FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended: March 31, 2000
__________________________
Commission File Number 1-13936
__________________________
BOSTONFED BANCORP, INC.
________________________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 52-1940834
________________________________________________________________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
17 New England Executive Park, Burlington, Massachusetts 01803
________________________________________________________________________________
(Address of principal executive offices) (Zip Code)
(781) 273-0300
________________________________________________________________________________
(Registrant's telephone number, including area code)
Not Applicable
________________________________________________________________________________
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes (X) No ( )
Number of shares of common stock, par value $.01 per share,
outstanding as of April 30, 2000: 4,902,881.
<PAGE>
BOSTONFED BANCORP INC.
FORM 10-Q
INDEX
PART I - FINANCIAL INFORMATION Page
______________________________ ____
Item 1. Financial Statements:
Consolidated Balance Sheets as of
March 31, 2000 (unaudited) and December 31, 1999 2
Consolidated Statements of Operations for the Three
Months ended March 31, 2000 and 1999 (unaudited) 3
Consolidated Statement of Changes in Stockholders'
Equity for the Three Months ended
March 31, 2000 (unaudited) 4
Consolidated Statements of Cash Flows for the
Three Months ended March 31, 2000 and 1999 (unaudited) 5 - 6
Notes to Consolidated Financial Statements 7 - 9
Average Balances and Yield / Costs 10
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 11 - 16
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 17 - 18
PART II _ OTHER INFORMATION
___________________________
Item 1. Legal Proceedings 19
Item 2. Changes in Securities and Use of Proceeds 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19
Signature Page 20
1
<PAGE>
BOSTONFED BANCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
---------------------------
(In Thousands)
March 31, December 31,
2000 1999
----------- --------------
Assets (Unaudited)
- ------------
Cash and cash equivalents $ 34,422 $ 34,696
Investment securities available for sale
(amortized cost of $58,237 and $55,051 at
March 31, 2000 and December 31, 1999,
respectively) 57,367 53,203
Investment securities held to maturity (fair
value of $2,264 and $2,275 at March 31,
2000 and December 31, 1999) 2,304 2,304
Mortgage-backed securities available for sale
(amortized cost of $15,473 and $15,881 at
March 31, 2000 and December 31, 1999) 15,052 15,540
Mortgage-backed securities held to maturity (fair
value of $62,434 and $14,030 at March 31,
2000 and December 31, 1999) 64,085 13,941
Mortgage loans held for sale 16,527 16,174
Loans, net of allowance for loan losses of $10,725
and $10,654 at March 31, 2000 and December 31, 1,008,000 1,032,594
1999)
Accrued interest receivable 6,504 6,267
Stock in FHLB of Boston and Federal Reserve Bank 20,649 20,311
Premises and equipment 9,055 8,212
Real estate owned 370 376
Goodwill 20,254 19,519
Other assets 31,459 30,516
------- -------
Total assets $1,286,048 $1,253,653
======= =======
Liabilities and Stockholders' Equity
- ---------------------------------------
Liabilities:
Deposit accounts $808,466 $770,049
Federal Home Loan Bank advances and other
Borrowed Money 379,501 387,555
Advance payments by borrowers for taxes
and insurance 3,376 3,298
Other liabilities 7,695 7,047
------- -------
Total liabilities 1,199,038 1,167,949
------- -------
Commitments and contingencies
Stockholders' equity;
Preferred stock, $.01 par value, 1,000,000 shares
authorized; none issued -- -- -- --
Common stock, $0.01 par value, 17,000,000 shares
authorized; 6,589,617 shares issued (4,907,481 and
4,973,081 shares outstanding at March 31, 2000
and December 31, 1999, respectively) 66 66
Additional paid-in capital 67,260 67,198
Retained earnings 52,176 50,481
Accumulated other comprehensive income (loss) (984) (1,485)
Less Treasury Stock, (1,682,136 shares and
1,616,536 shares at March 31, 2000
and December 31, 1999, respectively), at cost (29,553) (28,532)
Less unallocated ESOP shares (1,663) (1,663)
Less unearned Stock-Based Incentive Plan (292) (361)
------- -------
Total stockholders' equity 87,010 85,704
------- -------
Total liabilities and stockholders' equity $1,286,048 $1,253,653
======= =======
See accompanying condensed notes to consolidated financial statements.
2
<PAGE>
BOSTONFED BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Dollars In Thousands, except per share amount)
Three Months Ended
------------------
3/31/00 3/31/99
------------------
(Unaudited)
Interest income:
Loans $ 19,661 $ 17,658
Mortgage-backed securities 698 616
Investment securities 1,387 1,257
------- -------
Total interest income 21,746 19,531
------- -------
Interest expense:
Deposit accounts 7,180 6,275
Borrowed funds 5,716 5,088
------- -------
Total interest expense 12,896 11,363
------- -------
Net interest income 8,850 8,168
Provision for loan losses 251 430
------- -------
Net interest
income after provision 8,599 7,738
Non-interest income:
Loan processing and servicing
fees 175 161
Gain on sale of loans 1,908 764
Deposit service fees 460 409
Other 623 213
------- -------
Total non-interest income 3,166 1,547
------- -------
Non-interest expense:
Compensation and benefits 5,134 3,626
Occupancy and equipment 1,004 797
Federal deposit insurance
premiums 39 94
Real Estate Operations (287) (21)
Other 2,337 1,547
------- -------
Total non-interest expense 8,227 6,043
------- -------
Income before income taxes 3,538 3,242
Income tax expense 1,256 1,238
------- -------
Net income $ 2,282 $ 2,004
======= =======
Basic earnings per share $0.48 $0.41
Diluted earnings
per share $0.48 $0.40
Basic weighted average shares
outstanding 4,744,871 4,853,831
Common stock equivalents
due to dilutive effect
of stock options 55,817 190,890
Diluted total weighted average
shares outstanding 4,800,688 5,044,721
See accompanying condensed notes to consolidated financial statements.
