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 March 31, 1998
[ ] 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.)
5718 Westheimer, Suite 600
Houston, Texas 77057
------------------------
(Address of principal executive office)
(713) 435-5000
------------------
(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: 5,041,177 AS OF APRIL 30, 1998
<PAGE>
COASTAL BANCORP, INC. AND SUBSIDIARIES
Table of Contents
PART I. FINANCIAL INFORMATION
- -------- ----------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Item 1 Financial Statements
Consolidated Statements of Financial Condition at March 31, 1998
(unaudited) and December 31, 1997 1
Consolidated Statements of Income for the Three-Month Periods Ended
March 31, 1998 and 1997 (unaudited) 2
Consolidated Statements of Comprehensive Income (Loss) for the Three-
Month Periods Ended March 31, 1998 and 1997 (unaudited) 3
Consolidated Statements of Cash Flows for the Three-Month Periods
Ended March 31, 1998 and 1997 (unaudited) 4
Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial Condition and Results
of Operations 15
Item 3 Quantitative and Qualitative Disclosures About Market Risk 19
</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 Security Holders 20
Item 5 Other Information 20
Item 6 Exhibits and Reports on Form 8-K 20
</TABLE>
SIGNATURES
ITEM 1. FINANCIAL STATEMENTS
- -------- ---------------------
<TABLE>
<CAPTION>
COASTAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS, EXCEPT SHARE DATA)
March 31, December 31,
1998 1997
------------ ------------
ASSETS (Unaudited)
- ---------------------------------------------------------
<S> <C> <C>
Cash and amounts due from depository institutions $ 25,026 $ 37,096
Federal funds sold 3,500 --
Loans receivable (note 4) 1,335,955 1,261,435
Mortgage-backed securities held-to-maturity (note 3) 1,325,249 1,345,090
Mortgage-backed securities available-for-sale, at market
value (note 3) 169,783 169,997
Mortgage loans held for sale 7,154 --
Accrued interest receivable 15,219 14,813
Property and equipment 22,955 22,250
Stock in the Federal Home Loan Bank of Dallas (FHLB) 30,162 27,801
Goodwill 15,248 15,717
Mortgage servicing rights 5,279 5,653
Prepaid expenses and other assets 10,672 11,558
------------ ----------
$ 2,966,202 $2,911,410
============ ==========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
---------------------------------------
<S> <C> <C>
Liabilities:
Savings deposits (note 5) $1,367,371 $1,375,060
Advances from the FHLB (note 6) 556,805 540,475
Securities sold under agreements to repurchase (note 6) 829,202 791,760
Senior notes payable (note 7) 50,000 50,000
Advances from borrowers for taxes and insurance 7,116 3,975
Other liabilities and accrued expenses 16,451 16,560
----------- -----------
Total liabilities 2,826,945 2,777,830
----------- -----------
9.0% noncumulative preferred stock of Coastal Banc ssb 28,750 28,750
Commitments and contingencies (notes 4 and 8)
Stockholders' equity (notes 3, 9, 10 and 14):
Preferred stock, no par value; authorized shares 5,000,000;
no shares issued -- --
Common stock, $.01 par value; authorized shares 30,000,000;
5,035,493 and 5,008,926 shares issued and outstanding in
1998 and 1997 50 50
Additional paid-in capital 33,556 33,186
Retained earnings 79,204 73,868
Accumulated other comprehensive income (loss) -
unrealized loss on securities available-for-sale (2,303) (2,274)
----------- -----------
Total stockholders' equity 110,507 104,830
----------- -----------
$2,966,202 $2,911,410
=========== ===========
</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
March 31,
--------------------
1998 1997
-------- -------
(Unaudited)
<S> <C> <C>
Interest income:
Mortgage-backed securities $ 23,446 $23,192
Loans receivable 26,940 26,015
Federal funds sold, certificates of deposit and other investments. 502 397
---------- --------
50,888 49,604
---------- --------
Interest expense:
Savings deposits 15,507 15,166
Other borrowed money 11,229 13,780
Senior notes payable 1,250 1,250
Advances from the FHLB:
Short-term 3,955 1,856
Long-term 3,947 2,904
---------- --------
35,888 34,956
---------- --------
Net interest income 15,000 14,648
Provision for loan losses 1,450 450
---------- --------
Net interest income after provision for loan losses 13,550 14,198
---------- --------
Noninterest income:
Loan fees and service charges on deposit accounts 1,324 894
Loan servicing income, net 240 407
Writedown of purchased mortgage loan premium (709) --
Other 192 168
---------- --------
1,047 1,469
---------- --------
Noninterest expense:
Compensation, payroll taxes and other benefits 4,940 4,625
Office occupancy 1,989 1,611
Insurance premiums 265 271
Data processing 608 513
Amortization of goodwill 469 437
Real estate owned 252 239
Other 1,812 1,861
