<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, 1997
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, 1998: 2,288,565 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, 1997 (Unaudited) and June 30, 1997
Consolidated Statements of Operations for the Three and 2
Six Months Ended December 31, 1997 and 1996 (Unaudited)
Consolidated Statements of Stockholders' Equity for the 3
Six Months Ended December 31, 1997 (Unaudited)
Consolidated Statements of Cash Flows for the Six 4
Months Ended December 31, 1997 and 1996 (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
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 19
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 20
</TABLE>
<PAGE> 3
LAUREL CAPITAL GROUP, INC. AND SUBSIDIARY
Consolidated Statements of Financial Condition
(In thousands)
<TABLE>
<CAPTION>
December 31 June 30
1997 1997
- -------------------------------------------------------------------------------------------------------
(unaudited)
ASSETS
<S> <C> <C>
Cash $1,182 $406
Money market investments 7,310 9,086
Interest-earning deposits with other institutions 3,273 5,843
Investment securities available for sale 15,008 15,494
Investment securities (market value of $20,548 and $15,504) 20,441 15,494
Mortgage-backed securities available for sale 12,760 13,259
Mortgage-backed securities (market value of $1,191 and $1,230) 1,173 1,220
Loans receivable, held for sale 1,606 1,827
Loans receivable, net of unearned discounts of $18 and $34 147,740 146,613
Allowance for possible loan losses (1,821) (1,943)
- -------------------------------------------------------------------------------------------------------
Loans receivable, net 145,919 144,670
Federal Home Loan Bank Stock 1,277 1,277
Real estate owned 84 --
Accrued interest receivable:
Loans 826 894
Interest-earning deposits and investments 484 505
Mortgage-backed securities 82 86
Office properties and equipment, net of accumulated depreciation 1,317 1,267
Prepaid expenses and sundry assets 637 659
- -------------------------------------------------------------------------------------------------------
Total Assets $213,379 $211,987
- -------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Savings deposits $173,969 $175,019
FHLB Advances 13,036 11,044
Advance deposits by borrowers for taxes and insurance 2,210 3,154
Accrued interest payable on savings deposits 577 533
Accrued income taxes 126 289
Other accrued expenses and sundry liabilities 910 686
- -------------------------------------------------------------------------------------------------------
Total Liabilities 190,828 190,725
- -------------------------------------------------------------------------------------------------------
Stockholders' Equity
Common stock, $.01 par value; 5,000,000
shares authorized; 2,288,490 and 2,277,913 shares
issued respectively 23 23
Additional paid-in capital 4,726 4,682
Treasury stock, at cost (113,670 shares) (1,626) (1,626)
Retained earnings 19,168 18,095
Unrealized gains on securities available for sale, net of tax 378 206
Stock held in deferred compensation trust (118) (118)
- -------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 22,551 21,262
- -------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholder's Equity $213,379 $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 Six Months Ended December 31, 1997 and 1996
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
December 31, December 31,
------------------ -----------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest Income:
Loans 2,919 2,993 5,869 5,973
Mortgage-backed securities 249 260 504 529
Investments 669 533 1,308 1,024
Interest-earning deposits 67 37 140 69
------ ------ ------ ------
Total interest income 3,904 3,823 7,821 7,595
Interest expense:
Savings deposits 1,877 1,791 3,778 3,548
Borrowings 157 121 277 232
------ ------ ------ ------
Total interest expense 2,034 1,912 4,055 3,780
------ ------ ------ ------
Net interest income before provision
for possible loan losses 1,870 1,911 3,766 3,815
Provision for possible loan losses 2 7 9 15
------ ------ ------ ------
Net interest income after provision
for possible loan losses 1,868 1,904 3,757 3,800
------ ------ ------ ------
Other income:
Service charges 163 119 305 243
Net gain on sale of investments and
mortgage-backed securities available for sale 16 85 46 91
Gain on the sale of loans held for sale 6 3 17 10
Other operating income 39 27 81 58
------ ------ ------ ------
Total other income 224 234 449 402
------ ------ ------ ------
Operating expenses:
Compensation, payroll taxes and
