FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to
Commission file number 0-16276
STERLING FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2449551
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
101 North Pointe Boulevard
Lancaster, Pennsylvania 17601-4133
(Address of principal executive offices) (Zip Code)
(717) 581-6030
(Registrant's telephone number including area code)
Not Applicable
(Former name, former address and former fiscal year,if changed since
last report)
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 (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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock, $5.00 Par Value - 6,463,912 shares outstanding as of July 31,
1998.
Sterling Financial Corporation and Subsidiaries
Index
PART I - FINANCIAL INFORMATION Page
Item 1 - Financial Statements
Consolidated Balance Sheets
as of June 30, 1998 (Unaudited), December 31, 1997,
and June 30, 1997 (Unaudited). 3
Consolidated Statements of Income
for the Three and Six Months ended June 30, 1998
and 1997 (Unaudited). 4
Consolidated Statements of Cash Flows
for the Six Months ended
June 30, 1998 and 1997 (Unaudited). 6
Notes to Consolidated Financial
Statements (Unaudited). 7
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3 - Quantitative and Qualitative Disclosures About Market Risk 18
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 20
Item 4 - Submission of Matters to a Vote of Security Holders 20
Item 6 - Exhibits and Reports on Form 8-K 20
Signature Page 21
Subsidiaries of the Registrant 22
<TABLE>
Part I - Financial Information
Sterling Financial Corporation and Subsidiaries
Consolidated Balance Sheets
<CAPTION>
June 30, December 31, June 30,
1998 1997 1997
ASSETS (Unaudited) (Unaudited)
<S> <C> <C> <C>
Cash and due from banks.................$ 33,627,290 $ 34,291,962 $ 30,549,585
Interest-bearing deposits in other banks. 31,216 14,565 51,210
Federal funds sold....................... 18,700,000 28,150,000 21,450,000
Mortgage loans held for sale............. 2,570,600 791,500 1,074,305
Investment Securities::
Securities held to maturity (market value-
$74,338,420;$86,465,497;$87,777,576.... 73,162,922 85,155,282 87,032,544
Securities available for sale........... 156,531,431 121,474,497 96,673,639
Loans.................................... 529,349,865 512,073,424 493,616,941
Less: Unearned Income.................. (229,836) (435,979) (744,730)
Allowance for loan losses........ (8,047,151) (7,730,000) (7,979,022)
----------- ----------- -----------
Loans, Net............................... 521,072,878 503,907,445 484,893,189
----------- ----------- -----------
Premises and Equipment................... 21,705,638 21,937,626 22,145,264
Other real estate owned.................. 527,645 340,685 368,345
Accrued interest receivable and prepaid
expenses............................... 15,090,958 12,243,207 13,136,480
Other assets............................. 43,026,769 37,181,308 34,890,795
----------- ----------- -----------
TOTAL ASSETS............................$ 886,047,347 $ 845,488,077 $ 792,265,356
LIABILITIES ============ ============ ============
Deposits:
Noninterest-bearing...................$ 87,256,792 $ 82,564,955 $ 80,969,311
Interest-bearing...................... 666,311,972 636,095,660 585,396,868
------------ ------------ ------------
TOTAL DEPOSITS.......................... 753,568,764 718,660,615 666,366,179
------------ ------------ ------------
Interest-bearing demand notes issued to
U.S. Treasury........................ 5,000,000 3,000,000 3,000,000
Other liabilities for borrowed money.... 28,519,775 32,312,232 34,351,212
Accrued interest payable and accrued
expenses............................. 12,349,116 10,164,729 10,112,242
Other liabilities....................... 8,800,433 7,363,508 6,167,624
----------- ------------ ------------
TOTAL LIABILITIES....................... 808,238,088 771,501,084 719,997,257
STOCKHOLDERS' EQUITY ----------- ------------ ------------
Common Stock - (Par Value: $5.00)
No. Shares authorized: 35,000,000
No. Shares issued:
6,468,433; 6,237,009; 6,237,009
No. Shares outstanding:
6,455,840; 6,149,795; 6,205,484..... 32,342,165 31,185,045 31,185,045
Capital Surplus.......................... 24,641,680 16,321,050 16,322,245
Retained Earnings........................ 17,817,555 25,827,750 23,303,653
Net unrealized gain on securities
available for sale..................... 3,505,262 2,915,718 2,262,433
Less: Treasury Stock
(12,593; 87,214; 31,525) - at cost..... (497,403) (2,262,570) (805,277)
----------- ----------- -----------
TOTAL STOCKHOLDERS' EQUITY............... 77,809,259 73,986,993 72,268,099
TOTAL LIABILITIES AND STOCKHOLDERS' ----------- ----------- -----------
EQUITY................................ $886,047,347 $845,488,077 $792,265,356
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements
<TABLE>
Part 1 - Financial Information
Sterling Financial Corporation and Subsidiaries
Consolidated Statements of Income (Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans.......................$11,657,603 $11,215,796 $23,078,654 $21,883,934
Interest on deposits in other banks.............. 665 3,603 1,206 11,409
Interest on federal funds sold................... 201,918 122,790 496,943 264,235
Interest and dividends on investment securities:
Taxable...................................... 2,348,719 1,794,033 4,495,353 3,577,060
Tax-exempt................................... 848,527 756,444 1,647,016 1,497,049
Dividends on stock........................... 58,838 57,455 119,213 112,838
----------- ----------- ----------- -----------
TOTAL INTEREST INCOME............................. 15,116,270 13,950,121 29,838,385 27,346,525
----------- ----------- ----------- -----------
INTEREST EXPENSE
Interest on time certificates of deposit of
$100,000 or more............................... 527,998 392,332 1,069,605 757,071
Interest on all other deposits.................. 5,977,381 5,109,624 11,738,000 9,954,516
Interest on demand notes issued to the
U.S. Treasury....... ......................... 35,172 32,146 59,611 57,128
Interest on federal funds purchased............. none 1,178 none 1,285
Interest on other borrowed money................ 483,106 637,486 980,016 1,138,102
----------- ----------- ----------- -----------
TOTAL INTEREST EXPENSE............................ 7,023,657 6,172,766 13,847,232 11,908,102
----------- ----------- ----------- -----------
NET INTEREST INCOME............................... 8,092,613 7,777,355 15,991,153 15,438,423
Provision for loan losses....................... 346,000 453,000 706,000 651,100
----------- ----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES.................................... 7,746,613 7,324,355 15,285,153 14,787,323
----------- ----------- ----------- -----------
OTHER OPERATING INCOME
Income from fiduciary activities............... 462,405 398,732 939,790 768,742
