<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 June 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 July 31,
1998 was:
Common Stock, $1.00 par value - 2,595,444 shares outstanding
<PAGE> 2
NSD BANCORP, INC.
FORM 10-Q
For the Quarter Ended June 30, 1998
INDEX
Page
Part I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheet - June 30, 1998
and December 31, 1997 3
Consolidated Statement of Income - For the Three and
Six Months Ended June 30, 1998 and 1997 4
Consolidated Statement of Cash Flows - For the Six
Months Ended June 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 21
<PAGE> 3
NSD BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1998 1997
------------- -------------
<S> <C> <C>
Cash and Due From Banks $ 15,424,934 $ 13,638,396
Federal Funds Sold 16,200,000 2,000,000
Investment Securities Available for Sale (Amortized Cost of
$57,483,010 at June 30, 1998 and $55,290,512 at
December 31, 1997) 60,473,383 58,179,424
Investment Securities Held to Maturity (Market Value of $4,115,213
at June 30, 1998 and $5,459,499 at December 31, 1997 3,955,597 5,287,319
Loans Available for Sale 3,569,208 3,419,440
Loans, Net of Deferred Fees 225,948,119 233,039,784
Unearned Income (1,429,008) (1,290,389)
Reserve for Loan Losses (2,606,088) (2,914,329)
------------- -------------
Loans, Net 225,482,231 232,254,506
Premises and Equipment, Net 2,932,282 3,095,629
Accrued Interest Receivable 2,094,786 2,116,439
Other Real Estate Owned and Assets
Held for Sale 866,153 369,416
Other Assets 3,430,496 3,388,441
------------- -------------
TOTAL ASSETS $ 330,859,862 $ 320,329,570
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-Interest Bearing $ 56,552,319 $ 57,112,908
Interest Bearing 212,437,611 211,613,706
------------- -------------
Total Deposits 268,989,930 268,726,614
Borrowed Funds:
Short-Term Borrowings 1,000,000 6,000,000
Long-Term Borrowings 23,000,000 9,000,000
------------- -------------
Total Borrowed Funds 24,000,000 15,000,000
Accrued Interest Payable 4,394,671 4,783,086
Other Liabilities 1,887,529 1,480,299
------------- -------------
Total Liabilities 299,272,130 289,989,999
Common Stock $1 Par Value; Authorized 10,000,000
Shares, Issued and Outstanding 2,593,121 Shares at June
30, 1998 and 2,586,999 Shares at December 31, 1997 2,593,121 2,586,999
Capital Surplus 7,714,760 7,633,361
Net Unrealized Holding Gains on Investment Securities Available for Sale 1,973,647 1,906,683
Retained Earnings 19,306,204 18,212,528
------------- -------------
Total Shareholders' Equity 31,587,732 30,339,571
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 330,859,862 $ 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 Six Months Ended For the Three Months Ended
June 30, June 30,
--------------------------- ---------------------------
NET INTEREST INCOME 1998 1997 1998 1997
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Loans, Including Fees $ 9,824,898 $ 9,406,820 $ 4,921,593 $4,872,452
Investment Securities:
Taxable 1,613,334 1,811,702 834,071 936,849
Tax-Exempt 138,251 258,719 61,008 117,925
Dividends 74,931 58,130 37,920 28,278
Interest Bearing Deposits 7,358 2,800 2,549 1,332
Federal Funds Sold 364,938 67,345 177,939 18,019
----------- ----------- ----------- ----------
Total Interest Income 12,023,710 11,605,516 6,035,080 5,974,855
----------- ----------- ----------- ----------
Interest on Deposits 4,426,095 4,495,654 2,205,402 2,274,369
Interest on Borrowed Funds:
Repurchase Agreements -- 49,972 -- 26,186
Short-Term Borrowings -- 313,407 (86,812) 33,185
Long-Term Borrowings 586,131 25,737 370,387 171,200
----------- ----------- ----------- ----------
Total Interest Expense 5,012,226 4,884,770 2,488,977 2,504,940
----------- ----------- ----------- ----------
Net Interest Income 7,011,484 6,720,746 3,546,103 3,469,915
----------- ----------- ----------- ----------
Provision for Possible Loan Losses 390,000 330,000 195,000 180,000
----------- ----------- ----------- ----------
Net Interest Income After Provision for Possible Loan Losses 6,621,484 6,390,746 3,351,103 3,289,915
----------- ----------- ----------- ----------
OTHER INCOME
Net Investment Securities Gains 143,694 94,931 116,942 94,521
Service Fees 375,881 331,198 194,366 173,616
Other Operating Income 307,939 430,896 119,329 278,042
----------- ----------- ----------- ----------
Total Other Income 827,514 857,025 430,637 546,179
----------- ----------- ----------- ----------
OTHER EXPENSES
Salaries and Employee Benefits 2,150,140 2,086,884 1,057,655 1,043,713
Occupancy Expense 401,105 385,307 203,153 184,270
Equipment and Supplies 506,327 497,574 244,883 260,642
Data Processing 304,403 274,114 144,201 136,445
FDIC Insurance 19,115 27,067 9,665 19,110
Advertising 79,948 82,607 50,345 57,590
Other Operating Expenses 1,093,168 1,218,125 550,213 708,596
----------- ----------- ----------- ----------
Total Other Expenses 4,554,206 4,571,678 2,260,115 2,410,366
