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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) Quarterly Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the Quarterly Period
Ended June 30, 2002,
or
( ) Transition report pursuant to Section 13 or 15(d) of the
Exchange Act for the Transition Period from
_________________ to _________________.
No. 0-14555
(Commission File Number)
LEESPORT FINANCIAL CORP.
------------------------
(Exact name of Registrant as specified in its charter)
PENNSYLVANIA 23-2354007
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.)
1240 Broadcasting Road, Wyomissing, Pennsylvania 19610
(Address of principal executive offices) (Zip Code)
(610) 208-0966
(Registrant's telephone number, including area code)
Check whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 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 [ ]
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date.
Number of Shares Outstanding
as of August 6, 2002
COMMON STOCK ($5.00 Par Value) 3,097,772
(Title of Class) (Outstanding Shares)
Forward-looking Statements
Leesport Financial Corp. (the "Company") may from time to time make
written or oral "forward-looking statements," including statements
contained in the Company's filings with the Securities and Exchange
Commission (including this Quarterly Report on Form 10-Q and the exhibits
hereto and thereto), in its reports to shareholders and in other
communications by the Company, which are made in good faith by the Company
pursuant to the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995.
These forward-looking statements include statements with respect to
the Company's beliefs, plans, objectives, goals, expectations,
anticipations, estimates and intentions, that are subject to significant
risks and uncertainties, and are subject to change based on various
factors (some of which are beyond the Company's control). The words
"may," "could," "should," would, "believe," "anticipate," "estimate,"
"expect," intend, "plan" and similar expressions are intended to identify
forward-looking statements. The following factors, among others, could
cause the Company's financial performance to differ materially from the
plans, objectives, expectations, estimates and intentions expressed in
such forward-looking statements: the strength of the United States economy
in general and the strength of the local economies in which the Company
conducts operations; the effects of, and changes in, trade, monetary and
fiscal policies and laws, including interest rate policies of the Board of
Governors of the Federal Reserve System; inflation, interest rate, market
and monetary fluctuations; the timely development of and acceptance of new
products and services of the Company and the perceived overall value of
these products and services by users, including the features, pricing and
quality compared to competitors' products and services; the willingness of
users to substitute competitors' products and services for the Company's
products and services; the success of the Company in gaining regulatory
approval of its products and services, when required; the impact of
changes in financial services' laws and regulations (including laws
concerning taxes, banking, securities and insurance); technological
changes; acquisitions; changes in consumer spending and saving habits; and
the success of the Company at managing the risks involved in the
foregoing.
The Company cautions that the foregoing list of important factors is
not exclusive. Readers are also cautioned not to place undue reliance on
these forward-looking statements, which reflect management's analysis only
as of the date of this report. The Company does not undertake to update
any forward-looking statement, whether written or oral, that may be made
from time to time by or on behalf of the Company.
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
LEESPORT FINANCIAL CORP. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
June 30, December 31,
2002 2001
--------- ------------
ASSETS
Cash and Due from Banks $ 12,434 $ 18,885
Interest-bearing Deposits in Other
Banks 200 831
Federal Funds Sold 9,650 -
-------- --------
Total Cash & Cash Equivalents 22,284 19,716
Mortgage Loans Held for Sale 5,013 12,209
Securities Available for Sale 153,546 146,957
Loans, Net of Allowance for Loan Losses
6/02 - $4,123; 12/01 - $3,723 318,634 298,200
Premises and Equipment, Net 10,751 9,623
Goodwill 4,309 4,309
Accrued Interest Receivable and Other
Assets 13,989 12,495
------- --------
TOTAL ASSETS $528,526 $503,509
======== ========
LIABILITIES:
DEPOSITS:
Non-interest Bearing $ 55,876 $ 43,476
Interest Bearing 317,157 288,101
-------- -------
TOTAL DEPOSITS 373,033 331,577
Federal Funds Purchased - 32,500 Securities
Sold Under Agreements
to Repurchase 20,732 21,074
Long-term Debt 75,300 62,200
Mandatory Redeemable Capital
Securities Of Subsidiary Trust 5,000 5,000
Accrued Interest Payable
and Other Liabilities 6,942 5,937
-------- --------
TOTAL LIABILITIES 481,007 458,288
-------- --------
SHAREHOLDERS' EQUITY
Common Stock, $5.00 Par Value; 15,483 15,397
Authorized 10,000,000 shares,
Issued and outstanding,
3,096,554 in 2002
3,079,338 in 2001
Surplus 13,683 13,510
Retained Earnings 17,303 16,055
Accumulated Other Comprehensive
Income 1,050 259
-------- --------
TOTAL SHAREHOLDERS' EQUITY 47,519 45,221
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $528,526 $503,509
======== ========
The accompanying notes are an integral part of these financial statements.
