<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For Quarter Ended: JUNE 30, 1997 Commission File Number: 0-19345
------------- -------
PENNFIRST BANCORP, INC.
-----------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
PENNSYLVANIA 25-1659846
- - ---------------------------------------------------------------- ----------------------------------
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
600 LAWRENCE AVENUE, ELLWOOD CITY, PA 16117
- - ---------------------------------------------------------------- ----------------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (412) 758-5584
-----------------
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. X Yes No
---- ----
Number of shares of common stock outstanding as of July 31, 1997:
<TABLE>
<S> <C>
COMMON STOCK, $0.01 PAR VALUE 4,827,637 SHARES
- - ----------------------------- ----------------
(Class) (Outstanding)
</TABLE>
<PAGE> 2
PENNFIRST BANCORP, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements
Consolidated Statements of Financial Condition
as of June 30, 1997 (Unaudited) and December 31, 1996....................................1
Consolidated Statements of Operations for the three and six
month periods ended June 30, 1997 and 1996 (Unaudited)...................................2
Consolidated Statements of Cash Flows for the six
months ended June 30, 1997 and 1996 (Unaudited)..........................................3
Notes to Consolidated Financial Statements...............................................4
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations.........................................8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.......................................................................15
Item 2. Changes in Securities...................................................................15
Item 3. Defaults Upon Senior Securities.........................................................15
Item 4. Submission of Matters to a Vote of Security Holders.....................................15
Item 5. Other Information.......................................................................15
Item 6. Exhibits and Reports on Form 8-K........................................................15
Signatures..............................................................................16
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PENNFIRST BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
As of June 30, 1997 (Unaudited) and December 31, 1996
(Dollar amounts in thousands, except share data)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
(Unaudited)
------------- ---------------
ASSETS:
- - -------
<S> <C> <C>
Cash on hand and in banks $ 2,357 $ 1,884
Interest-earning deposits with banks 6,440 5,244
Federal funds sold 1,457 156
Securities available for sale; cost of $351,780 and $347,924 353,386 348,129
Securities held to maturity; market value of $88,918 and $93,561 91,101 96,200
Loans receivable, net 325,180 216,865
Accrued interest receivable 5,822 5,557
Federal Home Loan Bank stock 17,009 15,153
Premises and equipment, net 3,253 2,740
Real estate acquired through foreclosure, net 474 37
Prepaid expenses and other assets 10,475 6,770
--------- ---------
TOTAL ASSETS $ 816,954 $ 698,735
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
- - -------------------------------------
LIABILITIES:
Deposits $ 391,066 $ 332,889
Advance payments by borrowers for taxes and insurance 4,362 1,855
Borrowed funds 350,472 309,195
Accrued expenses and other liabilities 5,048 3,253
--------- ---------
Total liabilities 750,948 647,192
--------- ---------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 5,000,000 shares
authorized; none issued - -
Common stock, $.01 par value, 10,000,000 shares authorized;
issued 5,337,866 and 4,364,023; outstanding 4,823,237
and 3,901,780 53 44
Additional paid-in capital 40,639 26,465
Retained earnings, substantially restricted 33,691 31,990
Treasury stock, at cost; 514,629 and 462,243 shares (6,695) (5,956)
Unearned Employee Stock Ownership Plan shares (2,504) (1,136)
Unvested shares held by Management Recognition Plan (237) -
Unrealized gain on securities available for sale, net 1,059 136
--------- ---------
Total stockholders' equity 66,006 51,543
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 816,954 $ 698,735
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE> 4
PENNFIRST BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the three and six month periods ended June 30, 1997 and 1996 (Unaudited)
(Dollar amounts in thousands, except share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
----------------------------------- ------------------------------------
1997 1996 1997 1996
---------------- ---------------- ---------------- ----------------
INTEREST INCOME:
<S> <C> <C> <C> <C>
Loans receivable $ 6,427 $ 3,975 $ 10,736 $ 7,840
Securities available for sale 5,983 5,892 11,910 11,341
Securities held to maturity 1,424 1,555 2,861 3,260
Federal Home Loan Bank stock 268 222 505 424
Deposits with banks 127 40 168 90
----------- ----------- ----------- -----------
TOTAL INTEREST INCOME 14,229 11,684 26,180 22,955
----------- ----------- ----------- -----------
INTEREST EXPENSE:
Deposits 4,282 3,612 7,875 7,306
Borrowed funds 5,493 4,432 10,235 8,571
----------- ----------- ----------- -----------
TOTAL INTEREST EXPENSE 9,775 8,044 18,110 15,877
----------- ----------- ----------- -----------
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES 4,454 3,640 8,070 7,078
Provision for loan losses 600 - 801 285
----------- ----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 3,854 3,640 7,269 6,793
----------- ----------- ----------- -----------
OTHER OPERATING INCOME:
Loan fees and service charges 243 167 437 334
Loss on sales of securities available for sale (9) (23) (46) (21)
Other non-interest income 11 7 27 26
----------- ----------- ----------- -----------
TOTAL OTHER OPERATING INCOME 245 151 418 339
----------- ----------- ----------- -----------
OTHER OPERATING EXPENSES:
Salaries and personnel 1,422 1,060 2,534 2,118
Occupancy and equipment 268 238 514 494
Federal insurance premiums 65 193 74 387
Data processing 114 91 218 186
Other 443 596 1,004 881
----------- ----------- ----------- -----------
TOTAL OTHER OPERATING EXPENSES 2,312 2,178 4,344 4,066
----------- ----------- ----------- -----------
NET INCOME BEFORE INCOME TAXES 1,787 1,613 3,343 3,066
Provision for income taxes 333 529 744 967