----------- ----------- ----------- ----------
Income Before Income Taxes 2,894,792 2,676,093 1,521,625 1,425,728
Provision for Income Taxes 919,450 839,000 496,550 441,080
----------- ----------- ----------- ----------
NET INCOME $ 1,975,342 $ 1,837,093 $ 1,025,075 $ 984,648
=========== =========== =========== ==========
Other Comprehensive Income (net of tax) 66,964 266,866 48,353 539,454
----------- ----------- ----------- ----------
COMPREHENSIVE INCOME 2,042,306 2,103,959 1,073,428 1,524,102
=========== =========== =========== ==========
NET INCOME PER COMMON SHARE - Basic $ 0.76 $ 0.71 $ 0.40 $ 0.38
=========== =========== =========== ==========
NET INCOME PER COMMON SHARE - Diluted $ 0.75 $ 0.71 $ 0.39 $ 0.38
=========== =========== =========== ==========
Common Dividends Declared and Paid Per Share $ 0.34 $ 0.33 $ 0.17 $ 0.16
=========== =========== =========== ==========
Weighted Average Shares Outstanding - Basic 2,593,121 2,578,789 2,593,121 2,578,789
=========== =========== =========== ==========
Weighted Average Shares Outstanding - Diluted 2,638,556 2,595,568 2,638,943 2,597,217
=========== =========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
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NSD BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
For The Six Months Ended
June 30,
---------------------------------
1998 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 1,975,342 $ 1,837,093
Adjustments to Net Income:
Provision for Possible Loan Losses 390,000 330,000
Gains on Investment Securities (143,694) (94,931)
Gains on Sale of Other Assets (1,966) (11,036)
Gain on Sale of Land -- (167,000)
Depreciation and Amortization 318,967 323,703
Net Premium Amortization and Discount
Accretion on Investment Securities 35,412 44,391
Decrease (Increase) in Accrued Interest Receivable 23,080 (249,586)
(Decrease) Increase in Accrued Interest Payable (389,842) 248,752
Increase in Other Assets (140,366) (912,256)
Deferred Loan Fees, Net (26,387) (11,790)
Increase in Other Liabilities 344,236 544,709
------------ ------------
Net Cash Provided by Operating Activities 2,384,782 1,882,049
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Sales of Investment Securities Available for Sale 11,551,239 7,993,975
Proceeds from Repayments and Maturities of Investment
Securities Available for Sale 15,708,514 4,335,948
Proceeds from Repayments and Maturities of Investment
Securities Held to Maturity 1,327,000 2,390,000
Purchases of Investment Securities Available for Sale (29,348,248) (17,621,813)
Proceeds from Sales of Other Real Estate Owned 200,943 185,259
Net Decrease (Increase) in Loans 5,710,556 (18,557,518)
Purchases of Premises and Equipment, Net (57,970) 369,462
------------ ------------
Net Cash Provided (Used) by Investing Activities 5,092,034 (20,904,687)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net Increase in Demand and Savings
Deposit Accounts 1,514,198 3,786,421
Net (Decrease) Increase in Certificates of Deposit (1,250,881) 2,483,758
Net Increase in Repurchase Agreements -- 64,120
Proceeds from the Exercise of Stock Options 128,072 --
Proceeds from Borrowings 15,000,000 7,299,000
Repayments of Borrowings (6,000,000) (960,000)
Cash Dividends Paid in Lieu of Fractional Shares -- (6,026)
Cash Dividends Paid (881,667) (839,163)
------------ ------------
Net Cash Provided by Financing Activities 8,509,722 11,828,110
------------ ------------
Increase (Decrease) in Cash and Cash Equivalents 15,986,538 (7,194,528)
Cash and Cash Equivalents at Beginning of Year 15,638,396 20,893,654
------------ ------------
Cash and Cash Equivalents at End of Period $ 31,624,934 $ 13,699,126
============ ============
</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 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 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 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 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
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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>
June 30, 1998 June 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
xarising during the period $101,461 $34,497 $66,964 $404,343 $137,477 $266,866
Less: reclassification adjustment
for gain realized in net income 0 0 0 0 0 0
Net unrealized gains 101,461 34,497 66,964 404,343 137,477 266,866
-------- ------- ------- -------- -------- --------
Other Comprehensive Income $101,461 $34,497 $66,964 $404,343 $137,477 $266,866
======== ======= ======= ======== ======== ========
</TABLE>
Accumulated Other Comprehensive Income:
1998 1997
---- ----
Balance January 1: $1,906,683 $1,199,083
Other Comprehensive Income, net 66,964 266,866
---------- ----------
Balance June 30: $1,973,647 $1,465,949
========== ==========
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 six months ended June 30,
1998 compared to the six months ended June 30, 1997.