LEESPORT FINANCIAL CORP. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
Three Months Ended Six Months Ended
------------------ ----------------
June 30, 2002 June 30, 2001 June 30, 2002 June 30, 2001
------------- ------------- ------------- -------------
INTEREST INCOME
Interest & Fees on Loans $5,810 $5,930 $11,354 $11,784
Interest on Securities:
Taxable 1,703 1,121 3,224 2,200
Tax-Exempt 199 148 415 290
Dividend Income 50 66 116 152
Interest on Deposits with Banks 3 23 7 30
Interest on Federal Funds Sold 5 142 9 251
------ ------ ------- -------
TOTAL INTEREST INCOME 7,770 7,430 15,125 14,707
------ ------ ------- -------
INTEREST EXPENSE
Interest on Deposits 2,415 3,509 4,905 7,038
Interest on Short-term Borrowings 86 118 198 264
Interest on Long-term Debt 1,006 812 1,993 1,640
------ ------ ------ ------
TOTAL INTEREST EXPENSE 3,507 4,439 7,096 8,942
------ ------ ------ ------
NET INTEREST INCOME 4,263 2,991 8,029 5,765
Provision for Loan Losses 345 225 660 515
------ ------ ------ ------
Net Interest Income after the
Provision for Loan Losses 3,918 2,766 7,369 5,250
OTHER INCOME
Customer Service Fees 312 266 584 471
Mortgage Banking Activities 213 204 486 379
Brokerage and Investment
Advisory Fees 185 184 346 382
Commissions on Insurance Sales 1,038 987 2,082 1,864
Other Income 298 292 696 491
Net Realized Gain on Sale of
Securities 62 12 62 8
------ ------ ------ ------
TOTAL OTHER INCOME 2,108 1,945 4,256 3,595
------ ------ ------ ------
OTHER EXPENSES
Salaries and Benefits 2,260 1,907 4,495 3,870
Occupancy Expense 391 270 774 550
Furniture and Equipment Expense 282 260 537 525
Computer & Processing Services 346 279 681 556
Goodwill Amortization - 67 - 133
Other Real Estate Expenses (5) 58 (7) 111
Other Operating Expenses 1,198 893 2,101 1,610
------ ------ ------ ------
TOTAL OTHER EXPENSES 4,472 3,734 8,581 7,355
------ ------ ------ ------
Income before Income Taxes 1,554 977 3,044 1,490
Income Taxes 431 265 836 367
------ ------ ------- ------
NET INCOME $1,123 $ 712 $ 2,208 $1,123
====== ====== ======= ======
EARNINGS PER SHARE DATA:
Averages Shares Outstanding 3,095,415 1,870,842 3,090,421 1,866,179
Basic Earnings Per Share $0.36 $0.38 $0.71 $0.60
Average Shares Outstanding for
Diluted Earnings Per Share 3,118,810 1,874,268 3,103,732 1,869,120
Diluted Earnings Per Share $0.36 $0.38 $0.71 $0.60
Cash Dividends Declared Per Share $0.16 $0.15 $0.31 $0.30
The accompanying notes are an integral part of these financial statements.
LEESPORT FINANCIAL CORP. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
Six Months Ended
----------------
June 30, 2002 June 30, 2001
------------- -------------
Net Income $2,208 $ 1,123
------ -------
Other Comprehensive Income
(Loss), net of tax:
Unrealized gains (losses) on
securities arising during
the period, net of tax
expense (benefit):
2002 - $408; 2001 - $119 832 231
Less: Reclassification adjust-
ments for gains included in
net income, net of tax
expense (benefit):
2002 - $21; 2001 - $3 41 5
------ ------
Other Comprehensive Income
(Loss) 791 226
------ ------
Comprehensive Income $2,999 $1,349
====== ======
The accompanying notes are an integral part of these financial statements.
LEESPORT FINANCIAL CORP. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Six Months Ended
----------------
June 30, 2002 June 30, 2001
------------- -------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Income $ 2,208 $ 1,123
Adjustments to reconcile net income
to net cash provided by
operating activities:
Provision for loan losses 660 515
Provision for depreciation and
amortization 426 502
Net amortization of securities
premiums and discounts 284 12
Deferred income taxes 7 -
Net realized (gain) loss on sale of
foreclosed real estate (18) 48
Amortization of goodwill - 133
Amortization of mortgage servicing
rights 34 11
Earnings on investment in life
insurance (166) (217)
Increase in mortgage servicing rights (192) (44)
Net gain on loans held for sale (437) (291)
Loans originated for sale (25,457) (15,819)
Proceeds from sale of loans 33,090 14,588
Net realized gain on sale of
securities (62) (8)
Net realized gain on property
and equipment (5) -
(Increase) decrease in accrued
interest receivable and other
assets (1,580) 236
Increase in accrued interest
payable and other liabilities 972 1,147
-------- --------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 9,764 1,936
-------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Available for sale securities:
Principal repayments, maturities
and calls 31,916 8,878
Purchases (40,018) (41,776)
Proceeds from sales 2,142 17,967
Loans made to customers, net of
repayments (21,241) (10,577)
Net increase (decrease) in Federal
Home Loan Bank stock 348 (1,337)
Proceeds from sale of foreclosed
real estate 160 257
Purchases of premises and equipment (1,595) (1,374)
Proceeds from sale of premises
and equipment 46 -
-------- --------
NET CASH USED IN INVESTING
ACTIVITIES (28,242) (27,962)
-------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net increase in deposits 41,456 40,888
Net decrease in federal funds
purchased (32,500) (600)
Net increase (decrease) in
securities sold under
agreements to repurchase (342) 1,475
Proceeds from long-term debt 13,100 -
Issuance of common stock 259 255
Cash dividends paid (927) (558)
-------- --------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 21,046 41,460
-------- --------
Increase in cash and
cash equivalents 2,568 15,434
Cash and cash equivalents:
Beginning 19,716 12,149
-------- --------
Ending $ 22,284 $ 27,583
======== ========
Cash payments for:
Interest $ 7,335 $ 8,916
======== ========
Income taxes $ 850 $ 382
======== ========
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Other real estate acquired in
settlement of loans $ 147 $ 268
======== ========
The accompanying notes are an integral part of these financial statements.
LEESPORT FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The unaudited consolidated financial statements contained herein
have been prepared in accordance with the instructions to Form 10-Q of
Regulation S-X. All significant intercompany accounts and transactions
have been eliminated. The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information. Accordingly,
they do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (including
normal recurring adjustments) considered necessary for a fair presentation
of the results for the interim periods have been included. For
comparative purposes, the prior year's consolidated financial statements
have been reclassified to conform with report classifications of the
current year.
