<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
FORM 10-QSB
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 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.: 0-18833
CHESTER VALLEY BANCORP INC.
---------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
PENNSYLVANIA 23-2598554
------------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 E. LANCASTER AVE., DOWNINGTOWN PA 19335
------------------------------------- ---------
(Address Of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (610) 269-9700
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
----- -----
Transitional Small Business Disclosure Format. YES NO X
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<S> <C>
COMMON STOCK ($1.00 PAR VALUE) 2,053,693
------------------------------ ------------
(Title of Each Class) (Number of Shares Outstanding
as of May 1, 1997)
</TABLE>
<PAGE> 2
CHESTER VALLEY BANCORP INC. AND SUBSIDIARY
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART 1. FINANCIAL INFORMATION
- ------------------------------
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
March 31, 1997 and June 30, 1996 (Unaudited) 3
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31, 1997 and 1996 (Unaudited) 4
CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months Ended March 31, 1997 and 1996 (Unaudited) 5
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended March 31, 1997 and 1996 (Unaudited) 6
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 7-13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 14-23
PART 2. OTHER INFORMATION 24
- --------------------------
ITEM 1. LEGAL PROCEEDINGS 24
ITEM 2. CHANGES IN SECURITIES 24
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 24
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 24
ITEM 5. OTHER INFORMATION 24
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 24
SIGNATURES 25
- ----------
</TABLE>
<PAGE> 3
CHESTER VALLEY BANCORP INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in Thousands)
<TABLE>
<CAPTION>
MARCH 31, June 30,
1997 1996
---------------- ------------------
<S> <C> <C>
ASSETS:
Cash in banks $ 1,740 $ 1,528
Interest-bearing deposits 3,956 8,784
Investment securities available for sale 25,150 6,159
Investment securities (market value - March 31, $20,522; June
30, $22,491) 20,736 24,593
Accrued interest receivable 1,840 1,616
Loans held for sale 201 --
Loans receivable, less allowance for possible loan losses of
$2,710 and $2,667 244,211 223,963
Prepaid and deferred income taxes 905 720
Real estate owned 483 121
Property and equipment 4,407 4,323
Other assets 1,558 1,125
---------------- ------------------
TOTAL ASSETS $ 305,187 $ 272,932
================ ==================
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposit accounts $ 242,304 $ 228,206
Securities sold under agreements to repurchase 169 --
Advance payments by borrowers for taxes and insurance 2,209 3,015
Employee Stock Ownership Plan ("ESOP") debt 379 511
Federal Home Loan Bank advances 31,412 13,972
Other borrowings 250 --
Accrued interest payable 786 653
Accrued and deferred income taxes 79 322
Other liabilities 1,468 689
---------------- ------------------
TOTAL LIABILITIES 279,056 247,368
---------------- ------------------
STOCKHOLDERS' EQUITY:
Preferred stock - $1.00 par value; 5,000,000 shares
authorized; none issued -- --
Common stock - $1.00 par value; 15,625,000 shares authorized;
2,072,083 and 1,990,261 shares issued at March 31 and June 30,
respectively(1) 2,072 1,990
Additional paid-in capital(1) 12,720 11,265
Common stock acquired by ESOP (379) (511)
Retained earnings - partially restricted 12,236 13,110
Net unrealized loss on securities available for sale, net of
taxes (255) (97)
---------------- ------------------
Subtotal 26,394 25,757
Treasury stock, at cost (17,773 shares and 14,555 shares at
March 31 and June 30, respectively)(1) (263) (193)
---------------- ------------------
TOTAL STOCKHOLDERS' EQUITY 26,131 25,564
---------------- ------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 305,187 $ 272,932
================ ==================
</TABLE>
(1) June 30, 1996, amounts have been restated for the March 1997 five-for-four
stock split effected in the form of a dividend
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE> 4
CHESTER VALLEY BANCORP INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except for Per Share Amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------------------
1997 1996
---------------- -----------------
<S> <C> <C>
INTEREST INCOME:
Loans $ 5,029 $ 4,536
Investment securities and interest-bearing deposits 541 652
------------ --------------
TOTAL INTEREST INCOME 5,570 5,188
------------ --------------
INTEREST EXPENSE:
Deposits 2,572 2,492
Short-term borrowings 79 68
Long-term borrowings 213 196
------------ --------------
TOTAL INTEREST EXPENSE 2,864 2,756
------------ --------------
NET INTEREST INCOME 2,706 2,432
Provision for possible loan losses 97 62
------------ --------------
NET INTEREST INCOME AFTER PROVISION FOR POSSIBLE LOAN LOSSES 2,609 2,370
------------ --------------
OTHER INCOME:
Service charges and fees 228 219
Gain (loss) on sale of loans held for sale (2) 13
Gain on sale of securities available for sale 30 47
Other 40 (46)
------------ --------------
TOTAL OTHER INCOME 296 233
------------ --------------
OPERATING EXPENSES:
Salaries and employee benefits 978 804
Occupancy and equipment 379 328
Data processing 142 136
Deposit insurance premiums 9 126
Other 393 329
------------ --------------
TOTAL OPERATING EXPENSES 1,901 1,723
------------ --------------
Income before income taxes 1,004 880
Income tax expense 275 239
------------ --------------
NET INCOME $ 729 $ 641
============ ==============
EARNINGS PER SHARE (1):
Primary $ 0.35 $ 0.31
============ ==============
Fully Diluted $ 0.35 $ 0.31
============ ==============
DIVIDENDS PER SHARE PAID DURING PERIOD (1) $ 0.09 $ 0.07
============ ==============
WEIGHTED AVERAGE SHARES OUTSTANDING (1):
Primary 2,057,718 2,068,858
============ ==============
Fully Diluted 2,061,677 2,068,858
============ ==============
</TABLE>
(1) Earnings per share, dividends per share and weighted average shares
outstanding have been restated to reflect the effects of the 5% stock
dividend paid in September 1996 and the March 1997 five-for-four stock
split effected in the form of a dividend.
