<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, 1999
--------------------
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 May 1, 1999: 2,174,771 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, 1999 (Unaudited) and June 30, 1998
Consolidated Statements of Operations for the Three and ............. 2
Nine Months Ended March 31, 1999 and 1998 (Unaudited)
Consolidated Statements of Stockholders' Equity for the ............. 3
Nine Months Ended March 31, 1999 (Unaudited)
Consolidated Statements of Cash Flows for the Nine .................. 4
Months Ended March 31, 1999 and 1998 (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,
1999 1998
- -----------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
ASSETS
Cash $ 651 $ 753
Money market investments 3,668 3,532
Interest-earning deposits with other institutions 7,934 7,092
Investment securities available for sale 34,385 25,539
Investment securities held to maturity (market value of $8,455 and $14,097) 8,441 14,003
Mortgage-backed securities available for sale 11,179 11,554
Mortgage-backed securities held to maturity (market value of $1,697 and $1,068) 1,687 1,051
Loans receivable, held for sale 1,641 1,633
Loans receivable, net of unearned discounts of $2 and $7 154,338 152,976
Allowance for loan losses (1,862) (1,852)
- -----------------------------------------------------------------------------------------------------------------------
Loans receivable, net 152,476 151,124
Federal Home Loan Bank Stock 1,277 1,277
Real estate owned 196 143
Accrued interest receivable:
Loans 830 854
Interest-earning deposits and investments 351 406
Mortgage-backed securities 70 73
Office properties and equipment, net of accumulated depreciation 1,379 1,322
Prepaid expenses and sundry assets 675 630
- -----------------------------------------------------------------------------------------------------------------------
Total Assets $ 226,840 $ 220,986
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Savings deposits $ 176,765 $ 175,390
FHLB Advances 20,030 17,033
Advance deposits by borrowers for taxes and insurance 2,470 3,143
Accrued interest payable 1,491 523
Accrued income taxes 248 169
Other accrued expenses and sundry liabilities 1,060 1,222
- -----------------------------------------------------------------------------------------------------------------------
Total Liabilities 202,064 197,480
- -----------------------------------------------------------------------------------------------------------------------
Stockholders' Equity
Common stock, $.01 par value; 5,000,000
shares authorized; 2,321,091 and 2,305,055 shares
issued, respectively 23 23
Additional paid-in capital 5,171 4,823
Treasury stock, at cost (140,570 and 113,670 shares) (2,082) (1,626)
Retained earnings 21,614 20,200
Accumulated other comprehensive income, net of tax 326 290
Stock held in deferred compensation trust (276) (204)
- -----------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 24,776 23,506
- -----------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 226,840 $ 220,986
=================================================================================================== ===========
</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, 1999 and 1998
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
-------------------------- --------------------------
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest Income:
Loans $ 2,962 $ 2,961 $ 8,924 $ 8,830
Mortgage-backed securities 188 241 598 745
Investments 628 671 1,901 1,979
Interest-earning deposits 122 97 334 237
------- ------- ------- -------
Total interest income 3,900 3,970 11,757 11,791
Interest expense:
Savings deposits 1,730 1,802 5,322 5,580
Borrowings 265 209 737 486
------- ------- ------- -------
Total interest expense 1,995 2,011 6,059 6,066
------- ------- ------- -------
Net interest income before provision
for loan losses 1,905 1,959 5,698 5,725
Provision for loan losses 5 4 14 13
------- ------- ------- -------
Net interest income after provision
for loan losses 1,900 1,955 5,684 5,712
------- ------- ------- -------
Other income:
Service charges 122 139 425 444
Net gain on sale of investments and
mortgage-backed securities available for sale 0 140 225 186
Gain on the sale of loans held for sale 1 1 15 18
Other operating income 39 44 119 125
------- ------- ------- -------
Total other income 162 324 784 773
------- ------- ------- -------
Operating expenses:
Compensation, payroll taxes and
fringe benefits 454 435 1,356 1,325
Premises and occupancy costs 131 132 369 373
Federal insurance premiums 27 27 79 82
Net loss on real estate owned 5 6 21 20
Data processing expense 50 65 159 192
Professional fees 45 77 178 262
Other operating expenses 194 214 642 618
------- ------- ------- -------
Total operating expenses 906 956 2,804 2,872
------- ------- ------- -------
Income before income taxes 1,156 1,323 3,664 3,613
------- ------- ------- -------
Provision for income taxes:
Federal 306 397 1,013 1,080
State 79 92 250 250
------- ------- ------- -------
Total income taxes 385 489 1,263 1,330
------- ------- ------- -------
Net income $ 771 $ 834 $ 2,401 $ 2,283
======= ======= ======= =======
Earnings per share
Basic $ 0.35 $ 0.38 $ 1.10 $ 1.05
======= ======= ======= =======
Diluted $ 0.34 $ 0.36 $ 1.04 $ 0.99
======= ======= ======= =======
