UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
March 31, 1998
---------------------
Commission File Number 001-14070
PIEDMONT BANCORP, INC.
(Exact Name of Registrant as Specified in its Charter)
North Carolina 56-1936232
-------------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
260 South Churton Street, Hillsborough, NC 27278
- ------------------------------------------ -----
(Address of Principal Executive Offices) (Zip Code)
(Registrant's telephone number, including area code) (919) 732-2143
--------------
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.
[ X ] Yes [ ] No
As of May 13, 1998, 2,750,800 shares of the registrant's common stock, no par
value, were outstanding. The registrant has no other classes of securities
outstanding.
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1 - Financial Statements
<TABLE>
<CAPTION>
PIEDMONT BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
March 31, June 30,
1998 1997
(unaudited) *
--------- ---------
(in thousands, except shares)
Assets
<S> <C> <C>
Cash ......................................................... $ 830 $ 879
Interest-bearing deposits in other financial institutions .... 1,271 3,766
Investment securities:
Available-for-sale ........................................ 12,024 10,866
Held-to-maturity .......................................... 3,579 3,341
Loans receivable (net of allowance for loan losses of $914 and
$796 at March 31, 1998 and June 30, 1997, respectively) ... 110,694 100,173
Federal Home Loan Bank stock, at cost ........................ 1,109 920
Premises and equipment ....................................... 1,308 1,205
Real estate owned ............................................ -- --
Prepaid expenses and other assets ............................ 2,013 1,611
--------- ---------
Total assets ....................................... $ 132,828 $ 122,761
========= =========
Liabilities and Stockholders' Equity
Liabilities
Deposits :
Demand, non-interest bearing .............................. 2,175 2,074
Savings, NOW and MMDA ..................................... 31,802 28,594
Certificates of Deposit ................................... 54,346 54,192
--------- ---------
88,323 84,860
Advances from the Federal Home Loan Bank ..................... 21,700 16,500
Accrued expenses and other liabilities ....................... 1,421 985
--------- ---------
Total liabilities ....................................... 111,444 102,345
--------- ---------
Stockholders' Equity
Preferred stock, no par value, 5,000,000 shares authorized;
none issued ............................................... -- --
Common stock, no par value, 20,000,000 shares authorized;
2,750,800 shares issued and outstanding ................... 9,130 9,143
Unearned ESOP shares ......................................... (739) (933)
Unamortized deferred compensation ............................ (1,025) (1,269)
Unallocated restricted stock ................................. (61) (21)
Retained earnings, substantially restricted (note 6) ......... 14,007 13,580
Unrealized holding losses on available-for-sale securities ... 72 (84)
--------- ---------
Total stockholders' equity ............................. 21,384 20,416
--------- ---------
Total liabilities and stockholders' equity ......... $ 132,828 $ 122,761
========= =========
</TABLE>
* Derived from audited financial statements
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
PIEDMONT BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
(In thousands, except per share data) 1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest income:
Interest on loans .......................................... $ 2,333 $ 2,013 $ 6,765 $ 5,987
Interest on deposits in other financial institutions ....... 12 17 42 84
Interest and dividends on investment securities ............ 254 268 762 1,120
------- ------- ------- -------
Total interest income ............................. 2,599 2,298 7,569 7,191
------- ------- ------- -------
Interest expense:
Interest on deposits ....................................... 987 914 2,972 2,665
Interest on borrowings ..................................... 315 244 882 752
------- ------- ------- -------
Total interest expense ............................ 1,302 1,158 3,854 3,417
------- ------- ------- -------
Net interest income ........................................... 1,297 1,140 3,715 3,774
Provision for loan losses ..................................... 24 20 72 638
------- ------- ------- -------
Net interest income after provision for loan losses 1,273 1,120 3,643 3,136
------- ------- ------- -------
Other income:
Customer service and other fees ............................ 53 50 157 149
Mortgage loan servicing fees ............................... 15 21 54 65
Gain (loss) on sale of investment securities ............... -- -- 6 (132)
Lower-of-cost or market adjustment on loans held-for-sale .. (24) (18) 12 22
Gain on sale of real estate owned .......................... 114 -- 114 --
Other ...................................................... 49 17 97 49
------- ------- ------- -------
Total other income ................................ 207 70 440 153
------- ------- ------- -------
Other expenses:
Compensation and fringe benefits ........................... 430 374 1,255 2,762
SAIF recapitalization assessment ........................... -- -- -- 487
Data and items processing .................................. 69 63 185 186
Deposit insurance premiums ................................. 13 13 39 58
Occupancy expense .......................................... 32 25 84 86
Furniture and equipment expense ............................ 32 30 83 92
Professional fees .......................................... 52 28 145 98
Other ...................................................... 158 84 396 323
------- ------- ------- -------
Total other expenses .............................. 786 617 2,187 4,092
------- ------- ------- -------
Income (loss) before income tax expense ........... 694 573 1,896 (803)
Income tax expense (benefit) .................................. 247 201 672 73
------- ------- ------- -------
Net income (loss) ........................... $ 447 $ 372 $ 1,224 $ (876)
======= ======= ======= =======
Net income (loss) per share - basic ........................... $ 0.17 $ 0.14 $ 0.46 $ (0.33)
Net income (loss) per share - diluted ......................... $ 0.16 $ 0.14 $ 0.45 $ (0.33)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PIEDMONT BANCORP, INC. AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY (unaudited)
Unearned Unamortized
Shares Common ESOP Deferred
Outstanding Stock Shares Compensation
----------- ----- ------ ------------
(dollars in thousands)
<S> <C> <C> <C> <C>
Balance at June 30, 1996 ......................... 2,645,000 $ 25,398 $ (2,552) $ --
Net income ................................. -- -- -- --
Issuance of restricted stock ............... 105,800 1,587 -- (1,587)
Release of ESOP shares ..................... -- 105 1,545 --
Amortization of unearned compensation ...... -- -- -- 161
Forfeiture of restricted stock and
related dividends- ...................... -- 105 -- 224
Allocation of restricted stock ............. -- (60) -- (143)
Tax benefit of dividends on restricted stock -- 279 -- --
Cash dividends ............................. -- (19,763) -- --
Change in unrealized holding gains (losses),
net of income taxes ..................... -- -- -- --
--------- --------- --------- ---------
Balance at March 31, 1997 ........................ 2,750,800 $ 7,651 $ (1,007) $ (1,345)
========= ========= ========= =========
Balance at June 30, 1997 ......................... 2,750,800 $ 9,143 $ (933) $ (1,269)