----------- ----------- ----------- -----------
NET INCOME $ 1,454 $ 1,084 $ 2,599 $ 2,099
=========== =========== =========== ===========
NET INCOME PER SHARE $ 0.30 $ 0.27 $ 0.59 $ 0.53
=========== =========== =========== ===========
DIVIDENDS PER SHARE $ 0.09 $ 0.59 $ 0.18 $ 0.68
=========== =========== =========== ===========
WEIGHTED AVERAGE SHARES AND EQUIVALENTS OUTSTANDING 4,831,746 3,978,657 4,372,055 3,985,981
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 5
PENNFIRST BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the six months ended June 30, 1997 and 1996 (Unaudited)
(Amounts in thousands)
<TABLE>
<CAPTION>
Six months ended
June 30,
-------------------------------
1997 1996
------------- --------------
OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 2,599 $ 2,099
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation and amortization 142 200
Provision for losses 801 289
Amortization of premiums and accretion of discounts 260 589
Loss on sales of securities available for sale 46 21
Decrease/(increase) in accrued interest receivable 305 (905)
Decrease/(increase) in prepaid expenses and other assets 401 (4)
Increase in accrued expenses and other liabilities 2,079 1,771
Other (6) 99
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 6,627 4,159
--------- ---------
INVESTING ACTIVITIES:
Loan originations and purchases (54,179) (52,092)
Purchases of:
Securities available for sale (65,002) (93,641)
Securities held to maturity (5,970) (8,489)
Principle repayments of:
Loans 34,962 31,933
Securities available for sale 25,041 34,723
Securities held to maturity 10,880 17,569
Proceeds from the sale of securities available for sale 42,991 31,706
Redemption/(purchase) of Federal Home Loan Bank stock 236 (1,975)
Purchases of premises and equipment (48) (200)
Payment for purchase of Troy Hill Bancorp, Inc., net of cash acquired (2,734) -
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (13,823) (40,466)
--------- ---------
FINANCING ACTIVITIES:
Net increase/(decrease) in deposits 4,394 (2,846)
Net increase in borrowed funds 7,443 45,270
Proceeds received from exercise of stock options 61 562
Dividends paid (703) (2,694)
Payments to acquire treasury stock (938) (2,337)
Stock purchased by Employee Stock Ownership Plan (ESOP) (242) (96)
Principal repayment of ESOP loan 151 124
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 10,166 37,983
--------- ---------
Net increase in cash equivalents 2,970 1,676
Cash equivalents at beginning of period 7,284 6,794
--------- ---------
Cash equivalents at end of period $ 10,254 $ 8,470
========= =========
SUPPLEMENTAL INFORMATION:
Interest paid $ 16,598 $ 14,740
Income taxes paid 642 828
NON-CASH TRANSACTIONS:
Transfers from loans receivable to real estate acquired through foreclosure 193 55
Dividends declared but not paid 434 345
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
The Company purchased all of the common stock of Troy Hill Bancorp, Inc. (THBC) for
$23.5 million. In conjunction with the acquisition, the assets acquired and liabilities
assumed were as follows:
Fair value of assets acquired $ 109,296 $ -
Stock and stock options issued for the purchase of THBC common stock (14,204) -
Cash paid for THBC commom stock (9,270) -
Liabilities assumed (89,362) -
========= =========
Excess liabilities assumed over assets acquired $ (3,540) $ -
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 6
PENNFIRST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. BASIS OF PRESENTATION
PennFirst Bancorp, Inc. (the Company) is a publicly traded thrift holding
company. The consolidated financial statements include the accounts of the
Company and its direct and indirect wholly owned subsidiaries, ESB Bank, FSB
(ESB), Troy Hill Federal Savings Bank (Troy Hill), PennFirst Financial
Services, Inc., AMSCO, Inc. and ESB Bank Building Associates. ESB and Troy Hill
(collectively, the Banks) are federally chartered Federal Deposit Insurance
Corporation (FDIC) insured stock savings banks.
The accompanying unaudited consolidated financial statements for the interim
periods include all adjustments, consisting only of normal recurring accruals,
which are necessary, in the opinion of management, to fairly reflect the
Company's financial position and results of operations. Additionally, these
consolidated financial statements for the interim periods have been prepared in
accordance with instructions for the SEC's Form 10-Q and therefore do not
include all information or footnotes necessary for a complete presentation of
financial condition, results of operations and cash flows in conformity with
generally accepted accounting principles. For further information, refer to the
audited consolidated financial statements and footnotes thereto for the year
ended December 31, 1996, as contained in the 1996 Annual Report to
Stockholders.
The results of operations for the three and six month periods ended June 30,
1997 are not necessarily indicative of the results that may be expected for the
entire year.
Certain amounts previously reported have been reclassified to conform with the
current year's reporting format.
2. SUBSEQUENT EVENT
On July 15, 1997, the Board of Directors declared a 10% stock dividend to
stockholders of record on July 31, 1997 and payable on August 25, 1997.
3. ACQUISITION
On April 3, 1997, the Company completed its acquisition of Troy Hill based in
Pittsburgh, Pennsylvania. Troy Hill is a community savings bank that offers a
variety of financial products and services through two branch offices that
operate in Allegheny County, Pennsylvania.
The acquisition was accounted for under the purchase method of accounting.
Under the terms of the merger agreement, Troy Hill Bancorp, Inc. (THBC), the
holding company for Troy Hill, merged with and into the Company. The
consideration paid by the Company in connection with the acquisition consisted
of $9.3 million in cash and 974,000 shares of the Company's common stock. In
addition, options to purchase shares of THBC were converted into options to
acquire 104,000 shares of the Company's common stock.
At June 30, 1997, Troy Hill had total assets of $106.1 million, including $93.9
million in loans receivable, and total liabilities of $91.8 million, including
$54.2 million in customer deposits. Goodwill arising from this transaction was
$3.5 million. The estimated useful life for the straight-line amortization of
the goodwill is expected to be 15 years.
