<PAGE>
<PAGE>
FORM 10-Q
----------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended: Commission File Number
June 30, 1996 0-26440
Quantum Financial Holdings, Inc.
--------------------------------
(Exact name of Registrant as Specified in its Charter)
Maryland 52-1919323
- ------------------------------- ----------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
4023 Annapolis Road
Baltimore, Maryland 21227 21227
- ------------------------------- ---------------------
(Address of principal (Zip Code)
executive office)
Registrant's telephone number, including area code: (410) 789-6882
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 require-
ments for the past 90 days.
YES X NO
----- -----
Number of shares outstanding of common stock
as of: June 30, 1996
$0.01 per value common stock 106,924 shares
---------------------------- --------------
Class Outstanding
<PAGE>
<PAGE>
QUANTUM FINANCIAL HOLDINGS, INC.
--------------------------------
INDEX
-----
Part I - Financial Information
- ------------------------------
ITEM 1 - Consolidated Financial Statements:
Consolidated Balance Sheets as of June 30, 1996
(unaudited), and December 31, 1995.
Consolidated Statements of Operations for the six and
three months ended June 30, 1996 and 1995 (unaudited).
Consolidated Statements of Cash Flows for the six
months ended June 30, 1996 and 1995 (unaudited).
Notes to Consolidated Financial Statements (unaudited)
ITEM 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Part II - Other Information
- ---------------------------
ITEM 1 - Legal Proceedings
ITEM 2 - Changes in Securities
ITEM 3 - Defaults Upon Senior Securities
ITEM 4 - Submission of Matters to a Vote of Security Holders
ITEM 5 - Other Materially Important Events
ITEM 6 - Exhibits and Reports on Form 8-K
Part III - Signatures
- ---------------------
<PAGE>
<PAGE>
QUANTUM FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
-----------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
AS OF JUNE 30, 1996 AND DECEMBER 31, 1995
-----------------------------------------
<TABLE>
<CAPTION>
(Unaudited)
June 30, December 31,
1996 1995
---------- ------------
ASSETS
------
<S> <C> <C>
CASH AND DUE FROM BANKS $ 871,985 $ 1,063,563
FEDERAL FUNDS SOLD 2,426,871 509,018
----------- -----------
Cash and cash equivalents 3,298,856 1,572,581
INVESTMENT SECURITIES HELD-TO-MATURITY 598,673 564,927
ACCRUED INTEREST RECEIVABLE 237,883 249,527
SECONDARY MARKET FUNDING RECEIVABLE 294,884 525,732
LOANS RECEIVABLE, net 21,264,046 22,006,556
RESIDENTIAL REAL ESTATE OWNED 1,615,466 1,524,583
COMMERCIAL REAL ESTATE OWNED 1,259,863 1,263,292
FEDERAL HOME LOAN BANK STOCK 169,100 165,000
PREMISES AND EQUIPMENT, net 424,592 381,971
OTHER ASSETS 677,797 729,557
----------- -----------
Total Assets $29,841,160 $28,983,726
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
DEPOSITS $27,416,565 $24,546,708
FEDERAL HOME LOAN BANK ADVANCES 0 2,000,000
ACCRUED EXPENSES 159,179 203,431
OTHER LIABILITIES 23,497 18,500
OTHER BORROWED MONEY 18,000 27,000
----------- -----------
Total Liabilities 27,617,241 26,795,639
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, par value $0.01 per share;
5,000,000 shares authorized, 109,624
shares issues and outstanding 1,069 1,069
Additional Paid-in Capital 700,205 700,205
Retained earnings 1,540,645 1,513,813
----------- -----------
2,241,919 2,215,087
Deferred compensation (18,000) (27,000)
----------- -----------
Total Stockholders' Equity 2,223,919 2,188,087
----------- -----------
Total Liabilities and Stockholders'
Equity $29,841,160 $28,983,726
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
balance sheets.
