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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT UNDER SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE
FISCAL YEAR ENDED DECEMBER 31, 2000
Commission File Number 0-14555
FIRST LEESPORT BANCORP, INC._____________
(Exact name of Registrant as specified in its Charter)
Pennsylvania 23-2354007
(State or Other Juris- (I.R.S. Employer
diction of Incorporation) Identification No.)
133 North Centre Avenue
Leesport, Pennsylvania 19533
(Address of Principal Executive Offices)
(610) 926-2161
Registrant's Telephone Number:
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $5.00 Par Value
(Title of Class)
The Registrant has (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No. ___
Indicate by checkmark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of March 19, 2001, the aggregate market value of the Common
Stock (based upon the average sales price on such date) of the
Registrant held by nonaffiliates was $25.6 million.
Number of Shares of Common Stock Outstanding at March 19, 2001:
1,868,900.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive Proxy Statement prepared
in connection with its Annual Meeting of Stockholders to be held
on April 24, 2001 are incorporated in Part III hereof.
INDEX
PAGE
PART I
Item 1. Business.........................................
Item 2. Properties.......................................
Item 3. Legal Proceedings................................
Item 4. Submission of Matters to a Vote of Security
Holders..........................................
Item 4A. Executive Officers of the Registrant.............
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters......................
Item 6. Selected Financial Data..........................
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations.......................................
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk................................
Item 8. Financial Statements and Supplementary Data......
Item 9. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure.......................................
PART III
Item 10. Directors and Executive Officers of the
Registrant.......................................
Item 11. Executive Compensation...........................
Item 12. Security Ownership of Certain Beneficial
Owners and Management............................
Item 13. Certain Relationships and Related
Transactions.....................................
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K..........................
SIGNATURES...................................................
PART I
FORWARD LOOKING STATEMENTS
Except for historical information, this report may be
deemed to contain "forward looking" statements. First Leesport
Bancorp, Inc. (the "Company") desires to avail itself of the
Safe Harbor provisions of the Private Securities Litigation
Reform Act of 1995 (the "Reform Act") and is including this
cautionary statement for the express purpose of availing itself
of the protection afforded by the Reform Act.
Examples of forward looking statements include, but are not
limited to (a) projections of or statements regarding future
earnings, net interest income, other income, earnings or loss
per share, asset mix and quality, growth prospects, capital
structure and other financial terms, (b) statements of plans and
objectives of the Company or its management or Board of
Directors, (c) statements of future economic performance, and
(d) statements of assumptions, such as economic conditions in
the Company's market areas, underlying other statements and
statements about the Company or its businesses. Such forward
looking statements can be identified by the use of forward
looking terminology such as "believes," "expects," "may,"
"intends," "will," "should," "anticipates," or the negative of
any of the foregoing or other variations thereon or comparable
terminology, or by discussion of strategy.
No assurance can be given that the future results covered
by the forward-looking statements will be achieved. Such
statements are subject to risks, uncertainties, and other
factors which could cause actual results to differ materially
from future results expressed or implied by such forward-looking
statements. Important factors that could impact the Company's
operating results include, but are not limited to, (i) the
effects of changing economic conditions in the Company's market
areas and nationally, (ii) credit risks of commercial, real
estate, consumer and other lending activities, (iii) significant
changes in interest rates, (iv) changes in federal and state
banking laws and regulations which could impact the Company's
operations, (v) funding costs, and (vi) other external
developments which could materially affect the Company's
business and operations.
Item 1. Business
The Company
First Leesport Bancorp, Inc. (the "Company") is a
Pennsylvania business corporation headquartered at 133 North
Centre Avenue, Leesport, Pennsylvania 19533. The Company was
organized as a bank holding company on January 1, 1986. The
Company offers a wide array of financial services through its
various subsidiaries. The Company's executive offices are
located at 133 North Center Avenue, Leesport, Pennsylvania
19533.
The Bank
The Company wholly-owns its banking subsidiary, Leesport
Bank ("Leesport Bank" or the "Bank"),a Pennsylvania chartered
commercial bank. During the year ended December 31, 2000, the
charters of The First National Bank of Leesport and Merchants
Bank of Pennsylvania, both wholly-owned banking subsidiaries of
the Company, were merged into a single charter under the name
Leesport Bank. The First National Bank of Leesport was
incorporated under the laws of the United States of America as a
national bank in 1909. Since its inception, Leesport Bank, or
its predecessor, the First National Bank of Leesport, has
operated as a banking institution doing business in Berks
County, Pennsylvania. Merchants Bank of Pennsylvania, a
Pennsylvania chartered commercial bank, was acquired in 1999 as
a result of the merger between the Company and Merchants of
Shenandoah Ban-Corp. Merchants Bank of Pennsylvania, now a
division of the Bank, operates in the counties of Schuylkill and
Luzerne in Pennsylvania.
At December 31, 2000, the Company had total assets of $394
million, total stockholders' equity of $28 million, and total
deposits of $296 million. The Company currently has the
equivalent of 164 full-time employees.
The Company's and the Bank's main office is located at
133 North Centre Avenue, Leesport, Pennsylvania. Leesport Bank
provides services to its customers through ten full service
offices, seven of which operate under Leesport Bank's name in
Leesport, Blandon, Bern Township, Wyomissing Hills, Breezy
Corner, Hamburg, and Reading, all of which are in Berks County,
Pennsylvania, and three of which operate under the name
Merchants Bank, a division of Leesport Bank, in Shenandoah,
Schuylkill County, in Drums and in Hazel Township, both located
in Luzerne County. The Bank also operates a limited service
facility in Wernersville, Berks County, Pennsylvania. All
offices, except the Wernersville office, provide automated
teller machine services. Each office except the Wernersville,
Breezy Corner, and Drums branches provide drive-in facilities.
(See "Properties.")
The Bank engages in full service commercial and consumer
banking business, including such services as accepting deposits
in the form of time, demand and savings accounts. Such time
deposits include certificates of deposit, individual retirement
accounts, Roth IRA accounts, and club accounts. The Bank's
savings accounts include money market accounts, NOW accounts and
traditional regular savings accounts. In addition to accepting
deposits, the Bank makes both secured and unsecured commercial
and consumer loans, finances commercial transactions, provides
equipment lease and accounts receivable financing, makes
construction and mortgage loans, including home equity loans,
and rents safe deposit facilities. The Bank also provides small
business loans and student loans.
Subsidiary Activities
The Company also owns First Leesport Capital Trust I (the
"Trust"), a Delaware statutory business trust formed on March 9,
2000. The Trust issued $5 million of 10-7/8% fixed rate capital
trust pass-through securities to investors. Leesport Bank has
four wholly owned subsidiaries: Essick & Barr, Inc., a Berks
County based general insurance agency ("Essick & Barr") which
was acquired in 1998; First Leesport Wealth Management, Inc.
("FLWM"), an investment advisory business which was acquired in
1999; First Leesport Investment Group, Inc. ("FLIG"), which was
formed in 1999 to purchase the securities brokerage business of
KRJ & Associates; and Horizon Realty Solutions, Inc., which was
formed during 2000 to provide title insurance and other real
estate related services to its customers through a limited
partnership. Both FLIG and FLWM are headquartered at 560 Van
Reed Road, Suite 308, Wyomissing, Pennsylvania and collectively
had 9 employees at December 31, 2000. Essick & Barr offers a
full line of personal and commercial property and casualty
insurance as well as group insurance for businesses, employee
benefit plans, and life insurance. Headquartered in Leesport,
Pennsylvania with a sales office at 108 South Fifth Street,
Reading, Pennsylvania, Essick & Barr employed approximately 30
full-time employees at December 31, 2000.
Supervision and Regulation
Securities Regulation
The Company is under the jurisdiction of the Securities and
Exchange Commission and of state securities commissions for
matters relating to the offering and sale of its securities. In
addition, the Company is subject to the Securities and Exchange
Commission's rules and regulations relating to periodic
reporting, proxy solicitation, and insider trading.
General
The Company is registered as a bank holding company and is
subject to supervision and regulation by the Board of Governors
of the Federal Reserve System under the Bank Holding Act of
1956, as amended. As a bank holding company, the Company's
activities and those of its bank subsidiary are limited to the
business of banking and activities closely related or incidental
to banking. Bank holding companies are required to file
periodic reports with and are subject to examination by the
Federal Reserve Board. The Federal Reserve Board has issued
regulations under the Bank Holding Company Act that require a
bank holding company to serve as a source of financial and
managerial strength to its subsidiary banks. As a result, the
Federal Reserve Board, pursuant to such regulations, may require
the Company to stand ready to use its resources to provide
adequate capital funds to its bank subsidiaries during periods
of financial stress or adversity.
The Bank Holding Company Act prohibits the Company from
acquiring direct or indirect control of more than 5% of the
outstanding shares of any class of voting stock, or
substantially all of the assets of, any bank, or from merging or
consolidating with another bank holding company, without prior
approval of the Federal Reserve Board. Additionally, the Bank
Holding Company Act prohibits the Company from engaging in or
from acquiring ownership or control of more than 5% of the
outstanding shares of any class of voting stock of any company
engaged in a non-banking business, unless such business is
determined by the Federal Reserve Board to be so closely related
to banking as to be a proper incident thereto. The types of
businesses that are permissible for bank holding companies to
own have been expanded by recent federal legislation; see
discussion below.
As a Pennsylvania bank holding company for purposes of the
Pennsylvania Banking Code, the Company is also subject to
regulation and examination by the Pennsylvania Department of
Banking.
Regulation of Leesport Bank
Leesport Bank is a Pennsylvania chartered bank and its
deposits are insured (up to applicable limits) by the Bank
Insurance Fund of the Federal Deposit Insurance Corporation (the
"FDIC"). The Bank is subject to regulation and examination by
the Federal Reserve Board, the Pennsylvania Department of
Banking, and by the FDIC. The Community Reinvestment Act
requires Leesport Bank to help meet the credit needs of the
entire community where Leesport Bank operates, including low and
moderate income neighborhoods. Leesport Bank's rating under the
Community Reinvestment Act, assigned by the Federal Reserve
Board pursuant to an examination of Leesport Bank, is important
in determining whether The Bank may receive approval for, or
utilize certain streamlined procedures in, applications to
engage in new activities.
Leesport Bank is also subject to requirements and
restrictions under federal and state law, including requirements
to maintain reserves against deposits, restrictions on the types
and amounts of loans that may be granted and the interest that
may be charged thereon, and limitations on the types of
investments that may be made and the types of services that may
be offered. Various consumer laws and regulations also affect
the operations of Leesport Bank. In addition to the impact of
regulation, commercial banks are affected significantly by the
actions of the Federal Reserve Board as it attempts to control
the money supply and credit availability in order to influence
the economy.
Capital Adequacy Guidelines
Bank holding companies are required to comply with the
Federal Reserve Board's risk-based capital guidelines. The
required minimum ratio of total capital to risk-weighted assets
(including certain off-balance sheet activities, such as standby
letters of credit) is 8%. At least half of the total capital is
required to be "Tier 1 capital," consisting principally of
common shareholders' equity, less certain intangible assets.
The remainder ("Tier 2 capital") may consist of certain
preferred stock, a limited amount of subordinated debt, certain
hybrid capital instruments and other debt securities, and a
limited amount of the general loan loss allowance. The risk-
based capital guidelines are required to take adequate account
of interest rate risk, concentration of credit risk, and risks
of nontraditional activities.
In addition to the risk-based capital guidelines, the
Federal Reserve Board requires a bank holding company to
maintain a leverage ratio of a minimum level of Tier 1 capital
(as determined under the risk-based capital guidelines) equal to
3% of average total consolidated assets for those bank holding
companies which have the highest regulatory examination ratings
and are not contemplating or experiencing significant growth or
expansion. All other bank holding companies are required to
maintain a ratio of at least 1% to 2% above the stated minimum.
The Pennsylvania Department of Banking requires state chartered
banks to maintain a 6% leverage capital level and 10% risk based
capital, defined substantially the same as the federal
regulations. The Bank is subject to almost identical capital
requirements adopted by the FDIC.
Prompt Corrective Action Rules
The federal banking agencies have regulations defining the
levels at which an insured institution would be considered "well
capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized" and "critically
undercapitalized." The applicable federal bank regulator for a
depository institution could, under certain circumstances,
reclassify a "well-capitalized" institution as "adequately
capitalized" or require an "adequately capitalized" or
"undercapitalized" institution to comply with supervisory
actions as if it were in the next lower category. Such a
reclassification could be made if the regulatory agency
determines that the institution is in an unsafe or unsound
condition (which could include unsatisfactory examination
ratings). The Company and the Bank each satisfy the criteria to
be classified as "well capitalized" within the meaning of
applicable regulations.
Regulatory Restrictions on Dividends
Dividend payments made by Leesport Bank to the Company are
subject to the Pennsylvania Banking Code, the Federal Deposit
Insurance Act, and the regulations of the Federal Reserve Board.
Under the Banking Code, no dividends may be paid except from
"accumulated net earnings" (generally, retained earnings). The
Federal Reserve Board and the FDIC have formal and informal
policies which provide that insured banks and bank holding
companies should generally pay dividends only out of current
operating earnings, with some exceptions. The Prompt Corrective
Action Rules, described above, further limit the ability of
banks to pay dividends if they are not classified as well
capitalized or adequately capitalized.
Under these policies and subject to the restrictions
applicable to the Bank, the Bank had approximately $13.35
million available for payment of dividends to the Company at
December 31, 2000, without prior regulatory approval.
FDIC Insurance Assessments
The FDIC has implemented a risk-related premium schedule
for all insured depository institutions that results in the
assessment of premiums based on capital and supervisory
measures. Under the risk-related premium schedule, the FDIC
assigns, on a semiannual basis, each depository institution to
one of three capital groups (well-capitalized, adequately
capitalized or undercapitalized) and further assigns such
institution to one of three subgroups within a capital group.
The institution's subgroup assignment is based upon the FDIC's
judgment of the institution's strength in light of supervisory
evaluations, including examination reports, statistical analyses
and other information relevant to measuring the risk posed by
the institution. Only institutions with a total capital to
risk-adjusted assets ratio of 10% or greater, a Tier 1 capital
to risk-based assets ratio of 6% or greater, and a Tier 1
leverage ratio of 5% or greater, are assigned to the well-
capitalized group. As of December 31, 2000, the Bank was well
capitalized for purposes of calculating insurance assessments.
The Bank Insurance Fund is presently fully funded at more
than the minimum amount required by law. Accordingly, the 2000
Bank Insurance Fund assessment rates ranged from zero for those
institutions with the least risk, to $0.27 for every $100 of
insured deposits for institutions deemed to have the highest
risk. The Bank is in the category of institutions that
presently pay nothing for deposit insurance. The FDIC adjusts
the rates every six months.
While the Bank presently pays no premiums for deposit
insurance, it is subject to assessments to pay the interest on
Financing Corporation bonds. The Financing Corporation was
created by Congress to issue bonds to finance the resolution of
failed thrift institutions. Prior to 1997, only thrift
institutions were subject to assessments to raise funds to pay
the Financing Corporation bonds. Beginning in 2000, commercial
banks and thrifts are subject to the same assessment for
Financing Corporation bonds. The FDIC sets the Financing
Corporation assessment rate every quarter. The Financing
Corporation assessment for the Bank (and all other banks) for
the first quarter of 2001 is an annual rate of $.0196 for each
$100 of deposits.
New Legislation
Landmark legislation in the financial services area was
signed into law by the President on November 12, 1999. The
Gramm-Leach-Bliley Act dramatically changes certain banking laws
that have been in effect since the early part of the 20th
century. One of the most significant changes was that the
separation between banking and the securities businesses
mandated by the Glass-Steagall Act has now been removed, and the
provisions of any state law that prohibits affiliation between
banking and insurance entities have been preempted.
