UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarter Ended September 30, 1997
FIDELITY FEDERAL BANCORP
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Indiana 0-22880 35-1894432
---------------------------- ---------- ------------------
(State of other jurisdiction Commission (IRS Employer
of Incorporation of File No. Identification No.)
Organization)
700 S. Green River Road, Suite 2000
Evansville, Indiana 47715
-----------------------------------------------------
(Address of principal executive offices) (Zip Code)
(812) 469-2100
--------------------------------------------------
Registrant's telephone number, including area code
Indicate by checkmark 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 twelve months and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
------- -------
As of November 6, 1997, there were 3,127,713 shares of the Registrant's common
stock, $1 stated value, issued and outstanding.
Exhibit Index is on page 22.
<PAGE>
FIDELITY FEDERAL BANCORP
AND SUBSIDIARIES
Index
Page
PART I - FINANCIAL INFORMATION
ITEM 1--Financial Statements:
Consolidated balance sheet . . . . . . . . . . . . . . . . 3
Consolidated statement of income . . . . . . . . . . . . . 4
Consolidated statement of changes in stockholders' equity . 5
Consolidated statement of cash flows . . . . . . . . . . . 6
Notes to consolidated financial statements . . . . . . . . 7
ITEM 2--Management's Discussion and Analysis of Results of
Operation and Financial Condition
Results of Operations . . . . . . . . . . . . . . . . . 10
Financial Condition . . . . . . . . . . . . . . . . . . . 13
Capital Resources and Capital Requirements . . . . . . . 17
Liquidity . . . . . . . . . . . . . . . . . . . . . . . . 18
PART II - OTHER INFORMATION . . . . . . . . . . . . . . . . . 19
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . 20
EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . 21
<PAGE>
ITEM 1 - FINANCIAL STATEMENTS
PART I - FINANCIAL INFORMATION
FIDELITY FEDERAL BANCORP
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1997 1997
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 2,532 $ 1,747
Short-term interest-bearing deposits 3,215 1,759
--------- ---------
Total cash and cash equivalents 5,747 3,506
Interest-bearing deposits 6 6
Securities available for sale 13,457 13,790
Loans 198,541 204,964
Allowance for loan losses (1,898) (1,781)
--------- ---------
Net loans 196,643 203,183
Premises and equipment 6,276 6,341
Federal Home Loan Bank of Indianapolis stock, at cost 3,919 3,920
Other assets 9,288 9,255
--------- ---------
Total assets $235,336 $240,001
========= =========
LIABILITIES
Deposits
Non-interest bearing $ 4,483 $ 4,714
Interest-bearing 175,187 177,073
--------- ---------
Total deposits 179,670 181,787
Borrowings 3,325 5,191
Federal Home Loan Bank advances and other long-term debt 34,424 38,089
Advances by borrowers for taxes and insurance 1,019 674
Other liabilities 2,517 1,324
--------- ---------
Total liabilities 220,955 227,065
STOCKHOLDERS' EQUITY
Preferred stock, no par or stated value
Authorized and unissued - 5,000,000 shares
Common stock, $1 stated value
Authorized - 5,000,000 shares
Issued Outstanding - 2,791,051 and 2,487,385 shares 2,791 2,487
Capital surplus 9,707 8,708
Stock warrants 142 264
Retained earnings, substantially restricted 1,717 1,508
Net unrealized losses on securities available for sale 24 (31)
--------- ---------
Total stockholders' equity 14,381 12,936
--------- ---------
Total liabilities and stockholders' equity $235,336 $240,001
========= =========
</TABLE>
See notes to consolidated financial statements.
NOTE: The consolidated balance sheet at June 30, 1997 has been derived from
the audited financial statements.
3
<PAGE>
FIDELITY FEDERAL BANCORP
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
1997 1996
----------------------
<S> <C> <C>
INTEREST INCOME
Loans $4,527 $4,755
Securities available for sale 208 285
Federal funds sold 29 17
Interest-bearing deposits 41 17
Other interest and dividend income 82 78
--------- ---------
Total interest income 4,887 5,152
INTEREST EXPENSE
Deposits 2,533 2,472
Federal Home Loan Bank advances 360 653
Federal funds purchased 40
Other interest expense 392 409
--------- ---------
Total interest expense 3,285 3,574
--------- ---------
NET INTEREST INCOME 1,602 1,578
Provision for loan losses 135 850
--------- ---------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,467 728
--------- ---------
NON-INTEREST INCOME
Fee income-real estate development and management 107 79
Service charges on deposit accounts 115 70
Gain on sale of
Real estate loans 62 68
Letter of credit fees 194 154
Real estate mortgage banking fees 3
Agent fee income 219 95
Other income 153 139
--------- ---------
Total non-interest income 850 608
--------- ---------
NON-INTEREST EXPENSE
Salaries and employee benefits 839 1,122
Net occupancy expense 113 112
Equipment expense 88 84
Data processing expense 89 73
Deposit insurance expense 15 1,151
Legal and professional fees 70 122
Other expense 435 619
--------- ---------
Total non-interest expense 1,649 3,283
--------- ---------
INCOME BEFORE INCOME TAX 668 (1,947)
Income tax expense 159 (703)
--------- ---------
NET INCOME $ 509 $(1,244)
========= =========
PER SHARE:
Primary net income $ 0.19 $ (0.46)
Fully diluted net income 0.19 (0.46)
AVERAGE COMMON AND COMMON EQUIVALENT SHARES
OUTSTANDING 2,613,418 2,727,611
See notes to consolidated financial statements.
4
<PAGE>
FIDELITY FEDERAL BANCORP
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
(UNAUDITED)
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
1997 1996
-----------------------------
<S> <C> <C>
BEGINNING BALANCES $12,936 $14,295
Net income 509 (1,244)
Net change in unrealized gain (loss) on securities
available for sale 54 22
Cash dividends (300) (499)
Purchase of common stock (32)
Exercise of stock warrants 1,182 2
Exercise of stock options 2
------- -------
BALANCES, SEPTEMBER 30 $14,381 $12,546
======= =======
</TABLE>
See notes to consolidated condensed financial statements.
