UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-18807
HOME FEDERAL FINANCIAL CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 94-3124158
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
20 O'Farrell Street, San Francisco, California 94108
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 982-4560
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 and Exchange Act
of 1934 during the preceding twelve (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 ninety (90) days.
Yes [X] No [ ]
As of May 10, 1996, there were issued and outstanding 3,666,090 shares of the
Registrant's $0.01 par value, common stock.
<PAGE>
<PAGE>
HOME FEDERAL FINANCIAL CORPORATION
FORM 10-Q
INDEX
Page
Part I - Financial Information
Item 1. Consolidated Financial Statements as of March 31, 1996 and
December 31, 1995 and for the Three Month Periods Ended
March 31, 1996 and 1995
Consolidated Statements of Financial Condition . . . . . . . . . 1
Consolidated Statements of Operations. . . . . . . . . . . . . . 2
Consolidated Statements of Cash Flows. . . . . . . . . . . . . . 3
Notes to Consolidated Financial Statements . . . . . . . . . . . 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . 6
Part II - Other Information
Items 1. - 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
<PAGE>
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Home Federal Financial Corporation and Subsidiaries
Consolidated Statements of Financial Condition
(Dollars in thousands except share amounts)
March 31, December 31,
1996 1995
-------- --------
(Unaudited)
ASSETS
Cash and non-interest bearing deposits $ 10,240 $ 8,147
Federal funds, interest bearing deposits and
repurchase agreements 13,400 59,900
-------- --------
Cash and equivalents 23,640 68,047
Investment securities available for sale,
at fair value 9,562 9,617
Securities held to maturity, at amortized cost:
Investment securities (Fair value: March 31,
1996, $58,731; December 31, 1995, $11,866) 58,737 11,861
Mortgage-backed securities (Fair value: March 31,
1996 $55,583; December 31, 1995, $59,111) 56,460 58,738
Loans held for sale 13,010 1,163
Loans receivable held for investment, net 536,510 549,902
Interest receivable 3,753 3,876
Real estate owned 2,179 2,380
Premises and equipment, net 4,494 4,472
Federal Home Loan Bank stock, at cost 6,175 6,096
Mortgage servicing rights, net 800 778
Intangible assets 191 279
Other assets 1,244 1,181
-------- --------
Total Assets $716,755 $718,390
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Customer deposits $626,195 $624,575
Federal Home Loan Bank advances 30,000 30,000
Securities sold under agreements to repurchase -- 3,489
Accrued expenses and other liabilities 6,156 6,412
-------- --------
Total Liabilities 662,351 664,476
Commitments and Contingencies -- --
Stockholders' Equity
Serial preferred stock (par value $0.01 per share):
Authorized, 1,000,000 shares
Issued, none -- --
Common stock (par value $0.01 per share):
Authorized, 5,000,000 shares
Issued and outstanding: March 31, 1996: 3,666,090
shares; December 31, 1995: 3,666,090 shares 37 37
Additional paid-in capital 17,173 17,173
Retained earnings - substantially restricted 38,120 37,650
Unrealized loss on securities, net of tax (926) (946)
-------- --------
Total Stockholders' Equity 54,404 53,914
-------- --------
Total Liabilities And Stockholders' Equity $716,755 $718,390
======== ========
See notes to consolidated financial statements.
<PAGE>
<PAGE>
Home Federal Financial Corporation and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
(Dollars in thousands except per share amounts)
For the Three Months
Ended March 31,
1996 1995
-------- --------
INTEREST INCOME:
Loans $ 11,178 $ 10,094
Mortgage-backed securities 813 1,849
Investments 1,079 494
-------- --------
Total 13,070 12,437
INTEREST EXPENSE:
Customer deposits 7,766 6,942
Federal Home Loan Bank advances 484 348
Securities sold under agreements to repurchase 4 689
-------- --------
Total 8,254 7,979
Net interest income 4,816 4,458
Provision for loan losses 280 250
-------- --------
Net interest income after provision for loan losses 4,536 4,208
NON-INTEREST INCOME:
Loan service fees 282 268
Amortization of mortgage servicing rights (59) (30)
Other fees 254 183
Gain on sale of loans and securities 16 2
Other income 105 87
Loss from real estate owned (164) (206)
-------- --------
Total 434 304
NON-INTEREST EXPENSE:
General and administrative expense:
Salaries and benefits 1,971 1,950
Office occupancy 699 684
Federal deposit insurance premiums 357 342
Professional fees 337 203
Data processing 191 190
Other expense 522 432
-------- --------
Total general and administrative expense 4,077 3,801
Amortization of intangible assets 89 85
-------- --------
Total 4,166 3,886
Income before income taxes 804 626
Income tax expense 334 260
-------- --------
NET INCOME $ 470 $ 366
======== ========
EARNINGS PER SHARE $ 0.12 $ 0.10
======== ========
See notes to consolidated financial statements.
<PAGE>
<PAGE>
Home Federal Financial Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in thousands)
Three Months Ended
March 31,
1996 1995
-------- --------
OPERATING ACTIVITIES:
Net income $ 470 $ 366
Reconciliation to net cash used by
operating activities:
Originations and purchases of mortgage loans
held for sale (22,065) --
Sales of mortgage loans held for sale 10,218 132
Amortization of mortgage servicing rights 59 30
Provision for loan losses 280 250
Provision for REO losses 120 155
Deferred loan fees, net (46) 38
Depreciation and amortization 362 379
Deferred income taxes (22) (28)
Changes in:
Interest receivable 123 14
Accrued expenses and other liabilities (234) (1,558)
Other (148) (1,686)
-------- --------
Net cash used by operating activities (10,883) (1,908)
INVESTING ACTIVITIES:
Originations of mortgage loans held for
investment, net of principal repayments 13,407 (2,730)
Purchases of mortgage loans held for investment (1,862) (1,455)
Originations of non-mortgage loans,
net of principal repayments 52 (47)
Purchases of investment securities held-
to-maturity (79,167) --
Proceeds from maturing investment securities
held-to-maturity 32,775 --
Purchases of mortgage-backed securities
held-to-maturity -- (487)
Principal repayments of mortgage-backed
securities held-to-maturity 2,368 3,682
Proceeds from sales of real estate owned 1,708 387
Other, net (936) 100
-------- --------
Net cash used by investing activities (31,655) (550)
FINANCING ACTIVITIES:
Net increase in customer deposits 1,620 19,452
Proceeds, net of repayments, from Federal
Home Loan Bank advances -- (700)
Proceeds, net of repayments, from securities
sold under agreements to repurchase (3,489) (16,117)
Proceeds from stock options exercised -- 12
Cash dividends paid -- (293)
-------- --------
Net cash provided (used) by financing activities (1,869) 2,354
Net decrease in cash and equivalents (44,407) (104)
Cash and equivalents at beginning of quarter 68,047 6,981
-------- --------
Cash and equivalents at end of quarter $ 23,640 $ 6,877
======== ========
Cash paid during the quarter for interest on
customer deposits, advances and other borrowings $ 8,546 $ 8,104
Supplemental non-cash investing activities:
Loans transferred to real estate owned $ 1,374 $ 74
See notes to consolidated financial statements.
