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 June 30, 1996
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to __________
Commission File Number: 0-19684
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 (June 30, 1996).
Common Stock $.01 Par Value Per Share 3,436,403 Shares
- - --------------------------------------------------------------------------------
(Class) (Outstanding)
<PAGE>
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER AND NINE MONTHS ENDED JUNE 30, 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 June 30, 1996
Consolidated Statements of Operations for the three
months ended June 30, 1995 and 1996
Consolidated Statements of Operations for the nine
months ended June 30, 1995 and 1996
Consolidated Statements of Cash Flows for the nine
months ended June 30, 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 June 30, 1995 and 1996
3. Management's Discussion and Analysis of Operations
for the nine months ended June 30, 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>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
September 30, June 30,
1995 1996
--------- ---------
(Unaudited)
(Dollars in thousands)
<S> <C> <C>
ASSETS:
Cash & amounts due from banks .................... $ 9,318 $ 9,500
Short-term interest-bearing deposits ............. 1,883 --
Investment securities held to maturity
(market value of $2,297 at September 30,
1995 and $333 at June 30, 1996) ............... 2,329 330
Investment securities available for sale ......... -- 15,476
Mortgage-backed securities held to
maturity(market value of $12,904
at September 30, 1995) ......................... 12,776 --
Mortgage-backed securities available for sale .... -- 31,776
Loans receivable (net of allowance for
loan losses of $3,578 at September 30,
1995 and $4,037 at June 30, 1996) ............. 356,819 372,069
Loans receivable held for sale ................... 2,393 4,214
Real estate acquired through foreclosure ......... 789 314
Office property and equipment, net ............... 5,415 5,662
Federal Home Loan Bank stock, at cost ............ 4,726 6,234
Accrued interest receivable on loans ............. 2,167 2,727
Accrued interest receivable on investments ....... 250 642
Other assets and deferred charges ................ 2,336 3,865
--------- ---------
$ 401,201 $ 452,809
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
LIABILITIES:
Deposits ......................................... $ 273,099 $ 291,894
Securities sold under agreements to
repurchase .................................... 2,677 2,399
Advances from Federal Home Loan Bank ............. 93,320 120,818
Other borrowings ................................. -- 3,466
Drafts outstanding ............................... 2,289 1,488
Accrued interest payable ......................... 767 753
Other liabilities ................................ 4,229 4,350
--------- ---------
Total liabilities .............................. $ 376,381 $ 425,168
--------- ---------
(CONTINUED)
<PAGE>
<CAPTION>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (CONTINUED)
September 30, June 30,
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; 3,356,056 shares at
September 30, 1995 and 3,436,403 shares
at June 30, 1996 issued and outstanding ....... 34 34
Additional paid-in capital ....................... 8,710 8,710
Retained earnings ................................ 18,674 20,249
Treasury stock, at cost (120,169 and 60,374
shares, respectively) .......................... (2,598) (1,318)
Unrealized loss on securities available
for sale, net of income taxes .................. -- (34)
--------- ---------
Total stockholders' equity ..................... 24,820 27,641
--------- ---------
$ 401,201 $ 452,809
========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996
1995 1996
----------- -----------
(Unaudited)
(Dollars in thousands)
<S> <C> <C>
Interest income:
Loans receivable ........................... $ 7,394 $ 7,890
Investment securities ...................... 105 235
Mortgage-backed securities ................. 238 546
Other ...................................... 148 77
----------- -----------
Total interest income ...................... 7,885 8,748
----------- -----------
Interest expense:
Deposits ................................... 2,685 2,833
Securities sold under agreement to
repurchase ............................... 14 101
Advances from Federal Home Loan Bank ....... 1,971 1,727
----------- -----------
Total interest expense ..................... 4,670 4,661
----------- -----------
Net interest income ........................ 3,215 4,087
Provision for loan losses ..................... 50 300
----------- -----------
Net interest income after provision
for loan losses .......................... 3,165 3,787
----------- -----------
Other income:
Fees and service charges ................... 253 379
Income (loss) from real estate owned ....... (141) 183
Income from real estate partnerships ....... 310 79
Gain on sale of loans receivable, net ...... 15 212
Other income ............................... 287 438