RESULTS OF OPERATIONS
Net income for the six months ended June 30, 1998 was $1,975,342, an increase of
$138,249 from $1,837,093 for the six months ended June 30, 1997. Contributing to
the overall increase were increases in net interest income, net investment
securities gains and service fee income of $290,738, $48,763 and $44,133,
respectively, and decreases in FDIC insurance, advertising, and other operating
expenses of $7,952, $2,659 and $124,957, respectively. Offsetting the increases
to net income was a decrease in other operating income of $122,957 and increases
in the provision for loan losses, salaries and employee benefits, occupancy
expense, equipment and supplies and data processing of $60,000, $63,256,
$15,798, $8,753 and $30,289, respectively. Return-on-assets (ROA) for the first
six months of 1998 was 1.23% compared to 1.21% for the first six months of 1997.
Return-on-equity (ROE) for the first six months of 1998 was 12.74% compared to
13.24% for the first six months of 1997.
Net income for the second quarter of 1998 was $1,025,075, an increase of $40,427
from $984,648 for the second quarter of 1997. Contributing to the overall
increase were increases in net interest income, net investment securities gains
and service fee income of $76,188, $22,421 and $20,750, respectively, and
decreases in equipment and supplies, FDIC insurance, advertising and other
operating expenses of $15,759, $9,445, $7,245 and $158,383, respectively.
Offsetting the increases to net income was a decrease in other operating income
of $158,713 and increases in the provision for loan losses, salary and employee
benefits, occupancy expense and data processing of $15,000, $13,942, $18,883 and
$7,756, respectively. ROA and ROE for the second quarter of 1998 was 1.27% and
13.05%, respectively, compared to 1.26% and 14.01%, respectively, for the second
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.
Total interest income increased $371,990 during the six months ended June 30,
1998 as compared to the same period in 1997. This increase was due to an
increase in average earning
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assets of $16,059,531 offset by a decrease in the yield on earning assets to
8.01% at June 30, 1998, from 8.19% at June 30, 1997. Average loans increased
$11,865,558 to $231,517,446 at June 30, 1998. The average yield on loans
declined to 8.57% at June 30, 1998 compared to 8.65% at June 30, 1997. Average
investment securities decreased $6,838,038 while the average yield also
decreased from 6.87% at June 30, 1997 to 6.48% at June 30, 1998. Interest
expense increased $127,457 during the first six months of 1998 as a result of an
increase in total interest bearing funds of $7,597,812 offset by a slight
decrease in average cost of funds from 4.34% at June 30, 1997 to 4.32% at June
30, 1998. Average interest bearing deposits decreased $104,825, consisting of a
$3,506,378 decrease in time deposits and increases of $549,313 and $2,852,239 in
savings, money market and interest checking deposits, respectively. Average
borrowed funds increased $7,702,636 from June 30, 1997 to June 30, 1998.
Total interest income increased $60,225 during the second quarter of 1998 as
compared to the same period in 1997. Contributing to this increase in interest
income was an increase in average earning assets of $10,561,957 which was offset
by a decrease in the yield on earning assets to 7.93% during the second quarter
of 1998 from 8.18% during the second quarter of 1997. Average loans increased
$5,184,402 which was offset by a decrease in the yield on average loans to 8.53%
during the second quarter of 1998 from 8.66% during the second quarter of 1997.
