<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 DECEMBER 31, 1996
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.
COMMON STOCK ($1.00 PAR VALUE) 1,633,885
------------------------------ ------------
(Title of Each Class) (Number of Shares Outstanding
as of February 1, 1997)
<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
December 31, 1996, and June 30, 1996 3
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended December 31, 1996 and 1995 4
CONSOLIDATED STATEMENTS OF OPERATIONS
Six Months Ended December 31, 1996 and 1995 5
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended December 31, 1996 and 1995 6
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 7-14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 15-23
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>
DECEMBER 31, June 30,
1996 1996
---------------- ---------------
<S> <C> <C>
ASSETS:
Cash in banks $ 2,921 $ 1,528
Interest-bearing deposits 6,040 8,784
Investment securities available for sale 9,025 6,159
Investment securities (market value - December 31, $19,969; June 30, $22,491) 20,173 22,864
Mortgage-backed securities (market value - December 31, $1,621; June 30,
$1,755) 1,596 1,729
Accrued interest receivable 1,682 1,616
Loans receivable, less allowance for possible loan losses of $2,911 and $2,667 241,410 223,963
Prepaid and deferred income taxes 876 720
Real estate owned 85 121
Property and equipment 4,894 4,323
Other assets 1,471 1,125
---------------- ---------------
TOTAL ASSETS $ 290,173 $ 272,932
================ ===============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposit accounts $ 242,727 $ 228,206
Advance payments by borrowers for taxes and insurance 1,945 3,015
Employee Stock Ownership Plan ("ESOP") debt 423 511
Federal Home Loan Bank advances 17,332 13,972
Other borrowings 250 --
Accrued interest payable 657 653
Accrued and deferred income taxes 181 322
Other liabilities 978 689
---------------- ---------------
TOTAL LIABILITIES 264,493 247,368
---------------- ---------------
STOCKHOLDERS' EQUITY:
Preferred stock - $1.00 par value; 5,000,000 shares authorized; none issued -- --
Common stock - $1.00 par value; 12,500,000 shares authorized; 1,657,895 and
1,580,164 shares issued at December 31 and June 30, respectively 1,658 1,580
Additional paid-in capital 13,252 11,675
Common stock acquired by ESOP (423) (511)
Retained earnings - partially restricted 11,688 13,110
Net unrealized loss on securities available for sale, net of taxes (51) (97)
---------------- ---------------
Subtotal 26,124 25,757
Treasury stock, at cost (24,010 shares and 10,464 shares at December 31 and
June 30, respectively) (444) (193)
---------------- ---------------
TOTAL STOCKHOLDERS' EQUITY 25,680 25,564
---------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 290,173 $ 272,932
================ ===============
</TABLE>
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
DECEMBER 31,
-------------------------------------------
1996 1995
----------------- -----------------
<S> <C> <C>
INTEREST INCOME:
Loans $ 5,138 $ 4,650
Mortgage-backed securities 31 36
Investment securities and interest-bearing deposits 437 469
----------------- -----------------
TOTAL INTEREST INCOME 5,606 5,155
----------------- -----------------
INTEREST EXPENSE:
Deposits 2,548 2,514
Securities sold under agreements to repurchase 24 --
Short-term borrowings 80 33
Long-term borrowings 200 189
----------------- -----------------
TOTAL INTEREST EXPENSE 2,852 2,736
----------------- -----------------
NET INTEREST INCOME 2,754 2,419
Provision for possible loan losses 164 93
----------------- -----------------
NET INTEREST INCOME AFTER PROVISION FOR POSSIBLE LOAN LOSSES 2,590 2,326
----------------- -----------------
OTHER INCOME:
Service charges and fees 236 234
Loss on sale of loans held for sale -- (3)
Gain on sale of securities available for sale 20 35
Other 51 22
----------------- -----------------
TOTAL OTHER INCOME 307 288
----------------- -----------------
OPERATING EXPENSES:
Salaries and employee benefits 885 811
Occupancy and equipment 379 315
Data processing 158 129
Deposit insurance premiums 131 125
Other 410 366
----------------- -----------------
TOTAL OPERATING EXPENSES 1,963 1,746
----------------- -----------------
Income before income taxes 934 868
Income tax expense 276 267
----------------- -----------------
NET INCOME $ 658 $ 601
================= =================
EARNINGS PER SHARE (1):
Primary $ 0.40 $ 0.36
================= =================
Fully Diluted $ 0.40 $ 0.36
================= =================
DIVIDENDS PER SHARE PAID DURING PERIOD (1) $ 0.11 $ 0.09
================= =================
WEIGHTED AVERAGE SHARES OUTSTANDING (1):
Primary 1,643,943 1,669,493
================= =================
Fully Diluted 1,645,535 1,670,979
================= =================
</TABLE>
(1) Earnings per share, dividends per share and weighted average shares
outstanding have been restated to reflect the effect of the 5% stock
dividend paid in September 1996.
