SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - Q
_X_ Quarterly report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the quarter ended March 31, 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 - 16123
---------------
Northeast Bancorp
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maine 01 - 0425066
- ---------------------------------------- --------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
232 Center Street, Auburn, Maine 04210
- ---------------------------------------- --------------------------------------
(Address of principal executive offices) (Zip Code)
(207) 777 - 6411
- -------------------------------------------------------------------------------
Registrant's telephone number, including area code
<PAGE> 2
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 periods 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 __
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Not Applicable
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Shares outstanding as of May 11, 1998: 2,461,030 of common stock, $1.00 par
value per share.
- -------------------------------------------------------------------------------
NORTHEAST BANCORP AND SUBSIDIARIES
Table of Contents
Part I. Financial Information
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets
March 31, 1998 and June 30, 1997
Consolidated Statements of Income
Three Months ended March 31, 1998 and 1997
Consolidated Statements of Income
Nine Months ended March 31, 1998 and 1997
Consolidated Statements of Changes in Shareholders' Equity
Nine Months ended March 31, 1998 and 1997
Consolidated Statements of Cash Flows
Nine Months ended March 31, 1998 and 1997
<PAGE> 3
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operation
Item 3. Quantitative and Qualitative Disclosure about Market Risk
Part II. Other Information
Items 1 - 6.
Signature Page
Index to Exhibits
NORTHEAST BANCORP AND SUBSIDIARY
Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997
_______________ _______________
<S> <C> <C>
Assets
Cash and due from banks $ 4,976,642 $ 6,112,425
Interest bearing deposits in other banks 286,735 443,021
Federal Home Loan Bank overnight deposits 4,074,000 12,218,898
Trading account securities at market 58,063 25,000
Available for sale securities 16,398,409 28,810,624
Federal Home Loan Bank stock 5,255,700 4,121,000
Loans held for sale 212,800 240,000
Loans 270,342,582 222,885,954
Deferred loan origination fees/cost 183,723 (203,819)
Allowance for loan losses (3,038,000) (2,741,809)
--------------- ---------------
Net loans 267,488,305 219,940,326
Bank premises and equipment, net 4,448,881 4,774,561
Real estate held for investment 272,949 361,654
Other real estate owned (net of allowance
for losses of $4,329 at 3/31/98 and
$50,839 at 6/30/97) 438,602 563,207
Goodwill (net of accumulated amortization
of $1,458,715 at 3/31/98 and $1,236,434
at 6/30/97) 1,998,008 2,220,289
Other assets 4,714,149 4,198,689
--------------- ---------------
Total Assets 310,623,243 284,029,694
=============== ===============
Liabilities and Shareholders' Equity
<PAGE> 4
Liabilities
Deposits $ 173,971,101 $ 172,921,286
Repurchase Agreements 4,440,979 5,098,622
Advances from Federal Home Loan Bank 105,113,653 80,494,471
Notes payable 1,069,444 1,298,611
Other Liabilities 2,283,151 2,121,123
--------------- ---------------
Total Liabilities 286,878,328 261,934,113
Shareholders' Equity
Preferred stock, Series A, 45,454
shares issued and outstanding 999,988 999,988
Preferred stock, Series B, 71,428
shares issued and outstanding 999,992 999,992
Common stock, par value $1, 2,236,668
and 1,462,909 shares issued and outstanding
at 3/31/98 and 6/30/97, respectively 2,236,668 1,462,909
Additional paid in capital 7,870,947 7,699,883
Retained earnings 11,738,073 11,266,984
--------------- ---------------
23,845,668 22,429,756
Net unrealized losses on available for
sale securities (100,753) (334,175)
--------------- ---------------
Total Shareholders' Equity 23,744,915 22,095,581
--------------- ---------------
Total Liabilities and Shareholders' Equity $ 310,623,243 $ 284,029,694
=============== ===============
</TABLE>
NORTHEAST BANCORP AND SUBSIDIARY
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1997
--------------- ---------------
<S> <C> <C>
Interest and Dividend Income
Interest on FHLB overnight deposits $ 188,201 $ 123,798
Interest on loans & loans held for sale 5,323,547 4,824,158
Interest on available for sale securities 281,251 537,053
Dividends on Federal Home Loan Bank stock 70,591 62,158
Other Interest Income 5,384 4,249
--------------- ---------------
Total Interest Income 5,868,974 5,551,416
Interest Expense
Deposits 1,845,499 1,766,509
Repurchase agreements 51,244 50,744
<PAGE> 5
Other borrowings 1,172,303 1,088,090
--------------- ---------------
Total Interest Expense 3,069,046 2,905,343
--------------- ---------------
Net Interest Income 2,799,928 2,646,073
Provision for loan losses 156,304 153,452
--------------- ---------------
Net Interest Income after Provision
for Loan Losses 2,643,624 2,492,621
Other Income
Service charges 227,757 259,084
Available for sale securities gains (losses) 37,439 10,652
Gain (Loss) on trading account -- 64,841
Other 330,163 322,926
--------------- ---------------
Total Other Income 595,359 657,503
Other Expenses
Salaries and employee benefits 1,069,548 1,163,669
Net occupancy expense 232,617 223,434
Equipment expense 198,337 225,365
Goodwill amortization 74,094 74,094
FDIC Insurance Assessment -- --
Other 549,040 769,564
--------------- ---------------
Total Other Expenses 2,123,636 2,456,126
--------------- ---------------
Income Before Income Taxes 1,115,347 693,998
Income tax expense 382,986 273,364
--------------- ---------------
Net Income $ 732,361 $ 420,634
=============== ===============
Earnings Per Share
Basic $ 0.31 $ 0.18
Diluted $ 0.27 $ 0.16
</TABLE>
NORTHEAST BANCORP AND SUBSIDIARY
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Nine months Ended
March 31,
1998 1997
--------------- ---------------
<S> <C> <C>
Interest and Dividend Income
<PAGE> 6
Interest on FHLB overnight deposits $ 451,878 $ 315,894
Interest on loans & loans held for sale 15,752,172 13,920,118
Interest on available for sale securities 1,207,686 1,744,076
Dividends on Federal Home Loan Bank stock 212,331 162,285
Other Interest Income 14,762 24,167
--------------- ---------------
Total Interest Income 17,638,829 16,166,540