Service charges on deposit accounts............ 720,576 742,660 1,420,712 1,380,300
Other service charges, commissions and fees.... 461,203 387,376 885,261 692,329
Mortgage banking income........................ 474,783 269,514 1,121,511 508,934
Income from sales of assets.................... 1,200,000 none 1,200,000 none
Other operating income......................... 1,095,397 1,280,389 2,149,654 2,467,106
Gains/(Losses) on securities transactions...... none 204,957 none 204,957
----------- ----------- ----------- -----------
TOTAL OTHER OPERATING INCOME..................... 4,414,364 3,283,628 7,716,928 6,022,368
----------- ----------- ----------- -----------
OTHER OPERATING EXPENSES
Salaries and employee benefits................ 4,702,336 4,098,341 8,976,987 8,052,073
Net occupancy expense......................... 516,605 554,920 1,053,425 1,183,024
Furniture and equipment expense............... 692,908 602,119 1,341,622 1,191,168
FDIC insurance assessment..................... 21,884 20,529 42,936 40,611
Other operating expenses...................... 1,897,257 1,845,218 3,526,326 3,416,859
----------- ----------- ----------- -----------
TOTAL OTHER OPERATING EXPENSES................... 7,830,990 7,121,127 14,941,296 13,883,735
----------- ----------- ----------- -----------
Income before income taxes.................... 4,329,987 3,486,856 8,060,785 6,925,956
Applicable income taxes....................... 1,106,050 910,318 2,011,726 1,760,896
----------- ----------- ----------- -----------
NET INCOME.......................................$ 3,223,937 $ 2,576,538 $ 6,049,059 $ 5,165,060
=========== =========== =========== ===========
Earnings per common share:
Net Income (Basic)..............................$ .50 $ .39 $ .94 $ .79
Net Income (Diluted)............................ .50 .39 .93 .79
Cash dividends declared per common share........$ .21 $ .18 $ .42 $ .36
</TABLE>
<TABLE>
CONSOLIDATED STATMENTS OF COMPREHENSIVE INCOME (Unaudited)
<S> <C> <C> <C> <C>
NET INCOME.......................................$ 3,223,937 $ 2,576,538 $ 6,049,059 $ 5,165,060
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities
available-for-sale arising during the period. 141,829 1,017,318 589,544 795,106
Reclassification adjustment for gains included
in net income................................ none (135,272) none (135,272)
----------- ----------- ----------- ----------
Other comprehensive income...................... 141,829 882,046 589,544 659,834
----------- ----------- ----------- ----------
COMPREHENSIVE INCOME.............................$ 3,365,766 $ 3,458,584 $ 6,638,603 $ 5,824,894
=========== =========== =========== ==========
See accompanying notes to financial statements
</TABLE>
<TABLE>
Part I - Financial Information
Sterling Financial Corporation and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
<CAPTION>
Six Months Ended
June 30,
1998 1997
<S> <C> <C>
Cash Flows from Operating Activities
Net Income...........................................$ 6,049,059 $ 5,165,060
Adjustments to reconcile net income to net cash
provided by/(used in) operating activities:
Depreciation...................................... 1,027,881 950,245
Accretion and amortization of investment securities 159,089 140,508
Provision for possible loan and lease losses...... 706,000 651,100
(Gain) loss on sale of investment securities...... none (204,957)
(Gain) loss on disposition of property and equipment (1,544) (451,397)
(Gain) loss on sale of mortgage loans............. (337,569) (114,438)
Proceeds from sales of mortgage loans............. 43,501,649 15,067,118
Origination of mortgage loans held for sale....... (44,943,180) (15,010,885)
Change in operating assets and liabilities:
(Increase) decrease in accrued interest
receivable and prepaid expenses................ (2,847,751) (1,874,414)
(Increase) decrease in other assets............. (6,032,421) (1,884,932)
Increase (decrease) in accrued interest payable
and accrued expenses........................... 2,184,387 1,407,757
Increase (decrease) in other liabilities....... 1,133,221 (149,040)
----------- -----------
Net cash provided by/(used in) operating activities.. 598,821 3,691,725
Cash Flows from Investing Activities
Proceeds from interest-bearing deposits in other banks 302,266 857,017
Purchase of interest-bearing deposits in other banks.. (318,917) (264,729)
Proceeds from sale of investment securities........... none 205,400
Proceeds from maturities of investment securities..... 26,098,998 15,645,939
Purchase of investment securities..................... (48,429,413) (24,896,434)
Federal funds sold, net............................... 9,450,000 2,700,000
Net loans and leases made to customers................ (17,871,433) (19,511,958)
Purchases of premises and equipment................... (799,325) (1,764,089)
Proceeds from sale of premises and equipment.......... 4,976 1,777,645
------------ -----------
Net cash provided by/(used in) investing activities.. (31,562,848) (25,251,209)
Cash Flows from Financing Activities
Net increase (decrease) in demand deposits,
NOW and savings accounts............................. 14,096,329 (1,052,522)
Net increase (decrease) in time deposits.............. 20,811,820 20,382,244
Net increase (decrease) in interest-bearing demand
notes issued to the U.S. Treasury.................... 2,000,000 258,603
Proceeds from borrowings.............................. 5,280,519 25,774,300
Repayments of borrowings.............................. (9,072,976) (21,856,914)
Cash dividends paid................................... (2,651,762) (2,363,863)
Cash paid in lieu of fractional shares................ (40,038) none
Acquisition of treasury stock......................... (1,257,756) (1,261,472)
Proceeds from issuance of treasury stock.............. 1,133,219 889,223
------------ -----------
Net cash provided by/(used in) financing activities. 30,299,355 20,769,599
Increase (decrease) in cash and due from banks....... (664,672) (789,885)
Cash and due from banks::
Beginning............................................. 34,291,962 31,339,470
------------ -----------
Ending................................................$ 33,627,290 $ 30,549,585
============ ===========
Supplemental Disclosure of Cash Flow Information:
Cash payments for:
Interest paid to depositors and on borrowed money....$ 13,699,700 $ 11,878,956
Income taxes......................................... 2,090,693 1,750,000
Supplemental Schedule of Noncash Investing
and Financing Activities
Other Real Estate acquired in settlement of loans...... 319,247 342,110
</TABLE>
See accompanying notes to financial notes to accompanying statement
Part I - Financial Information
Sterling Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited consolidated financial statements of Sterling
Financial Corporation ("Sterling") have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the six-month period ended June 30, 1998 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1998.
