UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended December 31, 1997
Commission file number 0-24606
NORTHWEST EQUITY CORP.
(exact name of small business issuer as specified in its charter)
Wisconsin 39-1772981
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
234 Keller Avenue South
Amery, Wisconsin 54001
(Address of principal executive offices) (Zip code)
(715) 268-7105
(Issuer's telephone number, including area code)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
report(s), and (2) has been subject to such filing requirements for the past 90
days.
(1) Yes __x__ No_____
(2) Yes __x__ No_____
The number of shares outstanding of the issuer's common stock, $1.00 par
value per share, was 838,754 at December 31, 1997.
SIGNATURES
In accordance with 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.
NORTHWEST EQUITY CORP.
Dated:___02/03/98______________ By: _/s/Brian L. Beadle____
(Brian L. Beadle, President
Principal Executive Officer and
Principal Financial and
Accounting Officer)
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PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
Item 2. Management's Discussion and Analysis or Plan of Operation.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
The Registrant is not involved in legal proceedings involving amounts
in the aggregate which management believes are material to the financial
condition and results of operations of the Registrant. (Materiality is defined
for accounting purposes as $250,000 or more) On October 16, 1996, the Bank
learned that a Minnesota Bank had commenced a repleven lawsuit against a
borrower of the Bank that involves several parties claiming interests in
collateral secured by a General Business Security Agreement of the Bank. On
November 20, 1996, the Bank filed its answer and a third party complaint seeking
repleven of its collateral and money judgments against its borrowers, the
guarantors, and other interested parties. Repleven judgment was entered in favor
of the Bank on January 15, 1997. A money judgment was filed against a guarantor
on December 30, 1996. One of the guarantors has since filed personal bankruptcy.
The Bank is asserting the priority of its liens against other creditors in state
circuit court. The court date has been scheduled for November, 1998. Depending
upon the non-exempt assets of the parties involved, the Bank's legal counsel
believes the Bank should have sufficient legal grounds to expect recovery from
the Bank's collateral, personal guarantees, and the other parties involved. The
Board of Directors at its meeting October 8, 1996, decided to increase the
quarterly loss allowance to $25,000 until more information is available to make
a reasonable estimate of any losses that may occur. The Board continued this
policy at subsequent meetings, because a reasonable estimate depends on the
probability of securing damages through the judicial process. As soon as the
Board can identify and quantify the amount of the loss if any, it will book the
loss. In order to establish an order of magnitude of the loss potential, a worst
case scenario of no recovery on a loan of $580,000 plus an overdraft of $83,000
less the current amount in the loan loss reserve of $347,000 allocated or
available to be allocated to this loan, would produce an after-tax loss of
approximately $209,000.
Item 2. Changes in Securities. None
Item 3. Defaults upon Senior Securities. None
Item 4. Submission of Matters to a Vote of Security Holders. None
Item 5. Other Information. None
Item 6. Exhibits and Reports on Form 8-k.
a. No reports on Form 8-K were filed during the quarter for which this
report was filed.
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<TABLE>
NORTHWEST EQUITY CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<CAPTION>
December 31,
ASSETS 1997 March 31,
---------
(unaudited) 1997
---------- ---------
<S> <C> <C>
Cash - including interest bearing deposits of $2,657
at December 31, 1997 and $1,721 at March 31, 1997 $4,051 $2,980
Securities held-to-maturity - market value of $2,803
at December 31, 1997 2,799 - -
Securities available-for-sale - fair value 346 2,752
Mortgage backed securities - market value of $6,823 at
December 31, 1997 and $7,308 at March 31, 1997 6,691 7,421
Loans held for sale - at market 246 415
Loans receivable - net 80,723 77,240
Real estate acquired in settlement of loans 157 - -
Investment in Federal Home Loan Bank stock - at
cost - which approximates fair value 1,026 912
Premises and equipment 2,277 2,341
Accrued interest receivable 636 656
Prepaid expenses and other assets 606 380
---------- ---------
TOTAL ASSETS $99,558 $95,097
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Savings accounts $62,969 $61,557
Advances from Federal Home Loan Bank 19,223 17,634
Other borrowed money 5,142 4,463
Accounts payable and accrued expenses 588 472
Accrued income taxes 80 112
---------- ----------
Total liabilities 88,002 84,238
---------- ----------
Stockholders' equity
Preferred stock - $1 par value; 2,000,000 shares
authorized; none issued - - - -
Common stock - $1 par value; 4,000,000 shares authorized;
1,032,517 shares issued; 838,754 shares outstanding 1,033 1,033
Additional paid-in capital 6,584 6,584
Net unrealized loss on securities available for sale - - (29)
Less unearned restricted stock plan award (38) (115)
Less unearned Employee Stock Ownership
Plan compensation (433) (558)
Less treasury stock - at cost - 193,763 shares (2,256) (2,256)
Retained earnings - substantially restricted 6,666 6,200
---------- ----------
Total stockholders' equity 11,556 10,859
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $99,558 $95,097
========== ==========
See accompanying Notes to Consolidated Financial Statements
</TABLE>
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<TABLE>
NORTHWEST EQUITY CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In Thousands except for per share amounts)
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $1,771 $1,708 $5,201 $4,979
Interest on mortgage-backed and related securities 121 139 379 421
Interest and dividends on investments 67 56 221 173
------ ---------- ---------- ----------
Total interest income 1,959 1,903 5,801 5,573
------ ---------- ---------- ----------
Interest expense:
Interest on savings 733 738 2,179 2,165
Interest on borrowings 342 314 1,012 869
------ ---------- ---------- ----------
Total interest expense 1,075 1,052 3,191 3,034
------ ---------- ---------- ----------
Net interest income 884 851 2,610 2,539
Provision for loan losses 25 25 75 56
------ ---------- ---------- ----------