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>
SIX MONTHS ENDED
DECEMBER 31,
-----------------------------------
1996 1995
---------------- --------------
<S> <C> <C>
INTEREST INCOME:
Loans $ 9,993 $ 9,213
Mortgage-backed securities 63 74
Investment securities and interest-bearing deposits 929 911
---------------- --------------
TOTAL INTEREST INCOME 10,985 10,198
---------------- --------------
INTEREST EXPENSE:
Deposits 5,012 4,973
Securities sold under agreements to repurchase 51 --
Short-term borrowings 152 93
Long-term borrowings 382 371
---------------- --------------
TOTAL INTEREST EXPENSE 5,597 5,437
---------------- --------------
NET INTEREST INCOME 5,388 4,761
Provision for possible loan losses 260 185
---------------- --------------
NET INTEREST INCOME AFTER PROVISION FOR POSSIBLE LOAN LOSSES 5,128 4,576
---------------- --------------
OTHER INCOME:
Service charges and fees 508 490
Gain on sale of loans held for sale 3 4
Gain on sale of securities available for sale 68 87
Other 97 40
---------------- --------------
TOTAL OTHER INCOME 676 621
---------------- --------------
OPERATING EXPENSES:
Salaries and employee benefits 1,802 1,626
Occupancy and equipment 738 639
Data processing 308 253
SAIF special assessment 1,387 --
Deposit insurance premiums 261 246
Other 802 705
---------------- --------------
TOTAL OPERATING EXPENSES 5,298 3,469
---------------- --------------
Income before income taxes 506 1,728
Income tax expense 49 531
---------------- --------------
NET INCOME $ 457 $ 1,197
================ ==============
EARNINGS PER SHARE (1):
Primary $ 0.28 $ 0.72
================ ==============
Fully Diluted $ 0.28 $ 0.72
================ ==============
DIVIDENDS PER SHARE PAID DURING PERIOD (1) $ 0.21 $ 0.17
================ ==============
WEIGHTED AVERAGE SHARES OUTSTANDING (1):
Primary 1,647,253 1,670,365
================ ==============
Fully Diluted 1,648,582 1,671,278
================ ==============
</TABLE>
(1) Earnings per share, dividends per share and weighted average shares
outstanding have been restated to reflect the effect of the 5% stock
dividend paid in September 1996.
