<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
<TABLE>
<CAPTION>
<S> <C>
For the quarterly period ended September 30, 1996 Commission file number 0-28746
</TABLE>
WALDEN BANCORP, INC.
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-29100071
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
125 NAGOG PARK, ACTON, MASSACHUSETTS 01720
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (508) 635-5000
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
The number of shares of common stock outstanding of each of the issuer's classes
of common stock, as of November 8, 1996 was 5,321,200.
<PAGE>
WALDEN BANCORP, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
<S> <C>
PART I - FINANCIAL INFORMATION................................................................. 1
Item 1 - Financial Statements........................................................ 1
Consolidated Balance Sheets.......................................................... 1
Consolidated Statements of Operations................................................ 2
Consolidated Statements of Cash Flows................................................ 3
Consolidated Statements of Changes in Stockholders' Equity........................... 4
Notes to Consolidated Financial Statements for the Period Ended September 30, 1996... 5
Item 2 - Management's Discussion and Analysis of Financial Condition.................
and Results of Operations............................................................. 7
PART II - OTHER INFORMATION.................................................................... 21
Item 1 - Legal Proceedings........................................................... 21
Item 2 - Changes in Securities....................................................... 21
Item 3 - Defaults Upon Senior Securities............................................. 21
Item 4 - Submission of Matters to a Vote of Security Holders......................... 21
Item 5 - Other Information..................................................................... 21
Item 6 - Exhibits and Reports on Form 8-K...................................................... 21
SIGNATURES..................................................................................... 22
EXHIBITS....................................................................................... 23
Computation of per share earnings - Exhibit 11................................................ 23
Selected Financial Data - Exhibit 99.......................................................... 23
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Walden Bancorp, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
-------------- -------------
<S> <C> <C>
(Unaudited)
ASSETS
Cash and due from banks (Note 6) $ 28,775 $ 36,316
Short-term investments 15,013 42,673
Investment and mortgage-backed securities
Available for sale (amortized cost of $158,803 and $125,190) 157,920 125,337
Held to maturity (market value of $164,594 and $130,293) 167,109 131,230
Loans receivable, net 621,847 636,174
Accrued interest receivable 6,429 5,944
Stock in Federal Home Loan Bank of Boston 11,449 7,527
Co-operative Central Bank Reserve Fund 3,207 3,207
Premises and equipment, net 12,341 12,849
Other real estate owned 1,245 679
Prepaid expenses and other assets 6,449 4,196
Deferred tax asset 4,382 4,539
Goodwill 13,227 14,060
---------- ----------
$1,049,393 $1,024,731
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 759,412 $ 769,564
Borrowed funds 181,325 147,324
Advance payments by borrowers for taxes and insurance 4,660 4,185
Accrued expenses and other liabilities 4,258 5,650
Subordinated debenture 4,689 4,619
---------- ----------
Total liabilities 954,344 931,342
---------- ----------
Commitments and Contingencies (Note 7)
Stockholders' equity:
Common stock, par value $1.00 per share, issued
and outstanding 5,319,700 and 5,261,449 shares 5,320 5,261
Additional paid-in capital 38,114 37,944
Retained income 56,505 50,077
Treasury Stock, at cost (204,808 shares) (4,169) --
Net unrealized (loss) gain on investments
available for sale, net of tax (721) 107
---------- ----------
Total stockholders' equity 95,049 93,389
---------- ----------
$1,049,393 $1,024,731
========== ==========
Equity-to-asset ratio 9.06% 9.11%
Book value per share $18.58 $17.75
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
1
<PAGE>
Walden Bancorp, Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------- -----------------
1996 1995 1996 1995
Interest income: (Unaudited)
<S> <C> <C> <C> <C>
Mortgage loans $ 11,572 $ 12,313 $ 34,975 $ 35,953
Other loans 2,101 1,498 6,041 4,117
Investments 5,441 4,203 14,804 12,833
---------- ---------- ---------- ----------
Total interest income 19,114 18,014 55,820 52,903
---------- ---------- ---------- ----------
Interest expense:
Deposits 6,639 6,981 19,941 19,714
Borrowed funds 2,640 1,418 6,602 4,770
---------- ---------- ---------- ----------
Total interest expense 9,279 8,399 26,543 24,484
---------- ---------- ---------- ----------
Net interest income before provision for
possible loan losses 9,835 9,615 29,277 28,419
Provision for possible loan losses 299 250 926 775
---------- ---------- ---------- ----------
Net interest income after provision for possible loan losses 9,536 9,365 28,351 27,644
---------- ---------- ---------- ----------
Non-interest income:
Fees and charges 871 851 2,593 2,468
Mortgage loan servicing fees 572 659 1,820 2,046
Income from real estate operations 51 20 131 49
Gain on sale of loans -- 2 16 151
Gain on sale of securities -- 27 40 341
Gain on sale of other real estate owned 9 4 25 29
Miscellaneous 274 117 424 225
---------- ---------- ---------- ----------
Total non-interest income 1,777 1,680 5,049 5,309
---------- ---------- ---------- ----------
Income before non-interest expense and income taxes 11,313 11,045 33,400 32,953
---------- ---------- ---------- ----------
Non-interest expense:
Salaries and benefits 3,392 3,253 10,091 9,923
Occupancy and equipment 992 1,073 3,068 3,142
Amortization of goodwill and other intangibles 279 278 834 834
Deposit insurance premium -- (42) 3 905
Other real estate owned expense 45 28 84 109
Provision for market value decline on other real estate owned -- 83 -- 93
Other 1,845 2,118 5,259 5,931
