<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: March 31, 1998
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 April 30, 1998: 2,188,096 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
March 31, 1998 (Unaudited) and June 30, 1997
Consolidated Statements of Operations for the Three and ..... 2
Nine Months Ended March 31, 1998 and 1997 (Unaudited)
Consolidated Statements of Stockholders' Equity for the ..... 3
Nine Months Ended March 31, 1998 (Unaudited)
Consolidated Statements of Cash Flows for the Nine ..... 4
Months Ended March 31, 1998 and 1997 (Unaudited)
Notes to (Unaudited) Consolidated Financial Statements ..... 5-9
Item 2. Management's Discussion and Analysis of Financial ..... 10-17
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk ..... 18
Part II - Other Information
Item 1. Legal Proceedings ..... 18
Item 2. Changes in Securities and Use of Proceeds ..... 18
Item 3. Defaults upon Senior Securities ..... 18
Item 4. Submission of Matters to a Vote of ..... 18
Security Holders
Item 5. Other Information ..... 18
Item 6. Exhibits and Reports on Form 8-K ..... 18
Signatures ..... 19
</TABLE>
<PAGE> 3
LAUREL CAPITAL GROUP, INC. AND SUBSIDIARY
Consolidated Statements of Financial Condition
(In thousands)
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997
- ---------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
ASSETS
Cash $ 769 $ 406
Money market investments 10,444 9,086
Interestearning deposits with other institutions 8,380 5,843
Investment securities available for sale 20,409 15,494
Investment securities (market value of $12,805 and $15,504) 12,707 15,494
Mortgagebacked securities available for sale 12,152 13,259
Mortgagebacked securities (market value of $1,165 and $1,230) 1,153 1,220
Loans receivable, held for sale 1,686 1,827
Loans receivable, net of unearned discounts of $11 and $34 146,135 146,613
Allowance for possible loan losses (1,838) (1,943)
- ---------------------------------------------------------------------------------------------------------------
Loans receivable, net 144,297 144,670
Federal Home Loan Bank Stock 1,277 1,277
Real estate owned 259
Accrued interest receivable:
Loans 835 894
Interestearning deposits and investments 269 505
Mortgagebacked securities 78 86
Office properties and equipment, net of accumulated depreciation 1,299 1,267
Prepaid expenses and sundry assets 767 659
- ---------------------------------------------------------------------------------------------------------------
Total Assets $ 216,781 $ 211,987
===============================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Savings deposits $ 171,488 $ 175,019
FHLB Advances 17,034 11,044
Advance deposits by borrowers for taxes and insurance 2,441 3,154
Accrued interest payable on savings deposits 1,456 533
Accrued income taxes 293 289
Other accrued expenses and sundry liabilities 1,027 686
- ---------------------------------------------------------------------------------------------------------------
Total Liabilities 193,739 190,725
- ---------------------------------------------------------------------------------------------------------------
Stockholders' Equity
Common stock, $.01 par value; 5,000,000
shares authorized; 2,300,422 and 2,277,913 shares
issued respectively 23 23
Additional paidin capital 4,806 4,682
Treasury stock, at cost (113,670 shares) (1,626) (1,626)
Retained earnings 19,717 18,095
Unrealized gains on securities available for sale, net of tax 326 206
Stock held in deferred compensation trust (204) (118)
- ---------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 23,042 21,262
- ---------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholder's Equity $ 216,781 $ 211,987
===============================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
-1-
<PAGE> 4
LAUREL CAPITAL GROUP, INC. AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
For the Three and Nine Months Ended March 31, 1998 and 1997
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
----------------------- -------------------------
1998 1997 1998 1997
------ ------- ------- --------
<S> <C> <C> <C> <C>
Interest Income:
Loans 2,961 2,915 8,830 8,888
Mortgagebacked securities 241 250 745 779
Investments 671 622 1,979 1,646
Interestearning deposits 97 44 237 113
------ ------- ------- --------
Total interest income 3,970 3,831 11,791 11,426
Interest expense:
Savings deposits 1,802 1,800 5,580 5,348
Borrowings 209 142 486 374
------ ------- ------- --------
Total interest expense 2,011 1,942 6,066 5,722
------ ------- ------- --------
Net interest income before provision
for possible loan losses 1,959 1,889 5,725 5,704
Provision for possible loan losses 4 8 13 23
------ ------- ------- --------
Net interest income after provision
for possible loan losses 1,955 1,881 5,712 5,681
------ ------- ------- --------
Other income:
Service charges 139 113 444 356
Net gain on sale of investments and
mortgagebacked securities available for sale 140 186 91
Gain on the sale of loans held for sale 1 18 10
Other operating income 44 30 125 88
------ ------- ------- --------
Total other income 324 143 773 545
------ ------- ------- --------
Operating expenses:
Compensation and employee benefits 435 456 1,325 1,316
Premises and occupancy costs 132 123 373 368
Federal insurance premiums 27 28 82 122
Special SAIF assessment 1,059
Net loss (income) on real estate owned 6 (22) 20 (34)
Data processing expense 65 66 192 188
Professional fees 77 36 262 136