3
<PAGE>
<TABLE>
BOSTONFED BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
Three Months Ended March 31, 2000
(In Thousands)
(Unaudited)
Accumulated Unearned
other Stock-
Additional Comprehensive Unallocated Based Total
Common paid-in Retained Treasury income ESOP Incentive stockholders'
stock capital earnings Stock (loss) shares Plan equity
------ -------- --------- -------- ---------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1999 $ 66 67,198 50,481 (28,532) (1,485) (1,663) (361) 85,704
Net income - - - - 2,282 - - - - - - - - 2,282
Change in net unrealized gain/(loss)
on investments available for sale
(net of tax of $396) - - - - - - - - 501 - - - - 501
--------
Total comprehensive income - - - - - - - - - - - - - - 2,783
Cash dividends declared and
paid ($0.12 per share) - - - - (587) - - - - - - - - (587)
Common Stock repurchased
(68,600 shares at an average
price of $15.63 per share) - - - - - - (1,073) - - - - - - (1,073)
Stock option exercised
(3 shares at an average price
$14.66 per share, net of tax
benefit) - - (13) - - 52 - - - - - - 39
Allocation relating to earned
portion of Stock-Based
Incentive Plan - - - - - - - - - - - - 69 69
Appreciation in fair value of
shares charged to expense for
compensation plans - - 75 - - - - - - - - - - 75
------- ------- -------- --------- --------- -------- --------- --------
Balance at March 31, 2000 $ 66 67,260 52,176 (29,553) (984) (1,663) (292) 87,010
------- ------- -------- --------- --------- -------- --------- --------
See accompanying condensed notes to consolidated financial statements.
4
</TABLE>
<PAGE>
BOSTONFED BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands)
For the Three Months Ended
March 31,
2000 1999
------- -------
(Unaudited)
Net cash flows from operating activities:
Net income $ 2,282 $ 2,004
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, amortization and
accretion, net 629 337
Earned SIP shares 69 121
Appreciation in fair value of shares
charged to expense for compensation plans 75 158
Income from bank owned life insurance (314) -
Provision for loan losses 251 430
Provision for valuation allowance for
real estate owned 6 -
Loans originated for sale (61,081) (80,743)
Proceeds from sale of loans 62,636 75,943
Gain on sale of loans (1,908) (764)
Increase in accrued interest receivable (237) (220)
Increase in prepaid expenses
and other assets, net (712) (544)
Increase (Decrease)in accrued expenses and
other liabilities, net 251 (1,312)
-------- -------
Net cash provided by (used in)
operating activities 1,947 (4,590)
-------- -------
Cash flows from investing activities:
Net cash paid for Forward Financial (994) -
Proceeds from maturities of investment
securities held to maturity - 3,000
Proceeds from maturities of investment
securities available for sale 1,000 5,075
Purchase of investment securities
available for sale (4,311) (11,249)
Purchase of FHLB and Federal Reserve Stock (338) (1,179)
Principal payments on mortgage-backed
securities available for sale 398 2,492
Principal payments on mortgage-
backed securities held to maturity 826 4,478
Principal payments on investment
securities available for sale 140 -
Increase in loans, net (26,631) (33,841)
Purchases of premises and equipment (1,131) (187)
Proceeds from sale of real estate owned - 47
------- -------
Net cash used in
investing activities (31,041) (31,364)
------- ---------
-Continued on next page-
5
<PAGE>
BOSTONFED BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands)
For the Three Months Ended
March 31,
2000 1999
------- -------
(Unaudited)
Cash flows from financing activities:
Increase in deposit accounts 38,417 1,700
Repayments of Federal Home Loan
Bank advances (76,123) (41,632)
Proceeds from Federal Home Loan
Bank advances 66,124 64,291
Proceeds from other borrowings 1,945 -
Cash dividends paid (587) (511)
Common stock repurchased (1,073) (1,188)
Options exercised 39 -
Decrease in advance payments by
borrowers for taxes and insurance 78 324
-------- -------
Net cash provided by
financing activities 28,820 22,984
------- -------
Net decrease
in cash and cash equivalents (274) (12,970)
Cash and cash equivalents at beginning of quarter 34,696 37,201
------- -------
Cash and cash equivalents at end of quarter $ 34,422 $ 24,231
======= =======
Supplemental disclosure of cash flow
information:
Payments during
the quarter for:
Interest $ 12,630 $ 10,543
======= =======
Taxes $ 351 $ 2,621
======= =======
See accompanying condensed notes to consolidated financial statements.
6
<PAGE>
BOSTONFED BANCORP INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: BASIS OF PRESENTATION
The unaudited consolidated financial statements as of March 31, 2000 and
December 31, 1999 and for the three-month periods ended March 31, 2000 and 1999
of BostonFed Bancorp, Inc., ("BostonFed" or the "Company") and its wholly-owned
subsidiaries, Boston Federal Savings Bank ("BFS"), Broadway National Bank
("BNB") and BF Funding Corporation, presented herein, should be read in
conjunction with the consolidated financial statements of the Company as of and
for the year ended December 31, 1999.
The unaudited consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all necessary adjustments, consisting
only of normal recurring accruals necessary for a fair presentation, have been
included. The results of operations for the three-month periods ended March 31,
2000 and 1999 are not necessarily indicative of the results that may be expected
for the entire fiscal year.
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This statement establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, (collectively referred to as
"derivatives") and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the balance sheet and measure
those instruments at fair value. Under this statement, an entity that elects to
apply hedge accounting is required to establish at the inception of the hedge
the method it will use for assessing the effectiveness of the hedging derivative
and the measurement approach for determining the ineffective aspect of the
hedge. In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of SFAS No.
133", which defers the effective date of SFAS No. 133 to fiscal quarters
beginning after June 15, 2000. The adoption of these statements is not expected
to have a material impact on the Company.
NOTE 2: COMMITMENTS, CONTINGENCIES AND CONTRACTS
At March 31, 2000, the Company had commitments of $72.2 million to
originate mortgage loans and $10.9 million to purchase loans from correspondent
lenders. Of these $83.1 million commitments, $76.4 million were adjustable rate
mortgage loans with interest rates ranging from 6.75% to 10.00% and $6.7 million
were fixed rate mortgage loans with interest rates ranging from 7.60% to 9.88%.
