UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From ____ to ____.
Commission file number 0-21638
FFY Financial Corp.
(Exact name of registrant as specified in its charter)
Delaware 34-1735753
(State of Incorporation) (IRS Employer Identification No.)
724 Boardman-Poland Road, Youngstown, Ohio
(Address of principal executive office)
44512
(Zip Code)
(330) 726-3396
(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
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS SHARES OUTSTANDING AT APRIL 30, 1999
---- -------------------------------------
common stock, $.01 par value 7,200,804
INDEX
<TABLE>
<CAPTION>
Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition 3
Consolidated Statements of Income 4
Consolidated Statements of Changes in Stockholders' Equity 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities and Use of Proceeds 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
</TABLE>
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
FFY FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
March 31, June 30,
1999 1998
(unaudited)
----------------------------
<S> <C> <C>
Assets
Cash $ 4,252,570 $ 4,362,127
Interest-bearing deposits 4,175,466 5,713,055
Short-term investments 80,000 -
----------------------------
TOTAL CASH AND CASH EQUIVALENTS 8,508,036 10,075,182
Securities available for sale 171,667,711 140,793,201
Loans receivable 458,396,538 482,463,396
Loans available for sale 97,125 -
Interest and dividends receivable on securities 1,699,534 1,421,574
Interest receivable on loans 2,616,800 2,698,117
Federal Home Loan Bank stock, at cost 4,759,100 4,511,500
Office properties and equipment, net 7,439,460 7,920,660
Other assets 3,077,571 1,862,863
----------------------------
TOTAL ASSETS $658,261,875 $651,746,493
============================
Liabilities and Stockholders' Equity
Liabilities:
Deposits $456,551,299 $444,017,422
Securities sold under agreements to repurchase:
Short-term 7,349,000 13,088,323
Long-term 51,300,000 51,300,000
Borrowed funds:
Short-term 22,100,000 33,985,000
Long-term 35,000,000 -
Advance payments by borrowers for taxes and insurance 1,404,316 2,621,514
Other payables and accrued expenses 9,110,256 22,518,533
----------------------------
TOTAL LIABILITIES 582,814,871 567,530,792
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value:
Authorized 5,000,000 shares; none outstanding - -
Common stock, $.01 par value:
Authorized 15,000,000 shares; issued 7,589,366 shares
at March 31, 1999 and 6,630,000 shares at June 30,
1998; outstanding 7,329,806 shares at March 31, 1999
and 4,010,990 shares at June 30, 1998 75,894 66,300
Additional paid-in capital 37,885,989 65,118,141
Retained earnings, substantially restricted 44,912,780 79,428,438
Treasury stock, at cost, 259,560 shares at
March 31, 1999 and 2,619,010 shares at June 30, 1998 (4,690,962) (57,893,563)
Accumulated other comprehensive income 287,875 812,737
Common stock purchased by:
Employee Stock Ownership and 401(k) Plan (2,742,782) (3,034,562)
Recognition and Retention Plans (281,790) (281,790)
----------------------------
TOTAL STOCKHOLDERS' EQUITY 75,447,004 84,215,701
----------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $658,261,875 $651,746,493
============================
</TABLE>
See accompanying notes to consolidated financial statements
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
FFY FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
1999 1998 1999 1998
--------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Income
Loans $ 9,613,281 $ 9,925,378 $29,470,051 $29,756,225
Securities available for sale 2,501,376 1,998,196 6,941,368 5,812,849
Federal Home Loan Bank stock 82,143 77,263 248,583 231,000
Other interest-earning assets 44,062 73,596 126,360 237,271
--------------------------------------------------------
TOTAL INTEREST INCOME 12,240,862 12,074,433 36,786,362 36,037,345
--------------------------------------------------------
Interest Expense
Deposits 4,981,248 5,227,474 15,292,422 16,107,754
Securities sold under agreements to repurchase:
Short-term 99,681 222,732 363,157 648,916
Long-term 733,328 522,420 2,232,575 1,301,864
Borrowed funds:
Short-term 287,193 344,696 1,162,063 1,084,673
Long-term 420,805 - 925,088 -
--------------------------------------------------------
TOTAL INTEREST EXPENSE 6,522,255 6,317,322 19,975,305 19,143,207
NET INTEREST INCOME 5,718,607 5,757,111 16,811,057 16,894,138
Provision for loan losses 130,565 115,284 380,528 441,540
--------------------------------------------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 5,588,042 5,641,827 16,430,529 16,452,598
--------------------------------------------------------
Non-Interest Income
Service charges 216,755 162,199 633,257 514,585
Gain on sale of securities available for sale 54,708 53,912 112,421 153,501
Gain on sale of loans 201,791 31,055 590,623 33,395
Other 112,990 263,133 550,173 515,355
--------------------------------------------------------
TOTAL NON-INTEREST INCOME 586,244 510,299 1,886,474 1,216,836
--------------------------------------------------------
Non-Interest Expense
Salaries and employee benefits 1,643,802 1,602,929 4,828,058 4,523,529
Net occupancy and equipment 504,843 473,308 1,503,577 1,330,996
Insurance and bonding 118,235 123,414 362,309 369,220
State and local taxes 230,082 266,769 739,080 818,476
Other 551,227 589,406 1,879,871 1,694,852
--------------------------------------------------------
TOTAL NON-INTEREST EXPENSE 3,048,189 3,055,826 9,312,895 8,737,073
--------------------------------------------------------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 3,126,097 3,096,300 9,004,108 8,932,361
--------------------------------------------------------
Income Tax Expense
Federal 1,082,000 1,128,000 3,001,000 3,121,000
State 3,510 - 44,742 -
Minority interest in loss of
consolidated subsidiaries (105,524) - (105,524) -
--------------------------------------------------------
NET INCOME $ 2,146,111 $ 1,968,300 $ 6,063,890 $ 5,811,361
========================================================
BASIC EARNINGS PER SHARE $ 0.31 $ 0.26 $ 0.84 $ 0.77
========================================================
DILUTED EARNINGS PER SHARE $ 0.30 $ 0.25 $ 0.81 $ 0.74
========================================================
</TABLE>