fringe benefits 444 442 890 860
Premises and occupancy costs 120 127 241 245
Federal insurance premiums 28 -- 55 94
Special SAIF assessment -- -- -- 1,059
Net loss (income) on real estate owned 14 (4) 14 (12)
Data processing expense 65 63 127 122
Professional fees 143 57 185 100
Other operating expenses 219 215 404 404
------ ------ ------ ------
Total operating expenses 1,033 900 1,916 2,872
------ ------ ------ ------
Income before income taxes 1,059 1,238 2,290 1,330
------ ------ ------ ------
Provision for income taxes:
Federal 314 373 683 391
State 73 89 158 96
------ ------ ------ ------
Total income taxes 387 462 841 487
------ ------ ------ ------
Net income $ 672 $ 776 $1,449 $ 843
====== ====== ====== ======
Earnings per share
Basic $ 0.31 $ 0.34 $ 0.67 $ 0.37
====== ====== ====== ======
Diluted $ 0.29 $ 0.34 $ 0.63 $ 0.37
====== ====== ====== ======
Dividends per share $ 0.09 $ 0.07 $ 0.18 $ 0.14
====== ====== ====== ======
</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, 1997
(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
(10,662 shares) -- 44 -- -- -- -- 44
Dividends on common stock
at $0.18 per share -- -- -- (376) -- -- (376)
Unrealized gains on
securities available
for sale -- -- -- -- 172 -- 172
Net income -- -- -- 1,449 -- -- 1,449
------ ------ ------- ------- ------ ------ -------
Balance, December 31, 1997 $23 $4,726 ($1,626) $19,168 $ 378 ($118) $22,551
====== ====== ======= ======= ====== ====== =======
</TABLE>
The Balances at June 30, 1997 reflect the effects of the three-for-two 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 Six Months Ended December 31, 1997 and 1996
(In thousands)
<TABLE>
<CAPTION>
1997 1996
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net income: $1,449 $843
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 74 67
Provision for possible loan losses 9 15
Net loss (gain) on sale of real estate owned 12 (18)
Net gain on sale of investments and mortgage-backed
securities available for sale (46) (91)
Gain on the sale of loans held for sale (17) (10)
Amortization of deferred loan fees (85) (89)
Origination of loans held for sale (634) (603)
Proceeds from sale of loans held for sale 872 581
Decrease (increase) in accrued interest receivable 93 (137)
Increase in accrued interest payable 44 36
Other - net (12) 277
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 1,759 871
- ---------------------------------------------------------------------------------------------------------------------
Investing activities:
Purchase of investment securities (13,644) (5,000)
Purchase of investment securities available for sale (1,550) (4,159)
Proceeds from investment maturities 10,200 2,250
Proceeds from sale of investment securities available for sale 739 794
Principal repayments of investment and
mortgage-backed securities available for sale 606 706
Principal repayments of investment and
mortgage-backed securities 47 210
Increase in loans (1,336) (1,544)
Proceeds from sale of real estate owned 67 87
Net additions to office properties and equipment (124) (62)
- ---------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (4,995) (6,718)
- ---------------------------------------------------------------------------------------------------------------------
Financing activities:
Net (decrease) increase in demand and club accounts (968) 744
Net (decrease) increase in time deposit accounts (82) 4,382
Net increase in FHLB advances 1,992 719
Decrease in advance deposits by borrowers
for taxes and insurance (944) (982)
Stock options exercised 44 21
Dividends paid (376) (333)
- ---------------------------------------------------------------------------------------------------------------------
Net cash used by financing activities (334) 4,551
- ---------------------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents (3,570) (1,296)
Cash and cash equivalents at beginning of period 15,335 9,618
- ---------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $11,765 $8,322
- ---------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
- ---------------------------------------------------------------------------------------------------------------------
Cash paid during the period for:
Interest on savings deposits $3,734 $3,523
Interest on FHLB advances 300 192
Income taxes 1,044 206
Transfer of loans to real estate owned 163 --
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Cash paid during the period for interest includes interest credited on
deposits of $3,247 and $3,059 for the six months ended December 31, 1997
and 1996, respectively.