Accordingly, the new legislation now permits firms engaged in
underwriting and dealing in securities, and insurance companies,
to own banking entities, and permits bank holding companies (and
in some cases, banks) to own securities firms and insurance
companies. The provisions of federal law that preclude banking
entities from engaging in non-financially related activities,
such as manufacturing, have not been changed. For example, a
manufacturing company cannot own a bank and become a bank
holding company, and a bank holding company cannot own a
subsidiary that is not engaged in financial activities, as
defined by the regulators.
The new legislation creates a new category of bank holding
company called a "financial holding company." In order to avail
itself of the expanded financial activities permitted under the
new law, a bank holding company must notify the Federal Reserve
Board ("Federal Reserve") that it elects to be a financial
holding company. A bank holding company can make this election
if it, and all its bank subsidiaries, are well capitalized, well
managed, and have at least a satisfactory Community Reinvestment
Act rating, each in accordance with the definitions prescribed
by the Federal Reserve and the regulators of the subsidiary
banks. Once a bank holding company makes such an election, and
provided that the Federal Reserve does not object to such
election by such bank holding company, the financial holding
company may engage in financial activities (i.e, securities
underwriting, insurance underwriting, and certain other
activities that are financial in nature as to be determined by
the Federal Reserve) by simply giving a notice to the Federal
Reserve within thirty days after beginning such business or
acquiring a company engaged in such business. This makes the
regulatory approval process to engage in financial activities
much more streamlined than it was under prior law.
The Company believes it qualifies to become a financial
holding company, but has not yet determined whether or not it
will file to become treated as one.
The new law makes major changes to the federal banking laws
and makes a number of additions and revisions to numerous
federal laws that affect the business of banking. For example,
there is now a federal law on privacy with respect to customer
information held by banks. The federal banking regulators are
authorized to adopt rules regarding privacy for customer
information. Banks must establish a disclosure policy for non-
public customer information, disclose the policy to their
customers, and give their customers the opportunity to object to
non-public information being disclosed to a third party. Also,
the Community Reinvestment Act ("CRA") has been amended by the
new law to provide that small banks (those under $250 million in
assets) that previously received an "outstanding" on their last
CRA exam will not have to undergo another CRA exam for five
years, or for four years if their last exam was "satisfactory."
In addition, any CRA agreement entered into between a bank and a
community group must be disclosed, with both the bank and the
group receiving any grants from the bank detailing the amount of
funding provided and what it was used for. The new law also
requires a bank's policy on fees for transactions at ATM
machines by non-customers to be conspicuously posted on the ATM.
A number of other provisions affecting other general regulatory
requirements for banking institutions were also adopted.
Pennsylvania banking law was amended in November 2000 to
provide for complete parity of Pennsylvania banks with federally
chartered banks in the area of permissible activities. Under
Pennsylvania law as revised, the Bank may engage in any activity
authorized for national banks or federal savings banks.
The subsidiaries of the Bank, Essick & Barr, FLIG, and
FLWM, are subject to additional regulatory requirements.
Essick & Barr is subject to Pennsylvania insurance laws and the
regulations of the Pennsylvania Department of Insurance. The
securities brokerage activities of FLIG are subject to
regulation by the SEC and the NASD, and FLWM is a registered
investment advisor subject to regulation by the Pennsylvania
Securities Commission.
Item 2. Properties
The only real estate owned by the Company is a single-
family home located adjacent to Leesport Bank's main office.
This property is presently listed for sale. The Company's
principal office is located in the main office of Leesport Bank
at 133 North Centre Avenue, Leesport, Pennsylvania. The Company
does not reimburse Leesport Bank for use of the property.
Listed below are the locations of properties owned by the
Bank. Such properties are not subject to any mortgage, lien or
encumbrance.
Property
Location Address
1. Leesport 133-141 North Centre Avenue,
Leesport, Pennsylvania
2. North Pointe 241 South Centre Avenue,
Leesport, Pennsylvania
3. Wyomissing Hills 2228 State Hill Road,
Wyomissing Hills, Pennsylvania
4. Reading 1210 Rockland Street
Reading, Pennsylvania
5. Hamburg 801 South Fourth Street
Hamburg, Pennsylvania
6. Bern Township 409 West Leesport Road
Leesport, Pennsylvania
7. Shenandoah 101 North Main Street
Shenandoah, Pennsylvania
8. Drums Rittenhouse Place
Drums, Pennsylvania
Each of these bank offices, except Drums, provides drive-in
facilities and automated teller machines. Leesport Bank leases
the premises of its Wernersville branch, which does not have a
drive-up facility or an automated teller machine. Leesport Bank
also leases the property at which its Breezy Corner branch is
located in Ruscombmanor Township, Berks County, Pennsylvania,
the property at which its Blandon branch is located in
Maidencreek Township, Berks County, Pennsylvania; the property
at which its Wyomissing financial center is located at
1199 Berkshire Boulevard, Wyomissing, Berks County,
Pennsylvania; and a branch facility in Hazle Township, Luzerne
County, Pennsylvania.
Essick & Barr owns its sales office at 108 South Fifth
Street, Reading, Pennsylvania.
FLIG and FLWM operate from leased office space located at
560 Van Reed Road, Suite 308, Wyomissing, Pennsylvania.
Item 3. Legal Proceedings
A certain amount of litigation arises in the ordinary
course of the business of the Company, and the Company's
subsidiaries. In the opinion of the management of the Company,
there are no proceedings pending to which the Company, or the
Company's subsidiaries are a party or to which their property is
subject, that, if determined adversely to the Company or its
subsidiaries, would be material in relation to the Company's
shareholders' equity or financial condition, nor are there any
proceedings pending other than ordinary routine litigation
incident to the business of the Company and its subsidiaries.
In addition, no material proceedings are pending or are known to
be threatened or contemplated against the Company or its
subsidiaries by governmental authorities.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders
during the fourth quarter of the Company's fiscal year ended
December 31, 2000.
Item 4A. Executive Officers of the Registrant
Certain information, as of January 31, 2001 including
principal occupation during the past five years, relating to
each executive officer of the Company is set forth below:
Position Principal Occupation
Name, Address, and Position Held for
Held with the Company Age Since Past 5 Years
RAYMOND H. MELCHER, JR. 49 1998 Chairman, President
Wyomissing, Pennsylvania and Chief Executive
Chairman, President and Officer of the Company
Chief Executive Officer since January 1, 2000;
prior thereto,
President and Chief
Executive Officer of
the Company since June
1998; prior thereto
President and Chief
Executive Officer
of Security National
Bank of Pottstown
ANTHONY R. CALI 57 1987 Executive Vice
Conyngham, Pennsylvania President of First
Executive Vice President of Leesport Bancorp since
First Leesport Bancorp, Inc. 1999, President of
President of Merchants Bank Merchants Bank Division
Division of Leesport Bank of Leesport Bank since
2000, prior thereto
President and Chief
Executive Officer of
Merchants Bank of
Pennsylvania
CHARLES J. HOPKINS 50 1998 President and CEO of
Wyomissing, Pennsylvania Essick & Barr, Inc.
President and Chief since 1992
Executive Officer of
Essick & Barr, Inc.
Senior Vice President of
Leesport Bank
MICHAEL D. HUGHES 49 1998 Senior Vice President
Reading, Pennsylvania of Essick & Barr, Inc.
Senior Vice President of since 1992
Essick & Barr, Inc.
KEITH W. JOHNSON, CFP 49 1991 President and Chief
Fleetwood, Pennsylvania Executive Officer of
President & Chief First Leesport
Executive Officer of Investment Group, Inc.
First Leesport Investment and First Leesport
Group, Inc. and First Wealth Management Inc.
Leesport Wealth since 1999; prior
Management, Inc.; thereto, owner of KRJ
Senior Vice President Associates and Johnson
of Leesport Bank Financial
JAMES E. KIRKPATRICK 39 1998 Senior Vice President
Sinking Spring, Pennsylvania of Commercial Banking
Sr. Vice President of since December 1998;
Commercial Banking prior thereto Vice
President of Commercial
Lending at Pennsylvania
National Bank
M. JANE LAUSER 56 1989 Vice President of the
Leesport, Pennsylvania Bank since May 1989
Senior Vice President of
Operations and Information
Systems
KURT A. PHILLIPS 44 1999 Senior Vice President
Lebanon, Pennsylvania and Chief Financial
Senior Vice President and Officer of the Company
Chief Financial Officer since December 27,
1999; prior thereto,
Senior Vice President,
Fulton Financial
Corporation from March
1998; prior thereto,
Executive Vice President
and Chief Financial Officer
of Lebanon Valley National
Bank
JENETTE L. ECK 38 1998 Secretary of the
Centerport, Pennsylvania Company since 1998,
Secretary of the Company Executive Assistant of
the Company since 1996
PART II
Item 5. Market For Common Equity and Related Shareholder
Matters.
As of December 31, 2000, there were 732 record holders of
the Company's Common Stock. The market price of the Company's
Common Stock for each quarter in 2000 and 1999 and the dividends
declared on the Company's Common Stock for each quarter in 2000
and 1999 are set forth below.
Market Value of Common Stock
The Company's Common Stock is traded on the NASDAQ Small
Capitalization Market under the symbol "FLPB."
The following table sets forth the high and low bid and
asked information of the Company's common stock to the extent
available, as reported by NASDAQ.
2000 1999
Bid Asked Bid Asked
Qtr High Low High Low Qtr High Low High Low
1st $18.13 $12.50 $18.25 $12.75 1st $21.63 $20.00 $22.25 $20.75
2nd 17.75 15.06 18.00 15.63 2nd 20.38 20.13 21.00 20.25
3rd 16.13 13.50 16.50 13.63 3rd 20.13 18.50 20.63 19.00
4th 14.56 12.38 15.00 13.13 4th 16.75 16.00 19.00 18.00
The bid quotations reflect interdealer quotations, do not
include retail mark ups, mark downs or commissions, and may not
necessarily represent actual transactions. The bid information
as stated is, to the knowledge of management of the Company, the
best approximate value at the time indicated.
Dividend Information
Dividends on the Common Stock of First Leesport Bancorp,
Inc. are payable on the 15th of January, April, July, and
October.
Dividends Declared
2000 1999
1st Qtr. $.15 $.12
2nd Qtr. .15 .14
3rd Qtr. .15 .14
4th Qtr. .15 .14
The Company derives substantially all of its income from
dividends paid to it by the Bank and its subsidiaries.
Item 6. Selected Financial Data.
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The selected consolidated financial and other data and
management's discussion and analysis set forth below is derived
in part from, and should be read in conjunction with, the
Consolidated Financial Statements and Notes thereto, contained
elsewhere herein.
Year Ended December 31,
----------------------------------------------------------------
2000 1999 1998 1997 1996
(in thousands)
Selected Financial Data:
Total assets $ 393,826 $ 358,618 $ 289,945 $ 235,567 $ 220,152
Investment securities available for sale 74,368 72,165 72,202 60,939 63,788
Investment securities held to maturity _ _ 423 _ _
Loans, net of unearned income 284,863 253,194 195,287 157,107 139,144
Allowance for loan losses 3,571 2,954 2,129 1,837 1,419
Deposits 296,363 269,344 228,984 196,308 187,246
Short-term borrowings 15,263 28,175 12,667 8,000 5,700
Long-term debt 48,500 31,000 16,000 _ 1,600
Shareholders' equity 28,346 25,602 27,826 25,139 23,456
Year Ended December 31,
----------------------------------------------------------------
2000 1999 1998 1997 1996
(in thousands)
Selected Operating Data:
Interest income $ 27,471 22,910 $ 18,548 $ 17,042 $ 16,391
Interest expense 16,386 12,363 9,491 7,991 7,403
Net interest income before provision
for loan losses 11,085 10,547 9,057 9,051 8,988
Provision for loan losses 1,082 1,270 620 543 298
Net interest income after provision
for loan losses 10,003 9,277 8,437 8,508 8,690
Non-interest income 6,686 4,665 1,149 904 739
Non-interest expense 13,952 12,087 7,758 6,843 6,626
Income before income taxes 2,737 1,855 1,828 2,569 2,803
Income taxes 611 454 317 562 637
Net income 2,126 1,401 1,511 2,007 2,166
Earnings per share-basic 1.15 0.76 0.86 1.14 1.45
Earnings per share-diluted 1.15 0.76 0.86 1.14 1.45
Cash dividends per share 0.60 0.54 0.49 0.49 0.49
Return on average assets .56% 0.43% 0.55% 0.88% 1.00%
Return on average shareholders' equity 7.97% 5.11% 5.85% 8.37% 9.51%
Dividend payout ratio 51.69% 69.45% 55.53% 39.26% 34.12%
Average equity to average assets 7.20% 8.41% 9.40% 10.51% 10.52%
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The Company is a bank holding company. Leesport Bank is a
wholly-owned subsidiary of the Company. Essick & Barr, FLIG and
FLWM, and Horizon Realty Solutions are wholly-owned non-bank
subsidiaries of Leesport Bank.
The financial statements have been restated to reflect the
impact of the acquisition of Merchants of Shenandoah Ban-Corp on
July 1, 1999, which was accounted for under the pooling of
interests method of accounting. Merchants of Shenandoah Ban-
Corp was a single-bank holding company acting as the parent
company of Merchants Bank of Pennsylvania. Merchants Bank of
Pennsylvania was a $60 million bank with three full-service
offices, one in Shenandoah, Pennsylvania, one in Drums,
Pennsylvania, and one just outside of Hazleton, Pennsylvania.
The costs of acquiring Merchants of Shenandoah Ban-Corp,
including legal and professional expenses, system conversion
costs, and investment banking activities, amounted to $544,000
before income tax considerations. In addition to the
consolidation, the reorganization of the banks resulted in three
retirement packages and their associated costs. These
transactions added $270,000 to the acquisition costs noted
above. The after tax cost of these merger, conversion and
reorganization expenses amounted to $617,000. These costs were
expensed during the third quarter of 1999.
The Company expanded into the securities sales business
with its October 1, 1999 acquisition of two Wyomissing,
Pennsylvania-based brokerage and financial management companies:
Johnson Financial Group, Inc., and KRJ & Associates. As part of
the acquisition, these companies were reorganized into First
Leesport Investment Group, Inc., and First Leesport Wealth
Management, Inc., respectively. This acquisition, combined with
the purchase of Essick & Barr, Inc., of Reading, Pennsylvania,
in December of 1998, provides the Company with a full array of
financial products and services for its customers and
affiliates.
During the year 2000, Horizon Realty Solutions, Inc. was
formed as a subsidiary of Leesport Bank for the purpose of
providing title insurance and other real estate related services
to its customers through a limited partnership.
Financial Condition
The Company's total assets increased to $393.8 million at
December 31, 2000, representing a growth rate of 9.82% from
$358.6 million at December 31, 1999.
Cash and Investment Securities
Cash and balances due from banks decreased from
December 31, 1999 to December 31, 2000 as the Bank had
maintained higher than normal levels of cash at the end of 1999
to accommodate concerns about the effects of the Year 2000 on
computer systems. There were, however, no significant problems
realized by the Company as a result of the Year 2000. Cash and
due from banks amounted to $11.6 million at the end of 2000
compared with $15.4 million at the end of 1999, a decrease of
24.28%. Interest bearing balances with other banks remained
relatively flat at $506,000 at December 31, 2000 and $489,000 at
December 31, 1999.
Investment securities increased to $74.4 million at
December 31, 2000 from $72.1 million at December 31, 1999.
Investment securities are used to supplement loan growth as
necessary and to help manage the Company's level of liquid
assets. Currently, all of the Company's securities are carried
as available for sale.