Net income ................................. -- -- -- --
Release of ESOP shares ..................... -- (33) 194 --
Amortization of unearned compensation ...... -- -- -- 193
Forfeiture of restricted stock ............. -- -- -- 146
Allocation of restricted stock ............. -- (11) -- (95)
Tax benefit of dividends on restricted stock -- (5) -- --
Cash dividends declared, net of
forfeited dividends on restricted stock . -- 36 -- --
Change in unrealized holding gains (losses),
net of income taxes ..................... -- -- -- --
--------- --------- --------- ---------
Balance at March 31, 1998 ........................ 2,750,800 $ 9,130 $ (739) $ (1,025)
========= ========= ========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PIEDMONT BANCORP, INC. AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY (unaudited)
(continued)
Unallocated Unrealized Total
Restricted Retained holding gain Stockholders'
Stock Earnings (losses) Equity
----- -------- -------- ------
<S> <C> <C> <C> <C>
Balance at June 30, 1996 ......................... $ -- $ 14,783 $ (579) $ 37,050
Net income ................................. -- (876) -- (876)
Issuance of restricted stock ............... -- -- -- --
Release of ESOP shares ..................... -- -- -- 1,650
Amortization of unearned compensation ...... -- -- -- 161
Forfeiture of restricted stock and
related dividends- ...................... (224) 2 -- 107
Allocation of restricted stock ............. 203 -- -- --
Tax benefit of dividends on restricted stock -- -- -- 279
Cash dividends ............................. -- 1,128 -- (18,635)
Change in unrealized holding gains (losses),
net of income taxes ..................... -- -- 364 364
--------- --------- --------- ---------
Balance at March 31, 1997 ........................ $ (21) $ 15,037 $ (215) $ 20,100
========= ========= ========= =========
Balance at June 30, 1997 ......................... $ (21) $ 13,580 $ (84) $ 20,416
Net income ................................. -- 1,224 -- 1,224
Release of ESOP shares ..................... -- -- -- 161
Amortization of unearned compensation ...... -- -- -- 193
Forfeiture of restricted stock ............. (146) -- -- --
Allocation of restricted stock ............. 106 -- -- --
Tax benefit of dividends on restricted stock -- -- -- (5)
Cash dividends declared, net of
forfeited dividends on restricted stock . -- (797) -- (761)
Change in unrealized holding gains (losses),
net of income taxes ..................... -- -- 156 156
--------- --------- --------- ---------
Balance at March 31, 1998 ........................ $ (61) $ 14,007 $ 72 $ 21,384
========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
PIEDMONT BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Nine Months Ended
March 31,
1998 1997
-------- --------
<S> <C> <C>
Operating activities:
Net income ........................................................................ $ 1,224 $ (876)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation ................................................................ 75 68
Net amortization (accretion) ................................................ 84 67
Provision for loan losses ................................................... 72 638
Net (gain) loss on sale of investments and mortgage-backed securities ....... (6) 132
Loss on sale of fixed assets ................................................ 4 --
Gain on sale of real estate owned ........................................... (114) --
Release of ESOP shares ...................................................... 161 1,650
Compensation earned under MRP ............................................... 193 161
Net decrease (increase) in mortgage loans held for sale ..................... (1,563) 287
Increase in other assets .................................................... (476) (68)
Increase (decrease) in other liabilities .................................... 388 (26)
-------- --------
Net cash provided by operating activities ............................. 42 2,033
-------- --------
Investing activities:
Net increase in loans held for investment ......................................... (9,599) (5,846)
Principal collected on mortgage-backed securities ................................. 375 458
Purchases of investment securities classified as available-for-sale ............... (1,250) --
Purchases of mortgage-backed securities classified as available-for-sale .......... (1,532) (1,576)
Purchases of investment securities classified as held-to-maturity ................. (307) --
Proceeds from sales or calls of mortgage-backed securities classified
as available-for-sale........................................................... 1,508 12,645
Proceeds from investment securities classified as held-to-maturity called by issuer 55 3,847
Purchases of Federal Home Loan Bank stock ......................................... (189) --
Purchases of premises and equipment ............................................... (182) (17)
Proceeds from sale of real estate owned ........................................... 636 --
-------- --------
Net cash provided by (used in) investing activities ................... (10,485) 9,511
-------- --------
Financing activities:
Net increase (decrease) in time deposits .......................................... 154 3,544
Net increase in other deposits .................................................... 3,309 5,015
Proceeds from borrowings .......................................................... 14,200 11,000
Repayments of borrowings .......................................................... (9,000) (12,750)
Cash dividends paid to shareholders ............................................... (764) (18,599)
-------- --------
Net cash provided by (used in) financing activities ................... 7,899 (11,790)
-------- --------
Increase (decrease) in cash and cash equivalents ...................... (2,544) (246)
Cash and cash equivalents at beginning of period ..................................... 4,645 2,670
-------- --------
Cash and cash equivalents at end of period ........................................... $ 2,101 $ 2,424
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PIEDMONT BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(continued)
Nine Months Ended
March 31,
1998 1997
-------- --------
<S> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest ....................................................................... $ 3,837 $ 3,386
======== ========
Income taxes ................................................................... $ 251 $ 339
======== ========
Supplemental disclosure of noncash transactions:
Unrealized gains (losses) on available-for-sale securities,
net of deferred taxes of $100 and $234 ........................................ $ 156 $ 364
======== ========
Dividends declared but unpaid ..................................................... 269 267
======== ========
Transfer from loans receivable to real estate owned ............................... 522 --
======== ========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PIEDMONT BANCORP, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
1) Organization and Operations
Piedmont Bancorp, Inc., ("the Parent") is a bank holding company, formed in
December 1995, which owns all of the outstanding common stock of Hillsborough
Savings Bank, Inc. SSB ("the Bank"). The Bank amended and restated its charter
to effect its conversion from a North Carolina chartered mutual savings bank to
a North Carolina chartered stock savings bank in December 1995. The Bank is
primarily engaged in the business of obtaining deposits and providing loans to
the general public. The principal activity of the Parent is ownership of the
Bank.
