UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] Quarterly Report Under Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For the Quarterly Period Ended JUNE 30, 1996
[ ] Transition Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For the Transition Period from _________ to _________
Commission File Number: 0-24526
COASTAL BANCORP, INC.
(Exact name of Registrant as specified in its charter)
Texas 76-0428727
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8 Greenway Plaza, Suite 1500
Houston, Texas 77046
(Address of principal executive office)
(713) 623-2600
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
COMMON STOCK ISSUED AND OUTSTANDING: 4,962,344 AS OF JUNE 30, 1996
<PAGE>
COASTAL BANCORP, INC.
Table of Contents
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
<S> <C> <C>
Item 1 Financial Statements
Consolidated Statements of Financial Condition at June 30, 1996 (unaudited) and December 31, 1995 1
Consolidated Statements of Income for the Six-Month Periods Ended June 30, 1996 and 1995
(unaudited) 2
Consolidated Statements of Income for the Three-Month Periods Ended June 30, 1996 and 1995
(unaudited) 3
Consolidated Statements of Cash Flows for the Six-Month Periods Ended June 30, 1996 and 1995 (unaudited)
4
Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 15
</TABLE>
PART II. OTHER INFORMATION
<TABLE>
<CAPTION>
<S> <C> <C>
Item 1 Legal Proceedings 20
Item 2 Changes in Securities 20
Item 3 Default upon Senior Securities 20
Item 4 Submission of Matters to a Vote of Securities Holders 20
Item 5 Other Information 20
Item 6 Exhibits and Reports on Form 8-K 20
</TABLE>
SIGNATURES
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
COASTAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS, EXCEPT SHARE DATA)
June 30, December 31,
1996 1995
------------ -------------
ASSETS (Unaudited)
- ---------------------------------------------------------------
<S> <C> <C>
Cash and amounts due from depository institutions $ 17,934 $ 9,870
Certificates and time deposits -- 174
------------ -------------
Cash and cash equivalents 17,934 10,044
Loans receivable (note 4) 1,130,380 1,098,555
Mortgage-backed securities held-to-maturity (note 3) 1,371,235 1,395,753
Mortgage-backed securities available-for-sale, at market value 182,922 186,414
U.S. Treasury security available-for-sale, at market value 11 3,997
Mortgage loans held for sale 1,961 731
Accrued interest receivable 14,526 15,538
Property and equipment 14,074 13,439
Stock in the Federal Home Loan Bank of Dallas (FHLB) 25,220 21,759
Goodwill 16,411 17,972
Purchased loan servicing rights 7,326 8,140
Capitalized excess servicing fees 156 183
Prepaid expenses and other assets 14,412 14,003
------------ -------------
$ 2,796,568 $ 2,786,528
============ =============
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Liabilities:
Savings deposits (note 5) $1,278,985 $1,287,084
Advances from the FHLB (note 6) 433,896 312,186
Securities sold under agreements to repurchase (note 6) 883,793 993,832
Senior notes payable (note 7) 50,000 50,000
Advances from borrowers for taxes and insurance 11,069 6,510
Other liabilities and accrued expenses 14,984 16,487
----------- -----------
Total liabilities 2,672,727 2,666,099
----------- -----------
9.0% noncumulative preferred stock of Coastal Banc ssb 28,750 28,750
Commitments and contingencies (notes 4, 9 and 12)
Stockholders' equity (notes 2 and 10):
Preferred stock, no par value; authorized shares 5,000,000;
no shares issued -- --
Common stock, $.01 par value; authorized shares 30,000,000;
4,962,344 and 4,957,870 shares issued and outstanding in
1996 and 1995 50 50
Additional paid-in capital 32,543 32,492
Retained earnings 64,443 59,631
Unrealized gain (loss) on securities available-for-sale (1,945) (494)
----------- -----------
Total stockholders' equity 95,091 91,679
----------- -----------
$2,796,568 $2,786,528
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
<PAGE>
COASTAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------
1996 1995
------------------ -------
(Unaudited)
<S> <C> <C>
Interest income:
Mortgage-backed securities $ 48,310 $50,685
Loans receivable 46,865 27,928
Investment securities, certificates, time deposits and other investments 706 776
------------------ -------
95,881 79,389
------------------ -------
Interest expense:
Savings deposits 29,767 27,016
Other borrowed money 26,717 21,272
Senior notes payable 2,500 --
Advances from the FHLB:
Short-term 2,945 522
Long-term 6,680 10,929
------------------ -------
68,609 59,739
------------------ -------
Net interest income 27,272 19,650
Provision for loan losses (note 4) 1,025 730
------------------ -------
Net interest income after provision for loan losses 26,247 18,920
------------------ -------
Noninterest income:
Loan fees and service charges 2,463 1,584
Loan servicing income 1,566 1,813
Gain on sale of branch office 521 --
Gain(loss) on sales of mortgage-backed securities available-for-sale, net (4) --
Other 246 195
------------------ -------
4,792 3,592
------------------ -------
Noninterest expense:
Compensation, payroll taxes and other benefits 8,106 5,698
Office occupancy 2,836 2,120
Insurance premiums 1,477 1,554
Amortization of purchased loan servicing rights 814 691
Data processing 1,294 861
Amortization of goodwill 897 578
Real estate owned 386 180
Other 4,041 2,893
------------------ -------
19,851 14,575
------------------ -------
Income before provision for Federal income taxes 11,188 7,937
Provision for Federal income taxes 4,090 2,985
------------------ -------
Net income before preferred stock dividends 7,098 4,952
Preferred stock dividends of Coastal Banc ssb 1,294 1,294
------------------ -------
Net income after preferred stock dividends $ 5,804 $ 3,658
================== =======
Net earnings per share (note 9) $ 1.16 $ 0.73
================== =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements
<PAGE>
COASTAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
--------------------------
1996 1995
-------------------- -------
(Unaudited)
<S> <C> <C>
Interest income:
Mortgage-backed securities $ 23,813 $25,953
Loans receivable 23,621 14,862
Investment securities, certificates, time deposits and other investments 329 377