<PAGE>
<PAGE>
HOME FEDERAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying consolidated financial statements of Home Federal
Financial Corporation and its subsidiaries (the "Company") as of March 31,
1996 and December 31, 1995 and for the three month periods ended March 31,
1996 and 1995 have been prepared in accordance with the rules and regulations
of the Securities and Exchange Commission and, therefore, do not include all
information and footnotes necessary to present the statements of financial
condition, statements of operations, and statements of cash flows in
conformity with generally accepted accounting principles. The data as of and
for the three month periods ended March 31, 1996 and 1995 are unaudited but,
in the opinion of management, reflect all accruals and adjustments (which are
solely of a normal recurring nature) necessary for fair presentation of the
Company's financial condition and results of operations as of the dates and
for the periods indicated. Certain amounts in the prior period consolidated
financial statements have been reclassified to conform to the current year
presentation. The results of operations for the three month period ended
March 31, 1996 are not necessarily indicative of results to be expected for
the entire year of 1996. This report should be read in conjunction with the
Company's 1995 Annual Report on Form 10-K.
2. The accompanying consolidated financial statements include the accounts
of Home Federal Financial Corporation, Home Federal Savings and Loan
Association of San Francisco and its wholly-owned subsidiary, Home Land
Developers, Inc. and Home Land's wholly-owned subsidiary, Home Auxiliary
Corporation.
3. Earnings per share has been calculated by dividing net income by the
weighted average number of shares of combined common stock outstanding and
common stock equivalents assumed outstanding during the period. Common stock
equivalents consist of unexercised stock options. Fully diluted earnings per
share were not materially different from primary earnings per share. The
weighted average number of shares of combined common stock outstanding and
common stock equivalents assumed outstanding for the three month periods ended
March 31, 1996 and 1995 were 3,761,462 and 3,746,342, respectively.
4. Effective January 1, 1995, the Company adopted SFAS No. 114,
"Accounting by Creditors for Impairment of a Loan," and SFAS No. 118,
"Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosures." A loan is impaired when it is "probable" that a creditor will
be unable to collect all amounts contractually due under a loan agreement.
The Company's loans are collateral dependent and therefore, as permitted by
SFAS No. 114, the measurement of impairment is based upon the fair value of
the property collateralizing the loan. The amount by which the recorded
investment in the loan exceeds the measure of the impaired loan is recognized
by recording a specific valuation allowance with a corresponding charge to the
provision for loan losses. The Company had previously measured loan
impairment in accordance with the methods prescribed in SFAS No. 114. As a
result, no additional loss provisions were required by adoption of this
accounting pronouncement.
5. The Association's deposits are insured by the Savings Association
Insurance Fund ("SAIF") which is one of two deposit insurance funds
administered by the Federal Deposit Insurance Corporation ("FDIC"). To
mitigate the effect of an insurance premium disparity which currently exists
between the funds, Congress passed legislation in late 1995, which was vetoed
by President Clinton, which would have required SAIF-insured savings
institutions to pay a one-time premium of approximately 85 basis points of
insured deposits. Subsequent to this one-time assessment, deposit insurance
premiums for SAIF-insured savings institutions would decline to an expected
level approximating the premium level for other FDIC-insured depository
institutions.
<PAGE>
<PAGE>
Based upon the Association's insured deposits at March 31, 1996 and the
provisions of this recent legislative action, the potential one-time premium,
net of related income taxes, would be approximately $3.1 million. If such
legislation were to be enacted into law, the premium would be required to be
accrued and charged against earnings, reducing the Association's (and the
Company's) capital by the amount of the premium, net of related income taxes.
Management cannot predict whether such legislation will be enacted during 1996
or what the provisions of such legislation may be.
6. Effective January 1, 1996, the Company adopted SFAS No. 121,
"Accounting for 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 an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Adoption of SFAS No. 121
did not have a material impact on the Company's financial condition or results
of operations.
7. Effective January 1, 1996, the Company also adopted SFAS No. 123,
"Accounting for Stock Based Compensation." This Statement establishes
accounting and disclosure requirements using a fair value based method of
accounting for stock based employee compensation plans. In accordance with
SFAS No. 123, the Company has elected to continue measuring compensation cost
for options granted under the Company's stock option plan using the intrinsic
value based method of accounting prescribed by Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees." Accordingly,
adoption of SFAS No. 123 did not have a material impact on the Company's
financial condition or results of operations.
<PAGE>
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
Home Federal Financial Corporation ("Home Federal") is a Delaware
corporation and unitary savings and loan holding company for its wholly-owned
subsidiary, Home Federal Savings and Loan Association of San Francisco (the
"Association"), which is a federally-chartered stock savings and loan
association. The principal business activity of Home Federal and its
subsidiaries (the "Company") is accepting deposits from the general public and
originating or purchasing residential, commercial real estate, consumer and
other types of loans through the Association. The Company's business is
conducted through the Association's home office in San Francisco and fifteen
branches in Northern California. Substantially all of the information set
forth herein, including the consolidated financial statements and related
data, relates to the Association.
