<PAGE>
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarter Ended September 30, 1999
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Commission File Number 0-17859
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NEW HAMPSHIRE THRIFT
BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
State of Delaware 02-0430695
(State of Incorporation) (IRS Employer I.D. Number)
9 Main St., PO Box 9, Newport, NH 03773
(Address of principal executive offices) (Zip Code)
603-863-0886
(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 reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No_____
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The number of shares outstanding of each of the issuer's classes of common
stock, $.01 par value per share, as of November 1, 1999, was 2,106,685.
----------
Transitional small business disclosure format:
Yes____ No X
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NEW HAMPSHIRE THRIFT BANCSHARES, INC.
INDEX TO FORM 10-QSB
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page
<S> <C> <C>
Item 1 Financial Statements:
Consolidated Statements of Financial Condition - 1
September 30, 1999 and December 31, 1998
Consolidated Statements of Operations - 2
For the Three Months Ended September 30, 1999 and 1998
and the Nine Months Ended September 30, 1999 and 1998
Consolidated Statements of Cash Flows - 3
For the Nine Months Ended September 30, 1999 and 1998
Notes To Consolidated Financial Statements - 5
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations - 6
PART II. OTHER INFORMATION
Item 1 Legal Proceedings 15
Item 2 Changes in Securities 15
Item 3 Defaults Upon Senior Securities 15
Item 4 Submission of Matters to a Vote of Common Shareholders 15
Item 5 Other Information 15
Item 6 Exhibits and Reports on Form 8-K 15
Signatures 16
</TABLE>
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
September 30, 1999 and December 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
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ASSETS
Cash and due from banks $ 10,416,605 $ 8,701,558
Federal funds sold 60,000 7,583,000
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Cash and cash equivalents 10,476,605 16,284,558
Securities available-for-sale 48,581,425 52,137,753
Other investments 12,515,205 2,032,999
Loans held-for-sale 1,268,000 3,775,802
Loans receivable, net 260,212,446 232,321,171
Accrued interest receivable 2,069,653 1,725,235
Bank premises and equipment, net 8,361,123 8,416,182
Investments in real estate 520,330 531,729
Real estate owned and property acquired in settlement of loans 594,153 670,153
Goodwill 3,027,661 3,213,028
Other assets 5,036,598 2,299,159
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Total assets $ 352,663,199 $ 323,407,769
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Checking accounts (non-interest-bearing) $ 17,159,927 $ 16,521,820
Savings and interest-bearing checking accounts 153,678,271 144,430,362
Time deposits 107,469,001 121,096,974
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Total deposits 278,307,199 282,049,156
Other borrowed funds 3,165,000 -
Securities sold under agreements to repurchase 8,083,897 11,849,116
Advances from Federal Home Loan Bank 15,000,000 -
Accrued expenses and other liabilities 4,293,341 1,729,891
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Total liabilities 308,849,437 295,628,163
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Guaranteed preferred beneficial interests in junior subordinated debentures 16,907,300 -
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COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY - -
Preferred stock, $.01 par value per share: 2,500,000 shares authorized,
no shares issued or outstanding
Common stock, $.01 par value per share: 5,000,000 shares authorized,
2,479,858 shares issued and 2,106,685 shares outstanding at
September 30, 1999 and 5,000,000 shares authorized, 2,479,858 shares
issued and 2,104,285 shares outstanding at December 31, 1998 24,798 24,798
Paid-in capital 17,383,766 17,874,567
Retained earnings 13,452,507 12,082,784
Accumulated other comprehensive income (1,504,832) 255,034
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29,356,239 30,237,183
Treasury stock, at cost, 373,173 shares as of September 30, 1999
and 375,573 shares as of December 31, 1998 (2,449,777) (2,457,577)
------------- -------------
Total shareholders' equity 26,906,462 27,779,606
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Total liabilities and shareholders' equity $ 352,663,199 $ 323,407,769
============= =============
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
1
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NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended September 30, 1999 and 1998
For the Nine Months Ended September 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
-------------- ----------- ------------ ------------
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Interest income
Interest on loans $ 4,851,470 $ 4,969,663 $ 14,233,066 $ 15,353,220
Interest and dividends on investments 963,252 892,665 2,765,555 2,217,348
-------------- ----------- ------------ ------------
Total interest income 5,814,722 5,862,328 16,998,621 17,570,568
-------------- ----------- ------------ ------------
Interest expense
Interest on deposits 2,490,582 2,990,434 7,623,774 8,885,138
Interest on advances and other borrowed money 340,694 72,803 503,447 302,802
-------------- ----------- ------------ ------------
Total interest expense 2,831,276 3,063,237 8,127,221 9,187,940
-------------- ----------- ------------ ------------
Net interest income 2,983,446 2,799,091 8,871,400 8,382,628
Provision for loan losses 30,000 53,329 90,000 120,167
-------------- ----------- ------------ ------------
Net interest income after provision for
loan losses 2,953,446 2,745,762 8,781,400 8,262,461
-------------- ----------- ------------ ------------
Other income
Loan origination and customer service fees 459,011 333,299 1,317,378 1,004,055
Net gain (loss) on sale of securities 3,689 7,010 36,243 32,807
Gain on sale of property acquired in settlement
of loans 5,068 - 30,572 -
Net gain on sale of loans 19,611 182,173 160,488 252,878
Net gain (loss) on sale of property and
equipment - - - 4,918
Rental income 76,955 89,297 247,532 248,992
Brokerage service income 37,542 29,477 122,822 101,809
-------------- ----------- ------------ ------------
Total other income 601,876 641,256 1,915,035 1,645,459
-------------- ----------- ------------ ------------
Other expenses
Salaries and employee benefits 1,338,554 1,157,899 3,764,124 3,134,917
Occupancy expenses 450,743 424,511 1,371,495 1,272,476
Advertising and promotion 74,216 27,156 229,758 176,126
Depositors' insurance 33,445 34,776 103,371 105,640
Outside services 119,664 167,682 386,130 482,385
Amortization of goodwill 61,789 61,789 185,367 185,367
Other expenses 407,610 404,585 1,270,008 1,299,222
-------------- ----------- ------------ ------------
Total other expenses 2,486,021 2,278,398 7,310,253 6,656,133
-------------- ----------- ------------ ------------
Income before provision for income taxes 1,069,301 1,108,620 3,386,182 3,251,787
Provision for income taxes 317,355 357,524 1,006,364 1,049,032
-------------- ----------- ------------ -------------
Net income $ 751,946 $ 751,096 $ 2,379,818 $ 2,202,755
============== =========== ============ =============
Comprehensive net income $ 316,322 $ 1,197,466 $ 576,979 $ 2,632,757
============== =========== ============ ============
Earnings per common share, basic $ 0.36 $ 0.36 $ 1.13 $ 1.05
============== =========== ============ ============
Earnings per common share, assuming dilution $ 0.35 $ 0.36 $ 1.12 $ 1.04
============== =========== ============ ============
Dividends declared per common share $ 0.16 $ 0.15 $ 0.48 $ 0.45
============== =========== ============ ============
</TABLE>
The accompanying notes to consolidated financial statements are
an integral part of these statements.
