on savings $1,724,369 $1,477,126
Interest on advances from the Federal Home
Loan Bank of Atlanta 462,467 575,352
----------- -----------
Total Interest Expense $2,186,836 $2,052,478
----------- -----------
NET INTEREST INCOME $1,866,048 $1,805,388
PROVISION FOR POSSIBLE LOAN LOSSES -- --
----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR
POSSIBLE LOAN LOSSES $1,866,048 $1,805,388
----------- -----------
OTHER INCOME
Loan fees $ 110,822 $ 96,282
Gains on sales of mortgage loans 64,076 4,077
Other 491,033 320,171
----------- -----------
Total Other Income $ 665,931 $ 420,530
----------- -----------
OTHER EXPENSES
Employee compensation and benefits $ 919,564 $ 821,540
Occupancy and equipment 411,587 393,343
Advertising and promotion 66,350 60,300
Provision for losses on real estate owned
held for sale -- 130,000
Federal insurance premiums 104,243 107,828
Other 372,311 335,680
----------- -----------
Total Other Expenses $1,874,055 $1,848,691
----------- -----------
INCOME BEFORE INCOME TAXES $ 657,924 $ 377,227
PROVISION FOR (BENEFIT FROM) INCOME TAXES 273,000 (3,800)
----------- -----------
NET INCOME $ 384,924 $ 381,027
=========== ===========
EARNINGS PER SHARE $ 0.15 0.15
=========== ===========
DIVIDENDS PER SHARE $ 0.04 $ 0.00
=========== ===========
<FN>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
</TABLE>
<TABLE>
HOME FEDERAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
<CAPTION>
Three Months Ended
March 31,
---------------------------
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 384,924 $ 381,027
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 167,836 156,920
Provision for losses on real estate
owned held for sale -- 130,000
Amortization of intangible assets 29,585 29,585
(Increase) in prepaids and other assets (368,513) (488,914)
Deferred tax provision 33,500 (154,000)
Origination of loans receivable originated
for sale (664,300) --
Proceeds from sale of loans receivable
originated for sale 1,174,947 40,000
Increase (decrease) in other liabilities 203,437 (1,397)
Increase in deferred fee income and unearned
discounts on loans receivable 535 96,201
Gains on sales of mortgage loans (64,076) (4,077)
Other, net 52,444 119,860
------------ ------------
Net cash provided by operating activities $ 950,319 $ 305,205
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from redemption of Federal Home
Loan Bank stock $ 50,000 $ 300,000
Purchase of Federal Home Loan Bank stock -- (100,000)
Purchase of investment securities (1,000,000) --
Net (increase) in loans receivable (1,542,636) (3,441,274)
Principal collections from mortgage-backed
securities available for sale 1,713,978 927,667
Purchase of mortgage-backed securities
held to maturity (14,035,915) --
Principal collections from mortgage-backed
securities held to maturity 1,015,950 370,910
Proceeds from sale of mortgage-backed
securities held for sale 8,009,069 --
Proceeds from sale of real estate owned held
for sale 1,494,060 401,908
Net (increase) in real estate owned held
for sale (206,751) (281,861)
Purchase of office property and equipment (214,797) (182,178)
------------ ------------
Net cash (used in) investing activities $ (4,717,042) $(2,004,828)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in savings accounts $ 4,325,889 $ 6,147,155
Payments at maturity of other FHLB advances (6,000,000) (25,000,000)
Proceeds from other FHLB advances 3,000,000 20,000,000
Net increase in advances for taxes and
insurance 274,213 311,219
Payment of dividends (100,760) --
------------ ------------
Net cash provided by financing activities $ 1,499,342 $ 1,458,374
------------ ------------
Net (decrease) in cash and cash equivalents $ (2,267,381) $ (241,249)
Beginning cash and cash equivalents 12,455,307 7,953,244
------------ ------------
Ending cash and cash equivalents $ 10,187,926 $ 7,711,995
============ ============
Supplemental disclosures of cash flow information:
Cash paid during the period:
Interest $ 2,221,109 $ 2,062,662
Income taxes $ 141,240 $ 17,150
Net proceeds due from sale of properties
securing impaired loans $ 508,782 $ --
Loans originated on sale of real estate
owned held for sale $ 469,450 $ 550,000
Net transfer to real estate owned held for
sale from loans receivable $ -- $ 1,943,643
Unrealized (gain) on mortgage-backed
securities available for sale, net $ (6,760) $ (633,686)
<FN>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
</TABLE>
<PAGE>
HOME FEDERAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - Basis of Presentation
In the opinion of Home Federal Corporation (Home Federal or the
Corporation), the accompanying unaudited consolidated financial statements
contain all adjustments (consisting of only normal recurring accruals)
necessary for a fair presentation of Home Federal's financial condition as of
March 31, 1996 and the results of operations for the three months ended March
31, 1996 and 1995 and cash flows for the three months ended March 31, 1996 and
1995.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions for Form 10-QSB. These financial
statements should be read in conjunction with the consolidated financial
statements and the notes included in Home Federal's Annual Report for the
year ended December 31, 1995.