Other operating expenses 214 186 618 590
------ ------- ------- --------
Total operating expenses 956 873 2,872 3,745
------ ------- ------- --------
Income before income taxes 1,323 1,151 3,613 2,481
------ ------- ------- --------
Provision for income taxes:
Federal 397 346 1,080 737
State 92 75 250 171
------ ------- ------- --------
Total income taxes 489 421 1,330 908
------ ------- ------- --------
Net income $ 834 $ 730 $ 2,283 $ 1,573
====== ======= ======= ========
Earnings per share
Basic $ 0.38 $ 0.32 $ 1.05 $ 0.69
====== ======= ======= ========
Diluted $ 0.36 $ 0.31 $ 0.99 $ 0.68
====== ======= ======= ========
Dividends per share $ 0.13 $ 0.07 $ 0.31 $ 0.22
====== ======= ======= ========
</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 Nine Months Ended March 31, 1998
(In thousands)
<TABLE>
<CAPTION>
Unrealized
Gains Stock Held in
Additional on Securities Deferred Total
Common Paid-in Treasury Retained Available Compensation Stockholders'
Stock Capital Stock Earnings for sale Trust Equity
----- ---------- -------- -------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1997 $23 $ 4,682 ($1,626) $18,095 $206 ($118) $21,262
Stock options exercised
(22,594 shares) -- 124 -- -- -- -- 124
Dividends on common stock
at $0.31 per share -- -- -- (661) -- -- (661)
Unrealized gains on
securities available
for sale -- -- -- -- 120 -- 120
Purchase of stock
in deferred
compensation trust -- -- -- -- -- (86) (86)
Net income -- -- -- 2,283 -- -- 2,283
--- ------- ------- ------- ---- ----- -------
Balance,
March 31, 1998 $23 $ 4,806 ($1,626) $19,717 $326 ($204) $23,042
=== ======= ======= ======= ==== ===== =======
</TABLE>
The Balances at June 30, 1997 reflect the effects of the threefortwo stock
split paid on January 16, 1998.
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 Nine Months Ended March 31, 1998 and 1997
(In thousands)
<TABLE>
<CAPTION>
1998 1997
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net income: $ 2,283 $ 1,573
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 112 101
Provision for possible loan losses 13 23
Net loss (gain) on sale of real estate owned 11 (44)
Net gain on sale of investments and mortgagebacked
securities available for sale (186) (91)
Gain on the sale of loans held for sale (18) (10)
Amortization of deferred loan fees (156) (127)
Origination of loans held for sale (844) (814)
Proceeds from sale of loans held for sale 1,003 651
Decrease (increase) in accrued interest receivable 303 (69)
Increase in accrued interest payable 923 906
Other net 76 274
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 3,520 2,373
- ---------------------------------------------------------------------------------------------------------------------
Investing activities:
Purchase of investment securities (14,663) (11,994)
Purchase of investment securities available for sale (9,368) (4,690)
Purchase of FHLB stock (1)
Proceeds from investment maturities 19,036 6,950
Proceeds from sale of investment securities available for sale 3,240 794
Principal repayments of investment and
mortgagebacked securities available for sale 1,111 1,171
Principal repayments of investment and
mortgagebacked securities 67 304
Decrease (increase) in loans 183 (362)
Proceeds from sale of real estate owned 67 223
Net additions to office properties and equipment (144) (132)
- ---------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (471) (7,737)
- ---------------------------------------------------------------------------------------------------------------------
Financing activities:
Net increase in demand and club accounts 193 518
Net (decrease) increase in time deposit accounts (3,724) 5,595
Net increase in FHLB advances 5,990 4,718
Decrease in advance deposits by borrowers
for taxes and insurance (713) (782)
Stock options exercised 124 34
Acquisition of treasury stock (391)
Dividends paid (661) (499)
- ---------------------------------------------------------------------------------------------------------------------
Net cash used by financing activities 1,209 9,193
- ---------------------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents 4,258 3,829
Cash and cash equivalents at beginning of period 15,335 9,618
- ---------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 19,593 $ 13,447
=====================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
- ---------------------------------------------------------------------------------------------------------------------
Cash paid during the period for:
Interest on savings deposits $ 4,657 $ 4,442
Interest on FHLB advances 462 351
Income taxes 1,341 788
Transfer of loans to real estate owned 337
Cash paid during the period for interest includes interest credited on
deposits of $3,982 and $3,760 for the nine months ended March 31, 1998 and
1997, 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
MARCH 31, 1998 AND JUNE 30, 1997
(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, 1997 except for the adoption of the
Financial Accounting Standards Board's (FASB) Statement of Financial Accounting
Standard No. 128, "Earnings Per Share", discussed below. The results of
operations for the three and nine months ended March 31, 1998 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") 1997 Annual Report to Stockholders
for the year ended June 30, 1997. All amounts presented in the Notes to
Unaudited Consolidated Financial Statements are presented in thousands except
share data.
