<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, 1999
OR
( ) Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ____ to ____
Commission File 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
incorporation or organization) Identification No.)
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 30,
1999 was:
Common Stock, $1.00 par value - 2,829,821 shares outstanding
<PAGE> 2
NSD BANCORP, INC.
FORM 10Q
For the Quarter Ended June 30, 1999
INDEX
Page
----
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets June 30, 1999
and December 31,1998 3
Consolidated Statements of Income For the Three and Six
Months Ended June 30,1999 and 1998 4
Consolidated Statements of Cash Flows For the Six
Months Ended June 30, 1999 and 1998 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Part II. Other Information
Item 6. Exhibits and Reports on Form 8K 19
<PAGE> 3
NSD BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
------------ -------------
<S> <C> <C>
ASSETS
Cash and Due From Banks $ 14,458,183 $ 19,778,095
Federal Funds Sold -- 2,500,000
Investment Securities Available for Sale at Market Value (Amortized Cost of
$104,062,423 at June 30, 1999 and $90,125,932 at December 31, 1998) 103,681,113 92,789,341
Investment Securities Held to Maturity at Amortized Cost (Market Value of
$3,071,971 at June 30, 1999 and $3,621,208 at December 31, 1998) 2,967,027 3,437,580
Loans Held for Sale 3,913,250 3,995,483
Loans, Net of Deferred Fees 241,288,874 230,937,044
Unearned Income (1,610,861) (1,984,393)
Reserve for Loan Losses (2,929,892) (2,756,502)
--------------------------------------------------------------------------------------------------------------------------------
Loans, Net 240,661,371 230,191,632
Premises and Equipment, Net 2,343,026 2,728,434
Accrued Interest Receivable 2,397,762 2,115,343
Other Real Estate Owned and Assets Held for Sale 262,748 306,620
Other Assets 5,358,936 3,320,947
--------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $372,130,166 $357,167,992
================================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest Bearing $ 61,386,163 $ 60,317,643
Interest Bearing 226,573,584 219,797,517
--------------------------------------------------------------------------------------------------------------------------------
Total Deposits 287,959,747 280,115,160
Borrowed Funds:
Advances from Federal Home Loan Bank and Other Borrowings 44,000,000 33,000,000
Fed Funds Purchased 2,201,805 --
--------------------------------------------------------------------------------------------------------------------------------
Total Borrowed Funds 46,201,805 33,000,000
Accrued Interest Payable 5,126,692 4,977,580
Other Liabilities 1,655,241 6,680,887
--------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 340,943,485 324,773,627
Common Stock $1 Par Value; 10,000 shares authorized, 2,872,580 issued and
2,832,357 outstanding at June 30, 1999 and 2,604,172 issued and 2,586,410
outstanding at December 31, 1998 2,872,580 2,604,172
Treasury Stock at cost, 40,223 shares at June 30, 1999 and 17,762 shares at
December 31, 1998 (945,356) (457,950)
Capital Surplus 13,612,252 7,885,041
Accumulated Other Comprehensive Income (251,663) 1,757,851
Retained Earnings 15,898,868 20,605,251
--------------------------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 31,186,681 32,394,365
--------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $372,130,166 $357,167,992
================================================================================================================================
</TABLE>
See notes to consolidated financial statements
-3-
<PAGE> 4
NSD BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, FOR THE THREE MONTHS ENDED JUNE 30,
------------------------------------------------------------------------------
1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, Including Fees $ 9,536,361 $ 9,824,898 $ 4,818,251 $4,921,593
Investment Securities
Taxable 2,914,466 1,613,334 1,551,622 834,071
Tax-Exempt 132,703 138,251 72,327 61,008
Dividends 107,322 74,931 58,761 37,920
Interest Bearing Deposits 10,758 7,358 9,734 2,549
Federal Funds Sold 18,383 364,938 843 177,939
- ------------------------------------------------------------------------------------------------------------------------------------
Total Interest Income 12,719,993 12,023,710 6,511,538 6,035,080
INTEREST EXPENSE
Deposits 4,306,357 4,426,095 2,182,540 2,205,402
Federal Funds Purchased 62,414 -- 46,531 (86,812)
FHLB Advances and Other Borrowings 959,644 586,131 515,115 370,387
- ------------------------------------------------------------------------------------------------------------------------------------
Total Interest Expense 5,328,415 5,012,226 2,744,186 2,488,977
Net Interest Income 7,391,578 7,011,484 3,767,353 3,546,103
Provision for Loan Losses 420,000 390,000 210,000 195,000
- ------------------------------------------------------------------------------------------------------------------------------------
Net Interest Income After Provision for Loan Losses 6,971,578 6,621,484 3,557,353 3,351,103
OTHER INCOME
Net Investment Securities Gains 141,059 143,694 140,991 116,942
Service Fees 430,457 375,881 230,198 194,366
Other Operating Income 313,028 307,939 121,479 119,329
- ------------------------------------------------------------------------------------------------------------------------------------
Total Other Income 884,544 827,514 492,668 430,637
OTHER EXPENSES
Salaries and Employee Benefits 2,243,794 2,150,140 1,123,830 1,057,655
Occupancy Expense 412,577 401,105 232,778 203,153
Equipment and Supplies 532,081 506,327 286,179 244,883
Data Processing 352,716 304,403 182,791 144,201