In October 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation" establishing financial accounting and reporting
standards for stock-based employee compensation plans. This statement encourages
all entities to adopt a new method of accounting to measure compensation cost of
all employee stock compensation plans based on the fair value method. However,
it also allows an entity to continue to measure compensation cost for those
plans using the intrinsic value based method of accounting prescribed by the
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees." Home Federal elected to continue to measure compensation cost
using APB No. 25, therefore, SFAS No. 123 will only require certain disclosures
in Home Federal's consolidated financial statements.
In May 1995, the FASB issued SFAS No. 122, "Accounting for Mortgage
Servicing Rights," which eliminates the accounting distinction between rights to
service mortgage loans for others that are acquired through loan origination
activities and those acquired through purchase transactions. Accordingly, Home
Federal will recognize as assets all rights to service loans for others for
loans originated after January 1, 1996 and will amortize these assets in
proportion to and over the period of estimated net servicing income. These
capitalized servicing rights must also be evaluated for impairment based on the
fair value of those rights. Home Federal adopted SFAS No. 122 as of January 1,
1996. The amount of capitalized originated mortgage servicing rights was
immaterial at March 31, 1996.
NOTE B - Proposed Merger
On April 2, 1996, Home Federal entered into a Plan and Agreement to Merge
("Acquisition Agreement") with F&M Bancorp, Frederick, Maryland, a Maryland
corporation and bank holding company ("F&M"), which provides for the acquisition
of Home Federal by F&M.
Under the terms of the Acquisition Agreement, Home Federal will merge with
and into F&M (the "Merger"), with F&M to be the surviving corporation. Pursuant
to the Acquisition Agreement, upon the effective date of the Merger ("Effective
Date"), each outstanding share of common stock of Home Federal, par value $1.00
per share ("Home Federal Stock"), will be converted into the right to receive
shares of common stock, par value $5.00 per share, of F&M ("F&M Stock"), in an
amount equal to 165% of Home Federal's book value (calculated as specified in
the Acquisition Agreement) as determined as of the end of the month immediately
prior to the Effective Date (the "Calculation Date"). The number of shares of
F&M Stock to be received will be based on the arithmetic average of F&M Stock
closing prices reported for the twenty (20) consecutive days preceding the
Calculation Date (the "Average Market Value"), subject to certain adjustments.
If the Average Market Value of F&M Stock is greater than 1.9 times the book
value per share of F&M as of the Calculation Date, the number of shares of F&M
Stock to be received by Home Federal stockholders shall be based on a F&M Stock
price equal to 1.9 times the book value per share of F&M as of such Calculation
Date.
In connection with the execution of the Acquisition Agreement, Home Federal
entered into a Stock Option Agreement with F&M pursuant to which it granted F&M
an option to acquire, upon the occurrence of certain events defined in the Stock
Option Agreement ("Purchase Events"), up to an aggregate of 501,282 authorized
but unissued shares of Home Federal Stock (the "Option") (or 19.9% of the shares
outstanding) at a price of $8.25 per share. The provisions of the Stock Option
Agreement concerning the Option will terminate upon consummation of the Merger
or upon termination of the Acquisition Agreement; however, if such termination
occurs as a result of a willful breach by Home Federal of the Acquisition
Agreement or failure of Home Federal's stockholders to approve the Acquisition
Agreement, then the Option shall terminate 12 months after termination of the
Acquisition Agreement. The Option is intended to increase the likelihood that
the Merger will be consummated by making it more difficult and expensive for a
third party to acquire control of Home Federal.
The consummation of the transaction is subject to, among other things,
receipt of regulatory approval and the receipt of the requisite vote of
stockholders of each of Home Federal and F&M approving the Acquisition
Agreement. In addition, the Acquisition Agreement may be terminated by either
party in the event the Average Market Value of F&M Stock calculated as of the
Calculation Date is less than 1.6 times the book value of F&M Stock as of such
date; provided that if F&M elects and Home Federal agrees, the parties could
agree to proceed with the transactions contemplated by the Acquisition Agreement
using an Average Market Value of F&M Stock equal to 1.6 times its book value per
share as of such date.
NOTE C - Investment Securities
Investment securities are summarized as follows:
<TABLE>
<CAPTION>
March 31, 1996
Gross Gross
Amortized Unrealized Market
Cost Losses Value
--------- ---------- ------
<S> <C> <C> <C>
Federal Home Loan Bank (FHLB) bond $1,000,000 $ -- $1,000,000
Accrued interest receivable 729 -- 729
---------- ---------- ----------
Total Investment Securities $1,000,729 $ -- $1,000,729
========== ========== ==========
</TABLE>
During 1996, the Savings Bank purchased investment securities in the amount
of $1,000,000.