See accompanying notes to consolidated financial statements
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
FFY FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
March 31,
1999 1998
--------------------------
<S> <C> <C>
Balance at July 1, $84,215,701 $82,174,216
Net income 6,063,890 5,811,361
Dividends paid, $.325 and $.2875 per share, respectively (2,356,807) (2,157,587)
Treasury stock purchased (13,738,551) (3,374,748)
Stock options exercised 525,106 211,050
Amortization of KSOP expense 291,780 305,100
Tax benefit related to exercise of stock options 306,903 82,991
Difference between average fair value per share and cost
per share on KSOP shares committed to be released 663,844 614,483
Change in unrealized holding gain on securities
available for sale, net (524,862) 775,528
--------------------------
Balance at March 31, $75,447,004 $84,442,394
==========================
</TABLE>
See accompanying notes to consolidated financial statements
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
FFY FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Nine months ended
March 31,
1999 1998
----------------------------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 9,576,999 $ 9,316,673
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturity of securities available for sale 10,697,077 14,727,605
Proceeds from sales of securities available for sale 27,274,701 22,740,102
Purchase of securities available for sale (107,864,491) (73,551,693)
Principal receipts on securities available for sale 22,448,087 16,754,310
Net (increase) decrease in loans 24,268,796 (3,394,078)
Purchase of office properties and equipment (488,758) (736,533)
Other, net (121,295) (6,767)
----------------------------
NET CASH USED IN INVESTING ACTIVITIES (23,785,883) (23,467,054)
----------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 12,605,034 1,362,723
Net increase (decrease) in short-term securities
sold under agreements to repurchase (5,739,323) 23,667,366
Net increase in long-term securities sold under
agreements to repurchase - 26,300,000
Net decrease in short-term borrowed funds (11,885,000) (11,455,000)
Proceeds from long-term borrowed funds 35,000,000 -
Decrease in amounts due to bank (858,126) (89,958)
Net increase in advance payments by borrowers
for taxes and insurance (1,217,198) (1,124,065)
Treasury stock purchases (13,738,551) (3,374,748)
Dividends paid (2,356,807) (2,157,587)
Proceeds from stock options exercised 525,106 211,050
Other, net 306,603 (339,131)
----------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 12,641,738 33,000,650
----------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,567,146) 18,850,269
CASH AND CASH EQUIVALENTS
Beginning of period 10,075,182 10,007,755
----------------------------
End of period $ 8,508,036 $ 28,858,024
============================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash payments of interest expense $ 17,816,678 $ 16,891,738
Cash payments of income taxes 2,900,000 3,000,000
Loans originated for sale 23,509,400 1,159,855
Proceeds from sales of loans originated for sale 23,541,237 1,166,056
</TABLE>
See accompanying notes to consolidated financial statements
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
FFY FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of Consolidation:
The interim consolidated financial statements of the Company
include the accounts of FFY Financial Corp. (FFY or Holding
Company) and its wholly-owned subsidiaries First Federal Savings
Bank of Youngstown (First Federal or Bank) and FFY Holdings,
Inc. The interim consolidated financial statements also include
the accounts of First Real Estate, Ltd. and Daniel W. Landers
Insurance Agency, Ltd., affiliates of which FFY Holdings, Inc.
has a two-thirds controlling interest. All significant
intercompany balances and transactions have been eliminated in
consolidation.
(b) Basis of Presentation:
The consolidated financial statements have been prepared in
conformity with generally accepted accounting principles for
interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. The financial statements
should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's 1998
Annual Report to Shareholders incorporated by reference into the
Company's 1998 Annual Report on Form 10-K. The interim
consolidated financial statements include all adjustments
(consisting of only normal recurring items) which, in the
opinion of management, are necessary for a fair presentation of
the financial position and results of operations for the periods
presented. The results of operations for the interim periods
disclosed herein are not necessarily indicative of the results
that may be expected for a full year.
(c) Earnings Per Share:
The computation of basic and diluted earnings per share is shown
in the following table.
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
------------------------ ------------------------
1999 1998 1999 1998
----------------------------------------------------
<S> <C> <C> <C> <C>
Basic earnings per share computation:
Numerator - Net income $2,146,111 $1,968,300 $6,063,890 $5,811,361
Denominator - Weighted average common
shares outstanding (1) 7,019,679 7,479,108 7,212,817 7,530,876
Basic earnings per share $ 0.31 $ 0.26 $ 0.84 $ 0.77
====================================================
Diluted earnings per share computation:
Numerator - Net income $2,146,111 $1,968,300 $6,063,890 $5,811,361
Denominator - Weighted average common
shares outstanding (1) 7,019,679 7,479,108 7,212,817 7,530,876
Dilutive effect of stock options (1) 227,403 282,434 236,712 279,448
----------------------------------------------------
Weighted average common shares
and common stock equivalents (1) 7,247,082 7,761,542 7,449,529 7,810,324
Diluted earnings per share $ 0.30 $ 0.25 $ 0.81 $ 0.74
====================================================
<F1> Weighted average common and common equivalent shares have been
restated in accordance with Statement of Financial Accounting
Standards (SFAS) No. 128 - Earnings per Share, to reflect a 100% stock
dividend, effected in the form of a two-for-one split, declared on
January 19, 1999.
</TABLE>
(d) Reclassifications:
Certain amounts in the prior period consolidated financial
statements have been reclassified to conform with the current
period's presentation.