Loans
Loans increased to $284.9 million by the end of 2000 from
$253.2 million at the end of 1999, an increase of $31.7 million
or 12.5%. Management has targeted the loan portfolio as a key
to its continuing growth. A significant increase in the volume
of commercial loans during 2000 and 1999 underscores that focus
as the commercial portfolio increased to $139.8 million at
December 31, 2000 from $107.1 million at December 31, 1999, an
increase of $32.6 million or 30.4%. Loans secured by
residential real estate, which include home equity lending
products, decreased to $122.6 million from $125.1 million
between the two dates, a decrease of $2.5 million or 2.0%. This
decrease is primarily due to the sale of $6.2 million of
outstanding balances of fixed rate residential real estate loans
into the secondary market. In addition, the Company commits to
sell a significant portion of its newly originated mortgages
loans at the time of origination, mostly government agency
qualified loans.
Premises and Equipment
Premises and equipment increased during 2000 to $8.4 million
from $7.6 million at the end of 1999. This increased growth is
primarily due to investments in bank processing technology and
the construction of a new retail-banking facility at 241 South
Centre Avenue, Leesport, Pennsylvania which will open in January
of 2001.
Other Assets
Other assets, which include accrued interest receivable,
increased to $17.6 million at December 31, 2000 from
$12.7 million at December 31, 1999. Included in this total are
the intangible assets recorded as a result of the Company's
purchase of Essick & Barr, Inc., First Leesport Investment
Group, Inc., and First Leesport Wealth Management, Inc. At
December 31, 2000, these intangibles totaled $4.6 million.
Another significant component of Other Assets includes the cash
surrender value of certain life insurance policies used to fund
deferred compensation plans for selected board members and
senior officers. The value of these policies at the end of 2000
was $5.9 million.
Deposits and Borrowings
Total deposits increased by $27.0 million or 10.0%, growing
from $269.3 million at December 31, 1999 to $296.4 million at
December 31, 2000.
Non-interest bearing deposits increased to $38.2 million at
December 31, 2000 from $30.9 million at December 31, 1999, an
increase of $7.3 million or 23.6%. Management continues to
promote growth in these types of deposits, which include the
Free Checking product, as a method to help reduce the overall
cost of the Company's funds. Interest bearing deposits
increased by $19.7 million or 8.3%, growing from $238.4 million
at December 31, 1999 to $258.1 million at December 31, 2000.
Growth in certificates of deposit and money market deposits
provided this increase.
Federal funds purchased and other funds borrowed from the
Federal Home Loan Bank are used to supplement deposit growth.
During 2000, the level of borrowed funds outstanding, including
federal funds purchased and securities sold under agreements to
repurchase, were $58.8 million at December 31, 2000 and
$59.2 million at December 31, 1999.
Capital
The Company's Common Stock, Surplus and Retained Earnings
increased by $1.0 million during 2000. Total Shareholders'
Equity includes accumulated other comprehensive income, which
includes an adjustment for the fair value of the Company's
securities. This amount attempts to identify the impact to
equity in the unlikely event that the Company's entire
securities portfolio would be liquidated under current economic
conditions. The amounts and types of securities held by the
Company at the end of 2000 combined with current interest rates
would have resulted in a decrease in equity, net of taxes, of
$469,000. This compares with a decrease to equity of
$2.1 million at the end of 1999. Retained Earnings, after the
payment of dividends, primarily accounted for the increase in
Shareholders' Equity, exclusive of the comprehensive loss.
Results of Operations
Net income for 2000 was $2.1 million or $1.15 per share
compared to $1.4 million or $.76 per share for 1999 and
$1.5 million or $.86 per share for 1998. Net income for 1999
and 1998 was affected by merger expenses and goodwill incurred
through the acquisition of Merchants of Shenandoah Ban-Corp and
the insurance and investment subsidiaries of the Company.
Improvement of 5.1% in net interest income was recognized in
2000. The table below shows the after-tax net income after
adjustments for certain items that are considered non-recurring
and the effect of goodwill amortization.
2000 1999 1998
Net income (as reported) $2,126 $1,401 $1,511
One-time merger expense,
net of taxes 0 617 0
Goodwill amortization 269 228 17
Adjusted net income 2,395 2,246 1,528
Percent increase (decrease)
from prior year 6.6% 47.0%
Adjusted net income per share $ 1.29 $ 1.22 $ .87
Percent increase (decrease)
from prior year 5.7% 40.2%
Merger expenses of $544,000 in 1999 represent primarily
professional services rendered in connection with the mergers
executed in 1999. Certain employment situations were resolved
during 1999 that resulted in additional expenses of $270,000
being incurred in 1999.
Return on average assets was 0.56% for 2000, 0.43% for 1999
and 0.55% for 1998. After adjustment for non-recurring expenses
and goodwill amortization discussed above, return on average
assets would have been 0.63% for 2000, 0.50% for 1999 and 0.55%
for 1998.
Return on average shareholders' equity was 7.97% for 2000,
5.11% for 1999 and 5.85% for 1998. After adjustment for non-
recurring expenses and goodwill amortization discussed above,
return on average stockholders' equity would have been 8.98% for
2000, 7.27% for 1999 and 5.90% for 1998.
Net Interest Income
Net interest income is a primary source of revenue for the
Company. This income results from the difference between the
interest and fees earned on loans and investments and the
interest paid on deposits to customers and other non-deposit
sources of funds, such as repurchase agreements and borrowings
from the Federal Home Loan Bank. Net interest margin is the
difference between the gross (tax-effected) yield on earning
assets and the cost of interest bearing funds as a percentage of
earning assets. All discussion of net interest income is on a
fully taxable equivalent basis.
Net interest income for 2000 was $11.1 million, a 5.2%
increase over 1999. Net interest income for 1998 was
$9.1 million. Average earning assets increased by $55.7 million
or 18.6% from 1999 to 2000. The net interest margin was 3.29% in
2000 and 3.71% in 1999. The primary growth in earning assets
for 2000 and 1999 was in average loans outstanding. Average
loans outstanding increased by 21.7% in 2000 and 33.4%in 1999.
Average interest-bearing deposits increased by 11.1% in 2000 and
18.5% in 1999. The return on interest earning assets increased
by 6 basis points from 1999 to 2000 while the cost of supporting
liabilities increased by 48 basis points.
Other Income
The Company's primary source of other income for 2000 was
commissions and other revenue generated through sales of
insurance products through its insurance subsidiary, Essick &
Barr, Inc. Revenues from insurance operations totaled
$3.9 million in 2000 compared to $3.3 million in 1999 and
$152,000 in 1998. Revenues generated from the Company's
investment subsidiaries, First Leesport Investment Group, Inc.,
and First Leesport Wealth Management, Inc., totaled $956,000 in
2000 compared to $187,000 in 1999 and $0 in 1998.
The Company also relies on several other sources for its
other income, including sales of newly originated mortgage loans
and service charges on deposit accounts. The income recognized
from mortgage banking activities was $220,000 in 2000, $198,000
in 1999 and $342,000 in 1998. Income from deposit service
charges was $784,000 in 2000, $503,000 in 1999 and $397,000 in
1998. Other income includes other fees and commissions on bank
products and services and amounted to $845,000 for 2000,
$429,000 for 1999 and $200,000 for 1998.
Other Expenses
Total other expenses for 2000 were $14.0 million, a
$1.9 million increase over 1999. Total other expenses for 1998
were $7.8 million.
Total salaries and employee benefits expense for 2000 was
$7.5 million, a 28.2% increase over the $5.9 million reported
for 1999. Total salary and benefits expense for 1998 was
$3.8 million. Salary and benefit costs associated with the
insurance and investment subsidiaries totaled approximately
$2.8 million in 2000, $1.9 million in 1999 and $99,000 in 1998.
The increase in salary and benefits expenses resulted from
annual merit salary increases and additional personnel costs
associated with constructing the professional infrastructure to
manage the Company as it retooled for the future. Total
occupancy expense increased by 24.4% in 2000 to $938,000 and had
increased by 27.2% in 1999. Total equipment expense increased
by 6.8% in 2000 to $853,000 from $799,000 in 1999. Total
equipment expense had increased by 24.1% in 1999.
The expense related to other real estate owned totaled
$202,000 in 2000, $210,000 in 1999, and $105,000 in 1998. The
expense for 2000 included $60,000 of costs associated with
writing down a single property and 1999 included $55,000 of
costs associated with carrying and writing down a single rental
property acquired during that year.
Marketing and advertising expenses were $575,000 in 2000,
$422,000 in 1999 and $338,000 in 1998. The increase in
marketing expense reflects the Company's efforts to increase
awareness of its various product offerings and the costs
associated with its new branch openings.
Expense incurred by the Company to receive professional
services totaled $729,000 in 2000 compared to $420,000 in 1999
and $231,000 in 1998. Total merger expenses were $544,000 in
1999, and the cost of reorganizing the Banks' management team
resulted in additional personnel costs amounting to $270,000 in
1999.
Interest Rate Sensitivity
Through the years, the banking industry has adapted to an
environment in which interest rates have fluctuated dramatically
and in which depositors have been provided with liquid, rate
sensitive investment options. The industry utilizes a process
known as asset/liability management as a means of managing this
adaptation.
Asset/liability management is intended to provide for
adequate liquidity and interest rate sensitivity by matching
interest rate sensitive assets and liabilities and coordinating
maturities and repricing characteristics on assets and
liabilities.
Interest rate risk management involves managing the extent
to which interest-sensitive assets and interest-sensitive
liabilities are matched. Interest rate sensitivity is the
relationship between market interest rates and earnings
volatility due to the repricing characteristics of assets and
liabilities. The Company's net interest income is affected by
changes in the level of market interest rates. In order to
maintain consistent earnings performance, the Company seeks to
manage, to the extent possible, the repricing characteristics of
its assets and liabilities.
One major objective of the Company when managing the rate
sensitivity of its assets and liabilities is to stabilize net
interest income. The management of and authority to assume
interest rate risk is the responsibility of the Company's
Asset/Liability Committee ("ALCO"), which is comprised of senior
management and Board members. The ALCO meets quarterly to
monitor the ratio of interest sensitive assets to interest
sensitive liabilities. The process to review interest rate risk
management is a regular part of management of the Company. In
addition, there is an annual process to review the interest rate
risk policy with the Board of Directors which includes limits on
the impact to earnings from shifts in interest rates.
To manage the interest rate sensitivity position, an
asset/liability model called "gap analysis" is used to monitor
the difference in the volume of the Company's interest sensitive
assets and liabilities that mature or reprice within given
periods. A positive gap (asset sensitive) indicates that more
assets reprice during a given period compared to liabilities,
while a negative gap (liability sensitive) has the opposite
effect.
At December 31, 2000, the Company maintained a positive
one-year cumulative gap. The effect of this gap position
provided a mismatch of assets and liabilities which can expose
the Company to interest rate risk during a period of falling
interest rates.
Interest Sensitivity Gap at December 31, 2000
3 to
0-3 12 months 1-3 years Over 3 years
Interest bearing deposits $ 506 $ 0 $ 0 $ 0
Investment securities(1),(2) 29,394 11,500 7,590 26,627
Loans(2) 76,569 62,870 66,523 76,837
Total rate sensitive assets 106,469 74,370 74,113 103,464
Interest bearing deposits(3) 68,857 2,868 20,846 46,763
Time deposits 23,840 63,975 63,812 5,402
Federal funds purchased 600 0 0 0
Short-term borrowed funds 14,663 0 0 0
Long-term borrowed funds 0 5,000 13,000 30,276
Total rate sensitive liabilities 107,960 71,843 97,658 82,441
Interest sensitivity gap (1,491) 2,527 (23,545) 21,023
Cumulative gap (1,491) 1,036 (22,509) (1,486)
Cumulative gap to total assets (0.38%) 0.26% (5.73%) (0.38%)
(1) Gross of unrealized gains/losses on available for sale
securities.
(2) Investments and loans are included in the earlier of the
period in which interest rates were next scheduled to
adjust or the period in which they are due.
(3) Demand and savings accounts are generally subject to
immediate withdrawal. However, management considers a
certain amount of such accounts to be core accounts
having significantly longer effective maturities
based on the retention experiences of such deposits in
changing interest rate environments.
Certain shortcomings are inherent in the method of analysis
presented in the above table. Although certain assets and
liabilities may have similar maturities or period of repricing,
they may react in different degrees to changes in market
interest rates. 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 of assets
and liabilities may lag behind changes in market interest rates.
Certain assets, such as adjustable-rate mortgages, have features
which restrict changes in interest rates on a short-term basis
and over the life of the asset. In the event of a change in
interest rates, prepayment and early withdrawal levels may
deviate significantly from those assumed in calculating the
table. The ability of many borrowers to service their
adjustable-rate debt may decrease in the event of an interest
rate increase.
The Company has also measured its sensitivity to interest
rate movements through simulations of the effects of rate
changes upon its net interest income. Interest rate movements
of 100, 200 and 300 basis points upward and downward were
applied to the Company's interest earning assets and interest
bearing liabilities as of December 31, 2000. The results of
these simulations indicate that approximately 6 percent of the
Company's net interest income was at risk for the downward
scenario of 300 basis points and approximately 3 percent and
2 percent of net interest income was at risk for the downward
movements of 200 and 100 basis points. Upward movements of 100,
200 and 300 basis points were expected to have marginal positive
effects upon the Company's net interest income.
Capital
Federal bank regulatory agencies have established certain
capital-related criteria that must be met by banks and bank
holding companies. The measurements which incorporate the
varying degrees of risk contained within the Bank's Balance
Sheet and exposure to off-balance sheet commitments were
established to provide a framework for comparing different
institutions.
The Company is not aware of any pending recommendations by
regulatory authorities that would have a material impact on the
Company's capital, resources, or liquidity if they were
implemented, nor is the Company under any agreements with any
regulatory authorities.
The adequacy of the Company's capital is reviewed on an
ongoing basis with regard to size, composition and quality of
the Company's resources. An adequate capital base is important
for continued growth and expansion in addition to providing an
added protection against unexpected losses.
An important indicator in the banking industry is the
leverage ratio, defined as the ratio of common shareholders'
equity less intangible assets, to average quarterly assets less
intangible assets. The leverage ratio at December 31, 2000 was
7.49% compared to 6.61% at December 31, 1999. This increase is
primarily the result of the issuance in 2000 of $5 million in
mandatory redeemable capital debentures which are eligible for
inclusion in Tier I capital calculations. For 2000, 1999 and
1998, the ratios were above minimum regulatory guidelines.
As required by the federal banking regulatory authorities,
guidelines have been adopted to measure capital adequacy. Under
the guidelines, certain minimum ratios are required for core
capital and total capital as a percentage of risk-weighted
assets and other off-balance sheet instruments. For the
Company, Tier I capital consists of common shareholders' equity
less intangible assets plus the mandatory redeemable capital
debentures, and Tier II capital includes the allowable portion
of the allowance for loan losses, currently limited to 1.25% of
risk-weighted assets. By regulatory guidelines, the separate
component of equity for unrealized appreciation or depreciation
on available for sale securities is excluded from Tier I
Capital.
The following table sets forth the Company's capital
ratios.
December 31,
2000 1999
(Dollars in thousands)
Tier I
Common shareholders' equity
(excluding unrealized gains(losses)
on securities) $ 28,815 $ 27,736
Intangible assets (4,586) (4,718)
Mandatory Redeemable Capital Debentures 5,000 0
Tier II
Allowable portion of allowance for
Loan losses 3,422 2,954
Risk-based capital $ 32,650 $ 25,972
Risk adjusted assets (including off-
balance sheet exposures) $273,604 $237,573
Tier I risk-based capital ratio 10.68% 9.69%
Total risk-based capital ratio 11.93% 10.93%
Leverage ratio 7.49% 6.61%
Regulatory guidelines require that Tier I capital and total
risk-based capital to risk-adjusted assets must be at least 4.0%
and 8.0%, respectively.