----------- -----------
724 1,291
----------- -----------
(CONTINUED)
<PAGE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996 (CONTINUED)
1995 1996
----------- -----------
(Unaudited)
(Dollars in thousands)
<S> <C> <C>
General and administrative expenses:
Salaries and employee benefits ............. 1,258 1,578
Net occupancy, furniture and fixtures
and data processing expense .............. 574 722
FDIC insurance premium ..................... 137 156
Other expenses ............................. 430 659
----------- -----------
2,399 3,115
----------- -----------
Earnings before income taxes .................. 1,490 1,963
Income taxes .................................. 544 729
----------- -----------
Net income .................................... $ 946 $ 1,234
=========== ===========
Earnings per common share ..................... $ .27 $ .34
=========== ===========
Weighted average common shares outstanding .... 3,550,000 3,598,000
=========== ===========
Dividends per share ........................... $ .096 $ .10
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED JUNE 30, 1995 AND 1996
1995 1996
----------- -----------
(Unaudited)
(Dollars in thousands)
<S> <C> <C>
Interest income:
Loans receivable .............................. $ 21,190 $ 23,636
Investment securities ......................... 302 451
Mortgage-backed securities .................... 509 1,259
Other ......................................... 352 387
----------- -----------
Total interest income ......................... 22,353 25,733
----------- -----------
Interest expense:
Deposits ...................................... 7,022 8,621
Securities sold under agreement to
repurchase .................................. 41 228
Advances from Federal Home Loan Bank .......... 5,571 5,254
----------- -----------
Total interest expense ........................ 12,634 14,103
----------- -----------
Net interest income ........................... 9,719 11,630
Provision for loan losses ........................ 145 640
----------- -----------
Net interest income after provision
for loan losses ............................. 9,574 10,990
----------- -----------
Other income:
Fees and service charges ...................... 783 1,023
Income (loss) from real estate owned .......... (88) 201
Income from real estate partnerships .......... 645 148
Gain on sale of loans receivable, net ......... 17 809
Loss on sale of securities available for sale . -- (12)
Other income .................................. 979 1,189
----------- -----------
2,336 3,358
----------- -----------
(CONTINUED)
<PAGE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED JUNE 30, 1995 AND 1996 (CONTINUED)
1995 1996
----------- -----------
(Unaudited)
(Dollars in thousands)
<S> <C> <C>
General and administrative expenses:
Salaries and employee benefits ................ 4,012 4,641
Net occupancy, furniture and fixtures
and data processing expense ................. 1,712 2,086
FDIC insurance premium ........................ 424 461
Other expenses ................................ 1,414 1,674
----------- -----------
7,562 8,862
----------- -----------
Earnings before income taxes ..................... 4,348 5,486
Income taxes ..................................... 1,603 2,027
----------- -----------
Net income ....................................... $ 2,745 $ 3,459
=========== ===========
Earnings per common share ........................ $ .77 $ .96
=========== ===========
Weighted average common shares outstanding ....... 3,565,313 3,586,000
=========== ===========
Dividends per share .............................. $ .192 $ .20
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE NINE MONTHS ENDED JUNE 30, 1995 AND 1996
1995 1996
--------- ---------
(Unaudited)
(In thousands)
<S> <C> <C>
Cash flows from operating activities:
Net earnings ................................... $ 2,745 $ 3,459
Adjustments to reconcile net earnings
to net cash provided by (used in)
operating activities:
Income from real estate partnerships ...... (645) (148)
Depreciation .............................. 401 540
Provision for loan losses ................. 145 640
Origination of loans receivable
held for sale ........................... (2,092) (34,600)
Proceeds from sales of loans receivable
held for sale ........................... 1,418 31,366
Increase in:
Other assets and deferred charges .......... (1,060) (1,277)
Accrued interest receivable ................ (651) (952)
Increase (decrease) in:
Accrued interest payable ................... 336 (14)
Other liabilities .......................... 536 628
--------- ---------
Net cash provided by (used in)
operating activities ................ 1,133 (358)
--------- ---------
Cash flows from investing activities:
Purchases of investment securities
available for sale ........................ (325) (21,535)
Proceeds from sales of investment
securities available for sale ............. -- 7,000
Proceeds from maturities of investment
securities available for sale ........... -- 1,000
Purchases of mortgage-backed securities