FDIC Insurance 20,579 19,115 11,217 9,665
Advertising 79,859 79,948 58,396 50,345
Other Operating Expenses 998,709 1,093,168 534,669 550,213
- ------------------------------------------------------------------------------------------------------------------------------------
Total Other Expenses 4,640,315 4,554,206 2,429,860 2,260,115
Income Before Income Taxes 3,215,807 2,894,792 1,620,160 1,521,625
Provision for Income Taxes 1,070,900 919,450 521,650 496,550
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME 2,144,907 1,975,342 1,098,510 1,025,075
====================================================================================================================================
Other Comprehensive Income, net of tax (2,009,514) 66,964 (1,709,669) 48,353
- ------------------------------------------------------------------------------------------------------------------------------------
Net Comprehensive Income $ 135,393 $ 2,042,306 $ (611,159) $1,073,428
NET INCOME PER COMMON SHARE (1)
Net Income - Basic $0.76 $0.69 $0.39 $0.36
Net Income - Diluted $0.75 $0.68 $0.38 $0.35
Common Dividends Declared and Paid Per Share $0.34 $0.30 $0.17 $0.15
Weighted Average Shares Outstanding - Basic 2,836,753 2,852,433 2,833,257 2,852,433
Weighted Average Shares Outstanding - Diluted 2,870,362 2,902,404 2,872,844 2,902,823
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE> 5
NSD BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30,
1999 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net Income $ 2,144,907 $ 1,975,342
Adjustments to Net Income:
Provision for Loan Losses 420,000 390,000
(Gain) on Sale of Investment Securities Available for Sale (140,139) (143,694)
Loss (Gain) on Sale of Other Assets 23,717 (1,966)
Gain on Disposition of Premises and Equipment (976) --
Depreciation and Amortization 307,357 318,967
Net Premium Amortization 69,560 35,412
(Increase) Decrease in Accrued Interest Receivable (282,419) 23,080
Decrease (Increase) in Accrued Interest Payable 149,113 (389,842)
(Increase) in Other Assets (593,363) (140,366)
Deferred Loan Fees, Net (9,730) (26,387)
(Decrease) Increase in Other Liabilities (5,526,267) 344,236
- ---------------------------------------------------------------------------------------------------------------------
Net Cash (Used) Provided by Operating Activities (3,438,240) 2,384,782
- ---------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Sale of Investment Securities Available for Sale 5,738,066 11,551,239
Proceeds from Repayments and Maturities of Investment Securities
Available for Sale 14,611,174 15,708,514
Proceeds from Repayments and Maturities of Investment Securities Held
to Maturity 471,080 1,327,000
Purchases of Investment Securities (34,215,680) (29,348,248)
Proceeds from Sales of Other Real Estate Owned 288,729 200,943
Net (Increase) Decrease in Loans (11,148,583) 5,710,556
Dispositions (Purchases) of Premises and Equipment, Net 167,327 (57,970)
- ---------------------------------------------------------------------------------------------------------------------
Net Cash (Used) Provided by Investing Activities (24,087,887) 5,092,034
- ---------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net Increase in Demand and Savings Accounts 6,261,937 1,514,198
Net Increase (Decrease) in Certificates of Deposit 1,582,651 (1,250,881)
Increase in Federal Funds Purchased 2,201,805 --
Proceeds from Federal Home Loan Bank Advances and Other Borrowings 21,000,000 15,000,000
Repayment of Federal Home Loan Bank Advances and Other Borrowings (10,000,000) (6,000,000)
Proceeds from the Exercise of Common Stock Options 127,838 128,072
Cash Paid in Lieu of Fractional Shares (3,926) --
Treasury Stock Purchased (487,406) --
Cash Dividends Paid (976,684) (881,667)
- ---------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 19,706,215 8,509,722
- ---------------------------------------------------------------------------------------------------------------------
(Decrease) Increase in Cash and Cash Equivalents (7,819,912) 15,986,538
Cash and Cash Equivalents at Beginning of Year 22,278,095 15,638,396
=====================================================================================================================
Cash and Cash Equivalents at End of Year 14,458,183 31,624,934
=====================================================================================================================
</TABLE>
See notes to 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 wholly owned subsidiary, NorthSide
Bank, a community bank operating ten branch offices located in Western
Pennsylvania, and NorthSide Bank's wholly owned subsidiary, 100 Federal Street,
Inc. Material intercompany accounts and transactions have been eliminated.
2. EARNINGS PER SHARE
Basic earnings per common share is calculated by dividing net income by the sum
of the weighted average number of shares of common stock outstanding during each
period. Diluted earnings per common share is calculated by dividing net income
by the sum of the weighted average number of shares of common stock 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 October 1998, Statement of Financial Accounting Standards (SFAS) No. 134,
"Accounting for Mortgage-Backed Securities Retained after the Securitization of
Mortgage Loans Held for Sale by a Mortgage Banking Enterprise" was issued which
establishes the accounting and reporting standards for enterprises involved in
the business of securitizing mortgage loans held for sale. This statement
requires that these instruments be classified as trading securities and reported
at fair value. The Corporation is not in the business of securitizing mortgage
loans and, therefore, will not implement this statement at this time.