Liquidity and Funds Management
Liquidity management ensures that adequate funds will be
available to meet anticipated and unanticipated deposit
withdrawals, debt servicing payments, investment commitments,
commercial and consumer loan demand and ongoing operating
expenses. Funding sources include principal repayments on loans
and investment securities, sales of loans, growth in core
deposits, short- and long-term borrowings and repurchase
agreements. Regular loan payments are a dependable source of
funds, while the sale of loans and investment securities,
deposit flows, and loan prepayments are significantly influenced
by general economic conditions and level of interest rates.
At December 31, 2000, the Company maintained $12.1 million
in cash and cash equivalents primarily consisting of cash and
due from banks. In addition, the Company had $74.4 million in
securities available for sale. The combined total of
$86.5 million represented 21.9% of total assets at December 31,
2000. The Company believes that its liquidity is adequate.
The Company considers its primary source of liquidity to be
its core deposit base, which includes noninterest bearing and
interest-bearing demand deposits, savings, and time deposits
under $100,000. This funding source has grown steadily over the
years and consists of deposits from customers throughout the
branch network. The Company will continue to promote the growth
of deposits through its branch offices. At December 31, 2000,
approximately 69% of the Company's assets were funded by core
deposits acquired within its market area. An additional 7% of
the assets were funded by the Company's equity. These two
components provide a substantial and stable source of funds.
Changes in Interest Income and Interest Expense
The following table sets forth certain information
regarding changes in interest income and interest expense of the
Company for the periods indicated. For each category of
interest-earning asset and interest-bearing liability,
information is provided on changes attributable to (1) changes
in volume (changes in volume multiplied by old rate), and (2)
changes in rate (changes in rate multiplied by average volume).
ANALYSIS OF CHANGES IN INTEREST INCOME(1)(2)(3)
2000/1999 Increase (Decrease) 1999/1998 Increase (Decrease)
Due to Change in Due to Change in
Volume Rate Net Volume Rate Net
Interest-bearing deposits
in other banks and
federal funds sold $ 99 $ (33) $ 66 $ (18) $ (28) $ (46)
Securities (taxable) 361 224 585 181 61 242
Securities (tax-exempt) (73) 63 (10) 64 31 95
Loans 4,001 (41) 3,960 5,063 (931) 4,132
Total Interest Income 4,388 213 4,601 5,290 (867) 4,423
Short-term borrowed funds 541 242 783 733 (145) 588
Long-term borrowed funds 885 542 1,427 720 (50) 670
Interest-bearing demand
deposits 268 291 559 33 524 557
Savings deposits 25 (130) (105) 191 91 282
Time deposits 913 447 1,360 1,006 (231) 755
Total Interest Expense 2,631 1,393 4,024 2,683 189 2,872
Increase (Decrease)
in Net Interest Income $1,757 $(1,180) $ 577 $ 2,607 $(1,056) $1,551
__________
(1) Loan fees have been included in the change in interest
income totals presented. Nonaccrual loans have been
included in average loan balances.
(2) Changes due to both volume and rates have been allocated in
proportion to the relationship of the dollar amount change
in each.
(3) Interest income on loans and investments is presented on a
taxable equivalent basis.
Average Balances, Rates and Net Yield
The following table sets forth the average daily balances
of major categories of interest earning assets and interest
bearing liabilities, the average rate paid thereon, and the net
interest margin for each of the periods indicated.
2000 1999 1998
----------------------- ----------------------- -----------------------
Interest Interest Interest
Average Income/ % Average Income/ % Average Income/ %
Balances Expense Rate Balances Expense Rate Balances Expense Rate
Interest bearing
deposits in other
banks and federal
funds sold $ 3,526 $ 148 4.20% $ 1,598 $ 82 5.13% $ 2,348 $ 128 5.45%
Securities(taxable) 59,713 4,193 7.02 54,281 3,608 6.65 51,044 3,366 6.59
Securities(tax-
exempt)(1) 15,813 1,335 8.44 16,722 1,345 8.04 15,551 1,250 8.04
Loans(2) 276,470 22,390 8.10 227,241 18,430 8.11 170,290 14,298 8.40
Total interest
earning
assets $355,522 $28,066 7.89 $299,842 $23,465 7.83 $239,233 $19,042 7.96
Interest bearing
liabilities
Interest bearing
demand deposits 54,043 2,113 3.91 46,092 1,554 3.37 33,483 997 2.98
Savings deposits 51,044 1,198 2.35 50,068 1,303 2.60 42,266 1,021 2.42
Time deposits 143,186 8,680 6.06 127,315 7,320 5.75 112,863 6,545 5.80
Short-term
borrowings 30,726 1,845 6.00 20,349 1,062 5.22 7,829 474 6.05
Long-term debt 35,108 2,127 6.06 21,806 1,124 5.15 8,559 454 5.30
Mandatory redeemable
capital debentures 3,866 424 10.97 0 0 0 0 0 0
Total interest
bearing
liabilities $317,973 $16,387 5.15% $265,630 $12,363 4.65% $205,000 $ 9,491 4.63%
Noninterest bearing
deposits $ 33,881 $ 30,689 $ 24,032
Net interest margin $11,679 3.29% $11,102 3.71% $ 9,551 3.99%
(1) Rates on loans and investment securities are reported on a
tax-equivalent basis.
(2) Nonaccrual loans have been included in average loan
balances.
Risk Elements
Non-performing loans, consisting of loans on non-accrual
status, loans past due 90 days or more and still accruing
interest, and renegotiated troubled debt decreased to
$2.6 million at December 31, 2000, down from $3.7 million at
December 31, 1999. Generally, loans that are more than 90 days
past due are placed on non-accrual status. As a percentage of
total loans, non-performing loans represented 0.90% at
December 31, 2000, down from 1.48% at December 31, 1999. The
allowance for loan losses at year-end improved to 139.2% of non-
performing loans at December 31, 2000 compared to 78.9% at
December 31, 1999.
The following table is a summary of nonperforming loans and
renegotiated loans for the years presented.
NONPERFORMING LOANS
(In Thousands)
As of December 31,
2000 1999 1998 1997 1996
Nonaccrual loans
Real estate $ 682 $ 797 $ 721 $ 959 $ 253
Consumer 0 0 23 45 4
Commercial 419 1,192 232 458 517
Total $1,101 $1,989 $ 976 $1,462 $ 774
Loans past due
90 days or more
and still accruing
interest
Real estate $ 265 $ 363 $ 454 $ 593 $ 263
Consumer 89 86 110 127 147
Commercial 116 226 825 234 74
Total loans past
due 90 days or
more $ 470 $ 675 $1,389 $ 954 $ 484
Troubled debt
restructurings
Real estate $ 0 $ 0 $ 0 $ 0 $ 0
Consumer 0 0 0 0 0
Commercial 994 1,084 387 0 0
Total troubled
debt
restructurings $ 994 $1,084 $ 0 $ 0 $ 0
Total non-performing
loans $2,565 $3,748 $2,752 $2,416 $1,258
The Bank generally places a loan on non-accrual after the
loan is more than 90 days past due.
At December 31, 2000, there were $1.58 million of
commercial loans for which payments are current, but as to which
the borrowers were experiencing significant financial
difficulties, that were not classified as non-accrual.
The following summary shows the impact on interest income
of nonaccrual and restructured loans for the year ended
December 31, 2000 (in thousands):
Amount of interest income on loans which would have
been recorded under original terms $102
Interest income reported during the period 0
Provision and Allowance for Loan Losses
The provision for loan losses for 2000 was $1.1 million
compared to $1.3 million in 1999 and $620,000 in 1998. The
Company performs a review of the credit quality of its loan
portfolio on a quarterly basis to determine the adequacy of the
allowance for possible loan losses. The Company experienced
significant growth in the loan portfolio of 12.5% in 2000 and
29.7% in 1999. The allowance for loan losses at December 31,
2000 was $3.6 million or 1.25% of outstanding loans compared to
$3.0 million or 1.17% of outstanding loans at December 31, 1999.
The allowance for loan losses is an amount that management
believes to be adequate to absorb potential losses in the loan
portfolio. Additions to the allowance are charged through the
provision for loan losses. Management considers various factors
in assessing the adequacy of the loan loss allowance, including
charge-off history, risk assessments of certain individual
credits, adequacy of collateral, risk characteristics in the
loan portfolio, and local and national economic conditions.
The following table details the allocation of the allowance
for loan losses to the various loan categories. The allocation
is made for analytical purposes and is not necessarily
indicative of the categories in which future credit losses may
occur. The total allowance is available to absorb losses from
any segment of loans.
Allocation of Allowance for Loan Losses
(In Thousands)
December 31,
2000 1999 1998 1997 1996
Percent Percent Percent Percent Percent
Of of of of of
Total Total Total Total Total
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
Commercial $2,225 51.5% $2,000 42.3% $1,028 27.1% $ 309 34.3% $ 254 29.7%
Residential Real Estate 648 31.2 196 47.4 741 59.9 591 50.2 137 56.0
Consumer 621 17.3 414 10.3 350 13.0 145 15.5 229 14.3
------ ------ ------ ------ ------
Total
Allocated 3,494 100.0 2,610 100.0 2,119 100.0 1,045 100.0 620 100.0
Unallocated 77 - 344 -- 10 -- 792 -- 799 --
------ ------ ------ ------ ------
TOTAL $3,571 100.0% $2,954 100.0% $2,129 100.0% $1,837 100.0% $1,419 100.0%
====== ====== ====== ====== ======
The following tables set forth an analysis of the Company's
allowance for loan losses for the years presented and the
allocation of the allowance.
Analysis of the Allowance for Loan Losses
(In Thousands Except Ratios)
Year Ended December 31,
2000 1999 1998 1997 1996
Balance, Beginning of
Year $ 2,954 $ 2,129 $ 1,837 $ 1,419 $ 1,521
Charge-Offs:
Commercial 194 164 59 24 331
Residential Real Estate 245 136 181 36 44
Consumer 116 268 184 132 113
-------- -------- -------- -------- --------
Total 555 568 424 192 488
Recoveries:
Commercial 6 80 31 8 20
Residential Real Estate 43 6 13 20 17
Consumer 41 37 52 39 51
-------- -------- -------- -------- --------
Total 90 123 96 67 88
Net Charge-Offs 465 445 328 125 400
-------- -------- -------- -------- --------
Provision Charged to
Operations 1,082 1,270 620 543 298
-------- -------- -------- -------- --------
Balance, End of Year $ 3,571 $ 2,954 $ 2,129 $ 1,837 $ 1,419
======== ======== ======== ======== ========
Average Loans $276,470 $227,241 $170,290 $151,295 $138,551
Ratio of Net Charge-
Offs to Average Loans .17% .20% .19% .08% .22%
Ratio of Allowance
to Loans, End of Year 1.25% 1.17% 1.10% 1.15% 1.01%
The allowance for loan losses is maintained at a level
considered adequate to provide for losses that can be reasonably
anticipated. The allowance is increased by provisions charged
to operating expenses and reduced by net charge-offs. The Bank
performs continuous credit reviews of the loan portfolio and
considers current economic conditions, review of specific
problem loans and other factors in determining the adequacy of
the allowance balance.
Loan Portfolio
The following table sets forth the Company's loan
distribution at December 31:
(In thousands)
2000 1999 1998 1997 1996
Commercial, Financial,
and Agricultural $141,425 $110,826 $ 71,941 $ 35,349 $ 37,782
Real Estate
Construction 4,152 374 1,741 2,092 1,618
Residential Real Estate 114,920 120,094 103,106 97,667 82,044
Consumer 24,366 21,900 18,499 21,999 17,700
-------- -------- -------- -------- --------
$284,863 $253,194 $195,287 $157,107 $139,144
======== ======== ======== ======== ========
Loan Maturities
The following table shows the maturity of loans outstanding
at December 31, 2000:
Maturities of Outstanding Loans
(In Thousands)
Within After One After
One But Within Five
Year Five Years Years Total
Commercial, Financial
and Agricultural $28,548 $38,989 $73,888 $141,425
Maturity of Certificates of Deposit of $100,000 or More
The following table sets forth the amounts of the Bank's
certificates of deposit of $100,000 or more by maturity date.
December 31, 2000
(In Thousands)
Three Months or Less $13,702
Over Three Through Six Months 4,895
Over Six Through Twelve Months 2,745
Over Twelve Months 5,223
TOTAL $26,565
Securities Portfolio Maturities and Yields
The following table sets forth information about the
maturities and weighted average yield on the Company's
securities portfolio. Floating rate, immediately repriceable
items are included in the first column, and yields are not
reported on a tax equivalent basis.
Amortized Cost at
December 31, 2000
(In Thousands)
Due in After 1 After 5
1 Year Year to Years to After
or Less 5 Years 10 Years 10 Years Total
Obligations of the $ 3,548 $ 3,873 $12,150 $ 8,654 $28,225
U.S. Treasury and 5.74% 6.19% 6.61% 6.64% 6.50%
other U.S. Govern-
ment Agencies and
Corporations
State and Municipal $ 1,058 $ 3,796 $ 6,330 $ 886 $12,070
Obligations 5.83% 5.13% 5.39% 6.03% 5.38%
Other Securities $4,247 $ 3,255 $ 5,330 0 $12,832
6.65% 8.94% 8.47% 0 7.99%
Mortgage Backed $21,952
6.64%
Securities Portfolio
The following table sets forth the carrying value of the
Company's investment securities at its last three fiscal year
ends:
As of December 31,
2000 1999 1998
(In Thousands)
U.S. Treasuries $ 3,115 $ 6,532 $10,038
U.S. Government Agencies 46,747 39,337 41,882
State and Political Subdivisions 12,086 18,681 16,759
Other Securities and Equity
Securities 12,420 7,615 3,946
Total $74,368 $72,165 $72,625
For purposes of the above table, all securities are classified
as available for sale and are reflected at fair value, except
$428,000 of state and political subdivision obligations that
were classified as held to maturity at December 31, 1998.
Average Deposits and Average Rates by Major Classification
The following table sets forth the average balances of the
Bank's deposits and the average rates paid for the years
presented.
2000 1999 1998
Amount Rate Amount Rate Amount Rate
(Dollars in thousands)
Non-interest bearing
demand $ 33,881 $ 30,689 $ 24,032
Interest bearing
demand 54,043 3.91% 46,092 3.37% 33,483 2.98%
Savings deposits 51,044 2.35% 50,068 2.60% 42,266 2.42%
Time Deposits 143,186 6.06% 127,315 5.75% 112,863 5.80%
-------- -------- --------
Total $282,154 $254,164 $212,644
======== ======== ========
Other Borrowed Funds
Short-term borrowings at December 31, 2000 consisted of
overnight borrowings from the FHLB under a repurchase agreement,
and repurchase agreements with customers. The borrowings are
collateralized by certain qualifying assets of the Bank.
Federal funds purchased by the Bank were $600,000 and
$23,567,000 at December 31, 2000, and 1999 respectively. The
federal funds purchased typically mature in one day.
Information concerning the short-term borrowings is
summarized as follows at December 31:
2000 1999 1998
Federal funds purchased:
Average balance during the
Year $17,699 $10,789 $1,420
Rate 6.06% 5.39% 6.03%
Securities sold under agreements
to repurchase:
Average balance during the
year $9,673 $1,946 $313
Rate 5.73% 5.16% 4.96%
Other short-term borrowings:
Average balance during the
year $3,354 $0 $13,651
Rate 6.50% - 5.71%
Maximum month end balance of
short-term borrowings during
the year $15,659 $4,169 $5,709
Dividends and Shareholders' Equity
The Company declared cash dividends in 2000 of $0.60 per share,
and $.54 per share in 1999. The Company's dividend payout ratio
decreased from 69.5% in 1999 to 51.7% in 2000. The Company's
ratio of average shareholders' equity to average assets for the
year ended December 31, 2000 was 7.20%.