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>
SIX MONTHS ENDED DECEMBER 31,
---------------------------------------------------
1996 1995
---------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 457 $ 1,197
Add (deduct) items not affecting cash flows from operating activities:
Depreciation 284 269
Provision for possible losses on loans 260 185
Gain on sale of loans held for sale (3) (4)
Gain on sale of securities available for sale (68) (87)
Amortization of deferred loan fees, discounts and premiums (242) (297)
Increase in accrued interest receivable (66) (58)
Increase in other assets (346) (13)
Decrease (increase) in prepaid and deferred income taxes (156) 31
Increase (decrease) in accrued and deferred income taxes (141) 18
Increase in other liabilities 289 115
Increase (decrease) in accrued interest payable 4 (9)
- --------------------------------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM OPERATING ACTIVITIES 272 1,347
- --------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM (USED IN) INVESTMENT ACTIVITIES:
Capital expenditures (855) (280)
Net (increase) decrease in loans and loans held for sale (17,687) 1,770
Principal receipts on mortgage-backed securities 132 147
Proceeds from sale of loans held for sale 162 1,420
Proceeds from maturities and calls of investment securities 2,703 3,165
Purchase of investment securities (20) (1,528)
Purchase of securities available for sale (29,064) (47,403)
Proceeds from sale of securities available for sale 26,334 42,230
Proceeds from real estate owned 86 6
- --------------------------------------------------------------------------------------------------------------------------------
NET CASH FLOWS USED IN INVESTMENT ACTIVITIES (18,209) (473)
- --------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Net increase in savings deposits before interest credited 10,249 3,691
Interest credited to savings accounts 4,272 4,207
Proceeds from FHLB advances 4,815 2,248
Repayments of FHLB advances (1,455) (1,836)
Decrease in advance payments by borrowers for taxes and insurance (1,070) (1,123)
Proceeds from other borrowings 250 --
Cash dividends on common stock (353) (276)
Repayments of principal on ESOP debt (88) (92)
Sale of common stock under the dividend reinvestment plan (4) 121
Payment for fractional shares (10) (11)
Stock options exercised 216 --
Reduction of common stock acquired by ESOP 88 92
Stock repurchased as treasury stock (324) (64)
- --------------------------------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES 16,586 6.957
- --------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (1,351) 7,831
CASH AND CASH EQUIVALENTS:
Beginning of period 10,312 7,444
----------------- ----------------
End of period $ 8,961 $ 15,275
================= ================
SUPPLEMENTAL DISCLOSURES:
Cash payments during the year for:
Taxes $ 317 $ 510
Interest $ 5,593 $ 5,448
NON-CASH ITEMS:
Acquisition of real estate in settlement of loans $ 50 $ 207
Stock dividend issued $ 1,516 $ 1,417
Transfer of investment securities to investment
securities available for sale $ -- $ 3,192
Net unrealized gain on investment securities available
for sale 71 $ 86
Tax effect on unrealized gain on investment securities
available for sale $ 25 $ 29
</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 six-month period ended
December 31, 1996, 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 six-month periods ended December 31, 1996, 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). The
Company regularly re-evaluates its originated loan sale policy
and revises it as deemed necessary. 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
effect of the 5% stock dividend paid in September 1996.
11
<PAGE> 12
NOTE 3 - LOANS RECEIVABLE
Loans receivable are summarized as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31, At June 30,
1996 1996
------------------------ --------------------------
(Dollars in Thousands)
<S> <C> <C>
First mortgage loans:
Residential $154,161 $148,530
Construction-residential 9,125 9,494
Land acquisition and
development 5,749 5,121
Commercial 29,489 22,552
Construction-commercial 4,808 2,413
Commercial business 7,386 5,701
Consumer 45,473 41,486
------------------------ --------------------------
TOTAL LOANS 256,191 235,298
------------------------ --------------------------
Less:
Undisbursed loan proceeds:
Construction-residential (6,833) (6,211)
Construction-commercial (3,486) (923)
Deferred loan fees - net (1,551) (1,533)
Allowance for loan losses (2,911) (2,667)
------------------------ --------------------------
NET LOANS $241,410 $223,963
======================== ==========================
</TABLE>
NOTE 4 - EMPLOYEE STOCK OWNERSHIP PLAN ("ESOP") DEBT
The ESOP purchased 62,500 shares of common stock in connection
with the Bank's conversion in 1987 at $7.20 per share, as
adjusted for the December 1993 five-for-four stock split
effected in the form of a dividend. In 1989 the ESOP
purchased an additional 81,235 shares of common stock at a
weighted average price of $10.86 per share, also as adjusted
for the December 1993 five-for-four stock split. Funds
necessary to purchase such shares were borrowed from an
independent third-party lender. Neither the Company nor the
Bank has guaranteed the debt, but the Company and the Bank
have in the past, and anticipate in the future, contributing
sufficient funds to the ESOP to enable it to meet its debt
service requirements. The outstanding loan balance has been
reflected as a liability and a reduction of stockholders'
equity in the Company's consolidated statements of financial
condition.
