<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, 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 February 1, 2000: 2,133,602 shares
<PAGE> 2
LAUREL CAPITAL GROUP, INC. AND SUBSIDIARY
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Part I - Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Financial Condition as of ..... 1
December 31, 1999 and June 30, 1999
Consolidated Statements of Operations for the Three ..... 2
and Six Months Ended December 31, 1999 and 1998
Consolidated Statement of Stockholders' Equity for the ..... 3
Six Months Ended December 31, 1999
Consolidated Statements of Cash Flows for the Six ..... 4
Months Ended December 31, 1999 and 1998
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 Security Holders ..... 18-19
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,
1999 1999
- -------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
ASSETS
Cash $ 1,796 $ 690
Money market investments -- 3,711
Interest-earning deposits with other institutions 5,234 7,710
Investment securities available for sale 37,751 35,549
Investment securities held to maturity (market value of $18,185 and $12,224) 18,985 12,439
Mortgage-backed securities available for sale 11,488 11,868
Mortgage-backed securities held to maturity (market value of $500 and $1,074) 501 1,072
Loans receivable, held for sale 1,304 1,562
Loans receivable, net of unearned discounts of $1 and $2 155,666 153,256
Allowance for loan losses (1,856) (1,866)
- -------------------------------------------------------------------------------------------------------------------
Loans receivable, net 153,810 151,390
Federal Home Loan Bank Stock 1,281 1,277
Real estate owned 523 377
Accrued interest receivable:
Loans 796 846
Interest-earning deposits and investments 635 492
Mortgage-backed securities 68 71
Office properties and equipment, net of accumulated depreciation 1,437 1,458
Prepaid expenses and sundry assets 1,242 962
- -------------------------------------------------------------------------------------------------------------------
Total Assets $236,851 $231,474
===================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Savings deposits $186,829 $182,118
FHLB Advances 22,427 20,029
Advance deposits by borrowers for taxes and insurance 2,066 3,020
Accrued interest payable 514 500
Accrued income taxes 116 294
Other accrued expenses and sundry liabilities 863 983
- -------------------------------------------------------------------------------------------------------------------
Total Liabilities 212,815 206,944
- -------------------------------------------------------------------------------------------------------------------
Stockholders' Equity
Common stock, $.01 par value; 5,000,000
shares authorized; 2,328,822 and 2,324,298 shares
issued, respectively 23 23
Additional paid-in capital 5,220 5,197
Treasury stock, at cost (192,720 and 152,120 shares) (2,881) (2,270)
Retained earnings 23,001 22,070
Accumulated other comprehensive loss, net of tax (949) (190)
Stock held in deferred compensation trust (378) (300)
- -------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 24,036 24,530
- -------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $236,851 $231,474
===================================================================================================================
</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, 1999 and 1998
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
December 31, December 31,
------------------- ------------------
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Interest Income:
Loans $2,928 $2,960 $5,836 $5,962
Mortgage-backed securities 206 200 424 410
Investments 899 613 1,767 1,273
Interest-earning deposits 20 111 45 212
------ ------ ------ ------
Total interest income 4,053 3,884 8,072 7,857
Interest expense:
Savings deposits 1,794 1,784 3,561 3,592
Borrowings 288 238 560 472
------ ------ ------ ------
Total interest expense 2,082 2,022 4,121 4,064
------ ------ ------ ------
Net interest income before provision
for loan losses 1,971 1,862 3,951 3,793
Provision for loan losses 4 5 9 9
------ ------ ------ ------
Net interest income after provision
for loan losses 1,967 1,857 3,942 3,784
------ ------ ------ ------
Other income:
Service charges 137 150 272 303
Net gain on sale of investments and
mortgage-backed securities available for sale 159 -- 225 --
Gain on the sale of loans held for sale 4 6 11 14
Other operating income 60 47 121 99
------ ------ ------ ------
Total other income 201 362 404 641
------ ------ ------ ------
Operating expenses:
Compensation, payroll taxes and
fringe benefits 470 433 934 902
Premises and occupancy costs 137 111 288 233
Federal insurance premiums 27 26 53 52
Net loss on real estate owned 0 12 40 16
Data processing expense 52 59 104 109
Professional fees 75 49 115 133
Other operating expenses 237 263 464 472
------ ------ ------ ------
Total operating expenses 998 953 1,998 1,917