Years ended December 31,
2000 1999 1998
Return on assets .56% 0.43% 0.55%
Return on equity 7.97% 5.11% 5.85%
Dividend payout ratio 51.69% 69.45% 55.53%
Average equity to average assets 7.20% 8.41% 9.40%
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk.
The discussion concerning the effects of interest rate
changes on the Company's estimated net interest income for the
year ending December 31, 2000 set forth under "Management's
Discussion and Analysis of financial Condition and Results of
Operations - Interest Rate Sensitivity" in Item 7 hereof, is
incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
First Leesport Bancorp, Inc.
Leesport, Pennsylvania
We have audited the accompanying consolidated balance
sheets of First Leesport Bancorp, Inc., and its wholly-owned
subsidiaries as of December 31, 2000 and 1999, and the related
consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended
December 31, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
The consolidated financial statements as of December 31,
1998 and for the year then ended have been restated to reflect
the pooling of interests with Merchants of Shenandoah Bancorp
(Merchants) as described in Note 2 to the consolidated financial
statements. We did not audit the 1998 financial statements of
Merchants, which statements reflect net interest income
constituting 23% of consolidated net interest income for the
year ended December 31, 1998. Those statements were audited by
other auditors whose report has been furnished to us and our
opinion, insofar as it relates to the amounts included for
Merchants as of December 31, 1998 and for the year then ended,
is based solely on the report of the other auditors.
We conducted our audits in accordance with auditing
standards generally accepted in the United States of America.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other
auditors, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of First Leesport Bancorp, Inc. and its wholly-owned
subsidiaries as of December 31, 2000 and 1999, and the
consolidated results of their operations and their cash flows
for each of three years in the period ended December 31, 2000 in
conformity with accounting principles generally accepted in the
United States of America.
Reading, Pennsylvania /s/ Beard Miller Company LLP
February 7, 2001
FIRST LEESPORT BANCORP, INC. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Consolidated Balance Sheets
December 31,
2000 1999
(In Thousands)
ASSETS
Cash and due from banks $ 11,643 $ 15,376
Interest-bearing deposits with other
banks 506 489
Total cash and cash equivalents 12,149 15,865
Securities available for sale 74,368 72,165
Loans 284,863 253,194
Allowance for loan losses 3,571 2,954
Loans, net of allowance for loan losses 281,292 250,240
Premises and equipment, net 8,400 7,599
Goodwill, net of accumulated
amortization 4,574 4,700
Other assets 13,043 8,049
Total assets $393,826 $358,618
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits:
Non-interest bearing $ 38,233 $ 30,941
Interest bearing 258,130 238,403
Total deposits 296,363 269,344
Securities sold under agreements to
repurchase 14,663 4,608
Federal funds purchased 600 23,567
Long-term debt 43,500 31,000
Mandatory redeemable capital debentures 5,000 -
Other liabilities 5,354 4,497
Total liabilities 365,480 333,016
Shareholders' equity
Common stock, par value $5 per share;
authorized 10,000,000 shares; Issued
1,858,919 shares 9,295 9,295
Surplus 4,996 4,988
Retained earnings 14,586 13,571
Accumulated other comprehensive loss (469) (2,134)
Treasury stock, at cost; 4,960 shares in
2000; 9,060 shares in 1999 (62) (118)
Total shareholders' equity 28,346 25,602
Total liabilities and shareholders'
equity $393,826 $358,618
See Notes to Consolidated Financial Statements.
Consolidated Statements of Income
Years Ended December 31,
2000 1999 1998
In Thousands, Except
Per Share Amounts
Interest income:
Interest and fees on loans $ 22,249 $ 18,346 $ 14,229
Interest on securities:
Taxable 3,941 3,439 3,366
Tax-exempt 849 874 825
Dividend income 284 169 71
Other interest income 148 82 57
Total interest income 27,471 22,910 18,548
Interest expense:
Interest on deposits 11,990 10,177 8,563
Interest on short-term
borrowings 1,757 1,062 474
Interest on long-term debt 2,215 1,124 454
Interest on mandatory redeem-
able capital debentures 424 - -
Total interest expense 16,386 12,363 9,491
Net interest income 11,085 10,547 9,057
Provision for loan losses 1,082 1,270 620
Net interest income after
provision for loan losses 10,003 9,277 8,437
Other income:
Customer service fees 784 503 397
Mortgage banking activities,
net 220 198 342
Commissions and fees from
insurance sales 3,852 3,296 152
Broker and investment advisory
commissions and fees 956 187 -
Other income 845 429 200
Net realized gains on sales of
securities 29 52 58
Total other income 6,686 4,665 1,149
Other expense:
Salaries and employee benefits 7,505 5,856 3,768
Occupancy expense 938 754 593
Equipment expense 853 799 644
Taxes, other than federal
income 224 263 242
Marketing and advertising
expense 575 422 338
Professional services 729 420 231
Merger-related costs - 544 -
Restructuring costs - 270 -
Other expense 3,128 2,759 1,942
Total other expense 13,952 12,087 7,758
Income before federal income
taxes 2,737 1,855 1,828
Federal income taxes 611 454 317
Net income $ 2,126 $ 1,401 $ 1,511
Net income excluding amorti-
zation of goodwill $ 2,395 $ 1,629 $ 1,528
Basic and diluted earnings
per share $ 1.15 $ .76 $ .86
Basic and diluted earnings per
share, excluding amortization
of goodwill $ 1.29 $ .89 $ .87
See Notes to Consolidated Financial Statements.
Consolidated Statements of Shareholders' Equity
Years Ended December 31,
(Dollars in thousands, except per share data)
Accum-
ulated
Other
Common Stock Compre-
Number of hensive
Shares Par Retained Income Treasury
Issued Value Surplus Earnings (Loss) Stock Total
1997 1,684,561 $8,423 $2,343 $13,957 $ 537 $(121) $25,139
Comprehensive income:
Net income - - - 1,511 - - 1,511
Change in net unrealized gains
(losses) on securities available
for sale, net of reclassification
adjustment - - - - 229 - 229
Total comprehensive income 1,740
Issuance of common stock in
connection with acquisition 73,284 366 1,414 - - - 1,780
Issuance of treasury stock - - 3 - - 3 6
Cash dividends declared ($.49 per
share) - - - (839) - - (839)
1998 1,757,845 8,789 3,760 14,629 766 (118) 27,826
Comprehensive income:
Net income - - - 1,401 - - 1,401
Change in net unrealized gains
(losses) on securities available
for sale, net of reclassification
adjustment - - - - (2,900) - (2,900)
Total comprehensive loss (1,499)
Issuance of common stock in
connection with acquisitions 12,742 64 191 - - - 255
Issuance of common stock in connec-
tion with a 5% stock dividend
and cash paid in lieu of
fractional shares 88,332 442 1,037 (1,486) - - (7)
Cash dividends declared ($.54 per
share) - - - (973) - - (973)
1999 1,858,919 9,295 4,988 13,571 (2,134) (118) 25,602
Comprehensive income:
Net income - - - 2,126 - - 2,126
Change in net unrealized gains
(losses) on securities available
for sale, net of reclassifi-
cation adjustment - - - - 1,665 - 1,665
Total comprehensive income - - - - - - 3,791
Reissuance of treasury stock in
connection with director and
employee stock purchase plans - - 8 - - 56 64
Cash dividends declared ($.60
per share - - - (1,111) - - (1,111)
2000 1,858,919 $9,295 $4,996 $14,586 $ (469) $ (62) $28,346
See Notes to Consolidated financial Statements.
Consolidated Statements of Cash Flows
Years Ended December 31,
2000 1999 1998
In Thousands
Cash Flows From Operating
Activities
Net income $ 2,126 $ 1,401 $ 1,511
Adjustments to reconcile net
income to net cash provided
by operating activities:
Provision for loan losses 1,082 1,270 620
Provision for depreciation 801 888 584
Amortization of goodwill 269 228 17
Deferred income taxes (235) (463) (36)
Net (accretion) amortization
of securities premiums and
discounts (47) 27 86
Amortization of mortgage
servicing rights 22 37 42
Net cash provided by (used
for) loans held for sale (1,536) 111 260
Net loss (gain) on sales of
securities available for
sale and loans 174 (348) (319)
Realized gain on sale of
premises and equipment (246) - -
Change in assets and liabil-
ities, net of effects from
acquisitions:
Increase in other assets (1,101) (181) (972)
Increase in other liabil-
ities 809 34 806
Net cash provided by oper-
ating activities 2,118 3,004 2,599
Cash Flows From Investing
Activities
Proceeds from sales of
securities available
for sale 11,030 15,449 1,946
Proceeds from principal
repayments and maturities
of securities available
for sale 6,225 12,295 19,648
Proceeds from maturities and
calls of securities held
to maturity - - 590
Purchase of securities avail-
able for sale (16,859) (31,650) (33,513)
Net cash used in acquisi-
tions (29) (523) (1,715)
Net (increase) decrease in
federal funds sold - 650 (318)
Loans made to customers, net
of principal collected (31,999) (58,150) (36,208)
Purchase of life insurance
policies (3,317) - -
Purchase of premises and
equipment (1,641) (1,861) (2,192)
Proceeds from sale of
premises and equipment 413 - -
Net cash used in investing
activities (36,177) (63,790) (51,762)
Cash Flows From Financing
Activities
Net increase in deposits 27,019 40,360 32,676
Net increase (decrease) in
federal funds purchased (22,967) 18,058 1,695
Net proceeds (repayment) of
short-term borrowings 10,055 (2,550) (842)
Repayment of long-term debt (11,000) - -
Proceeds from long-term debt 23,500 15,000 16,000
Issuance of mandatory redeem-
able capital debentures 5,000 - -
Deferred financing fees on
redeemable capital
debentures (229) - -
Reissuance of treasury stock 64 - 6
Cash dividends paid (1,099) (982) (829)
Net cash provided by financ-
ing activities 30,343 69,886 48,706
Increase (decrease) in cash
and cash equivalents (3,716) 9,100 (457)
Cash and cash equivalents:
January 1 15,865 6,765 7,222
December 31 $ 12,149 $ 15,865 $ 6,765
Cash payments for:
Interest $ 15,973 $ 12,222 $ 9,407
Federal income taxes $ 875 $ 756 $ 526
See Notes to Consolidated Financial Statements.
1. Significant Accounting Policies
Principles of consolidation:
The consolidated financial statements include the accounts
of First Leesport Bancorp, Inc. (the "Company"), a bank holding
company and its wholly-owned subsidiaries, First Leesport
Capital Trust I and Leesport Bank (the "Bank"),including the
Bank's wholly-owned subsidiaries, Essick & Barr, Inc. ("Essick &
Barr"), First Leesport Investment Group ("FLIG"), First Leesport
Wealth Management ("FLWM"), and Horizon Realty Solutions
("Horizon Realty"). All significant intercompany accounts and
transactions have been eliminated.
Nature of operations:
The Bank provides full banking services. Essick & Barr
provides risk management services and personal and commercial
insurance coverage through several insurance companies. FLIG
and FLWM provide investment advisory and brokerage services.
Horizon Realty is a real estate title insurance joint venture
that provides title insurance and related services to Leesport
Bank customers through a limited partnership. First Leesport
Capital Trust I is the trust formed for the purpose of issuing
the mandatory redeemable debentures on behalf of the Company.
The Company and the Bank are subject to the regulations of
various federal and state agencies and undergo periodic
examinations by various regulatory authorities. The area served
by the Bank and related subsidiaries is principally Berks,
Luzerne and Schuylkill counties in Pennsylvania.
Estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Reclassifications:
For comparative purposes, prior years' consolidated
financial statements have been reclassified to conform with
report classifications of the current year.
Presentation of cash flows:
For purposes of reporting cash flows, cash and cash
equivalents include cash and due from banks and interest-bearing
demand deposits in other banks.
Securities available for sale:
Securities classified as available for sale are those
securities that the Company intends to hold for an indefinite
period of time but not necessarily to maturity. Any decision to
sell a security classified as available for sale would be based
on various factors, including significant movement in interest
rates, changes in maturity mix of the Bank's assets and
liabilities, liquidity needs, regulatory capital considerations
and other similar factors. Securities available for sale are
carried at fair value. Unrealized gains and losses are reported
in other comprehensive income, net of the related deferred tax
effect. Realized gains or losses, determined on the basis of
the cost of the specific securities sold, are included in
earnings. Premiums and discounts are recognized in interest
income using a method which approximates the interest method
over the period to maturity.
Management determines the appropriate classification of
debt securities at the time of purchase and re-evaluates such
designation as of each balance sheet date.
Loans:
Loans that management has the intent and ability to hold
for the foreseeable future, or until maturity or pay-off,
generally are stated at their outstanding unpaid principal
balances, net of any deferred fees or costs on originated loans
or unamortized premiums or discounts on purchased loans.
Interest income is accrued on the unpaid principal balance.
Loan origination fees, net of certain direct origination costs,
are deferred and recognized as an adjustment of the yield
(interest income) of the related loans. These amounts are
generally being amortized over the contractual life of the loan.
Notes To Consolidated Financial Statements.
Allowance for loan losses:
The allowance for loan losses is established through
provisions for loan losses charged against income. Loans deemed
to be uncollectible are charged against the allowance for loan
losses, and subsequent recoveries, if any, are credited to the
allowance.
The allowance for loan losses is maintained at a level
considered adequate to provide for losses that can be reasonably
anticipated. Management's periodic evaluation of the adequacy
of the allowance is based on the Bank's past loan loss
experience, known and inherent risks in the portfolio, adverse
situations that may affect the borrower's ability to repay, the
estimated value of any underlying collateral, composition of the
loan portfolio, current economic conditions, and other relevant
factors. This evaluation is inherently subjective as it
requires material estimates that may be susceptible to
significant change, including the amounts and timing of future
cash flows expected to be received on impaired loans.
A loan is considered impaired when, based on current
information and events, it is probable that the Bank will be
unable to collect the scheduled payments of principal or
interest when due according to the contractual terms of the loan
agreement. Factors considered by management in determining
impairment include payment status, collateral value, and the
probability of collecting scheduled principal and interest
payments when due. Loans that experience insignificant payment
delays and payment shortfalls generally are not classified as
impaired. Management determines the significance of payment
delays and payment shortfalls on a case-by-case basis, taking
into consideration all of the circumstances surrounding the loan
and the borrower, including the length of the delay, the reasons
for the delay, the borrower's prior payment record and the
amount of the shortfall in relation to the principal and
interest owed. Impairment is measured on a loan by loan basis
for commercial and construction loans by either the present
value of expected future cash flows discounted at the loan's
effective interest rate, the loan's obtainable market price or
the fair value of the collateral if the loan is collateral
dependent.
Large groups of smaller balance homogeneous loans are
collectively evaluated for impairment. Accordingly, the Bank
does not separately identify individual consumer and residential
loans for impairment disclosures.
Loans held for sale:
Mortgage loans originated and intended for sale in the
secondary market at the time of origination are carried at the
lower of cost or estimated fair value. All sales are made
without recourse. At December 31, 2000 and 1999 ,there were
$2.07 million and $531,000, respectively, of residential
mortgage loans held for sale, included in loans.
Foreclosed assets:
Foreclosed assets, which are recorded in other assets,
include properties acquired through foreclosure or in full or
partial satisfaction of the related loan.
Foreclosed assets are initially recorded at fair value, net
of estimated selling costs, at the date of foreclosure. After
foreclosure, valuations are periodically performed by management
and the real estate is carried at the lower of carrying amount
or fair value, less estimated costs to sell. Revenue and
expense from operations and changes in the valuation allowance
are included in other expense.
Premises and equipment:
Premises and equipment are stated at cost less accumulated
depreciation. Depreciation is computed on straight-line and
accelerated depreciation methods over the estimated useful lives
of the related assets.