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE> 5
CHESTER VALLEY BANCORP INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except for Per Share Amounts)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
-------------------------------------------
1997 1996
------------------- -------------------
<S> <C> <C>
INTEREST INCOME:
Loans $ 15,022 $ 13,857
Investment securities and interest-bearing deposits 1,533 1,529
------------------- -------------------
TOTAL INTEREST INCOME 16,555 15,386
------------------- -------------------
INTEREST EXPENSE:
Deposits 7,584 7,465
Securities sold under agreements to repurchase 51 --
Short-term borrowings 231 161
Long-term borrowings 595 567
------------------- -------------------
TOTAL INTEREST EXPENSE 8,461 8,193
------------------- -------------------
NET INTEREST INCOME 8,094 7,193
Provision for possible loan losses 357 247
------------------- -------------------
NET INTEREST INCOME AFTER PROVISION FOR POSSIBLE
LOAN LOSSES 7,737 6,946
------------------- -------------------
OTHER INCOME:
Service charges and fees 736 709
Gain on sale of loans held for sale 1 17
Gain on sale of securities available for sale 98 134
Other 137 (6)
------------------- -------------------
TOTAL OTHER INCOME 972 854
------------------- -------------------
OPERATING EXPENSES:
Salaries and employee benefits 2,780 2,430
Occupancy and equipment 1,117 967
Data processing 450 389
SAIF special assessment 1,387 --
Deposit insurance premiums 270 372
Other 1,195 1,034
------------------- -------------------
TOTAL OPERATING EXPENSES 7,199 5,192
------------------- -------------------
Income before income taxes 1,510 2,608
Income tax expense 324 770
------------------- -------------------
NET INCOME $ 1,186 $ 1,838
=================== ===================
EARNINGS PER SHARE (1):
Primary $ 0.58 $ 0.89
=================== ===================
Fully Diluted $ 0.58 $ 0.89
=================== ===================
DIVIDENDS PER SHARE PAID DURING PERIOD (1) $ 0.26 $ 0.21
=================== ===================
WEIGHTED AVERAGE SHARES OUTSTANDING (1):
Primary 2,057,881 2,074,795
=================== ===================
Fully Diluted 2,060,846 2,076,258
=================== ===================
</TABLE>
(1) Earnings per share, dividends per share and weighted average shares
outstanding have been restated to reflect the effects of the 5% stock
dividend paid in September 1996 and the March 1997 five-for-four stock
split effected in the form of a dividend.
See accompanying notes to unaudited consolidated financial statements.
5
<PAGE> 6
CHESTER VALLEY BANCORP INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED MARCH 31,
-------------------------------------------------
1997 1996
-------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,186 $ 1,838
Add (deduct) items not affecting cash flows
from operating activities:
Depreciation 426 405
Provision for possible losses on loans 357 247
Gain on sale of loans held for sale (1) (17)
Gain on sale of securities available for sale (98) (134)
Loss on sale of real estate owned -- 52
Amortization of deferred loan fees,
discounts and premiums (392) (407)
Increase in accrued interest receivable (224) (171)
Decrease (increase) in other assets (433) 34
Increase in prepaid and deferred income taxes (185) (137)
Decrease in accrued and deferred income taxes (243) (147)
Increase in other liabilities 779 69
Increase in accrued interest payable 133 97
- ------------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM OPERATING ACTIVITIES 1,305 1,729
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM (USED IN) INVESTMENT ACTIVITIES:
Capital expenditures (510) (310)
Net (increase) decrease in loans and loans
held for sale (21,672) 1,548
Proceeds from sale of loans held for sale 905 2,452
Proceeds from maturities, payments and calls
of investment securities 4,066 3,971
Purchase of investment securities (221) (7,013)
Purchase of securities available for sale (69,909) (81,999)
Proceeds from sale of securities available
for sale 50,776 68,610
Proceeds from real estate owned 86 312
- ------------------------------------------------------------------------------------------------------------
NET CASH FLOWS USED IN INVESTMENT ACTIVITIES (36,479) (12,429)
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Net increase in savings deposits before
interest credited 7,716 5,181
Interest credited to savings accounts 6,382 6,242
Proceeds under securities sold under
agreements to repurchase 169 --
Proceeds from FHLB advances 18,914 2,248
Repayments of FHLB advances (1,474) (1,854)
Decrease in advance payments by borrowers
for taxes and insurance (806) (822)
Proceeds from other borrowings 250 --
Cash dividends on common stock (533) (416)
Repayments of principal on ESOP debt (132) (138)
Sale of common stock under the dividend
reinvestment plan (9) 165
Payment for fractional shares (17) (11)
Stock options exercised 290 95
Reduction of common stock acquired by ESOP 132 138
Stock repurchased as treasury stock (324) (242)
- ------------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES 30,558 10,586
- ------------------------------------------------------------------------------------------------------------
Decrease in cash and cash equivalents (4,616) (114)
CASH AND CASH EQUIVALENTS:
Beginning of period 10,312 7,444
------------------ --------------------
End of period $ 5,696 $ 7,330
================== ====================
SUPPLEMENTAL DISCLOSURES:
Cash payments during the year for:
Taxes $ 617 $ 935
Interest $ 8,328 $ 8,098
NON-CASH ITEMS:
Acquisition of real estate in settlement of
loans $ 448 $ 207
Stock dividend issued $ 1,516 $ 1,417
Transfer of investment securities to
investment securities available for sale $ -- $ 3,192
Net unrealized loss on investment securities
available for sale $ 240 $ 338
Tax effect on unrealized loss on investment
securities available for sale $ 82 $ 110
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
6
<PAGE> 7
CHESTER VALLEY BANCORP INC.
AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying consolidated financial statements have been
prepared in accordance with instructions to Form 10-QSB.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
("GAAP") for complete financial statements. However, such
information reflects all adjustments which are, in the opinion
of management, necessary for a fair presentation of results
for the unaudited interim periods.
The results of operations for the nine-month period ended
March 31, 1997, are not necessarily indicative of the results
to be expected for the fiscal year ending June 30, 1997. The
consolidated financial statements presented herein should be
read in conjunction with the audited consolidated financial
statements and the notes thereto included in Chester Valley
Bancorp Inc.'s Annual Report to Stockholders for the fiscal
year ended June 30, 1996.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the
accounts of Chester Valley Bancorp Inc. (the "Company" or
"Chester Valley"), its wholly-owned subsidiary, First
Financial Savings Bank PaSA (the "Bank" or "First Financial"),
a Pennsylvania-chartered stock savings association, and the
Bank's wholly-owned subsidiary, D & S Service Corp., which
owns D & F Projects and Wildman Projects, Inc., both of which
are wholly-owned subsidiaries thereof. All material
inter-company balances and transactions have been eliminated
in consolidation. Prior period amounts are reclassified when
necessary to conform with the current period's presentation.
