UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM 10-Q
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 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: 0-19684
COASTAL FINANCIAL CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
State of Delaware 57-0925911
- - - --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2619 N. OAK STREET, MYRTLE BEACH, S. C. 29577
- - - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (803) 448-5151
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 (March 31, 1996).
Common Stock $.01 Par Value Per Share 2,741,712 Shares
- - - --------------------------------------------------------------------------------
(Class) (Outstanding)
<PAGE>
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER AND SIX MONTHS ENDED MARCH 31, 1996
TABLE OF CONTENTS
PART 1- Consolidated Financial Statements
Item
1. Financial Statements (unaudited):
Consolidated Statements of Financial Condition
as of September 30, 1995 and March 31, 1996
Consolidated Statements of Operations for the three
months ended March 31, 1995 and 1996
Consolidated Statements of Operations for the six
months ended March 31, 1995 and 1996
Consolidated Statements of Cash Flows for the six
months ended March 31, 1995 and 1996
Consolidated Statements of Stockholders' Equity
Notes to Consolidated Financial Statements
2. Management's Discussion and Analysis of
Financial Condition
3. Management's Discussion and Analysis of Operations
for the three months ended March 31, 1995 and 1996
3. Management's Discussion and Analysis of Operations
for the six months ended March 31, 1995 and 1996
Part II - Other Information
Item
1. Legal Proceedings
2. Changes in Securities
3. Default Upon Senior Securities
4. Submission of Matters to a Vote of Securities Holders
5. Other Materially Important Events
6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
<TABLE>
<CAPTION>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
September 30, March 31,
1995 1996
--------- ---------
(Unaudited)
(Dollars in thousands)
<S> <C> <C>
ASSETS:
Cash & amounts due from banks .................... $ 9,318 $ 10,199
Short-term interest-bearing deposits ............. 1,883 3,536
Investment securities held to maturity
(market value of $2,297 at September 30,
1995 and $334 at March 31, 1996) .............. 2,329 330
Investment securities available for sale ......... -- 10,768
Mortgage-backed securities held to
maturity(market value of $12,904
at September 30, 1995) ......................... 12,776 --
Mortgage-backed securities available for sale .... -- 24,049
Loans receivable (net of allowance for
loan losses of $3,578 at September 30,
1995 and $3,856 at March 31, 1996) ............ 356,819 368,877
Loans receivable held for sale ................... 2,393 5,315
Real estate acquired through foreclosure ......... 789 809
Office property and equipment, net ............... 5,415 5,681
Federal Home Loan Bank stock, at cost ............ 4,726 5,712
Accrued interest receivable on loans ............. 2,167 2,616
Accrued interest receivable on investments ....... 250 395
Other assets and deferred charges .............. 2,336 2,929
--------- ---------
$ 401,201 $ 441,216
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
LIABILITIES:
Deposits ......................................... $ 273,099 $ 283,913
Securities sold under agreements to
repurchase .................................... 2,677 7,981
Advances from Federal Home Loan Bank ............. 93,320 114,228
Other borrowings ................................. -- 2,095
Drafts outstanding ............................... 2,289 1,521
Accrued interest payable ......................... 767 916
Other liabilities ................................ 4,229 3,715
--------- ---------
Total liabilities .............................. $ 376,381 $ 414,369
--------- ---------
(Continued)
<PAGE>
<CAPTION>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION -- Continued
September 30, March 31,
1995 1996
--------- ---------
(Unaudited)
(Dollars in thousands)
<S> <C> <C>
STOCKHOLDERS' EQUITY:
Serial preferred stock, 1,000,000 shares
authorized and unissued ....................... $ -- $ --
Common stock, $.01 par value, 5,000,000
shares authorized; 2,684,845 shares at
September 30, 1995 and 2,741,712 shares
at March 31, 1996 issued and outstanding ...... 22 22
Additional paid-in capital ....................... 8,722 8,722
Retained earnings ................................ 18,674 19,579
Treasury stock, at cost (120,169 and 67,984
shares, respectively) .......................... (2,598) (1,521)
Unrealized gain on securities available
for sale, net of income taxes .................. -- 45
--------- ---------
Total stockholders' equity ..................... 24,820 26,847
--------- ---------
$ 401,201 $ 441,216
========= =========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996
1995 1996
----------- -----------
(Unaudited)
(Dollars in thousands)
<S> <C> <C>
Interest income:
Loans receivable ............................... $ 7,033 $ 7,891
Investment securities .......................... 102 130
Mortgage-backed securities ..................... 239 414
Other .......................................... 109 142
----------- -----------
Total interest income .......................... 7,483 8,577
----------- -----------
Interest expense:
Deposits ....................................... 2,290 2,805
Securities sold under agreement to
repurchase ................................... 15 91
Advances from Federal Home Loan Bank ........... 1,967 1,789
----------- -----------
Total interest expense ......................... 4,272 4,685
----------- -----------
Net interest income ............................ 3,211 3,892
Provision for loan losses ......................... 20 225
----------- -----------
Net interest income after provision
for loan losses .............................. 3,191 3,667
----------- -----------
Other income:
Fees and service charges ....................... 270 331
Income from real estate owned .................. 97 55
Income (loss) from real estate partnerships .... 31 (27)
Gain on sale of loans receivable, net .......... 1 318
Gain on sale of securities available for sale .. -- 6
Other income ................................... 388 449
----------- -----------
787 1,132
----------- -----------
(Continued)
<PAGE>
<CAPTION>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS -- Continued
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996
1995 1996
----------- -----------
(Unaudited)
(Dollars in thousands)
<S> <C> <C>
General and administrative expenses:
Salaries and employee benefits ................. 1,442 1,629
Net occupancy, furniture and fixtures
and data processing expense .................. 562 697
FDIC insurance premium ......................... 137 156