-------------------- -------
47,763 41,192
-------------------- -------
Interest expense:
Savings deposits 14,685 14,245
Other borrowed money 12,834 11,122
Senior notes payable 1,250 --
Advances from the FHLB:
Short-term 1,712 257
Long-term 3,421 5,396
-------------------- -------
33,902 31,020
-------------------- -------
Net interest income 13,861 10,172
Provision for loan losses (note 4) 450 468
-------------------- -------
Net interest income after provision for loan losses 13,411 9,704
-------------------- -------
Noninterest income:
Loan fees and service charges 1,232 785
Loan servicing income 763 881
Gain on sale of branch office 521 --
Other 135 72
-------------------- -------
2,651 1,738
-------------------- -------
Noninterest expense:
Compensation, payroll taxes and other benefits 4,219 2,884
Office occupancy 1,419 1,086
Insurance premiums 731 780
Amortization of purchased loan servicing rights 404 368
Data processing 696 432
Amortization of goodwill 449 290
Real estate owned 133 101
Other 2,250 1,550
-------------------- -------
10,301 7,491
-------------------- -------
Income before provision for Federal income taxes 5,761 3,951
Provision for Federal income taxes 2,103 1,429
-------------------- -------
Net income before preferred stock dividends 3,658 2,522
Preferred stock dividends of Coastal Banc ssb 647 647
-------------------- -------
Net income after preferred stock dividends $ 3,011 $ 1,875
==================== =======
Net earnings per share (note 9) $ 0.60 $ 0.37
==================== =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements
<PAGE>
COASTAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------------
1996 1995
------------------ ----------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 7,098 $ 4,952
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization of property and equipment,
purchased loans servicing rights, capitalized excess servicing fees
and prepaid expenses and other assets 2,796 2,192
Net premium amortization (discount accretion) 719 (428)
Provision for loan losses 1,025 730
Amortization of goodwill 897 578
Originations and purchases of mortgage loans held for sale (12,784) (2,157)
Sales of mortgage loans held for sale 11,547 1,696
Loss on sales of mortgage-backed securities available-for-sale 4 --
Gain on sale of branch office (521) --
Decrease (increase) in:
Accrued interest receivable 1,008 (2,521)
Other, net 818 4,058
Stock dividends from the FHLB (537) (643)
------------------ ----------
Net cash provided by operating activities 12,070 8,457
------------------ ----------
Cash flows from investing activities:
Purchases of mortgage-backed securities -- (1,598)
Purchase of U.S. Treasury security available-for-sale (11) --
Principal repayments on mortgage-backed securities 24,071 11,687
Principal repayments on mortgage-backed securities
available-for-sale 395 --
Proceeds from maturity of U.S. Treasury security available-for-sale 4,000 --
Proceeds from sales of mortgage-backed securities available-for-sale 860 --
Purchases of loans receivable (43,344) (173,465)
Net (increase) decrease in loans receivable 7,766 (20,882)
Net purchases of property and equipment (2,056) (1,941)
Purchase of FHLB stock (7,924) --
Proceeds from sales of FHLB stock 5,000 563
Sale of branch office (13,622) --
------------------ ----------
Net cash used by investing activities (24,865) (185,636)
------------------ ----------
</TABLE>
<PAGE>
COASTAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------------
1996 1995
------------------ ------------
(Unaudited)
<S> <C> <C>
Cash flows from financing activities:
Net increase in savings deposits $ 6,690 $ 32,755
Advances from the FHLB 1,587,709 109,924
Principal payments on advances from the FHLB (1,465,999) (133,759)
Securities sold under agreements to repurchase 4,769,934 5,036,455
Purchases of securities sold under agreements to repurchase (4,879,973) (4,916,291)
Proceeds from issuance of senior notes payable, net -- 47,635
Exercise of stock options for purchase of common stock, net 51 32
Net increase in advances from borrowers for taxes and insurance 4,559 4,872
Dividends paid (2,286) (2,086)
------------------ ------------
Net cash provided by financing activities 20,685 179,537
------------------ ------------
Net increase in cash and cash equivalents 7,890 2,358
Cash and cash equivalents at beginning of period 10,044 6,388
------------------ ------------
Cash and cash equivalents at end of period $ 17,934 $ 8,746
================== ============
Supplemental schedule of cash flows--interest paid $ 71,242 $ 59,999
================== ============
Supplemental schedule of noncash investing and financing activities:
Foreclosures of loans receivable $ 2,366 $ 1,187
================== ============
In connection with the sale of the branch office in 1996, Coastal
recorded the following reductions of assets and liabilities:
Savings deposits sold $ 14,850 $ --
Accrued interest payable sold 65 --
Loans receivable sold 155 --
Property and equipment sold 438 --
Reduction of goodwill 179 --
================== ============
</TABLE>
COASTAL BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The accompanying unaudited Consolidated Financial Statements were
prepared in accordance with the instructions for Form 10-Q and, therefore, do
not include all disclosures necessary for a complete presentation of financial
condition, results of operations, and cash flows in conformity with generally
accepted accounting principles. All adjustments which are, in the opinion of
management, of a normal recurring nature and are necessary for a fair
presentation of the interim financial statements, have been included. The
results of operations for the period ended June 30, 1996 are not necessarily
indicative of the results that may be expected for the entire fiscal year or
any other interim period.
(2) PRINCIPLES OF CONSOLIDATION
The accompanying unaudited Consolidated Financial Statements include the
accounts of Coastal Bancorp, Inc. and its wholly-owned subsidiary, Coastal
Banc ssb and subsidiaries (collectively, Coastal). Coastal Banc ssb's
subsidiaries include CoastalBanc Financial Corp., CoastalBanc Investment
Corporation, CBS Builders, Inc., CBS Mortgage Corp., and CBS Asset Corp.