(2) EFFECT OF NEW FINANCIAL ACCOUNTING STANDARDS
On July 1, 1998, the Company adopted the provisions of SFAS No. 130,
Reporting Comprehensive Income. This statement establishes standards
for reporting and display of comprehensive income and its components.
Comprehensive income includes the reported net income of a company
adjusted for items that are currently accounted for as direct entries
to equity, such as the mark to market adjustment on securities
available for sale, foreign currency items and minimum pension
liability adjustments. At the Company, comprehensive income
represents net income plus other comprehensive income net of taxes,
which consists of the net change in unrealized gains or losses on
securities available for sale for the period. Accumulated other
comprehensive income represents the net unrealized gains or losses on
securities available for sale as of the balance sheet dates. Other
comprehensive income (loss) for the three and nine months ended March
31, 1999 was ($862,122) and ($524,862), respectively, compared to
($69,243) and $775,528, respectively, for the three and nine months
ended March 31, 1998. Total comprehensive income for the three and
nine months ended March 31, 1999 was $1,283,989 and $5,539,028,
respectively, compared to $1,899,057 and $6,586,889, respectively, for
the three and nine months ended March 31, 1998.
In June 1997, the Financial Accounting Standards Board (FASB) issued
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information. SFAS No. 131 requires public business enterprises to
report certain financial and descriptive information about operating
segments. This statement also establishes standards for related
disclosures about products and services, any major customers, and
geographic areas in which an enterprise operates. SFAS No. 131 is
effective for financial statements for periods beginning after
December 15, 1997. SFAS No. 131 was adopted July 1, 1998 and
management will determine its impact prior to the initial application
of the statement's provisions on June 30, 1999.
In February 1998, the FASB issued SFAS No. 132, Employers' Disclosures
about Pensions and Other Postretirement Benefits, an Amendment of FASB
Statements No. 87, 88 and 106. This statement amends disclosure
requirements with respect to pensions and other postretirement
benefits. It does not change any of the current guidance on
measurement or recognition related to these areas. SFAS No. 132 is
effective for fiscal years beginning after December 15, 1997. The
implementation of SFAS No. 132 will require revised disclosure in the
Company's June 1999 fiscal year-end and future financial statements,
but will not otherwise affect the Company.
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. This statement standardizes the
accounting for derivative contracts, by requiring that an entity
recognize those items as assets or liabilities in the statement of
financial condition and measure them at fair value. SFAS No. 133 is
effective for fiscal years beginning after June 15, 1999. Management
is currently evaluating the effects SFAS No. 133 will have on the
Company's financial condition or results of operations.
In October 1998, the FASB issued SFAS No. 134, Accounting for
Mortgage-Backed Securities Retained after the Securitization of
Mortgage Loans Held for Sale by a Mortgage Banking Enterprise. SFAS
No. 134 is an amendment of FASB Statement No. 65, which established
accounting and reporting standards for certain activities of mortgage
banking enterprises and other enterprises that conduct operations that
are substantially similar to the primary operations of a mortgage
banking enterprise. SFAS No. 134 is effective for the first fiscal
quarter beginning after December 15, 1998. Currently, this statement
does not affect the Company.
PART I: FINANCIAL INFORMATION
FFY FINANCIAL CORP.
MARCH 31, 1999
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following analysis discusses changes in the financial condition and
results of operations at and for the three and nine months ended March 31,
1999 for the Company.
Forward-Looking Statements
When used in this Form 10-Q, or, in future filings by the Holding Company
with the Securities and Exchange Commission, in the Holding Company's press
releases or other public or shareholder communications, or in oral
statements made with the approval of an authorized executive officer, the
words or phrases "will likely result", "are expected to", "will continue",
"is anticipated", "estimate", "project" or similar expressions are intended
to identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements are subject to
certain risks and uncertainties including changes in economic conditions in
the Bank's market area, changes in policies by regulatory agencies,
fluctuations in interest rates, demand for loans in the Bank's market area
and competition, that could cause actual results to differ materially from
historical earnings and those presently anticipated or projected. The
Holding Company wishes to caution readers not to place undue reliance on any
such forward-looking statements, which speak only as of the date made. The
Holding Company wishes to advise readers that the factors listed above could
affect the Holding Company's financial performance and could cause the
Holding Company's actual results for future periods to differ materially
from any opinions or statements expressed with respect to future periods in
any current statements.
The Holding Company does not undertake, and specifically disclaims any
obligation, to publicly release the result of any revisions which may be
made to any forward-looking statements to reflect events or circumstances
after the date of such statements or to reflect the occurrence of
anticipated or unanticipated events.
Year 2000
First Federal is highly dependent on the accuracy of computers and computer
programs. The Year 2000 issue is the result of computer programs being
written using two digits rather than four to define an applicable year. Any
of a company's hardware, date-driven automated equipment, or computer
programs that have date sensitive software could recognize a date using "00"
as the year 1900 rather than the year 2000. This improper recognition could
result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions or engage in normal business activities. The Company's
Technology and Facilities Committee is responsible for monitoring and
achieving Year 2000 (Y2K) readiness for the Company and oversees a Y2K
Committee. The Y2K Committee is headed by the Bank's Vice President of
Operations and consists of members from the Bank's internal audit,
information systems and user departments.
Over the past two and one-half years, the Company has been addressing Year
2000 issues. A significant part of Year 2000 readiness was converting the
Bank's financial computer system to a new comprehensive software system to
run the core banking operation. The conversion was successfully completed
on April 27, 1998. The new financial computer system has been tested for
Year 2000 readiness and the results were successful. Additionally, this new
system allows First Federal to enhance its current services. It was
determined that the Bank's previous financial computer system would be too
costly to make Year 2000 ready and would hinder other program development.