Pro forma combined historical results of operations for the current year up to
the most recent interim statement of financial condition date as though the
Company and Troy Hill had combined at the beginning of the year are presented
below. These unaudited condensed pro forma combined statements of operations
are presented as if the acquisition had been effective on January 1, 1997 and
1996, respectively.
4
<PAGE> 7
The unaudited condensed pro forma combined statements of operations for the six
months ended June 30, 1997 combines Troy Hill's results of operations for the
period January 1, 1997 through March 31, 1997, and the Company's results of
operations for the six months ended June 30, 1997, which include Troy Hill's
results of operations from April 1, 1997 to June 30, 1997. The unaudited
condensed pro forma combined statements of operations include the estimated
effect of a pro forma adjustment for the amortization of goodwill attributed to
the merger that would have been realized had the acquisition actually occurred
at the beginning of the respective periods. In addition, certain expenses have
been eliminated from the combined results of operations for the six months
ended June 30, 1997, as these expenses, related primarily to the acquisition,
do not represent ongoing expenses of the Company. The unaudited condensed pro
forma combined statements of operations have also been adjusted to reflect the
income tax impact of the non-ongoing expense adjustments for the respective
periods.
The unaudited condensed pro forma combined statement of operations information
is intended for informational purposes only and is not necessarily indicative
of the future results of operations of the Company, or results of operations
that would have actually occurred had the acquisition been in effect for the
periods presented.
The unaudited condensed pro forma combined statements of operations for the six
month periods ended June 30, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands, except share data) Pro Forma Pro Forma
combined for the combined for the
six months ended six months ended
June 30, 1997 June 30, 1996
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest income $ 28,217 $ 26,298
Interest expense 19,198 17,427
--------- ---------
NET INTEREST INCOME BEFORE
PROVISION FOR LOAN LOSSES 9,019 8,871
Provision for loan losses 801 445
--------- ---------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 8,218 8,426
Other operating income 498 461
Other operating expenses 4,901 5,098
--------- ---------
NET INCOME BEFORE PROVISION
FOR INCOME TAXES 3,815 3,789
Provision for income taxes 971 1,240
--------- ---------
NET INCOME $ 2,844 $ 2,549
========= =========
NET INCOME PER SHARE $ 0.65 $ 0.64
========= =========
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 8
4. SECURITIES
The securities available for sale and securities held to maturity portfolios
consist of the following:
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------------
(In thousands) Amortized Unrealized Unrealized Fair
cost gains losses value
- - -----------------------------------------------------------------------------------------------------------------------------------
AVAILABLE FOR SALE:
- - -------------------
JUNE 30, 1997:
<S> <C> <C> <C> <C>
U.S. government securities $ 16,998 $ 24 $ (119) $ 16,903
Municipal securities 52,482 908 (59) 53,331
Equity securities 2,025 9 (2) 2,032
Mortgage-backed securities 280,275 2,047 (1,202) 281,120
----------- ----------- ------------ -----------
$ 351,780 $ 2,988 $ (1,382) $ 353,386
=========== =========== ============ ===========
DECEMBER 31, 1996:
U.S. government securities $ 32,489 $ 19 $ (612) $ 31,896
Municipal securities 56,084 679 (225) 56,538
Equity securities 250 3 0 253
Mortgage-backed securities 259,101 1,776 (1,435) 259,442
----------- ----------- ------------ -----------
$ 347,924 $ 2,477 $ (2,272) $ 348,129
=========== =========== ============ ===========
HELD TO MATURITY:
- - -----------------
JUNE 30, 1997:
U.S. government securities $ 15,476 $ - $ (109) $ 15,367
Municipal securities 570 17 - 587
Mortgage-backed securities 75,055 - (2,091) 72,964
----------- ----------- ------------ -----------
$ 91,101 $ 17 $ (2,200) $ 88,918
=========== =========== ============ ===========
DECEMBER 31, 1996:
U.S. government securities $ 17,489 $ 30 $ (278) $ 17,241
Municipal securities 593 16 (1) 608
Mortgage-backed securities 78,118 - (2,406) 75,712
----------- ----------- ------------ -----------
$ 96,200 $ 46 $ (2,685) $ 93,561
=========== =========== ============ ===========
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
5. LOANS RECEIVABLE
Loans receivable consist of the following:
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------------------
(In thousands) June 30, December 31,
1997 1996
- - -------------------------------------------------------------------------------------------------------------------------------
Mortgage loans:
<S> <C> <C>
Residential - single family $ 217,966 $ 126,854
Residential - multi family 10,180 3,516
Commercial real estate 26,727 20,473
Construction 26,824 20,942
--------- ---------
281,697 171,785
Other loans:
Consumer loans 49,075 45,486
Commercial business 9,609 9,656
--------- ---------
340,381 226,927
Less:
Allowance for loan losses 4,924 3,309
Deferred loan fees and net discounts 1,144 380
Loans in process 9,133 6,373
--------- ---------
$ 325,180 $ 216,865
========= =========
- - -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 9
6. DEPOSITS
Deposits consist of the following:
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands) June 30, 1997 December 31, 1996
---------------------------------------- ----------------------------------------
Weighted Weighted
average average
Type of accounts rate Amount % rate Amount %
- - -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
Noninterest-bearing - $ 5,299 1.4% - $ 5,082 1.5%
Interest-bearing demand deposits 2.60% 154,582 39.5% 2.72% 137,807 41.4%
Time depostis 5.72% 231,185 59.1% 5.67% 190,000 57.1%
------ ------ -------- -----
4.41% $391,066 100.0% 4.36% $332,889 100.0%
======== ====== ======== ======
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
7. BORROWED FUNDS
Borrowed funds consist of the following:
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands) June 30, 1997 December 31, 1996
----------------------------- ----------------------------
Weighted Weighted
average average
rate Amount rate Amount
- - -----------------------------------------------------------------------------------------------------------------------------------
Secured notes payable to the
Federal Home Loan Bank of Pittsburgh:
<S> <C> <C> <C> <C>
Due within 12 months 5.96% $ 141,603 6.17% $ 158,335
Due beyond 12 months but within 5 years 6.34% 192,616 5.98% 135,721
Due beyond 5 years but within 10 years 8.91% 1,035 8.82% 1,072
Due beyond 10 years 6.64% 392 6.61% 394
----------- -----------
335,646 295,522
Treasury tax and loan note payable - 151 - 223
Reverse repurchase agreements 5.90% 14,675 5.58% 13,450
----------- -----------
$ 350,472 $ 309,195
=========== ===========
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CHANGES IN FINANCIAL CONDITION
GENERAL. The Company's total assets increased a net $118.2 million or 16.9% to
$817.0 million at June 30, 1997 from $698.7 million at December 31, 1996. This
increase was primarily the result of the acquisition of Troy Hill on April 3,
1997, which included the acquisition of Troy Hill's assets of $109.3 million,
including cash and equivalents of $6.5 million, securities available for sale
of $7.0 million, loans receivable of $90.0 million, Federal Home Loan Bank
(FHLB) stock of $2.1 million and other assets of $3.7 million. Also
contributing to the increase in total assets was an increase in loans
receivable of $18.3 million due to net growth in ESB's loan portfolio and an
increase in prepaid expenses and other assets of $3.5 related to goodwill
associated with the Troy Hill merger.