2
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NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
September 30, September 30,
1999 1998
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,379,818 $ 2,202,755
Depreciation and amortization 515,123 486,041
Amortization of goodwill 185,367 185,367
Loans originated for sale (36,631,550) (52,788,509)
Proceeds from sale of loans 36,792,039 53,041,387
Gain from sale of loans (160,488) (252,878)
Gain from sale of debt securities available-for-sale (36,243) (32,807)
Gain from sale of bank premises and equipment - (4,918)
Provision for loan losses and other real estate owned losses 90,000 120,167
Gain on sale of property acquired in settlement of loan (30,572) -
Increase in accrued interest and other assets (3,015,046) (632,852)
Decrease in deferred (310,314) (98,789)
Increase in accrued expenses and other liabilities 3,670,749 2,696,751
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Net cash provided by operating activities 3,448,883 4,921,715
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (456,659) (730,400)
Proceeds from sale of bank premises and equipment 7,995 9,145
Proceeds from sale of debt securities available-for-sale 21,530,924 15,769,260
Purchase of securities available-for-sale (31,573,966) (37,196,731)
Purchase of Federal Home Loan Bank stock - (77,000)
Maturities of securities available for sale 250,000 1,560,000
Net (increase) decrease in loans to customers (25,163,159) 15,374,408
(Increase) decrease in real estate owned 76,000 (160,082)
----------------- -----------------
Net cash used in investing activities (35,328,865) (5,451,400)
----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits (3,741,957) 4,448,341
Net increase (decrease) in repurchase agreements (3,765,219) 8,402,562
Increase (decrease) in advances from Federal Home Loan Bank
and other borrowings 18,165,000 (5,452,506)
Dividends paid (1,010,094) (941,597)
Proceeds from issuance of Capital Trust Preferred 16,400,000 -
Proceeds from exercise of stock options 24,299 59,953
----------------- -----------------
Net cash provided by financing activities 26,072,029 6,516,753
----------------- -----------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (5,807,953) 5,987,068
CASH AND CASH EQUIVALENTS, beginning of period 16,284,558 13,306,626
----------------- -----------------
CASH AND CASH EQUIVALENTS, end of period $ 10,476,605 $ 19,293,694
================= =================
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
3
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NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - (continued)
For the Nine Months Ended September 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
September 30, September 30,
1999 1998
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest on deposit accounts $ 7,623,774 $ 8,886,881
Interest on advances and other borrowed money 21,892 329,738
----------------- -----------------
Total interest paid $ 7,645,666 $ 9,216,619
================= =================
Income taxes, net $ 1,060,500 $ 984,905
================= =================
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Transfers from loans to real estate acquired through foreclosure $ 17,250 $ 363,000
================= =================
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
4
<PAGE>
HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999 and December 31, 1998
Note A - Basis of Presentation
- ------------------------------
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-QSB and, accordingly, do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of the
management of New Hampshire Thrift Bancshares, Inc., all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months and the nine months ended
September 30, 1999 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1999.
Note B - Accounting Policies
- ----------------------------
The accounting principles followed by New Hampshire Thrift Bancshares, Inc. and
Subsidiary and the methods of applying these principles which materially affect
the determination of financial position, results of operations, or changes in
financial position are consistent with those used for the year 1998.
The consolidated financial statements of New Hampshire Thrift Bancshares, Inc.
include its wholly owned subsidiary, Lake Sunapee Bank, fsb, and its
subsidiaries Lake Sunapee Group, Inc., and Lake Sunapee Financial Services Corp.
All significant intercompany balances have been eliminated.
Note C - Branch Acquisitions
- ----------------------------
On April 12, 1999, Lake Sunapee Bank, fsb signed a definitive agreement to
acquire three branch offices of New London Trust, New London, NH. This agreement
was amended on June 1, 1999. On October 13, 1999, the transaction received
regulatory approval. The transaction closed on October 29, 1999. The transaction
included approximately $100 million in deposits and $81 million in loans from
New London Trust, FSB. This in-market acquisition increased Company assets to
over $460 million and is expected to be accretive to shareholders beginning in
the year 2000.
