<PAGE> 1
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
or the quarterly period ended JUNE 30, 1997 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 No. 0-17222
WARREN BANCORP, INC.
(Exact Name of registrant as specified in the charter)
MASSACHUSETTS 04-3024165
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 MAIN STREET, PEABODY, MASSACHUSETTS 01960
(Address of principal executive offices) (Zip Code)
(508) 531-7400
(Registrant's telephone number, including area code)
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 report(s), and (2) has been subject to such
filing requirement for the past 90 days.
Yes X No
--- ---
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.
Class Outstanding at August 8, 1997
- -------------------------------------- -----------------------------
Common Stock, par value $.10 per share 3,787,707
<PAGE> 2
WARREN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
---- ----
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and due from banks (non-interest bearing)................................................... $ 7,509 $ 5,855
Money market funds and overnight investments..................................................... 6,974 6,733
Investment and mortgage-backed securities available for sale (amortized cost of $100,317
at June 30, 1997 and $103,802 at December 31, 1996)........................................... 101,919 104,937
Other investments (market value of $6,715 at June 30, 1997 and $6,918 at December 31, 1996....... 6,475 6,678
Loans held for sale.............................................................................. 651 3,003
Loans............................................................................................ 226,596 222,846
Allowance for loan losses........................................................................ (4,066) (4,533)
-------- --------
Net loans..................................................................................... 222,530 218,313
Banking premises and equipment, net.............................................................. 4,504 4,604
Accrued interest receivable...................................................................... 2,638 2,660
Real estate acquired by foreclosure.............................................................. 1,604 2,230
Other assets..................................................................................... 3,217 3,941
-------- --------
Total assets.................................................................................. $358,021 $358,954
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits...................................................................................... $314,300 $316,366
Borrowed funds................................................................................ 3,334 4,927
Escrow deposits of borrowers.................................................................. 893 1,108
Accrued interest payable...................................................................... 598 632
Accrued expenses and other liabilities........................................................ 1,778 1,476
-------- --------
Total liabilities........................................................................... 320,903 324,509
-------- --------
Stockholders' equity:
Preferred stock, $.10 par value; Authorized - 10,000,000 shares;
Issued and outstanding - none............................................................... -- --
Common stock, $.10 par value; Authorized - 20,000,000 shares;
Issued - 3,879,287 shares at June 30, 1997 and 3,759,567 shares at December 31, 1996........
Outstanding - 3,781,287 shares at June 30, 1997 and 3,661,567 shares at December 31, 1996.. 388 376
Additional paid-in capital.................................................................... 34,790 34,245
Retained earnings............................................................................. 2,071 260
Treasury stock, at cost, 98,000 shares at June 30, 1997 and December 31, 1996................. (1,174) (1,174)
-------- --------
36,075 33,707
Unrealized gain on marketable securities available for sale, net.............................. 1,043 738
-------- --------
Total stockholders' equity................................................................. 37,118 34,445
-------- --------
Total liabilities and stockholders' equity................................................. $358,021 $358,954
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
WARREN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ----------------
1997 1996 1997 1996
---- ---- ---- ----
(Unaudited)
(Dollars in thousands, except per-share data)
<S> <C> <C> <C> <C>
Interest and dividend income:
Interest on loans .......................................... $5,331 $5,028 $10,398 $10,000
Interest and dividends on investments ...................... 1,127 1,126 2,229 2,263
Interest on mortgage-backed securities ..................... 722 802 1,474 1,665
------ ------ ------- -------
Total interest and dividend income ...................... 7,180 6,956 14,101 13,928
------ ------ ------- -------
Interest expense:
Interest on deposits ....................................... 2,759 2,750 5,514 5,564
Interest on borrowed funds ................................. 30 69 82 182
------ ------ ------- -------
Total interest expense .................................. 2,789 2,819 5,596 5,746
------ ------ ------- -------
Net interest income ..................................... 4,391 4,137 8,505 8,182
Provision for (recovery of) loan losses ....................... (198) 23 (238) 158
------ ------ ------- -------
Net interest income after provision for (recovery of)
loan losses .......................................... 4,589 4,114 8,743 8,024
------ ------ ------- -------
Non-interest income:
Loan servicing fees ........................................ (4) 159 116 304
Customer service fees ...................................... 260 227 476 469
Gains on sales of investment securities, net ............... -- 40 99 241
Gains on sales of mortgage loans ........................... 26 132 91 182
Gain on sale of mortgage-servicing rights .................. (55) -- 1,407 --
Other ...................................................... 1 3 5 3
------ ------ ------- -------
Total non-interest income ............................... 228 561 2,194 1,199
------ ------ ------- -------
Income before non-interest expense and income taxes ..... 4,817 4,675 10,937 9,223
------ ------ ------- -------
Non-interest expense:
Salaries and employee benefits ............................. 1,410 1,380 2,890 2,773
Office occupancy and equipment ............................. 284 262 572 543
Professional services ...................................... 81 54 165 163
Marketing .................................................. 50 66 88 79
Real estate operations ..................................... 30 24 373 74
Outside data processing expense ............................ 121 106 233 227
Other ...................................................... 398 406 801 841
------ ------ ------- -------
Total non-interest expenses ............................. 2,374 2,298 5,122 4,700
------ ------ ------- -------
Income before income taxes ............................. 2,443 2,377 5,815 4,523
Income tax expense ........................................... 819 927 1,727 1,444
------ ------ ------- -------
Net income ............................................... $1,624 $1,450 $ 4,088 $ 3,079
====== ====== ======= =======
Net income per common and common-equivalent share ........ $ 0.41 $ 0.37 $ 1.04 $ 0.79