Interest Expense
Deposits 5,630,592 5,233,423
Repurchase agreements 154,300 143,700
Other borrowings 3,481,186 2,889,823
--------------- ---------------
Total Interest Expense 9,266,078 8,266,946
--------------- ---------------
Net Interest Income 8,372,751 7,899,594
Provision for loan losses 546,467 460,710
--------------- ---------------
Net Interest Income after Provision
for Loan Losses 7,826,284 7,438,884
Other Income
Service charges 741,397 813,967
Available for sale securities gains (losses) 245,131 115,532
Gain (Loss) on trading account 1,797 84,503
Other 904,206 583,376
--------------- ---------------
Total Other Income 1,892,531 1,597,378
Other Expenses
Salaries and employee benefits 3,506,114 3,459,402
Net occupancy expense 675,151 562,647
Equipment expense 652,433 637,016
Goodwill amortization 222,281 222,281
FDIC Insurance Assessment -- 296,860
Other 2,110,501 2,043,444
--------------- ---------------
Total Other Expenses 7,166,480 7,221,650
--------------- ---------------
Income Before Income Taxes 2,552,335 1,814,612
Income tax expense 893,343 692,190
--------------- ---------------
Net Income $ 1,658,992 $ 1,122,422
=============== ===============
Earnings Per Share
Basic $ 0.70 $ 0.48
Diluted $ 0.62 $ 0.44
</TABLE>
NORTHEAST BANCORP AND SUBSIDIARY
Consolidated Statements of Changes in Shareholders' Equity
<PAGE> 7
Nine Months Ended March 31, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
Net Unrealized
Gains(Losses)
Additional on Available
Common Preferred Paid-In Retained for Sale Treasury
Stock Stock Capital Earnings Securities Stock Total
------------ ----------- ----------- --------------------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1996 1,421,950 1,999,980 7,516,228 10,315,043 (837,354) (52,277) 20,363,570
Net income for nine months
ended March 31, 1997 -- -- -- 1,122,422 -- -- 1,122,422
Employee Stock Bonus -- -- (268) -- -- 13,642 13,374
Employee Stock Purchase 799 -- 9,663 -- -- -- 10,462
Dividends paid on common
Stock -- -- -- (295,808) -- -- (295,808)
Dividends paid on preferred
Stock -- -- -- (104,998) -- -- (104,998)
Common Stock Warrants
Exercised 20,000 -- 83,450 -- -- (28,420) 75,030
Stock Options Exercised 19,940 -- 88,005 -- -- 67,055 175,000
Net change in unrealized
losses on available for sale
securities -- -- -- -- 10,324 -- 10,324
------------ ----------- ----------- --------------------------- ------------- ------------
Balance March 31, 1997 $ 1,462,689 $1,999,980 $7,697,078 $ 11,036,659 $ (827,030) $ 0 $21,369,376
============ =========== =========== =========================== ============= ============
Balance at June 30, 1997 1,462,909 1,999,980 7,699,883 11,266,984 (334,175) -- 22,095,581
Net income for nine months
ended March 31, 1998 -- -- -- 1,658,992 -- -- 1,658,992
Employee Stock Bonus 250 -- 4,397 -- -- -- 4,647
<PAGE> 8
Employee Stock Purchase 502 -- 8,167 -- -- -- 8,669
Stock Split in the form of a
dividend 740,807 -- -- (741,902) -- -- (1,095)
Dividends paid on common
stock -- -- -- (341,003) -- -- (341,003)
Dividends paid on preferred
stock -- -- -- (104,998) -- -- (104,998)
Stock Options Exercised 32,200 -- 158,500 -- -- 44,988 235,688
Treasury Stock Purchased -- -- -- -- -- (44,988) (44,988)
Net change in unrealized
losses on available for
sale securities -- -- -- -- 233,422 -- 233,422
------------ ----------- ----------- --------------------------- ------------- ------------
Balance March 31, 1998 $ 2,236,668 $1,999,980 $7,870,947 $ 11,738,073 $ (100,753) $ 0 $23,744,915
============ =========== =========== =========================== ============= ============
</TABLE>
NORTHEAST BANCORP AND SUBSIDIARY
Consolidated Statements of Cash Flow
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
1998 1997
--------------- ---------------
<S> <C> <C>
Cash provided by operating activities $ 1,650,521 $ 2,205,901
Cash flows from investing activities:
FHLB stock purchased (1,134,700) (1,083,600)
Available for sale securities purchased (15,331,083) (13,262,186)
Available for sale securities principal
reductions 1,015,807 1,184,672
Available for sale securities matured 1,249,497 1,150,000
Available for sale securities sold 26,018,323 12,214,602
New loans, net of repayments & charge offs (47,512,954) (28,084,724)
Net capital expenditures (174,369) (790,108)
Real estate owned sold 161,896 399,257
<PAGE> 9
Real estate held for investment purchased -- (1,965)
Real estate held for investment sold 68,743 --
--------------- ---------------
Net cash provided by (used in) investing
activities (35,638,840) (28,274,052)
Cash flows from financing activities:
Net change in deposits 1,049,815 7,414,372
Net change in repurchase agreements (657,643) 1,025,630
Dividends paid (446,001) (400,806)
Proceeds from stock issuance 215,166 273,866
Net increase in advances from Federal
Home Loan Bank of Boston 24,619,182 14,126,875
Net change in notes payable (229,167) (127,193)
--------------- ---------------
Net cash used (provided) by financing
activities 24,551,352 22,312,744
--------------- ---------------
Net decrease in cash and cash equivalents (9,436,967) (3,755,407)
Cash and cash equivalents, beginning of period 18,774,344 13,873,947
--------------- ---------------
Cash and cash equivalents, end of period $ 9,337,377 $ 10,118,540
=============== ===============
Cash and cash equivalents include cash on
hand, amounts due from banks, interest
bearing deposits and federal funds sold
Supplemental schedule of noncash investing
activities:
Net decrease in valuation for unrealized
market value adjustments on available for
sale securities 233,422 10,324
Net transfer from Loans to Other Real
Estate Owned 56,325 551,265
Supplemental disclosure of cash paid during
the period for:
Income taxes paid, net of refunds 434,000 291,000
Interest paid 9,209,376 8,170,414
</TABLE>
NORTHEAST BANCORP AND SUBSIDIARY
Notes to Consolidated Financial Statements
March 31, 1998
1. Basis of Presentation
---------------------
The accompanying unaudited condensed and consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
<PAGE> 10
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 nine month
period ended March 31, 1998 are not necessarily indicative of the results that
may be expected for the year ending June 30, 1998. For further information,
refer to the audited consolidated financial statements and footnotes thereto
for the fiscal year ended June 30, 1997 included in the Company's annual report
on Form 10-K.
