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, 1998
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to __________
Commission File Number: 0-19684
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, 1998.
Common Stock $.01 Par Value Per Share 6,255,589 Shares
- ------------------------------------- ----------------
(Class) (Outstanding)
<PAGE>
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1998
TABLE OF CONTENTS
- -----------------
PART I- Consolidated Financial Information
Item 1.
Consolidated Financial Statements (unaudited):
Consolidated Statements of Financial Condition
as of September 30, 1997 and June 30, 1998
Consolidated Statements of Operations for the three
months ended June 30, 1997 and 1998
Consolidated Statements of Operations for the nine
months ended June 30, 1997 and 1998
Consolidated Statements of Cash Flows for the nine
months ended June 30, 1997 and 1998
Consolidated Statements of Stockholders' Equity
Notes to Consolidated Financial Statements
2.Management's Discussion and Analysis of
Financial Condition and Results of Operations
3.Quantitative and Qualitative Disclosures about
Market Risk
Part II - Other Information
Item
1.Legal Proceedings
2.Changes in Securities and Use of Proceeds
3.Default Upon Senior Securities
4.Submission of Matters to a Vote of Securities Holders
5.Other information
6.Exhibits and Reports on Form 8-K
Signatures
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
September 30, June 30,
1997 1998
--------- ---------
(Unaudited)
(Dollars in thousands)
ASSETS:
<S> <C> <C>
Cash & amounts due from banks ................... $ 12,852 $ 13,908
Short-term interest-bearing deposits ............ 559 284
Investment securities available for sale ........ 26,171 14,217
Mortgage-backed securities available for sale ... 23,023 150,732
Loans receivable (net of allowance for
loan losses of $4,902 at September 30,
1997 and $5,519 at June 30, 1998) ............ 403,570 405,985
Loans receivable held for sale .................. 8,359 10,184
Real estate acquired through foreclosure ........ 250 271
Office property and equipment, net .............. 7,561 8,437
Federal Home Loan Bank stock, at cost ........... 5,618 6,361
Accrued interest receivable on loans ............ 2,814 2,695
Accrued interest receivable on investments ...... 452 1,198
Other assets and deferred charges ............... 2,774 2,615
--------- ---------
$ 494,003 $ 616,887
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
LIABILITIES:
Deposits ........................................ $ 347,116 $ 367,922
Securities sold under agreements to
repurchase ................................... 2,666 76,226
Advances from Federal Home Loan Bank ............ 101,478 123,209
Other borrowings ................................ 2,193 5,186
Drafts outstanding .............................. 1,018 1,141
Advances by borrowers for property taxes
and insurance ................................. 1,409 1,088
Accrued interest payable ........................ 952 1,168
Other liabilities ............................... 4,780 4,569
--------- ---------
Total liabilities ............................. 461,612 580,509
--------- ---------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (CONTINUED)
September 30, June 30,
1997 1998
--------- ---------
(Unaudited)
(Dollars in thousands)
<S> <C> <C>
STOCKHOLDERS' EQUITY:
Serial preferred stock, 1,000,000 shares
authorized and unissued ...................... -- --
Common stock, $.01 par value, 15,000,000
shares authorized; 6,195,379 shares at
September 30, 1997 and 6,255,589 shares
at June 30, 1998 issued and outstanding ...... 62 62
Additional paid-in capital ...................... 8,682 8,873
Retained earnings ............................... 23,402 27,017
Treasury stock, at cost (9,760 shares) .......... (182) --
Unrealized gain on securities available
for sale, net of income taxes ................. 427 426
--------- ---------
Total stockholders' equity .................... 32,391 36,378
--------- ---------
$ 494,003 $ 616,887
========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1997 AND 1998
1997 1998
---- ----
(Unaudited)
(Dollars in thousands,
except per share data)
<S> <C> <C>
Interest income:
Loans receivable ............................ $ 8,542 $ 9,169
Investment securities ........................ 513 241
Mortgage-backed securities .................. 713 1,793
Other ....................................... 38 91
----------- -----------
Total interest income ....................... 9,806 11,294
----------- -----------
Interest expense:
Deposits .................................... 3,410 3,612
Securities sold under agreements to
repurchase ................................ 523 1,068
Advances from Federal Home Loan Bank ........ 1,280 1,649
----------- -----------
Total interest expense .................... 5,213 6,329
----------- -----------
Net interest income ......................... 4,593 4,965
Provision for loan losses ...................... 190 240
----------- -----------
Net interest income after provision
for loan losses ........................... 4,403 4,725
----------- -----------
Other income:
Fees and service charges .................... 367 469
Loss from real estate owned ................. (33) (22)
Gain on sale of loans receivable, net ....... 225 279
Gain on sale of securities available for sale 3 242
Other income ................................ 432 553
----------- -----------
994 1,521
----------- -----------
General and administrative expenses:
Salaries and employee benefits .............. 1,714 1,898