available for sale ........................ -- (10,686)
Proceeds from sales of mortgage-backed
securities available for sale ............. -- 8,068
Origination of loans receivable, net ........... (99,102) (95,238)
Purchases of loans receivable .................. -- (12,448)
Principal collected on loans receivable
and mortgage-backed securities, net ....... 66,786 76,356
Proceeds from sale of real estate
acquired through foreclosure, net ......... 236 946
Purchases of office properties and
equipment .................................. (752) (787)
Purchases of FHLB stock, net ................... (974) (1,508)
Other investing activities, net ................ 585 96
--------- ---------
Net cash used in
investing activities ................ (33,546) (48,736)
--------- ---------
(CONTINUED)
<PAGE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE NINE MONTHS ENDED JUNE 30, 1995 AND 1996 (CONTINUED)
1995 1996
--------- ---------
(Unaudited)
(In thousands)
<S> <C> <C>
Cash flows from financing activities:
Increase in deposits, net ...................... $ 15,594 $ 18,795
Decrease in securities sold
under agreement to repurchase, net ............ (602) (278)
Proceeds from FHLB advances .................... 328,619 75,850
Repayment of FHLB advances ..................... (309,140) (48,352)
Proceeds from other borrowings ................. -- 3,466
Decrease in advance payments by borrowers
for property taxes and insurance ............ (310) (509)
Decrease in drafts outstanding, net ............ (345) (801)
Repurchase of treasury stock, at cost .......... (760) --
Dividend to stockholders ....................... (954) (1,059)
Other financing activities, net ................ 97 281
--------- ---------
Net cash provided by financing activities ...... 32,199 47,393
--------- ---------
Net decrease
in cash and cash equivalents .................. (214) (1,701)
--------- ---------
Cash and cash equivalents at beginning
of the period .................................. 21,637 11,201
--------- ---------
Cash and cash equivalents at end
of the period .................................. $ 21,423 $ 9,500
========= =========
Supplemental information:
Interest paid .................................. $ 12,287 $ 25,747
========= =========
Income taxes paid .............................. $ 1,627 $ 2,237
========= =========
Supplemental schedule of non-cash investing
and financing transactions:
Transfer of mortgage loans to real estate
acquired through foreclosure ................ $ 3,371 $ 471
========= =========
Collateralization of mortgage loans to FHLMC
participation certificates .................. $ 11,793 $ 19,366
========= =========
Transfer of investment securities held to
maturity to available for sale ............... $ -- $ 14,775
========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
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 ......................... $ 33 $ 6,538 $ 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 ........................ 33 6,626 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 ........................ $ 34 $ 8,710 $ 18,674 $ (2,598) $ -- $ 24,820
Exercise of stock
options ......................... -- -- (758) 837 -- 79
Issuance of shares
in acquisition
of CFM, Inc. .................. -- -- (67) 443 -- 376
Cash dividends ..................... -- -- (1,059) -- -- (1,059)
Unrealized gain on
securities available
for sale, net of
income taxes ..................... -- -- -- -- (34) (34)
Net income ......................... -- -- 3,459 -- -- 3,459
-------- -------- -------- -------- -------- --------
Balance at June
30, 1996 ........................ $ 34 $ 8,710 $ 20,249 $ (1,318) $ (34) $ 27,641
======== ======== ======== ======== ======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<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 nine month periods ended June 30, 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, June 30,
1995 1996
--------- ---------
(Unaudited)
(In thousands)
<S> <C> <C>
First mortgage loans:
Single family to 4 family units ................ $ 226,488 $ 218,204
Other .......................................... 54,401 66,883
Construction loans ............................. 27,905 39,397
Consumer and commercial loans:
Installment consumer loans ..................... 34,123 32,301
Mobile home loans .............................. 1,204 1,042
Deposit account loans .......................... 705 473
Equity lines of credit ......................... 13,210 12,372
Commercial and other loans ..................... 19,610 25,408
--------- ---------
377,646 396,080
Less:
Allowance for loan losses ...................... 3,578 4,037
Unearned discounts ............................. 39 38
Deferred loan fees (costs) ..................... 32 (259)
Undisbursed portion of loans in process ........ 17,178 20,195
--------- ---------
$ 356,819 $ 372,069
========= =========
</TABLE>
<PAGE>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The changes in the allowance for loan losses consist of the following for the
nine months ended:
<TABLE>
<CAPTION>