Average investment securities decreased $6,884,322 while the average yield also
decreased to 6.28% during the second quarter of 1998 from 6.70% during the
second quarter of 1997. Interest expense decreased $15,963 during the second
quarter of 1998 compared to the second quarter of 1997 as a result of a decrease
in the yield on average interest bearing funds from 4.37% in 1997 to 4.28% in
1998 offset by an increase in the average total interest bearing funds of
$3,302,998. Average interest bearing deposits decreased $1,542,716, consisting
of a $4,987,015 decrease in time deposits and increases of $791,400 and
$2,752,899 in savings, money market and interest checking deposits,
respectively. Average borrowed funds increased $4,845,713 for the second quarter
of 1998 compared to the second quarter of 1997.
The Corporation's year-to-date net interest margin decreased from 4.80% as of
June 30, 1997 to 4.71% as of June 30, 1998, resulting from a decrease in the
yield on interest earning assets offset by a slight decrease in the average cost
of funds paid on interest bearing liabilities. The Corporation's second quarter
net interest margin decreased from 4.79% in 1997 to 4.68% in 1998, which was the
result of a lower yield on interest earning assets offset by a lower average
cost of funds paid on interest bearing liabilities.
PROVISION FOR LOAN LOSSES
The Corporation's provision for loan losses was $390,000 and $195,000 for the
six and three month periods ended June 30, 1998, respectively, compared to
$330,000 and $180,000, respectively, for the same periods in 1997. The
Corporation had net charge-offs of $698,241 and $161,694 for the first six
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 nonaccrual
status and reserves were set aside for
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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 SIX MONTHS
ENDED JUNE 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 --
Real Estate Mortgage Loans -- 29,932
Installment Loans 427,662 158,413
Lease Financing 29,944 32,638
---------- ----------
Total Charge-Offs 856,287 220,983
Recoveries:
Commercial, Financial and Agricultural Loans -- 36,870
Real Estate Mortgage Loans -- 900
Installment Loans 158,046 21,519
Lease Financing -- --
---------- ----------
Total Recoveries 158,046 59,289
---------- ----------
Net Charge-Offs 698,241 161,694
Provision for Loan Losses 390,000 330,000
---------- ----------
Reserve for Loan Losses at End of Period $2,606,088 $2,746,810
========== ==========
</TABLE>
OTHER INCOME
Other income decreased $29,511 from $857,025 for the six months ended June 30,
1997 to $827,514 for the six months ended June 30, 1998. The sales of certain
investment securities available for sale and calls of certain investment
securities being held to maturity during the first six months of 1998 resulted
in net investment securities gains of $143,694 compared to $94,931 for the same
period in 1997. Service fees increased to $375,881 for the first six months of
1998, from $331,198 for the first six months of 1997. Of this increase, $26,115
was attributed to increased net NSF charges and checking account fees during the
first six months of 1998. Other
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operating income decreased $122,957. This overall decrease was mainly
attributable to the sale of land owned by the bank in the second quarter of 1997
which resulted in a gain of $167,000. This was offset by an increase in money
order fees of $10,578 and an increase in ATM surcharge fees of $44,685 during
the first six months of 1998 versus the same period of 1997.
Other income decreased $115,542 during the second quarter, from $546,179 in 1997
to $430,637 in 1998. Other operating income decreased $158,713 due to a gain on
the sale of land of $167,000 being recognized in the second quarter of 1997. 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 $22,421 and service fees of $20,750, respectively, for the three months ended
June 30, 1998 compared to the same period of 1997.
OTHER EXPENSES
Total other expenses for the first half of 1998 decreased $17,472 to $4,554,206
from $4,571,678 for the first half 1997. Salaries and employee benefits
increased $63,256, 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 $15,798,
primarily due to an adjustment in property tax expense accruals during the first
half of 1998 compared to the first half of 1997. Equipment and supplies expense
increased $8,753 which was largely the result of increases in equipment
maintenance contracts of $4,897 and equipment repair expense of $13,243 offset
by a decrease in stationary and supplies of $11,945 during the first six months
of 1998 compared to the same period in 1997. Data processing expense increased
$30,289 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 by $124,957 for the first half of 1998, down from $1,218,125. This
decrease was primarily due to a $250,000 decrease in losses which were
recognized in 1997 largely related to transactions with one of NorthSide Bank's
merchant credit card customers. This decrease was offset by increases in
protection costs, audit expense, correspondent bank service charges, financial
services, unreimbursed dealer reserve, and commercial loan expenses of $16,877,
$17,313, $10,964, $7,029, $30,631 and $8,255, respectively, during the first
half of 1998 compared to the first half of 1997.