The increase in total assets reflects corresponding increases in liabilities of
$103.8 million or 16.0% and stockholders' equity of $14.5 million or 28.1%. In
connection with the acquisition of Troy Hill, the Company assumed $89.4 million
in liabilities, including deposits of $53.8 million, borrowed funds of $33.8
million and all other liabilities combined of $1.8 million. Also contributing
to the increase in liabilities, and contributing to funding the loan growth
noted above, was an increase in deposits of $4.4 million or 1.3% due to
internal growth and an increase in borrowings with the FHLB of $7.4 million or
2.4%. The increase in stockholders' equity can principally be attributed to the
issuance of 974,000 shares of the Company's stock to partially fund the Troy
Hill acquisition.
CASH ON HAND, INTEREST-EARNING DEPOSITS AND FEDERAL FUNDS SOLD. Cash on hand,
interest-earning deposits and federal funds sold represent cash and cash
equivalents and increased a combined $3.0 million or 40.8% to $10.3 million at
June 30, 1997 from $7.3 million at December 31, 1996. These accounts are
typically increased by deposits from customers into savings and checking
accounts, loan and security repayments and proceeds from borrowed funds.
Decreases result from customer withdrawals, new loan originations, security
purchases and repayments of borrowed funds.
SECURITIES. The Company's securities portfolios increased a net $158,000 to
$444.5 million at June 30, 1997 from $444.3 million at December 31, 1996. This
net increase was the result of the addition of $7.0 million in securities from
Troy Hill, $71.0 million of purchases and an increase in the unrealized gain on
securities available for sale of $1.4 million during the period, partially
offset by $35.9 million of maturities and repayments of principal and $43.0
million of securities sold during the period.
LOANS RECEIVABLE. Net loans receivable increased a net $108.3 million or 49.9%
to $325.2 million at June 30, 1997 from $216.9 million at December 31, 1996.
The increase in loans receivable can be attributed to the addition of Troy
Hill's loans receivable as a result of the merger and to growth within ESB's
loan portfolio during the six months ended June 30, 1997. Troy Hill's loan
portfolio contributed $93.9 million to the Company's total loan portfolio at
June 30, 1997, including single-family residential mortgage loans of $75.4
million, multi-family residential mortgage loans of $6.8 million, commercial
real estate mortgage loans of $6.8 million, construction mortgage loans of $5.5
million, consumer loans of $2.9 million and commercial business loans of
$675,000. ESB's single-family residential mortgage loans increased a net $15.7
million or 12.4%, while all other loan categories remained relatively
consistent, from December 31, 1996 to June 30, 1997. The net increase in loans
receivable was slightly offset by an increase in the Company's allowance for
loan losses of $1.6 million or 48.8% to $4.9 million at June 30, 1997 from $3.3
million at December 31, 1996 and repayments during the period.
ACCRUED INTEREST RECEIVABLE. Accrued interest receivable increased $265,000 or
4.8% to $5.8 million at June 30, 1997 from $5.6 million at December 31, 1996,
primarily as a result of the acquisition of Troy Hill.
FHLB STOCK. FHLB stock increased $1.9 million or 12.2% to $17.0 million at June
30, 1997 from $15.2 million at December 31, 1996, primarily as a result of the
acquisition of Troy Hill.
8
<PAGE> 11
NONPERFORMING ASSETS. Nonperforming assets include nonaccrual loans and real
estate acquired through foreclosure (REO). Nonperforming assets increased $1.2
million or 28.3% to $5.3 million or 0.65% of total assets at June 30, 1997 from
$4.1 million or 0.59% of total assets at December 31, 1996. This increase was
principally the result of the acquisition of Troy Hill, including Troy Hill's
REO of $294,000 at June 30, 1997.
PREMISES AND EQUIPMENT. Premises and equipment increased $513,000 or 18.7% to
$3.3 million at June 30, 1997 from $2.7 million at December 31, 1996, primarily
as a result of the acquisition of Troy Hill.
PREPAID EXPENSES AND OTHER ASSETS. Prepaid expenses and other assets increased
$3.7 million or 54.7% to $10.5 million at June 30, 1997 from $6.8 million at
December 31, 1996. This increase can primarily be attributed to $3.5 million in
goodwill being recorded associated with the acquisition of Troy Hill.