2. The results of operations for the three and six month periods
ended June 30, 2002 are not necessarily indicative of the results to be
expected for the full year.
3. For purposes of reporting cash flows, cash and cash equivalents
include cash and due from banks, interest-bearing deposits in other banks,
and federal funds sold.
4. For further information, refer to the Consolidated Financial
Statements and Footnotes included in the Company's Annual Report on Form
10-K for the year ended December 31, 2001.
5. Earnings Per Common 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 all periods presented.
Earnings per common share for the three months and six months ended
June 30, 2002 and 2001 have been computed based upon the following:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2002 2001 2002 2001
------ ------ ------ ----
(In thousands)
Net income available to
shareholders $1,123 $ 712 $2,208 $1,123
====== ====== ====== ======
Average number of shares
outstanding 3,095 1,871 3,090 1,866
Effect of dilutive stock
options 24 3 14 3
------ ------ ------ ------
Average number of shares
outstanding used to calculate
diluted earnings per share 3,119 1,874 3,104 1,869
====== ====== ====== ======
During the first six months of 2002, there were 17,216 shares of
common stock issued under the Company's employee and director stock plans.
6. In the ordinary course of business, the Company enters 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.
7. Recently Issued Accounting Standards
The Company adopted Statement No. 142, "Goodwill and Other Intangible
Assets" on January 1, 2002 and has accordingly ceased amortization of all
goodwill. During the first quarter of 2002, the Company completed the
transitional impairment test of goodwill. In all instances, the estimated
fair values of the reporting segments exceeded their book values; and
therefore, no write-down of goodwill was required as of January 1, 2002.
Goodwill as of June 30, 2002 was allocated by segment as follows:
insurance services - $3.8 million; investment services - $.5 million.
The Company's net income and earnings per share for the three months
and six months ended June 30, 2002 and 2001, adjusted to exclude goodwill
amortization are as follows (in thousands, except per share data):
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2002 2001 2002 2001
---- ------ ------ ------
Net income, as reported $1,123 $ 712 $2,208 $1,123
Add back: goodwill amortization,
net of tax - 64 - 129
------ ------- ------ ------
Adjusted net income $1,123 $ 776 $2,208 $1,252
====== ====== ====== ======
Basic and diluted earnings per share
As reported $ 0.36 $ 0.38 $ 0.71 $ 0.60
As adjusted $ 0.36 $ 0.41 $ 0.71 $ 0.67
In June 2001, the Financial Accounting Standards Board issued
Statement No. 143, "Accounting for Asset Retirement Obligations," which
addresses the financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. This Statement requires that the fair
value of a liability for as asset retirement obligation be recognized in
the period in which it is incurred if a reasonable estimate of fair value
can be made. The associated assets retirement costs are capitalized as
part of the carrying amount of the long-lived asset. This Statement will
become effective for the Company on January 1, 2003 and is not expected to
have a significant impact on the Company's financial condition or results
of operations.
8. Segment Information
The Company's insurance operations and investment operations are
managed separately from the traditional banking and related financial
services that the Company also offers. The insurance operation provides
commercial, individual and group benefit plans and personal coverage. The
investment operation provides individual financial and estate planning,
investment advice and services, corporate and small business pension and
retirement planning services.
Banking
and
Financial Insurance Investment
Services Services Services Total
-------- --------- --------- -----
(In thousands)
Three months ended June 30, 2002:
Revenues from external sources $ 5,148 $1,038 $185 $ 6,371
Income before income taxes 1,528 81 (55) 1,554
Six months ended June 30, 2002:
Revenues from external sources 9,857 2,082 346 12,285
Income before income taxes 3,023 170 (149) 3,044
Three months ended June 30, 2001:
Revenues from external sources $ 3,765 $ 987 $184 $ 4,936
Income before income taxes 950 72 (45) 977
Six months ended June 30, 2001:
Revenues from external sources 7,114 1,864 382 9,360
Income before income taxes 1,557 38 (105) 1,490
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations
Overview
Net income for the quarter ended June 30, 2002 was $1,123,000, an
increase of 58%, as compared to $712,000 for the same period in 2001. For
the first six months of 2002, net income was $2.2 million or 100% above
the $1.1 million reported for the first six months of 2001. Basic and
diluted earnings per share were $.36 and $.71 for the second quarter and
first six months of 2002, respectively, compared to $.38 and $.60 for the
second quarter and first six months of 2001.
The following are the key ratios for the periods:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2002 2001 2002 2001
---- ---- ---- ----
Return on average assets 0.88% 0.67% 0.89% 0.55%
Return on average
shareholders' equity 9.74% 9.21% 9.40% 7.64%
Dividend payout ratio 44.44% 39.47% 43.66% 50.00%
Average shareholders' equity
to average assets 9.04% 6.86% 9.46% 7.14%
Net Interest Income
Net interest income continues to be a primary source of revenue for
the Company. Net interest income results from the difference between the
interest and amortizable 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 short and long-term borrowed
funds. 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 margin
is on a fully taxable equivalent basis using a 34% tax rate.
Net interest income for the second quarter of 2002 was $4.3 million,
an increase of 43% as compared to the $3.0 million reported for the second
quarter of 2001. For the first six months of 2002, net interest income
was $8.0 million, an increase of 38% as compared to $5.8 million for the
first six months of 2001. The net interest margin improved to 3.72% for
the second quarter of 2002 from 3.19% for the second quarter of 2001 and
to 3.60% for the six months ended June 30, 2002 from 3.16% for the six
months ended June 30, 2001.