5
<PAGE>
FIDELITY FEDERAL BANCORP
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
1997 1996
------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 509 $(1,244)
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses 135 850
Loss on sale of premises and equipment 15 5
Depreciation 116 85
Investment securities amortization (accretion), net 3
Amortization of net loan origination fees and points (42)
Changes in:
Interest receivable and other assets (32) 272
Interest payable and other liabilities 1,111 405
--------- -------
Net cash provided by operating activities 1,812 376
--------- -------
INVESTING ACTIVITIES
Purchases of investment securities available for sale (1,011)
Proceeds from investment securities available for sale,
sales and maturities 419 662
Net changes in loans 6,447 (7,701)
Purchases of premises and equipment (66) (364)
--------- -------
Net cash provided (used) by investing activities 6,800 (8,414)
--------- -------
FINANCING ACTIVITIES
Net change in:
Noninterest-bearing, NOW, savings and money
market deposits 2,666 (1,980)
Certificates of deposit (4,783) 1,474
Net decrease in federal funds purchased 7,400
Proceeds from borrowings 792 663
Repayment of borrowings (2,658) (3,244)
Proceeds from FHLB advances 7,600
Repayment of FHLB advances (3,665) (11,000)
Net change in advances by borrowers for taxes and insurance 344 49
Purchase of common stock (32)
Cash dividends (249) (499)
Proceeds from exercise of stock warrants 1,182 2
Proceeds from exercise of stock options 2
--------- -------
Net cash provided (used) by financing activities (6,371) 435
--------- -------
Net change in Cash and Cash Equivalents 2,241 (7,603)
Cash and Cash Equivalents, beginning of year 3,506 10,213
--------- -------
Cash and Cash Equivalents, end of year $5,747 $2,610
========= =======
Additional Cash Flows and Supplementary information
Cash paid for income taxes, net of refunds $ 125 $ 200
Cash paid for interest 2,566 2,944
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
FIDELITY FEDERAL BANCORP
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
- - ACCOUNTING POLICIES
The significant accounting policies followed by Fidelity Federal Bancorp (the
"Company") and its wholly owned subsidiaries for interim financial reporting
are consistent with the accounting policies followed for annual financial
reporting. All adjustments which are necessary for a fair presentation of the
results for the periods reported, consist only of normal recurring
adjustments, and have been included in the accompanying unaudited consolidated
condensed financial statements. The results of operations for the three
months ended September 30, 1997 are not necessarily indicative of those
expected for the remainder of the year.
- - NET INCOME PER SHARE
Primary and fully diluted earnings per share have been computed based on the
weighted average common and common equivalent shares outstanding during the
periods. Common stock options and warrants are considered to be common
equivalent shares to the extent they are dilutive. In February 1997, the
Financial Accounting Standards Board issued Statement No. 128 "Earnings Per
Share." This statement simplifies the computation of earnings per share and
requires dual presentation of basic and diluted earnings per share on the face
of the income statement. This statement is effective for financial statements
issued for periods ending after December 15, 1997, with earlier application
not permitted. Management believes this will not have a material impact on the
Company's financial condition or results of operations.
- - STOCKHOLDERS' EQUITY
On September 22, 1997, the Company filed a Schedule 13E4 with the Securities
and Exchange Commission regarding a warrant tender offer to holders of its
1994 and 1995 warrants. The offer and withdrawal rights expired at 5:00 pm,
Central Standard Time, on October 31, 1997. The Board of Directors of the
Company had decreased the exercise price, upon the terms and subject to the
conditions set forth in the Letter of Transmittal, to $3.70 for the 1994
Warrants and $4.04 for the 1995 Warrants.
In connection with the Company's second debt and equity rights offering
completed January 31, 1995, the Company has reserved 346,500 shares of its
common stock for issuance upon exercise of 1,500 outstanding warrants. Each
warrant represents the right to purchase 231 shares of common stock. The
warrants were valued at $100 per warrant, carry an exercise price of $8.93 per
share, and expire on January 31, 2005. At September 30, 1997, a total of
210,441 of the shares originally reserved had been issued and 136,059 remained
reserved and unissued. At October 31, 1997, upon completion of the warrant
tender offer, the Company had remaining 9,471 shares reserved and unissued.
In connection with the Company's first debt and equity rights offering
completed on April 30, 1994, the Company has reserved 415,500 shares of its
common stock for issuance upon exercise of 1,500 outstanding warrants. Each
warrant represents the right to purchase 277 shares of common stock. The
warrants were valued at $100 per warrant, carry an exercise price of $6.22 per
share, and expire on April 30, 2004. At September 30, 1997, a total of
186,144 of the shares originally reserved had been issued and 229,356 remained
reserved and unissued. At October 31, 1997, upon completion of the warrant
tender offer, the Company had remaining 18,282 shares reserved and unissued.
- - CASH DIVIDEND
On September 17, 1997, the Board of Directors declared a dividend of $0.10 per
share payable on October 13, 1997 to stockholders of record on October 1,
1997.
7
<PAGE>
- - COMPANY SUBSIDIARIES
United Fidelity Bank, fsb ("Savings Bank") and Village Securities Corporation
are two subsidiaries of the Company. The Savings Bank is a federally
chartered savings bank, and is regulated by the Office of Thrift Supervision.
Village Securities Corporation began operations July 1, 1997, by providing
customers with deep discount brokerage services for stocks and bonds.
The Savings Bank's subsidiaries, Village Housing Corporation, Village
Management Corporation and Village Community Development Corporation, and
Fidelity Federal Capital Corporation (the "Affordable Housing Group") are
involved in various aspects of financing, owning, developing, building,
renting and managing affordable housing projects. The Company has found that
it may be advantageous for the Affordable Housing Group to finance, develop,
build, rent and manage many types of housing, including IRS Section 42
housing, condominiums, market-rate multifamily housing, and others. Another
subsidiary of the Savings Bank, Village Insurance Corporation, is engaged in
the business of selling various insurance products.