1<PAGE>
<PAGE>
QUANTUM FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
-----------------------------------------------
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
-----------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
--------------------- -------------------
1996 1995 1996 1995
------- ------- ------ -------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $1,036,511 $ 994,227 $505,536 $500,555
Interest on investment securities 63,396 56,018 25,857 27,072
Interest on federal funds sold 59,853 7,639 35,995 3,829
---------- --------- -------- --------
1,159,760 1,057,884 567,388 531,456
---------- --------- -------- --------
INTEREST EXPENSE:
Interest on deposits 716,825 513,916 368,346 266,876
Other interest expense 10,767 81,566 333 41,404
---------- --------- -------- --------
727,592 595,482 368,679 308,280
---------- --------- -------- --------
Net interest income 432,167 462,402 198,708 223,176
PROVISION FOR LOAN LOSSES (13,206) 12,565 (14,916) 10,011
---------- --------- -------- --------
Net interest income after
provision for loan losses 445,373 449,837 213,624 213,165
---------- --------- -------- --------
OTHER INCOME:
Fees on loans originated for others,
net of related commissions &
payroll taxes 69,633 37,172 43,608 21,573
Other operating income, including
subsidiary net income 142,357 94,391 86,122 62,042
---------- --------- -------- --------
211,990 131,563 129,730 83,615
---------- --------- -------- --------
OTHER EXPENSES:
Salaries, benefits and payroll taxes 258,300 265,816 123,053 128,867
Other operating expenses 352,190 240,789 206,780 123,715
---------- --------- -------- --------
610,490 506,605 329,832 252,582
---------- --------- -------- --------
INCOME BEFORE INCOME TAX
EXPENSE 46,873 74,795 13,522 44,198
INCOME TAX (BENEFIT) EXPENSE 20,042 31,414 5,616 18,563
---------- --------- -------- --------
NET INCOME $ 26,831 $ 43,381 $ 7,906 $ 25,635
========== ========= ======== ========
EARNINGS PER SHARE $ 0.25 $ 0.38 $ 0.07 $ 0.22
========== ========= ======== ========
Weighted average number of
shares outstanding 106,924 114,374 106,924 114,374
========== ========= ======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated statements.
2<PAGE>
<PAGE>
QUANTUM FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
-----------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
-------------------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
-----------------------------------------------
<TABLE>
<CAPTION>
1996 1995
---------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 26,831 $ 43,381
Adjustments to reconcile net income to net
cash used in operating activities:
Provision for loan losses (13,206) 12,565
Loan fees deferred, net of costs 12,529 11,417
Amortization of deferred loan fees (32,184) (26,185)
Depreciation 28,774 15,376
Decrease (increase) in accrued
interest receivable 11,644 39,906
Origination of loans sold on the
secondary market (2,931,629) (1,572,065)
Proceeds from sale of loans on the
secondary market 3,162,477 1,621,994
Decrease (increase) in deferred
income tax asset 0 0
Decrease (increase) in other assets 51,760 12,962
(Decrease) increase in accrued
expenses and other liabilities (39,255) (60,657)
Amortization of deferred compensation 9,000 9,000
Stock dividends received on Federal Home
Loan Bank Stock 0 0
---------- -----------
Net cash provided by operating activities 286,746 107,694
---------- -----------
3<PAGE>
<PAGE>
QUANTUM FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
-----------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
-------------------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
-----------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1996 1995
---------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
<S> <C> <C>
Proceeds from maturing investment securities $ 265,220 $ 99,149
Purchases of investment securities (298,968) (209,803)
Proceeds from sale of FHLB Stock 0 0
Purchase of FHLB Stock (4,100) (16,100)
Decrease (increase) in loans, net 775,371 (860,170)
Purchase of premises and equipment (71,397) (135,270)
Purchase of and investment in foreclosed
real estate, net (87,954) (402,243)
----------- -----------
Net cash (used in) provided by investing
activities 578,672 (1,524,437)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Decrease) increase in deposits, net 2,869,857 885,931
Repayment of FHLB Advances (2,000,000) 0
Dividends paid 0 (14,868)
Debt repayment (9,000) (9,000)
----------- -----------
Net cash used in financing activities 860,857 862,063
----------- -----------
(DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS 1,726,275 (554,681)
CASH AND CASH EQUIVALENTS, beginning of year 1,572,581 2,026,237
----------- -----------
CASH AND CASH EQUIVALENTS, end of 6 mos. $ 3,298,856 $ 1,471,557
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH
FLOWS INFORMATION:
Cash paid during the 6 mos. for:
Interest $ 727,592 $ 595,482
Income taxes, net of refund 0 52,794
In-substance foreclosure on real estate 0 0
Foreclosure on real estate 428,831 62,929
</TABLE>
The accompanying notes are an integral part of these
consolidated statements.