Other expenses ................................. 453 473
----------- -----------
2,594 2,955
----------- -----------
Earnings before income taxes ...................... 1,384 1,844
Income taxes ...................................... 529 676
----------- -----------
Net income ........................................ $ 855 $ 1,168
=========== ===========
Earnings per common share ......................... $ .30 $ .41
=========== ===========
Weighted average common shares outstanding ........ 2,843,000 2,876,000
=========== ===========
Dividends per share ............................... $ .12 $ .125
=========== ===========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1995 AND 1996
1995 1996
----------- -----------
(Unaudited)
(Dollars in thousands)
<S> <C> <C>
Interest income:
Loans receivable ............................... $ 13,795 $ 15,746
Investment securities .......................... 197 217
Mortgage-backed securities ..................... 272 713
Other .......................................... 204 309
----------- -----------
Total interest income .......................... 14,468 16,985
----------- -----------
Interest expense:
Deposits ....................................... 4,337 5,788
Securities sold under agreement to
repurchase ................................... 28 127
Advances from Federal Home Loan Bank ........... 3,600 3,527
----------- -----------
Total interest expense ......................... 7,965 9,442
----------- -----------
Net interest income ............................ 6,503 7,543
Provision for loan losses ......................... 95 340
----------- -----------
Net interest income after provision
for loan losses .............................. 6,408 7,203
----------- -----------
Other income:
Fees and service charges ....................... 530 645
Income from real estate owned .................. 54 18
Income from real estate partnerships ........... 319 69
Gain on sale of loans receivable, net .......... 2 597
Loss on sale of securities available for sale .. -- (12)
Other income ................................... 714 750
----------- -----------
1,619 2,067
----------- -----------
(Continued)
<PAGE>
<CAPTION>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS -- Continued
FOR THE SIX MONTHS ENDED MARCH 31, 1995 AND 1996
1995 1996
----------- -----------
(Unaudited)
(Dollars in thousands)
<S> <C> <C>
General and administrative expenses:
Salaries and employee benefits ................. 2,758 3,063
Net occupancy, furniture and fixtures
and data processing expense .................. 1,117 1,365
FDIC insurance premium ......................... 287 305
Other expenses ................................. 1,007 1,014
----------- -----------
5,169 5,747
----------- -----------
Earnings before income taxes ...................... 2,858 3,523
Income taxes ...................................... 1,059 1,297
----------- -----------
Net income ........................................ $ 1,799 $ 2,226
=========== ===========
Earnings per common share ......................... $ .66 $ .78
=========== ===========
Weighted average common shares outstanding ........ 2,723,000 2,860,000
=========== ===========
Dividends per share ............................... $ .24 $ .25
=========== ===========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE SIX MONTHS ENDED MARCH 31, 1995 AND 1996
1995 1996
-------- --------
(Unaudited)
(In thousands)
<S> <C> <C>
Cash flows from operating activities:
Net earnings ......................................... $ 1,799 $ 2,226
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Income from real estate partnerships ............ (319) (69)
Depreciation .................................... 269 357
Provision for loan losses ....................... 95 340
Origination of loans receivable
held for sale ................................. -- (7,359)
Proceeds from sales of loans receivable
held for sale ................................. -- 4,437
(Increase) decrease in:
Other assets and deferred charges ................ (288) (276)
Accrued interest receivable ...................... (516) (594)
Increase (decrease) in:
Accrued interest payable ......................... 347 149
Other liabilities ................................ (536) 329
-------- --------
Net cash provided by (used in)
operating activities ...................... 851 (460)
-------- --------
Cash flows from investing activities:
Purchases of investment securities
available for sale .............................. -- (15,996)
Proceeds from sales of investment
securities available for sale ................... -- 7,000
Purchases of mortgage-backed securities
available for sale .............................. (327) (8,952)
Proceeds from sales of mortgage-backed
securities available for sale ................... -- 8,068
Origination of loans receivable, net ................. (71,020) (67,824)
Proceeds from sales of loans receivable, net ......... 340 --
Purchase of loans receivable ......................... -- (12,448)
Principal collected on loans receivable
and mortgage-backed securities, net ............. 41,553 57,617
Proceeds from sale of real estate
acquired through foreclosure, net ............... 115 20
Purchases of office properties and
equipment ........................................ (169) (623)
Purchases of FHLB stock, net ......................... (1,387) (986)
Other investing activities, net ...................... 512 82
-------- --------
Net cash used in
investing activities ...................... (30,383) (34,042)
-------- --------
(Continued)
<PAGE>
<CAPTION>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 1995 AND 1996 (CONTINUED)
1995 1996
-------- --------
(Unaudited)
(In thousands)
<S> <C> <C>
Cash flows from financing activities:
Increase in deposits, net ............................ $ 1,435 $ 10,814
Decrease in securities sold
under agreement to repurchase, net .................. (873) (36)
Proceeds from FHLB advances .......................... 261,619 56,650
Repayment of FHLB advances ........................... (235,080) (35,742)
Proceeds from other borrowings ....................... -- 7,435
Decrease in advance payments by borrowers
for property taxes and insurance .................. (689) (843)
Decrease in drafts outstanding, net .................. (201) (768)
Repurchase of treasury stock, at cost ................ (482) --
Dividend to stockholders ............................. (616) (682)
Other financing activities, net ...................... 94 208
-------- --------
Net cash provided by financing activities ............ 25,207 37,036
-------- --------
Net increase (decrease)
in cash and cash equivalents ........................ (4,325) 2,534
-------- --------
Cash and cash equivalents at beginning
of the period ........................................ 21,637 11,201