---------- ---------- ---------- ----------
Total non-interest expense 6,553 6,791 19,339 20,937
---------- ---------- ---------- ----------
Income before income taxes 4,760 4,254 14,061 12,016
Income tax expense 1,719 1,640 5,206 4,575
---------- ---------- ---------- ----------
Net income $ 3,041 $ 2,614 $ 8,855 $ 7,441
========== ========== ========== ==========
Earnings per share $.58 $.49 $1.65 $1.40
========== ========== ========== ==========
Dividends paid per share $.16 $.11 $.46 $.32
========== ========== ========== ==========
Weighted Average shares outstanding (fully diluted) 5,275,777 5,354,095 5,376,949 5,322,319
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE>
Walden Bancorp, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(In thousands) Nine months ended September 30,
--------------------------------
1996 1995
-------- -------
(Unaudited)
Net cash flows from operating activities:
<S> <C> <C>
Net income $ 8,855 $ 7,441
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision for possible loan losses 926 775
Provision for other real estate owned -- 93
Provision for depreciation and amortization 1,088 1,011
Amortization of goodwill 834 834
Amortization of investment securities discounts and premiums, net 15 372
Amortization of loan fees and discounts (704) (148)
Amortization of discount on subordinated debenture 70 68
(Gain) loss on sale of securities (40) (341)
Equity in limited partnership losses 71 126
Loans originated for sale (2,592) (10,436)
Loans sold 2,608 11,555
Gain on sale of loans (16) (151)
Gain on sale of other real estate owned (25) (29)
Increase in accrued interest receivable (485) (507)
Increase in prepaid expense and other assets (2,324) (2,462)
Increase in deferred income tax asset (excluding SFAS 115) 498 239
Decrease in income tax receivable -- 356
Decrease in accrued taxes, payments due from borrowers and other liabilities (917) (989)
--------- ---------
Net cash provided by operating activities 7,862 7,807
--------- ---------
Net cash flows from investing activities:
Maturities and principal repayments on investments held to maturity 32,363 18,622
Maturities and principal repayments on investments available for sale 32,888 18,130
Proceeds from sales of investments available for sale 3,000 31,137
Purchase of investments held to maturity (66,515) (3,243)
Purchase of investments available for sale (71,344) (36,668)
Purchase of FHLB of Boston Stock (3,922) --
Loans originated and principal payments, net 12,323 (22,235)
Capital expenditures (580) (1,991)
Proceeds from sales of real estate held for sale -- 62
Proceeds from sales of and receipts on other real estate owned 1,242 2,277
--------- ---------
Net cash (used) provided for investing activities (60,545) 6,091
--------- ---------
Net cash flows from financing activities:
Net deposit activity (10,152) 20,471
Proceeds from borrowings 251,008 262,681
Repayment of borrowings (217,007) (287,648)
Purchase of treasury stock (5,047) --
Cash dividends paid on common stock (2,427) (1,691)
Proceeds from exercise of stock options 1,107 512
--------- ---------
Net cash provided (used) by financing activities 17,482 (5,675)
--------- ---------
Net (decrease) increase in cash and cash equivalents: (35,201) 8,223
Cash and cash equivalents at beginning of period 78,989 38,085
--------- ---------
Cash and cash equivalents at end of period $ 43,788 $ 46,308
========= =========
Supplemental disclosure of cash flow information:
Cash paid during period for:
Interest 26,345 24,354
Income taxes 5,049 4,171
Supplemental disclosure of non-cash investing and financing:
Foreclosures 1,783 1,762
Loans transferred to performing status from foreclosure -- 1,033
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
Walden Bancorp, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
(In thousands)
<TABLE>
<CAPTION>
Net
Unrealized
Additional Gain/(Loss) on Total
Common Paid-in Retained Treasury Investment Stockholders'
Stock Capital Income Stock Securities Equity
------- ---------- --------- --------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 $5,128 $36,884 $43,140 $ $(3,622) $81,530
--
Net income -- -- 9,299 -- -- 9,299
Proceeds from sale of stock under
stock purchase and option plans 133 961 -- -- -- 1,094
Cash dividend ($0.45 per share) -- -- (2,362) -- -- (2,362)
Tax benefit from exercise of
stock options -- 99 -- -- -- 99
Change in net unrealized loss on
investments available for sale -- -- -- -- 3,729 3,729
------ ------- ------- -------- ------- -------
Balance at December 31, 1995 5,261 37,944 50,077 -- 107 93,389
Net income -- -- 8,855 -- -- 8,855
Purchase of treasury stock -- -- -- (5,047) -- (5,047)
Proceeds from sale of stock under
stock purchase and option plans 59 170 -- 878 -- 1,107
Cash dividend ($0.46 per share) -- -- (2,427) -- -- (2,427)
Tax benefit from exercise of
stock options -- -- -- -- -- --
Change in net unrealized loss on
investments available for sale -- -- -- -- (828) (828)
------ ------- ------- -------- ------- -------
Balance at September 30, 1996 $5,320 $38,114 $56,505 $(4,169) $ (721) $95,049
(Unaudited) ====== ======= ======= ======== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED SEPTEMBER 30, 1996
(1) Accounting Principles
---------------------
The accompanying unaudited consolidated financial statements of Walden
Bancorp, Inc. 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, the
financial statements 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 adjustments (consisting solely of
normal recurring adjustments) considered necessary for a fair presentation have
been included. Operating results for the three months and nine months ended
September 30, 1996 are not necessarily indicative of the results that may be
expected for the current fiscal year.
For further information, refer to the consolidated financial
statements included in the Company's annual report and Form 10-K for the period
ended December 31, 1995, and Form 10-Q for the periods ended March 31, 1996 and
June 30, 1996, filed with the Securities and Exchange Commission.
As a result of the pooling of interests discussed in Note 2, these
consolidated financial statements reflect the Company's consolidated operations
as if the pooling occurred on January 1, 1995.