====== ====== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
WARREN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1996 AND 1997
<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS) ON
RETAINED MARKETABLE
ADDITIONAL EARNINGS SECURITIES
COMMON PAID-IN ACCUMULATED AVAILABLE FOR TREASURY
STOCK APITAL DEFICIT) SALE, NET STOCK TOTAL
------- ---------- ----------- --------------- -------- -----
(Unaudited)
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 .............. $364 $33,911 $(4,401) $ 1,364 $ -- $31,238
Net income ............................. -- -- 3,079 -- -- 3,079
Dividend paid .......................... -- -- (1,154) -- -- (1,154)
Purchase of treasury stock (60,000
shares) .............................. -- -- -- -- (709) (709)
Change in unrealized gain
on marketable securities
available for sale, net ............... -- -- -- (1,192) -- (1,192)
Issuance of 105,885 shares for exercise
of options ............................ 12 272 -- -- -- 284
---- ------- ------- ------- ------- -------
Balance at June 30, 1996 .................. $376 $34,183 $(2,476) $ 172 (709) $31,546
Net income ............................. -- -- 3,530 -- -- 3,530
Dividend paid .......................... -- -- (794) -- -- (794)
Purchase of treasury stock (38,000
shares) .............................. -- -- -- -- (465) (465)
Change in unrealized gain
on marketable securities
available for sale, net ............... -- -- -- 566 -- 566
Issuance of 16,140 shares for exercise
of options ............................ -- 62 -- -- -- 62
---- ------- ------- ------- ------- -------
Balance at December 31, 1996 .............. $376 $34,245 $ 260 $ 378 $(1,174) $34,445
Net income ............................. -- -- 4,088 -- -- 4,088
Issuance of 119,720 shares for exercise
of options ............................ 12 545 -- -- -- 557
Dividend paid .......................... -- -- (2,277) -- -- (2,277)
Change in unrealized gain
on marketable securities
available for sale, net .............. -- -- -- 305 -- 305
---- ------- ------- ------- ------- -------
Balance at June 30, 1997 .................. $388 $34,790 $ 2,071 $ 1,043 $(1,174) $37,118
==== ======= ======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE> 5
WARREN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------
1997 1996
---- ----
(In thousands)
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net Income ...................................................................... $ 4,088 $ 3,079
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for (recovery of) loan losses ....................................... (238) 158
Depreciation and amortization ................................................. 296 289
Deferred income tax expense (benefit) ......................................... (154) 1,081
Amortization of premiums, fees ................................................ 70 11
(Gains) on sales of investment securities ..................................... (99) (241)
(Gains) on sales of mortgage loans ............................................ (91) (182)
Provision for losses on real estate acquired by foreclosure ................... 208 20
(Gains) on sale of real estate acquired by foreclosure ........................ (2) (40)
Decrease in loans held for sale ............................................... 2,352 1,418
(Increase) decrease in accrued interest receivable ............................ 22 (79)
(Increase) decrease in other assets ........................................... 717 (959)
Increase (decrease) in accrued interest payable ............................... (34) 27
Increase in other liabilities ................................................. 87 93
------- -------
Net cash provided by operating activities .................................... 7,222 4,675
------- -------
Cash flows from investing activities:
Net (increase) decrease in money market funds and
overnight investments .......................................................... (241) 3,851
Purchase of investment securities ............................................... (20,972) (23,227)
Proceeds from sales of investment securities available for sale ................. 1,100 12,351
Proceeds from payments of mortgage-backed securities ............................ 3,585 6,278
Proceeds from maturities of investment securities ............................... 20,003 12,182
Purchases of mortgage-backed securities ......................................... -- (1,911)
Proceeds from sales of real estate acquired by foreclosure ...................... 549 785
Net (increase) in loans ......................................................... (4,017) (4,369)
Purchases of premises and equipment ............................................. (196) (96)
------- -------
Net cash provided by (used in) investing activities .......................... $ (189) $ 5,844
------- -------
</TABLE>
<PAGE> 6
WARREN FIVE CENTS SAVINGS BANK
CONSOLIDATED STATEMENTS OF CASH FLOWS-CONTINUED
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------
1997 1996
---- ----
(In thousands)
(Unaudited)
<S> <C> <C>
Cash flows from financing activities: ................................
Net (decrease) in deposits ......................................... (2,066) $(4,094)
Proceeds from Federal Home Loan Bank advances ...................... 630 693
Principal payments on Federal Home Loan Bank advances .............. (2,674) (3,737)
Net increase in other borrowed funds ............................... 451 85
Purchase of treasury stock ......................................... -- (709)
Dividends paid ..................................................... (2,277) (1,154)
Proceeds from issuance of common stock ............................. 557 284
------- -------
Net cash used in financing activities ......................... (5,379) (8,632)
------- -------
Net increase in cash and due from banks ............................ 1,654 1,887
Cash and due from banks at beginning of period ..................... 5,855 8,869
------- -------
Cash and due from banks at end of period ........................... $ 7,509 $10,756
------- -------
Cash paid during the period for:
Interest ......................................................... $ 5,630 $ 5,719
Income taxes ..................................................... $ 350 $ 927
Supplemental noncash investing and financing activities:
Real estate foreclosures ......................................... $ 129 $ 147
Increase (decrease) in unrealized gain on investment and mortgage-
backed securities available for sale, net of estimated income taxes $ 305 $(1,192)
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 7
WARREN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
BASIS OF PRESENTATION
The consolidated financial statements of Warren Bancorp, Inc. (the
"Corporation") presented herein should be read in conjunction with the
consolidated financial statements of the Corporation as of and for the year
ended December 31, 1996. In the opinion of management, the financial statements
reflect all adjustments necessary for a fair presentation of the results for the
interim periods presented. Certain amounts have been reclassified to conform
with the 1997 presentation.
EARNINGS PER COMMON AND COMMON-EQUIVALENT SHARE
Earnings-per-share data are based upon the average daily number of shares
and share equivalents (options) outstanding, which was 3,967,000 and 3,937,000,
respectively, for the quarter and six months ended June 30, 1997 and for the
quarter and six months ended June 30, 1996 was 3,936,000 and 3,915,000,
respectively..