The Company reevaluated its business plan in fiscal 1997. As a result,
Village Community Development Corporation has reduced its activities
significantly. Village Capital Corporation (formerly known as Fidelity
Federal Capital Corporation) continues to receive consulting fees for its
services in assisting unaffiliated borrowers obtain financing. Village Housing
Corporation and Village Management Corporation continue to be fully
operational.
- - NEW ACCOUNTING STANDARD
The Financial Accounting Standards Board has issued Statement No. 130,
"Reporting Comprehensive Income," which establishes standards for reporting
and display of comprehensive income and its components. In addition, the
Financial Accounting Standards Board has issued Statement No. 131,
"Disclosures about Segments of an Enterprise and Related Information," which
establishes standards for disclosing information about operating segments in
interim and annual financial statements. The Company will comply with the new
disclosure requirements beginning in 1998. The application of the new rules
will not have a material impact on the Company's financial condition or
results of operations.
- - SEGMENT INFORMATION
The Company operates principally in two industries, banking and real estate
development and management. The Savings Bank offers traditional banking
products, such as checking, savings, and certificates of deposit, as well as
mortgage, consumer, and commercial loans. Through the Affordable Housing
Group, the Company is involved in various aspects of financing, owning,
developing, building, renting and managing affordable housing projects.
Operating profit is total revenue less operating expenses. In computing
operating profit, income taxes have been deducted.
Identified assets are principally those used in each segment. Real estate
development and management activities conducted by the Company are not asset
intensive. The assets in this segment primarily include cash received in the
form of fees and land to be used for future developments.
8
<PAGE>
Presented below is condensed financial information relating to the Company's
business segments:
<TABLE>
<CAPTION>
(IN THOUSANDS) THREE MONTHS ENDED
SEPTEMBER 30,
1997 1996
-------------------------
<S> <C> <C>
REVENUE:
Banking $ 5,630 $ 5,681
Real estate development and management 107 79
--------- ---------
Total consolidated $ 5,737 $ 5,760
========= =========
OPERATING PROFIT:
Banking $ 683 $ (620)
Real estate development and management (174) (624)
--------- ---------
Total consolidated $ 509 $ (1,244)
========= =========
IDENTIFIABLE ASSETS:
Banking $ 222,246 $ 246,572
Real estate development and management 13,090 15,262
--------- ---------
Total consolidated $ 235,336 $ 261,834
========= =========
DEPRECIATION AND AMORTIZATION:
Banking $ 111 $ 71
Real estate development and management 5 14
--------- ---------
Total consolidated $ 116 $ 85
========= =========
CAPITAL EXPENDITURES:
Banking $ 66 $ 363
Real estate development and management 1
--------- ---------
Total consolidated $ 66 $ 364
========= =========
</TABLE>
9
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain matters discussed in this Quarterly Report on Form 10-Q are
"forward-looking statements" intended to qualify for the safe harbors from
liability established by the Private Securities Litigation Reform Act of 1995.
These forward-looking statements can generally be identified as such because
the context of the statement will include words such as the Company
"believes", "anticipates", "expects", "estimates" or words of similar import.
Similarly, statements that describe the Company's future plans, objectives or
goals are also forward- looking statements. Such forward-looking statements
are subject to certain risks and uncertainties which are described inclose
proximity to such statements and which could cause actual results to differ
materially from those anticipated as of the date of this report. Shareholders,
potential investors and other readers are urged to consider these factors in
evaluating the forward-looking statements and are cautioned not to place undue
reliance on such forward-looking statements. The forward-looking statements
included herein are only made as of the date of this report and the Company
undertakes no obligation to publicly update such forward-looking statements to
reflect subsequent events or circumstances.
- - RESULTS OF OPERATIONS
The net income for the three months ended September 30, 1997 was $509,000,
compared to a net loss of $1,244,000 for the same period last year. Fully
diluted net income per share was $.19 per share for the three months ended
September 30, 1997, compared to a net loss of $0.46 per share in 1996. Last
year's net loss was impacted by the federal legislation resolving the FDIC
insurance funding issue signed by President Clinton in September, 1996,
requiring thrifts to pay a one-time assessment of approximately $.66 per $100
of deposits within 60 days of September 30, 1996. As a result, the Company
recorded a charge of $1,040,000 during the first quarter of fiscal 1997. The
legislation provisions include a reduction of the ongoing insurance premiums
thrifts pay from $.23 - $.31 per $100 of deposits to approximately $.06 per
$100, as well as the ultimate merger of the funds by the year 2000. In
anticipation of this and as a result of continued consolidation and
standardization of the bank and thrift industries, the Company, in an ongoing
effort to more closely resemble a commercial banking operation, set aside
$850,000 in loan loss allowances during the first quarter of fiscal 1997. The
Company continues developing its agent relationship in the indirect auto
lending markets, resulting in an $124,000 increase in agent fees for the three
months ended September 30, 1997, compared to the same period last year.
The Company announced on January 21, 1997 an expense reduction plan calling
for approximately $1 million in after tax savings. The plan calls for the
Company to work towards achieving optimum efficiency within its banking and
real estate management, development, and financing units by eliminating
duplicative and less profitable activities. The Company's long term plan
originally called for rapid internal growth to approximately $500 million in
assets. Management mobilized for the ambitious goal by appropriately staffing
the Company to meet the increased demands of a larger organization. Recently,
management determined that a more conservative growth plan would allow the
Company to grow profitably without straining its capital resources. As such,
it was determined that some infrastructure that had been developed would not
be required in the short run.
On April 25, 1997 the Company announced its third quarter results and the
completion of the cost reduction program. The Company completed the cost
reduction program ahead of schedule and is anticipating an annual savings of
approximately $2.0 million on a pretax basis or about $.44 per share after
tax. Excluding the $1,040,000 insurance premium paid last year, non-interest
expense decreased $619,000 from the prior year.
NET INTEREST INCOME. Net interest income, the Company's largest component of
income, represents the difference between interest and fees earned on loans,
investments and other interest earning assets, and interest paid on interest
bearing liabilities. It also measures how effectively management has balanced
and allocated the Company's interest rate-sensitive assets and liabilities.