(2) Organization
------------
Walden Bancorp, Inc. ("Company" or "Walden") was incorporated under
the laws of the Commonwealth of Massachusetts in June 1995 for the purpose of
serving as the holding company of The Co-operative Bank of Concord ("Concord")
and Braintree Savings Bank ("Braintree") upon the consummation of the
acquisitions of Braintree and Concord (the "Acquisition")(Concord and Braintree
together referred to as "Banks"). The Acquisition, completed as of the close of
business December 8, 1995, was on a one for one share exchange basis and was
accounted for as a pooling of interests in accordance with APB No. 16. Prior to
the Acquisition, Walden had not engaged in any material operations. Walden has
no significant assets or liabilities other than the outstanding capital stock of
the Banks and the proceeds of any dividends paid by the Banks. Walden's
principal business is performing support functions for Concord and Braintree and
their respective subsidiaries.
(3) Acquisition
-----------
On August 30, 1996 Walden announced that it had signed a definitive
agreement to be acquired by UST Corp. ("UST") (NASDAQ:USTB). Under the terms of
agreement (The "Affiliation Agreement"), Walden shareholders will receive
1.9 shares of UST common stock for each share of Walden common stock, in a tax-
free exchange. As part of the acquisition, three of
5
<PAGE>
Walden's directors will assume seats on the board of directors of UST Corp. The
acquisition, which will be accounted for as a pooling of interests, is expected
to close during the first quarter of 1997, subject to shareholder and regulatory
approvals.
As a condition precedent to UST Corp. entering into the Affiliation
Agreement, and in consideration therefor (without other consideration or
monetary payment), UST Corp. and Walden entered into a Stock Option Agreement on
August 30, 1996 (the "Stock Option Agreement"). The Stock Option Agreement is
intended to protect UST's interest under the Affiliation Agreement upon the
occurrence of certain events which may create the potential for a third party to
acquire or obtain control of Walden. The Stock Option Agreement may discourage
competing offers to acquire Walden by third parties other than UST or a
subsidiary of UST and increase the likelihood that the affiliation will be
consummated in accordance with the terms of the Affiliation Agreement.
Pursuant to the Stock Option Agreement, Walden granted UST an option
(the "Option") to purchase, under certain circumstances and subject to
adjustment, up to 19.9% of the issued and outstanding fully paid and
nonassessable shares of Walden Common Stock at a price of $20.50 per share. The
Option is exercisable upon the occurrence of certain events that create the
potential for a third party to acquire or obtain control of Walden. In lieu of
exercising the Option, UST or any permitted transferee of UST can require Walden
to repurchase, for a formula price, the Option or any shares of Walden Common
Stock purchased upon exercise of the Option. To the best knowledge of UST and
Walden, no such event which would permit exercise of the Option has occurred as
of today. Upon the successful closing of the merger, the option will expire
unexercised.
(4) Recent Accounting Pronouncements
--------------------------------
On January 1, 1996 the Company adopted the Financial Accounting
Standards Board ("FASB") Statement of Financial Accounting Standard ("SFAS")
121, Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of. This statement requires that certain long-lived assets and
identifiable intangibles to be disposed of be reported at the lower of the
carrying amount or fair value less cost to sell. The adoption of the statement
had no material impact on the reported results of operations for the period
ended September 30, 1996.
On January 1, 1996 the Company adopted the FASB SFAS 122 Accounting
for Mortgage Servicing Rights. This statement requires that a mortgage banking
enterprise recognize, as separate assets, rights to service mortgage loans for
others regardless of the manner in which the servicing rights are acquired. In
addition, capitalized mortgage servicing rights are required to be assessed
periodically for impairment based on the fair value of those rights. The
adoption of the statement had no material impact on the reported results of
operations for the period ended September 30, 1996.
(5) Stock Repurchase Program
------------------------
On June 24, 1996, Walden announced the commencement of a stock
repurchase program to acquire certain shares of the Company's common stock,
which represents approximately 4.13 percent of the outstanding common stock.
Walden holds the repurchased shares as treasury stock
6
<PAGE>
which are available for general corporate purposes, including issuance under the
Company's employee stock option plans. The repurchase program was intended to be
completed by December 31, 1996 and was dependent upon market conditions and the
availability of shares. As of September 30, 1996, 204,808 shares were held in
treasury stock. Walden discontinued its repurchase program August 30, 1996 after
announcing its agreement with UST.
(6) Restrictions on Cash and Due From Banks
---------------------------------------
The Banks must maintain reserves under Regulation D issued by the
Federal Reserve Board. Commercial checking accounts, NOW accounts, and other
types of accounts that permit payments or transfers to third parties are subject
to Regulation D reserve requirements, as are any non-personal time deposits.
The Banks currently meet this reserve requirement through their deposits at the
Federal Reserve Bank of Boston and their cash on hand.
(7) Commitments and Contingencies
-----------------------------
In the ordinary course of business, the Company and its subsidiaries
become defendants in a variety of judicial and administrative proceedings. In
the opinion of management, there is no proceeding pending, which in the event of
an adverse decision, would be likely to result in a material adverse change in
the financial condition or results of operations of the Company and its
subsidiaries.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Agreement with UST Corp.
- ------------------------
On August 30, 1996 Walden announced that it had signed a definitive
agreement to be acquired by UST Corp. (NASDAQ:USTB). Under the terms of the
agreement, Walden shareholders will receive 1.9 shares of UST common stock for
each share of Walden common stock, in a tax-free exchange. As part of the
acquisition, three of Walden's directors will assume seats on UST's board of
directors. The acquisition, which will be accounted for as a pooling of
interests, is expected to close during the first quarter of 1997, subject to
shareholder and regulatory approvals.
As a condition precedent to UST Corp. entering into the Affiliation
Agreement, and in consideration therefor (without other consideration or
monetary payment), UST Corp. and Walden entered into a Stock Option Agreement,
which is intended to protect UST's interest under the Affiliation Agreement upon
the occurrence of certain events which may create the potential for a third
party to acquire or obtain control of Walden. The Stock Option Agreement may
discourage competing offers to acquire Walden by third parties other than UST or
a subsidiary of UST and increase the likelihood that the Affiliation will be
consummated in accordance with the terms of the Affiliation Agreement.
