<PAGE> 1
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: December 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Transition period from ________________ to _________________
Commission File Number: 0-23101
LAUREL CAPITAL GROUP, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 25-1717451
- ------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2724 Harts Run Road
Allison Park, Pennsylvania 15101
- --------------------------------------- ----------
(Address of principal executive office) (Zip Code)
Registrant's telephone number including area code: (412) 487-7404
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
--- ---
The number of shares outstanding for each of the issuer's classes of common
stock, as of the latest practicable date is:
Class: Common stock, par value $.01 per share
Outstanding at January 31, 1997: 1,515,385 shares
<PAGE> 2
LAUREL CAPITAL GROUP, INC. AND SUBSIDIARY
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
Part I - Financial Information
- ------------------------------
Item 1. Financial Statements
Consolidated Statements of Financial Condition as of ..... 1
December 31, 1996 (Unaudited) and June 30, 1996
Consolidated Statements of Operations for the Three ..... 2
and Six Months Ended December 31, 1996 and 1995 (Unaudited)
Consolidated Statements of Stockholders' Equity for the ..... 3
Six Months Ended December 31, 1996 (Unaudited)
Consolidated Statements of Cash Flows for the Six ..... 4
Months Ended December 31, 1996 and 1995 (Unaudited)
Notes to (Unaudited) Consolidated Financial Statements ..... 5-9
Item 2. Management's Discussion and Analysis of Financial ..... 10-19
Condition and Results of Operations
Part II - Other Information
- ---------------------------
Item 1. Legal Proceedings ..... 20
Item 2. Changes in Securities ..... 20
Item 3. Defaults upon Senior Securities ..... 20
Item 4. Submission of Matters to a Vote of ..... 20-21
Security Holders
Item 5. Other Information ..... 21
Item 6. Exhibits and Reports on Form 8-K ..... 21
Signatures ..... 22
</TABLE>
<PAGE> 3
LAUREL CAPITAL GROUP, INC. AND SUBSIDIARY
Consolidated Statements of Financial Condition
(In thousands)
<TABLE>
<CAPTION>
December 31, June 30,
1996 1996
- ---------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
ASSETS
Cash $686 $520
Money market investments 3,875 6,291
Interest-earning deposits with other institutions 3,761 2,807
Investment securities available for sale 15,135 11,639
Investment securities (market value of $12,739 and $9,944) 12,698 9,948
Mortgage-backed securities available for sale 13,388 14,021
Mortgage-backed securities (market value of $1,339 and $1,542) 1,336 1,546
Loans receivable, held for sale 1,659 1,627
Loans receivable, net of unearned discounts of $55 and $84 147,073 145,431
Allowance for possible loan losses (1,923) (1,899)
- ---------------------------------------------------------------------------------------------------------------------------------
Loans receivable, net 145,150 143,532
Federal Home Loan Bank Stock 1,275 1,275
Real estate owned 150 219
Accrued interest receivable:
Deposits and investments 409 233
Mortgage-backed securities 86 92
Loans 861 894
Office properties and equipment, net of accumulated depreciation 1,241 1,246
Prepaid expenses and sundry assets 764 1,057
- ---------------------------------------------------------------------------------------------------------------------------------
$202,474 $196,947
=================================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Savings deposits $169,809 $164,683
FHLB Advances 7,046 6,327
Advance deposits by borrowers for taxes and insurance 2,339 3,321
Accrued interest payable on savings deposits 610 574
Accrued income taxes 460 410
Other accrued expenses and sundry liabilities 525 546
- ---------------------------------------------------------------------------------------------------------------------------------
180,789 175,861
- ---------------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity
Common stock, $.01 par value; 5,000,000
shares authorized; 1,515,385 and 1,512,667 shares
issued and outstanding, respectively 15 15
Additional paid-in capital 4,667 4,646
Retained earnings 16,946 16,436
Unrealized gains on securities available for sale, net of tax 124 49
Stock held in deferred compensation trust (67) (60)
- ---------------------------------------------------------------------------------------------------------------------------------
21,685 21,086
- ---------------------------------------------------------------------------------------------------------------------------------
$202,474 $196,947
=================================================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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<PAGE> 4
LAUREL CAPITAL GROUP, INC. AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
For the Three and Six Months Ended December 31, 1996 and 1995
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
December 31, December 31,
--------------------- ---------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest Income:
Loans $2,993 $3,024 $5,973 $6,041
Mortgage-backed securities 260 214 529 449
Investments 533 400 1,024 827
Interest-earning deposits 37 61 69 100
-------- -------- -------- --------
Total interest income 3,823 3,699 7,595 7,417
Interest expense:
Savings deposits 1,791 1,763 3,548 3,558
Borrowings 121 85 232 157
-------- -------- -------- --------
Total interest expense 1,912 1,848 3,780 3,715
-------- -------- -------- --------
Net interest income before provision
for possible loan losses 1,911 1,851 3,815 3,702
Provision for possible loan losses 7 8 15 18
-------- -------- -------- --------
Net interest income after provision
for possible loan losses 1,904 1,843 3,800 3,684
-------- -------- -------- --------
Other income:
Service charges 119 111 243 211
Net gain on sale of investments and
mortgage-backed securities
available for sale 85 22 91 85
Gain on the sale of loans held for sale 3 3 10 5
Other operating income 27 28 58 54
-------- -------- -------- --------
Total other income 234 164 402 355
-------- -------- -------- --------
Operating expenses:
Compensation, payroll taxes and
fringe benefits 442 413 860 827
Premises and occupancy costs 127 107 245 223
Federal insurance premiums - 94 94 187
Special SAIF assessment - - 1,059 -
Net income on real estate owned (4) (1) (12) (4)
Data processing expense 63 63 122 127
Professional fees 57 98 100 181
Other operating expenses 215 201 404 359
-------- -------- -------- --------
Total operating expenses 900 975 2,872 1,900
-------- -------- -------- --------
Income before income taxes 1,238 1,032 1,330 2,139
-------- -------- -------- --------
Provision for income taxes:
Federal 373 320 391 672
State 89 70 96 148
-------- -------- -------- --------
Total income taxes 462 390 487 820
-------- -------- -------- --------
Net income $776 $642 $843 $1,319