Note D - Guaranteed Preferred Beneficial Interests in Company's Debentures
- --------------------------------------------------------------------------
On August 12, 1999, NHTB Capital Trust I (the "Trust"), a Delaware business
trust formed by the Company, completed the sale of $15 million of 9.25% Capital
Securities (the "Capital Securities"). The Trust also issued Common Securities
to the Company and used the net proceeds from the offering to purchase a like
amount of 9.25% Junior Subordinated Deferrable Interest Debentures (the
"Debentures") of the Company. The Debentures are the sole assets of the Trust
and are eliminated, along with the related income statement effects, in the
consolidated financial statements. The Company will contribute the proceeds from
the sale of the Debentures to the Bank as Tier I Capital to support the pending
acquisition of the three branches of New London Trust, FSB. Total expenses
associated with the offering approximating $900,000 were included in other
assets and are being amortized on a straight-line basis over the life of the
Debentures.
The Capital Securities accrue and pay distributions quarterly at an annual rate
of 9.25% of the stated liquidation amount of $10 per Capital Security. The
Company has fully and unconditionally guaranteed all of the obligations of the
Trust. The guaranty covers the quarterly distributions and payments on
liquidation or redemption of the Capital Securities, but only to the extent of
the funds held by the Trust.
The Preferred Securities are mandatorily redeemable upon the maturing of the
Debentures on September 30, 2029 or upon earlier redemption as provided in the
Indenture. The Company has the right to redeem the Debentures, in whole or in
part on or after September 20, 2004 at the liquidation amount, plus any accrued
but unpaid interest to the redemption date.
5
<PAGE>
Part l. Item II.
NEW HAMPSHIRE THRIFT BANCSHARES, NC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
New Hampshire Thrift Bancshares, Inc. (the "Company'), a Delaware holding
company organized on July 5, 1989, is the parent company of Lake Sunapee Bank,
fsb (the "Bank'), a federally chartered savings bank. The Bank is a member of
the Federal Deposit Insurance Corporation (FDIC) and its deposits are insured
through the Savings Association Insurance Fund (SAIF). The Bank is regulated by
the Office of Thrift Supervision (OTS).
The Company's profitability is derived from its only subsidiary, Lake
Sunapee Bank, fsb. The Bank's earnings in turn are generated from the net income
from the yield on its loan and investment portfolios less the cost of its
deposit accounts and borrowings. These core revenues are supplemented by loan
origination fees, retail banking service fees, gains on the sale of investment
securities, and brokerage fees. The Bank passes its earnings to the Company to
the extent allowed by OTS regulations. Current regulations enable the Bank to
pay to the Company the higher of an amount equal to seventy-five per cent of the
Bank's prior four quarter earnings or up to fifty per cent of excess capital
plus total current year earnings. As of September 30, 1999, the Company had
$1,697,243 available, which it plans to use to continue its annual dividend
payout of $0.64 per share and its capital securities interest payments.
Forward-looking Statements
The preceding and following discussion may contain certain forward-looking
statements which are based on management's current expectations regarding
economic, legislative, and regulatory issues that may impact the Company's
earnings in future periods. Factors that could cause future results to vary
materially from current management expectations include, but are not limited to:
general economic conditions, changes in interest rates, deposit flows, real
estate values, and competition; changes in accounting principles, policies, or
guidelines; changes in legislation or regulation; and other economic,
competitive, governmental, regulatory and technological factors affecting the
Company's operations, pricing, products and services. In particular, these
issues may impact management's estimates used in evaluating market risk and
interest rate risk in it GAP and NPV tables, loan loss provisions,
classification of assets, Year 2000 issues, accounting estimates and other
estimates used throughout this discussion.
Acquisition of Three New London Trust, FSB Branches
On October 13, 1999, the Bank received regulatory approval to purchase
three New London Trust, FSB branches located in New London, Andover, and
Newbury, New Hampshire. The transaction closed on October 29, 1999 and systems
were successfully converted over the weekend of October 30, 1999.
The Bank acquired all of the deposits, loans and other certain assets and
liabilities related to the three branches. As of October 30, 1999, total
deposits acquired amounted to approximately $100 million and total loans
acquired amounted to approximately $81 million.
On August 12, 1999, NHTB Capital Trust I (the `Trust'), a Delaware business
trust formed by the Company, completed the sale of $16.4 million of 9.25%
Capital Securities (the "Capital Securities"). The Trust also issued Common
Securities to the Company and used the net proceeds from the offering to
purchase a like amount of 9.25% Junior Subordinated Deferrable Interest
Debentures (the "Debentures') of the Company. The Debentures are the sole assets
of the Trust and are eliminated, along with the related income statement
effects, in the consolidated financial statements. The Company contributed the
proceeds from the sale of the Debentures to the Bank as Tier I Capital to
support the acquisition of the
6
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
three branches of New London Trust, FSB. Total expenses associated with the
offering approximating $900,000 are included in other assets and are being
amortized on a straight-line basis over the life of the Debentures.
The Capital Securities accrue and pay distributions quarterly at an annual
rate of 9.25% of the stated liquidation amount of $10 per Capital Security. The
first distribution was September 30, 1999. The Company has fully and
unconditionally guaranteed all of the obligations of the Trust. The guaranty
covers the quarterly distributions and payments on liquidation or redemption of
the Capital Securities, but only to the extent of the Trust has funds necessary
to make these payments.
The Preferred Securities are mandatorily redeemable upon the maturing of
the Debentures on September 30, 2029 or upon earlier redemption as provided in
the Indenture. The Company has the right to redeem the Debentures, in whole or
in part on or after September 20, 2004 at the liquidation amount plus any
accrued but unpaid interest to the redemption date.
Year 2000
Many companies continue to undertake projects to address the Year 2000
(Y2K). Companies have determined potential costs and uncertainties based on a
number of factors, including its software and hardware and the nature of its
business. Companies must also coordinate with other entities with which they do
business. Lake Sunapee Bank, through its technology committee and an outside
consultant, implemented many hardware and software changes during 1998. The Bank
installed a new data processing mainframe computer, upgraded its mainframe
software, and installed a new proof of deposit and check imaging system. All of
these Y2K compliant systems were in operation throughout most of 1998.