2. Merger
------
On October 24, 1997, the Company completed the merger of Cushnoc Bank & Trust
Company (Cushnoc) into its wholly owned subsidiary Northeast Bank (the Bank).
Under the terms of the agreement, the Company issued 2.089 shares of its common
stock for each share of Cushnoc, which had 90,000 common shares outstanding.
The business combination was accounted for under the pooling of interest method
and, accordingly, the consolidated financial statements for periods prior to
the combination have been restated to include the accounts and results of
operations of Cushnoc.
The results of operations previously reported by the separate companies and the
combined amounts presented in the accompanying consolidated financial
statements are summarized below.
<TABLE>
<CAPTION>
Nine Months
Three months ended ended
September 31, March 31,
1996 1997 1997
--------------- --------------- ---------------
<S> <C> <C> <C>
Interest Income:
Northeast $ 4,716,634 $ 5,396,273 $ 14,732,307
Cushnoc 497,675 481,203 1,434,233
Combined 5,214,309 5,877,476 16,166,540
Net Income:
Northeast $ 184,261 $ 552,841 $ 1,162,411
Cushnoc 6,980 17,724 (39,989)
Combined 191,241 570,565 1,122,422
At September 30, At March 31,
1996 1997 1997
--------------- --------------- ---------------
Shareholders' Equity:
Northeast $ 18,201,498 $ 20,464,660 $ 19,197,037
Cushnoc 2,218,058 2,212,693 2,172,339
Combined 20,419,556 22,677,353 21,369,376
</TABLE>
No adjustments were necessary to conform Cushnoc's method of accounting to the
methods used by Northeast.
<PAGE> 11
3. Securities
----------
Securities available for sale at cost and approximate market values are
summarized below.
<TABLE>
<CAPTION>
March 31, 1998 June 30, 1997
------------------------- -------------------------
Market Market
Cost Value Cost Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Debt securities issued by
the U.S. Treasury and
other U.S. Government
corporations and agencies $ 4,947,085 $ 4,949,517 $ 2,948,525 $ 2,905,400
Corporate bonds 203,210 203,525 259,749 252,805
Mortgage-backed securities 9,999,924 10,038,344 25,211,936 24,801,837
Equity securities 1,400,846 1,207,023 896,739 850,582
------------ ------------ ------------ ------------
$16,551,065 $16,398,409 $29,316,949 $28,810,624
============ ============ ============ ============
March 31, 1998 June 30, 1997
------------------------- -------------------------
Market Market
Cost Value Cost Value
------------ ------------ ------------ ------------
Due in one year or less $ 347,689 $ 346,814 $ 398,829 $ 398,829
Due after one year
through five years 553,481 551,703 1,403,991 1,396,491
Due after five years
through ten years 1,249,729 1,253,900 405,454 398,510
Due after ten years 2,999,396 3,000,625 1,000,000 964,375
Mortgage-backed securities
(including securities with
interest rates ranging
from 5.15% to 9.0% maturing
September 2003 to February
2026) 9,999,924 10,038,344 25,211,936 24,801,837
Equity securities 1,400,846 1,207,023 896,739 850,582
------------ ------------ ------------ ------------
$16,551,065 $16,398,409 $29,316,949 $28,810,624
============ ============ ============ ============
</TABLE>
4. Allowance for Loan Losses
-------------------------
The following is an analysis of transactions in the allowance for loan losses:
<TABLE>
<CAPTION>
Nine Months Ended
<PAGE> 12
March 31,
1998 1997
------------ ------------
<S> <C> <C>
Balance at beginning of year $ 2,741,809 $ 2,760,872
Add provision charged to operations 546,467 460,710
Recoveries on loans previously charged off 249,202 111,516
------------ ------------
3,537,478 3,333,098
Less loans charged off 499,478 497,316
------------ ------------
Balance at end of period $ 3,038,000 $ 2,835,782
============ ============
</TABLE>
5. Advances from Federal Home Loan Bank
------------------------------------
A summary of borrowings from the Federal Home Loan Bank is as follows:
<TABLE>
<CAPTION>
March 31, 1998
-----------------------------------------------
Principal Interest Maturity
Amounts Rates Dates
--------------- --------------- -------------
<C> <C> <C>
$ 56,230,931 5.64% - 6.39% 1999
4,000,000 5.56% - 6.27% 2001
1,444,399 6.21% - 6.49% 2002
5,398,939 5.71% - 6.64% 2003
2,039,384 6.36% - 6.67% 2004
5,000,000 5.25% 2005
2,000,000 6.65% 2006
29,000,000 4.89% - 5.68% 2008
---------------
$ 105,113,653
===============
June 30, 1997
-----------------------------------------------
Principal Interest Maturity
Amounts Rates Dates
--------------- --------------- -------------
$ 55,458,706 4.97% - 6.40% 1998
15,606,482 5.64% - 6.20% 1999
3,000,000 6.27% 2000
273,080 6.40% 2001
1,441,827 6.21% - 6.49% 2002
740,762 6.61% - 6.64% 2003
1,973,614 6.36% - 6.67% 2004
2,000,000 6.65% 2005
---------------
$ 80,494,471
===============
<PAGE> 13
</TABLE>
6. Earnings Per Share
------------------
On December 31, 1997, the Company adopted FASB Statement No. 128, "Earnings Per
Share". Earnings per share for prior periods have been restated in accordance
with the requirements of Statement No. 128.