June 30,
1995 1996
------- -------
(Unaudited)
(In thousands)
<S> <C> <C>
Beginning allowances ....................... $ 3,353 $ 3,578
Provision for loan losses .................. 145 640
Loan recoveries ............................ 155 70
Loan charge-offs ........................... (223) (251)
------- -------
Ending allowance ........................... $ 3,430 $ 4,037
======= =======
</TABLE>
(3) DEPOSITS
Deposits consist of the following:
<TABLE>
<CAPTION>
September 30, 1995 June 30, 1996
--------------------- ---------------------
Weighted Weighted
Amount Rate Amount Rate
-------- ---- -------- ----
(Unaudited)
(In thousands)
<S> <C> <C> <C> <C>
Transaction accounts ....... $ 87,862 2.59% $122,566 3.05%
Passbook accounts .......... 46,421 2.54 42,222 2.52
Certificate accounts ....... 138,816 6.08 127,106 5.61
-------- ---- -------- ----
$273,099 4.35% $291,894 4.06%
======== ==== ======== ====
</TABLE>
<PAGE>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(4) ADVANCES FROM FEDERAL HOME LOAN BANK
Advances from Federal Home Loan Bank consist of the following:
<TABLE>
<CAPTION>
September 30, 1995 June 30, 1996
-------------------- ---------------------
Weighted Weighted
Amount Rate Amount Rate
-------- ---- -------- ----
(Unaudited)
(In thousands)
<S> <C> <C> <C> <C>
Maturing within:
1 year ......................... $ 36,989 6.40% $ 58,254 5.71%
2 years ........................ 12,368 6.87 26,334 6.38
3 years ........................ 21,634 6.62 14,305 6.33
4 years ........................ 5,905 7.57 5,761 6.49
5 years and thereafter ......... 16,424 6.77 16,163 6.46
-------- ---- -------- ----
$ 93,320 6.65% $120,818 6.07%
======== ==== ======== ====
</TABLE>
At September 30, 1995, and June 30, 1996, the Bank had pledged first mortgage
loans with unpaid balances of approximately $164.7 million and $214.8 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 and June 20, 1996,
the Company declared a five for four stock split in the form of a 25% stock
dividend, aggregating approximately 542,000 and 687,000 shares respectively. All
per share data has been retroactively restated to give effect to the common
stock dividends.
<PAGE>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(6) 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, legislation passed by Congress and awaiting the President's
signature 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 legislation, the change in accounting
method that eliminated the reserve method would trigger bad debt reserve
recapture for post-1987 excess reserves over a nine-year period. At June 30,
1996, the Bank's post-1987 excess reserve amounted to approximately $1.2
million. 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 nine 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.
(7) 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>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
DISCUSSION OF FINANCIAL CONDITION CHANGES FROM
SEPTEMBER 30, 1995 TO JUNE 30, 1996
GENERAL
The Company reported $3.5 million in net earnings for the nine months ended June
30, 1996, compared to net earnings of $2.7 million for the nine months ended
June 30, 1995. Net interest income increased $1.9 million primarily as a result
of an increase in interest income of $3.4 million which was offset by an
increase in interest expense of $1.5 million. Provision for loan losses
increased from $145,000 for the nine months ended June 30, 1995, to $640,000 for
the nine months ended June 30, 1996. Other income increased from $2.3 million
for the nine months ended June 30, 1995, to $3.4 million for the nine months
ended June 30, 1996. General and administrative expenses increased from $7.6
million for the nine months ended June 30, 1995, to $8.9 million for the nine
months ended June 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
In accordance with Office of Thrift Supervision (OTS) regulations, the Bank 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
currently equal to 5% of such amount. Short-term liquid assets must currently be
1.0% of the liquidity base.
Liquid assets, consisting of cash, interest-bearing deposits, and investment
securities available for sale, increased from $13.5 million at September 30,
1995, to $25.3 million at June 30, 1996.
Historically, the Bank 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 Bank's liquidity was 7.3% at September 30, 1995 and June 30, 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 $101.2 million for the nine months ended
June 30, 1995, compared to $129.8 million for the nine months ended June 30,
1996. The majority of these loan originations were financed through loan
principal repayments which amounted to $66.8 million and $76.4 million for the
nine month periods ended June 30, 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 nine month period ended June
30, 1996, the Company sold $31.4 million in mortgage loans compared to $1.4
million sold for the nine month period ended June 30, 1995. The remainder of the
loan originations were funded with FHLB advances.