STOCK SPLIT
On December 18, 1997, the Company's Board of Directors declared a three-for-two
stock split payable on January 16, 1998 to stockholders of record on January 2,
1998. An amount equal to the par value of the shares issued has been transferred
from additional paid-in-capital to common stock. The number of shares and per
share amounts have been restated to reflect this distribution.
EARNINGS PER SHARE
In February 1997, the FASB released 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 the standards for computing earnings per
share previously found in APB Opinion No. 15, Earnings Per Share, and makes them
comparable to international EPS standards. It replaces the presentation of
primary EPS with a presentation of basic EPS. It also requires dual presentation
of basic and diluted EPS on the face of the income statement. Basic EPS excludes
dilution and is computed by dividing income available to common stockholders by
the weighted-average number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the earnings of the
entity. Diluted EPS is computed similarly to fully diluted EPS pursuant to APB
Opinion No. 15. The Company adopted SFAS No. 128 as of
-5-
<PAGE> 8
December 31, 1997 and all prior period per share amounts have been restated.
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
Numerator: 1998 1997 1998 1997
---------------- -----------------
<S> <C> <C> <C> <C>
Net income $ 834 $ 730 $2,283 $1,573
----- ----- ------ ------
Numerator for basic and
diluted earnings per share $ 834 $ 730 $2,283 $1,573
===== ===== ====== ======
Denominator:
Denominator for basic
earnings per share-
weighted-average shares 2,179 2,267 2,173 2,270
Effect of dilutive securities:
Employee stock options 149 95 123 45
----- ----- ------ ------
Denominator for diluted earnings
per share-weighted-average shares
and assumed conversions 2,328 2,362 2,296 2,315
===== ===== ====== ======
Basic earnings per share $0.38 $0.32 $ 1.05 $0.69
===== ===== ====== ======
Diluted earnings per share $0.36 $0.31 $ 0.99 $0.68
===== ===== ====== ======
</TABLE>
SECURITIES
The Company accounts for investments in 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 $326, net of tax, on
investments classified as available for sale are recorded as a separate
component of equity at March 31, 1997.
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
-6-
<PAGE> 9
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. 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. Consumer loans more than 120 days or 180 days delinquent (depending
on the nature of the loan) are generally required to be written off.
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.
Loans receivable classified as held for sale are recorded in the financial
statements in the aggregate at the lower of cost or market.
(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.
-7-
<PAGE> 10
(3) INVESTMENT AND MORTGAGE-BACKED 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 MARCH 31, 1998:
Municipal obligations $4,888 $200 $ --- 5,088
FNMA preferred stock 250 15 --- 265
FHLMC preferred stock 250 14 --- 264
FNMA common stock 316 --- --- 316
FHLMC common stock 243 --- 5 238
Shay Financial Services
ARMs Fund 14,243 --- 5 14,238
----------------------------------------------------------
20,190 229 10 20,409
Mortgage-backed securities 11,877 275 --- 12,152
----------------------------------------------------------
Total $32,067 $504 $10 $32,561
==========================================================
</TABLE>
<TABLE>
<CAPTION>
At March 31, 1998, the contractual maturities of the debt securities Amortized Fair
available for sale are: Cost Value
---------------------------------
<S> <C> <C>
Due after ten years $4,888 $5,088
---------------------------------
$4,888 $5,088
=================================
</TABLE>
Mortgage-backed securities have various contractual maturity dates. Actual
repayments may be different due to prepayments on the loans underlying the
securities. The FNMA stock, FHLMC stock and Shay Financial Services ARMs
Fund have no stated maturity.
Note: There were gross realized gains of $186 and $91 recorded during the
nine months ended March 31, 1998 and 1997, respectively, on the sale
of investment securities available for sale. Proceeds from the sale of
investment securities available for sale during the nine months ended
March 31, 1998 and 1997 were $3,240 and $794, respectively.