12
<PAGE> 13
Contributions by the Bank to the ESOP during the six-month
periods ended December 31, 1996 and 1995, amounted to $95,623
and $101,266, respectively, and are included in salaries and
employee benefits expense. Interest expense paid by the ESOP
for the ESOP loan during the six-month periods ended December
31, 1996 and 1995, amounted to $18,959 and $26,007,
respectively.
The ESOP loans were refinanced in May 1996, such loans being
combined into one. The interest rate on the refinanced loan
is fixed at 7.50% until maturity with interest expense being
computed on the unpaid principal balance. As principal
payments are made by the ESOP, the corresponding liability is
reduced and stockholders' equity is increased. Principal
payments and cash dividends paid on the common stock held by
the ESOP during the six-month periods ended December 31, 1996
and 1995, amounted to $87,500 and $91,657, respectively, and
remaining principal payments are scheduled as follows:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
---------------------- ----------------------
<S> <C>
1997 $ 89,750
1998 186,872
1999 146,618
----------------------
TOTAL $ 423,240
======================
</TABLE>
At December 31, 1996, the ESOP had pledged 88,597 shares of
unallocated common stock held by it as collateral for the
loan.
NOTE 5 - COMMITMENTS
Commitments to potential mortgagors of the Bank amounted to
$4.67 million as of December 31, 1996, of which $3.40 million
was for variable-rate loans. The balance of the commitments
represents $1.27 million of fixed-rate loans bearing interest
rates of 6.50% to 7.75%. At December 31, 1996, the Company
had $10.32 million of undisbursed construction loan funds as
well as $13.55 million of undisbursed remaining credit line
balances. In addition, the Company has issued $81,000 of
commercial letters of credit fully secured by deposit accounts
or real estate.
13
<PAGE> 14
NOTE 6 - 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 December 31 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>
DECEMBER 31, 1996 June 30, 1996
-------------------------------------------------- ----------------------------------------------
TANGIBLE CORE RISK-BASED Tangible Core Risk-based
CAPITAL CAPITAL CAPITAL Capital Capital Capital
------------- -------------- --------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Total Regulatory Capital $ 25,150 $ 25,150 $ 27,308 $ 25,301 $ 25,301 $ 27,348
Minimum Required Regulatory
Capital 4,353 8,707 14,325 4,095 8,191 13,243
------------- -------------- --------------- -------------- ------------- --------------
Excess Regulatory Capital $ 20,797 $ 16,443 $ 12,983 $ 21,206 $ 17,110 $ 14,105
============= ============== =============== ============== ============= ==============
Regulatory Capital as a
Percentage of Assets 8.67% 8.67% 15.25% 9.27% 9.27% 16.52%
Minimum Capital Required as
a Percentage of Assets 1.50 3.00 8.00 1.50 3.00 8.00
------------- -------------- --------------- -------------- ------------- --------------
Excess Regulatory Capital as a
Percentage of Assets 7.17% 5.67% 7.25% 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.
14
<PAGE> 15
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
FINANCIAL CONDITION
The Company's total assets increased to $290.17 million at December 31, 1996,
from $272.93 million at June 30, 1996, largely as the result of the increase in
net loans to $241.41 million at December 31, 1996, from $223.96 million at June
30, 1996. The increase in total assets was funded primarily by an increase in
deposit accounts to $242.73 million at December 31, 1996, from $228.21 million
at June 30, 1996.
Stockholders' equity increased to $25.68 million at December 31, 1996, from
$25.56 million at June 30, 1996, as a result of net income earned of $457,000,
proceeds of $216,000 from stock options exercised during the period, the
recognition of net unrealized gains on securities available for sale, net of
taxes, of $46,000, and the reduction in the principal balance of the ESOP debt
by $88,000. The increase in stockholders' equity was offset, in large part, by
the payment of cash dividends totaling $353,000, the repurchase of $324,000 of
common stock, as well as the payment of $10,000 for fractional shares in
connection with the 5% stock dividend paid during the six-month period ended
December 31, 1996.