In June 1998, the Financial Accounting Standards Board ("FASB") issued
statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities ("FAS No. 133"). FAS No. 133 establishes accounting and reporting
standards for derivative instruments and for hedging activities which require
that an entity recognize all derivatives as either assets or liabilities in a
balance sheet and measure those instruments at fair value. FAS No. 133 which
was amended by FAS statement No. 137 in June 1998. FAS No. 137 delays the
effective date of FAS No. 133 to the first quarter of years beginning after
June 15, 2000. Management believes that adoption of FAS No. 133 will not have a
material impact on the Corporation's financial condition or results of
operations.
-6-
<PAGE> 7
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 three and
six months ended June 30, 1999 compared to the three and six months ended
June 30, 1998.
RESULTS OF OPERATIONS
Net income for the six months ended June 30, 1999 was $2,144,907, an increase of
$169,565 from $1,975,342 for the six months ended June 30, 1998. Contributing to
the increase were increases in net interest income and service fee income of
$380,094 and $54,576, respectively, and decreases in other operating expense of
$94,460. Offsetting these increases to net income were increases in the
provision for loan losses, salaries and employee benefits, occupancy, equipment
and supplies, data processing and provision for income taxes of $30,000,
$93,654, $11,472, $25,754, $48,313 and $151,450, respectively, for the six
months ended June 30, 1999 compared to the same period in 1998. The
Corporation's annualized return on average assets (ROA) for the first six months
of 1999 was 1.20% compared to 1.23%. This decrease reflects the impact of
significant growth in average assets and compression in the net interest margin.
Annualized return on average equity (ROE) was 13.48% for the first half of 1999
compared to 12.74% for the same period in 1998. This increase is largely due to
a lower equity-to-assets ratio resulting from significant growth in average
assets and, to a lesser extent, the repurchase of common shares into treasury.
Offsetting this increase was a decline in net interest margin.
Net income for the second quarter of 1999 was $1,098,510, an increase of $73,435
from $1,025,075 for the second quarter of 1998. Contributing to the overall
increase were increases in net interest income, net investment securities gains
and service fee income of $221,250, $24,049 and $35,832, respectively, and a
decrease in other operating expenses of $15,544. Offsetting the increases to net
income were increases to the provision for loan losses, salaries and employee
benefits, occupancy expense, equipment and supplies, data processing and
provision for income taxes of $15,000, $66,175, $29,625, $41,296, $38,590 and
$25,100, respectively. ROA and ROE for the second quarter of 1999 was 1.21% and
13.80%, respectively, compared to 1.27% and 13.05% for same period in 1998.
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 $648,011 during the six months June 30, 1999 as
compared to the same period in 1998 as the result of a $34,615,741 increase in
average earning assets offset by a decline in the yield on average earning
assets to 7.58% at June 30, 1999 from 8.01% at June 30, 1998. The increase in
average assets was comprised of increases in average investment securities and
loans of $44,806,161 and $3,332,307, respectively, while average federal funds
sold declined by $12,557,127 for the first half of 1999 as compared to the first
half of 1998.
-7-
<PAGE> 8
Total interest expense increased $316,190 during the six months ended June 30,
1999 compared to the same period in 1998 as the result of a $29,061,033 increase
in average interest bearing liabilities offset by a decline in the average cost
of such funds to 4.09% at June 30, 1999 from 4.32% at June 30, 1998. The
increase in average interest bearing liabilities was comprised of increases in
average interest bearing deposits, federal funds purchased and FHLB advances of
$9,560,104, $2,550,652 and $16,950,277, respectively.
Total interest income increased $513,251 to $6,576,384 during the second quarter
of 1999 as compared to the same period in 1998. This increase is the result of
growth in average earning assets of $38,884,851 offset by a decline in the yield
on total earning assets from 7.93% for the second quarter of 1998 to 7.63% for
the second quarter of 1999. Average loans increased, quarter over quarter, by
$6,426,278. The benefit of this increase was partially offset by a decrease in
the yield on average loans to 8.15% during 1999's second quarter compared to
8.53% for the same period in 1998. An increase in average investment securities
outstanding of $47,383,480, in conjunction with an increase in average yield
during the quarter to 6.32% from 6.28% for the second quarter of 1998,
contributed significantly to the overall increase in interest income.
Interest expense increased $255,209 during the second quarter of 1999 compared
to the second quarter of 1998 largely due to a $35,572,931 increase in interest
bearing liabilities. The increase was somewhat mitigated by a decline in the
average total cost of funds from 4.28% for the second quarter of 1998 to 4.09%
for second quarter of 1999. Average interest bearing deposits increased
$12,994,963 while the cost of total average interest bearing deposits declined
to 3.90% in the first half of 1999 from 4.28% for the same period in 1998. The
increase in average interest bearing deposits consisted of $676,472, $9,042,074
and $3,276,417 increases in saving, money market and interest checking, and
certificate of deposit accounts, respectively. Average borrowed funds increased
$22,577,968 for the second quarter of 1999 compared to the second quarter of
1998.