DEPOSITS. Total deposits increased $58.2 million or 17.5% to $391.1 million at
June 30, 1997 from $332.9 at December 31, 1996. Included in this increase was
the assumption of Troy Hill's deposits associated with the merger and deposit
growth by ESB of $4.0 million or 1.2% to $336.8 million at June 30, 1997. Troy
Hill's total deposits were $54.2 million at June 30, 1997, including time
deposits of $35.6 million, interest bearing demand deposits of $17.9 million
and non-interest bearing deposits of $715,000.
ADVANCE PAYMENTS BY BORROWERS FOR TAXES AND INSURANCE. Advance payments by
borrowers for taxes and insurance (escrow accounts) increased $2.5 million to
$4.4 million at June 30, 1997 from $1.9 million at December 31, 1996 partially
as a result of the acquisition of Troy Hill and partially due to the timing of
payment of customer escrow account balances.
BORROWED FUNDS. Borrowed funds increased $41.3 million or 13.3% to $350.5
million at June 30, 1997 from $309.2 million at December 31, 1996. This
increase was primarily the result of the addition of Troy Hill's borrowed
funds, comprised primarily of FHLB advances of $33.8 million, and the Company
utilizing additional FHLB advances to fund the increase in loans receivable.
ACCRUED EXPENSES AND OTHER LIABILITIES. Accrued expenses and other liabilities
increased $1.8 million or 55.2% to $5.0 million at June 30, 1997 from $3.3
million at December 31, 1996. This increase can primarily be attributed to the
acquisition of Troy Hill.
STOCKHOLDERS' EQUITY. Stockholders' equity increased by $14.5 million or 28.1%
to $66.0 million at June 30, 1997 from $51.5 million at December 31, 1996. This
increase was primarily the result of the issuance of 974,000 shares of the
Company's common stock to partially fund the acquisition of Troy Hill, net
income of $2.6 million for the six months ended June 30, 1997 and a $923,000
increase in the unrealized gain on securities available for sale, net of income
taxes. Partially offsetting these increases in stockholders' equity, were
dividends declared of $759,000, treasury stock purchases of $739,000 and a $1.6
million increase in unearned employee stock plans shares.
RESULTS OF OPERATIONS
GENERAL. The Company recorded net income of $1.5 million and $2.6 million for
the three and six month periods ended June 30, 1997, respectively, as compared
to net income of $1.1 million and $2.1 million, respectively, for the same
periods last year. Included in the Company's net income for the three and six
month periods ended June 30, 1997 was net income from the operations of Troy
Hill of $352,000 for the three months ended June 30, 1997.
The $370,000 or 34.1% increase in net income for the three months ended June
30, 1997, as compared to the three months ended June 30, 1996 was comprised of
an increase in net interest income of $814,000 or 22.4%, an increase in other
operating income of $94,000 or 62.3% and a decrease in the provision for income
taxes of $196,000 or 37.1%, offset by increases in the provision for loan
losses of $600,000 and other operating expenses of $134,000 or 6.2%.
9
<PAGE> 12
The $500,000 or 23.8% increase in net income for the six months ended June 30,
1997, as compared to the six months ended June 30, 1996, was comprised of an
increase in net interest income of $992,000 or 14.0%, an increase in other
operating income of $79,000 and a decrease in the provision for income taxes of
$223,000 or 23.1%, offset by increases in the provision for loan losses of
$516,000 and other operating expenses of $278,000 or 6.8%.
NET INTEREST INCOME. Net interest income is determined by the Company's
interest rate spread (i.e., the difference between the yields earned on
interest-earning assets and the rates paid on interest-bearing liabilities) and
the relative amounts, or volumes, of interest-earning assets and
interest-bearing liabilities.
Net interest income was $4.5 million for the three months ended June 30, 1997,
as compared to $3.6 million for the same period in the prior year. The $814,000
or 22.4% increase in net interest income was attributable to an increase in
interest income of $2.5 million or 21.8%, partially offset by a $1.7 million or
21.5% increase in interest expense.
Net interest income was $8.1 million for the six months ended June 30, 1997, as
compared to $7.1 million for the same period in the prior year. The $992,000 or
14.0% increase in net interest income was attributable to an increase in
interest income of $3.2 million or 14.0%, partially offset by a $2.2 million or
14.1% increase in interest expense.
INTEREST INCOME. Interest income was $14.2 million and $26.2 million for the
three and six month periods ended June 30, 1997, respectively, as compared to
$11.7 million and $23.0 million, respectively, for the same periods in the
prior year. The $2.5 million or 21.8% and $3.2 million or 14.0% increases for
the three and six month periods ended June 30, 1997, respectively, as compared
to the same periods in the prior year, can be attributed primarily to an
increase in interest income recorded on loans receivable.
Interest income from loans receivable increased $2.5 million or 61.7% and $2.9
million or 36.9% for the three and six month periods ended June 30, 1997,
respectively, as compared to the same period in the prior year due primarily to
an increase in loans outstanding during the respective periods. Average loans
receivable increased $123.1 million or 63.0% to $318.4 million for the quarter
ended June 30, 1997 from $195.3 million for the same quarter last year. Average
loans receivable increased $78.1 million or 41.1% to $268.1 million for the six
months ended June 30, 1997 from $190.0 million for the same period in the prior
year. The weighted average yields on loans receivable decreased to 8.07% and
8.01% for the three and six month periods ended June 30, 1997, respectively,
from 8.14% and 8.25%, respectively, for the same periods in the prior year.
Interest income from securities and other interest-earning assets (including
U.S. Government and agency obligations, municipal obligations, mortgage-backed
securities, interest-earning deposits with banks, FHLB stock and federal funds
sold) was $7.8 million and $15.4 million for the three and six month periods
ended June 30, 1997, respectively as compared to $7.7 million and $15.1 for the
same periods last year.