Net interest income after provision for loan losses 859 826 2,535 2,483
------ ---------- ---------- ----------
Other income:
Mortgage servicing fees 18 20 57 58
Service charges on deposits 75 59 197 171
Gain on sale of mortgage loans 24 18 76 48
Other 18 49 92 150
------ ---------- ---------- ----------
Total other income 135 146 422 427
------ ---------- ---------- ----------
Realized losses on available-for-sale securities - - - - (24) - -
------ ---------- ---------- ----------
General and administrative expenses:
Salaries and employee benefits 285 278 901 901
Net occupancy expense 87 107 250 241
Data processing 34 31 99 98
Federal insurance premiums 10 - - 29 418
Other 144 131 424 420
------ ---------- ---------- ----------
Total general and administrative expense 560 547 1,703 2,078
------ ---------- ---------- ----------
Income before income taxes 434 425 1,230 832
Income taxes 149 177 437 349
------ ---------- ---------- ----------
Net income $285 $248 $793 $483
====== ========== ========== ==========
Earnings per share $0.37 $0.29 $1.02 $0.55
====== ========== ========== ==========
See accompanying Notes to Consolidated Financial Statements
</TABLE>
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NORTHWEST EQUITY CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
Nine Months Ended December 31,
(In Thousands)
<CAPTION>
Unrealized
Gain (Loss) Unearned
Additional on Securities Unearned ESOP
Common Paid-In Available Restricted Compen- Treasury Retained
Stock Capital For Sale Stock sation Stock Earnings Total
------- ------- -------- ---------- ------- ------ -------- -----
Nine Months Ended December 31, 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance - March 31, 1996 $1,033 $6,584 ($34) ($319) ($699) ($561) $5,860 $11,864
======= ======= ========= ======= ====== ======== ======= =======
Net income - - - - - - - - - - - - 483 483
Adjustment of carrying value of securities available
for sale, net of deferred taxes of $14 - - - - 21 - - - - - - - - 21
Amortization of unearned ESOP and restricted stock
award - - - - - - 172 105 - - - - 277
Purchase of Treasury Stock - - - - - - - - - - (544) - - (544)
Cash dividends - $.29 per share - - - - - - - - - - - - (274) (274)
Balance - December 31, 1996 $1,033 $6,584 ($13) ($147) ($594) ($1,105) $6,069 $11,827
======= ======= ======== ======= ====== ======== ======= =======
Nine Months Ended December 31, 1997
Balance - March 31, 1997 $1,033 $6,584 ($29 ) ($115) ($558) ($2,256) $6,200 $10,859
======= ======= ======== ======= ====== ======== ======= =======
Net income - - - - - - - - - - - - 793 793
Adjustment of carrying value of securities available
for sale, net of deferred taxes of $20 - - - - 29 - - - - - - - - 29
Amortization of unearned ESOP and restricted stock
award - - - - - - 77 125 - - - - 202
Cash dividends - $.39 per share - - - - - - - - - - - - (327) (327)
------- ------- ------- -------- ------- ------- ------- ------
Balance - December 31, 1997 $1,033 $6,584 $ - - ($38) ($433) ($2,256) $6,666 $11,556
======== ======= ======== ======== ======= ======= ======= =======
See accompanying Notes to Consolidated Financial Statements
</TABLE>
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<TABLE>
NORTHWEST EQUITY CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In Thousands)
<CAPTION>
Nine Months Ended
Dectember 31,
1997 1996
------- ------
<S> <C> <C>
Cash provided by operating activities:
Net income $793 $483
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation 111 110
Provision for loan losses 75 56
Deferred income taxes (20) - -
Amortization of ESOP and restricted stock awards 202 277
Realized loss on available for sale securities 24
Proceeds from sales of mortgage loans 3,682 4,295
Loans originated for sale (3,513) (3,959)
Decrease accrued interest receivable 20 22
(Increase) prepaid expenses and other assets (226) (106)
Increase (decrease) accrued interest payable 91 (17)
Decrease (increase) accrued income taxes payable (32) 71
Increase other accrued liabilities 45 118
---------- ----------
Net cash provided by operating activities 1,252 1,350
---------- ----------
Cash provided by investing activities:
Principal collected on long-term loans 21,443 20,937
Long-term loans originated or acquired (25,158) (28,950)
Purchases of mortgage-backed securities - - (2,766)
Principal collected on mortgage-backed securities 730 572
Proceeds from sale of foreclosed property - - 137
Purchase of office properties and equipment (47) (281)
Proceeds from sale or maturity of investment securities 2,536 - -
Purchase of investments (3,038) (209)
---------- ----------
Net cash (used in) investing activities (3,534) (10,560)
---------- ----------
See accompanying Notes to Consolidated Financial Statements
</TABLE>
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<TABLE>
NORTHWEST EQUITY CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<CAPTION>
Nine Months Ended
December 31,
1997 1996
---------- ----------
<S> <C> <C>
Cash provided by financing activities:
Net increase in savings accounts 1,412 5,184
Net increase(decrease) in short-term borrowings 4,196 (2,564)
Repayments of long-term financing (7,894) (861)
Proceeds from long-term financing 5,966 8,269
Purchases of treasury stock - - (544)
Dividends paid (327) (274)
---------- ----------
Net cash provided by financing activities 3,353 9,210
---------- ----------
Increase (decrease) in cash and equivalents 1,071 0
Cash and equivalents - beginning 2,980 3,412
---------- ----------
Cash and equivalents - ending $4,051 $3,412
========== ==========
Supplemental disclosures of cash flow information:
Loans receivable transferred to foreclosed properties
and properties subject to foreclosure $157 $83
Interest paid 3,100 2,450
Income taxes paid 469 562
See accompanying Notes to Consolidated Financial Statements
</TABLE>
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NORTHWEST EQUITY CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies:
The accompanying unaudited consolidated financial statements have been
prepared by the Company in accordance with the accounting policies described in
the Bank's audited financial statements for the year ended March 31, 1997, and
should be read in conjunction with the financial statements and notes that
appear in that report. These statements do not include all the information and
disclosures required by generally accepted accounting principles. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered for a fair presentation have been included.
8
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF
NORTHWEST EQUITY CORP.