---------- --------
10,335 9,557
---------- --------
Income before provision (benefit) for Federal income taxes 4,262 6,110
Provision (benefit) for Federal income taxes (note 11) (2,326) 2,225
---------- --------
Net income before preferred stock dividends 6,588 3,885
Preferred stock dividends of Coastal Banc ssb (Series A) 647 647
---------- --------
Net income available to common stockholders $ 5,941 $ 3,238
========== ========
Basic earnings per share (note 9) $ 1.18 $ 0.65
========== ========
Diluted earnings per share (note 9) $ 1.14 $ 0.63
========== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
<PAGE>
COASTAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
1998 1997
---------- --------
(Unaudited)
<S> <C> <C>
Net income available to common stockholders $ 5,941 $3,238
Other comprehensive income (loss), net of tax:
Unrealized holding gains (losses) on securities available-for-sale
arising during period (29) 693
---------- ------
Total comprehensive income $ 5,912 $3,931
========== ======
</TABLE>
See accompanying Notes to Consolidated Financial Statements
<PAGE>
COASTAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1998 1997
---------- --------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income before preferred stock dividends $ 6,588 $ 3,885
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization of property and equipment,
mortgage servicing rights and prepaid expenses and other assets 2,004 1,648
Net premium amortization 1,867 112
Provision for loan losses 1,450 450
Amortization of goodwill 469 437
Originations and purchases of mortgage loans held for sale (7,154) (4,162)
Sales of mortgage loans held for sale -- 3,229
Decrease (increase) in:
Accrued interest receivable (406) 165
Other, net 1,714 7,558
Stock dividends from the FHLB (431) (370)
-------------- ------------
Net cash provided by operating activities 6,101 12,952
-------------- ------------
Cash flows from investing activities:
Net increase in federal funds sold (3,500) --
Principal repayments on mortgage-backed securities held-to-maturity 19,794 6,995
Principal repayments on mortgage-backed securities
available-for-sale 169 88
Purchases of loans receivable (121,593) (9,232)
Net decrease in loans receivable 42,226 9,727
Net purchases of property and equipment (1,661) (746)
Purchase of FHLB stock (1,930) --
Proceeds from sales of FHLB stock -- 9,000
-------------- ------------
Net cash provided (used) by investing activities (66,495) 15,832
-------------- ------------
(continued)
</TABLE>
<PAGE>
COASTAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1998 1997
---------- --------
(Unaudited)
<S> <C> <C>
Cash flows from financing activities:
Net increase (decrease) in savings deposits $ (7,707) $ 4,886
Advances from the FHLB 1,013,550 1,295,000
Principal payments on advances from the FHLB (997,220) (1,378,884)
Securities sold under agreements to repurchase 1,817,924 2,588,007
Purchases of securities sold under agreements to repurchase (1,780,482) (2,543,065)
Exercise of stock options for purchase of common stock, net 369 21
Net increase in advances from borrowers for taxes and insurance 3,141 2,996
Dividends paid (1,251) (1,144)
----------- ------------
Net cash provided (used) by financing activities 48,324 (32,183)
----------- ------------
Net decrease in cash and cash equivalents (12,070) (3,399)
Cash and cash equivalents at beginning of period 37,096 27,735
----------- ------------
Cash and cash equivalents at end of period $ 25,026 $ 24,336
========== ============
Supplemental schedule of cash flows-interest paid $ 33,920 $ 32,704
========== ============
Supplemental schedule of noncash investing and financing activities:
Foreclosures of loans receivable $ 1,595 $ 2,037
========== ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements
<PAGE>
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 periods ended March 31, 1998 are not necessarily indicative of the results
that may be expected for the entire fiscal year or any other interim period.
Coastal Bancorp, Inc. and subsidiaries adopted the Financial Accounting
Standards Boards Statement No. 130 ("Statement 130"), "Reporting Comprehensive
Income" as of January 1, 1998. Statement 130 requires the disclosure of all
components of comprehensive income, which includes net income and other
comprehensive income. Other comprehensive income includes all nonowner related
changes to stockholders' equity, which is the unrealized gain (loss) on
securities available-for-sale. These amounts have been disclosed on the
consolidated statements of comprehensive income. Statement 130 did not change
the current accounting treatment for components of other comprehensive income
(i.e. changes in unrealized gain (loss) on securities available-for-sale).