(collectively with Coastal Banc ssb, the Bank). All significant intercompany
balances and transactions have been eliminated in consolidation.
(3) MORTGAGE-BACKED SECURITIES HELD-TO-MATURITY
Mortgage-backed securities held-to-maturity at June 30, 1996 (unaudited)
are as follows (dollars in thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
REMICS - Agency $ 945,066 $ 3,053 $ (20,038) $ 928,081
REMICS - Non-agency 284,535 844 (13,209) 272,170
FNMA certificates 83,143 (1,605) 81,538
GNMA certificates 36,439 22 (52) 36,409
Non-agency securities 22,005 257 (88) 22,174
Interest-only securities 47 (7) 40
----------- ----------- ----------- -----------
$ 1,371,235 $ 4,176 $ (34,999) $ 1,340,412
=========== =========== ============ ===========
</TABLE>
Mortgage-backed securities held-to-maturity at December 31, 1995 are as
follows (dollars in thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
REMICS - Agency $ 948,027 $ 4,298 $ (13,430) $ 938,895
REMICS - Non-agency 291,124 1,039 (6,641) 285,522
FNMA certificates 92,977 44 (232) 92,789
GNMA certificates 39,520 618 40,138
Non-agency securities 24,049 300 (93) 24,256
Interest-only securities 56 (6) 50
----------- ----------- ----------- -----------
$ 1,395,753 $ 6,299 $ (20,402) $ 1,381,650
=========== =========== ============ ===========
</TABLE>
(4) LOANS RECEIVABLE
Loans receivable at June 30, 1996 and December 31, 1995 are as follows
(dollars in thousands):
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
--------------- -------------------
(Unaudited)
<S> <C> <C>
Real estate mortgage loans:
First-lien mortgage, primarily residential $ 707,730 $ 742,880
Multifamily 114,103 95,297
Residential construction 59,819 33,935
Acquisition and development 16,085 15,517
Commercial 133,310 122,622
Commercial construction 4,604 --
Commercial loans, secured by residential mortgage loans held for sale 64,724 48,822
Commercial loans, secured by purchased loan servicing rights 27,248 21,548
Commercial, financial and industrial 16,924 19,860
Loans secured by savings deposits 7,572 8,292
Consumer and other loans 12,658 10,316
--------------- -------------------
1,164,777 1,119,089
Less loans in process (24,971) (11,526)
Less allowance for loan losses (6,343) (5,703)
Less unearned loan fees (2,096) (1,939)
Less discount to record loans at fair value, net (987) (1,366)
--------------- -------------------
$ 1,130,380 $ 1,098,555
=============== ===================
Weighted average yield 8.22% 8.52%
=============== ===================
</TABLE>
At June 30, 1996, Coastal had outstanding commitments to originate or
purchase $72.7 million of real estate mortgage and other loans and had
commitments under lines of credit to originate construction and other
commercial loans of approximately $93.0 million. In addition, at June 30,
1996, Coastal had letters of credit of $2.0 million outstanding. Management
anticipates the funding of these commitments through normal operations.
At June 30, 1996, the carrying value of loans that are considered to be
impaired totaled approximately $623,000 (all of which are on nonaccrual) and
the related allowance for loan losses on those impaired loans totaled
$330,000. The average recorded investment in impaired loans during the six
months ended June 30, 1996 was $939,000. There were no loans considered
impaired during the six months ended June 30, 1995.
<PAGE>
An analysis of activity in the allowance for loan losses for the six
months ended June 30, 1996 and 1995 is as follows (in thousands):
<TABLE>
<CAPTION>
Six months ended June 30,
---------------------------
1996 1995
--------------------------- -------
(Unaudited)
<S> <C> <C>
Balance, beginning of period $ 5,703 $2,158
Provision for loan losses 1,025 730
Charge-offs, net of recoveries (385) (168)
Acquisition allowance adjustment -- 1,043
--------------------------- -------
Balance, end of period $ 6,343 $3,763
=========================== =======
</TABLE>
Coastal services for others loans receivable which are not included in
the Consolidated Financial Statements. The total amounts of such loans were
$831.4 million and $900.7 million at June 30, 1996 and December 31, 1995,
respectively.
Coastal adopted the Financial Accounting Standards Board's Statement 122,
"Accounting for Mortgage Servicing Rights -- an amendment of FASB Statement
No. 65" (Statement 122) effective January 1, 1996. Statement 122 eliminates
the accounting distinction between rights to service mortgage loans for others
that are acquired through loan origination activities and those acquired
through purchase transactions. Under Statement 122, if Coastal sells or
securitizes loans and retains the mortgage servicing rights, Coastal is
required to allocate a portion of the cost of the mortgage loans to the
mortgage servicing rights and recognize the cost allocated as a separate
asset. The adoption of Statement 122 had no material impact on Coastal's
consolidated financial statements for the six months ended June 30, 1996.