Loan servicing:
Capitalized servicing rights are reported in other assets
and are amortized into noninterest income in proportion to, and
over the period of, the estimated future net servicing income of
the underlying financial assets. Servicing rights are evaluated
for impairment based upon the fair value of the rights as
compared to amortized cost. Fair value is determined using
prices for similar assets with similar characteristics, when
available, or based upon discounted cash flows using market
based assumptions. Impairment is recognized through a valuation
allowance to the extent that fair value is less than the
capitalized amount.
Goodwill:
Goodwill is the excess of the purchase price over the fair
value of net assets of the entity acquired through a business
combination that is recorded using the purchase method of
accounting. Goodwill is being amortized using the straight-line
method over periods ranging from 15 to 20 years and is
periodically reviewed for impairment.
Other assets:
Financing costs related to the Company's issuance of
mandatory redeemable capital debentures are being amortized over
the life of the debentures and are included in other assets.
Federal income taxes:
Deferred taxes are provided on the liability method whereby
deferred tax assets are recognized for deductible temporary
differences and deferred tax liabilities are recognized for
taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and
liabilities in the financial statements and their tax basis.
Deferred tax assets are reduced by a valuation allowance when,
in the opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will not be
realized. Deferred tax assets and liabilities are adjusted
through the provision for income taxes for the effects of
changes in tax laws and rates on the date of enactment.
Off-balance sheet financial instruments:
In the ordinary course of business, the Bank has entered
into off-balance sheet financial instruments consisting of
commitments to extend credit, letters of credit and commitments
to sell loans. Such financial instruments are recorded in the
consolidated balance sheets when they become receivable or
payable.
Advertising:
Advertising costs are expensed as incurred.
Earnings per share:
Basic earnings per share represents income available to
common shareholders divided by the weighted-average number of
common shares outstanding during the period. Diluted earnings
per share reflects additional common shares that would have been
outstanding if dilutive potential common shares (stock options)
had been issued, as well as any adjustments to income that would
result from the assumed issuance. The effect of stock options
was not dilutive for any periods presented. The weighted-
average number of shares of common stock outstanding, as
adjusted for a 5% stock dividend in 1999, was 1,851,764 in 2000,
1,840,049 in 1999 and 1,764,270 in 1998.
Comprehensive income:
Accounting principles generally require that recognized
revenue, expense, gains and losses be included in net income.
Although certain changes in assets and liabilities, such as
unrealized gains and losses on available for sale securities are
reported as a separate component of the equity section of the
balance sheet, such items, along with net income, are components
of comprehensive income.
The components of other comprehensive income and related
tax effects were as follows:
Years Ended December 31,
2000 1999 1998
In Thousands
Unrealized holding gains (losses)
on available for sale securities $2,552 $(4,339) $ 401
Less reclassification adjustment
for gains realized in income (29) (52) (58)
Net unrealized gains (losses) 2,523 (4,391) 343
Tax effect (858) 1,491 (114)
Net of tax amount $1,665 $(2,900) $ 229
Segment reporting:
The Bank acts an as independent community financial
services provider, and offers traditional banking and related
financial services to individual, business and government
customers. Through its branch and automated teller machine
networks, the Bank offers a full array of commercial and retail
financial services, including the taking of time, savings and
demand deposits; the making of commercial, consumer and mortgage
loans; and the providing of other financial services.
Management does not separately allocate expenses, including the
cost of funding loan demand, between the commercial, retail and
mortgage banking operations of the Bank. As such, discrete
financial information is not available and segment reporting
would not be meaningful. See Note 19 for a discussion of
insurance operations and investment advisory and brokerage
operations.
New accounting standards:
In June 1998, the Financial Accounting Standards Board
issued Statement No. 133 (as amended by Statement Nos. 137 and
138), "Accounting for Derivative Instruments and Hedging
Activities". This statement and its amendments establish
accounting and reporting standards for derivative instruments
and hedging activities, including certain derivative instruments
embedded in other contracts, and require that an entity
recognize all derivatives as assets or liabilities in the
balance sheet and measure them at fair value. The Statement
requires that changes in the fair value of derivatives be
recorded each period in current earnings or other comprehensive
income, depending on whether a derivative is designated as part
of a hedge transaction and, if it is, the type of hedge
transaction. The Company adopted the Statement on January 1,
2001. The adoption of the Statement did not have a significant
impact on the financial condition or results of operations of
the Company.
In September 2000, the Financial Accounting Standards Board
issued Statement No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of
Liabilities". This Statement replaces SFAS NO. 125 of the same
name. It revises the standards of securitizations and other
transfers of financial assets and collateral and requires
certain disclosures, but carries over most of the provisions of
SFAS No. 125 without reconsideration. SFAS No. 140 is effective
for transfers and servicing of financial assets and
extinguishments of liabilities occurring after March 31, 2001.
The Statement is effective for recognition and reclassification
of collateral and for disclosures relating to securitization
transactions and collateral for fiscal years ending after
December 15, 2000. This Statement is to be applied
prospectively with certain exceptions. Other than these
exceptions, earlier or retroactive application of its accounting
provision is not permitted. The adoption of the Statement is
not expected to have a significant impact on the Company.
2. Mergers And Acquisitions
On September 22, 2000 the charters of the wholly-owned
banking subsidiaries of the Company, the First National Bank of
Leesport and Merchants Bank of Pennsylvania, were merged into a
single charter under the name Leesport Bank.
The consolidated financial statements give retroactive
effect to the July 1999 pooling of interests merger of the
Company and Merchants of Shenandoah Ban-Corp (Merchants) as more
fully described below. As a result, the consolidated statements
of income, shareholders' equity and cash flows for the years
ended December 31, 1999 and 1998, are presented as if the
combining companies had been consolidated for that period. The
consolidated statements of shareholders' equity reflect the
accounts of the Company as if the common stock issued in the
merger had been issued and outstanding during all periods
presented.
On July 1, 1999, Merchants' shareholders received 1.5854
shares of the Company's common stock for each outstanding share,
for a total of 484,561 shares. Cash was paid for fractional
share interests. The merger was accounted for as a pooling of
interests by the Company. Merger costs of approximately
$544,000 consisting primarily of professional fees and related
transaction costs were expensed in 1999 in connection with the
merger.
The results of operations of the separate entities for
periods prior to the combination were as follows:
Company Merchants Combined
In Thousands
For the period from
January 1, 1999 to
June 30, 1999 (unaudited):
Net interest income $3,898 $1,076 $4,974
Net income 885 254 1,139
For the year ended December 31,
1998:
Net interest income $6,983 $2,074 $9,057
Net income 1,024 487 1,511
On January 29, 1999 the Company acquired EBFS, Inc., a
licensed insurance agency and broker, through a payment of cash
of $250,000. Additional consideration of $29,000 was paid in
2000. The acquisition has been accounted for as a purchase and
results of operations of EBFS since the date of acquisition are
included in the consolidated financial statements.
On September 30, 1999, the Company acquired an investment
advisory firm and a brokerage firm that have been renamed First
Leesport Wealth Management and First Leesport Investment Group.
The Company issued 12,742 shares of its common stock and paid
cash of $250,000 in exchange for stock of one entity and assets
of a second entity. The acquisitions have been accounted for as
purchases and the results of operations of these two entities
since the date of acquisition are included in the consolidated
financial statements.
On December 7, 1998, the Company completed its acquisition
of Essick & Barr, Inc., an independent insurance agency. The
Company issued 73,284 shares of its common stock and paid cash
of $1,715,000 in exchange for all of the shares of common stock
of Essick & Barr, Inc. The acquisition has been accounted for as
a purchase and results of operations of Essick & Barr, Inc.,
since the date of acquisition are included in the consolidated
financial statements.
3. Restrictions On Cash And Due From Banks
The Banks are required to maintain average reserve balances
with the Federal Reserve Bank. For the years 2000 and 1999, the
average of these daily reserve balances approximated $451,000
and $1,011,000, respectively.
4. Securities - Available For Sale
The amortized cost of securities and their approximate fair
values at December 31 were as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
In Thousands
December 31, 2000:
U.S. Treasury securities $ 3,098 $ 17 $ - $ 3,115
U.S. Government agency
securities 25,128 - (227) 24,901
Mortgage-backed securities 21,952 95 (201) 21,846
Obligations of states and
political subdivisions 12,070 155 (139) 12,086
Corporate debt securities 8,908 - (415) 8,493
Equity securities 3,923 67 (63) 3,927
$75,079 $334 $(1,045) $74,368
December 31, 1999:
U.S. Treasury securities $ 6,526 $ 12 $ (6) $ 6,532
U.S. Government agency
securities 22,825 - (1,323) 21,502
Mortgage-backed securities 18,739 94 (881) 17,952
Obligations of states and
political subdivisions 19,554 79 (952) 18,681
Corporate debt securities 3,803 - (209) 3,594
Equity securities 3,951 42 (89) 3,904
$75,398 $227 $(3,460) $72,165
Equity securities are comprised of stock in the Federal
Home Loan Bank, Atlantic Central Bankers' Bank and other bank
stocks in 2000, as well as the Federal Reserve Bank in 1999.
The amortized cost and fair value of securities as of
December 31, 2000, by contractual maturity, are shown below.
Expected maturities may differ from contractual maturities
because certain securities may be called or prepaid without
penalty.
Amortized Fair
Cost Value
In Thousands
Due in one year or less $ 4,905 $ 4,893
Due after one year through five years 9,150 9,178
Due after five years through ten years 25,608 25,112
Due after ten years 9,541 9,412
Mortgage-backed securities 21,952 21,846
Equity securities 3,923 3,927
$75,079 $74,368
Securities with a carrying amount of $39.71 million and
$27.33 million at December 31, 2000 and 1999, respectively, were
pledged to secure public deposits and for other purposes as
required or permitted by law.
Gains of $29,000, $52,000 and $58,000 were realized on
sales of securities available for sale in 2000, 1999 and 1998,
respectively.
5. Loans
The components of loans were as follows:
December 31,
2000 1999
In Thousands
Residential real estate $114,920 $120,094
Commercial 104,758 82,139
Commercial secured by real estate 34,997 25,001
Consumer, net of unearned income 16,648 16,892
Home equity 7,718 5,008
Other 5,822 4,060
Loans 284,863 253,194
Allowance for loan losses (3,571) (2,954)
Loans, net of allowance for loan losses $281,292 $250,240
Changes in the allowance for loan losses were as follows:
Years Ended December 31,
2000 1999 1998
In Thousands
Balance, beginning $2,954 $2,129 $1,837
Provision for loan losses 1,082 1,270 620
Loans charged off (555) (568) (424)
Recoveries 90 123 96
Balance, ending $3,571 $2,954 $2,129
The recorded investment in impaired loans, not requiring an
allowance for loan losses, was $471,000 at December 31, 2000 and
$669,000 at December 31, 1999. The recorded investment in
impaired loans requiring an allowance for loan losses was $1.01
million and $589,000 at December 31, 2000 and 1999,
respectively. At December 31, 2000 and 1999, the related
allowance for loan losses associated with those loans was
$517,000 and $221,000, respectively. For the years ended
December 31, 2000, 1999 and 1998, the average recorded
investment in these impaired loans was $1.50 million, $1.28
million and $556,000, respectively, and the interest income
recognized on impaired loans was $61,000 for 2000 and $0 for
1999 and 1998.
6. Loan Servicing
Loans serviced for others are not included in the
accompanying consolidated balance sheets. The unpaid principal
balance of these loans as of December 31, 2000 and 1999 was
$22.6 million and $16.7 million, respectively.
The balance of capitalized servicing rights, net of
valuation allowances, included in other assets at December 31,
2000 and 1999, was $228,000 and $167,000, respectively. The
fair value of these rights was $240,000 and $167,000,
respectively. The fair value of servicing rights was determined
using discount rates from 12.0 percent to 12.5 percent.
Mortgage servicing rights of $244,000 were sold in 1999.
The following summarizes mortgage servicing rights
capitalized and amortized:
Years Ended December 31,
2000 1999 1998
In Thousands
Mortgage servicing rights capitalized $83 $170 $161
Mortgage servicing rights amortized $22 $ 23 $ 42
7. Premises And Equipment
Components of premises and equipment were as follows:
December 31,
2000 1999
In Thousands
Land and land improvements $ 1,858 $ 1,595
Buildings 7,520 7,013
Furniture and equipment 5,393 4,947
Premises and equipment 14,771 13,555
Less accumulated depreciation 6,371 5,956
Premises and equipment, net $ 8,400 $ 7,599
Certain facilities and equipment are leased under various
operating leases. Rental expense for these leases was $230,000,
$177,000 and $93,000 for the years ended December 31, 2000, 1999
and 1998, respectively. Future minimum rental commitments under
noncancellable leases were as follows (in thousands):
2001 $ 543
2002 594
2003 537
2004 542
2005 551
Thereafter 4,850
$7,617
8. Deposits
The components of deposits were as follows:
Years ended December 31,
2000 1999
In Thousands
Demand, non-interest bearing $ 38,233 $ 30,941
Demand, interest bearing 54,783 59,818
Savings 46,317 48,850
Time, $100,000 and over 26,565 16,226
Time, other 130,465 113,509
Total deposits $296,363 $269,344
At December 31, 2000, the scheduled maturities of time
deposits were as follows (in thousands):
2001 $ 93,194
2002 49,866
2003 8,530
2004 2,471
2005 2,619
Thereafter 350
$157,030
9. Borrowings
The Bank had federal funds purchased and other short-term
borrowings from the Federal Home Loan Bank at December 31, 2000
and 1999 in the amount of $600,000 and $23.57 million,
respectively. The December 31, 2000 balance outstanding matured
January 2, 2001, at an interest rate of 6.10%.
In addition, the Bank enters into agreements with customers as
part of cash management services where the Bank sells securities
to the customer overnight with the agreement to repurchase them
at par. Securities sold under agreements to repurchase
generally mature one day from the transaction date. The
securities underlying the agreements were under the Bank's
control. The outstanding balances and related information of
securities sold under agreements to repurchase are summarized as
follows:
Years Ended December 31,
2000 1999
Dollars In Thousands
Average balance during the year $ 9,673 $1,946
Average interest rate during the year 5.73% 5.16%
Maximum month-end balance during the
year $15,659 $ 4,169
Long-term debt consisted of the following:
December 31,
2000 1999
In Thousands
Notes with the Federal Home Loan Bank
(FHLB):
Term Note Due October 2000 at 4.72% $ - $ 1,000
18 Month/6 Month Term Note Due July 2001,
Variable at 6.83% 10,000 -
2 Year Term Note Due November 2002,
Fixed at 6.57% 4,000 -
3 Year Term Note Due November 2003,
Fixed at 6.59% 4,000 -
4 Year Term Note Due November 2004,
Fixed at 6.63% 4,000 -
5 Year/2 Year Term Note Due December 2004,
Fixed at 6.14%(1) 5,000 5,000
7 Year/2 Year Term Note Due April 2005,
Fixed at 5.55%(1) - 10,000
10 Year/5 Year Term Note Due September 2008,
Fixed at 4.92%(1) 5,000 5,000
10 Year/5 Year Term Note Due February 2009,
Fixed at 4.97%(1) 5,000 5,000
10 Year/5 Year Term Note Due December 2009,
Fixed at 6.30%(1) 5,000 5,000
42,000 31,000
Notes with other financial institutions:
5 Year Term Note Due March 2005, Fixed
at 8.50% 500 -
5 Year Term Note Due March 2005, Fixed
at 9.00%(2) 1,000 -
$43,500 $31,000
(1) These notes contain a convertible option that allows the
FHLB, at quarterly intervals, to change the note to an
adjustable-rate advance at three-month LIBOR (6.40% at
December 31, 2000) plus 14 to 16 basis points. If the note
is converted, the option allows the Bank to put the funds
back to the FHLB at par. The year/year refers to the
maturity of the note (in years) and the term until the
first convertible date.