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Certain statements in this Form 10-Q constitute "forward-looking
statements" as that term is defined under the Private Securities Litigation
Reform Act of 1995. The words "believe," "expect," "anticipate," "intend,"
"plan," "assume" and other similar expressions which are predictions of or
indicate future events and trends and which do not relate to historical matters
identify forward-looking statements. Reliance should not be placed on
forward-looking statements because they involve known and unknown risks,
uncertainties and other factors, which are in some cases beyond the control of
the Corporation and may cause the actual results, performance or achievements of
the Corporation to differ materially from anticipated future results,
performance or achievements expressed or implied by such forward-looking
statements.
Certain factors that might cause such differences include, but are not
limited to, the following: interest rates may increase, adversely affecting the
ability of borrowers to repay adjustable-rate loans and the Corporation's
earnings and income which derive in significant part from loans to borrowers;
unemployment in the Corporation's market area may increase, adversely affecting
the ability of individual borrowers to repay loans; property values may decline,
adversely affecting the ability of borrowers to repay loans and the value of
real estate securing repayment of loans; and general economic and market
conditions in the Corporation's market area may decline, adversely affecting the
ability of borrowers to repay loans, the value of real estate securing repayment
of loans and the Corporation's ability to make profitable loans. Any of the
above may also result in lower interest income, increased loan losses,
additional charge-offs and writedowns and higher operating expenses. These and
other factors that might cause differences between actual and anticipated
results, performance and achievements are discussed in greater detail in this
Form 10-Q.
GENERAL
Warren Bancorp, Inc.'s (the "Corporation") operating results for the three
and six months ended June 30, 1997 (the "1997 quarter" and "1997 period,"
respectively) reflect the operations of its only subsidiary, Warren Five Cents
Savings Bank (the "Bank"). The Bank, which is wholly owned by the Corporation,
operates as a community bank and is in the business of making individual and
commercial loans to customers in its market area.
The Corporation recorded an increased profit for the 1997 period primarily
due to a gain from the sale of rights to service residential mortgage loans
compared to the period ended June 30, 1996 (the "1996 period"). On January 31,
1997, the Corporation sold its rights to service approximately $209 million of
residential mortgage loans representing over 95% of its portfolio of loans
serviced for others. The Corporation received net proceeds of $2.6 million.
Certain assets and expenses totaling $1.2 million consisting mainly of
capitalized mortgage-servicing rights and capitalized excess service fees, were
charged against this gain resulting in a pre-tax profit of $1.4 million. Please
see "Loans and Loans Held-For-Sale," "Other Assets" and "Non-Interest Income"
under "Results of Operations for the Six-Months Ended June 30, 1997," for
further discussion on this item.
Real estate acquired by foreclosure decreased by $626,000 to $1.6 million
at June 30, 1997 from December 31, 1996. Nonperforming loans decreased by $1.6
million to $2.7 million during the 1997 period. Management continues to monitor
these nonperforming asset portfolios closely. If conditions in the
Massachusetts' real estate market become unstable and values deteriorate, the
amount of nonaccrual loans and real estate acquired through foreclosure would be
expected to increase, resulting in lower interest income and increased loan
losses, which could require additional loan loss provisions to be charged to
operating income. Moreover, real estate acquired through foreclosure may give
rise to additional charge-offs and writedowns and higher expenses for property
taxes and other carrying costs.
1
<PAGE> 9
OTHER
The Bank has applied to the appropriate governmental agencies to terminate
its defined-benefit pension plan provided through the Savings Bank Employees
Retirement Association. The Bank had stopped providing new pension benefits
through that plan for employee services after September 30, 1993. The Bank
expects to obtain approval before year-end 1997, and, although it cannot
determine at this time the precise amount of fund assets at the time of
distribution and the amounts to be distributed to plan participants, the Bank
expects to recognize a pre-tax gain on the termination in the approximate range
of $400,000 to $500,000.
ASSET/LIABILITY MANAGEMENT
A primary objective of the Corporation's asset/liability management policy
is to manage interest-rate risk over time to achieve a prudent level of net
interest income in changing interest-rate environments. Management's strategies
are intended to be responsive to changes in interest rates and to recognize
market demands for particular types of deposit and loan products. These
strategies are overseen by an internal Asset/Liability Management Committee and
by the Bank's Board of Directors.
2
<PAGE> 10
The following table summarizes the Corporation's interest-rate sensitivity
position as of June 30, 1997. Assets and liabilities are classified as
interest-rate sensitive if they have a remaining term to maturity of 0-12
months, or are subject to interest-rate adjustments within those time periods.
Adjustable-rate loans and mortgage-backed securities are shown as if the entire
balance came due on the repricing date. Nonaccruing loans are not included in
this analysis due to their status as non-earning assets. Estimates of fixed-rate
loan and fixed-rate mortgage-backed security amortization and prepayments are
included with rate sensitive assets. Because regular savings and N.O.W. accounts
may be withdrawn at any time and are subject to interest-rate adjustments at any
time, they are presented in the table below based on an assumed maturity of less
than six months.
INTEREST-RATE SENSITIVITY POSITION
<TABLE>
<CAPTION>
JUNE 30, 1997
-------------
0-3 3-6 6-12 1-5 OVER 5
MONTHS MONTHS MONTHS YEARS YEARS
------ ------ ------ ----- ------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
INTEREST SENSITIVE ASSETS:
Investment securities ................. $ 28,251 $ 9,090 $ 14,101 $21,780 $ --
Loans held for sale ................... 651 -- -- -- --
Adjustable-rate loans ................. 81,312 21,479 54,862 38,171 224
Fixed-rate loans ...................... 4,973 3,363 2,008 10,451 8,882
Mortgage-backed securities ............ 1,502 12,413 9,198 10,521 5,025
-------- -------- -------- ------- -------
Total interest sensitive assets .... 116,689 46,345 80,169 80,923 14,131
-------- -------- -------- ------- -------
INTEREST SENSITIVE LIABILITIES:
Cash manager and passbook plus
accounts ............................. 12,434 12,433 -- -- --
Time deposits ......................... 32,527 25,237 43,327 36,969 11
Other deposits (a) .................... 68,234 68,577 -- -- --
Borrowings ............................ 2,663 -- -- 657
-------- -------- -------- ------- -------
Total interest sensitive liabilities 115,858 106,247 43,327 36,983 668
-------- -------- -------- ------- -------
Excess (deficiency) of interest
sensitive assets over interest
sensitive liabilities ................ $ 831 $(59,902) $ 36,842 $43,940 13,463
======== ======== ======== ======= =======
Excess (deficiency) of cumulative
interest sensitive assets over cumu-
lative interest sensitive liabilities $ 831 $(59,071) $(22,229) $21,711 $35,174
======== ======== ======== ======= =======
Cumulative interest sensitive assets
as a percentage of cumulative
interest sensitive liabilities ....... 100.7% 73.4% 91.6% 107.2% 111.6%
======== ======== ======== ======= =======
Cumulative excess (deficiency) as a
percentage of total assets ........... 0.2% (16.5%) (6.2%) 6.1% 9.8%
======== ======== ======== ======= =======
</TABLE>
- ----------
(a) Other deposits consist of regular savings, club and N.O.W. accounts.