(2) PRINCIPLES OF CONSOLIDATION
The accompanying unaudited Consolidated Financial Statements include the
accounts of Coastal Bancorp, Inc. and its wholly-owned subsidiary, Coastal Banc
Holding Company, Inc. and its wholly-owned subsidiaries, Coastal Banc ssb and
subsidiaries and Coastal Banc Capital Corp. (collectively, Coastal). Coastal
Banc ssb's subsidiaries include CoastalBanc Financial Corp., 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
Mortgage-backed securities at March 31, 1998 (unaudited) were as follows
(dollars in thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ----------- ---------- -------
<S> <C> <C> <C> <C>
Held-to-Maturity:
REMICS - Agency $ 942,955 $ 6,117 $ (21,783) $ 927,289
REMICS - Non-agency 273,139 674 (6,333) 267,480
FNMA certificates 68,167 150 (398) 67,919
GNMA certificates 27,002 506 -- 27,508
Non-agency securities 13,970 243 (72) 14,141
Interest-only securities 16 -- -- 16
----------- ------- ---------- -----------
$ 1,325,249 $ 7,690 $ (28,586) $ 1,304,353
=========== ======= ========== ===========
Available-for-sale:
REMICS - Agency $ 171,169 $ 390 $ (3,916) $ 167,643
REMICS - Non-agency 2,156 -- (16) 2,140
----------- ------- ---------- -----------
$ 173,325 $ 390 $ (3,932) $ 169,783
=========== ======= ========== ===========
</TABLE>
Mortgage-backed securities at December 31, 1997 were as follows (dollars in
thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ----------- ---------- -------
<S> <C> <C> <C> <C>
Held-to-maturity:
REMICS - Agency $ 950,689 $ 5,022 $ (20,478) $ 935,233
REMICS - Non-agency 279,131 701 (5,610) 274,222
FNMA certificates 71,887 144 (683) 71,348
GNMA certificates 28,808 566 -- 29,374
Non-agency securities 14,555 239 (23) 14,771
Interest-only securities 20 -- -- 20
----------- ------- ---------- -----------
$ 1,345,090 $ 6,672 $ (26,794) $ 1,324,968
=========== ======= ========== ===========
Available-for-sale:
REMICS - Agency $ 171,167 $ 579 $ (4,044) $ 167,702
REMICS - Non-agency 2,328 -- (33) 2,295
----------- ------- ---------- -----------
$ 173,495 $ 579 $ (4,077) $ 169,997
=========== ======= ========== ===========
</TABLE>
(4) LOANS RECEIVABLE
Loans receivable at March 31, 1998 and December 31, 1997 were as follows
(dollars in thousands):
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
--------------- -----------------
(Unaudited)
<S> <C> <C>
Real estate mortgage loans:
First-lien mortgage, primarily residential $ 720,623 $ 689,767
Commercial 197,797 181,315
Multifamily 132,707 131,454
Residential construction 87,041 83,359
Acquisition and development 34,005 31,619
Commercial construction 16,997 14,506
Commercial loans, secured by residential mortgage
loans held for sale 137,182 98,679
Commercial loans, secured by mortgage servicing 15,880 32,685
rights
Commercial, financial and industrial 27,183 30,877
Loans secured by savings deposits 7,402 8,695
Consumer and other loans 24,753 15,030
------------ ------------
1,401,570 1,317,986
Loans in process (55,441) (47,893)
Allowance for loan losses (8,685) (7,412)
Unearned interest and loan fees (2,933) (2,926)
Premium to record purchased loans, net 1,444 1,680
------------ ------------
$ 1,335,955 $ 1,261,435
============ ============
Weighted average yield 8.27% 8.30%
============ ============
</TABLE>
At March 31, 1998, Coastal had outstanding commitments to originate or
purchase $69.9 million of real estate mortgage and other loans and had
commitments under lines of credit to originate primary construction and other
loans of approximately $106.9 million. In addition, at March 31, 1998, Coastal
had $3.6 million of outstanding letters of credit. Management anticipates the
funding of these commitments through normal operations.
At March 31, 1998 and December 31, 1997, the carrying value of loans that
were considered to be impaired totaled approximately $1.4 million and $2.0
million, respectively (all of which are on nonaccrual), and the related
allowance for loan losses on those impaired loans totaled $1.1 million at both
period ends. The average recorded investment in impaired loans during the three
months ended March 31, 1998 and 1997 was $1.9 million and $722,000,
respectively.
An analysis of activity in the allowance for loan losses for the three
months ended March 31, 1998 and 1997 is as follows (in thousands):
<TABLE>
<CAPTION>
Three months ended March 31,
------------------------------
1998 1997
------------ ----------
(Unaudited)
<S> <C> <C>
Balance, beginning of period $ 7,412 $6,880
Provision for loan losses 1,450 450
Charge-offs, net of recoveries (177) (424)
------------ -------
Balance, end of period $ 8,685 $6,906
============ =======
</TABLE>
Coastal services for others loans receivable which are not included in the
Consolidated Financial Statements. The total amounts of such loans were $639.0
million and $675.7 million at March 31, 1998 and December 31, 1997,
respectively.
<PAGE>
(5) SAVINGS DEPOSITS
Savings deposits, their stated rates and the related weighted average
interest rates at March 31, 1998 and December 31, 1997 are summarized as follows
(dollars in thousands):
<TABLE>
<CAPTION>
Stated Rate March 31, 1998 December 31, 1997
-------------- ---------------- -------------------
(Unaudited)
<S> <C> <C> <C>
Noninterest-bearing checking 0.00% $ 49,467 $ 101,782
Interest-bearing checking 1.49 - 2.00 8,373 69,972
Savings accounts 2.18 - 2.75 25,963 25,555
Money market demand accounts 0.00 - 4.51 283,632 165,986
---------------- -------------------
367,435 363,295
---------------- -------------------
Certificate accounts 2.00 - 2.99 3,038 5,142
3.00 - 3.99 4,483 2,763
4.00 - 4.99 68,411 64,478
5.00 - 5.99 825,860 834,727
6.00 - 6.99 90,591 94,405
7.00 - 7.99 5,556 7,624
8.00 - 8.99 1,649 1,854
9.00 - 9.99 405 847
---------------- -------------------
999,993 1,011,840
---------------- -------------------
Discount to record savings
deposits at fair value, net (57) (75)
---------------- -------------------
$ 1,367,371 $ 1,375,060
================ ===================
Weighted average rate 4.63% 4.67%
================ ===================
</TABLE>
The scheduled maturities of certificate accounts outstanding at March 31,
1998 were as follows (dollars in thousands):
<TABLE>
<CAPTION>
March 31, 1998
----------------
(Unaudited)
<S> <C>
0 to 12 months $ 782,844
12 to 24 months 179,735
24 to 36 months 22,899
36 to 48 months 6,652
48 to 60 months 7,657
Over 60 months 206
----------------
$ 999,993
================
</TABLE>
Effective January 1, 1998, Coastal implemented a program whereby a portion
of the balances in noninterest-bearing and interest-bearing checking accounts
are reclassified to money market demand accounts under Federal Reserve
Regulation D.