======== ======== ======== ========
Net income per share $0.50 $0.41 $0.54 $0.85
======== ======== ======== ========
Dividends per share $0.11 $0.08 $0.22 $0.13
======== ======== ======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
-2-
<PAGE> 5
LAUREL CAPITAL GROUP, INC. AND SUBSIDIARY
Consolidated Statement of Stockholders' Equity
(Unaudited)
For the six Months Ended December 31, 1996
(In thousands)
<TABLE>
<CAPTION>
Unrealized
Gains Stock Held in
Additional on Securities Deferred Total
Common Paid-in Retained Available Compensation Stockholders'
Stock Capital Earnings for sale Trust Equity
------- ---------- -------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1996 $15 $4,646 $16,436 $49 (60) $21,086
Stock options exercised
(2,718 shares) 21 21
Dividends on common stock
at $0.11 per share (333) (333)
Unrealized gains on
securities available
for sale 75 75
Unrealized gains on stock held
in deferred compensation trust (7) (7)
Net income 843 843
----- -------- --------- ------ ------- ---------
Balance, December 31, 1996 $15 $4,667 $16,946 $124 ($67) $21,685
===== ======== ========= ====== ======= =========
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
-3-
<PAGE> 6
LAUREL CAPITAL GROUP, INC. AND SUBSIDIARY
Consolidated Statement of Cash Flows
(Unaudited)
For the Six Months Ended December 31, 1996 and 1995
(In thousands)
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net income: $843 $1,319
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 67 57
Provision for possible loan losses 15 18
Net gain on real estate owned (18) (8)
Net gain on sale of investments and mortgage-backed
securities available for sale (91) (85)
Gain on the sale of loans held for sale (10) (5)
Amortization of deferred loan fees (89) (121)
Origination of loans held for sale (603) (725)
Proceeds from sale of loans held for sale 581 357
Increase in accrued interest receivable (137) (146)
Increase in accrued interest payable 36 156
Other - net 277 61
- --------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 871 878
- --------------------------------------------------------------------------------------------------------------------------------
Investing activities:
Purchase of investment securities (5,000) (6,156)
Purchase of investment securities available for sale (4,159) (4,403)
Purchase of mortgage-backed securities - (900)
Proceeds from investment maturities 2,250 2,500
Proceeds from sale of investment securities available for sale 794 349
Proceeds from sale of mortgage-backed securities available for sale - 703
Principal repayments of investment and
mortgage-backed securities available for sale 706 346
Principal repayments of investment and
mortgage-backed securities 210 1,061
Increase in loans (1,544) (93)
Proceeds from sale of real estate owned 87 77
Net additions to office properties and equipment (62) (61)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash (used) provided by investing activities (6,718) (6,577)
- --------------------------------------------------------------------------------------------------------------------------------
Financing activities:
Net increase (decrease) in demand and club accounts 744 (2,143)
Net increase in time deposit accounts 4,382 1,116
Proceeds from FHLB advances 10,700 4,328
Repayment of FHLB advances (9,981) -
Decrease in advance deposits by borrowers
for taxes and insurance (982) (982)
Stock options exercised 21 82
Dividends paid (333) (204)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash used by financing activities 4,551 2,197
- --------------------------------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents (1,296) (3,502)
Cash and cash equivalents at beginning of period 9,618 15,072
- --------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $8,322 $11,570
================================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
- --------------------------------------------------------------------------------------------------------------------------------
Cash paid during the period for:
Interest on savings deposits $3,523 $3,417
Interest on FHLB advances 192 138
Income taxes 206 842
Transfer of loans to real estate owned - 217
Transfer of investment securities to available for sale - 1,402
Transfer of mortgage-backed securities to available for sale - 6,461
Cash paid during the period for interest includes interest credited on
deposits of $3,059 and $2,960 for the six months ended December 31, 1996
and 1995, respectively.
================================================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
-4-
<PAGE> 7
LAUREL CAPITAL GROUP, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND JUNE 30, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions for Form 10-Q and, therefore, do not
include all the information or footnotes necessary for a complete presentation
of financial condition, results of operation and cash flows in conformity with
generally accepted accounting principles. However, all adjustments, consisting
only of normal recurring adjustments which, in the opinion of management, are
necessary for a fair presentation, have been included. Significant accounting
policies have not changed since June 30, 1996. The results of operations for
the three and six months ended December 31, 1996 are not necessarily indicative
of the results which may be expected for the entire fiscal year. The financial
statements should be read in conjunction with the audited consolidated
financial statements and the notes thereto included in Laurel Capital Group,
Inc.'s ( the "Company") 1996 Annual Report to Stockholders for the year ended
June 30, 1996. All amounts presented in the Notes to Unaudited Consolidated
Financial Statements are presented in thousands except share data.
EARNINGS PER SHARE
The average number of common and common equivalent shares used to calculate
earnings per share for the three months ended December 31, 1996 and 1995 was
1,560,539 and 1,552,839, respectively. The average number of common and common
equivalent shares used to calculate earnings per share for the six months ended
December 31, 1996 and 1995 was 1,559,018 and 1,547,610, respectively.
SECURITIES
The Company accounts for investments and debt and equity securities in
accordance with Financial Accounting Standards Board ("FASB") Statement No. 115
("FAS 115"). FAS 115 requires that investments be classified as either: (1)
Securities Held to Maturity- reported at amortized cost, (2) Trading
Securities- reported at fair value, or (3) Securities Available for Sale-
reported at fair value. Unrealized gains and losses for trading securities are
reported in earnings while unrealized gains and losses for securities available
for sale are reported as a separate component of equity. Unrealized gains of
$124, net of tax, on assets classified as available for sale is recorded as a
separate component of equity at December 31, 1996.