The consolidated financial statements of Sterling include the accounts of
its wholly owned subsidiary, Bank of Lancaster County, N.A. (the "Bank") and its
wholly owned subsidiary, Town & Country, Inc. All significant intercompany
transactions are eliminated in the consolidation.
In June 1996, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 125 - "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities." The Statement amends and extends to all servicing assets and
liabilities the accounting standards for mortgage servicing rights now in
FASB Statement No. 65, "Accounting for Certain Mortgage Banking Activities,"
and supersedes FASB Statement No. 122, "Accounting for Mortgage Servicing
Rights." SFAS No. 125 establishes accounting and reporting standards
for transfers and servicing of
financial assets and extinguishments of liabilities based on the consistent
application of the financial-components approach. This approach requires the
recognition of financial assets and servicing assets that are controlled by the
reporting entity, the derecognition of financial assets when control is
surrendered and the derecognition of liabilities when they are extinguished.
Specific criteria are established for determining when control has been
surrendered in the transfer of financial assets. Liabilities incurred and
derivatives obtained by transferors in connection with the transfer of financial
assets are measured at fair value, if practicable. Servicing assets and other
retained interests in transferred assets are measured by allocating any prior
carrying amount between the assets sold, if any, and the interest retained, if
any, and the interest retained, if any, based on the relative fair values of the
assets at the date of transfer. Servicing assets retained are then subject to
amortization and assessment for impairment. As issued, this Statement is
effective for transfers and servicing of financial assets and extinguishments of
liabilities occurring after December 31, 1996, and is to be applied
prospectively.
The FASB became aware that the volume and variety of certain transactions
and the related changes to information systems and accounting processes
necessary to comply with the requirements of SFAS No. 125 would make it
extremely difficult, if not impossible, for some affected companies to comply by
January 1, 1997. As a result, in December 1966, the FASB issued FASB No. 127,
"Deferral of the Effective Date of Certain Provisions of FASB Statement No. 125"
that defers, for one year, the effective date of certain provisions, as well as
accounting for transfer and servicing for repurchase agreements, dollar-roll,
securities lending and similar transactions. Therefore, this Statement shall be
effective for such transfers of financial assets after December 31, 1997.
Management does not expect the adoption of SFAS No. 127 to have a material
effect on the financial position or results of operations of the Corporation.
In June 1997, the FASB issued Statement No. 130 - "Reporting Comprehensive
Income," which establishes standards for the reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. Statement No. 130 requires that all items that are
required to be recognized as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. Statement No. 130 is effective for fiscal years beginning
after December 15, 1997. Sterling adopted SFAS No. 130, effective March 31,
1998. The adoption of this Statement requires the Corporation to set forth
additional disclosures in the Corporation's financial statements.
In June 1997, the FASB issued SFAS No. 131 - "Disclosures about Segments
of an Enterprise and Related Information." This Statement establishes standards
for the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. The Statement also establishes standards for
related disclosures about products and services, geographic areas and major
customers. This Statement supersedes FASB No. 14 - "Financial Reporting for
Segments of a Business Enterprise," but retains the requirement to report
information about major customers. It amends FASB Statement No. 94 -
"Consolidation of All Majority-Owned Subsidiaries," to remove the special
disclosure requirements for previously unconsolidated subsidiaries. The
Statement is effective for fiscal years beginning after December 15, 1997. The
adoption of this Statement will require the Corporation to set forth additional
disclosures in the Corporation's financial statements.
In February 1998, the FASB issued SFAS No. 132 - "Employers' Disclosures
about Pensions and Other Postretirement Benefits - an amendment of FASB
Statements No. 87, 88 and 106." This Statement revises employers' disclosures
about pension and other postretirement benefit plans. It does not change the
measurement or recognition of those plans. It standardizes the disclosure
requirements for pensions and other postretirement benefits to the extent
practicable, requires additional information on changes in the benefit
obligations and fair values of plan assets that will facilitate financial
analysis, and eliminates certain disclosures that are no longer as useful as
they were when FASB Statements No. 87, No. 88 and No. 106 were issued. The
Statement suggests combined formats for presentation of pension and other
postretirement benefit disclosures. This Statement is effective for fiscal
years beginning after December 15, 1997. Restatement of disclosures for earlier
periods provided for comparative purposes is required unless the information is
not readily available, in which case the notes to the financial statements
should include all available information and a description of the information
not available. The adoption of this Statement will require the Corporation to
set forth additional disclosures in the Corporation's financial statements.