Net interest income for the three months ended September 30, 1997, was
$1,602,000 compared to $1,578,000 for the three month period ending September
30, 1996, an increase of $24,000.
The net interest margin is a percentage computed by dividing net interest
income on a fully taxable equivalent basis ("FTE") by average earning assets
and represents a measure of basic earnings on interest bearing assets held by
the Company. The Company's annualized net interest margin for the quarter
increased from 2.57% at September 30, 1996, to 2.87% at September 30, 1997.
The increase in the margin was caused in part, by the increase in multifamily
construction and commercial real estate loans, which typically bear yields
that are significantly higher than traditional single family loans. There is
no assurance that the volume of these credits will continue to increase into
the future. The average yield on interest earning assets increased 37 basis
points to 8.73% at September 30, 1997, compared to 8.36% at September 30,
1996. The average yield on interest bearing liabilities increased 7 basis
points from September 30, 1996, to 5.86% at
10
<PAGE>
September 30, 1997, which increased primarily in certificates of deposits. The
Company repositioned its interest rate risk profile during the latter part of
fiscal 1996 by selling over $57.0 million of fixed-rate mortgage loans. The
loan sale provided funding for certain multifamily and commercial loan
increases giving the Company the flexibility of allowing agent-acquired funds
to mature or rollover at the prevailing rate, thus creating a favorable impact
on the net interest margin. As the loan sale proceeds were utilized in fiscal
1997, the Company has been innovative in offering selected retail products to
enhance the core deposit base. The Company hopes to replace as many agent
acquired deposits with core deposits as possible. The Company anticipates
using agent acquired funds only when the brokered deposits maturing exceed new
core deposit growth. An ongoing objective of the Company's asset/liability
management policy is to match rate- adjustable assets and liabilities at
similar maturity horizons to minimize wide fluctuations in net interest
income. Management utilizes the Office of Thrift Supervision Net Portfolio
Valve ("NPV") model. This model analyzes the NPV and changes in the NPV under
several different interest rate scenarios. The NPV model utilizes several
measures of interest rate risk (IRR): the IRR Exposure Measure, the Interest
Rate Sensitivity Measuring the Base-Case Net Present Value Capital Ratio and
the Percentage Change in NPV. Results of the NPV model indicate that the
Company's rate sensitivity measure based on a 200 basis points rate shock
would be 63 basis points at June 30, 1997, which ranks it in the lowest
quintile in the thrift industry. Interest income for the quarter ended
September 30, 1997, was $4,887,000 compared to $5,152,000 for the quarter
ended September 30, 1996, a decrease of $265,000. These decreases are
primarily due to a decrease in earning assets compared to the prior year.
Interest expense for the quarter ended September 30, 1997, decreased $289,000
over the corresponding period in 1996. This is the result of paying off FHLB
advances and allowing agent acquired funds mature or rollover at the
prevailing rate. The Company is continuing to monitor the net interest margin
which continues to be an area of increased concentration this year.
NON-INTEREST INCOME. Non-interest income for the quarter ended September 30,
1997, was $850,000 compared to $608,000 for the same period in 1996, an
increase of $242,000.
NON-INTEREST INCOME
- ----------------------------------------------------------------------------
(IN THOUSANDS)
THREE MONTHS ENDED
SEPTEMBER 30, INCREASE
1997 1996 (DECREASE)
---- ---- ----------
Net income from real estate development and
management $107 $79 $28
Real estate investment banking fees 2 (2)
Letter of credit fees 194 154 40
Service charges on deposit accounts 115 70 45
Net gain on sale of loans 62 68 (6)
Agent fee income 219 95 124
Servicing fees on loans sold 44 43 1
Other 109 97 12
---- ---- ----
Total non-interest income $850 $608 $242
==== ==== ====
Non-interest income for the three months ended September 30, 1997, increased
by $242,000 as compared to the three months ended September 30, 1996. The
Company's fee income from real estate development and management was up
slightly from $79,000 last year to $107,000 for the first three months of
fiscal 1998. These fees, which are transaction-based, are volatile in nature.
There is no assurance that individual transactions, once initiated, will be
completed. While the Company may continue to participate in development
activities, it has shifted its focus to financing multifamily real estate for
non- affiliated borrowers. The Company has not exited the development
industry, but has significantly reduced its activities. The Company intends
to remain active in financing multifamily transactions. The Affordable
Housing Group has encountered increased competition in the financing and
development of multifamily housing. The IRS Section 42 tax credit program has
been used by the Company to develop affordable housing for individuals with
low to moderate incomes. The Company has provided financing for other
developers which began utilizing the program, due to increased competition in
this area. As a result, the Company has noted a significant reduction in the
amount of fees it has been able to collect on individual transactions. The
Company continues to develop new and innovative housing-related products to
supplement its Section 42 activity. However, there is no assurance that those
new products will be able to replace the reduction of income compared to the
development activities. The Company did recognize $194,000 in multifamily
loan letter of credit fees compared to $154,000 in fiscal 1997.
Service charges on deposit accounts increased $45,000 over the prior fiscal
year due to the continued growth in the deposit base. Agent fee income
increased $124,000 over September 30, 1996, as a result of the Company's
origination of auto loans as agent for another financial institution. Other
non-interest income increased $12,000 over the prior year as
11
<PAGE>
reborrowing fees increased $22,000, but were partially offset by decreases in
rate cap fees and title fee income of $4,000 and $8,000 respectively.
PROVISION FOR LOAN LOSSES. The provision for loan losses for the current
quarter decreased $715,000 compared to the quarter ended September 30, 1996.
As a result of the continued consolidation and standardization of the bank and
thrift institutions, the Company, in an ongoing effort to more closely
resemble a commercial banking operation, set aside $850,000 in loan loss
allowance during the first quarter of fiscal 1997. The increase in the
provision in the previous year did not result from the identification of any
particular problem credit or credits, but does reflect the increase of
multifamily construction and commercial loans in the Company's loan portfolio.