Net occupancy, furniture and fixtures
and data processing expense ............... 677 837
FDIC insurance premium ...................... 52 53
Other expenses .............................. 556 656
----------- -----------
2,999 3,444
----------- -----------
Earnings before income taxes ................... 2,398 2,802
Income taxes ................................... 882 1,040
----------- -----------
Net income ..................................... $ 1,516 $ 1,762
=========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1997 AND 1998 (CONTINUED)
1997 1998
---- ----
(Unaudited)
(Dollars in thousands,
except per share data)
<S> <C> <C>
Earnings per common share
Basic ........................................ $ .24 $ .28
=========== ===========
Diluted ...................................... $ .23 $ .27
=========== ===========
Weighted average common shares
outstanding - basic .......................... 6,188,000 6,256,000
=========== ===========
Weighted average common shares
outstanding - diluted ........................ 6,531,000 6,581,000
=========== ===========
Dividends per share ............................ $ .0675 $ .07
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED JUNE 30, 1997 AND 1998
1997 1998
----------- -----------
(Unaudited)
(Dollars in thousands)
<S> <C> <C>
Interest income:
Loans receivable .......................... $ 24,939 $ 27,182
Investment securities ..................... 1,123 1,095
Mortgage-backed securities ................ 1,761 3,732
Other ..................................... 209 236
----------- -----------
Total interest income ..................... 28,032 32,245
----------- -----------
Interest expense:
Deposits .................................. 10,116 10,645
Securities sold under agreements to
repurchase .............................. 854 2,338
Advances from Federal Home Loan Bank ...... 3,906 4,748
----------- -----------
Total interest expense .................... 14,876 17,731
----------- -----------
Net interest income ....................... 13,156 14,514
Provision for loan losses .................... 540 680
----------- -----------
Net interest income after provision
for loan losses ......................... 12,616 13,834
----------- -----------
Other income:
Fees and service charges .................. 1,209 1,292
Loss from real estate owned ............... (106) (76)
Income from real estate held for investment 278 221
Gain on sale of loans receivable, net ..... 628 976
Gain on sale of securities
available for sale ....................... 33 510
Other income .............................. 1,287 1,519
----------- -----------
3,329 4,442
----------- -----------
General and administrative expenses:
Salaries and employee benefits ............ 5,051 5,605
Net occupancy, furniture and fixtures
and data processing expense ............. 2,133 2,395
FDIC insurance premium .................... 231 158
Other expenses ............................ 1,955 2,100
----------- -----------
9,370 10,258
----------- -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED JUNE 30, 1997 AND 1998 (CONTINUED)
1997 1998
----------- -----------
(Unaudited)
(Dollars in thousands)
<S> <C> <C>
Earnings before income taxes ................. 6,575 8,018
Income taxes ................................. 2,405 2,949
----------- -----------
Net income ................................... $ 4,170 $ 5,069
=========== ===========
Earnings per common share
Basic .................................... $ .67 $ .81
=========== ===========
Diluted .................................. $ .65 $ .77
=========== ===========
Weighted average common shares
outstanding - basic ........................ 6,188,000 6,256,000
=========== ===========
Weighted average common
shares outstanding - diluted ............... 6,464,000 6,546,000
=========== ===========
Dividends per share .......................... $ .2025 $ .21
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE NINE MONTHS ENDED JUNE 30, 1997 AND 1998
1997 1998
--------- ---------
(Unaudited)
(In thousands)
<S> <C> <C>
Cash flows from operating activities:
Net earnings .............................. $ 4,170 $ 5,069
Adjustments to reconcile net earnings
to net cash provided by
operating activities:
Income from real estate
held for investment ................. (278) (221)
Depreciation ......................... 643 753
Provision for loan losses ............ 540 680
Origination of loans receivable
held for sale ...................... (29,652) (50,611)
Proceeds from sales of loans receivable
held for sale ...................... 31,123 52,436
(Increase) decrease in:
Other assets and deferred charges ..... (1,052) 159
Accrued interest receivable ........... (875) (627)
Increase (decrease) in:
Accrued interest payable .............. 50 216
Other liabilities ...................... (401) (211)
--------- ---------
Net cash provided by
operating activities ........... 4,268 7,643
--------- ---------
Cash flows from investing activities:
Purchases of investment securities
available for sale ................... (20,023) (15,167)
Proceeds from sales of investment
securities available for sale ........ 2,399 4,500
Proceeds from maturities of investment
securities available for sale ......... 5,936 22,596
Proceeds from maturities of mortgage-backed
securities available for sale ......... 949 --
Purchases of mortgage-backed securities
available for sale ................... (24,636) (226,852)
Proceeds from sales of mortgage-backed
securities available for sale ........ 4,712 77,947