Total other expenses for the second quarter of 1998 decreased $150,251 to
$2,260,115 from $2,410,366 for the second quarter of 1997. Salaries and employee
benefits increased $13,942, reflecting normal salary and benefit increases,
temporary employee costs and increased medical insurance cost to the
Corporation. Occupancy expense increased $18,883, primarily due to an adjustment
in property tax expense accruals during the second quarter of 1998 compared to
the second quarter of 1997. Equipment and supplies expense decreased $15,759
which was the result of decreases in equipment maintenance contracts, equipment
rental, depreciation and stationary and supplies during the second quarter of
1998 compared to the same period in 1997. Data processing expense increased
$30,289 largely due to the addition of an automated collection
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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. Advertising
expense decreased $7,245 to $50,345 for the second quarter of 1998 from $57,590
for the second quarter of 1997 which was due to the increased promotion-related
expenses in 1997. Other operating expenses decreased to $158,383 for the second
quarter of 1998, down from $708,596. This decrease was primarily due to a
$250,000 decrease in losses which were recognized in 1997 primarily related to
transactions with one of NorthSide Bank's merchant credit card customers. This
decrease was offset by increases in audit expense, correspondent bank service
charges, financial services, unreimbursed dealer reserve, Pennsylvania shares
tax, commercial loan expenses, and holding company-related expenses of $9,470,
$11,787, $5,644, $23,600, $6,604, $8,255 and $23,499, respectively, during the
second quarter of 1998 compared to the second 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 which 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.
INCOME TAXES
The Corporation recorded an income tax provision of $919,450, for the six months
ended June 30, 1998 compared to $839,000 for the six months ended June 30, 1997.
The effective tax rates for the first half of 1998 and 1997 were 31.8% and
31.4%, respectively. The increase in effective tax rate is due mainly to the
decrease in income earned on tax-exempt earning assets.
The Corporation recorded an income tax provision of $496,550, for the three
months ended June 30, 1998 compared to $441,080 for the three months ended June
30, 1997. The effective tax rates for the first half of 1998 and 1997 were 32.6%
and 30.9%, respectively. The increase in effective tax rate is due mainly to the
decrease in income earned on tax-exempt earning assets.
12
<PAGE> 13
FINANCIAL CONDITION
The Corporation's total assets were $330,859,862 at June 30, 1998, an increase
of $10,530,292 from December 31, 1997. The purchases of investment securities
available for sale resulted in an an increase of $2,293,959 since December 31,
1997. The maturities and calls of investment securities held to maturity
resulted in a decrease of $1,331,722. Net loans decreased $6,772,275, from
$232,254,506 at December 31, 1997 to $225,482,231 at June 30, 1998. Cash and due
from banks and federal funds sold increased $1,786,538 and $14,200,000,
respectively, at June 30, 1998.
INVESTMENT SECURITIES
Investment securities available for sale increased $2,293,959 during the first
half of 1998. The increase was due to increases of $861,341 in U.S. government
agencies and by the purchase of $1,971,874 of trust preferred investments,
offset by decreases of $1,142,884 in mortgage backed securities and $4,520 in
obligations of state and political subdivisions which were due to a significant
number of calls resulting from the current interest rate environment. Investment
securities held to maturity decreased during the first six months of 1998 due to
calls or maturities of certain investment securities.