NON-INTEREST EXPENSE. Non-interest expense for the quarter ended September
30, 1997, was $1,649,000 compared to $3,283,000 for the same period in 1996, a
decrease of $1,634,000, or 49.7%. The Company continues to work hard to
control costs.
NON-INTEREST EXPENSE
- --------------------------------------------------------------------------
(IN THOUSANDS)
THREE MONTHS ENDED
SEPTEMBER 30, INCREASE
1997 1996 (DECREASE)
---- ---- ----------
Salaries and employee benefits $839 $1,122 $(283)
Legal and professional 70 122 (52)
Occupancy expense 113 112 1
Equipment expense 88 84 4
Deposit insurance 15 1,151 (1,136)
Data processing expense 89 73 16
Advertising 51 69 (18)
Printing and supplies 23 56 (33)
Travel and lodging 14 19 (5)
Telephone 18 29 (11)
Postage 16 25 (9)
Abandoned projects 135 (135)
Loss on investment 36 24 12
Other operating expense 277 262 15
------ ------ -------
Total non-interest expense $1,649 $3,283 $(1,634)
====== ====== =======
Salaries and employee benefits decreased $283,000 for the three months ended
September 30, 1997, compared to the same period last year. The Company
completed a cost reduction in the fourth quarter of fiscal 1997, resulting in
a significant reduction in staff. The Company should realize the full impact
of the cost reduction during fiscal 1998. Legal and professional fees
decreased $52,000 from the prior year due to the legal costs associated with
the affordable housing segment, which has decreased from the prior year.
Occupancy and equipment expense increased by only $5,000 compared to the prior
year as management continues to closely monitor expenses. Deposit insurance
decreased $1,136,000 from the prior year, due primarily to the one-time
special SAIF assessment imposed on thrifts in September 1996. Data processing
expense increased $16,000 due primarily to the increase in the Company's
retail deposit base and increased volumes in other areas. Advertising expense
decreased $16,000 from the prior year primarily due to a decrease in media
spending this year. Printing and supplies decreased $33,000 from the prior
year due to the cost reduction program and increased cost control measures.
Travel and lodging decreased $5,000 from prior year due to the decreased
activities in the Company's affordable housing segment. Telephone and postage
decreased $11,000 and $9,000, respectively, also a result of having fewer
employees. The Company's housing subsidiaries continue to search for new
sites to develop and/or finance, but sometimes expenses are incurred on
potential sites that do not materialize and are expensed as abandoned
projects. Abandoned projects expense was $135,000 in the previous year
compared to zero in the current year. The Company has written down the
investment in various developments by $36,000 compared to $24,000 in the prior
year. These writedowns are offset by tax credits received for the investments
in these developments. Other operating expense increased $15,000 over the
prior year due to a $9,000 increase in indirect consumer credit reports as a
result of increased volume over prior year and a $14,000 writeoff of leasehold
improvements due to the relocation of the Indianapolis, IN offices to
Evansville, IN. These increases were offset by decreases in other
miscellaneous expenses.
INCOME TAX EXPENSE. Income tax expense increased $862,000 for the three
months ended September 30, 1997, compared to the same period in 1996, due to
the taxable net loss in the previous year compared to the current year's
taxable net income.
12
<PAGE>
The Company has an ongoing program to ensure that its operational and
financial systems will not be adversely affected by year 2000 software
failures. While the Company believes it is taking all appropriate steps to
assure year 2000 compliance, it is dependent on vendor compliance to some
extent. The Company is requiring its systems and software vendors to
represent that the services and products provided are, or will be, year 2000
compliant, and has planned a program of testing compliance. The Company
estimates that the cost to redevelop, replace or repair its technology will
not be material.
- - FINANCIAL CONDITION
Total assets decreased by $4.7 million from June 30, 1997, to approximately
$235.3 million at September 30, 1997. The decrease is the result of the
Company continuing to sell current production of fixed 1-4 family mortgages,
the pass through of various consumer loans to another institution that meet
certain criteria, the payoffs received on certain multifamily loans, and the
normal reduction in assets due to paydowns and payoffs.
LOANS. The following table shows the composition of the Company's loan
portfolio as of September 30, 1997 and June 30, 1997.
LOANS OUTSTANDING
- --------------------------------------------------------------------------
(IN THOUSANDS)
SEPTEMBER 30, JUNE 30,
1997 1997
------------- ---------
Real estate mortgage loans
First mortgage loans
Conventional $92,173 $94,293
Construction 28,892 32,577
Commercial 27,073 26,668
Multifamily loans 6,582 9,602
First mortgage real estate loans
purchased 3,076 3,184
Commercial loans - other than secured by
real estate 12,437 12,522
Consumer and home equity loans 28,308 26,118
-------- --------
Total loans 198,541 204,964
======== ========
Total assets $235,336 $240,001
======== ========
Total loans to total assets 84.4% 85.4%
======== ========
Total loans decreased by $6.4 million or 3.1% to $198.5 million at September
30, 1997, compared to June 30, 1997. The Company continues to sell new single
family loan production, recognize the gain or loss on the sale, and use the
proceeds to fund more single family loan production. The Savings Bank is
continually offering new and competitive first mortgage and multifamily loan
products. The Company's construction loan category, which includes
approximately $24.8 million in commercial and multi-family loans and $4.1
million in 1-4 family real estate loans, has decreased slightly since June 30,
1997, while commercial real estate loans have increased $405,000 as the
Company continues to expand the portfolio. Multifamily loans decreased $3.0
million since June 30, 1997 due to the refinancing of some large multifamily
loans, which could negatively impact the interest rate margin if the decrease
becomes a trend. Consumer and home equity loans increased $2.2 million due to
the Company's retention of a portion of indirect automobile loan
originations.
13
<PAGE>
NON-PERFORMING LOANS. The Company discontinues the accrual of interest income
on loans when, in the opinion of management, there is reasonable doubt as to
the timely collectibility of interest or principal. Non-accrual loans are
returned to an accrual status when, in the opinion of management, the
financial position of the borrower indicates that there is no longer any
reasonable doubt as to the timely payment of principal and interest.