2) Basis of Presentation
The consolidated financial statements include the accounts of the Parent and the
Bank, together referred to as "the Company". All significant intercompany
transactions and balances are eliminated in consolidation. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities as of the date of the balance sheets and the reported amounts of
income and expenses for the periods presented. Actual results could differ
significantly from those estimates. In management's opinion, the financial
information, which is unaudited, reflects all adjustments (consisting solely of
normal recurring adjustments) necessary for a fair presentation of the financial
information as of March 31, 1998 and for the three and nine month periods ended
March 31, 1998 and March 31, 1997 in conformity with generally accepted
accounting principles. Operating results for the three and nine month periods
ended March 31, 1998 are not necessarily indicative of the results that may be
expected for the fiscal year ending June 30, 1998.
3) Cash and Cash Equivalents
For purposes of reporting cash flows, the Company considers cash and
interest-bearing deposits in other financial institutions with original
maturities of three months or less to be cash equivalents.
4) Adoption of Statements of Financial Accounting Standards ("SFAS")
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings per Share". SFAS
128 establishes standards of computing and presenting earnings per share (EPS)
and applies to entities with publicly held common stock or potential common
stock. This statement simplifies the standards for computing earnings per share
previously found in APB Opinion No. 15, "Earnings per Share", and makes them
comparable to international EPS standards. It replaces the presentation of
primary EPS with a presentation of basic EPS. It also requires dual
<PAGE>
PIEDMONT BANCORP, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
4) Adoption of Statements of Financial Accounting Standards ("SFAS"), continued
presentation of basic and diluted EPS on the face of the income statement for
all entities with complex capital structures and requires a reconciliation of
the numerator and denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation. SFAS 128 is effective for financial
statements issued for periods ending after December 15, 1997 and requires
restatement of all prior period EPS data presented. The Company adopted SFAS 128
at December 31, 1997 and made all the required disclosures.
In February 1997, the FASB issued Statement of Financial Accounting Standards
No. 129 ("SFAS 129"), "Disclosure of Information about Capital Structure". SFAS
129 establishes standards for disclosing information about an entity's capital
structure and is applicable to all entities. It contains no change in disclosure
requirements for entities that were previously subject to the requirements of
APB Opinion No. 10, "Omnibus Opinion - 1966", APB Opinion No. 15, "Earnings Per
Share", and Statement of Financial Accounting Standards No. 47, "Disclosure of
Long-Term Obligations". SFAS 129 is effective for financial statements for
periods ending after December 15, 1997. The Company adopted SFAS 129 at December
31, 1997 with no impact on its consolidated financial statements.
5) Employee and Director Benefit Plans
The Company has an employee stock ownership plan ("ESOP") whereby an aggregate
number of shares amounting to 211,600 were purchased for future allocation to
employees. Contributions to the ESOP are made by the Bank on a discretionary
basis, and are allocated among ESOP participants on the basis of relative
compensation in the year of allocation. Benefits will vest in full upon five
years of service with credit given for years of service prior to the conversion.
The ESOP was funded by a $40,000 cash contribution from the Bank in December
1995 and a loan from the Parent in the amount of $2,690,677. The loan is secured
by shares of stock purchased by the ESOP and is not guaranteed by the Bank.
Principal and interest payments on this loan are funded primarily from
discretionary contributions by the Bank. Dividends, if any, paid on shares held
by the ESOP may also be used to reduce the loan. Dividends on unallocated shares
which are used to repay debt are not reported as dividends in the consolidated
financial statements but rather are recorded as an element of compensation
expense. Dividends on allocated shares are credited to the accounts of the
participants and reported as dividends in the consolidated financial statements.
For the nine month periods ended March 31, 1998 and 1997, ESOP-related
compensation expense totaled $161,000 and $1,650,000, respectively. For the
three month periods ended March 31, 1998 and 1997, ESOP-related compensation
expense totaled $50,000 and $47,000, respectively. Additionally, in December of
1997 and 1996, 19,918 and 125,819 shares, respectively, were released to
individual participant accounts. The significant expense and release and
allocation of shares under the ESOP in the three and nine month periods ending
March 31, 1997, as compared to the same period in 1998, was attributable to the
$7.00 special dividend paid on the Company's stock on December 6, 1996, and
management's decision to use the dividends on unallocated shares to repay debt
to the parent. At March 31, 1998, a total of 148,837 shares have been released
and allocated to participants under the Plan and 62,763 shares remain
unallocated.
<PAGE>
PIEDMONT BANCORP, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
5) Employee and Director Benefit Plans, continued
The Bank has a management recognition plan ("MRP") which serves as a means of
providing existing directors and employees of the Bank with an ownership
interest in the Company. On August 29, 1996, restricted stock awards of 105,800
shares were made to 38 directors, officers, and employees of the Bank. The
shares awarded under the MRP were issued from authorized but unissued shares of
common stock at no cost to recipients. The shares granted vest at a rate of 20%
each year on the anniversary of the initial award of shares so that the shares
will be completely vested at the end of five years. During the first nine months
of fiscal 1998, seven MRP participants forfeited a total of 11,645 restricted,
non-vested shares of the Company's stock and $40,000 of dividends previously
paid to the participants on those restricted shares. The dividends refunded to
the Bank have been reflected as an addition to equity in the same ratio the
dividends were originally paid to the former participants. The Bank allocated
9,000 of the forfeited restricted shares to new MRP participants during the nine
months ending March 31, 1998, leaving 4,059 restricted shares unallocated under
the MRP. Compensation expense of $193,000 and $161,000 was recorded during the
nine month periods ended March 31, 1998 and 1997, respectively. During the three
months ended March 31, 1998 and 1997, compensation expense was recorded of
$70,000 and $55,000, respectively.