Comparison of Operating Results for the Three Months Ended December 31, 1996 and
December 31, 1997
Net Income
Net income for the three months ended December 31, 1997, increased $37,000
or 14.9% to $285,000 compared to $248,000 for the three months ended December
31, 1996. The increase in net income was primarily due to an increase of $33,000
in net interest income from $851,000 for the three months ended December 31,
1996, to $884,000 for the three months ended December 31, 1997. Total other
income decreased $11,000 from $146,000 for the three months ended December 31,
1996, to $135,000 for the three months ended December 31, 1997. Federal
insurance expense increased $10,000 from $0 for the three months ended December
31, 1996, to $10,000 for the three months ended December 31, 1997. The increase
stems from recent legislation that recapitalized the Federal Deposit Insurance
Corporation (FDIC) fund insuring deposits in savings institutions with a one
time Special Assessment. The assessment for the Company of $350,000 was expensed
in the three months ended September 30, 1996. In exchange for this one-time
assessment, the future premiums paid to the Savings Association Fund (SAIF) was
reduced by about 70 percent, to 6.4 cents from 23 cents per $100 of deposits
beginning January 1, 1997. The premium paid for the last quarter of the calendar
year of 1996 was refunded. Total general and administrative expense increased
$13,000 from $547,000 for the three months ended December 31, 1996, to $560,000
for the three months ended December 31, 1997. These increases were offset by a
decrease in income taxes of $28,000 from $177,000 for the three months ended
December 31, 1996, to $149,000 for the three months ended December 31, 1997,
although income before income taxes decreased only $15,000 from $425,000 for the
three months ended December 31, 1996, to $410,000 for the three months ended
December 31, 1997. The reduction of the effective tax rate reflects the
establishment of a Nevada investment subsidiary on May 30, 1997, which
effectively eliminates the state tax obligation of the company since that date.
Net Interest Income Net interest income increased by $33,000 from $851,000 for
the three months ended December 31, 1996, to $884,000 for the three months ended
December 31, 1997. Interest income increased $56,000 to $2.0 million for the
three months ended December 31, 1997, compared to $1.9 million for the three
months ended December 31, 1996, while interest expense increased only $23,000 to
$1.08 million for the three months ended December 31, 1997, from $1.05 million
for the three months ended December 31, 1996. Net interest income/interest rate
spread increased 0.06% from 3.77% for the three months ended December 31, 1996,
to 3.83% for the three months ended December 31, 1997. The average outstanding
balance of total interest-earning assets increased $1.8 million from $90.4
million for the three months ended December 31, 1996, to $92.2 million for the
three months ended December 31, 1997. The average outstanding balance of total
interest-earning liabilities increased $2.5 million from $83.5 million for the
three months ended December 31, 1996, to $86.0 million for the three months
ended December 31, 1997. The increase in net interest income expected from the
interest rate spread and the increase in interest-earnings assets was offset by
the larger increase in interest-earning liabilities.
Interest Income
Interest income increased $56,000 or 2.9% to $2.0 million for the three months
ended December 31, 1997, compared to $1.9 million for the three months ended
December 31, 1996. Of the increase, $63,000 was due to an increase in interest
and fees on loans to $1.8 million for the three months ended December 31, 1997,
9
<PAGE>
MANAGEMENT'S DISCUSSION (CONT.)
compared to $1.7 million for the three months ended December 31, 1996. This
increase was due to the increase in the average outstanding balance of total
loans to $81.0 million for the three months ended December 31, 1997, compared to
$78.7 million for the three months ended December 31, 1996. The increase was
offset by a $18,000 decrease in interest on mortgage-backed and related
securities to $121,000 for the three months ended December 31, 1997, from
$139,000 for the three months ended December 31, 1996. This decrease was due to
an decrease in the average outstanding balance of mortgage backed securities
from $7.6 million for the three months ended December 31, 1996, to an average
outstanding balance of $6.8 million for the three months ended December 31,
1997. Interest on investments increased $11,000 to $67,000 for the three months
ended December 31, 1997, compared to $56,000 for the three months ended December
31, 1996. The increase was due to an increase in the average outstanding
balances of interest-bearing deposits in other financial institutions,
investment securities, and Federal Home Loan Bank ("FHLB") stock of $433,000
from $4.0 million for the three months ended December 31, 1996, to $4.4 million
for the three months ended December 31, 1997 The higher average outstanding
balances of interest-bearing deposits is partially due to the establishment of a
Nevada investment subsidiary on May 30, 1997. The increase in advances from the
FHLB require holding correspondingly greater amounts of FHLB stock.
Interest Expense
Interest expense increased $23,000 or 2.2% to $1.08 million for the three months
ended December 31, 1997, compared to $1.05 million for the three months ended
December 31, 1996. Interest on savings decreased $5,000 or 0.68% from $738,000
for the three months ended December 31, 1996, to $733,000 for the three months
ended December 31, 1997. The decrease in interest expense is due to a decrease
in the average yield/rate of total deposits from 4.73% for the three months
ended December 31, 1996, to 4.65% for the three months ended December 31, 1997.
The average outstanding balances of total deposits increased to $63.1 million
for the three months ended December 31, 1997, from an average outstanding
balance of $62.4 million for the three months ended December 31, 1996. Interest
on borrowings increased $28,000 or 8.9% from $314,000 for the three months ended
December 31, 1996, to $342,000 for the three months ended December 31, 1997. The
increase reflects an increase in the average outstanding balance of advances and
other borrowings from $21.0 million for the three months ended December 31,
1996, to $23.0 million for the three months ended December 31, 1997. The
increase in advances and other borrowings was used to fund the increase in
assets between the periods.
Provision for Loan Losses
The provision for loan losses remained at $25,000 for the three months ended
December 31, 1997, compared to $25,000 for the three months ended December 31,
1996. The amount reflects the Board of Directors' recognition of a commercial
loan that appeared on the September 30, 1996, watch list for the first time.