- --------------------------------------------------------------------------------
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, 1997 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 six months ended December 31, 1997 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 December 31, 1997 and all
prior period per share amounts have been restated.
-5-
<PAGE> 8
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
Numerator: 1997 1996 1997 1996
---------------- ---------------
<S> <C> <C> <C> <C>
Net income $672 $776 $1,449 $843
---- ---- ----- ----
Numerator for basic and
diluted earnings per share $672 $776 $1,449 $843
==== ==== ===== ====
Denominator:
Denominator for basic
earnings per share-
weighted-average shares 2,171 2,273 2,170 2,271
Effect of dilutive securities:
Employee stock options 136 40 124 36
----- ----- ----- -----
Denominator for diluted earnings
per share-weighted-average shares
And assumed conversions 2,307 2,313 2,294 2,307
===== ===== ===== =====
Basic earnings per share $0.31 $0.34 $0.67 $0.37
===== ===== ===== =====
Diluted earnings per share $0.29 $0.34 $0.63 $0.37
===== ===== ===== =====
</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 $378, net of tax, on
investments classified as available for sale is recorded as a separate component
of equity at December 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.
<PAGE> 10
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> 11
(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 DECEMBER 31, 1997:
Municipal obligations $ 4,888 $234 $ -- 5,122
FNMA preferred stock 250 14 -- 264
FHLMC preferred stock 250 10 -- 260
FHLMC common stock 243 8 -- 251
Shay Financial Services
ARMs Fund 9,101 10 -- 9,111
--------------------------------------------------------------------------------
14,732 276 -- 15,008
Mortgage-backed securities 12,463 301 4 12,760
--------------------------------------------------------------------------------
Total $27,195 $577 $4 $27,768
--------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
At December 31, 1997, the contractual maturities of the debt securities Amortized Fair
available for sale are: Cost Value
<S> <C> <C>
----------------------------------------
Due after ten years $4,888 $5,122
----------------------------------------
$4,888 $5,122
========================================
</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 $46 and $91 recorded during the six
months ended December 31, 1997 and 1996, respectively, on the sale of
investment securities available for sale. Proceeds from the sale of
investment securities available for sale during the three months ended
December 31, 1997 and 1996 were $739 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 DECEMBER 31, 1997:
Corporate notes and commercial paper $20,441 $110 $3 $20,548
Mortgage-backed securities 1,173 18 -- 1,191
----------------------------------------------------
Total $21,614 $128 $3 $21,739
----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
At December 31, 1997, the contractual maturities of the debt securities are: Amortized Fair
Cost Value
---------------------------------
<S> <C> <C>
Due in less than one year $ 993 $ 993
Due after one year through five years 6,455 6,466
Due after five years through ten years 7,996 8,018
Due after ten years 4,997 5,071
---------------------------------
$20,441 $20,548
=================================
</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> 12
(4) Loans Receivable
Loans receivable are comprised of the following:
<TABLE>
<CAPTION>
December 31, June 30,
1997 1997
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
First mortgage loans:
Conventional:
1 to 4 family dwellings $113,369 $113,986
Multi-family dwellings 2,586 2,740
Commercial 6,583 5,676
- -------------------------------------------------------------------------------------------------------
122,538 122,402
Guaranteed or insured 72 76
- -------------------------------------------------------------------------------------------------------
Total long term with monthly amortization 122,610 122,478
Construction and development loans 3,540 3,079
- -------------------------------------------------------------------------------------------------------
126,150 125,557
Less: Allowance for possible losses (1,273) (1,358)
Loans in process (1,995) (1,634)
Deferred loan fees (766) (860)
- -------------------------------------------------------------------------------------------------------
122,116 121,705
- -------------------------------------------------------------------------------------------------------
Consumer loans:
Home improvement loans (net of unearned
discounts of $18 and $34) 183 291
Mobile home loans 417 747
Loans secured by savings accounts 322 288
Commercial loans 787 998
Installment loans 22,642 21,226
- -------------------------------------------------------------------------------------------------------
24,351 23,550
Less: Allowance for possible losses (548) (585)
- -------------------------------------------------------------------------------------------------------
23,803 22,965
- -------------------------------------------------------------------------------------------------------
$145,919 $144,670
- -------------------------------------------------------------------------------------------------------
</TABLE>
Changes in the allowance for possible loan losses for the
six months ended December 31, 1997 and 1996 are as follows:
1998 1997
- ------------------------------------------------------------------------------
Balance at beginning of the fiscal year $1,943 $1,899
Provision for losses 9 15
Charge-offs (144) (25)
Recoveries 13 34
- ------------------------------------------------------------------------------
Balance at December 31, $1,821 $1,923
- ------------------------------------------------------------------------------
At December 31, 1997, the recorded investment in loans that are considered to be
impaired under Statement 114 was $436. Included in this amount is $102 of
impaired loans for which the related allowance for credit losses is $4, and $334
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, 1997 was approximately $443. For the six months ended
December 31, 1997, the Company recognized interest income on those impaired
loans of $1 which was recognized using the cash basis method of income
recognition.