------ ------ ------ ------
Income before income taxes 1,170 1,266 2,348 2,508
------ ------ ------ ------
Provision for income taxes:
Federal 309 355 613 707
State 56 86 115 171
------ ------ ------ ------
Total income taxes 365 441 728 878
------ ------ ------ ------
Net income $ 805 $ 825 $1,620 $1,630
====== ====== ====== ======
Earnings per share
Basic $ 0.38 $ 0.38 $ 0.75 $ 0.74
====== ====== ====== ======
Diluted $ 0.36 $ 0.36 $ 0.73 $ 0.71
====== ====== ====== ======
Dividends per share $ 0.16 $ 0.15 $ 0.32 $ 0.30
====== ====== ====== ======
</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, 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, 1999 $23 $5,197 $(2,270) $22,070 $(190) $(300) $24,530
Comprehensive income:
Net income -- -- -- 1,620 -- -- 1,620
Other comprehensive loss,
net of tax $(391) -- -- -- -- (759) -- (759)
--- ------ ------- ------- ----- ----- -------
Total comprehensive income -- -- -- 1,620 (759) -- 861
Stock options exercised
(4,524 shares) -- 23 -- -- -- -- 23
Dividends on common stock
at $0.32 per share -- -- -- (689) -- -- (689)
Treasury stock purchased -- -- (611) -- -- -- (611)
Net purchase of stock in
deferred compensation trust -- -- -- -- -- (78) (78)
--- ------ ------- ------- ----- ----- -------
Balance, December 31, 1999 $23 $5,220 $(2,881) $23,001 $(949) $(378) $24,036
=== ====== ======= ======= ===== ===== =======
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
-3-
<PAGE> 6
LAUREL CAPITAL GROUP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
For the Six Months Ended December 31, 1999 and 1998
(In thousands)
<TABLE>
<CAPTION>
1999 1998
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net income: $ 1,620 $ 1,630
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 97 68
Provision for loan losses 9 9
Net loss on sale of real estate owned 29 15
Net gain on sale of investment securities available for sale -- (225)
Gain on the sale of loans held for sale (11) (14)
Amortization of deferred loan fees (59) (79)
Origination of loans held for sale (400) (550)
Proceeds from sale of loans held for sale 669 693
(Increase) decrease in accrued interest receivable (90) 46
Increase in accrued interest payable 14 111
Other - net (223) (255)
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 1,655 1,449
- --------------------------------------------------------------------------------------------------------------------
Investing activities:
Purchase of investment securities held to maturity (9,537) (5,451)
Purchase of investment securities available for sale (3,276) (8,386)
Purchase of mortgage-backed securities held to maturity -- (1,011)
Purchase of mortgage-backed securities available for sale (1,000) --
Proceeds from maturities of investment securities held to maturity 3,000 8,000
Proceeds from maturities of mortgage-backed securities available for sale 159 28
Proceeds from sale of investment securities available for sale -- 2,567
Principal repayments of investment and
mortgage-backed securities available for sale 1,085 1,923
Principal repayments of investment and
mortgage-backed securities held to maturity 571 183
Increase in loans (2,553) (975)
Proceeds from sale of real estate owned 13 85
Net additions to office properties and equipment (76) (18)
- --------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (11,614) (3,055)
- --------------------------------------------------------------------------------------------------------------------
Financing activities:
Net decrease in demand and club accounts (2) (208)
Net increase in time deposit accounts 4,713 2,232
Net increase (decrease) in FHLB advances 2,398 2,998
Decrease in advance deposits by borrowers
for taxes and insurance (954) (965)
Stock options exercised 23 128
Acquisition of treasury stock (611) (317)
Dividends paid (689) (659)
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 4,878 3,209
- --------------------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents (5,081) 1,603
Cash and cash equivalents at beginning of period 12,111 11,377
- --------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 7,030 $12,980
====================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
- --------------------------------------------------------------------------------------------------------------------
Cash paid during the period for:
Interest on savings deposits $ 3,547 $ 3,481
Interest on FHLB advances 612 469
Income taxes 847 880
Transfer of loans to real estate owned 183 --
Cash paid during the period for interest includes interest credited on
deposits of $3,090 and $3,025 for the six months ended December 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
DECEMBER 31, 1999 AND JUNE 30, 1999
(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, 1999. The results of operations for the
three and six months ended December 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") 1999 Annual Report to Stockholders for the year ended June 30, 1999.