Origination of loans receivable, net ...... (103,523) (99,314)
Purchase of loans receivable .............. (3,065) (10,442)
Principal collected on loans receivable
and mortgage-backed securities, net .. 89,517 124,164
Proceeds from sale of real estate
acquired through foreclosure, net .... 135 27
Purchases of office properties and
equipment ............................. (888) (1,629)
Purchases (sales)of FHLB stock, net ....... 491 (743)
Other investing activities, net ........... 51 --
--------- ---------
Net cash used in
investing activities ........... (47,945) (124,913)
--------- ---------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 1997 AND 1998 (CONTINUED)
1997 1998
--------- ---------
(Unaudited)
(In thousands)
<S> <C> <C>
Cash flows from financing activities:
Increase in deposits, net .................... $ 18,566 $ 20,806
Increase in securities sold
under agreement to repurchase, net .......... 34,963 73,560
Proceeds from FHLB advances .................. 122,470 176,025
Repayment of FHLB advances ................... (134,694) (154,294)
Proceeds from other borrowings, net ........... (40) 2,993
Decrease in advance payments by borrowers
for property taxes and insurance, net ..... (332) (321)
Decrease in drafts outstanding, net .......... (876) 123
Dividend to stockholders ..................... (1,198) (1,271)
Other financing activities, net .............. 611 430
--------- ---------
Net cash provided by financing ............... 39,470 118,051
--------- ---------
activities
Net increase (decrease)
in cash and cash equivalents ................ (4,207) 781
--------- ---------
Cash and cash equivalents at beginning
of the period ................................ 20,861 13,411
--------- ---------
Cash and cash equivalents at end
of the period ................................ $ 16,654 $ 14,192
========= =========
Supplemental information:
Interest paid ................................ $ 14,826 $ 17,515
========= =========
Income taxes paid ............................ $ 1,410 $ 2,872
========= =========
Supplemental schedule of non-cash investing
and financing transactions:
Transfer of mortgage loans to real estate
acquired through foreclosure .............. $ 357 $ 48
========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. 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, 1996 .............. $ 62 $ 8,682 $ 20,015 $ (1,185) $ 107 $ 27,681
Exercise of stock
options ............... -- -- (786) 1,003 -- 217
Cash paid for fractional
shares ................ -- -- (18) -- -- (18)
Cash dividends .......... -- -- (1,600) -- -- (1,600)
Change in unrealized gain
on securities available
for sale, net of
income taxes .......... -- -- -- -- 320 320
Net income .............. -- -- 5,791 -- -- 5,791
-------- -------- -------- -------- -------- --------
Balance at September
30, 1997 .............. $ 62 $ 8,682 $ 23,402 $ (182) $ 427 $ 32,391
Exercise of stock
options ............... -- 191 (183) 182 -- 190
Cash dividends .......... -- -- (1,271) -- -- (1,271)
Change in unrealized gain
on securities available
for sale, net of
income taxes .......... -- -- -- -- (1) (1)
Net income .............. -- -- 5,069 -- -- 5,069
-------- -------- -------- -------- -------- --------
Balance at June
30, 1998 ............. $ 62 $ 8,873 $ 27,017 $ -- $ 426 $ 36,378
======== ======== ======== ======== ======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. 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 changes in 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, 1998 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, 1997, included in
the Company's 1997 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,
1997 1998
--------- ---------
(Unaudited)
(In thousands)
<S> <C> <C>
First mortgage loans:
Single family to 4 family units ................ $ 237,964 $ 251,157
Other, primarily commercial
real estate ................................... 97,680 91,135
Construction loans ............................. 34,216 27,088
Consumer and commercial loans:
Installment consumer loans ..................... 24,378 20,829
Mobile home loans .............................. 1,291 1,144
Deposit account loans .......................... 1,336 951
Equity lines of credit ......................... 15,294 17,225
Commercial and other loans ..................... 10,939 10,145
--------- ---------
423,098 419,674
Less:
Allowance for loan losses ...................... 4,902 5,519
Deferred loan fees (costs) ..................... (458) (698)
Undisbursed portion of loans in process ........ 15,084 8,868
--------- ---------
$ 403,570 $ 405,985
========= =========
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The changes in the allowance for loan losses consist of the following for the
nine months ended:
<TABLE>
<CAPTION>
June 30,
1997 1998
------- -------
(Unaudited)
(In thousands)
<S> <C> <C>
Beginning allowances ..................... $ 4,173 $ 4,902
Provision for loan losses ................ 540 680
Allowance on acquired loans .............. 25 109
Loan recoveries .......................... 57 34
Loan charge-offs ......................... (195) (206)
------- -------
Ending allowance ......................... $ 4,600 $ 5,519
======= =======
</TABLE>
(3) DEPOSITS
Deposits consist of the following:
<TABLE>
<CAPTION>
September 30, 1997 June 30, 1998
----------------------- -----------------------
Weighted Weighted
Average Average
Amount Rate Amount Rate
------ ---- ------ ----
(Unaudited)
(In thousands)
<S> <C> <C> <C> <C>
Transaction accounts ....... $167,014 3.10% $183,943 3.24%