<TABLE>
<CAPTION>
December 31,
1997 1996
-------------------
<S> <C> <C>
Non-accrual loans $809 $668
Non-accrual loans as a percent of total loans 0.55% 0.46%
- ---------------------------------------------
</TABLE>
All loans 90 days or more past due are reported as
non-accrual.
-9-
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
BALANCE SHEET DATA At December 31,
1997 1996
------------------------------------
(In thousands except per share data)
(Unaudited)
<S> <C> <C>
Total assets $213,379 $202,474
Money market investments 7,310 3,875
Interest-earning deposits with other institutions 3,273 3,761
Investment securities available for sale 15,008 15,135
Investment securities 20,441 12,698
Mortgage-backed securities available for sale 12,760 13,388
Mortgage-backed securities 1,173 1,336
Loans receivable held for sale 1,606 1,659
Loans receivable, net 145,919 145,150
Savings deposits 173,969 169,809
FHLB advances 13,036 7,046
Retained earnings 19,168 16,946
Stockholders' equity 22,551 21,685
Stockholders' equity per share (1) $10.37 $9.54
</TABLE>
<TABLE>
<CAPTION>
STATISTICAL PROFILE Three months ended Six months ended
December 31, December 31,
------------------------------ ------------------------------
1997 1996 1997 1996
------------------------------ ------------------------------
<S> <C> <C> <C> <C>
Average yield earned on all interest-earning assets 7.57% 7.76% 7.62% 7.74%
Average rate paid on all interest-bearing liabilities 4.56 4.45 4.54 4.42
Average interest rate spread 3.01 3.31 3.08 3.32
Net yield on average interest-earning assets 3.62 3.88 3.67 3.89
Average interest-earning assets as a percentage of
average interest-bearing liabilities 116.45 115.65 116.03 115.74
Return on average assets (2) (3) 1.27 1.54 1.37 0.84
Return on average assets (2) (4) 1.27 1.54 1.37 1.49
Return on average equity (2) (3) 12.07 14.51 13.22 7.90
Return on average equity (2) (4) 12.07 14.51 13.22 14.00
Average equity to average assets 10.54 10.59 10.39 10.34
</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 six months ended December 31, 1996, after effect of
the one-time special SAIF assessment.
(4) Percentages for the six months ended December 31, 1996, before effect of
the one-time special SAIF assessment.