Dividends per share $ 0.15 $ 0.13 $ 0.45 $ 0.31
======= ======= ======= =======
</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, 1999
(In thousands)
<TABLE>
<CAPTION>
Accumulated
Other Stock Held in
Additional Comprehensive Deferred Total
Common Paid-in Treasury Retained Income Compensation Stockholders'
Stock Capital Stock Earnings Net of Tax Trust Equity
-------- ---------- --------- -------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1998 $ 23 $ 4,823 ($ 1,626) $ 20,200 $ 290 ($ 204) $ 23,506
Comprehensive income:
Net income -- -- -- 2,401 -- -- 2,401
Unrealized gains on
securities available
for sale, net of tax -- -- -- -- 36 -- 36
-------- -------- -------- -------- -------- -------- --------
Total comprehensive income -- -- -- 2,401 36 -- 2,437
Stock options exercised
(16,036 shares) -- 129 -- -- -- -- 129
Dividends on common stock
at $0.45 per share -- -- -- (987) -- -- (987)
Treasury stock purchased -- -- (456) -- -- -- (456)
Deferred compensation
payable in common stock -- 219 -- -- -- -- 219
Net purchase of stock in
deferred compensation trust -- -- -- -- -- (72) (72)
-------- -------- -------- -------- -------- -------- --------
Balance, March 31, 1999 $ 23 $ 5,171 ($ 2,082) $ 21,614 $ 326 ($ 276) $ 24,776
======== ======== ======== ======== ======== ======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements
3
<PAGE> 6
LAUREL CAPITAL GROUP, INC. AND SUBSIDIARY
Consolidated Statement of Cash Flows
(Unaudited)
For the Nine Months Ended March 31, 1999 and 1998
(In thousands)
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Net income: $ 2,401 $ 2,283
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 109 112
Provision for loan losses 14 13
Net loss on sale of real estate owned 15 11
Net gain on sale of investment securities available for sale (225) (186)
Gain on the sale of loans held for sale (15) (18)
Amortization of deferred loan fees (131) (156)
Origination of loans held for sale (800) (844)
Proceeds from sale of loans held for sale 807 1,003
Decrease in accrued interest receivable 82 303
Increase in accrued interest payable 968 923
Other - net 30 76
- ----------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 3,255 3,520
- ----------------------------------------------------------------------------------------------------------
Investing activities:
Purchase of investment securities held to maturity (9,891) (14,663)
Purchase of investment securities available for sale (11,114) (9,368)
Purchase of mortgage-backed securities held to maturity (1,011) --
Purchase of mortgage-backed securities available for sale (1,981) --
Proceeds from maturities of investment securities held to maturity 15,500 17,455
Proceeds from maturities of investment securities available for sale 3 1,500
Proceeds from maturities of mortgage-backed securities available for sale 28 81
Proceeds from sale of investment securities available for sale 2,567 3,240
Principal repayments of investment and
mortgage-backed securities available for sale 2,231 1,111
Principal repayments of investment and
mortgage-backed securities held to maturity 375 67
(Increase) decrease in loans (1,390) 183
Proceeds from sale of real estate owned 85 67
Net additions to office properties and equipment (166) (144)
- ----------------------------------------------------------------------------------------------------------
Net cash used by investing activities (4,764) (471)
- ----------------------------------------------------------------------------------------------------------
Financing activities:
Net (decrease) increase in demand and club accounts (407) 193
Net increase (decrease) in time deposit accounts 1,782 (3,724)
Net increase in FHLB advances 2,997 5,990
Decrease in advance deposits by borrowers
for taxes and insurance (673) (713)
Stock options exercised 129 124
Acquisition of treasury stock (456) --
Dividends paid (987) (661)
- ----------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 2,385 1,209
- ----------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents 876 4,258
Cash and cash equivalents at beginning of period 11,377 15,335
- ----------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 12,253 $ 19,593
- ----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
- ----------------------------------------------------------------------------------------------------------
Cash paid during the period for:
Interest on savings deposits $ 4,354 $ 4,657
Interest on FHLB advances 731 462
Income taxes 1,185 1,341
Transfer of loans to real estate owned 155 337
Cash paid during the period for interest includes interest credited on deposits
of $3,700 and $3,982 for the nine months ended March 31, 1999 and 1998, 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, 1999 AND JUNE 30, 1998
(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, 1998 except for the adoption of the
Financial Accounting Standards Board's ("FASB") Statement of Financial
Accounting Standard No. 130, ("SFAS 130") "Reporting Comprehensive Income",
discussed below. The results of operations for the three and nine months ended
March 31, 1999 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") 1998 Annual
Report to Stockholders for the year ended June 30, 1998. All amounts presented
in the Notes to Unaudited Consolidated Financial Statements are presented in
thousands except share and per share data.