(6) SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND FHLB ADVANCES
(a) The weighted average interest rates on securities sold under
agreements to repurchase at March 31, 1998 and December 31, 1997 were 5.51% and
6.00%, respectively. The stated interest rates on securities sold under
agreements to repurchase ranged from 4.93% to 5.67% at March 31, 1998.
(b) The weighted average interest rate on advances from the FHLB at
March 31, 1998 and December 31, 1997 were 5.62% and 5.95%, respectively. The
scheduled maturities and related weighted average interest rates on advances
from the FHLB at March 31, 1998 are summarized as follows (dollars in thousands)
(unaudited):
<TABLE>
<CAPTION>
Due during the year ended December 31, Weighted Average
- -------------------------------------- -----------------
Interest Rate Amount
----------------- ---------
<S> <C> <C>
1998 5.59% $ 287,178
1999 5.84 120,291
2000 6.17 7,929
2001 6.22 8,604
2002 5.62 69,649
2004 6.52 2,764
2006 6.91 3,102
2007 6.78 1,057
2008 4.66 50,000
2009 8.25 4,413
2011 6.78 1,268
2018 6.00 550
---------
$ 556,805
=========
</TABLE>
FHLB advances are secured by certain first-lien mortgage loans and
mortgage-backed securities owned by Coastal.
(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.
<PAGE>
(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 utilizes interest rate swap and interest rate cap agreements to
reduce exposure to floating interest rates by altering the interest rate
sensitivity of a portion of its variable-rate assets and borrowings. At March
31, 1998, Coastal had interest rate swap and cap agreements having notional
principal amounts totaling $45.8 million and $217.2 million, respectively.
The terms of the interest rate swap agreements outstanding at March 31,
1998 (unaudited) and December 31, 1997 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 March 31, 1998:
1998 $ 4,400 Three-month 6.709% 5.625% $ (24)
1999 14,600 Three-month 6.926 5.625 (221)
2000 4,800 Three-month 6.170 5.684 (31)
2,485 Three-month 6.000 5.688 (3)
2005 19,527 Three-month 6.500 5.676 (623)
---------
$ 45,812 $ (902)
========= ===============
At December 31, 1997:
1998 $ 4,400 Three-month 6.709% 5.875% $ (28)
1999 14,600 Three-month 6.926 5.875 (239)
2000 4,800 Three-month 6.170 5.906 (99)
2,520 Three-month 6.000 5.906 --
2005 19,527 Three-month 6.500 5.879 (230)
--------- ---------------
$ 45,847 $ (596)
========= ===============
</TABLE>
The interest rate swap 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 interest rate of
payments received on all of the interest rate swap agreements was approximately
5.80% and the weighted average interest payment rate on all of the interest rate
swap agreements was approximately 6.56% for the three months ended March 31,
1998. 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 on other borrowed money" in the accompanying
consolidated statements of income. The net interest expense related to these
agreements was approximately $86,000 for the three months ended March 31, 1998
and approximately $137,000 for the three months ended March 31, 1997. Coastal
had pledged approximately $5.8 million of mortgage-backed securities to secure
interest rate swap agreements at March 31, 1998.
Coastal has interest rate cap agreements with third parties. The
agreements provide for the third parties to make payments to Coastal whenever a
defined floating rate exceeds rates ranging from 5.0% 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 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 $186,000 and $286,000 at March 31, 1998 and December 31, 1997,
respectively, with the estimated fair value of the agreements being $202,000 and
$300,000 at March 31, 1998 and December 31, 1997, 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 income. The net decrease in interest
income related to the interest rate cap agreements was approximately $24,000 and
$134,000 for the three months ended March 31, 1998 and 1997 respectively.
Interest rate cap agreements outstanding at March 31, 1998 (unaudited)
expire as follows (dollars in thousands):
<TABLE>
<CAPTION>
Year of Strike rate Notional
expiration range amount
- ---------- --------------- ---------
<S> <C> <C>
1998 5.00 - 12.50% $ 129,300
1999 7.25 - 11.00 63,564
2000 8.50 - 9.50 8,000
2001 7.00 9.00 16,315
---------
$ 217,179
=========
</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 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.