-10-
<PAGE> 14
COMPARISON OF THE THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
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, 1997
was $672,000 compared to $776,000 for the same period in the prior year. The
decrease of $104,000 or 13.4% was primarily the result of a $133,000 or 14.8%
increase in operating expenses, a $41,000 or 2.2% decrease in net interest
income and a $10,000 or 4.3% decrease in other income partially offset by a
$75,000 or 16.2% decrease 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 decreased by $41,000 or 2.2% during the three months ended
December 31, 1997 as compared to the same period of the prior year. The decrease
was primarily due to a decrease in the average interest rate spread from 3.31%
for the quarter ended December 31, 1996 to 3.01% for the quarter ended
December 31, 1997. This decrease was partially offset by a $2.5 million or 9.2%
increase in average net earning assets for the quarter ended December 31, 1997
as compared to 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 interest-earning assets from 7.76% for the quarter ended
December 31, 1996 to 7.57% for the quarter ended December 31, 1997. In addition,
the average rate paid on the Bank's interest-bearing liabilities increased from
4.45% for the quarter ended December 31, 1996 to 4.56% for the quarter ended
December 31, 1997.
Interest income on loans receivable and loans held for sale decreased by
$74,000 or 2.5% during the three months ended December 31, 1997 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 8.13% for the quarter ended December 31,
1996 to 7.98% for the quarter ended December 31, 1997. In addition, the average
outstanding balance of loans receivable decreased for the quarter ended
December 31, 1997 by $900,000 or .6% as compared to the same period in the prior
year. The decrease in the average yield on loans receivable was primarily due to
a general decline in interest rates in the Bank's market area over the past
year. The decline in the average outstanding balance of loans receivable was
partially offset by an $801,000 or 3.3% 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 $11,000 or 4.2% during the quarter ended December 31, 1997
as compared to the December 31, 1996 quarter. This decrease was primarily due to
a $926,000 or 6.3% decrease in the average outstanding balance of
mortgage-backed securities during the quarter ended December 31, 1997 as
compared to the December 31, 1996 quarter. This decrease was partially offset by
an increase in the average yield on mortgage-backed securities from 7.03% for
the quarter ended December 31, 1996 to 7.18% for the quarter ended December 31,
1997. At December 31, 1997, the Bank's portfolio of mortgage-backed securities
available for sale had net unrealized gains of $297,000. The available for sale
portfolio consists of fixed and adjustable
-11-
<PAGE> 15
rate securities with an average yield of 7.33% at December 31, 1997. 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 obligations (CMO's) with an average
yield of 6.95% at December 31, 1997. At December 31, 1997, the Bank's portfolio
of mortgage-backed securities had net unrealized gains of $18,000. 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 December 31, 1997 by $136,000 or 25.5% from the
comparable period in 1996, primarily due to a $9.0 million or 27.9% increase in
the average outstanding balance of such securities for the quarter ended
December 31, 1997 as compared to the quarter ended December 31, 1996. This
increase was partially offset by a decrease in the average yield on investment
securities from 6.57% for the quarter ended December 31, 1996 to 6.43% for the
quarter ended December 31, 1997. 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, 1997, the
Bank's portfolio of investment securities available for sale and investment
securities held to maturity had net unrealized gains of $276,000 and $107,000,
respectively. See Note 3 of "Notes to Unaudited Consolidated Financial
Statements."
Interest income on interest-earning deposits increased during the three months
ended December 31, 1997 by $30,000 or 81.1% from the comparable period in 1996.
This increase was primarily due to an increase of $2.0 million or 71.1% in the
average outstanding balance of interest-earning deposits for the quarter ended
December 31, 1997 as compared to the December 31, 1996 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 5.18% for the
quarter ended December 31, 1996 to 5.39% for the quarter ended December 31,
1997.
Interest expense on deposits increased by $86,000 or 4.8% for the quarter
ended December 31, 1997, compared to the same period in 1996 primarily due to a
$4.3 million or 2.7% increase in the average outstanding balance of deposits
during the quarter ended December 31, 1997 as compared to the same period of the
prior year. In addition, the average interest rate paid on savings deposits
increased slightly from 4.39% for the quarter ended December 31, 1996 to 4.48%
for the quarter ended December 31, 1997.
Interest expense on borrowings increased $36,000 or 29.8% for the quarter ended
December 31, 1997 compared to the quarter ended December 31, 1996 due to a $2.4
million or 29.0% increase in the average outstanding balance of FHLB advances.
The average rate paid on borrowings increased slightly from 5.70% for the
quarter ended December 31, 1996 to 5.74% for the quarter ended December 31,
1997.