Another significant part of the Company's Year 2000 readiness includes
contacting significant third party vendors who are required to provide
evidence of their efforts to become Year 2000 ready. Management has
evaluated each of the Company's significant vendor's Year 2000 readiness
progress and considers them to be satisfactory. Management plans to have
ongoing communications with such vendors to insure Year 2000 readiness.
Although the Company has been assured of the readiness of its financial
computer system and significant vendors' systems for the Year 2000, the Y2K
Committee continues to test such systems for Year 2000 readiness for further
assurance. The Company has and will continue to inform customers and
employees regarding Year 2000 readiness. The Company plans to substantially
complete the Year 2000 readiness project by June 30, 1999; however,
continued efforts such as testing, vendor contacts, customer and employee
awareness will continue throughout the Year 2000.
The Company has incurred cash outlays of approximately $755,000 through
March 31, 1999, including $429,000 for the new comprehensive software
system, in connection with the Year 2000 readiness project. Management
estimated the total cost of Year 2000 compliance issues would be
approximately $1.0 million, which is being funded through operations. The
total cost of the Year 2000 project is not expected to have a material
impact on the Company's results of operations.
The Company faces several risk factors with respect to the Year 2000. For
example, the ability of First Federal's loan customers to repay their
obligations could be affected by business interruptions caused by Year 2000
problems. The potential impact on First Federal of such problems has not
been determined, but could be significant in that customers may be unable to
repay their obligations. The Company is also vulnerable to its significant
vendors' Year 2000 issues with respect to their major suppliers and their
own Year 2000 issues.
The Company is currently finalizing a written contingency plan and expects
it to be substantially complete by June 30, 1999. The plan is being
developed for a general failure of the Company's systems and specific
contingency plans will be developed for each critical application and
vendor. The Company currently has contingency plans to replace significant
vendors that may have Year 2000 difficulties in addition to replacing the
vendors or suppliers the Company cannot test.
The dates and costs of the Year 2000 remediation process are based on
management's best estimates. Management believes that the Company's Year
2000 efforts will be resolved on a timely and cost-efficient basis and does
not anticipate that the Company's additional efforts regarding Year 2000
compliance will have a material impact on its financial condition, results
of operations, liquidity and capital resources. There can be no guarantee,
however, that such estimates and assumptions will be achieved and actual
results could differ materially from those estimates.
Financial Condition
General. Total assets at March 31, 1999 were $658.3 million compared to
$651.7 million at June 30, 1998, an increase of $6.6 million, or 1.0%. The
increase was primarily an increase in securities available for sale
partially offset by a decline in loans receivable. Total liabilities at
March 31, 1999 were $582.8 million compared to $567.5 million at June 30,
1998, an increase of $15.3 million, or 2.7%. The increase was primarily
attributable to increases in deposits and long-term borrowings, partially
offset by declines in short-term securities sold under agreements to
repurchase (repurchase agreements), short-term borrowings and other payables
and accrued expenses.
Securities. The Company's securities portfolio increased $30.9 million, or
21.9%, during the first nine months of fiscal year 1999, and totaled $171.7
million at March 31, 1999 compared to $140.8 million at June 30, 1998. The
increase over the nine month period primarily consisted of security
purchases totaling $92.5 million partially offset by $27.3 million, $10.7
million and $22.4 million in sales, maturities and principal receipts on
mortgage-backed securities, respectively. Security purchases on the
Company's March 31, 1999 Statement of Cash Flows includes securities that
were recorded on the trade date in June 1998, but did not settle until July
1998. The increase in securities was primarily funded by increased
borrowings as part of management's strategy to maximize net interest income.
At March 31, 1999, fair value of the securities portfolio consisted of 47.7%
in mortgage-backed securities, 19.9% in federal agency obligations, 15.9% in
municipal securities, 14.3% in trust preferred securities and 2.2% in equity
securities.
Loans. Net loans receivable, including loans available for sale, declined
$24.0 million, or 5.0%, and totaled $458.5 million at March 31, 1999
compared to $482.5 million at June 30, 1998. The decline in the loan
portfolio was attributable to (i) repayments on $17.1 million in short-term
consumer loans made to customers in June 1998 to fund their stock
subscriptions in a local financial institution's initial public offering and
(ii) loans sold in the secondary market, as opposed to being retained in
First Federal's portfolio in the current low interest rate environment.
Adjustable-rate loans continued to grow within the Bank's loan portfolio.
At March 31, 1999, adjustable-rate loans totaled 40.3% of gross loans
compared to 32.5% of gross loans at June 30, 1998. Management's effort to
minimize the impact of interest rate changes is reflected in the increase in
adjustable-rate loans, primarily in the one-to-four family portfolio. The
Bank's loan portfolio composition continued to be primarily in one-to-four
family mortgages, representing 72.1% of the gross loan portfolio at March
31, 1999 compared to 71.7% of the gross loan portfolio at June 30, 1998.
Loan originations during the first nine months of fiscal year 1999 totaled
$111.9 million compared to $87.8 million during the first nine months of
fiscal year 1998. The increase in loan originations is largely attributable
to the Bank's secondary market operation which accounted for $23.5 of
current year originations. Mortgage loans for the purchase, construction or
refinance of one-to-four family homes in the Bank's market continued to
represent the largest segment of its loan originations. During the nine
months ended March 31, 1999, one-to-four family loan originations, including
the construction of one-to-four family homes were $62.0 million, or 55.4% of
total originations; multi-family residential, commercial real estate and
development loan originations were $14.9 million, or 13.3% of total
originations; and consumer loan originations were $35.0 million, or 31.3% of
total originations.
The Bank's secondary market mortgage lending operation, which began in
December 1997, is designed to originate and sell qualifying loans to Fannie
Mae in an effort to access that portion of the mortgage market that is
currently serviced by secondary market lenders. Currently, the Bank only
sells fixed-rate loans to Fannie Mae. The Bank sold 348 loans during the
nine months ended March 31, 1999, resulting in a pre-tax gain of $591,000.
