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 June 30, 1999
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 825,301 at June 30, 1999.
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:____7/26/99______ 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
None
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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NORTHWEST EQUITY CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In Thousands)
ASSETS
June 30,
1999 March 31,
(unaudited) 1999
------------ ------------
Cash and due from banks $3,571 $4,749
Interest-bearing deposits with financial institutions 3,596 5,721
Securities held to maturity 9,072 9,435
Investment in Federal Home Loan Bank stock 712 850
Loans held for sale 299 143
Loans receivable - Net of allowance for loan losses 72,668 73,347
Foreclosed properties and properties subject to foreclosure 63 63
Accrued interest receivable 552 556
Premises and equipment 2,149 2,176
Prepaid expenses and other assets 939 545
------------ -----------
TOTAL ASSETS $93,621 $97,585
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand and NOW deposits $10,936 $9,936
Savings and money market deposits 14,619 13,419
Certificates of deposit 36,524 38,648
------------ -----------
Total deposits 62,079 62,003
Advances from Federal Home Loan Bank 14,240 16,990
Borrowed funds 4,145 5,625
Accounts payable and accrued expenses 591 606
------------ -----------
Total liabilities 81,055 85,224
------------ -----------
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; 825,301 shares outstanding 1,033 1,033
Additional paid-in capital 6,582 6,582
Less unearned Employee Stock Ownership Plan (104) (155)
Less 207,216 treasury stock - at cost (2,549) (2,549)
Retained earnings - Substantially restricted 7,604 7,450
------------ -----------
Total stockholders' equity 12,566 12,361
------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $93,621 $97,585
============ ===========
See accompanying Notes to Consolidated Financial Statements
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NORTHWEST EQUITY CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In Thousands except for per share amounts)
Three Months Ended
June 30,
1999 1998
------------ ------------
Interest income:
Interest and fees on loans $1,619 $1,745
Interest on mortgage-backed securities 97 115
Interest and dividends on investments 111 97
------------ ------------
Total interest income 1,827 1,957
------------ ------------
Interest expense:
Interest on deposits 655 720
Interest on borrowings 255 326
------------ ------------
Total interest expense 910 1,046
------------ ------------
Net interest income 917 911
Provision for loan losses 0 25
------------ ------------
Net interest income after provision for loan losses 917 886
------------ ------------
Other income:
Mortgage servicing fees 26 21
Service charges on deposits 71 62
Gain on sale of mortgage loans 8 38
Other 39 83
------------ ------------
Total other income 144 204
------------ ------------
General and administrative expenses:
Salaries and employee benefits 367 336
Net occupancy expense 84 86
Data processing 35 35
Federal insurance premiums 8 10
Other 115 134
------------ ------------
Total general and administrative expense 609 601
------------ ------------
Income before provision for income taxes 452 489
Provision for income taxes 157 167
------------ ------------
Net income $295 $322
============ ============
Basic earnings per share $0.37 $0.42
============ ============
Diluted earnings per share $0.35 $0.39
============ ============
See accompanying Notes to Consolidated Financial Statements
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<TABLE>
NORTHWEST EQUITY CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
(In Thousands)
Unearned
Additional Unearned ESOP
Common Paid-In Restricted Compen- Treasury Retained
Stock Capital Stock sation Stock Earnings Total
-------- ---------- ----------- --------- --------- --------- -------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Three Months Ended June 30, 1998
Balance - March 31, 1998 $1,033 $6,584 $(26) $(389) $(2,557) $6,869 $11,514
Comprehensice income
Net income - - - - - - - - - - 322 322
Amortization of unearned ESOP and restricted stock
award - - - - 13 31 - - - - 44
Exercise of incentive stock options - - (2) - - - - 8 - - 6
Cash dividends - $.16 per share - - - - - - - - - - (132) (132)
-------- ------- ----- ------ --------- ------ -------
Balance - June 30, 1998 1,033 6,582 $(13) (358) (2,549) 7,059 11,754
======== ======= ===== ====== ========= ====== =======