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 Six Months Ended
December 31, December 31,
1999 1998 1999 1998
----------------------------- ------------------------------
<S> <C> <C> <C> <C>
Basic earnings per share:
Net income $ 805 $ 825 $ 1,620 $ 1,630
Weighted average shares outstanding 2,140,190 2,193,210 2,150,518 2,196,410
Earnings per share $ 0.38 $ 0.38 $ 0.75 $ 0.74
Diluted earnings per share:
Net income $ 805 $ 825 $ 1,620 $ 1,630
Weighted average shares outstanding 2,140,190 2,193,210 2,150,518 2,196,410
Dilutive effect of employee
stock options 76,943 110,787 82,373 114,727
---------- ---------- ---------- ----------
Diluted weighted shares outstanding 2,217,133 2,303,997 2,232,891 2,311,137
Earnings per share $ 0.36 $ 0.36 $ 0.73 $ 0.71
</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 six
months ended December 31, 1999 and 1998, the Company's total comprehensive
income was $861 and $1,813, respectively. Total comprehensive income is
comprised of net income of $1,620 and $1,630, respectively, and other
comprehensive income (loss) of $(759) and $183, net of tax, respectively. Other
comprehensive income consists of unrealized gains and losses on investment
securities and mortgage-backed securities available for sale, net of tax.
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 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
-6-
<PAGE> 9
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 DECEMBER 31, 1999:
Municipal obligations $21,198 $ 120 $ 1,334 $19,984
FNMA preferred stock 250 10 -- 260
FHLMC preferred stock 250 -- -- 250
FNMA common stock 582 63 21 624
FHLMC common stock 480 37 46 471
SLM Student Loan Trust 681 16 -- 697
Standard Insurance Company stock 4 -- -- 4
Shay Financial Services ARMs Fund 15,661 -- 200 15,461
----------------------------------------------------
39,106 246 1,601 37,751
Mortgage-backed securities available for sale 11,571 103 186 11,488
----------------------------------------------------
Total $50,677 $ 349 $ 1,787 $49,239
====================================================
</TABLE>
<TABLE>
<CAPTION>
At December 31, 1999, the contractual maturities of the debt securities Amortized Fair
available for sale are: Cost Value
-----------------------
<S> <C> <C>
Due after five years through ten years $ 681 $ 697
Due after ten years 21,198 19,984
-----------------------
Total $21,879 $20,681
=======================
</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, Standard
Insurance Company stock and the Shay Financial Services ARMs Fund have
no stated maturity.
Note: There were no sales of investment securities available for
sale during the six months ended December 31, 1999. Gross
realized gains of $225 were recorded during the six months
ended December 31, 1998 on the. sale of such securities.
Proceeds from the sale of investments available for sale
during the six months ended December 31, 1998 were $2,567.