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities." This
Statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. If certain conditions are
met, a derivative may be specifically designated as (a) a hedge of the exposure
to changes in the fair value of a recognized asset or liability or an
unrecognized firm commitment, (b) a hedge of the exposure to variable cash flows
of a forecasted transaction, or (c) a hedge of the foreign currency exposure of
a net investment in a foreign operation, and unrecognized firm commitment, an
available-for-sale security, or a foreign-currency-denominated forecaster
transaction. This Statement is effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. Sterling has not completed the analysis
required to estimate the impact of this statement.
Note 2 - Earnings Per Share
In 1997, the FASB issued Statement No. 128 - "Earnings per Share." The
Statement is effective for periods ending after December 15, 1997. The
Statement is designed to simplify the computation of earnings per share and
requires disclosure of "basic earnings per share" and if applicable, "diluted
earnings per share." Basic earnings per share is simply the per share
allocation of income available to common stockholders based only on the weighted
average number of common shares actually outstanding during the period. Diluted
earnings per share represents the per share allocation of income attributable to
common stockholders based on the weighted average number of common shares
actually outstanding plus all dilutive potential common shares outstanding
during the period. The Statement requires restatement of all prior period
earnings per share data when adopted.
Basic earnings per share were computed by dividing net income by the
weighted average number of shares of common stock outstanding which were
6,466,829 and 6,536,211 for 1998 and 1997 respectively. Diluted earnings per
share were computed by dividing net income by the weighted average number of
shares of common stock outstanding plus all dilutive potential common shares
outstanding during the period which were 6,503,002 and 6,537,760 for 1998 and
1997 respectively.
Figures for 1997 were retroactively restated to reflect a 5% stock
dividend paid in June 1988.
Part I - Financial Information
Sterling Financial Corporation and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Financial Condition
Total assets at June 30, 1998 amounted to $886,047,347 compared to
$792,265,356 at June 30, 1997. This represents an increase of $93,781,991, or
11.8% over that period of time. Total assets at June 30, 1998 increased
$40,559,270 or 4.8% over the $845,488,077 reported at December 31, 1997.
The investment securities portfolio reflects an 25% increase of
$45,988,170 during the twelve month period June 30, 1997 to June 30, 1998. The
Corporation accounts for securities under the SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," which requires that these
securities be classified into one of three categories: held-to-maturity,
available-for-sale or trading. Specific accounting treatments apply to each of
the three categories. Securities held-to-maturity will be reported at amortized
cost, trading securities are reported at fair value with unrealized gains and
losses included in earnings and available-for-sale will be reported at fair
value, with unrealized gains and losses excluded from earnings and reported as a
separate component of shareholders' equity. Sterling has segregated its
investment securities into two categories: those held-to-maturity and those
available-for-sale. During the first six months of 1998, there was in increase
in investment securities in the amount of $23,064,574 or 11.2% from the
$206,629,779 reported at December 31, 1997. The amount of unrealized gains
included in the available-for-sale category at December 31, 1997 was $4,417,755,
while at June 30, 1998 and 1997 it was $5,311,004 and $3,427,929 respectively.
Net loans have grown from $484,893,189 at June 30, 1997 to $521,072,878 at
June 30, 1998. This represents an increase of $36,179,689 or 7.5%. Net loans
have grown from $503,907,445 to $521,072,878 during the six month period ended
June 30, 1998. This represents an increase of 3.4% since December 31, 1997.
Federal funds sold amounted to $18,700,000 at June 30, 1998 compared to
$21,450,000 at June 30, 1997 and $28,150,000 at December 31, 1997.
Premises and equipment decreased $439,626 from $22,145,264 at June 30,
1997 to $21,705,638 at June 30, 1998. During the first six months of 1998,
total premises and equipment decreased $231,988 from $21,937,626 at December 31,
1997. Depreciation expense during these periods was greater than the net
acquisition of premises and equipment which resulted in the decrease in premises
and equipment.
Total deposits increased $87,202,585 or 13.1% from $666,366,179 at June
30, 1997 to $753,568,764 at June 30, 1998. During the first six months of
1998, total deposits increased $34,908,149 or 4.9% from the $718,660,615
reported at December 31, 1997. Noninterest bearing deposits increased
$6,287,481 from $80,969,311 at June 30, 1997 to $87,256,792 at June 30, 1998.
This represents an increase of 7.8%. During the same period, interest bearing
deposits increased $80,915,104 or 13.8%. Noninterest bearing deposits increased
$4,691,837 during the first six months of 1998 while interest bearing deposits
increased $30,216,312. Included in the growth figures above is approximately $6
million in deposits involving the acquisition of the Leola branch deposit
accounts of CoreStates Bank, N.A. which was finalized in May 1998.
Stockholders' equity increased $5,541,160 or 7.7% from the $72,268,099
reported at June 30, 1997 to $77,809,259 at June 30, 1998. There was an
increase of $3,822,266 or 5.2% from the $73,986,993 reported at December 31,
1997. The major contributor to these increases was net income from operations.
Adding to the increase in stockholders' equity was an increase in net unrealized
gains on available-for-sale securities for both periods indicated. These
increases were to some degree offset by the repurchase of outstanding common
stock throughout both periods indicated. Regulatory authorities have decided to
exclude the net unrealized holding gains and losses on available-for-sale
securities from the definition of common stockholders' equity for regulatory
capital purposes. The capital ratios reflect that exclusion. Total
stockholders' equity to total assets at June 30, 1998 was 8.44% compared to
8.87% at June 30, 1997 and 8.45% at December 31, 1997.
Federal regulatory authorities issued risk-based capital guidelines
applicable to banks and bank holding companies in an effort to make regulatory
capital more responsive to the risk exposure related to various categories of
assets and off-balance sheet items. These guidelines require that banking
organizations meet a minimum risk-based capital, define the components of
capital, categorize assets into different risk classes and include certain
off-balance sheet items in the calculation of capital requirements. The
components
of total capital are called Tier 1 and Tier 2 Capital. Tier 1 capital is the
shareholders' equity and Tier 2 capital is the allowance for loan losses. The
risk-based capital ratios are computed by dividing the components of capital by
risk-weighted assets. Risk-weighted assets are determined by assigning various
levels of risk to different categories of assets and off-balance sheet items.