Y2K testing has been ongoing and will continue throughout 1999. Based on a
review of internal practices and communications with third party processors, the
Bank does not expect to encounter significant difficulties in connection with
the transition to the Year 2000. The status of the Bank's `Year 2000 Action
Plan' is reported to its Board of Directors monthly. A $100,000 annual provision
has been established to cover Y2K related expenses. In conjunction with the
`Action Plan', the Bank has developed a `Business Continuity Plan'. This Plan is
designed to allow the Bank to operate should a system it relies on fail. As part
of the `Business Continuity Plan', the Bank has purchased power generators and
designed a manual accounting system. It is unlikely the Bank will need to
utilize these systems, but nevertheless, they have been developed and tested. On
September 29, 1999, the Bank held a successful `mock' Y2K disaster simulation.
Teams were assigned tasks and the plan was implemented using various
assumptions. This exercise highlighted the effectiveness of the Bank's Y2K
Business Continuity Plan.
The Bank is subject to regulatory review concerning the Year 2000 from its
primary regulator, The Office of Thrift Supervision (OTS). During 1998, the Bank
had both its Phase I and Phase 11 examinations and during the second quarter of
1999 its Phase III exam. No further examinations are expected.
Monitoring and managing the Year 2000 project has and will likely continue to
result in additional direct and indirect costs to the Bank. Direct costs include
potential charges by third party software vendors for product enhancements, and
costs involved in testing software for Year 2000 compliance. Indirect costs will
principally consist of the time devoted by existing employees in monitoring
software vendor progress, testing enhanced software products and contingency
plans. Both direct and indirect costs of addressing the Year 2000 Issue will be
charged to earnings as incurred. Such costs have not been material to date.
7
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Financial Condition
During the first nine months of 1999, total assets increased by
$29,255,430, or 9.05% from $323,407,769 to $352,663,199. An increase in gross
loans of $24,816,171, or 10.38%, an increase in securities available-for-sale of
$6,925,878, or 13.28% and an increase of $1,134,362 in other assets related to
deferred expense associated with the acquisition of three New London Trust
branches partially offset by an $5,807,953, or 35.67% decrease in cash and cash
equivalents accounted for the majority of the change.
As mentioned above, gross loans increased $24,816,171 from $239,116,440 to
$263,932,611, or 10.38%. As of September 30, 1999, the Bank had originated
approximately $125 million in loans, had pay-offs of approximately $55 million,
normal amortization of approximately $22 million and loans sold of approximately
$23 million. Of the $125 million in loan originations, approximately 83% was
attributed to mortgage and other consumer loans. Commercial real estate and
other commercial loans accounted for the remaining 17%. During the first three
months of 1999, as interest rate remained favorable, many of the Bank's variable
rate mortgage loan customers refinanced into fixed rate products. The Bank sold
much of this fixed rate product into the secondary market, retaining the
servicing. Selling fixed rate loans into the secondary market helps protect the
Bank against interest rate risk and provides the Bank with a consistent fee
income stream. The Bank expects to continue to sell fixed rate loans into the
secondary market from time to time in order to manage interest rate risk. Market
risk exposure during the production cycle is managed through the use of
secondary market forward commitments. Proceeds from the sale of loans are
available to lend back into the Bank's market area and to purchase investment
securities. At September 30, 1999, the Bank had $151,174,390 in its servicing
portfolio. The Bank expects to exceed $160 million in serviced loans by the end
of 1999. As interest rates began to rise during the second quarter, many
customers sought variable rate loan programs rather than fixed rate programs.
The Bank elected to hold many of these variable rate loans in portfolio. At
September 30, 1999, adjustable rate loans comprised approximately 79% of the
Bank's loan portfolio. This is consistent with prior years.
As of September 30, 1999, total investment securities increased $9,793,042,
or 18.22% from $53,755,251 to $63,548,293 (at amortized cost). During the first
nine months of 1999, the Bank purchased approximately $32 million of investment
securities. This was partially offset by approximately $22 million in calls,
sales and maturities of securities that occurred during that same time. The Bank
used certain proceeds from the issuance of its Capital Securities to purchase
investment securities. The Bank also used proceeds from sold loans and paid
loans to purchase investment securities with favorable yields, thereby
mitigating the reduction in the Bank's interest rate spread that might otherwise
occur. The Bank's net unrealized gain was $415,501 at December 31, 1998 compared
to a net unrealized loss of $2,451,663 at September 30, 1999. This change of
$2,867,164 reflects the rise in interest rates during the first nine months of
1999 and the corresponding decrease in investment security market values.
Real estate owned and property acquired in settlement of loans decreased by
$76,000, or 11.34% to $594,153. This total reflects $336,153 in market value for
the remaining five lots at Blye Hill Landing in Newbury, NH. As of September 30,
1999, three real estate owned properties were sold. The Bank realized a $30,572
gain on the sales.
Deposits decreased by $3,741,957, or 1.33% to $278,307,199 at September 30,
1999, from $282,049,156 at year-end.
Certificates of deposit decreased 11.25% as many higher balance customers
sought investment alternatives. Savings and interest-bearing checking accounts
increased by 6.40% as many customers who traditionally sought CDs invested funds
in overnight-type accounts. Non-interest bearing checking accounts increased by
3.86%.
8
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Securities sold under agreement to repurchase decreased by $3,765,219, to
$8,083,897 from $11,849,116. As mentioned above, many higher balance customers
sought investment alternatives. Repurchase agreements are collateralized by the
Bank's government and agency investment securities.