The Company also had commitments to sell $26.8 million of mortgage loans.
At March 31, 2000, the Company was servicing first mortgage loans of
approximately $853.6 million, which are either partially or wholly-owned by
others.
NOTE 3: LEGISLATIVE MATTERS
Federal Financial Modernization legislation, formally known as the
"Gramm-Leach-Bliley Act" was recently enacted by Congress and signed into law by
the President on November 12, 1999, eliminates many federal and state law
barriers to affiliations among banks and other financial services providers. The
legislation, which takes effect 120 days after the date of enactment,
establishes a statutory framework pursuant to which full affiliations can occur
between banks and securities firms, insurance companies, and other financial
companies. The legislation provides some degree of flexibility in structuring
these new affiliations, although certain activities may only be conducted
through a holding company structure. The legislation, preserves the role of the
Board of Governors of the Federal Reserve System as the umbrella supervisor for
holding companies, but incorporates a system of functional regulation pursuant
to which the various federal and state financial supervisors will continue to
regulate the activities traditionally within their jurisdictions. The
legislation specifies that banks may not participate in the new affiliations
unless the banks are well-capitalized and well-managed or if any bank affiliate
had received a less than "satisfactory" Community Reinvestment Act of 1977
rating as of its most recent examination.
7
<PAGE>
NOTE 4: Business Segments
The Company's wholly-owned bank subsidiaries, BFS and BNB (collectively
"the Banks"), have been identified as reportable operating segments in
accordance with the provisions of SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information." BF Funding Corp., a wholly-owned
subsidiary of the Company, and various subsidiaries of the Banks did not meet
the quantitative thresholds for determining reportable segments. The Banks
provide general banking services to their customers, including deposit accounts,
residential, commercial, consumer and business loans. Each Bank also invests in
mortgage-backed securities and other financial instruments. In addition to its
own operations, the Company provides managerial expertise and other professional
services. The results of the Company and BF Funding comprise the "other"
category.
The Company evaluates performance and allocates resources based on the
Banks' net income, net interest margin, return on average assets and return on
average equity. The Banks follow generally accepted accounting principles as
described in the summary of significant accounting policies. The Company and
Banks have inter-company expense and tax allocation agreements. These
inter-company expenditures are allocated at cost. Inter-company asset sales were
accounted for at current market prices at the time of sale and approximated
cost.
Each Bank is managed separately. BNB is managed by a President and CEO, who
reports directly to BNB's Board of Directors. BFS is managed by a CEO, who is
also the Company's CEO, and reports directly to BFS' and the Company's Board of
Directors, as applicable. The following table sets forth certain information
about and the reconciliation of reported net income for each of the reportable
segments.
8
<PAGE>
<TABLE>
<CAPTION> (Dollars In Thousands)
TOTAL
REPORTABLE CONSOLIDATED
BFS BNB SEGMENTS OTHER ELIMINATIONS TOTALS
-------- -------- ------------ ------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
At or for the three-months
ended March 31, 2000:
Interest income $ 19,557 2,185 21,742 47 (43) 21,746
Interest expense 12,243 592 12,835 104 (43) 12,896
Provision for loan losses 221 30 251 251
Non-interest income 2,937 276 3,213 (47) 3,166
Non-interest expense 6,909 1,208 8,117 157 (47) 8,227
Income tax expense 1,104 220 1,324 (68) 1,256
Net income 2,017 411 2,428 (146) 2,282
Total assets 1,142,673 141,728 1,284,401 94,187 (92,540) 1,286,048
Net interest margin 2.81% 5.22% n.m. n.m. n.m. 3.04%
Return on average assets .72% 1.18% n.m. n.m. n.m. .73%
Return on average equity 10.30% 13.97% n.m. n.m. n.m. 10.41%
At or for the three-months
ended March 31, 1999:
Interest income $ 17,240 2,152 19,392 284 (145) 19,531
Interest expense 10,984 524 11,508 (145) 11,363
Provision for loan losses 400 30 430 430
Non-interest income 1,366 181 1,547 1,547
Non-interest expense 4,855 1,086 5,941 102 6,043
Income tax expense 893 273 1,166 72 1,238
Net income 1,474 420 1,894 110 2,004
Total assets 1,015,285 135,755 1,151,040 85,692 (74,169) 1,162,563
Net interest margin 2.49% 4.86% n.m. n.m. n.m. 2.95%
Return on average assets .59% 1.25% n.m. n.m. n.m. .70%
Return on average equity 10.90% 13.50% n.m. n.m. n.m. 9.48%
n.m. = not meaningful
9
</TABLE>
<PAGE>
<TABLE>
BOSTONFED BANCORP, INC. AND SUBSIDIARIES
Average Balances and Yields / Costs
(Unaudited)
<CAPTION>
For the three months ended March 31: 2000 1999
------------------------------------- ------------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
---------- ---------- --------- --------- ---------- ---------
(Dollars in thousands)
Assets:
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Investment securities (1) $ 82,990 $ 1,387 6.69% $ 87,078 $ 1,257 5.77%
Loan, net and mortgage loans held for sale (2) 1,039,444 19,661 7.57% 977,834 17,658 7.22%
Mortgage-backed securities (3) 43,234 698 6.46% 40,838 616 6.03%
---------- --------- --------- ----------
Total interest-earning assets 1,165,668 21,746 7.46% 1,105,750 19,531 7.07%
--------- --------- ---------- ---------
Non-interest-earning assets 92,905 45,290
---------- ---------
Total assets $ 1,258,573 $1,151,040
========== =========
Liabilities and Stockholders' Equity:
Interest-bearing Liabilities:
Money market deposit accounts $ 56,205 398 2.83% $ 59,832 426 2.85%
Savings accounts 149,999 980 2.61% 132,372 779 2.35%
NOW accounts 112,907 216 0.77% 108,568 261 0.96%
Certificate accounts 399,253 5,586 5.60% 341,398 4,809 5.63%
---------- --------- --------- ----------
Total 718,364 7,180 4.00% 642,170 6,275 3.91%
Borrowed Funds (4) 387,068 5,716 5.91% 357,564 5,088 5.69%
---------- --------- --------- ----------
Total interest-bearing liabilities 1,105,432 12,896 4.67% 999,734 11,363 4.55%
--------- --------- ---------- ---------
Non-interest-bearing liabilities 65,435 66,735
---------- ---------
Total liabilities 1,170,867 1,066,469
---------- ---------
Stockholders' equity 87,706 84,571
---------- ---------
Total liabilities and
stockholders' equity $1,258,573 $1,151,040
========== =========
Net interest rate spread (5) $ 8,850 2.79% $ 8,168 2.52%
========= ========= ========== =========
Net interest margin (6) 3.04% 2.95%
========= =========
Ratio of interest-earning assets to
interest-bearing liabilities 105.45% 110.60%
========= =========
<FN>
(1) Includes investment securities available for sale and held to maturity,
short-term investments, stock in FHLB-Boston and daily federal funds sold.