Interest-rate sensitivity statistics are static measures that do not
necessarily take into consideration external factors which might affect the
sensitivity of assets and liabilities and consequently cannot be used alone to
predict the operating results of a financial institution in a changing
environment. However, these measurements do reflect major trends and thus the
Corporation's sensitivity to interest rates changes over time.
3
<PAGE> 11
LIQUIDITY
The Bank seeks to ensure sufficient liquidity is available to meet cash
requirements while earning a return on liquid assets. The Bank uses its
liquidity primarily to fund loan and investment commitments, to supplement
deposit flows and to meet operating expenses. The primary sources of liquidity
are interest and amortization from loans, mortgage-backed securities and
investments, sales and maturities of investments, loan sales, deposits and
Federal Home Loan Bank of Boston ("FHLBB") advances, which include a $15 million
overnight line of credit. The Bank also has access to the Federal Reserve Bank's
discount window and may borrow from the Depositors Insurance Fund Liquidity
Fund. During the 1997 period, the Bank did not use the Federal Reserve Bank
discount window and did not borrow from the Depositors Insurance Fund Liquidity
Fund.
The Bank also uses the longer term borrowings facilities within its total
available credit line with the FHLBB. Advances from the FHLBB, none of which
were from the overnight facility, were $671,000 at June 30, 1997.
During 1997, the primary sources of liquidity were $12.1 million in loan
sales, proceeds from sale of investments of $1.1 million, proceeds from
maturities of investment securities of $20.0 million, proceeds from paydowns of
mortgage-backed securities of $3.6 million, and $2.6 million from the sale of
rights to service residential mortgage loans. Primary uses of funds were $36.0
million in residential, commercial real estate and commercial loan originations,
$21.0 million to purchase investment securities and $2.0 million to paydown
Federal Home Loan Bank advances. At June 30, 1997, the Bank had $7.0 million in
overnight investments.
The primary source of liquidity for the Corporation is dividends from the
Bank. The Corporation pays dividends to its shareholders which are funded by
dividends paid by the Bank to the Corporation. Dividends paid by the Corporation
is the primary use of this liquidity.
From time to time, the Bank has obtained time deposits in denominations of
$100,000 and over. The following table summarizes maturities of time deposits of
$100,000 or more outstanding at June 30, 1997:
Within One Year (IN THOUSANDS)
---------------
Less than 3 months...................... $ 7,047
3 to 6 months........................... 2,445
6 to 12 months.......................... 3,602
-------
13,094
More than 12 months..................... 4,144
-------
$17,238
=======
CAPITAL ADEQUACY
Total stockholders' equity at June 30, 1997 was $37.1 million, an increase
of $2.7 million from $34.4 million at the end of 1996. Included in stockholders'
equity at June 30, 1997 is an unrealized gain on marketable securities available
for sale, which increased stockholders' equity, of $1.0 million as compared to
an unrealized gain at December 31, 1996 of $738,000. This positive change in the
market value of marketable securities available for sale was due mainly to
decreased interest rates during the 1997 period. Future interest-rate increases
could reduce the market value of these securities and reduce stockholders'
equity. As a percentage of total assets, stockholders' equity was 10.37% at June
30, 1997 compared to 9.60% at December 31, 1996.
At June 30, 1997, neither the Federal Reserve Board ("FRB") nor the FDIC
permitted the unrealized gain or loss to be used in their calculation of Tier I
capital. At June 30, 1997, net of applicable income taxes, the unrealized gain
on marketable securities available for sale was $1.0 million.
The Federal Reserve Board's leverage capital-to-assets guidelines require
the strongest and most highly rated bank holding companies to maintain at least
a 3.00% ratio of Tier I capital to average consolidated assets. All other bank
holding companies, including the Corporation, are required to maintain at least
4.00% to 5.00%, depending on how the FRB evaluates their condition. The FRB may
require a
4
<PAGE> 12
higher capital ratio. At June 30, 1997, the FRB leverage capital ratio was
10.17% compared to 9.48% at December 31, 1996.
The FDIC's leverage capital-to-assets ratio guidelines are substantially
similar to those adopted by the FRB and described above. At June 30, 1997, the
Bank's leverage capital ratio, under FDIC guidelines, was 9.73% compared to
9.14% at December 31, 1996.
The FRB and the FDIC have also imposed risk-based capital requirements on
the Corporation and the Bank, respectively, which give different risk weightings
to assets and to off-balance sheet assets such as loan commitments and loans
sold with recourse. Both the FRB and FDIC guidelines require the Corporation and
the Bank to have an 8.00% risk-based capital ratio. The Corporation's and the
Bank's risk-based capital ratios were 15.22% and 14.61%, respectively, at June
30, 1997 compared to 14.72% and 14.28% at December 31, 1996, thus exceeding
their risk-based capital requirements.