The Corporation's year-to-date net interest margin decreased from 4.71% as of
June 30, 1998 to 4.43% as of June 30, 1999, due to a decrease in the average
yield on earning assets partially offset by a decrease in the average cost of
funds paid on interest bearing liabilities. The Corporation's 1999 second
quarter net interest margin of 4.45% reflects a decline from 4.68% for the same
period in 1998. This decline was the result of earning asset yield compression
offset by a lower average cost for interest bearing liabilities.
PROVISIONS FOR LOAN LOSSES
The Corporation's provision for loan losses was $420,000 and $210,000 for the
six and three month periods ended June 30, 1999, respectively, compared to
$390,000 and $195,000, respectively, for the same periods in 1998. The
Corporation had net charge-offs of $246,610 and $698,241 for the first six
months of 1999 and 1998, respectively. The decrease in net charge-offs was
largely due to commercial loans charged-off related to one borrower during the
second quarter of 1998. The charged-off loans related to this borrower had been
anticipated by management and, therefore, had been placed on nonaccrual status
with an appropriate reserve allocation.
-8-
<PAGE> 9
The Corporation's net charge-off by loan type in the reserve for loan losses
were as follows:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30,
- --------------------------------------------------------------------------------------------------------------------------------
1999 1998
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Reserve for Loan Losses at Beginning of Year $2,756,502 $2,914,329
Charge-offs:
Commercial, Financial, and Agricultural Loans 66,560 398,681
Real Estate Mortgage Loans -- --
Installment Loans 196,210 427,662
Lease Financing 19,963 29,944
- --------------------------------------------------------------------------------------------------------------------------------
Total Charge-offs 282,733 856,287
Recoveries:
Commercial, Financial, and Agricultural Loans -- --
Real Estate Mortgage Loans -- --
Installment Loans 34,923 158,046
Lease Financing 1,200 --
- --------------------------------------------------------------------------------------------------------------------------------
Total Recoveries 36,123 158,046
- --------------------------------------------------------------------------------------------------------------------------------
Net Charge-offs 246,610 698,241
Provisions for Loan Losses 420,000 390,000
- --------------------------------------------------------------------------------------------------------------------------------
Reserve for Loan Losses at End of Year $2,929,892 $2,606,088
================================================================================================================================
</TABLE>
OTHER INCOME
Other income increased $57,030 to $884,544 for the six months ended June 30,
1999 from $827,514 for the six months ended June 30, 1998. Sales of investment
securities available for sale during the first six months of 1999 resulted in
net gains of $141,059 compared to $143,694 for the same period in 1998. Service
fees increased $54,576 to $430,457 for the first half of 1999, from $375,881 for
the first half of 1998. Of this increase, $53,458 was attributed to increased
net NSF charges and checking account fees during the first six months of 1999.
Other operating income increased slightly to $313,028 for the six months ended
June 30, 1999. A gain recognized on the sale of land of $100,814 and increased
ATM surcharge income of $56,702 was offset by the writedown of $100,000 in fixed
assets in connection with installation of a new computer network and branch
teller/platform system and a $33,633 loss recognized due to an appraised value
modification related to one property held as Other Real Estate Owned. Checkbook
commissions income also declined during the first six months of 1999 by $13,718.
Other income increased $62,031 during the second quarter of 1999 to $492,668
from $430,637 for second quarter of 1998. The sale of investment securities
resulted in net gains of $140,991 for the three months ended June 30, 1999
compared to $116,942 for the same period a year ago. Service fees increased
$35,832 to $230,198 for the second quarter of 1999 due to increased net NSF
charges and checking fees of $24,307 and $12,033, respectively. Other operating
income increased slightly over last year's second quarter as an increase in ATM
surcharge income of $27,601 and a gain recognized on the recovery of a
previously charged-off asset of $5,347 were offset by the $40,000 writedown of
fixed assets replaced due to Year 2000 related upgrades.
-9-
<PAGE> 10
OTHER EXPENSES
Total other expenses for the first half of 1999 increased $86,109 to $4,640,315
from $4,554,206 for the first half of 1998. Salaries and employee benefits
increased $93,654, reflecting normal salary and benefit increases and additional
staffing to support the growth of the Corporation. Occupancy expense increased
$11,472 with contractual lease payment escalations and an increase in building
maintenance expense. Equipment and supplies expense increased $25,754 due to
increases in office and stationery and supply expenses of $20,427 and $10,473,
respectively, offset by a decrease in equipment repairs of $5,535. Data
processing expense increased $48,313 primarily due to increases in ATM network
charges and home banking system costs and additional core processing vendor
charges associated with the Bank's new contract and system installations.
Advertising expense remained at virtually the same level as the same period in
1998. Contributing to the $94,459 decrease in other operating expenses were
decreases in protection, asset recovery, promotions, financial services,
director's fees, general loss, teller and ATM over/short of $20,948, $15,430,
$34,799, $18,083, $20,357, $21,027 and $17,691, respectively, offset by
increases in postage, telephone, student loan processing, PA shares tax, audit
and checking account losses of $9,017, $15,988, $20,783, $14,696, $8,320 and
$6,161, respectively.