Management believes that loans now current where there are reasonable doubts
as to the ability of the borrower to comply with the present loan repayment
terms are immaterial. The Company adopted SFAS Nos. 114 and 118, Accounting
by Creditors for Impairment of a Loan and Accounting by Creditors for
Impairment of a Loan-Income Recognition and Disclosures on July 1, 1995. The
adoption of SFAS Nos. 114 and 118 did not have a material impact on the
Company's financial position or results of operations. The Company has not
experienced any impaired loans since the adoption of SFAS Nos. 114 and 118.
NON-PERFORMING LOANS
- --------------------------------------------------------------------------
(IN THOUSANDS)
SEPTEMBER 30, JUNE 30,
1997 1997
------------ --------
Nonaccrual loans $134 $256
Restructured
90 days or more past due 83 29
----- -----
Total $217 $285
===== =====
Percent of total loans 0.11% 0.14%
===== =====
The ratio decreased from 0.14% at June 30, 1997, to 0.11% at September 30,
1997 as non-performing loans decreased $68,000. Management is not aware of
any loans that have not been disclosed that represent or result from trends or
uncertainties which may have a material impact on the Company's future
operating results, liquidity or capital resources.
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES. The Company establishes its provision
for loan losses and evaluates the adequacy of its allowance for loan losses
based on management's evaluation of its loan portfolio and changes in loan
activity. Such evaluation, which includes a review of all loans for which
full collectiblity may not be reasonably assured, considers among other
matters, the estimated fair value of the underlying collateral, economic
conditions, historical loan loss experience, the composition of the loan
portfolio and other factors that warrant recognition in providing for an
adequate loan loss allowance. This evaluation is performed on a monthly basis
and is designed to ensure that all relevant matters affecting loan
collectibility will consistently be identified in a detailed loan review and
that the outcome of the review will be considered in a disciplined manner by
management in determining the necessary allowance and the provision for loan
losses. The amounts actually reported in each period will vary with the
outcome of this detailed review.
The following table sets forth an analysis of the allowance for loan losses
for the three months ended September 30, 1997, and the year ended June 30,
1997.
ALLOWANCE FOR LOAN LOSSES
- --------------------------------------------------------------------------
(IN THOUSANDS)
SEPTEMBER 30, JUNE 30,
1997 1997
-------------------------
Allowance for loan losses:
Balances, beginning of year $1,781 $1,059
Provision for losses 135 975
Loans charged off (25) (267)
Recoveries on loans 7 14
------ ------
Balances, end of quarter $1,898 $1,781
====== ======
As of September 30, 1997, net loan charge-offs were $18,000, or 0.04%
(annualized) of average loans for the period, compared to $253,000 or 0.07% of
average loans as of June 30, 1997. The provision for loan losses decreased
$840,000 for the three months ended September 30, 1997 compared to the
previous year as the Company set aside $850,000 in loan loss allowance in the
first quarter of fiscal 1997 in an ongoing effort to more closely resemble
commercial banking allowance levels, compared to a more normalized provision
in the current fiscal year. The allowance for loan losses to
14
<PAGE>
total loans outstanding increased from .87% at June 30, 1997 to .96% at
September 30, 1997. Management considers the allowance for loan losses
adequate to meet losses inherent in the loan portfolio as of September 30,
1997.
INVESTMENT SECURITIES. The Savings Bank's investment policy is annually
reviewed by its Board of Directors and any significant changes to the policy
must be approved by the Board. The Board has an asset/liability management
committee which is responsible for keeping the investment policy current.
As of September 30, 1997, the investment portfolio represented 5.7% of the
Company's assets compared to same at June 30, 1997, and is managed in a manner
designed to meet the Board's investment policy objectives. The primary
objectives, in order of priority, are to further the safety and soundness of
the Company, to provide the liquidity necessary to meet day to day funding
needs, cyclical and long-term changes in the mix of our assets and
liabilities, and to provide for diversification of risk and management of
interest rate and economic risk. At September 30, 1997, the entire investment
portfolio was classified as available for sale, in accordance with Statement
of Financial Accounting Standards No. 115, "Accounting for Certain Investment
in Debt and Equity Securities". The net unrealized gain at September 30, 1997
was $24,000, which was comprised of gross gains of $107,000, gross losses of
$101,000, and a tax benefit of $18,000. The increase of $54,000 over June 30,
1997 was caused by market interest rate changes during the period. Although
the entire portfolio is available for sale, management has not identified
individual investments for sale in future periods.
The following table sets forth the components of the Savings Bank's securities
available for sale as of the dates indicated.
SEPTEMBER 30, JUNE 30,
1997 1997
------------- ----------
(IN THOUSANDS)
Securities available for sale:
U.S. Treasury securities $ 1,002 $ 1,000
Federal agencies securities 2,970 2,944
Federal Home Loan Mortgage Corporation
mortgage-backed securities 2,825 3,003
Federal National Mortgage Association
mortgage-backed securities 1,544 1,562
Government National Mortgage Association
mortgage-backed securities 4,037 4,223
Municipal revenue bonds 1,079 1,058
------- -------
Total securities available for sale $13,457 $13,790
======= =======
The Savings Bank's total investment securities portfolio decreased by $333,000
at September 30, 1997, from June 30, 1997. The Savings Bank receives payments
of principal and interest on its mortgage-backed securities on a monthly
basis. These certificates represent ownership of pools of one-to-four family
mortgage loans. As interest rates decline, principal of the underlying
mortgage loans typically is returned more quickly in the form of payoffs and
refinancings.
FUNDING SOURCES
DEPOSITS. The Savings Bank attracts both short-term and long-term deposits
from the retail market by offering a wide assortment of accounts with
different terms and different interest rates. These deposit alternatives
include checking accounts, regular savings accounts, money market deposit
accounts, fixed rate certificates with varying maturities, variable interest
rate certificates, negotiable rate jumbo certificates ($100,000 or more), and
variable rate IRA certificates.