(2) This note contains prepayment penalty provisions ranging
from 3% in the first year to 1% in the fifth year.
Contractual maturities of long-term debt at December 31,
2000 were as follows (in thousands):
2001 $10,000
2002 4,000
2003 4,000
2004 9,000
2005 1,500
Thereafter 15,000
$43,500
The Bank has a maximum borrowing capacity with the Federal
Home Loan Bank of approximately $123.0 million, of which $42.6
million was outstanding at December 31, 2000. Advances from the
Federal Home Loan Bank are secured by qualifying assets of the
Bank.
10. Mandatory Redeemable Capital Debentures
First Leesport Capital Trust I, a Delaware statutory
business trust, was formed on March 9, 2000 and is a wholly-
owned subsidiary of the Company. The Trust issued $5 million of
10 7/8% fixed rate capital trust pass-through securities to
investors. First Leesport Capital Trust I purchased $5 million
of fixed rate junior subordinated deferrable interest debentures
from First Leesport Bancorp. The debentures are the sole asset
of the Trust. The terms of the junior subordinated debentures
are the same as the terms of the capital securities. The
obligations under the debentures constitute a full and
unconditional guarantee by First Leesport Bancorp of the
obligations of the Trust under the capital securities. The
capital securities are redeemable by First Leesport Bancorp on
or after March 9, 2010, at stated premiums, or earlier if the
deduction of related interest for federal income taxes is
prohibited, classification as Tier 1 Capital is no longer
allowed, or certain other contingencies arise. The capital
securities must be redeemed upon final maturity of the
subordinated debentures on March 9, 2030.
11. Employee Benefits
In 2000, the Company established an Employee Stock
Ownership Plan (ESOP) to provide its employees with future
retirement plan assistance. The ESOP will invest primarily in
the Company's common stock. During 2000, $167,000 was accrued
to provide for contribution of shares to the Plan. No shares
were purchased on behalf of the ESOP as of December 31, 2000.
Leesport Bank terminated its noncontributory defined
benefit pension plan during 2000. This plan had covered all
Leesport Bank employees who met the eligibility requirements.
The Plan assets in excess of the projected benefit obligation
were allocated to the Plan's eligible participants and a gain on
the termination of $21,000 was recognized. The expense related
to these plans was $88,000 for the year ended December 31, 1999,
and $81,000 for the year ended December 31, 1998.
Net pension cost for this plan consisted of the following
components:
Years Ended December 31,
In thousands
1999 1998
Service cost (benefits earned) $ 134 $ 128
Interest cost on projected benefit
obligation 115 109
Expected return on plan assets (150) (139)
Net amortization and deferral (11) (17)
$ 88 $ 81
Assumptions used by Leesport Bank in the determination of
pension plan information for 1999 and 1998 consisted of the
following: Discount rate - 6.5%, rate of increase in
compensation levels - 4.0%, expected long-term rate of return on
plan assets - 8.0%.
The Company has a 401(k) Salary Deferral Plan. This plan
covers all eligible employees who elect to contribute to the
Plan. An employee who has attained 18 years of age and has been
employed for at least 30 calendar days is eligible to
participate in the Plan effective with the next quarterly
enrollment period. Employees become eligible for the Company
contribution to the Salary Deferral Plan at each future
enrollment period upon completion of one year of service.
Effective January 1, 2000, the Company contributed 100% of the
first three percent of eligible employees' annual salary
deferral and 50% of the next four percent of salary deferred.
The Company previously contributed 50% of the employee's
contribution up to a maximum of seven percent of annual salary.
Contributions from the Company vest to the employee over a five
year schedule. The annual expense included in salaries and
employee benefits representing the expense of the Company's
contribution was $257,000, $132,000, and $52,000 for the years
ended December 31, 2000, 1999, and 1998, respectively.
The Company has entered into deferred compensation
agreements with certain directors and a salary continuation plan
for certain key employees. At December 31, 2000 and 1999, the
present value of the future liability for these plans was
$625,000 and $462,000, respectively. To fund the benefits under
these agreements, the Company is the owner and beneficiary of
life insurance policies on the lives of the directors and
employees. These policies had an aggregate cash surrender value
of $5.90 million and $2.28 million at December 31, 2000 and
1999, respectively. For the years ended December 31, 2000, 1999
and 1998, $226,000, $125,000 and $112,000, respectively, was
charged to expense in connection with these agreements.
In May 2000, the Board of Directors of First Leesport
Bancorp, Inc. adopted a non-compensatory Employee Stock Purchase
Plan (ESPP). Under the ESPP, employees of the Company who elect
to participate are eligible to purchase common stock at prices
up to a 15 percent discount from the market value of the stock.
The ESPP does not allow the discount in the event that the
purchase price would fall below the Company's most recently
reported book value per share. The ESPP allows an employee to
make contributions through payroll deduction to purchase common
shares up to 15 percent of annual compensation. The total
number of shares of common stock that may be issued pursuant to
the ESPP is 250,000. As of December 31, 2000 a total of 940
shares have been issued under the ESPP.
12. Stock Option Plans
The Company has an Employee Stock Incentive Plan that
covers all officers and key employees of the Company and its
subsidiaries and is administered by a committee of the Board of
Directors. The Plan covers 210,000 shares of common stock. The
option price for options issued under the Plan must be at least
equal to 100% of the fair market value of the common stock on
the date of grant and shall not be less than the stock's par
value. Options granted under the Plan are exercisable over a
period not less than six months after the date of grant, but no
later than ten years after the date of grant in accordance with
the vesting period as determined by the Plan committee. Options
expire on the earlier of ten years after the date of grant,
three months from the participants' termination of employment or
one year from the date of the participants' death or disability.
The Company has an Independent Directors Stock Option Plan
that covers 52,500 shares of common stock. The Plan covers all
directors of the Company who are not employees. The option
price for options issued under the Plan will be equal to the
fair market value of the Company's common stock on the date of
grant. Options are exercisable from the date of grant and
expire on the earlier of ten years after the date of grant,
three months from the date the participant ceases to be a
director of the Company or twelve months from the date of the
participants' death or disability.
The Company has elected to follow Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees"
(APB 25) and related Interpretations in accounting for its
employee and director stock options. Under APB 25, because the
exercise price of the Company's stock options equals the market
price of the underlying stock on the date of grant, no
compensation expense is recognized.
Pro forma information regarding net income and earnings per
share is required by Financial Accounting Standards Board
Statement 123, "Accounting and Disclosure of Stock-Based
Compensation" (FASB 123), and has been determined as if the
Company had accounted for its stock options under the fair value
method of that statement. The fair value of options granted
during 2000 and 1999 was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-
average assumptions: risk-free interest rates of 4.71% to 6.63%;
volatility factors of the expected market price of the Company's
common stock of 12.77% to 21.82%; expected life of the options
of 7 years and a cash dividend yield of 2.2%.
For purposes of pro forma disclosures, the estimated fair
value of the options is amortized to expense over the options'
vesting period. The Company's pro forma information follows:
Years Ended December 31,
2000 1999 1998
In Thousands, Except Per Share Data
Net income:
As reported $2,126 $1,401 $1,511
Pro forma $1,979 $1,305 $1,511
Earnings per share:
As reported, basic and
diluted $ 1.15 $ .76 $ .86
Pro forma, basic and diluted $ 1.07 $ .71 $ .86
Stock option transactions under the Plans were as follows:
Years Ended December 31,
2000 1999 1998
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
Outstanding at the
beginning of the year 94,653 $20.67 47,408 $23.32 - $ -
Granted 40,050 14.58 47,245 18.00 47,408 23.32
Exercised - - - - - -
Forfeited (2,362) 18.39 - - - -
Outstanding at the end
of the year 132,341 $18.86 94,653 $20.67 47,408 $23.32
Exercisable at December 31 46,397 $19.94
Weighted-average fair value of
options granted during the
year $ 4.68 $ 5.29 $ 5.80
Options available for grant at December 31, 2000 were
130,159.
Stock options outstanding at December 31, 2000, were
exercisable at prices ranging from $13.75 to $25.95 a share.
The weighted-average remaining contractual life of the above
options is approximately 8 years.
13. Federal Income Taxes
The components of federal income tax expense were as
follows:
Years Ended December 31,
2000 1999 1998
In Thousands
Current $ 846 $ 917 $ 353
Deferred (235) (463) (36)
$ 611 $ 454 $ 317
Reconciliation of the statutory federal income tax expense
computed at 34% to the federal income tax expense included in
the consolidated statements of income is as follows:
Years Ended December 31,
2000 1999 1998
In Thousands
Federal income tax at statutory rate $ 931 $ 631 $ 622
Tax exempt interest (378) (351) (333)
Interest disallowance 59 41 49
Bank owned life insurance (107) (32) (38)
Non-deductible goodwill 85 76 6
Non-deductible merger costs - 81 -
Other 21 8 11
$ 611 $ 454 $ 317
The federal income tax provision includes $10,000, $18,000
and $20,000 in 2000, 1999 and 1998, respectively, of federal
income taxes related to gains on the sale of securities.
Net deferred tax assets consisted of the following
components:
December 31,
2000 1999
In Thousands
Deferred tax assets:
Allowance for loan losses $1,021 $ 806
Deferred compensation 214 157
Net unrealized losses on securities
available for sale 242 1,100
Other 10 42
Total deferred tax assets 1,487 2,105
Deferred tax liabilities:
Premises and equipment (86) (86)
Mortgage servicing rights (77) (57)
Other (6) (21)
Total deferred tax liabilities (169) (164)
Net deferred tax assets $1,318 $1,941
14. Transactions With Executive Officers And Directors
The Bank has had banking transactions in the ordinary
course of business with its executive officers and directors and
their related interests on the same terms, including interest
rates and collateral, as those prevailing at the time for
comparable transactions with others. At December 31, 2000 and
1999, these persons were indebted to the Bank for loans totaling
$5.62 million and $6.24 million, respectively. During 2000,
$649,000 of new loans were made and repayments totaled $1.27
million.
15. Regulatory Matters And Capital Adequacy
The Company and the Bank are subject to various regulatory
capital requirements administered by the federal banking
agencies. Failure to meet minimum capital requirements can
initiate certain mandatory and possibly additional discretionary
actions by regulators that, if undertaken, could have a direct
material effect on their financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt
corrective action, the Company and the Bank must meet specific
capital guidelines that involve quantitative measures of its
assets, liabilities and certain off-balance sheet items as
calculated under regulatory accounting practices. The capital
amounts and classification are also subject to qualitative
judgments by the regulators about components, risk-weightings
and other factors.
Quantitative measures established by regulation to ensure
capital adequacy require the Company and the Bank to maintain
minimum amounts and ratios of total and tier I capital (as
defined in the regulations) to risk-weighted assets, and of
tier I capital to average assets. Management believes, as of
December 31, 2000, that the Company and the Bank meet all
minimum capital adequacy requirements to which they are subject.
As of December 31, 2000, the most recent notification from
the Bank's primary regulator categorized the Bank as well
capitalized under the regulatory framework for prompt corrective
action. There are no conditions or events since that
notification that management believes have changed its category.
The Company's and the Bank's actual capital amounts and
ratios are presented below:
As of December 31, 2000
Minimum
To Be Well
Minimum Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
Amount Ratio Amount Ratio Amount Ratio
Dollar Amounts in Thousands
Total capital (to risk-weighted
assets):
First Leesport Bancorp $32,650 11.93% $ 22,032 8.00% $ 27,540 10.00%
Leesport Bank 31,427 11.53 21,798 8.00 27,248 10.00
Tier I capital (to risk-weighted
assets):
First Leesport Bancorp 29,228 10.68 11,016 4.00 16,524 6.00
Leesport Bank 28,019 10.28 10,899 4.00 16,349 6.00
Tier I capital (to average assets):
First Leesport Bancorp 29,228 7.49 15,787 4.00 19,734 5.00
Leesport Bank 28,019 7.35 15,252 4.00 19,065 5.00
As of December 31, 1999:
Total capital (to risk-weighted
assets):
First Leesport Bancorp $25,972 10.93% $ 19,006 8.00% $ 23,757 10.00%
Leesport Bank 25,036 10.48 19,432 8.00 24,290 10.00
Tier I capital (to risk-weighted
assets):
First Leesport Bancorp 23,018 9.69 9,503 4.00 14,254 6.00
Leesport Bank 22,105 9.29 9,716 4.00 14,574 6.00
Tier I capital (to average assets):
First Leesport Bancorp 23,018 6.61 13,933 4.00 17,417 5.00
Leesport Bank 22,105 6.38 13,851 4.00 17,314 5.00
Federal and state banking regulations place certain
restrictions on dividends paid and loans or advances made by the
Bank to the Company. At December 31, 2000, the Bank had
approximately $13.35 million available for payment of dividends
to the Company. Loans or advances are limited to 10 percent of
the Bank's capital stock and surplus on a secured basis.
As of December 31, 2000, the Company had declared a $.15
per share cash dividend for shareholders of record on January 3,
2001, payable January 12, 2001. The Company's Board of
Directors declared a five percent stock dividend in December
1999 to shareholders of record on January 3, 2000, which was
paid on January 17, 2000.
16. Financial Instruments With Off-Balance Sheet Risk
The Bank is party to financial instruments with off-balance
sheet risk in the normal course of business to meet the
financing needs of its customers. These financial instruments
include commitments to extend credit and letters of credit.
Those instruments involve, to varying degrees, elements of
credit and interest rate risk in excess of the amount recognized
in the balance sheets.
The Bank's exposure to credit loss in the event of
nonperformance by the other party to the financial instrument
for commitments to extend credit and letters of credit is
represented by the contractual amount of those instruments. The
Bank uses the same credit policies in making commitments and
conditional obligations as it does for on-balance sheet
instruments.
A summary of the contractual amount of the Bank's financial
instrument commitments was as follows:
December 31,
2000 1999
In Thousands
Commitments to grant loans $11,425 $15,737
Unfunded commitments under lines of credit 28,830 23,759
Outstanding letters of credit 291 550
Commitments to extend credit are agreements to lend to a
customer as long as there is no violation of any condition
established in the contract. Since many of the commitments are
expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash
requirements. Commitments generally have fixed expiration dates
or other termination clauses and may require payment of a fee.
The Bank evaluates each customer's credit worthiness on a case-
by-case basis. The amount of collateral obtained, if deemed
necessary by the Bank upon extension of credit, is based on
management's credit evaluation. Collateral held varies but may
include personal or commercial real estate, accounts receivable,
inventory and equipment.
Outstanding letters of credit are conditional commitments
issued by the Bank to guarantee the performance of a customer to
a third party. The credit risk involved in issuing letters of
credit is essentially the same as that involved in extending
loan facilities to customers.
17. Concentrations Of Credit Risk
The Bank grants commercial, residential and consumer loans
to customers primarily located in Berks, Schuylkill and Luzerne
counties in Pennsylvania. The concentrations of credit by type
of loan are set forth in Note 5. Although the Bank has a
diversified loan portfolio, its debtors' ability to honor these
contracts is influenced by the region's economy.
18. Fair Value Of Financial Instruments
Management uses its best judgment in estimating the fair
value of the Company's financial instruments; however, there are
inherent weaknesses in any estimation technique. Therefore, for
substantially all financial instruments, the fair value
estimates herein are not necessarily indicative of the amounts
the Company could have realized in a sales transaction on the
dates indicated. The estimated fair value amounts have been
measured as of their respective year ends and have not been re-
evaluated or updated for purposes of these consolidated
financial statements subsequent to those respective dates. As
such, the estimated fair values of these financial instruments
subsequent to the respective reporting dates may be different
than the amounts reported at each year end.