4<PAGE>
<PAGE>
QUANTUM FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
-----------------------------------------------
Baltimore, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1 - Basis of Presentation
---------------------
The accompanying unaudited consolidated financial statements have
been prepared in accordance with instructions to Form 10-Q and,
therefore, do not include information or footnotes necessary for a
fair presentation of financial position, results of operations and
cash flows in conformity with generally accepted accounting
principles. However, all adjustments which are, in the opinion of
management, necessary for a fair presentation have been included.
The results of operations for the six and three month period ended
June 30, 1996 are not necessarily indicative of the results which
may be expected for the entire fiscal year. The Notes to
Consolidated Financial Statements for the year ended December 31,
1995, included in the Savings Bank's Form 10-K, should be read in
conjunction with these statements.
Note 2 - Holding Company Reorganization
------------------------------
On July 12, 1995, the Company completed the acquisition of
Baltimore American Savings Bank, FSB (the "Bank") pursuant to an
Agreement and Plan of Reorganization in which the Bank became a
wholly-owned subsidiary of the Company, a newly formed holding
company incorporated by the Bank for that purpose. Under the terms
of the Agreement and Plan of Reorganization, each outstanding
share, other than shares as to which dissenters' rights were
properly exercised, of the common stock, $1.00 par value per share,
of the Bank (the "Bank's Common Stock") was converted into one
share of the common stock $.01 par value per share, of the Company
(the "Common Stock") and the former holders of the Bank's Common
Stock became the holders of all the outstanding Common Stock. For
the periods prior to July 12, 1995, the financial statements of the
Company consist of the financial statements of the Bank.
5<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL PERSPECTIVE
- -------------------
For the three and six months ended June 30, 1996, earnings
were $0.07 and $0.25 per share, respectively, as compared with
$0.22 and $0.38 per share, respectively, for the same periods in
1995. The reductions in earnings per share of $0.15 and $0.13 from
1995 were the result of increases in deposits and the interest paid
on deposits, an increase in operating expenses, and the continued
high level of nonperforming loans. Management and the Board of
Directors continue to emphasize the resolution of past
nonperforming loans and real estate owned by the Company.
FINANCIAL CONDITION
- -------------------
General Overview
Total assets increased by $857,434 or 2.96% during the six
months ended June 30, 1996. The increase in total assets was a
direct result of the increase in federal funds sold. "Table 1.
Utilization of Assets" exhibits for the periods indicated certain
consolidated balance sheet items related to the financial structure
of Quantum Financial Holdings, Inc.
_________________________________________________________________
TABLE 1
Utilization of Assets
- -----------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995 Difference
------- ------- -------------------
<S> <C> <C> <C> <C>
Cash and due from banks $ 871,985 $ 1,063,563 $ (191,578) (18.01)%
Federal funds sold 2,426,871 509,018 1,917,853 376.78
Investment securities
held-to-maturity 598,673 564,927 33,746 5.97
Loans receivable, Net 21,264,046 22,006,556 (742,510) (3.37)
Secondary market funding
receivable 294,884 525,732 (230,848) (43.90)
Residential Real Estate Owned 1,615,466 1,524,583 90,883 5.96
Commercial Real Estate Owned 1,259,863 1,263,292 (3,429) (0.27)
All other assets 1,509,372 1,526,055 (16,683) (1.09)
----------- ----------- ----------
$29,841,160 $28,983,726 $ 857,434 2.96%
=========== =========== =========== ====
</TABLE>
- -----------------------------------------------------------------
The decrease in cash and due from banks is a result of
utilizing the cash in the daily operations of the Savings Bank.
