<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended September 30, 1998
OR
( ) Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to
----------- ----------
Commission File No. 0-22124
NSD Bancorp, Inc.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Commonwealth of Pennsylvania 25-1616814
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5004 McKnight Road, Pittsburgh, Pennsylvania 15237
-------------------------------------------- ----------
(Address of principal executive offices) (ZIP Code)
(412) 231-6900
----------------------------------------------------
(Registrant's telephone number, including area code)
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 of the Registrant's common stock as of October
31, 1998 was:
Common Stock, $1.00 par value - 2,600,854 shares outstanding
<PAGE> 2
NSD BANCORP, INC.
FORM 10-Q
For the Quarter Ended September 30, 1998
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheet - September 30, 1998
and December 31, 1997 3
Consolidated Statement of Income - For the Three and
Nine Months Ended September 30, 1998 and 1997 4
Consolidated Statement of Cash Flows - For the Nine
Months Ended September 30, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 22
</TABLE>
<PAGE> 3
NSD BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1998 1997
------------- -----------
<S> <C> <C>
Cash and Due From Banks $ 14,761,510 $ 13,638,396
Federal Funds Sold 10,200,000 2,000,000
Investment Securities Available for Sale (Amortized Cost of
$67,812,112 at September 30, 1998 and $55,290,512 at
December 31, 1997) 70,472,612 58,179,424
Investment Securities Held to Maturity (Market Value of $3,940,791
at September 30, 1998 and $5,459,499 at December 31, 1997) 3,745,923 5,287,319
Loans Available for Sale 3,803,200 3,419,440
Loans, Net of Deferred Fees 221,649,213 233,039,784
Unearned Income (1,663,113) (1,290,389)
Reserve for Loan Losses (2,696,423) (2,914,329)
------------- -------------
Loans, Net 221,092,877 232,254,506
Premises and Equipment, Net 2,820,984 3,095,629
Accrued Interest Receivable 1,909,090 2,116,439
Other Real Estate Owned and Assets
Held for Sale 849,593 369,416
Other Assets 3,282,626 3,388,441
------------- -------------
TOTAL ASSETS $ 329,135,215 $ 320,329,570
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-Interest Bearing $ 52,802,969 $ 57,112,908
Interest Bearing 211,735,771 211,613,706
------------- -------------
Total Deposits 264,538,740 268,726,614
Borrowed Funds:
Short-Term Borrowings 1,000,000 6,000,000
Long-Term Borrowings 25,000,000 9,000,000
------------- -------------
Total Borrowed Funds 26,000,000 15,000,000
Accrued Interest Payable 4,541,939 4,783,086
Other Liabilities 1,969,539 1,480,299
------------- -------------
Total Liabilities 297,050,218 289,989,999
Common Stock $1 Par Value; 10,000,000 shares authorized,
2,602,754 issued and 2,602,354 outstanding at September 30, 1998
and 2,856,999 issued and outstanding at December 31, 1997 2,602,754 2,586,999
Treasury Stock at cost, 400 shares at September 30, 1998 (11,400) 0
Capital Surplus 7,849,959 7,633,361
Net Unrealized Holding Gains on Investment Securities Available for Sale 1,755,931 1,906,683
Retained Earnings 19,887,753 18,212,528
------------- -------------
Total Shareholders' Equity 32,084,997 30,339,571
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 329,135,215 $ 320,329,570
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 4
NSD BANCORP, INC
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended For the Three Months Ended
September 30, September 30,
----------------------------- ----------------------------
NET INTEREST INCOME 1998 1997 1998 1997
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Loans, Including Fees $ 14,700,794 $14,450,589 $ 4,875,896 $ 5,043,769
Investment Securities:
Taxable 2,537,669 2,754,708 924,335 943,006
Tax-Exempt 198,413 361,376 60,162 102,657
Dividends 114,385 88,811 39,454 30,681
Interest Bearing Deposits 14,675 3,790 7,317 989
Federal Funds Sold 584,497 70,917 219,559 3,574
----------- ----------- ----------- -----------
Total Interest Income 18,150,433 17,730,191 6,126,723 6,124,676
----------- ----------- ----------- -----------
Interest on Deposits 6,662,356 6,827,199 2,236,261 2,331,546
Interest on Borrowed Funds:
Repurchase Agreements and Fed Funds Purchased -- 149,137 -- 99,165
Federal Home Loan Bank Advances 881,202 475,195 295,071 136,051
----------- ----------- ----------- -----------
Total Interest Expense 7,543,558 7,451,531 2,531,332 2,566,762
----------- ----------- ----------- -----------
Net Interest Income 10,606,875 10,278,660 3,595,391 3,557,914
----------- ----------- ----------- -----------
Provision for Possible Loan Losses 585,000 525,000 195,000 195,000
----------- ----------- ----------- -----------
Net Interest Income After Provision for Possible Loan Losses 10,021,875 9,753,660 3,400,391 3,362,914
----------- ----------- ----------- -----------
OTHER INCOME
Net Investment Securities Gains 175,975 95,803 32,281 872
Service Fees 572,178 515,384 196,297 184,186
Other Operating Income 428,151 567,178 120,212 136,282
----------- ----------- ----------- -----------
Total Other Income 1,176,304 1,178,365 348,790 321,340
----------- ----------- ----------- -----------
OTHER EXPENSES
Salaries and Employee Benefits 3,243,910 3,144,669 1,093,770 1,057,785
Occupancy Expense 608,661 583,716 207,556 198,408
Equipment and Supplies 761,984 760,096 255,657 262,523
Data Processing 461,545 410,150 157,142 136,035
FDIC Insurance 28,447 38,201 9,332 11,134
Advertising 111,224 116,152 31,276 55,320
Other Operating Expenses 1,578,041 1,728,734 484,873 488,835
----------- ----------- ----------- -----------
Total Other Expenses 6,793,812 6,781,718 2,239,606 2,210,040
----------- ----------- ----------- -----------
Income Before Income Taxes 4,404,367 4,150,307 1,509,575 1,474,214
Provision for Income Taxes 1,405,450 1,347,750 486,000 508,750
----------- ----------- ----------- -----------