Investment securities are comprised of the following:
<TABLE>
<CAPTION>
Amortized Gross Unrealized Fair
Cost Gains Losses Value
---------------------------------------------------------------
<S> <C> <C> <C> <C>
AT MARCH 31, 1998:
Corporate notes and commercial paper $12,707 $101 $3 $12,805
Mortgage-backed securities 1,153 13 1 1,165
---------------------------------------------------------------
Total $13,860 $114 $4 $13,970
---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
At March 31, 1998, the contractual maturities of the debt securities are: Amortized Fair
Cost Value
------------------------------------
<S> <C> <C>
Due after five years through ten years $6,699 $6,728
Due after ten years 6,008 6,077
------------------------------------
$12,707 $12,805
====================================
</TABLE>
Mortgage-backed securities have various contractual maturity dates. Actual
repayments may be different due to prepayments on the loans underlying the
securities.
-8-
<PAGE> 11
(4) Loans Receivable
Loans receivable are comprised of the following:
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997
- ------------------------------------------------------------------------------------
<S> <C> <C>
First mortgage loans:
Conventional:
1 to 4 family dwellings $ 110,043 $ 113,986
Multi-family dwellings 2,529 2,740
Commercial 6,611 5,676
- ------------------------------------------------------------------------------------
119,183 122,402
Guaranteed or insured 70 76
- ------------------------------------------------------------------------------------
Total long term with monthly amortization 119,253 122,478
Construction and development loans 4,714 3,079
- ------------------------------------------------------------------------------------
123,967 125,557
Less: Allowance for possible losses (1,273) (1,358)
Loans in process (2,212) (1,634)
Deferred loan fees (701) (860)
- ------------------------------------------------------------------------------------
119,781 121,705
- ------------------------------------------------------------------------------------
Consumer loans:
Home improvement loans (net of unearned
discounts of $11 and $34) 120 291
Mobile home loans 360 747
Loans secured by savings accounts 270 288
Commercial loans 649 998
Installment loans 23,682 21,226
- ------------------------------------------------------------------------------------
25,081 23,550
Less: Allowance for possible losses (565) (585)
- ------------------------------------------------------------------------------------
24,516 22,965
- ------------------------------------------------------------------------------------
$ 144,297 $ 144,670
====================================================================================
</TABLE>
Changes in the allowance for possible loan losses for the
nine months ended March 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
- ---------------------------------------------------------------------------
<S> <C> <C>
Balance at beginning of the fiscal year $ 1,943 $ 1,899
Provision for losses 13 15
Charge-offs (147) (25)
Recoveries 29 34
- ---------------------------------------------------------------------------
Balance at March 31, $ 1,838 $ 1,923
===========================================================================
</TABLE>
At March 31, 1998, the recorded investment in loans that are considered to be
impaired under Statement 114 was $383. Included in this amount is $102 of
impaired loans for which the related allowance for credit losses is $4, and $281
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 nine
months ended March 31, 1998 was approximately $428. For the nine months ended
March 31, 1998, the Company recognized interest income on those impaired loans
of $1 which was recognized using the cash basis method of income recognition.
<TABLE>
<CAPTION>
March 31,
1998 1997
--------------------
<S> <C> <C>
Non-accrual loans $551 $1,027
Non-accrual loans as a percent of total loans 0.38% 0.71%
- ---------------------------------------------
</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 March 31,
1998 1997
------ ------
(In thousands except per share data)
(Unaudited)
<S> <C> <C>
Total assets $216,781 $208,577
Money market investments 10,444 8,965
Interest-earning deposits with other institutions 8,380 3,917
Investment securities available for sale 20,409 15,046
Investment securities 12,707 15,494
Mortgage-backed securities available for sale 12,152 12,861
Mortgage-backed securities 1,153 1,242
Loans receivable held for sale 1,686 1,800
Loans receivable, net 144,297 143,998
Savings deposits 171,488 170,796
FHLB advances 17,034 11,045
Retained earnings 19,717 17,510
Stockholders' equity 23,042 21,736
Stockholders' equity per share (1) $10.54 $9.67
</TABLE>
<TABLE>
<CAPTION>
STATISTICAL PROFILE Three months ended Nine months ended
March 31, March 31,
-------------------------- ----------------------
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Average yield earned on all interest-earning assets 7.56% 7.65% 7.58% 7.71%
Average rate paid on all interest-bearing liabilities 4.48 4.49 4.52 4.44
Average interest rate spread 3.08 3.16 3.06 3.27
Net yield on average interest-earning assets 3.71 3.73 3.68 3.83
Average interest-earning assets as a percentage of
average interest-bearing liabilities 115.98 115.44 116.01 115.63
Return on average assets (2) (3) 1.55 1.41 1.43 1.03
Return on average assets (2) (4) 1.55 1.41 1.43 1.46
Return on average equity (2) (3) 14.63 13.36 13.71 9.75
Return on average equity (2) (4) 14.63 13.36 13.71 13.80
Average equity to average assets 10.57 10.57 10.45 10.60
</TABLE>
(1) Amounts reflect the effects of the three-for-two stock split paid on
January 16, 1998.