7
<PAGE>
Pursuant to the Stock Option Agreement, Walden granted UST an option
to purchase, under certain circumstances and subject to adjustment, up to 19.9%
of the issued and outstanding fully paid and nonassessable shares of Walden
Common Stock at a price of $20.50 per share. The Option is exercisable upon the
occurrence of certain events that create the potential for a third party to
acquire or obtain control of Walden. In lieu of exercising the Option, UST or
any permitted transferee of UST can require Walden to repurchase, for a formula
price, the Option or any shares of Walden Common Stock purchased upon exercise
of the Option. To the best knowledge of UST and Walden, no such event which
would permit exercise of the Option has occurred as of today. Upon the
successful closing of the merger, the option will expire unexercised.
A special meeting of shareholders will be held on December 17, 1996.
Shareholders of record as of November 4, 1996 will be eligible to vote at the
meeting.
General
- -------
Walden Bancorp, Inc., a bank holding company registered with the Board
of Governors of the Federal Reserve System (the "Federal Reserve Board"), was
organized as a Massachusetts business corporation in June 1995 for the purpose
of serving as the holding company of The Co-operative Bank of Concord, a
Massachusetts chartered co-operative bank, and The Braintree Savings Bank, a
Massachusetts chartered savings bank.
Concord has eight full service retail banking offices located in
Middlesex county. Braintree has eight full service offices and one limited
service office in Norfolk and Plymouth counties. Through these offices, the
Banks offer a full range of commercial and retail banking products and services
and conduct other business as allowable for Massachusetts banks. The Banks'
lending operations focus on commercial and small business lending, commercial
real estate loans, residential construction loans, residential first mortgages,
home equity lines of credit, and consumer loans.
Concord has three active subsidiaries: Walden Financial Corporation,
Builders Collaborative Inc., and Walden Securities Corporation, Inc. Braintree
has three active subsidiaries: Braintree Savings Corporation, Bra-Prop
Corporation, and Braintree Securities Corporation. Builders Collaborative
Inc.'s and Bra-Prop Corporation's primary line of business is the ownership and
management of real properties owned by the Banks. Walden Financial operates as a
leasing company, leasing depreciable equipment and buildings to the Banks.
Braintree Savings Corporation's primary line of business is limited partnership
investments. Walden Securities Corporation, Inc. and Braintree Securities
Corporation were established to act solely for the purpose of acquiring and
holding security investments which are permissible for banks under
Massachusetts' law.
The Banks' business activities are concentrated in Eastern
Massachusetts. All retail banking activity is conducted through the banking
offices. Lending operations, particularly loan originations, are conducted from
the retail offices and at the point of sale. Neither Bank nor any of their
subsidiaries conduct business on a national or international basis.
The consolidated operating results of the Company depend primarily on
its net interest and dividend income, which is the difference between (i)
interest and dividend income on earning assets, primarily loans and investment
securities, and (ii) interest expense on interest bearing liabilities,
8
<PAGE>
which consist of deposits and borrowings. Results of operations are also
affected by the provision for loan and lease losses, the level of non-interest
income, including deposit and loan fees, and gains on sales of assets, operating
expenses, and income taxes.
FINANCIAL CONDITION
Investments
The table below sets forth the composition of the Company's short-term
investments as of the dates presented:
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995
-------------------- -----------------
(In thousands)
<S> <C> <C>
Federal Home Loan Bank overnight deposits $ 9,460 $ 20,171
Interest bearing deposits in banks 3,500 6,400
Regulated investment funds 2,053 16,102
------- --------
$15,013 $ 42,673
======= ========
</TABLE>
The tables below show the investment and mortgage-backed securities
portfolios as of the dates presented.
The amortized cost and estimated market values of
investments available for sale were:
<TABLE>
September 30, 1996 December 31, 1995
------------------ -----------------
Estimated Estimated
Amortized market Amortized market
cost value cost value
------------------ --------- ----------- -----------------
INVESTMENT SECURITIES: (In thousands)
<S> <C> <C> <C> <C>
U.S. Treasuries $ 53,540 $ 53,588 $ 27,301 $ 27,523
Government agencies and corporate obligations 22,883 22,717 12,128 12,182
Corporate bonds and notes 22,435 22,312 19,061 19,117
Common and preferred stocks 6,827 6,762 5,177 5,178
-------- -------- -------- --------
105,685 105,379 63,667 64,000
-------- -------- -------- --------
MORTGAGE-BACKED SECURITIES:
GNMA, FNMA, and FHLMC 36,474 36,482 43,392 43,647
Collateralized mortgage obligations:
GNMA, FNMA, and FHLMC 12,785 12,211 12,265 11,831
Privately issued (a) 3,859 3,848 5,866 5,859
-------- -------- -------- --------
53,118 52,541 61,523 61,337
-------- -------- -------- --------
$158,803 $157,920 $125,190 $125,337
======== ======== ======== ========
</TABLE>
(a) Rated Investment Grade.
9
<PAGE>
As a result of the increase in interest rates since the first of the
year and the corresponding decrease in the market value of the investments
classified as available for sale, a $721,000 net unrealized loss is included as
a separate component of stockholders' equity at September 30, 1996, compared to
an unrealized gain of $107,000 at December 31, 1995.
The amortized cost and estimated market values of investments held to
maturity were:
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995
----------------------- -----------------
Estimated Estimated
Amortized market Amortized market
cost value cost value
----------------------- ----------- ----------------- -----------
INVESTMENT SECURITIES: (In thousands)
<S> <C> <C> <C> <C>
Government agencies and corporate obligations $ 32,408 $ 31,968 $ 33,705 $ 33,339
Municipal bonds and notes 7,513 7,536 6,045 6,088
-------- -------- -------- --------
39,921 39,504 39,750 39,427
-------- -------- -------- --------
MORTGAGE-BACKED SECURITIES:
GNMA, FNMA and FHLMC 51,408 49,839 56,410 56,012
Collateralized mortgage obligations:
GNMA, FNMA and FHLMC 55,329 55,077 13,334 13,271
Privately issued (a) 20,451 20,174 21,736 21,583
-------- -------- -------- --------
127,188 125,090 91,480 90,866
-------- -------- -------- --------
$167,109 $164,594 $131,230 $130,293
======== ======== ======== ========
</TABLE>
(a) Rated Investment Grade.