NET INCOME $ 2,998,917 $ 2,802,557 $ 1,023,575 $ 965,464
=========== =========== =========== ===========
Other Comprehensive Income (net of tax) (150,752) 539,190 (217,716) (264)
----------- ----------- ----------- -----------
COMPREHENSIVE INCOME 2,848,165 3,341,747 805,859 965,200
=========== =========== =========== ===========
NET INCOME PER COMMON SHARE - BASIC $1.16 $1.09 $0.39 $0.37
=========== =========== =========== ===========
NET INCOME PER COMMON SHARE - DILUTED $1.14 $1.08 $0.39 $0.37
=========== =========== =========== ===========
Common Dividends Declared and Paid Per Share $0.51 $0.49 $0.17 $0.17
=========== =========== =========== ===========
Weighted Average Shares Outstanding - Basic 2,595,475 2,578,789 2,600,184 2,578,789
=========== =========== =========== ===========
Weighted Average Shares Outstanding - Diluted 2,638,825 2,597,845 2,639,376 2,602,399
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 5
NSD BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
For The Nine Months Ended
September 30,
------------------------------
1998 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 2,998,917 $ 2,802,557
Adjustments to Net Income:
Provision for Possible Loan Losses 585,000 525,000
Gains on Investment Securities (175,975) (95,803)
(Gains) Losses on Sale of Other Assets (6,373) 3,965
Gain on Sale of Land -- (167,000)
Depreciation and Amortization 473,144 482,835
Net Premium Amortization and Discount
Accretion on Investment Securities 56,645 42,987
Decrease (Increase) in Accrued Interest Receivable 207,349 (17,587)
(Decrease) Increase in Accrued Interest Payable (241,147) 211,822
Decrease (Increase) in Other Assets 110,152 (889,807)
Deferred Loan Fees, Net (45,843) (12,363)
Increase in Other Liabilities 438,986 556,412
------------ ------------
Net Cash Provided by Operating Activities 4,400,855 3,443,018
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Sales of Investment Securities Available for Sale 13,815,947 9,960,691
Proceeds from Repayments and Maturities of Investment
Securities Available for Sale 27,824,805 12,568,226
Proceeds from Repayments and Maturities of Investment
Securities Held to Maturity 1,527,000 3,185,000
Purchases of Investment Securities Available for Sale (54,047,575) (23,000,897)
Proceeds from Sales of Other Real Estate Owned 292,763 185,259
Net Decrease (Increase) in Loans 9,859,783 (19,949,169)
Net (Increase) Decrease in Premises & Equipment (59,851) 489,828
------------ ------------
Net Cash Used by Investing Activities (787,128) (16,561,062)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net Decrease in Demand and Savings Deposit Accounts (4,684,295) (3,121,278)
Net Increase in Certificates of Deposit 496,421 1,578,040
Net Decrease in Repurchase Agreements -- (1,911,184)
Proceeds from the Exercise of Stock Options 232,353 --
Proceeds from Borrowings 22,000,000 23,500,000
Repayments of Borrowings (11,000,000) (13,060,000)
Cash Dividends Paid in Lieu of Fractional Shares -- (6,026)
Increase in Treasury Stock (11,400) --
Cash Dividends Paid (1,323,692) (1,268,987)
------------ ------------
Net Cash Provided by Financing Activities 5,709,387 5,710,565
------------ ------------
Increase (Decrease) in Cash and Cash Equivalents 9,323,114 (7,407,479)
Cash and Cash Equivalents at Beginning of Year 15,638,396 20,893,654
------------ ------------
Cash and Cash Equivalents at End of Period $ 24,961,510 $ 13,486,175
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 6
NSD Bancorp, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
1. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of NSD Bancorp, Inc. (the
Corporation) include the accounts of the Corporation and its wholly owned
subsidiary, NorthSide Bank (the Bank), and the Bank's wholly owned
subsidiary, 100 Federal Street, Inc. Material intercompany accounts and
transactions have been eliminated. In the opinion of management, the
accompanying consolidated financial statements include all normal recurring
adjustments necessary for a fair presentation of the financial position and
results of operations for the periods presented.
2. EARNINGS PER SHARE
Basic earnings per share are based on the weighted average number of shares
outstanding and common stock equivalents in each period. Diluted earnings
per share are based the sum of the weighted average shares outstanding and
the number of shares of common stock which would be issued assuming the
exercise of stock options during each period.
3. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" was issued. This statement addresses the accounting for
derivative instruments, including certain derivative instruments embedded
in other contracts, and hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the statement
of financial position and measure those instruments at fair value. This
statement is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999.
In February 1998, Statement of Financial Accounting Standard (SFAS) No.
132, "Employers Disclosure about Pension and Other Post-Retirement
Benefits" was issued. This statement will require certain footnote
disclosures related to pension and other retiree benefits. Implementation
of this standard is required for fiscal year 1998.
In June 1997, SFAS No. 130, "Reporting Comprehensive Income" was issued
which requires businesses to disclose comprehensive income and its
components in their general-purpose financial statements. This standard
requires the reporting of all items of comprehensive income in a financial
statement that is displayed with the same prominence as other financial
statements. This statement is effective for fiscal years beginning after
December 15, 1997, with reclassification of comparative financial
6
<PAGE> 7
statements and is applicable to interim periods. The Corporation has chosen
to disclose comprehensive income in a separate income statement, in which
the components of comprehensive income are displayed net of income taxes.