<PAGE>
(5) SAVINGS DEPOSITS
Savings deposits, their stated rates and the related weighted average
interest rates at June 30, 1996 and December 31, 1995 are summarized as
follows (dollars in thousands):
<TABLE>
<CAPTION>
Stated Rate June 30, 1996 December 31, 1995
---------------- --------------- -------------------
(Unaudited)
<S> <C> <C> <C>
Noninterest-bearing checking 0.00% $ 88,847 $ 81,207
NOW accounts 1.50 - 2.00 48,459 47,476
Savings accounts 2.28 - 2.75 20,863 22,374
Money market demand accounts 2.90 - 4.65 156,210 165,214
--------------- -------------------
314,379 316,271
--------------- -------------------
Certificate accounts 2.00 - 2.99 19,250 10,915
3.00 - 3.99 1,265 3,472
4.00 - 4.99 91,182 108,845
5.00 - 5.99 715,291 613,098
6.00 - 6.99 123,016 214,534
7.00 - 7.99 9,066 8,776
8.00 - 8.99 4,077 4,893
9.00 - 9.99 1,416 1,620
10.00 - 10.99 275 1,297
11.00 - 11.99 16 3,718
--------------- -------------------
964,854 971,168
--------------- -------------------
Discount to record savings deposits
at fair value, net (248) (355)
--------------- -------------------
$ 1,278,985 $ 1,287,084
=============== ===================
Weighted average rate 4.60% 4.82%
=============== ===================
</TABLE>
The scheduled maturities of certificate accounts outstanding at June 30,
1996 were as follows (dollars in thousands):
<TABLE>
<CAPTION>
June 30, 1996
---------------
(Unaudited)
<S> <C>
0 to 12 months $ 753,239
12 to 24 months 142,916
24 to 36 months 38,726
36 to 48 months 24,467
48 to 60 months 5,284
Over 60 months 222
---------------
$ 964,854
===============
</TABLE>
<PAGE>
(6) SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND FHLB ADVANCES
(a) The weighted average interest rates on securities sold under
agreements to repurchase at June 30, 1996 and December 31, 1995 were 5.36% and
5.78%, respectively. The stated interest rates on securities sold under
agreements to repurchase ranged from 5.13% to 5.40% at June 30, 1996.
(b) The weighted average interest rate on advances from the FHLB at
June 30, 1996 and December 31, 1995 were 5.56% and 5.88%, respectively.
Advances and related interest rates and maturities at June 30, 1996 and
December 31, 1995 are summarized as follows (dollars in thousands):
<TABLE>
<CAPTION>
Maturity Interest rates June 30, 1996 December 31, 1995
- -------- --------------- --------------- ------------------
(Unaudited)
<S> <C> <C> <C>
1996 4.23 - 8.71% $ 186,261 $ 225,445
1997 4.93 - 8.31 27,113 24,293
1998 5.25 - 6.96 19,749 16,221
1999 4.95 - 8.11 171,089 19,916
2000 5.57 - 7.76 8,469 8,614
2001 5.71 - 6.46 8,948 9,025
2004 6.52 3,366 3,526
2006 6.91 3,192 --
2007 7.94 270 270
2009 8.25 4,780 4,876
2011 7.24 659 --
--------------- ------------------
$ 433,896 $ 312,186
=============== ==================
</TABLE>
FHLB advances are secured by certain first-lien mortgage loans and
mortgage-backed securities.
(7) SENIOR NOTES PAYABLE
On June 30, 1995, Coastal issued $50.0 million of 10.0% Senior Notes due
June 30, 2002. The Senior Notes are redeemable at Coastal's option, in whole
or in part, on or after June 30, 2000, at par, plus accrued interest to the
redemption date. Interest on the Senior Notes is payable quarterly.
(8) FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
Coastal is a party to financial instruments with off-balance sheet risk
in the normal course of business to reduce its own exposure to fluctuations in
interest rates. These financial instruments include interest rate swap
agreements and interest rate cap agreements.
Coastal is a party to interest rate swap and interest rate cap agreements
in order to reduce its exposure to floating interest rates by altering the
interest rate sensitivity of a portion of its variable-rate assets and
borrowings. At June 30, 1996, Coastal had interest rate swap and cap
agreements totaling $75.7 million and $427.2 million, respectively.
<PAGE>
The terms of the interest rate swap agreements outstanding at June 30,
1996 (unaudited) and December 31, 1995 are summarized as follows (dollars in
thousands):
<TABLE>
<CAPTION>
Floating Rate Fair Value at
Notional LIBOR Fixed at End of Period
Maturity Amount Index Rate End of Period gain (loss)
- --------------------- --------- ----------- ------ -------------- ---------------
<S> <C> <C> <C> <C> <C>
At June 30, 1996:
1996 $ 7,300 Three-month 6.130% 5.488% $ (6)
2,750 Six-month 5.630 5.711 --
1997 5,000 One-month 4.990 5.484 52
6,000 Three-month 6.493 5.488 (24)
1998 4,400 Three-month 6.709 5.488 (28)
1999 14,600 Three-month 6.926 5.488 (153)
2000 4,800 Three-month 6.170 5.598 87
2,730 Three-month 6.000 5.570 63
2005 28,077 Three-month 6.500 5.500 1,066
--------- ---------------
$ 75,657 $ 1,057
========= ===============
At December 31, 1995:
1996 $ 7,300 Three-month 6.130% 5.875% $ (46)
2,750 Six-month 5.630 5.676 (7)
1997 5,000 One-month 4.990 5.938 26
6,000 Three-month 6.493 5.875 (124)
1998 4,400 Three-month 6.709 5.875 (150)
1999 14,600 Three-month 6.926 5.875 (696)
2000 4,800 Three-month 6.170 5.813 (104)
2,800 Three-month 6.000 5.938 (40)
2005 28,077 Three-month 6.500 5.938 (1,106)
--------- ---------------
$ 75,727 $ (2,247)
========= ===============
</TABLE>
The agreements provide for Coastal to make weighted average fixed
interest payments and receive payments based on a floating LIBOR index, as
defined in each agreement. The weighted average receive rate on all of the
interest rate swap agreements was approximately 5.50% and the weighted average
interest payment rate on all of the interest rate swap agreements was
approximately 6.31% for the six months ended June 30, 1996. Payments on the
interest rate swap agreements are based on the notional principal amount of
the agreements; no funds were actually borrowed or are to be repaid. The
interest rate swap agreements are used to alter the interest rate sensitivity
of a portion of Coastal's variable-rate borrowings. As such, Coastal records
net interest expense or income related to these agreements on a monthly basis
in "interest expense" in the accompanying consolidated statements of
operations. The net interest expense related to these agreements was
approximately $309,000 for the six months ended June 30, 1996 and the net
interest income was approximately $37,000 for the six months ended June 30,
1995. Coastal had pledged approximately $6.2 million of mortgage-backed
securities to secure interest rate swap agreements at June 30, 1996.