Management anticipates increased activity in secondary market mortgage
lending as long as market conditions allow it to be profitable.
Deposits. Deposits increased $12.5 million, or 2.8%, during the first nine
months of fiscal year 1999 and totaled $456.5 million at March 31, 1999
compared to $444.0 million at June 30, 1998. Deposit outflows occurred
during June 1998 as a result of customers funding their stock subscriptions
in an initial public offering by a local financial institution. However,
since June 30, 1998, the Bank was successful in obtaining funds by offering
higher-yield short-term certificates of deposit. The Bank's 10-month
certificate of deposit special with an annual percentage yield of 5.10%
accumulated a balance of $53.0 million through March 31, 1999. Overall,
certificate accounts increased $3.6 million since June 30, 1998. First
Federal also introduced a new money market product in November 1997 for
customers who are generally interest rate conscious and want to keep their
funds liquid. At March 31, 1999, this new money market product had a
balance of $21.0 million compared to a balance of $11.5 million at June 30,
1998. Overall, money market accounts increased $8.0 million since June 30,
1998. NOW accounts grew $1.9 million, whereas passbook accounts declined
$1.0 million during the first nine months of fiscal year 1999. The weighted
average cost of deposits was 4.33% and 4.63% at March 31, 1999 and June 30,
1998, respectively.
Repurchase Agreements. Short-term repurchase agreements declined $5.8
million during the first nine months of fiscal year 1999 and totaled $7.3
million at March 31, 1999 compared to $13.1 million at June 30, 1998. The
reduction in short-term repurchase agreements was due to the maturity of an
agreement in February 1999. This reduction was funded by the decline in
cash and cash equivalents from $13.8 million at February 28, 1999 to $8.5
million at March 31, 1999. One short-term repurchase agreement remains on
the Bank's books at March 31, 1999 with a rate of 5.0%.
Borrowed Funds. Borrowed funds increased $23.1 million during the first
nine months of fiscal year 1999 and totaled $57.1 million at March 31, 1999
compared to $34.0 million at June 30, 1998. Both short- and long-term
borrowings consist of advances from the Federal Home Loan Bank (FHLB) of
Cincinnati. Borrowed funds are managed within the Company's guidelines for
asset/liability management, profitability and overall growth objectives.
The increase in borrowed funds was primarily used to fund the growth in
securities.
Other Liabilities. Other payables and accrued expenses declined $13.4
million during the first nine months of fiscal year 1999, primarily from
customers' short-term loan repayments (see "Loans" above) in July 1998, and
totaled $9.1 million at March 31, 1999 compared to $22.5 million at June 30,
1998. The decline was primarily due to $16.1 million in securities
purchases recorded on the trade date in June 1998 that did not settle until
July 1998, partially offset by an increase in accrued interest on deposits
totaling $2.3 million.
Stockholders' Equity. Total stockholders' equity declined $8.8 million
during the first nine months of fiscal year 1999 and totaled $75.4 million
at March 31, 1999 compared to $84.2 million at June 30, 1998. This decline
resulted principally from stock repurchases, dividends paid to shareholders
and a decline in holding gains on available-for-sale securities totaling
$13.7 million, $2.4 million and $525,000, respectively, partially offset by
net income for the nine months ended March 31, 1999 of $6.1 million and
other increases of $1.8 million consisting of stock option exercises,
amortization and tax benefits associated with employee benefits and KSOP
accounting. On January 19, 1999, the Company announced a 100% stock
dividend, which is equivalent to a two-for-one stock split, that was paid on
March 5, 1999 to shareholders of record on February 19, 1999. The Company
used its 2.8 million treasury shares and issued an additional 959,000 shares
to pay for the stock dividend. Proper accounting treatment to record these
transactions warranted the decline in additional paid in capital and
retained earnings, but did not affect total stockholders' equity. On
February 10, 1999, the Company announced the completion of its share
repurchase that was announced on October 7, 1998. On February 16, 1999, the
Company announced its intention to repurchase 10%, or 758,936 shares of its
then outstanding common stock in open market transactions over a twelve
month period beginning February 23, 1999. As of April 20, 1999, 354,336
shares had been repurchased at an average price of $18.13 per share.
Results of Operations
Comparison of the Three and Nine Months Ended March 31, 1999 and 1998
General. The Company recorded net income of $2.1 million, or $0.30 per
diluted share for the three months ended March 31, 1999 compared to net
income of $2.0 million, or $0.25 per diluted share for the same three month
period last year. This represents a 9.0% increase in net income and a 20.0%
increase in diluted earnings per share comparing the three month periods.
For the nine months ended March 31, 1999, the Company recorded net income of
$6.1 million, or $0.81 per diluted share compared to $5.8 million, or $0.74
per diluted share for the nine months ended March 31, 1998. This represents
a 4.3% increase in net income and a 9.5% increase in diluted earnings per
share comparing the nine month periods. The Company's annualized return on
average assets and return on average equity for the three months ended March
31, 1999 were 1.29% and 10.86%, respectively, compared to 1.27% and 9.45%
for the three months ended March 31, 1998. The Company's annualized return
on average assets and return on average equity for the nine months ended
March 31, 1999 were 1.22% and 9.91%, respectively, compared to 1.26% and
9.33% for the nine months ended March 31, 1998.