-5-
<PAGE> 8
LOANS RECEIVABLE
Loans receivable are stated at unpaid principal balances net of the allowance
for possible loan losses, net deferred loan fees and discounts. The Company
adopted FAS 114, "Accounting by Creditors for Impairment of a Loan" and FAS
118, "Accounting by Creditors for Impairment of a Loan-Income Recognition and
Disclosures", an amendment of FAS 114, effective July 1, 1995. These statements
address the accounting by creditors for impairment of certain loans. They apply
to all creditors and to all loans, uncollateralized as well as collateralized,
except for large groups of smaller-balance homogeneous loans that are
collectively evaluated for impairment. The Bank considers all one-to-four
family residential mortgage loans and all consumer loans (as presented in Note
4) to be smaller-balance homogeneous loans. Loans within the scope of these
statements are considered impaired when, based on current information and
events, it is probable that all principal and interest will not be collected in
accordance with the contractual terms of the loans. Management determines the
impairment of loans based on knowledge of the borrower's ability to repay the
loan according to the contractual agreement, the borrower's repayment history
and the fair value of collateral for certain collateral dependent loans.
Pursuant to FAS 114 paragraph 8, management does not consider an insignificant
delay or insignificant shortfall to impair a loan. Management has determined
that a delay less than 90 days will be considered an insignificant delay and
that an amount less than $5,000 will be considered an insignificant shortfall.
The Bank does not apply FAS 114 using major risk characteristics for groups of
loans, but on a loan by loan basis. Non-accrual loans are not necessarily
considered to be impaired if management believes that it is probable that all
principal and interest will be collected in accordance with the contractual
terms of the loan. All loans are charged off when management determines that
principal and interest are not collectible.
The accrual of interest on all loans is discontinued when, in management's
opinion, the borrower may be unable to meet payments as they become due or when
the loan becomes 90 days past due, whichever occurs first. When interest
accrual is discontinued, all unpaid accrued interest is reserved. Such interest
ultimately collected is credited to income in the period of recovery or applied
to reduce principal if there is sufficient doubt about the collectability of
principal.
Any excess of the Bank's recorded investment in the loans over the measured
value of the loans in accordance with FAS 114 is provided for in the allowance
for loan losses. The Bank reviews its loans for impairment on a quarterly
basis.
(2) CONTINGENT LIABILITIES
The Company is subject to a number of asserted and unasserted potential claims
encountered in the normal course of business. In the opinion of management and
legal counsel, the resolution of these claims is not expected to have a
material adverse effect on the Company's financial position, liquidity or
results of operations.
-6-
<PAGE> 9
(3) INVESTMENT SECURITIES
Investment securities available for sale are comprised of the following:
<TABLE>
<CAPTION>
Amortized Gross Unrealized Fair
Cost Gains Losses Value
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1996:
Corporate notes and commercial paper $2,000 $1 $3 $1,998
Municipal obligations 4,293 58 27 4,324
FNMA preferred stock 250 9 - 259
Shay Financial Services
ARMs Fund 8,570 - 16 8,554
----------------------------------------------------------------------
15,113 68 46 15,135
Mortgage-backed securities 13,222 216 50 13,388
----------------------------------------------------------------------
Total $28,335 $284 $96 $28,523
======================================================================
</TABLE>
<TABLE>
<CAPTION>
At December 31, 1996, the contractual maturities of the debt securities Amortized Fair
available for sale are: Cost Value
<S> <C> <C>
Due in one year or less $500 $501
Due after one year through five years 1,066 1,067
Due after five years through ten years 1,618 1,620
Due after ten years 16,331 16,522
-----------------------------
$19,515 $19,710
=============================
</TABLE>
Mortgage-backed securities are shown at their contractual maturity dates.
Actual repayments may be different due to prepayments on the loans
underlying the securities. The FNMA stock and Shay Financial Services ARMs
Fund have no stated maturity.
Note: There were gross realized gains of $91 and $85 recorded during the
six months ended December 31, 1996 and 1995, respectively, on the
sale of investment securities available for sale. Proceeds from the
sale of investment securities available for sale during the six
months ended December 31, 1996 and 1995 were $794 and $1,052,
respectively.
Investment securities are comprised of the following:
<TABLE>
<CAPTION>
Amortized Gross Unrealized Fair
Cost Gains Losses Value
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1996:
Corporate notes and commercial paper $12,698 $53 $12 $12,739
Mortgage-backed securities 1,336 6 3 1,339
----------------------------------------------------------------------
Total $14,034 $59 $15 $14,078
======================================================================
</TABLE>
<TABLE>
<CAPTION>
At December 31, 1996, the contractual maturities of the debt securities are: Amortized Fair
Cost Value
<S> <C> <C>
Due in one year or less $81 $78
Due after one year through five years 6,198 6,211
Due after five years through ten years 2,500 2,521
Due after five years through ten years 5,255 5,268
-----------------------------
$14,034 $14,078
=============================
</TABLE>
Mortgage-backed securities are shown at their contractual maturity dates.
Actual repayments may be different due to prepayments on the loans
underlying the securities.
-7-
<PAGE> 10
(4) Loans Receivable
Loans receivable are comprised of the following:
<TABLE>
<CAPTION>
December 31, June 30,
1996 1996
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
First mortgage loans:
Conventional:
1 to 4 family dwellings $114,103 $113,050
Multi-family dwellings 2,628 2,811
Commercial 5,665 5,788
- --------------------------------------------------------------------------------------------------------------
122,396 121,649
Guaranteed or insured 80 110
- --------------------------------------------------------------------------------------------------------------
Total long term with monthly amortization 122,476 121,759
Construction and development loans 3,872 4,281
- --------------------------------------------------------------------------------------------------------------
126,348 126,040
Less: Allowance for possible losses (1,368) (1,363)
Loans in process (1,906) (2,148)
Deferred loan fees (930) (1,007)
- --------------------------------------------------------------------------------------------------------------
122,144 121,522
- --------------------------------------------------------------------------------------------------------------
Consumer loans:
Home improvement loans (net of unearned
discounts of $55 and $84) 438 604
Mobile home loans 961 1,157
Loans secured by savings accounts 291 316
Installment loans 21,871 20,469
- --------------------------------------------------------------------------------------------------------------
23,561 22,546
Less: Allowance for possible losses (555) (536)
- --------------------------------------------------------------------------------------------------------------
23,006 22,010
- --------------------------------------------------------------------------------------------------------------
$145,150 $143,532
==============================================================================================================
</TABLE>
Note Continued
-8-
<PAGE> 11
Changes in the allowance for possible loan losses for the six months ended
December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance at beginning of the fiscal year $1,899 $1,893
Provision for losses 15 18
Charge-offs (25) (40)
Recoveries 34 23
- ------------------------------------------------------------------------------------------------
Balance at December 31, $1,923 $1,894
================================================================================================
</TABLE>
At December 31, 1996, the recorded investment in loans that are considered to
be impaired under Statement 114 was $425. Included in this amount is $33 of
impaired loans for which the related allowance for credit losses is $2, and
$392 of impaired loans that as a result of write-downs do not have an allowance
for credit losses. The average recorded investment in impaired loans during the
six months ended December 31, 1996 was approximately $430. For the six months
ended December 31, 1996, the Company recognized interest income on those
impaired loans of $2 which was recognized using the cash basis method of income
recognition.