(2) Amount is net of deferred loan origination costs, construction loans in
process, net unearned discount on loans purchased and allowance for loan
losses and includes non-performing loans.
(3) Includes mortgage-backed securities available for sale and held to maturity.
(4) Interest paid on borrowed funds for the periods presented includes
interest expense on FNMA deposits held in escrow accounts with the
Company related to the Company's FNMA servicing, which, if such interest
expense were excluded, would result in an average cost of borrowed funds
of 5.90% and 5.65% for the three months ended March 31, 2000 and
March 31, 1999, respectively.
(5) Net interest rate spread represents the difference between the weighted
average yield on interest-earning assets and the weighted average cost of
interest-bearing liabilities.
(6) Net interest margin represents net interest income as a percentage of
average interest-earning assets.
</FN>
</TABLE>
10
<PAGE>
MANAGEMENTS'S DISCUSSTION AND ANALYSIS OF FINACNCIAL CONDITION
AND RESULTS OF OPERATIONS
A. GENERAL
The Company is the holding company for two banking subsidiaries, Boston
Federal Savings Bank, a federally chartered savings bank, and Broadway National
Bank, a nationally chartered commercial bank. Each is considered a business
segment and accordingly the Company has complied with the segment reporting
requirement in Note 4 of this document and in discussion herein as appropriate.
On February 7, 1997, the Company acquired BNB and as a result of the
acquisition, the Company became a bank holding company subject to regulation by
the Federal Reserve Bank ("FRB"). Boston Federal Savings Bank is regulated by
the Office of Thrift Supervision and Broadway National Bank is regulated by the
Office of the Comptroller of the Currency ("OCC"). On August 4, 1999, the
Company entered into a Purchase and Sale Agreement by and among the Company,
Diversified Ventures, Inc., d/b/a Forward Financial Company ("Forward
Financial"), Ellsmere Insurance Agency, Inc. ("Ellsmere") and Gene J. DeFeudis,
pursuant to which BFS purchased all of the outstanding capital stock of Forward
Financial and BNB purchased all of the outstanding capital stock of Ellsmere in
a cash transaction for approximately $38.3 million. The transaction was
consummated at the close of business on December 6, 1999 and was recorded by the
use of the purchase method of accounting. During March 2000, an additional
$975,000 was paid by BFS to Mr. DeFeudis in order to satisfy the remaining
payments due Mr. DeFeudis in connection with the acquisition, which payment was
based on certain performance agreed to by the parties. Substantially all of the
Company's business is coordinated through its subsidiary banks and references
herein to "Company" include the banks as appropriate. The Company's principal
business has been and continues to be attracting retail deposits from the
general public in the areas surrounding its branch offices and investing those
deposits, together with funds generated from operations and borrowings,
primarily in one- to four-family residential mortgage loans. To a lesser extent,
the Company invests in multi-family mortgages, commercial real estate,
construction and land, consumer loans, business loans, and investment
securities. The Company originates loans for investment and loans for sale in
the secondary market, generally retaining the servicing rights for loans sold.
Through Forward Financial, the Company also originates consumer loans primarily
with customers purchasing or refinancing manufactured homes, recreational
vehicles, marine and leased equipment and subsequently sells substantially all
of such loans, servicing released. Loan sales are made from loans held in the
Company's portfolio designated as being held for sale or originated for sale
during the period. The Company's revenues are derived principally from interest
on its mortgage loans, and to a lesser extent, interest and dividends on its
investments and mortgage-backed securities, fees, gains on sale of loans and
loan servicing income. The Company's primary sources of funds are retail
deposits, wholesale brokered deposits, principal and interest payments on loans
and mortgage-backed securities, FHLB advances, other borrowings and proceeds
from the sale of loans.
B. YEAR 2000 ISSUE
Due to the extensive planning and testing during the three-years ended
December 31, 1999, the Company was able to begin the Year 2000 without any
interruption in its operations, whatsoever. Included in other non-interest
expenses during the three-month period ended March 31, 1999, were charges
incurred in connection with the modification or replacement of software and
hardware in order for the Company's computer systems to properly recognize the
Year 2000. The expense incurred totaled approximately $50,000 for the
three-month period ended March 31, 1999. No Year 2000 related expenses were
incurred in the period ended March 31, 2000.
C. FINANCIAL CONDITION
Total assets at March 31, 2000 were $1.286 billion, compared to $1.254 billion
at December 31, 1999, an increase of $32 million or 2.6%. Asset growth was
primarily attributable to a $50.1 million increase in mortgage-backed securities
held to maturity, partially offset by a $24.6 million decrease in loans, net of
allowance for loan losses. Mortgage-backed securities held to maturity increased
from $13.9 million at December 31, 1999 to $64.1 million at March 31, 2000 due
to the securitization of $51.0 million of loans into Federal Home Loan Mortgage
Corporation ("FHLMC") securities. Loans, net, declined from $1.033 billion at
December 31, 1999 to $1.008 billion at March 31, 2000. Investment securities
available for sale also contributed to asset growth by increasing $4.2 million
form $53.2 million at December 31, 1999 to $57.4 million at March 31, 2000.
11
<PAGE>
Deposit accounts increased by $38.4 million, or 5.0%, from a balance of $770.0
million at December 31, 1999 to a balance of $808.5 million at March 31, 2000.