As of June 30, 1997, the Bank's total risk-based capital ratio, Tier I
risk-based capital ratio and leverage capital ratio were 14.61%, 13.36%, and
9.73%, respectively. Based on these capital ratios, the Bank is considered to be
"well capitalized."
FINANCIAL CONDITION
The Corporation's total assets decreased to $358.0 million at June 30, 1997
from $359.0 million at December 31, 1996. Decreases occurred in investments
available for sale, residential mortgage loans and real estate acquired by
foreclosure and from the elimination of certain assets related to the sale of
the rights to service residential mortgage loans consisting mainly of
capitalized mortgage-servicing rights and capitalized excess servicing fees.
These decreases were partially offset by increases in commercial construction
loans.
INVESTMENTS AND MORTGAGE-BACKED SECURITIES
Investments, consisting of overnight investments, investment and
mortgage-backed securities available for sale, and other investments, decreased
to $115.4 million at June 30, 1997 from $118.3 million at December 31, 1996.
This decrease was due to various maturities of U.S. Treasury and U.S. Government
Agency obligations and corporate notes. Mortgage-backed securities decreased to
$39.2 million at June 30, 1997 from $42.7 million at December 31, 1996 due to
$3.6 million of normal principal payments during the 1997 period. The market
value of these investments increased during 1997 due mainly to the decrease in
interest rates from December 31, 1996. Future increases in interest rates could
reduce the value of these investments.
5
<PAGE> 13
INVESTMENTS AT JUNE 30, 1997 ARE AS FOLLOWS:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
--------- ---------- ---------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
OVERNIGHT
Money market funds............................. $ 134 $ -- $ -- $ 134
Federal funds sold............................. 6,840 -- -- 6,840
-------- ------ ----- --------
6,974 -- -- 6,974
-------- ------ ----- --------
AVAILABLE-FOR-SALE
Fixed income mutual funds...................... 18,990 528 -- 19,518
FNMA mortgage-backed securities................ 24,566 915 -- 25,481
GNMA mortgage-backed securities................ 14,093 -- (374) 13,719
U.S. Government and related
obligations................................... 22,689 10 (27) 22,672
Corporate notes................................ 12,058 4 (5) 12,057
Common stock................................... 21 37 -- 58
Preferred stock................................ 7,900 514 -- 8,414
-------- ------ ----- --------
100,317 2,008 (406) 101,919
-------- ------ ----- --------
OTHER
Foreign government bonds and
notes........................................ 500 -- -- 500
Stock in Federal Home Loan Bank
of Boston.................................... 4,110 -- -- 4,110
Stock in Depositors Insurance Fund
Liquidity Fund............................... 108 -- -- 108
Advances to Thrift Institution Fund
for Economic Development..................... 181 -- -- 181
Stock in Savings Bank Life Insurance
Company of Massachusetts .................... 1,576 240 -- 1,816
-------- ------ ----- --------
6,475 240 -- 6,715
-------- ------ ----- --------
$113,766 $2,248 $(406) $115,608
======== ====== ===== ========
</TABLE>
LOANS AND LOANS HELD FOR SALE
Loans and loans held for sale increased by $1.4 million during the 1997
period to $227.2 million at June 30, 1997. This increase is primarily the result
of increases in commercial construction loans partially offset by paydowns and
payoffs of commercial real estate loans and from the sale of the residential
mortgage loans held for sale at December 31, 1996. Commercial real estate,
commercial construction and commercial loans typically earn higher yields than
residential mortgage loans, but usually carry higher risk due to loan size.
The following table sets forth the classification of the Corporation's
loans as of June 30, 1997 and December 31, 1996 (in thousands):
<TABLE>
<CAPTION>
JUNE 30, 1997 DECEMBER 31, 1996
------------- -----------------
<S> <C> <C>
Residential mortgages............. $ 63,460 $ 66,654
Commercial real estate............ 107,602 107,428
Commercial construction .......... 17,194 10,742
Commercial loans.................. 17,868 16,458
Consumer loans.................... 20,472 21,564
-------- --------
$226,596 $222,846
======== ========
</TABLE>
6
<PAGE> 14
Residential mortgage loan originations during the 1997 period were $14.6
million compared to $20.3 million in the 1996 period. The Corporation originated
$7.4 million in fixed-rate loans during the 1997 period compared to $13.6
million during the 1996 period. Adjustable-rate loans totaling $7.3 million were
originated during the 1997 period compared to $6.7 million during the 1996
period. The Corporation sold loans totaling $12.1 million during the 1997 period
compared to $18.0 million sold in the 1996 period. At June 30, 1997, the
Corporation held $651,000 of fixed rate residential mortgage loans for sale
compared to $3.0 million at December 31, 1996.
On January 31, 1997, the Corporation sold its rights to service
approximately $209 million of residential mortgage loans representing over 95%
of the portfolio of loans serviced for others. In the future, the Corporation
intends to sell servicing released all residential fixed-rate mortgage loans it
originates, and it will continue to service the loans it owns.
CREDIT QUALITY
IMPAIRED LOANS
Loans are deemed by the Corporation to be impaired when, based on current
information and events, it is probable that the Corporation will be unable to
collect all amounts due according to the contractual terms of the original loan
agreement. Generally, nonaccruing loans are deemed impaired. Large groups of
homogeneous loans, such as smaller balance residential mortgage and consumer
installment loans are collectively evaluated for impairment. Typically, the
minimum delay in receiving payments according to the contractual terms of the
loan that can occur before a loan is considered impaired is ninety days.
Impaired loans are analyzed and categorized by level of credit risk and
collectibility in order to determine their related allowance for loan losses. At
June 30, 1997 and December 31, 1996 there were six loans considered impaired and
accruing totaling $1.4 million.
NONPERFORMING LOANS
Loans past due 90 days or more, or past due less than 90 days but in a
nonaccrual status were $1.1 million at June 30, 1997 compared to $2.7 million at
December 31, 1996. Included in nonperforming loans is one loan considered
impaired and nonaccruing in the amount of $224,000 at June 30, 1997 as compared
to six loans considered impaired and nonaccruing totaling $1.9 million at
December 31, 1996. Accrual of interest on loans is discontinued either when a
reasonable doubt exists as to that the full, timely collection of principal or
interest or when the loans become contractually past due by ninety days or more,
unless they are adequately secured and are in the process of collection.