<PAGE>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION- CONTINUED
COMPARISONS OF THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996
LIQUIDITY AND CAPITAL RESOURCES - CONTINUED
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.
The Bank experienced an increase of $18.8 million in deposits for the nine month
period ended June 30, 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 June 30, 1996, the Company had commitments to originate $9.4 million in
mortgage loans, and $17.0 million in undisbursed lines of credit, which the
Company expects to fund from normal operations.
At June 30, 1996, the Company had $97.9 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 June 30, 1996, the Company had pledged first mortgage loans
approximating $215 million to the FHLB which could support approximately $40.2
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 $27.4 million at June 30, 1996, exceeding tangible and
core capital requirements by $20.6 million and $13.8 million, respectively. At
June 30, 1996, the Bank's risk-based capital of approximately $30.9 million
exceeded its current risk-based capital requirement by $7.3 million. (For
further information see Regulatory Matters).
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATION
FOR THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996
GENERAL
Net income increased from $946,000 for the three months ended June 30, 1995, to
$1.2 million for three months ended June 30, 1996, or 30.4%. Net interest income
increased $872,000 primarily as a result of an increase of $863,000 in interest
income. Provision for loan losses increased from $50,000 for three months ended
June 30, 1995, to $300,000 for the three months ended June 30, 1996. Other
income increased $567,000 primarily as a result of increased gains on the sale
of mortgage loans of $197,000 and gains on the sale of real estate owned of
$324,000.
<PAGE>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATION- CONTINUED
COMPARISONS OF THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996
INTEREST INCOME
Interest income for the three months ended June 30, 1996, increased to $8.7
million as compared to $7.9 million for the three months ended June 30, 1995.
The earning asset yield for the three months ended June 30, 1996, was 8.34%
compared to a yield of 8.32% for the three months ended June 30, 1995. The
average yield on loans receivable for the three months ended June 30, 1996, was
8.44% compared to 8.46% for the three months ended June 30, 1995. The yield on
investments increased to 6.55% for the three months ended June 30, 1996, from
5.25% for the three months ended June 30, 1995. The primary reason for the
increase in interest income was the $40.3 million increase in average balances.
Total average earning assets were $424.9 million for the quarter ended June 30,
1996, as compared to $384.6 million for the quarter ended June 30, 1995.
INTEREST EXPENSE
Interest expense on interest-bearing liabilities was $4.7 million for the three
months ended June 30, 1995 and 1996. The average cost of deposits for the three
months ended June 30, 1996, was 3.95% compared to 4.19% for the three months
ended June 30, 1995. The average cost of advances for the three months ended
June 30, 1996, was 5.86% compared to 6.56% for the three months ended June 30,
1995. The cost on interest-bearing liabilities was 4.52% for the three months
ended June 30, 1996, as compared to 4.95% for the three months ended June 30,
1995. With the increase in short-term interest rates during the latter part of
fiscal 1995, the Company experienced a slight increased cost of deposits.
However, short-term advances cost decreased in the first nine months of the
fiscal 1996 more than offsetting the increased deposit cost. Total average
interest-bearing liabilities increased from $377.6 million at June 30, 1995 to
$412.7 million at June 30, 1996.
NET INTEREST INCOME
Net interest income was $4.1 million for the three months ended June 30, 1996,
as compared to $3.2 million for the three months ended June 30, 1995. The net
interest margin increased to 3.82% for the three months ended June 30, 1996,
from 3.37% for the three months ended June 30, 1995.
PROVISION FOR LOAN LOSSES
The provision for loan losses increased from $50,000 for the three months ended
June 30, 1995, to $300,000 for the three months ended June 30, 1996. This is due
primarily to the growth in commercial real estate loans. For the three months
ended June 30, 1996, net charge-offs were $119,000 compared to net recoveries of
$7,000 for the three months ended June 30, 1995. The allowance for loan losses
as a percentage of total loans was 1.08% at June 30, 1996, compared to 1.00% at
September 30, 1995. Loans delinquent 90 days or more were .10% of total loans at
June 30, 1996, compared to .59% at September 30, 1995. The allowance for loan
losses was 1,121% of loans delinquent more than 90 days at June 30, 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>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATION- CONTINUED
COMPARISONS OF THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996
OTHER INCOME
For the three months ended June 30, 1996, other income increased 78.3% to $1.3
million compared to $724,000 for the three months ended June 30, 1995. The major
portion of the increase was due to increased gains on the sale of mortgage loans
held for sale of $197,000 and gains on sale of real estate owned of $324,000.