Overnight and long-term advances from the Federal Home Loan Bank (FHLB)
increased to $18,165,000 from zero at year-end. During the first nine months of
1999, the Bank funded a net $25 million increase in loans, a $7 million increase
on investment securities (carrying amount), and an $8 million decrease in
deposits and repurchase agreements using approximately $5.8 million in cash and
cash equivalents and investment security proceeds, $18 million from FHLB
advances, and $16.4 million in proceeds from the Capital Securities issuance.
Accrued expenses and other liabilities increased $2,563,450, to $4,293,341
from $1,729,891. The majority of the increase was attributable to an increase in
secondary market loan payments and mortgagors' insurance and tax payments held
in escrow.
Liquidity and Capital Resources
The Bank is required to maintain a 4% ratio of liquid assets to net
withdrawable funds. At September 30, 1999, the Bank's ratio of 6.12% exceeded
regulatory requirements for long-term liquidity.
The Bank's source of funds comes primarily from net deposit inflows, loan
amortizations, principal pay downs from loans, sold loan proceeds, and advances
from the FHLB. At September 30, 1999, the Bank had approximately $91 million in
additional borrowing capacity from the FHLB.
At September 30, 1999, the Company's shareholders' equity totaled
$26,906,462, or 7.63% of total assets, compared to $27,779,606, or 8.59% of
total assets at year-end 1998. The increase in shareholders' equity also
reflects net income of $2,379,818, the payment of $1,010,094 in common stock
dividends, $7,800 associated with the issuance of treasury stock and the
decrease of $1,759,866 in the net unrealized holding gain on securities
classified as available-for-sale. The decrease in the net unrealized holding
gain on securities classified as available-for-sale reflects the rise in
interest rates during the first nine months of 1999 and the corresponding
decrease in investment security market values during the same period.
For the nine months ended September 30, 1999, net cash provided by
operating activities was $3,448,883 versus $4,921,715 for the same period in
1998. A net change in accrued interest and other assets accounted for the
majority of the change.
Net cash flows used in investing activities amounted to $35,328,865 for the
nine months ended September 30, 1999, compared to $5,451,400 for the same period
in 1998, a change of approximately $30 million. A net increase in loans to
customers used cash flows of $25,163,159 compared to a decrease in loans that
provided cash flows of $15,374,408 for the same period in 1998, a change of
approximately $41 million. During the first nine months of 1999, purchases of
investment securities were approximately $32 million and sales, calls and
maturities of investment securities were approximately $22 million. As a result,
investment securities activity for the first nine months of 1999 used cash of
approximately $10 million compared to net cash used of approximately $20 million
for the same period in 1998, a change of approximately $10 million.
At September 30, 1999, net cash flows provided by financing activities was
$26,072,029 compared to $6,516,753 for the same period in 1998, a change of
approximately $19.6 million. The majority of the increase was due to the
proceeds from the issuance of the Capital Securities. Also, a decrease in
deposits and repurchase agreements of $20,358,079 over 1998 was offset by an
increase in advances from the FHLB and other borrowings of $23,617,506 for the
same period.
9
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
The Bank expects to be able to fund loan demand and other investing during
1999 by continuing to use funds provided from customer deposits, as well as the
FHLB's advance program. Management believes that cash from its operations will
be sufficient to meet its cash and capital requirements. Management is not aware
of any trends, events, or uncertainties that will have or that are reasonably
likely to have a material effect in the Company's liquidity, capital resources
or results of operations.
Banks are required to maintain tangible capital, core leverage capital, and
total risk based capital of 1.50%, 4.00%, and 8.00%, respectively. As of
September 30, 1999, the Bank's ratios were 11.45%, 11.45%, and 18.81%,
respectively, well in excess of the regulators' requirements. The significant
increase was due to the issuance of the capital securities. The proceeds and
subsequent impact on Tier I capital were realized prior to the consummation of
the New London Trust, FSB acquisition.
Book value per share was $12.77 at September 30, 1999, versus $13.20 per
share at September 30, 1998. The decrease in accumulated other comprehensive
income provided the decrease in book value per share.
Interest Rate Sensitivity
The principal objective of the Bank's interest rate management function is
to evaluate the interest rate risk inherent in certain balance sheet accounts
and determine the appropriate level of risk given the Bank's business
strategies, operating environment, capital and liquidity requirements and
performance objectives and to manage the risk consistent with the Board of
Directors' approved guidelines. The Bank's Board of Directors has established an
Asset/Liability Committee (ALCO) to review its asset/liability policies and
interest rate position monthly. Trends and interest rate positions are reported
to the Board of Directors quarterly.
Gap analysis is used to examine the extent to which assets and liabilities
are "rate sensitive". An asset or liability is said to be interest rate
sensitive within a specific time-period if it will mature or reprice within that
time. The interest rate sensitivity gap is defined as the difference between the
amount of interest-earning assets maturing or repricing within a specified
period of time and the amount of interest-bearing liabilities maturing or
repricing within the same specified period of time. The strategy of matching
rate sensitive assets with similar liabilities stabilizes profitability during
periods of interest rate fluctuations.
The Bank's one-year gap at September 30, 1999 was approximately -9.85%,
compared to the December 31, 1998 gap of -6.78%. The Bank continues to hold in
portfolio adjustable rate mortgages, which reprice at one, three, and five-year
intervals. The Bank sells fixed-rate mortgages into the secondary market in
order to minimize interest rate risk. The Bank's gap, of approximately negative
ten percent at September 30, 1999, means net interest income would increase if
interest rates trended downward. The opposite would occur if interest rates were
to rise. Management feels that maintaining the gap within ten points of the
parity line provides adequate protection against severe interest rate swings. In
an effort to maintain the gap within ten points of parity, the Bank may utilize
the FHLB advance program to control the repricing of a segment of liabilities.