7. Subsequent Events
-----------------
In April of 1998, Square Lake Holding Corporation exercised 10,000 warrants at
an aggregate price of $46,700. During the month of April 1998, Square Lake
Holding Corporation also converted its Series B convertible preferred stock on
a three for one basis and received 214,284 shares of common stock. The exercise
of the warrants and the conversion of the preferred stock increased the
Company's common shares outstanding to 2,460,952. Square Lake Holding
Corporation currently holds 45,454 shares of Series A preferred stock
convertible at a three for one rate as well as the ability to exercise 153,146
warrants.
NORTHEAST BANCORP AND SUBSIDIARY
Part I.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operation
------------
Description of Operations
- -------------------------
Northeast Bancorp (the "Company"), is a unitary savings and loan holding
company with the Office of Thrift Supervision ("OTS") as its primary regulator.
The Company has one wholly-owned subsidiary, Northeast Bank, FSB (the "Bank"),
which has branches located in Auburn, Augusta, Bethel, Harrison, South Paris,
Buckfield, Mechanic Falls, Brunswick, Richmond and Lisbon Falls, Maine.
Merger
- ------
On October 24, 1997, the Bank completed its merger with Cushnoc Bank & Trust
Company (Cushnoc). On October 24, 1997, Cushnoc had approximately $21,000,000
in total assets and $2,200,000 in stockholders' equity. Under the terms of the
agreement, the Company issued 2.089 shares of its common stock for each share
of Cushnoc, which had 90,000 common shares outstanding. The acquisition was
accounted for under the pooling of interest method. In accordance with the
pooling of interest accounting method, the Company's financial statements and
information provided for previous reporting periods have been restated to
include Cushnoc's financial information.
Financial Condition
- -------------------
Total consolidated assets were $310,623,243 on March 31, 1998, which
represents an increase of $26,593,549 from June 30, 1997. Total net loans,
Federal Home Loan Bank ("FHLB") stock and other assets increased by
<PAGE> 14
$47,547,979, $1,134,700 and $515,460, respectively, while cash equivalents and
securities available for sale decreased by $9,436,967 and $12,412,215,
respectively, during the same period. Total deposits and repurchase agreements
as well as FHLB borrowings increased by $392,172 and $24,619,182, respectively
from June 30, 1997 to March 31, 1998.
The funds available from the decrease in cash equivalents and securities
available for sale as well as the increase in FHLB borrowings were utilized to
support the increase in the loan portfolio from June 30, 1997 to March 31,
1998. FHLB stock increased due to levels of FHLB advances during the period.
The FHLB requires financial institutions to hold a certain level of FHLB stock
based on advances outstanding. The increase in other assets was primarily due
to deferred mortgage servicing rights and federal income tax receivable.
The decrease in securities available for sale was due to the Company
repositioning the fixed rate mortgage-backed securities portfolio, taking
advantage of price fluctuations in the current market. The sale of these
securities strengthens the Company's Asset/Liability (ALCO) position and helps
mitigate the Company's interest rate risk in an increasing rate environment.
At March 31, 1998, the carrying value of securities available for sale by the
Company was $16,398,409, which is $152,656 less than the cost of the underlying
securities. The difference between the carrying value and the cost of the
securities was primarily attributable to the decline in the market value of
equity securities from the prices at the time of purchase. Management
attributes the reduction in the market value of equity securities to the
decline of the stock market at the end of the quarter, which had a greater
affect on the market value of the Company's investments in high-tech stocks.
Management reviews the portfolio of investments on an ongoing basis to
determine if there has been an other-than-temporary decline in value. Some of
the considerations management makes in the determination are market valuations
of particular securities and economic analysis of the securities' sustainable
market values based on the underlying companies profitability.
Total loans increased by $47,456,628 for the nine months ended March 31, 1998.
The loan portfolio growth was in 1-4 family mortgages, consumer installment and
commercial loans. In the March 1998 quarter, the Bank purchased approximately
$39,000,000 of 1-4 family mortgages. The purchase consisted of 1-4 family
adjustable and fixed rate mortgages secured by property located primarily in
the Midwest states. The Bank's local market, as well as the secondary market,
continues to be very competitive for loan origination volume. The local
competitive environment and customer response to favorable secondary market
rates have affected the Bank's ability to increase the loan portfolio. In the
effort to increase loan volume, the Bank's offering rates for its loan products
have been reduced to compete in the various markets. The Bank will experience
some margin compression due to decreased loan rates.
The loan portfolio contains elements of credit and interest rate risk. The
Bank primarily lends within its local market areas, which management believes
helps them to better evaluate credit risk. The Bank also maintains a well
collateralized position in real estate mortgages. Residential real estate
mortgages make up 65% of the total loan portfolio, in which 63% of the
residential loans are variable rate products, as compared to 70% and 53%,
respectively, at March 31, 1997. It is management's intent to increase the
volume in variable rate residential loans to reduce the interest rate risk in
this area.
<PAGE> 15
At March 31, 1998, 18% of the Bank's total loan portfolio balance is commercial
real estate mortgages. Similar to residential mortgages, the Bank tries to
mitigate credit risk by lending in its local market area as well as maintaining
a well collateralized position in real estate. Commercial real estate loans
have minimal interest rate risk as 88% of the portfolio consists of variable
rate products.
Commercial loans make up 9% of the total loan portfolio, of which 66% are
variable rate instruments. The credit loss exposure on commercial loans is
highly dependent on the cash flow of the customer's business. The Bank
attempts to mitigate losses in commercial loans through lending in accordance
with the Company's credit policies.
Consumer and other loans make up 8% of the loan portfolio. Since these loans
are primarily fixed rate products, they have interest rate risk when market
rates increase. These loans also have credit risk with, at times, minimal
collateral security. Management attempts to mitigate these risks by keeping the
products offered short-term, receiving a rate of return commensurate with the
measured risks, and lending to individuals in the Bank's known market areas.