The following summarizes net interest margin information:
Three Months Ended June 30,
---------------------------
2002 2001
---- ----
Interest Interest
Average Income/ % Average Income/ %
Balance Expense Rate Balance Expense Rate
------- ------- ---- ------- ------- ----
(In thousands, except percentages)
Assets:
Loans (1)(2)
Commercial $192,742 $3,408 7.09 $154,288 $3,353 8.72
Mortgage 66,539 1,193 7.17 85,172 1,602 7.52
Consumer 62,116 1,230 7.94 48,502 1,022 8.45
Other 1,044 - - 3,899 - -
Investments (2) 149,451 2,057 5.52 86,730 1,436 6.64
Federal Funds Sold 1,441 5 1.34 13,205 142 4.31
-------- ------ -------- ------
Total Earning Assets $473,333 $7,893 6.69 $391,796 $7,555 7.73
======== ====== ======== ======
Liabilities:
Transaction Accounts $161,747 $ 634 1.57 $127,890 $1,014 3.18
Certificates of Deposit 148,830 1,781 4.80 163,983 2,495 6.10
Short-term Borrowings 19,372 86 1.78 11,205 118 4.22
Long-term Borrowings 69,929 868 4.98 43,500 675 6.22
Mandatory Redeemable
Capital Securities 5,000 138 11.05 5,000 137 10.99
-------- ------ -------- ------
Total Interest-bearing
Liabilities 404,878 3,507 3.47 351,578 4,439 5.06
-------- ------ -------- ------
Noninterest-bearing
Liabilities 53,354 39,016
-------- --------
Total Cost of Funds $458,232 $3,507 3.07 $390,594 $4,439 4.55
======== ====== ======== ======
Net Interest Margin
(fully taxable
equivalent) 3.72 3.19
==== ====
Six Months Ended June 30,
------------------------
2002 2001
---- ----
Interest Interest
Average Income/ % Average Income/ %
Balance Expense Rate Balance Expense Rate
------- ------- ---- ------- ------- ----
(In thousands, except percentages)
Assets:
Loans (1)(2)
Commercial $187,154 $ 6,621 7.13 $151,861 $ 6,622 8.79
Mortgage 68,923 2,574 7.47 85,478 3,181 7.44
Consumer 60,208 2,201 7.37 47,973 2,066 8.68
Other 1,230 - - 3,125 - -
Investments (2) 144,442 3,972 5.55 83,315 2,822 6.47
Federal Funds Sold 1,300 9 1.38 10,811 251 4.68
-------- ------- -------- ------
Total Earning Assets $463,256 $15,377 6.69 $382,563 $14,942 7.88
======== ======= ======== =======
Liabilities:
Transaction Accounts $153,355 $ 1,208 1.59 $118,115 $ 1,949 3.33
Certificates of Deposit 149,242 3,697 5.00 165,646 5,089 6.20
Short-term Borrowings 21,132 198 1.79 11,052 264 4.56
Long-term Borrowings 69,018 1,717 5.02 43,500 1,365 6.33
Mandatory Redeemable
Capital Securities 5,000 276 11.11 5,000 275 11.09
-------- ------- -------- ------
Total Interest-bearing
Liabilities 397,748 7,096 3.60 343,313 8,942 5.25
-------- ------- -------- ------
Noninterest-bearing
Liabilities 50,470 36,699
-------- --------
Total Cost of Funds $448,218 $7,096 3.19 $380,012 $8,942 4.75
======== ====== ======== ======
Net Interest Margin
(fully taxable
equivalent) 3.60 3.16
==== ====
(1) Loan fees have been included in the interest income
totals presented. Nonaccrual loans have been included
in average loan balances.
(2) Interest income on loans and investments is presented
on a taxable equivalent basis using an effective tax
rate of 34%.
The increase in net interest income for the three and six month
periods is primarily the result of the growth in earning assets. Average
earning assets for the quarter ended June 30, 2002 increased to $473
million from $392 million for the quarter ended June 30, 2001 and to $463
million for the six months ended June 30, 2002 from $383 million for the
six months ended June 30, 2001.
Also contributing to the increase in net interest income is the fact
that the decline in the yield on average earning assets between the two
quarters and six month periods was less than the decline in the cost of
average supporting liabilities for the same periods. The overall declines
in interest rates are mainly the result of the declining interest rate
environment in 2001 and 2002. However, the Company's cost of supporting
liabilities was also impacted favorably by the repricing of guaranteed-
rate promotional deposit programs run to increase money market deposits
and previously run certificate of deposit promotional programs instituted
to provide liquidity after the first quarter of 2001. In addition,
average non-interest bearing deposits increased to $53 million for the
second quarter of 2002 from $39 million for the second quarter of 2001 and
to $50 million for the six months ended June 30, 2002 from $37 million for
the six months ended June 30, 2001.
Therefore, on a fully taxable equivalent basis, the $1.3 million
dollar increase in net interest income for the second quarter of 2002, as
compared to the second quarter of 2001, can be attributed to the net
positive effect of $1.2 million related to the increase in volume and the
net positive effect of $0.1 million related to the decline in interest
rates. On a fully taxable equivalent basis, the $2.3 million increase in
net interest income for the six months ended June 30, 2002, as compared to
the six months ended June 30, 2001, can be attributed to the net positive
effect of $2.0 million related to the increase in volume and the net
positive effect of $0.3 million related to the decline in interest rates.
Provision for Loan Losses
The provision for loan losses for the quarter ended June 30, 2002 was
$345,000 compared to $225,000 for the second quarter of 2001, a 53%
increase. For the first six months of 2002, the provision for loan losses
was $660,000 compared to $515,000 for the first six months of 2001. The
provision reflects the amount deemed appropriate by management to provide
an adequate reserve to meet the present risk characteristics of the loan
portfolio. The $145,000 increase in the provision between the six-month
period ended June 30, 2002 and the six-month period ended June 30, 2001 is
the result of the Company's efforts to maintain its asset quality ratios
in light of the continued growth in the Company's loan portfolio. Please
see further discussion under the caption "Allowance for Loan Losses."