RESULTS OF OPERATIONS
Net interest income, on a fully tax equivalent basis, increased 13.7% to $2.82
million for the three-month period ended December 31, 1996, and 12.9% to $5.51
million for the six-month period ended December 31, 1996, compared to $2.48
million and $4.88 million for the same periods in 1995. Total interest income,
on a fully tax equivalent basis, increased to $5.67 million and $11.11 million
for the three- and six-month periods ended December 31, 1996, from $5.21
million and $10.31 million for the same periods in 1995, primarily as the
result of the combined effects of an increase in both the average balance of
interest-earning assets and the average yield on such assets. The average
balance of interest-earning assets increased to $276.51 million and $272.66
million for the three- and six-month periods ended December 31, 1996, from
$255.68 million and $253.98 million for the same periods in 1995. In addition,
the average yield on the interest-earning assets increased to 8.20% and 8.15%
for the three- and six-month periods ended December 31, 1996, from 8.15% and
8.12% for the same periods in 1995. Loan originations of $43.85 million during
the six months ended December 31, 1996, contributed to the increase in the
average balance of interest-earning assets. The increase in the average yield
of such assets is the result of the Bank increasing its emphasis on originating
commercial real estate and commercial construction loans. Such loans accounted
for 23% of the loan originations during the six-month period ended December 31,
1996, and contributed to a shift in the composition of the Bank's loan
portfolio from lower-yielding residential mortgages to higher-yielding
commercial mortgages.
15
<PAGE> 16
Total interest expense increased to $2.85 million and $5.60 million from $2.74
million and $5.44 million for the respective three-and six-month periods in
1996 and 1995, largely as the result of the increase in the average balance of
interest-bearing liabilities to $239.70 million and $235.24 million as compared
to $221.77 million and $221.38 million for the same periods in 1995. Partially
offsetting the effect of the increases in the average balance of
interest-bearing liabilities were the decreases in the average rate paid on
those liabilities to 4.76% for both the three- and six-month periods ended
December 31, 1996, from 4.94% and 4.91% for the same periods in 1995,
respectively, in part due to the Bank lowering the rates paid on its
interest-bearing checking accounts.
The tax equivalent interest rate spread increased to 3.39% from 3.21%, and the
average net yield on interest-earning assets increased to 4.04% from 3.83% for
the six-month periods ended December 31, 1996 and 1995, respectively, due to
the reasons discussed above.
PROVISION FOR POSSIBLE LOAN LOSSES
The Company provided $164,000 and $260,000 during the three- and six-month
periods ended December 31, 1996, respectively, for possible loan losses as
compared to $93,000 and $185,000 for the same periods in 1995. 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 December 31, 1996,
the allowance for possible loan losses totaled $2.91 million or 1.19% of net
loans, compared to $2.67 million or 1.18% of net loans and $2.56 million or
1.16% of net loans at June 30, 1996, and December 31, 1995, respectively. As a
percentage of non-performing loans, the allowance for possible loan losses was
164.4% at December 31, 1996, compared to 120.3% at June 30, 1996, and further
compared to 93.7% at December 31, 1995.
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.
16
<PAGE> 17
OTHER INCOME
Total other income increased to $307,000 and $676,000 during the three- and
six-month periods ended December 31, 1996, as compared to $288,000 and $621,000
during the same periods in 1995 due to increases in service charges and fees.
Service charges and fees increased to $508,000 from $490,000 during the
six-month periods ended December 31, 1996 and 1995, respectively, as the 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.
OPERATING EXPENSES
Total operating expenses for the three- and six-month periods ended December
31, 1996, increased to $1.96 million and $5.30 million, respectively, from
$1.75 million and $3.47 million for the same periods in 1995. The increase for
the six months ended December 31, 1996, 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 per cent of total insured
deposits. In addition, the board of 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 six-month
periods ended December 31, 1996, 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 $276,000 and $49,000 for the three- and six-month
periods ended December 31, 1996, compared to $267,000 and $531,000 for the
same periods in 1995. The decrease in income tax expense for the six-month
period ended December 31, 1996, was the result of the $1.39 million one-time
SAIF assessment which caused the Company to incur a net loss for the first
quarter of fiscal 1997.
17
<PAGE> 18
NET INCOME
The Company earned net income of $457,000 or $.28 per share, for the six months
ended December 31, 1996, after posting the one-time SAIF special assessment,
compared to $1.20 million or $.72 per share for the same period in 1995. 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 $.50 per share.