CASH AND CASH EQUIVALENTS
For the purpose of the consolidated statements of cash flows,
cash and cash equivalents include cash and interest-bearing
deposits with an original maturity of generally three months
or less.
7
<PAGE> 8
INVESTMENTS AND MORTGAGE-BACKED SECURITIES
The Company divides its securities portfolio into three
segments: (a) held to maturity; (b) available for sale; and
(c) trading. Securities in the held to maturity category are
accounted for at amortized cost. Trading securities, if any,
are accounted for at quoted market prices with changes in
market values being recorded as gain or loss in the income
statement. All other securities are included in the available
for sale category and are accounted for at fair value with
unrealized gains or losses, net of taxes, being reflected as
adjustments to equity.
Investments and mortgage-backed securities held for investment
are carried at cost, adjusted for amortization of premiums and
accretion of discounts using a method which approximates a
level yield, based on the Company's intent and ability to hold
the securities until maturity. At the time of purchase, the
Company makes a determination on whether or not it will hold
the investments and mortgage-backed securities to maturity,
based upon an evaluation of the probability of the occurrence
of certain future events. Investments and mortgage-backed
securities which the Company believes may be involved in
interest rate risk, liquidity, or other asset/liability
management decisions which might reasonably result in such
securities not being held until maturity, are classified as
available for sale. If investments and mortgage-backed
securities available for sale are sold, any gain or loss is
determined by specific identification and reflected in the
operating results for the period.
ALLOWANCE FOR POSSIBLE LOAN LOSSES
The allowance for possible loan losses is maintained at a
level that management considers adequate to provide for
potential losses based upon an evaluation of known and
inherent risks in the loan portfolio. Management's evaluation
is based upon an analysis of the portfolio, past loss
experience, current economic conditions and other relevant
factors. While management uses the best information available
to make such evaluations, such evaluations are highly
subjective, and future adjustments to the allowance may be
necessary if conditions differ substantially from the
assumptions used in making the evaluations. In addition,
various regulatory agencies, as an integral part of their
examination process, periodically review the Company's
allowance for losses on loans. Such agencies may require the
Company to recognize additions to the allowance based on their
judgments about information available to them at the time of
their examination. The allowance is increased by the
provision for possible loan losses which is charged to
operations. Loan losses are charged directly against the
allowance and recoveries on previously charged-off loans are
added to the allowance.
8
<PAGE> 9
On July 1, 1995, the Company prospectively implemented
Statement of Financial Accounting Standards No. 114 ("SFAS No.
114"), "Accounting by Creditors for Impairment of Loans," and
SFAS No. 118, "Accounting by Creditors for Impairment of a
Loan-Income Recognition and Disclosures," which amends SFAS
No. 114 and requires certain related disclosures. SFAS No.
114, as amended, requires certain impaired loans to be
measured based on the present value of expected future cash
flows discounted at the loan's effective interest rate, the
loan's market price or the fair value of the collateral if the
loan is collateral dependent. The implementation of these
statements had no material effect on the Company's results of
operations, financial condition, or stockholders' equity.
For purposes of applying the measurement criteria for impaired
loans under SFAS No. 114, as amended, the Company excludes
large groups of smaller-balance homogeneous loans, primarily
consisting of residential real estate loans and consumer loans
as well as commercial loans with balances of less than
$100,000. For applicable loans, the Company evaluates the
need for impairment recognition when a loan becomes
non-accrual or earlier if, based on management's assessment of
the relevant facts and circumstances, it is probable that the
Bank will be unable to collect all proceeds due according to
the contractual terms of the loan agreement. At and during
the three- and nine-month periods ended March 31, 1997, the
recorded investment in impaired loans was not material. The
Company's policy for the recognition of interest income on
impaired loans is the same as for non-accrual loans discussed
below. Impaired loans are charged off when the Company
determines that foreclosure is probable and the fair value of
the collateral is less than the recorded investment of the
impaired loan.
LOANS, LOAN ORIGINATION FEES AND UNCOLLECTED INTEREST
Loans (other than loans held for sale) are recorded at cost
net of unearned discounts, deferred fees and allowances.
Discounts and premiums on purchased loans are amortized using
the interest method over the remaining contractual life of the
portfolio, adjusted for actual prepayments. Loan origination
fees and certain direct origination costs are deferred and
amortized over the life of the related loans as an adjustment
of the yield on the loans.
Uncollected interest receivable on loans is accrued to income
as earned. Non-accrual loans are loans on which the accrual
of interest has ceased because the collection of principal or
interest payments is determined to be doubtful by management.
It is the policy of the Company to discontinue the accrual of
interest when principal or interest payments are delinquent 90
days or more (unless the loan principal and interest are
determined by management to be fully secured and in the
process of collection), or earlier, if the financial condition
of the borrower raises
9
<PAGE> 10
significant concern with regard to the ability of the borrower
to service the debt in accordance with the current loan terms.
Interest income on such loans is not accrued until the
financial condition and payment record of the borrower once
again demonstrate the ability to service the debt.
LOANS HELD FOR SALE
The Company periodically identifies certain loans as held for
sale at the time of origination. These loans consist
primarily of fixed-rate, single-family residential mortgage
loans which meet the underwriting characteristics of certain
government-sponsored enterprises (conforming loans). Loans
held for sale are carried at the lower of aggregate cost or
fair value, with the resulting gain or loss included in other
income for the period.
REAL ESTATE OWNED ("REO")
Real estate acquired through foreclosure or by deed in lieu of
foreclosure is classified as REO. REO is carried at the lower
of cost (lesser of carrying value of the loan or fair value of
the property at date of acquisition) or fair value less
selling expenses. Costs relating to the development or
improvement of the property are capitalized; holding costs are
charged to expense.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, less accumulated
depreciation. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets. When
assets are retired or otherwise disposed of, the cost and
related accumulated depreciation are removed from the
accounts. The cost of maintenance and repairs is charged to
expense as incurred and renewals and betterments are
capitalized.
DEFERRED INCOME TAXES
The Company accounts for income taxes under the asset and
liability method. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered
or settled. The effect on deferred tax assets
10
<PAGE> 11
and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
EARNINGS PER COMMON SHARE AND COMMON EQUIVALENT SHARE
Earnings per share have been calculated based on the weighted
average number of common and common equivalent shares
outstanding for the respective periods. Stock options are
considered common stock equivalents and are included in the
computation of the number of outstanding shares using the
treasury stock method. Earnings per share and weighted average
shares outstanding have been adjusted to reflect the effects
of the 5% stock dividend paid in September 1996 and the March
1997 five-for-four stock split effected in the form of a
dividend.