<PAGE>
(9) EARNINGS PER SHARE
The following summarizes information related to the computation of basic
and diluted earnings per share ("EPS") for the three months ended March 31, 1998
and 1997 (dollars in thousands, except per share data):
<TABLE>
<CAPTION>
Three months ended March 31,
--------------------------------
<S> <C> <C>
1998 1997
---------- ----------
Net income available to common stockholders $ 5,941 $ 3,238
========== ==========
Weighted average number of common shares
outstanding used in basic EPS calculation 5,027,540 4,968,126
Add assumed exercise of outstanding stock options
as adjusted for dilutive securities 171,918 139,831
---------- ----------
Weighted average number of common shares
outstanding used in diluted EPS calculation 5,199,458 5,107,957
========== ==========
Basic EPS $ 1.18 $ 0.65
========== ==========
Diluted EPS $ 1.14 $ 0.63
========== ==========
</TABLE>
(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 March 31, 1998, the Bank's regulatory capital (unaudited) in relation to
its existing regulatory capital requirements for capital adequacy purposes were
as follows (dollars in thousands):
<TABLE>
<CAPTION>
Minimum For Capital Well-Capitalized
Actual Adequacy Purposes Requirements
------------------- ------------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Capital Requirement Amount Ratio Amount Ratio Amount Ratio
- -------------------- ---------- --------- -------- ------ -------- ------
Tier 1 (core) $ 166,351 5.69% $116,933 4.00% $146,166 5.00%
Tier 1 risk-based 166,351 11.24 59,214 4.00 88,822 6.00
Total risk-based 175,036 11.82 118,429 8.00 148,036 10.00
</TABLE>
As of March 31, 1998, the most recent notification from the Federal Deposit
Insurance Corporation ("FDIC") categorized the Bank as well capitalized under
the regulatory framework for prompt corrective action. There are no conditions
or events since that notification that management believes have changed the
institution's category.
<PAGE>
(11) FEDERAL INCOME TAXES
In March 1998, Coastal announced that it had successfully resolved an
outstanding tax benefit issue with the FDIC as Manager of the Federal Savings
and Loan Insurance Corporation Resolution Fund. The resolution of the issue
resulted in Coastal recording a $3.7 million, or 71 cents per diluted share,
reversal of accrued income taxes during the three months ended March 31, 1998;
therefore a one-time positive effect on net income. The resolution of the tax
benefit issue also contributes an ongoing quarterly tax benefit of $226,000 or
approximately 4 cents per diluted share, as of March 31, 1998.
(12) RECENT ACCOUNTING STANDARDS
The Financial Accounting Standards Board's Statement No. 131 ("Statement
131"), "Disclosure about Segments of an Enterprise and Related Information"
requires public companies to report certain information about their operating
segments in their annual financial statements and quarterly reports issued to
stockholders for years after implementation. It also requires public companies
to report certain information about their products and services, the geographic
areas in which they operate, and their major customers. Statement 131 is
effective for fiscal years beginning after December 15, 1997. Coastal
anticipates implementing Statement 131 for its fiscal 1998 Annual Report on Form
10-K. Implementation of Statement 131 should have no material effect on
Coastal's Consolidated Financial Statements.
(13) PENDING BRANCH PURCHASE
On May 4, 1998, Coastal announced the execution of a definitive agreement
to purchase the Valley Branches of Pacific Southwest Bank, also known as San
Benito Bank and Trust Company, a unit of Pacific Southwest Bank. Twelve
branches located in Harlingen, San Benito, Mission, Pharr, Edinburg,
Brownsville, McAllen and South Padre with deposits of approximately $357 million
and loans of approximately $175 million, will be acquired in this transaction.
The acquisition is pending regulatory approval and is expected to close in the
third quarter of 1998.
(14) STOCK SPLIT
On April 23, 1998, the Board of Directors declared a 3:2 stock split on the
common stock of Coastal payable on June 15, 1998 to the stockholders of record
at the close of business on May 15, 1998.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
---------------------------------------------------------------
Financial Condition
- --------------------
Total assets increased 1.9% or $54.8 million from December 31, 1997 to
March 31, 1998. The net increase resulted primarily from an increase in loans
receivable of $74.5 million, an increase in Federal funds sold of $3.5 million,
an increase of $7.2 million in loans held for sale and a $2.4 million increase
in Stock in the Federal Home Loan Bank of Dallas, offset by decreases of $19.8
million and $12.1 million in mortgage-backed securities held-to-maturity and
cash and amounts due from depository institutions, respectively. The increase
in loans receivable was primarily due to bulk residential mortgage loan
purchases of $114.4 million and $6.4 million of consumer loan purchases from
correspondent lenders, in addition to increases of $38.5 million and $16.5
million in commercial loans, secured by residential mortgage loans held for sale
and commercial real estate loans, respectively, during the three months ended
March 31, 1998. These increases were somewhat offset by principal payments
received. The decrease in mortgage-backed securities held-to-maturity was due
to principal payments received.
Savings deposits decreased slightly by 0.6% or $7.7 million from December
31, 1997 to March 31, 1998. Securities sold under agreements to repurchase
increased 4.7% or $37.4 million and advances from the FHLB increased 3.0% or
$16.3 million from December 31, 1997 to March 31, 1998. Stockholders' equity
increased 5.4% or $5.7 million from December 31, 1997 to March 31, 1998 as a
result primarily of net income offset by dividends declared and a $29,000
decrease in accumulated other comprehensive income (loss).