Approximately $10.8 million of the deposit account balance increase was due to
the Company's acquisition of wholesale brokered certificates of deposit. Federal
Home Loan Bank advances and other borrowings decreased by $8.1 million, to a
balance of $379.5 million at March 31, 2000 from a balance of $387.6 million at
December 31, 1999.
D. LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds are deposits, (including brokered
deposits), principal and interest payments on loans, investments,
mortgage-backed and related securities and loan sales, FHLB advances and
repurchase agreements. While maturities and scheduled amortization of loans are
predictable sources of funds, deposit flows and mortgage prepayments are greatly
influenced by general interest rates, economic conditions and competition. The
Company has maintained in excess of the required minimum levels of liquid assets
at BFS as defined by OTS regulations. This requirement, which may be varied at
the direction of the OTS depending upon economic conditions and deposit flows,
is based upon a percentage of the BFS's deposits and short-term borrowings.
BFS's current required liquidity ratio is 4%. At March 31, 2000 and December 31,
1999 BFS's liquidity ratio was 10.8% and 6.9% respectively. Management has
maintained liquidity as close as possible to the minimum requirement so that it
may invest any excess liquidity in higher yielding interest-earning assets or
use such funds to repay higher cost FHLB advances. The OCC does not have
specific guidance for liquidity ratios for BNB, but does require banks to
maintain reasonable and prudent liquidity levels. Management believes such
levels have been maintained.
The Company's most liquid assets are cash, overnight federal funds sold,
and loans and investments available for sale. The levels of these assets are
dependent on the Company's operating, financing, lending and investing
activities during any given period. At March 31, 2000, BFS' cash, loans and
investments available for sale totaled $77.1 million or 6.7% of BFS's total
assets. While not all of these liquid assets qualify for BFS's regulatory
liquidity requirements, other assets in the held to maturity category qualify
for regulatory liquidity requirements.
The Company has other sources of liquidity if a need for additional funds
arises, including FHLB advances. At March 31, 2000, the Company had $374.5
million in advances outstanding from the FHLB. The Company generally does not
pay the highest deposit rates in its market and accordingly utilizes alternative
sources of funds such as FHLB advances, wholesale brokered deposits and
repurchase agreements to supplement cash flow needs.
At March 31, 2000, the Company had commitments to originate loans and
unused outstanding lines of credit totaling $193.50 million. The Company
anticipates that it will have sufficient funds available to meet its current
loan origination commitments. Certificate accounts which are scheduled to mature
in less than one year from March 31, 2000, totaled $265.4 million.
At March 31, 2000, the consolidated stockholders' equity to total assets
ratio was 6.8%. As of March 31, 2000, the Company, BFS and BNB exceeded all of
their regulatory capital requirements. The Company's consolidated tier 1
capital, total capital and Tier 1 leverage ratios were 9.0%, 10.2% and 5.4%,
respectively. BFS's tier 1, total risk-based, tier 1 risk-based and tangible
equity capital ratios were 5.5%, 10.1%, 9.0% and 5.5%, respectively. BNB's total
risk-based, tier 1 risk-based and tier 1 leverage capital ratios were 12.8%,
12.0%, and 6.4%, respectively.
12
<PAGE>
E. COMPARISON OF THREE-MONTHS ENDED MARCH 31, 2000 AND 1999
General
Earnings for the quarter ended March 31, 2000 were $2.3 million, or $.48
basic and diluted earnings per share, compared to earnings of $2.0 million, or
$.41 basic and $.40 diluted earnings per share for the first quarter of 1999.
The current quarter's earnings amount to a 17% increase in basic earnings per
share and a 20% increase in diluted earnings per share compared to last year's
first quarter. The Company's annualized return on average assets was .73% and
the annualized return on average stockholders' equity was 10.4% during the
three-months ended March 31, 2000, compared to .70% and 9.5%, respectively, for
the three-months ended March 31, 1999 (annualized). Comments regarding the
components of net income are detailed in the following paragraphs.
Interest Income
Total interest income on interest-earning assets for the quarter ended
March 31, 2000 increased by $2.2 million, or 11.3%, to $21.7 million, compared
to the quarter ended March 31, 1999. The increase in interest income was
attributable to the combined effects of a $59.9 million increase in average
interest-earning assets and a 39 basis point increase in the average yield. The
average yield on interest-earning assets increased to 7.46% for the three months
ended March 31, 2000 from 7.07% for the three months ended March 31, 1999.
Interest on mortgage-backed securities for the quarter ended March 31, 2000
increased by $82,000 to $698,000, compared to $616,000 for the same quarter in
1999. This decrease in income was due to the combined effects of a $2.4 million
higher average balance, which increased to $43.2 million, and a 43 basis point
increase in the average yield, which increased to 6.46% during the quarter ended
March 31, 2000, compared to the quarter ended March 31, 1999.
Income from investment securities was $130,000 higher for the quarter ended
March 31, 2000 compared to the quarter ended March 31, 1999. The increase was
due to a 92 basis point improvement in the average yield on investment
securities in the current quarter, partially offset by the effects of a $4.1
million decrease in the average balance in the quarter ended March 31, 2000,
compared to the quarter ended March 31, 1999.
13
<PAGE>
Interest Expense
Total interest expense on interest-bearing liabilities for the quarter
ended March 31, 2000 increased by $1.5 million or 13.5%, to $12.9 million
compared to the quarter ended March 31, 1999. The increase in interest expense
for the quarter ended March 31, 2000 was due primarily to an increase of $105.7
million in the average balance of interest-bearing liabilities, which averaged
$1.105 billion during the current quarter, compared to an average balance of
$999.7 million during the quarter ended March 31, 1999. The increase in interest
expense was also partially caused by an increase of 12 basis points in the
average cost of interest-bearing liabilities during the quarter ended March 31,
2000. The average cost of interest-bearing liabilities increased to 4.67% during
the quarter ended March 31, 2000, compared to 4.55% for last year's comparable
quarter. The increase was due to generally rising market interest rates.