Investment and mortgage-backed 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 DECEMBER 31, 1999:
Corporate notes and commercial paper $18,985 $3 $803 $18,185
Mortgage-backed securities 501 3 4 500
----------------------------------------------------
Total $19,486 $6 $807 $18,685
====================================================
</TABLE>
<TABLE>
<CAPTION>
At December 31, 1999, the contractual maturities of the debt securities Amortized Fair
held to maturity are: Cost Value
-----------------------
<S> <C> <C>
Due in less than one year $ 1,045 $ 1,045
Due after one year through five years 1,499 1,453
Due after five years through ten years 7,497 7,281
Due after ten years 8,944 8,406
-----------------------
Total $18,985 $18,185
=======================
</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>
December 31, June 30,
1999 1999
-------------------------------------------------------------------------
<S> <C> <C>
First mortgage loans:
1 to 4 family dwellings $ 112,037 $ 112,295
Multi-family dwellings 2,384 1,612
Commercial 5,258 5,375
Guaranteed or insured 37 39
Construction and development loans 2,403 2,268
-------------------------------------------------------------------------
122,119 121,589
Consumer loans:
Home improvement loans (net of unearned
discounts of $1 and $2) 9 21
Loans secured by savings accounts 225 276
Commercial loans 1,362 941
Installment loans 33,586 31,802
-------------------------------------------------------------------------
35,182 33,040
-------------------------------------------------------------------------
Loans receivable, net of unearned discounts 157,301 154,629
Less: Allowance for loan losses (1,856) (1,866)
Loans in process (1,331) (987)
Deferred loan fees (304) (386)
-------------------------------------------------------------------------
Loans receivable, net $ 153,810 $ 151,390
==========================================================================
</TABLE>
Changes in the allowance for loan losses for the six months ended
December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
Fiscal Fiscal
2000 1999
---------------------------------------------------------------------------
<S> <C> <C>
Balance at beginning of the fiscal year $1,866 $1,852
Provision for losses 9 9
Charge-offs (27) (29)
Recoveries 8 30
---------------------------------------------------------------------------
Balance at December 31, $1,856 $1,862
===========================================================================
</TABLE>
At December 31, 1999, the recorded investment in loans that are
considered to be impaired under SFAS 114 was $298. Included in this
amount is $89 of impaired loans for which the related allowance for
loan losses is $3, and $209 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 six months ended
December 31, 1999 was approximately $292. For the six months ended
December 31, 1999, the Company recognized interest income on those
impaired loans of $2 which was recognized using the cash basis method
of income recognition.
<TABLE>
<CAPTION>
December 31,
1999 1998
------------------------
<S> <C> <C>
Non-accrual loans $ 536 $ 596
Non-accrual loans as a percent of total loans 0.35% 0.39%
</TABLE>
--------------------------------
All loans 90 days or more past due are reported as non-accrual.
-9-
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
BALANCE SHEET DATA At December 31,
1999 1998
----- ----
(In thousands except per share data)
------------------------------------
(Unaudited)
<S> <C> <C>
Total assets $236,851 $225,917
Money market investments -- 3,626
Interest-earning deposits with other institutions 5,234 8,313
Investment securities available for sale 37,751 31,926
Investment securities held to maturity 18,985 11,478
Mortgage-backed securities available for sale 11,488 9,532
Mortgage-backed securities held to maturity 501 1,879
Loans receivable held for sale 1,304 1,504
Loans receivable, net 153,810 152,169
Savings deposits 186,829 177,414
FHLB advances 22,427 20,031
Retained earnings 23,001 21,171
Stockholders' equity 24,036 24,675
Stockholders' equity per share $ 11.25 $ 11.17
</TABLE>
<TABLE>
<CAPTION>
STATISTICAL PROFILE Three months ended Six months ended
December 31, December 31,
----------------------- -----------------------
1999 1998 1999 1998
----- ----- ---- ----
<S> <C> <C> <C> <C>
Average yield earned on all interest-earning assets 7.12% 7.13% 7.12% 7.22%
Average rate paid on all interest-bearing liabilities 4.20 4.34 4.18 4.36
Average interest rate spread 2.92 2.79 2.94 2.86
Net yield on average interest-earning assets 3.46 3.42 3.48 3.49
Average interest-earning assets as a percentage of
average interest-bearing liabilities 115.74 117.84 115.96 117.64
Return on average assets (1) 1.38 1.48 1.39 1.47
Return on average equity (1) 13.37 13.55 13.37 13.52
Average equity to average assets 10.29 10.93 10.40 10.85
</TABLE>
- ----------------------------
(1) Amounts are annualized.