EARNINGS PER SHARE
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,
1999 1998 1999 1998
------------------------- --------------------------
<S> <C> <C> <C> <C>
Basic earnings per share:
Net income $771 $834 $2,401 $2,283
Weighted average shares outstanding 2,185,078 2,178,752 2,192,630 2,172,759
Earnings per share $0.35 $0.38 $1.10 $1.05
Diluted earnings per share:
Net income $771 $834 $2,401 $2,283
Weighted average shares outstanding 2,185,078 2,178,752 2,192,630 2,172,759
Dilutive effect of employee
Stock options 98,937 149,461 109,800 123,351
--------- --------- --------- ---------
Diluted weighted shares outstanding 2,284,015 2,328,213 2,302,430 2,296,110
Earnings per share $0.34 $0.36 $1.04 $0.99
</TABLE>
5
<PAGE> 8
SECURITIES
The Company accounts for investments in debt and equity securities in accordance
with FASB Statement No. 115 ("SFAS 115"). SFAS 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 other comprehensive income in
stockholders' equity.
COMPREHENSIVE INCOME
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income."
SFAS No. 130 establishes standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains, and losses) in a full set
of general purpose financial statements. SFAS No. 130 requires that all items
that are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. SFAS No. 130 requires that an
enterprise (a) classify items of other comprehensive income by their nature in a
financial statement and (b) display the accumulated balance of other
comprehensive income separately from retained earnings and additional paid-in
capital in the equity section of a statement of financial position. For the nine
months ended March 31, 1999 and 1998, the Company's total comprehensive income
was $2,437 and $2,403, respectively. Total comprehensive income is comprised of
net income of $2,401 and $2,283, respectively, and other comprehensive income of
$36 and $120, net of tax, respectively. Other comprehensive income consists of
unrealized gains and losses on investment securities and mortgage-backed
securities available for sale.
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 SFAS 114, "Accounting by Creditors for Impairment of a Loan" and SFAS
118, "Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosures", an amendment of SFAS 114, effective July 1, 1995. These statements
address the accounting by creditors for impairment of certain loans. They apply
to all creditors and to all loans, uncollateralized as well as collateralized,
except for large groups of smaller-balance homogeneous loans that are
collectively evaluated for impairment. The Bank considers all one-to-four family
residential mortgage loans and all consumer loans (as presented in Note 4) to be
smaller-balance homogeneous loans. Loans within the scope of these statements
are considered impaired when, based on current information and events, it is
probable that all principal and interest will not be collected in accordance
with the contractual terms of the loans. Management determines the impairment of
loans based on knowledge of the borrower's ability to repay the loan according
to
6
<PAGE> 9
the contractual agreement, the borrower's repayment history and the fair value
of collateral for certain collateral dependent loans. Pursuant to SFAS 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 SFAS 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, 1999:
Municipal obligations $17,456 $303 $135 $17,624
FNMA preferred stock 250 13 --- 263
FHLMC preferred stock 250 15 --- 265
FNMA common stock 598 98 3 693
FHLMC common stock 489 88 4 573
Shay Financial Services
ARMs Fund 15,044 --- 77 14,967
---------------------------------------------------------------------
34,087 517 219 34,385
Mortgage-backed securities 10,983 197 1 11,179
---------------------------------------------------------------------
Total $45,070 $714 $220 $45,564
---------------------------------------------------------------------
At March 31, 1999, the contractual maturities of the debt securities Amortized Fair
available for sale are: Cost Value
------------------------------
Due after five years through ten years $836 $855
Due after ten years 16,620 16,769
------------------------------
Total $17,456 $17,624
==============================
</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 $225 and $186 recorded
during the nine months ended March 31, 1999 and 1998,
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, 1999
and 1998 were $2,567 and $3,240, respectively.