Passbook accounts .......... 39,445 2.62 35,481 2.73
Certificate accounts ....... 140,657 5.58 148,498 5.37
-------- ---- -------- ----
$347,116 4.02% $367,922 4.05%
======== ==== ======== ====
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(4) ADVANCES FROM FEDERAL HOME LOAN BANK
Advances from Federal Home Loan Bank ("FHLB") consist of the following:
<TABLE>
<CAPTION>
September 30, 1997 June 30, 1998
---------------------- -----------------------
Weighted Weighted
Average Average
Amount Rate Amount Rate
------ ---- ------ ----
Maturing within: (Unaudited)
(In thousands)
<S> <C> <C> <C> <C>
1 year ......................... $ 23,620 6.15 % $ 29,435 5.78 %
2 years ........................ 28,435 5.79 5,861 6.23
3 years ........................ 6,761 6.45 10,246 5.79
4 years ........................ 7,646 5.91 2,519 6.40
5 years and thereafter ......... 35,016 5.60 75,148 5.25
-------- ---- -------- ----
$101,478 5.86 % $123,209 5.49 %
======== ==== ======== ====
</TABLE>
At September 30, 1997, and June 30, 1998, the Bank had pledged first mortgage
loans with unpaid balances of approximately $213.9 million and $203.6 million,
respectively, as collateral for FHLB advances. At September 30, 1997, included
in the four and five years and thereafter maturities were $30.0 million subject
to call provisions. At June 30, 1998, included in the three and five years and
thereafter maturities were $67.0 million subject to call provisions. Call
provisions are more likely to be exercised by the FHLB when rates rise.
(5) EARNINGS PER SHARE
Diluted earnings per share for the three and nine month periods ended June 30,
1997 and 1998, are computed by dividing net earnings by the weighted average
common equivalent shares outstanding during the respective periods. Common share
equivalents include dilutive common stock option share equivalents determined by
using the treasury stock method. All share and per share data have been
retroactively restated for all common stock dividends.
(6) COMMON STOCK DIVIDENDS
On April 30, 1997, the Company declared a four for three stock split in the form
of a 33% stock dividend, aggregating approximately 1,160,000 shares. On May 6,
1998, the Company declared a four-for-three stock split in the form of a 33%
stock dividend, aggregating approximately 1,562,000 shares. All share and per
share data has been retroactively restated to give effect to the common stock
dividends.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 2. COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
DISCUSSION OF FINANCIAL CONDITION CHANGES FROM SEPTEMBER 30, 1997 TO JUNE 30,
1998
FORWARD LOOKING STATEMENTS
This report may contain certain "forward-looking statements" within the meaning
of Section 27A of the Securities Exchange Act of 1934, as amended, that
represent the Company's expectations or beliefs concerning future events. Such
forward-looking statements are about matters that are inherently subject to
risks and uncertainties. Factors that could influence the matters discussed in
certain forward-looking statements include the timing and amount of revenues
that may be recognized by the Company, continuation of current revenue and
expense trends (including trends affecting charge-offs), absence of unforeseen
changes in the Company's markets, legal and regulatory changes, and general
changes in economy (particularly in the markets served by the Company).
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, Federal Agency Securities,
mortgage-backed securities, and certain other investments. The required level of
such investments is calculated on a "liquidity base" consisting of net
withdrawlable accounts and short-term borrowings, and is currently equal to 4%
of such amount.
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 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 and purchase of securities.
The Company originated loans receivable of $133.2 million for the nine months
ended June 30, 1997, compared to $149.9 million for the nine months ended June
30, 1998. The majority of these loan originations were financed through loan and
mortgage-backed securities principal repayments which amounted to $89.5 million
and $70.1 million for the nine month periods ended June 30, 1997 and 1998,
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, 1997, the Company sold $31.1
million in mortgage loans compared to $52.4 million sold for the nine month
period ended June 30, 1998.
For the nine month period ended June 30, 1997, the Company purchased $44.7
million in investment and mortgage-backed securities. For the nine month period
ended June 30, 1998, the Company purchased $242.0 million in investment and
mortgage-backed securities. The securities purchased generally reprice in less
than five years. A majority of the mortgage-backed securities purchased were
primarily secured by one year ARMs. These purchases were funded primarily with
short-term reverse repurchase agreements and FHLB advances.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 2. COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION- CONTINUED
COMPARISONS OF THE THREE MONTHS ENDED JUNE 30, 1997 AND 1998
LIQUIDITY AND CAPITAL RESOURCES - CONTINUED
The Bank experienced an increase of $20.8 million in deposits for the nine month
period ended June 30, 1998, primarily as a result of increased transaction
accounts. During fiscal 1997, the Company funded a portion of its loan growth
and increase in securities available for sale with advances from the FHLB and
reverse repurchase agreements.