NOTE D - Mortgage-Backed Securities
A summary of mortgage-backed securities available for sale is as follows:
<TABLE>
<CAPTION>
March 31, 1996
----------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ------
<S> <C> <C> <C> <C>
Federal Home Loan
Mortgage Corporation
(FHLMC) $ 4,366,707 $ 38,003 $ 25,406 $ 4,379,304
Government National
Mortgage Associaiton
(GNMA) 3,121,500 11,768 86,602 3,046,666
----------- -------- -------- -----------
$ 7,488,207 $ 49,771 $112,008 $ 7,425,970
Accrued Interest
Receivable 97,187 -- -- 97,187
----------- -------- -------- -----------
Total Mortgage-Backed
Securities Available
for Sale $ 7,585,394 $ 49,771 $112,008 $ 7,523,157
=========== ======== ======== ===========
<CAPTION>
December 31, 1995
----------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ------
<S> <C> <C> <C> <C>
FHLMC $14,029,515 $ 85,836 $117,087 $13,998,264
GNMA 3,247,299 16,049 38,433 3,224,915
----------- -------- -------- -----------
$17,276,814 $101,885 $155,520 $17,223,179
Accrued Interest
Receivable 149,856 -- -- 149,856
----------- -------- -------- -----------
Total Mortgage-Backed
Securities Available
for Sale $17,426,670 $101,885 $155,520 $17,373,035
=========== ======== ======== ===========
</TABLE>
Mortgage-backed securities held-to-maturity are summarized as follows:
<TABLE>
<CAPTION>
March 31, 1996
----------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ------
<S> <C> <C> <C> <C>
GNMA $ 9,745,510 $ -- $179,702 $ 9,565,808
Federal National Mortgage
Association (FNMA) 18,869,365 51,470 191,244 18,729,591
Collaterialized Mortgage
Obligations 13,966,308 -- 176,383 13,789,925
----------- -------- -------- -----------
$42,581,183 $ 51,470 $547,329 $42,085,324
Accrued Interest
Receivable 246,125 -- -- 246,125
----------- -------- -------- -----------
Total Mortgage-Backed
Securities Held-to-
Maturity $42,827,308 $ 51,470 $547,329 $42,331,449
=========== ======== ======== ===========
<CAPTION>
December 31, 1995
---------------------------------------
Gross
Amortized Unrealized Market
Cost Gains Value
--------- ---------- ------
<S> <C> <C> <C>
GNMA $ 9,946,527 $ 66,219 $10,012,746
FNMA 19,630,214 165,603 19,795,817
----------- -------- -----------
$29,576,741 $231,822 $29,808,563
Accrued interest receivable 171,290 -- 171,290
----------- -------- -----------
Total Mortgage-Backed
Securities Held-to-Maturity $29,748,031 $231,822 $29,979,853
=========== ======== ===========
</TABLE>
The March 31, 1996 and December 31, 1995 mortgage-backed securities held to
maturity amortized cost includes $212,475 and $232,090, respectively, in gross
unrealized losses resulting from the reclassification to held-to-maturity.
GNMA, FHLMC, and FNMA mortgage-backed securities in the amortized cost
amount of $20,883,769 and $22,061,250 were pledged as collateral for Federal
Home Loan Bank advances at March 31, 1996 and December 31, 1995, respectively.
During 1996 the Savings Bank purchased mortgage-backed securities in the
amount of $14,035,915. Proceeds from the sale of mortgage-backed securities
during 1996 amounted to $8,009,069. Net losses of $30,369 were realized on sales
of such securities in 1996.
NOTE E - Loans Receivable
<TABLE>
Loans receivable are summarized as follows:
<CAPTION>
March 31, December 31,
1996 1995
------------- ------------
<S> <C> <C>
Real Estate Loans:
Residential $ 86,496,047 $ 85,483,281
Commercial 17,635,875 16,920,576
Construction 18,552,296 21,501,651
------------ ------------
$122,684,218 $123,905,508
Less:
Loans in process (6,334,098) (7,740,530)
Allowances for possible loan losses (3,180,795) (3,132,147)
Deferred fee income and
unearned discounts (519,476) (562,661)
Unrealized loss on loans held for sale (13,000) --
------------ ------------
Total Real Estate Loans $112,636,849 $112,470,170
------------ ------------
Consumer Loans $ 23,488,870 $ 23,052,450
Less:
Allowances for possible loan losses (491,918) (500,157)
Unearned discounts (72,580) (28,860)
------------ ------------
Total Consumer Loans $ 22,924,372 $ 22,523,433
------------ ------------
Commercial Business Loans $ 1,862,898 $ 1,429,015
------------ ------------
Accrued Interest Receivable $ 894,773 $ 840,076
------------ ------------
Total Loans Receivable, net $138,318,892 $137,262,694
============ ============
</TABLE>
Non-Performing loans consist of nonaccrual and impaired loans and loans
which are 90 days or more delinquent. Loans are placed on nonaccrual status or