Three Months Ended June 30, 1999
Balance - March 31, 1999 1,033 6,582 - - (155) (2,549) 7,450 12,361
Comprehensice income
Net income - - - - - - - - - - 295 295
Amortization of unearned ESOP and restricted stock
award - - - - - - 51 - - - - 51
Cash dividends - $.17 per share - - - - - - - - - - (141) (141)
-------- ------- ----- ------ --------- ------ -------
Balance - June 30, 1999 $1,033 $6,582 $ - - $(104) $(2,549) $7,604 $12,566
======== ======= ===== ====== ========= ====== =======
See accompanying Notes to Consolidated Financial Statements
</TABLE>
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NORTHWEST EQUITY CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In Thousands)
Three Months Ended
June 30,
1999 1998
----------- ----------
Cash flows from operating activities:
Net income $295 $322
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for depreciation 36 37
Provision for loan losses - - 25
Amortization of ESOP and restricted stock awards 51 44
Proceeds from sales of mortgage loans 1,538 4,466
Loans originated for sale (1,694) (4,517)
Changes in operating assets and liabilities:
Accrued interest receivable 4 (19)
Prepaid expenses and other assets (394) 7
Accrued interest payable 124 128
Accrued income taxes payable 100 79
Other accrued liabilities (239) (130)
----------- ----------
Net cash provided by (used in) operating activities (179) 442
----------- ----------
Cash flows from investing activities:
Net decrease in interest-bearing deposits with
financial institutions 2,125 2,149
Proceeds from sales of Federal Home Loan Bank stock 138 206
Proceeds from maturities of held to maturity securities - - 500
Purchase of held to maturity securities - - (500)
Principal collected on mortgage-backed securities 363 287
Net (increase) decrease in loans 679 (409)
Purchase of office properties and equipment (9) (39)
----------- ----------
Net cash provided by investing activities 3,296 2,194
----------- ----------
See accompanying Notes to Consolidated Financial Statements
6
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NORTHWEST EQUITY CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Three Months Ended
June 30,
1999 1998
-------- --------
Cash flows from financing activities:
Net increase (decrease) in deposits 76 (403)
Net (decrease) in short-term borrowings (4,509) (6,309)
Net increase in long-term borrowings 279 4,106
Proceeds from exercise of stock options - - 8
Dividends paid (141) (132)
--------- ---------
Net cash (used in) financing activities (4,295) (2,730)
--------- ---------
(Decrease) in cash and due from banks (1,178) (94)
Cash and due from banks at beginning 4,749 2,642
--------- ---------
Cash and due from banks at end $3,571 $2,548
========= =========
Supplemental disclosures of cash flow information:
Loans receivable transferred to foreclosed
properties and properties subject to foreclosure $ - - $166
Loans charged off 31 40
Interest Paid 786 918
Income taxes paid 57 88
See accompanying Notes to Consolidated Financial Statements
7
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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, 1999 and should be read in conjunction with the financial
statements and notes which 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.
Note 2. Subsequent Events: none
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 June 30, 1998 and
June 30, 1999
Net Income
Net income for the three months ended June 30, 1999, decreased $27,000
or 8.4% to $295,000 compared to $322,000 for the three months ended June 30,
1998. The decrease in net income was primarily due to a decrease in total other
income of $60,000 from $204,000 for the three months ended June 30, 1998 to
$144,000 for the three months ended June 30, 1999. Other income decreased
$44,000 from $83,000 for the three months ended June 30, 1998, to $39,000 for
the three months ended June 30, 1999. The decrease in other income was partially
due to a decrease in the profit on sale of real estate held in the Bank's
subsidiary of $50,000 from $50,000 for the three months ended June 30, 1998, to
$0 for the three months ended June 30, 1999. Gain on sale of mortgage loans
decreased $30,000 from $38,000 for the three months ended June 30, 1998, to
$8,000 for the three months ended June 30, 1999. A $6,000 increase in net
interest income from $911,000 for the three months ended June 30, 1998 to
$917,000 for the three months ended June 30, 1999, was offset by an increase in
$8,000 in general and administrative expense from $601,000 for the three months
ended June 30, 1998 to $609,000 for the three months ended June 30, 1999.