Interest Income. Interest income totaled $12.2 million for the three months
ended March 31, 1999 compared to $12.1 million for the three months ended
March 31, 1998, representing an increase of $166,000, or 1.4%. This
increase was primarily a volume increase in securities, partially offset by
yield declines in securities and loans. The average balance of total
interest-earning assets for the three months ended March 31, 1999 and 1998
was $644.2 million and $600.0 million, respectively. The weighted average
yield on total interest-earning assets for the three months ended March 31,
1999 and 1998 was 7.73% and 8.11%, respectively. For the nine months ended
March 31, 1999, interest income totaled $36.8 million compared to $36.0
million for the nine months ended March 31, 1998, an increase of $749,000,
or 2.1%. This increase was primarily volume increases in securities and
loans, partially offset by yield declines in securities and loans and a
volume decline in other interest-earning assets. The average balance of
total interest-earning assets for the nine months ended March 31, 1999 and
1998 was $639.2 million and $593.6 million, respectively. The weighted
average yield on total interest-earnings assets for the nine months ended
March 31, 1999 and 1998 was 7.79% and 8.14%, respectively. The current year
increases in average interest-earning assets over the prior year primarily
reflect increases in Federal agency obligations, tax-exempt securities and
trust preferred securities, which were primarily funded with increases in
repurchase agreements and borrowings. The current year declines in yield
primarily reflect decreased yields on securities and loans which was largely
the result of redeploying proceeds from a high level of loan prepayments on
mortgage-backed securities and loan refinances.
Interest Expense. Interest expense totaled $6.5 million for the three
months ended March 31, 1999 compared to $6.3 million for the three months
ended March 31, 1998, representing an increase of $205,000, or 3.2%. This
increase was primarily volume increases in deposits, long-term repurchase
agreements and long-term borrowed funds, partially offset by rate declines
in deposits, short-term repurchase agreements and short-term borrowed funds.
The average balance of total interest-bearing liabilities for the three
months ended March 31, 1999 and 1998 was $570.4 million and $523.4 million,
respectively. The weighted average rate paid on total interest-bearing
liabilities for the three months ended March 31, 1999 and 1998 was 4.57% and
4.83%, respectively. For the nine months ended March 31, 1999, interest
expense totaled $20.0 million compared to $19.1 million for the nine months
ended March 31, 1998, an increase of $832,000, or 4.3%. This increase was
volume increases in long-term repurchase agreements and short- and long-term
borrowed funds, partially offset by rate declines in all interest-bearing
liabilities, except for long-term borrowed funds, which had no activity
during last fiscal year. The average balance of total interest-bearing
liabilities for the nine months ended March 31, 1999 and 1998 was $561.8
million and $517.1 million, respectively. The weighted average rate paid on
total interest-bearing liabilities for the nine months ended March 31, 1999
and 1998 was 4.74% and 4.94%, respectively. The current year growth in
average interest-bearing liabilities over the prior year was used to fund
the growth in interest-earning assets mentioned above. The current year
declines in rate primarily reflect a reduction in market rates.
Net Interest Income. Net interest income totaled $5.7 million for the three
months ended March 31, 1999, a decline of $39,000, or 0.7%, compared to the
three months ended March 31, 1998. The Company's net interest margin (net
interest income as a percentage of average interest-earning assets) was
3.67% for the three months ended March 31, 1999, down 22 basis points from
3.89% for the three months ended March 31, 1998. Net interest income
totaled $16.8 million for the nine months ended March 31, 1999, a decline of
$83,000, or 0.5%, compared to the nine months ended March 31, 1998. The
Company's net interest margin was 3.62% for the nine months ended March 31,
1999, down 22 basis points from 3.84% for the nine months ended March 31,
1998. The decline in net interest margin was due mainly to the current
interest rate environment and the funding of growth in average interest-
earning assets with increased average borrowings and repurchase agreements.
These sources of funds tend to have a higher cost than core deposits.
Provision for Loan Losses. The provision for loan losses totaled $131,000
and $381,000 for the three and nine months ended March 31, 1999,
respectively, compared to $115,000 and $442,000 for the same periods last
year. The provision for loan losses reflects management's evaluation of the
underlying credit risk of the Bank's loan portfolio to provide for an
adequate level of allowance for loan losses. The Bank's allowance for loan
losses at March 31, 1999 totaled 75.6% and 0.6% of non-performing loans and
gross loans outstanding, respectively. This compares to an allowance for
loan losses totaling 82.4% and 0.6% of non-performing loans and gross loans
outstanding, respectively, at June 30, 1998. Future additions to the
allowance for loan losses will be dependent on a number of factors,
including the performance of the Bank's loan portfolio, the economy, changes
in interest rates and the effect of such changes on real estate values and
inflation. Management believes that the allowance for loan losses was
adequate at March 31, 1999.
Non-Interest Income. Non-interest income totaled $586,000 for the three
months ended March 31, 1999, an increase of $76,000 compared to the same
prior year period. This increase is primarily attributable to the Bank's
secondary market mortgage operation, which began in December 1997. Gains
from loan sales totaled $202,000 for the three months ended March 31, 1999
compared to $31,000 for the three months ended March 31, 1998. Partially
offsetting the gain from loan sales for the current quarter was a decline in
commissions from credit life sales and the activities of FFY Holdings, Inc.,
namely a decline in revenues from its real estate affiliates (see Item 5 -
Other Information on page 16 of this Form 10-Q). For the nine months ended
March 31, 1999, non-interest income totaled $1.9 million, an increase of
$670,000 compared to the same prior year period. Mostly contributing to
this increase comparing the nine month periods is an increase in gains from
loan sales of $557,000. Other factors affecting the nine-month growth in
non-interest income are increases in service fee income, namely from NOW
accounts, loan extension fees and debit cards, partially offset by a decline
in the gain on sale of securities.