The Corporation currently has one component of other comprehensive income
which includes unrealized gains or losses on securities available for sale
which is detailed as follows for the six months ended June 30, 1998 and
1997:
Other Comprehensive Income:
<TABLE>
<CAPTION>
September 30, 1998 September 30, 1997
----------------------------------- -----------------------------------
Before-Tax Tax Net-of-Tax Before-Tax Tax Net-of-Tax
Amount Expense Amount Amount Expense Amount
---------- ----------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Unrealized gains on securities:
Unrealized holding gains arising
during the period $(228,411) $(77,659) $(150,752) $816,955 $277,765 $539,190
Less: reclassification adjustment
for gain realized in net income 0 0 0 0 0 0
Net unrealized gains (228,411) (77,659) (150,752) 816,955 277,765 539,190
--------- -------- --------- -------- -------- --------
Other Comprehensive Income $(228,411) $(77,659) $(150,752) $816,955 $277,765 $539,190
========= ======== ========= ======== ======== ========
Accumulated Other Comprehensive Income:
1998 1997
---------- ----------
Balance, January 1: $1,906,683 $1,199,083
Other Comprehensive Income, net (150,752) 539,190
---------- ----------
Balance, September 30: $1,755,931 $1,738,273
========== ==========
</TABLE>
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion is an analysis of NSD Bancorp, Inc.'s (the Corporation)
financial condition and results of operations for the nine months ended
September 30, 1998 compared to the nine months ended September 30, 1997 and a
similar analysis for the three months ended September 30, 1998 compared to the
three months ended September 30, 1997.
RESULTS OF OPERATIONS
Net income for the nine months ended September 30, 1998 was $2,998,917, an
increase of $196,360 from $2,802,557 for the nine months ended September 30,
1997. Contributing to the overall increase were increases in net interest
income, net investment securities gains and service fee income of $328,215,
$80,172 and $56,794, respectively, and decreases in FDIC insurance, advertising,
and other operating expenses of $9,754, $4,928 and $150,693, respectively.
Offsetting the increases to net income was a decrease in other operating income
of $139,027 and increases in the provision for loan losses, salaries and
employee benefits, occupancy expense and data processing of $60,000, $99,241,
$24,945 and $51,395, respectively. Return-on-assets (ROA) for the first nine
months of 1998 was 1.24% compared to 1.23% for the first nine months of 1997.
Return-on-equity (ROE) for the first nine months of 1998 was 12.70% compared to
13.49% for the first nine months of 1997.
Net income for the third quarter of 1998 was $1,023,575, an increase of $58,111
from $965,464 for the third quarter of 1997. Contributing to the overall
increase were increases in net interest income, net investment securities gains
and service fee income of $37,477, $31,409 and $12,111, respectively, and
decreases in equipment and supplies, FDIC insurance, advertising and other
operating expenses of $6,866, $1,802, $24,044 and $3,962, respectively.
Offsetting the increases to net income was a decrease in other operating income
of $16,070 and increases in salaries and employee benefits, occupancy expense
and data processing of $35,985, $9,148 and $21,107, respectively. ROA and ROE
for the third quarter of 1998 was 1.24% and 12.61%, respectively, compared to
1.21% and 13.23%, respectively, for the third quarter of 1997.
NET INTEREST INCOME
The primary component of the Corporation's earnings is net interest income,
which is the difference between interest earned on loans, investments and other
earning assets and the interest expense on deposits and other interest bearing
liabilities which fund those assets. Tax-exempt securities and loans carry
pretax yields lower than comparable taxable assets. Therefore, it is more
meaningful to analyze net interest income on a tax-equivalent basis.
8
<PAGE> 9
Total interest income increased $362,188 during the nine months ended September
30, 1998 as compared to the same period in 1997. This increase was due to an
increase in average earning assets of $13,787,529 offset by a decrease in the
yield on average earning assets to 7.99% at September 30, 1998, from 8.20% at
September 30, 1997. Average loans increased $5,393,315 to $229,180,219 at
September 30, 1998. The yield on average loans declined to 8.59% at September
30, 1998 compared to 8.64% at September 30, 1997. Average investment securities
decreased $4,250,793 while the yield also decreased from 6.83% at September 30,
1997 to 6.40% at September 30, 1998. Interest expense increased $92,027 during
the first nine months of 1998 as a result of an increase in average total
interest bearing funds of $6,599,729 offset by a slight decrease in the cost of
funds from 4.38% at September 30, 1997 to 4.31% at September 30, 1998. Average
interest bearing deposits decreased $847,381, consisting of a $3,848,751
decrease in time deposits and increases of $584,996 and $2,416,374 in savings
and money market and interest checking deposits, respectively. Average borrowed
funds increased $7,447,110 for the nine months ended September 30, 1998 over the
same period in 1997.
Total interest income decreased $29,265 during the third quarter of 1998 as
compared to the same period in 1997. Contributing to this decrease in interest
income was a decrease in the yield on average earning assets to 7.89% for the
third quarter of 1998 from 8.17% for the third quarter of 1997 offset by an
increase in average earning assets of $9,042,889. Average loans during the third
quarter of 1998 decreased $7,551,172 over the same period last year. The yield
on average loans declined slightly to 8.61% for the third quarter of 1998 from
8.63% for the third quarter of 1997. Average investment securities increased
$723,026 while the yield decreased to 6.10% during the third quarter of 1998
from 6.60% during the third quarter of 1997. For the third quarter of 1998,
interest expense decreased $35,430 from the third quarter of 1997. This was the
result of a decrease in the yield on average interest bearing funds from 4.43%
in 1997 to 4.29% in 1998 offset by an increase in the average total interest
bearing funds of $4,603,565. Average interest bearing deposits decreased
$2,332,495, consisting of a $4,533,499 decrease in time deposits and increases
of $656,361 and $1,544,643 in savings and money market and interest checking
deposits, respectively. Average borrowed funds increased $6,936,060 for the
three months ended September 30, 1998 over the same period in 1997.