At June 30, 1998, the Company had commitments to originate $10.2 million in
mortgage loans, and $31.1 million in undisbursed lines of credit, which the
Company expects to fund from normal operations.
At June 30, 1998, the Company had $116.7 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, 1998, the Company had pledged first mortgage loans in
the amount of $203.6 million to the FHLB which could support approximately $29.5
million in additional advances.
OTS 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 $37.7 million at June 30, 1998, exceeding tangible and core
capital requirements by $28.5 million and $13.1 million, respectively. At June
30, 1998, the Bank's risk-based capital of approximately $41.3 million exceeded
its current risk-based capital requirement by $14.7 million. (For further
information see Regulatory Matters).
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS FOR THE THREE MONTHS ENDED
JUNE 30, 1997 AND 1998
GENERAL
Net income increased from $1.5 million for the three months ended June 30, 1997,
to $1.8 million for three months ended June 30, 1998, or 16.2%. Net interest
income increased $372,000 primarily as a result of an increase of $1.5 million
in interest income offset by a $1.1 million increase in interest expense.
Provision for loan losses increased from $190,000 for three months ended June
30, 1997, to $240,000 for the three months ended June 30, 1998. Other income
increased $527,000 primarily as a result of increased income from fees and
service charges and gain on sales of securities. General and administrative
expense increased from $3.0 million for the quarter ended June 30, 1997, to $3.4
million for the quarter ended June 30, 1998.
INTEREST INCOME
Interest income for the three months ended June 30, 1998, increased to $11.3
million as compared to $9.8 million for the three months ended June 30, 1997.
The earning asset yield for the three months ended June 30, 1998, was 8.07%
compared to a yield of 8.51% for the three months ended June 30, 1997. The
average yield on loans receivable for the three months ended June 30, 1998 was
<PAGE>
PART I. FINANCIAL INFORMATION
Item 2. COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION- CONTINUED
COMPARISONS OF THE THREE MONTHS ENDED JUNE 30, 1997 AND 1998
LIQUIDITY AND CAPITAL RESOURCES - CONTINUED
8.83% compared to 8.77% for the three months ended June 30, 1997. The yield on
investments decreased to 6.77% for the three months ended June 30, 1998, from
6.90% for the three months ended June 30, 1997. Total average interest-earning
assets were $565.5 million for the quarter ended June 30, 1998, as compared to
$464.6 million for the quarter ended June 30, 1997. The increase in average
interest-earning assets is due to an increase in average loans receivable of
approximately $25.8 million and mortgage-backed securities of approximately
$85.4 million.
INTEREST EXPENSE
Interest expense on interest-bearing liabilities was $6.3 million for the three
months ended June 30, 1998, as compared to $5.2 million for June 30, 1997. The
average cost of deposits for the three months ended June 30, 1998, was 4.05%
compared to 4.13% for the three months ended June 30, 1997. The cost on
interest-bearing liabilities was 4.57% for the three months ended June 30, 1998,
as compared to 4.60% for the three months ended June 30, 1997. The cost of FHLB
advances and reverse repurchase agreements was 5.57% and 5.67%, respectively,
for the three months ended June 30, 1998. For the three months ended June 30,
1997, the cost was 5.96% and 5.69%, respectively. Total average interest-bearing
liabilities increased from $453.3 million at June 30, 1997 to $538.2 million at
June 30, 1998. The increase in average interest-bearing liabilities is due to an
increase in average deposits of approximately $26.5 million, FHLB advances of
$32.5 million and reverse repurchase agreements of $25.4 million.
NET INTEREST INCOME
Net interest income was $5.0 million for the three months ended June 30, 1998,
as compared to $4.6 million for the three months ended June 30, 1997. The net
interest margin was 3.50% for the three months ended June 30, 1998, and 3.91%
for the three months ended June 30, 1997. During the second quarter, the Bank
entered into a leverage strategy by purchasing ARM mortgage-backed securities
which were funded by repurchase agreements and short-term advances. This
strategy has an expected spread of approximately fifty basis points during the
first year.
PROVISION FOR LOAN LOSSES
The provision for loan losses increased from $190,000 for the period ended June
30, 1997, to $240,000 for the three months ended June 30, 1998. For the three
months ended June 30, 1998, net charge-offs were $80,000 compared to net
charge-offs of $68,000 for the three months ended June 30, 1997. The allowance
for loan losses as a percentage of total loans was 1.33% at June 30, 1998,
compared to 1.19% at September 30, 1997. Loans delinquent 90 days or more were
.64% of total loans at June 30, 1998, compared to .06% at September 30, 1997.
The allowance for loan losses was 208% of loans delinquent more than 90 days at
June 30, 1998, as compared to 1,906% at September 30, 1997. Non- performing
<PAGE>
PART I. FINANCIAL INFORMATION
Item 2. COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATION- CONTINUED
COMPARISONS OF THE THREE MONTHS ENDED JUNE 30, 1997 AND 1998
PROVISION FOR LOAN LOSSES - CONTINUED
loans included one significant loan with a balance of approximately $2.0
million. The Bank has initiated foreclosure proceedings on this property.