-------- --------
Cash and cash equivalents at end
of the period ........................................ $ 17,312 $ 13,735
======== ========
Supplemental information:
Interest paid ........................................ $ 7,618 $ 16,837
======== ========
Income taxes paid .................................... $ 1,087 $ 1,492
======== ========
Supplemental schedule of non-cash investing
and financing transactions:
Transfer of mortgage loans to real estate
acquired through foreclosure ...................... $ -- $ 40
======== ========
Collateralization of mortgage loans to FHLMC
participation certificates ........................ $ 11,793 $ 11,692
======== ========
Transfer of investment securities held to
maturity to available for sale ..................... $ -- $ 14,775
======== ========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Additional Total
Common Paid-In Retained Treasury Stockholders'
Stock Capital Earnings Stock Other Equity
-------- -------- -------- -------- ----- --------
(Unaudited)
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance at September
30, 1993 .............. $ 21 $ 6,550 $ 15,258 $ -- $ -- $ 21,829
Exercise of stock
options ............... -- 88 -- -- -- 88
Cash paid for
fractional shares .. -- -- (7) -- -- (7)
Treasury stock
repurchase ......... -- -- -- (2,001) -- (2,001)
Cash dividend ........... -- -- (617) -- -- (617)
Net income .............. -- -- 3,812 -- -- 3,812
-------- -------- -------- -------- ----- --------
Balance at September
30, 1994 ............. 21 6,638 18,446 (2,001) -- 23,104
Exercise of stock
options ............... -- 96 (215) 241 -- 122
Treasury stock repurchase -- -- -- (838) -- (838)
Cash paid for
fractional shares ..... -- -- (6) -- -- (6)
Cash dividends .......... -- -- (1,282) -- -- (1,282)
Common stock dividend ... 1 1,988 (1,989) -- -- --
Net income .............. -- -- 3,720 -- -- 3,720
-------- -------- -------- -------- ----- --------
Balance at September
30, 1995 ............. $ 22 $ 8,722 $ 18,674 $ (2,598) $ -- $ 24,820
Exercise of stock
options .............. -- -- (573) 634 -- 61
Issuance of shares
in acquisition
of CFM, Inc. ....... -- -- (67) 443 -- 376
Cash dividends .......... -- -- (681) -- -- (681)
Unrealized gain on
securities available
for sale, net of
income taxes .......... -- -- -- -- 45 45
Net income .............. -- -- 2,226 -- -- 2,226
-------- -------- -------- -------- ----- --------
Balance at March
31, 1996 ............. $ 22 $ 8,722 $ 19,579 $ (1,521) $ 45 $26,847
======== ======== ======== ======== ==== =======
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements were prepared in
accordance with instructions for Form 10-Q and, therefore, do not include all
disclosures necessary for a complete presentation of financial condition,
results of operations, cash flows and stockholders' equity in conformity with
generally accepted accounting principles. All adjustments, consisting only of
normal recurring accruals, which in the opinion of management are necessary for
fair presentation of the interim financial statements, have been included. The
results of operations for the three and six month periods ended March 31, 1996
are not necessarily indicative of the results which may be expected for the
entire fiscal year. These consolidated financial statements should be read in
conjunction with the Company's audited consolidated financial statements and
related notes for the year ended September 30, 1995, included in the Company's
1995 Annual Report to Stockholders. The principal business of the Company is
conducted by its wholly-owned subsidiary, Coastal Federal Savings Bank ("the
Bank"). The information presented hereon, therefore, relates primarily to the
Bank.
(2) LOANS RECEIVABLE, NET
Loans receivable, net consist of the following:
<TABLE>
<CAPTION>
September 30, March 31,
1995 1996
--------- ---------
(Unaudited)
(In thousands)
<S> <C> <C>
First mortgage loans:
Single family to 4 family units ................ $ 226,488 $ 225,479
Other .......................................... 54,401 62,103
Construction loans ............................. 27,905 35,572
Consumer and commercial loans:
Installment consumer loans ..................... 34,123 32,813
Mobile home loans .............................. 1,204 1,062
Deposit account loans .......................... 705 522
Equity lines of credit ......................... 13,210 12,873
Commercial and other loans ..................... 19,610 22,335
--------- ---------
377,646 392,759
Less:
Allowance for loan losses ...................... 3,578 3,856
Unearned discounts ............................. 39 38
Deferred loan fees (costs) ..................... 32 (258)
Undisbursed portion of loans in process ........ 17,178 20,246
--------- ---------
$ 356,819 $ 368,877
========= =========
</TABLE>
<PAGE>
The changes in the allowance for loan losses consist of the following for the
six months ended:
<TABLE>
<CAPTION>
March 31,
1995 1996
------- -------
(Unaudited)
(In thousands)
<S> <C> <C>
Beginning allowances ....................... $ 3,353 $ 3,578
Provision for loan losses .................. 95 340
Loan recoveries ............................ 138 11
Loan charge-offs ........................... (213) (73)
------- -------
Ending allowance ........................... $ 3,373 $ 3,856
======= =======
</TABLE>
(3) DEPOSITS
Deposits consist of the following:
<TABLE>
<CAPTION>
September 30, 1995 March 31, 1996
------------------ --------------
Weighted Weighted
Amount Rate Amount Rate
-------- ---- -------- ----
(Unaudited)
(In thousands)
<S> <C> <C> <C> <C>
Transaction accounts .............. $ 87,862 2.59% $109,573 2.79%
Passbook accounts ................. 46,421 2.54 43,795 2.52
Certificate accounts .............. 138,816 6.08 130,545 5.63
-------- ---- -------- ----
$273,099 4.35% $283,913 4.06%
======== ==== ======== ====
</TABLE>
<PAGE>
(4) ADVANCES FROM FEDERAL HOME LOAN BANK
Advances from Federal Home Loan Bank consist of the following:
<TABLE>
<CAPTION>
September 30, 1995 March 31, 1996
------------------ --------------
Weighted Weighted
Amount Rate Amount Rate
------- ---- ------- ----
Maturing within: (Unaudited)
(In thousands)
<S> <C> <C> <C> <C>
1 year ........................... $36,989 6.40% $ 55,670 5.97%
2 years .......................... 12,368 6.87 21,419 6.33
3 years .......................... 21,634 6.62 19,377 6.38
4 years .......................... 5,905 7.57 1,426 6.64
5 years and thereafter ........... 16,424 6.77 16,336 6.74
------- ---- ------- ----
$93,320 6.65% $114,228 6.23%
======= ==== ======= ====
</TABLE>
At September 30, 1995, and March 31, 1996, the Bank had pledged first mortgage
loans with unpaid balances of approximately $164.7 million and $175.5 million,
respectively, as collateral for FHLB advances.