Other Income
Total other income for the three months ended June 30, 2002 increased
10.5% over the same period in 2001, to $2.1 million from $1.9 million and
19.4% for the six-month period to $4.3 million in 2002 from $3.6 million
in 2001.
Included in other income for 2002 is a $16,000 gain on the sale of
approximately $5.0 million in portfolio mortgage loans in June, a $17,000
loss on the replacement of several ATMs for technological reasons in May,
a $109,000 gain on the sale of approximately $9.2 million in portfolio
mortgage loans in January, and a $22,000 gain on the sale of a single-
family home owned by the Company in March. Included in other income for
2001 is a $40,000 net gain on the sale of approximately $4.9 million of
portfolio mortgage loans in May.
Customer service fees increased 17.3% for the second quarter of 2002,
as compared to the same period in 2001, to $312,000 from $266,000. For
the six-month period ended June 30, 2002, customer service fees increased
24.0%, as compared to the same period in 2001, to $584,000 from $471,000.
These increases are primarily due to an expanded customer base, new
services, and a new fee-pricing schedule.
The Company's primary source of other income is commissions and other
revenue generated through sales of insurance products by the Bank's
insurance subsidiary, Essick & Barr, Inc. Revenues from insurance
operations totaled $1,038,000 for the second quarter of 2002 compared to
$987,000 for the same period in 2001, an increase of 5.2%. Revenues for
the six-month period ended June 30, 2002 totaled $2,082,000 compared to
$1,864,000 for the same period in 2002, an increase of 11.7%. These
increases are attributable to the Company's continuing efforts to
cultivate new business relationships.
Income from mortgage banking activities increased slightly for the
second quarter of 2002 as compared to the second quarter of 2001, to
$213,000 from $204,000. However, income from mortgage banking activities
for the six months ended June 30, 2002 increased to $486,000 from $379,000
for the six months ended June 30, 2001, or by 28.2%. These increases are
primarily due to continuing customer demand for mortgage loans as a result
of lower interest rates and the Bank's continuing ability to sell the
mortgages in the secondary market.
Revenues generated by the Bank's investment subsidiaries also
increased slightly for the second quarter of 2002 as compared to the
second quarter of 2001, to $185,000 from $184,000. For the six months
ended June 30, 2002, however, overall revenues declined, when compared to
the six months ended June 30, 2001, by 9.4%, to $346,000 from $382,000.
This decline is primarily the result of continued difficulties in
generating investment revenues in light of market conditions and continued
negative investor sentiment.
Other Expense
Other expense for the three months ended June 30, 2002 was $4.5
million compared to $3.7 million for 2001, an increase of 21.6%. Other
expense for the first six months of 2002 was $8.6 million compared to $7.4
million in 2001, an increase of 16.2%.
Salary and benefits expense, the largest component in the other
expense category, increased by $0.4 million, or 21.1%, for the second
quarter of 2002 as compared to the second quarter of 2001, to $2.3 million
from $1.9 million. For the six months ended June 30, 2002, salary and
benefits expense increased by $0.6 million, or 15.4%, to $4.5 million from
$3.9 for the six months ended June 30, 2001. These increases are
primarily the result of an increase in the number of full time equivalent
employees, to 196 at June 30, 2002 from 170 at June 30, 2001, as the
Company continues to grow; overall merit increases applied to base
salaries; and increase in employee health insurance costs consistent with
national trends.
Occupancy and equipment expense for the second quarter of 2002 was
$673,000, a $143,000 or 27.0% increase over the $530,000 for the second
quarter of 2001. For the first six months of 2002, occupancy and
equipment expense was $1,311,000, a $236,000, or 22%, increase over the
first six months of 2001. This increase is primarily attributable to the
addition and related renovations of three financial service centers opened
in July 2001, December 2001, and May 2002; renovations to the Company's
operations center in Leesport; and costs associated with the Company's
newly-constructed, leased executive and administrative office building,
which was occupied in June 2001.
Computer & processing services expenses increased 24.0%, to $346,000
for the second quarter of 2002 from $279,000 for the same period in 2001.
For the six months ended June 30, 2002, computer & processing services
expenses increased 22.5%, to $681,000 from $556,000 for the same period in
2001. Costs incurred during the first six months of 2002 to convert and
improve data communication lines among all the Company's locations
contributed to the majority of this increase. As the process is completed
during the third quarter of 2002, the Company expects data communication
costs to decline. Also contributing to the increase is the overall growth
of the Company and the accompanying increases in demand for services, and
fee increases imposed by outside processors.
Also impacting non-interest expenses for the second quarter of 2002
and the six months ended June 30, 2002 were $67,000 and $133,000
decreases, respectively, as a result of the cessation of goodwill
amortization in connection with the adoption of Financial Accounting
Standards Board Statement No. 142 on January 1, 2002.
Income Taxes
The effective income tax rate for the Company for the quarter ended
June 30, 2002 was 27.7% compared to 27.1% for the quarter ended June 30,
2001. For the first six months of 2002 the effective income tax rate was
27.5% compared to 24.6% for the first six months of 2001. The effective
tax rate for the second quarter of 2002 was higher than the rate for the
second quarter of 2001 as the result of a decline in tax-advantaged
interest income as a percentage of net income before taxes, from 25.1% for
the quarter ended June 30, 2001 to 15.2% for the quarter ended June 30,
2002. The effective tax rate for the six months ended June 30, 2002 was
higher than the rate for the six months ended June 30, 2001 also as the
result of the decline in tax-advantaged interest income as a percentage of
net income before taxes, from 31.1% to 16.1%.