are considered impaired when, in the judgement of management, the probability
of collection of principal or interest is deemed to be insufficient to warrant
further accrual. A summary of nonaccrual and impaired loans as of March 31, 1996
and 1995 and December 31, 1995 is as follows:
<TABLE>
<CAPTION>
March 31,
------------------- December 31,
1996 1995 1995
---- ---- ------------
<S> <C> <C> <C>
Non-Performing Loans:
Non-Accrual Loans:
Real Estate Loans:
Residential $ 643,033 $ 551,951 $ 601,902
Commercial 37,562 37,946 37,732
Consumer Loans 151,516 84,900 145,948
----------- ----------- ----------
Total Non-Accrual
Loans $ 832,111 $ 674,797 $ 785,582
----------- ----------- ----------
Impaired Loans:
Real Estate Loans:
Residential $ 128,107 $ 2,964,185 $ 561,571
Commercial 306,254 3,192,452 731,330
Construction 3,713,104 9,656,304 3,712,557
Consumer Loan -- 127,300 --
----------- ----------- ----------
Total Impaired Loans $ 4,147,465 $15,940,241 $5,005,458
----------- ----------- ----------
Total Non-Performing
Loans $ 4,979,576 $16,615,038 $5,791,040
=========== =========== ==========
<CAPTION>
An analysis of the allowances for possible loan losses follows:
Real Estate Loans
-------------------------------------------
Three Months Ended March 31, Year Ended
---------------------------- December 31,
1996 1995 1995
---------- ---------- ------------
<S> <C> <C> <C>
Beginning Balance $3,132,147 $4,879,682 $4,879,682
Additional provision -- -- (349,000)
Recoveries 57,068 -- 407,500
Reallocation of reserves
from consumer and
commercial loan losses -- -- 244,000
Charge-offs:
Construction -- (121,000) (160,000)
Commercial -- (79,000) (808,331)
Single-family (8,420) (102,443) (528,704)
Multi-family -- (100,000) (100,000)
Land -- -- (453,000)
---------- ---------- ----------
Ending Balance $3,180,795 $4,477,239 $3,132,147
========== ========== ==========
<CAPTION>
Consumer and Commercial Loans
-------------------------------------------
Three Months Ended Match 31, Year Ended
---------------------------- December 31,
1996 1995 1995
-------- -------- ------------
<S> <C> <C> <C>
Beginning Balance $500,157 $761,521 $761,521
Additional provision -- -- --
Reallocation of reserves
to real estate loans -- -- (244,000)
Recoveries 18,091 31,414 103,516
Charge-offs (26,330) (38,904) (120,880)
-------- -------- --------
Ending Balance $491,918 $754,031 $500,157
======== ======== ========
</TABLE>
NOTE F - Real Estate Owned Held for Sale
<TABLE>
Real estate owned held for sale is summarized as follows:
<CAPTION>
March 31,
------------------ December 31,
1996 1995 1995
---- ---- ----
<S> <C> <C> <C>
Real estate owned acquired
by foreclosure $1,395,188 $2,693,785 $2,535,651
Real estate owned acquired by
deed in lieu of foreclosure 3,736,600 7,175,314 4,715,104
Real estate owned in substance 1,440,490 -- 1,440,490
----------- ----------- ----------
$6,572,278 $9,869,099 $8,691,245
Less:
Allowance for losses 1,255,804 2,087,945 1,492,012
Accumulated depreciation -- 201,000 124,000
----------- ----------- ----------
Total Real Estate Owned
held for sale, net $5,316,474 $7,580,154 $7,075,233
=========== =========== ==========
<CAPTION>
An analysis of the allowance for losses on real estate owned held for
sale follows:
Three Months Ended March 31, Year Ended
---------------------------- December 31,
1996 1995 1995
---- ---- ------------
<S> <C> <C> <C>
Beginning Balance $1,492,012 $2,336,945 $2,336,945
Additional provision -- 130,000 479,000
Recoveries 7,798 -- 1,643
Charge-offs (244,006) (379,000) (1,325,576)
---------- ---------- ----------
Ending Balance $1,255,804 $2,087,945 $1,492,012
========== ========== ==========
</TABLE>
NOTE G - Advances from the Federal Home Loan Bank of Atlanta
Advances from the Federal Home Loan Bank of Atlanta (FHLB) totaling
$27,131,569 at March 31, 1996 are at a 6.2% weighted average interest rate
per annum with $11,728,000 maturing in 1996, $8,728,000 maturing in 1997,
$728,000 maturing in 1998, $1,728,000 maturing in 1999, $728,000 maturing in
2000, $1,728,000 maturing in 2001, $732,000 maturing in 2002 and $300,000
maturing in 2003, 2004 and 2005, respectively. Such advances are secured by
assets amounting to $38,818,259 at March 31, 1996. Such amount is composed of
capital stock in the FHLB, certain of the Savings Bank's mortgage loans and
mortgage-backed securities, and certain other assets. Accrued interest payable
on advances from the FHLB totaled $131,569 at March 31, 1996.