(5) COMMON STOCK DIVIDENDS
On January 27, 1993, August 18, 1993 and January 7, 1995, the Company declared 3
for 2 stock splits in the form of common stock dividends aggregating 327,330,
495,084 and 745,179 shares. On May 30, 1995, the Company declared a 5% common
stock dividend aggregating 102,003 shares. On January 9, 1996, the Company
declared a five for four stock split in the form of a 25% stock dividend,
aggregating approximately 542,000 shares. All per share data has been
retroactively restated to give effect to the common stock dividends.
(6) TREASURY STOCK
On February 22, 1995, and March 22, 1995, the Company repurchased 42,500 and
44,400 shares for an aggregate purchase price of $1,001,250 and $1,000,068,
respectively. On July 27, 1995, the Company announced the commencement of a
third stock repurchase program. As of March 31, 1996, the Company had
repurchased 7,500 shares in its third stock repurchase program for an aggregate
purchase price of $144,375.
<PAGE>
(7) CONTINGENCIES
Effective January 1996, the Federal Deposit Insurance Corporation (FDIC) reduced
deposit insurance premiums for financial institutions that are members of the
Bank Insurance Fund ("BIF") so approximately 92% of BIF members pay only the
statutory minimum annual premium of $2,000. The FDIC did not reduce the
assessments for financial institutions that are members of the Savings
Association Insurance Fund ("SAIF"), which ranges from 23 to 31 basis points of
insured deposits. The Bank is a member of the SAIF. In order to address the
BIF/SAIF premium disparity, legislation is pending in Congress to levy all
SAIF-member institutions a one-time assessment of approximately 80 basis points
for every $100 of deposit balances as of March 31, 1995. Payment of this
one-time assessment would immediately reduce the pre-tax earnings and capital of
the Bank by the amount of the assessment. Although not assured, the assessment
is expected to be tax deductible. It is expected that after payment of the
one-time assessment, SAIF premiums would be reduced to the level of BIF
premiums. Based on the Bank's deposit balances as of March 31, 1995, the after
tax effect of the one time assessment would be approximately $1.3 million.
Management cannot predict whether this legislation will be enacted into law or,
if enacted, the amount of the one-time assessment, or if ongoing SAIF premiums
would be reduced to BIF premium levels.
In addition, proposed federal legislation would repeal the reserve method of
accounting for thrift bad debt reserves (including the
percentage-of-taxable-income) for tax years beginning after March 31, 1996. This
would require the Bank to account for bad debts using the specific charge-off
method. Under the proposed legislation, the change in accounting method that
eliminated the reserve method would trigger bad debt reserve recapture for
post-1987 excess reserves over a six-year period. At March 31, 1996, the Bank's
post-1987 excess reserve amounted to approximately $1,000,000. The Company has
previously provided deferred taxes for this amount. A special provision suspends
recapture of post-1987 excess reserves for up to two years if, during those
years, the institution satisfies a "residential loan requirement." This
requirement would be met if the principal amount of the institution's
residential loans exceeds a base year amount, which is determined by reference
to the average of the institution's loans during the six taxable years ending
before January 1, 1996. However, notwithstanding this special provision,
recapture would be required to begin no later than the first taxable year
beginning after March 31, 1997. Management cannot predict whether the
legislation providing for the recapture of bad debt reserves will be enacted,
or, if enact, the final form of such legislation and its ultimate impact on the
Bank.
(8) ACQUISITION
On November 2, 1995, the Company acquired the assets of Granger O'Harra
Mortgage, Inc. The successor Company is Coastal Federal Mortgage, Inc. ("CFM,
Inc.") CFM, Inc. is a mortgage brokerage company located in Florence, South
Carolina which at date of acquisition had assets of approximately $1.0 million
and liabilities of approximately $650,000. In fiscal 1995, Granger-O'Harra
originated approximately $20 million in mortgage loans. The Company exchanged
18,810 shares of its treasury common stock for the stock of Granger-O'Harra. The
transaction was accounted for as a purchase and there were no material
intangibles resulting from the transaction.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
DISCUSSION OF FINANCIAL CONDITION CHANGES FROM SEPTEMBER 30, 1995 TO
MARCH 31, 1996
GENERAL
The Company reported $2.2 million in net earnings for the six months ended March
31, 1996, compared to net earnings of $1.8 million for the six months ended
March 31, 1995. Net interest income increased $1.0 million primarily as a result
of an increase in interest income of $2.5 million which was offset by an
increase in interest expense of $1.5 million. Provision for loan losses
increased from $95,000 for the six months ended March 31, 1995, to $340,000 for
the six months ended March 31, 1996. Other income increased from $1.6 million
for the six months ended March 31, 1995, to $2.1 million for the six months
ended March 31, 1996. General and administrative expenses increased from $5.2
million for the six months ended March 31, 1995, to $5.7 million for the six
months ended March 31, 1996.