In addition, adoption of FAS No. 142, Goodwill and Other Intangible
Assets, on January 1, 2002 decreased the Company's effective tax rate by
1.5% for the second quarter of 2002 as compared to the second quarter of
2001 and by 1.4% for the six months ended June 30, 2002 as compared to the
same period in 2001.
Financial Condition
The total assets of the Company at June 30, 2002 were $528.5 million,
an increase of approximately $25 million, or 5%, since December 31, 2001.
Securities Available for Sale
Investment securities available for sale increased 4.4% to $153.5
million at June 30, 2002 from $147.0 million at December 31, 2001.
Investment securities are used to supplement loan growth as necessary, to
generate interest and dividend income, to manage interest rate risk, and
to provide liquidity.
Loans
Total loans increased to $322.8 million at June 30, 2002 from $301.9
million at December 31, 2001, an increase of $20.9 million, or 6.9%.
The following summarizes the components of the Company's loan
portfolio:
June 30,2002 December 31, 2001
------------ -----------------
(In thousands)
Residential real estate $103,999 $109,435
Commercial 99,070 111,772
Commercial, secured by real
estate 87,609 54,799
Consumer, net of unearned
income 13,215 11,376
Home equity lines of credit 18,864 14,541
-------- --------
Total Loans 322,757 301,923
Allowance for loan losses (4,123) (3,723)
-------- --------
Loans, net of allowance
for loan losses $318,634 $298,200
======== ========
Commercial loans increased to $186.7 million at June 30, 2002 from
$166.6 million at December 31, 2001, an increase of $20.1 million, or
12.1%. This increase underscores the Company's continuing focus on making
higher yielding commercial loans to small and medium sized businesses in
our market area.
In addition, home equity lines of credit increased to $18.9 million
at June 30, 2002 from $14.5 million at December 31, 2001, an increase of
$4.4 million, or 30.3%. This increase is primarily the continuing result
of successful home equity lending promotions.
Loans secured by residential real estate (including fixed-term home
equity lending products) decreased $5.4 million, or 5%, between December
31, 2001 and June 30, 2002, from $109.4 million to $104.0 million. This
decline is mainly the result of the sale of approximately $5.0 million of
fixed-rate, portfolio residential mortgages into the secondary market in
the second quarter of 2002. The sale of these mortgages in the secondary
market reflects the Company's continuing financial management strategy of
de-emphasizing the retention of such loans for its portfolio.
Allowance for Loan Losses
The allowance for loan losses at June 30, 2002 was $4.1 million
compared to $3.7 million at December 31, 2001. Additions to the allowance
are made from time to time based upon management's assessment of credit
quality factors existing at that time. The Company performs a review of
the credit quality of its loan portfolio on a monthly basis to determine
the adequacy of the allowance for loan losses. The allowance at June 30,
2002 was 1.28% of outstanding loans compared to 1.35% of outstanding loans
at June 30, 2001, and 1.23% of outstanding loans at December 31, 2001.
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. Loans deemed to be uncollectible are charged against the
allowance for loan losses, and subsequent recoveries, if any, are credited
to the allowance. Management regularly assesses the adequacy of the
allowance by performing an ongoing evaluation of the loan portfolio,
including such factors as charge-off history, the level of delinquent
loans, the current financial condition of specific borrowers, the value of
any underlying collateral, risk characteristics in the loan portfolio,
local and national economic conditions, and other relevant factors.
Significant loans are individually analyzed, while other smaller balance
loans are evaluated by loan category. This evaluation is inherently
subjective as it requires material estimates that may be susceptible to
change. Based upon the results of such reviews, management believes that
the allowance for loan losses at June 30, 2002 was adequate to absorb
credit losses inherent in the portfolio at that date.
The following table shows the activity in the Company's allowance for
loan losses:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2002 2001 2002 2001
---- ---- ---- ----
(In thousands) (In thousands)
Loans outstanding at end of period
(net of unearned income) $322,757 $292,992 $322,757 $292,992
Average balance of loans outstanding
during the period 322,440 291,861 317,516 288,437
Balance of allowance for loan losses,
beginning of period 3,891 3,803 3,723 3,571
Loans charged-off:
Commercial, financial and agricultural 65 24 164 63
Real estate - mortgage 16 32 55 70
Consumer 50 25 99 52
-------- -------- -------- --------
Total loans charged-off 131 81 318 185
Recoveries of loans previously charged-off
Commercial, financial and agricultural (6) - (37) (42)
Real estate - mortgage (6) - (9) -
Consumer (6) (5) (12) (9)
-------- -------- -------- --------
Total recoveries (18) (5) (58) (51)
-------- -------- -------- --------
Net loans charged-off 113 76 260 134
Provision for loan losses 345 225 660 515
-------- -------- -------- --------
Balance, end of period $ 4,123 $ 3,952 $4,123 $3,952
-------- -------- -------- --------
Net charge-offs to average loans .04% .03% 0.08% 0.05%
Allowance for loan losses to loans outstanding 1.28% 1.35% 1.28% 1.35%
The following table summarizes the Company's non-performing assets:
June 30, 2002 December 31, 2001
------------- -----------------
(In thousands)
Non-accrual loans
Real estate - mortgage $ 153 $ 215
Consumer - 5
Commercial, financial and agricultural 379 531
------ ------
Total 532 751
Loans past due 90 days or more and still accruing interest
Real estate - mortgage 187 -
Consumer - 8
Commercial, financial and agricultural 121 56
------ ------
Total 308 64
Troubled debt restructurings 115 116
------ ------
Total non-performing loans 955 931
Other real estate owned 59 54
------ ------
Total non-performing assets $1,014 $ 985
====== ======
Non-performing loans to total loans .30% 0.31%
Non-performing assets to total loans plus OREO .31% 0.33%
Premises & Equipment
Premises and equipment, net of accumulated depreciation and
amortization, increased $1.2 million, or 12.5%, between December 31, 2001
and June 30, 2002, to $10.8 million from $9.6 million.