The Corporation's year-to-date net interest margin decreased from 4.80% as of
September 30, 1997 to 4.71% as of September 30, 1998, resulting from a decrease
in the yield on average interest earning assets offset by a slight decrease in
the cost of funds paid on average interest bearing liabilities. The
Corporation's third quarter net interest margin decreased from 4.78% in 1997 to
4.65% in 1998, which was the result of a lower yield on average interest earning
assets offset by a lower cost of funds paid on average interest bearing
liabilities.
PROVISION FOR LOAN LOSSES
The Corporation's provision for loan losses was $585,000 and $195,000 for the
nine and three month periods ended September 30, 1998, respectively, compared to
$525,000 and $195,000,
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<PAGE> 10
respectively, for the same periods in 1997. The Corporation had net charge-offs
of $802,906 and $191,507 for the first nine months of 1998 and 1997,
respectively. The increase in net charge-offs was largely due to commercial
loans charged-off related to one borrower during the second quarter of 1998. The
charge-off of these loans related to this borrower had been anticipated by
management and, therefore, had been placed on non-accrual status and reserves
were set aside for them. An increase in net charge-offs of installment loans is
currently being addressed by management through the modification of existing
underwriting guidelines and more aggressive collection efforts.
The Corporation's net charge-offs by loan type and changes in the reserve for
loan losses were as follows:
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
1998 1997
---------- ----------
<S> <C> <C>
Reserve for Loan Losses at Beginning of Year $2,914,329 $2,578,504
Charge-Offs:
Commercial, Financial and Agricultural Loans 398,681 23,338
Real Estate Mortgage Loans -- 29,932
Installment Loans 398,960 214,257
Lease Financing 36,309 37,268
---------- ----------
Total Charge-Offs 833,950 304,795
Recoveries:
Commercial, Financial and Agricultural Loans -- 80,133
Real Estate Mortgage Loans -- 1,350
Installment Loans 29,844 31,804
Lease Financing 1,200 --
---------- ----------
Total Recoveries 31,044 133,287
---------- ----------
Net Charge-Offs 802,906 191,508
Provision for Loan Losses 585,000 525,000
---------- ----------
Reserve for Loan Losses at End of Period $2,696,423 $2,911,996
========== ==========
</TABLE>
10
<PAGE> 11
OTHER INCOME
Other income decreased $2,061 from $1,178,365 for the nine months ended
September 30, 1997 to $1,176,304 for the nine months ended September 30, 1998.
The sales of certain investment securities available for sale and calls of
certain investment securities being held to maturity during the first nine
months of 1998 resulted in net investment securities gains of $175,975 compared
to $95,803 for the same period in 1997. Service fees increased to $572,178 for
the first nine months of 1998, from $515,384 for the first nine months of 1997.
Of this increase, $50,497 was attributed to increased net NSF charges and
checking account fees during the first nine months of 1998. Other operating
income decreased $139,027. This overall decrease was mainly attributable to the
sale of land owned by the bank in the second quarter of 1997 resulting in a gain
of $167,000. This was offset by an increase in money order fees of $21,764 and
an increase in ATM surcharge fees of $70,305 during the first nine months of
1998 versus the same period of 1997.
Other income increased $27,450 during the third quarter, from $321,340 in 1997
to $348,790 in 1998. The sales of certain investment securities available for
sale and calls of certain investment securities being held to maturity and
increased net NSF charges and checking account fees resulted in increases in net
investment securities gains of $31,409 and service fees of $12,111,
respectively, for the three months ended September 30, 1998 compared to the same
period of 1997. The overall increase was offset by a decrease in other operating
income of $16,070. This decrease was largely the result of a $36,863 gain on the
sale of NorthSide Bank's merchant credit card portfolio that occurred in the
third quarter of 1997 and is offset by an increase in ATM surcharge fee income
of $25,620 during the third quarter of 1998.
OTHER EXPENSES
Total other expenses for the first nine months of 1998 increased $12,094 to
$6,793,812 from $6,781,718 for the first nine months of 1997. Salaries and
employee benefits increased $99,241, reflecting normal salary and benefit
increases, additional staffing to support the growth of the Corporation and the
payroll tax effect of stock options exercised by employees. Occupancy expense
increased $24,945, primarily due to an adjustment in property tax expense
accruals during the first nine months of 1998 compared to the same period in
1997. Equipment and supplies expense increased $1,888 during the first nine
months of 1998 over the same period of 1997. This net increase was primarily the
result of increases in equipment repair expense and general office expense
$23,323 and $5,760, respectively, offset by decreases in equipment maintenance
contracts, vehicle expense and stationary and supplies expense of $7,767, $3,448
and $17,076, respectively. Data processing expense increased $51,395 largely due
to the addition of an automated collection system during the second half of 1997
and partially due to the increase in the number of deposit and loan accounts and
related per-account charges. Other operating expenses decreased $150,693 for the
first nine months of 1998, down from $1,728,734. This decrease was primarily due
to a $250,000 decrease in account-related losses that were
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<PAGE> 12
recognized in 1997 and were largely related to transactions with one of
NorthSide Bank's merchant credit card customers. This decrease was offset by
protection costs, audit expense, correspondent bank service charges, financial
services, and unreimbursed dealer reserve of $15,271, $26,977, $10,139, $13,494
and $44,993, respectively, during the first nine months of 1998 compared to the
same period of 1997.