As previously reported in the Company's Annual Report on Form 10-K for
the year ended December 31, 1995, Home Federal entered into an Agreement and
Plan of Merger with First Nationwide Bank on December 19, 1995 in which Home
Federal will be merged into First Nationwide Bank in an all cash transaction
of $18.50 per common share for aggregate merger consideration of $69.6
million. The Office of Thrift Supervision ("OTS"), First Nationwide Bank's
primary regulator, approved the merger application on April 23, 1996 and the
stockholders of Home Federal will vote on the proposed merger on May 21, 1996.
In accordance with the provisions of the Agreement and Plan of Merger between
Home Federal and First Nationwide Bank, Home Federal did not declare a regular
quarterly cash dividend for the fourth quarter of 1995 and the first quarter
of 1996. The proposed transaction is expected to close in the second quarter
of 1996.
LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY
The Company's primary sources of funds include loan repayments, sales of
loans and securities, customer deposits, and collateralized borrowings. The
primary uses of funds include originations of mortgage loans, repayment of
maturing customer deposits and operating expenses.
OTS regulations require a savings institution to maintain a specified
ratio of cash and eligible investment securities to net withdrawable deposits
and borrowings due in one year or less. This minimum liquidity requirement is
based upon average liquidity balances maintained during each month and may
vary from time to time; currently, it is 5.0%. Savings institutions must also
maintain an average daily balance of short-term liquid assets (generally those
having maturities of twelve months or less) equal to at least 1.0% of its
average daily balance of net withdrawable deposits plus borrowings due within
one year. At March 31, 1996, the Association's regulatory liquidity was
$123.3 million, or 19.6% of its regulatory liquidity base, up from $100.0
million, or 15.7% at December 31, 1995. At March 31, 1996 and December 31,
1995, the Association's short-term liquidity percentage was 12.9% and 12.6%,
respectively. The Association's liquidity position fluctuates depending on
various factors, including customer deposit activity, borrowing alternatives,
loan repayment/sales activity, and investment opportunities.
FINANCING ACTIVITIES
Financing activities, including acquisition of savings deposits, FHLB
advances and reverse repurchase agreement borrowings, represent a major source
of funds. Customer deposits were substantially unchanged through the first
quarter of 1996, totaling $626.2 million at March 31, 1996
<PAGE>
<PAGE>
compared to $624.6 million at December 31, 1995. The Company's borrowings,
consisting of long- term FHLB advances, amounted to $30.0 million at March 31,
1996, down from $33.5 million at year-end 1995. During the first quarter of
1996, the Company repaid $3.5 million of maturing reverse repurchase agreement
borrowings. At March 31, 1996, the Association had an unused line of credit
available from the FHLB of San Francisco of $149.6 million and, based upon
collateral pledged at March 31, 1996, available credit under the line of $53.8
million. The Company was also in a position to obtain additional credit of
$69.6 million through reverse repurchase agreement borrowings.
INVESTING ACTIVITIES
Cash flow from investing activities is principally comprised of
originations and purchases of loans, offset by loan repayments, and purchases
and sales of investment securities. In accordance with the Company's
asset/liability management strategies, fixed rate loans are generally
originated or purchased with the intent of selling the loans and retaining the
loan servicing; adjustable rate loans are generally retained in the Company's
loan portfolio. The Company also purchases investment securities as an
alternative to its originations and purchases of mortgage loans.
During the first quarter of 1996, the Company originated $15.3 million of
loans within its Northern California market. These originations were
substantially all conventional, one-to-four family mortgage loans;
approximately $0.4 million of multi-family and commercial real estate
properties were also originated during the quarter. This is in comparison to
the first three months of 1995 when originations totaled $14.9 million. To
supplement these originations during the first quarter of 1996, the Company
also purchased $14.4 million of seasoned loans secured by one-to-four family
properties located primarily within its Northern California market. During
the first quarter of 1995, the Company purchased $1.5 million of loans.
Mortgage interest rates have a significant impact on both the volume and type
of loan originations. During 1995, declining interest rates created strong
consumer demand for adjustable rate mortgages. Rising interest rates during
the first quarter of 1996 resulted in a significant shift to fixed rate
mortgage originations. Loan repayments totaled $19.2 million and $12.2
million for the quarters ended March 31, 1996 and 1995, respectively. The
Company also sold loans totaling $10.2 million and $0.1 million during the
quarters ended March 31, 1996 and 1995, respectively.
Mortgage-backed securities totaled $56.5 million at March 31, 1996
compared to $58.7 million at December 31, 1995. The decline was attributable
to principal repayments received during the quarter. Mortgage loan and MBS
repayments totaled $2.4 million and $3.7 million for the three month periods
ended March 31, 1996 and 1995, respectively.
<PAGE>
<PAGE>
The following tables set forth the Company's mortgage loan origination
and purchase activity for the three month periods ended March 31, 1996 and
1995, and the Company's loan portfolio by collateral type as of March 31,
1996, December 31,1995 and March 31, 1995:
For the Three Month
(Dollars in thousands) Periods Ended March 31,
1996 1995
------- -------
Loan Originations:
Adjustable $ 4,844 32% $14,380 96%
Fixed 10,454 68 537 4
Total originations 15,298 100 14,917 100
Loan Purchases:
Adjustable 14,270 100 761 52
Fixed 133 -- 694 48
Total purchases 14,403 100 1,455 100
Total loan acquisitions $29,701 100% $16,372 100%
As of
(Dollars in thousands) March 31, December 31, March 31,
Loans by Collateral Type 1996 1995 1995
---------- ---------- ----------
One-to-four family real estate $392,832 71% $395,401 71% $417,467 74%
Commercial real estate 113,338 20 114,742 21 97,826 18
Multi-family real estate 48,850 9 46,162 8 45,492 8
Consumer 1,146 -- 1,198 -- 1,109 --
---------- ---------- ----------
Total loans $556,166 100% $557,503 100% $561,894 100%
ASSET QUALITY
Internal Loan Review. The Company maintains an asset review process for
purposes of assessing loan portfolio quality and the adequacy of its loan loss
allowances. This review process is administered by a senior management
committee. Designated asset managers and appraisers review the performance
of loans, make on-site inspections when deemed appropriate, and report their
findings to the committee. Problem loans are evaluated and classified
according to the nature and degree of identifiable weaknesses. Such loans are
discussed further under "Asset Quality -- Nonperforming Assets" and "--
Classified Assets."