Major additions to this category in 2002 include: the purchase of
property adjacent to the Hamburg financial center for $202,000 for much
needed expansion; the purchase of property in Exeter Township, Berks
County, Pennsylvania for $740,000 for the construction of a new financial
center; expenditures for furniture and equipment totaling approximately
$87,000 for the temporary financial center established in Exeter Township
until the aforementioned construction is completed.
In addition, the Company received approval during the second quarter
of 2002 from the Federal Deposit Insurance Corporation and the
Pennsylvania Department of Banking to construct a new branch in South
Heidelberg Township, Berks County, Pennsylvania.
Deposits
Total deposits at June 30, 2002 were $373.0 million compared to
$331.6 million at December 31, 2001, an increase of $41.4 million, or
12.5%.
The following summarizes the components of the Company's deposit
liabilities:
June 30, 2002 December 31, 2001
------------- -----------------
(In thousands)
Demand, non-interest bearing $ 55,876 $ 43,476
Demand, interest bearing 116,728 96,672
Savings 51,362 41,338
Time, $100,000 and over 23,225 22,906
Time, other 125,842 127,185
-------- --------
Total deposits $373,033 $331,577
======== ========
Factors contributing to the overall increase in total deposits
include: successful promotional programs run throughout the first six
months of 2002; the opening of new branches in December 2001, and May
2002; and merger activity in our market area. The decrease in other time
deposits of $1.3 million, or
0.9%, reflects our customers' uncertainty about longer-term interest rate
movement and our efforts to reduce the cost of funds by reducing our
reliance on higher rate certificates of deposit accounts.
Borrowings
Total debt decreased $19.8 million, or 16.4%, to $101.0 million at
June 30, 2002 from $120.8 million at December 31, 2001. Federal funds
purchased declined 100.0% to $0 at June 30, 2002 from $32.5 million at
December 31, 2001. The average balance of federal funds purchased for the
first six months of 2002 was $5.0 million. The repayment of these funds
throughout the six-month period ended June 30, 2002 was accomplished using
the proceeds of long-term debt and increases in deposit accounts.
Long-term debt, composed of borrowings with the Federal Home Loan
Bank, increased $13.1 million between December 31, 2001 and June 30, 2002.
The additional borrowings were made to take advantage of relatively low
long-term interest rates.
Off Balance Sheet Commitments
The Bank is a 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 is as follows:
June 30, December 31,
2002 2001
-------- ------------
(In thousands)
Commitments to grant loans $11,442 $12,820
Unfunded commitments under
lines of credit 79,041 49,696
Outstanding letters of credit 3,499 2,070
Investment in Leesport Mortgage LLC
In May 2002, the Company's subsidiary, Leesport Bank, jointly formed
Leesport Mortgage LLC with a real estate company. Leesport Mortgage LLC
was formed to provide mortgage brokerage services, including, without
limitation, any activity in which a mortgage broker may engage. It is
operated as a permissible "affiliated business arrangement" within the
meaning of the Real Estate Settlement Procedures Act of 1974. Leesport
Bank's initial investment was $15,000.
Capital
Total shareholders' equity increased $2.3 million to $47.5 million at
June 30, 2002 from $45.2 million at December 31, 2001. The increase is
the net result of net income for the period of $2.2 million less dividends
declared of $0.96 million, proceeds of $259,000 from the issuance of
shares of common stock under the Company's employee and director stock
plans, and net unrealized gains on securities available for sale, net of
tax, of $791,000.
Federal bank regulatory agencies have established certain capital-
related criteria that must be met by banks and bank holding companies.
The measurements that incorporate the varying degrees of risk contained in
the Banks' balance sheets and exposure to off-balance sheet commitments
were established to provide a framework for comparing different
institutions.
As required by 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 1 capital consists of common
stockholders' equity plus mandatory redeemable capital securities less
intangible assets, and Tier II capital includes Tier I capital plus 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 and Tier II capital.
June 30, 2002 December 31, 2001
------------- -----------------
(In thousands)
Tier I Capital:
Total Equity Capital $47,519 $45,221
Less: net unrealized gains
(losses) on available for sale
securities 1,050 259
Mandatory redeemable capital securities 5,004 5,000
Less: disallowed goodwill and other
intangible assets 4,362 4,346
------- -------
Tier I Capital 47,111 45,616
------- -------
Tier II Capital:
Allowance for loan losses includible
in Tier II capital 4,123 3,722
Unrealized gains on available for sale
equity securities includible in
Tier II capital 93 -
------- -------
Allowable Tier II Capital 4,216 3,722
------- -------
Total Risk-based Capital $51,327 $49,338
======= =======
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 Tier I capital less intangible assets, to average
quarterly assets less intangible assets. The leverage ratio at June 30,
2002, was 9.30% compared to 10.03% at December 31, 2001. The decrease in
this ratio resulted primarily from the increase in deposits, which in turn
increased average total assets by 11.4%, while Tier I capital only
increased by 3.3%. The mandatory redeemable securities are included for
regulatory purposes as Total I capital with certain limiting restrictions.
At June 30, 2002, the entire amount of these securities was allowable to
be included as Tier I capital for the Company. For both periods, the
capital ratios were above minimum regulatory guidelines.
On March 23, 2000, the Company established First Leesport Capital
Trust I, in which the Company owns all of the common equity. The Trust
issued $5 million of mandatory redeemable capital securities. These
debentures are the sole asset of the Trust. These securities must be
redeemed in March 2030 and may be redeemed earlier in the event that the
interest expense becomes non-deductible for federal income tax purposes or
if the treatment of these securities is no longer qualified as Tier I
capital for the Company. The securities carry an interest rate of
10.875%.