Liquid assets, consisting of cash, interest-bearing deposits, and investment
securities available for sale, increased from $13.5 million at September 30,
1995, to $14.1 million at March 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
In accordance with Office of Thrift Supervision (OTS) regulations, the Company
is required to maintain specific levels of cash and "liquid" investments in
qualifying types of United States Treasury and Federal Agency Securities and
other investments generally having maturities of five years or less. The
required level of such investments is calculated on a "liquidity base"
consisting of net withdrawable accounts and short-term borrowings, and is equal
to 5% of such amount. Short-term liquid assets must be 1.0% of the liquidity
base.
Historically, the Company has maintained its liquidity at levels believed by
management to be adequate to meet the requirements of normal operations,
potential deposit out-flows and strong loan demand and still allow for optimal
investment of funds and return on assets.
The Company's liquidity was 7.3% and 6.6% at September 30, 1995, and March 31,
1996, respectively as calculated in accordance with OTS regulations.
The principal sources of funds for the Company are cash flows from operations,
consisting mainly of mortgage, consumer and commercial loan payments, retail
customer deposits, advances from the FHLB, and loan sales.
The principal use of cash flows is the origination of loans receivable. The
Company originated loans receivable of $71.0 million for the six months ended
March 31, 1995, compared to $75.2 million for the six months ended March 31,
1996. The majority of these loan originations were financed through loan
principal repayments which amounted to $41.6 million and $57.6 million for the
six month periods ended March 31, 1995 and 1996, respectively. In addition, the
Company sells certain loans in the secondary market to finance future loan
originations. Generally, these loans have consisted only of mortgage loans which
have been originated in the current period. For the six month period ended March
31, 1996, the Company sold $4.4 million in mortgage loans compared to $340,000
sold for the six month period ended March 31, 1995.
<PAGE>
In the first fiscal quarter, the Company took the opportunity to restructure a
portion of its loan portfolio to improve interest rate sensitivity. At September
30, 1995, the Company had approximately $10 million in fifteen year conforming
fixed rate mortgage loans in loans receivable. The Company began the process of
securitizing these loans into mortgage-backed securities available for sale. Any
fifteen year conforming mortgage not anticipated to be securitized were moved to
the loans receivable held for sale classification.
The Company sold a portion of these fixed rate loans to fund the purchase of
$6.4 million of one year adjustable rate mortgage loans. Due to the significant
decrease in long term interest rates during the period, the Company sold these
loans, and realized a gain of approximately $280,000. It is unlikely that the
Company will realize gains of this magnitude in the future.
The Bank experienced an increase of $10.8 million in deposits for the six month
period ended March 31, 1996. During 1996, the Company funded a portion of its
loan growth and increase in securities available for sale with advances from the
FHLB.
At March 31, 1996, the Company had commitments to originate $10.4 million in
mortgage loans, and $16.6 million in undisbursed lines of credit, which the
Company expects to fund from normal operations.
At March 31, 1996, the Company had $107.1 million of certificates of deposits
which were due to mature within one year. Based upon previous experience, the
Company believes that a major portion of these certificates will be renewed.
Additionally, at March 31, 1996, the Company had pledged first mortgage loans in
the amount of $175.5 million to the FHLB which could support approximately $31.8
million in additional advances.
As a condition of deposit insurance, current Federal Deposit Insurance
Corporation(FDIC) regulations require that the Bank calculate and maintain a
minimum regulatory capital requirement on a quarterly basis and satisfy such
requirement as of the calculation date and throughout the quarter. The Bank's
capital is approximately $26.5 million at March 31, 1996, exceeding tangible and
core capital requirements by $19.9 million and $13.3 million, respectively. At
March 31, 1996, the Bank's risk-based capital of approximately $29.8 million
exceeded its current risk-based capital requirement by $7.1 million. (For
further information see Regulatory Matters).
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATION
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996
GENERAL
Net income increased from $855,000 for the three months ended March 31, 1995, to
$1.2 million for three months ended March 31, 1996, or 36.6%. Net interest
income increased $681,000 primarily as a result of an increase in interest
expense of $413,000 and an increase of $1.1 million in interest income.
Provision for loan losses increased from $20,000 for three months ended March
31, 1995, to $225,000 for the three months ended March 31, 1996. Other income
increased $345,000 primarily as a result of increased gains on the sale of
mortgage loans of $317,000.
<PAGE>
INTEREST INCOME
Interest income for the three months ended March 31, 1996, increased to $8.6
million as compared to $7.5 million for the three months ended March 31, 1995.
The earning asset yield for the three months ended March 31, 1996, was 8.48%
compared to a yield of 8.16% for the three months ended March 31, 1995. The
average yield on loans receivable for the three months ended March 31, 1996, was
8.58% compared to 8.25% for the three months ended March 31, 1995. The increase
in yield primarily resulted from repricing of adjustable-rate mortgage loans as
a result of higher general market rates during fiscal year 1996. Approximately
70% of the Company's loans are adjustable or reprice within one year. The yield
on investments increased to 6.55% for the three months ended March 31, 1996,
from 5.09% for the three months ended March 31, 1995. Total average earning
assets were $409.8 million for the quarter ended March 31, 1996, as compared to
$366.8 million for the quarter ended March 31, 1995.