Investment securities held to maturity are comprised of the following:
<TABLE>
<CAPTION>
Amortized Gross Unrealized Fair
Cost Gains Losses Value
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
AT MARCH 31, 1999:
Corporate notes and commercial paper $8,441 $27 $13 $8,455
Mortgage-backed securities 1,687 10 --- 1,697
----------------------------------------------------------------------
Total $10,128 $37 $13 $10,152
----------------------------------------------------------------------
At March 31, 1999, the contractual maturities of the debt securities Amortized Fair
held to maturity are: Cost Value
---------------------------------
Due after one year through five years $1,499 $1,498
Due after five years through ten years 1,500 1,505
Due after ten years 7,129 7,149
---------------------------------
Total $10,128 $10,152
=================================
</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,
1999 1998
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
First mortgage loans:
1 to 4 family dwellings $114,214 $114,905
Multi-family dwellings 1,646 2,474
Commercial 4,850 6,391
Guaranteed or insured 40 67
Construction and development loans 2,308 4,341
-------------------------------------------------------------------------------------------------------------------
123,058 128,178
Consumer loans:
Home improvement loans (net of unearned
discounts of $2 and $7) 31 92
Loans secured by savings accounts 255 335
Commercial loans 996 650
Installment loans 31,428 26,289
-------------------------------------------------------------------------------------------------------------------
32,710 27,366
-------------------------------------------------------------------------------------------------------------------
Loans receivable, net of unearned discounts 155,768 155,544
Less: Allowance for loan losses (1,862) (1,852)
Loans in process (994) (1,953)
Deferred loan fees (436) (615)
-------------------------------------------------------------------------------------------------------------------
Loans receivable, net $152,476 $151,124
===================================================================================================================
Changes in the allowance for loan losses for the nine months ended
March 31, 1999 and 1998 are as follows:
Fiscal Fiscal
1999 1998
-------------------------------------------------------------------------------------------------------------------
Balance at beginning of the fiscal year $1,852 $1,943
Provision for losses 14 13
Charge-offs (49) (147)
Recoveries 45 29
-------------------------------------------------------------------------------------------------------------------
Balance at March 31, $1,862 $1,838
===================================================================================================================
</TABLE>
At March 31, 1999, the recorded investment in loans that are considered
to be impaired under SFAS 114 was $278. Included in this amount is $88
of impaired loans for which the related allowance for loan losses is
$3, and $190 of impaired loans that as a result of write-downs do not
have an allowance for loan losses. The average recorded investment in
impaired loans during the nine months ended March 31, 1999 was
approximately $293. For the nine months ended March 31, 1999, the
Company recognized interest income on those impaired loans of $4 which
was recognized using the cash basis method of income recognition.
<TABLE>
<CAPTION>
March 31,
1999 1998
--------------------------------------------
<S> <C> <C>
Non-accrual loans $515 $551
Non-accrual loans as a percent of total loans 0.34 % 0.38 %
</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,
1999 1998
---- ----
(In thousands except per share data)
------------------------------------
(Unaudited)
<S> <C> <C>
Total assets $226,840 $216,781
Money market investments 3,668 10,444
Interest-earning deposits with other institutions 7,934 8,380
Investment securities available for sale 34,385 20,409
Investment securities held to maturity 8,441 12,707
Mortgage-backed securities available for sale 11,179 12,152
Mortgage-backed securities held to maturity 1,687 1,153
Loans receivable held for sale 1,641 1,686
Loans receivable, net 152,476 144,297
Savings deposits 176,765 171,488
FHLB advances 20,030 17,034
Retained earnings 21,614 19,717
Stockholders' equity 24,776 23,042
Stockholders' equity per share (1) $11.36 $10.54
</TABLE>
<TABLE>
<CAPTION>
STATISTICAL PROFILE Three months ended Nine months ended
March 31, March 31,
-------------------- ------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Average yield earned on all interest-earning assets 7.04 % 7.56 % 7.17 % 7.58 %
Average rate paid on all interest-bearing liabilities 4.27 4.48 4.33 4.52
Average interest rate spread 2.77 3.08 2.84 3.06
Net yield on average interest-earning assets 3.42 3.71 3.46 3.68
Average interest-earning assets as a percentage of
average interest-bearing liabilities 117.47 115.98 117.58 116.01
Return on average assets (2) 1.36 1.55 4.43 1.43
Return on average equity (2) 12.47 14.63 13.16 13.71
Average equity to average assets 10.91 10.57 10.88 10.45
</TABLE>
- -----------------
(1) Amounts reflect the effects of the three-for-two stock split paid on
January 16, 1998.