Presently, the Bank does not expect any material losses or charge-offs regarding
this loan. Management believes that the current level of allowances is adequate
considering the Company's current loss experience and delinquency trends, among
other criteria.
OTHER INCOME
For the three months ended June 30, 1998, other income increased 53.0% to $1.5
million compared to $1.0 million for the three months ended June 30, 1997. Fees
and service charges were $469,000 for the quarter ended June 30, 1998, compared
to $367,000 for the quarter ended June 30, 1997. This increase resulted from
approximately 10% growth in core deposits and increased charges for certain
deposit services since September 30, 1997. Gain on sale of loans was $279,000
for the quarter ended June 30, 1998, compared to $225,000 for the quarter ended
June 30, 1997. This is due to a decreasing long-term interest rate environment
which has led to increased mortgage refinancing. Gain on sale of securities was
$242,000 for the quarter ended June 30, 1998, compared to $3,000 for the quarter
ended June 30, 1997.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased from $3.0 million for the three
months ended June 30, 1997, to $3.4 million for the three months ended June 30,
1998. Salaries and employee benefits increased from $1.7 million for the three
months ended June 30, 1997, to $1.9 million for the three months ended June 30,
1998 primarily due to increased number of lending personnel. Net occupancy,
furniture and fixtures and data processing expenses increased $160,000 when
comparing the two periods. This is primarily a result of increased maintenance,
lease expense and depreciation expense due to the addition of the Coastal
Federal University facility. Other expenses were $656,000 for the quarter ended
June 30, 1998, compared to $556,000 for the quarter ended June 30, 1997.
INCOME TAXES
Income taxes increased from $882,000 for the three months ended June 30, 1997,
to $1.0 million for the three months ended June 30, 1998, as a result of
increased income before taxes.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS FOR THE NINE MONTHS ENDED
JUNE 30, 1997 AND 1998
GENERAL
Net income increased from $4.2 million for the nine months ended June 30, 1997,
to $5.1 million for the nine months ended June 30, 1998, or 21.6%. Net interest
income increased $1.4 million primarily as a result of an increase in interest
income of $4.2 million offset by an increase of $2.9 million in interest
expense. Provision for loan losses increased from $540,000 for the nine months
ended June 30, 1997, to $680,000 for the nine months ended June 30, 1998. Other
income increased $1.1 million. General and administrative expenses increased
$888,000.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 2. COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATION- CONTINUED
COMPARISONS OF THE THREE MONTHS ENDED JUNE 30, 1997 AND 1998
GENERAL - CONTINUED
Interest income for the nine months ended June 30, 1998, increased to $32.2
million as compared to $28.0 million for the nine months ended June 30, 1997.
The earning asset yield for the nine months ended June 30, 1998, was 8.19%
compared to a yield of 8.44% for the nine months ended June 30, 1997.
Approximately $178,000 of interest income on loans was reserved during the nine
months ended June 30, 1998 for a $2.0 million non performing loan. This reserve
impacted the average loan yield by 6 basis points. The average yield on loans
receivable for the nine months ended June 30, 1998, was 8.75% compared to 8.65%
for the nine months ended June 30, 1997. The yield on investments decreased to
6.69% for the nine months ended June 30, 1998, from 6.80% for the nine months
ended June 30, 1997. Total average earning assets were $530.6 million for the
nine month period ended June 30, 1998, as compared to $445.7 million for the
nine month period ended June 30, 1997.
INTEREST EXPENSE
Interest expense on interest-bearing liabilities was $17.7 million for the nine
months ended June 30, 1998, as compared to $14.9 million for the nine months
ended June 30, 1997. The average cost of deposits for the nine months ended June
30, 1998, was 4.08% compared to 4.15% for the nine months ended June 30, 1997.
The cost of interest-bearing liabilities was 4.57% for the nine months ended
June 30, 1998 and 1997. Total average interest-bearing liabilities increased
from $432.3 million at June 30, 1997 to $511.7 million at June 30, 1998.