11
<PAGE> 12
NOTE 3 - LOANS RECEIVABLE
Loans receivable are summarized as follows:
<TABLE>
<CAPTION>
AT MARCH 31, At June 30,
1997 1996
--------------------- -----------------------
(Dollars in Thousands)
<S> <C> <C>
First mortgage loans:
Residential $152,703 $148,530
Construction-residential 9,444 9,494
Land acquisition and
development 6,454 5,121
Commercial 31,576 22,552
Construction-commercial 5,287 2,413
Commercial business 7,008 5,701
Consumer 46,265 41,486
--------------------- -----------------------
TOTAL LOANS 258,737 235,298
--------------------- -----------------------
Less:
Undisbursed loan proceeds:
Construction-residential (6,867) (6,211)
Construction-commercial (3,454) (923)
Deferred loan fees - net (1,495) (1,533)
Allowance for loan losses (2,710) (2,667)
--------------------- -----------------------
NET LOANS $244,211 $223,963
===================== =======================
</TABLE>
NOTE 4 - COMMITMENTS
Commitments to potential mortgagors of the Bank amounted to
$7.82 million as of March 31, 1997, of which $4.84 million was
for variable-rate loans. The balance of the commitments
represents $2.98 million of fixed-rate loans bearing interest
rates of 6.70% to 8.625%. At March 31, 1997, the Company had
$10.32 million of undisbursed construction loan funds as well
as $13.99 million of undisbursed remaining credit line
balances. In addition, the Company has issued $71,000 of
commercial letters of credit fully secured by deposit accounts
or real estate.
12
<PAGE> 13
NOTE 5 - REGULATORY CAPITAL
The Bank is required by regulations of the Office of Thrift
Supervision ("OTS") to maintain minimum levels of capital as
measured by three ratios. Savings institutions are currently
required to maintain a minimum regulatory tangible capital
equal to 1.5% of total assets, minimum core capital of 3% of
total assets, and risk-based capital equal to 8% of total
risk-weighted assets. At March 31, 1997, and June 30, 1996,
the Bank exceeded all regulatory capital requirements. The
following sets forth the reconciliation of the Bank's
compliance with each of the regulatory capital requirements
(dollars in thousands):
<TABLE>
<CAPTION>
MARCH 31, 1997
---------------------------------------------------------
TANGIBLE CORE RISK-BASED
CAPITAL CAPITAL CAPITAL
----------- ------------ --------------
<S> <C> <C> <C>
Total Regulatory Capital $ 25,920 $ 25,920 $ 28,109
Minimum Required Regulatory Capital 4,582 9,163 14,644
----------- ------------ --------------
Excess Regulatory Capital $ 21,338 $ 16,757 $ 13,465
=========== ============ ==============
Regulatory Capital as a
Percentage of Assets 8.49% 8.49% 15.36%
Minimum Capital Required as a
Percentage of Assets 1.50 3.00 1.50
----------- ------------ --------------
Excess Regulatory Capital as a
Percentage of Assets 6.99% 5.49% 7.36%
=========== ============ ==============
</TABLE>
<TABLE>
<CAPTION>
June 30, 1996
--------------------------------------------------------------
Tangible Core Risk-based
Capital Capital Capital
------------ ----------- --------------
<S> <C> <C> <C>
Total Regulatory Capital $ 25,301 $ 25,301 $ 27,348
Minimum Required Regulatory Capital 4,095 8,191 13,243
------------ ----------- --------------
Excess Regulatory Capital $ 21,206 $ 17,110 $ 14,105
============ =========== ==============
Regulatory Capital as a
Percentage of Assets 9.27% 9.27% 16.52%
Minimum Capital Required as a
Percentage of Assets 8.00 3.00 8.00
------------ ----------- --------------
Excess Regulatory Capital as a
Percentage of Assets 7.77% 6.27% 8.52%
============ =========== ==============
</TABLE>
The Bank is not under any agreement with the regulatory authorities, nor is it
aware of any current recommendations by the regulatory authorities which, if
they were to be implemented, would have a material effect on the liquidity,
capital resources or operations of the Company.
13
<PAGE> 14
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
FINANCIAL CONDITION
The Company's total assets increased to $305.19 million at March 31, 1997, from
$272.93 million at June 30, 1996, largely as the result of the increases in net
loans and securities available for sale to $244.21 million and $25.15 million,
respectively, at March 31, 1997, from $223.96 million and $6.16 million at June
30, 1996, respectively. The increase in total assets was funded primarily by
increases in deposit accounts to $242.30 million and in Federal Home Loan Bank
advances to $31.41 million at March 31, 1997, from $228.21 million and $13.97
million at June 30, 1996, respectively.
Stockholders' equity increased to $26.13 million at March 31, 1997, from $25.56
million at June 30, 1996, as a result of net income of $1.19 million, the
receipt of $290,000 from the exercise of stock options during the period, and
the reduction in the principal balance of the ESOP debt by $132,000. The
increase in stockholders' equity was offset, in large part, by the payment of
cash dividends totaling $533,000, the repurchase of $324,000 of common stock,
the recognition of net unrealized losses on securities available for sale, net
of taxes, of $158,000, as well as the payment of $17,000 for fractional shares
in connection with the 5% stock dividend paid during the nine-month period
ended March 31, 1997.
RESULTS OF OPERATIONS
Net interest income, on a fully tax equivalent basis, increased 11.7% to $2.78
million for the three-month period ended March 31, 1997, and 12.6% to $8.30
million for the nine-month period ended March 31, 1997, compared to $2.49
million and $7.37 million for the same periods in 1996. Total interest income,
on a fully tax equivalent basis, increased to $5.64 million and $16.76 million
for the three- and nine-month periods ended March 31, 1997, from $5.25 million
and $15.56 million for the same periods in 1996, primarily as the result of an
increase in the average balance of interest-earning assets. The average
balance of interest-earning assets increased to $283.16 million and $276.30
million for the three- and nine-month periods ended March 31, 1997, from
$262.03 million and $256.52 million for the same respective periods in 1996.
Loan originations of $61.24 million during the nine months ended March 31,
1997, contributed to the increase in the average balance of interest-earning
assets. The average yield on interest-earning assets remained the same at
8.09% for the nine months ended March 31, 1997 and 1996.