Interest income from securities and other interest earning assets remained
relatively consistent for the three and six month periods ended June 30, 1997,
compared to the same period last year, with both average balances and weighted
average yields on these interest-earning assets increasing slightly from the
1996 periods to the 1997 periods.
INTEREST EXPENSE. Interest expense was $9.8 million and $18.1 million for the
three and six month periods ended June 30, 1997, respectively, as compared to
$8.0 million and $15.9 million for the same periods in the prior year. The $1.7
million or 21.5% and $2.2 million or 14.1% increases for the three and six
month periods ended June 30, 1997 respectively, as compared to the same periods
in the prior year, were due to increases in interest expense on both deposits
and borrowed funds.
Interest expense on deposits increased by $670,000 or 18.5% and $569,000 or
7.8% for the three and six month periods ended June 30, 1997, respectively, as
compared to the same periods in the prior year. These increases were primarily
the result of an increase in the average balance of interest-bearing deposits
and escrow. The average balance of interest-bearing deposits and escrow
accounts increased $54.0 million or
10
<PAGE> 13
16.1% to $389.5 million for the three months ended June 30, 1997 from $335.6
million for the same quarter last year. Average interest-earning deposits and
escrow accounts increased $25.2 million or 7.5% to $360.8 million for the six
months ended June 30, 1997 from $335.6 million for the same period in the prior
year. The weighted average cost of funds on interest-bearing deposits and
escrow accounts increased to 4.41% and 4.40% for the three and six month
periods ended June 30, 1997, respectively, from 4.33% and 4.38%, respectively,
for the same periods in the prior year.
Interest expense on borrowed funds increased by $1.1 million or 23.9% and $1.7
million or 19.4% for the three and six month periods ended June 30, 1997,
respectively, as compared to the same periods in the prior year. The average
balance of borrowed funds increased $60.2 million or 20.7% to $351.1 million
for the three months ended June 30, 1997 from $290.9 million for the same
quarter in the prior year. The average balance of borrowed funds increased
$51.3 million or 18.3% to $331.1 million for the six months ended June 30, 1997
from $279.8 million for the same period in the prior year. The weighted average
cost of borrowed funds increased to 6.29% and 6.18% for the three and six month
periods ended June 30, 1997, respectively, from 6.09% and 6.13%, respectively,
for the same periods in the prior year.
PROVISION FOR LOAN LOSSES. The provision for loan losses was $600,000 and
$801,000 for the three and six month periods ended June 30, 1997, respectively,
as compared to no provision and $285,000, respectively, for the same periods
last fiscal year. The $600,000 and $516,000 increases in the provision for loan
losses for the three and six month periods ended June 30, 1997, respectively,
compared to the same periods in the prior year, reflects the Company's policy
of recording provisions for loan losses in amounts necessary to bring the total
allowance for loan losses to a level deemed adequate to cover potential losses
in the loan portfolio. In determining the appropriate level of allowance for
loan losses, management considers historical loss experience, the present and
prospective financial condition of borrowers, current and prospective economic
conditions (particularly as they relate to markets where the Company originates
loans), the status of nonperforming assets, the estimated underlying value of
the collateral and other factors related to the collectibility of the loan
portfolio.
The Company recorded a $600,000 provision for loan losses during the quarter
ended June 30, 1997 associated with the previously disclosed thirteen
nonperfoming lease agreements between the Company and Bennett Funding Group and
affiliates of Syracuse, NY. The lease agreements were purchased by the Company
and are secured by commercial equipment leases located in various parts of the
country. On March 29, 1996, it was reported that Bennett Funding Group was the
target of a civil complaint filed by the Secruities and Exchange Commission
(SEC) and further reported on April 1, 1996 that Bennett Funding Group filed a
Chapter 11 bankruptcy petition and was halting payments on the lease
agreements.
As a result of the foregoing, during the quarter ended March 31, 1996, the
Company placed all $3.6 million of the lease agreements on nonaccrual status
and, in connection therewith, established a reserve of approximately $900,000
for potential losses related to such lease agreements. Moreover, during the
quarter ended June 30, 1997, as a result of questions concerning the ultimate
collectibility of certain of the lease agreements and concerns with respect to
the Company's security interest in the collateral securing certain of the lease
agreements, the Company determined to provide an additional $600,000 in loan
loss reserves. The Company is insured with a private carrier with respect to
$800,000 of credit losses relating to the Bennett Funding Group lease
agreements. Consequently, as of June 30, 1997, the Company had approximately
$2.8 million of uninsured lease agreements and had total loan loss reserves
relating to such lease agreements of approximately $1.7 million as of such
date.
As a result of the provision during the three month and six month periods ended
June 30, 1997, the Company's total allowance for losses on loans at June 30,
1997 amounted to $4.9 million or 1.45% of the Company's total loan portfolio,
as compared to $3.3 million or 1.46% at December 31, 1996. The Company's
allowance for losses on loans as a percentage of nonperforming loans at June
30, 1997 was 102.3%, as compared to 81.0% at December 31, 1996.
OTHER OPERATING INCOME. Other operating income was $245,000 and $418,000 and
for the three and six month periods ended June 30, 1997, respectively, as
compared to $151,000 and $339,000, respectively, for the same periods in the
prior year. The increases in other operating income between periods were
11
<PAGE> 14
primarily the result of the inclusion of other operating income of $89,000 for
Troy Hill for the three months ended June 30, 1997.