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 real estate owned was the
decrease in income from real estate partnerships. For the three months ended
June 30, 1995, income from real estate partnerships was $310,000 compared to
$79,000 for the three months ended June 30, 1996.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased from $2.4 million for the three
months ended June 30, 1995, to $3.1 million for the three months ended June 30,
1996. Salaries and employee benefits increased $320,000, or 25.4% 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 $148,000. Enhancements to technology resulted in expense of
approximately $66,000 in the third 1996 quarter. The remainder of the increase
is due to normal growth and the addition of CFM, Inc.
INCOME TAXES
Income taxes increased from $544,000 for the three months ended June 30, 1995,
to $729,000 for the three months ended June 30, 1996, as a result of increased
income before taxes.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATION
FOR THE NINE MONTHS ENDED JUNE 30, 1995 AND 1996
GENERAL
Net income increased from $2.7 million for the nine months ended June 30, 1995,
to $3.5 million for nine months ended June 30, 1996, or 26.0%. Net interest
income increased $1.9 million primarily as a result of an increase in interest
expense of $1.5 million and an increase of $3.4 million in interest income.
Provision for loan losses increased from $145,000 for nine months ended June 30,
1995, to $640,000 for the nine months ended June 30, 1996. Other income
increased $1.0 million primarily as a result of increased gains on the sale of
mortgage loans of $792,000.
<PAGE>
1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATION
COMPARISONS OF THE NINE MONTHS ENDED JUNE 30, 1995 AND 1996
INTEREST INCOME
Interest income for the nine months ended June 30, 1996, increased to $25.7
million as compared to $22.4 million for the nine months ended June 30, 1995.
The earning asset yield for the nine months ended June 30, 1996, was 8.45%
compared to a yield of 8.22% for the nine months ended June 30, 1995. The
average yield on loans receivable for the nine months ended June 30, 1996, was
8.54% compared to 8.33% for the nine months ended June 30, 1995. The increase in
yield primarily resulted from repricing of adjustable-rate mortgage loans and a
higher mix of commercial real estate loans. Approximately 70% of the Company's
loans are adjustable or reprice within one year. The yield on investments
increased to 6.47% for the nine months ended June 30, 1996, from 5.15% for the
nine months ended June 30, 1995. Total average earning assets were $409.7
million for the nine month period ended June 30, 1996, as compared to $367.6
million for the nine month period ended June 30, 1995.
INTEREST EXPENSE
Interest expense on interest-bearing liabilities was $14.1 million for the nine
months ended June 30, 1996, as compared to $12.6 million for June 30, 1995. The
average cost of deposits for the nine months ended June 30, 1996, was 4.10%
compared to 3.86% for the nine months ended June 30, 1995. The cost of
interest-bearing liabilities was 4.70% for the nine months ended June 30, 1995
and 1996. With the increase in interest rates during fiscal 1996, the Company
experienced an increased cost of deposits and short term advances in the first
nine months of the fiscal 1996. However, the increase in PART interest expense
primarily was due to the increase in average balances of $40.0 million. Total
average interest-bearing liabilities increased from $358.7 million at June 30,
1995 to $398.7 million at June 30, 1996.
NET INTEREST INCOME
Net interest income was $11.6 million for the nine months ended June 30, 1996,
as compared to $9.7 million for the nine months ended June 30, 1995. The net
interest margin increased to 3.75% for the nine months ended June 30, 1996, from
3.53% for the nine months ended June 30, 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 $145,000 for the nine months ended
June 30, 1995, to $640,000 for the nine months ended June 30, 1996. This is due
primarily from the growth in commercial real estate loans. For the nine months
ended June 30, 1996, net charge-offs were $181,000 compared to net charge-offs
of $68,000 for the nine months ended June 30, 1995. The allowance for loan
losses as a percentage of total loans was 1.08% at June 30, 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.