Nonperforming Assets. The Company defines nonperforming assets as
nonaccrual loans and foreclosed real estate owned ("REO"). Nonaccrual loans
are loans for which the Company has ceased accruing interest income; it
includes all loans which are 90 days or more delinquent plus certain other
loans which have been placed on nonaccrual status prior to becoming 90 days
delinquent. In order to minimize nonperforming assets, the Company has
maintained a strategy of actively servicing delinquent loans and disposing of
REO properties.
During the first quarter of 1996, nonperforming assets were reduced by
$0.4 million, to $7.9 million at March 31, 1996. As a percentage of total
assets, nonperforming assets were reduced to 1.10% from 1.15%, respectively.
This decline in nonperforming assets was the result of continued reduction in
the balance of REO and nonaccruing one-to-four family loans (i.e., loans with
severe delinquencies of 90 days or greater) during the quarter. At March 31,
1996, the Company's inventory of REO properties, excluding general valuation
allowances, totaled 23 properties with a carrying value of
<PAGE>
<PAGE>
$2.2 million. The inventory, which primarily consists of one-to-four family
properties, also includes one multi-family property located in Southern
California and one office building located in Modesto, California.
The following table sets forth the composition and trend of the Company's
nonperforming assets:
(Dollars in thousands) March 31, December 31, March 31,
Description 1996 1995 1995
-------- -------- --------
Nonaccrual loans:
90+ Day delinquent loans:
One-to-four family loans $ 2,783 $ 2,993 $ 3,728
Multi-family and commercial real
estate loans 1,466 1,471 832
-------- -------- --------
Total 90+ day delinquent loans 4,249 4,464 4,560
Other nonaccruing loans 1,283 1,283 1,299
-------- -------- --------
Total nonaccruing loans 5,532 5,747 5,859
REO:
1-4 family residences 1,700 1,807 1,022
Multi-family and commercial real
estate properties 638 709 2,808
-------- -------- --------
Total REO 2,338 2,516 3,830
-------- -------- --------
Total Nonperforming Assets $ 7,870 $ 8,263 $ 9,869
Nonperforming assets as a percentage
of total assets 1.10% 1.15% 1.33%
Classified Assets. The Company defines classified assets as
nonperforming assets plus certain performing loans which exhibit credit or
collateral weaknesses. These classified performing loans include one-to-four
family loans which typically involve borrower bankruptcies or deficient
property taxes, and multi-family and commercial real estate loans
collateralized by income properties with deficient operating cash flow. The
Company's asset review process incorporates the OTS system for grading or
classifying problem loans and other assets; in order of increasing weakness,
these designations are "Substandard," "Doubtful," and "Loss."
The Company's classified assets declined by $2.8 million during the first
quarter of 1996, from $13.3 million at December 31, 1995 and $17.1 million at
March 31, 1995 to $10.5 million at March 31, 1996. As a percentage of total
assets, classified assets were reduced from 1.85% and 2.33% to 1.46%,
respectively. This decline in classified assets was attributable to
restoration of a $1.3 million commercial real estate loan to a satisfactory
performing status, the decline in nonperforming assets, as well as a decline
in one-to-four family loans involving a borrower in bankruptcy. All
classified assets were designated as Substandard at March 31, 1996.
Classified assets includes restructured loans of nil and $389 thousand at
March 31, 1996 and December 31, 1995, respectively.
Allowances for Loan and REO Losses. The Company maintains certain
valuation allowances to absorb future losses which may be realized on its loan
portfolio and inventory of REO properties. These allowances include specific
reserves for identifiable impairments of individual loans and general
allowances for estimates of probable losses not specifically identified. REO
is valued at the lower of cost or fair value, less estimated disposition
costs, and carried net of related chargeoffs. In addition to providing for
losses charged off, the Company also maintains general allowances for other
probable REO losses which have not been specifically identified.
<PAGE>
<PAGE>
At March 31, 1996, combined general allowances and specific reserves for
loans totaled $4.5 million compared to $4.3 million and $4.1 million at
December 31, 1995 and March 31, 1995. As a percentage of total loans, such
allowances represented 0.81%, 0.78% and 0.73% of total loans, respectively.
Net loan chargeoffs, annualized as a percentage of average outstanding loans,
were 0.06% and 0.04% for the quarters ended March 31, 1996 and 1995,
respectively. General allowances for loans and REO totaled $3.5 million, or
34% of classified assets and 45% of nonperforming assets, at March 31, 1996,
compared to $3.5 million, or 26% of classified assets and 42% of nonperforming
assets, at December 31, 1995 and $3.7 million, or 22% of classified assets and
37% or nonperforming assets, at March 31, 1995.
In evaluating the adequacy of general allowances for loan and REO losses,
consideration is given to a number of factors, including the level, trend and
composition of nonperforming and classified assets; evaluation of specifically
identified loan and REO losses; historical loss experience; current and future
economic and real estate conditions that may impact the value of REO and loan
collateral, and individual borrowers; concentrations of credit; results of
examinations by regulatory agencies; and other factors. Management believes
that the allowances for loan and REO losses were adequate as of March 31,
1996, based on its evaluation of the quality of loan and REO portfolios at
that date. While management believes it uses the most current information
available to evaluate these loss allowances, future adjustments may be
necessary based on changes in economic and real estate market conditions in
California.
