FORM 10-QSB


[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2000

OR

[ ] 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 0-25518

SOBIESKI BANCORP, INC.
(Exact name of small business issuer as specified in its charter)

           Delaware                                                                        35-1942803_________
(State or other jurisdiction of                                                (IRS Employer Identification No.)
incorporation or organization)

2930 W. Cleveland Road, South Bend, Indiana                                    46628
(Address of principal executive offices)                                              (Zip Code)

Issuer's telephone number, including area code:                                   (219) 271-8300

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the
Exchange Act during the past 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 [ ]

As of November 8, 2000, there were 704,662 shares of the registrant's common stock issued and outstanding.

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When used in this Form 10-QSB and in future filings by the Company with the SEC, in the Company's press releases or other public or shareholder communications, and in oral statements made with the approval of an authorized executive officer, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project", "believe" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties, including, among other things, changes in economic conditions in the Company's market area, changes in policies by regulatory agencies, fluctuations in interest rates, demand for loans in the Company's market area and competition, that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company wishes to advise readers that the factors noted above could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from those anticipated or projected.

The Company does not undertake and specifically disclaims any obligation to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

The Company's total assets increased $2.8 million during the three months ended September 30, 2000, to $113.6 million from $110.8 million at June 30, 2000. This increase was mainly due to increases in cash and cash equivalents of $2.2 million and $0.8 million of net loans, partially offset by a decrease of $0.2 million in the securities portfolio. The increase in loans was principally in home equity and other non-one-to-four family real estate mortgage loans.

The Company's total liabilities increased $2.7 million from $98.0 million at June 30, 2000, to $100.7 million at September 30, 2000. The increase was from deposit growth of $1.4 million, $2.0 million of additional FHLB advances and increases in advance payments by borrowers for taxes and insurance and other liabilities partially offset by decreased federal funds purchased of $1.4 million. Deposits increased to $75.3 million at September 30, 2000 from $73.9 million at June 30, 2000. FHLB advances increased to $23.5 million at September 30, 2000, from $21.5 million at June 30, 2000.

Stockholders' equity increased $60,000 to $12.9 million at September 30, 2000, from $12.8 million at June 30, 2000, principally the result of $148,000 of net income, offset by $55,000 of cash dividends declared and $89,000 of treasury stock purchases.

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General. The Company recorded net income for the three months ended September 30, 2000, of $148,000 which is a decrease of $20,000 or 11.9%, over net income of $168,000 for the same period in 1999. The decrease in net income for the current three month period was primarily from a decrease in net interest income and higher non-interest expense offset by increased non-interest income, reduced loan loss provisions and lower income taxes.

Net Interest Income. The Company's net income is primarily dependent upon net interest income. Net interest income was $772,000 for the three month period ended September 30, 2000, as compared to $820,000 for the same period in the prior year. The decrease of $48,000 was primarily a result of increased deposits and FHLB advance interest which exceeded loan volume and other earning asset interest gains.

Interest income increased $157,000 to $2.08 million for the three month period ended September 30, 2000, from $1.93 million for the comparable 1999 period. Average earning assets for the three-month period ended September 30, 2000, increased $3.88 million adding volume generated interest earnings of $82,000. Rate variances added $75,000 for a total of $157,000 of additional interest income over the prior 1999 period. The yield on earning assets increased 31 basis points to 7.71% for the 2000 period from 7.40% for the comparable 1999 period.

Interest expense for the three-month period ended September 30, 2000, was $1.31 million as compared to $1.11 million for the comparable period in the prior year. The increase in interest expense of $204,000 was in part due to $4.2 of million of additional average deposit and borrowing levels over the prior 1999 period. The higher borrowing levels added $48,000, while higher borrowing rates added $156,000 to overall interest expense. Funding cost increased to 5.27% or 62 basis points for the 2000 period from 4.65% for the 1999 period. The higher funding cost is principally due to higher rates and the lengthening of deposit and FHLB advance maturities to mitigate interest rate risk.

Provisions for Loan Losses. During the three-months ended September 30, 2000, the Company had provisions of $15,000, with provisions of $35,000 for the comparable period in the prior year. At September 30, 2000, the Company's allowance for loan losses totaled $375,000 or .40% of net loans and 33% of total non-performing loans.