6) Regulatory Restrictions
At the time of conversion, the Bank established a liquidation account in an
amount equal to its net worth at June 30, 1995. The liquidation account will be
maintained for the benefit of eligible deposit account holders who continue to
maintain their deposit accounts in the Bank after conversion. Only in the event
of a complete liquidation will each eligible deposit account holder be entitled
to receive a liquidation distribution from the liquidation account in the amount
of the current adjusted subaccount balance for deposit accounts then held before
any liquidation distribution may be made with respect to common stock. Dividends
paid subsequent to the conversion cannot be paid from this liquidation account.
The Bank may not declare or pay a cash dividend on or repurchase any of its
common stock if its net worth would thereby be reduced below either the
aggregate amount then required for the liquidation account or the minimum
regulatory capital requirements imposed by federal and state regulations. In
addition, for a period of five years after the conversion, the Bank will be
required, under existing North Carolina regulations, to obtain prior written
approval of the Administrator before it can declare and pay a cash dividend on
its capital stock in an amount in excess of one-half of the greater of (i) its
net income for the most recent fiscal year, or (ii) the average of its net
income after dividends for the most recent fiscal year and not more than two of
the immediately preceding fiscal years, if applicable. As a result of this
limitation, the Bank cannot pay a dividend without the approval of the
Administrator.
Management is not aware of any other trends, events, uncertainties, or current
recommendations by regulatory authorities that will have or that are reasonably
likely to have a material effect on the Company's liquidity, capital resources,
or other operations.
<PAGE>
PIEDMONT BANCORP, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
7) Earnings per Share
Basic EPS is computed by dividing net income by the weighted average number of
shares of common stock outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if the Company's dilutive stock options were
exercised. The numerator of the basic EPS computation is the same as the
numerator of the diluted EPS computaions for all periods presented A
reconciliation of the denominator of the basic EPS computation is as follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
----------------------- -----------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Basic EPS denominator: weighted average
number of common shares outstanding 2,690,574 2,670,386 2,683,500 2,627,126
Dilutive effect of stock options ...... 26,735 19,156 26,208 16,524
--------- --------- --------- ---------
Diluted EPS denominator ............... 2,717,309 2,689,542 2,709,708 2,643,650
========= ========= ========= =========
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Comparison of Results of Operations for the Nine Months Ended March 31, 1998 and
1997
Summary
For the nine months ended March 31, 1998, the Company recorded net income of
$1,224,000, or $0.46 basic and $0.45 diluted earnings per share, compared to a
net loss of $876,000, or $0.33 basic and diluted loss per share for the nine
months ended March 31, 1997. Earnings for the nine months ended March 31, 1997
were adversely affected by a number of non-recurring items. For the nine months
ended March 31, 1997, the Company recorded $1,650,000 of compensation expense
associated with the release and allocation of approximately 126,000 shares of
common stock of the Parent to participants of the ESOP. This release and
allocation of shares under the ESOP was mainly attributable to the $7.00 special
dividend paid on the Parent's stock on December 6, 1996 and management's
decision to use the special dividends paid on the unallocated shares of the
Parent's common stock held by the ESOP to pre-pay the ESOP loan from the Parent
to the ESOP. In addition, the Company recorded a provision for loan losses of
$638,000, which resulted primarily from the charge off of approximately $510,000
in loans to a single borrower. Losses of $132,000 were recognized on the sale of
investment securities, which were sold to fund the special dividend. Finally,
earnings for the nine month period reflect the $487,000 FDIC special assessment
to recapitalize the Savings Association Insurance Fund ("SAIF") which the
Company recorded during the first quarter. Without these non-recurring items,
net income for the nine month period would have been approximately $1,187,000 or
$0.46 basic and diluted earnings per share.
Net Interest Income
As shown in the table on the following page, tax-equivalent net interest income
decreased $162,000 to $3,806,000 for the nine months ended March 31, 1998 from
$3,968,000 for the same period in 1997. Net interest income is analyzed on a
tax-equivalent basis to adjust for the nontaxable status of income earned on
certain investments such as municipal bonds.
<PAGE>
Net Interest Income (continued)
<TABLE>
<CAPTION>
Nine Months Ended March 31,
-----------------------------------------------------------------------------
1998 1997
-------------------------------------- -------------------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Rate(1) Balance Interest Rate(1)
------- -------- ------- ------- -------- -------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Interest-bearing deposits .......................... $ 1,631 $ 42 3.43% $ 2,601 $ 84 4.30%
FHLB common stock .................................. 1,029 56 7.26 886 48 7.22
Taxable investment securities ...................... 11,460 560 6.52 15,235 769 6.73
Tax-exempt investment securities (2) ............... 3,941 236 7.98 8,271 497 8.02
Loans receivable ................................... 106,273 6,765 8.49 95,167 5,987 8.39
-------- -------- ---- -------- -------- ----
Total interest-earning assets ........................ 124,334 7,659 8.21 122,160 7,385 8.06
-------- ---- --------
Non-interest-earning assets .......................... 3,288 3,217
-------- --------
Total ........................................... $127,622 $125,377
======== ========
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Deposit accounts ................................... 83,864 2,972 4.72 75,700 2,665 4.69
Borrowings ......................................... 19,675 882 5.98 16,725 752 6.00
-------- -------- ---- -------- -------- ----
Total interest-bearing liabilities ................... 103,539 3,854 4.96 92,425 3,417 4.93
-------- ---- --------
Non-interest-bearing liabilities ..................... 3,019 5,214
Stockholders' equity ................................. 21,064 27,738
-------- --------
Total ........................................... $127,622 $125,377
======== ========
Net interest income and interest rate spread ......... $ 3,805 3.25% $ 3,968 3.13%
Net interest-earning assets and net interest marg$n .. 20,795 4.08% $ 29,735 4.33%
======== ========
Ratio of interest-earning assets to interest-bearing
liabilities .......................................... 120.08% 132.17%
</TABLE>
(1) All information presented in this column is annualized with the exception of
the ratio of interest-earning assets to interest bearing liabilities. (2)
Interest earned on tax-exempt investment securities has been adjusted to a
tax-equivalent basis using the applicable federal and state rates of 34% and
7.50%, respectively, and reduced by the nondeductible portion of interest
expense.