As another part of its interest rate risk analysis, the Bank uses an
interest rate sensitivity model, which generates estimates of the change in the
Bank's net portfolio value (NPV) over a range of interest rate scenarios. The
OTS produces the data quarterly using its own model and data submitted by the
Bank.
NPV is the present value of expected cash flows from assets, liabilities
and off-balance sheet contracts. The NPV ratio, under any rate scenario, is
defined as the NPV in that scenario divided by the market value of assets in the
same scenario. Modeling changes requires making certain assumptions, which may
or may not reflect the manner in which actual yields and costs respond to the
changes in
10
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
market interest rates. In this regard, the NPV model assumes that the
composition of the Bank's interest sensitive assets and liabilities existing at
the beginning of a period remain constant over the period being measured and
that a particular change in interest rates is reflected uniformly across the
yield curve. Accordingly, although the NPV measurements and net interest income
models provide an indication of the Bank's interest rate risk exposure at a
particular point in time, such measurements are not intended to and do not
provide a precise forecast of the effect of changes in market rates on the
Bank's net interest income and will likely differ from actual results.
The following table sets forth the Bank's NPV as of June 30, 1999 (the latest
NPV analysis prepared by the OTS), as calculated by the OTS.
<TABLE>
<CAPTION>
Change Net Portfolio Value NPV as % of PV Assets
in Rates $ Amount $ Change % Change NPV Ratio Change
---------------- --------------------------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C>
+300 bp .............. 24,681 -13,463 - 35% 7.52% - 368 bp
+200 bp .............. 29,779 - 8,365 - 22% 8.94% - 225 bp
+100 bp .............. 34,381 - 3,763 - 10% 10.19% - 100 bp
0 bp .............. 38,143 -- -- 11.20% --
- 100 bp .............. 40,652 2,509 + 7% 11.85% + 65 bp
- 200 bp .............. 42,451 4,307 + 11% 12.30% + 110 bp
- 300 bp .............. 44,532 6,389 + 17% 12.81% + 161 bp
</TABLE>
Allowance for Loan Losses and Asset Quality
The Bank considers many factors in determining the allowance for loan
losses. These include the risk and size characteristics of loans, the prior
years' loss experience, the levels of delinquencies, the prevailing economic
conditions, the number of foreclosures, unemployment rates, interest rates, and
the value of collateral securing the loans. No changes were made to the Bank's
procedures with respect to maintaining the loan loss allowances as a result of
any regulatory examinations.
Additionally, the Bank's commercial loan officers review the financial
condition of commercial loan customers on a regular basis and perform visual
inspections of facilities and inventories. The Bank also has an internal audit
and compliance program. Results of the audit and compliance programs are
reported directly to the Audit Committee of the Bank's Board of Directors.
The allowance for loan losses at September 30, 1999 was $2,860,080,
compared to $3,117,068 at year-end 1998. As of September 30, 1999, the allowance
included $2,719,797 in general reserves compared to $2,731,374 at year-end 1998.
The total allowance represented 1.08% of total loans at September 30, 1999
versus 1.30% at year-end 1998. During the first nine months of 1999, the Bank
had net charge-offs of $346,988 compared to net charge-offs of $56,329 for the
same period in 1998. Included in the 1999 charge-offs was $335,422 resulting
from the Bank selling $1,147,963 of non-performing loans during September. As a
result of the sale, the allowance for loan losses as a percentage of non-
performing loans was 338.10% at September 30, 1999, compared to 154.22% at
December 31, 1998.
Loans classified for regulatory purposes as loss, doubtful, substandard or
special mention do not result from trends or uncertainties which the Bank
reasonably expects will materially impact future operating results, liquidity,
or capital resources. As of September 30, 1999, there were no other loans not
included in the table below or discussed where known information about the
possible credit problems of borrowers caused management to have doubts as to the
ability of the borrower to comply with present loan repayment terms and which
may result in disclosure of such loans in the future.
11
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Total classified loans, excluding special mention, as of September 30, 1999
were $1,833,000 compared to $5,356,046 at December 31, 1998. At September 30,
1999, loans classified as 90 days delinquent were $303,784 compared to $170,999
at December 31, 1998. At September 30, 1999, non-earning impaired loans were
$542,147 compared to $1,850,214 at year-end 1998. Total non-performing assets
amounted to $1,440,084 and $2,691,366, for September 30, 1999 and December 31,
1998, respectively.
The following table shows the breakdown of non-performing assets and non-
performing assets as a percentage of total assets (dollars in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
-------------------- -----------------
<S> <C> <C>
90 day delinquent loans/(1)/ $ 304 0.09% $ 171 0.05%
Non-earning impaired loans/(2)/ 542 0.15% 1,850 0.57%
Other real estate owned 594 0.17% 670 0.21%
-------------------- -----------------
Total non-performing assets $1,440 0.41% $ 2,691 0.83%
==================== =================
Troubled debt restructured $ - - $ 114 0.04%
==================== =================
</TABLE>
/(1)/ All loans 90 days or more delinquent are placed on a non-accruing status.
/(2)/ Loans considered to be impaired, pending foreclosure, or in bankruptcy
proceeding, are placed on a non-earning status.