Unable to make an informed estimate of the loss potential, the Board decided to
establish an increased quarterly loss allowance until more information is
available to make a reasonable estimate of any losses that may occur (See Part
II, Item 1, Legal Proceedings). The allowance for loan losses totaled $474,000
at December 31, 1997, compared to $479,000 at December 31, 1996, and represented
0.59 % and 0.61% of gross loans and 40.6% and 34.3% of non-performing loans,
respectively. When compared to the allowance for loan losses calculation that is
based on a three year actual loss average, the Board of Directors believes the
allowance for loan losses is at an adequate level to provide for potential loan
losses and that future provisions for loan losses will be at levels necessary to
cover only charge-offs and general increases in gross loans. The non-performing
assets to total assets ratio was 1.44% at December 31, 1997, compared to 1.54%
at December 31, 1996.
Other Income
Total other income decreased 7.5% or $11,000 to $135,000 for the three
months ended December 31, 1997, compared to $146,000 for the three months ended
December 31, 1996. The decrease was primarily due to a
10
<PAGE>
MANAGEMENT'S DISCUSSION(CONT.)
decrease in other income of $31,000 from $49,000 for the three months ended
December 31, 1996, to $18,000 for the three months ended December 31, 1997. The
other income decrease was primarily due to an decrease of $34,000 in profit on
sale of lots from $34,000 for the three months ended December 31,1996, to $0 for
the three months ended December 31, 1997, in the Bank's subsidiary. Service
charges on deposits increased $16,000 to $75,000 for the three months ended
December 31, 1997, compared, to $59,000 for the three months ended December 31,
1996. The increase in fees is due to the increase in the average outstanding
balance of NOW accounts from $9.0 million for the three months ended December
31, 1996, to $9.7 million for the three months ended December 31, 1997. Gain on
sale of mortgage loans increased $6,000 to $24,000 for the three months ended
December 31, 1997, compared, to $18,000 for the three months ended December 31,
1996. The increase in gain on sale of mortgage loans is due to the general
decline of mortgage interest rates over the respective periods.
General and Administrative Expenses
General and administrative expenses increased $13,000 or 2.4% to $560,000 for
the three months ended December 31, 1997, compared to $547,000 for the three
months ended December 31, 1996. Salaries and employee benefits increased $7,000
from $278,000 for the three months ended December 31, 1996, to $285,000 for the
three months ended December 31, 1997. The increase was due to annual cost of
living wage increases and the cost of additional employees. The increase was
partially offset by a reduction of $19,000 in expense from accounting for the
Company's stock incentive plan from $32,000 for the three months ended December
31, 1996, to $13,000 for the three months ended December 31, 1997. The
accounting for this expense did not begin until the approval of the Company's
stock incentive plan in October 1995; and required under applicable accounting
standards that 61.1% of the three-year cost be amortized in the first year after
approval, 27.8% the second year after approval, and 11.1% the third year after
approval. In dollar terms, $70,000 per quarter was amortized in the first year,
$32,000 per quarter the second year, and $13,000 per quarter the third year
after approval. The $32,000 per quarter amount continued through September 30,
1997, and was reduced to $13,000 per quarter for the final one-year period
ending September 30, 1998. Other expenses increased $13,000 from $131,000 for
the three months ended December 31, 1996, to $144,000 for the three months ended
December 31, 1997. Net occupancy expense decreased $20,000 from $107,000 for the
three months ended December 31, 1996, to $87,000 for the three months ended
December 31, 1997. The decrease was due to adjusting entries made in the three
months ended December 31, 1996, to compensate for underaccrual of depreciation
expense in the previous quarter. Federal insurance expense increased $10,000
from $0 for the three months ended December 31, 1996, to $10,000 for the three
months ended December 31, 1997. The increase stems from recent legislation that
recapitalized the Federal Deposit Insurance Corporation (FDIC) fund insuring
deposits in savings institutions with a one time Special Assessment. The
assessment for the Company of $350,000 was expensed in the three months ended
September 30, 1996. In exchange for this one-time assessment, the future
premiums paid to the Savings Association Fund (SAIF) were reduced by about 70
percent, to 6.4 cents from 23 cents per $100 of deposits beginning January 1,
1997. The premium paid for the last quarter of the 1996 calendar year was
refunded.
Income Tax Expense
Income tax expense decreased $28,000 or 15.8% from $177,000 for the three months
ended December 31, 1996, to $149,000 for the three months ended December 31,
1997. The decrease in income tax expense is the direct result of the decrease in
income before taxes of $15,000 or 3.5% from $425,000 for the three months ended
December 31, 1996, to $410,000 for the three months ended December 31, 1997. The
effective tax rate for the three months ended December 31, 1996, was 41.7%
compared to 36.3% for the three months ended December 31, 1997. The reduction of
the effective tax rate reflects the establishment of a Nevada investment
subsidiary on May 30, 1997, which effectively eliminates the state tax
obligation of the company since that date.
11
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MANAGEMENT'S DISCUSSION (CONT.)
Comparison of Operating Results for the Nine months Ended December 31, 1996 and
December 31, 1997
Net Income
Net income for the nine months ended December 31, 1997, increased $310,000 or
64.2% to $793,000 compared to $483,000 for the nine months ended December 31,
1996. The increase in net income was primarily due to a one time $350,000
Federal Deposit Insurance Corporation (FDIC) Special Assessment for the three
months ended September 30, 1996. The charge stemmed from legislation that
recapitalized the FDIC fund insuring deposits in savings institutions. In
exchange for this one-time assessment, the future premiums paid to the Savings
Association Fund (SAIF) was reduced by about 70 percent, to 6.4 cents from 23
cents per $100 of deposits. The charge will be more than offset by the reduction
in future premiums. The premium paid for the last quarter of the 1996 calendar
year was refunded. Federal insurance premiums decreased $389,000 from $418,000
for the nine months ended December 31, 1996 to $29,000 for the nine months ended
December 31, 1997. The reduction in federal insurance expense was partially
offset by an increase of $88,000 in income taxes from $349,000 for the nine
months ended December 31, 1996, to $437,000 for the nine months ended December
31, 1997.