PROVISION FOR POSSIBLE LOAN LOSSES. The Bank provided $2,000 and $7,000 to its
allowance for possible loan losses for the quarters ended December 31, 1997 and
1996, 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.
-12-
<PAGE> 16
At December 31, 1997 and 1996, the Bank's allowance for possible loan losses
amounted to $1.8 million and $1.9 million, or 1.2% and 1.3% of the total loan
portfolio, respectively. As a percentage of non-performing loans (loans
delinquent 90 days and over), the allowance for possible loan losses was 225.1%
and 287.9% at December 31, 1997 and 1996, 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.
OTHER INCOME. Total other income decreased by $10,000 or 4.3% to $224,000 for
the quarter ended December 31, 1997 as compared to the same period in 1996. This
was primarily due to a $69,000 decrease in net gains on the sale of investments
available for sale. This decrease was partially offset by a $44,000 increase in
fees and service charges, a $12,000 increase in other income and a $3,000
increase in gains on the sale of loans receivable held for sale during the three
months ended December 31, 1997 as compared to the same period in the prior year.
OPERATING EXPENSES. Total operating expenses increased by $133,000 or 14.8%
during the quarter ended December 31, 1997 as compared to the comparable 1996
quarter. This increase was primarily due to an $86,000 increase in professional
fees, a $28,000 increase in federal insurance premiums, a $18,000 increase in
real estate owned expense, a $4,000 increase in other operating expense and
$2,000 increases in both compensation and benefits and data processing expense.
These increases were partially offset by a $7,000 decrease in premises and
occupancy expense. 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 federal insurance premiums was due to there being
no premiums assessed for SAIF insured institutions for the quarterly insurance
period ending December 31, 1996.
INCOME TAX EXPENSE. Income tax expense decreased by $75,000 for the quarter
ended December 31, 1997 as compared to the quarter ended December 31, 1996 as a
result of lower pre-tax income recorded during the quarter ended December 31,
1997.
-13-
<PAGE> 17
COMPARISON OF THE SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996
GENERAL. The Company's net income for the six months ended December 31, 1997 was
$1.4 million compared to $843,000 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 ("SAIF"). For the six months
ended December 31, 1997, operating expenses decreased $956,000 or 33.3% and
other income increased $47,000 or 11.7% compared to the same period in the prior
year. Such benefits were partially offset by a $354,000 or 72.7% increase in
income tax expense and a $49,000 or 1.3% decrease in net interest income. 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 decreased by $49,000 or 1.3% during the
six months ended December 31, 1997 as compared to the same period of the prior
year. The decrease was primarily due to a decrease in the average interest rate
spread from 3.32% for the six months ended December 31, 1996 to 3.08% for the
six months ended December 31, 1997. This decrease was partially offset by a $1.7
million or 6.3% increase in average net earning assets for the six months ended
December 31, 1997 as compared to 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 interest-earning assets from 7.74% for the
six months ended December 31, 1996 to 7.62% for the six months ended December
31, 1997. In addition, the average rate paid on the Bank's interest-bearing
liabilities increased from 4.43% for the six months ended December 31, 1996 to
4.54% for the six months ended December 31, 1997.
Interest income on loans receivable and loans held for sale decreased by
$104,000 or 1.7% during the six months ended December 31, 1997 as compared to
the same period in the prior year. This was primarily due to a $1.8 million or
1.2% decrease in the average outstanding balance of loans receivable for the
six months ended December 31, 1997 as compared to the six months ended
December 31, 1996. In addition, the average yield on loans receivable decreased
slightly from 8.10% for the six months ended December 31, 1996 to 8.06% for the
six months ended December 31, 1997. The decline in the average outstanding
balance was primarily due to increased repayments on loans receivable. The
decline in the average outstanding balance of loans receivable was partially
offset by an $735,000 or 3.1% 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 $25,000 or 4.7% during the six months ended December 31,
1997 as compared to the same period in the prior year. This decrease was
primarily due to a $1.0 million or 6.7% decrease in the average outstanding
balance of mortgage-backed securities during the six months ended December 31,
1997 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 7.04% for the six months ended December 31, 1996 to 7.19% for
the six months ended December 31, 1997. See "Comparison of the Three Months
Ended December 31, 1997 and 1996 - Net Interest Income."