Total other expenses for the third quarter of 1998 increased $29,566 to
$2,239,606 from $2,210,040 for the third quarter of 1997. Salaries and employee
benefits increased $35,985 which was primarily the result of an increase in the
commercial lending salaries expense, the tax-related expense of stock options
exercised by employees during the third quarter of 1998, and increased medical
insurance costs to the Corporation. Occupancy expense increased $9,148,
primarily due to an adjustment in property tax expense accruals during the third
quarter of 1998 compared to the third quarter of 1997. Equipment and supplies
expense decreased $6,866 which was the result of decreases in equipment
maintenance contracts, depreciation and stationary and supplies offset by an
increase in equipment repair expense during the third quarter of 1998 compared
to the same period in 1997. Data processing expense increased $21,107 largely
due to the increase in the number of deposit and loan accounts and related
per-account charges and increased ATM network expenses. Advertising expense
decreased $24,044 to $31,276 for the third quarter of 1998 from $55,320 for the
third quarter of 1997 which was due to increased promotion-related expenses in
1997. Other operating expenses experienced a net decrease to $484,873 for the
third quarter of 1998, down from $488,835. This net decrease was primarily
comprised of decreases in federal reserve service charges, installment loan
dealer commissions and teller out-of-balance expenses of $13,291, $15,745 and
$9,190, respectively, and primarily offset by increases in telephone expense,
student loan processing fees, asset recovery expense, unreimbursed dealer
reserve, financial services, Pennsylvania shares tax and audit expense of
$6,933, $4,381, $9,699, $14,363, $6,466, $6,604, and $9,664, respectively,
during the third quarter of 1998 compared to the third quarter of 1997.
In 1997, the Corporation initiated the process of analyzing its information
systems and vendor supplied application systems to address any year 2000 issues
relating to its business or operations. The process involves internal testing or
obtaining certification of compliance then, if necessary, modifying or replacing
certain hardware and software systems maintained by the Corporation as well as
those provided by outside vendors. Management expects to have substantially all
systems and applications compliant or near completion of any necessary remedial
actions by the end of 1998. Failure of third parties or the Corporation to
adequately resolve year 2000 issues could cause a disruption of operations
resulting in additional unanticipated operating costs. Credit quality could be
affected to the extent customer's financial positions are weakened as a result
of year 2000 issues. It is estimated that the total cumulative cost of this
process will approximate $570,000 and includes costs associated with modifying
systems as well as the cost of purchasing or leasing certain hardware and
software. Purchased hardware and software will be capitalized in accordance with
normal policy. Personnel and all other costs related to this process are being
expensed as incurred.
12
<PAGE> 13
INCOME TAXES
The Corporation recorded an income tax provision of $1,405,450, for the nine
months ended September 30, 1998 compared to $1,347,750 for the nine months ended
September 30, 1997. The effective tax rates for the nine months ended September
30, 1998 and 1997 were 31.9% and 32.5%, respectively. The decrease in effective
tax rate is due mainly to a tax benefit available to the Corporation related to
the exercise of stock options by employees during 1998.
The Corporation recorded an income tax provision of $486,000, for the three
months ended September 30,1998 compared to $508,750 for the three months ended
September 30, 1997. The effective tax rates for the third quarter of 1998 and
1997 were 32.2% and 34.5%, respectively. The decrease in effective tax rate is
due mainly to a tax benefit available related to the exercise of stock options
by employees during the third quarter of 1998.
FINANCIAL CONDITION
The Corporation's total assets were $329,135,215 at September 30, 1998, an
increase of $8,805,645 from December 31, 1997. The purchases of investment
securities available for sale resulted in an increase of $12,293,188 since
December 31, 1997. The maturity and calls of investment securities held to
maturity resulted in a decrease of $1,541,396. Net loans decreased $11,161,629,
from $232,254,506 at December 31, 1997 to $221,092,877 at September 30, 1998.
Cash and due from banks and federal funds sold increased $1,123,114 and
$8,200,000, respectively, at September 30, 1998.
INVESTMENT SECURITIES
Investment securities available for sale increased $12,293,188 during the first
nine months of 1998. The overall increase was the result of net increases in
mortgage-backed securities and trust-preferred securities of $11,834,546 and
$6,687,047, respectively. These increases were offset by a decrease in U.S.
government agencies of $6,786,816. U.S. treasuries, obligations of state and
political subdivisions and marketable equity securities remained relatively flat
with slight changes in current market value adjustments. Investment securities
held to maturity decreased $1,518,708 during the first nine months of 1998 due
to the maturity or calls of certain investment securities.
13
<PAGE> 14
A summary of investment securities available for sale is as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
-----------------------------------------------------------
GROSS UNREALIZED HOLDING
AMORTIZED --------------------------- FAIR
COST GAINS LOSSES VALUE
----------- ---------- -------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury Securities $ 6,217,718 $ 36,631 $ 2,227 $ 6,252,122
Obligations of U.S. Government Agencies 13,887,205 137,222 -- 14,024,427
Mortgage-Backed Securities 38,447,596 140,117 206,850 38,380,863
Obligations of State and Political Subdivisions 553,603 11,541 -- 565,144
Trust Preferred 6,833,926 39,518 186,397 6,687,047
Marketable Equity Securities 1,872,064 2,690,945 -- 4,563,009
----------- ---------- -------- -----------
$67,812,112 $3,055,974 $395,474 $70,472,612
=========== ========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------------------------------------------
GROSS UNREALIZED HOLDING
AMORTIZED --------------------------- FAIR
COST GAINS LOSSES VALUE
----------- ---------- -------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury Securities $ 6,199,308 $ 30,403 $ 1,413 $ 6,228,298
Obligations of U.S. Government Agencies 20,657,983 174,423 21,163 20,811,243
Mortgage-Backed Securities 26,385,529 204,861 44,073 26,546,317
Obligations of State and Political Subdivisions 544,955 3,694 -- 548,649
Marketable Equity Securities 1,502,737 2,542,180 -- 4,044,917
----------- ---------- -------- -----------
$55,290,512 $2,955,561 $66,649 $58,179,424
=========== ========== ======= ===========
</TABLE>
14
<PAGE> 15
A summary of investment securities held to maturity is as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
-----------------------------------------------------
GROSS UNREALIZED HOLDING
AMORTIZED ------------------------ FAIR
COST GAINS LOSSES VALUE
---------- -------- ------ ----------
<S> <C> <C> <C> <C>
Obligations of State and Political Subdivisions $3,495,923 $171,418 -- $3,667,341
Corporate Bonds 250,000 23,450 -- 273,450
---------- -------- ------ ----------
$3,745,923 $194,868 -- $3,940,791
========== ======== ====== ==========
DECEMBER 31, 1997
-----------------------------------------------------
GROSS UNREALIZED HOLDING
AMORTIZED ------------------------ FAIR
COST GAINS LOSSES VALUE
---------- -------- ------ ----------
<S> <C> <C> <C> <C>
Obligations of State and Political Subdivisions $5,037,319 $172,180 -- $5,209,499
Corporate Bonds 250,000 -- -- 250,000
---------- -------- ------ ----------
$5,287,319 $172,180 -- $5,459,499
========== ======== ====== ==========
</TABLE>
LOANS
Loans, net of deferred fees, decreased to $221,649,213 at September 30, 1998.