When a loan is placed on nonaccrual status, all interest previously accrued
but not collected is reversed against current period interest income. Income on
such loans is recognized to the extent that cash is received and where the
ultimate collection of principal and interest is probable. Following collection
procedures, the Corporation generally institutes appropriate action to foreclose
the property or acquire it by deed in lieu of foreclosure.
7
<PAGE> 15
The table below details nonperforming loans at:
<TABLE>
<CAPTION>
JUNE 30, 1997 DECEMBER 31, 1996
------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Accruing loans 90 days or more in arrears..... $ 254 $ 0
Nonaccrual loans.............................. 871 2,712
------ ------
Total nonperforming loans..................... $1,125 $2,712
====== ======
Percentage of nonperforming loans to:
Total loans................................... 0.50% 1.22%
====== ======
Total assets.................................. 0.31% 0.76%
====== ======
</TABLE>
REAL ESTATE ACQUIRED BY FORECLOSURE
Real estate acquired by foreclosure totaled $1.6 million at June 30, 1997
compared to $2.2 million at December 31, 1996. Real estate acquired by
foreclosure, net of an allowance for loss, is reflected at the lower of the net
carrying value or fair value of the property less estimated cost of disposition.
These properties consist mainly of land and single-family and multi-family
dwellings.
The Corporation had a provision for losses of $208,000 on real estate
acquired by foreclosure, net of gains on sale, in the 1997 period compared to a
gain of $20,000 in the 1996 period. Unstable conditions in the Massachusetts
real estate market could result in losses and writedowns as the Corporation
reduces the book value of real estate to reflect likely realizable values.
Changes in the allowance for losses on real estate acquired by foreclosure
for the six months ended June 30, 1997 are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Balance at December 31, 1996...................... $160
Provision charged to expense...................... 208
Net charge-offs................................... 0
----
Balance at June 30, 1997.......................... $368
====
</TABLE>
Gains on sale and recoveries on real estate acquired by foreclosure were
$2,000 in the 1997 period.
In summary, nonperforming assets are as follows (in thousands):
<TABLE>
<CAPTION>
JUNE 30, 1997 DECEMBER 31, 1996
------------- -----------------
<S> <C> <C>
Nonperforming loans..................................... $1,125 $2,712
Real estate acquired by foreclosure..................... 1,604 2,230
------ ------
Total nonperforming assets.............................. $2,729 $4,942
====== ======
Total nonperforming assets as a
percentage of total assets............................... 0.8% 1.4%
</TABLE>
8
<PAGE> 16
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses was $4.1 million at June 30, 1997 and $4.5
million at December 31, 1996. The following table presents the activity in the
allowance for loan losses for the six months ended June 30, 1997 (dollars in
thousands):
<TABLE>
<S> <C>
Balance at beginning of period...................................... $4,533
------
Losses charged to the allowance:
Residential mortgage............................................ 184
Commercial mortgage and construction............................ 309
Commercial loans................................................ --
Consumer loans.................................................. 3
------
496
------
Loan recoveries:
Residential mortgage............................................ 39
Commercial mortgage and construction............................ 217
Commercial loans................................................ 4
Consumer loans.................................................. 7
------
267
------
Net charge-offs..................................................... (229)
------
Provision for (recovery of) loan losses (credited) to income........ (238)
------
Balance at end of period............................................ $4,066
======
Allowance to total loans at end of period........................... 1.79%
======
Allowance to nonperforming loans at end of period................... 361.4%
======
Allocation of ending balance:
Residential mortgage............................................ $ 806
Commercial mortgage and construction............................ 2,698
Commercial loans................................................ 248
Consumer loans.................................................. 314
------
$4,066
======
</TABLE>
Notwithstanding the foregoing allocations, the entire allowance for loan
losses is available to absorb charge-offs in any category of loans. Loan losses
are charged against the allowance when management believes that the
collectibility of the loan principal is unlikely.
Balances in the allowance for loan losses are determined on a periodic
basis by management and the Loan Committee of the Board of Directors with
assistance from an independent credit review consulting firm. Loan loss
allocations are based on the conditions of each loan, whether performing or
non-performing, including collectibility, collateral adequacy and the general
condition of the borrowers, economic conditions, delinquency statistics, market
area activity, the risk factors associated with each of the various loan
categories and the borrower's adherence to the original terms of the loan.
Individual loans, including loans considered impaired, are analyzed and
categorized by level of credit risk and collectibility. The associated provision
for loan losses is the amount required to bring the allowance for loan losses to
the balance considered necessary by management at the end of the period after
accounting for the effect of loan charge-offs (which decrease the allowance) and
loan-loss recoveries (which increase the allowance). The allowance for loan
losses included above attributable to $1.6 million of impaired loans, of which
$1.4 million is measured using the present value method and $261,000 using the
fair value method, is $286,000.
LEGAL AND OFF-BALANCE SHEET RISKS
Various legal claims arise from time to time in the course of
business of the Corporation and its subsidiaries. At June 30, 1997, there were
no legal claims against the Corporation or its subsidiaries..
9
<PAGE> 17
The Corporation is party to financial instruments with off-balance sheet
risk in the normal course of business to meet the financial needs of its
customers and to reduce its own exposure to fluctuations of interest rates.
These financial instruments include commitments to originate loans, unused lines
of credit, standby letters of credit, recourse arrangements on sold assets and
forward commitments to sell loans. The financial instruments involve, to varying
degrees, elements of credit and interest rate risk in excess of the amount
recognized in the consolidated balance sheets.