Secondary market funding receivable decreased as the secondary
investors more quickly reimbursed the cash funded by Baltimore
American for the sale of loans.
Commercial real estate owned comprises commercial real estate
that was foreclosed upon by the Company. Of the $1,259,863 in
commercial real estate, $1,137,972 represents Sheridan Station
Shopping Center, which is 33,014 square feet and is comprised of
eleven (11) tenant spaces, with 127 parking spaces available.
6<PAGE>
<PAGE>
As of June 30, 1996, the center is seventy percent (70%)
leased and generated operating income of $107,494 and operating
expenses of $46,687 for pretax income of $60,807, which is included
as other operating income in the accompanying consolidated
statement of operations for the six and three months ended June 30,
1996. During the first six months of 1996, Management has been
negotiating with three prospective tenants for the remaining space.
Management is actively marketing this property for sale.
Management intends to sell the property as soon as a viable buyer
is identified. During the first half of 1996, Management met with
two investment groups for the purchase of Sheridan Station Shopping
Center, which did not result in a sale. However, no assurance can
be made that a sale will be consummated or that losses on the sale
or from operations prior to the sale will not be realized.
Management believes that an adequate allowance for any potential
losses on the ultimate sale of the property has been provided as of
June 30, 1996.
In addition, commercial real estate owned includes a one acre
parcel of commercial property located in Anne Arundel County on
Ridge Road in the amount of $121,891. This asset is over five
years old and is now considered real estate held for investment.
As such, the balance at which the property is carried reduces the
risk-based capital of the Company by that amount. Although the
Company believes its interest in this property is currently
adequately secured, there is no assurance that the property will be
sold or that Baltimore American will recoup its investment.
Residential real estate owned comprises residential real
estate that was foreclosed upon by the Company. Of the $1,615,466
in residential real estate, $1,534,503 represents residential homes
and $80,963 represents residential land owned by the Company.
Management is actively marketing these properties and intends to
sell these properties as soon as viable buyers are identified.
During the first half of 1996, the Company entered into contracts
to sell six properties. Out of those six properties, one settled
in June, one will settle in July, and two more should settle in
September. The buyer has withdrawn the other two contracts. In
the interim, and where possible, the Company is rehabilitating
these homes and renting them out to low- and moderate-income
families. The rental income is being applied directly to the
outstanding balance, reducing the Company's exposure and enhancing
the property's marketability. It is worth noting that management
was awarded citations by Baltimore's Mayor Schmoke and by Mary Pat
Clark, President of the Baltimore City Council, in recognition of
its commitment in building strong communities. While management
believes it will be able to find buyers in the future, no assurance
can be made that buyers will be found or that losses on the sale
will not be realized. Management believes that an adequate
allowance for any potential losses on the ultimate sale of these
properties has been provided as of June 30, 1996.
Total liabilities increased by $821,602 or 3.06% during the
six months ended June 30, 1996 primarily due to an increase in
deposits (see Table 2. Source of Funds).
The increase in deposits is the result of aggressive marketing
to established customers to increase their deposit base within the
Company. Management reduced $2 million in advances with the
Federal Home Loan Bank of Atlanta. Other borrowed money,
representing a loan from a third party lender to the Employee Stock
Ownership Plan (ESOP), was reduced by $9,000, which is the
principal amount of the loan paid each year.