Decreases in all loan categories other than lease financing during the first
nine months of 1998 were due to increasingly competitive market pricing and an
increase in the rate of prepayments. The most significant decline occurred in
indirect automobile loans and can be attributed to an overall drop in sales of
automobiles to this point in 1998 versus 1997 and extremely aggressive pricing
by manufacturer-owned finance subsidiaries. Loans available for sale increased
slightly to $3,803,200 at September 30, 1998, from $3,419,440 at December 31,
1997. This increase is attributable to the origination of student loans that are
intended for sale in the secondary market in 1998.
15
<PAGE> 16
The composition of loans is shown in the following table:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31, INCREASE
1998 1997 (DECREASE)
------------ ------------ ------------
<S> <C> <C> <C>
Consumer Loans to Individuals $ 90,767,214 $ 95,357,873 $ (4,590,659)
Mortgage
Non-Residential 28,129,864 29,385,042 (1,255,178)
Residential 52,604,174 55,125,240 (2,521,066)
Commercial, Financial and Agricultural 33,758,352 37,831,540 (4,073,188)
Lines of Credit 5,445,412 5,487,417 (42,005)
Lease Financing 10,547,189 8,900,409 1,646,780
Nonaccrual Loans 754,519 1,355,617 (601,098)
------------ ------------ ------------
222,006,724 233,443,138 (11,436,414)
Deferred Fees (357,511) (403,354) 45,843
------------ ------------ ------------
$221,649,213 $233,039,784 $(11,390,571)
============ ============ ============
</TABLE>
A loan is considered to be impaired when, based upon current information and
events, it is probable that the Corporation will be unable to collect all
amounts due for principal and interest according to the contracted terms of the
loan agreement. At September 30, 1998, there was not an investment recorded in
loans for which impairment has been recognized in accordance with SFAS No. 114
and, consequently, there was no additional required reserve for loan losses,
compared to $471,181 and $235,591, respectively, at December 31, 1997. The
average recorded investment in impaired loans was $282,709 during the first nine
months of 1998. There was no interest income recognized on a cash basis for the
nine months ended September 30, 1998 that was related to impaired loans. There
was no additional reserve required for impaired loans during the first nine
months of 1998.
NON-PERFORMING ASSETS
Non-performing assets decreased slightly from $2,820,685 at December 31, 1997 to
$2,819,798 at September 30, 1998. The increase in other assets held for sale of
$112,731 was related to more aggressive collection and repossession efforts. The
increase in other real estate owned of $485,019 and decrease in non-accrual
loans of $601,098 were largely related to the foreclosure on properties of one
commercial borrower.
16
<PAGE> 17
The following table presents the composition of non-performing assets and past
due loans:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
<S> <C> <C>
Non-accrual Loans $ 754,519 $1,355,617
Other Real Estate Owned 667,152 182,133
Other Assets Held For Sale 182,441 69,710
---------- ----------
Total Non-performing Assets 1,604,112 1,607,460
Loans Past Due 90 Days or More an Still Accruing 1,215,686 1,213,225
---------- ----------
Total Non-performing Assets and Past Due Loans $2,819,798 $2,820,685
========== ==========
</TABLE>
RESERVE FOR LOAN LOSSES
The Corporation's loan loss reserve at September 30, 1998 was $2,696,423 or
1.20% of total loans compared to $2,911,996 or 1.25% of total loans at September
30, 1997. Management anticipates that the reserve for loan losses is adequate to
absorb reasonably foreseeable losses on loans.
The following table details the activity in the loan loss reserve for the nine
months ended September 30, 1998 and 1997:
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
1998 1997
---------- ----------
<S> <C> <C>
Beginning Balance $2,914,329 $2,578,504
Provision 585,000 525,000
Net Charge-Offs 802,906 191,508
---------- ----------
Ending Balance $2,696,423 $2,911,996
========== ==========
Reserve for Loan Losses to Total Loans 1.20% 1.25%
</TABLE>
17
<PAGE> 18
LIABILITIES
Total liabilities were $297,050,218 at September 30, 1998, an increase of
$7,060,219 from $289,989,999 at December 31, 1997. The increase in total
liabilities was primarily the result of a net increase in borrowed funds of
$11,000,000 offset by a decrease in total deposits of $4,187,874.
DEPOSITS
Total deposits decreased $4,187,874 from $268,726,614 at December 31, 1997 to
$264,538,740 at September 30, 1998. The overall decrease was primarily the
result of a decrease of $6,886,830 in total demand deposits offset by an
increase of money market deposits of $2,498,523. Savings and time deposits have
remained at approximately the same level since December 31, 1997.