Loans and leases
Since December 31, 1995, net loans receivable decreased by $14,327,000, or
2.25%, as detailed below:
<TABLE>
<CAPTION>
September 30, % of total December 31, % of total
1996 loans 1995 loans
-------- ---------- -------- ----------
Mortgage loans: (Dollars in thousands)
<S> <C> <C> <C> <C>
Residential $354,873 55.92% $376,896 57.99%
Commercial real estate 137,916 21.73 155,339 23.90
Construction and land 35,187 5.55 32,880 5.06
Second mortgage and home equity 23,367 3.68 25,176 3.88
-------- -------- -------- --------
Total mortgage loans 551,343 86.88 590,291 90.83
-------- -------- -------- --------
Commercial loans 73,837 11.64 50,451 7.76
Other loans 9,382 1.48 9,157 1.41
-------- -------- -------- --------
Total loans 634,562 100.00% 649,899 100.00%
-------- ======== -------- ========
Deduct:
Allowance for loan loss 11,332 12,091
Unearned discount 410 953
Deferred loan fees 973 681
-------- --------
Loans receivable, net $621,847 $636,174
======== ========
</TABLE>
10
<PAGE>
The Banks' primary lending focus is commercial and small business
lending. At September 30, 1996, commercial real estate, construction and land,
and commercial loans increased and represented 38.92% of total loans, compared
to 36.72% at December 31, 1995.
Residential mortgage loans decreased as a result of the lower
origination levels from the reduction of mortgage banking activities. The net
reduction in loans has come primarily from the decline in residential first
mortgage loans. At September 30, 1996 loans serviced for investors decreased to
$598,460,000, from $672,154,000 at December 31, 1995. With the elimination of
the mortgage banking activities, it is expected that the level of residential
mortgage loans and loans serviced for others will continue to decline in future
periods.
Asset Quality
During the period from December 31, 1995 to September 30, 1996, non-
performing assets increased from $5,860,000 to $8,756,000. Non-performing
assets increased $3,556,000 from September 30, 1995 to September 30, 1996. At
September 30, 1996, non-performing assets represented 0.83% of total assets and
1.41% of total net loans receivable and other real estate owned, compared to
0.57% and 0.92%, respectively, at December 31, 1995. The increase in non-
performing assets was primarily in other real estate owned and commercial loans
past due over 90 days.
While the level of non-performing loans has increased from prior
period levels, management believes that the current levels are manageable and
are not indicative of any negative trends in asset quality. Even with the
increase in non-performing assets, the loan loss coverage ratios remain strong
at 129.42% of non-performing assets, 167.76% of non-accrual loans, and 1.79% of
total loans. Refer to allowance for loan losses for discussion concerning the
loan loss reserve methodology.
11
<PAGE>
The composition of non-performing assets for the periods presented
was:
<TABLE>
<CAPTION>
September 30, December 31,
------------------------ -------------
1996 1995 1995
----------- ---------- -------------
(Dollars in thousands)
<S> <C> <C> <C>
Loans past due 90 days or more:
Residential:
Accruing $ 236 $ 527 $ 358
Non-accruing 3,326 2,614 3,996
Commercial real estate:
Accruing 87 -- --
Non-accruing 2,461 1,637 1,416
Commercial:
Accruing 287 -- --
Non-accruing 699 7 226
Consumer:
Accruing -- 35 --
Non-accruing 141 10 120
------- ------- -------
$ 7,237 $ 4,830 $ 6,116
======= ======= =======
Loans past due 90 days or more as a percentage of:
Loans receivable, net 1.16% 0.76% 0.96%
Total assets 0.69 0.49 0.60
Non-performing assets:
Non-accrual loans (a) $ 6,755 $ 4,513 $ 5,181
Renegotiated loans 756 -- --
------- ------- -------
Total non-performing loans (b) 7,511 4,513 5,181
------- ------- -------
Other real estate owned 1,245 687 679
------- ------- -------
Total non-performing assets (b) $ 8,756 $ 5,200 $ 5,860
======= ======= =======
Total non-performing loans as a
percentage of total loans (b) 1.18% 0.70% 0.80%
Total non-performing assets as a percentage of:
Loans receivable, net and other real estate owned (b) 1.41% 0.82% 0.92%
Total assets 0.83 0.53 0.57
Loan loss reserve coverage ratios:
Non-performing assets 129.42% 230.04% 206.33%
Non-accrual loans 167.76 265.06 233.37
Total loans 1.79 1.85 1.86
</TABLE>
(a) Includes loans less than 90 days or more past due and classified as non-
accrual.
(b) Non-performing loans and assets exclude accruing loans contractually past
due 90 days or more.
Potential Problem Loans
Potential Problem loans are loans which cause management to have
serious doubts as to the ability of borrowers to comply with present loan
repayment terms and are not now disclosed as nonaccrual, accruing past due 90
days or more, or renegotiated. Based on management's opinion, at September 30,
1996 there are no potential problem loans that are not disclosed as nonaccrual,
accruing past due 90 days or more, or renegotiated.