A summary of investment securities available for sale is as follows:
<TABLE>
<CAPTION>
JUNE 30, 1998
--------------------------------------------------------------------
AMORTIZED GROSS UNREALIZED HOLDING FAIR
--------------------------------
COST GAINS LOSSES VALUE
----------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
U.S. Treasury Securities $ 6,198,208 $ 28,422 $ -- $ 6,226,630
Obligations of U.S. Government Agencies 21,575,746 106,449 9,611 21,672,584
Mortgage-Backed Securities 25,361,443 145,037 103,047 25,403,433
Obligations of State and Political 553,676 406 913 553,169
Subdivisions
Trust Preferred 1,971,874 -- -- 1,971,874
Marketable Equity Securities 1,822,063 2,823,630 -- 4,645,693
----------- ---------- ----------- -----------
$57,483,010 $3,103,944 $ 113,571 $60,473,383
=========== ========== =========== ===========
</TABLE>
13
<PAGE> 14
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-------------------------------------------------------------------
AMORTIZED GROSS UNREALIZED HOLDING 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 544,955 3,694 -- 548,649
Subdivisions
Marketable Equity Securities 1,502,737 2,542,180 -- 4,044,917
----------- ---------- ----------- -----------
$55,290,512 $2,955,561 $ 66,649 $58,179,424
=========== ========== =========== ===========
</TABLE>
A summary of investment securities held to maturity is as follows:
<TABLE>
<CAPTION>
JUNE 30, 1998
--------------------------------------------------------------
AMORTIZED GROSS UNREALIZED HOLDING FAIR
--------------------------
COST GAINS LOSSES VALUE
---------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Obligations of State and Political $3,705,597 $139,473 -- $3,845,070
Subdivisions
Corporate Bonds 250,000 $ 20,143 -- 270,143
---------- -------- ---------- ----------
$3,955,597 $159,616 -- $4,115,213
========== ======== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
--------------------------------------------------------------
AMORTIZED GROSS UNREALIZED HOLDING FAIR
--------------------------
COST GAINS LOSSES VALUE
---------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Obligations of State and Political $5,037,319 $172,180 -- $5,209,499
Subdivisions
Corporate Bonds 250,000 -- -- 250,000
---------- -------- ---------- ----------
$5,287,319 $172,180 -- $5,459,499
========== ======== ========== ==========
</TABLE>
14
<PAGE> 15
LOANS
Loans, net of deferred fees, decreased to $225,482,231 at June 30, 1998.
Decreases in nearly all loan categories during the first six months of 1998 were
due to increasingly competitive market pricing and increases in the rate of
prepayments. The most significant decline occured in indirect automobile loans
which 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 subsidairies. Loans available for sale increased slightly to $3,569,208
at June 30, 1998, from $3,419,440 at December 31, 1997. This increase is
attributable to the origination of student loans which are intended for sale in
the secondary market in 1998.
The composition of loans is shown in the following table:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31, INCREASE
1998 1997 (DECREASE)
------------- ------------- -----------
<S> <C> <C> <C>
Consumer Loans to Individuals $ 90,511,821 $ 95,357,873 $(4,846,052)
Mortgage
Non-Residential 26,048,356 29,385,042 (3,336,686)
Residential 55,678,702 55,125,240 553,462
Commercial, Financial and Agricultural 38,086,832 37,831,540 255,292
Lines of Credit 5,395,254 5,487,417 (92,163)
Lease Financing 9,723,500 8,900,409 823,091
Nonaccrual Loans 880,620 1,355,617 (474,997)
------------- ------------- -----------
226,325,085 233,443,138 (7,118,053)
Deferred Fees (376,966) (403,354) 26,388
------------- ------------- -----------
$ 225,948,119 $ 233,039,784 $(7,091,665)
============= ============= ===========
</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 June 30, 1998, there was no recorded investment 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 $403,869 during the first six months
of 1998. There was no interest income related to impaired loans recognized on a
cash basis during the six months ended June 30, 1998. There was no additional
reserve required for impaired loans during the first six months of 1998.
15
<PAGE> 16
NON-PERFORMING ASSETS
Non-performing assets increased slightly from $2,820,685 at December 31, 1997 to
$2,839,420 at June 30, 1998. The increase in other assets held for sale of
$193,874 and decrease in loans past due 90 days or more and still accruing of
$120,578 were related to more aggressive collection and reposession efforts. The
increase in other real estate owned of $420,436 and decrease in nonaccrual loans
of $474,997 were largely related to the foreclosure on properties of one
commercial borrower.
The following table presents the composition of non-performing assets and past
due loans:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
---------- ----------
<S> <C> <C>
Nonaccrual Loans $ 880,620 $1,355,617
Other Real Estate Owned 602,569 182,133
Other Assets Held For Sale 263,584 69,710
---------- ----------
Total Non-Performing Assets 1,746,773 1,607,460
Loans Past Due 90 Days or More and Still
Accruing 1,092,647 1,213,225
---------- ----------
Total Non-Performing Assets and Past Due
Loans $2,839,420 $2,820,685
========== ==========
</TABLE>
RESERVE FOR LOAN LOSSES
The Corporation's loan loss reserve at June 30, 1998 was $2,606,088 or 1.14% of
total loans compared to $2,746,810 or 1.19% of total loans at June 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 six
months ended June 30, 1998 and 1997.