Net Interest Income
Net interest income increased by $6,000 from $911,000 for the three
months ended June 30, 1998, to $917,000 for the three months ended June 30,
1999. The improvement in net interest income results from a decrease of $136,000
in total interest expense to $910,000 for the three months ended June 30, 1999,
from $1,046,000 for the three months ended June 30, 1998, while total interest
income decreased only $130,000 to $1,827,000 for the three months ended June 30,
1999, compared to $1,957,000 for the three months ended June 30, 1998
Interest Income
Interest income decreased $130,000 or 6.6% to $1,827,000 for the three
months ended June 30, 1999, compared to $1,957,000 million for the three months
ended June 30, 1998. Interest and fees on loans decreased $126,000 to $1,619,000
for the three months ended June 30, 1999, compared to $1,745,000 for the three
months ended June 30, 1998. The decrease was due to the decrease in the average
outstanding balance of total loans to $74.0 million for the three months ended
June 30, 1999, compared to $79.1 million for the three months ended June 30,
1998. The average yield/rate on total loans decreased .08% from 8.83% for the
three months ended June 30, 1998, to 8.75% for the three months ended June 30,
1999. The decrease in yield and total loans was due to a decrease in market
interest rates over the two comparable periods which encouraged customers to
refinance adjustable rate mortgages which are held in the portfolio with fixed
rate loans which are sold on the secondary market. Interest on mortgage-backed
and related securities decreased $18,000 to $97,000 for the three months ended
June 30, 1999, from $115,000 for the three months ended June 30, 1998. The
decrease was due to a decrease in the average balance of mortgage backed and
related securities from $6.3 million for the three months ended June 30, 1998,
to an average balance of $5.8 million for the three months ended June 30, 1999.
The decrease in mortgage-backed and related securities was the result of the
principal repayments and pre-payments. Interest on investments increased $14,000
to $111,000 for the three months ended June 30, 1999, compared to $97,000 for
the three months ended June 30, 1998. The increase was the result of an increase
in the average outstanding balance of interest bearing deposits in other
financial institutions from $2.3 million for the three months ended June 30,
1998, to $3.8 million for the three months ended June 30, 1999.
Interest Expense
Interest expense decreased $136,000 or 13.0% to $910,000 for the three
months ended June 30, 1999, compared to $1,046,000 for the three months ended
June 30, 1998. Interest on deposits decreased $65,000 or 9.0% from $720,000 for
the three months ended June 30, 1998 to $655,000 for the three months ended June
30, 1999. The decrease reflects a decrease in the average yield/rate of total
deposits of 0.41% to 4.22%for the three months ended June 30, 1999, from an
average yield/rate of total deposits of 4.63% for the three months ended June
30, 1998. Interest on borrowings decreased $71,000 or 21.7% from $326,000 for
the three months ended June 30, 1998, to $255,000 for the three months ended
June 30, 1999. The decrease
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reflects a decrease in average rate paid on advances and other borrowings from
5.68% for the three months ended June 30, 1998, to 5.30% for the three months
ended June 30, 1999. In addition, the average balance of advances and other
borrowings decreased $3.7 million from $23.0 million for the three months
ended June 30, 1998, to $19.3 million for the three months ended June 30, 1999.
Provision for Loan Losses
The provision for loan losses decreased $25,000 to $0 for the three
months ended June 30, 1999, compared to $25,000 for the three months ended June
30, 1998. The allowance for loan losses totaled $348,000 at June 30, 1999,
compared to $472,000 at June 30, 1998, and represented 0.47% and 0.59% of gross
loans and 232.0% and 34.9% of non-performing loans, respectively. The
non-performing assets to total assets ratio was 0.22% at June 30, 1999, compared
to 1.72% at June 30, 1998.