Average deposits decreased by $1.1 million during the first three months of
fiscal 1998. Most of the decreases were due to certificates of deposit
acquired through agents, which decreased $12.1 million to $58.3 million at
September 30, 1997. Demand accounts and money market accounts decreased
$2.0 million and $720,000, respectively, offset by an increase in a premium
rate NOW accounts product of $1.5 million. The Company's savings bank
subsidiary continues to actively market this premium rate NOW account product.
The Company has been promoting retail certificates of deposit, which have
increased $11.6 million since June 30, 1997 as the Savings Bank continues to
grow its core deposits.
15
<PAGE>
The following table sets forth the average balances of and the average rate
paid on deposits by deposit category for the year ended June 30, 1997 and for
the three months ended September 30, 1997.
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1997 JUNE 30, 1997
------------------- ------------------
AVERAGE AVERAGE
BALANCE RATE BALANCE RATE
------- ---- ------- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Average Deposits
Demand $ 3,651 $ 5,685
Now accounts 22,045 4.34% 20,585 4.22%
Money market accounts 3,170 2.71 3,890 2.72
Savings accounts 5,422 2.52 4,792 2.90
Certificates of deposit 90,044 5.78 78,408 5.68
Agent-acquired certificates of deposit 58,293 6.29 70,346 6.31
-------- --------
Total $182,625 5.50% $183,706 5.45%
======== ========
</TABLE>
FEDERAL HOME LOAN BANK ADVANCES AND OTHER LONG-TERM DEBT. The following table
summarizes the Company's borrowings as of September 30, 1997, and June 30,
1997.
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1997 1996
------------- --------
(IN THOUSANDS)
<S> <C> <C>
Note payable, 7.70% adjusted annually, payable $16,443
per month, including interest, due April 1, 2009,
secured by specific multifamily mortgages $2,229 $2,234
Note payable, 7.75% adjusted annually, payable $7,272
per month, including interest, due September 14, 2010,
secured by specific multifamily mortgages 1,004 1,006
Note payable, 7.75% adjusted annually, payable $11,119
per month, including interest, due September 22, 2010,
secured by specific multifamily mortgages 1,539 1,542
Junior subordinated notes, 9 1/8%, interest paid
semi-annually, due April 30, 2001, unsecured 1,476 1,476
Junior subordinated notes, 9 1/4% interest paid
semi-annually, due January 31, 2002 unsecured 1,494 1,494
Senior subordinated notes, 10%, interest paid semi-
annually, due June 1, 2005, unsecured 7,000 7,000
Federal Home Loan Bank advances 19,682 23,337
------- -------
Total $34,424 $38,089
======= =======
</TABLE>
Borrowings decreased $3.7 million to $34.4 million at September 30, 1997.
Borrowings have been slower or reduced during fiscal 1997 as the Company has
continued selling its current fixed rate 1-4 family loan production. This
allows the Company to use the proceeds from the sale of loans to fund new loan
originations and ease the need for additional borrowings in the future. The
decrease is due primarily to the maturity of FHLB advances. The Company, thus
far, has been in a position to allow the FHLB advance to mature and not
replace it.
16
<PAGE>
CAPITAL RESOURCES AND CAPITAL REQUIREMENTS
The ratio of stockholders' equity to total assets for the Savings Bank, was
7.66% at September 30, 1997, compared to 6.93% at June 30, 1997. The
dividends paid and declared on common stock, and the purchase of common stock
decreased the ratio, while a decrease in the unrealized loss on available for
sale investments, net income for the period, and an infusion of capital from
the Savings Bank's parent company increased the ratio. The Company's book
value per share at September 30, 1997 was $5.15, compared to $5.20 at June 30,
1997.
The OTS has adopted capital standards under which savings associations must
maintain (i) "core capital" in an amount not less than 3% of total assets,
(ii) "tangible capital" in an amount not less than 1.5% of total adjusted
assets, and (iii) a level of risk-based capital equal to 8.0% of risk-weighted
assets. The capital standards established by the OTS for savings associations
must generally be no less stringent than those applicable to national banks.
Under OTS regulations "core capital" includes common stockholders' equity,
noncumulative perpetual preferred stock and related surplus, and minority
interests in the equity accounts of consolidated subsidiaries, less intangible
assets other than certain qualifying supervisory goodwill and certain
purchased mortgage servicing rights. In determining compliance with the
capital standards, a savings association must deduct from capital its entire
investment in and loans to any subsidiary engaged in activities not
permissible for a national bank, other than subsidiaries (i) engaged in such
non-permissible activities solely as agent for their customers; (ii) engaged
in mortgage banking activities; or (iii) that are themselves savings
associations, or companies the only investment of which is another insured
depository institution, acquired prior to May 1, 1989.
In determining total risk-weighted assets for purposes of the risk based
requirement, (i) each off-balance sheet asset must be converted to its
on-balance sheet credit equivalent amount by multiplying the face amount of
each such item by a credit conversion factor ranging from 0% to 100%
(depending upon the nature of the asset), (ii) the credit equivalent amount of
each off-balance sheet asset and the book value of each on-balance sheet asset
must be multiplied by a risk factor ranging from 0% to 100% (again depending
upon the nature of the asset), and (iii) the resulting amounts are added
together and constitute total risk-weighted assets. Total capital, for
purposes of the risk-based capital requirement, equals the sum of core capital
plus supplementary capital (which, as defined, includes, among other items,
perpetual preferred stock not counted as core capital, limited life preferred
stock, subordinated debt, and general loan and lease loss allowances up to
1.25% of risk-weighted assets) less certain deductions including the savings
association's interest-rate risk component. The amount of supplementary
capital that may be counted towards satisfaction of the total capital
requirement may not exceed 100% of core capital.
At September 30, 1997, actual and required minimum levels of regulatory
capital for the Savings Bank were as follows:
(Dollars in Thousands)
Required
Amount Percent Amount Percent Excess
-------------------------------------------------
Core $17,619 7.66% $6,897 3.0% $10,722
Tangible $17,619 7.66% $3,448 1.5% $14,171
Risk-based $24,287 11.80% $16,468 8.0% $7,819
Pursuant to HOLA of 1933, as amended, the OTS is required to issue capital
standards that are no less stringent than those applicable to national banks.
