U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-QSB
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2001
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 000-26499
STEELTON BANCORP, INC.
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(Exact name of Registrant as specified in its Charter)
Pennsylvania 25-1830745
- ------------------------------ ------------
(State or other jurisdiction of I.R.S. Employer Identification Number
incorporation or organization)
51 South Front Street, Steelton, Pennsylvania 17113
- --------------------------------------------- -------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (717) 939-1966
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Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
X Yes No
--- ---
As of July 31, 2001 there were 361,427 shares of the Registrant's
common stock, par value $ 0.10 per share, outstanding. The Registrant has no
other classes of common equity outstanding.
Transitional small business disclosure format:
Yes X No
--- ---
STEELTON BANCORP, INC.
STEELTON, PENNSYLVANIA
C O N T E N T S
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Page
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements................................................................................3
Consolidated Balance Sheets - as of
June 30, 2001 (unaudited) and December 31, 2000 (audited)...........................................3
Consolidated Statements of Income - for the three months and
six months ended June 30, 2001 and June 30, 2000 (unaudited)........................................4
Consolidated Statements of Stockholders' Equity - for the six
months ended June 30, 2001 and June 30, 2000 (unaudited)............................................5
Consolidated Statements of Cash Flows - for the six months ended
June 30, 2001 and June 30, 2000 (unaudited).........................................................6
Notes to Consolidated Financial Statements..........................................................8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................................................11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..................................................................................14
Item 2. Changes in Securities and Use of Proceeds..........................................................14
Item 3. Defaults Upon Senior Securities....................................................................14
Item 4. Submission of Matters to a Vote of Security Holders................................................14
Item 5. Other Information..................................................................................14
Item 6. Exhibits and Reports on Form 8-K...................................................................15
PART I, ITEM 1, FINANCIAL STATEMENTS
STEELTON BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
- ----------------------------------------------------------------------------------------------------------------------------
June 30, December 31,
June 30, 2001 and December 31, 2000 2001 2000
- ----------------------------------------------------------------------------------------------------------------------------
(Unaudited)
ASSETS
Cash and due from banks $ 555,065 $ 278,524
Interest bearing deposits in other banks 2,891,263 1,140,038
------------------------------------------
Cash and cash equivalents 3,446,328 1,418,562
Investment securities available for sale 12,448,486 10,007,980
Investment securities held to maturity (fair values 2001 $ 2,739,469;
2000 $ 5,341,664) 2,717,696 5,380,735
Loans receivable, net of allowance for loan losses 2001 $ 153,709;
2000 $ 149,603 39,083,390 39,769,076
Federal Home Loan Bank stock, at cost 989,200 1,030,700
Bank premises and equipment, net 1,579,847 1,449,585
Accrued interest receivable and other assets 1,732,270 1,688,395
------------------------------------------
Total assets $ 61,997,217 $ 60,745,033
==========================================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits $ 35,478,515 $ 34,133,250
Advances from Federal Home Loan Bank 19,048,657 19,398,854
Advances from borrowers for insurance and taxes 377,832 305,662
Accrued interest payable and other liabilities 342,444 262,479
------------------------------------------
Total liabilities 55,247,448 54,100,245
------------------------------------------
STOCKHOLDERS' EQUITY
Preferred stock, no par value; 2,000,000 shares authorized;
none issued and outstanding -
Common stock, $ .10 par value; 8,000,000 shares authorized;
issued 2001 and 2000 404,250 shares 40,425 40,425
Surplus 3,678,543 3,665,547
Retained earnings 3,942,320 3,889,722
Unearned stock compensation (376,168) (422,598)
Treasury stock, at cost, 2001 42,823 shares; 2000 41,398 shares (499,009) (478,826)
Accumulated other comprehensive income (loss) (36,342) (49,482)
------------------------------------------
Total stockholders' equity 6,749,769 6,644,788
------------------------------------------
Total liabilities and stockholders' equity $ 61,997,217 $ 60,745,033
==========================================
See Notes to Consolidated Financial Statements.