Coastal has interest rate cap agreements with various counterparties.
The agreements provide for the counterparties to make payments to Coastal
whenever a defined floating rate exceeds rates ranging from 4.5% to 12.5%,
depending on the agreement. Payments on the interest rate cap agreements are
based on the notional principal amount of the agreements; no funds were
actually borrowed or are to be repaid. The
<PAGE>
purchase prices of the interest rate cap agreements are capitalized and
included in "prepaid expenses and other assets" in the accompanying
consolidated statements of financial condition and are amortized over the life
of the agreements using the straight-line method. The unamortized portion of
the purchase price of the interest rate cap agreements was approximately $1.7
million and $2.5 million at June 30, 1996 and December 31, 1995, respectively,
with the estimated fair value of the agreements being $2.0 million and $1.6
million at June 30, 1996 and December 31, 1995, respectively. The interest
rate cap agreements are used to alter the interest rate sensitivity of a
portion of Coastal's mortgage-backed securities, loans receivable and their
related funding sources. As such, the amortization of the purchase price and
interest income from the interest rate cap agreements are recorded in
"interest income on mortgage-backed securities or loans receivable," as
appropriate, in the accompanying consolidated statements of operations. The
net decrease in interest income related to the interest rate cap agreements
was approximately $283,000 for the six months ended June 30, 1996 and the net
increase in interest income was approximately $501,000 for the six months
ended June 30, 1995.
Interest rate cap agreements outstanding at June 30, 1996 expire as
follows (dollars in thousands):
<TABLE>
<CAPTION>
Year of Strike rate Notional
expiration range amount
- ---------- ------------- ---------
<S> <C> <C>
1996 4.5 - 11.0% $ 63,625
1997 5.0 - 9.0 195,650
1998 5.0 - 12.5 142,400
1999 6.0 - 11.0 22,542
2000 9.5 3,000
---------
$ 427,217
=========
</TABLE>
Market risk, or the risk of loss due to movement in market prices or
rates, is quantified by Coastal through a risk monitoring process of marking
to market the portfolio to expected market level changes in an instantaneous
shock of plus and minus 200 basis points on a monthly basis and 300 basis
points on a quarterly basis. This process discloses the effects on market
values of the assets and liabilities, unrealized gains and losses, including
off-balance sheet items, as well as potential changes in net interest income.
The fluctuation in the market value, however, has no effect on the level
of earnings of Coastal because the securities are categorized as
"held-to-maturity" or "available-for-sale".
Coastal is exposed to credit loss in the event of nonperformance by the
counterparty to the swap or cap and controls this risk through credit
monitoring procedures. The notional principal amount does not represent
Coastal's exposure to credit loss.
(9) NET EARNINGS PER SHARE
Net earnings per share is calculated by dividing net income after
preferred stock dividends by the weighted average number of common shares and
common stock equivalents. Stock options outstanding are regarded as common
stock equivalents and are, therefore, considered in earnings per share
calculations if dilutive. Common stock equivalents are computed using the
treasury stock method. The weighted average number of shares used in the
computation of earnings per share are 5,022,070 and 4,984,932 for the three
months ended June 30, 1996 and 1995, respectively (unaudited) and 5,016,086
and 4,984,745 for the six months ended June 30, 1996 and 1995, respectively
(unaudited).
(10) STATUTORY CAPITAL REQUIREMENTS
The applicable regulations require federally insured institutions, which
are not the highest rated, to have a minimum regulatory tier 1 (core) capital
to total assets ratio equal to a minimum of 4.0%, a tier 1 risk-based capital
to risk-weighted assets ratio of 4.0% and total risk-based capital to
risk-weighted assets ratio of 8.0%.
At June 30, 1996, the Bank's regulatory capital (unaudited) in relation
to its current existing regulatory capital requirements are as follows
(dollars in thousands):
<TABLE>
<CAPTION>
Actual Requirement Excess
-------- ------------ --------
Capital Requirement Dollar Percent Dollar Percent Dollar Percent
- -------------------- -------- -------- ------------ -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Tier 1 (Core) $152,590 5.49% $ 111,102 4.00% $ 41,488 1.49%
Tier 1 risk-based 152,590 12.42 49,130 4.00 103,460 8.42
Total risk-based 158,933 12.94 98,261 8.00 60,672 4.94
</TABLE>
At June 30, 1996, the Bank, according to certain capital requirements
outlined by the FDIC was categorized as "well capitalized".
(11) SALE OF SAN ANGELO BRANCH
On May 24, 1996, Coastal consummated the sale of its San Angelo location,
which had approximately $14.9 million in deposits, to First State Bank, N.A.,
a subsidiary of Independent Bankshares, Inc., headquartered in Abilene, Texas.
As a result of this sale, Coastal recorded a $521,000 gain before applicable
income taxes. Coastal acquired this location in the 1994 acquisition of Texas
Trust Savings Bank, FSB.
(12) PENDING BRANCH SWAP
On May 8, 1996, Coastal announced the execution of definitive agreements
with Compass Bank to exchange certain branch locations. Coastal will sell its
three San Antonio branches having deposits of approximately $58.0 million to
Compass Bank and will purchase the Compass Bay City Branch having deposits of
approximately $86.0 million.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Financial Condition
Total assets increased 0.36% or $10.0 million from December 31, 1995 to
June 30, 1996. The net increase resulted primarily from the increase in loans
receivable of $31.8 million and an increase in amounts due from depository
institutions of $7.9 million, offset by a decrease in mortgage-backed
securities held-to-maturity of $24.5 million due to principal repayments
received. The increase in loans receivable from December 31, 1995 to June 30,
1996 consisted primarily of increases of approximately $18.8 million, $15.9
million and $9.8 million in multifamily mortgage loans, commercial loans
secured by residential mortgage loans held for sale and residential
construction loans (net of loans in process), respectively, offset by an
approximate $35.2 million decrease in first-lien residential mortgage loans
due to principal payments received.