Other Income
Total other income decreased 29.4% or $60,000 to $144,000 for the three
months ended June 30, 1999, compared to $204,000 for the three months ended June
30, 1998. Other income decreased $44,000 from $83,000 for the three months ended
June 30, 1998 to $39,000 for the three months ended June 30, 1999. The decrease
in other income was partially due to an decrease in the profit on sale of real
estate held in the Bank's subsidiary of $50,000 from $50,000 for the three
months ended June 30, 1998, to $0 for the three months ended June 30, 1999. That
sale divested all the real estate investments of the subsidiary. Gain on sale of
mortgage loans decreased $30,000 from $38,000 for the three months ended June
30, 1998, to $8,000 for the three months ended June 30, 1999. The decrease
reflects the recent upward trend in interest rates during the current period
that acts to reduce gains on sale of mortgage loans sold in the secondary
market. Service charges on deposits increased $9,000 from $62,000 for the three
months ended June 30, 1998, to $71,000 for the three months ended June 30, 1999.
The increase reflect an increase in the average outstanding balance of NOW
accounts of $0.9 million from $9.8 million for the three months ended June 30,
1998, to $10.7 million for the three months ended June 30, 1999.
General and Administrative Expenses
General and administrative expenses increased $8,000 or 1.3% to
$609,000 for the three months ended June 30, 1999, compared to $601,000 for the
three months ended June 30, 1998. Salaries and employee benefits increased
$31,000 from $336,000 for the three months ended June 30, 1998, to $367,000 for
the three months ended June 30, 1999. The increase reflects the change of the
salary review process to coincide with the fiscal year-end that moved salary
adjustments from July 1st of the prior fiscal year to April 1st of the current
fiscal year and cost of living salary increases. Net occupancy expense remained
virtually unchanged at $84,000 for the three months ended June 30, 1999,
compared to $86,000 for the three months ended June 30, 1998. Data processing
expenses remained at $35,000 for the three months ended June 30, 1999, and the
three months ended June 30, 1998. Federal insurance premiums decreased $2,000 to
$8,000 for the three months ended June 30, 1999, for $10,000 for the three
months ended June 30, 1998. Other expenses decreased $19,000 form $134,000 for
the three months ended June 30, 1998, to $115,000 for the three months ended
June 30, 1999.
Income Tax Expense
Income tax expense decreased $10,000 or 6.0% from $167,000 for the
three months ended June 30, 1998, to $157,000 for the three months ended June
30, 1999. Income before taxes decreased $37,000 from $489,000 for the three
months ended June 30, 1998, to $452,000 for the three months ended June 30,
1999. The effective tax rate for the three months ended June 30, 1999, was 34.7%
compared to 34.1% for the three months ended June 30, 1998.
Financial Condition
Total assets decreased $4.0 million or 4.1% to $93.6 million at June
30, 1999, compared to $97.6 million at March 31, 1999. The decrease is partially
due to the decrease in cash and interest-bearing deposits with financial
institutions of $3.3 million to $7.2 million at June 30, 1999, from $10.5
million at March 31, 1999 and the decrease in loans receivable of $0.6 million
from $73.3 million at March 31, 1999, to $72.7 million at June 30, 1999. The
cash and interest-bearing deposits were used to reduce advances from the Federal
Home Loan Bank $2.8 million from $17.0 million at March 31, 1999, to $14.2
million at June 30, 1999; and a decrease in other borrowed money of $1.5 million
from $5.6 million at March 31, 1999, to $4.1 million at June 30, 1999. The
decrease in loans receivable was due the level on long-term mortgage interest
rates during the current period which encouraged customers to refinance
adjustable rate mortgages which are held in the portfolio with fixed rate loans
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which are sold on the secondary market. Securities held-to-maturity decreased
$0.3 million to $9.1 million at June 30, 1999, compared to $9.4 million March
31, 1999. Shareholders' equity increased $205,000 from $12.4 million at March
31, 1999, to $12.6 million at June 30, 1999, as a result of net income for the
three months ended June 30, 1999, less $141,000 in cash dividends and the
amortization of the common stock purchased by the employee stock ownership plan
of $51,000.