-14-
<PAGE> 18
Interest income on investments and investments available for sale increased
during the six months ended December 31, 1997 by $284,000 or 27.7% from the
comparable period in 1996, primarily due to a $9.4 million or 30.1% increase in
the average outstanding balance of such securities for the six months ended
December 31, 1997 as compared to the six months ended December 31, 1996. This
increase was partially offset by a decrease in the average yield on investment
securities from 6.54% for the six months ended December 31, 1996 to 6.40% for
the six months ended December 31, 1997. 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 December 31, 1997 and 1996 - Net Interest Income."
Interest income on interest-earning deposits increased during the six months
ended December 31, 1997 by $71,000 or 102.9% from the comparable period in 1996.
This increase was primarily due to an increase of $2.5 million or 93.0% in the
average outstanding balance of interest-earning deposits for the six months
ended December 31, 1997 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 5.20% for the
six months ended December 31, 1996 to 5.45% for the six months ended December
31, 1997.
Interest expense on deposits increased by $230,000 or 6.5% for the six
months ended December 31, 1997, compared to the same period in 1996 primarily
due to a $5.9 million or 3.6% increase in the average outstanding balance of
deposits during the six months ended December 31, 1997 as compared to the same
period of the prior year. In addition, the average interest rate paid on savings
deposits increased slightly from 4.37% for the six months ended December 31,
1996 to 4.48% for the six months ended December 31, 1997.
Interest expense on borrowings increased $45,000 or 19.4% for the six months
ended December 31, 1997 compared to the six months ended December 31, 1996 due
to a $1.5 million or 18.7% increase in the average outstanding balance of FHLB
advances. The average rate paid on borrowings increased slightly from 5.65% for
the six months ended December 31, 1996 to 5.67% for the six months ended
December 31, 1997.
PROVISION FOR POSSIBLE LOAN LOSSES. The Bank provided $9,000 and $15,000 to its
allowance for possible loan losses for the six months ended December 31, 1997
and 1996, 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 31, 1997 and 1996 - Provision For Possible Loan Losses."
OTHER INCOME. Total other income increased by $47,000 or 11.7% to $449,000 for
the six months ended December 31, 1997 as compared to the same period in 1996.
This was primarily due to a $62,000 increase in fees and service charges, a
$23,000 increase in other income and a $7,000 increase in gains on the sale of
loans receivable held for sale. These increases were partially offset by a
$45,000 decrease in net gains on the sale of investments available for sale
during the six months ended December 31, 1997 as compared to the same period in
the prior year.
-15-
<PAGE> 19
OPERATING EXPENSES. Total operating expenses decreased by $956,000 or 33.3%
during the six months ended December 31, 1997 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 six months ended December 31, 1996. Also contributing to the
decrease in total operating expenses were decreases of $39,000 in federal
insurance premiums and $4,000 in premises and occupancy expense. These decreases
were partially offset by an increase of $85,000 in professional fees, a $30,000
increase in compensation and benefits, a $26,000 increase in real estate owned
expense and a $5,000 increase in data processing expense. 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 there being no premiums assessed for SAIF insured
institutions for the quarterly insurance period ending December 31, 1996.
INCOME TAX EXPENSE. Income tax expense increased by $354,000 for the six months
ended December 31, 1997 as compared to the six months ended December 31, 1996 as
a result of higher pre-tax income recorded during the six months ended December
31, 1997.
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 $1.4 million or .7% from June 30, 1997 to December 31,
1997. The largest increases were a $4.9 million increase in investment
securities and a $1.2 million increase in loans receivable. These increases were
partially offset by a $2.6 million decrease in interest-earning deposits with
other institutions and a $1.8 million decrease in money market investments. The
largest components of change in liabilities were a $2.0 million increase in FHLB
advances offset by a $1.1 million decrease in savings deposits and a $1.0
million decrease in advance deposits by borrowers for taxes and insurance. The
increase in investment securities and loans receivable was primarily due to the
purchase of securities and origination of loans 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 December 31, 1997, the Bank exceeded all of these
requirements, with Tier I and Tier II ratios of 10.33% and 21.21%, respectively.