(2) Amounts are annualized.
(3) Percentages for the nine months ended March 31, 1997, after effect of the
one-time special SAIF assessment.
(4) Percentages for the nine months ended March 31, 1997, before effect of the
one-time special SAIF assessment.
-10-
<PAGE> 13
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
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 March 31, 1998 was
$834,000 compared to $730,000 for the same period in the prior year. The
increase of $104,000 or 14.3% was primarily the result of a $181,000 or 126.6%
increase in other income and a $70,000 or 3.7% increase in net interest income
partially offset by a $83,000 or 9.5% increase in operating expenses and a
$68,000 or 16.2% 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 $70,000 or 3.7% during the three months ended March
31, 1998 as compared to the same period of the prior year. The increase was
primarily due to a $2.0 million or 7.4% increase in average net earning assets
for the quarter ended March 31, 1998 as compared to the quarter ended March 31,
1997. This increase was partially offset by a decrease in the average interest
rate spread from 3.16% for the quarter ended March 31, 1997 to 3.08% for the
quarter ended March 31, 1998. The decrease in the average interest rate spread
was primarily due to a decrease in the average interest rate earned on
interest-earning assets from 7.65% for the quarter ended March 31, 1997 to 7.56%
for the quarter ended March 31, 1998. The average rate paid on the Bank's
interest-bearing liabilities decreased slightly from 4.49% for the quarter ended
March 31, 1997 to 4.48% for the quarter ended March 31, 1998.
Interest income on loans receivable and loans held for sale increased by $46,000
or 1.6% during the three months ended March 31, 1998 as compared to the same
period in the prior year. This was primarily due to an increase in the average
yield on loans receivable from 8.03% for the quarter ended March 31, 1997 to
8.08% for the quarter ended March 31, 1998. In addition, the average outstanding
balance of loans receivable increased for the quarter ended March 31, 1998 by
$541,000 or .4% as compared to the same period in the prior year. The increase
in the average outstanding balance of loans receivable was primarily due to a
$1.0 million or 4.2% increase in the average outstanding balance of consumer
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 decreased by $9,000 or 3.6% during the quarter ended March 31, 1998 as
compared to the March 31, 1997 quarter. This decrease was primarily due to a
$854,000 or 6.0% decrease in the average outstanding balance of mortgage-backed
securities during the quarter ended March 31, 1998 as compared to the March 31,
1997 quarter. This decrease was partially offset by an increase in the average
yield on mortgage-backed securities from 6.99% for the quarter ended March 31,
1997 to 7.17% for the quarter ended March 31, 1998. At March 31, 1998, the
Bank's portfolio of mortgage-backed securities available for sale had net
unrealized gains of $275,000. The available for sale portfolio consists of fixed
and adjustable rate securities with an average yield of 7.28% at March 31, 1998.
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 rate collateralized mortgage
-11-
<PAGE> 14
obligations (CMO's) with an average yield of 6.89% at March 31, 1998. At March
31, 1998, the Bank's portfolio of mortgage-backed securities had net unrealized
gains of $12,000. 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 March 31, 1998 by $49,000 or 7.9% from the
comparable period in 1997, primarily due to a $5.1 million or 13.1% increase in
the average outstanding balance of such securities for the quarter ended March
31, 1998 as compared to the quarter ended March 31, 1997. This increase was
partially offset by a decrease in the average yield on investment securities
from 6.75% for the quarter ended March 31, 1997 to 6.22% for the quarter ended
March 31, 1998. 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 March 31, 1998, the Bank's portfolio of
investment securities available for sale and investment securities held to
maturity had net unrealized gains of $219,000 and $98,000, respectively. See
Note 3 of "Notes to Unaudited Consolidated Financial Statements."
Interest income on interest-earning deposits increased during the three months
ended March 31, 1998 by $53,000 or 120.5% from the comparable period in 1997.
This increase was primarily due to an increase of $3.9 million or 115.9% in the
average outstanding balance of interest-earning deposits for the quarter ended
March 31, 1998 as compared to the March 31, 1997 quarter. Also contributing to
the increase in interest income on interest-earning deposits was an increase in
the average yield on interest-earning deposits from 5.27% for the quarter ended
March 31, 1997 to 5.38% for the quarter ended March 31, 1998.
Interest expense on deposits increased by $2,000 or .1% for the quarter ended
March 31, 1998, compared to the same period in 1997. The average outstanding
balance of deposits increased by $1.1 million or .7% during the quarter ended
March 31, 1998 as compared to the same period of the prior year. The average
interest rate paid on savings deposits decreased slightly from 4.42% for the
quarter ended March 31, 1997 to 4.39% for the quarter ended March 31, 1998.