Net Interest Income
Net interest income increased by $71,000 from $2.54 million for the nine months
ended December 31, 1996, to $2.61 million for the nine months ended December 31,
1997. Interest income increased $228,000 to $5.8 million for the nine months
ended December 31, 1997, compared to $5.6 million for the nine months ended
December 31, 1997, while interest expense increased only $157,000 to $3.2
million for the nine months ended December 31, 1997, from $3.0 million for the
nine months ended December 31, 1996. The improvement in net interest income is
due to an decrease average yield/rate of total deposits of 0.04% from 4.70% for
the nine months ended December 31, 1996, to 4.66% for the nine months ended
December 31, 1997. The average outstanding balance of interest-earning assets
increased $3.6 million to $91.1 million for the nine months ended December 31,
1997, compared to $87.5 million for the nine months ended December 31, 1996.
Total interest-bearing liabilities increased $3.5 million from $81.4 million for
the nine months ended September 30, 1996 to $84.9 million for the six months
ended September 30, 1997.
Interest Income
Interest income increased $228,000 or a 4.1% to $5.8 million for the nine months
ended December 31, 1997, compared from $5.6 million for the nine months ended
December 31, 1996. Of the increase, $222,000 was due to an increase in interest
and fees on loans to $5.2 million for the nine months ended December 31, 1997,
compared to $5.0 million for the nine months ended December 31, 1996. This
increase was due to the increase in the average outstanding balance of total
loans to $79.1 million for the nine months ended December 31, 1997, compared to
$75.6 million for the nine months ended December 31, 1996. Interest on
investments increased $48,000 to $221,000 for the nine months ended December 31,
1997, compared to $173,000 for the nine months ended December 31, 1996, as a
result of an increase in the average outstanding balances of interest-bearing
deposits in other financial institutions, securities held for sale, and Federal
Home Loan Bank stock from $4.2 million for the nine months ended December 31,
1996, to $5.0 million for the nine months ended December 31, 1997. These
increases were offset by a decrease of $42,000 in interest on mortgage-backed
and related securities to $379,000 for the nine months ended December 31, 1997,
from $421,000 for the nine months ended December 31, 1996. This decrease was due
to an decrease in the average outstanding balance of mortgage backed securities
from $7.7 million for the nine months ended December 31, 1996, to an average
balance of $7.1 million for the nine months ended December 31, 1997. The
decrease was due to the scheduled repayment and prepayments of principle on the
mortgage backed securities.
12
<PAGE>
MANAGEMENT'S DISCUSSION (CONT.)
Interest Expense
Interest expense increased $157,000 or 5.2% to $3.19 million for the nine months
ended December 31, 1997, compared to $3.03 million for the nine months ended
December 31, 1996. Interest on savings increased $14,000 or 6.4% from $2.16
million for the nine months ended December 31, 1996, to $2.18 million for the
nine months ended December 31, 1997. The increase reflects an increase in the
average outstanding balance of total deposits to $62.4 million for the nine
months ended December 31, 1997, from an average balance of $61.5 million for the
nine months ended December 31, 1996. Interest on borrowings increased $143,000
or 16.5% from $869,000 for the nine months ended December 31, 1996, to
$1,012,000 for the nine months ended December 31, 1997. The increase reflects an
increase in average outstanding balance of advances and other borrowings from
$20.0 million for the nine months ended December 31, 1996, to $22.5 million for
the nine months ended December 31, 1997. The increase in advances and other
borrowings was used to fund the increase in assets between the periods.
Provision for Loan Losses
The provision for loan losses increased $19,000 to $75,000 for the nine months
ended December 31, 1997, compared to $56,000 for the nine months ended December
31, 1996. The increase reflects the Board of Directors' recognition of a
commercial loan that appeared on the September 30, 1996, watch list for the
first time. Unable to make an informed estimate of the loss potential, the Board
decided to establish a quarterly loss allowance of $25,000 until more
information is available to make a reasonable estimate of any losses that may
occur (See Part II, Item 1, Legal Proceedings). The nine month period ended
December 31, 1996, includes one quarter with a $6,000 provision and two quarters
of the $25,000 provision. The nine month period ended December 31, 1997,
included 3 quarters of the $25,000 provision. The allowance for loan losses
totaled $474,000 at December 31, 1997, compared to $479,000 at December 31,
1996, and represented .59 % and 0.61% of gross loans and 40.6% and 34.3% of
non-performing loans, respectively. When compared to the allowance for loan
losses calculation that is based on a three year actual loss average, the Board
of Directors believes the allowance for loan losses is at an adequate level to
provide for potential loan losses and that future provisions for loan losses
will be at levels necessary to cover only charge-offs and general increases in
gross loans. The non-performing assets to total assets ratio was 1.44% at
December 31, 1997, compared to 1.54% at December 31, 1996.
Other Income
Total other income decreased $5,000 or 1.2% to $422,000 for the nine months
ended December 31, 1997, compared to $427,000 for the nine months ended December
31, 1996. Other income decreased $58,000 from $150,000 for the nine months ended
December 31, 1996, to $92,000 for the nine months ended December 31, 1997. The
decrease is primarily due to and decrease of $73,000 in real estate lot sales in
the bank's subsidiary to $11,000 for the nine months ended December 31, 1997,
from $84,000 for the nine months ended December 31, 1996. The decrease in real
estate lots sales was offset by an increase of $26,000 in service charges on
deposits to $197,000 for the nine months ended December 31, 1997, from $171,000
for the nine months ended December 31, 1996. The increase is due to the increase
of the average outstanding balance of NOW accounts from $9.0 million for the
nine months ended December 31, 1996, to $9.4 million for the nine months ended
December 31, 1997. The decrease in real estate lots sales was also offset by an
increase of $28,000 in gain on sale of mortgage loans to $76,000 for the nine
months ended December 31, 1997, from $48,000 for the nine months ended December
31, 1996. The decrease in long term mortgage rates experienced during the nine
month period ended December 31, 1997, enhances the prospects of selling loans
with a gain on the sale.
13
<PAGE>
MANAGEMENT'S DISCUSSION (CONT.)