12
<PAGE>
Allowance for Loan Losses
The following represents the activity in the allowance for loan losses
for the nine months ended September 30, 1996:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
Balance at December 31, 1995 $12,091
Provision for possible loan losses 926
Losses charged to allowance (1,781)
Recoveries 96
-------
Balance at September 30, 1996 $11,332
=======
</TABLE>
The management of the subsidiary banks analyze the adequacy of the
allowance for loan losses at least quarterly. Management measures the adequacy
of allowance for loan losses by assigning loans into risk categories based on a
loan classification system modeled after the bank regulatory classification
system. In addition to the classification of loans based on the risk
characteristics of the portfolio, management considers many other factors in
determining the adequacy of the loan loss reserve, including trends in loan
delinquencies and charge-offs, underlying collateral, current and anticipated
economic conditions that may affect the borrowers' ability to pay, and specific
and potential problem loans. While management uses the best information
available in establishing the allowance, future adjustments may be necessary if
economic conditions differ substantially from the assumptions used in making the
evaluation. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the Banks' allowance for loan
losses. Such agencies may require the Banks to recognize additions to the
allowance based on judgments different from those of management.
Deposits and Borrowed Funds
Deposits decreased slightly during the nine month period as detailed
below:
<TABLE>
<CAPTION>
September 30, % of total December 31, % of total
1996 deposits 1995 deposits
---------------------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
(Dollars in thousands)
Regular savings accounts $182,740 24.06% $191,080 24.83%
NOW accounts 95,600 12.59 105,846 13.75
Advantage Accounts 28,395 3.74 30,215 3.93
Money market accounts 76,009 10.01 64,899 8.43
Non-interest bearing deposits 58,463 7.70 51,858 6.74
-------- ------ -------- ------
441,207 58.10 443,898 57.68
Term deposits 318,205 41.90 325,666 42.32
-------- ------ -------- ------
Total deposits $759,412 100.00% $769,564 100.00%
======== ====== ======== ======
</TABLE>
During the period, borrowed funds increased $34,001,000, or 23.08%, as
the Banks used these funds from the Federal Home Loan Bank of Boston to match
fund certain loans and increase the level of the investment portfolio.
13
<PAGE>
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
Results of Operations
Consolidated net income for the three months ended September 30, 1996
totaled $3,041,000, or $0.58 per share, compared to $2,614,000, or $0.49 per
share, for the same period last year. This represents an increase of 16.34% in
earnings and an increase of 18.37% in earnings per share. The increase in
earnings was directly attributable to an increase in net interest income, an
increase in non-interest income, and lower operating expenses, as compared to
the same period last year. The increase in earnings per share is attributable
to both the increase in earnings and the decrease in weighted average shares
outstanding.
14
<PAGE>
Net interest income
The table below shows the average balance sheet, the interest earned
and paid on interest earning assets and interest-bearing liabilities, and the
resulting net interest spread and margin for the periods presented. Loan
balances on non-accruing loans are included in the average balances outstanding.
<TABLE>
<CAPTION>
For the three months ended September 30,
------------------------------------------------------------------------------------------
1996 1995
--------------------------------------------- -------------------------------------
Interest Interest
Average income/ Yield/ Average income/ Yield/
balance expense rate balance expense rate
------------ ----------- --------- ----------- --------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest-earning assets:
Mortgage loans $ 546,008 $11,572 8.48% $580,696 $12,313 8.48%
Other loans 89,668 2,101 9.30 63,307 1,498 9.39
Investments (a) 353,588 5,441 6.16 276,640 4,203 6.08
---------- ------- -------- -------
Total interest-earning 989,264 19,114 7.73 920,643 18,014 7.83
assets
Non interest-earning assets 58,697 56,878
---------- --------
Total $1,047,961 $977,521
========== ========
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Deposits $ 710,261 $ 6,639 3.71 $733,326 $ 6,981 3.78
Borrowed funds 182,385 2,640 5.74 98,372 1,418 5.72
---------- ------- -------- -------
Total interest-bearing liabilities 892,646 9,279 4.12 831,698 8,399 4.01
Non interest-bearing liabilities:
Demand deposits 56,352 -- -- 45,728 --
---------- ------- -------- -------
Total cost of funds 948,998 9,279 3.88 877,426 8,399 3.80
Other liabilities 4,939 9,960
Stockholders' equity 94,024 90,135
---------- --------
Total $1,047,961 $977,521
========== ========
Net interest income $ 9,835 $ 9,615
======= =======
Interest rate spread 3.85% 4.03%
Net interest margin 3.98% 4.18%
</TABLE>
- ---------------------------
(a) Excludes the effect
of SFAS 115.
15
<PAGE>
The increase of $220,000 in net interest income is analyzed as follows:
<TABLE>
<CAPTION>
Quarters ended September 30, 1996 vs. 1995 Change due to Increase (Decrease)
- ------------------------------------------ --------------------------------
Total Volume Rate Rate/Volume
------- ------- -------- -----------
Interest income: (In thousands)
<S> <C> <C> <C> <C>
Loans $ (138) $(20) $ (112) $ (6)
Investment securities 1,238 54 1,169 15
------- ----- ------- -------
Total 1,100 34 1,057 9
------- ----- ------- -------
Interest expense:
Deposits (342) (127) (219) 4
Borrowings 1,222 6 1,211 5
------- ----- -------- -------
Total 880 (121) 992 9
------- ----- -------- -------
Net interest income $ 220 $ 155 $ 65 $ --
======= ===== ======== =======
</TABLE>
Provision for loan losses
The provision for possible loan losses totaled $299,000 for the
quarter, compared to $250,000 for the same period last year. The provision
reflects the risks associated with the Banks' primary lending objective to
increase the level of commercial loans.
Non-interest income
Total non-interest income increased $97,000, or 5.77%, to $1,777,000.
Fees and charges increased $20,000 due to increased volumes in transaction
accounts and the increase in fees charged on certain transactions. Mortgage
loan service fees decreased $87,000 as a result of the lower level of loans
serviced for investors. In addition, in 1995 $27,000 in gains were recognized
from the sale of securities; there were no such sales of securities during the
third quarter of 1996.