Total other expenses for the second quarter of 1999 increased $169,745 to
$2,429,860 from $2,260,115 for the same period in 1998. Salaries and employee
benefits increase $66,175 reflecting normal salary and benefit increases,
addition incentive compensation accruals and increased medical insurance costs
to the Corporation. Occupancy expense increased $29,625 almost entirely due to a
one-month mismatch in the payment cycle for bank owned properties. Equipment and
supplies expense increased $41,296 largely due to stationery and supply and
other office expense increases of $19,315 and $26,433, respectively, offset by a
$3,526 reduction in equipment repairs. Data processing expense increased $38,590
as a result of increases in ATM network charges and home banking system costs
and additional core processing vendor charges associated with the Bank's new
contract and system installations. Advertising expense increased $8,051
primarily due to the timing difference in purchasing print advertising space.
Contributing to the $15,544 decrease in other operating expenses were decreases
in promotions, financial services, correspondent bank service charges, and
general losses of $12,071, $12,470, $8,183 and $9,941, respectively, offset by
increases in telephone, student loan processing and legal expenses of $14,388,
$9,905 and $5,349, respectively.
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<PAGE> 11
INCOME TAXES
The Corporation recorded an income tax provision of $1,070,900 for the six
months ended June 30, 1999 compared to $919,450 for the six months ended June
30, 1998. The increase in tax provision was the result of higher pre-tax
earnings. The effective tax rates for the first half of 1999 and 1998 were 33.3%
and 31.8%, respectively. The increase in effective tax rate is due mainly to the
decrease in income and earned on tax-exempt earning assets.
The Corporation recorded an income tax provision of $521,650 for the three
months ended June 30, 1999 compared to $496,550 for the three months ended June
30, 1998. The increase in the tax was the result of higher pre-tax earnings. The
effective tax rates for the first half of 1999 and 1998 were 32.2% and 32.6%,
respectively. The increase in effective tax rate is due mainly to the decrease
in income earned on tax-exempt earning assets.
FINANCIAL CONDITION
The Corportation's total assets increased $14,962,174 from $357,167,992 at
December 31, 1998 to $372,130,166 at June 30, 1999. Securities available for
sale increased $10,891,772 while securities held to maturity decreased $470,553.
Loans available for sale decreased to $3,913,250 at June 30, 1999 from
$3,995,483 at December 31, 1998. The loans available for sale at June 30, 1999
and December 31, 1998 were entirely comprised of student loans. Loans, net of
deferred fees, increased from $230,937,044 at December 31, 1998 to $241,288,874
at June 30, 1999.
INVESTMENT SECURITIES
Investment securities available for sale increased $10,891,772 during the first
half of 1999. Increases in U.S. Government agencies, mortgage-backed securities
and obligations of state and political subdivisions of $3,235,997, $5,461,870
and $1,968,032, respectively, were due to normal purchasing activity net of any
sales, calls, maturities and changes in unrealized gains classes. The
Corporation experienced a significant change in net, unrealized gains (losses)
on fixed income securities principally due to a dramatic shift in market pricing
during the second quarter of 1999. Although such investment securities are
categorized as available for sale, the portfolio is managed based on yield and
cashflow. Management considers this change in fair value to be temporary in
nature posing minimal impact to future profitability. Investment securities held
to maturity decreased $470,553 due to normal maturity and call activity as all
new purchases are categorized as available for sale. As a member of the Federal
Home Loan Bank (FHLB), the Corporation is required to maintain a minimum
investment in FHLB stock which is calculated based on the level of assets,
residential real estate loans and outstanding FHLB advances. Marketable equity
securities increased $259,377 during the first half of 1999 which was due almost
entirely to an increase in the level of FHLB stock.