NOTE H - Provision for (Benefit from) Income Taxes
Federal and state income taxes consisted of the following:
<TABLE>
<CAPTION>
Three Months Ended March 31, Year Ended
--------------------------- December 31,
1996 1995 1995
----------- -------- ------------
<S> <C> <C> <C>
State income tax current expense $ 31,300 $ 27,500 $ 49,300
Federal income tax current expense 208,200 122,700 180,000
Deferred income tax expense 33,500 96,000 693,000
Change in valuation allowance -- (250,000) (1,476,000)
----------- -------- ----------
$ 273,000 $ (3,800) $ (553,700)
=========== ======== ==========
Home Federal's income tax differs from the tax determined by applying the
statutory Federal income tax rate to income before taxes for the following
reasons:
<CAPTION>
Three Months Ended March 31, Year Ended
--------------------------- December 31,
1996 1995 1995
----------- -------- ------------
<S> <C> <C> <C>
Tax at Federal income tax rate $ 223,694 $128,257 $ 671,221
Bad debt deduction (28,900) (30,600) 177,704
State income tax 31,300 27,500 49,300
Change in valuation allowance -- (250,000) (1,476,000)
Other - net 46,906 121,043 24,075
----------- -------- -----------
$ 273,000 $ (3,800) $ (553,700)
=========== ======== ===========
The tax effects of temporary differences between the financial reporting
basis and income tax basis of assets and liabilities that are included in net
deferred tax assets at March 31, 1996 and 1995 and December 31, 1995 relate
to the following:
<CAPTION>
March 31,
------------------------- December 31,
1996 1995 1995
---------- ---------- ------------
<S> <C> <C> <C>
Deferred Tax Assets:
Allowances for losses $1,581,000 $2,308,000 $1,723,000
Unrealized loss on securities
available for sale 116,000 565,000 110,000
Intangible asset 358,000 312,000 343,000
Deferred fees on loans 121,000 174,000 133,000
Deferred directors' fees 151,000 167,000 150,000
Other, net 134,000 41,000 45,000
---------- ---------- ----------
Total deferred tax assets $2,461,000 $3,567,000 $2,504,000
Less valuation allowances 474,000 1,700,000 474,000
---------- ---------- ----------
Total Deferred Tax Assets
less Valuation Allowances $1,987,000 $1,867,000 $2,030,000
Deferred Tax Liabilities -
Depreciation and amortization 314,000 331,000 320,000
---------- ---------- ----------
Net Deferred Tax Assets $1,673,000 $1,536,000 $1,710,000
========== ========== ==========
Federal and state current income taxes payable is as follows:
<CAPTION>
March 31,
-------------------- December 31,
1996 1995 1995
-------- ------- ------------
<S> <C> <C> <C>
Current (refundable) payable:
State $ (65,000) $ -- $ (65,000)
Federal (285,000) (70,000) (290,000)
</TABLE>
NOTE I - Common Stock and Earnings Per Share
Earnings per share have been computed based on 2,519,010 average shares
outstanding in 1995 and 1994. On March 29, 1996, Home Federal paid a $100,760
or $0.04 per share dividend to stockholders of record on March 15, 1996.
<PAGE>
HOME FEDERAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For the Three Months Ended March 31, 1996
GENERAL
Home Federal Corporation (Corporation) is the unitary savings and loan
holding company of Home Federal Savings Bank (Savings Bank) and its
subsidiaries. The Corporation and its subsidiaries are sometimes collectively
referred to herein as "Home Federal." The Corporation currently owns 100% of
the issued and outstanding common stock of the Savings Bank, which is the
principal asset of the Corporation.
On April 2, 1996, Home Federal entered into a Plan and Agreement to Merge
("Acquisition Agreement") with F&M Bancorp, Frederick, Maryland, a Maryland
corporation and bank holding company ("F&M"), which provides for the acquisition
of Home Federal by F&M. See Note B of the unaudited notes to consolidated
financial statements.
Financial Condition
The Corporation's total assets increased $2.1 million or 1.0% to $216.7
million from December 31, 1995 to March 31, 1996, due primarily to a $1.1
million increase in net loans, a $3.2 million increase in mortgage-backed
securities and a $1.0 million increase in investment securities, which increases
were partially offset by a $2.3 million decrease in cash and cash equivalents
and a $1.8 million decrease in real estate owned, net. The Corporation's total
liabilities increased by $1.8 million or 0.9% to $198.0 million from December
31, 1995 to March 31, 1996, primarily due to a $4.3 million increase in savings
accounts, which was offset to some extent by a $3.0 million decrease in
borrowings. Stockholders' equity increased $291,000 to $18.7 million at March
31, 1996 due primarily to a $284,000 increase in retained earnings.
Nonperforming Assets
The Corporation's nonperforming assets decreased by $2.6 million or 20.0%
from $12.9 million or 6.0% of total assets at December 31, 1995 to $10.3 million
or 4.8% of total assets at March 31, 1996. At March 31, 1996, the allowances for
possible loan losses amounted to $3.7 million or 2.7% of loans, net, and 73.8%
of total nonperforming loans. At March 31, 1996, the allowance for losses on
real estate owned held for sale (REO) amounted to $1.3 million or 23.6% of REO,
net. While management presently believes that its allowances for possible loan
losses and REO losses are adequate, no assurance can be given that future
provisions for possible loan or REO losses may not be necessary. See Notes E and
F of the unaudited notes to consolidated financial statements.
RESULTS OF OPERATIONS
Net Income
Net income for the three months ended March 31, 1996 amounted to $385,000,
essentially the same as net income of $381,000 during the comparable period in
1995.