Savings deposits decreased slightly by 0.63% or $8.1 million from
December 31, 1995 to June 30, 1996, primarily due to the sale of the San
Angelo branch with deposits of approximately $14.9 million at May 24, 1996.
Advances from the FHLB increased by $121.7 million or 39.0% and securities
sold under agreements to repurchase decreased 11.1% or $110.0 million from
December 31, 1995 to June 30, 1996. The reallocation of borrowings during
such period was directly attributable to more favorable interest rates. The
net increase in advances from the FHLB together with securities sold under
agreements to repurchase was used to fund the increase in the loans receivable
portfolio. Stockholders' equity increased 3.72% or $3.4 million from December
31, 1995 to June 30, 1996 due to net income offset by dividends declared.
Results of Operations for the Six Months Ended June 30, 1996 and 1995
General
For the six months ended June 30, 1996, net income before preferred stock
dividends increased 43.3% to $7.1 million from $5.0 million for the six months
ended June 30, 1995. Net interest income increased $7.6 million for the six
months ended June 30, 1996 as compared to the six months ended June 30, 1995
as a result of increased interest income of $16.5 million which was partially
offset by increased interest expense of $8.9 million. Noninterest income
increased during such period by $1.2 million primarily as a result of
increased loan fees and service charges of $879,000 and the $521,000 gain on
the sale of a branch office, partially offset by a decrease in loan servicing
income of $247,000. Noninterest expense increased by $5.3 million primarily
due to increased operating expenses as a result of the Texas Capital
Bancshares, Inc. (Texas Capital) acquisition on November 1, 1995. The
increased noninterest expense was also due to the May 1996 data processing
conversion, the June 1996 conversion of the five Texas Capital locations to
the new data processing system and to overall expenses related to the
expansion of the product base being offered by Coastal to its customers,
including the continuing development of commercial business lending programs.
Coastal engaged in the data processing system conversion to a PC based client
server technology throughout its branch network to enable the branch offices
to offer a more expanded product base (including loan and deposit products) to
its customers and to automate and upgrade the work flow in the customer
contact areas, allowing branch office employees a better opportunity to serve
their customers. The approximate cost during the period related to the data
processing conversion was $226,000. These costs are expected to continue into
the third quarter of 1996. The increased noninterest expense related to the
expansion of the product base and the continuing development of the commercial
business lending programs has primarily been staffing related and should
continue for the remainder of the year.
<PAGE>
Interest Income
Interest income for the six months ended June 30, 1996 increased $16.5
million or 20.77% from the six months ended June 30, 1995. The increase was
primarily due to an increase of $18.9 million in interest earned on loans
receivable over the prior comparable period. The increase in interest income
on loans receivable was due primarily to a $455.0 million increase in the
average balance of loans receivable. This increase was offset by a $2.4
million decrease in interest income on mortgage-backed securities primarily
due to the lower average balance and a $70,000 decrease in interest earned on
investment securities, certificates and time deposits and other investments.
Total interest-earning assets for the six months ended June 30, 1996 averaged
$2.7 billion as compared to $2.3 billion for the six months ended June 30,
1995.
Interest Expense
Interest expense on interest-bearing liabilities was $68.6 million for
the six months ended June 30, 1996, as compared to $59.7 million for the same
period in 1995. The increase in interest expense was due to a $366.3 million
increase in interest-bearing liabilities during such period offset by a
decrease in the average rate paid on interest-bearing liabilities from 5.47%
for the six months ended June 30, 1995 to 5.38% for the six months ended June
30, 1996. The average balance of interest-bearing liabilities was $2.6
billion for the six months ended June 30, 1996 as compared to $2.2 billion for
the six months ended June 30, 1995.
Net Interest Income
Net interest income was $27.3 million for the six months ended June 30,
1996 as compared to $19.7 million for the same period in 1995. The increase
in net interest income was due to the increase in net interest rate spread,
defined to exclude noninterest-bearing deposits, from 1.33% for the six months
ended June 30, 1995 to 1.67% for the six months ended June 30, 1996 and the
increase in average net interest-earning assets of $19.0 million from the six
months ended June 30, 1995 to the six months ended June 30, 1996. Net
interest rate spread is affected by the changes in the amount and mix of
interest-earning assets and interest-bearing liabilities. The increase in the
net interest rate spread was primarily due to the increase in the average
yield on interest-earning assets from 6.80% for the six months ended June 30,
1995 to 7.05% for the same period in 1996 and a decrease in the average
interest rates on interest-bearing liabilities from 5.47% for the six months
ended June 30, 1995 to 5.38% for the same period in 1996.
Provision for Loan Losses
Provision for loan losses was $1.0 million for the six months ended June
30, 1996 as compared to $730,000 for the six months ended June 30, 1995. The
increase in the provision for loan losses was due to the change in the mix of
the loans receivable portfolio and the increased loans receivable balance to
$1.1 billion at June 30, 1996 as compared to $780.3 million at June 30, 1995.
Commercial loans increased $156.2 million to $246.8 million from June 30, 1995
to June 30, 1996. The allowance for loan losses as a percentage of total
loans was 0.56% at June 30, 1996 as compared to 0.48% at June 30, 1995.
Although no assurance can be given, management believes that the present
allowance for loan losses is adequate considering loss experience, delinquency
trends and current economic conditions. Management will continue to review its
loan loss allowance policy as Coastal's loan portfolio grows and diversifies
to determine if changes to the policy are necessary.
<PAGE>
Noninterest Income
For the six months ended June 30, 1996, noninterest income increased $1.2
million or 33.41% to $4.8 million, compared to $3.6 million for the six months
ended June 30, 1995. The increase in noninterest income was primarily due to
an increase of $879,000 in loan fees and service charges and the $521,000 gain
recorded as a result of the branch office sale in May 1996 offset by a
decrease of $247,000 in loan servicing income.