-10-
<PAGE> 13
COMPARISON OF THE THREE MONTHS ENDED DECEMBER 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 December 31, 1999
was $805,000 compared to $825,000 for the same period in the prior year. The
decrease of $20,000 or 2.4% was primarily the result of a $159,000 or 100.0%
decrease in net gains on the sale of investments and mortgage-backed securities
available for sale and a $45,000 or 4.7% increase in other operating expenses
partially offset by an $109,000 or 5.9% increase in net interest income and a
$76,000 or 17.2% 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 increased by $109,000 or 5.9% during the three months ended
December 31, 1999 as compared to the same period of the prior year. The increase
was primarily due to a $15.5 million or 35.4% increase in the average
outstanding balance of investment securities for the quarter ended December 31,
1999 as compared to the quarter ended December 31, 1998. Also contributing to
the increase in net interest income was an increase in the average interest rate
spread from 2.79% for the quarter ended December 31, 1998 to 2.92% for the
quarter ended December 31, 1999. These increases were partially offset by a $2.0
million or 6.2% decrease in the average outstanding balance of net earning
assets for the quarter ended December 31, 1999 compared to the quarter ended
December 31, 1998.
Interest income on loans receivable and loans held for sale decreased by $32,000
or 1.1% during the three months ended December 31, 1999 as compared to the same
period in the prior year. This decrease was primarily due to a decrease in the
average yield on loans receivable from 7.74% for the quarter ended December 31,
1998 to 7.59% for the quarter ended December 31, 1999. This decrease was
partially offset by an $1.2 million or .8% increase in the average outstanding
balance of loans receivable for the quarter ended December 31, 1999 as compared
to the same period in the prior year. The increase in the average outstanding
balance of loans receivable was due to a $4.3 million or 13.8% increase in the
average outstanding balance of consumer loans which was partially offset by a
$3.0 million or 2.5% decrease in the average outstanding balance of mortgage
loans. The decrease in the average yield was primarily due to lower market
interest rates preceding the period ended December 31, 1999. 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 increased by $6,000 or 3.0% during the quarter
ended December 31, 1999 as compared to the December 31, 1998 quarter. This
increase was primarily due to a $507,000 or 4.3% increase in the average
outstanding balance of mortgage-backed securities during the quarter ended
December 31, 1999 as compared to the December 31, 1998 quarter. This increase
was partially offset by a decrease in the average yield on mortgage-backed
securities from 6.75% for the quarter ended December 31, 1998 to 6.70% for the
quarter ended December 31, 1999. At December 31, 1999, the Bank's portfolio of
mortgage-backed securities available for sale had net unrealized losses of
$83,000. This portfolio consists of fixed and adjustable rate
-11-
<PAGE> 14
securities with an average yield of 6.83% at December 31, 1999. Rising interest
rates would increase the unrealized losses in this portfolio if the fixed rate
securities are 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 6.07% at December 31,
1999. At December 31, 1999, the Bank's portfolio of mortgage-backed securities
held to maturity had net unrealized losses of $1,000. 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 increased during the three months ended December 31, 1999 by $286,000 or
46.7% from the comparable period in 1998, primarily due to a $15.5 million or
35.4% increase in the average outstanding balance of such securities for the
quarter ended December 31, 1999 as compared to the quarter ended December 31,
1998. In addition, the average yield on investment securities increased from
5.54% for the quarter ended December 31, 1998 to 6.00% for the quarter ended
December 31, 1999. 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 December 31, 1999, the Bank's
portfolio of investment securities available for sale and investment securities
held to maturity had net unrealized losses of $1.4 million and $801,000,
respectively. See Note 3 of "Notes to Unaudited Consolidated Financial
Statements."
Interest income on interest-earning deposits decreased during the three months
ended December 31, 1999 by $91,000 or 82.0% from the comparable period in 1998.
This decrease was primarily due to a decrease of $7.5 million or 82.9% in the
average outstanding balance of interest-earning deposits for the quarter ended
December 31, 1999 as compared to the December 31, 1998 quarter. The average
yield on interest-earning deposits increased from 4.84% for the quarter ended
December 31, 1998 to 5.11% for the quarter ended December 31, 1999.
Interest expense on interest-bearing deposits increased by $10,000 or .6% for
the quarter ended December 31, 1999, compared to the same period in 1998. The
increase was primarily due to a $7.4 million or 4.4% increase in the average
outstanding balance of such deposits during the three months ended December 31,
1999 as compared to the same period of the prior year. This increase was
partially offset by a decrease in the average interest rate paid on savings
deposits from 4.22% for the three months ended December 31, 1998 to 4.06% for
the three months ended December 31, 1999.