FOR THE SIX MONTHS ENDED
JUNE 30,
1998 1997
---------- ----------
Beginning Balance $2,914,329 $2,578,504
Provision 390,000 330,000
Net Charge-Offs 698,241 161,694
---------- ----------
Ending Balance $2,606,088 $2,746,810
========== ==========
Reserve for Loan Losses to Total Loans 1.14% 1.19%
16
<PAGE> 17
LIABILITIES
Total liabilities were $299,272,130 at June 30, 1998, an increase of $9,282,131
from $289,989,999 at December 31, 1997. The increase in total liabilities was
primarily the result of an increase in borrowed funds of $9,000,000.
DEPOSITS
Total deposits increased $263,316 from $268,726,614 at December 31, 1997 to
$268,989,930 at June 30, 1998. The overall increase was primarily the result of
increases of $2,902,877 and $872,364 in money-market and savings deposits,
respectively, offset by decreases of $2,524,474 and $987,450 in demand and time
deposits, respectively.
The composition of deposits is shown in the following table:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31, INCREASE
1998 1997 (DECREASE)
------------ ------------ -----------
<S> <C> <C> <C>
Non-Interest Bearing Demand Deposits $ 56,552,319 $ 57,112,908 $ (560,589)
Interest Bearing Demand Deposits 27,634,764 29,598,650 (1,963,886)
Savings Deposits 38,392,602 37,520,238 872,364
Money Market Deposit Accounts 55,114,925 52,212,048 2,902,877
Time Deposits + $100,000 13,117,224 12,246,082 871,142
Time Deposits - $100,000 78,178,096 80,036,688 (1,858,592)
------------ ------------ -----------
$268,989,930 $268,726,614 $ 263,316
============ ============ ===========
</TABLE>
REPURCHASE AGREEMENTS
At June 30, 1998, the Corporation had no outstanding repurchase agreements.
BORROWED FUNDS
At June 30, 1998, the Corporation had outstanding borrowings of $24,000,000, of
which $1,000,000 will mature during the next 12 months. The Corporation borrowed
these funds as part of a community investment program to finance mortgage loans
to lower income borrowers and for specific asset-liability management
strategies. Borrowings are collateralized by qualifying securities and loans.
These advances are subject to restrictions or penalties related to prepayments.
17
<PAGE> 18
SHAREHOLDERS EQUITY
Consolidated shareholders' equity increased $1,248,161 from $30,339,571 at
December 31, 1997 to $31,587,732 at June 30, 1998. This increase is the result
of the retention of earnings, the issuance of new shares of common stock due to
the exercise of employee/director stock options and an increase in net
unrealized holding gains on securities available for sale offset by dividends
paid to shareholders.
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 June 30, 1998 was 12.53% compared to 12.53% at December 31, 1997. The
Corporation's total risk-based capital ratio at June 30, 1998 was 13.68%
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 less 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
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
18
<PAGE> 19
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.
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 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
19
<PAGE> 20
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 $2,384,782 during the first six months
of 1998 compared to $1,882,049 during the first six months of 1997. The primary
source of operating cash flows are net income adjusted for the effect of noncash
expenses such as the provision for loan losses and depreciation.
Investing activities provided net cash of $5,092,034 during the first six months
of 1998 compared to using net cash of $20,904,687 during the first six months of
1997. Cash was provided through the sales, calls and maturities of investment
securities and the net decrease in loans and used by the purchase of investment
securities and premises and equipment during the first quarter of 1998. The
first six months of 1997 provided cash by sales, repayments, and maturities of
investment securities and used cash by reinvesting in investment securities
available for sale. Cash was also provided by net purchases of premises and
equipment and used to fund the net increase in loan volume.
Financing activities provided net cash of $8,509,722 during the first half of
1998 compared to $11,828,110 during the first half of 1997. During the first
quarter of 1998, cash was provided by an increase in demand and savings deposits
and borrowings and used by a decrease in certificates of deposits, matured
borrowings and dividends paid to shareholders. During the first six months of
1997, cash was provided by an increase in certificate of deposit accounts and
non-interest demand deposit accounts resulting from specific product promotions.
Cash was also provided by borrowings and repurchase agreements and used by
matured borrowings and cash dividends paid to shareholders.