<PAGE>
1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATION
COMPARISONS OF THE NINE MONTHS ENDED JUNE 30, 1995 AND 1996
OTHER INCOME
For the nine months ended June 30, 1996, other income increased 43.8% to $3.4
million compared to $2.3 million for the nine months ended June 30, 1995. The
major portion of the increase was due to increased gains on the sale of mortgage
loans held for sale of $792,000. 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 1995, the Company closed on the 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 $7.6 million for the nine
months ended June 30, 1995, to $8.9 million for the nine months ended June 30,
1996. Salaries and employee benefits increased $629,000, or 15.7% primarily as a
result of the acquisition of CFM, Inc. which accounted for $252,000 of the
increase. Net occupancy, furniture and fixtures and data processing expense
increased $374,000. Enhancement to technology resulted in expense of
approximately $206,000 in the first nine months of fiscal 1996. The remainder of
the increase is due to normal growth and the addition of CFM, Inc.
INCOME TAXES
Income taxes increased from $1.6 million for the nine months ended June 30,
1995, to $2.0 million for the nine months ended June 30, 1996, as a result of
increased income before taxes.
<PAGE>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REGULATORY MATTERS
The Company is not subject to any regulatory capital requirements. The
regulatory capital requirements for the Bank and the Bank's compliance with such
requirements at June 30, 1996 is as follows:
<TABLE>
<CAPTION>
Percent
Amount of Assets
------ ---------
<S> <C> <C>
Stockholders' equity ......................... $ 27,410 6.05%
Reduction for investment in and
advances to "nonincludables"
subsidiaries ................................. (49) (0.01)
-------- -----
Tangible capital ............................. 27,361 6.04
Tangible capital
requirement .................................. 6,767 1.50
-------- -----
Excess ....................................... $ 20,594 4.54%
======== =====
Core capital ................................. $ 27,361 6.05%
Core capital
requirement .................................. 13,534 3.00
-------- -----
Excess ....................................... $ 13,827 3.05%
======== =====
Risk-based capital ........................... $ 30,870 10.47%
Minimum risk-based
capital requirement .......................... 23,576 8.00
-------- -----
Excess ....................................... $ 7,294 2.47%
======== =====
</TABLE>
<PAGE>
IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS
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.
<PAGE>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS - CONTINUED
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.
In June, 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities." This statement
will become effective January 1, 1997. The Statement uses a "financial
components" approach that focuses on control to determine the proper accounting
for financial asset transfers. Under that approach, after financial assets are
transferred, an entity would recognize on its balance sheet all assets it
controls and liabilities it has incurred. The entity would remove from the
balance sheet those assets it no longer controls and liabilities it has
satisfied. The Company does not anticipate that adoption of this standard will
have a material effect on the Company's financial statements in 1997.
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 early fall.
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 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
Not Applicable.
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
/s/Michael C. Gerald
- - ------------------------- ------------------------------------
Date Michael C. Gerald
President and Chief Executive Officer
/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> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 9,500
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 47,252
<INVESTMENTS-CARRYING> 330
<INVESTMENTS-MARKET> 0
<LOANS> 376,283
<ALLOWANCE> 4,037
<TOTAL-ASSETS> 452,809
<DEPOSITS> 291,894
<SHORT-TERM> 65,607
<LIABILITIES-OTHER> 5,103
<LONG-TERM> 62,563
0
0
<COMMON> 34
<OTHER-SE> 27,607
<TOTAL-LIABILITIES-AND-EQUITY> 452,809
<INTEREST-LOAN> 25,733
<INTEREST-INVEST> 1,710
<INTEREST-OTHER> 387
<INTEREST-TOTAL> 25,733
<INTEREST-DEPOSIT> 8,621
<INTEREST-EXPENSE> 14,103
<INTEREST-INCOME-NET> 11,630
<LOAN-LOSSES> 809
<SECURITIES-GAINS> (12)
<EXPENSE-OTHER> 8,862
<INCOME-PRETAX> 5,486
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,459
<EPS-PRIMARY> .96
<EPS-DILUTED> 0
<YIELD-ACTUAL> 8.45
<LOANS-NON> 0
<LOANS-PAST> 360
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,014
<CHARGE-OFFS> 251
<RECOVERIES> 70
<ALLOWANCE-CLOSE> 23
<ALLOWANCE-DOMESTIC> 4,037
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