The composition of deposits is shown in the following table:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31, INCREASE
1998 1997 (DECREASE)
------------ ------------- -----------
<S> <C> <C> <C>
Non-Interest Bearing Demand Deposits $ 52,802,969 $ 57,112,908 $(4,309,939)
Interest Bearing Demand Deposits 27,021,759 29,598,650 (2,576,891)
Savings Deposits 37,310,762 37,520,238 (209,476)
Money Market Deposit Accounts 54,710,571 52,212,048 2,498,523
Time Deposits > $100,000 13,523,255 12,246,082 1,277,173
Time Deposits < $100,000 79,169,424 80,036,688 (867,264)
------------ ------------- -----------
$264,538,740 $ 268,726,614 $(4,187,874)
============ ============= ===========
</TABLE>
REPURCHASE AGREEMENTS
At September 30, 1998, the Corporation had no outstanding repurchase agreements.
BORROWED FUNDS
At September 30, 1998, the Corporation had outstanding borrowings of
$26,000,000, of which $1,000,000 will mature during the next 12 months. From
time to time, the Corporation employs wholesale borrowings as a funding
alternative to retail deposit growth and also for use in
18
<PAGE> 19
executing specific asset-liability management strategies. Borrowings are
collateralized by qualifying securities and loans. These advances are subject to
restrictions or penalties related to prepayments.
SHAREHOLDERS EQUITY
Consolidated shareholders' equity increased $1,745,426 from $30,339,571 at
December 31, 1997 to $32,084,997 at September 30, 1998. This increase is the
result of the retention of earnings and the issuance of new shares of common
stock through the exercise of employee/director stock options. These increases
were offset by a decrease in net unrealized holding gains on securities
available for sale, dividends paid to shareholders and the repurchase of common
stock.
The Corporation continues to maintain a strong capital position in excess of
current regulatory requirements. The Corporation's tier I risk-based capital
ratio at September 30, 1998 was 13.18% compared to 12.53% at December 31, 1997.
The Corporation's total risk-based capital ratio at September 30, 1998 was
14.38% compared to 13.78% at December 31, 1997. Regulatory requirements for tier
I and total risk-based capital ratios are 4.00% and 8.00%, respectively.
MARKET RISK
The Corporation operates as a traditional commercial banking institution
investing in securities and loans with funding primarily provided by retail
deposits and wholesale borrowings. The primary source of revenue is the net
spread between interest earned on investments and the cost of related funding.
Inherent in this business is market risk or the risk of an adverse impact on
earnings from changes in market interest rates. Other types of market risks such
as foreign currency exchange rate risk and commodity price risk do not arise in
the normal course of the Corporation's business activities. The Corporation has
an asset/liability management process in place to monitor and control risks
associated with changing interest rates and the potential impact on future
financial performance. Management's objective is to provide an optimum return
while maintaining an appropriate mix of earning assets and funding sources
consistent with acceptable exposure to market risk. Ultimately, the Corporation
seeks to produce consistent profitability in all interest rate environments.
Simulation modeling enables management to quantify the extent of the
Corporation's interest rate exposure by forecasting how net interest income, and
consequently net income, varies under alternative interest rate scenarios based
on the Corporation's current position. At June 30, 1998, a simulation analysis
assuming a one-time 200 basis point increase in interest rates, results in a
negative impact of less than 1.0% on projected net interest income over a
one-year period. Conversely, a 200 basis point decrease in interest rates
results in an increase in projected net interest income by more than 1.0% over
the same period. These findings are the result of normal projected growth in
interest earning assets and interest related liability levels based on the
19
<PAGE> 20
Corporation's position at June 30, 1998. The results reflect the impact of a
relatively short repricing or rate adjustment period of the Corporation's loan
products and the effect of investment security prepayments matched with the
relative short term nature of interest sensitive deposit and borrowing
liabilities. In a rising rate environment, the increased cost of funding would
be offset by increases in yields on prime rate, LIBOR and Treasury indexed loans
and securities and the repricing of significant cashflow in the consumer loan
portfolio. In a declining rate environment, the declining yield on loans and
securities due to prepayments and index adjustments would be offset by a
shortening of deposit maturities and the repricing of a significant interest
bearing demand deposit portfolio. In any event, a sudden, substantial and
protracted shift in interest rates may adversely impact the Corporation's
earnings to the extent that the interest rates on interest earning assets and
interest earning liabilities change at varying frequencies and market forces may
limit the ability to appropriately respond to such changes.
Interest rate risk is also analyzed by comparing the maturity and repricing
relationships between interest earning assets and interest bearing liabilities
at specific points in time or "GAP" analysis. Management, however, recognizes
that a simplified GAP analysis may not adequately reflect the degree to which
asset and liabilities with similar repricing characteristics react to changes in
market interest rates. In addition, repricing characteristics identified under a
specific GAP position may vary significantly under different interest rate
environments. Therefore, simulation modeling is also performed to evaluate the
extent and direction of the Corporation's interest rate exposure under upward or
downward changes in interest rates.
Based upon historical trends, the Corporation has typically considered all
demand and savings deposits as core deposits and relatively non-rate sensitive.
Such analysis is prepared, as required, presenting interest bearing demand
deposits and savings deposits as repricing within the earliest period. As a
result, a negative, or liability sensitive, cumulative interest GAP position of
$46,382 is present in the first one-year GAP as of June 30, 1998. Results of
simulation modeling and historical experience indicate, however, that the
overall potential effect on net interest income should not have an adverse
result of future financial performance.
There have been no shifts in asset/liability composition or repricing
characteristics of individual portfolios which would materially affect the
results of the analysis performed as of June 30, 1998. Therefore, such analysis
is regarded as a fair representation of the Corporation's market risk as of
September 30, 1998.