NET INTEREST INCOME
Net interest income was $14.5 million for the nine months ended June 30, 1998,
as compared to $13.2 million for the nine months ended June 30, 1997. The net
interest margin decreased to 3.62% for the nine months ended June 30, 1998, from
3.87% for the nine months ended June 30, 1997. 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 $540,000 for the period ended June
30, 1997, to $680,000 for the nine months ended June 31, 1998. For the nine
months ended June 30, 1998, net charge-offs were $172,000 compared to net
charge-offs of $138,000 for the nine months ended June 30, 1997. The allowance
for loan losses as a percentage of total loans was 1.33% at June 30, 1998,
compared to 1.19% at September 30, 1997. Non performing loans included one
significant loan with a balance of approximately $2.0 million dollars. The Bank
has initiated foreclosure proceedings on this property. Presently, the Bank does
not expect any material losses or charge-offs regarding this loan. Management
believes that the current level of allowances is adequate considering the
Company's current loss experience and delinquency trends, among other criteria.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 2. COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATION- CONTINUED
COMPARISONS OF THE THREE MONTHS ENDED JUNE 30, 1997 AND 1998
OTHER INCOME
For the nine months ended June 30, 1998, other income increased 33.4% to $4.4
million compared to $3.3 million for the nine months ended June 30, 1997. Fees &
service charges for the nine months ended June 30, 1997 were $1.2 million
compared to $1.3 million for the nine months ended June 30, 1998. This is the
result of approximately 10% growth in core deposits and increased charges for
certain deposit services since September 30, 1997. Other income increased from
$1.3 million for the nine months ended June 30, 1997 compared to $1.5 million
for the nine months ended June 30, 1998. Due to a decreasing long-term interest
rate environment which has resulted in increased mortgage refinancing, gain on
sale of loans was $628,000 for the nine months ended June 30, 1997, compared to
$976,000 for the nine months ended June 30, 1998. Proceeds from sales of
mortgage loans were $52.4 million, an increase of 68.5%, for the first nine
months of 1998 compared to $31.1 million for the comparable 1997 period. Gain on
sale of securities was $33,000 for the nine months ended June 30, 1997, compared
to $510,000 for the nine months ended June 30, 1998.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased from $9.4 million for the nine
months ended June 30, 1997, to $10.3 million for the nine months ended June 30,
1998. Salaries and employee benefits increased $554,000, or 11.0% primarily as a
result of increased lending personnel. Net occupancy, furniture and fixtures and
data processing expense increased $262,000 primarily as a result of increased
maintenance, lease expense and depreciation expense due to the addition of the
Coastal Federal University facility. Other expense was $2.0 million for the nine
months ended June 30, 1997, compared to $2.1 million for the nine months ended
June 30, 1998. These were partially offset by lower FDIC premiums of $73,000.
INCOME TAXES
Income taxes increased from $2.4 million for the nine months ended June 30,
1997, to $2.9 million for the nine months ended June 30, 1998, as a result of
increased income before taxes.
REGULATORY MATTERS
To be categorized as "Well Capitalized" under the prompt corrective action
regulations adopted by the Federal Banking Agencies, the Bank must maintain a
total risk-based capital ratio as set forth in the following table and not be
subject to a capital directive order.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 2. COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATION- CONTINUED
COMPARISONS OF THE THREE MONTHS ENDED JUNE 30, 1997 AND 1998
REGULATORY MATTERS - CONTINUED
<TABLE>
<CAPTION>
Categorized as "Well
Capitalized" Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provision
---------------------- --------------------------- -----------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
(Dollar In Thousands)
<S> <C> <C> <C> <C> <C> <C>
As of June 30, 1998:
Total Capital: $41,270 12.43% $26,564 8.00% $33,205 10.00%
(To Risk Weighted Assets)
Tier 1 Capital: $37,684 11.35% $N/A N/A% $19,923 6.00%
(To Risk Weighted Assets)
Tier 1 Capital: $37,684 6.14% $18,414 3.00% $30,689 5.00%
(To Total Assets)
Tangible Capital: $37,684 6.14% $9,207 1.50% $N/A N/A%
(To Total Assets)
</TABLE>
IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130, Reporting Comprehensive Income (Statement 130). Statement 130 establishes
standards for reporting and display of comprehensive income and its components
in a full set of general purpose financial statements. Enterprises are required
to classify items of "other comprehensive income" by their nature in the
financial statement and display the balance of other comprehensive income
separately in the equity section of a statement of financial position. Statement
130 is effective for fiscal years beginning after December 15, 1997. Earlier
application is permitted. Comparative financial statements provided for earlier
periods are required to be reclassified to reflect the provisions of this
statement. The Company will adopt Statement 130 in the first quarter of fiscal
1999.
In June 1997, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information (Statement 131). Statement 131 establishes
standards for the way public business enterprises are to report information
about operating segments in annual financial statements and requires those
enterprises to report selected information about operating segments in interim
financial reports issued to shareholders. Statement 131 is effective for
financial statements for fiscal years beginning after December 15, 1997. Earlier
application is encouraged. In the initial year of application, comparative
information for earlier years is to be restated, unless it is impractical to do
so. Statement 131 need not be applied to interim financial statements in the
initial year of its application, but comparative information for interim periods
in the initial year of application shall be reported in financial statements for
interim periods in the second year of application. It is not anticipated that
this standard will materially effect the Company.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 2. COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATION- CONTINUED
COMPARISONS OF THE NINE MONTHS ENDED JUNE 30, 1997 AND 1998
EFFECT ON INFLATION AND CHANGING PRICES
The accompanying unaudited 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.