-3-
STEELTON BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
- -------------------------------------------------------------------------------------------------------------------------------
For the Three and Six Months Ended June 30, 2001 Three Months Ended Six Months Ended
and June 30, June 30,
2000 (Unaudited) 2001 2000 2001 2000
- -------------------------------------------------------------------------------------------------------------------------------
Interest and dividend income:
Loans $ 759,522 $ 731,069 $ 1,549,849 $ 1,406,350
Securities:
Taxable 208,657 234,918 445,554 471,190
Tax exempt 21,914 22,036 43,878 43,904
Dividends on FHLB stock 16,647 23,476 34,267 43,028
Other 19,375 16,053 41,462 34,228
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Total interest and dividend income 1,026,115 1,027,552 2,115,010 1,998,700
--------------------------------------------------------------------------
Interest expense:
Deposits 384,539 371,290 784,906 736,523
Advances from Federal Home Loan Bank 294,122 266,229 611,649 467,133
--------------------------------------------------------------------------
Total interest expense 678,661 637,519 1,396,555 1,203,656
--------------------------------------------------------------------------
Net interest income 347,454 390,033 718,455 795,044
Provision for loan losses 4,500 1,000 7,000 1,000
--------------------------------------------------------------------------
Net interest income after provision
for loan losses 342,954 389,033 711,455 794,044
--------------------------------------------------------------------------
Noninterest income:
Fees and service charges 45,580 47,007 83,200 84,565
Income from bank-owned life insurance 13,430 - 26,860 8,206
Other 15,261 24,719 33,343 27,256
Gain on sale of investments 11,619 - 5,842 286
--------------------------------------------------------------------------
Total noninterest income 85,890 71,726 149,245 120,313
--------------------------------------------------------------------------
Noninterest expense:
Salaries and employee benefits 187,710 204,790 379,886 368,914
Occupancy 28,026 24,786 56,469 50,496
Equipment 61,659 41,888 122,086 81,506
Professional fees 29,068 22,982 63,992 52,174
Advertising 12,921 14,943 19,614 27,643
Other 58,074 55,030 118,317 115,688
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Total noninterest expense 377,458 364,419 760,364 696,421
--------------------------------------------------------------------------
Income before income taxes 51,386 96,340 100,336 217,936
Income taxes 6,723 30,823 13,784 63,083
--------------------------------------------------------------------------
Net income $ 44,663 $ 65,517 $ 86,552 $ 154,853
==========================================================================
Per share data:
Net income, basic $ 0.14 $ 0.19 $ 0.27 $ 0.44
==========================================================================
Net income, diluted $ 0.13 $ 0.18 $ 0.25 $ 0.42
==========================================================================
See Notes to Consolidated Financial Statements.
-4-
STEELTON BANCORP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------------------------------------------
For the Six Months Ended June 30, 2001 and 2000 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated
Other Total
Common Retained Unearned Treasury Comprehensive Stockholders'
Stock Surplus Earnings Compensation Stock Income (Loss) Equity
-------------------------------------------------------------------------------------------------
Balance, December 31, 1999 $ 38,500 $ 3,457,015 $ 3,863,701 $ (308,000) $ - $ (279,138) $ 6,772,078
-------------
Comprehensive income:
Net income - - 154,853 - - - 154,853
Net change in unrealized
losses on available for
sale securities - - - - - - (9,455) (9,455)
-----------
Total comprehensive income 145,398
-----------
Stock purchased for treasury
and benefit plans - - - - (387,540) - (387,540)
Earned compensation - 2,695 - 42,594 - - 45,289
Cash dividends declared
($.08 per share) - - (25,808) - - - (25,808)
------------------------------------------------------------------------------------------------
Balance, June 30, 2000 $ 38,500 $ 3,459,710 $ 3,992,746 $ (265,406) $ (387,540) $ (288,593) $ 6,549,417
================================================================================================
Balance, December 31, 2000 $ 40,425 $ 3,665,547 $ 3,889,722 $ (422,598) $ (478,826) $ (49,482) $ 6,644,788
-------------
Comprehensive income:
Net income - - 86,552 - - - 86,552
Net change in unrealized
losses on available for
sale securities - - - - - 13,140 13,140
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Total comprehensive income 99,692
-------------
Stock purchased for treasury
and benefit plans - - - - (20,183) - (20,183)
Earned compensation - 12,996 - 46,430 - - 59,426
Cash dividends declared
($ .09 per share) - - (33,954) - - - (33,954)
------------------------------------------------------------------------------------------------
Balance, June 30, 2001 $ 40,425 $ 3,678,543 $ 3,942,320 $ (376,168) $ (499,009) $ (36,342) $ 6,749,769
================================================================================================
See Notes to Consolidated Financial Statements.