The following tables summarize the components of the Company's loss
allowances:
Allowances for Loan Losses March 31, December 31, March 31,
(Dollars in thousands) 1996 1995 1995
-------- -------- --------
General allowances:
1-4 family loans $ 1,450 $ 1,468 $ 1,795
Multi-family/commercial real
estate loans 1,915 1,906 1,725
-------- -------- --------
Total general allowances 3,365 3,374 3,520
Specific reserves:
1-4 family loans 278 123 223
Multi-family/commercial real
estate loans 871 826 368
-------- -------- --------
Total specific reserves 1,149 949 591
-------- -------- --------
Total allowances for loan losses $ 4,514 $ 4,323 $ 4,111
Allowances for REO Losses March 31, December 31, March 31,
(Dollars in thousands) 1996 1995 1995
-------- -------- --------
General allowances:
1-4 family properties $ 116 $ 84 $ 50
Multi-family/commercial real
estate properties 44 52 128
-------- -------- --------
Total allowances for REO losses $ 160 $ 136 $ 178
<PAGE>
<PAGE>
The following table sets forth an analysis of the activity in the
Company's allowance for loan losses for the three month periods ended March
31:
One-to-Four Commercial Multi-
Family Real Estate Family Total
(In thousands) Loans Loans Loans
------- ------- ------- -------
For the Three Month Period Ended March 31, 1996:
Balance at December 31, 1995 $ 1,591 $ 2,423 $ 309 $ 4,323
Provision charged to operations 167 74 39 280
Losses charged off (57) (36) (23) (116)
Recoveries 27 -- -- 27
------- ------- ------- -------
Balance at March 31, 1996 $ 1,728 $ 2,461 $ 325 $ 4,514
For the Three Month Period Ended March 31, 1995:
Balance at December 31, 1994 1,926 1,643 350 3,919
Provision charged to operations 150 100 -- 250
Losses charged off (58) -- -- (58)
Recoveries -- -- --
------- ------- ------- -------
Balance at March 31, 1995 $ 2,018 $ 1,743 $ 350 $ 4,111
The following table summarizes the allowance for loan losses, by loan type and
as a percentage of loans:
Percent Percent
Gross Loan of Total of Loan
(Dollars in thousands) Portfolio Balance Loans Allowance Balance
----------- ------- --------- -------
March 31, 1996:
One-to-four family $ 392,832 70.6% $ 1,728 0.44%
Commercial real estate 113,338 20.4 2,461 2.17
Multi-family 48,850 8.8 325 0.67
Consumer 1,146 0.2 -- --
----------- ------- --------- -------
Total $ 556,166 100.0% $ 4,514 0.81%
December 31, 1995:
One-to-four family $ 394,787 70.9% $ 1,591 0.40%
Commercial real estate 114,741 20.6 2,423 2.11
Multi-family 46,162 8.3 309 0.67
Consumer 1,199 0.2 -- --
----------- ------- --------- -------
Total $ 556,889 100.0% $ 4,323 0.78%
March 31, 1995:
One-to-four family $ 417,467 72.6% $ 2,018 0.48%
Commercial real estate 97,826 17.5 1,743 1.78
Multi-family 45,492 9.6 350 0.77
Consumer 1,109 0.3 -- --
----------- ------- --------- -------
Total $ 561,894 100.0% $ 4,111 0.73%
<PAGE>
<PAGE>
The following table sets forth the ratio of net chargeoffs to average
loans outstanding for the three month periods ended March 31:
1996 1995
-------- --------
One-to-four family 0.03% 0.06%
Commercial real estate 0.12 --
Multi-family 0.20 --
-------- --------
Total Net Chargeoffs 0.06% 0.04%
The following table sets forth the activity in the general allowance
accounts for REO for the three month periods ended March 31:
(In thousands) 1996 1995
-------- --------
Beginning Balance $ 136 $ 178
Provision for losses 120 155
Charge-offs, net of recoveries (96) (155)
-------- --------
Ending Balance $ 160 $ 178
MORTGAGE SERVICING RIGHTS
In conjunction with its mortgage banking activities, the Company services
a portfolio of mortgage loans owned by various investors for which it earns
fee income for servicing such loans for the duration of the mortgage servicing
obligation. The Company builds its mortgage servicing portfolio by selling
loans and retaining the right to service the mortgage loans for the investors.
The Company's loan sale agreements specify a mortgage servicing fee for which
the Company capitalizes the value of the related mortgage servicing rights as
an asset at the time it sells such loans and retains the obligation to service
the loans for investors. This asset is referred to as "mortgage servicing
rights."
Effective January 1, 1995, the Company adopted SFAS No. 122, "Accounting
for Mortgage Servicing Rights" as an amendment of SFAS No. 65, "Accounting for
Certain Mortgage Banking Activities." SFAS No. 122 addresses the measurement
and capitalization of mortgage servicing rights related to mortgage loans sold
with servicing retained. The OTS has issued guidelines for estimating the
appropriate amortized book value of mortgage servicing rights. The
methodology defines acceptable assumptions for estimating the remaining life
of loans, the discount rate and normal servicing fee rate. The Company
incorporates these guidelines in its valuations. The carrying value of
mortgage servicing rights does not purport to reflect its market value.
The balance of the unamortized mortgage servicing rights was $0.8
million, or approximately 0.32% of loans serviced for others, at March 31,
1996 and December 31, 1995. For the three months ended March 31, 1996,
mortgage servicing rights of $81 thousand were capitalized. At March 31,
1996, December 31, 1995 and March 31, 1995, the Company was servicing loans
for investors of $249 million, $248 million and $243 million, respectively.
CAPITAL RESOURCES
As required by the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA"), the Association is required to maintain
certain minimum levels of regulatory capital. The regulatory requirements
include a leverage limit or core capital requirement of 3.0% of adjusted total
assets, a tangible capital requirement of 1.5% of adjusted total assets and a
risk-based capital requirement of 8.0% of total risk-weighted assets.
<PAGE>
<PAGE>
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") established a regulatory framework to resolve the problems of
under-capitalized savings institutions, in which the authority for regulatory
actions is based on a savings institution's capital level. This framework
established five categories of capital strength, ranging from a high, defined
as "well capitalized," to a low, defined as "critically undercapitalized."