<TABLE>
<CAPTION>
December 31,
1996 1995
-------------------------------
<S> <C> <C>
Non-accrual loans $668 $798
Non-accrual loans as a percent of total loans 0.46% 0.56%
- -------------------------------------------------------------
</TABLE>
All loans 90 days or more past due are reported as non-accrual
-9-
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
BALANCE SHEET DATA At December 31,
1996 1995
-------- --------
(In thousands except per share data)
(Unaudited)
<S> <C> <C>
Total assets $202,474 $192,654
Money market investments 3,875 -
Interest-earning deposits with other institutions 3,761 5,400
Over-night repurchase agreement - 5,591
Investment securities available for sale 15,135 7,566
Investment securities 12,698 11,947
Mortgage-backed securities available for sale 13,388 10,321
Mortgage-backed securities 1,336 1,746
Loans receivable held for sale 1,659 1,578
Loans receivable, net 145,150 143,095
Savings deposits 169,809 162,281
FHLB advances 7,046 6,328
Retained earnings 16,946 15,332
Stockholders' equity 21,685 20,173
Stockholders' equity per share $14.31 $13.38
</TABLE>
<TABLE>
<CAPTION>
STATISTICAL PROFILE Three months ended Six months ended
December 31, December 31,
-------------------- --------------------
1996 1995 1996 1995
-------------------- --------------------
<S> <C> <C> <C> <C>
Avergae yield eanred on all interest-earning assets 7.76% 7.95% 7.74% 7.97%
Average rate paid on all interest-bearing liabilities 4.45 4.52 4.42 4.53
Average interest rate speed 3.31 3.43 3.32 3.44
Net yield average interest-earning assets 3.88 3.98 3.89 3.98
Average interest-earning assets as a percentage of
average interest-bearing liabilities 115.65 114.77 115.74 114.45
Return on average assets (1)(2) 1.54 1.35 0.84 1.44
Return on average assets (1)(3) 1.54 1.35 1.49 1.44
Return on average equity (1)(2) 14.51 12.97 7.90 13.53
Return on average equity (1)(3) 14.51 12.97 14.00 13.53
Average equity to average assets 10.59 10.38 10.34 10.22
</TABLE>
- ------------------------
(1) Amounts are annualized.
(2) Percentages for the six months ended December 31, 1996, after effect of the
one-time special SAIF assessment.
(3) Percentages for the six months ended December 31, 1996, before effect of the
one-time special SAIF assessment.
-10-
<PAGE> 13
COMPARISON OF THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
GENERAL. Laurel Capital Group, Inc.'s (the "Company") only significant asset is
the stock it owns of its wholly-owned subsidiary, Laurel Savings Bank (the
"Bank"). The Company's net income for the three months ended December 31, 1996
was $776,000 compared to $642,000 for the same period in the prior year. The
increase of $134,000 or 20.9% was primarily the result of a reduction of
$75,000 or 7.7% in operating expenses, an increase of $70,000 or 42.7% in other
income and an increase of $60,000 or 3.2% in net interest income. Such benefits
were partially offset by a $72,000 or 18.5% increase in income tax expense.
These and other significant fluctuations are discussed below.
NET INTEREST INCOME. The Company's operating results depend substantially on
the Bank's net interest income, which is determined by the average interest
rate spread between the Bank's interest-earning assets and interest-bearing
liabilities and the relative amounts of such assets and liabilities. Net
interest income increased by $60,000 or 3.2% during the three months ended
December 31, 1996 as compared to the same period of the prior year. The
increase was primarily due to a $2.7 million or 11.4% increase in average net
earning assets for the quarter ended December 31, 1996 as compared to the
quarter ended December 31, 1995. This increase was partially offset by a
decrease in the average interest rate spread from 3.43% for the quarter ended
December 31, 1995 to 3.31% for the quarter ended December 31, 1996. The
decrease in the average interest rate spread was primarily due to a decrease in
the average interest rate earned on the Bank's interest-earning assets from
7.95% for the quarter ended December 31, 1995 to 7.76% for the quarter ended
December 31, 1996. This decrease was partially offset by a decrease in the rate
paid on interest-bearing liabilities from 4.52% for the quarter ended December
31, 1995 to 4.45% for the quarter ended December 31, 1996.
Interest income on loans receivable and loans held for sale decreased by
$31,000 or 1.0% during the three months ended December 31, 1996 as compared to
the same period in the prior year. This was primarily due to a decrease in the
average yield on loans receivable from 8.31% for the quarter ended December 31,
1995 to 8.13% for the quarter ended December 31, 1996. This decrease was
partially offset by a $2.8 million or 13.0% increase in the average outstanding
balance of consumer loans receivable for the quarter ended December 31, 1996 as
compared to the same period in the prior year primarily as a result of the
continued emphasis on the origination of consumer loan products. The decrease
in the average yield on loans receivable was primarily due to increased loan
repayment activity on higher yielding loans and an increase in the origination
of adjustable rate mortgages which generally have lower starting rates of
interest compared to fixed rate loans. The Bank continues to emphasize the
origination of consumer loan products as part of its Asset/Liability management
due to their generally shorter terms.