-16-
<PAGE> 20
The following table sets forth certain information concerning the Bank's
regulatory capital at December 31, 1997.
<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) $22,283 $22,283 $22,283
Less unrealized securities gains (378) (378) (378)
Plus general valuation allowances (2) -- -- 1,377
------ ------- ------
Total regulatory capital 21,905 21,905 23,282
Minimum required capital 8,481 4,408 8,815
------- ------- ------
Excess regulatory capital $13,424 $17,497 $14,467
======= ======= =======
Minimum required capital to be well
capitalized under Prompt Corrective
Action Provisions $10,601 $ 6,585 $10,975
======= ======= =======
Regulatory capital as a percentage (3) 10.33% 19.96% 21.21%
Minimum required capital percentage 4.00 4.00 8.00
------- ------- ------
Excess regulatory capital percentage 6.33% 15.96% 13.21%
======= ======= =======
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
December 31, 1997.
(2) Limited to 1.25% of risk adjusted assets.
(3) Tier I capital is calculated as a percentage of adjusted total assets of
$212,019. Tier I and Tier II risk-based capital are calculated as a
percentage of adjusted risk-weighted assets of $109,750.
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> 21
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
A. The Annual Meeting of Stockholders was held on November 13, 1997.
B. The following items were submitted to the stockholders of the
Company for approval:
1. To elect two directors for a term of three years or until their
successors have been elected and qualified
Nominees for a three-year term:
Annette D. Ganassi
For: 1,126,854
Withheld: 35,206
Harvey J. Haughton
For: 1,128,837
Withheld: 33,223
2. To ratify the appointment of KPMG Peat Marwick LLP, as the
Company's independent auditors for the fiscal year ending June
30, 1998.
For: 1,135,537
Against: 25,516
Abstain: 1,007
-18-
<PAGE> 22
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
On December 22, 1997, Laurel Capital Group, Inc. filed a form 8-K to
report under "Item 5. Other Events" the declaration of a three-for-two
stock split of the Company's common stock payable on January 16, 1998
to stockholders of record on January 2, 1998. No financial statements
were required to be filed with the Form 8-K.
-19-
<PAGE> 23
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 17, 1998
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000892158
<NAME> LAUREL CAPITAL GROUP, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,182
<INT-BEARING-DEPOSITS> 3,273
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 27,768
<INVESTMENTS-CARRYING> 21,614
<INVESTMENTS-MARKET> 21,739
<LOANS> 147,740
<ALLOWANCE> 1,821
<TOTAL-ASSETS> 213,379
<DEPOSITS> 173,969
<SHORT-TERM> 1,900
<LIABILITIES-OTHER> 3,823
<LONG-TERM> 11,136
0
0
<COMMON> 23
<OTHER-SE> 22,528
<TOTAL-LIABILITIES-AND-EQUITY> 213,379
<INTEREST-LOAN> 5,869
<INTEREST-INVEST> 1,308
<INTEREST-OTHER> 644
<INTEREST-TOTAL> 7,821
<INTEREST-DEPOSIT> 3,778
<INTEREST-EXPENSE> 4,055
<INTEREST-INCOME-NET> 3,766
<LOAN-LOSSES> 9
<SECURITIES-GAINS> 46
<EXPENSE-OTHER> 1,916
<INCOME-PRETAX> 2,290
<INCOME-PRE-EXTRAORDINARY> 2,290
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,449
<EPS-PRIMARY> .67
<EPS-DILUTED> .63
<YIELD-ACTUAL> 3.08
<LOANS-NON> 809
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,943
<CHARGE-OFFS> 144
<RECOVERIES> 13
<ALLOWANCE-CLOSE> 1,821
<ALLOWANCE-DOMESTIC> 1,821
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