Regulatory authorities have decided to exclude the net unrealized holding gains
and losses on available-for-sale securities from the definition of common
stockholders' equity for regulatory capital purposes. However, national banks
will continue to deduct unrealized losses on equity securities in their
computation of Tier 1 capital. Therefore, national banks will continue to
report the net unrealized holding gains and losses on available-for-sale
securities in the reports of condition and income submitted to federal
regulators as required by SFAS No. 115 and the financial reports prepared in
accordance with generally accepted accounting principles, but will exclude these
amounts from calculations of Tier 1 capital. In addition, national banks should
use the amortized cost of available-for-sale debt securities (as opposed to fair
value) to determine the average total assets as well as the risk-weighted assets
used in the calculations of the leverage and risk-based capital ratios. The
ratios below reflect the above definition of common stockholders' equity which
included common stock, capital surplus and retained earnings, less net realized
holding losses on available-for-sale equity securities with readily determinable
fair values. The guidelines require Tier 1 capital of at least 4% and total
capital of 8% of risk-weighted assets. The Tier 1 capital ratio was 9.68% and
the total risk-based capital ratio was 10.76% at June 30, 1998 while the Tier 1
capital ratio was 10.57% and the total risk-based capital ratio was 11.81% at
June 30, 1997.
The following table reflects the various capital ratios for the periods
indicated:
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997 June 30, 1997
<S> <C> <C> <C>
"Statement"
Equity Capital 8.44% 8.45% 8.87%
Primary and
Total Capital 9.27% 9.28% 9.79%
"Risk-based"
Tier 1 Capital 9.68% 10.23% 10.57%
Total Capital 10.76% 11.38% 11.81%
Changes in the Allowance for Loan Losses for the six months ended June 30,
1998 and 1997 were as follows:
1998 1997
Balance at January 1 $ 7,730,000 $ 7,800,000
Provision for loan losses
charged to operating expenses 706,000 651,100
8,436,000 8,451,100
Losses charged to allowance 503,031 660,886
Recoveries credited to allowance 114,182 188,808
Net charge-offs 388,849 472,078
Balance at June 30, $ 8,047,151 $ 7,979,022
=========== ===========
Allowance as a percent of
period-end loans 1.52% 1.62%
The net charge-offs for the first six months of 1998 were within the
corporation's expectations and management believes that the allowance for loan
losses is adequate. Management makes a determination no less frequently than
quarterly as to the appropriate provision necessary to maintain an adequate
allowance for potential loan losses. The amount of provision made is based upon
a variety of factors including a specific allocation by individual credits, loss
experience for classified loans using migration analysis, loss experience for
homogenous loan pools, levels and trends in delinquency, specific non-accruing
and problem loans, evaluation of economic conditions and forecasts and other
factors deemed appropriate by management. While there can be no assurance that
material amounts of additional loan loss provisions will not be required in the
future, management believes that, based upon information presently available,
the amount of the allowance for possible loan losses is adequate.
The following table presents information concerning the aggregate amount of
nonaccrual, past due and restructured loans:
June 30, December 31, June 30,
1998 1997 1997
Nonaccrual loans $1,308,269 $1,313,717 $1,911,820
Accruing loans, past
due 90 days or more $ 594,112 $ 787,402 $ 669,820
Restructured loans $2,082,828 $2,104,560 $ none
Non-performing loans
to total loans .75% .82% .52%
Allowance for loan losses
to non-performing loans 201.9% 183.8% 309.1%
The general policy has been to cease accruing interest on loans when it is
determined that a reasonable doubt exists as to the collectibility of additional
interest. Interest income on these loans is only recognized to the extent
payments are received. If interest income had been recorded on such loans for
the periods indicated, such interest income would have been increased by
approximately $55,689 and $82,290 at June 30, 1998 and 1997 respectively, and
$152,755 at December 31, 1997. There was no interest income recorded on the
nonaccrual loans in 1998, while in 1997 there was $10,010. Potential problem
loans are loans which are included as performing loans, but for which possible
credit problems of the borrower causes management to have doubts as to the
ability of such borrower to comply with present repayment terms and which may
eventually result in disclosure as a non-performing loan. At June 30,1998,
there were no such loans that had to be disclosed as potential problem loans.
The increase in the total nonperforming assets over June 30, 1997 is primarily
attributed to the restructure of a series of loans to one borrower involving
$2,082,828. There are no commitments to lend additional funds to this borrower
in relation to the restructured loans. A loan is categorized as restructured if
the original interest rate on the loan, repayment terms or both are restructured
due to a deterioration in the financial condition of the borrower. In the case
of the above referenced loans, the Bank is secured by real estate. The loans
are current and have performed in accordance with the contractural terms, both
prior to and after the restructure. Accrual of interest on these loans
continues.
SFAS No. 118, "Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures", an amendment of SFAS No. 114, was implemented at
the beginning of 1995. The Bank has defined impaired loans as all loans on
nonaccrual status, except those specifically excluded from the scope of SFAS No.
114, regardless of the credit grade assigned by loan review. All impaired loans
were measured by utilizing the fair value of the collateral for each loan. When
the measure of an impaired loan is less than the recorded investment in the
loan, the Bank will compare the impairment to the existing allowance assigned to
the loan. If the impairment is greater than the existing allowance, the Bank
will adjust the existing allowance to reflect the greater amount or take a
corresponding charge to the provision for loan and lease losses. If the
impairment is less than the existing allowance for a particular loan, no
adjustments to the allowance or the provision for loan and lease losses will be
made. There was no adjustment necessary for the impaired loans for the period
indicated.