Interest expense on borrowings increased $67,000 or 47.2% for the quarter ended
March 31, 1998 compared to the quarter ended March 31, 1997 due to a $5.5
million or 55.2% increase in the average outstanding balance of FHLB advances.
The average rate paid on borrowings decreased from 5.73% for the quarter ended
March 31, 1997 to 5.44% for the quarter ended March 31, 1998.
PROVISION FOR POSSIBLE LOAN LOSSES. The Bank provided $4,000 and $8,000 to its
allowance for possible loan losses for the quarters ended March 31, 1998 and
1997, 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 March 31, 1998 and 1997, the Bank's allowance for possible loan losses
amounted to $1.8 million and $1.9 million, respectively, or 1.3% of the total
loan portfolio in both years. As a percentage of non-performing loans (loans
delinquent 90 days and over), the allowance for possible loan losses was 333.6%
and 188.3% at March 31, 1998 and 1997, respectively.
-12-
<PAGE> 15
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 Bank's most recent examination.
OTHER INCOME. Total other income increased by $181,000 or 126.6% to $324,000 for
the quarter ended March 31, 1998 as compared to the same period in 1997. This
was primarily due to a $140,000 increase in net gains on the sale of investments
available for sale, a $26,000 increase in fees and service charges and a $14,000
increase in other operating income. The increase in net gains on the sale of
investments available for sale was due to gains from increased purchase and sale
activity of FHLMC and FNMA common stock recorded during the three months ended
March 31, 1998.
OPERATING EXPENSES. Total operating expenses increased by $83,000 or 9.5% during
the quarter ended March 31, 1998 as compared to the comparable 1997 quarter.
This increase was primarily due to a $41,000 increase in professional fees, a
$28,000 increase in real estate owned expense, a $28,000 increase in other
operating expense and a $9,000 increase in premises and occupancy expense. These
increases were partially offset by a $21,000 decrease in compensation and
benefits. The increase in professional fees was primarily due to legal fees
incurred in litigation brought by the Bank against another financial
institution. The increase in real estate owned expense was due to a gain of
$26,000 on the sale of real estate owned being recorded during the quarter ended
March 31, 1997.
INCOME TAX EXPENSE. Income tax expense increased by $68,000 for the quarter
ended March 31, 1998 as compared to the quarter ended March 31, 1997 as a result
of higher pre-tax income recorded during the quarter ended March 31, 1998.
-13-
<PAGE> 16
COMPARISON OF THE NINE MONTHS ENDED MARCH 31, 1998 AND 1997
GENERAL. The Company's net income for the nine months ended March 31, 1998 was
$2.3 million compared to $1.6 million for the same period in the prior year. The
$1.6 million of net income during the nine months ended March 31, 1997 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 ("SAIF"). For the nine
months ended March 31, 1998, operating expenses decreased $873,000 or 23.3%,
other income increased $228,000 or 41.8% and net interest income increased
$21,000 or .4% compared to the same period in the prior year. Such benefits were
partially offset by a $422,000 or 46.5% increase in income tax expense. The
decrease in operating expenses and increase in income taxes were due to the
special SAIF assessment. These and other significant fluctuations are discussed
below.
NET INTEREST INCOME. Net interest income increased by $21,000 or .4% during the
nine months ended March 31, 1998 as compared to the same period of the prior
year. The increase was primarily due to a $1.8 million or 6.7% increase in
average net earning assets for the nine months ended March 31, 1998 as compared
to the nine months ended March 31, 1997. This increase was partially offset by a
decrease in the average interest rate spread from 3.27% for the nine months
ended March 31, 1997 to 3.06% for the nine months ended March 31, 1998. The
decrease in the average interest rate spread was primarily due to a decrease in
the average interest rate earned on interest-earning assets from 7.71% for the
nine months ended March 31, 1997 to 7.58% for the nine months ended March 31,
1998. In addition, the average rate paid on the Bank's interest-bearing
liabilities increased from 4.44% for the nine months ended March 31, 1997 to
4.52% for the nine months ended March 31, 1998.
Interest income on loans receivable and loans held for sale decreased by $58,000
or .7% during the nine months ended March 31, 1998 as compared to the same
period in the prior year. This was primarily due to a $993,000 or .7% decrease
in the average outstanding balance of loans receivable for the nine months ended
March 31, 1998 as compared to the nine months ended March 31, 1997. The average
yield on loans receivable was 8.06% for both the nine months ended March 31,
1998 and 1997. The decline in the average outstanding balance was primarily due
to increased repayments on mortgage loans. The decline in the average
outstanding balance of mortgage loans was partially offset by an $839,000 or
3.5% increase in average outstanding balance of consumer 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 decreased by $34,000 or 4.4% during the nine months ended March 31,
1998 as compared to the same period in the prior year. This decrease was
primarily due to a $959,000 or 6.5% decrease in the average outstanding balance
of mortgage-backed securities during the nine months ended March 31, 1998 as
compared to the same period in the prior year. This decrease was partially
offset by an increase in the average yield on mortgage-backed securities from
7.02% for the nine months ended March 31, 1997 to 7.18% for the nine months
ended March 31, 1998. See "Comparison of the Three Months Ended March 31, 1998
and 1997 - Net Interest Income."