General and Administrative Expenses
General and administrative expenses decreased $375,000 or 18.0% to $1.7 million
for the nine months ended December 31, 1997, compared to $2.1 million for the
nine months ended December 31, 1996. The decrease was primarily due to an
decrease of $389,000 in Federal insurance premiums from $418,000 for the nine
months ended December 31, 1996, to $29,000 for the nine months ended December
31, 1997. The increase is due to a one-time $350,000 Federal Deposit Insurance
Corporation (FDIC) Special Assessment for the three months ended September 30,
1996. The charge stems from legislation that recapitalized the FDIC fund
insuring deposits in savings institutions. In exchange for this one-time
assessment, the future premiums paid to the Savings Association Fund (SAIF) was
reduced by about 70 percent, to 6.4 cents from 23 cents per $100 of deposits.
The charge will be more than offset by the reduction in future premiums. Net
occupancy expense increased $9,000 from $241,000 for the nine months ended
December 31, 1996, to $250,000 for the nine months ended December 31, 1997, and
reflects the depreciation expense associated with the addition and remodeling
project to the New Richmond office location completed in June, 1996, and the
purchase of new computer equipment for all three offices in October, 1996. Other
expenses increased $4,000 from $420,000 for the nine months ended December 31,
1996, to $424,000 for the nine months ended December 31, 1997. Salaries and
employee benefits remained at $901,000 for the nine months ended December 31,
1997, from $901,000 for the nine months ended December 31, 1997. Salaries
increased $70,000 from $586,000 for the nine months ended December 31, 1996, to
$656,000 for the nine months ended December 31, 1997. Of the increase, $48,000
is due to cost of living increases and additional personnel, $8,000 for
increased commissions on loan originations, and $14,000 for increased brokerage
commissions. Employee benefits increased $25,000 from $184,000 for the nine
months ended December 31, 1996, to $209,000 for the nine months ended December
31, 1997. Of the increase, $10,000 was due to the increased in pension plan
expense due to the increase in salaries; $11,000 was due to an increase in ESOP
expense due to the reduced consolidating entry that eliminates interest on the
ESOP loan (less interest paid as the principle balance reduces with each
payment); and $4,000 was an increase in other benefits such as health insurance.
The $95,000 increase in salaries and employee benefits was offset by a decrease
in expense from accounting for the Company's stock incentive plan of $95,000 to
$77,000 for the nine months ended December 31, 1997, from $172,000 for the nine
months ended December 31, 1996. The accounting for this expense did not begin
until the approval of the Company's stock incentive plan in October 1995; and
required under applicable accounting standards that 61.1% of the three-year cost
be amortized in the first year after approval, 27.8% the second year after
approval, and 11.1% the third year after approval. In dollar terms, $70,000 per
quarter was amortized in the first year, $32,000 per quarter the second year,
and $13,000 per quarter the third year after approval. The $32,000 per quarter
amount continued through September 30, 1997, and was reduced to $13,000 per
quarter for the final one-year period ending September 30, 1998
Income Tax Expense
Income tax expense increased $88,000 or 25.2% from $349,000 for the nine months
ended December 31, 1996, to $437,000 for the nine months ended December 31,
1997. The increase in income tax expense is the direct result of a increase in
income before taxes of $398,000 from $832,000 for the nine months ended December
31, 1996, to $1,230,000 for the nine months ended December 31, 1997. The
effective tax rate for the nine months ended December 31, 1997, was 35.5%
compared to 42.0% for the nine months ended December 31, 1996. The reduction of
the effective tax rate reflects the establishment of a Nevada investment
subsidiary on May 30, 1997, which effectively eliminates the state tax
obligation of the Company since that date.
14
<PAGE>
MANAGEMENT'S DISCUSSION (CONT.)
Financial Condition
Total assets increased $4.5 million or 4.7% to $99.6 million at December 31,
1997, compared to $95.1 million at March 31, 1997. The increase is a result of a
$3.5 million or 4.5% increase in net loans receivable to $80.7 million at
December 31, 1997, compared to $77.2 million at March 31, 1997. The increase in
net loans receivable was the result of the expected seasonal increase of loan
activity during the spring and summer months. Cash increased $1.1 million from
$3.0 million at March 31, 1997, to $4.1 million at December 31, 1997. The
increase is partially due to an increase of $1.0 million in interest bearing
deposits from $1.7 million at March 31, 1997, to $2.7 million at December 31,
1997. The increase in interest bearing deposits is partially due to the
establishment of the Nevada investment subsidiary on May 30, 1997,which receives
interest payments on the investment portfolio formerly held by Northwest Savings
Bank. Securities available for sale decreased $2.8 million from $2.8 million at
March 31, 1997, to $.4 million December 31, 1997, as the result of the sale of
the "securities available for sale"
and the repurchase of additional securities that were classified "held to
maturity". Mortgage backed and related securities decreased $730,000 from $7.4
million on March 31, 1997, to $6.7 million at December 31, 1997, as the result
of principle repayments and prepayments on the securities. Savings accounts
increased $1.4 million or 2.3% from $61.6 million at March 31, 1997, to $63.0
million at December 31, 1997. Outstanding advances from the Federal Home Loan
Bank increased $1.6 million from $17.6 million at March 31, 1997 to $19.2
million at December 31, 1997. Other borrowed money increased $679,000 from $4.5
million at March 31, 1997, to $5.1million at December 31, 1997, as the result of
increase in retail reverse repurchase agreements. The increase in advances and
other borrowings was used to fund the increase in assets between the periods.
Shareholders Equity increased $697,000 from $10.9 million at March 31,
1997, to $11.6 million at December 31, 1997, as a result of net income for the
nine months ended December 31, 1997, less dividends paid, and the amortization
of the common stock purchased by the employee stock ownership plan of $125,000
from ($558,000) on March 31, 1997 to ($433,000) on December 31, 1997; the
amortization of the unearned restricted stock plan award of $77,000 from
($115,000) at March 31, 1997, to ($38,000) at December 31, 1997.