OTHER OPERATING EXPENSES. Other operating expenses were $2.3 million and $4.3
million for the three and six month periods ended June 30, 1997, respectively,
as compared to $2.2 million and $4.1 million, respectively, for the same
periods in the prior year. The net increases in other operating expenses
between periods were primarily the result of the inclusion of other operating
expenses of $431,000 for Troy Hill for the three months ended June 30, 1997,
partially offset by decreases of $139,000 and $323,000 for the three and six
month periods ended June 30, 1997, respectively, as compared to the same
periods last year, in federal deposit insurance premiums, as a result of the
legislation enacted in September of 1996 that recapitalized the Savings
Association Insurance Fund and as a reduced deposit insurance premiums paid by
savings banks.
INCOME TAXES. For the three and six month periods ended June 30, 1997, the
Company recorded provisions for income taxes of $333,000 and $744,000,
respectively, as compared to $529,000 and $967,000, respectively, for the same
periods in the prior year. The decreases in the provision for income taxes
between the respective periods can be attributed to an improvement in the
Company's effective income tax rate to 22.3% from 31.5% between years primarily
as a result of the Company's strategy of improving effective rates of return on
securities by purchasing tax exempt municipal obligations during 1996 and 1997.
ASSET AND LIABILITY MANAGMENT
The Company maintains a program designed to preserve a relatively low exposure
to material and prolonged increases in interest rates. The principal
determinant of the exposure of the Company's earnings to interest rate risk is
the timing difference between the repricing or maturity of interest-earning
assets and the repricing or maturity of its interest-bearing liabilities. The
Company's asset and liability management policies have increased interest rate
sensitivity primarily by shortening the maturities of interest-earning assets
while at the same time extending the maturities of interest-bearing
liabilities. The Board of Directors of the Company continues to believe in
strong asset/liability management in order to insulate the Company from
material and prolonged increases in interest rates. As a result of this policy,
the Company emphasizes a larger, more diversified portfolio of residential
mortgage loans in the form of mortgage-backed securities.
The Company's Board of Directors has established an Asset and Liability
Management Committee consisting of two outside directors, the President and
Chief Executive Officer, Senior Vice President and Chief Financial Officer,
Senior Vice President of Operations and the Senior Vice President of Lending of
the Company. This committee, which meets quarterly, generally monitors various
asset and liability management policies which were implemented by the Company
over the past few years. These strategies have included: (i) an emphasis on the
investment in adjustable-rate and shorter duration mortgage-backed securities
and (ii) an emphasis on the origination of single-family residential
adjustable-rate mortgages (ARMs), residential construction loans and commercial
real estate loans, which generally have adjustable or floating interest rates
and/or shorter maturities than traditional single-family residential loans, and
consumer loans, which generally have shorter terms and higher interest rates
than mortgage loans.
As of June 30, 1997, the implementation of these asset and liability
initiatives resulted in the following: (i) $167.7 million or 49.3% of the
Company's total loan portfolio had adjustable interest rates or maturities of
12 months or less; (ii) $114.1 million or 48.2% of the Company's portfolio of
single-family residential mortgage loans (including residential construction
loans) consisted of ARMs and (iii) $146.3 million or 41.1% of the Company's
portfolio of mortgage-backed securities (including mortgage-backed securities
available for sale) were secured by ARMs.
The implementation of the foregoing asset and liability strategies has resulted
in the Company being able to maintain a one-year interest rate sensitivity GAP
ranging between a positive 5.0% of total assets to a
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<PAGE> 15
negative 15.0% of total assets. The one-year interest rate sensitivity GAP is
defined as the difference between the Company's interest-earning assets which
are scheduled to mature or reprice within one year and its interest-bearing
liabilities which are scheduled to mature or reprice within one year. At June
30, 1997, the Company's interest-earning assets maturing or repricing within
one year totaled $305.9 million while the Company's interest-bearing
liabilities maturing or repricing within one-year totaled $416.3 million,
providing a deficiency of interest-earning assets over interest-bearing
liabilities of $110.4 million or a negative 13.4% of total assets. At June 30,
1997, the percentage of the Company's assets to liabilities maturing or
repricing within one year was 73.5%. The Company does not presently anticipate
that its one-year interest rate sensitivity GAP will fluctuate beyond a range
of a positive 5.0% of total assets to a negative 15.0% of total assets.
The one year interest rate sensitivity GAP has been the most common industry
standard used to measure an institution's interest rate risk position. The
Company also utilizes income simulation modeling in measuring its interest rate
risk and managing its interest rate sensitivity. The Asset and Liability
Management Committee of the Company believes that simulation modeling may more
accurately estimate the possible effects on net interest income due to the
exposure to changing market interest rates, the slope of the yield curve and
different prepayment and decay assumptions to maximize the stability of net
interest income under various interest rate scenarios. At June 30, 1997, the
Company's simulation model indicated that the Company's balance sheet is
liability sensitive, and as such in a 300 basis point rising rate environment,
with minor changes in the balance sheet and limited reinvestment changes, net
interest income would be projected to decrease by approximately 8.0% over a
24-month period.
LIQUIDITY AND CAPITAL RESOURCES
The Banks are required by the Office of Thrift Supervision (OTS) to maintain
minimum levels of liquidity to assure their ability to meet demands for
customers withdrawals and the repayment of short term borrowings. The liquidity
requirement is calculated as a percentage of deposits and short-term
borrowings, as defined by the OTS, and currently must be maintained at amounts
not less than 5.0%. The Banks' liquidity ratios fluctuate depending primarily
upon deposit flows but have been consistently maintained at levels in excess of
the required percentage. At June 30, 1997, the ESB's liquidity ratio was
approximately 11.7%, and Troy Hill's liquidity ratio was approximately 8.8%.
The Company's primary source of funds generally have been deposits obtained
through the Bank's offices, borrowings from the FHLB and, to a lesser extent,
amortization and prepayments of outstanding loans and maturing investment
securities. During the three months ended June 30, 1997, the Company used its
sources of funds primarily to purchase securities, and to a lesser extent, the
funding of loan commitments. As of such date, the Company had outstanding loan
commitments totaling $25.1 million, unused lines of credit totaling $16.0
million and $10.0 million of undisbursed loans in process.