(2) Amounts are annualized .
10
<PAGE> 13
COMPARISON OF THE THREE MONTHS ENDED MARCH 31,1999 AND 1998
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, 1999 was
$771,000 compared to $834,000 for the same period in the prior year. The
decrease of $63,000 or 7.6% was primarily the result of a $162,000 or 50.0%
decrease in other income and a $54,000 or 2.8% decrease in net interest income
partially offset by a $104,000 or 21.3% decrease in income tax expense and a
$50,000 or 5.2% decrease in other operating expenses. 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 $54,000 or 2.8% during the three months ended March
31, 1999 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 3.08% for
the quarter ended March 31, 1998 to 2.77% for the quarter ended March 31, 1999.
This decrease was partially offset by a $4.0 million or 13.9% increase in
average net earning assets for the quarter ended March 31, 1999 as compared to
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 7.56% for the quarter ended March 31, 1998 to 7.04%
for the quarter ended March 31, 1999. This decrease was partially offset by a
decease in the average rate paid on the Bank's interest-bearing liabilities from
4.48% for the quarter ended March 31, 1998 to 4.27% for the quarter ended March
31, 1999.
Interest income on loans receivable and loans held for sale increased by $1,000
or .03% during the three months ended March 31, 1999 as compared to the same
period in the prior year. The average outstanding balance of loans receivable
increased by $8.3 million or 5.6% for the quarter ended March 31, 1999 as
compared to the same period in the prior year. This increase was mostly offset
by a decrease in the average yield on loans receivable from 8.08% for the
quarter ended March 31, 1998 to 7.65% for the quarter ended March 31, 1999. The
increase in the average outstanding balance of loans receivable was due to a
$7.4 million or 28.6% increase in the average outstanding balance of consumer
loans and a $910,000 or .8% increase in the average outstanding balance of
mortgage loans. The decrease in the average yield was primarily due to lower
market interest rates. 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 held to maturity and mortgage-backed
securities available for sale decreased by $53,000 or 22.0% during the quarter
ended March 31, 1999 as compared to the March 31, 1998 quarter. This decrease
was primarily due to a $2.1 million or 15.3% decrease in the average outstanding
balance of mortgage-backed securities during the quarter ended March 31, 1999 as
compared to the March 31, 1998 quarter. In addition, the average yield on
mortgage-backed securities decreased from 7.17% for the quarter ended March 31,
1998 to 6.60% for the quarter ended March 31, 1999. At March 31, 1999, the
Bank's portfolio of mortgage-backed securities available for sale had net
unrealized gains of $196,000. This portfolio consists of fixed and adjustable
rate securities with an average yield
11
<PAGE> 14
of 6.79% at March 31, 1999. Rising interest rates would reduce the unrealized
gains in this portfolio if the fixed rate securities were not sold. The
mortgage-backed securities held to maturity portfolio consists of two
adjustable-rate and one fixed-rate collateralized mortgage obligations (CMO's)
with an average yield of 6.09% at March 31, 1999. At March 31, 1999, the Bank's
portfolio of mortgage-backed securities held to maturity had net unrealized
gains of $10,000. 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 held to maturity and investments available for
sale decreased during the three months ended March 31, 1999 by $43,000 or 6.4%
from the comparable period in 1998, primarily due to a decrease in the average
yield on investment securities from 6.22% for the quarter ended March 31, 1998
to 5.56% for the quarter ended March 31, 1999. This decrease was partially
offset by a $2.1 million or 4.7% increase in the average outstanding balance of
such securities for the quarter ended March 31, 1999 as compared to 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") of Pittsburgh. At March 31, 1999, the
Bank's portfolio of investment securities available for sale and investment
securities held to maturity had net unrealized gains of $298,000 and $14,000,
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, 1999 by $25,000 or 25.8% from the comparable period in 1998.
This increase was primarily due to an increase of $3.3 million or 45.8% in the
average outstanding balance of interest-earning deposits for the quarter ended
March 31, 1999 as compared to the March 31, 1998 quarter. The average yield on
interest-earning deposits decreased from 5.38% for the quarter ended March 31,
1998 to 4.64% for the quarter ended March 31, 1999.
Interest expense on interest-bearing deposits decreased by $72,000 or 4.0% for
the quarter ended March 31, 1999, compared to the same period in 1998. The
decrease was primarily due to a decrease in the average interest rate paid on
savings deposits from 4.39% for the three months ended March 31, 1998 to 4.14%
for the three months ended March 31, 1999. This decrease was partially offset by
a $3.1 million or 1.9% increase in the average outstanding balance of such
deposits during the three months ended March 31, 1999 as compared to the same
period of the prior year.