But for the special SAIF assessment, the Company would have earned net income
of $1.29 million or $.78 per share, for the six months ended December 31, 1996.
ASSET QUALITY
Non-performing assets are comprised of non-performing loans and REO and totaled
$1.86 million at December 31, 1996. 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 December 31, 1996, 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 .64% and .61%, respectively, at December 31, 1996, compared
to .86% and .81%, respectively, at June 30, 1996, and to 1.08% and .95%,
respectively, at December 31, 1995. Non-performing loans totaling $1.77
million at December 31, 1996, consisted of nine residential mortgage loans
aggregating $878,000, one land loan for $425,000, and $471,000 in consumer and
commercial business loans. Subsequent to December 31, 1996, the Company
foreclosed on the non-performing land loan and has classified it as REO at its
fair value less selling expenses which required a $100,000 charge-off to the
allowance for loan losses. The Company is currently evaluating its
alternatives with regard to disposition of the property.
At December 31, 1996, the Company's classified assets, which consisted of
assets classified as substandard, doubtful, loss, and REO, totaled $1.97
million compared to $2.97 million at June 30, 1996, and further compared to
$3.55 million at December 31, 1995. Included in the assets classified
substandard at December 31, 1996 and 1995, 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.
18
<PAGE> 19
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 Bank of Pittsburgh and other sources. During the
first six 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 December 31, 1996, the total of approved mortgage
loan commitments amounted to $4.67 million. In addition, at such date the
Company had $10.32 million of undisbursed construction loan funds and $13.55
million of undisbursed remaining credit line balances, as well as $81,000 of
commercial letters of credit fully secured by deposit accounts or real estate.
$58.76 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 November 20, 1996, the Board of Directors
declared a quarterly cash dividend of $.11 per share which was paid on December
18, 1996, to stockholders of record as of December 4, 1996. 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 December 30, 1996 was 8.38%.
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.
19
<PAGE> 20
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.
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 December 31, 1996, $120.84
million, or 42.7% 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 4.2%. 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 December 31,
1996. 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 December 31, 1996, the Company serviced $22.39 million
of mortgage loans for others. Sales of loans produce future servicing income
and provide funds for additional lending and other purposes. In fiscal 1995
the Company entered into an agreement with a third party to originate and sell
jumbo fixed-rate mortgage loans with servicing released upon sale of the loans.
In the current fiscal year, the Company had no jumbo fixed-rate loan
originations or related sales of such loans.
20
<PAGE> 21
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 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 would be 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
entry'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 does not anticipate that the adoption of SFAS 125 will have a
material impact on its financial statements and will adopt SFAS No. 125
prospectively, effective January 1, 1997, the required date of adoption.
21
<PAGE> 22
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, and 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 assessment was fully anticipated by the Bank because legislation had
been close to enactment on several occasions over the past year.
The legislation also mandated that SAIF-insured institutions' (such as the
Bank's) deposit insurance 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
negative impact of the one-time assessment on the Company's earnings.