-11-
<PAGE> 12
A summary of investment securities available for sale is as follows:
<TABLE>
<CAPTION>
JUNE 30, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
GROSS UNREALIZED
HOLDING
AMORTIZED ----------------------------------
COST GAINS LOSSES FAIR VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U. S. Treasury Securities $ 5,207,958 $ 4,942 $ 2,278 $ 5,210,622
Obligations of U.S. Government Agencies 30,387,817 4,292 910,088 29,482,021
Mortgage-backed Securities 56,029,854 37,880 1,615,189 54,452,545
Obligations of State and Political Subdivisions 2,651,064 2,861 122,783 2,531,142
Other Bonds 6,860,967 9,859 168,196 6,702,630
Marketable Equity Securities 2,924,763 2,377,390 -- 5,302,153
- ------------------------------------------------------------------------------------------------------------------------------------
$104,062,423 $2,437,224 $2,818,534 $103,681,113
====================================================================================================================================
<CAPTION>
DECEMBER 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
GROSS UNREALIZED
HOLDING
AMORTIZED ----------------------------------
COST GAINS LOSSES FAIR VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U. S. Treasury Securities $ 5,225,749 $ 30,280 $ 2,823 $ 5,253,206
Obligations of U.S. Government Agencies 26,187,451 92,554 33,981 26,246,024
Mortgage-backed Securities 49,140,324 170,208 319,857 48,990,675
Obligations of State and Political Subdivisions 553,529 9,581 -- 563,110
Other Bonds 6,802,815 14,724 123,989 6,693,550
Marketable Equity Securities 2,216,064 2,826,712 -- 5,042,776
- ------------------------------------------------------------------------------------------------------------------------------------
$90,125,932 $3,144,059 $480,650 $92,789,341
====================================================================================================================================
</TABLE>
A summary of investment securities held to maturity is as follows:
<TABLE>
<CAPTION>
JUNE 30, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
GROSS UNREALIZED
HOLDING
AMORTIZED ----------------------------------
COST GAINS LOSSES FAIR VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Obligations of State and Political Subdivisions $2,717,027 $ 95,817 $ -- $2,812,845
Other Bonds 250,000 9,126 -- 259,126
- ------------------------------------------------------------------------------------------------------------------------------------
$2,967,027 $104,943 $ -- $3,071,971
====================================================================================================================================
<CAPTION>
DECEMBER 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
GROSS UNREALIZED
HOLDING
AMORTIZED ----------------------------------
COST GAINS LOSSES FAIR VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
Obligations of State and Political Subdivisions $3,187,580 $162,355 $ -- $3,349,935
Other Bonds 250,000 21,273 -- 271,273
- ------------------------------------------------------------------------------------------------------------------------------------
$3,437,580 $183,628 $ -- $3,621,208
====================================================================================================================================
</TABLE>
-12-
<PAGE> 13
LOANS
Loans, net of deferred fees, increased to $241,288,874 at June 30, 1999 from
$230,937,044 at December 31, 1998. Commercial loan development efforts resulted
in an increase of $5,006,097 in nonresidential mortgages which offset a net
decline of $5,035,446 in commercial, financial and agricultural loans due to
paydowns. Increased production of indirect automobile loans was the primary
reason for the $9,511,020 increase in consumer loans to individuals offsetting a
decrease in equipment leases of $852,114. More aggressive residential mortgage
loan pricing resulted in an increase of $2,277,622 while lines of credit
decreased $495,603. Other loan categories experienced only slight changes in
outstanding volume during the first half of 1999.
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31, INCREASE
1999 1998 (DECREASE)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Consumer Loans to Individuals $101,511,284 $ 92,000,264 $ 9,511,020
Mortgage:
Nonresidential 33,066,964 28,060,867 5,006,097
Residential 54,972,908 52,695,286 2,277,622
Commercial, Financial and Agricultural 35,409,603 40,445,049 (5,035,446)
Lines of Credit 4,881,245 5,376,848 (495,603)
Lease Financing 11,058,640 11,910,754 (852,114)
Nonaccrual Loans 715,884 785,360 (69,476)
- -----------------------------------------------------------------------------------------------------------------------
Total Loans 241,616,528 231,274,428 10,342,100
Deferred Fees (327,654) (337,384) 9,730
- -----------------------------------------------------------------------------------------------------------------------
Loans, Net of Deferred Fees $241,288,874 $230,937,044 $10,351,830
=======================================================================================================================
</TABLE>
A loan is considered 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, 1999, the Corporation had no recorded investment in loans for which
impairment has been recognized in accordance with SFAS No. 114. There were no
loans considered impaired that have been partially written down through
charge-offs. The average recorded investment in impaired loans was $0 for the
first six months of 1999. Therefore, no interest was recognized on impaired
loans and no additional reserve was required for impaired loans during the first
half of 1999.
NON-PERFORMING ASSETS
Non-performing assets increased from $1,905,658 at December 31, 1998 to
$2,023,686 at June 30, 1999 due to a $231,376 increase in loans 90 days past due
and still accruing offset by declines in nonaccrual loans, other real estate
owned and other assets held for sale of $69,475, $39,877 and $3,996,
respectively.
The current quality of the loan portfolio can be demonstrated by the following
table which details total non-performing loans and past due loans:
-13-
2
<PAGE> 14
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Nonaccrual Loans $ 715,885 $ 785,360
Other Real Estate Owned 151,675 191,552
Other Assets Held for Sale 111,073 115,069
---------------------------------------------------------------------------------------------------------------------------------
Total Non-Performing Assets 978,633 1,091,981
Loans 90 Days Past Due and Still Accruing 1,045,053 813,677
---------------------------------------------------------------------------------------------------------------------------------
Total Non-Performing Assets and Past Due Loans $2,023,686 $1,905,658
=================================================================================================================================
</TABLE>
RESERVE FOR LOAN LOSSES
The Corporation's loan loss reserve at June 30, 1999 was $2,929,892 or 1.20% of
total loans compared to $2,606,088 or 1.14% of total loans at June 30, 1998.
Management anticipates that the loan losses is adequate to absorb reasonably
foreseeable losses on loans.