Interest expense on borrowings increased $56,000 or 26.8% for the quarter ended
March 31, 1999 compared to the quarter ended March 31, 1998 due to a $4.4
million or 28.5% increase in the average outstanding balance of FHLB advances.
The average rate paid on borrowings decreased from 5.44% for the quarter ended
March 31, 1998 to 5.37% for the quarter ended March 31, 1999.
PROVISION FOR LOAN LOSSES. The Bank provided $5,000 and $4,000 to its allowance
for loan losses for the quarters ended March 31, 1999 and 1998, respectively.
Such provisions were the result of an analysis of the allowance for loan losses
in connection with a review of the Bank's loan portfolio.
12
<PAGE> 15
At March 31, 1999 and 1998, the Bank's allowance for loan losses amounted to
$1.9 and $1.8 million or 1.2% and 1.3%, respectively, of the total loan
portfolio.
A review of the loan portfolio is conducted at least quarterly by management to
determine that the allowance for loan losses is appropriate to absorb estimated
loan losses. In determining the appropriate level of the allowance for loan
losses, consideration is given to general economic conditions, diversification
of loan portfolios, historic loss experience, identified credit problems,
delinquency levels and adequacy of collateral. In consideration of the above,
management has assessed the risks in the loan portfolio and has determined that
no significant changes have occurred during the three and nine months ended
March 31, 1999. Thus, the level of the allowance for loan losses is
substantially unchanged from June 30, 1998. Although management believes that
the current allowance for loan losses is appropriate, 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 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 $162,000 or 50.0% to $162,000 for
the quarter ended March 31, 1999 as compared to the same period in 1998. This
was primarily due to a $140,000 decrease in net gains on the sale of investments
available for sale and a $17,000 decrease in fees and service charges.
OPERATING EXPENSES. Total operating expenses decreased by $50,000 or 8.6% during
the quarter ended March 31, 1999 as compared to the comparable quarter in 1998.
This decrease was primarily due to a $32,000 decrease in professional fees, a
$15,000 decrease in data processing expense and a $20,000 decrease in other
operating expenses. These decreases were partially offset by an increase of
$19,000 in compensation and benefits expense. The decrease in professional fees
was primarily due to a decrease in legal fees incurred in litigation brought by
the Bank against another financial institution.
INCOME TAX EXPENSE. Income tax expense decreased by $104,000 for the quarter
ended March 31, 1999 as compared to the quarter ended March 31, 1998 primarily
as a result of lower pre-tax income. In addition, the effective tax rate
decreased from 37.0% for the 1998 quarter to 33.3% for the 1999 quarter. This
decrease was primarily due to increased purchases of non-taxable municipal
obligations by the Company during the past year.
13
<PAGE> 16
COMPARISON OF THE NINE MONTHS ENDED MARCH 31,1999 AND 1998
GENERAL. The Company's net income for the nine months ended March 31, 1999 was
$2.4 million compared to $2.3 million for the same period in the prior year. The
increase of $118,000 or 5.2% was primarily the result of a $68,000 or 2.4%
decrease in other operating expenses, a $67,000 or 5.0% decrease in income tax
expense and a $11,000 or 1.4% increase in other income partially offset by a
$27,000 or .5% decrease in net interest income. These and other significant
fluctuations are discussed below.
NET INTEREST INCOME. Net interest income decreased by $27,000 or .5% during the
nine months ended March 31, 1999 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 3.06% for the nine months ended March 31, 1998 to 2.84% for the nine
months ended March 31, 1999. This decrease was partially offset by a $4.2
million or 14.6% increase in average net earning assets for the nine months
ended March 31, 1999 as compared to 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 7.58% for the
nine months ended March 31, 1998 to 7.17% for the nine months ended March 31,
1999. This decrease was partially offset by a decease in the average rate paid
on the Bank's interest-bearing liabilities from 4.52% for the nine months ended
March 31, 1998 to 4.33% for the nine months ended March 31, 1999.
Interest income on loans receivable and loans held for sale increased by $94,000
or 1.1% during the nine months ended March 31, 1999 as compared to the same
period in the prior year. This was primarily due to a $7.8 million or 5.4%
increase in the average outstanding balance of loans receivable for the nine
months ended March 31, 1999 as compared to the same period in the prior year.