Interest expense on deposit accounts was $7.2 million for the quarter ended
March 31, 2000, an increase of $905,000 from the $6.3 million for the quarter
ended March 31, 1999. The increase in the expense was primarily due to an
increase in the deposit account balances of $76.2 million. A major portion of
the deposit growth was attributable to the Company's wholesale brokered deposit
acquisition program. Also contributing to the increase in the interest expense
on deposit accounts was a nine basis point increase in the average cost of
deposits during the quarter ended March 31, 2000, compared to the quarter ended
March 31, 1999. Average deposit balances increased to $718.4 million for the
quarter ended March 31, 2000 from $642.2 million for the prior year comparable
quarter. The cost of funds increased due to rising interest rates paid on most
types of deposit accounts.
Interest expense on borrowed funds increased from $5.1 million for the
quarter ended March 31, 1999 to $5.7 million for the current quarter. The
increased interest expense was due to the combined effects of an increase of 22
basis points in the average cost of borrowed funds and the $29.5 million
increase in the average balance during the quarter ended March 31, 2000 compared
to the quarter ended March 31, 1999. During the quarter ended March 31, 2000,
average borrowed funds were $387.1 million and cost an average of 5.91%, whereas
the average balance of borrowed funds were $357.6 million with an average cost
of 5.69% during the quarter ended March 31, 1999.
Net Interest Income
Net interest income during the first quarters of 2000 and 1999 was $8.9
million and $8.2 million, respectively, as increased net interest rate spreads
and margins combined with increases in interest-earning assets contributed to
the improvement in net interest income. The net interest margin, at 3.04% for
the quarter ended March 31, 2000 was nine basis points higher than last year's
comparable quarter.
14
<PAGE>
Provision for Loan Losses
The Company's provision for loan losses amounted to $251,000 for the
quarter ended March 31, 2000, compared to the $430,000 loan loss provision for
the comparable quarter last year. A lower provision was recorded in the current
quarter as the current level of the allowance for loan losses was deemed
adequate. The allowance for loan losses was $10.7 million at March 31, 2000 and
December 31, 1999.
The Company establishes provisions for loan losses, which are charged to
operations, in order to maintain the allowance for loan losses at a level which
is deemed to be appropriate based upon size and type of loans and management's
assessment of the risk inherent in its loan portfolio in light of current
economic conditions, actual loss experience, industry trends and other factors
which may affect the real estate values in the Company's market area. In
addition, various regulatory agencies, as an integral part of their examination
process, periodically review the Company's allowance for loan losses. Such
agencies may require the Company to make additional provisions for estimated
loan losses based upon judgements different from those of management. While
management believes the current allowance for loan losses is adequate, actual
losses are dependent upon future events, and as such, future provisions for loan
losses may be necessary. As part of the Company's determination of the adequacy
of the allowance for loan losses, the Company monitors its loan portfolio
through its Asset Classification Committee. The Committee classifies loans
depending on risk of loss characteristics. The most severe classification before
a charge-off is required is "sub-standard." At March 31, 2000, the Company
classified $4.4 million of loans ($3.8 million at BFS and $604,000 at BNB) as
sub-standard compared to $3.6 million ($3.0 million of BFS and $579,000 of BNB)
at December 31, 1999. The Asset Classification Committee, which meets quarterly,
determines the adequacy of the allowance for loan losses through ongoing
analysis of historical loss experience, the composition of the loan portfolios,
delinquency levels, underlying collateral values, cash flow values and state of
the real estate economy. Utilizing these procedures, management believes that
the allowance for loan losses at March 31, 2000 was sufficient to provide for
anticipated losses inherent in the loan portfolio.
The Company's allowance for loan losses at March 31, 2000 was $10.7
million, which represented 1,039% of non-performing loans or 1.04% of total
loans, compared to $10.7 million at December 31, 1999, or 1,428% of
non-performing loans and 1.01% of total loans. Management believes this coverage
ratio is prudent due to the balance increase in the combined total of
construction and land, commercial real estate, multi-family, home equity and
improvement, consumer and business loans. These combined balances approximated
$236 million at March 31, 2000 and December 31 1999.
Non-performing loans at March 31, 2000 amounted to $1,032,000 or .10% of
total loans, compared to $746,000, or .07% of total loans, at December 31, 1999.
The amount of interest income on non-performing loans that would have been
recorded had these loans been current in accordance with their original terms,
was $21,000 and $26,000 for the three-month periods ended March 31, 2000 and
1999, respectively. The amount of interest income that was recorded on these
loans was $7,000 and $11,000 for the three-month periods ended March 31, 2000
and 1999, respectively.
At March 31, 2000, loans characterized as impaired, totaled $234,000.
During the three-months ended March 31, 2000, the average recorded value of
impaired loans was $234,000, $3,000 interest income was recognized and $4,000 of
interest income would have been recognized under the loans' original terms.
At March 31, 2000 and at December 31, 1999, the Company had $370,000 and
$376,000 in real estate owned, respectively. Further, at March 31, 2000, the
Company also had restructured real estate loans amounting to $234,000 for which
interest is being recorded in accordance with the loans' restructured terms. The
amount of the interest income lost on these restructured loans is not material
to the Company's financial statements.
15
<PAGE>
Non-Interest Income
Total non-interest income in the first quarter of 2000 increased by $1.6
million, or 104.7%, to $3.2 million from $1.5 million for the three months ended
March 31, 1999. The largest component of non-interest income was gain on sale of
loans, which increased to $1.9 million for the quarter ended March 31, 2000 from
$764,000 for the quarter ended March 31, 1999. The gain on sale of loans was
higher due to the inclusion of $1.6 million of gain on sale of loans by Forward
Financial. The gains on sale of mortgage loans that BFS recorded in the quarter
ended March 31, 2000 were lower than last year's comparable quarter as the
volume of mortgage loans sold declined. Additionally, a higher percentage of
mortgage loans sold have been adjustable-rate loans, which generally are sold at
lower profit margins. BFS sold $41.7 million of mortgage loans during the
quarter ended March 31, 2000 compared to $75.2 million during last year's
comparable quarter. Other non-interest income increased to $1.1 million for the
quarter ended March 31, 2000 from $622,000 for the prior year comparable
quarter. The primary reason for this increase was due to the Company's purchase
of a $20 million bank-owned life insurance policy ("BOLI")in July 1999. The
increase in the cash surrender value of the policy is recorded as non-interest
income.