INTEREST RATE SENSITIVITY AND LIQUIDITY
The Corporation has an asset/liability management process in place to monitor
and control risks associated with changing interest rates and the potential
impact on future financial performance. Interest rate risk is managed by
analyzing the maturity and repricing relationships between interest earning
assets and interest bearing liabilities at specific points in time or "GAP"
analysis. Management, however, recognizes that a simplified GAP analysis may not
adequately reflect the
20
<PAGE> 21
degree to which assets and liabilities with similar repricing characteristics
react to changes in market interest rates. In addition, repricing
characteristics identified under a specific gap position may vary significantly
under different interest rate environments. Therefore, simulation modeling is
also performed to evaluate the extent and direction of the Corporation's
interest rate exposure under upward or downward changes in interest rates.
Liquidity is the ability to generate cash or obtain funds at reasonable costs to
satisfy customer credit needs and the requirements of depositors. Liquid assets
include cash, federal funds sold, investments maturing in less than one year and
loan repayments. The Corporation is dependent upon the ability to obtain
deposits and purchase funds at reasonable rates. As a result of liquid asset
management and the ability to generate liquidity through deposit funding,
management believes that the Corporation maintains overall liquidity sufficient
to satisfy customer needs. In the event that such measures are not sufficient,
the Corporation has established alternative sources of funds in the form of
borrowing and repurchase agreements.
Operating activities provided net cash of $4,400,855 during the first nine
months of 1998 compared to $3,443,018 during the first nine months of 1997. The
primary source of operating cash flows is net income adjusted for the effect of
non-cash expenses such as the provision for loan losses and depreciation.
Investing activities used net cash of $787,128 during the first nine months of
1998 compared to $16,561,062 during the first nine months of 1997. Cash was
provided through the sales, calls and maturity of investment securities and the
net decrease in loans and used by the purchase of investment securities during
the first nine months of 1998. The first nine months of 1997 provided cash by
sales, repayments, and maturity of investment securities and through the sales
of other real estate owned and land. Cash was used to fund new loan production
and purchase investment securities available for sale.
Financing activities provided net cash of $5,709,387 during the first nine
months of 1998 compared to $5,710,565 during the first nine months of 1997.
During the first nine months of 1998, cash was provided by new Federal Home Loan
Bank advances and used by decreases in total deposits, repayment of matured
advances, payment of quarterly cash dividends to shareholders and the repurchase
of shares of the Corporation's common stock. During the first nine months of
1997, cash was provided by an increase in certificate of deposit accounts
resulting from specific product promotions and through new advances. Cash was
used by the repayment of repurchase agreements, the maturity of advances and
cash dividends paid to shareholders.
21
<PAGE> 22
PART II - OTHER INFORMATION
Items 1-5. Not applicable pursuant to the instructions to Part II.
Items 6. Exhibits and Reports on Forms 8-K.
(a) Exhibits
10.1 Employment agreement, dated July 1, 1993 between NSD
Bancorp, Inc. and Lloyd G. Gibson filed as Exhibit 10D to
NSD Bancorp, Inc.'s 10K for the fiscal year ended December
31, 1993 is incorporated herein by reference.
10.2 NSD Bancorp, Inc. 1994 Stock Option Plan filed as Exhibit
4.1 to NSD Bancorp, Inc.'s Form S-8 filed April 27, 1994 is
incorporated herein by reference.
10.3 NSD Bancorp, Inc. 1994 Non-Employee director Stock Option
Plan filed as Exhibit 4.1 to NSD Bancorp, Inc.'s form S-8
filed April 27, 1994 is incorporated herein by reference.
27 Financial Data Schedule
(b) Reports on Forms 8-K: None
22
<PAGE> 23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NSD BANCORP, INC.
----------------------------------
(Registrant)
Dated: November 10, 1998 /s/ Lloyd G. Gibson
----------------------------------
Lloyd G. Gibson
President and Chief
Executive Officer
Dated: November 10, 1998 /s/ James P. Radick
----------------------------------
James P. Radick
Senior Vice President and
Treasurer (Principal Financial and
Accounting Officer)
23
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL INFORMATION INCORPORATED BY REFERENCE TO THE 1998 THIRD
QUARTER INCORPORATE FINANCIAL REVIEW AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL INFORMATION.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 14,761,510
<INT-BEARING-DEPOSITS> 211,735,771
<FED-FUNDS-SOLD> 10,200,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 70,472,612
<INVESTMENTS-CARRYING> 3,745,923
<INVESTMENTS-MARKET> 3,940,791
<LOANS> 223,789,300
<ALLOWANCE> 2,696,423
<TOTAL-ASSETS> 329,135,215
<DEPOSITS> 264,538,740
<SHORT-TERM> 1,000,000
<LIABILITIES-OTHER> 6,511,478
<LONG-TERM> 25,000,000
0
0
<COMMON> 2,602,754
<OTHER-SE> 29,482,243
<TOTAL-LIABILITIES-AND-EQUITY> 329,135,215
<INTEREST-LOAN> 14,700,794
<INTEREST-INVEST> 2,850,468
<INTEREST-OTHER> 599,171
<INTEREST-TOTAL> 18,150,433
<INTEREST-DEPOSIT> 6,662,356
<INTEREST-EXPENSE> 7,543,558
<INTEREST-INCOME-NET> 10,606,875
<LOAN-LOSSES> 195,000
<SECURITIES-GAINS> 175,975
<EXPENSE-OTHER> 6,793,813
<INCOME-PRETAX> 4,404,367
<INCOME-PRE-EXTRAORDINARY> 2,998,917
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,998,917
<EPS-PRIMARY> 1.16
<EPS-DILUTED> 1.14
<YIELD-ACTUAL> 4.71
<LOANS-NON> 754,519
<LOANS-PAST> 1,215,686
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> (2,914,329)
<CHARGE-OFFS> 833,950
<RECOVERIES> 31,044
<ALLOWANCE-CLOSE> (2,696,423)
<ALLOWANCE-DOMESTIC> (2,696,423)
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 554,000
</TABLE>