Interest on mortgage-backed securities and mortgage-backed securities available
for sale increased by $46,000 or 21.5% during the quarter ended December 31,
1996 as compared to the December 31, 1995 quarter. This increase was primarily
due to a $3.2 million or 28.0% increase in the
-11-
<PAGE> 14
average outstanding balance of mortgage-backed securities during the quarter
ended December 31, 1996 as compared to the December 31, 1995 quarter. Such
increase was primarily due the investment of excess funds into mortgage-backed
securities. This increase was partially offset by a decrease in the average
yield on mortgage-backed securities from 7.41% for the quarter ended December
31, 1995 to 7.03% for the quarter ended December 31, 1996. At December 31,
1996, the Bank's portfolio of mortgage-backed securities available for sale had
net unrealized gains of $166,000. The available for sale portfolio consists of
fixed and adjustable rate securities with an average yield of 7.27% at December
31, 1996. Rising interest rates would reduce the unrealized gains in this
portfolio if the fixed rate securities were not sold. The held to maturity
portfolio consists of three adjustable and one fixed rate collateralized
mortgage obligations (CMO's) with an average yield of 6.95% at December 31,
1996. At December 31, 1996, the Bank's portfolio of mortgage-backed securities
had net unrealized gains of $2,900. In periods of rising interest rates,
unrealized losses could occur due to the timing difference of when the
securities reprice. The Bank uses these securities as part of its
Asset/Liability strategy. See Note 3 of "Notes to Unaudited Consolidated
Financial Statements."
Interest income on investments and investments available for sale increased
during the three months ended December 31, 1996 by $133,000 or 33.3% from the
comparable period in 1995, due primarily to a $7.7 million or 31.2% increase in
the average outstanding balance of such securities for the quarter ended
December 31, 1996 as compared to the quarter ended December 31, 1995. In
addition, the average yield on investment securities increased from 6.45% for
the quarter ended December 31, 1995 to 6.55% for the quarter ended December 31,
1996. The increase in the average outstanding balance was primarily due to the
investment of increased savings deposits and funds borrowed from the Federal
Home Loan Bank ("FHLB"). At December 31, 1996, the Bank's portfolio of
investment securities available for sale and investment securities held to
maturity had net unrealized gains of $22,000 and $41,000, respectively. See
Note 3 of "Notes to Unaudited Consolidated Financial Statements."
At December 31, 1996, the Bank's investment securities included $1,000,000 of
step-up notes which meet some of the definitions of structured notes. The notes
are issued by the Federal Home Loan Bank and mature in less than ten years. The
interest rate on step-up notes is scheduled to increase by pre-determined
amounts on pre-determined dates, and the notes are callable at par on each date
the interest rate is scheduled to increase. If the step-up interest rate
exceeds the then current market rate for notes with similar terms to the next
adjustment date or maturity date, then the note would generally be called and
the Bank would have to re-invest the proceeds in the lower interest rate
environment. If the step-up interest rate is less than the then current market
rate, the note would generally not be called and the Bank would continue to
hold the note with a below market interest rate. During the past twelve months,
the Company had approximately $1.5 million of step-up notes that were called.
Interest income on interest-earning deposits decreased during the three months
ended December 31, 1996 by $24,000 or 39.3% from the comparable period in 1995.
This decrease was primarily due to a decrease of $1.5
-12-
<PAGE> 15
million or 34.4% in the average outstanding balance of interest-earning
deposits for the quarter ended December 31, 1996 as compared to the December
31, 1995 quarter. Also contributing to the decrease in interest income on
interest-earning deposits was a decrease in the average yield on
interest-earning deposits from 5.59% for the quarter ended December 31, 1995 to
5.17% for the quarter ended December 31, 1996 as a result of the recent
decreases in short-term interest rates.
Interest expense on deposits increased by $28,000 or 1.6% for the quarter ended
December 31, 1996, compared to the same period in 1995 primarily due to a $5.5
million or 3.5% increase in the average outstanding balance of deposits during
the quarter ended December 31, 1996 as compared to the same period of the prior
year. This increase was partially offset by a decrease in the average interest
rate paid on deposits from 4.47% for the quarter ended December 31, 1995 to
4.39% for the quarter ended December 31, 1996. The decrease in the average rate
paid was primarily due to lower interest rates paid on the Bank's certificate
of deposit accounts.
Interest expense on borrowings increased $36,000 or 42.4% for the quarter ended
December 31, 1996 compared to the quarter ended December 31, 1995 primarily due
to a $2.8 million or 50.9% increase in the average outstanding balance of FHLB
advances. This increase was partially offset by a decrease in the average rate
paid on borrowings from 6.05% for the quarter ended December 31, 1995 to 5.70%
for the quarter ended December 31, 1996. The increased advances were used to
purchase investment securities with similar maturities.
PROVISION FOR POSSIBLE LOAN LOSSES. The Bank provided $7,000 and $8,000 to its
allowance for possible loan losses for the quarters ended December 31, 1996 and
1995, respectively. Such provisions were the result of an analysis of the
adequacy of the allowance for possible loan losses in connection with a review
of the Bank's loan portfolio.
At each of December 31, 1996 and 1995, the Bank's allowance for possible loan
losses amounted to $1.9 million, or 1.3% of the total loan portfolio. As a
percentage of non-performing loans (loans delinquent 90 days and over), the
allowance for possible loan losses was 287.9% and 237.3% at December 31, 1996
and 1995, respectively.
A review of the loan portfolio is conducted at least quarterly by management to
determine that the allowance for possible loan losses is adequate to absorb
estimated future loan losses. In determining the appropriate level of the
allowance for possible loan losses required, consideration is given to general
economic conditions, diversification of loan portfolios, historic loss
experience, identified credit problems, delinquency levels and adequacy of
collateral. Although management believes that the current allowance for
possible loan losses is adequate, future additions to the reserve may be
necessary due to changes in economic conditions and other factors. In addition,
as an integral part of their periodic examination, certain regulatory agencies
review the adequacy of the Bank's allowance for possible loan losses and may
direct the Bank to make additions to the allowance based on their judgement. No
such additions were required to be made during the Company's most recent
examination.