Results of Operations for the Three Months Ended March 31, 1998 and 1997
- --------------------------------------------------------------------------------
General
-------
For the three months ended March 31, 1998, net income before preferred
stock dividends was $6.6 million compared to $3.9 million for the three months
ended March 31, 1997. The increase in net income in the first quarter of 1998
was primarily due to the resolution of an outstanding tax benefit issue with the
Federal Deposit Insurance Corporation as Manager of the Federal Savings and Loan
Insurance Corporation Resolution Fund. The resolution of the issue resulted in
Coastal recording a $3.7 million, or 71 cents per diluted share, reversal of
accrued income taxes; resulting in a one-time positive effect on net income.
The resolution of the tax benefit issue will also contribute an ongoing
quarterly tax benefit of $226,000 or approximately 4 cents per diluted share (as
of March 31, 1998); which is expected to continue for approximately 3 to 4
years.
The positive effect of the tax benefit issue resolution was somewhat offset
by the recording in the first quarter of 1998 of an additional provision for
loan losses of $1.0 million and a writedown of purchased mortgage loan premium
of $709,000. The additional provision for loan losses of $1.0 million, or 13
cents per diluted share after tax, was recorded to increase the allowance for
loan losses due to the continuing change in the composition of the loans
receivable portfolio. This change is occurring as a result of management's
current emphasis on business lending. The writedown of the purchased mortgage
loan premium of $709,000, or 9 cents per diluted share after tax, was related to
an adjustable rate whole loan package purchased in the second quarter of 1997,
on which Coastal experienced high prepayments during 1997 and continuing into
1998, resulting from a comparatively lower current interest rate environment.
The net benefit of recording the resolution of the tax issue after these
adjustments (net of their applicable income tax effects) amounted to $2.6
million or approximately 49 cents per diluted share. Excluding the net benefit
from these nonrecurring items recorded during the three months ended March 31,
1998, net income available to common stockholders from ongoing core operations
was $3.4 million or 65 cents per diluted share (as of March 31, 1998).
Net interest income increased $352,000 for the three months ended March 31,
1998 as compared to the three months ended March 31, 1997. Noninterest income
(excluding the writedown of purchased mortgage loan premium) increased during
such period by $287,000. Noninterest expense increased by $778,000 and the
provision (benefit) for federal income taxes (excluding the one-time effect of
the $3.7 million reversal of accrued income taxes) decreased by $872,000 from
the 1997 to the 1998 three month period due to the ongoing quarterly benefit
attributable to the tax benefit issue and the tax effect of the recording of the
additional provision for loan losses and the writedown of the purchased mortgage
loan premium during the first quarter of 1998.
Interest Income
----------------
Interest income for the three months ended March 31, 1998 increased $1.3
million or 2.6% from the three months ended March 31, 1997. The increase was
primarily due to an increase of $925,000 in interest earned on loans receivable
over the prior comparable quarter. The increase in interest income on loans
receivable was due to a $74.6 million increase in the average balance of loans
receivable offset by a decrease in the average yield from 8.40% for the three
months ended March 31, 1997 to 8.20% for the three months ended March 31, 1998.
The decrease in the average yield on loans receivable was primarily due to
$749,000 (or 9 cents per diluted share after tax) of additional amortization of
purchased mortgage loan premium during the three months ended March 31, 1998.
This amortization was attributable to an adjustable rate whole loan package
purchased in the second quarter of 1997, on which Coastal experienced high
prepayments during 1997 and through the first quarter of 1998. As discussed
previously, Coastal recorded a $709,000 writedown of the purchased mortgage loan
premium on this package in March 1998, which should positively impact the
average yield in the future.
In addition, interest income on mortgage-backed securities and federal
funds sold, certificates of deposit and other investments increased $254,000 and
$105,000, respectively. Total interest-earning assets for the three months
ended March 31, 1998 averaged $2.9 billion as compared to $2.8 billion for the
three months ended March 31, 1997.
Interest Expense
-----------------
Interest expense on interest-bearing liabilities was $35.9 million for the
three months ended March 31, 1998, as compared to $35.0 million for the same
period in 1997. The increase in interest expense was due to a $39.3 million
increase in the average balance of interest-bearing liabilities during such
period and an increase in the average rate paid on interest-bearing liabilities
from 5.31% for the three months ended March 31, 1997 to 5.37% for the three
months ended March 31, 1998. The increase in average interest-bearing
liabilities consisted of a $220.5 million increase in FHLB advances, a $34.2
million increase in interest-bearing savings deposits, offset by a $215.6
million decrease in securities sold under agreements to repurchase.
Net Interest Income
---------------------
Net interest income was $15.0 million for the three months ended March 31,
1998 and $14.6 million for the same period in 1997. Net interest margin
("Margin") was 2.10% for both three month periods. Margin represents net
interest income as a percentage of average interest-earning assets. Net
interest spread ("Spread"), defined to exclude noninterest-bearing deposits,
decreased from 1.79% for the three months ended March 31, 1997 to 1.74% for the
three months ended March 31, 1998. Management also calculates an alternative
Spread which includes noninterest-bearing deposits. Under this calculation, the
alternative Spreads for the three months ended March 31, 1998 and 1997 were
1.92% and 1.94%, respectively. Margin and Spread are affected by the changes in
the amount and composition of interest-earning assets and interest-bearing
liabilities. The average interest rates paid on interest-bearing liabilities
increased from 5.31% for the three months ended March 31, 1997 to 5.37% for the
same period in 1998. This increase was slightly offset by an increase in the
average yield on interest-earning assets from 7.10% for the three months ended
March 31, 1997 to 7.11% for the same period in 1998. In addition, average net
interest-earning assets increased $27.6 million from the three months ended
March 31, 1997 to the three months ended March 31, 1998.