Savings institutions are categorized depending upon their capital ratios in
relation to certain capital measures, including risk-based capital measures, a
core capital measure, and certain other factors. FDICIA requires the OTS and
other federal banking regulatory agencies to take prompt corrective action
against undercapitalized financial institutions and imposes a series of
progressive constraints on the operation of such undercapitalized
institutions.
At March 31, 1996, the Association's regulatory capital ratios
significantly exceeded the regulatory requirements, including the FDICIA
capital requirements for a "well-capitalized" institution. The following
table summarizes the Association's March 31, 1996 regulatory capital in
comparison with its regulatory capital requirements:
(Dollars in thousands) As of March 31, 1996
Actual Requirement Excess Actual Requirement Excess
(1) (1)
------ ------- ------ ------ ------- ------
Tangible capital $54,103 $10,758 $43,345 7.54% 1.50% 6.04%
Core capital $54,272 $35,869 $18,403 7.57% 5.00% 2.57%
Tier 1 Risk-based
capital $54,272 $24,439 $29,833 13.32% 6.00% 7.32%
Total Risk-based
capital $57,637 $40,731 $16,906 14.15% 10.00% 4.15%
1. The Tangible capital requirement refers to the 1.5% minimum capital
requirement set forth by FIRREA; the Core, Tier 1 Risk-based and Total
Risk-based capital requirements refer to the requirements for a
"well-capitalized" financial institution set forth by FDICIA.
The following table summarizes the Association's March 31, 1996
regulatory capital ratios in comparison with its ratios at December 31, 1995
and March 31, 1995.
March 31, December 31, March 31,
1996 1995 1995
-------- -------- --------
Tangible capital 7.54% 7.43% 7.20%
Core capital 7.57% 7.47% 7.26%
Tier 1 Risk-based capital 13.32% 13.28% 13.10%
Total Risk-based capital 14.15% 14.11% 13.97%
The Association's stockholder's equity and regulatory capital at March
31, 1996 are reconciled as follows:
(Dollars in thousands)
Stockholder's equity $53,368
Add: Unrealized loss on securities available for sale 926
Less: Intangible assets (191)
--------
Tangible capital 54,103
Add: Qualifying intangible assets 169
--------
Core or Tier 1 Risk-based capital 54,272
Add: Loan general valuation allowances 3,365
--------
Risk-based capital $57,637
The Association has been rated by the OTS as a Tier 1 institution which
is defined as an institution that has capital equal to or greater than the OTS
fully phased-in capital requirements and has not been
<PAGE>
<PAGE>
deemed by the OTS to be "in need of more than normal supervision."
The capital distribution regulations allow a Tier 1 institution,
including the Association, to make capital distributions during a calendar
year of up to 100% of its net income to date plus the amount that would reduce
by one-half its surplus capital ratio at the beginning of the calendar year;
provided that the capital distributions are not made from the liquidation
account. Any distributions in excess of that amount require prior OTS notice,
with the opportunity for OTS to object to the distribution. An institution
that is not ranked as a Tier 1 institution is subject to additional
restrictions on payment of dividends. As a savings and loan holding company,
Home Federal Financial Corporation is not subject to the OTS capital
distribution limitations.
ASSET LIABILITY MANAGEMENT
The principal component of the Company's earnings is net interest income,
which represents interest income in excess of interest expense. Net interest
income is affected by the relative average balances of interest-earning assets
and interest-bearing liabilities in combination with the yields earned on
assets and rates paid on liabilities. The correlation between the frequency
of the repricing of interest rates on assets and liabilities also influences
net interest income. Savings institutions have historically experienced a
mismatch between the maturities of assets and liabilities, primarily because
customers have traditionally preferred short-term deposits and long-term,
fixed-rate loans. This mismatch normally increases net interest income during
periods of declining market interest rates and reduces net interest income
during periods of rising interest rates.
The objective of interest rate risk management is to manage the
sensitivity of net interest income resulting from changes in interest rates.
The objective of the Company's asset/liability management strategy is to
prudently manage its interest rate risk through the management of its balance
sheet structure. OTS regulations also require that insured institutions
maintain their earnings and net worth within self-imposed parameters over a
range of possible interest rate environments. The Company reduces its
sensitivity to interest rate movements through emphasis on originations and
purchases of adjustable rate loans. While most of the loan portfolio is
currently indexed to the Federal Home Loan Bank of San Francisco 11th District
Cost of Funds Index ("COFI"), an index which corresponds generally with the
Association's cost of funds, the Company shifted its loan origination and
purchase emphasis to adjustable rate loans indexed to the one-year constant
maturity Treasury Index ("CMT") during 1995. The one-year CMT Index has
historically reflected changes in market interest rates more promptly than the
COFI Index. To the extent the Company originates adjustable rate mortgages
indexed to the COFI Index, such loans are primarily repriced on a monthly
basis. The Company's Investment Committee meets regularly to review the
current interest rate environment and the Company's interest rate risk
profile, liquidity, cash flow position, borrowing needs, and outstanding
commitments to sell and purchase loans. If economic or operating conditions
change, strategies may be modified to meet those changing conditions;
strategic changes are submitted to the Company's Board of Directors for
review.
Interest rate risk results from assets and liabilities repricing at
differing times as interest rates change, often referred to as "term structure
risk." Measurement of the cumulative "gap" is a commonly used method for
analyzing the impact of changes in interest rates on depository institutions'
net interest income. Gap is the difference between the amount of assets and
liabilities scheduled to mature or reprice within the same period, expressed
as a percentage of assets. Generally, the smaller the gap, the less sensitive
the Company's earnings are to changes in interest rates. However, the
usefulness of this method of measuring interest rate sensitivity is limited,
particularly for thrift institutions, because it does not take into account
the differing repricing characteristics of the various assets and liabilities,
often referred to as "basis risk." Certain assets or liabilities may have
similar maturities or repricing characteristics, yet they may react
differently to changes in market interest rates. As discussed above, the
Company's ARM
<PAGE>
<PAGE>
loans are primarily indexed to the COFI index, an index which typically has a
delayed response to changes in market interest rates, whereas the majority of
the Company's maturing savings and borrowings reprice to market interest rates
immediately. Basis risk is a significant source of the Company's interest
rate risk and is difficult to quantify.