In April 1991, the OTS proposed to amend its capital regulations to reflect
amendments made by the OCC to the leverage ratio capital requirement for
national banks. The proposal would establish a core capital leverage ratio
(core capital to adjusted total assets) of 3% for savings associations rated
composite 1 under the OTS MACRO rating system. For all other savings
associations, the minimum core capital leverage ratio would be 3% plus at
least an additional 100 to 200 basis points. Under the proposal, the OTS may
impose higher regulations for individual savings associations. The OTS has
not adopted this regulation in final form. The prompt corrective action
regulation adopted by the OTS provides that a savings association that has a
leverage capital ratio of less than 4% will be considered "undercapitalized"
and may be subject to certain restrictions. At September 30, 1997 the Savings
Bank had a core capital leverage ratio (as defined in the proposal) of 7.66%.
The OTS adopted a final regulation adding an interest-rate risk component to
its risk- based capital rule. A savings association's interest-rate risk is
generally defined as the change that occurs to its net portfolio value as a
result of a hypothetical two hundred basis point increase or decrease in
market interest rates. A "normal level" of interest-rate risk
17
<PAGE>
is defined as any decline in net portfolio value of up to 2% of the
institution's assets. If the 2% threshold is exceeded, a savings association
will be required to deduct from its capital, for purposes of determining
whether the institution meets its risk-based capital requirements, an amount
equal to one-half of the difference between the measured risk and 2% of
assets.
Capital requirements higher than the generally applicable minimum requirement
may be established for a particular savings association if the OTS determines
that the institution's capital was or may become inadequate in view of its
particular circumstances. Individual minimum capital requirements may be
appropriate where the savings association is receiving special supervisory
attention, has a high degree of exposure to interest rate risk, or poses other
safety or soundness concerns.
LIQUIDITY
Liquidity for a savings bank represents its ability to accommodate growth in
loan demand and/or reduction in deposits. The Savings Bank liquidity ratio
was 6.35% on September 30, 1997, up from 5.57% on June 30, 1997. Management
believes that this level of liquidity is sufficient to meet any anticipated
requirements for the Bank's operations. Federal regulations have historically
required the Bank to maintain minimum levels of liquid assets. The required
percentage has varied from time to time based on economic condition and
savings flows, and is currently 5% of net withdrawable savings deposits and
borrowings payable on demand or in one year or less during the preceding
calendar month.
18
<PAGE>
PART II -- OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS:
------------------
There are no material pending legal proceedings, other than ordinary
routine litigation incidental to the Registrant's business, to which
the Registrant or its subsidiaries are a party of or which any of
their property is the subject.
ITEM 2 CHANGES IN SECURITIES:
----------------------
Not applicable.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES:
--------------------------------
Not applicable.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
----------------------------------------------------
On October 15, 1997 at 10:00 AM, at the Company's principal executive
offices at 18 N.W. Fourth Street, Evansville, Indiana, the Annual
meeting of Shareholders was held in order to vote on two matters.
Matter I was to elect two directors to the Board of Directors to serve
for the ensuing term of three years and until their successors are
duly elected and qualified. The vote tabulation for the election of
Curt J. Angermeier was 2,253,255 for and 248,317 shares withheld. For
Barry A. Schnakenburg the vote tabulation was 1,998,379 for, and
254,846 shares withheld.
The following directors term continued after the meeting, William R.
Baugh, Bruce A. Cordingley, Jack Cunningham, M. Brian Davis, and
Robert F. Doerter.
Matter 2 was the ratification of the appointment of auditor of the
Company. The vote tabulation for Geo. S. Olive & Co., LLC was
2,023,756 for, 70,011 shares against and, 159,487 shares abstained.
ITEM 5 OTHER INFORMATION:
------------------
None
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K:
---------------------------------
a. The following exhibit is submitted herewith:
27 Financial Data Schedule
Reports on Form 8-K
b. No reports were filed
19
<PAGE>
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.
FIDELITY FEDERAL BANCORP
Date: NOVEMBER 13, 1997 By: /s/ M. BRIAN DAVIS
------------------------------------
M. Brian Davis
President and CEO
By: /s/ DONALD R. NEEL
------------------------------------
Donald R. Neel,
Executive Vice President, CFO and Treasurer
(Principal Financial Officer)
20
<PAGE>
Exhibit Index
Reg. S-K
Exhibit No. Description of Exhibit Page
- ------------------------------------------------------------------
27 Financial Data Schedule 22
21
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FIDELITY FEDERAL BANCORP CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER
30, 1997 AND THE CONSOLIDATED INCOME STATEMENT FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,532
<INT-BEARING-DEPOSITS> 3,221
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 13,457
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 198,541
<ALLOWANCE> 1,898
<TOTAL-ASSETS> 235,336
<DEPOSITS> 179,670
<SHORT-TERM> 3,325
<LIABILITIES-OTHER> 3,536
<LONG-TERM> 34,424
0
0
<COMMON> 2,791
<OTHER-SE> 11,590
<TOTAL-LIABILITIES-AND-EQUITY> 235,336
<INTEREST-LOAN> 4,527
<INTEREST-INVEST> 208
<INTEREST-OTHER> 152
<INTEREST-TOTAL> 4,887
<INTEREST-DEPOSIT> 2,533
<INTEREST-EXPENSE> 752
<INTEREST-INCOME-NET> 1,602
<LOAN-LOSSES> 135
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,649
<INCOME-PRETAX> 668
<INCOME-PRE-EXTRAORDINARY> 668
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 509
<EPS-PRIMARY> .19
<EPS-DILUTED> .19
<YIELD-ACTUAL> 2.87
<LOANS-NON> 134
<LOANS-PAST> 83
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,781
<CHARGE-OFFS> 25
<RECOVERIES> 7
<ALLOWANCE-CLOSE> 1,898
<ALLOWANCE-DOMESTIC> 1,898
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