Spread for the three months ended March 31, 1998 was negatively affected by
the additional amortization of purchased mortgage loan premium as discussed
previously and by the higher borrowing costs experienced by Coastal. The
writedown of the purchased mortgage loan premium recorded during the three
months ended March 31, 1998 should decrease the ongoing amortization effect of
prepayments related to the adjustable rate whole loan package. In addition,
while management believes that the higher borrowing costs are temporary, efforts
are being made to replace borrowings with lower cost deposits.
Management's goal is to achieve a more desirable asset/liability
composition which is less vulnerable to market interest rate fluctuations,
primarily through the addition of loans tied to variable rates such as LIBOR and
local and regional prime rates and through the efforts to replace LIBOR based
borrowings with lower cost deposits. In addition, management intends to
gradually increase commercial business loans to approximately 15% of total
assets and commercial business (noninterest-bearing) deposits to approximately
10% of total deposits within three to five years.
Provision for Loan Losses
----------------------------
The provision for loan losses was $1,450,000 for the three months ended
March 31, 1998 and $450,000 for the three months ended March 31, 1997. During
the three months ended March 31, 1998, Coastal recorded an additional provision
for loan losses of $1.0 million to increase the allowance for loan losses due to
the continuing change in the composition of the loans receivable portfolio.
This change is occurring as a result of management's current emphasis on
business lending. The allowance for loan losses as a percentage of total loans
was 0.65% at March 31, 1998 and 0.56% at March 31, 1997. Although no assurance
can be given, management believes that the present allowance for loan losses is
adequate considering historical 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 and resulting allowance for loan losses are necessary.
Noninterest Income
-------------------
For the three months ended March 31, 1998, noninterest income (excluding
the writedown of purchased mortgage loan premium) increased $287,000 or 19.5% to
$1.8 million, compared to $1.5 million for the three months ended March 31,
1997. The increase in noninterest income was primarily due to an increase of
$430,000 in loan fees and service charges on deposit accounts and a $24,000
increase in other noninterest income. These increases were somewhat offset by a
$167,000 decrease in loan servicing income. In addition, as discussed
previously, during the three months ended March 31, 1998, Coastal recorded a
writedown of purchased mortgage loan premium of $709,000.
Noninterest Expense
--------------------
For the three months ended March 31, 1998, noninterest expense increased
$778,000 from the three months ended March 31, 1997. Compensation, payroll
taxes and other benefits as well as office occupancy expense increased $315,000
and $378,000, respectively, from the three months ended March 31, 1997 to the
three months ended March 31, 1998, primarily due to the staffing increases
related to the expansion of the loan product base and the continuing development
of commercial business lending programs. In addition, occupancy expenses also
increased due to the acquisition of assets and other expenses related to the
relocation of Coastal's corporate headquarters in the third quarter of 1997. In
addition, data processing expenses and the amortization of goodwill increased
$95,000 and $32,000, respectively. Other changes included a $13,000 increase in
real estate owned expenses, a $6,000 decrease in insurance premiums and a
$49,000 decrease in other operating expenses.
Provision (Benefit) for Federal Income Taxes
-------------------------------------------------
For the three months ended March 31, 1998, the provision (benefit) for
federal income taxes (excluding the one-time effect of the $3.7 million reversal
of accrued income taxes) was $1.4 million compared to $2.2 million for the three
months ended March 31, 1997. The decrease from 1997 to 1998 was due primarily
to the ongoing quarterly benefit attributable to the tax benefit issue and the
tax benefit effect of the recording of the additional provision for loan losses
and the writedown of the purchased mortgage loan premium during the first
quarter of 1998.
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, federal funds purchased 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 of other
banks and thrifts, either on a branch office or whole bank acquisition basis. At
March 31, 1998, Coastal had binding commitments to originate or purchase loans
totaling approximately $69.9 million and had $55.4 million of undisbursed loans
in process. Scheduled maturities of certificates of deposit during the 12 months
following March 31, 1998 totaled $782.8 million at March 31, 1998. Management
believes that Coastal has adequate resources to fund all of its commitments.
As of March 31, 1998, Coastal operated 37 retail banking offices in Texas
cities, including Houston, Austin, Corpus Christi and small cities in the
southeast quadrant of Texas. Management's five year goal is to have over $5
billion in assets, over $3 billion in deposits, $2.5 billion in loans and 80
branches in cities throughout central and south Texas, although there can be no
assurance that this goal can be accomplished through growth or acquisitions.
Forward-Looking Information
----------------------------
"Safe Harbor" Statement under the Private Securities Litigation Reform Act
of 1995: The statements contained in this Quarterly Report on Form 10-Q which
are not historical facts contain forward looking information with respect to
plans, projections or future performance of the Company, the occurrence of which
involve certain risks and uncertainties detailed in the Company's filings with
the Securities and Exchange Commission.