Noninterest Expense
For the six months ended June 30, 1996, noninterest expense increased
$5.3 million or 36.2% to $19.9 million compared to $14.6 million for the six
months ended June 30, 1995. Compensation, payroll taxes and other benefits
and office occupancy increased $2.4 million and $716,000, respectively, from
the six months ended June 30, 1995 to the six months ended June 30, 1996,
primarily due to the operation of the five offices acquired from Texas Capital
on November 1, 1995 and staffing increases related to the data processing
conversion and the expansion of the product base available to customers and
continuing development of the commercial business lending programs. The
amortization of goodwill and expenses related to real estate owned increased
by $319,000 and $206,000, respectively, also due primarily to the Texas
Capital acquisition. Data processing expenses increased $433,000 due to the
Texas Capital acquisition, the May 1996 data processing conversion and the
conversion in June 1996 of the five Texas Capital locations acquired in 1995
to the new data processing system. The expense associated with the
amortization of purchased loan servicing rights increased slightly by $123,000
and other expenses, including advertising, increased $1.1 million for the six
months ended June 30, 1996 over the prior comparable period.
Provision for Federal Income Taxes
For the six months ended June 30, 1996, the provision for Federal income
taxes increased to $4.1 million compared to $3.0 million for the six months
ended June 30, 1995 due to the increase in income before provision for Federal
income taxes.
Results of Operations for the Three Months Ended June 30, 1996 and 1995
General
For the three months ended June 30, 1996, net income before preferred
stock dividends increased 45.04% to $3.7 million from $2.5 million for the
three months ended June 30, 1995. Net interest income increased $3.7 million
for the three months ended June 30, 1996 as compared to the three months ended
June 30, 1995 as a result of increased interest income of $6.6 million which
was partially offset by increased interest expense of $2.9 million.
Noninterest income increased during such period by $913,000. Noninterest
expense increased by $2.8 million primarily due to increased operating
expenses as a result of the Texas Capital acquisition on November 1, 1995.
The increased noninterest expense was also due to the May 1996 data processing
conversion, the June 1996 conversion of the five Texas Capital locations to
the new data processing system and to overall expenses related to the
expansion of the product base being offered by Coastal to its customers,
including the continuing development of commercial business lending programs.
Coastal engaged in the data processing system conversion to a PC based client
server technology throughout its branch network to enable the branch offices
to offer a more expanded product base (including loan and deposit products) to
its customers and to automate and upgrade the work flow in the customer
contact areas, allowing branch office employees a better opportunity to serve
their customers. The approximate cost during the period related to the data
processing conversion was $226,000. These costs are expected to continue into
the third quarter
<PAGE>
of 1996. The increased noninterest expense related to the expansion of the
product base and the continuing development of the commercial business lending
programs has primarily been staffing related and should continue for the
remainder of the year.
Interest Income
Interest income for the three months ended June 30, 1996 increased $6.6
million or 15.95% from the three months ended June 30, 1995. The increase was
primarily due to an increase of $8.8 million in interest earned on loans
receivable over the prior comparable quarter. The increase in interest income
on loans receivable was due to a $427.0 million increase in the average
balance of loans receivable offset by a slight decrease in the average yield
from 8.41% for the three months ended June 30, 1995 to 8.33% for the three
months ended June 30, 1996. This increase was offset by a $2.1 million
decrease in interest income on mortgage-backed securities primarily due to the
lower average balance and a $48,000 decrease in interest earned on investment
securities, certificates and time deposits and other investments. Total
interest-earning assets for the three months ended June 30, 1996 averaged $2.7
billion as compared to $2.4 billion for the three months ended June 30, 1995.
Interest Expense
Interest expense on interest-bearing liabilities was $33.9 million for
the three months ended June 30, 1996, as compared to $31.0 million for the
same period in 1995. The increase in interest expense was due to a $334.1
million increase in interest-bearing liabilities during such period and a
decrease in the average rate paid on interest-bearing liabilities from 5.58%
for the three months ended June 30, 1995 to 5.32% for the three months ended
June 30, 1996. The increase in average interest-bearing liabilities consisted
of a $224.4 million increase in securities sold under agreements to
repurchase, a $81.3 million increase in interest-bearing savings deposits, a
$50.0 million increase in Senior notes payable offset by a $21.6 million
decrease in FHLB advances. The average balance of interest-bearing
liabilities was $2.5 billion for the three months ended June 30, 1996 as
compared to $2.2 billion for the three months ended June 30, 1995.
Net Interest Income
Net interest income was $13.9 million for the three months ended June 30,
1996 as compared to $10.2 million for the same period in 1995. The increase
in net interest income was due to the increase in net interest rate spread,
defined to exclude noninterest-bearing deposits, from 1.39% for the three
months ended June 30, 1995 to 1.69% for the three months ended June 30, 1996
and the increase in average net interest-earning assets of $25.7 million from
the three months ended June 30, 1995 to the three months ended June 30, 1996.
Net interest rate spread is affected by the changes in the amount and mix of
interest-earning assets and interest-bearing liabilities. The increase in the
net interest rate spread was primarily due to the increase in the average
yield on interest-earning assets from 6.97% for the three months ended June
30, 1995 to 7.01% for the same period in 1996 and a decrease in the average
interest rates on interest-bearing liabilities from 5.58% for the three months
ended June 30, 1995 to 5.32% for the same period in 1996.
Provision for Loan Losses
Provision for loan losses was $450,000 for the three months ended June
30, 1996 as compared to $468,000 for the three months ended June 30, 1995.