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 following table sets forth the Company's capital ratios:
Minimum Minimum Amount
Amount To Be Well
For Capital Capitalized Under
Adequacy Prompt Corrective
Actual Purposes Action Provisions
Amount Ratio Amount Ratio Amount Ratio
(Amounts In Thousands)
As of June 30, 2002:
Total capital (to risk-weighted assets):
Leesport Financial Corp. $51,327 14.26% $28,792 8.00% $35,990 10.00%
Leesport Bank 47,278 13.23 28,584 8.00 35,730 10.00
Tier I capital (to risk-weighted assets):
Leesport Financial Corp. 47,111 13.09 14,396 4.00 21,594 6.00
Leesport Bank 43,144 12.08 14,291 4.00 21,438 6.00
Tier I capital (to average assets):
Leesport Financial Corp. 47,111 9.30 20,262 4.00 25,328 5.00
Leesport Bank 43,144 8.59 20,100 4.00 25,126 5.00
As of December 31, 2001:
Total capital (to risk-weighted assets):
Leesport Financial Corp. $49,338 14.78% $26,705 8.00% $33,381 10.00%
Leesport Bank 33,520 10.13 26,474 8.00 33,092 10.00
Tier I capital (to risk-weighted assets):
Leesport Financial Corp. 45,616 13.67 13,352 4.00 20,029 6.00
Leesport Bank 29,798 9.00 13,237 4.00 19,856 6.00
Tier I capital (to average assets):
Leesport Financial Corp. 45,616 10.03 18,191 4.00 22,739 5.00
Leesport Bank 29,798 6.62 17,994 4.00 22,493 5.00
Liquidity and Interest Rate Sensitivity
The banking industry has been required to adapt to an environment in
which interest rates may be volatile and in which deposit deregulation has
provided customers with the opportunity to invest in liquid, interest
rate-sensitive deposits. The banking industry has adapted to this
environment by using a process known as asset/liability management.
Adequate liquidity means the ability to obtain sufficient cash to
meet all current and projected needs promptly and at a reasonable cost.
These needs include deposit withdrawal, liability runoff, and increased
loan demand. The principal sources of liquidity are deposit generation,
overnight federal funds transactions with other financial institutions,
investment securities portfolio maturities and cash flows, and maturing
loans and loan payments. The Bank can also package and sell residential
mortgage loans into the secondary market. Other sources of liquidity are
term borrowings from the Federal Home Loan Bank, and the discount window
of the Federal Reserve Bank. In view of all factors involved, the Bank's
management believes that liquidity is being maintained at an adequate
level.
At June 30, 2002, the Company had a total of $101 million or 19.1% of
total assets in borrowed funds. These borrowings included $20.7 million
of repurchase agreements with customers, $75.3 million of term borrowing
with the Federal Home Loan Bank having final maturities ranging from July
2002 through December 2009 at interest rates ranging from 1.89% to 6.63%.
At June 30, 2002, the Company had a maximum borrowing capacity with the
Federal Home Loan Bank of approximately $136 million.
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 on assets and
liabilities. With the exception of the majority of residential mortgage
loans, loans generally are written having terms that provide for a
readjustment of the interest rate at specified times during the term of
the loan. In addition, interest rates offered for all types of deposit
instruments are reviewed weekly and are established on a basis consistent
with funding needs and maintaining a desirable spread between cost and
return. The Bank does not use reverse repurchase agreements, interest
rate swaps, or other derivative products in its asset/liability management
practices at this time.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes in the Company's assessment of
its sensitivity to market risk since its presentation in the Annual Report
on Form 10-K for the year ended December 31, 2002, filed with the SEC.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to Vote of Security Holders -
At the annual meeting of shareholders held on April 23, 2002,
shareholders of the Company ratified the appointment of Beard Miller
Company LLP as the Company's independent auditors for the year ending
December 31, 2002. The Company's shareholders also elected Charles J.
Hopkins, William J. Keller, Raymond H. Melcher, Jr. and Roland C. Moyer as
Class II directors of the Company to serve until 2005. The votes cast in
such matters were as follows:
Abstentions/
For Against Broker Non-Votes
--------- ------- ----------------
Ratification of Beard
Miller Company LLP as
independent auditors 2,602,635 18,854 17,183
There was no solicitation in opposition to the nominees of the Board
of Directors. The votes cast in the election with respect to each
individual nominee were as follows:
Nominee For Withheld
- ----------------------- --------- --------
Charles J. Hopkins 2,600,849 37,823
William J. Keller 2,597,689 40,983
Raymond H. Melcher, Jr. 2,569,812 68,860
Roland C. Moyer 2,594,545 44,127
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Title
3.1 Articles of Incorporation of the Company
(Incorporated by reference to Exhibit 3.1 to
the Company's Annual Report on Form 10-K
for the year ended December 31, 2000.)
3.2 Bylaws of the Company (Incorporated by
reference to Exhibit 3.2 to the Company's
Annual Report on Form 10-K for the year
ended December 31, 2000.)
99.1 Certification of Chief Executive Officer
under Section 906 of the Sarbanes-Oxley Act
of 2002.
99.2 Certification of Chief Financial Officer
under Section 906 of the Sarbanes-Oxley Act
of 2002.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LEESPORT FINANCIAL CORP.
(Registrant)
Dated: August 14, 2002 By /s/Raymond H. Melcher, Jr.
-------------------------------
Raymond H. Melcher, Jr.
Chairman, President and Chief
Executive Officer
Dated: August 14, 2002 By /s/ Stephen A. Murray
-------------------------------
Stephen A. Murray
Senior Vice President and
Chief Financial Officer