<PAGE>
The decrease in net interest income is primarily due to a higher level of
average interest-bearing liabilities during the nine months ended March 31, 1998
compared to the same period in 1997. Average total investment securities
declined $8.9 million while average loans receivable increased $11.1 million
over the same nine month period last year. Interest rate spread (on a
tax-equivalent basis) increased to 3.25% for the nine months ended March 31,
1998 from 3.13% for the same period in 1997 due primarily to a shift in the mix
toward higher earning assets, principally loans receivable. Despite the increase
in interest rate spread, net interest margin (on a tax-equivalent basis)
decreased to 4.08% for the nine months ended March 31, 1998 from 4.33% for the
nine months ended March 31,1997. Net interest margin for the nine months ended
March 31, 1997 reflects return on conversion proceeds that were invested in
loans and investment securities. Net interest margin for the nine months ending
March 31, 1998 reflects the liquidation of investment securities to fund the
special dividend paid on December 6, 1996 that required increased liability
funding of asset growth.
Provision for Loan Losses
The provision for loan losses for the nine months ended March 31, 1998 totaled
$72,000 compared to $638,000 for the same period in 1997. The unusually high
provision in 1997 resulted primarily from the charge off of approximately
$510,000 of loans to a single borrower. The provision for loan losses is based
on management's evaluation of the loan portfolio as discussed under "Financial
Condition".
Other Income
Other income totaled $440,000 for the nine months ended March 31, 1998 compared
to $153,000 for the same period in 1997. The increase is attributable to
$132,000 of net losses recorded in the nine months ended March 31, 1997 on
investment securities sold to fund the special dividend paid on December 6,
1996. In addition, a gain on sale of real estate owned of $114,000 was recorded
in the nine months ended March 31, 1998. Another factor contributing to the
increase is an increase of $48,000 in other income. This increase is primarily
attributable to a $38,000 increase in rental income associated with the rental
of the Company's former branch facility that commenced in December of 1996 and a
gain on sale of loans of $23,000 that was recorded in the nine months ended
March 31, 1998. Offsetting this increase is a $10,000 decline in merchant
income.
Other Expenses
Other expenses totaled $2,187,000 for the nine months ended March 31, 1998
compared to $4,092,000 for the same period in 1997. The significant decline was
primarily attributable to two large non-recurring expenses that occurred in the
nine months ended March 31, 1997. The Company recorded a total of $1,650,000 of
compensation expense associated with the release and allocation of 125,819
shares of common stock to ESOP participants as of December 31, 1996. Such a
large release and allocation of shares was made possible by the $7.00 special
dividend and management's decision to use the special dividends paid on
unallocated ESOP shares to prepay the ESOP loan. Approximately $1,428,000 of
compensation expense associated with the release and allocation of approximately
103,000 shares was attributable to the special dividend and was considered to be
non-recurring.
<PAGE>
The second non-recurring other expense that occurred in the nine months ended
March 31, 1997 was the $487,000 one-time FDIC special assessment for the
recapitalization of the SAIF. The assessment was levied on all depository
institutions with SAIF-insured deposits and was calculated as 65.7 basis points
on assessable deposits as of March 31, 1995. The Bank received a $45,000 refund
of premiums paid for the quarter ended December 31, 1996 and has seen a benefit
in the form of lower deposit insurance premiums during the nine months ended
March 31, 1998 as compared to the same period in 1997.
Without the effect of the non-recurring SAIF assessment and the non-recurring
portion of ESOP-related compensation expense, other expenses would have totaled
$2,177,000 for the nine months ended March 31, 1997.
Income Tax Expense
The Company recorded income tax expense of $672,000 for the nine months ended
March 31, 1998 compared to income tax expense of $73,000 during the same period
in 1997. The increase is attributable to the increase in taxable income in the
nine months ended March 31, 1998 compared to the same period in 1997.
Comparison of Results of Operations for the Three Months Ended March 31, 1998
and 1997
Summary
For the quarter ended March 31, 1998, the Company recorded net income of
$447,000, or $0.17 basic and $0.16 diluted earnings per share, compared to net
income of $372,000, or $0.14 basic and diluted earnings per share, for the same
quarter last year.
Net Interest Income
As shown in the table on the following page, tax-equivalent net interest income
increased $157,000 to $1,328,000 for the three months ended March 31, 1998 from
$1,171,000 for the same period in 1997. Net interest income is analyzed on a
tax-equivalent basis to adjust for the nontaxable status of income earned on
certain investments such as municipal bonds.