7<PAGE>
<PAGE>
Liquidity
Adequate liquidity must be maintained to fund deposit
withdrawals, to meet customers' borrowing needs, to take advantage
of investment opportunities, and to maintain the required levels of
reserves. On the asset side, the primary sources of liquidity are
cash and due from banks, investment securities, federal funds, and
scheduled repayments on outstanding loans. On the liability side,
the primary sources of liquidity are deposit growth.
_________________________________________________________________
TABLE 2
Sources of Funds
- -----------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, December 31,
1995 1995 Difference
------- ------- -------------------
<S> <C> <C> <C> <C>
Deposits $27,416,565 $24,546,708 $ 2,869,857 11.69%
Federal Home Loan Bank Advances 0 2,000,000 (2,000,000) (100.00)
Accrued Expenses 159,179 203,431 (44,252) (21.75)
Other Liabilities 23,497 18,500 4,997 27.01
Other Borrowed Money 18,000 27,000 (9,000) (33.33)
----------- ----------- ---------- ------
$27,617,241 $26,795,639 $ 821,602 3.06%
=========== =========== ========== ======
</TABLE>
Management evaluates the Company's liquidity position daily to
maintain a level conducive to efficient operations and to satisfy
regulatory requirements. Attention is directed primarily to assets
and liabilities that mature or can be repriced within one year.
The Company matches the maturities, to the extent possible, of its
assets and liabilities to minimize variability in net interest
income; this practice helps to minimize interest rate risk.
Prudent risks are taken, however, by leaving certain assets and
liabilities unmatched in an effort to benefit from the interest
rate sensitivity inherent in the U.S. monetary system.
The minimum regulatory required level of long-term liquidity
is currently 5% of total deposits and borrowed money; the minimum
required short-term level is 1%. The liquidity level of the
Company at June 30, 1996, as measured for regulatory purposes, was
approximately 14.53% for both long- and short-term purposes.
Management recognizes that it is excessively liquid and will
utilize the excess liquidity for either investment in loans or the
reduction of high yielding certificates of deposit with pending
maturities. Management believes the Company can meet its
obligations of outstanding loan commitments and at the same time
maintain liquidity in excess of the minimum regulatory requirement
without having to borrow funds.
Capital Resources
The Company's Stockholders' Equity was $2,223,919 or 7.45% of
total assets on June 30, 1996 compared to $2,188,087 or 7.54% on
December 31, 1995. The percentage of Stockholders' Equity to Total
Assets increased in dollar value, but decreased on a percentage
basis as a result of the increase in assets. Quantum Financial
Holdings, Inc. exceeds all regulatory requirements for capital.
Management continually reviews and identifies areas of growth
opportunity.
8<PAGE>
<PAGE>
Table 3. Regulatory Capital Requirements represents the
Company's position to its various minimum regulatory capital
requirements at June 30, 1996.
_________________________________________________________________
TABLE 3
Regulatory Capital Requirements
- -----------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, 1996 (unaudited)
-------------------------
Percentage
Amount of Assets*
------ ----------
(Dollars in thousands)
<S> <C> <C>
Tangible Capital $2,139 7.16%
Tangible Capital Requirement 448 1.50%
------ -----
Excess $1,691 5.66%
====== =====
Core Capital $2,139 7.16%
Core Capital Requirement 896 3.00%
------ -----
Excess $1,243 4.16%
====== =====
Total Capital $2,259 11.77%
(Core and Supplementary Capital)
Risk-Based Capital Requirement 1,536 8.00%
------ -----
Excess $ 723 3.77%
====== =====
</TABLE>
- ----------------
*Based on adjusted total assets of $29,862,000 for purposes of the
tangible capital and core capital requirements, and risk-weighted
assets of $19,198,000 for purposes of the risk-based capital
requirements.
- -----------------------------------------------------------------
RESULTS OF OPERATIONS
General Overview
For the first six months of 1996, the Company posted a $26,831
profit, as compared to a profit of $43,381 for the same period in
1995. For the three months ended June 30, 1996, the Company posted
a $7,906 profit, as compared to a profit of $25,635 for the same
period in 1995. Although the Company reported positive earnings
for the first six months of 1996, net income was not as significant
as that for the same period in 1995, which is the result of a
significant increase in interest paid on deposits and a significant
increase in operating expenses, which is the result of high
professional fees.