Total interest expense increased to $2.86 million and $8.46 million from $2.76
million and $8.19 million for the respective three- and nine-month periods in
1997 and 1996, largely as the result of the increase in the average balance of
interest-bearing liabilities to $245.93 million and $238.79 million,
respectively, as compared to $226.87 million and $223.22 million for the same
periods in
14
<PAGE> 15
1996. Partially offsetting the effect of increases in the average balances of
interest-bearing liabilities were decreases in the average rate paid on such
liabilities to 4.65% and 4.72% for the three- and nine-month periods ended
March 31, 1997, from 4.87% and 4.89% for the same periods in 1996,
respectively. Such declines were due, in part, to the Bank lowering the rates
paid on its interest-bearing retail checking accounts combined with the Bank's
successful efforts in obtaining low-costing or no-cost deposits in the form of
commercial business accounts.
The tax equivalent interest rate spread increased to 3.37% from 3.20%, and the
average net yield on interest-earning assets increased to 4.01% from 3.83% for
the nine-month periods ended March 31, 1997 and 1996, respectively, due to the
reasons discussed above.
PROVISION FOR POSSIBLE LOAN LOSSES
The Company provided $97,000 and $357,000 during the three- and nine-month
periods ended March 31, 1997, respectively, for possible loan losses as
compared to $62,000 and $247,000 for the same periods in 1996. These
provisions have been added to the Company's allowance for possible loan losses
due to the current economic conditions and management's assessment of the
inherent risk of loss existing in the loan portfolio. At March 31, 1997, the
allowance for possible loan losses totaled $2.71 million or 1.10% of net loans,
compared to $2.67 million or 1.18% of net loans and $2.63 million or 1.20% of
net loans at June 30, 1996, and March 31, 1996, respectively. As a percentage
of non-performing loans, the allowance for possible loan losses was 280.8% at
March 31, 1997, compared to 120.3% at June 30, 1996, and further compared to
92.7% at March 31, 1996.
Provisions for possible loan losses which are added to the allowance for
possible loan losses are based upon, among other things, delinquency trends,
the volume of non-performing loans, prior loss experience of the portfolio,
current economic conditions, and other relevant factors. Although management
believes it has used the best information available to it in making such
determinations and that the present allowance for possible loan losses is
adequate, future adjustments to the allowance may be necessary, and net income
may be adversely affected if circumstances differ substantially from the
assumptions used in determining the level of the allowance. In addition,
various regulatory agencies, as an integral part of their examination process,
periodically review the Company's allowance for possible losses on loans. Such
agencies may require the Company to recognize additions to the allowance based
on their judgments about information available to them at the time of their
examination.
OTHER INCOME
Total other income increased to $296,000 and $972,000 during the three- and
nine-month periods ended March 31, 1997, as compared to $233,000 and $854,000
during the same periods in 1996 due to increases in service charges and fees.
Service charges and fees increased to $736,000 from $709,000 during the
nine-month periods ended March 31, 1997 and 1996, respectively, as the
15
<PAGE> 16
result of an increase in fees charged on safe deposit box rentals, an increase
in the number of safe deposit boxes rented and an increase in commissions
earned on the sale of disability and life insurance to the Bank's loan
customers. In addition, other income included a gain on the sale of real
estate of $6,700 compared to a loss of $52,000 during the nine months ended
March 31, 1997 and 1996, respectively.
OPERATING EXPENSES
Total operating expenses for the three- and nine-month periods ended March 31,
1997, increased to $1.90 million and $7.20 million, respectively, from $1.72
million and $5.19 million for the same respective periods in 1996. The
increase for the nine months ended March 31, 1997, was mainly due to the
one-time Savings Institutions Insurance Fund ("SAIF") special assessment of
$1.39 million. The one-time assessment, which required a payment of 65.7 basis
points on SAIF-insured deposits that were held as of March 31, 1995, was part
of the Economic Growth and Regulatory Paperwork Reduction Act of 1996 ("Deposit
Insurance Legislation") passed by Congress and signed by the President on
September 30, 1996. The assessment brought the SAIF's reserve ratio to a
comparable level of that of the Bank Insurance Fund portion of the Federal
Deposit Insurance Corporation ("FDIC"), at 1.25 percent of total insured
deposits. In addition, the FDIC lowered the SAIF premium charged to certain
well-capitalized institutions from 23 cents per $100 of deposits to 6.44 cents
per $100 of deposits beginning in January 1997, which will result in an annual
estimated pretax savings of approximately $400,000 per year for the Company.
The increase in operating expenses for the three- and nine-month periods ended
March 31, 1997, was also due to (i) normal salary increases combined with
increases in benefits expense, as well as the cost of additional staff for the
Bank's newest branch office, Brandywine Square, which opened during the first
quarter of fiscal 1997, (ii) an increase in office rental expense, furniture,
fixture and equipment expense, and advertising expense in connection with the
opening of the Brandywine Square branch office in the first quarter of fiscal
1997, and (iii) an increase in data processing expenses related to an increased
number of accounts and usage.
INCOME TAX EXPENSE
Income tax expense was $275,000 and $324,000 for the three- and nine-month
periods ended March 31, 1997, compared to $239,000 and $770,000 for the same
periods in 1996. The decrease in income tax expense for the nine-month period
ended March 31, 1997, was the result of the $1.39 million one-time SAIF
assessment which significantly reduced the Company's pre-tax income during such
period.
NET INCOME
The Company earned net income of $1.19 million or $.58 per share for the nine
months ended March 31, 1997, after posting the one-time SAIF special
assessment, compared to $1.84 million or
16
<PAGE> 17
$.89 per share for the same period in 1996. The pre-tax effect of the one-time
special assessment was $1.39 million resulting in an after-tax charge to
earnings of approximately $832,000 or $.42 per share. Excluding the one-time
SAIF special assessment and adding back the effect of the premium reduction
from 23 cents per $100 of deposits to 6.48 cents, the Company would have earned
net income of $2.06 million or $1.00 per share, for the nine months ended March
31, 1997.