The Bank's allowance for loan losses was $3,038,000 as of March 31, 1998 versus
$2,741,809 as of June 30, 1997, representing 1.12% and 1.23% of total loans,
respectively. The Bank had non-performing loans totaling $2,926,000 at March
31, 1998 compared to $2,881,000 at June 30, 1997. Non-performing commercial
mortgages increased by 33% from June 30, 1997 to March 31, 1998. This increase
was due to the addition of a single loan and in management's opinion does not
indicate a trend. Non-performing loans represented .94% and 1.01% of total
assets at March 31, 1998 and June 30, 1997, respectively. The Bank's allowance
for loan losses was equal to 104% and 95% of the total non-performing loans at
March 31, 1998 and June 30, 1997, respectively. At March 31, 1998, the Bank
had approximately $451,000 of loans classified substandard, exclusive of the
non-performing loans stated above, that could potentially become non-performing
due to delinquencies or marginal cash flows. These substandard loans have been
reduced substantially in the past twelve months. The decrease was attributed
to the reclassification of loans to lower risk classifications as a result of
favorable changes in the borrower's financial condition, indicating a decreased
potential for these loans becoming non-performing assets. The following table
represents the Bank's non-performing loans as of March 31, 1998 and June 30,
1997, respectively:
<TABLE>
<CAPTION>
March 31, June 30,
Description 1998 1997
------------------------- --------------- ---------------
<S> <C> <C>
1-4 Family Mortgages $ 940,000 $ 1,268,000
Commercial Mortgages 1,400,000 1,052,000
Commercial Installment 536,000 492,000
Consumer Installment 50,000 69,000
--------------- ---------------
Total non-performing $ 2,926,000 $ 2,881,000
=============== ===============
</TABLE>
The following table reflects the quarterly trend of total delinquencies 30
<PAGE> 16
days or more past due, including non-performing loans, for the Bank as a
percentage of total loans:
<TABLE>
<C> <C> <C> <C>
6-30-97 9-30-97 12-31-97 3-31-98
1.94% 1.64% 1.72% 1.44%
</TABLE>
At March 31, 1998, loans classified as non-performing included approximately
$646,000 of loan balances that are current and paying as agreed, but which the
Bank maintains as non-performing until the borrower has demonstrated a
sustainable period of performance. Excluding these loans, the Bank's total
delinquencies 30 days or more past due, as a percentage of total loans, would
be 1.20% as of March 31, 1998.
The level of the allowance for loan losses as a percentage of total loans has
decreased due to the increase of loan volume, while the level of allowance for
loan losses as a percentage of non-performing loans increased at March 31,
1998, when compared to June 30,1997. Based on reviewing the credit risk and
collateral of delinquent, non-performing and classified loans, management
considers the allowance for loan losses to be adequate.
On a regular and ongoing basis, management evaluates the adequacy of the
allowance for loan losses. The process to evaluate the allowance involves a
high degree of management judgement. The methods employed to evaluate the
allowance for loan losses are quantitative in nature and consider such factors
as the loan mix, the level of non-performing loans, delinquency trends, past
charge-off history, loan reviews and classifications, collateral, and the
current economic climate.
While management uses its best judgement in recognizing loan losses in light of
available information, there can be no assurance that the Company will not have
to increase its provision for loan losses in the future as a result of changing
economic conditions, adverse markets for real estate or other factors. In
addition, various regulatory agencies, as an integral part of their examination
process, periodically review the Bank's allowance for loan losses. Such
agencies may require the Bank to recognize additions to the allowance for loan
losses based on their judgements about information available to them at the
time of their examination. The Bank's most recent examination by the OTS was
on September 22, 1997. At the time of the exam the regulators proposed no
additions to the allowance for loan losses.
Total deposits were $173,971,101 and securities sold under repurchase
agreements were $4,440,979 as of March 31, 1998. These amounts represent an
increase of $1,049,815 and a decrease of $657,643, respectively, compared to
June 30, 1997. The fluctuations in deposits and repurchase agreements were due
to normal business transactions. Brokered deposits represented $7,078,080 of
the total deposits at March 31, 1998. The Bank utilizes brokered deposits as
alternative sources of funds. Brokered deposits are similar to local deposits,
in that both are interest rate sensitive with respect to the Bank's ability to
retain the funds. Cross selling strategies are employed by the Bank to develop
deposit growth. Even though deposit interest rates are competitive in our
local markets, the rate of return remains stronger in other financial
instruments such as mutual funds and annuities. Like other companies in the
banking industry, the Bank will be challenged to maintain and/or increase its
<PAGE> 17
core deposit base.
Total advances from the FHLB were $105,113,653 as of March 31, 1998, an
increase of $24,619,182 compared to June 30, 1997. The cash received from the
increase in FHLB advances was utilized for the increased volume in loans. The
Bank's current advance availability, subject to the satisfaction of certain
conditions, is approximately $22,000,000 greater than the March 31, 1998
advances reported. Mortgages, free of liens, pledges and encumbrances are
required to be pledged to secure FHLB advances. The Bank utilizes FHLB
advances as alternative sources of funds, when the interest rates of the
advances are less than market deposit interest rates and to fund short-term
liquidity demands for loan volume. With the borrowing capacity at the Federal
Home Loan Bank, the normal growth in bank deposits and repurchase agreements
and the immediate availability of the Bank's cash equivalents as well as
securities available for sale, management believes that the Company's available
liquidity resources are sufficient to support the Company's needs.
Total equity of the Company was $23,744,915 as of March 31, 1998 versus
$22,095,581 at June 30, 1997. Book value per common share was $9.72 as of
March 31, 1998 versus $9.16 at June 30, 1997. Total equity to total assets of
the Company as of March 31, 1998 was 7.64%. On December 15, 1997, the Company
paid a 50% stock dividend to all shareholders. As a result of the stock
dividend, the Company's common shares outstanding increased by 740,807 shares.
The June 30, 1997 book value per common share and the March 31, 1997 earnings
per share have been restated as a result of the stock dividend.