The average amount of impaired loans was $3,233,380 for the second quarter
of 1998 and $1,630,989 for the second quarter of 1997, while the average for the
year 1997 was $2,203,003. .
The following table presents information concerning impaired loans for the
periods indicated:
</TABLE>
<TABLE>
<CAPTION>
June 30, December 31, June 30,
1998 1997 1997
------ ------ ------
<S> <C> <C> <C>
Gross impaired loans which have allowances..$3,391,097 $3,418,277 $1,911,820
Less: Related allowances for loan losses.... (169,555) (410,193) (287,043)
---------- ---------- ----------
Net impaired loans........................$3,221,542 $3,008,084 $1,624,777
========== ========== ==========
</TABLE>
At June 30, 1998, there were no concentrations exceeding 10% of total
loans. A concentration is defined as amounts loaned to a multiple number of
borrowers engaged in similar activities which would cause them to be similarly
affected by changes in economic or other conditions. There were no foreign
loans outstanding at June 30, 1998.
Liquidity is the ability to meet the requirements of customers for loans and
deposit withdrawals in the most economical manner. Some liquidity is ensured by
maintaining assets which may be immediately converted into cash at minimal
cost.
Liquidity from asset categories is provided through cash, noninterest-bearing
and interest bearing deposits with banks, federal funds sold and marketable
investment securities maturing within one year. The loan portfolio also
provides an additional source of liquidity due to the Bank's participating in
the secondary mortgage market. The loan portfolio also provides significant
liquidity by repayment of loans by maturity or scheduled amortization payments.
On the liability side, liquidity is available through customer deposit growth
and short term borrowings. Liquidity must constantly be monitored because
future customer demands for funds are uncertain. The amount of liquidity needed
is determined by the changes in levels of deposits and in the demand for loans.
Management believes that the source of funds mentioned provide sufficient
liquidity.
Results of Operations
The following discussion analyzes the specific components affecting the
changes in net income for the periods analyzed.
Three months ended June 30, 1998 compared to three months ended June 30, 1997
Net income for the second quarter of 1998 amounted to $3,223,937 compared
to $2,576,538 for the second quarter of 1997. This represents an increase of
$647,399 or 25.1%. On a per share basis, both basic and diluted, income was
$.50 compared to $.39.
Total interest income increased $1,166,149 or 8.4% while total interest
expense increased $850,891 or 13.8%. Increased volumes in loans generated an
increase in interest and fees of $441,807 or 3.9% over 1997. Interest on
deposits with banks decreased $2,938, while interest on federal funds sold
increased $79,128. Income on investment securities increased $648,152 or 24.9%
in 1998 as a result of an increase in average volumes of various investment
securities.
Total interest expense amounted to $7,023,657 compared to $6,172,766.
This represents an increase of $850,891 or 13.8%. Interest paid on time
certificates of deposit of $100,000 or more increased $135,666 or 34.6% in 1998
over the same period in 1997, while interest paid on all other deposits
increased $867,757 or 17%. Interest expense on other interest bearing
liabilities decreased $152,532 during the same period of time. Increased
volumes in deposits was the primary reason for the increase in interest expense.
The provision for possible loan losses decreased $107,000 from a charge of
$453,000 in 1997 to $346,000 in 1998. The provision reflects the amount deemed
appropriate by management to provide an adequate reserve to meet the present and
foreseeable risk characteristics of the loan portfolio.
Total other operating income increased $1,130,736 or 34.4%. Income from
fiduciary activities increased $63,673 or nearly 16%. Service charges on
deposit accounts decreased $22,084 while other various service charges increased
$73,827. Mortgage banking income increased $205,269 as a result of increased
volumes of originations and subsequent sales of mortgage loans. Other operating
income reflects a decrease of $184,992 during this period of time. Included in
other operating income in 1997 was a gain of $267,000 on the sale of the
building that had been occupied by Town & Country. Gains on securities
transactions amounted to $204,957 in 1997 while there were none in 1998. The
major contributor to the increase in total other operating income was a one-time
earnings' gain of $1,200,000 as a result of the sale of the Bank's credit card
portfolio.
Total other operating expenses rose $709,863 or nearly 10% over the same
period last year. Increases of $603,995 in salaries and employee benefits,
$52,039 in other operating expenses, $52,474 in occupancy and furniture and
equipment expense and $1,355 in FDIC insurance constitute the total increase.
The increase in salaries and employee benefits was primarily due to increases in
staff as well as increases in wages and increased costs of employee benefits.
One new branch office was opened in the last quaarter of 1997.
Applicable income taxes increased $195,732 due in part to increased
taxable income. The effective tax rate was 25.5% for the second quarter of 1998
compared to 26.1% for 1997.
Six months ended June 30, 1998 compared to six months ended June 30, 1997
Net income increased from $5,165,060 in June 30, 1997 to $6,049,059 in
June 30, 1998. This represents an increase of $883,999 or 17.1%. Net income on
a per share basis (basic) was $.94 for six months ended June 30, 1998 compared
to $.79 for the same period 1997. Sterling's return on average assets was 1.41%
for 1998 compared to 1.35% for 1997. Return on average stockholders' equity was
16.55% and 14.95% respectively for 1998 and 1997.
Total interest income increased $2,491,860 or 9.1%. Earning assets
increased $80,447,395 or 11.5% during this time. Loans increased approximately
$36 million or 7.2%, while securities increased nearly $46 million or 25% over
the same period last year. Federal funds sold amounted to $18.7 million at June
30, 1998 compared to $21.5 million at June 30, 1997. Increased volumes
generated the increase in interest income. Interest and fees on loans increased
$1,194,720. Interest on deposits with banks decreased $10,203 while interest on
federal funds sold increased $232,708. Interest on investment securities
increased $1,074,635. The daily average balance on time deposits with banks was
$38,071 in 1998 compared to $402,071 in 1997. During this time the daily
average balance of federal funds sold increased from $9,709,392 in 1997 to
$18,026,878 in 1998. The daily average balance of investment securities was
$216,578,922 at June 30, 1998 and $177,427,108 at June 30, 1997.