Non-Interest Expense
Total non-interest expenses increased to $8.2 million for the quarter ended
March 31, 2000 from $6.0 million for the quarter ended March 31, 1999, primarily
due to the inclusion of Forward Financial's expenses in the current quarter.
Compensation and benefits expense increased from $3.6 million for the first
quarter of 1999 to $5.1 million for the current quarter due to Forward
Financial's compensation and benefits expenses of $763,000, normal year over
year increases and BFS' higher compensation levels due to additional staff hired
to expand the Company's corporate lending department. Occupancy and equipment
expenses increased from $797,000 for the quarter ended March 31, 1999 to $1.0
million for the current quarter primarily due to the inclusion of Forward
Financial's expenses. Federal deposit insurance premiums declined from $94,000
for the quarter ended March 31, 1999 to $39,000 for the current quarter due to
the Federal Deposit Insurance Corporation's ("FDIC") change in assessing
insurance premiums. Real estate operations provided income of $287,000 in the
quarter ended March 31, 2000 compared to income of $21,000 in the first quarter
of 1999. The current quarter's income is larger due to income recognized in the
dissolution of a real estate subsidiary of BFS. Other non-interest expenses were
$2.3 million for the quarter ended March 31, 2000, compared to $1.5 million for
the quarter ended March 31, 1999. The increase was primarily due to the
inclusion of Forward Financial's non-interest expenses during the current
quarter.
Income Tax Expense
Income tax expense for the quarters ended March 31, 2000 and 1999 was $1.3
million and $1.2 million, respectively. The effective income tax rate was 35.5%
during the current quarter, compared to 38.2% for the quarter ended March 31,
1999. The effective tax rate was lower during the current quarter due to the
effects of BOLI and a lower non-deductible Employee Stock Ownership Plan
("ESOP") expense.
16
<PAGE>
Item 3. MARKET RISK AND MANAGEMENT OF INTEREST RATE RISK
The principal market risk affecting the Company is interest rate risk. The
objective of the Company's interest rate risk management function is to evaluate
the interest rate risk included in certain balance sheet accounts, determine the
level of risk appropriate given the Company's business strategy, operating
environment, capital and liquidity requirements and performance objectives, and
manage the risk consistent with Board of Directors' approved guidelines. Through
such management, the Company seeks to reduce the vulnerability of its operations
to changes in interest rates. The Company monitors its interest rate risk as
such risk relates to its operating strategies. The Company's Board of Directors
has established a management Asset/Liability Committee that is responsible for
reviewing the Company's asset/ liability policies and interest rate risk
position. The Committee meets frequently and reports trends and interest rate
risk position to the Board of Directors on a quarterly basis. The extent of the
movement of interest rates is an uncertainty that could have a negative impact
on the earnings of the Company.
In recent years, the Company has utilized the following strategies to
manage interest rate risk: (1) emphasizing the origination and retention of
adjustable-rate, mortgage loans; (2) generally selling in the secondary market
substantially all fixed-rate mortgage loans originated with terms of 15 years or
greater while generally retaining the servicing rights thereof; (3) primarily
investing in short-term investment securities or mortgage-backed securities with
adjustable interest rates; and (4) attempting to reduce the overall interest
rate sensitivity of liabilities by emphasizing longer-term retail and wholesale
deposits and utilizing longer-term FHLB advances to replace short-term, rate
sensitive deposits.
The matching of assets and liabilities may be analyzed by examining the
extent to which such assets and liabilities are "interest rate sensitive" and by
monitoring the Company's interest rate sensitivity "gap." An asset or liability
is said to be interest rate sensitive within a specific time period if it will
mature or reprice within that time period. The interest rate sensitivity gap is
defined as the difference between the amount of interest-earning assets maturing
or repricing within a specific time period and the amount of interest-bearing
liabilities maturing or repricing within that time period. These differences are
a primary component of the risk to net interest income. A gap is considered
positive when the amount of interest rate sensitive assets exceeds the amount of
interest rate sensitive liabilities. A gap is considered negative when the
amount of interest rate sensitive liabilities exceeds the amount of interest
rate sensitive assets. Accordingly, during a period of rising interest rates, an
institution with a positive gap position would be in a better position to invest
in higher yielding assets which, consequently, may result in the yield on its
assets increasing at a pace more closely matching the increase in the cost of
its interest-bearing liabilities than if it had a negative gap. During a period
of falling interest rates, an institution with a positive gap would tend to have
its assets repricing at a faster rate than one with a negative gap which,
consequently, may tend to restrain the growth of its net interest income.
Certain shortcomings are inherent in gap analysis. For example, although
certain assets and liabilities may have similar maturities or periods to
repricing, they may react in different degrees to changes in market interest
rates. Also, the interest rates on certain types of assets and liabilities may
fluctuate in advance of changes in market interest rates, while interest rates
on other types may lag behind changes in market rates. Additionally, certain
assets, such as adjustable-rate loans, have features which restrict changes in
interest rates both on a short-term basis and over the life of the asset.
Further, in the event of change in interest rates, prepayment and early
withdrawal levels would likely deviate significantly from those assumed in
calculating the table. Finally, the ability of many borrowers to service their
adjustable-rate loans may decrease in the event of an interest rate increase.
At March 31, 2000, the Company's one year gap was a negative 6.29% of
total assets, compared to a positive 8.5% of total assets at December 31, 1999.
The Company's interest rate sensitivity is also monitored by management
through the use of a model which internally generates estimates of the change in
net portfolio value (NPV") over a range of interest rate change scenarios. NPV
is the present value of expected cash flows from assets, liabilities, and
off-balance sheet contracts. The NPV ratio, under any interest rate scenario, is
defined as the NPV in that scenario divided by the market value of assets in the
same scenario.