9<PAGE>
<PAGE>
Earnings per share of common stock were $0.25 per share for the
six months ended June 30, 1996, as compared to $0.38 per share for
the same period in 1995. For the three months ended June 30, 1996,
earnings per share of common stock were $0.07 per share, as
compared to $0.22 per share for the same period in 1995. Table 4.
Operations Items as of June 30, 1996 exhibits for the periods
indicated certain consolidated statement of operations items which
contributed to earnings.
Net Interest Income
Net interest income is the foundation and core of the Company's
earnings, representing the difference between total interest and
fees earned on all loans, investments and other interest earning
assets, and the total interest paid on deposits and borrowings.
For the six months ended June 30, 1996, net interest income was
$432,167, as compared with $462,402 for the same period in 1995.
For the three months ended June 30, 1996, net interest income was
$198,708, as compared with $223,176 for the same period in 1995.
For the first six months of 1996, interest income increased by
$101,876 or 9.63% as compared with the same period in 1995. This
was the result of an increase in loan yields charged for portfolio
loans and an increase in investments and the yields paid on
investments. The Company has increased its investment portfolio
pending the identification of more attractive lending
opportunities. Interest income was $35,932 or 6.76% greater for the
three months ended June 30, 1996, as compared with the same period
in 1995.
For the first six months of 1996, interest expense increased
by $132,110 or 22.19% as compared with the same period in 1995.
This was the result of an increase in the volume of deposits and
the yield increases paid on deposits as older deposits matured.
Interest expense was $60,399 or 19.59% greater for the three months
ended June 30, 1996, as compared with the same period in 1995.
In recognition of the nonperforming loans and the inherent
risk in lending, Management has established a provision for loan
losses. The provision for loan losses is a reserve of funds
established to absorb potential loan losses after evaluating the
asset portfolio (current economic conditions, changes in the nature
and volume of lending, and past loan loss experience, as well as
other factors). Upon evaluation of the future trends of general
economic conditions in this country and in particular the Company's
market area, Management and the Board of Directors decided to
continue to reserve additional funds in regard to the future
economic trends that might have an effect on the portfolio of
loans. Based on its evaluation of the Company's general reserve
level, the Company provided $(14,916) amd $(13,206), respectively,
for loan losses during the three and six months ended June 30,
1996. As of June 30, 1996, management believes that the provision
for loan loss is adequate for the volume of loans originated for
the Company's portfolio.
For the six months ended June 30, 1996, net interest income
after provision for loan loss was $445,373, as compared with
$449,837 for the same period in 1995. For the three months ended
June 30, 1996, net interest income after provision for loan loss
was $213,624, as compared with $213,165 for the same period in
1995.
Other Income
There are two significant components of non-interest income.
(1) Fees on loans originated for others increased by $32,461 or
87.33% for the first six months of 1996 as compared with the same
period in 1995. For the three months ended June 30, 1996, fees on
loans originated for others increased by $22,035 or 102.14% as
compared with the same period in 1995. This is the direct result
of an increase in the volume of residential loans.