The following is a summary of activity in the reserve for loan losses:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30,
1999 1998
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Beginning Balance $2,756,502 $2,914,329
Provision 420,000 390,000
Net Charge-offs 246,610 698,241
---------------------------------------------------------------------------------------------------------------------------------
Ending Balance $2,929,892 $2,606,088
=================================================================================================================================
Reserve for Loan Losses to Total Loans 1.20% 1.14%
=================================================================================================================================
</TABLE>
LIABILITIES
Total liabilities were $340,943,485 at June 30, 1999, an increase of $16,169,858
from December 31, 1998. An increase in total borrowed funds of $11,000,000 and
total deposits of $7,844,587, offset by a decrease in other liabilities of
$4,876,534. The increase in borrowed funds was used to fund loan growth and to
increase the investment portfolio as part of an overall leverage strategy.
DEPOSITS
Total deposits increased $7,844,587 from $280,115,160 at December 31, 1998 to
$287,959,747 at June 30, 1999. Contributing to the overall increase were
increase in noninterest bearing demand deposits, saving deposits, money market
deposits and time deposits of $1,068,520, $2,169,474, $6,480,768 and $1,892,469,
respectively, offset by decreases in interest bearing demand deposits and time
deposits over $100,000 of $3,456,825 and $309,819, respectively.
-14-
<PAGE> 15
The composition of deposits is shown in the following table:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31, INCREASE
1999 1998 (DECREASE)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Noninterest Bearing Demand $ 61,386,163 $ 60,317,643 $ 1,068,520
Interest Bearing Demand 28,243,164 31,699,989 (3,456,825)
Savings 39,876,004 37,706,530 2,169,474
Money Market Account 63,096,664 56,615,896 6,480,768
Time Deposits equal to or more than $100,000 13,829,504 14,139,323 (309,819)
Time Deposits less than $100,000 81,528,248 79,635,779 1,892,469
- ------------------------------------------------------------------------------------------------------------------------------
Total Deposits $287,959,747 $280,115,160 $ 7,844,587
==============================================================================================================================
</TABLE>
TOTAL BORROWED FUNDS
At June 30, 1999, the Corporation had total borrowed funds of $46,201,805,
$2,201,805 of which will mature within the next 12 months. The Corporation
borrowed these funds to provide liquidity for specific asset-liability
management strategies. At June 30, 1999, total borrowed funds was comprised of
advances from the Federal Home Loan Bank which are collateralized by qualifying
securities and loans and are subject to restrictions or penalties related to
prepayments of $44,000,000 and federal funds purchased of $2,201,805.
SHAREHOLDER'S EQUITY
Consolidated shareholders' equity decreased $1,207,684 from $32,394,365 at
December 31, 1998 to $31,186,681 at June 30, 1999. This decrease was the result
of the retention of earnings offset by the purchase of treasury stock, payment
of cash dividends to shareholders and a decline in accumulated other
comprehensive income which is comprised entirely of unrealized holding
gains/losses on investment securities.
The Corporation continues to maintain a strong capital position. Risk-based
capital ratios exceed current regulatory requirements. The Corporation's Tier I
risk-based capital ratio at June 30, 1999 was 12.10% compared to 12.36% at
December 31, 1998. The Corporation's total risk-based capital ratio at June 30,
1999 was 13.66% compared to 14.02% at December 31, 1998. 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.
-15-
<PAGE> 16
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 December 31, 1998, a simulation
analysis assuming a one-time 200 basis point increase in interest rates, results
in a negative impact of less than 1.2% or approximately $179,000 on projected
net interest income over a one-year period. conversely, a 200 basis point
decrease in interest rates resulted in a slight increase in projected net
interest income of .1% or approximately $19,000 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
December 31, 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 cash flow 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
interest rates on earning assets and interest bearing liabilities change at
varying frequencies and market forces may limit the ability to appropriately
respond to such changes.
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 December 31, 1998. Therefore, such
analysis is regarded as a fair presentation of the Corporation's market risk as
of June 30, 1999.
YEAR 2000 CONSIDERATIONS
In 1997, the Corporation began analyzing information systems and vendor supplied
application systems to identify and resolve any year 2000 issues concerning its
business or operations. Senior management views this initiative as one of the
highest priorities of the Corporation. With oversight from the Board of
Directors, the Corporation is aggressively pursuing appropriate solutions and
assurances with regard to compliance of all applications affected by the year
2000. As of June 30, 1999, the Corporation had completed its assessment of all
hardware, software, core business applications and data exchange interfaces and
had substantially completed renovating systems and applications and validating
year 2000 readiness.
Non-information technology systems such as the elevator, HVAC, security systems,
etc., have been reviewed to determine if there are any year 2000 issues. Any
non-compliant system or related equipment has either already been replaced or is
in the process of being replaced before the year 2000.
It is estimated that the total cumulative cost to the Corporation of this
process will approximate $750,000 which includes costs associated with modifying
existing systems, purchasing or leasing certain hardware and software and
writedown of items which will be disposed prematurely due to noncompliance. The
majority of such costs will be incurred during 1999. 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.
Although the Corporation believes that it will be year 2000 compliant, any
unforeseen system failures could result in a compromise in the Corporation's
ability to service customers and could have a potentially adverse impact on NSD
Bancorp's financial condition or results of operations. A Contingency and
Business Resumption Plan has been developed to help insure that the Corporation
is prepared in the event of an automated information system failure and to
address liquidity concerns due to possible public demands for cash.