At March 31, 1998, the Bank's regulatory capital was in compliance with
regulatory capital requirements as follows:
<TABLE>
<CAPTION>
Actual Capital Required Capital Excess Capital
Amount Ratio Amount Ratio Amount
------------- ------- ------------- ------- --------------
<S> <C> <C> <C> <C> <C>
Tangible capital $ 21,789,000 7.06% $ 4,629,000 1.50% $ 17,160,000
Core capital $ 21,789,000 7.06% $ 9,257,000 3.00% $ 12,532,000
Leverage capital $ 21,789,000 7.06% $ 12,343,000 4.00% $ 9,446,000
Risk-based capital $ 23,062,000 11.35% $ 16,257,000 8.00% $ 6,805,000
</TABLE>
Results of Operations
Net income for the quarter ended March 31, 1998 was $732,361. Basic earnings
per share were $.31 and diluted earnings per share were $.27 for the quarter
ended March 31, 1998. This compares to earnings of $420,634 or basic earnings
per share of $.18 and diluted earnings per share of $.16 for the quarter ended
March 31, 1997. Net income for the nine months ended March 31, 1998 was
$1,658,992 versus $1,122,422 for the period ended March 31, 1997. Basic
earnings per share were $.70 and diluted earnings per share were $.62 for the
nine months ended March 31, 1998 versus basic earnings per share of $.48 and
diluted earnings per share of $.44 for the period ended March 31, 1997. Net
income and earnings per share have been restated to include the acquisition of
Cushnoc Bank under the pooling of interest method of accounting and the effect
of the Company's 50% stock dividend in December, 1997.
<PAGE> 18
The Company completed the acquisition of Cushnoc in the quarter ended December
31, 1997. The one-time costs associated with the acquisition totaled
approximately $283,000 after tax of which $276,000 after tax was recognized in
the quarter ended December 31, 1997. The Company's net operating income, before
the aforementioned one-time charge, was $1,941,469, basic earnings per share
were $.82 and diluted earnings per share were $.72 for the nine months ended
March 31, 1998.
On December 31, 1997, the Company adopted FASB Statement No. 128, "Earnings Per
Share" and Statement No. 129 "Disclosure of Information about Capital
Structure". Earnings per share for prior periods have been restated in
accordance with the requirements of Statement No. 128.
In September of 1996, Congress enacted comprehensive legislation amending the
FDIC BIF-SAIF deposit insurance assessment on savings and loan institution
deposits. The legislation imposed a one-time assessment on institutions
holding SAIF deposits on March 31, 1995, in an amount necessary for the SAIF to
reach its 1.25% Designated Reserve Ratio. Institutions with SAIF deposits were
required to pay an assessment rate of 65.7 cents per $100 of domestic deposits
held as of March 31, 1995. The Bank held approximately $57,900,000 of SAIF
deposits as of March 31, 1995. The net effect of the one time assessment was
$296,860 and decreased the Company's basic earnings per share by $.09 and the
diluted earnings per share by $.08 for the six months ended December 31, 1996.
Commencing in 1997 and continuing through 1999, the Bank is required to pay an
annual assessment of 1.29 cents for every $100 of domestic BIF insured deposits
and 6.44 cents for every $100 of domestic SAIF insured deposits. Commencing in
2000 and continuing through 2017, banks will be required to pay a flat annual
assessment of 2.43 cents for every $100 of domestic deposits.
The Company's net interest income was $8,372,751 for the nine months ended
March 31, 1998, versus $7,899,594 for the nine months ended March 31, 1997, an
increase of $473,157. Total interest income increased $1,472,289 during the
nine months ended March 31, 1998 compared to the nine months ended March 31,
1997, resulting primarily from an increase in the volume of loans offset in
part by a decrease in rates. The increase in total interest expense of $999,132
for the nine months ended March 31, 1998 resulted primarily from the increased
volume of deposits and borrowings.
The changes in net interest income are presented in the schedule below.
Northeast Bancorp
Rate/Volume Analysis for the nine months ended
March 31, 1998 versus March 31, 1997
<TABLE>
<CAPTION>
Difference Due to
Volume Rate Total
------------ ------------ ------------
<S> <C> <C> <C>
Investments $ (472,716) $ (21,055) $ (493,771)
Loans 2,047,717 (215,663) 1,832,054
FHLB & Other Deposits 130,894 3,112 134,006
------------ ------------ ------------
Total 1,705,895 (233,606) 1,472,289
<PAGE> 19
Deposits 347,483 49,686 397,169
Repurchase Agreements 16,757 (6,157) 10,600
Borrowings 615,191 (23,828) 591,363
------------ ------------ ------------
Total 979,431 19,701 999,132
------------------------------------------
Net Interest Income $ 726,464 $ (253,307) $ 473,157
==========================================
</TABLE>
Rate/Volume amounts spread proportionately between volume and rate.
The majority of the Company's income is generated from the Bank. Management
believes that the Bank is slightly asset sensitive based on its own internal
analysis which considers its core deposits long term liabilities that are
matched to long term assets; therefore, it will generally experience a
contraction in its net interest margins during a period of falling rates.
Management believes that the maintenance of a slight asset sensitive position
is appropriate since historically interest rates tend to rise faster than they
decline.
Approximately 22% of the Bank's loan portfolio is comprised of floating rate
loans based on a prime rate index. Interest income on these existing loans
will increase as the prime rate increases, as well as on approximately 41% of
other loans in the Bank's portfolio that are based on short-term rate indices
such as the one-year treasury bill. An increase in short-term interest rates
will also increase deposit and FHLB advance rates, increasing the Company's
interest expense. The Company is experiencing and anticipates additional net
interest margin compression due to fluctuating rates. The impact on net
interest income will depend on, among other things, actual rates charged on the
Bank's loan portfolio, deposit and advance rates paid by the Bank and loan
volume.
Total non-interest income was $595,359 and $1,892,531 for the three and nine
months ended March 31, 1998 versus $657,503 and $1,597,378 for the three and
nine months ended March 31, 1997. Service fee income was $227,757 and $741,397
for the three and nine months ended March 31, 1998 versus $259,084 and $813,967
for the three and nine months ended March 31, 1997. The $31,327 and $72,570
service fee decrease for the three and nine months ended March 31, 1998,
respectively, was primarily due to a reduction in loan servicing and deposit
fee income. Gains from available for sale securities were $37,439 and $245,131
for the three and nine months ended March 31, 1998 versus $10,652 and $115,532
for the three and nine months ended March 31, 1997. The Company sold some of
its available for sale securities during the three and nine month period ended
March 31, 1998, taking advantage of the fluctuation in market prices in the
mortgage-backed security portfolio. Income from trading account securities was
$1,797 for the nine month period ended March 31, 1998 versus $84,503 for the
nine month period ended March 31, 1997. Larger gains on the trading account
portfolio were attained in the nine month period ended March 31, 1997, due to
the appreciation in the market values of the securities classified as trading
in that time period.