10
<PAGE>
_________________________________________________________________
TABLE 4
Operations Items
- -----------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------
1996 1995 Difference
------- ------- -------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $1,036,511 $ 994,227 $ 42,284 4.25%
Other interest income 123,249 63,657 59,592 93.61
---------- ---------- -------- -------
$1,159,760 $1,057,884 $101,876 9.63%
========== ========== ======== =======
INTEREST EXPENSE:
Interest on deposits $ 716,825 $ 513,916 $202,909 39.48%
Other interest expense 10,767 81,566 (70,799) (86.80)
---------- ---------- -------- -------
$ 727,592 $ 595,482 $132,110 22.19%
========== ========== ======== =======
PROVISION FOR LOAN LOSSES $ (13,206) $ 12,565 $(25,771) (205.10)%
========== ========== ======== =======
OTHER INCOME:
Fees on loans originated for
others $ 69,633 $ 37,172 $ 32,461 87.33%
(Net of sales commissions
and related payroll taxes)
Other operating income,
including subsidiary net
income 142,357 94,391 47,966 50.82
---------- ---------- -------- -------
$ 211,990 $ 131,563 $ 80,427 61.13%
========== ========== ======== =======
OTHER EXPENSES:
Salaries, benefits and payroll
taxes $ 258,300 $ 265,816 $ (7,516) (2.83)%
Other operating expenses 352,190 240,789 111,401 46.26
---------- ---------- -------- -------
$ 610,490 $ 506,605 $103,885 20.51%
========== ========== ======== =======
</TABLE>
11<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
June 30,
----------------------
1996 1995 Difference
------- ------- -------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 505,536 $ 500,555 $ 4,981 9.95%
Other interest income 61,852 30,901 30,951 100.16
---------- ---------- -------- -------
$ 567,388 $ 531,456 $ 35,932 6.76%
========== ========== ======== =======
INTEREST EXPENSE:
Interest on deposits $ 368,346 $ 266,876 $101,470 38.02%
Other interest expense 333 41,404 (41,071) (99.20)
---------- ---------- -------- -------
$ 368,679 $ 308,280 $ 60,399 19.59%
========== ========== ======== =======
PROVISION FOR LOAN LOSSES $ (14,916) $ 10,011 $(24,927) (248.99)%
========== ========== ======== =======
OTHER INCOME:
Fees on loans originated for
others $ 43,608 $ 21,573 $ 22,035 102.14%
(Net of sales commissions
and related payroll taxes)
Other operating income,
including subsidiary net
income 86,122 62,042 24,080 38.81
---------- ---------- -------- -------
$ 129,730 $ 83,615 $ 46,115 55.15%
========== ========== ======== =======
OTHER EXPENSES:
Salaries, benefits and payroll
taxes $ 123,053 $ 128,867 $ (5,814) (4.51)%
Other operating expenses 206,780 123,715 83,065 67.14
---------- ---------- -------- -------
$ 329,832 $ 252,582 $ 77,250 30.58%
========== ========== ======== =======
</TABLE>
12<PAGE>
<PAGE>
(2) Other operating income increased by $47,966 or 50.82% during
the six months ended June 30, 1996 as compared with the same period
in 1995. Other operating income increased by $24,080 or 38.81%
during the three months ended June 30, 1996 as compared with the
same period in 1995. This is the direct result of the revenues
generated by Sheridan Station Shopping Center, held by the
Company's subsidiary and the gain on sale of real estate owned
sold. Total other income increased by $80,427 or 61.13% for the
six months ended June 30, 1995. Total other income increased by
$46,115 or 55.15% for the three months ended June 30, 1995.
Other Expense
Total non-interest expense increased by $103,885 or 20.51%
during the six months ending June 30, 1996 as compared to the same
period in 1995. Employee compensation for the first six months
decreased by $7,516 or 2.83%, as a result of re-engineering human
resources in order to obtain greater efficiency at less cost. All
other operating expenses increased by $111,401 or 46.26% as a
direct result of the increase in deposit insurance, electronic data
processing expenses, professional fees related to 1995 examination
issues and reo expense. Total non-interest expense increased by
$77,250 or 30.58% during the three months ending June 30, 1996 as
compared to the same period in 1995. Employee compensation for the
three months ending June 30, 1996 decreased by $5,814 or 4.51%, as
a result of re-engineering human resources in order to obtain
greater efficiency at less cost. All other operating expenses
increased by $83,065 or 67.14% as a direct result of the increase
in deposit insurance, electronic data processing expenses,
professional fees and reo expense.