-13-
<PAGE> 16
OTHER INCOME. Total other income increased by $70,000 or 42.7% to $234,000 for
the quarter ended December 31, 1996 as compared to the same period in 1995.
This was primarily due to a $63,000 increase in net gains on the sale of loans,
investments and mortgage-backed securities available for sale. Gains of $88,000
were recorded during the quarter ended December 31, 1996 compared to gains of
$25,000 during the quarter ended December 31, 1995. Also contributing to the
increase in total other income was an increase of $8,000 in fees and service
charges during the three months ended December 31, 1996 as compared to the same
period in the prior year.
OPERATING EXPENSES. Total operating expenses decreased by $75,000 or 7.7%
during the quarter ended December 31, 1996 as compared to the comparable 1995
quarter. This decrease was primarily due to a $94,000 decrease in federal
insurance premiums, and a $41,000 decrease in professional fees partially
offset by a $29,000 increase in compensation and benefits, a $20,000 increase
in premises and occupancy expenses and a $14,000 increase in other operating
expenses. The decrease in federal insurance premiums was due to the premiums
being eliminated for certain SAIF insured institutions for the quarterly
insurance period ended December 31, 1996. Going forward, the Bank will pay 6.48
basis points for each $100.00 of insured deposits. The decrease in professional
fees was primarily due to a decrease in legal fees associated with litigation
in the normal course of business.
INCOME TAX EXPENSE. Income tax expense increased by $72,000 or 18.5% for the
quarter ended December 31, 1996 as compared to the quarter ended December 31,
1995 primarily as a result of higher pre-tax income.
-14-
<PAGE> 17
COMPARISON OF THE SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995
GENERAL. The Company's net income for the six months ended December 31, 1996
was $843,000 compared to $1.3 million for the same period in the prior year.
The $843,000 of net income during the six months ended December 31, 1996
reflects the effect of the imposition of a $1.1 million pre-tax charge for the
Federal Deposit Insurance Corporation's ("FDIC") one-time special assessment to
recapitalize the Savings Association Insurance Fund. See "SAIF Special
Assessment". For the six months ended December 31, 1996, net interest income
increased by $113,000 or 3.1%, income tax expense decreased $333,000 or 40.6%
and other income increased by $47,000 or 13.2% compared to the same period in
the prior year. Such benefits were offset by a $972,000 or 51.2% increase in
operating expenses. The increase in operating expenses and decrease in income
tax expense were due to the special SAIF assessment. These and other
significant fluctuations are discussed below.
NET INTEREST INCOME. Net interest income increased by $113,000 or 3.1% during
the six months ended December 31, 1996 as compared to the same period of the
prior year. The increase was primarily due to a $3.2 million or 13.6% increase
in average net earning assets for the six months ended December 31, 1996 as
compared to the six months ended December 31, 1995. This increase was partially
offset by a decrease in the average interest rate spread from 3.44% for the six
months ended December 31, 1995 to 3.32% for the six months ended December 31,
1996. The decrease in the average interest rate spread was primarily due to a
decrease in the average interest rate earned on the Bank's interest-earning
assets from 7.97% for the six months ended December 31, 1995 to 7.74% for the
six months ended December 31, 1996. This decrease was partially offset by a
decrease in the rate paid on interest-bearing liabilities from 4.53% for the
six months ended December 31, 1995 to 4.42% for the six months ended December
31, 1996.
Interest income on loans receivable and loans held for sale decreased by
$68,000 or 1.1% during the six months ended December 31, 1996 as compared to
the same period in the prior year. This was primarily due to a decrease in the
average yield on loans receivable from 8.33% for the six months ended December
31, 1995 to 8.10% for the six months ended December 31, 1996. This decrease was
partially offset by a $2.9 million or 13.7% increase in the average outstanding
balance of consumer loans receivable for the six months ended December 31, 1996
as compared to the same period in the prior year primarily as a result of the
continued emphasis on the origination of consumer loan products. The decrease
in the average yield on loans receivable was primarily due to increased loan
repayment activity on higher yielding loans and an increase in the origination
of adjustable rate mortgages which generally have lower starting rates of
interest compared to fixed rate loans. The Bank continues to emphasize the
origination of consumer loan products as part of its Asset/Liability management
due to their generally shorter terms.
Interest on mortgage-backed securities and mortgage-backed securities available
for sale increased by $80,000 or 17.8% during the six months ended December 31,
1996 as compared to the six months ended December 31,
-15-
<PAGE> 18
1995. This increase was primarily due to a $3.0 million or 24.8% increase in
the average outstanding balance of mortgage-backed securities during the six
months ended December 31, 1996 as compared to the six months ended December 31,
1995. Such increase was primarily due the investment of excess funds into
mortgage-backed securities. This increase was partially offset by a decrease in
the average yield on mortgage-backed securities from 7.46% for the six months
ended December 31, 1995 to 7.04% for the six months ended December 31, 1996.
See "Comparison of the Three Months Ended December 31, 1996 and 1995 - Net
Interest Income."
Interest income on investments and investments available for sale increased
during the six months ended December 31, 1996 by $197,000 or 23.8% from the
comparable prior period in 1995, due to a $5.6 million or 22.0% increase in the
average outstanding balance of such securities for the six months ended
December 31, 1996 as compared to the six months ended December 31, 1995. In
addition, the average yield on investment securities increased from 6.42% for
the six months ended December 31, 1995 to 6.54% for the six months ended
December 31, 1996. The increase in the average outstanding balance was
primarily due to the investment of increased savings deposits and funds
borrowed from the FHLB. See "Comparison of the Three Months Ended December 31,
1996 and 1995 - Net Interest Income."
Interest income on interest-earning deposits decreased during the six months
ended December 31, 1996 by $31,000 or 31.0% from the comparable period in 1995.