22
<PAGE> 23
INTEREST RATE SENSITIVITY ANALYSIS AT DECEMBER 31, 1996
(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) $20,138 $17,612 $39,470 $22,198
Balloons and fixed-rate mortgages (2) 2,199 2,437 4,109 19,780
Consumer (2) (3) 7,554 972 2,005 8,894
Commercial 4,738 126 243 888
Securities and interest-bearing deposits (4) 13,562 974 4,698 10,129
-------------------------------------------------------------------------
TOTAL INTEREST-EARNING ASSETS $48,191 $22,121 $50,525 $61,889
-------------------------------------------------------------------------
INTEREST-BEARING LIABILITIES:
Savings accounts (5) $999 $999 $2,002 --
NOW accounts (5) 900 900 1,800 --
Money market accounts (5) 27,593 -- -- --
Certificate accounts 41,402 17,860 37,002 29,251
Borrowings -- 598 1,000 3,430
-------------------------------------------------------------------------
TOTAL INTEREST-BEARING LIABILITIES $70,894 $20,357 $41,804 $32,681
-------------------------------------------------------------------------
Cumulative excess of interest-earning assets
to interest-bearing liabilities ($22,703) ($20,939) ($12,218) $16,990
========= ========= ========= =======
Cumulative ratio of interest rate-sensitive
assets to interest rate-sensitive liabilities 68% 77% 91% 110%
=== === === ====
CUMULATIVE DIFFERENCE AS A PERCENTAGE OF
TOTAL ASSETS (7.8%) (7.2%) (4.2%) 5.9%
====== ====== ====== ====
<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) $ 7,278 $789 $107,485
Balloons and fixed-rate mortgages (2) 17,194 39,809 85,528
Consumer (2) (3) 7,691 18,357 45,473
Commercial 756 635 7,386
Securities and interest-bearing deposits (4) 2,945 4,526 36,834
-------------------------------------------------
TOTAL INTEREST-EARNING ASSETS $35,864 $64,116 $282,706
-------------------------------------------------
INTEREST-BEARING LIABILITIES:
Savings accounts (5) -- $20,786 $24,786
NOW accounts (5) -- 21,580 25,180
Money market accounts (5) -- -- 27,593
Certificate accounts 16,152 5,695 147,362
Borrowings 10,505 1,799 17,332
-------------------------------------------------
TOTAL INTEREST-BEARING LIABILITIES $26,657 $49,860 $242,253
-------------------------------------------------
Cumulative excess of interest-earning assets
to interest-bearing liabilities $26,197 $40,453 $40,453
======= ======= =======
Cumulative ratio of interest rate-sensitive
assets to interest rate-sensitive liabilities 114% 117% 117%
==== ==== ====
CUMULATIVE DIFFERENCE AS A PERCENTAGE OF
TOTAL ASSETS 9.0% 13.9% 13.9%
==== ===== =====
</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.
<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 2-6-97 /s/ Ellen Ann Roberts
---------------------- -----------------------------------------
Ellen Ann Roberts
Chairman and Chief Executive Officer
Date 2-6-97 /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 6-MOS
<FISCAL-YEAR-END> JUN-30-1997 JUN-30-1997
<PERIOD-START> JUL-01-1996 JUL-01-1996
<PERIOD-END> DEC-31-1996 DEC-31-1996
<CASH> 2,921 2,921
<INT-BEARING-DEPOSITS> 6,040 6,040
<FED-FUNDS-SOLD> 0 0
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 9,025 9,025
<INVESTMENTS-CARRYING> 21,769 21,769
<INVESTMENTS-MARKET> 21,590 21,590
<LOANS> 244,321 244,321
<ALLOWANCE> 2,911 2,911
<TOTAL-ASSETS> 290,173 290,173
<DEPOSITS> 242,727 242,727
<SHORT-TERM> 1,598 1,598
<LIABILITIES-OTHER> 3,761 3,761
<LONG-TERM> 16,407 16,407
0 0
0 0
<COMMON> 1,658 1,658
<OTHER-SE> 24,022 24,022
<TOTAL-LIABILITIES-AND-EQUITY> 290,173 290,173
<INTEREST-LOAN> 5,138 9,993
<INTEREST-INVEST> 468 992
<INTEREST-OTHER> 0 0
<INTEREST-TOTAL> 5,606 10,985
<INTEREST-DEPOSIT> 2,548 5,012
<INTEREST-EXPENSE> 2,852 5,597
<INTEREST-INCOME-NET> 2,754 5,388
<LOAN-LOSSES> 164 260
<SECURITIES-GAINS> 20 68
<EXPENSE-OTHER> 1,963 5,298
<INCOME-PRETAX> 934 506
<INCOME-PRE-EXTRAORDINARY> 934 506
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 658 457
<EPS-PRIMARY> .40 .28
<EPS-DILUTED> .40 .28
<YIELD-ACTUAL> 4.08 4.04
<LOANS-NON> 1,774 1,774
<LOANS-PAST> 0 0
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 2,222 2,222
<ALLOWANCE-OPEN> 2,667 2,667
<CHARGE-OFFS> 39 39
<RECOVERIES> 23 23
<ALLOWANCE-CLOSE> 2,911 2,911
<ALLOWANCE-DOMESTIC> 1,268 1,268
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 1,643 1,643
</TABLE>