INTEREST EXPENSE
Interest expense on interest-bearing liabilities was $4.7 million for the three
months ended March 31, 1996, as compared to $4.3 million for March 31, 1995. The
average cost of deposits for the three months ended March 31, 1996, was 4.03%
compared to 3.82% for the three months ended March 31, 1995. The cost on
interest-bearing liabilities was 4.68% for the three months ended March 31,
1996, as compared to 4.69% for the three months ended March 31, 1995. With the
increase in short term interest rates during the latter part of fiscal 1995, the
Company experienced an increased cost of deposits and short term advances in the
first six months of the fiscal 1996. Total average interest-bearing liabilities
increased from $364.1 million at March 31, 1995 to $398.3 million at March 31,
1996.
NET INTEREST INCOME
Net interest income was $3.9 million for the three months ended March 31, 1996,
as compared to $3.2 million for the three months ended March 31, 1995. The net
interest margin increased to 3.80% for the three months ended March 31, 1996,
from 3.47% for the three months ended March 31, 1995.
PROVISION FOR LOAN LOSSES
The provision for loan losses increased from $20,000 for the period ended March
31, 1995, to $225,000 for the three months ended March 31, 1996. For the three
months ended March 31, 1996, net charge-offs were $53,000 compared to net
recoveries of $92,000 for the three months ended March 31, 1995. The allowance
for loan losses as a percentage of total loans was 1.04% at March 31, 1996,
compared to 1.00% at September 30, 1995. Loans delinquent 90 days or more were
.27% of total loans at March 31, 1996, compared to .59% at September 30, 1995.
The allowance for loan losses was 375% of loans delinquent more than 90 days at
March 31, 1996, as compared to 270% at September 30, 1995. Management believes
that the current level of allowances is adequate considering loss experience and
delinquency trends, among other criteria.
<PAGE>
OTHER INCOME
For the three months ended March 31, 1996, other income increased 43.8% to $1.1
million compared to $787,000 for the three months ended March 31, 1995. The
major portion of the increase was due to increased gains on the sale of mortgage
loans held for sale of $317,000. With the acquisition of CFM, Inc., the Company
has experienced a large increase in gains on loan sales related to CFM, Inc.'s
mortgage banking activities. Offsetting some of the increase on gain on sales of
loans was the decrease in income from real estate partnerships. For the three
months ended March 31, 1995, income from real estate partnerships was $31,000
compared to a loss of $27,000 for the three months ended March 31, 1996.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased from $2.6 million for the three
months ended March 31, 1995, to $3.0 million for the three months ended March
31, 1996. Salaries and employee benefits increased $187,000, or 13% primarily as
a result of the acquisition of CFM, Inc. which accounted for the majority of the
increase. Net occupancy, furniture and fixtures and data processing expense
increased $135,000. Enhancements to technology resulted in expense of
approximately $66,000 in the second 1996 quarter. The remainder of the increase
is due to normal growth and the addition of CFM, Inc.
INCOME TAXES
Income taxes increased from $529,000 for the three months ended March 31, 1995,
to $676,000 for the three months ended March 31, 1996, as a result of increased
income before taxes.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATION
FOR THE SIX MONTHS ENDED MARCH 31, 1995 AND 1996
GENERAL
Net income increased from $1.8 million for the six months ended March 31, 1995,
to $2.2 million for six months ended March 31, 1996, or 23.7%. Net interest
income increased $1.0 million primarily as a result of an increase in interest
expense of $1.5 million and an increase of $2.5 million in interest income.
Provision for loan losses increased from $95,000 for six months ended March 31,
1995, to $340,000 for the six months ended March 31, 1996. Other income
increased $448,000 primarily as a result of increased gains on the sale of
mortgage loans of $595,000.
INTEREST INCOME
Interest income for the six months ended March 31, 1996, increased to $17.0
million as compared to $14.5 million for the six months ended March 31, 1995.
The earning asset yield for the six months ended March 31, 1996, was 8.52%
compared to a yield of 8.18% for the six months ended March 31, 1995. The
average yield on loans receivable for the six months ended March 31, 1996, was
8.61% compared to 8.27% for the six months ended March 31, 1995. The increase in
yield primarily resulted from repricing of adjustable-rate mortgage loans as a
result of higher general market rates during fiscal year 1996. Approximately 70%
of the Company's loans are adjustable or reprice within one year. The yield on
investments increased to 6.41% for the six months ended March 31, 1996, from
5.07% for the six months ended March 31, 1995. Total average earning assets were
$402.5 million for the six month period ended March 31, 1996, as compared to
$353.6 million for the six month period ended March 31, 1995.
<PAGE>
INTEREST EXPENSE
Interest expense on interest-bearing liabilities was $9.4 million for the six
months ended March 31, 1996, as compared to $8.0 million for March 31, 1995. The
average cost of deposits for the six months ended March 31, 1996, was 4.18%
compared to 3.67% for the six months ended March 31, 1995. The cost of
interest-bearing liabilities was 4.80% for the six months ended March 31, 1996,
as compared to 4.56% for the six months ended March 31, 1995. With the increase
in interest rates during fiscal 1996, the Company experienced an increased cost
of deposits and short term advances in the first six months of the fiscal 1996.
Total average interest-bearing liabilities increased from $349.2 million at
March 31, 1995 to $392.1 million at March 31, 1996.