At June 30, 1997, certificates of deposits amounted to $231.2 million or 59.1%
of the Company's total consolidated deposits, including $147.9 million which
were scheduled to mature by June 30, 1998. At the same date, the total amount
of FHLB advances which were scheduled to mature by June 30, 1998 was $141.6
million. Management of the Company believes that it has adequate resources to
fund all of these commitments, that all of these commitments will be funded by
June 30, 1998 and that, based upon past experience and current pricing
policies, it can adjust the rates of savings certificates to retain a
substantial portion of its maturing certificates and also, to the extent deemed
necessary, refinance the maturing FHLB advances.
Current regulatory requirements specify that the Banks' and similar
institutions must maintain tangible capital equal to 1.5% of adjusted totals
assets, core capital equal to 3% of adjusted total assets and risk-based
capital equal to 8% of risk-weighted assets. The Office of the Comptroller of
the Currency and the FDIC have adopted more stringent core capital requirements
which require that the most highly rated banks have a minimum core capital
ratio of 3%, with an additional 100 to 200 basis point cushion required for all
13
<PAGE> 16
other banks as established by the regulator on a case-by-case basis. Both the
FDIC and the OTS reserve the right to apply this higher standard to any insured
financial institution when considering an institution's capital adequacy. At
June 30, 1997, ESB was in compliance with all regulatory capital requirements
with tangible, core and risk-based capital ratios of 6.3%, 6.3 % and 21.3 %,
respectively. At June 30, 1997, Troy Hill was in compliance with all regulatory
capital requirements with tangible, core and risk-based capital ratios of
11.4%, 11.4% and 19.3%, respectively.
RECENT ACCOUNTING AND REGULATORY MATTERS
In June 1996, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 125, "Accounting For Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities", which will
be effective in whole, on a prospective basis, for fiscal years beginning after
December 31, 1996. SFAS No. 125 provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishment of liabilities
based on consistent application of a financial-components approach and focuses
on control. SFAS No. 125 extends the "available for sale" and "trading"
approach of SFAS No. 115, "Accounting for Certain Investments in Debt and
Equity Securities", to non-security financial assets that can be contractually
prepaid or otherwise settled in such a way that the holder of the asset would
not recover substantially all of its recorded investment. In addition, SFAS No.
125 amends SFAS No. 115 to prevent a security from being classified as held to
maturity if the security can be prepaid or settled in such a manner that the
holder of the security would not recover substantially all of its recorded
investment. The extension of the SFAS No. 115 approach to certain non-security
financial assets and the amendment of SFAS No. 115 are effective for financial
assets held on or acquired after January 1, 1997.
In December 1996, the FASB issued SFAS No. 127, "Deferral of the Effective Date
of Certain Provisions of FASB Statement No. 125", which defers the effective
date of SFAS No. 125 until January 1, 1998 for certain transactions including
repurchase agreements, dollar-roll, securities lending and similar
transactions.
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share". SFAS No.
128 establishes standards for computing and presenting earnings per share (EPS)
and applies to entities with publicly held common stock or potential common
stock. SFAS No. 128 simplifies previous standards for computing EPS. SFAS No.
128 is effective for financial statements issued for periods ending after
December 15, 1997, including interim periods; earlier application is not
permitted. SFAS No. 128 requires restatement of all prior period EPS data
presented. Management does not expect SFAS No. 128 to have a significant impact
on the Company's net income per share amounts disclosed.
In February 1997, the FASB issued SFAS No. 129, "Disclosure of Information
about Capital Structure". SFAS No. 129 summarizes previously issued disclosure
guidance contained within APB Opinions No. 10 and 15 as well as SFAS No. 47.
There will be no changes to the Company's disclosures pursuant to the adoption
of SFAS No. 129. This statement is effective for financial statements issued
for periods ending after December 15, 1997.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income",
which establishes standards for reporting and display of comprehensive income
and its components in a full set of general-purpose financial statements.
Comprehensive income is defined as "the change in equity of a business
enterprise during a period from transactions and other events and circumstances
from nonowner sources. It includes all changes in equity during a period except
those resulting from investments by owners and distributions to owners". The
comprehensive income and related cumulative equity impact of comprehensive
income items will be required to be disclosed prominently as part of the notes
to the financial statements. Only the impact of unrealized gains or losses on
securities available for sale is expected to be disclosed as an additional
component of the Company's income under the requirements of SFAS No. 130. This
statement is effective for fiscal years beginning after December 15, 1997.
14
<PAGE> 17
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company and its subsidiaries are involved in various legal proceedings
occurring in the ordinary course of business. It is the opinion of management,
after consultation with legal counsel, that these matters will not materially
effect the Company's consolidated financial position or results of operations.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
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
a. Form 8-K - The Company filed a Form 8-K dated April 4, 1997 to report the
consummation of the acquisition of Troy Hill Bancorp, Inc. and
subsidiaries.
b. Form 8-K - The Company filed a Form 8-K dated June 19, 1997 to report a
$0.09 per share quarterly cash dividend.
15
<PAGE> 18
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.
PENNFIRST BANCORP, INC.
Date: August 11, 1997 By: /s/ Charlotte A. Zuschlag
----------------------------------
Charlotte A. Zuschlag
President and Chief Executive Officer
Date: August 11,1997 By: /s/ Charles P. Evanoski
----------------------------------
Charles P. Evanoski
Senior Vice President and
Chief Financial Officer
16
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE SECOND
QUARTER 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,357
<INT-BEARING-DEPOSITS> 6,440
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<INVESTMENTS-HELD-FOR-SALE> 353,386
<INVESTMENTS-CARRYING> 91,101
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<SHORT-TERM> 141,603
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<COMMON> 53
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