-14-
<PAGE> 17
Interest income on investments and investments available for sale increased
during the nine months ended March 31, 1998 by $333,000 or 20.2% from the
comparable period in 1997, primarily due to a $7.9 million or 23.6% increase in
the average outstanding balance of such securities for the nine months ended
March 31, 1998 as compared to the nine months ended March 31, 1997. This
increase was partially offset by a decrease in the average yield on investment
securities from 6.60% for the nine months ended March 31, 1997 to 6.34% for the
nine months ended March 31, 1998. 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"). See "Comparison of the
Three Months Ended March 31, 1998 and 1997 - Net Interest Income."
Interest income on interest-earning deposits increased during the nine months
ended March 31, 1998 by $124,000 or 109.7% from the comparable period in 1997.
This increase was primarily due to an increase of $2.9 million or 102.0% in the
average outstanding balance of interest-earning deposits for the nine months
ended March 31, 1998 as compared to the same period in the prior year. Also
contributing to the increase in interest income on interest-earning deposits was
an increase in the average yield on interest-earning deposits from 5.21% for the
nine months ended March 31, 1997 to 5.41% for the nine months ended March 31,
1998.
Interest expense on deposits increased by $232,000 or 4.3% for the nine months
ended March 31, 1998, compared to the same period in 1997 primarily due to a
$4.3 million or 2.6% increase in the average outstanding balance of deposits
during the nine months ended March 31, 1998 as compared to the same period of
the prior year. In addition, the average interest rate paid on savings deposits
increased slightly from 4.38% for the nine months ended March 31, 1997 to 4.45%
for the nine months ended March 31, 1998.
Interest expense on borrowings increased $112,000 or 30.0% for the nine months
ended March 31, 1998 compared to the nine months ended March 31, 1997 primarily
due to a $2.9 million or 32.6% increase in the average outstanding balance of
FHLB advances. The average rate paid on borrowings decreased slightly from 5.67%
for the nine months ended March 31, 1997 to 5.56% for the nine months ended
March 31, 1998.
PROVISION FOR POSSIBLE LOAN LOSSES. The Bank provided $13,000 and $23,000 to its
allowance for possible loan losses for the nine months ended March 31, 1998 and
1997, 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 March
31, 1998 and 1997 - Provision For Possible Loan Losses."
OTHER INCOME. Total other income increased by $228,000 or 41.8% to $773,000 for
the nine months ended March 31, 1998 as compared to the same period in 1997.
This was primarily due to a $95,000 increase in net gains on the sale of
investments available for sale, an $88,000 increase in fees and service charges,
a $37,000 increase in other income and a $8,000 increase in gain on the sale of
loans held for sale. The increase in net gains on the sale of investments
available for sale was due to gains from increased purchase and sale activity of
FHLMC and FNMA common stock recorded during the nine months ended March 31,
1998. The increase in fees and service charges was primarily due to increases in
the fees the Bank charges on its NOW accounts and ATM cards.
-15-
<PAGE> 18
OPERATING EXPENSES. Total operating expenses decreased by $873,000 or 23.3%
during the nine months ended March 31, 1998 as compared to the comparable period
in the prior year. This decrease was primarily due to the $1.1 million pre-tax
charge for the FDIC's one-time special assessment to recapitalize the SAIF
during the nine months ended March 31, 1997. Also contributing to the decrease
in total operating expenses was a decreases of $40,000 in federal insurance
premiums. These decreases were partially offset by an increase of $126,000 in
professional fees, a $54,000 increase in real estate owned expense, a $28,000
increase in other operating expenses and a $9,000 increase in compensation and
benefits. The increase in professional fees was primarily due to legal fees
incurred in litigation brought by the Bank against another financial
institution. The decrease in federal insurance premiums was due to the lack of a
premium assessment for SAIF insured institutions for the quarterly insurance
period ending December 31, 1996. The increase in real estate owned expense was
primarily due to $44,000 in net gains on the sale of real estate owned being
recorded for the nine months ended March 31, 1997 compared to $11,000 of net
losses recorded during the nine months ended March 31, 1998.
INCOME TAX EXPENSE. Income tax expense increased by $422,000 for the nine months
ended March 31, 1998 as compared to the nine months ended March 31, 1997 as a
result of higher pre-tax income recorded during the nine months ended March 31,
1998.