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------------------------------------------------------
1998 1997
----------------------------------- -------------------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Rate(1) Balance Interest Rate(1)
------- -------- ------- ------- -------- -------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets: (dollars in thousands)
Interest-earning assets:
Interest-bearing deposits ....................... $ 1,626 $ 12 2.95% $ 1,666 $ 17 4.14%
FHLB common stock ............................... 1,106 20 7.23 897 16 7.23
Taxable investment securities ................... 11,414 185 6.48 12,133 203 6.69
Tax-exempt investment securities (2) ............ 3,995 80 8.01 3,983 80 8.08
Loans receivable ................................ 109,161 2,333 8.55 96,657 2,013 8.35
-------- -------- ---- -------- -------- ----
Total interest-earning assets ..................... 127,302 2,630 8.26 115,336 2,329 8.10
-------- ---- --------
Non-interest-earning assets ....................... 3,494 3,638
-------- --------
Total ........................................ $130,796 $118,974
======== ========
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Deposit accounts ................................ 85,330 987 4.69 79,217 914 4.68
Borrowings ...................................... 21,126 315 5.96 16,713 244 5.84
-------- -------- ---- -------- -------- ----
Total interest-bearing liabilities ................ 106,456 1,302 4.89 95,930 1,158 4.88
Non-interest-bearing liabilities .................. 2,970 3,116
Stockholders' equity .............................. 21,370 19,928
-------- --------
Total ........................................ $130,796 $118,974
======== ========
Net interest income and interest rate spread ...... $ 1,328 3.37% $ 1,171 3.22%
======== ========
Net interest-earning assets and net interest margin $ 20,846 4.13% $ 19,406 4.02%
Ratio of interest-earning assets to
interest-bearing liabilities ...................... 119.58% 120.23%
</TABLE>
(1) All information presented in this column is annualized with the exception of
the ratio of interest-earning assets to interest bearing liabilities. (2)
Interest earned on tax-exempt investment securities has been adjusted to a
tax-equivalent basis using the applicable federal and state rates of 34% and
7.50%, respectively, and reduced by the nondeductible portion of interest
expense.
<PAGE>
The increase in net interest income is primarily due to a increase in average
earning assets and a higher average yield on earning assets during the three
months ended March 31, 1998 compared to the same three month period in 1997.
Average loans receivable increased $12.5 million from March 31, 1997 to March
31, 1998. Interest rate spread (on a tax-equivalent basis) increased to 3.37%
for the three months ended March 31, 1998 from 3.22% for the same three month
period in 1997 due primarily to a shift in the mix toward higher earning assets,
principally loans receivable
Provision for Loan Losses
The provision for loan losses for the three months ended March 31, 1998 totaled
$24,000 compared to $20,000 for the same period in 1997. The provision for loan
losses is based on management's evaluation of the loan portfolio as discussed
under "Financial Condition".
Other Income
Other income totaled $207,000 for the three months ended March 31, 1998 compared
to $70,000 for the same period in 1997. Included in other income for the three
months ended March 31, 1998 is a $114,000 gain on sale of real estate owned and
a $21,000 gain on sale of loans that was not present during the same period in
1997.
Other Expenses
Other expenses totaled $786,000 for the three months ended March 31, 1998
compared to $617,000 for the same period in 1997. The increase was primarily due
to increases in three other expense categories. Compensation and fringe benefits
increased to $430,000 for the three months ended March 31, 1998 from $374,000
for the same three month period in 1997. This increase is attributable to a
higher number of employees during the three months ended March 31, 1998 as
compared to the same period in 1997. Professional fees increased to $52,000 for
the three months ended March 31, 1998 from $28,000 for the same three month
period in 1997 due to fees associated with the development of a strategic plan,
a branch analysis study and a state bank examination. Other expense increased to
$158,000 for the three months ended March 31, 1998 from $84,000 for the same
three month period in 1997. The increase was caused by increases in marketing
expenses and office supplies as well as employee training associated with the
conversion to a new data center during the quarter ended March 31, 1998.
Income Tax Expense
The Company recorded income tax expense of $247,000 for the three months ended
March 31, 1998 compared to an income tax expense of $201,000 during the same
period in 1997. The increase is attributable to the increase in taxable income
in the three months ended March 31, 1998 compared to the same period in 1997.
Financial Condition
CHANGES IN FINANCIAL CONDITION
Total assets increased to $132.8 million at March 31, 1998 from $122.8 million
at June 30, 1997. During the nine months ended March 31, 1998, loans grew by
$10.5 million to $110.7 million at March 31, 1998. Loan growth was funded
largely with (1) advances from the Federal Home Loan Bank which increased by
$5.2 million to $21.7 million at March 31, 1998 from $16.5 million at June 30,
1997, and (2) deposits which increased by $3.4 million to $88.3 million at March
31, 1998 from $84.9 million at June 30, 1997.
Stockholders' equity increased from $20.4 million at June 30, 1997 to $21.4
million at March 31, 1998. As discussed in note 5 to the financial statements of
this report, during the nine months ended December 31, 1997, seven MRP
participants forfeited 11,645 restricted, non-vested shares of the Company's
stock and $40,000 of dividends previously paid to the participants on those
restricted shares. The dividends refunded to the Bank have been reflected as an
addition to equity in the same ratio the dividends were originally paid to the
former participants. The Bank allocated 9,000 of the forfeited restricted shares
to new MRP participants during the nine months ending March 31, 1998, leaving
4,059 restricted shares unallocated under the MRP.
<PAGE>
ASSET QUALITY
Nonperforming Assets and Risk Assets
Nonperforming assets include nonaccrual loans, restructured loans and real
estate owned. The table below presents information on nonperforming assets and
loans contractually past due but still accruing at March 31, 1998 and June 30,
1997.
<TABLE>
<CAPTION>
March 31, June 30
1998 1997
-------- --------
(in thousands)
<S> <C> <C>
Total nonaccrual loans ......................... $ 642 $ 803
Total restructured loans ....................... -- --
-------- --------
Total nonperforming loans ................. 642 803
Real estate owned .............................. -- --
-------- --------
Total nonperforming assets ..................... 642 803
Accruing loans, delinquent 90 days or more ..... -- 244
-------- --------
Total risk assets .............................. $ 642 $ 1,047
======== ========
Nonperforming loans to total loans ............. 0.58% 0.80%
Nonperforming assets to total assets ........... 0.48% 0.65%
Risk assets to total assets .................... 0.48% 0.85%
Allowance for loan losses to:
Total nonperforming assets .................. 1.42x 0.99x
Total risk assets ........................... 1.42x 0.76x
Total assets ................................... $132,828 $122,761
Total loans, net ............................... $110,694 $100,173
Allowance for loan losses ...................... 914 796
</TABLE>
<PAGE>
The primary change in nonperforming assets from June 30, 1997 to March 31, 1998
was the foreclosure and transfer of property from loans receivable to real
estate owned. This occurred during the three months ended December 31, 1997 and
was followed by the sale of the property during the three months ended March 31,
1997. Management has reviewed the collateral for nonperforming assets and
believes that collateral values related to the loans exceeds such balances. At
March 31, 1998 and June 30, 1997, the recorded investment in loans that are
considered to be impaired under SFAS No. 114 (Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a Loan") was
$119,000 and $580,000, respectively. Impaired loans totaling $114,000 at March
31, 1998 and $458,000 at June 30, 1996 were in non-accrual status. There was no
related allowance for credit losses associated with these loans as determined in
accordance with SFAS No. 114, however, approximately $18,000 and $87,000 of the
general allowance for loan losses is allocated to impaired loans at March 31,
1998 and June 30, 1997, respectively. Management has included this review among
the factors considered in the evaluation of the allowance for possible loan
losses.