Non-Interest Expense. Non-interest expense totaled $3.0 million for the
three months ended March 31, 1999, a decline of $8,000 compared to the same
prior year period. Most components of non-interest expense remained
relatively constant comparing the three months ended March 31, 1999 and
1998, except for the inclusion of FFY Holding's insurance affiliate, Daniel
W. Landers Insurance Agency, Ltd. (Landers), which began operations on April
1, 1998. Largely offsetting the activities of Landers are declines in
medical benefits, franchise taxes and professional fees. For the nine
months ended March 31, 1999, non-interest expense totaled $9.3 million, an
increase of $576,000 compared to the same prior year period. Increases
comparing the nine month periods include the activities of Landers as well
as increased depreciation, advertising and loan expenses at the Bank.
Additionally, severance pay was awarded to a long-tenured company officer in
December 1998 as a result of her retirement. Partially offsetting the
aforementioned increases were declines in professional fees and franchise
taxes. The Company's efficiency ratio (operating expenses excluding
goodwill amortization as a percentage of net interest income plus non-
interest income excluding gains/losses from securities sales) totaled 47.8%
and 49.8% for the three and nine months ended March 31, 1999 compared to
49.1% and 48.6% for the three and nine months ended March 31, 1998.
Income Taxes. Federal income taxes totaled $1.1 million for both the three
months ended March 31, 1999 and 1998. For the nine months ended March 31,
1999, federal income tax expense totaled $3.0 million compared to $3.1
million for the same period last year. The decline in federal income taxes
comparing the nine months ended March 31, 1999 and 1998 was due to a decline
in the Company's effective tax rate, which was attributable to increased
income from tax-exempt securities.
Minority Interest. Minority interest in loss of consolidated subsidiaries,
which is now being separately stated on the statement of income, totaled
$106,000 for the nine months ended March 31, 1999. Minority interest
represents the portion of the net loss from the real estate and insurance
affiliates not owned by FFY Holdings, Inc. The real estate and insurance
affiliates are consolidated in the Company's financial statements. See Item
5 - Other Information on page 16 of this Form 10-Q regarding the formation
of a new real estate company.
Effect of New Accounting Standards
Refer to Note 2 of the Notes to Consolidated Financial Statements contained
in this report.
Liquidity and Cash Flows
In general terms, liquidity is a measurement of the Company's ability to
meet its cash needs. For example, the Company seeks to be able to meet loan
commitments, purchase securities or to repay deposits and other liabilities
in accordance with their terms without an adverse impact on current or
future earnings. The Company's principal sources of funds are deposits,
amortization and prepayments of loans, maturities, sales and principal
receipts of securities, borrowings, repurchase agreements and operations.
Federal regulations, which became effective November 24, 1997, require the
Bank to maintain minimum levels of liquid assets in each calendar quarter of
not less than 4% of either (i) its liquidity base at the end of the
preceding quarter, or (ii) the average daily balance of its liquidity base
during the preceding quarter. The new federal regulations decreased the
minimum liquidity requirement from 5%, removed the 1% short-term liquidity
requirement, expanded categories of liquid assets and reduced the liquidity
base. The Bank's liquidity exceeded the applicable liquidity requirement at
March 31, 1999. Simply meeting the liquidity requirement does not
automatically mean the Bank has sufficient liquidity for a safe and sound
operation. The rule includes a separate requirement that each thrift must
maintain sufficient liquidity to ensure its safe and sound operation. Thus,
adequate liquidity may vary depending on the Bank's overall asset/liability
structure, market conditions, the activities of competitors, and the
requirements of its own deposit and loan customers. Management believes
the Bank's liquidity is sufficient.
Liquidity management is both a daily and long-term responsibility of
management. The Bank adjusts its investments in liquid assets based upon
management's assessment of (i) expected loan demand, (ii) expected deposit
flows, (iii) yields available on interest-earning deposits and securities
and (iv) the objective of its asset/liability management program. Along
with its liquid assets, the Bank has additional sources of liquidity
available including, but not limited to, loan repayments, the ability to
obtain deposits through offering above market interest rates and access to
advances from the Federal Home Loan Bank of Cincinnati (FHLB).
The primary investing activities of the Bank and/or Company are originating
loans and purchasing securities. A decline in the Bank's loan portfolio
provided $24.3 million whereas the growth in the securities portfolio used
$47.4 million during the nine months ended March 31, 1999. The decline in
loans was the result of current period payoffs of short-term loans
outstanding at June 30, 1998 and loans being sold in the secondary market -
see "Financial Condition" above. Generally, during periods of general
interest rate declines, the Bank would be expected to experience increased
loan prepayments, which would likely be reinvested at lower interest rates.
During a period of increasing interest rates, loan prepayments would be
expected to decline, reducing funds available for investment at higher
interest rates.
The primary financing activities of the Bank are deposits, repurchase
agreements and borrowings. Deposit accounts and borrowed funds provided
$12.6 million and $23.1 million, respectively, during the nine months ended
March 31, 1999 and repurchase agreements used $5.7 million during the same
period.
Capital Resources
Office of Thrift Supervision (OTS) regulations require savings institutions
to maintain certain minimum levels of regulatory capital. An institution
that fails to comply with its regulatory capital requirements must obtain
OTS approval of a capital plan and can be subject to a capital directive and
certain restrictions on its operations. At March 31, 1999, the minimum
regulatory capital regulations require institutions to have tangible capital
to total tangible assets of 1.5%; a minimum leverage ratio of core (Tier 1)
capital to total adjusted tangible assets of 3.0%; and a minimum ratio of
total capital (core capital and supplementary capital) to risk weighted
assets of 8.0%, of which 4.0% must be core capital.
Under the prompt corrective action regulations, the OTS is required to take
certain supervisory actions (and may take additional discretionary actions)
with respect to an undercapitalized institution. Such actions could have a
direct material effect on an institution's financial statements. The
regulations establish a framework for the classification of savings
institutions into five categories: well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized. Generally, an institution is considered well capitalized
if it has a core (Tier 1) capital ratio of at least 5.0% (based on average
total assets); a core (Tier 1) risk-based capital ratio of at least 6.0%;
and a total risk-based capital ratio of at least 10.0%.