17
<PAGE>
As in the case with the gap analysis, certain shortcomings are inherent in
the methodology used in the above interest rate risk measurements. Modeling
changes in NPV require the making of certain assumptions which may or may not
reflect the manner in which actual yields and costs respond to changes in market
interest rates. In this regard, the NPV model used assumes that the composition
of the Company's interest sensitive assets and liabilities existing at the
beginning of a period remains constant over the period being measured and also
assumes that a particular change in interest rates is reflected uniformly across
the yield curve regardless of the duration to maturity or repricing of specific
assets and liabilities. Accordingly, although the NPV measurements and net
interest income models provide an indication of the Company's interest rate risk
exposure at a particular point in time, such measurements are not intended to
and do not provide a precise forecast of the effect of changes in market
interest rates on the Company's net interest income and will differ from actual
results. See the Company's Form 10-K for the year ended December 31, 1999 for a
detail of the GAP and NPV tables. There have been no material changes in the net
portfolio value since December 31, 1999.
In addition to historical information, this 10-Q includes certain
forward-looking statements based on current management expectations. Generally,
verbs in the future tense and the words, "believe", "expect", "anticipate",
"intends", "opinion", "potential", and similar expressions identify
forward-looking statements. Examples of this forward-looking information can be
found in, but are not limited to, the allowance for losses discussion,
subsequent events and any quantitative and qualitative disclosure about market
risk. The Company's actual results could differ materially from those management
expectations. Factors that could cause future results to vary from current
management expectations include, but are not limited to, general economic
conditions, legislative and regulatory changes, monetary and fiscal policies of
the federal government, changes in tax policies, rates and regulations of
federal, state and local tax authorities, changes in interest rates, deposit
flows, the cost of funds, demand for loan products, demand for financial
services, competition, changes in the quality or composition of the Company'
loan and investment portfolios, changes in accounting principles, policies or
guidelines, and other economic, competitive, governmental and technological
factors affecting the Company's operations, markets, products, services and
prices. These risks and uncertainties should be considered in evaluating
forward-looking statements and undue reliance should not be placed on such
statements. Further information concerning the Company and its business,
including additional factors that could materially affect the Company's
financial results, is included in the Company's filings with the Securities and
Exchange Commission.
The Company does not undertake, and specifically disclaims any obligation,
to publicly release the result of any revisions, which may be made to any
forward-looking statements, to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events.
18
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Except as described below, the Company is not involved in any pending
material legal proceedings other than routine legal proceedings occurring in the
ordinary course of business. Such routine legal proceedings, in the aggregate,
are believed by management to be immaterial to the Company's financial condition
or results of operations. Broadway National Bank, a national bank subsidiary of
the Company, was named a defendant in the Superior Court for Suffolk County,
Massachusetts, civil action No. SUCV 99-018F served on April 12, 1999 in a
matter captioned "Glyptal, Inc. v. John Hetherton, Jr., Fleet Bank, NA and
Broadway National Bank of Chelsea." The suit alleges that an officer of the
Plaintiff, Glyptal, embezzled funds from Plaintiff, by making unauthorized
transfers from Plaintiff's corporate accounts and subsequently deposited checks
drawn on such account into an account at Broadway National Bank. Plaintiff
alleges that Broadway National Bank knew or should have known of the alleged
fraudulent actions of Plaintiff's Officer, and that Broadway National Bank owed
a duty to Plaintiff to investigate the transactions and protect Plaintiff from
the alleged fraudulent actions. The Plaintiff is seeking damages for the alleged
breach of duty by the defendants. Broadway National Bank intends to deny the
allegations that it owed or breached any duty to Plaintiff or that it is liable
for any losses incurred by Plaintiff. Broadway National Bank intends to
vigorously defend the action and believes the action is not likely to result in
any material loss or adverse effect on the financial condition of the Company.
Item 2. Changes in Securities and Use of Proceeds
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Restated Certificate of Incorporation*
3.2 Amended and Restated Bylaws as of February 23, 2000**
27 Financial Data Schedule
* Incorporated herein by reference into this document from Exhibits 3.1,
4.0 and 10.5 to the Form S-1, Registration Statement, and any amendments
thereto, originally filed on July 21, 1995, as amended and declared effective on
September 11, 1995. Registration No. 333-94860.
** Incorporated herein by reference in to this document from Exhibit 3.2
filed with Form 10-K on March 30, 2000.
19
<PAGE>
SIGNATURES
Pursuant to 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.
BOSTONFED BANCORP, INC.
(Registrant)
Date: May 11, 2000 By: /s/ David F. Holland
__________________________________
David F. Holland
President and
Chief Executive Officer
Date: May 11, 2000 By: /s/ John A. Simas
__________________________________
John A. Simas
Executive Vice President,
Corporate Secretary and Chief
Financial Officer (Principal
financial and accounting
Officer)
20
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
(This schedule contains summary financial information extracted from Form 10-Q
and is qualified in its entirety by reference to such financial statements.)
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 31,415
<INT-BEARING-DEPOSITS> 3,007
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 72,419
<INVESTMENTS-CARRYING> 66,389
<INVESTMENTS-MARKET> 64,698
<LOANS> 1,024,527
<ALLOWANCE> 10,725
<TOTAL-ASSETS> 1,286,048
<DEPOSITS> 808,466
<SHORT-TERM> 195,501
<LIABILITIES-OTHER> 11,071
<LONG-TERM> 189,000
0
0
<COMMON> 66
<OTHER-SE> 87,010
<TOTAL-LIABILITIES-AND-EQUITY> 1,286,048
<INTEREST-LOAN> 19,661
<INTEREST-INVEST> 2,085
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 21,746
<INTEREST-DEPOSIT> 7,180
<INTEREST-EXPENSE> 12,896
<INTEREST-INCOME-NET> 8,850
<LOAN-LOSSES> 251
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 8,227
<INCOME-PRETAX> 3,538
<INCOME-PRE-EXTRAORDINARY> 3,538
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,282
<EPS-BASIC> .48
<EPS-DILUTED> .48
<YIELD-ACTUAL> 3.04
<LOANS-NON> 1,032
<LOANS-PAST> 0
<LOANS-TROUBLED> 234
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 10,654
<CHARGE-OFFS> 180
<RECOVERIES> 7
<ALLOWANCE-CLOSE> 10,725
<ALLOWANCE-DOMESTIC> 10,725
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