At March 31, 1996, the Company's cumulative one-year gap, an
interest-rate risk measure, which represents the difference between the
interest-earning assets and interest-bearing liabilities that mature or
reprice within one year, was a positive 12% of interest-earning assets
compared to 14% at December 31, 1995. Although the Company has a positive
one-year cumulative gap of 12%, as set forth in the table below, its net
interest income tends to decrease in periods of rising interest rates because
of the differing repricing characteristics of its assets and liabilities, as
discussed above. The Company relies primarily on simulation modeling to
determine the potential impact of interest rate changes to the Company's net
interest income and capital position and believes that, at March 31, 1996, it
has moderate interest rate risk.
INTEREST RATE SENSITIVITY
3 Months 3-12 1-5 5-10 10-20 Over 20
(Dollars in thousands) or Less Months Years Years Years Years Total
------- ------- ------ ------ ------ ------ ------
Interest-earning Assets
Cash and equivalents $13,400 $ -- $ -- $ -- $ -- $ -- $13,400
Investment securities(1) 68,299 -- -- -- -- -- 68,299
Mortgage-backed
securities(2) 13,662 12,992 28,311 1,495 -- -- 56,460
Loans receivable:(2)
One-to-four family
residential 186,924 116,038 46,285 19,927 15,016 2,086 386,276
Multi-family 14,229 23,078 6,894 2,783 1,650 216 48,850
Commercial real estate 25,347 74,187 10,301 3,116 325 62 113,338
Second mortgage loans 6,365 -- 98 51 36 6 6,556
Consumer 1,106 -- 40 -- -- -- 1,146
Unamortized yield
adjustments (1,041) (640) (251) (108) (82) (11) (2,133)
------- ------- ------ ------ ------ ------ ------
Total interest-earning
assets 328,291 225,655 91,678 27,264 16,945 2,359 692,192
Interest-bearing Liabilities
Customer deposits(3) 218,779 254,053 112,799 21,712 18,852 -- 626,195
Borrowings(4) -- -- 15,000 15,000 -- -- 30,000
------- ------- ------ ------ ------ ------ ------
Total interest-bearing
liabilities 218,779 254,053 127,799 36,712 18,852 -- 656,195
Net asset (liability)
sensitivity 109,512 (28,398)(36,121)(9,448)(1,907) 2,359 35,997
Cumulative net asset
sensitivity 109,512 81,114 44,993 35,545 33,638 35,997
Cumulative net asset
sensitivity as a % of
interest-earning assets 15.82% 11.72% 6.50% 5.14% 4.86% 5.20%
(1) Repricing terms are based upon the contractual maturities of the
respective investment securities; investments in bond mutual funds are
considered to reprice immediately.
(2) Repricing terms of ARMs are based upon the interest rate reset periods of
the respective notes. Repricing terms of fixed rate loans and MBS are
based upon the contractual maturities of the respective notes. Repricings
have been adjusted for projected prepayments of principal, based upon the
Company's historical experience.
(3) Repricing terms of certificates of deposit are based upon the contractual
maturities of the instruments. Checking and money market accounts are
assumed to reprice immediately; repricing terms of passbook accounts
reflect decay factors based upon historical experience as reported by the
OTS.
(4) Repricing terms are based upon the contractual materials of the respective
fixed rate borrowings.
<PAGE>
<PAGE>
RESULTS OF OPERATIONS - THREE MONTHS ENDED March 31, 1996 AND 1995
For the three months ended March 31, 1996, the Company reported net
income of $470 thousand, or $0.12 per share, compared to $366 thousand, or
$0.10 per share, for the three months ended March 31, 1995. The increase in
the first quarter 1996 earnings, compared to the first quarter of 1995, was
attributable to increased net interest income and fee income offset, in part,
by higher operating expenses.
NET INTEREST INCOME
First quarter 1996 net interest income, the primary component of earnings
rose to $4.8 million, an increase from $4.5 million for the first quarter of
1995. During this period, net interest margin (annualized net interest income
divided by average interest-earning assets) rose to 2.78% from 2.52%, as the
yield earned on loans and investment securities rose more sharply than rates
paid on deposits and borrowings. Market interest rates declined steadily
through 1995 and into the beginning of 1996, resulting in the Company's cost
of funds peaking in mid-1995. The yield on the Company's loans and investment
securities increased more sharply during 1995 and into the first quarter of
1996, as a result of the lag inherent in the repricing of the Company's
adjustable rate loans and investment securities. The analysis of net interest
income on the following page sets forth the extent to which changes in average
interest rates and changes in the balances of interest-earning assets and
interest- bearing liabilities have affected the Company's interest income and
interest expense for the quarters ended March 31, 1996 and 1995.
Non-performing assets had an adverse impact on net interest income during
both quarters. During the three months ended March 31, 1996 and 1995,
non-performing assets averaged $8.2 million and $9.1 million, respectively.
The ratio of interest-earning assets to interest-bearing liabilities rose to
105.7% during the first quarter of 1996, from 105.3% during the first quarter
of 1995.
Interest income rose to $13.1 million for the three months ended March
31, 1996, from $12.4 million for the three months ended March 31, 1995. This
increase in interest income was attributable to an increase in the average
yield on interest-earning assets of 52 basis points, offset by a decrease in
the balance of average interest-earning assets of $15.4 million.
Interest expense increased to $8.3 million for the three months ended
March 31, 1996 from $8.0 million for the three months ended March 31, 1995 .
This increase in interest expense was attributable to an increase in the
average cost of deposits and borrowings of 30 basis points, offset by a
decrease in average interest-bearing liabilities of $17.3 million.