Non-interest expense
Total non-interest expense decreased $238,000, or 3.50%. Salaries and
benefits increased $139,000, the net result of the decrease in employees in the
residential lending area, an increase in employees in the commercial lending and
support areas, and a decline in the cost of medical and retirement benefits.
Occupancy and equipment expenses decreased $81,000 as a result of the reduction
in costs associated with maintaining the Company's facilities and the
elimination of two branch offices. Deposit insurance premium increased $42,000
due to the FDIC deposit insurance premium rebates received by the Banks during
the third quarter of 1995. Other expenses decreased $273,000 due to the
Company's focus on reducing costs and from the costs eliminated in the
acquisition of Braintree and the formation of the holding company to provide
support services to both Banks.
16
<PAGE>
Income taxes
Income taxes for the three months ended September 30, 1996 were 36.11%
of pretax income, compared to 38.55% for 1995. The lower effective tax rate
resulted from the increased utilization of the Massachusetts securities
corporation subsidiaries of the Banks, higher income from tax exempt municipal
bonds, and the utilization of available tax credits.
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
Results of Operations
Consolidated net income for the nine months ended September 30, 1996
totaled $8,855,000, or $1.65 per share, compared to $7,441,000, or $1.40 per
share, for the same period last year. This represents an increase of 19.00% in
earnings and an increase of 17.86% in earnings per share. The increase in
earnings was directly attributable to an increase in net interest income, a
decrease in non-interest income, and lower operating expenses, as compared to
the same period last year.
17
<PAGE>
Net interest income
The table below shows the average balance sheet, the interest earned
and paid on interest earning assets and interest-bearing liabilities, and the
resulting net interest spread and margin for the periods presented. Loan
balances on non-accruing loans are included in the average balances outstanding.
<TABLE>
<CAPTION>
For the nine months ended September 30,
-------------------------------------------------------------------------------------------
1996 1995
------------------------------------------------ -----------------------------------------
Interest Interest
Average income/ Yield/ Average income/ Yield/
balance expense rate balance expense rate
--------------- -------------- --------------- ----------------- --------- ------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest-earning assets:
Mortgage loans $ 554,205 $34,975 8.41% $574,771 $35,953 8.34%
Other loans 84,181 6,041 9.59 60,108 4,117 9.16
Investments (a) 326,768 14,804 6.04 283,649 12,833 6.03
---------- ------- -------- --------
Total interest-earning 965,154 55,820 7.71 918,528 52,903 7.68
assets
Non interest-earning assets 63,612 56,220
---------- --------
Total $1,028,766 $974,748
========== ========
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Deposits $ 711,736 $19,941 3.74 $727,420 $19,714 3.62
Borrowed funds 156,374 6,602 5.64 109,235 4,770 5.84
---------- ------- -------- --------
Total interest-bearing liabilities 868,110 26,543 4.08 836,655 24,484 3.91
Non interest-bearing liabilities:
Demand deposits 53,218 -- 42,603 --
---------- ------- -------- --------
Total cost of funds 921,328 26,543 3.85 879,258 24,484 3.72
Other liabilities 12,322 8,233
Stockholders' equity 95,116 87,257
---------- --------
Total $1,028,766 $974,748
========== ========
Net interest income $29,277 $28,419
======= ========
Interest rate spread 3.86% 3.96%
Net interest margin 4.04% 4.13%
</TABLE>
- ---------------------------
(a) Excludes the effect
of SFAS 115.
18
<PAGE>
The increase of $858,000 in net interest income is analyzed as follows:
<TABLE>
<CAPTION>
Nine months ended September 30,
1996 vs. 1995 Change due to Increase (Decrease)
- --------------------------- --------------------------------
Total Volume Rate Rate/Volume
--------- -------- -------- -----------
(In thousands)
<S> <C> <C> <C> <C>
Interest income:
Loans $ 946 $513 $ 367 $ 66
Investment securities 1,971 17 1,951 3
------- ----- -------- -----
Total 2,917 530 2,318 69
------- ----- -------- -----
Interest expense:
Deposits 227 705 (463) (15)
Borrowings 1,832 (163) 2,065 (70)
------- ----- -------- -----
Total 2,059 542 1,602 (85)
------- ----- -------- -----
Net interest income $ 858 $ (12) $ 716 $ 154
======= ===== ======== =====
</TABLE>
Provision for loan losses
The provision for possible loan and lease losses totaled $926,000 for
the nine month period, compared to $775,000 for the same period last year. The
increased level of the provision reflects the risks associated with the Banks'
primary lending objective to increase the level of commercial loans.
Non-interest income
Total non-interest income decreased $260,000, or 4.90%, to $5,049,000.
Fees and charges increased $125,000 due to increased volumes in transaction
accounts and the increase in fees charged on certain transactions. Mortgage
loan servicing fees decreased $226,000 as a result of the lower level of loans
serviced for investors. In 1995, the Banks recognized $151,000 from the gain on
sale of loans, compared to $16,000 in 1996, reflecting the reduced level of loan
originations and sales. In addition, in 1995 $341,000 in gains were recognized
from the sale of securities, compared to $40,000 in 1996.
Non-interest expense
Total non-interest expense declined $1,598,000, or 7.63%. FDIC
deposit insurance premium decreased $902,000, a result of the reduction in
premiums paid on deposits. Other expenses decreased $672,000 due to the
Company's focus on reducing costs and from the costs eliminated in the
acquisition of Braintree and the formation of the holding company to provide
support services to both Banks. Salaries and benefits increased $168,000, the
net result of the decrease in employees in the residential lending area, an
increase in employees in the commercial lending and support areas, and a decline
in the cost of medical and retirement benefits. Occupancy and equipment
expenses decreased $74,000 as a result of the reduction in costs associated with
maintaining the Company's facilities and the elimination of two branch offices.