Net Interest Income
Net interest income for the three months ended March 31, 1996 increased
by $61,000, or 3.4%, over the same period in 1995 due to increased interest
income which more than offset increased interest expense. Interest income for
the three months ended March 31, 1996 increased by $195,000 or 5.1% compared to
the same period in 1995, while interest expense increased by $134,000 or 6.6%
during the three months ended March 31, 1996 as compared to the same period in
the prior year.
During the three month period, the increase in interest income was due
primarily to an increase in the average balances of loans receivable,
mortgage-backed and short-term interest bearing deposits and an increase in the
average rate earned on loans receivable and mortgage-backed securities. Such
increases were offset by decreases in the average balances of investment
securities and federal funds. The primary reason for the increase in the average
balance of short-term interest bearing deposits was the Savings Bank's
investment of funds in short-term investments prior to purchasing mortgage-
backed securities. The increase in the average balance of mortgage-backed
securities in 1996 was due to the Savings Bank's purchasing $14.0 million in
mortgage-backed securities, which was funded by the sale of $8.0 million in
mortgage-backed securities and funds from increased savings accounts, loan
repayments and loan sales. The increase in interest expense was primarily the
result of increases in the average balances of savings accounts and the average
rates paid thereon which were partially offset by a decrease in the average
balance of advances from the Federal Home Loan Bank of Atlanta ("FHLB"). The
increase in the average balance of savings accounts was due to competitive
pricing, as the Savings Bank sought funds in order to originate loans, purchase
mortgage-backed and investment securities and repay advances. The average
balance of advances from the FHLB of Atlanta decreased primarily due to the
Savings Bank utilizing excess funds to repay advances.
The Savings Bank's interest rate spread was 3.9% during the three months
ended March 31, 1996 and 1995 and the ratio of interest earning assets to
interest-bearing liabilities increased from 99.0% during the three months ended
March 31, 1995 to 99.9% during the three months ended March 31, 1996.
Other Income
Other income totaled $666,000 and $421,000 for the three months ended March
31, 1996 and 1995, respectively. The $245,000 or 58.4% increase during the three
months ended March 31, 1996 was primarily due to increases in income related to
loan originations, loan sales, stockbrokerage commissions, fees on checking and
savings accounts and gain on sales of real estate owned, which was partially
offset by losses on sales of mortgage-backed securities and decreased insurance
commissions.
Operating Expenses
Operating expenses amounted to $1.9 million and $1.8 million for the three
months ended March 31, 1996 and 1995, respectively. During the three months
ended March 31, 1996, the Corporation experienced increases in employee
compensation and benefits, office occupancy and equipment expenses and other
expenses, which were substantially offset by deceases in provision for losses on
REO. Employee compensation and benefits increased due to increased profit
sharing expenses, merit increases and incentive compensation expenses. Office
occupancy and equipment expenses increased due to increased depreciation on
office properties and equipment due to computer technology upgrades during 1995
and 1996. Other operating expenses increased due to increases in professional
fees which was offset by decreases in insurance expense, ATM expenses and
expenses associated with REO operations, net and impaired loan expenses.
Provision for losses on real estate owned amounted to $130,000 for the
three months ended March 31 1995. The decrease in 1996 reflects managements
evaluation of the fair value less disposition costs or the net realizable value
of such real estate. See Note F of the unaudited notes to consolidated financial
statements.
Income Taxes
Home Federal's income tax expense totaled $273,000 for the three months
ended March 31, 1996 as compared to income tax benefit of $4,000 during the same
period in the prior year. The significant increase in income tax expense for the
three months ended March 31, 1996 as compared to the prior year was attributable
to increased taxable income, and Home Federal's reduction in the valuation
allowance on deferred tax assets which reduced income tax expense in 1995.
ASSET AND LIABILITY MANAGEMENT
Home Federal has undertaken a variety of strategies to better match the
interest-rate sensitivity of its assets and liabilities. Home Federal's
present policy is to emphasize the origination for portfolio of 10-15 year fixed
rate residential mortgage loan products and loan products such as
adjustable-rate residential mortgage loans, short-term residential construction
loans to individuals and a variety of consumer loans. With respect to Home
Federal's single-family residential loan originations, the Savings Bank
originates both fixed-rate and adjustable-rate loans. Single-family, fixed-rate
loans originated with terms greater that 20 years are primarily for resale in
the secondary market, thereby reducing Home Federal's interest rate risk. Home
Federal generally retains single-family adjustable-rate loans in portfolio.
During the three months ended March 31, 1996 and 1995, Home Federal originated
$8.2 million and $6.8 million, respectively, of single-family residential loans.
Of such amounts, $3.8 million and $5.1 million provided for periodic adjustment
of interest rates, or 46.1% and 75.0% of single-family residential loans
originated by Home Federal during the respective periods. During 1996, Home
Federal originated $1.0 million of fixed-rate loans with 10 or 15 year
maturities.
Home Federal also has continued to originate both commercial business
(primarily automobile floor plan loans) and consumer loans, which generally
have shorter terms and/or rates that vary with interest rate indices and higher
yields than residential mortgage loans. Consumer and commercial business loan
originations amounted to $4.3 million during the three months ended March 31,
1996 as compared to $3.5 million during the comparable period in 1995.