-16-
<PAGE> 17
All commercial loan customers with significant loan exposures have been
contacted to emphasize the importance of adequately preparing for year 2000
issues and to assess the state of their year 2000 readiness. The Corporation
could experience losses due to the interruption of a loan customer's business
caused by year 2000 related problems. As of June 30, 1999, there appears to be
no significant additional exposure to loan losses due to year 2000 related
issues. There is, however, no assurance that customers will not experience a
year 2000 related business interruption resulting in a potentially material
adverse effect on NSD Bancorp's financial condition or results of operation.
Management intends to continue its monitoring and assessments throughout 1999 to
mitigate any such losses.
INTEREST RATE SENSITIVITY, LIQUIDITY AND CASH FLOWS
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 flows or obtain funds at a reasonable
cost 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's ability to obtain deposits and
purchase funds at reasonable rates determines its liability liquidity. As a
result of liquid asset management and the ability to generate liquidity through
deposit funding, management feels 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 wholesale borrowings and repurchase agreements.
Operating activities used net cash of $3,438,240 during the first half of 1999,
compared to providing cash of $2,384,782 during the first half of 1998. The
primary source of operating cash flows for 1999 was net income adjusted for the
effect of noncash expenses such as the provision for loan losses, depreciation
of premises and equipment and amortization of intangible assets.
Investing activities used net cash of $24,087,887 during the first half of 1999,
compared to providing cash of $5,092,034 during the first half of 1998. A
significant portion of borrowings were invested in investment securities
available for sale as part of an overall leverage strategy. Proceeds from sales,
repayments and maturities of investment securities available for sale and held
to maturity were reinvested primarily in investment securities available for
sale although some cash was used to fund loan growth.
Financing activities provided cash of $19,706,215 and $8,509,722 for the first
half of 1999 and 1998, respectively. A net increase in total borrowed funds and
total deposits provided while cash was used by the payment of cash dividends to
shareholders and purchases of treasury stock.
-17-
<PAGE> 18
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 27, 1999, for the purpose of (a) electing 4 directors,
(b) ratifying the appointment of Deloitte & Touche, L.L.P.,
Certified Public Accountants, as the independent auditors and
accountants for the Corporation.
(a) All 4 nominees were elected and the votes for and
against/withheld were as follows:
NOMINEE FOR AGAINST
William R. Baierl 2,268,442 3,610
Grant A. Colton, Jr. 2,268,442 3,610
L.R. Gaus 2,268,537 3,515
Arthur J. Rooney, II 2,224,616 47,436
(b) The appointment of Deloitte & Touche, L.L.P., as independent
auditors and accountants was ratified with a vote of 2,210,324
for and 61,728 against/withheld or abstaining.
With respect to the above matters, each holder of the
Corporation's common stock was entitled to one vote per share.
The number of shares of common stock outstanding and entitled
to vote as of March 16, 1999, the record date, was 2,862,878.
Item 5. Not applicable pursuant to the instructions to Part II.
Item 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
-18-
<PAGE> 19
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 11, 1999 /s/ Lloyd G. Gibson
------------------------------
Lloyd G. Gibson, President and
Chief Executive Officer
Dated: August 11, 1999 /s/ James P. Radick
------------------------------
James P. Radick, Treasurer
(Principal Financial and
Accounting Officer)
-19-
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL INFORMATION INCORPORATED BY REFERENCE TO THE 1999 SECOND
QUARTER INCORPORATED 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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 13,291,538
<INT-BEARING-DEPOSITS> 1,166,645
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 103,681,113
<INVESTMENTS-CARRYING> 2,967,027
<INVESTMENTS-MARKET> 3,071,971
<LOANS> 239,678,013
<ALLOWANCE> 2,929,892
<TOTAL-ASSETS> 372,130,166
<DEPOSITS> 287,959,747
<SHORT-TERM> 2,201,805
<LIABILITIES-OTHER> 6,781,933
<LONG-TERM> 44,000,000
0
0
<COMMON> 2,872,580
<OTHER-SE> 28,314,101
<TOTAL-LIABILITIES-AND-EQUITY> 372,130,166
<INTEREST-LOAN> 9,536,361
<INTEREST-INVEST> 3,154,491
<INTEREST-OTHER> 29,141
<INTEREST-TOTAL> 12,719,993
<INTEREST-DEPOSIT> 4,306,357
<INTEREST-EXPENSE> 5,328,415
<INTEREST-INCOME-NET> 7,391,578
<LOAN-LOSSES> 420,000
<SECURITIES-GAINS> 141,059
<EXPENSE-OTHER> 4,640,315
<INCOME-PRETAX> 3,215,807
<INCOME-PRE-EXTRAORDINARY> 2,144,907
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,144,907
<EPS-BASIC> 0.76
<EPS-DILUTED> 0.75
<YIELD-ACTUAL> 4.43
<LOANS-NON> 715,885
<LOANS-PAST> 1,045,053
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> (2,756,502)
<CHARGE-OFFS> 282,733
<RECOVERIES> 36,123
<ALLOWANCE-CLOSE> (2,929,892)
<ALLOWANCE-DOMESTIC> (2,414,892)
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 515,000
</TABLE>