NET INTEREST INCOME
Net interest income was $7.5 million for the six months ended March 31, 1996, as
compared to $6.5 million for the six months ended March 31, 1995. The net
interest margin increased to 3.72% for the six months ended March 31, 1996, from
3.62% for the six months ended March 31, 1995. Since the majority of the
Company's assets are adjustable rate mortgage loans which reprice annually
versus many of the Company's liabilities which reprice more quickly, the Company
may experience a decrease in its interest rate spread should interest rates
increase rapidly.
PROVISION FOR LOAN LOSSES
The provision for loan losses increased from $95,000 for the period ended March
31, 1995, to $340,000 for the six months ended March 31, 1996. For the six
months ended March 31, 1996, net charge-offs were $62,000 compared to net
charge-offs of $75,000 for the six months ended March 31, 1995. The allowance
for loan losses as a percentage of total loans was 1.04% at March 31, 1996,
compared to 1.00% at September 30, 1995. Management believes that the current
level of allowances is adequate considering loss experience and delinquency
trends, among other criteria.
OTHER INCOME
For the six months ended March 31, 1996, other income increased 27.7% to $2.1
million compared to $1.6 million for the six months ended March 31, 1995. The
major portion of the increase was due to increased gains on the sale of mortgage
loans held for sale of $595,000. With the significant decrease in long term
interest rates in the latter half of 1995, the Bank experienced approximately
$280,000 in gains from the sale of certain fixed rate loans. In addition, with
the acquisition of CFM, Inc., the Company had gains on loan sales of $290,000
from CFM, Inc.'s mortgage banking activities. Offsetting the increase on gain on
sales of loans was the decrease in income from real estate partnerships. In the
first fiscal quarter of 1996, the Company experienced a large sale of land which
resulted in a gain of $319,000. In the first half of 1996, the comparable gain
was $69,000.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased from $5.2 million for the six
months ended March 31, 1995, to $5.7 million for the six months ended March 31,
1996. Salaries and employee benefits increased $305,000, or 11.1% primarily as a
result of the acquisition of CFM, Inc. which accounted for $160,000 of the
increase. Net occupancy, furniture and fixtures and data processing expense
increased $248,000. Enhancement to technology resulted in expense of
approximately $140,000 in the first six months of fiscal 1996. The remainder of
the increase is due to normal growth and the addition of CFM, Inc.
<PAGE>
INCOME TAXES
Income taxes increased from $1.1 million for the six months ended March 31,
1995, to $1.3 million for the six months ended March 31, 1996, as a result of
increased income before taxes.
REGULATORY MATTERS
The regulatory capital requirements for the Bank's compliance with such
requirements at March 31, 1996 is as follows:
<TABLE>
<CAPTION>
Percent
Amount of Assets
------ ---------
<S> <C> <C>
Stockholders' equity ......................... $ 26,509 6.01%
Reduction for investment in and
advances to "nonincludables"
subsidiaries ................................. (37) (0.00)
-------- -----
Tangible capital ............................. 26,472 6.01
Tangible capital
requirement .................................. 6,581 1.50
-------- -----
Excess ....................................... $ 19,891 4.51%
======== =====
Core capital ................................. $ 26,472 6.01%
Core capital
requirement .................................. 13,161 3.00
-------- -----
Excess ....................................... $ 13,311 3.01%
======== =====
Risk-based capital ........................... $ 29,821 10.49%
Minimum risk-based
capital requirement .......................... 22,743 8.00
-------- -----
Excess ....................................... $ 7,078 2.49%
======== =====
</TABLE>
<PAGE>
IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standard ("SFAS") No. 114 "Accounting by
Creditors for Impairment of a Loan" became effective for the Company on October
1, 1995. This statement requires a lender to consider a loan to be impaired if
the lender believes it is probable that it will be unable to collect all
principal and interest due according to the contractual terms of the loan. If a
loan is impaired, the lender will be required to record a loan valuation
allowance equal to the difference in the loan's carrying value and the present
value of the estimated future cash flows discounted at the loan's effective
rate. This accounting change, will significantly change the troubled debt
restructuring accounting by lenders previously allowed under Financial
Accounting Standards Board ("FASB") Statement No. 15. This statement did not
have a material adverse effect on the Company.
SFAS No. 119, "Disclosures about Derivative Financial Instruments and Fair
Value of Financial Instruments" was issued in late 1994 and is effective for
fiscal years ending after December 15, 1994. SFAS No. 119 requires disclosure
about amounts, nature, and terms of derivative financial instruments. It also
requires that a distinction be made between financial instruments held or issued
for trading purposes or issued for purposes other than trading. This statement
is not anticipated to have a material impact on the Company as it does not own
any derivatives at this time.
On June 30, 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" which is
effective for financial statements issued for fiscal year beginning after
December 15, 1995. SFAS No. 121 provides guidance for recognition and
measurement of impairment of long-lived assets, certain identifiable
intangibles, and goodwill related both to assets to be held and used and assets
to be disposed of. This statement is not anticipated to have a material effect
on the Company.
In May 1995, the FASB issued SFAS No. 122, "Accounting for Mortgage Servicing
Rights, an amendment of SFAS No. 65" which is effective prospectively for years
beginning after December 15, 1995. The statement requires the recognition of an
asset for the right to service mortgage loans for others, regardless of how
those rights were acquired (either purchased or originated). Further, it amends
SFAS 65 to require assessment of impairment based on fair value. Based upon the
Company's present mortgage lending operation, management believes this statement
will have a slight positive effect on earnings during the early years of its
adoption.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock Based
Compensation" which is effective for financial statements issued for fiscal
years beginning after December 15, 1995. SFAS No. 123 provides guidance on the
valuation of compensation costs arising from both fixed and performance stock
compensation plans. SFAS No. 123 encourages but does not require entities to
account for stock compensation awards based on their estimated fair value on the
date they are granted. Entities can continue to follow current accounting
requirements, which generally do not result in an expense charge for most
options. However, they must disclose in a footnote to their financial statements
what the effect on net income would have been had they recognized expense for
options. The Company expects to continue its current accounting practice.