During 1996, Home Federal purchased investment and mortgage-backed
securities to maintain its asset mix. The Savings Bank purchased $1.0 million
and $14.0 million of investment and mortgage-backed securities, respectively
which was funded by savings deposits, loan sales and repayments, and the
proceeds of $8.0 million from the sale of mortgage-backed securities available
for sale.
Rates of interest paid on deposits at Home Federal are priced to be
sufficiently competitive in its primary market area in order to meet its
asset/liability management objectives and requirements for funds, but are
typically not the highest rates available. This policy helps Home Federal
control its cost of funds. Home Federal maintains a tiered pricing program for
some of its certificate accounts, pursuant to which higher rates of interest
are paid for longer-term certificate accounts. Home Federal relies on savings
deposits, loan and mortgage-backed securities repayments and advances from the
FHLB of Atlanta to fund loan originations and commitments.
REGULATORY CAPITAL REQUIREMENTS
The Savings Bank is subject to regulations of the Office of Thrift
Supervision ("OTS") that impose certain minimum regulatory capital requirements.
At March 31, 1996 the Savings Bank's tangible, core and risk-based capital
exceeded regulatory requirements. The following table summarizes, as of March
31, 1996, the Savings Bank's regulatory capital requirements, the amount of its
actual capital and the amount of its excess capital on a dollar and percentage
basis.
<TABLE>
<CAPTION>
March 31, 1996
---------------------------------
Capital Capital
Capital Requirement Excess
------- ----------- -------
(Dollars in Thousands)
<S> <C> <C> <C>
Dollar basis:
Tangible $18,281 $ 3,236 $15,045
Core 18,281 6,472 11,809
Risk-based 19,987 10,781 9,206
Percentage basis:
Tangible 8.5% 1.5% 7.0%
Core 8.5 3.0 5.5
Risk-based 14.8 8.0 6.8
</TABLE>
There can be no assurance that the Savings Bank will not be subject to
additional capital requirements in the future, either as a result of
regulations, guidelines and policies of general applicability or individual
regulatory capital requirements which may be applied to the Savings Bank.
Liquidity
Home Federal is required under applicable Federal regulations to maintain
specified levels of "liquid" investments including United States government and
Federal agency securities and other investments. Regulations currently in
effect require Home Federal to maintain liquid assets of not less than 5% of
its net withdrawable accounts plus short-term borrowings, of which short-term
liquid assets must consist of not less than 1%. These levels are changed from
time to time by the OTS to reflect economic conditions. Liquidity is influenced
by general economic conditions, financial market conditions and fluctuations in
the interest rates and products offered by competing entities. Home Federal's
regulatory liquidity ratio averaged 9.3% for the month ended March 31, 1996. At
March 31, 1996, Home Federal was required to maintain liquid investments
amounting to $9.2 million, none of which were pledged to secure advances from
the FHLB of Atlanta.
The principal sources of funds to Home Federal are savings accounts,
amortization and prepayments of outstanding loans and mortgage-backed
securities, sales of loans, FHLB advances and other borrowings. During the
past several years, Home Federal has used such funds primarily to meet its
ongoing commitments to fund maturing savings certificates and savings
withdrawals, fund existing and continuing loan commitments, purchase
mortgage-backed securities and maintain its liquidity.
At March 31, 1996, the total of approved loan origination commitments
amounted to $3.0 million, exclusive of loans in process. The amount of savings
certificates which are scheduled to mature during the twelve months ended
March 31, 1997 is $56.8 million. Management believes that, by evaluating
competitive instruments and prices in its market area, it can, in most
circumstances, manage and control maturing deposits so that a portion of such
maturing deposits will be redeposited in the Savings Bank. During the three
months ended March 31, 1996, the Savings Bank experienced a $4.3 million
increase in savings accounts. The Savings Bank utilized these funds to repay
FHLB advances and purchase investment and mortgage-backed securities during the
three months ended March 31, 1996.
IMPACT OF INFLATION ON CHANGING PRICES
The consolidated financial statements and related data presented herein
have been prepared in accordance with generally accepted accounting principles
which require the measurement of financial position and operating results in
terms of historical dollars, without considering changes in the relative
purchasing power of money over time due to inflation.
Unlike many industrial corporations, virtually all of the assets and
liabilities of Home Federal are monetary in nature. As a result, interest
rates have a more significant impact on Home Federal's performance than the
effects of general levels of inflation. Over short periods of time, interest
rates may not necessarily move in the same direction or in the same magnitude
as the prices of goods and services, since such prices are affected by
inflation to a larger extent than interest rates.
RECAPITALIZATION OF SAIF AND RELATED LEGISLATIVE PROPOSALS
The deposits of the Savings Bank are currently insured by the Savings
Association Insurance Fund (SAIF) of the Federal Deposit Insurance Corporation
(FDIC). Both the SAIF and the Bank Insurance Fund (BIF), the federal deposit
insurance fund that covers commercial bank deposits, are required by law to
attain and thereafter maintain a reserve ratio of 1.25% of insured deposits. The
BIF has achieved a fully funded status in contrast to the SAIF and, therefore,
as discussed below, the FDIC recently substantially reduced the average deposit
insurance premium paid by BIF-insured commercial banks to a level substantially
below the average premium paid by SAIF-insured institutions.