This decrease was primarily due to a decrease of $856,000 or 24.5% in the
average outstanding balance of interest-earning deposits for the six months
ended December 31, 1996 as compared to the six months ended December 31, 1995.
Also contributing to the decrease in interest income on interest-earning
deposits was a decrease in the average yield on interest-earning deposits from
5.67% for the six months ended December 31, 1995 to 5.20% for the six months
ended December 31, 1996 as a result of the recent decreases in short-term
interest rates.
Interest expense on deposits decreased by $10,000 or .3% for the six months
ended December 31, 1996 compared to the same period in 1995 primarily due to a
decrease in the average interest rate paid on deposits from 4.48% for the six
months ended December 31, 1995 to 4.37% for the six months ended December 31,
1996. This decrease was partially offset by a $3.9 million or 2.5% increase in
the average outstanding balance of deposits during the six months ended
December 31, 1996 as compared to the same period of the prior year. The
decrease in the average rate paid was primarily due to lower interest rates
paid on the Bank's certificate of deposit accounts.
Interest expense on borrowings increased $75,000 or 47.8% for the six months
ended December 31, 1996 compared to the six months ended December 31, 1995
primarily due to a $3.0 million or 58.7% increase in the average outstanding
balance of FHLB advances. This increase was partially offset by a decrease in
the average rate paid on borrowings from 6.06% for the six months ended
December 31, 1995 to 5.65% for the six months ended December 31, 1996. The
increased advances were used to purchase investment securities with similar
maturities.
-16-
<PAGE> 19
PROVISION FOR POSSIBLE LOAN LOSSES. The Bank provided $15,000 and $18,000 to
its allowance for possible loan losses for the six months ended December 31,
1996 and 1995, respectively. Such provisions were the result of an analysis of
the adequacy of the allowance for possible loan losses in connection with a
review of the Bank's loan portfolio. See "Comparison of the Three Months Ended
December 1996 and 1995 - Provision For Possible Loan Losses."
OTHER INCOME. Total other income increased by $47,000 or 13.2% to $402,000 for
the six months ended December 31, 1996 as compared to the same period in 1995.
This was due to increases of $32,000 in fees and service charges, $11,000 in
gains on sale of loans, investments and mortgage-backed securities available
for sale and $4,000 in other income during the six months ended December 31,
1996 as compared to the same period in the prior year. The increase in fees and
service charges was primarily due to increases in the fees the Bank earns on
NOW accounts.
OTHER EXPENSES. Total operating expenses increased by $972,000 or 51.2% during
the six months ended December 31, 1996 as compared to the comparable 1995
period. This increase was due to the $1.1 million pre-tax charge for the FDIC's
one-time special assessment to recapitalize the SAIF. Excluding this one-time
charge, total operating expenses decreased by $87,000 for the six months ended
December 31, 1996 as compared to the six months ended December 31, 1995. This
decrease was primarily due to decreases of $93,000 in federal insurance
premiums, $81,000 in professional fees, $5,000 in data processing expenses, and
$8,000 in net real estate owned expenses, partially offset by increases of
$45,000 in other operating expenses, $33,000 in compensation and benefit
expenses and $22,000 in premises and occupancy expenses. The decrease in
federal insurance premiums was due to the premiums being eliminated for certain
SAIF insured institutions for the quarterly insurance period ended December 31,
1996. The decrease in professional fees was primarily due to a decrease in
legal fees associated with litigation in the normal course of business.
INCOME TAX EXPENSE. Income tax expense decreased by $333,000 or 40.6% for the
six months ended December 31, 1996 as compared to the six months ended December
31, 1995 primarily as a result of lower pre-tax income due to the $1.1 million
one-time FDIC assessment.
FINANCIAL CONDITION AND CAPITAL RESOURCES
Total assets increased by $5.5 million or 2.8% from June 30, 1996 to December
31, 1996. The largest increases were a $3.5 million increase in investment
securities available for sale, a $2.8 million increase in investment securities
and a $1.6 million increase in net loans receivable. These increases were
partially offset by a $2.4 million decrease in money market investments. The
largest components of change in liabilities were a $5.1 million increase in
savings deposits and a $719,000 increase in FHLB advances partially offset by a
$982,000 decrease in advance deposits by borrowers for taxes and insurance. The
decrease in money market investments was primarily due to the reinvestment of
those funds into investment securities and other short term investments.
-17-
<PAGE> 20
Under regulations adopted by the FDIC, the Bank is required to maintain Tier I
(Core) capital equal to at least 4% of the Bank's adjusted total assets, and
Tier II (Supplementary) risk-based capital equal to at least 8% of the
risk-weighted assets. At December 31, 1996, the Bank exceeded all of these
requirements, with Tier I and Tier II ratios of 10.67% and 21.59%,
respectively.
The following table sets forth certain information concerning the Bank's
regulatory capital at December 31, 1996.
<TABLE>
<CAPTION>
Tier I Tier I Tier II
Core Risk-Based Risk-Based
Capital Capital Capital
------- ------- -------
(Dollar amounts in thousands)
<S> <C> <C> <C>
Equity Capital (1) $21,685 $21,685 $21,685
Less unrealized securities gains (124) (124) (124)
Plus general valuation allowances (2) - - 1,333
------- ------- ------
Total regulatory capital 21,561 21,561 22,894
Minimum required capital 8,084 4,264 8,529
------- ------- ------
Excess regulatory capital $13,477 $17,297 $14,365
======= ======= =======
Minimum required capital to be well
capitalized under Prompt Corrective
Action Provisions $10,105 $ 6,361 $10,602
======= ======= =======
Regulatory capital as a percentage (3) 10.67% 20.34% 21.59%
Minimum required capital percentage 4.00 4.00 8.00
---- ----- ----
Excess regulatory capital percentage 6.67% 16.34% 13.59%
==== ===== =====
Minimum required capital percentage
to be well capitalized under Prompt
Corrective Action Provisions 5.00% 6.00% 10.00%
==== ===== =====
</TABLE>
- ---------------------
(1) Represents equity capital of the Bank as reported to the FDIC and the
Pennsylvania Department of Banking on Form 033 for the six months ended
December 31, 1996.