Other income was $330,163 and $904,206 for the three and nine months ended
March 31, 1998, which was an increase of $7,237 and $320,830 when compared to
other income of $322,926 and $583,376 for the three and nine months ended March
<PAGE> 20
31, 1997, respectively. The increase in other income in the three and nine
months ended March 31,1998, was primarily due to gains from 1-4 family mortgage
and SBA guaranteed loan sales as well as income generated from the Bank's trust
department and revenue from the sale of investments to customers through the
Bank's relationship with Commonwealth Financial Services, Inc..
Total operating expense, or non-interest expense, for the Company was
$2,123,636 and $7,166,480 for the three and nine months ended March 31, 1998
versus $2,456,126 and $7,221,650 for the three and nine months ended March 31,
1997. The increase in compensation expense for the nine month period ended
March 31, 1998 was primarily due to acquisition costs associated with Cushnoc
Bank. The increase in occupancy and equipment expense for the three and nine
months ended March 31, 1998 was due to costs associated with the new branch
opened in Auburn, Maine, the branches acquired from Cushnoc Bank as well as
normal growth and maintenance. Other expenses decreased by $220,524 for the
three months and increased by $67,057 for the nine months ended March 31, 1998,
compared to March 31, 1997. The decrease in other expenses during the three
month period was primarily due to the reduction in professional fees,
advertising expenses, loan expenses and director fees.
Impact of Inflation
- -------------------
The consolidated financial statements and related notes herein have been
presented in terms of historic dollars without considering changes in the
relative purchasing power of money over time due to inflation. Unlike
industrial companies, substantially all of the assets and virtually all of the
liabilities of the Company are monetary in nature. As a result, interest rates
have a more significant impact on the Company's performance than the general
level of inflation. Over short periods of time, interest rates may not
necessarily move in the same direction or in the same magnitude as inflation.
Year 2000
- ---------
The Company is currently addressing the Year 2000 issue. Many existing computer
programs and hardware configurations use only two digits to identify a year in
the date field. Since these programs did not take into consideration the
upcoming change in the century, many computer applications could create
erroneous results by the year 2000 if not corrected. The Year 2000 issue will
affect this Company and it will affect virtually all companies and
organizations, including the Company's borrowers. The Company has organized a
Year 2000 committee to research, develop and implement a plan that will correct
this issue before the year 2000. The Office of Thrift Supervision (OTS) has
issued a formal regulation and comprehensive plan concerning the Year 2000
issue for financial institutions, for which the OTS has oversight. The Company
has adopted the regulatory comprehensive plan which has the following phases.
Awareness Phase
- ---------------
This phase consists of defining the Year 2000 problem; developing the resources
necessary to perform compliance work, establishing a Year 2000 program
committee and developing an overall strategy that encompasses in-house systems,
service bureaus for systems that are outsourced, vendors, auditors, customers,
and suppliers (including correspondents). This phase has been completed by the
Company's committee.
<PAGE> 21
Assessment Phase
- ----------------
This phase consists of assessing the size and complexity of the problem and
detailing the magnitude of the effort necessary to address the Year 2000 issue.
This phase must identify all hardware, software, networks, automated teller
machines, other various processing platforms, and customer and vendor
interdependencies affected by the Year 2000 date change. The assessment must go
beyond information systems and include environmental systems that are dependent
on embedded microchips, such as security systems, elevators and vaults. During
this phase management also must evaluate the Year 2000 effect on other
strategic business initiatives. The assessment should consider the potential
effect that mergers and acquisitions, major system development, corporate
alliances, and system interdependencies will have on existing systems and/or
the potential Year 2000 issues that may arise from acquired systems. The
financial institution or vendor should also identify resource needs, establish
time frames and sequencing of Year 2000 efforts. Resource needs include
appropriately skilled personnel, contractors, vendor support, budget
allocations, and hardware capacity. This phase should clearly identify
corporate accountability throughout the project, and policies should define
reporting, monitoring, and notification requirements. Finally, contingency
plans should be developed to cover unforeseen obstacles during the renovation
and validation phases and include plans to deal with lesser priority systems
that would be fixed later in the renovation phase.
The assessment phase has been materially completed, but is considered an
ongoing phase for the Company. The Company has instituted a comprehensive plan
to communicate with all its borrowers that the Company considers to be at risk
concerning the Year 2000 issue. The Company considers this plan necessary to
mitigate the risk associated with borrowers not having the ability to make loan
payments due to a Year 2000 issue. The company has currently estimated the
following costs associated with the Year 2000 issue, (1) computer hardware
replacement $470,000, (2) software replacement $30,000, (3) testing and
administrative costs $84,000, and (4) potential contingency costs $95,000.
These costs are under continuous review and will be revised as needed. As of
March 31, 1998, the Company's current computer hardware and software have been
substantially depreciated.
Renovation Phase
- ----------------
This phase includes code enhancements, hardware and software upgrades, system
replacements, vendor certification, and other associated changes. Work should
be prioritized based on information gathered during the assessment phase. For
institutions relying on outside servicers or third-party software providers,
ongoing discussions and monitoring of vendor progress are necessary. The
Company has limited out-side servicers and vendors. Each servicer and vendor
has been contacted and has or will provide information to the Company
concerning their efforts to comply with the Year 2000 issue. The Company
anticipates to have this phase completed by December 31, 1998.
Validation Phase
- ----------------
Testing is a multifaceted process that is critical to the Year 2000 project and
inherent in each phase of the project management plan. This process includes
<PAGE> 22
the testing of incremental changes to hardware and software components. In
addition to testing upgraded components, connections with other systems must be
verified, and all changes should be accepted by internal and external users.
Management will establish controls to assure the effective and timely
completion of all hardware and software testing prior to final implementation.
As with the renovation phase, the Company will be in ongoing discussions with
their vendors on the success of their validation efforts. The Company
anticipates to have this phase completed by March 31, 1999.