Disclosures Involving Year 2000 Issues
Issues related to the century date change and the impact on computer
systems and business operations are receiving prominent publicity and attention.
Depositors, business partners, investors, and the general public are
specifically interested in the effect on the financial condition of each
depository institution. The FDIC has advised state savings banks that safe and
sound banking practices require them to address Year 2000 issues. The Securities
and Exchange Commission (SEC) issued a revised Staff Legal Bulletin NO. 5 to
provide specific guidance on disclosure associated with Year 2000 obligations
for companies registered under federal securities laws.
Computer programs generally abbreviated dates by eliminating the century
digits of the year. Many resources, such as software; hardware; telephones;
voicemail; heating; ventilating and air conditioning; alarms, etc. ("Systems")
are affected. These Systems were designed to assume a century value of "19" to
save memory and disk space within their programs. In addition, many Systems use
a value of "99" in a year or "99/99/99" in a date to indicate "no date" or "any
date" or even a default expiration date. As the year 2000 approaches, this
abbreviated date mechanism within Systems threatens to disrupt the function of
computer software at nearly every business which relies heavily on computer
systems for account and other recordkeeping functions. If the millennium issue
is ignored, system failures or miscalculations could occur, causing disruptions
of operations and a temporary inability to process business transactions.
The Bank has an inventory of personal computers that access a data
processing system provided by EDS in Des Moines, Iowa. If the personal computers
and data processing systems fail to process the century date change, it may
impair the Bank's ability to process loan payments, accept deposits, and address
other operational issues. The Bank's customers, suppliers, other constituents
may also be impaired to meet their contractual obligations with the Bank. The
Bank has developed a Year 2000 Plan (the "Plan"). The Bank's Plan attempts to
identify the systems, assess the risk, and conduct inventories as necessary to
assure compliance with the Plan. The Plan calls for identifying all systems in
need of remediation by June 30, 1999, and remedying all systems in need of
remediation by September 30, 1999. As of June 30, 1999, the Bank estimates it
will have to purchase hardware and equipment in the amount of $17,000 (pre-tax)
to address the Y2K issues. The expenditures would be amortized over a 5-year
period, and would add approximately $3,400 in furniture and fixture expense per
year for the next 5 years. In addition, the Bank paid in the quarter ended
December 31, 1998, a one-time fee of $20,000 by EDS to support the FFIEC's
testing guidance regarding Year 2000 efforts of financial institutions as
outlined in the April 10, 1998, Interagency Statement. These amounts are not
considered to be material.
On February 24, 1998, the FDIC conducted an on-site visitation of the
Bank's Year 2000 process. The examiner followed guidelines and recommendations
contained in the FFIEC Interagency Statement on Year 2000 Project Management
Awareness, dated May 5, 1997, and subsequent publications. In a letter dated
March 17, 1998, the FDIC stated that the Bank's Year 2000 Committee is
adequately monitoring Year 2000 compliance. In a letter dated September 8, 1998,
The FDIC reported to the Board of Directors that the Federal Reserve Bank of
Dallas had conducted an examination of Electronic Data Systems, Inc.,(EDS)
Plano, Texas, the Bank's data processor. The Board of Directors reviewed the
Exam at its September 18, 1998, meeting and the record of this action was
entered into the minutes. The results of the examination are deemed to be
confidential by the FDIC. On October 9, 1998, the Bank received an extensive Y2k
Contingency Plan from EDS. On February 4, 1999, the FDIC conducted an on-site
Year 2000 readiness examination. Again, the FDIC mandates that the results of
that examination be held confidential. . In a letter dated April 30, 1999, EDS
reported that the overall product line remediation was now 100% complete. The
Bank filed its Y2K Contingency Plan with FDIC before the June 30, 1999 deadline.