Interest expense on borrowings increased $50,000 or 21.0% for the quarter ended
December 31, 1999 compared to the quarter ended December 31, 1998 due to a $4.4
million or 25.4% increase in the average outstanding balance of FHLB advances.
The average rate paid on borrowings decreased from 5.54% for the quarter ended
December 31, 1998 to 5.32% for the quarter ended December 31, 1999.
PROVISION FOR LOAN LOSSES. The Bank provided $4,000 and $5,000 to its allowance
for loan losses for the quarters ended December 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 both December 31, 1999 and 1998, the Bank's allowance for loan losses
amounted to $1.9 million or 1.2% 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 months ended December 31,
1999. Thus, the level of the allowance for loan losses is substantially
unchanged from June 30, 1999. 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 $161,000 or 44.5% to $201,000 for
the quarter ended December 31, 1999 as compared to the same period in 1998. This
was primarily due to a $159,000 decrease in net gains on the sale of investments
available for sale and a $13,000 decrease in fees and service charges partially
offset by a $13,000 increase in other operating income. The decrease in net
gains on the sale of investments available for sale was a result of no such
securities being sold during the three months ended December 31, 1999.
OPERATING EXPENSES. Total operating expenses increased by $45,000 or 4.7% during
the quarter ended December 31, 1999 as compared to the comparable quarter in
1998. This increase was primarily due to a $37,000 increase in compensation and
benefits expense, a $26,000 increase in premises and occupancy expense and a
$26,000 increase in professional fees. These increases were partially offset by
a decrease of $26,000 other operating expenses, a $12,000 decrease in net real
estate owned expense and a $7,000 decrease data processing expense. The increase
in professional fees was primarily due to an increase in legal fees incurred in
litigation brought by the Bank against another financial institution.
INCOME TAX EXPENSE. Income tax expense decreased by $76,000 for the quarter
ended December 31, 1999 as compared to the quarter ended December 31, 1998
primarily as a result of a decrease in the effective tax rate from 34.8% for the
1998 quarter to 31.2% 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 SIX MONTHS ENDED DECEMBER 31,1999 AND 1998
GENERAL. The Company's net income for the six months ended December 31, 1999 was
$1,620,000 compared to $1,630,000 for the same period in the prior year. The
decrease of $10,000 or .6% was primarily the result of a $225,000 or 100.0%
decrease in net gains on the sale of investments and mortgage-backed securities
available for sale and a $81,000 or 4.2% increase in other operating expenses
partially offset by an $158,000 or 4.2% increase in net interest income and a
$150,000 or 17.1% decrease in income tax expense. These and other significant
fluctuations are discussed below.
NET INTEREST INCOME. Net interest income increased by $158,000 or 4.2% during
the six months ended December 31, 1999 as compared to the same period of the
prior year. The increase was primarily due to a $14.6 million or 33.1% increase
in the average outstanding balance of investment securities for the six months
ended December 31, 1999 as compared to the six months ended December 31, 1998.
Also contributing to the increase in net interest income was an increase in the
average interest rate spread from 2.86% for the six months ended December 31,
1998 to 2.94% for the six months ended December 31, 1999. These increases were
partially offset by a $1.4 million or 4.3% decrease in the average outstanding
balance of net earning assets for the six months ended December 31, 1999
compared to the six months ended December 31, 1998.
Interest income on loans receivable and loans held for sale decreased by
$126,000 or 2.1% during the six months ended December 31, 1999 as compared to
the same period in the prior year. This decrease was primarily due to a decrease
in the average yield on loans receivable from 7.78% for the six months ended
December 31, 1998 to 7.60% for the six months ended December 31, 1999. This
decrease was partially offset by a $210,000 or .1% increase in the average
outstanding balance of loans receivable for the six months ended December 31,
1999 as compared to the same period in the prior year. The increase in the
average outstanding balance of loans receivable was due to a $4.6 million or
15.3% increase in the average outstanding balance of consumer loans and a $4.4
million or 3.6% decrease 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 increased by $14,000 or 3.4% during the six months
ended December 31, 1999 as compared to the six months ended December 31, 1998.