OTHER ASSETS
Included in other assets at June 30, 1997 and December 31, 1996 are
$860,000 and $980,000, respectively, of deferred income taxes receivable. Also
included in other assets was a current income tax receivable of none at June 30,
1997 compared to $278,000 at December 31, 1996. In addition, a prepaid pension
asset of $1.1 million at June 30, 1997 and $864,000 at December 31, 1996 is
included in other assets. As noted previously, on January 31, 1997, the Bank
sold its rights to service approximately $209 million of residential mortgage
loans. In that regard the entire balance of mortgage-servicing rights and
capitalized excess servicing fees were charged against the gain from the sale of
mortgage-servicing rights. These assets were included in other assets at
December 31, 1996 and had balances of $682,000 and $344,000, respectively.
LIABILITIES
Deposits decreased to $314.3 million at June 30, 1997 from $316.4 million
at December 31, 1996. This decrease took place primarily in demand, money market
deposit accounts, and savings deposits and was partially offset by increases in
NOW and time deposits.
Federal Home Loan Bank of Boston advances decreased to $671,000 at June 30,
1997 from $2.7 million at December 31, 1996. Securities sold under agreement to
repurchase were $2.7 million at June 30, 1997 compared to $2.2 million at
December 31, 1996.
RESULTS OF OPERATIONS - FOR THE THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THE
THREE MONTHS ENDED JUNE 30, 1996
GENERAL
The Corporation recorded a profit for the 1997 quarter of $1.6 million
compared to a profit for the 1996 quarter of $1.5 million. The increase in the
1997 quarter profit is primarily due to an increase in net interest income and a
decrease in the provision for loan loss to a recovery and was partially offset
by a decrease in non-interest income compared to the 1996 quarter.
Net interest income for the 1997 and 1996 quarters was $4.4 million and
$4.1 million, respectively. The weighted average interest rate spread for the
1997 quarter was 4.93% compared to 4.66% for the 1996 quarter. The net yield on
average earning assets was 5.16% for the 1997 quarter and 4.92% for the 1996
quarter.
INTEREST AND DIVIDEND INCOME
Total interest and dividend income was $7.2 million and $7.0 million for
the 1997 and 1996 quarters, respectively. Interest and fees on loans increased
to $5.3 million for the 1997 quarter from $5.0 million for the 1996 quarter.
This increase is primarily the result of an increase in average loans
outstanding for the 1997 quarter compared to the 1996 quarter, a significant
reduction in non-accruing loans during the 1997 quarter, and an increase in
average loan yields to 9.42% for the 1997 quarter from 9.24% for the 1996
quarter. Interest and dividends on investments was $1.1 million for both the
1997 and 1996 quarters. This is attributed to an increase in the average amount
of investments held in the 1997 quarter offset by a decrease in the average
yield on investments to 6.07% for the 1997 quarter from 6.53% for the 1996
quarter. Mortgage-backed securities income decreased to $722,000 in the 1997
quarter from $802,000 in the 1996 quarter, despite an increase in the average
yield to 7.25% for the 1997 quarter compared to 7.06% in the 1996 quarter,
primarily due to a decrease in the average amount of mortgage-backed securities
held.
10
<PAGE> 18
INTEREST EXPENSE
Interest on deposits was $2.8 million for both the 1997 and 1996 quarters.
The average cost of deposits decreased to 3.50% for the 1997 quarter compared to
3.55% for the 1996 quarter, while average interest-bearing deposits outstanding
increased during the 1997 quarter. Interest on borrowed funds, which includes
interest on escrow deposits of borrowers, decreased to $30,000 in the 1997
quarter from $69,000 for the 1996 quarter. This decrease is primarily related to
a significant decrease in borrowings. The average cost of borrowings was 2.95%
for the 1997 quarter and 4.40% for the 1996 quarter.
NON-INTEREST INCOME
Total non-interest income for the 1997 quarter was $228,000 compared to
$561,000 for the 1996 quarter. This decrease is mainly a result of the sale of
mortgage servicing rights during the first quarter of 1997. Because the
Corporation has sold its mortgage servicing rights, it no longer generates loan
servicing fees. This is reflected for the first time in the three months ended
June 30, 1997. In addition, the Corporation incurred additional charges of
$4,000 against loan servicing fee income and $55,000 against the gain on sale of
mortgage servicing rights during the 1997 quarter related to the above mentioned
sale. The Corporation recorded no gain or loss on the sale of investment
securities in the 1997 quarter compared to $40,000 in the 1996 quarter. Gains
from the sale of mortgage loans were $26,000 in the 1997 quarter and $132,000 in
the 1996 quarter.
NON-INTEREST EXPENSE
Total non-interest expense was $2.4 million in the 1997 quarter and $2.3
million in the 1996 quarter. Increases in salaries and employee benefits, office
occupancy and equipment, professional services, real estate operations expense
and outside data processing expense were offset by decreases in marketing and
other expenses.
INCOME TAX EXPENSE
The income tax expense for the 1997 quarter was $819,000 compared to
$927,000 for the 1996 quarter. The net deferred tax asset at June 30, 1997 is
$860,000 compared to $980,000 at December 31, 1996.
RESULTS OF OPERATIONS - FOR THE SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO THE
SIX MONTHS ENDED JUNE 30, 1996
GENERAL
The Corporation recorded a profit for the 1997 period of $4.1 million
compared to a net profit for the 1996 period of $3.1 million, primarily due to a
gain from the sale of rights to service mortgage loans, an increase in net
interest income and a decrease in the provision for loss to a recovery . These
were partially offset by decreases in gain on sale of investment securities,
loan servicing fees, and gains on sale of mortgage loans and an increase in real
estate operations expense.
Net interest income for the 1997 period was $8.5 million compared to $8.2
million for the 1996 period. The weighted average interest rate spread for the
1997 period was 4.77% compared to 4.72% for the 1996 period. The net yield on
average earning assets was 4.98% for the 1997 period and 4.90% for the 1996
period.