<PAGE>
<PAGE>
<TABLE>
ANALYSIS OF NET INTEREST INCOME
1ST QUARTER 1996/1ST QUARTER 1995
Average Balance Average Rate Interest Due to
1st Qtr 1st Qtr 1st Qtr 1st Qtr 1st Qtr 1st Qtr Change in
(Dollars in thousands) 1996 1995 1996 1995 1996 1995 Variance Balance Rate Mix
ASSETS ------ ------ ------ ------ ------ ------ -------- ------- ---- ---
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans $558,760 $560,184 8.00% 7.21% $11,178 $10,094 $1,084 $(26) $1,106 $ 4
Mortgage-backed
securities 57,436 128,417 5.66 5.76 813 1,849 (1,036) (1,022) (32) 18
Investment securities 77,353 20,362 5.57 9.70 1,079 494 585 1,382 (210) (587)
Total interest-earning ------- -------- ------ ------ ------ ------ -------- ------- ---- ---
assets 693,549 708,963 7.54% 7.02% $13,070 $12,437 $ 633 $ 334 $ 864 $(565)
All other assets 23,503 22,714
------- -------
Total Assets $717,052 $731,677
LIABILITIES & STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Customer deposits $625,411 $606,439 5.03% 4.64% $ 7,766 $ 6,942 $ 824 $ 220 $ 591 $ 13
Borrowings 30,872 67,130 6.42 6.26 488 1,037 (549) (567) 27 (9)
Total interest-bearing ------- -------- ------ ------ ------ ------ -------- ------- ---- ---
liabilities 656,283 673,569 5.10% 4.80% $ 8,254 $ 7,979 $ 275 $(347) $ 618 $ 4
All other liabilities 6,605 5,661
------- -------
Total liabilities 662,888 679,230
Stockholders' equity 54,164 52,447
------- -------
Total Liabilities and
Stockholders' Equity $717,052 $731,677
Net interest rate spread and
net interest income 2.44% 2.22% $ 4,816 $ 4,458 $ 358 $ 681 $ 246 $(569)
Net interest margin 2.78% 2.52%
</TABLE>
<PAGE>
<PAGE>
PROVISION FOR LOAN LOSSES
A provision for loan losses is charged to operations based on the
Company's evaluation of its loan portfolio and the adequacy of its allowance
for loan losses. Provision for loan losses totaled $280 thousand and $250
thousand for the quarters ended March 31, 1996 and 1995, respectively. During
this period, the Company increased the balance of its allowance for loan
losses from $4.1 million at March 31, 1995 to $4.5 million at March 31, 1996.
This increase was attributable to increases in specific reserves for
identified loan impairment.
In addition, while the balance of the loan portfolio was substantially
unchanged between these quarter-ends, credit risk increased somewhat, as the
loan portfolio mix shifted from one-to-four family loans to commercial real
estate loans. One-to-four family and commercial real estate loans represented
71% and 20% of the portfolio, respectively, at March 31, 1996 compared to 74%
and 18% of the portfolio, respectively, at March 31, 1995. Offsetting this
shift in portfolio composition, the Company experienced a 6% decline in the
balance of nonaccruing loans and a 45% decline in the balance of classified
loans between the quarter-ends. For further information, reference is made to
"Liquidity and Capital Resources - Asset Quality - Allowances for Loan and REO
Losses."
NON-INTEREST INCOME
Non-interest income totaled $434 thousand for the three months ended
March 31, 1996, representing an increase of $130 thousand, or 42%, over the
corresponding period in 1995. This increase was primarily the result of a $71
thousand increase in other fee income resulting primarily from growth in
savings fees generated from checking accounts. Losses from real estate owned
operations also declined by $42 thousand, primarily on reduced writedowns of
the carrying value of REO.
NON-INTEREST EXPENSE
Non-interest expense, defined as operating expense plus amortization of
intangible assets, rose by $280 thousand, or 7%, to $4.2 million for the three
months ended March 31, 1996 from $3.9 million for the three months ended March
31, 1995. This increase was primarily the result of costs related to the
proposed merger of Home Federal and First Nationwide Bank as well as costs of
a promotional campaign to market checking accounts and increase the Company's
checking account base. As a percentage of average assets, annualized
operating expenses were 2.27% for the three months ended March 31, 1996
compared to 2.08% for the same period in 1995.
INCOME TAXES
Income taxes for the three months ended March 31, 1996 and 1995 were $334
thousand and $260 thousand, respectively, representing a combined effective
tax rate of 41.5%.
<PAGE>
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not party to any material legal proceedings at this time. It
is involved in various claims and legal actions arising in the ordinary course
of business.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 13, 1996 By: /s/ Stanley E. Bailey
----------------------
Stanley E. Bailey
Chairman of the Board and
Chief Executive Officer
Date: May 13, 1996 By: /s/ John Okubo
-----------------------
John Okubo
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 10240000
<INT-BEARING-DEPOSITS> 13400000
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 22572000
<INVESTMENTS-CARRYING> 115197000
<INVESTMENTS-MARKET> 114314000
<LOANS> 536510000
<ALLOWANCE> 0
<TOTAL-ASSETS> 716755000
<DEPOSITS> 626195000
<SHORT-TERM> 30000000
<LIABILITIES-OTHER> 6156000
<LONG-TERM> 0
0
0
<COMMON> 37000
<OTHER-SE> 54367000
<TOTAL-LIABILITIES-AND-EQUITY> 716755000
<INTEREST-LOAN> 11460000
<INTEREST-INVEST> 1079000
<INTEREST-OTHER> 813000
<INTEREST-TOTAL> 13070000
<INTEREST-DEPOSIT> 7766000
<INTEREST-EXPENSE> 8254000
<INTEREST-INCOME-NET> 4816000
<LOAN-LOSSES> 280000
<SECURITIES-GAINS> 16000
<EXPENSE-OTHER> 4166000
<INCOME-PRETAX> 804000
<INCOME-PRE-EXTRAORDINARY> 804000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 470000
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.12
<YIELD-ACTUAL> 2.44
<LOANS-NON> 5532000
<LOANS-PAST> 0
<LOANS-TROUBLED> 2338000
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4323000
<CHARGE-OFFS> 116000
<RECOVERIES> 27000
<ALLOWANCE-CLOSE> 4514000
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 4514000
</TABLE>