This increase was partially offset by a decrease in the average yield on loans
receivable from 8.06% for the nine months ended March 31, 1998 to 7.73% for the
nine months ended March 31, 1999. The increase in the average outstanding
balance of loans receivable was due to a $5.9 million or 23.5% increase in the
average outstanding balance of consumer loans and a $1.9 million or 1.6%
increase in the average outstanding balance of mortgage loans. The decrease in
the average yield was primarily due to lower market interest rates. 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 held to maturity and mortgage-backed
securities available for sale decreased by $147,000 or 19.7% during the nine
months ended March 31, 1999 as compared to the nine months ended March 31, 1998.
This decrease was primarily due to a $2.1 million or 15.2% decrease in the
average outstanding balance of mortgage-backed securities during the nine months
ended March 31, 1999 as compared to the nine months ended March 31, 1998. In
addition, the average yield on mortgage-backed securities decreased from 7.18%
for the nine months ended March 31, 1998 to 6.80% for the nine months ended
March 31, 1999. See "Comparison of the Three Months Ended March 31, 1999 and
1998 - Net Interest Income."
Interest income on investments held to maturity and investments available for
sale decreased during the nine months ended March 31, 1999 by $78,000 or 3.9%
from the comparable period in 1998, primarily due to a decrease in the average
yield on investment securities from 6.34% for the nine months ended March 31,
1998 to 5.67% for the nine months ended March 31, 1999. This decrease was
partially offset by a
14
<PAGE> 17
$3.1 million or 7.3% increase in the average outstanding balance of such
securities for the nine months ended March 31, 1999 as compared to 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 FHLB of Pittsburgh. See "Comparison of the Three Months Ended March 31,
1999 and 1998 - Net Interest Income."
Interest income on interest-earning deposits increased during the nine months
ended March 31, 1999 by $97,000 or 40.9% from the comparable period in 1998.
This increase was primarily due to an increase of $3.2 million or 55.1% in the
average outstanding balance of interest-earning deposits for the nine months
ended March 31, 1999 as compared to the same period in the prior year. The
average yield on interest-earning deposits decreased from 5.41% for the nine
months ended March 31, 1998 to 4.91% for the nine months ended March 31, 1999.
Interest expense on interest-bearing deposits decreased by $258,000 or 4.6% for
the nine months ended March 31, 1999, compared to the same period in 1998. The
decrease was primarily due to a decrease in the average interest rate paid on
savings deposits from 4.45% for the nine months ended March 31, 1998 to 4.21%
for the nine months ended March 31, 1999. This decrease was partially offset by
a $1.4 million or .9% increase in the average outstanding balance of such
deposits during the nine months ended March 31, 1999 as compared to the same
period of the prior year.
Interest expense on borrowings increased $251,000 or 51.7% for the nine months
ended March 31, 1999 compared to the nine months ended March 31, 1998 due to a
$6.4 million or 55.0% increase in the average outstanding balance of FHLB
advances. The average rate paid on borrowings decreased from 5.56% for the nine
months ended March 31, 1998 to 5.43% for the nine months ended March 31, 1999.
PROVISION FOR LOAN LOSSES. The Bank provided $14,000 and $13,000 to its
allowance for loan losses for the nine months ended March 31, 1999 and 1998,
respectively. Such provisions were the result of an analysis of the allowance
for loan losses in connection with a review of the Bank's loan portfolio. See
"Comparison of the Three Months Ended March 31, 1999 and 1998 - Provision For
Loan Losses."
OTHER INCOME. Total other income increased by $11,000 or 1.4% to $784,000 for
the nine months ended March 31, 1999 as compared to the same period in 1998.
This was primarily due to a $39,000 increase in net gains on the sale of
investments available for sale partially offset by a $19,000 decrease in fees
and service charges.
OPERATING EXPENSES. Total operating expenses decreased by $68,000 or 2.4% during
the nine months ended March 31, 1999 as compared to the comparable period in
1998. This decrease was primarily due to a $84,000 decrease in professional fees
and a $33,000 decrease in data processing fees partially offset by a $31,000
increase in compensation and benefits and a $24,00 increase in other operating
expense. The decrease in professional fees was primarily due to a decrease in
legal fees incurred in litigation brought by the Bank against another financial
institution.
15
<PAGE> 18
INCOME TAX EXPENSE. Income tax expense decreased by $67,000 for the nine months
ended March 31, 1999 as compared to the nine months ended March 31, 1998 and
resulted in an effective tax rate of 36.8% for the 1998 period as compared to
34.5% for the 1999 period. This decrease was primarily due to increased
purchases of non-taxable municipal obligations by the Company during the past
year.