The following information should not be interpreted as an
estimate of the fair value of the entire Company since a fair
value calculation is only provided for a limited portion of the
Company's assets and liabilities. Due to a wide range of
valuation techniques and the degree of subjectivity used in
making the estimates, comparisons between the Company's
disclosures and those of other companies may not be meaningful.
The following methods and assumptions were used to estimate the
fair values of the Company's financial instruments at
December 31, 2000 and 1999:
Cash and cash equivalents:
The carrying amounts reported in the balance sheet for cash
and short-term instruments approximate those assets' fair
values.
Securities available for sale:
Fair values for securities are based on quoted market
prices, where available. If quoted market prices are not
available, fair values are based on quoted market prices of
comparable instruments.
Loans:
For variable-rate loans that reprice frequently and with no
significant change in credit risk, fair values are based on
carrying values. The fair values for other loans (e.g., consumer
loans and fixed rate mortgage loans) are estimated using
discounted cash flow analyses, using interest rates currently
being offered for loans with similar terms to borrowers of
similar credit quality.
Deposit liabilities:
The fair values disclosed for demand deposits (e.g.,
interest and non-interest checking, passbook savings and certain
types of money market accounts) are considered to be equal to
the amount payable on demand at the reporting date (i.e., their
carrying amounts). Fair values for fixed-rate time deposits are
estimated using a discounted cash flow calculation that applies
interest rates currently being offered on time deposits to a
schedule of aggregated expected monthly maturities on time
deposits.
Securities sold under agreements to repurchase and federal funds
purchased:
The carrying amounts of these short-term borrowings
approximate their fair values.
Long-term debt:
The fair value of long-term debt is calculated based on the
discounted value of contractual cash flows, using rates
currently available for borrowings with similar maturities.
Mandatory redeemable capital debentures:
The fair value of these debentures is calculated based on
the discounted value of contractual cash flows, using rates
currently available.
Accrued interest receivable and payable:
The carrying amount of accrued interest receivable and
accrued interest payable approximate its fair value.
Off-balance sheet instruments:
Fair values for the Bank's off-balance sheet instruments
are based on fees currently charged to enter into similar
agreements, taking into account the remaining terms of the
agreements and the counterparties' credit standing.
The estimated fair values of the Company's financial
instruments were as follows:
December 31,
2000 1999
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
In Thousands
Financial Assets:
Cash and cash equivalents $ 12,149 $ 12,149 $ 15,865 $ 15,865
Securities 74,368 74,368 72,165 72,165
Loans 284,863 285,147 253,194 253,444
Accrued interest receivable 2,399 2,399 2,019 2,019
Financial Liabilities:
Deposits 296,363 297,230 269,344 269,482
Securities sold under agreements to
repurchase 14,663 14,663 4,608 4,608
Federal funds purchased 600 600 23,567 23,567
Long-term debt 43,500 43,952 31,000 31,799
Mandatory redeemable capital debentures 5,000 4,961 - -
Accrued interest payable 1,828 1,828 1,415 1,415
Off-Balance Sheet Financial Instruments:
Commitments to extend credit - - - -
Standby letters of credit - - - -
19. Segment And Related Information
The Company's insurance operations and brokerage and
investment operations are managed separately from the
traditional banking and related financial services that the
Company also offers. These operations provide commercial
insurance, individual and group benefit plans, personal
insurance coverage, securities brokerage services, and
investment advisory services. The brokerage and investment
advisory operation was not material to the consolidated
financial statements of the Company in 1999, and the insurance
operation was not material to the consolidated financial
statements of the Company in 1998.
Segment information for 2000 and 1999 is as follows (in
thousands):
Banking and Brokerage and
Financial Investment
2000 Services Services Insurance Total
Revenues from external customers $12,963 $956 $3,852 $17,771
Income (loss) before federal income taxes 2,404 (11) 344 2,737
Total assets 391,102 114 2,610 393,826
Purchases of premises and equipment 1,536 23 82 1,641
Banking and
Financial
1999 Services Insurance Total
Revenues from external customers $11,916 $3,296 $15,212
Income before federal income taxes 1,653 202 1,855
Total assets 356,610 2,008 358,618
Purchases of premises and equipment 1,503 358 1,861
Income (loss) before federal income taxes, as presented above,
reflects referral and management fees of approximately $614,000
and $179,000 that the insurance operation and the brokerage and
investment operation, respectively, paid to the Bank during
2000. Referral and management fees of approximately $614,000
were paid by the insurance operation to the Bank in 1999.
20. First Leesport Bancorp, Inc. (Parent Company Only)
Financial Information
December 31, 2000 1999
In Thousands
ASSETS
Cash $ 68 $ 453
Investment in bank subsidiary 32,238 24,860
Investment in non-bank subsidiary 229 -
Securities available for sale 3,031 1,874
Premises and equipment and other assets 558 122
Total assets $36,124 $27,309
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Borrowed funds $ 2,510 $ 1,010
Other liabilities 268 697
Corporate obligation for mandatory redeemable debentures 5,000 -
Shareholders' Equity 28,346 25,602
Total liabilities and shareholders' equity 36,124 $27,309
======= =======
STATEMENTS OF INCOME
Years Ended December 31, 2000 1999 1998
in Thousands
Dividends from bank subsidiary $2,165 $4,178 $1,223
Other income 233 108 95
Interest expense on corporate obligation for mandatory
redeemable capital debentures (424) - -
Other expense (645) (570) (194)
Income before equity in (excess of) undistributed
net income of subsidiaries and income taxes 1,329 3,716 1,124
Income tax benefit (283) (78) (34)
Equity in (excess of) undistributed net
income of bank subsidiary 514 (2,393) 353
Net income $2,126 $ 1,401 $1,511
===== ====== =====
20. First Leesport Bancorp, Inc. (Parent Company Only)
Financial Information (continued)
STATEMENTS OF CASH FLOWS
Years Ended December 31, 2000 1999 1998
in Thousands
Cash flows provided by operating activities
Net income $2,126 $1,401 $1,511
Depreciation 4 3 4
Equity in (excess of) undistributed
earnings of bank subsidiary (514) 2,393 (353)
(Decrease) increase in other liabilities (397) 485 23
Increase in other assets (509) (37) (7)
Net cash provided by operating activities 710 4,245 1,178
Cash flows used in investing activities
Purchase of investment securities (1,141) (1,146) (314)
Investment in bank subsidiary (5,190) (2,700) -
Investment in non-bank subsidiary (229) - -
Net cash used in investing activities (6,560) (4,116) (314)
Cash flows provided by (used in) financing activities
Proceeds from borrowings 1,500 1,010 -
Issuance of mandatory redeemable capital debentures 5,000 - -
Reissuance of treasury stock 64 - -
Cash dividends paid (1,099) (982) (829)
Net cash provided by (used in) financing activities 5,465 28 (823)
Increase (decrease) in cash (385) 157 41
Cash:
Beginning 453 296 255
Ending $ 68 $ 453 $ 296
===== ===== =====
21. Quarterly Data (Unaudited)
Year Ended December 31, 2000 Fourth Third Second First
Quarter Quarter Quarter Quarter
In Thousands, Except Per Share Data
Interest income $7,245 $7,054 $6,823 $6,349
Interest expense 4,435 4,231 4,014 3,706
Net interest income 2,810 2,823 2,809 2,643
Provision for loan losses 300 308 237 237
Net interest income after provision for loan losses 2,510 2,515 2,572 2,406
Other income 1,627 1,570 1,733 1,756
Other expense 3,543 3,575 3,398 3,436
Income before federal income taxes 594 510 907 726
Federal income taxes 153 67 248 143
Net income $ 441 $ 443 $ 659 $ 583
===== ===== ===== =====
Earnings per common share, basic and diluted $ .24 $ .24 $ .36 $ .31
===== ===== ===== =====
Net income, excluding goodwill amortization $ 508 $ 510 $ 726 $ 651
===== ===== ===== =====
Earnings per common share, basic and diluted,
excluding goodwill amortization $ .27 $ .27 $ .40 $ .35
===== ===== ===== =====
Year Ended December 31, 1999 Fourth Third Second First
Quarter Quarter Quarter Quarter
In Thousands, Except Per Share Data
Interest income $6,237 $6,014 $5,550 $5,144
Interest expense 3,487 3,191 2,973 2,747
Net interest income 2,750 2,823 2,577 2,397
Provision for loan losses 270 505 248 247
Net interest income after provision for loan losses 2,480 2,318 2,329 2,150
Other income 1,271 1,149 1,226 1,125
Other expense 3,248 3,646 2,750 2,549
Income (loss) before federal income taxes (benefit) 503 (179) 805 726
Federal income taxes (benefit) 136 (74) 224 168
Net income (loss) $ 367 $(105) $ 581 $ 558
===== ===== ===== =====
Earnings (loss) per common share, basic and diluted $ .20 $(.06) $ .32 $ .30
===== ===== ===== =====
Net income (loss), excluding goodwill amortization $ 432 $(46) $ 633 $ 610
===== ===== ===== =====
Earnings (loss) per common share, basic and diluted,
excluding goodwill amortization $ .23 $(.03) $.35 $ .34
===== ===== ===== =====
Merger and restructuring costs totaling $814,000 ($617,000 after
tax) were expensed during the third quarter of 1999.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information relating to directors and executive
officers of the Registrant is incorporated herein by reference
to the information disclosed under the caption "MATTER NO. 1 -
ELECTION OF DIRECTORS - Directors" included in the Registrant's
Proxy Statement for the Annual meeting of Stockholders to be
held on April 24, 2001.
Item 11. Executive Compensation
The information relating to executive compensation and
directors' compensation is incorporated herein by reference to
the information disclosed under the captions "MATTER NO. 1 -
ELECTION OF DIRECTORS - Director Compensation; Executive
Compensation; Executive Officer Agreements; Deferred
Compensation and Salary Continuation Agreements; and
Compensation Committee Interlocks and Insider Participation"
included in the Registrant's Proxy Statement for the Annual
Meeting of Stockholders to be held on April 24, 2001.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The information relating to security ownership of certain
beneficial owners and management is incorporated herein by
reference to the information disclosed under the caption "MATTER
NO. 1 - ELECTION OF DIRECTORS - Directors - Director and Officer
Stock Ownership" included in the Registrant's Proxy Statement
for the Annual Meeting of Stockholders to be held on April 24,
2001.
Item 13. Certain Relationships and Related Transactions
The information relating to certain relationships and
related transactions is incorporated herein by reference to the
information disclosed under the caption "MATTER NO. 1 - ELECTION
OF DIRECTORS - Transactions with Management and Others" included
in the Registrant's proxy Statement for the Annual Meeting of
Stockholders to be held on April 24, 2001.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K
(a) 1. Financial Statements.
Consolidated financial statements are included under Item 8
of Part II of this Form 10-K.
(b) 2. Financial Statement Schedules.
Financial statement schedules are omitted because the
required information is either not applicable, not required or
is shown in the respective financial statements or in the notes
thereto.
3. Exhibits
Exhibit No. Description
3.1 Articles of Incorporation of First Leesport
Bancorp, Inc.
3.2 Bylaws of First Leesport Bancorp, Inc.
10.1 Contract between the First National Bank of
Leesport and Bisys (Incorporated herein by
reference to Exhibit 10.1 to Registrant's annual
report on Form 10-KSB for the year ended
December 31, 1998).
10.2 Severance Agreement between the First National
Bank of Leesport and John T. Connelly
(Incorporated herein by reference to Exhibit 10.2
to Registrant's annual report on Form 10-KSB for
the year ended December 31, 1998).*
10.3 Employment Agreement between the First National
Bank of Leesport and Raymond H. Melcher, Jr.
(Incorporated herein by reference to Exhibit 10.4
to Registrant's annual report on Form 10-KSB for
the year ended December 31, 1998).*
10.4 Supplemental Executive Retirement Plan
(Incorporated herein by reference to Exhibit 10.1
to Registrant's Quarterly Report on Form 10-QSB
for the quarter ended June 30, 1996).*
10.5 Deferred Compensation Plan for Directors
(Incorporated herein by reference to Exhibit 10.2
to Registrant's Quarterly Report on Form 10-QSB
for the quarter ended June 30, 1996).*
10.6 Non-Employee Director Compensation Plan
(Incorporated by reference to Exhibit A to
Registrant's Definitive Proxy Statement on
Form 14A for the year ended December 31, 1999).*
10.7 1998 Employee Stock Incentive Plan (Incorporated
by reference to Exhibit 10.9 to Registrant's
Annual Report on Form 10-KSB for the year ended
December 31, 1998).*
10.8 1998 Independent Directors Stock Option Plan
(Incorporated by reference to Exhibit 10.10
to Registrant's Annual Report on Form 10-KSB for
the year ended December 31, 1998).*
10.9 Employment Agreement, dated September 17, 1998,
among First Leesport Bancorp, Inc., Essick & Barr,
Inc. and Charles J. Hopkins (Incorporated by
reference to Exhibit 10.12 to Registrant's
Annual Report on Form 10-KSB for the year ended
December 31, 1998).*
10.10 Employment Agreement, dated October 1, 1999, among
First Leesport Bancorp, Inc., First Leesport
Investment Group, Inc., First Leesport Wealth
Management, Inc. and Keith W. Johnson.
(Incorporated herein by reference to Exhibit 10.12
of the Registrant's annual report on Form 10-K for
the year ended December 31, 1990.)*
11 No statement setting forth the computation of per
share earnings is included because such
computation is reflected clearly in the financial
statements set forth in response to Item 7 of this
Report.
21 Subsidiaries of First Leesport Bancorp, Inc.
23.1 Consent of Beard Miller Company LLP.
23.2 Consent of Stokes & Hinds, LLC.
99 Report of Stokes & Hinds, LLC.
_____________________
* Denotes a management contract or compensatory plan or
arrangement.
(b) Reports on Form 8-K.
The following report on Form 8-K was filed by the
Company during the quarter ended December 31, 2000:
None.
Signatures
In accordance with Section 13 or 15(d) of the Exchange Act,
the registrant has caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
March 29, 2001 FIRST LEESPORT BANCORP, INC.
By:/s/Raymond H. Melcer, Jr.
Raymond H. Melcher, Jr.,
Chairman, President and
Chief Executive Officer
In accordance with the Exchange Act, this report has been
signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/Raymond H. Melcher, Jr. Chairman, March 29, 2001
Raymond H. Melcher, Jr. President and Chief
Executive Officer,
Director
/s/Kurt A. Phillips Chief Financial March 29, 2001
Kurt A. Phillips and Chief
Accounting Officer
/s/Edward C. Barrett Director March 29, 2001
Edward C. Barrett
/s/James H. Burton Director March 29, 2001
James H. Burton
/s/Anthony R. Cali Director March 29, 2001
Anthony R. Cali
/s/John T. Connelly Director March 29, 2001
John T. Connelly
/s/Charles J. Hopkins Director March 29, 2000
Charles J. Hopkins
/s/Keith W. Johnson Director March 29, 2000
Keith W. Johnson
/s/William J. Keller Director March 29, 2001
William J.Keller
/s/Andrew J. Kuzneski, Jr. Director
Andrew J. Kuzneski, Jr.
/s/Roland C. Moyer, Jr. Director March 29, 2001
Roland C. Moyer, Jr.
/s/Harry J. O'Neill III Director March 29, 2001
Harry J. O'Neill III
/s/Karen A. Rightmire Director March 29, 2001
Karen A. Rightmire
/s/Alfred J. Weber Director March 29, 2001
Alfred J. Weber
EXHIBIT INDEX
Exhibit No. Description
3.1 Articles of Incorporation of First Leesport
Bancorp, Inc.
3.2 Bylaws of First Leesport Bancorp, Inc.
21 Subsidiaries of First Leesport Bancorp,
Inc.
23.1 Consent of Beard Miller Company LLP.
23.2 Consent of Stokes & Hinds, LLC.
99 Report of Stokes & Hinds, LLC.