Current Developments
Numerous regulatory bodies have recently alerted financial institutions
and public companies to potential problems associated with computer software and
the change to the year 2000. The Company has been assured by its data processing
vendor that all necessary changes have been made to accommodate the year 2000.
The Company has performed tests on its own in-house computers and has found them
to be compatible with the year 2000. The company has and continues to seek
assurances from various software vendors that their products are compatible with
the year 2000. Based on these tests and assurances to date, the Company
estimates the costs of updating software and computers to accommodate the year
2000 will be less than $5,000, or at worst case be non-material.
Asset/Liability Management
Asset/liability management is an ongoing process of matching asset and
liability maturities to reduce interest rate risk. Management attempts to
control this risk through pricing of assets and liabilities and maintaining
specific levels of maturities. In recent periods, management's strategy has been
to (1) sell substantially all new originations of long-term, fixed-rate single
family mortgage loans in the secondary market, (2) invest in various
adjustable-rate and short-term mortgage-backed and related securities, (3)
invest in adjustable-rate, single family mortgage loans, and (4) encourage
medium and longer-term
15
<PAGE>
MANAGEMENT'S DISCUSSION (CONT.)
certificates of deposit. The Company's estimated cumulative one-year gap between
assets and liabilities was a negative 9.4% of total assets, at December 31,
1997. A negative gap occurs when a greater dollar amount of interest-earning
liabilities than interest-bearing assets are repricing or maturing during a
given time period. During periods of rising interest rates, a negative interest
rate sensitivity gap will tend to negatively affect net interest income. During
periods of falling interest rates, a negative interest rate sensitivity gap will
tend to positively affect the net interest income.
Management believes that its asset/liability management strategies
have reduced the potential effects of changes in interest rates on its
operations. Increases in interest rates may increase net interest income because
interest-earning assets will reprice more quickly than interest-bearing
liabilities. The Company's analysis of the maturity and repricing of assets and
liabilities incorporates certain assumptions concerning the amortization and
prepayment of such assets and liabilities.
Management believes that these assumptions approximate actual experience and
considers them reasonable, although the actual amortization and repayment of
assets and liabilities may vary substantially.
Management Strategy
Asset Quality
The Company emphasizes high asset quality in both its investment
portfolio and lending activities. Non-performing assets have ranged between .76%
and 1.44% of total assets during the last three years and were 1.44 % of total
assets at December 31, 1997. Cumulative gross charge-offs over the last three
fiscal years totaled $132,000 and were offset by $35,000 in recoveries. The last
three fiscal years cumulative gross charge-offs of commercial loans have totaled
$27,000. The cumulative gross charge-offs of consumer loans totaled $86;000 and
were offset by $16,000 in recoveries. The remaining $19,000 in cumulative gross
charge-offs were real estate loans and were offset by $19,000 in recoveries.
On October 16, 1996, the Bank learned that a Minnesota Bank had
commenced a repleven lawsuit against a borrower of the Bank that involves
several parties claiming interests in collateral secured by a General Business
Security Agreement of the Bank. On November 20, 1996, the Bank filed its answer
and a third party complaint seeking repleven of its collateral and money
judgments against its borrowers, the guarantors, and other interested parties.
Repleven judgment was entered in favor of the Bank on January 15, 1997. A money
judgment was filed against a guarantor on December 30, 1996. One of the
guarantors has since filed personal bankruptcy. The Bank is asserting the
priority of its liens against other creditors in state circuit court. A trial
date has been scheduled for November, 1998. Depending upon the non-exempt assets
of the parties involved, the Bank's legal counsel believes the Bank should have
sufficient legal grounds to expect recovery from the Bank's collateral, personal
guarantees, and the other parties involved. The Board of Directors at its
meeting October 8, 1996, decided to increase the quarterly loss allowance to
$25,000 until more information is available to make a reasonable estimate of any
losses that may occur. The Board continued this policy at its meeting held
December 10, 1996, and subsequent meetings because a reasonable estimate depends
on the probability of securing damages through the judicial process. As soon as
the Board can identify and quantify the amount of the loss if any, it will book
the loss. In order to establish an order of magnitude of the loss potential, a
worst case scenario of no recovery on a loan of $580,000 plus an overdraft of
$83,000 less the current amount in the loan loss reserve of $347,000 allocated
or available to be allocated to this loan, would produce an after-tax loss of
approximately $209,000.
16
<PAGE>
MANAGEMENT'S DISCUSSION (CONT.)
During the fiscal years ended March 31, 1997, 1996 and 1995, the
Company recorded provisions for loan losses of $81,000, $24,000, and $17,000,
respectively, to its allowance for loan losses and had net charge-offs of
$53,000, $25,000, $19,000, respectively. The Company's allowance for loan losses
at December 31, 1997, totaled $474,000 or 354% of cumulative gross charge-offs
during the last three fiscal years. Management currently believes the allowance
for loan losses at December 31, 1997, is at an adequate level and that future
provisions for loan losses will be maintained at current levels until more
information is available concerning the large commercial loan mentioned
previously.
Total loans past due 90 days or more and not accruing increased to $1.2
million at December 31, 1997, compared to $1.1 million at March 3l, 1997.
Increased balances of past due commercial loans were offset by reductions in
past due real estate and consumer loans. Total loans past due 31-89 days
decreased from $3.3 million at March 31, 1997, to $2.0 million at December 31,
1997. Management considers the 31-89 day category as a trend indicator and the
reduction should indicate a reduction in delinquent loans in the future. The
latest available peer group comparison of nonperforming loans and real estate
owned as a percentage of total loans and real estate owned as prepared by
America's Community Bankers was 1.56% for the Company at June 30, 1997, compared
to 1.41% on a nation wide basis, 0.90% on a geographic basis, 1.30% on an asset
size basis, and 1.64% on an owner type basis. Of the total past due 90 or days,
$580,000 is the commercial loan discussed previously in this section. Adjusting
for that loan would lower the Company's average nonperforming loans to below the
peer group comparison.