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.
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 or replacement of all critical systems will be completed by June
30, 1999. The Company has begun testing the identified functions and anticipates
concluding its testing of all affected functions during the quarter ended June
30, 1999. The Company has also contacted its largest borrowers to determine if
they will be materially affected by potential year 2000 problems. To date, the
Company has received confirmations from its primary vendors that corrections
have been made and testing completed to address and correct the issues
associated with the year 2000 problem. The Company continues to formulate
contingency plans for its major functions in the event systems fail and expects
to complete tests on its ability to implement such plans by September 30, 1999.
The Company has contracted to replace various hardware and software during
fiscal 1999 at a cost of approximately $300,000 that will be depreciated over
future periods. 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 based on its plans and testing results to date.
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 $5.9 million or 2.7% from June 30, 1998 to March 31,
1999. The largest increases were a $8.8 million increase in investment
securities available for sale, a $1.4 million increase in loans receivable, net
and a $842,000 increase in interest-bearing deposits with other institutions.
These increases were partially offset by a $5.6 million decrease in investment
securities held to maturity. The largest components of change in liabilities
were a $3.0 million increase in FHLB advances, a $1.4 million increase in
deposits and a $968,000 increase in accrued interest payable partially offset by
a $673,000 decrease in advance deposits by borrowers for taxes and insurance.
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, 1999, the Bank exceeded all of these
requirements, with Tier I and Tier II ratios of 10.55% and 21.19%, respectively.
16
<PAGE> 19
The following table sets forth certain information concerning the Bank's
regulatory capital at March 31, 1999.
<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) $24,276 $24,276 $24,276
Less unrealized securities gains (326) (326) (326)
Plus general valuation allowances (2) - - 1,506
------- ------- ------
Total regulatory capital 23,950 23,950 25,456
Minimum required capital 9,079 4,821 9,641
------- ------- ------
Excess regulatory capital $14,871 $19,129 $15,815
======= ======= =======
Minimum required capital to be well
capitalized under Prompt Corrective
Action Provisions $11,348 $ 7,210 $12,016
======= ======= =======
Regulatory capital as a percentage (3) 10.55% 19.93% 21.19%
Minimum required capital percentage 4.00 4.00 8.00
---- ----- ----
Excess regulatory capital percentage 6.55% 15.93% 13.19%
==== ===== =====
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, 1999.
(2) Limited to 1.25% of risk adjusted assets.
(3) Tier I capital is calculated as a percentage of adjusted total assets
of $226,964. Tier I and Tier II risk-based capital are calculated as a
percentage of adjusted risk-weighted assets of $120,159.
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 1998 Annual Report to
Stockholders. There has been no material change in the Company's asset and
liability position or market value of portfolio equity since June 30, 1998.
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 17, 1999
19
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
STATEMENTS OF FINANCIAL CONDITION CONSOLIDATED STATEMENTS OF OPERATIONS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000892158
<NAME> LAUREL CAPITAL GROUP, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-1-1998
<PERIOD-END> MAR-31-1999
<CASH> 651
<INT-BEARING-DEPOSITS> 7,934
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 45,564
<INVESTMENTS-CARRYING> 10,128
<INVESTMENTS-MARKET> 10,152
<LOANS> 154,338
<ALLOWANCE> 1,862
<TOTAL-ASSETS> 226,840
<DEPOSITS> 176,765
<SHORT-TERM> 2,900
<LIABILITIES-OTHER> 5,269
<LONG-TERM> 17,130
0
0
<COMMON> 23
<OTHER-SE> 24,652
<TOTAL-LIABILITIES-AND-EQUITY> 226,840
<INTEREST-LOAN> 8,924
<INTEREST-INVEST> 1,901
<INTEREST-OTHER> 932
<INTEREST-TOTAL> 11,757
<INTEREST-DEPOSIT> 5,322
<INTEREST-EXPENSE> 6,059
<INTEREST-INCOME-NET> 5,698
<LOAN-LOSSES> 14
<SECURITIES-GAINS> 225
<EXPENSE-OTHER> 2,804
<INCOME-PRETAX> 3,664
<INCOME-PRE-EXTRAORDINARY> 3,664
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,401
<EPS-PRIMARY> 1.10
<EPS-DILUTED> 1.04
<YIELD-ACTUAL> 3.46
<LOANS-NON> 515
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,852
<CHARGE-OFFS> 49
<RECOVERIES> 45
<ALLOWANCE-CLOSE> 1,862
<ALLOWANCE-DOMESTIC> 1,862
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