Total interest expense amounted to $13,847,232 reflecting an increase of
$1,939,130 or 17.8% from the $11,908,102 reported in 1997. Interest-bearing
deposits increased 13.8%. Increased volumes in deposits generated a major
portion of the increase in interest on deposits expense of $2,096,018 or 19.6%.
Interest paid on other interest-bearing liabilities decreased $156,888 primarily
as a result of decreased average borrowings during this period of time.
The provision for possible loan loss increased $54,900 in 1998 over 1997.
The provision for loan losses is based upon the monthly review of the loan
portfolio and reflects the amount deemed appropriate by management to provide an
adequate reserve to meet the present and foreseeable risk characteristics of the
loan portfolio.
Total other operating income increased $1,694,560 or 28.1% during the first
six months of 1998 over the same period in 1997. Income from fiduciary
activities increased $171,040 or 22.3%. Service charges on deposit accounts
increased $40,412 while other various service charges increased $192,932.
Mortgage banking income increased $612,577 as a result of increased volumes of
originations and subsequent sales. Other operating income decreased $371,452.
Included in other operating income in 1997 was gains realized on the sale of
real estate and equipment in the amount of $456,000. Gains on securities
transactions amounted to $204,957 in 1997 while there were none in 1998. The
major contributor to the increase in total other operating income was a one-time
eaarnings gain of $1,200,000 as a result of the sale of the Bank's credit card
portfolio.
Total other operating expenses rose $1,057,561 or 7.6% over the same
period last year. Increases of $924,914 in salaries and employee benefits,
$20,855 in occupancy and furniture and equipment expense, $2,325 in FDIC
insurance and $109,467 in other operating expenses constitute the total
increase. The increase in salaries and employee benefits was primarily due to
increases in staff as well as increases in wages and increased costs of employee
benefits. One new branch office was opened in the last quarter of 1997.
Applicable income taxes amounted to $2,011,726 in 1998 compared to
$1,760,896 in 1997. The increase in taxes is due in part to increases in taxable
income. The effective tax rate was 25% and 25.4% respectively for 1998 and
1997.
Three Months ended June 30, 1998 compared to three months ended March 31, 1998
Net income increased $398,815 or 14.1% in the second quarter of 1998 over
the first quarter of 1998. Net income for the three months ended June 30, 1998
was $3,223,937 compared to $2,825,122 for the three months ended March 31, 1998.
Net income on a per share basis (basic) was $.50 for the second quarter of 1998,
compared to $.44 for the first quarter of 1998. Return on average assets was
1.48% for the second quarter of 1998 compared to 1.34% for the first quarter of
1998. Return on average stockholder's equity was 17.48% for the second quarter
of 1998 compared to 15.59% for the first quarter of 1998.
Total interest income increased $394,155 or 2.7% while total interest
expense increased $200,082 or 2.9%. This resulted in an increase in net
interest income of $194,073. Earning assets increased $14,140,116 or 1.9% while
interest-bearing liabilities increased $10,934,815 or 1.6%. Both interest
income and interest expense increased due mainly to these increased volumes.
However, there was a moderate increase on rates paid on interest-bearing
deposits.
The loan loss provision decreased $14,000 over the first quarter of 1998.
Total other operating income increased $1,111,800 or 33.7% over the first
quarter. All categories of other operating income reflect increases over the
first quarter with the exception of income from fiduciary activities and
mortgage banking income which reflects decreases. Increases of $20,440 in
service charges on deposit accounts, $37,145 in other service charges, $41,140
in other operating income and decreases of $14,980 in fiduciary activities and
$171,945 in mortgage banking income along with the one-time earnings gain of
$1,200,000 as a result of the sale of the Bank's credit card portfolio
represents the increase in total other operating income.
Total other operating expenses increased $720,684 or 10.1% over the first
quarter. There was an increase of $427,685 in salaries and employee benefits,
$44,194 in furniture and equipment expenses, $832 in FDIC insurance and $268,188
in other operating expenses. Net occupancy expense decreased $20,215.
Contributing to the increase in other operating expenses were increases in
education and training expense, marketing expense, professional services and
Visa fees.
Applicable income taxes increased $200,374 over the first quarter as a
result of an increase in taxable income.
Part I - Financial Information
Quantitative and Qualitative Disclosures About Market Risk
Discussion of Market Risk and Interest Rate Sensitivity
As a financial institution, the primary component of the Bank's market risk
is interest rate volatility. Changes in interest rates will ultimately impact
the Bank's interest income from earning assets and the interest expense from
funding sources (deposits and debt).
Based upon the Bank's nature of operations, the Bank is not subject to
foreign currency exchange or commodity price risk. The Bank's market area for
loans and deposits is concentrated in Lancaster County, Pennsylvania and as such
is subject to risks associated with the local economy. The Bank does not own
any trading assets. The Bank does not have any hedging transactions in place
such as interest rate swaps and caps.
Management endeavors to control the exposure of earnings to changes in
interest rates. The Bank's asset/liability committee manages interest rate risk
by various means including '"Gap" management and internally developed models and
reports. In 1997, the Bank also utilized Sheshunoff Interest Rate Risk
management services and IBAA investment portfolio valuation services to enhance
risk exposure review. Interest repricing of assets and liabilities is measured
over future time periods (interest rate sensitivity gaps). While all time gaps
are measured, management's primary focus is the cumulative gap through six
months, as this time frame directly impacts net interest income in the near term
time horizon and is most difficult to make reactive adjustment to actual rate
movements.
The Bank has various investments structured to change investment yield with
current market conditions. Assets subject to repricing include federal funds
sold (repricing daily), loans floating to "treasury bill" indexes (repricing
monthly) and loans tied to "prime" or other indexes subject to immediate
change.