YEAR 2000 COMPLIANCE
The Company began working on year 2000 compliance issues in early 1997. Its data
processor has gone through testing and as of May 15, 1998, the core processing
system is Year 2000 qualified. Another test is scheduled for August 23, 1998 to
test local programs, hardware and communications. In February 1998, the Company
engaged a national consulting firm to assist in the identification and testing
of year 2000 issues. The Company believes it has adequate resources and funds to
address the year 2000 issues. The Company is also in the process of addressing
any loan relationships it believes could be materially effected by year 2000
issues. The Company currently expects the expenses related to addressing the
year 2000 issues to be between $100,000 to $200,000 (to be expensed as incurred)
and expects additional hardware and software capital expenditures of
approximately $100,000. Most of these expenses will be incurred in fiscal 1998
and 1999. However, no assurance can be given that such expenses and capital
expenditures will not exceed these expected amounts. The Company does not intend
to change its data processor prior to year 2000. Contingency plans are currently
being written by the Company in the event that they have to process manually in
January 2000.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
At June 30, 1998, no material changes have occurred in market risk disclosures
included in the Company's form 10-K for the year ended September 30, 1997.
<PAGE>
PART II. OTHER INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
Item 1. Legal Proceedings
The Bank is a defendant in one significant lawsuit. The action commenced on
December 1, 1997, and the Plaintiffs are seeking approximately $1.5 million in
actual damages as well as punitive damages. The cause of action is breach of
fiduciary duties, negligence, fraud, civil conspiracy and breach of contract
arising out of a lending relationship. At this date, the Bank does not know if
or when the action will go to trial. The Bank will vigorously defend this suit
and does not anticipate any settlement discussions.
Item 2. Changes In Securities and Use of Proceeds
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.
<PAGE>
PART II. OTHER INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3 (a) Certificate of Incorporation of Coastal Financial
Corporation**
3 (b) Certificate of Amendment to Certificate of
Incorporation of Coastal Financial Corporation*******
(c) Bylaws of Coastal Financial Corporation**
10 (a) Employment Agreement with Michael C. Gerald***
(b) Employment Agreement with Jerry L. Rexroad***
(c) Employment Agreement with Phillip G. Stalvey*****
(d) Employment Agreement with Allen W. Griffin***
(e) Employment Agreement with Jimmy R. Graham***
(f) 1990 Stock Option Plan***
(g) Directors Performance Plan****
(h) Loan Agreement with Bankers Bank******
27 Financial Data Schedule
(b) No reports on Form 8-K have been filed during the quarter covered by
this report.
* Incorporated by reference from the Annual Report to Stockholders for
the fiscal year ended September 30, 1997, attached as an exhibit
hereto.
** Incorporated by reference to Registration Statement on Form S-4 filed
with the Securities and Exchange Commission on November 26, 1990.
*** Incorporated by reference to 1995 Form 10-K filed with the Securities
and Exchange Commission on December 29, 1995.
**** Incorporated by reference to the proxy statement for the 1996 Annual
Meeting of Stockholders.
***** Incorporated by reference to 1997 Form 10-K filed with the Securities
and Exchange Commission on January 2, 1998.
****** Incorporated by reference to December 31, 1997 Form 10-Q filed with
Securities and Exchange Commission on February 13, 1998.
******* Incorporated by reference to March 31, 1998 Form 10-Q filed with
Securities and Exchange Commission on May 15, 1998.
<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
August 13, 1998 /s/ Michael C. Gerald
- ----------------- ----------------------
Date Michael C. Gerald
President and Chief Executive Officer
August 13, 1998 /s/ Jerry L. Rexroad
- --------------- --------------------
Date Jerry L. Rexroad
Executive Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 13,908
<INT-BEARING-DEPOSITS> 284
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 164,949
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 416,169
<ALLOWANCE> 5,519
<TOTAL-ASSETS> 616,887
<DEPOSITS> 367,922
<SHORT-TERM> 111,988
<LIABILITIES-OTHER> 6,825
<LONG-TERM> 93,774
0
0
<COMMON> 62
<OTHER-SE> 36,316
<TOTAL-LIABILITIES-AND-EQUITY> 616,887
<INTEREST-LOAN> 27,182
<INTEREST-INVEST> 4,827
<INTEREST-OTHER> 236
<INTEREST-TOTAL> 32,245
<INTEREST-DEPOSIT> 10,645
<INTEREST-EXPENSE> 17,731
<INTEREST-INCOME-NET> 14,514
<LOAN-LOSSES> (976)
<SECURITIES-GAINS> 510
<EXPENSE-OTHER> 10,574
<INCOME-PRETAX> 8,018
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,069
<EPS-PRIMARY> .81
<EPS-DILUTED> 0
<YIELD-ACTUAL> 8.19
<LOANS-NON> 0
<LOANS-PAST> 2,660
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 5,519
<CHARGE-OFFS> 206
<RECOVERIES> 34
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 5,519
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