20
<PAGE> 21
PART II - OTHER INFORMATION
Items 1-3. Not applicable pursuant to the instructions to Part II.
Item 4. Submission of Matters for a Vote of Security Holders
An annual meeting of shareholders of the Corporation was held
on April 28, 1998, for the purpose of (a)electing 5 directors,
(b)ratifying the appointment of Deloitte & Touche, L.L.P.,
Certified Public Accountants, as the independent auditors and
accountants for the Corporation, (c)amending Article 4 of the
Articles of Incorporation to increase the number of authorized
shares of the Corporation's common stock from 5,000,000 shares
to 10,000,000 shares, and (d)adding a new Article (Article 12)
to the Articles of Incorporation which would provide that
fundamental transactions such as a merger, acquisition or sale
of all or substantially all of the assets of the Corporation,
requires the approval of 75% of the outstanding shares of the
Corporation unless first approved by 75% of the Board of
Directors, in which case the approval of only 51% of the
outstanding shares is required to approve the transaction and
would provide that this new Article shall not be amended
except by the affirmative vote of 75% of the outstanding
shares.
(a) All 5 nominees were elected and the votes for and
against/withheld were as follows:
NOMINEE FOR AGAINST
Nicholas C. Geonopulos 1,994,521 4,779
Lloyd G. Gibson 1,993,321 5,979
Charles S. Lenzner 1,994,521 4,779
David W. McConnell 1,994,521 4,779
Kenneth L. Rall 1,994,521 4,779
(b) The appointment of Deloitte & Touche, L.L.P., as independent
auditors and accountants was ratified with a vote of 1,916,211
for and 9,600 against/witheld or abstaining.
(c) The amendment of Article 4 of the Articles of Incorporation
was ratified with a vote of 1,861,423 for and 64,388
against/withheld or abstaining.
(d) The addition of Article 12 to the Articles of Incorporation
was ratified with a vote of 1,653,133 for and 69,370
against/withheld or abstaining.
With respect to the above matters, each holder of the
Corporation's common stock
21
<PAGE> 22
was entitled to one vote per share. The number of shares of
common stock outstanding and entitled to vote as of April 10,
1998, the record date, was 2,589,435.
Item 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 Form 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: August 13, 1998 /S/ Lloyd G. Gibson
-------------------
Lloyd G. Gibson
President and Chief
Executive Officer
Dated: August 13, 1998 /S/ James P. Radick
-------------------
James P. Radick
Vice President, 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 Second
Quarter Incorporate Financial Review and is qualified in its entirety by
reference to such financial information.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 15,424,934
<INT-BEARING-DEPOSITS> 212,437,611
<FED-FUNDS-SOLD> 16,200,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 60,473,383
<INVESTMENTS-CARRYING> 3,955,597
<INVESTMENTS-MARKET> 4,115,213
<LOANS> 228,088,320
<ALLOWANCE> 2,606,088
<TOTAL-ASSETS> 330,859,862
<DEPOSITS> 268,989,930
<SHORT-TERM> 1,000,000
<LIABILITIES-OTHER> 6,292,200
<LONG-TERM> 23,000,000
0
0
<COMMON> 2,593,121
<OTHER-SE> 28,994,611
<TOTAL-LIABILITIES-AND-EQUITY> 330,859,862
<INTEREST-LOAN> 9,824,898
<INTEREST-INVEST> 1,826,516
<INTEREST-OTHER> 372,296
<INTEREST-TOTAL> 12,023,710
<INTEREST-DEPOSIT> 4,426,095
<INTEREST-EXPENSE> 5,012,226
<INTEREST-INCOME-NET> 7,011,484
<LOAN-LOSSES> 390,000
<SECURITIES-GAINS> 143,694
<EXPENSE-OTHER> 4,554,206
<INCOME-PRETAX> 2,894,792
<INCOME-PRE-EXTRAORDINARY> 1,975,342
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,975,342
<EPS-PRIMARY> 0.76
<EPS-DILUTED> 0.75
<YIELD-ACTUAL> 4.71
<LOANS-NON> 880,620
<LOANS-PAST> 1,092,647
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> (2,914,329)
<CHARGE-OFFS> 856,287
<RECOVERIES> 158,046
<ALLOWANCE-CLOSE> (2,606,088)
<ALLOWANCE-DOMESTIC> (2,606,088)
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 410,000
</TABLE>