ASSET QUALITY
Non-performing assets are comprised of non-performing loans and REO and totaled
$1.45 million at March 31, 1997. Non-accrual loans are loans on which the
accrual of interest has ceased because the collection of principal or interest
payments is determined to be doubtful by management. It is the policy of the
Company to discontinue the accrual of interest when principal or interest
payments are delinquent 90 days or more (unless the loan principal and interest
are determined by management to be fully secured and in the process of
collection), or earlier, if the financial condition of the borrower raises
significant concern with regard to the ability of the borrower to service the
debt in accordance with the current loan term. Interest income is not accrued
until the financial condition and payment record of the borrower once again
demonstrate the ability to service the debt. At March 31, 1997, the Company
did not have any loans greater than 90 days delinquent which were accruing
interest. Non-performing assets to total assets and non-performing loans to
total assets were .47% and .32%, respectively, at March 31, 1997, compared to
.86% and .81%, respectively, at June 30, 1996, and 1.03% and 1.03%,
respectively, at March 31, 1996. Non-performing loans, which totaled $965,000
at March 31, 1997, consisted of seven residential mortgage loans aggregating
$487,000 and $478,000 in consumer loans.
At March 31, 1997, the Company's classified assets, which consisted of assets
classified as substandard, doubtful, loss, and REO, totaled $1.87 million
compared to $2.97 million at June 30, 1996, and further compared to $3.58
million at March 31, 1996. Included in the assets classified substandard at
March 31, 1997 and 1996, and June 30, 1996, were all loans 90 days past due and
loans which are less than 90 days delinquent but inadequately protected by the
current paying capacity of the borrower or of the collateral pledged, or which
were subject to a well-defined weakness which may jeopardize the liquidation of
the debt. The $420,000 of classified assets which were not considered
non-performing at March 31, 1997, were comprised primarily of four loans to one
borrower totaling $297,000, which were classified substandard but were
performing in accordance with the terms and conditions of the loans.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds have historically consisted of deposits,
regular principal payments and prepayments of outstanding loans, and borrowings
from the Federal Home Loan
17
<PAGE> 18
Bank of Pittsburgh and other sources. During the first nine months of fiscal
1997, the Company used its capital resources primarily to meet its ongoing
commitments to fund maturing savings certificates and savings withdrawals, fund
existing and continuing loan commitments, and maintain its liquidity. At March
31, 1997, the total of approved mortgage loan commitments amounted to $7.82
million. In addition, at such date the Company had $10.32 million of
undisbursed construction loan funds and $13.99 million of undisbursed remaining
credit line balances, as well as $71,000 of commercial letters of credit fully
secured by deposit accounts or real estate. $42.73 million of certificates of
deposit are scheduled to mature during the remainder of fiscal 1997, the
majority of which the Company believes, on the basis of prior experience, will
be reinvested with the Company.
The Company's current dividend policy is to declare a regular quarterly
dividend with the intent that the level of the dividend per share be reviewed
by the Board of Directors on a quarterly basis. Dividends will be in the form
of cash and/or stock after giving consideration to all aspects of the Company's
performance for the quarter. On February 24, 1997, the Board of Directors
declared a five-for-four stock split and a quarterly cash dividend of $.11 per
share, both of which were paid on March 19, 1997, to stockholders of record as
of March 5, 1997.
The Bank, which is the Company's wholly-owned subsidiary, is required, under
applicable federal regulations, to maintain specified levels of liquid
investments and qualifying types of United States Treasury, federal agency and
other investments having maturities of five years or less. Regulations
currently in effect require the Bank to maintain a liquid asset ratio of not
less than 5% of its net withdrawable accounts plus short-term borrowings, of
which short-term liquid assets must amount to not less than 1%. These levels
are changed from time to time by the OTS to reflect economic conditions. First
Financial's average regulatory liquidity ratio for the month ended March 31,
1997 was 10.66%.
ASSET AND LIABILITY MANAGEMENT
The principal objective of the Company's asset and liability management
function is to maximize the Company's net interest margin while maintaining an
appropriate level of risk given the Company's business focus, operating
environment, capital and liquidity requirements and performance objectives.
Through such management, the Company seeks to reduce the vulnerability of its
operations to changes in interest rates and to manage the ratio of interest
rate-sensitive assets to interest rate-sensitive liabilities within specified
maturities or repricing dates. The Company's actions in this regard are taken
under the guidance of the Asset-Liability Management Committee.
Interest rate risk is derived from timing differences in the repricing of
assets and liabilities, loan prepayments, deposit withdrawals, and differences
in lending and funding rates. One measure of interest rate risk is the GAP
ratio, which is defined as the difference between the dollar volume of
interest-earning assets and interest-bearing liabilities maturing or repricing
within the same specified period of time as a percentage of total assets.
18
<PAGE> 19
The Company's asset and liability management strategy currently is to emphasize
the origination of adjustable-rate mortgages, short-term consumer and
commercial business loans, and floating-rate construction loans and commercial
real estate loans. This strategy has greatly reduced the Company's
vulnerability to changes in interest rates. As of March 31, 1997, $119.19
million, or 40.0% of the Company's interest-sensitive assets were scheduled to
reprice within a one-year period, and the Company's cumulative one-year
interest rate GAP was negative 10.2%. The table on page 23 summarizes the
appropriate contractual maturities or replacement periods of the Company's
interest-earning assets and interest-bearing liabilities as of March 31, 1997.
Adjustable- and floating-rate assets are included in the period in which
interest rates are next scheduled to adjust, rather than in the period for
which they are contractually due. Fixed-rate loans are included in the periods
in which they are anticipated to be repaid. The analysis on page 23 takes into
consideration the timing of the repricing but does not take into consideration
any restrictions on the magnitude of the repricing interest-sensitive assets.
Rates of interest paid on deposits are priced to be sufficiently competitive in
the Company's primary market area to meet its asset and liability management
objectives and requirements. The Company generally maintains a pricing program
for its certificate accounts which entails paying higher rates of interest on
longer-term certificates to encourage customers to invest in certificates of
deposit for longer maturities. This strategy has assisted the Company in
controlling its cost of funds and supported its goal of extending the maturity
of its liabilities.
The Company periodically identifies certain loans as held for sale at the time
of origination. These loans consist primarily of fixed-rate, single-family
residential mortgage loans which meet the underwriting characteristics of
certain government-sponsored enterprises (conforming loans). The Company
regularly re-evaluates its policy and revises it as deemed necessary. The
majority of loans sold to date have consisted of sales to the Federal Home Loan
Mortgage Corporation ("FHLMC") of whole loans and 95% participation interests
in long-term, fixed-rate, single-family residential mortgage loans in
furtherance of the Company's goal of better matching the maturities and
interest-rate sensitivity of its assets and liabilities. When selling loans,
the Company has generally retained servicing in order to increase its
non-interest income. At March 31, 1997, the Company serviced $23.55 million of
mortgage loans for others. Sales of loans produce future servicing income and
provide funds for additional lending and other purposes.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1995 the Financial Accounting Standards Board ("FASB") issued SFAS No.