Implementation Phase
- --------------------
In this phase, systems should be certified as Year 2000 compliant and be
accepted by the business users. For any system failing certification, the
business effect must be assessed clearly and the organization's Year 2000
contingency plans should be implemented. Any potentially noncompliant mission-
critical system should be brought to the attention of executive management
immediately for resolution. In addition, this phase must ensure that any new
systems or subsequent changes to verified systems are compliant with Year 2000
requirements. The Company anticipates to have this phase completed by June 30,
1999.
In summary, the Company recognizes the Year 2000 as a global issue with
potentially catastrophic results if not addressed. The Company has and will
continue to undertake all the necessary steps to protect itself and its
customers concerning the Year 2000 issue. Management is confident that all the
instituted phases will be completed and in place prior to the year 2000.
Item 3. Quantitative and Qualitative Disclosure about Market Risk
---------------------------------------------------------
There have been no material changes in the Company's market risk from June 30,
1997. For information regarding the Company's market risk, refer to the Annual
Report on Form 10-K dated as of June 30, 1997.
Forward - Looking Statements
- ----------------------------
Certain statements contained herein are not based on historical facts and are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements, which are based on
various assumptions (some of which are beyond the Company's control), may be
identified by reference to a future period or periods, or by the use of
forward-looking terminology; such as "may", "will", "believe", "expect",
"estimate", "anticipate", "continue", or similar terms or variations on those
terms, or the negative of those terms. Actual results could differ materially
from those set forth in forward-looking statements due to a variety of factors,
including, but not limited to, those related to the economic environment,
particularly in the market areas in which the Company operates, competitive
products and pricing, fiscal and monetary policies of the U.S. Government,
changes in government regulations affecting financial institutions, including
regulatory fees and capital requirements, changes in prevailing interest rates,
acquisitions and the integration of acquired businesses, credit risk
management, asset/liability management, the financial securities markets, and
the availability of and the costs associated with sources of liquidity.
<PAGE> 23
NORTHEAST BANCORP AND SUBSIDIARIES
Part II - Other Information
Item 1. Legal Proceedings
-----------------
Not Applicable.
Item 2. Changes in Securities
---------------------
Not Applicable.
Item 3. Defaults Upon Senior Securities
-------------------------------
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not Applicable.
Item 5. Other Information
-----------------
(a) Not applicable
Item 6. Exhibits and Reports on Form 8 - K
----------------------------------
(a) Exhibits
11 Statement regarding computation of per share earnings.
27 Financial data schedule
(b) Reports on Form 8 - K
On January 14, 1998, the Company filed a report on Form 8-K announcing
second quarter earnings which reflects combined earnings of Cushnoc
Bank & Trust and Northeast Bancorp.
NORTHEAST BANCORP AND SUBSIDIARIES
Signatures
Pursuant to the requirements of the Securities Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
NORTHEAST BANCORP
------------------------------
(Registrant)
/s/ James D. Delamater
------------------------------
James D. Delamater
President and CEO
<PAGE> 24
/s/ Richard Wyman
------------------------------
Richard Wyman
Chief Financial Officer
Date: May 12, 1998
NORTHEAST BANCORP AND SUBSIDIARIES
Index to Exhibits
EXHIBIT NUMBER DESCRIPTION
11 Statement regarding computation of per share earnings
27 Financial data schedule
NORTHEAST BANCORP AND SUBSIDIARIES
Exhibit 11. Statement Regarding Computation of Per Share Earnings
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1998 March 31, 1997
-------------------- --------------------
<S> <C> <C>
EQUIVALENT SHARES:
Weighted Average Shares Outstanding 2,232,162 2,158,395
Total Diluted Shares 2,743,406 2,573,419
Net Income $ 732,361 $ 420,634
Less Preferred Stock Dividend 35,000 35,000
-------------------- --------------------
Income Available to Common
Stockholders $ 697,361 $ 385,634
==================== ====================
<PAGE> 25
Basic Earnings Per Share $ 0.31 $ 0.18
Diluted Earnings Per Share $ 0.27 $ 0.16
Nine Months Ended Nine Months Ended
March 31, 1998 March 31, 1997
-------------------- --------------------
EQUIVALENT SHARES:
Weighted Average Shares Outstanding 2,224,194 2,138,682
Total Diluted Shares 2,683,732 2,552,011
Net Income $ 1,658,992 $ 1,122,422
Less Preferred Stock Dividend 104,998 104,998
-------------------- --------------------
Income Available to Common
Stockholders $ 1,553,994 $ 1,017,424
==================== ====================
Basic Earnings Per Share $ 0.70 $ 0.48
Diluted Earnings Per Share $ 0.62 $ 0.44
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 4,976,642
<INT-BEARING-DEPOSITS> 4,360,735
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 58,063
<INVESTMENTS-HELD-FOR-SALE> 16,398,409
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 270,526,305
<ALLOWANCE> 3,038,000
<TOTAL-ASSETS> 310,623,243
<DEPOSITS> 173,971,101
<SHORT-TERM> 60,977,466
<LIABILITIES-OTHER> 2,283,151
<LONG-TERM> 49,646,610
0
1,999,980
<COMMON> 2,236,668
<OTHER-SE> 19,508,267
<TOTAL-LIABILITIES-AND-EQUITY> 310,623,243
<INTEREST-LOAN> 15,752,172
<INTEREST-INVEST> 1,207,686
<INTEREST-OTHER> 678,971
<INTEREST-TOTAL> 17,638,829
<INTEREST-DEPOSIT> 5,630,592
<INTEREST-EXPENSE> 9,266,078
<INTEREST-INCOME-NET> 8,372,751
<LOAN-LOSSES> 546,467
<SECURITIES-GAINS> 246,928
<EXPENSE-OTHER> 7,166,480
<INCOME-PRETAX> 2,552,335
<INCOME-PRE-EXTRAORDINARY> 2,552,335
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,658,992
<EPS-PRIMARY> 0.70
<EPS-DILUTED> 0.62
<YIELD-ACTUAL> 3.761
<LOANS-NON> 2,926,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 187,293
<LOANS-PROBLEM> 451,000
<ALLOWANCE-OPEN> 2,741,809
<CHARGE-OFFS> 499,478
<RECOVERIES> 249,202
<ALLOWANCE-CLOSE> 3,038,000
<ALLOWANCE-DOMESTIC> 396,584
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,641,416
</TABLE>