The following table sets forth the allocation of the loan loss valuation
allowance and the percentage of loans in each category to total loans (dollars
in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
-------------------- --------------------
<S> <C> <C>
Real estate loans -
Conventional $ 1,400 79% $ 1,473 79%
Construction 119 1% 123 2%
Collateral and Consumer 79 12% 68 11%
Commercial and Municipal 1,044 8% 1,007 8%
Other loans 78 - 60 -
Impaired Loans 140 - 386 -
--------------------- ---------------------
Valuation allowance $ 2,860 100% $ 3,117 100%
--------------------- ---------------------
Total valuation allowance as a
Percentage of total loans 1.08% 1.30%
--------- ----------
</TABLE>
Results of Operations
Net income for the nine months ended September 30, 1999, was $2,379,818, or
$1.12 per common share (assuming dilution) compared to $2,202,755, or $1.04 per
common share (assuming dilution) for the same period in 1998, an increase of
$177,063, or 8.04%. Net income for the third quarter in 1999 remained
essentially unchanged at $751,946, or $0.35 per share (assuming dilution) as
compared to $751,096, or $0.36 per share (assuming dilution) for the same period
in 1998. The increase in net income for the nine month period was due primarily
to an increase in interest and dividends on investments and a decrease in the
cost of deposits and the resultant increase in net interest income.
Total interest income for the nine months and the three months ended
September 30, 1999 decreased by $571,947, or 3.26%, to $16,998,621 and $47,606,
or 0.81% to $5,814,722, respectively. The change is primarily attributable to a
$1,120,154, or 7.30% and $118,193, or 2.38%, decrease in interest on loans,
respectively. During the first quarter, as many of the Bank's loan customers
refinanced adjustable rate loans into fixed rate loans, the Bank, in order to
avoid interest rate risk, sold the loans into
12
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
the secondary market. Fee income associated with the sales was recorded in other
income. During the second and third quarters, many customers sought variable
loan programs as interest rates increased. The Bank has traditionally held these
loans in portfolio. As a result of the increased balances in the loan portfolio,
the decrease in interest on loans over 1998, narrowed to 2.38% in the third
quarter versus 7.53% for the second quarter.
Partially offsetting the decrease in interest on loans was a $548,207, or
24.72% and $70,587, or 7.91% increase in interest and dividends on investments
for the nine months and the three months ended September 30, 1999, respectively.
Over the past several months, using certain proceeds from the Capital Securities
issuance, the Bank increased its investment portfolio by purchasing quality
corporate bonds and government agencies with favorable yields as a strategy to
stabilize its yield on interest-earning assets.
For the nine months and the three months ended September 30, 1999, total
interest expense decreased $1,060,719, or 11.54% and $231,961, or 7.57%,
respectively. The decrease was primarily a result of lower interest expense
associated with deposits. During the first nine months of 1999, both total
deposits and the cost of deposits decreased. Seasonal customer demands and
alternative investment opportunities were the primary cause of the decrease in
deposit balances. Many certificate of deposit customers sought investment
alternatives as deposit rates continued to decline. Savings and interest-bearing
checking accounts increased as customers elected shorter-term instruments.
Interest expense on FHLB overnight and long-term advances increased
$200,645, or 66.26% for the nine months ended and $267,891, or 367.97% for the
three months ended September 30, 1999. At September 30, 1999, overnight and
long-term FHLB advances totaled $18,165,000 compared to zero for the same period
in 1998 as the Bank funded loan growth with FHLB advances. The weighted cost of
advances was 4.83% at September 30,1999.
Net interest income increased $488,772, or 5.83%, for the first nine months
of 1999 and $184,355, or 6.59%, for the third quarter. As mentioned above, the
increase was primarily attributable to a decrease in the cost of deposits and an
increase in interest and dividends on investments.
Due to continued lower levels of non-performing loans and lower loan
portfolio average balances combined with management's assessment that reserve
levels are adequate and credit risk has been reduced, the net provision for loan
losses was maintained at $90,000 for the first nine months of 1999 as compared
to $120,167 for the same period in 1998. For the third quarter, the net
provision for loan losses was $30,000 compared to $53,329 for the same period in
1998. The total allowance represented 1.08% of total loans at September 30, 1999
versus 1.28% for the same period in 1998. As mentioned above, the decrease was
associated with the sale of $1,147,963 of non-performing loans during September.
As a result of the sale, the allowance for loan losses as a percentage of non-
performing loans was 338.10% at September 30, 1999, compared to 154.22% at
December 31, 1998.
For the nine months ended September 30, 1999, total other income increased
by $269,576, or 16.38% from $1,645,459 in 1998 to $1,915,035 for the same period
in 1999. The change was primarily a result of an increase in loan origination
and customer service fees and net gains on the sale of securities and property
acquired in settlement of loans. For the third quarter, total other income
decreased by $39,380, or 6.14%. A reduction in loan sale activity and the
resultant fees accounted for the majority if this change.
Total operating expenses increased $654,120, or 9.83% and $207,623, or
9.11% for the nine months and the three months ended September 30, 1999,
respectively. The increase was primarily due to costs associated with additional
staffing, increased benefit costs, occupancy and marketing expenses. Salaries
and employee benefits increased as the Bank managed its loan production and
prepared for the New London Trust, FSB acquisition. Occupancy costs increased as
general expenses related to the
13
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Bank's branches increased and as depreciation expenses associated with capital
expenditures done during 1998 were fully recognized. Marketing increased as the
Bank enhanced its position within a highly competitive market and recognized
costs associated with the New London Trust, FSB acquisition.
Financial Services Modernization Bill
In October 1999, the U.S. Congress overwhelmingly passed the Gramm-Leach-
Bliley Financial Services Modernization Act of 1999, federal legislation
intended to modernize the financial services industry by establishing a
comprehensive framework to permit affiliations among commercial banks, insurance
companies, securities firms and other financial service providers. The
legislation has been forwarded to the President for his approval. Generally, the
legislation would (i) repeal the historical restrictions and eliminate many
federal and state law barriers to affiliations among banks, securities firms,
insurance companies and other financial service providers, (ii) provide a
uniform framework for the functional regulation of the activities of banks,
savings institutions and their holding companies, (iii) broaden the activities
that may be conducted by national banks, banking subsidiaries of bank holding
companies and their financial subsidiaries, (iv) provide an enhanced framework
for protecting the privacy of consumer information, (v) adopt a number of
provisions related to capitalization, membership, corporate governance and other
measures designed to modernize the Federal Home Loan Bank system, (vi) modify
the laws governing the implementation of the Community Reinvestment Act and
(vii) address a variety of other legal and regulatory issues affecting both day-
to-day operations and long-term activities of financial institutions.