YEAR 2000. The Company outsources its primary data processing functions. A
challenging problem exists as the millennium ("year 2000") approaches as many
computer systems worldwide do not have the capability of recognizing the year
2000 or years thereafter. To date, the Company has received confirmations from
its primary vendors that plans have been developed by them to address and
correct the issues associated with the year 2000 problem.
The Company has established a management committee to identify all of its
functions potentially affected by the year 2000, and to ensure that
re-programming of the affected systems will be completed by December 31, 1998,
thus allowing adequate time for testing. The Company does not anticipate that
the year 2000 issue will pose any significant operational problems or will have
any material impact on its results of operations. However, if the modifications
and conversions are not completed timely, the year 2000 problem may have a
material impact on the operations of the Company.
FINANCIAL CONDITION AND CAPITAL RESOURCES
Total assets increased by $4.8 million or 2.3% from June 30, 1997 to March 31,
1998. The largest increases were a $4.9 million increase in investment
securities available for sale, a $2.5 million increase in interest-bearing
deposits with other institutions and a $1.4 million increase in money market
investments. These increases were partially offset by a $2.8 million decrease in
investment securities and a $1.1 million decrease in mortgage-backed securities
available for sale. The largest components of change in liabilities were a $6.0
million increase in FHLB advances partially offset by a $3.5 million decrease in
savings deposits. The increase in investment securities available for sale was
primarily due to the purchase of securities with the funds received from the
increased FHLB advances.
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 March 31, 1998, the Bank exceeded all of these
requirements, with Tier I and Tier
-16-
<PAGE> 19
II ratios of 10.36% and 21.71%, respectively.
The following table sets forth certain information concerning the Bank's
regulatory capital at March 31, 1998.
<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) $ 22,690 $ 22,690 $ 22,690
Less unrealized securities gains (326) (326) (326)
Plus general valuation allowances (2) -- -- 1,373
-------- -------- --------
Total regulatory capital 22,364 22,364 23,737
Minimum required capital 8,639 4,392 8,784
-------- -------- --------
Excess regulatory capital $ 13,725 $ 17,972 $ 14,953
======== ======== ========
Minimum required capital to be well
capitalized under Prompt Corrective
Action Provisions $ 10,798 $ 6,560 $ 10,934
======== ======== ========
Regulatory capital as a percentage (3) 10.36% 20.45% 21.71%
Minimum required capital percentage 4.00 4.00 8.00
-------- -------- --------
Excess regulatory capital percentage 6.36% 16.45% 13.71%
======== ======== ========
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 three months ended
March 31, 1998.
(2) Limited to 1.25% of risk adjusted assets.
(3) Tier I capital is calculated as a percentage of adjusted total assets of
$215,965. Tier I and Tier II risk-based capital are calculated as a
percentage of adjusted risk-weighted assets of $109,340.
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.
-17-
<PAGE> 20
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For a discussion of the Company's asset and liability management policies as
well as the potential impact of interest rate changes upon the market value of
the Bank's portfolio equity, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in the 1997 Annual Report to
Stockholders. There has been no material in the Company's asset and liability
position or market value of portfolio equity since June 30, 1997.
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 and Use of Proceeds
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
None
-18-
<PAGE> 21
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: May 15, 1998
-19-
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000892158
<NAME> LAUREL CAPITAL GROUP, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 769
<INT-BEARING-DEPOSITS> 8,380
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 32,561
<INVESTMENTS-CARRYING> 13,860
<INVESTMENTS-MARKET> 13,970
<LOANS> 146,135
<ALLOWANCE> 1,838
<TOTAL-ASSETS> 216,781
<DEPOSITS> 171,488
<SHORT-TERM> 900
<LIABILITIES-OTHER> 5,217
<LONG-TERM> 16,134
0
0
<COMMON> 23
<OTHER-SE> 23,019
<TOTAL-LIABILITIES-AND-EQUITY> 216,781
<INTEREST-LOAN> 8,830
<INTEREST-INVEST> 1,979
<INTEREST-OTHER> 982
<INTEREST-TOTAL> 11,791
<INTEREST-DEPOSIT> 5,580
<INTEREST-EXPENSE> 6,066
<INTEREST-INCOME-NET> 5,725
<LOAN-LOSSES> 13
<SECURITIES-GAINS> 186
<EXPENSE-OTHER> 2,872
<INCOME-PRETAX> 3,613
<INCOME-PRE-EXTRAORDINARY> 3,613
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,283
<EPS-PRIMARY> 1.05
<EPS-DILUTED> .99
<YIELD-ACTUAL> 3.06
<LOANS-NON> 551
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,943
<CHARGE-OFFS> 147
<RECOVERIES> 29
<ALLOWANCE-CLOSE> 1,838
<ALLOWANCE-DOMESTIC> 1,838
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