121, "Accounting for the Impairment of Long-lived Assets and for Long-lived
Assets to be Disposed of." This Statement requires that long-lived assets and
certain identifiable intangibles to be held and
19
<PAGE> 20
used by the Company be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable, and that any related impairment be based on the fair value of the
asset. In addition, long-lived assets to be disposed of must be carried at the
lower of cost or fair value, less estimated disposal costs. This Statement was
adopted as of July 1, 1996, and the impact was not material to the Company's
results of operations, financial condition, or stockholders' equity.
In May 1995 the FASB issued SFAS No. 122, "Accounting for Mortgage Servicing
Rights." This Statement prospectively requires the Company, which services
mortgage loans for others in return for a servicing fee, to recognize these
servicing assets, regardless of how they were acquired. Additionally, the
Company is required to assess the fair value of these assets at each reporting
date to determine impairment. This statement was adopted as of July 1, 1996,
and the impact was not material to the Company's results of operations,
financial condition, or stockholders' equity.
In October 1995 the FASB issued SFAS No. 123, "Accounting for Stock-based
Compensation." This Statement encourages the adoption of fair value accounting
for stock-based compensation issued to employees. In the event that fair value
accounting is not adopted, the statement requires pro forma disclosure in the
entity's financial statements of net income and earnings per share as if fair
value accounting had been adopted. The Company does not anticipate adopting
the fair value accounting provisions of SFAS 123 and will instead provide the
required pro forma disclosures as permitted, starting with the fiscal year
ending June 30, 1997.
In June 1996 the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." This
Statement provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities based on
consistent application of a financial-components approach that focuses on
control. It distinguishes transfers of financial assets that are sales from
transfers that are secured borrowings. Under the financial-components
approach, after a transfer of financial assets an entity recognizes all
financial and servicing assets it controls and liabilities it has incurred and
de-recognizes financial assets it no longer controls and liabilities that have
been extinguished. The approach focuses on the assets and liabilities that
exist after the transfer. If a transfer does not meet the criteria for a sale,
the transfer is accounted for as a secured borrowing with pledge of collateral.
The Company adopted SFAS 125 prospectively, effective January 1, 1997, the
required date of adoption except for those types of transactions for which the
provisions of SFAS 125 have been delayed by the issuance of SFAS 127, Deferral
of Certain Provisions of SFAS 125. The adoption of SFAS 125 did not have a
material impact on the operation, financial condition, or shareholders' equity
of the Bank. The Company has not yet determined the effect that the adoption
of those provisions deferred by SFAS 127 would have on its operation, financial
condition and shareholders' equity, but believes present accounting practices
fairly depict the financial transactions and obligations of the Bank.
20
<PAGE> 21
In February 1997 the FASB issued SFAS No. 128, "Earnings Per Share." This
Statement establishes standards for computing and presenting earnings per share
(EPS) and applies to entities with publicly held common stock or potential
common stock. This Statement simplifies the standards for computing earnings
per share previously found in APB Opinion No. 15, Earnings per Share, and makes
them comparable to international EPS standards. It replaces the presentation
of primary EPS with a presentation of basic EPS. It also requires dual
presentation of basic and diluted EPS on the face of the income statement for
all entities with complex capital structures and requires a reconciliation of
the numerator and denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation. This Statement is effective for
financial statements issued for periods ending after December 15, 1997,
including interim periods; earlier application is not permitted. This
Statement requires restatement of all prior-period EPS data presented. Had the
Company adopted SFAS No. 128 as of March 31, 1997, the pro forma disclosure of
basic earnings per share would have been $0.36 and $0.31 for the three months
ended March 31, 1997 and 1996, respectively. Pro forma disclosure of basic
earnings per share would have been $0.58 and $0.89 for the nine months ended
March 31, 1997 and 1996, respectively. The pro forma disclosure of diluted
earnings per share would have been $0.35 and $0.31 for the three months ended
March 31, 1997 and 1996, respectively. Pro forma disclosure of diluted
earnings per share would have been $0.58 and $0.89 for the nine months ended
March 31, 1997 and 1996, respectively.
See also Note 2 of the notes to unaudited consolidated financial statements for
additional discussion of certain accounting pronouncements.
DEPOSIT INSURANCE PREMIUM
The deposits of the Bank are insured by the SAIF administered by the FDIC.
Both the SAIF and the BIF, the federal deposit insurance fund that covers
commercial bank deposits, are required by law to attain and thereafter maintain
a reserve ratio of 1.25% of insured deposits. By 1996 the BIF had achieved a
fully funded status in contrast to the SAIF. As a consequence, in late 1995
the FDIC approved a final rule regarding deposit insurance premiums which,
effective with the semi-annual premium assessment on January 1, 1996, reduced
deposit insurance premiums for BIF member institutions to zero (subject to an
annual minimum of $2,000) for institutions in the lowest risk category.
Deposit insurance premiums for SAIF members were maintained at their then
existing levels (23 basis points for institutions in the lowest risk category).
Accordingly, until the SAIF attained a reserve ratio of 1.25% of insured
deposits, SAIF members such as the Bank would have been competitively
disadvantaged as compared to commercial banks due to this premium differential.
The Deposit Insurance Legislation passed by the U.S. House of Representatives
and the Senate was signed into law by the President on September 30, 1996, to
recapitalize the SAIF. As a result of such legislation, the Bank was required
to pay a one-time assessment of 65.7 cents for every $100 of deposits, which
amounted to $1.39 million pre-tax with an $832,000 after-tax effect. The
special
21
<PAGE> 22
assessment was fully anticipated by the Bank because legislation had been close
to enactment on several occasions during 1996 and 1995.
The legislation also mandated that SAIF-insured institutions' (such as the
Bank's) premiums decline from 23 basis points to approximately 6.4 basis points
effective January 1, 1997. In addition, BIF-insured institutions' assessment
rates were established at 1.3 basis points. The mandated decline in the
premium rate is expected to reduce the Bank's pre-tax annual SAIF premiums by
approximately $400,000 (based on current deposit levels). The reduced future
annual premiums will more than offset the adverse impact of the one-time
assessment on the Company's earnings.