In particular, the pending legislation would restrict the authority of
unitary savings and loan holding companies under current law to engage in non-
financially related activities. Unitary savings and loan holding companies that
are "grandfathers," i.e., became a unitary savings and loan holding company
pursuant to an application filed with the OTS before May 4, 1999, (such as the
Company) would retain this authority. All other savings and loan holding
companies would be limited to financially related activities permissible for
financial holding companies, as defined under the new law. The proposed
legislation would also prohibit non-financial companies from acquiring savings
and loan holding companies.
Bank holding companies would be permitted to engage in a wider variety of
financial activities than permitted under the current law, particularly with
respect to insurance and securities activities. In addition, in a change from
current law, bank holding companies will be in a position to be owned,
controlled or acquired by any company engaged in financially related activities.
The Bank does not believe that the proposed legislation, as publicly
reported, would have a material adverse effect on its operations in the near
term. However, to the extent the legislation permits banks, securities firms and
insurance companies to affiliate, the financial services industry may experience
further consolidation. This could result in a growing number of larger financial
institutions that offer a wider variety of financial services than the Bank
currently offers and that can aggressively compete in the market currently
served by the Bank.
14
<PAGE>
Part II.
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
There is no material litigation pending in which the Company or its
subsidiary is a party or which the property of the Company or its
subsidiary is subject.
Item 2. Changes in Securities
---------------------
None
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Common Shareholders
------------------------------------------------------
None
Item 5. Other Information
-----------------
As of the close of business on October 29, 1999, the Bank completed
its purchase of certain assets and assumption of certain liabilities of New
London Trust, FSB, including the three branches, pursuant to an agreement
entered with PM Holdings, Inc., ("PM Holdings"), a wholly owned subsidiary of
Phoenix Home Life Mutual Insurance Company ("Phoenix"), and PM Trust Holding
Company, a wholly owned subsidiary of PM Holdings. The acquisition occurred
immediately after PM Trust's acquisition of all outstanding capital stock of New
London Trust from Sun Life Assurance Company of Canada (U.S.). The agreements
among the parties relating to this transaction were filed as exhibits to the
Form 10-QSB for the quarter ended March 31, 1999.
In connection with the acquisition, the Bank acquired the New London
main office, Andover and Newbury branches of New London Trust with deposits
totaling approximately $100 million and loans totaling approximately $81
million. The consolidated assets of the Company upon consummation of the
acquisition of the three branches are in excess of $460 million. The acquisition
was consummated after satisfaction of certain conditions, including the receipt
of all requisite regulatory approvals and will be accounted for as a purchase
under generally accepted accounting principles. The Bank paid $10,576,000 of a
deposit premium.
As of the date of this filing, it is impracticable to provide
financial statements and pro forma financial information for the acquired
branches of New London Trust. The required financial statements will be filed as
soon as possible and in no event later than January 14, 2000, under cover of a
Current Report on Form 8-K.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
A.) Exhibits:
Exhibit 27: Financial Data Schedules (EDGAR filing only)
B.) Reports on Form 8-K:
None
15
<PAGE>
NEW HAMPSHIRE THRIFT BANCSHARES, INC. AND SUBSIDIARY
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.
NEW HAMPSHIRE THRIFT BANCSHARES, INC.
-------------------------------------
(Registrant)
Date: November 15 1999 /s/ Stephen W. Ensign
--------------------------- ---------------------------------------
Stephen W. Ensign
Vice Chairman of the Board, President
and Chief Executive Officer
Date: November 15, 1999 /s/ Stephen R. Theroux
--------------------------- ---------------------------------------
Stephen R. Theroux
Executive Vice President and
Chief Operating Officer
Date: November 15, 1999 /s/ Daryl J. Cady
--------------------------- ---------------------------------------
Daryl J. Cady
Senior Vice President and
Chief Financial Officer
(Principal Accounting Officer)
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 10,416,605
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 60,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 48,581,425
<INVESTMENTS-CARRYING> 12,420,206
<INVESTMENTS-MARKET> 12,400,491
<LOANS> 254,964,105
<ALLOWANCE> 2,860,080
<TOTAL-ASSETS> 352,663,199
<DEPOSITS> 278,307,199
<SHORT-TERM> 18,165,000
<LIABILITIES-OTHER> 12,377,238
<LONG-TERM> 0
0
0
<COMMON> 24,798
<OTHER-SE> 26,881,664
<TOTAL-LIABILITIES-AND-EQUITY> 352,663,199
<INTEREST-LOAN> 4,851,470
<INTEREST-INVEST> 963,252
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 5,814,722
<INTEREST-DEPOSIT> 2,490,582
<INTEREST-EXPENSE> 2,831,276
<INTEREST-INCOME-NET> 2,983,446
<LOAN-LOSSES> 30,000
<SECURITIES-GAINS> 3,689
<EXPENSE-OTHER> 2,486,021
<INCOME-PRETAX> 1,069,301
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 751,946
<EPS-BASIC> 0.36
<EPS-DILUTED> 0.35
<YIELD-ACTUAL> 7.45
<LOANS-NON> 542,147
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,185,480
<CHARGE-OFFS> 217,791
<RECOVERIES> 816
<ALLOWANCE-CLOSE> 2,860,080
<ALLOWANCE-DOMESTIC> 2,860,080
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