This increase was primarily due to an $845,000 or 7.1% increase in the average
outstanding balance of mortgage-backed securities during the six months ended
December 31, 1999 as compared to the six months ended December 31, 1998. The
average yield on mortgage-backed securities decreased from 6.89% for the six
months ended December 31, 1998 to 6.66% for the six months ended December 31,
1999. See "Comparison of the Three Months Ended December 31, 1999 and 1998 - Net
Interest Income."
Interest income on investments held to maturity and investments available for
sale increased during the six months ended December 31, 1999 by $494,000 or
38.8% from the comparable period in 1998, primarily due to a $14.6 million or
33.1% increase in the average outstanding balance of such securities for the six
months ended December 31,1999 as compared to the six months ended December 31,
1998. In addition,
-14-
<PAGE> 17
the average yield on investment securities increased from 5.72% for the six
months ended December 31, 1998 to 5.97% for the six months ended December 31,
1999. 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 December 31, 1999 and 1998
- - Net Interest Income."
Interest income on interest-earning deposits decreased during the six months
ended December 31,1999 by $167,000 or 78.8% from the comparable period in 1998.
This decrease was primarily due to a decrease of $6.4 million or 78.2% in the
average outstanding balance of interest-earning deposits for the six months
ended December 31, 1999 as compared to the same period in the prior year. The
average yield on interest-earning deposits decreased from 5.12% for the six
months ended December 31, 1998 to 4.98% for the six months ended December 31,
1999.
Interest expense on interest-bearing deposits decreased by $31,000 or .9% for
the six months ended December 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 4.24% for the six months ended December 31, 1998 to 4.04%
for the six months ended December 31, 1999. This decrease was partially offset
by a $6.9 million or 4.1% increase in the average outstanding balance of such
deposits during the six months ended December 31, 1999 as compared to the same
period of the prior year.
Interest expense on borrowings increased $88,000 or 18.6% for the six months
ended December 31, 1999 compared to the six months ended December 31, 1998 due
to a $3.7 million or 21.9% increase in the average outstanding balance of FHLB
advances. The average rate paid on borrowings decreased from 5.48% for the six
months ended December 31, 1998 to 5.34% for the six months ended December 31,
1999.
PROVISION FOR LOAN LOSSES. The Bank provided $9,000 to its allowance for loan
losses for both the six months ended December 31, 1999 and 1998. 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 December 31, 1999 and 1998 - Provision For Loan Losses."
OTHER INCOME. Total other income decreased by $237,000 or 37.0% to $404,000 for
the six months ended December 31, 1999 as compared to the same period in 1998.
This was primarily due to a $225,000 decrease in net gains on the sale of
investments available for sale and a $31,000 decrease in fees and service
charges partially offset by a $22,000 increase in other operating income. The
decrease in net gains on the sale of investments available for sale was a result
of no such securities being sold during the six months ended December 31, 1999.
OPERATING EXPENSES. Total operating expenses increased by $81,000 or 4.2% during
the six months ended December 31, 1999 as compared to the comparable period in
1998. This increase was primarily due to a $55,000 increase in premises and
occupancy costs, a $32,000 increase in compensation and benefits and a $24,000
increase in net real estate owned expense. These increases were partially offset
by a $18,000 decrease in professional fees, an $8,000 decrease in other
operating expense and a $5,000 decrease in data processing fees. The increase in
premises and occupancy costs was primarily due to an increase in depreciation as
a result of new teller equipment purchased during fiscal 1999.
-15-
<PAGE> 18
INCOME TAX EXPENSE. Income tax expense decreased by $150,000 for the six months
ended December 31, 1999 as compared to the six months ended December 31, 1998
primarily as a result of a decrease in the effective tax rate from 35.0% for the
1998 period to 31.0% 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
In December 1997, the Company established a management committee to identify all
of its functions potentially affected by the year 2000 date change, help ensure
that re-programming or replacement of all critical systems occurred and to
formulate contingency plans in the event any of those critical systems failed.