Selected Financial Ratios and Other Data: At or For the
Three months ended Nine months ended
December 31, December 31,
Performance Ratios 1997 1996 1997 1996
Return on average assets 1.06% 1.03% 1.09% 0.69%
Return on average equity 9.17% 8.47% 9.53% 5.49%
17
<PAGE>
MANAGEMENT'S DISCUSSION(CONT.)
Average Balance Sheet
<TABLE>
Three Months Ended December 31, Nine Months Ended December 31,
1997 1996 1997 1996
<CAPTION>
Average Average Average Average
Out- Interest Average Out- Interest Average Out- Interest Average Out- Interest Average
standing Earned/ Yield/ standing Earned/ Yield/ standing Earned/ Yield/ standing Earned/ Yield/
Balance Paid Rate Balance Paid Rate Balance Paid Rate Balance Paid Rate
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Interest-earning assets:
Mortgage loans.......................$68,216 $1,473 8.64% $66,518 $1,430 8.60% $66,729 $4,357 8.71 $63,599 $4,110 8.62%
Commercial loans..................... 4,826 101 8.34 4,485 89 7.94 4,751 279 7.82 4,473 315 9.39
Consumer loans........................ 7,935 197 9.94 7,729 189 9.76 7,577 565 9.95 7,542 554 9.79
------ ----- ---- ------ ----- ---- ------ ----- ---- ------ ----- ----
Total loans......................... 80,977 1,771 8.75 78,732 1,708 8.67 79,056 5,201 8.77 75,614 4,979 8.78
Mortgage-backed securities 6,816 121 7.09 7,640 139 7.28 7,066 379 7.15 7,742 421 7.25
Interest-bearing deposits in
other financial institutions......... 313 4 5.67 339 4 5.00 876 36 5.53 530 20 5.03
Investment securities................. 3,145 49 6.17 2,829 38 5.37 3,213 138 5.71 2,929 117 5.34
Federal Home Loan Bank stock.......... 965 14 6.75 822 14 7.00 930 47 6.75 721 36 6.74
------ ----- ---- ------ ----- ---- ------ ----- ---- ------ ----- ----
Total interest-earning assets...... 92,216 1,959 8.50% 90,362 1,903 8.42% 91,141 5,801 8.49% 87,536 5,573 8.49%
Non-interest earning assets........... 5,836 5,216 5,428 5,593
------ ------ ------ ------
Total assets...................... $98,052 $95,578 $96,569 $93,129
====== ====== ====== ======
Liabilities and Stockholders' Equity
Deposits:
NOW accounts........................ $9,695 $36 1.46 $9,041 $37 1.64 $9,446 $105 1.48 $9,038 $115 1.70%
Money market deposit accounts....... 5,847 69 4.74 4,786 57 4.76 5,434 189 4.65 3,836 137 4.76
Passbook............................ 6,034 32 2.11 6,319 36 2.28 6,037 97 2.15 6,760 115 2.27
Certificate of deposit.............. 41,491 596 5.75 42,291 608 5.75 41,470 1,787 5.75 41,828 1,798 5.73
------ --- ---- ------ --- ---- ------ ----- ---- ------ ----- ----
Total deposits.................... 63,067 733 4.65 62,437 738 4.73 62,386 2,179 4.66 61,462 2,165 4.70
Advances and other borrowings........ 22,956 342 6.00 21,023 314 5.97 22,489 1,012 6.01 19,970 869 5.80
------ ----- ---- ------ ----- ---- ------ ----- ---- ------ ----- ----
Total interest-bearing liabilities.. 86,023 1,076 5.00% 83,460 1,052 5.04% 84,876 3,191 5.01% 81,432 3,034 4.97%
Non-interest bearing liabilities (1). 647 409 599 599
Stockholders' equity.................. 11,381 11,709 11,093 11,719
------ ------ ------ ------
Total liabilities and stockholders' $98,052 $95,578 $96,569 $93,129
equity ====== ====== ====== ======
Net interest income/interest rate spread(2) $883 3.50% $851 3.38% $2,610 3.47% $2,539 3.52%
=== ==== === ==== ===== ==== ====
Net earning assets/net interest margin(3)6,193 3.83$ 6,902 3.77% $6,265 3.82% $6,104 3.87%
Average interest-earning assets to ===== ==== ===== ==== ===== ==== ===== ====
average interest-bearing liabilities.. 1.07 1.08 1.07 1.07
==== ==== ==== ====
-----
(1)Includes non-interest bearing checking accounts.
(2)Interest rate spread represents the difference between the average yield on interest-earning assets and the average rate on
interest-bearing liabilities.
(3)Net interest margin represents net interest income divided by average interest-earning assets.
</TABLE>
18
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> DEC-31-1997
<CASH> 1,394
<INT-BEARING-DEPOSITS> 2,657
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 346
<INVESTMENTS-CARRYING> 9,490
<INVESTMENTS-MARKET> 9,626
<LOANS> 80,969
<ALLOWANCE> 474
<TOTAL-ASSETS> 99,558
<DEPOSITS> 62,969
<SHORT-TERM> 13,791
<LIABILITIES-OTHER> 668
<LONG-TERM> 10,574
0
0
<COMMON> 1,033
<OTHER-SE> 10,523
<TOTAL-LIABILITIES-AND-EQUITY> 99,558
<INTEREST-LOAN> 5,201
<INTEREST-INVEST> 600
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 5,801
<INTEREST-DEPOSIT> 2,179
<INTEREST-EXPENSE> 3,191
<INTEREST-INCOME-NET> 2,610
<LOAN-LOSSES> 75
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,703
<INCOME-PRETAX> 1,230
<INCOME-PRE-EXTRAORDINARY> 793
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 793
<EPS-PRIMARY> 1.02
<EPS-DILUTED> 1.02
<YIELD-ACTUAL> 3.47
<LOANS-NON> 1,153
<LOANS-PAST> 15
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 312
<ALLOWANCE-OPEN> 461
<CHARGE-OFFS> 69
<RECOVERIES> 7
<ALLOWANCE-CLOSE> 474
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