In late 1995, the FDIC approved a final rule regarding deposit insurance
premiums which, effective with respect to the semiannual premium assessment
beginning January 1, 1996, reduced deposit insurance premiums for BIF member
institutions to zero basis points (subject to an annual minimum of $2,000) for
institutions in the lowest risk category. Deposit insurance premiums for SAIF
members were maintained at their existing levels (23 basis points for
institutions in the lowest risk category). Accordingly, in the absence of
further legislative action, SAIF members such as the Savings Bank will be
competitively disadvantaged as compared to commercial banks by the resulting
premium differential. It is anticipated that, under present conditions, it will
be at least several years before the SAIF reaches a reserve ratio of 1.25% of
insured deposits.
The U.S. House of Representatives and Senate have actively considered
legislation which would have eliminated the premium differential between SAIF
- -insured institutions and BIF-insured institutions by recapitalizing the SAIF's
reserves to the required ratio. The proposed legislation would have provided
that all SAIF member institutions pay a special one-time assessment to
recapitalize the SAIF, which in the aggregate would have been sufficient to
bring the reserve ratio in the SAIF to 1.25% of insured deposits. Based on the
current level of reserves maintained by the SAIF, it was anticipated that the
amount of the special assessment required to recapitalize the SAIF would have
been approximately 80 to 85 basis points of the SAIF-assessable deposits. It was
anticipated that after the recapitalization of the SAIF, premiums paid by SAIF-
insured institutions would be reduced to match those currently being assessed
BIF-insured commercial banks. The legislation also provided for the merger of
the BIF and the SAIF, with such merger being conditioned upon the prior
elimination of the thrift charter.
The legislation discussed above had been, for some time, included as part
of a fiscal 1996 federal budget bill, but was eliminated prior to the bill being
enacted on April 26, 1996. In light of the legislation's elimination and the
uncertainty of the legislative process generally, management cannot predict
whether legislation reducing SAIF premiums and/or imposing a special one-time
assessment will be adopted, or, if adopted, the amount of the assessment, if
any, that would be imposed on the Savings Bank.
If legislation were to be enacted in the future which would assess a one
- -time special assessment of 85 basis points, the Savings Bank would (based upon
the Savings Bank's SAIF deposits as of March 31, 1996) pay approximately
$876,000, net of related tax benefits. In addition, the enactment of such
legislation might have the effect of immediately reducing the Savings Bank's
capital by such an amount. Nevertheless, management does not believe, based upon
the foregoing assumptions, that a one-time assessment of this nature would have
a material adverse effect on Home Federal's consolidated financial condition.
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
The Corporation and its subsidiaries are involved in various legal
proceedings occurring in the ordinary course of business. There are no
material legal proceedings to which the Corporation or any of its
subsidiaries is a part, or to which any of their property is subject.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
Filed on April 9, 1996 and included:
Press release dated April 2, 1996, announcing Home Federal and the
Savings Bank signing a Plan and Agreement to Merge with F&M Bancorp.
Also, a copy of the Plan and Agreement to Merge with F&M Bancorp and
a Stock Option Agreement with F&M Bancorp.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
HOME FEDERAL CORPORATION
BY: /s/ Richard W. Phoebus
Date Richard W. Phoebus
President and
Chief Executive Officer
BY: /s/ Salvatore M. Savino
Date Salvatore M. Savino
Vice President and Treasurer,
Chief Financial Officer
(principal financial and
accounting officer)
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 6,020
<INT-BEARING-DEPOSITS> 4,139
<FED-FUNDS-SOLD> 30
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 7,523
<INVESTMENTS-CARRYING> 43,828
<INVESTMENTS-MARKET> 43,332
<LOANS> 142,597
<ALLOWANCE> 3,673
<TOTAL-ASSETS> 216,684
<DEPOSITS> 167,989
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,890
<LONG-TERM> 27,132
<COMMON> 2,519
0
0
<OTHER-SE> 16,154
<TOTAL-LIABILITIES-AND-EQUITY> 216,684
<INTEREST-LOAN> 3,282
<INTEREST-INVEST> 763
<INTEREST-OTHER> 119
<INTEREST-TOTAL> 4,164
<INTEREST-DEPOSIT> 1,724
<INTEREST-EXPENSE> 2,187
<INTEREST-INCOME-NET> 1,866
<LOAN-LOSSES> 0
<SECURITIES-GAINS> (31)
<EXPENSE-OTHER> 1,874
<INCOME-PRETAX> 658
<INCOME-PRE-EXTRAORDINARY> 658
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 385
<EPS-PRIMARY> 0.15
<EPS-DILUTED> 0.15
<YIELD-ACTUAL> 3.90
<LOANS-NON> 4,980
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 12,550
<ALLOWANCE-OPEN> 3,632
<CHARGE-OFFS> 34
<RECOVERIES> 75
<ALLOWANCE-CLOSE> 3,673
<ALLOWANCE-DOMESTIC> 3,673
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,088
</TABLE>