The Company experienced no known disruptions as a result of the year 2000 date
change and intends to continue monitoring its critical systems at various other
date changes during the year 2000.
FINANCIAL CONDITION AND CAPITAL RESOURCES
Total assets increased by $5.4 million or 2.3% from June 30, 1999 to December
31, 1999. The largest increases were a $6.5 million increase in investment
securities held to maturity, a $2.4 million increase in loans receivable, net, a
$2.2 million increase in securities available for sale and a $1.1 million
increase in cash. These increases were partially offset by a $3.7 million
decrease in money market investments and a $2.5 million decrease in
interest-earning deposits in other institutions. The largest components of
change in liabilities were a $4.7 million increase in deposits and a $2.4
million increase in FHLB advances and partially offset by a $954,000 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 December 31, 1999, the Bank exceeded all of these
requirements, with Tier I and Tier II ratios of 10.03% and 18.99%, respectively.
-16-
<PAGE> 19
The following table sets forth certain information concerning the Bank's
regulatory capital at December 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) $23,525 $23,525 $23,525
Plus general valuation allowances (2) -- -- 1,660
------- ------- -------
Total regulatory capital 23,525 23,525 25,185
Minimum required capital 9,381 5,312 10,624
------- ------- -------
Excess regulatory capital $14,144 $18,213 $14,561
======= ======= =======
Minimum required capital to be well
capitalized under Prompt Corrective
Action Provisions $11,726 $ 7,957 $13,261
======= ======= =======
Regulatory capital as a percentage (3) 10.03% 17.74% 18.99%
Minimum required capital percentage 4.00 4.00 8.00
------- ------- -------
Excess regulatory capital percentage 6.03% 13.74% 10.99%
======= ======= =======
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, 1999.
(2) Limited to 1.25% of risk adjusted assets.
(3) Tier I capital is calculated as a percentage of adjusted total assets of
$234,529. Tier I and Tier II risk-based capital are calculated as a
percentage of adjusted risk-weighted assets of $132,609.
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 1999 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, 1999.
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 11, 1999.
B. The following items were submitted to the stockholders of
the Company for approval:
1. To elect three directors for a term of three years or
until their successors have been elected and qualified
Nominees for a three-year term:
Richard S. Hamilton
For: 1,937,053
Withheld: 101,374
Edwin R. Maus
For: 1,937,180
Withheld: 101,247
-18-
<PAGE> 21
J. Harold Norris
For: 1,934,463
Withheld: 103,964
2. To ratify the appointment of KPMG LLP, as the Company's
independent auditors for the fiscal year ending June 30, 2000.
For: 1,986,648
Against: 51,616
Abstain: 163
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
-19-
<PAGE> 22
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 14, 2000
-20-
<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-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,796
<INT-BEARING-DEPOSITS> 5,234
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 49,239
<INVESTMENTS-CARRYING> 19,486
<INVESTMENTS-MARKET> 18,685
<LOANS> 155,666
<ALLOWANCE> 1,856
<TOTAL-ASSETS> 236,851
<DEPOSITS> 186,829
<SHORT-TERM> 14,793
<LIABILITIES-OTHER> 3,559
<LONG-TERM> 7,634
0
0
<COMMON> 23
<OTHER-SE> 24,013
<TOTAL-LIABILITIES-AND-EQUITY> 236,851
<INTEREST-LOAN> 5,836
<INTEREST-INVEST> 2,191
<INTEREST-OTHER> 45
<INTEREST-TOTAL> 8,072
<INTEREST-DEPOSIT> 3,561
<INTEREST-EXPENSE> 4,121
<INTEREST-INCOME-NET> 3,951
<LOAN-LOSSES> 9
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,998
<INCOME-PRETAX> 2,348
<INCOME-PRE-EXTRAORDINARY> 2,348
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,620
<EPS-BASIC> .75
<EPS-DILUTED> .73
<YIELD-ACTUAL> 3.48
<LOANS-NON> 536
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,866
<CHARGE-OFFS> 27
<RECOVERIES> 8
<ALLOWANCE-CLOSE> 1,856
<ALLOWANCE-DOMESTIC> 1,753
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 103
</TABLE>