The above discussion should be read in conjunction with the information
contained in the Consolidated Financial Statements and the Notes thereto. The
above information contains "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995 (the "Reform Act"), and are
subject to the safe harbor created by that Reform Act. The words "estimate,"
"project," "anticipate," "expect," "intend," "believe," "plans," and similar
expressions are intended to identify forward-looking statements. Because such
forward-looking statements involve risks and uncertainties, there are important
factors that could cause actual results to differ materially from those
expressed or implied by such forward-looking statements. Factors, all of which
are difficult to predict and many of which are beyond the control of Coastal,
that could cause actual results to differ materially include, but are not
limited to: risks related to Coastal's acquisition strategy, including risks of
adversely changing results of operations and factors affecting Coastal's ability
to consummate further acquisitions; changes in general economic and business
conditions; changes in market rates of interest; changes in the laws and
regulations applicable to Coastal; the risks associated with the Bank's
non-traditional lending (loans other than single-family residential mortgage
loans such as multifamily, real estate acquisition and development, commercial
real estate, commercial business, warehouse and mortgage servicing rights
loans); and changes in business strategies and other factors as discussed in
Coastal's Annual Report on Form 10-K for the year ended December 31, 1997, as
filed with the Securities and Exchange Commission (SEC) on March 24, 1998.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
--------------------------------------------------------------
There have been no material changes in Coastal's interest rate risk
position since December 31, 1997. Coastal's principal market risk exposure is
to interest rates.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
------------------
Coastal is involved in routine legal proceedings occurring in the ordinary
course of business which, in the aggregate, are believed by management to be
immaterial.
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
------------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
-------------------------------------
The following exhibits are filed as part of this report:
Exhibit 27 - Financial Data Schedule (filed via EDGAR)
Exhibit 99 - Forward-Looking Information
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: 5/15/98 By/s/ Manuel J. Mehos
------- -------------------------
Manuel J. Mehos
Chairman of the Board
Chief Executive Officer
Dated: 5/15/98 By/s/ Catherine N. Wylie
------- ------------------------
Catherine N. Wylie
Chief Financial Officer
Exhibit 27
Financial Data Schedule
(filed via EDGAR)
Exhibit 99
Forward-Looking Information
Forward-Looking Information
"Safe Harbor" Statement under the Private Securities Litigation Reform Act
of 1995: The statements contained in this Quarterly Report on Form 10-Q which
are not historical facts contain forward looking information with respect to
plans, projections or future performance of the Company, the occurrence of which
involve certain risks and uncertainties detailed in the Company's filings with
the Securities and Exchange Commission.
The above discussion should be read in conjunction with the information
contained in the Consolidated Financial Statements and the Notes thereto. The
above information contains "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995 (the "Reform Act"), and are
subject to the safe harbor created by that Reform Act. The words "estimate,"
"project," "anticipate," "expect," "intend," "believe," "plans," and similar
expressions are intended to identify forward-looking statements. Because such
forward-looking statements involve risks and uncertainties, there are important
factors that could cause actual results to differ materially from those
expressed or implied by such forward-looking statements. Factors, all of which
are difficult to predict and many of which are beyond the control of Coastal,
that could cause actual results to differ materially include, but are not
limited to: risks related to Coastal's acquisition strategy, including risks of
adversely changing results of operations and factors affecting Coastal's ability
to consummate further acquisitions; changes in general economic and business
conditions; changes in market rates of interest; changes in the laws and
regulations applicable to Coastal; the risks associated with the Bank's
non-traditional lending (loans other than single-family residential mortgage
loans such as multifamily, real estate acquisition and development, commercial
real estate, commercial business, warehouse and mortgage servicing rights
loans); and changes in business strategies and other factors as discussed in
Coastal's Annual Report on Form 10-K for the year ended December 31, 1997, as
filed with the Securities and Exchange Commission (SEC) on March 24, 1998.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated statement of financial condition, the consolidated statement of
income and notes thereto found on pages 1 through 14 of the Company's Form
10-Q for the year-to-date March 31, 1998 and is qualified in its entirety by
reference to such financial statements
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1998
<CASH> 25,026
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 3,500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 169,783
<INVESTMENTS-CARRYING> 1,325,249
<INVESTMENTS-MARKET> 1,304,353
<LOANS> 1,335,955
<ALLOWANCE> 8,685
<TOTAL-ASSETS> 2,966,202
<DEPOSITS> 1,367,371
<SHORT-TERM> 1,116,380
<LIABILITIES-OTHER> 52,317
<LONG-TERM> 319,627
0
0
<COMMON> 50
<OTHER-SE> 110,457
<TOTAL-LIABILITIES-AND-EQUITY> 2,966,202
<INTEREST-LOAN> 26,940
<INTEREST-INVEST> 23,446
<INTEREST-OTHER> 502
<INTEREST-TOTAL> 50,888
<INTEREST-DEPOSIT> 15,507
<INTEREST-EXPENSE> 35,888
<INTEREST-INCOME-NET> 15,000
<LOAN-LOSSES> 1,450
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 10,335
<INCOME-PRETAX> 3,615
<INCOME-PRE-EXTRAORDINARY> 5,941
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,941
<EPS-PRIMARY> 1.18
<EPS-DILUTED> 1.14
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 7,412
<CHARGE-OFFS> 350
<RECOVERIES> 173
<ALLOWANCE-CLOSE> 8,685
<ALLOWANCE-DOMESTIC> 8,685
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