Therefore, this statement will generally not have an effect on future operating
results.
<PAGE>
In November 1995, the FASB issued a guide to implementation of SFAS 115 on
accounting for certain investments in debt and equity securities which allows
for the one time transfer of certain investments classified as held for
investment to available for sale. In order to increase the Company's ability to
manage its liquid assets, the Company reclassified the majority of its
investments classified as held for investment, which had an amortized cost of
$14.8 million and a market value of $15.0 million, to the available for sale
classification in the first quarter of fiscal 1996.
EFFECT ON INFLATION AND CHANGING PRICES
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles which require the measurement of
financial position and results of operations in terms of historical dollars,
without consideration of change in the relative purchasing power over time due
to inflation. Unlike most industrial companies, virtually all of the assets and
liabilities of a financial institution are monetary in nature. As a result,
interest rates have a more significant impact on a financial institution's
performance than the effects of inflation. Interest rates do not necessarily
change in the same magnitude as the price of goods and services.
<PAGE>
PART 2. OTHER INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
Item 1. Legal Proceedings
The Bank is the defendant in an action which commenced on August 9, 1993. The
Plaintiff is seeking $1.2 million in damages. The Plaintiff contends that the
Bank breached its fiduciary duties in the handling of their accounts. The Bank
is vigorously defending this suit and does not anticipate any settlement
discussions. This trial is set for late this summer.
A second lawsuit involves a joint venture investment made by a wholly-owned
subsidiary of Coastal Mortgage Bankers & Realty Company, Inc. An answer to this
suit was filed on October 29, 1993 on behalf of the Joint Venture. The
Plaintiff's complaint was amended to add additional Defendants on June 25, 1995.
The Plaintiff alleges construction deficiencies and seeks damages in excess of
$13 million. The cause of action is negligent construction, breach of implied
warranty of workmanship, habitability and fitness. A subsidiary of Coastal
Mortgage Bankers and Realty Company, Inc. is a one-third owner in the joint
venture company which is one of the defendants in this action. The joint venture
is vigorously defending this suit.
Based upon the present status of these cases, the Corporation's understanding
of the facts in each case, and discussion with its legal representatives, the
Corporation does not believe that any of these lawsuits represent a material
FASB No. 5 contingency which would require financial statement accrual. As a
result, the Corporation has not established any specific allowances for the
suits. Due to the nature of the uncertainty of litigation, the Corporation can
not predict the amount of loss, if any, that may ultimately result from this
litigation.
Item 2. Changes In Securities
Not Applicable.
Item 3. Defaults Upon Senior Securities
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders
At the annual meeting held on January 22, 1996, the following items were
ratified.
(a) The election of directors of all nominees: James C. Benton, James P.
Creel, and Wilson B. Springs.
A total of 2,698,453 votes were entitled to be cast. Votes for Benton were
2,280,264 with 3,206 withheld; votes for Creel were 2,280,136 with 3,206
withheld; votes for Springs were 2,280,136 with 3,206 withheld.
J. T. Clemmons, G. David Bishop, Harold D. Clardy, Michael C. Gerald and Samuel
Smart are directors whose terms continued after the meeting.
(b) The Coastal Financial Corporation 1996 Directors Performance Plan.
A total of 2,698,453 votes were entitled to be cast. Votes for the Plan were
2,276,155 and votes withheld were 7,316.
<PAGE>
Item 5. Other Information
Not Applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) No exhibits are required to be filed by the Registrant pursuant to item
601 of Regulation S-K.
(b) The Company did not file any current reports on Form 8-K during the
quarter under report.
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
COASTAL FINANCIAL CORPORATION
May 15, 1996 /s/Michael C. Gerald
- - - ------------------------- ---------------------------------------
Date Michael C. Gerald
President and Chief Executive Officer
May 15, 1996 /s/Jerry L. Rexroad
- - - ------------------------- ---------------------------------------
Date Jerry L. Rexroad
Executive Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 10,199
<INT-BEARING-DEPOSITS> 3,536
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 34,817
<INVESTMENTS-CARRYING> 330
<INVESTMENTS-MARKET> 0
<LOANS> 374,192
<ALLOWANCE> 3,856
<TOTAL-ASSETS> 441,216
<DEPOSITS> 283,913
<SHORT-TERM> 67,267
<LIABILITIES-OTHER> 4,630
<LONG-TERM> 58,559
0
0
<COMMON> 22
<OTHER-SE> 26,825
<TOTAL-LIABILITIES-AND-EQUITY> 441,216
<INTEREST-LOAN> 15,746
<INTEREST-INVEST> 930
<INTEREST-OTHER> 309
<INTEREST-TOTAL> 16,985
<INTEREST-DEPOSIT> 5,788
<INTEREST-EXPENSE> 9,442
<INTEREST-INCOME-NET> 7,543
<LOAN-LOSSES> 597
<SECURITIES-GAINS> (12)
<EXPENSE-OTHER> 5,747
<INCOME-PRETAX> 3,523
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,226
<EPS-PRIMARY> .78
<EPS-DILUTED> 0
<YIELD-ACTUAL> 8.52
<LOANS-NON> 0
<LOANS-PAST> 1,028
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,682
<CHARGE-OFFS> 73
<RECOVERIES> 11
<ALLOWANCE-CLOSE> 174
<ALLOWANCE-DOMESTIC> 3,856
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