19
<PAGE>
Income taxes
Income taxes for the nine months ended September 30, 1996 were 37.02%
of pretax income, compared to 38.07% for 1995. The lower effective tax rate
resulted from the increased utilization of the Massachusetts securities
corporation subsidiaries of the Banks, higher income from tax exempt municipal
bonds, and the utilization of available tax credits.
Capital Adequacy
At September 30, 1996 the Company's capital ratios were total capital
of 9.06% of total assets, tier 1 risk-based capital ratio of 14.01%, and total
risk-based capital of 15.58% (unaudited).
The FDIC sets minimum leverage ratios for each insured institution
depending upon its CAMEL rating. Banks with the highest ratings are required to
carry a 3.0% leverage ratio, with less highly rated institutions required to
have minimum ratios at least 1.0% to 2.0% greater. Additionally, the FDIC has
risk-based capital regulations. Under these requirements, banks must have a
minimum risk-based capital rate of 8.00%.
At September 30, 1996 the Banks met all the capital requirements of a
"well capitalized" institution as defined by the FDIC. At September 30, 1996,
the Banks' regulatory capital ratios (unaudited) were:
<TABLE>
<CAPTION>
Concord Braintree
-------- ----------
<S> <C> <C>
Total equity to total assets 8.07% 8.92%
Tier 1 capital 7.87 6.92
Tier 1 risk-based capital 14.36 11.84
Total risk-based capital 16.29 13.09
</TABLE>
Asset/Liability Management
The Company's objective with respect to asset/liability management is
to position the Company so that changes in interest rates do not have a material
impact on net interest income. The primary objective is to manage the assets
and liabilities to provide for profitability and capital at prudent levels of
liquidity and interest rate, credit, and market risk.
The Company uses a static gap measurement as well as a modeling
approach to review its level of interest rate risk. The internal targets
established by the Company are to maintain a static gap of no more than a
positive or negative 10% of total assets at the one year time frame. At
September 30, 1996, the Company's one year static gap was a negative
$36,978,000, or (3.50)% of total assets.
20
<PAGE>
Liquidity
Deposits and borrowings are the principal sources of funds for use in
lending and for general business purposes. Cash flows related to these sources
are included in the financing activity section of the Company's consolidated
statements of cash flows. Loan and investment amortization and prepayments
provide additional significant cash flows. These cash flows are included in the
investing activity section of the Company's consolidated statement of cash
flows. The Company currently has $172,933,000, or 16.48%, of assets in short-
term investments and investment and mortgage-backed securities classified
available for sale. The Banks are members of the Federal Home Loan Bank of
Boston, and as such have access to a combined credit line of $35,000,000 and the
ability and capacity to borrow additional funds if needed.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
Neither the Company nor any of its subsidiaries is party to any
pending legal proceedings which are material other than routine litigation
incidental to their business activities.
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
-------------- -----------
11 Computation of Per Share Earnings
27 Financial Data Schedule
99 Selected Financial Data
(b) Reports on Form 8-K
(I) During the third quarter of 1996, the Company filed a Form 8-
K dated September 11, 1996 concerning the proposed
acquisition of Walden by UST Corp.
21
<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.
Walden Bancorp, Inc.
November 13, 1996 /s/ David E. Bradbury
- --------------------------------- ---------------------------------
Date David E. Bradbury
Chairman, President, and
Chief Executive Officer
November 13, 1996 /s/ Michael O. Gilles
- --------------------------------- ---------------------------------
Date Michael O. Gilles
Executive Vice President,
Treasurer and Chief Financial
Officer
22
<PAGE>
EXHIBITS
Computation of per share earnings - Exhibit 11
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
-------------------------- -----------------------
1996 1995 1996 1995
------------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Average shares outstanding 5,136,662 5,182,208 5,247,364 5,170,956
Average dilutive option shares 139,115 171,887 129,585 151,363
---------- ---------- ---------- ----------
Total average shares 5,275,777 5,354,095 5,376,949 5,322,319
========== ========== ========== ==========
Net income $3,041,000 $2,614,000 $8,855,000 $7,441,000
========== ========== ========== ==========
Earnings per share $ 0.58 $ 0.49 $ 1.65 $ 1.40
========== ========== ========== ==========
</TABLE>
Selected Financial Data - Exhibit 99
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------- ------------------
1996 1995 1996 1995
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Return on average assets (annualized) 1.16% 1.07% 1.15% 1.02%
Return on average equity (annualized) 12.94 11.60 12.41 11.37
</TABLE>
23
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM WALDEN
BANCORP INC. AND SUBSIDIARIES
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 28,775
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 15,013
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 167,109
<INVESTMENTS-MARKET> 157,920
<LOANS> 621,847
<ALLOWANCE> 11,332
<TOTAL-ASSETS> 1,049,393
<DEPOSITS> 759,412
<SHORT-TERM> 79,899
<LIABILITIES-OTHER> 4,660
<LONG-TERM> 101,426
0
0
<COMMON> 5,320
<OTHER-SE> 89,729
<TOTAL-LIABILITIES-AND-EQUITY> 1,049,393
<INTEREST-LOAN> 41,016
<INTEREST-INVEST> 14,804
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 55,820
<INTEREST-DEPOSIT> 19,941
<INTEREST-EXPENSE> 26,543
<INTEREST-INCOME-NET> 29,277
<LOAN-LOSSES> 926
<SECURITIES-GAINS> 40
<EXPENSE-OTHER> 5,259
<INCOME-PRETAX> 14,061
<INCOME-PRE-EXTRAORDINARY> 14,061
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,885
<EPS-PRIMARY> 1.65
<EPS-DILUTED> 1.65
<YIELD-ACTUAL> 4.04
<LOANS-NON> 6,755
<LOANS-PAST> 610
<LOANS-TROUBLED> 756
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 12,091
<CHARGE-OFFS> (1,781)
<RECOVERIES> 96
<ALLOWANCE-CLOSE> 11,332
<ALLOWANCE-DOMESTIC> 11,332
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