The foregoing capital ratios are based in part on specific quantitative
measures of assets, liabilities and certain off-balance sheet items as
calculated under regulatory accounting practices. Capital amounts and
classifications are also subject to qualitative judgments by the OTS about
capital components, risk weightings and other factors.
At March 31, 1999, the Bank meets all capital adequacy requirements to which
it is subject. Further, the most recent OTS notification categorized the
Bank as a well-capitalized institution under the prompt corrective action
regulations. There have been no conditions or events since that notification
that management believes have changed the Bank's capital classification.
The following is a reconciliation of the Bank's GAAP and Regulatory capital,
and a summary of the Bank's actual capital ratios compared with the OTS
minimum bank capital adequacy requirements and their requirements for
classification as well capitalized at March 31, 1999:
<TABLE>
<CAPTION>
Tier-1 Tier-1 Total
Equity Tangible Core Risk-Based Risk-Based
(dollars in thousands) Capital Equity Capital Capital Capital
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GAAP Capital $ 54,355 $ 54,355 $ 54,355 $ 54,355 $ 54,355
Accumulated losses (gains) on certain
securities available for sale, net 252 252 252 252
General loan valuation allowances - - - 2,406
Other, net (266) (266) (266) (1,490)
----------------------------------------------
Regulatory capital 54,341 54,341 54,341 55,523
Total assets 641,960
Adjusted total assets 641,985 641,985
Risk-weighted assets 397,248 397,248
----------------------------------------------------------
Actual capital ratio 8.47% 8.46% 8.46% 13.68% 13.98%
Minimum capital adequacy requirements 1.50% 3.00% 8.00%
Regulatory capital category
Well capitalized - equal to or greater than 5.00% 6.00% 10.00%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There were no material changes in information about market risk that was
provided in the 1998 Annual Report to Shareholders, which was incorporated
by reference into the Company's 1998 Annual Report on Form 10-K.
PART II: OTHER INFORMATION
FFY FINANCIAL CORP.
MARCH 31, 1999
Item 1. Legal Proceedings
FFY or FFY Holdings, Inc. is not a party to any material legal proceeding
before any court or regulatory authority, administrative agency or other
tribunal. Further, FFY or FFY Holdings, Inc. is not aware of the threat of
any such proceeding.
As part of its ordinary course of business, First Federal is a party to
several lawsuits involving a variety of claims, including the collection of
delinquent accounts. No litigation is pending or, to First Federal's
knowledge, threatened in which the Bank faces potential loss or exposure
which would have a material impact on its financial condition or results of
operations. First Federal is not involved in any administrative or judicial
proceeding under any Federal, State or Local provisions which have been
enacted or adopted relating to the protection of the environment.
Item 2. Changes in Securities
None to be reported.
Item 3. Defaults on Senior Securities
None to be reported.
Item 4. Submission of Matters to a Vote of Security Holders
None to be reported.
Item 5. Other Information
On January 15, 1999, FFY announced the formation of a new real estate
affiliate combining the operations of its existing real estate affiliate,
First Real Estate, Ltd. with Coldwell Banker United Group Realtors to form
Coldwell Banker FFY Real Estate. Operations began on February 1, 1999.
This new affiliate is 1/3 owned by FFY Holdings, Inc. and is accounted for
using the equity method of accounting.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits - Exhibit 27 - Financial Data Schedule.
B. Reports on Form 8-K - On January 19, 1999, the Registrant announced
earnings of $2.0 million, or $0.27 per diluted share for the quarter
ended December 31, 1998. The Registrant also announced a 100% stock
dividend and its regular quarterly dividend of $0.225 per share, to be
paid prior to the record date of the 100% stock dividend.
Pursuant 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.
FFY Financial Corp.
Date: May 14, 1999 By: /s/ Jeffrey L. Francis
-------------------------------------
Jeffrey L. Francis
President and Chief Executive Officer
(Principal Executive Officer)
Date: May 14, 1999 By: /s/ Therese Ann Liutkus
-------------------------------------
Therese Ann Liutkus
Treasurer and Chief Financial Officer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> MAR-31-1999
<CASH> 4,252,570
<INT-BEARING-DEPOSITS> 4,255,466
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 171,667,711
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 458,493,663
<ALLOWANCE> 2,750,795
<TOTAL-ASSETS> 658,261,875
<DEPOSITS> 456,551,299
<SHORT-TERM> 29,449,000
<LIABILITIES-OTHER> 10,514,572
<LONG-TERM> 86,300,000
0
0
<COMMON> 75,894
<OTHER-SE> 75,371,110
<TOTAL-LIABILITIES-AND-EQUITY> 658,261,875
<INTEREST-LOAN> 29,470,051
<INTEREST-INVEST> 7,189,951
<INTEREST-OTHER> 126,360
<INTEREST-TOTAL> 36,786,362
<INTEREST-DEPOSIT> 15,292,422
<INTEREST-EXPENSE> 19,975,305
<INTEREST-INCOME-NET> 16,811,057
<LOAN-LOSSES> 380,528
<SECURITIES-GAINS> 112,421
<EXPENSE-OTHER> 9,312,895
<INCOME-PRETAX> 9,004,108
<INCOME-PRE-EXTRAORDINARY> 6,063,890
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,063,890
<EPS-PRIMARY> $0.84
<EPS-DILUTED> $0.81
<YIELD-ACTUAL> 3.62
<LOANS-NON> 3,249,028
<LOANS-PAST> 0
<LOANS-TROUBLED> 165,660
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,740,169
<CHARGE-OFFS> 461,528
<RECOVERIES> 91,626
<ALLOWANCE-CLOSE> 2,750,795
<ALLOWANCE-DOMESTIC> 2,750,795
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 624,144
</TABLE>