Provision and Allowance for Loan Losses
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
------------------ ------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Balance at the beginning of period .. $ 879 $ 715 $ 796 $ 608
Provision for loan losses ........... 24 20 72 638
Recoveries .......................... 11 41 50 42
Loans charged off ................... -- (4) (4) (516)
----- ----- ----- -----
Balance at the end of period ........ $ 914 $ 772 $ 914 $ 772
===== ===== ===== =====
</TABLE>
The following table summarizes the activity in the allowance for loan losses for
the three and nine months ended March 31, 1998 and 1997, respectively.
At March 31, 1998, the allowance for loan losses was 0.82% of total loans,
compared to 0.79% of total loans at June 30, 1997 and 0.80% of total loans at
March 31, 1997.
<PAGE>
The levels of the provision and allowance for loan losses are based on
management's ongoing evaluation of the risk characteristics of the loan
portfolio considering current economic conditions, financial condition of
borrowers, growth and composition of the loan portfolio, collateral values, the
relationship of the allowance for loan losses to outstanding loans, the level of
nonperforming loans that have been identified as potential problems, past and
expected loss experience, results of the most recent regulatory examinations,
and other factors deemed relevant by management. Management actively maintains a
current loan watch list and knows of no other loans which are material and (1)
represent or result from trends or uncertainties which management reasonably
expects will materially impact future operating results, liquidity, or capital
resources, or (2) represent material credits about which management has serious
doubts as to the ability of such borrowers to comply with the loan repayment
terms. Based on management's evaluation of the loan portfolio, as described
above, the Company recorded a $72,000 provision for loan losses for the nine
months ended March 31, 1998 compared to a $638,000 provision for the same period
in 1997. The primary reason for the large decrease in the provision for loan
losses in 1998 compared to 1997 was a $597,000 provision for loan losses that
was recorded in the three months ended December 31, 1996 which resulted
primarily from the charge off of approximately $510,000 in loans to a single
borrower.
YEAR 2000 PLANNING
The Company has been assessing possible effects of the Year 2000 problem in
connection with its technology investments and operations. Management believes
that the Company has limited exposure and expects the cost of addressing the
Year 2000 issues to be approximately $30,000. As part of its assessment, the
Company has contacted its primary vendors to evaluate Year 2000 compliance. The
Year 2000 problem creates risk for the Company from unforeseen problems in its
own computer systems and from third parties. Such failures of the Company and/or
third parties' computer systems could have a material impact on the Company's
ability to conduct business.
LIQUIDITY AND INTEREST RATE RISK MANAGEMENT
Liquidity is the ability to raise funds or convert assets to cash in order to
meet customer and operating needs. The Company's primary sources of liquidity
are its portfolio of investment securities available-for-sale, principal and
interest payments on loans and mortgage-backed securities, interest income from
investment securities, maturities of investment securities held-to-maturity,
increases in deposits, and advances from the FHLB of Atlanta. At March 31, 1998,
the Bank had $8.3 million of credit available from the FHLB that would be
collateralized by a blanket lien on qualifying loans secured by first mortgages
on 1-4 family residences. Additional amounts may be made available under this
blanket floating lien or by using investment securities as collateral.
Management believes that it will have sufficient funds available to meet its
anticipated future loan commitments as well as other liquidity needs.
Interest rate risk is the sensitivity of interest income and interest expense to
changes in interest rates. Management structures the Company's assets and
liabilities in an attempt to protect net interest income from large fluctuations
associated with changes in interest rates. At March 31, 1998, the Company had a
cumulative one year asset-sensitive gap position of $5.4 million or 4.07% of
interest-earning assets. A asset-sensitive gap position generally indicates that
net interest income would decrease in a declining rate environment and increase
in a rising rate environment. The Company had a cumulative one year
liability-sensitive gap position of $2.7 million or 2.24% of interest-earning
assets at June 30, 1997. The Company will continue to actively manage its
balance sheet in order protect net interest income from changes in interest
rates.
It should be noted that these measures reflect the interest-sensitivity of the
balance sheet as of a specific date and are not necessarily indicative of future
results. Because of this and other limitations, management also monitors
interest rate sensitivity through the use of a model which estimates the change
in net portfolio value and net interest income in response to a range of assumed
changes in market interest rates. Based on interest sensitivity measures as of
March 31, 1998, management believes that its interest rate risk is at an
acceptable level.