(2) Limited to 1.25% of risk adjusted assets.
(3) Tier I capital is calculated as a percentage of adjusted total assets of
$202,092. Tier I and Tier II risk-based capital are calculated as a
percentage of adjusted risk-weighted assets of $106,016.
-18-
<PAGE> 21
IMPACT OF INFLATION AND CHANGING PRICES
The financial statements and related data presented herein have been prepared
in accordance with generally accepted accounting principles, which require the
measurement of financial position and operating results in terms of historical
dollars without considering changes in the relative purchasing power of money
over time due to inflation. Unlike most industrial companies, substantially all
of the assets and liabilities of a financial institution are monetary in
nature. As a result, interest rates have a more significant impact on a
financial institution's performance than the effects of general levels of
inflation. Interest rates do not necessarily move in the same direction or in
the same magnitude as the prices of goods and services as measured by the
consumer price index.
SAIF SPECIAL ASSESSMENT
The deposits of the Bank are insured by the SAIF of the FDIC. Both the SAIF and
the Bank Insurance Fund ("BIF"), the federal deposit insurance fund that covers
commercial bank deposits, are required by law to attain and thereafter maintain
a reserve ratio of 1.25% of insured deposits. The BIF had achieved a fully
funded status in contrast to the SAIF and the FDIC had recently reduced the
average deposit insurance premium paid by BIF-insured commercial banks to a
level substantially below the average premium paid by SAIF-insured
institutions.
In late 1995, the FDIC approved a final rule regarding deposit insurance
premiums which, effective with the semiannual premium assessment on January 1,
1996, reduced deposit insurance premiums for BIF member institutions to zero
(subject to an annual minimum of $2,000) for institutions in the lowest risk
category. Deposit insurance premiums for SAIF members were maintained at their
then existing levels (23 basis points for institutions in the lowest risk
category). Accordingly, until the SAIF had attained a reserve ratio of 1.25% of
insured deposits, SAIF members such as the Bank would have been competitively
disadvantaged as compared to commercial banks due to this premium differential.
Legislation, passed by the U.S. House of Representatives and the Senate, was
signed into law by the President on September 30, 1996 to recapitalize the
SAIF. The special assessment was fully anticipated by the Bank because
legislation has been close to enactment on several occasions over the past
year. As a result of such legislation, the Bank was required to pay a one-time
assessment of 65.7 cents for every $100 of deposits as of March 31, 1995 which
amounted to $1.1 million pre-tax with a $635,000 after tax effect.
The legislation also mandated that SAIF-insured institutions' (such as the
Bank) deposit insurance premiums decline from 23 basis points to approximately
6.48 basis points, effective January 1, 1997. The mandated decline in the
premium rate is expected to reduce the Bank's pre-tax annual SAIF premiums by
approximately $280,000 (based on current deposit levels). The reduced future
annual premiums will more than offset the negative impact on the Bank's
earnings for the six months ended December 31, 1996.
-19-
<PAGE> 22
LAUREL CAPITAL GROUP, INC. AND SUBSIDIARY
PART II
Item 1. Legal Proceedings
The Company is not engaged in any legal proceedings at the present
time other than those generally associated with the normal course of
business. In the opinion of management and legal counsel, the
resolution of these claims are not expected to have a material adverse
effect on the Company's financial position, liquidity 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
A. The Annual Meeting of Stockholders was held on November 14, 1996.
B. The following items were submitted to the stockholders of the
Company for approval:
1. To elect three directors for a term of three years or until
their successors have been elected and qualified
Nominees for a three-year term:
Richard S. Hamilton
For: 1,014,819
Withheld: 74,930
J. Harold Norris
For: 1,013,942
Withheld: 75,807
Edwin R. Maus
For: 1,014,374
Withheld: 75,375
2. To adopt the 1996 Stock Compensation Plan
For: 971,490
Against: 107,422
Withheld: 6,888
-20-
<PAGE> 23
3. To ratify the appointment of KPMG Peat Marwick LLP, as the
Company's independent auditors for the fiscal year ending June
30, 1997.
For: 1,063,567
Against: 26,182
Abstain: -0-
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
-21-
<PAGE> 24
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
LAUREL CAPITAL GROUP, INC.
/s/ EDWIN R. MAUS
- ---------------------------------------
Edwin R. Maus
President and Chief Executive Officer
/s/ JOHN A. HOWARD, JR.
- ---------------------------------------
John A. Howard, Jr.
Senior Vice President and
Chief Financial Officer
Date: February 13, 1997
-22-
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000892158
<NAME> LAUREL CAPITAL GROUP
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 686
<INT-BEARING-DEPOSITS> 3,761
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 28,523
<INVESTMENTS-CARRYING> 14,034
<INVESTMENTS-MARKET> 14,078
<LOANS> 147,073
<ALLOWANCE> 1,923
<TOTAL-ASSETS> 202,474
<DEPOSITS> 169,809
<SHORT-TERM> 4,900
<LIABILITIES-OTHER> 3,934
<LONG-TERM> 2,146
0
0
<COMMON> 15
<OTHER-SE> 21,670
<TOTAL-LIABILITIES-AND-EQUITY> 202,474
<INTEREST-LOAN> 5,973
<INTEREST-INVEST> 1,024
<INTEREST-OTHER> 598
<INTEREST-TOTAL> 7,595
<INTEREST-DEPOSIT> 3,548
<INTEREST-EXPENSE> 3,780
<INTEREST-INCOME-NET> 3,815
<LOAN-LOSSES> 15
<SECURITIES-GAINS> 101
<EXPENSE-OTHER> 2,872
<INCOME-PRETAX> 1,330
<INCOME-PRE-EXTRAORDINARY> 843
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 843
<EPS-PRIMARY> .56
<EPS-DILUTED> .54
<YIELD-ACTUAL> 3.32
<LOANS-NON> 668
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,899
<CHARGE-OFFS> 25
<RECOVERIES> 34
<ALLOWANCE-CLOSE> 1,923
<ALLOWANCE-DOMESTIC> 1,923
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