22
<PAGE> 23
INTEREST RATE SENSITIVITY ANALYSIS AT MARCH 31, 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
MORE THAN MORE THAN MORE THAN
THREE MONTHS SIX MONTHS ONE YEAR
THREE MONTHS THROUGH THROUGH THROUGH
OR LESS SIX MONTHS ONE YEAR THREE YEARS
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans (1)
Adjustable- and floating-rate
mortgages (2) $24,959 $18,954 $32,695 $19,824
Balloons and fixed-rate mortgages (2) 3,373 2,212 4,253 21,087
Consumer (2) (3) 7,623 1,034 2,133 9,457
Commercial 4,009 142 275 1,008
Securities and interest-bearing deposits (4) 7,010 5,299 5,222 15,174
------------------------------------------------------------------------
TOTAL INTEREST-EARNING ASSETS $46,974 $27,641 $44,578 $66,550
------------------------------------------------------------------------
INTEREST-BEARING LIABILITIES:
Savings accounts (5) $999 $1,003 $1,998 --
NOW accounts (5) 900 900 1,800 --
Money market accounts (5) 22,536 -- -- --
Certificate accounts 43,013 23,266 34,579 30,034
Securities sold under agreements to
repurchase 169 -- -- --
Borrowings 15,242 3,546 442 3,270
------------------------------------------------------------------------
TOTAL INTEREST-BEARING LIABILITIES $82,859 $28,715 $38,819 $33,304
------------------------------------------------------------------------
Cumulative excess of interest-earning assets
to interest-bearing liabilities ($35,885) ($36,959) ($31,200) $2,046
========= ========= ========= ======
Cumulative ratio of interest rate-sensitive
assets to interest rate-sensitive
liabilities 57% 67% 79% 101%
=== === === ====
CUMULATIVE DIFFERENCE AS A PERCENTAGE OF
TOTAL ASSETS (11.8%) (12.1%) (10.2%) 0.7%
======= ======= ======= ====
</TABLE>
<TABLE>
<CAPTION>
MORE THAN
THREE YEARS
THROUGH MORE THAN
FIVE YEARS FIVE YEARS TOTAL
---------------------------------------------------
<S> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans (1)
Adjustable- and floating-rate
mortgages (2) $ 7,362 $ 590 $104,384
Balloons and fixed-rate mortgages (2) 18,002 41,832 90,759
Consumer (2) (3) 7,760 18,258 46,265
Commercial 855 719 7.008
Securities and interest-bearing deposits (4) 3,085 14,052 49,842
---------------------------------------------------
TOTAL INTEREST-EARNING ASSETS $37,064 $75,451 $298,258
---------------------------------------------------
INTEREST-BEARING LIABILITIES:
Savings accounts (5) -- $21,571 $25,571
NOW accounts (5) -- 22,208 25,808
Money market accounts (5) -- -- 22,536
Certificate accounts 15,339 4,248 150,479
Securities sold under agreements to
repurchase -- -- 169
Borrowings 7,492 2,049 32,041
---------------------------------------------------
TOTAL INTEREST-BEARING LIABILITIES $22,831 $50,076 $256,604
---------------------------------------------------
Cumulative excess of interest-earning assets
to interest-bearing liabilities $16,279 $41,654 $41,654
======= ======= =======
Cumulative ratio of interest rate-sensitive
assets to interest rate-sensitive
liabilities 108% 116% 116%
==== ==== ====
CUMULATIVE DIFFERENCE AS A PERCENTAGE OF
TOTAL ASSETS 5.3% 13.6% 13.6%
==== ===== =====
</TABLE>
(1) Net of undisbursed loan proceeds.
(2) Assumes market prepayment rates.
(3) Includes home improvement, home equity, automobile and other consumer
loans.
(4) Includes investment securities, mortgage-backed securities and
interest-bearing deposits.
(5) Balances distributed among the various repricing time intervals based
on historical and anticipated repricing patterns.
23
<PAGE> 24
Part II. Other Information
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
Not Applicable.
Item 4. Submission of Matters to a Vote of Security
Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
24
<PAGE> 25
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.
Chester Valley Bancorp Inc.
Date 5-9-97 /s/ Ellen Ann Roberts
------------------------------- ------------------------------
Ellen Ann Roberts
Chairman and Chief
Executive Officer
Date 5-9-97 /s/ Christine N. Dullinger
-------------------------------- ------------------------------
Christine N. Dullinger
Treasurer and Chief
Financial Officer
25
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000854098
<NAME> CHESTER VALLEY BANCORP INC
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> JUN-30-1997 JUN-30-1997
<PERIOD-START> JUL-01-1996 JUL-01-1996
<PERIOD-END> MAR-31-1997 MAR-31-1997
<CASH> 1,740 1,740
<INT-BEARING-DEPOSITS> 3,956 3,956
<FED-FUNDS-SOLD> 0 0
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 25,150 25,150
<INVESTMENTS-CARRYING> 20,736 20,736
<INVESTMENTS-MARKET> 20,522 20,522
<LOANS> 246,921 246,921
<ALLOWANCE> 2,710 2,710
<TOTAL-ASSETS> 305,187 305,187
<DEPOSITS> 242,304 242,304
<SHORT-TERM> 19,046 19,046
<LIABILITIES-OTHER> 5,090 5,090
<LONG-TERM> 12,616 12,616
0 0
0 0
<COMMON> 2,072 2,072
<OTHER-SE> 24,059 24,059
<TOTAL-LIABILITIES-AND-EQUITY> 305,187 305,187
<INTEREST-LOAN> 5,029 15,022
<INTEREST-INVEST> 541 1,533
<INTEREST-OTHER> 0 0
<INTEREST-TOTAL> 5,570 16,555
<INTEREST-DEPOSIT> 2,572 7,584
<INTEREST-EXPENSE> 2,864 8,461
<INTEREST-INCOME-NET> 2,706 8,094
<LOAN-LOSSES> 97 357
<SECURITIES-GAINS> 30 98
<EXPENSE-OTHER> 1,901 7,199
<INCOME-PRETAX> 1,004 1,510
<INCOME-PRE-EXTRAORDINARY> 1,004 1,510
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 729 1,186
<EPS-PRIMARY> .35 .58
<EPS-DILUTED> .35 .58
<YIELD-ACTUAL> 3.93 4.01
<LOANS-NON> 965 965
<LOANS-PAST> 0 0
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 1,385 1,385
<ALLOWANCE-OPEN> 2,667 2,667
<CHARGE-OFFS> 340 340
<RECOVERIES> 26 26
<ALLOWANCE-CLOSE> 2,710 2,710
<ALLOWANCE-DOMESTIC> 1,143 1,143
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 1,567 1,567
</TABLE>