Provision For Taxes
The Company's effective tax rate varies with changes in the
proportion of tax exempt income, changes in corporate tax rates,
and certain local tax credits. Provision for income taxes for the
six months ended June 30, 1996 was $20,042, compared to $31,414
during the first six months of 1995.
IMPACT OF INFLATION AND CHANGING PRICES
The impact of inflation on the Company is reflected primarily
in the increased cost of operations. A portion of these increased
costs are generally passed on to customers in the form of increased
service fees. Because the Company's assets and liabilities are
virtually all monetary in nature, reinvestment and prepayment rate
fluctuations more significantly impact the Company's performance
than the effects of inflation. Volatile interest rate environments
require Management to maintain acceptable levels of liquidity and
to maintain proper maturity structure of the Company's assets and
liability.
In structuring fees, negotiating loan margins, and developing
customer relationships, Management concentrates its efforts on
maximizing earnings, while attempting to contain increases in
operating expenses. Management and the Board of Directors
continually review the feasibility of new and additional fee-
generating services to offset the effects of inflation and changing
prices. Management and the Board of Directors perform this
function with the objective of increased earnings.
13<PAGE>
<PAGE>
PART II
ITEM 1. Legal Proceedings
-----------------
Not applicable.
ITEM 2. Changes in Securities
---------------------
Not applicable.
ITEM 3. Defaults Upon Senior Securities
-------------------------------
ITEM 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
On May 1, 1996, the Company held its Annual Meeting of
Stockholders at which the following matters were voted on:
Proposal I -- Election of Director
--------------------
NOMINEE FOR WITHHELD
------- ----- --------
Pearl J. Rogers 71,819 1,516
Jay C. Middleton 71,819 1,516
Vernon F. Plack 64,472 8,863
There were no abstentions or broker non-votes.
ITEM 5. Other Materially Important Events
---------------------------------
Effective June 25, 1996, the Memorandum of Understanding
(MOU), which was executed on April 3, 1991 by and between the
Office of Thrift Supervision (OTS) and Baltimore American Savings
Bank, FSB, was terminated. As a result, the Bank has been released
from certain operating restrictions.
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits. The following exhibits are being filed with
-------- this report:
Exhibit Description
------- -----------
27 Financial Data Schedule (EDGAR ONLY)
(b) Reports on Form 8-K. None
-------------------
14<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Date: August 14, 1996 By: /s/ Richard W. Kraus
---------------------------------
Richard W. Kraus
President, Chief Executive
Officer & Chief Financial Officer
15
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<CASH> 871,985
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 2,426,871
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 598,673
<INVESTMENTS-MARKET> 647,859
<LOANS> 21,907,951
<ALLOWANCE> 434,020
<TOTAL-ASSETS> 29,841,160
<DEPOSITS> 27,416,565
<SHORT-TERM> 0
<LIABILITIES-OTHER> 23,497
<LONG-TERM> 18,000
0
0
<COMMON> 1,069
<OTHER-SE> 2,222,850
<TOTAL-LIABILITIES-AND-EQUITY> 29,841,160
<INTEREST-LOAN> 1,036,511
<INTEREST-INVEST> 63,396
<INTEREST-OTHER> 59,853
<INTEREST-TOTAL> 1,159,760
<INTEREST-DEPOSIT> 716,825
<INTEREST-EXPENSE> 727,592
<INTEREST-INCOME-NET> 432,167
<LOAN-LOSSES> (13,206)
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 610,490
<INCOME-PRETAX> 46,873
<INCOME-PRE-EXTRAORDINARY> 26,831
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,831
<EPS-PRIMARY> 0.25
<EPS-DILUTED> 0.25
<YIELD-ACTUAL> 4.49
<LOANS-NON> 395,000
<LOANS-PAST> 1,092,000
<LOANS-TROUBLED> 11,000
<LOANS-PROBLEM> 3,481,000
<ALLOWANCE-OPEN> 447,226
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 434,020
<ALLOWANCE-DOMESTIC> 434,020
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