Other factors effecting income are maturing and contracted repayments and\
prepayments of existing loans and investments. These cash flows will be
re-invested at current market yields.
The Bank's funding liabilities (customer deposits and borrowed funds) have
more complex repricing characteristics, since interest bearing deposits are
subject to rate change but are not specifically indexed to "prime" or "treasury"
indexes. Time certificates and borrowed money are subject to interest rate
change at maturity. The Bank's deposit funding is essentially comprised of
"core" deposits that have been historically loyal and stable, and these
deposits, with the exception of certificates of deposit, have not been rate
sensitive. All interest rates do not move in full and equal amounts for loans
and deposits. Deposit rates historically lag loans in rate movement, and rate
movement occurs to a smaller degree for deposits than loans. Modeling is used
to forecast projected impact to the net interest margin as a result of
rate movements, either increasing or decreasing. Historic pricing correlations
are calculated for all interest-bearing deposit products for rate change
repricing impact as - immediate, monthly, and annually over a five year time
period. Management's view of interest rate sensitivity reflects a calculated
interpretation of net interest margin exposure to rate changes. Pricing
correlations are constantly refined by management. There is no guarantee that
past history will accurately reflect future changes.
Although the make-up of the balance sheet is subject to change from time to
time, management is of the opinion that there have been no material changes in
reported market risks faced by the company since the end of the most recent
fiscal year. Quantitative and qualitative disclosures about market risk was
listed in Part II, Item 7A, of the Form 10-K for the fiscal year ended December
31, 1997.
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings.
As of June 30, 1998, there were no material pending legal proceedings,
other than ordinary routine litigation incidental to business, to which the
Corporation or its subsidiaries are a party or of which any of their property is
the subject.
Item 4 - Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of Sterling Financial Corporation was
held on April 28, 1998. The following individuals were elected to Sterling's
Board of Directors to hold office for the term specified:
For a Term of Three Years
Nominee In Favor Withheld
Richard H. Albright, Jr. 4,830,987 30,147
Howard E. Groff, Jr. 4,849,426 11,708
John E. Stefan 4,849,729 11,405
Glenn R. Walz 4,849,741 11,393
There are six continuing directors whose terms of office will expire at the
1999 or 2000 Annual Meeting. They are as follows:
Robert H. Caldwell J. Roger Moyer
Joan R. Henderson E. Glenn Nauman
J. Robert Hess
Calvin G. High
The results of the voting on the following additional item was as follows:
Proposal to ratify the selection of Trout, Ebersole & Groff as the
Corporation's independent certified public accountants for the year ending
December 31, 1998.
Votes For Votes Against Abstentions
4,836,565 7,484 17,085
Item 6 - Exhibits and Reports on Form 8-K
(a) EXHIBITS
21. Subsidiaries of the Registrant
27. Financial Data Schedule
(b) REPORTS ON FORM 8-K - A report on Form 8-K dated April 28, 1998 was
filed April 28, 1998 pursuant to Item 5 and Item 7 on Form 8-K filing, as
Exhibit 99, a copy of a Sterling Financial Corporation press release announcing
the declaration of a 5% stock dividend.
A report on Form 8-K dated May 29, 1998 was filed June 1, 1998 pursuant to
Item 5 and Item 7 on Form 8-K filing, as Exhibit 99, a copy of the press release
announcing that the Registrant's subsidiary, Bank of Lancaster County, N.A.,
completed the acquisition of the Leola branch deposit accounts from CoreStates
Bank, N.A. previosly announced in February 1998.
Signatures
Pursuant to the requirements 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.
Sterling Financial Corporation
Date: August 7, 1998 By: /s/ John E. Stefan
John E. Stefan
Chairman of the Board, President
and Chief Executive Officer
Date: August 7, 1998 By: /s/ Jere L. Obetz
Jere L. Obetz
Executive Vice President/Treasurer
Chief Financial Officer
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
The following are the subsidiaries of Sterling Financial Corporation:
Subsidiary State of Incorporation or Organization
Bank of Lancaster County, N.A. Pennsylvania (National Banking Association)
1 East Main Street
P.O. Box 0300
Strasburg, PA 17579
Town & Country, Inc. (Wholly owned Pennsylvania
Subsidiary of Bank of Lancaster
County, N.A.)
1097 Commercial Avenue
East Petersburg, PA 17520
Sterling Mortgage Services, Inc. Pennsylvania
101 North Pointe Boulevard
Lancaster, PA 17601-4133
(Presently inactive)
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 33627290
<INT-BEARING-DEPOSITS> 31216
<FED-FUNDS-SOLD> 18700000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 156531431
<INVESTMENTS-CARRYING> 73162922
<INVESTMENTS-MARKET> 74338420
<LOANS> 531690629
<ALLOWANCE> 8047151
<TOTAL-ASSETS> 886047347
<DEPOSITS> 753568764
<SHORT-TERM> 20221834
<LIABILITIES-OTHER> 21149549
<LONG-TERM> 13297941
0
0
<COMMON> 32342165
<OTHER-SE> 45467094
<TOTAL-LIABILITIES-AND-EQUITY> 886047347
<INTEREST-LOAN> 23078654
<INTEREST-INVEST> 6759731
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 29838385
<INTEREST-DEPOSIT> 12807605
<INTEREST-EXPENSE> 13847232
<INTEREST-INCOME-NET> 15991153
<LOAN-LOSSES> 706000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 14941296
<INCOME-PRETAX> 8060785
<INCOME-PRE-EXTRAORDINARY> 8060785
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6049059
<EPS-PRIMARY> .94
<EPS-DILUTED> .93
<YIELD-ACTUAL> 7.996
<LOANS-NON> 1308269
<LOANS-PAST> 1466127
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 7730000
<CHARGE-OFFS> 503031
<RECOVERIES> 114182
<ALLOWANCE-CLOSE> 8047151
<ALLOWANCE-DOMESTIC> 8047151
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 4471853
</TABLE>