11
<PAGE> 19
INTEREST AND DIVIDEND INCOME
Total interest and dividend income increased to $14.1 million for the 1997
period from $13.9 million for the 1996 period. Interest and fees on loans
increased to $10.4 million for the 1997 period from $10.0 million for the 1996
period. This increase is primarily the result of a higher volume of loans
outstanding during the 1997 period and an increase in average loan yield to
9.24% for the 1997 period from 9.15% for the 1996 period. Interest and dividends
on investments decreased to $2.2 million for the 1997 period compared to $2.3
million for the 1996 period due to a decrease in the average yield on
investments to 6.01% for the 1997 period from 6.43% for the 1996 period despite
an increase to the average amount of investments held. Mortgage-backed
securities income was $1.5 million for the 1997 period and $1.8 million for the
1996 period. This decrease is primarily due to a decrease in the average amount
of mortgage-backed securities held despite an increase in the average yield to
7.25% during the 1997 period from 7.06% for the 1996 period.
INTEREST EXPENSE
Interest on deposits decreased to $5.5 million in the 1997 period from $5.6
million for the 1996 period. This decrease was primarily related to a decrease
in the average cost of deposits to 3.51% for the 1997 period from 3.58% for the
1996 period offset by an increase in average interest-bearing deposits during
1997. Interest on borrowed funds, which includes interest on escrow deposits of
borrowers, decreased to $82,000 from $182,000 for the 1996 period. This decrease
is primarily related to a decrease in borrowed funds and a decrease in the
average cost of borrowings to 3.54% for the 1997 period from 5.18% for the 1996
period.
NON-INTEREST INCOME
Total non-interest income for the 1997 period was $2.2 million compared to
$1.2 million for the 1996 period. The gain from the sale of mortgage servicing
rights, noted above, was $1.4 million for the 1997 period. The gain from the
sale of mortgage loans was $91,000 in the 1997 period compared to $182,000 in
the 1996 period. Loan servicing fees were $116,000 for the 1997 period compared
to $304,000 in the 1996 period. This decrease is mainly due to the sale of the
above-mentioned mortgage servicing rights. The gains from the sale of investment
securities was $99,000 for the 1997 period compared to $241,000 in the 1996
period.
NON-INTEREST EXPENSE
Total non-interest expense was $5.1 million in the 1997 period and $4.7
million in the 1996 period. This increase is mainly attributable to real estate
operations expense increasing to $373,000 in the 1997 period compared to $74,000
in the 1996 period mainly due to a writedown in the value of real estate owned
through foreclosure.
INCOME TAX EXPENSE
Income tax expense for the 1997 period was $1.7 million compared to $1.4
million for the 1996 period. As a result of the capital gain generated from the
sale of mortgage-servicing rights, the Corporation was able to recognize a tax
benefit in the amount of $279,000 in the 1997 period from capital losses of
prior periods. This compares to a tax credit of $400,000 recognized in the 1996
period in connection with an IRS audit. Also, depending on the outcome of
certain tax rulings by federal and state taxing authorities over the next
one-to-two years not specific to Warren Bancorp, the Corporation may have the
ability to record additional tax credits of up to an estimated $470,000 in
future periods.
12
<PAGE> 20
WARREN BANCORP, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
-----------------
None
ITEM 2. Changes in Securities
---------------------
None
ITEM 3. Defaults Upon Senior Securities
-------------------------------
None
ITEM 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
ANNUAL MEETING - MAY 7, 1997
----------------------------
A. ELECTION OF DIRECTORS
---------------------
TERM TO EXPIRE IN 2000
----------------------
Total Vote for Total Vote Withheld
Each Director From Each Director
-------------- -------------------
Stephen J. Connolly, IV 2,388,459 5,314
Robert R. Fanning, Jr. 2,387,620 6,153
John C. Jeffers 2,386,459 7,314
Paul M. Peduto 2,388,459 5,314
OTHER DIRECTORS
TERM TO EXPIRE IN 1998 TERM TO EXPIRE IN 1999
---------------------- ----------------------
Francis L. Conway Peter V. Bent
Arthur E. Holden Paul J. Curtin
Stephen G. Kasnet Stephen R. Howe
Linda Lerner Arthur E. McCarthy
Arthur J. Pappathanasi John D. Smidt
George W. Phillips
John H. Womack TERM TO EXPIRE IN 2000
----------------------
John R. Putney (elected 5/7/97)
ITEM 5. Other Information
-----------------
None
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
None
13
<PAGE> 21
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.
WARREN BANCORP, INC.
DATE: August 12, 1997 By: /s/George W. Phillips
_____________________________
George W. Phillips
President and
Chief Executive Officer
DATE: August 12, 1997 By: /s/Paul M. Peduto
_____________________________
Paul M. Peduto
Treasurer
(Principal Financial Officer
and Principal Accounting
Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JUNE 30,
1997 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 7,509
<INT-BEARING-DEPOSITS> 6,974
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 101,919
<INVESTMENTS-CARRYING> 6,475
<INVESTMENTS-MARKET> 6,715
<LOANS> 227,247
<ALLOWANCE> 4,066
<TOTAL-ASSETS> 358,021
<DEPOSITS> 314,300
<SHORT-TERM> 2,663
<LIABILITIES-OTHER> 3,269
<LONG-TERM> 671
0
0
<COMMON> 388
<OTHER-SE> 36,730
<TOTAL-LIABILITIES-AND-EQUITY> 358,021
<INTEREST-LOAN> 5,331
<INTEREST-INVEST> 1,849
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 7,180
<INTEREST-DEPOSIT> 2,759
<INTEREST-EXPENSE> 2,789
<INTEREST-INCOME-NET> 4,391
<LOAN-LOSSES> (198)
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,374
<INCOME-PRETAX> 2,443
<INCOME-PRE-EXTRAORDINARY> 2,443
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,624
<EPS-PRIMARY> 0.41
<EPS-DILUTED> 0.41
<YIELD-ACTUAL> 5.16
<LOANS-NON> 871
<LOANS-PAST> 254
<LOANS-TROUBLED> 1,401
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,533
<CHARGE-OFFS> 496
<RECOVERIES> 267
<ALLOWANCE-CLOSE> (238)
<ALLOWANCE-DOMESTIC> 4,066
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