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 certificates of deposit. The Company's estimated
cumulative one-year gap between assets and liabilities was a negative 0.29% of
total assets,
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at the latest available reporting date of March 31, 1999. 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 decrease net interest income because
interest-bearing liabilities will reprice more quickly than interest-earning
assets. 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
.0.32% and 1.72% of total assets during the last three fiscal years and were
0.22% of total assets at June 30, 1999. During the fiscal years ended March 31,
1999, 1998, and 1997, the Company recorded provisions for loan losses of
$100,000, $81,000, and $81,000, respectively, to its allowance for loan losses
and had net charge-offs of $77,000, $53,000, and $25,000, respectively. The
Company's allowance for loan losses at June 30, 1999, totaled $358,000. The
allowance for loan losses calculation is based on a three year actual loss
average. Total non-performing loans decreased to $150,000 at June 30, 1999, from
$238,000 at March 31, 1999
Selected Financial Ratios and Other Data: At or For the
Three months ended June 30,
Performance Ratios 1999 1998
---- ----
Return on average assets 1.23% 1.32%
Return on average equity 9.46% 11.28%
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MANAGEMENT' S DISCUSSION(CONT.)
<TABLE>
Three Months Ended June 30,
------------------------------------------------------------------------------------
1999 1998
------------------------------------------------------------------------------------
Average Interest Average Average Interest Average
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate Balance Paid Rate
<CAPTION>
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Assets
Interest-earning assets:
Mortgage loans $63,163 $1,337 8.47% $66,827 $1,449 8.67%
Commerical loans 3,731 110 11.79% 4,399 104 9.46%
Consumer loans 7,090 172 9.70% 7,837 192 9.80%
---------- -------- -------- --------- -------- -------
Total loans 73,984 1,619 8.75% 79,063 1,745 8.83%
Mortgage-backed securities 5,826 97 6.66% 6,311 115 7.29%
Interest bearing deposits in other
financial institutions 3,791 49 5.17% 2,339 32 5.47%
Investment securities 3,399 50 5.88% 2,978 46 6.18%
Federal Home Loan Bank stock 753 12 6.75% 1,003 19 6.75%
---------- -------- -------- --------- -------- -------
Total interest-earning assets 87,753 $1,827 8.33% 91,694 $1,957 8.54%
-------- --------
Non-interest earning assets 7,850 5,299
---------- ---------
Total assets $95,603 $96,993
========== ==========
Liabilities and retained earnings:
Deposits:
NOW accounts(1) $10,652 $34 1.28% $9,842 $35 1.42%
Money market deposit accounts 7,202 73 4.08% 6,171 76 4.93%
Passbook 6,551 35 2.14% 6,146 33 2.15%
Certificates of deposit 37,751 513 5.44% 40,021 576 5.76%
---------- ------- -------- ---------- -------- -------
Total deposits 62,156 655 4.22% 62,180 720 4.63%
Advances and other borrowings 19,252 255 5.30% 22,974 326 5.68%
---------- -------- -------- ---------- -------- -------
Total interest-bearing liabilities 81,408 910 4.47% 85,154 1,046 4.91%
-------- --------
Non-interest bearing liabilities 1,732 416
Equity 12,463 11,423
---------- ----------
Total liabilities and retained earnings $95,603 $96,993
========== ==========
Net interest income/interest
rate spread(2) $917 3.86% $911 3.63%
======== ======== ======== =======
Net earning assets/net interest margin(3) $6,345 4.18% $6,540 3.97%
========== ======== ========== =======
Average interest-earning assets to
average interest-bearing liabilities 1.08 x 1.08 x
========== ==========
________________________
<FN>
(1) Includes non-interest bearing NOW 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.
</FN>
</TABLE>
13
<PAGE>
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<S> <C>
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<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> MAR-31-1999
<PERIOD-END> JUN-30-1999
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<LOANS> 72,967
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<TOTAL-ASSETS> 93,621
<DEPOSITS> 62,079
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0
0
<COMMON> 1,033
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<EXPENSE-OTHER> 609
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</TABLE>