During the quarter ended June 30, 2000, the Company became aware of certain circumstances related to a single borrower in which the Association had purchased a participation interest. The borrower discontinued principal and interest payments on the loan and filed for Chapter 11 bankruptcy protection. Under the terms of a plan, which has been accepted by the lead participant, the borrower and the bankruptcy court, the collateral of this loan has been surrendered to the lead participant to be sold. Management believes the proceeds from the sale of this collateral will be sufficient to repay principal and interest on our outstanding loan. As of September 30. 2000, management has placed this loan, totaling $1,013,175, on non accrual status.

Although management believes that it uses the best information available to determine the allowance, unforeseen market conditions could result in adjustments and net income could be significantly affected if circumstances differ substantially from the assumptions used in making the final determination. Future additions to the Company's allowance for loan losses will be the result of periodic loan, property and collateral reviews and thus cannot be predicted in advance. In addition, federal regulatory agencies, as an integral part of their oversight process, periodically review the Company's allowance for loan losses. Such agencies may require the Company to recognize additions to the allowance based upon their judgment of the information available to them at the time of their examination.

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Non-Interest Income. Non-interest income consists primarily of fees and service charges on deposit accounts and other income. Non-interest income increased $7,000 to $54,000 for the three-months ended September 30, 2000, as compared to $47,000 for the same period last year. The increases were due primarily to increased fee income and service charges on customer accounts.

Non-Interest Expenses. Non-interest expenses were $566,000 for the three-month period ended September 30, 2000, compared to $545,000 for the same period last year. The increase of $21,000 for the three-month period ended September 30, 2000, compared to the same period last year was due primarily to higher compensations and benefits, advertising and promotion, and service bureau expenses offset by lower occupancy and equipment expense and lower professional expenses.

Income Taxes. Income taxes for the three months ended September 30, 2000, were $96,800 on pre-tax income of $245,000, an effective tax rate of 39.5%. For the three months ended September 30, 1999, income taxes were $118,200 on pre-tax income of $287,000, an effective tax rate of 41.2%

The Company's principal sources of funds are deposits and principal and interest payments on loans and investments. While scheduled loan repayments and maturing investments are relatively predictable, deposit flows and early loan prepayments are more influenced by interest rates, general economic conditions and competition. Additionally, the Company may borrow funds from the Federal Home Loan Bank of Indianapolis ("FHLB") or utilize other borrowings of funds based on need, comparative costs and availability at the time.

Federal regulations require the Association to maintain minimum levels of liquid assets. The required percentage has varied from time to time based upon the economic conditions and savings flows and is currently 4% of net withdrawable savings deposits and borrowings payable on demand or in one year or less during the preceding calendar month. Liquid assets for purposes of this ratio include cash, certain time deposits, U.S. Government obligations, government agency and other securities and obligations generally having remaining maturities of less than five years. The Company has maintained its liquidity ratio at levels in excess of those required. At September 30, 2000, the Company's liquidity ratio was 26.9%.

At September 30, 2000, the Company had $23.5 million in outstanding advances from the FHLB used primarily to fund purchases of participation interests in commercial loans, internally originated loans and other investments.

The Company uses its liquidity resources principally to meet ongoing commitments to fund maturing certificates of deposit and deposit withdrawals and to meet operating expenses. At September 30, 2000, the Company had outstanding commitments to extend credit, which amounted to $10.8 million (including $3.5 million in available home equity lines of credit). Management believes that loan repayments and other sources of funds will be adequate to meet the Company's foreseeable liquidity needs.

At September 30, 2000, the Association had tangible capital of $10.2 million or 9.1% of adjusted total assets, which was $8.5 million above the minimum capital requirement of $1.7 million or 1.5% of adjusted total assets.

At September 30, 2000, the Association had core capital of $10.2 million or 9.1% of adjusted total assets which was $6.8 million above the minimum capital requirement of $3.4 million or 3.0% of adjusted total assets.

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In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Sobieski Bancorp, Inc.

(Registrant)

Date: November 13, 2000                                           By:                                      
                                                                               Thomas F. Gruber
                                                                               President and Chief Executive Officer

Date: November 13, 2000                                          By:                                       
                                                                                Arthur Skale
                                                                                Chief Financial Officer

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