The allowance for loan losses as a percentage of total loans was 0.56% at June
30, 1996 as compared to 0.48% at June 30, 1995. Although no assurance can be
given, management believes that the present allowance for loan losses is
adequate considering loss experience, delinquency trends and current economic
conditions. Management will continue to review its loan loss allowance policy
as Coastal's loan portfolio grows and diversifies to determine if changes to
the policy are necessary.
<PAGE>
Noninterest Income
For the three months ended June 30, 1996, noninterest income increased
$913,000 or 52.53% to $2.7 million, compared to $1.7 million for the three
months ended June 30, 1995. The increase in noninterest income was primarily
due to a gain of $521,000 recorded as a result of the branch office sale in
May 1996 and an increase of $447,000 in loan fees and service charges offset
by a decrease of $118,000 in loan servicing income.
Noninterest Expense
For the three months ended June 30, 1996, noninterest expense increased
$2.8 million or 37.51% to $10.3 million compared to $7.5 million for the three
months ended June 30, 1995. Compensation, payroll taxes and other benefits
and office occupancy increased $1.3 million and $333,000, respectively, from
the three months ended June 30, 1995 to the three months ended June 30, 1996,
primarily due to the operation of the five offices acquired from Texas Capital
on November 1, 1995 and staffing increases related to the data processing
conversion and the expansion of the product base available to customers and
continuing development of the commercial business lending programs. In
addition, the amortization of goodwill and expenses related to real estate
owned increased by $159,000 and $32,000, respectively, primarily due to the
Texas Capital acquisition. Data processing expenses increased $264,000 due to
the Texas Capital acquisition, the May 1996 data processing conversion of
Coastal and the conversion in June 1996 of the five Texas Capital locations
acquired in 1995 to the new data processing system. The expense associated
with the amortization of purchased loan servicing rights increased slightly by
$36,000 and other expenses, including advertising, increased $700,000 for the
three months ended June 30, 1996 over the prior comparable quarter.
Provision for Federal Income Taxes
For the three months ended June 30, 1996, the provision for Federal
income taxes increased to $2.1 million compared to $1.4 million for the three
months ended June 30, 1995 due to the increase in income before provision for
Federal income taxes.
Liquidity and Capital Resources
Coastal's primary sources of funds consist of savings deposits bearing
market rates of interest, securities sold under agreements to repurchase,
advances from the FHLB and principal payments on loans receivable and
mortgage-backed securities. Coastal uses its funding resources principally to
meet its ongoing commitments to fund maturing deposits and deposit
withdrawals, repay borrowings, purchase loans receivable and mortgage-backed
securities, fund existing and continuing loan commitments, maintain its
liquidity, meet operating expenses and fund acquisitions. At June 30, 1996,
Coastal had binding commitments to originate or purchase loans totaling
approximately $72.7 million and had $25.0 million of undisbursed loans in
process. Scheduled maturities of certificates of deposit during the 12 months
following June 30, 1996 totaled $753.2 million at June 30, 1996. Management
believes that Coastal has adequate resources to fund all of its commitments.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Coastal is engaged from time to time in various legal actions incident to
its business. The current legal activities are not believed to be material to
the financial condition of Coastal and its subsidiaries.
Item 2. Changes in Securities
a) Not applicable.
b) Not applicable.
Item 3. Default Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Coastal has filed applications to organize a Texas savings bank with
deposits intended to be insured by the Bank Insurance Fund (BIF) administered
by the FDIC. Application for the charter was filed on March 24, 1995 with the
Texas Savings and Loan Department (TSLD) and with the FDIC on June 24, 1996.
The TSLD gave conditional approval on July 12, 1996 and the FDIC approval is
pending.
Item 6. Exhibits and Reports on Form 8-K
a) Not applicable.
b) Form 8-K filed on May 13, 1996 to disclose the execution of definitive
agreements between Coastal's subsidiary Coastal Banc ssb and Compass Bank -
San Antonio to exchange certain branch locations.
SIGNATURES
Pursuant to the requirement 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.
Dated: 8/9/96 By/s/ Manuel J. Mehos
Manuel J. Mehos
Chairman of the Board
Chief Executive Officer
Dated: 8/9/96 By/s/ Catherine N. Wylie
Catherine N. Wylie
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated statement of financial condition and consolidated statement of
income found on pages 1 and 2 of the Company's Form 10-Q for the year-to-date
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000919805
<NAME> COASTAL BANCORP INC/TX/
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 17,934
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 182,933
<INVESTMENTS-CARRYING> 1,396,455
<INVESTMENTS-MARKET> 1,365,632
<LOANS> 1,130,380
<ALLOWANCE> 6,343
<TOTAL-ASSETS> 2,796,568
<DEPOSITS> 1,278,985
<SHORT-TERM> 883,793
<LIABILITIES-OTHER> 26,053
<LONG-TERM> 50,000
0
0
<COMMON> 50
<OTHER-SE> 95,041
<TOTAL-LIABILITIES-AND-EQUITY> 2,796,568
<INTEREST-LOAN> 46,865
<INTEREST-INVEST> 48,310
<INTEREST-OTHER> 706
<INTEREST-TOTAL> 95,881
<INTEREST-DEPOSIT> 29,767
<INTEREST-EXPENSE> 68,609
<INTEREST-INCOME-NET> 27,272
<LOAN-LOSSES> 1,025
<SECURITIES-GAINS> (4)
<EXPENSE-OTHER> 19,851
<INCOME-PRETAX> 11,188
<INCOME-PRE-EXTRAORDINARY> 11,188
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,098
<EPS-PRIMARY> 1.16
<EPS-DILUTED> 1.16
<YIELD-ACTUAL> 0
<LOANS-NON> 12,124
<LOANS-PAST> 273
<LOANS-TROUBLED> 0
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<ALLOWANCE-OPEN> 5,703
<CHARGE-OFFS> 449
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<ALLOWANCE-CLOSE> 6,343
<ALLOWANCE-DOMESTIC> 6,343
<ALLOWANCE-FOREIGN> 0
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</TABLE>