CAPITAL RESOURCES
The Parent is regulated by the Board of Governors of the Federal Reserve System
("FRB") and is subject to securities registration and public reporting
regulations of the Securities and Exchange Commission. The Bank is regulated by
the Federal Deposit Insurance Corporation ("FDIC") and the Administrator,
Savings Institutions Division, North Carolina Department of Commerce, (the
"Administrator"). The Bank is subject to the capital requirements of the FDIC
and the Administrator. The FDIC requires the Bank to maintain minimum ratios of
Tier I capital to total risk-weighted assets and total capital to risk-weighted
assets of 4% and 8%, respectively. Tier I capital consists of total
stockholders' equity calculated in accordance with generally accepted accounting
principles less intangible assets, and total capital is comprised of Tier I
capital plus certain adjustments, the only one applicable to the Bank is the
allowance for possible loan losses. Risk-weighted assets refer to the on- and
off-balance sheet exposures of the Bank adjusted for their relative risk levels
using formulas set forth in FDIC regulations. The Bank is also subject to a FDIC
leverage capital requirement, which calls for a minimum ratio of Tier I capital
(as defined above) to quarterly average total assets of 3% and a ratio of 5% to
be "well-capitalized". The Administrator requires a net worth equal to at least
5% of total assets. At March 31, 1998, the Bank was in compliance with all of
the aforementioned capital requirements.
As of March 31, 1998, the FDIC categorized the Bank as "well-capitalized" under
the regulatory framework for prompt corrective action. To be categorized as
"well-capitalized", the Bank must meet minimum ratios for total risk-based, and
Tier I leverage (the ratio of Tier I capital to average assets) of 10% and 5%,
respectively. There have been no events or conditions since notification that
management believes have changed the Bank's category.
Current Accounting Issues
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130 ("SFAS 130"), "Reporting Comprehensive Income". SFAS 130 establishes
standards for reporting and displaying comprehensive income and its components
(revenues, expenses, gains, and losses) in a full set of general-purpose
financial statements. This Statement requires that an enterprise (a) classify
items of other comprehensive income by their nature in the financial statement
and (b) display the accumulated balance of other comprehensive income separately
from retained earnings and additional paid-in-capital in the equity section of a
statement of financial position. SFAS 130 is effective for fiscal years
beginning after December 15, 1997. Reclassification of financial statements for
earlier periods provided for comparative purposes is required. The Company plans
to adopt SFAS 130 in fiscal year 1999 and will make the required disclosures
upon adoption.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131 ("SFAS 131"), "Disclosures about Segments of an Enterprise and Related
Information". SFAS 131 establishes standards for the way that public businesses
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas, and major customers. This Statement is effective for financial
statements for periods beginning after December 15, 1997 and in the initial year
of application, comparative information for earlier years is to be restated. The
Company plans to adopt SFAS 131 in fiscal year 1999 without any significant
impact on its consolidated financial statements as the Company operates as one
segment.
In February 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 132, "Employer's Disclosure about Pensions
and Other Postretirement Benefits" ("SFAS No. 132"). SFAS No. 132 standardizes
the disclosure requirements of pensions and other postretirement benefits. It
does not change any measurement or recognition provisions, and thus will not
materially impact the Corporation. SFAS No. 132 is effective for fiscal years
beginning after December 15, 1997. The Corporation will present the required
disclosures in its financial statements for the year ended June 30, 1999.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
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) Exhibits
Exhibit Number Description
27.1 Financial Data Schedule (Edgar only)
27.2 Restated Financial Data Schedule
(b) Reports on Form 8-K
None
<PAGE>
SIGNATURES
Under the requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized
Date: May 13, 1998 By: /s/ D. Tyson Clayton
--------------------
D. Tyson Clayton
President
Date: May 13, 1998 By: /s/ Thomas W. Wayne
-------------------
Vice President and principal
financial officer
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 830
<INT-BEARING-DEPOSITS> 1,271
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 12,024
<INVESTMENTS-CARRYING> 3,579
<INVESTMENTS-MARKET> 0
<LOANS> 110,694
<ALLOWANCE> 914
<TOTAL-ASSETS> 132,828
<DEPOSITS> 88,323
<SHORT-TERM> 21,700
<LIABILITIES-OTHER> 1,421
<LONG-TERM> 0
0
0
<COMMON> 9,130
<OTHER-SE> 12,254
<TOTAL-LIABILITIES-AND-EQUITY> 132,828
<INTEREST-LOAN> 6,765
<INTEREST-INVEST> 762
<INTEREST-OTHER> 42
<INTEREST-TOTAL> 7,569
<INTEREST-DEPOSIT> 2,972
<INTEREST-EXPENSE> 3,854
<INTEREST-INCOME-NET> 3,715
<LOAN-LOSSES> 72
<SECURITIES-GAINS> 6
<EXPENSE-OTHER> 2,187
<INCOME-PRETAX> 1,896
<INCOME-PRE-EXTRAORDINARY> 1,896
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,224
<EPS-PRIMARY> .46
<EPS-DILUTED> .45
<YIELD-ACTUAL> 4.08
<LOANS-NON> 642
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 796
<CHARGE-OFFS> 4
<RECOVERIES> 50
<ALLOWANCE-CLOSE> 914
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 933
<INT-BEARING-DEPOSITS> 1,491
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 12,197
<INVESTMENTS-CARRYING> 3,506
<INVESTMENTS-MARKET> 3,522
<LOANS> 96,086
<ALLOWANCE> 772
<TOTAL-ASSETS> 118,519
<DEPOSITS> 81,920
<SHORT-TERM> 15,500
<LIABILITIES-OTHER> 999
<LONG-TERM> 0
0
0
<COMMON> 5,278
<OTHER-SE> 14,822
<TOTAL-LIABILITIES-AND-EQUITY> 118,519
<INTEREST-LOAN> 5,987
<INTEREST-INVEST> 1,120
<INTEREST-OTHER> 84
<INTEREST-TOTAL> 7,191
<INTEREST-DEPOSIT> 2,665
<INTEREST-EXPENSE> 3,417
<INTEREST-INCOME-NET> 3,774
<LOAN-LOSSES> 638
<SECURITIES-GAINS> (132)
<EXPENSE-OTHER> 4,092
<INCOME-PRETAX> (803)
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (876)
<EPS-PRIMARY> (.33)
<EPS-DILUTED> (.33)
<YIELD-ACTUAL> 4.33
<LOANS-NON> 793
<LOANS-PAST> 291
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 608
<CHARGE-OFFS> 516
<RECOVERIES> 42
<ALLOWANCE-CLOSE> 772
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