-5-
STEELTON BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
- ----------------------------------------------------------------------------------------------------------------------------
For the Six Months Ended June 30, 2001 and 2000 (Unaudited) 2001 2000
- ----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 86,552 $ 154,853
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 7,000 1,000
Depreciation 36,264 37,335
Deferred benefit plan expense 55,411 33,495
Earnings on bank-owned life insurance (26,860) (8,206)
Deferred income taxes (40,216) (11,324)
Decrease (increase) in accrued interest receivable 74,778 (56,555)
Increase in accrued interest payable 19,264 55,483
Other 19,044 (88,862)
-----------------------------------------
Net cash provided by operating activities 231,237 117,219
-----------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Available for sale securities:
Sales 3,389,482 271,725
Maturities 3,266,747 250,000
Purchases (6,213,278) (762,384)
Held to maturity securities:
Maturities 289,853 160,313
Purchases (508,750) -
Net (increase) decrease in loans 678,686 (6,232,187)
Purchase of bank-owned life insurance - (1,000,000)
Purchase of bank premises and equipment (166,526) (121,518)
Redemption (purchase) of Federal Home Loan Bank stock 41,500 (338,900)
-----------------------------------------
Net cash provided by (used in) investing activities 777,714 (7,772,951)
-----------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 1,345,265 224,918
Net increase (decrease) in advances from borrowers for insurance and taxes 72,170 139,506
Advances from Federal Home Loan Bank 9,681,200 15,000,000
Repayment of Federal Home Loan Bank advances (10,031,397) (9,248,896)
Stock purchased for treasury and benefit plans (20,183) (387,540)
Payment of dividends (28,240) (30,800)
-----------------------------------------
Net cash provided by financing activities 1,018,815 5,697,188
-----------------------------------------
Increase (decrease) in cash and cash equivalents 2,027,766 (1,958,544)
Cash and cash equivalents:
Beginning 1,418,562 3,287,791
-----------------------------------------
Ending $ 3,446,328 $ 1,329,247
=========================================
-6-
STEELTON BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------
For the Six Months Ended June 30, 2001 and 2000 (Unaudited) 2001 2000
- ----------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest $ 1,377,291 $ 1,111,121
=========================================
Income taxes $ 54,000 $ 86,407
=========================================
See Notes to Consolidated Financial Statements.
-7-
STEELTON BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1
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BASIS OF PRESENTATION
The accompanying condensed financial statements were prepared in
accordance with instructions for Form 10-QSB and, therefore, do not
include all information necessary for a complete presentation of
financial condition, results of operations and cash flows in conformity
with generally accepted accounting principles. However, all
adjustments, consisting of normal recurring accruals that, in the
opinion of management, are necessary for a fair presentation of the
financial statements have been included. The results of operations for
the period ended June 30, 2001 are not necessarily indicative of the
results that may be expected for the fiscal year ending December 31,
2001 or any other period. The condensed financial statements include
the accounts of Steelton Bancorp, Inc. (the "Corporation"), its
wholly-owned subsidiary, Mechanics Savings Bank (the "Bank"), and the
Bank's wholly-owned subsidiary, Baldwin Investment Corporation. The
Corporation's business is conducted principally through the Bank.
Through its main office located in Steelton and its branch office
located in Lower Swatara Township, Pennsylvania, the Bank provides
retail banking services, with an emphasis on one-to-four family
residential mortgages.
2
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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 Corporation adopted the statement on
January 1, 2001 and transferred securities having a carrying value of $
2,880,464 and fair value of $ 2,849,864 from held to maturity to
available for sale.
-8-
STEELTON BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2
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NEW ACCOUNTING STANDARDS (CONTINUED)
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 was effective for recognition and reclassification of
collateral and for disclosures relating to securitization transactions
and collateral for fiscal years ending after March 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
did not have a significant impact on the Corporation.
In July of 2001, the Financial Accounting Standards Board issued
Statement No. 141, "Business Combinations", and Statement No. 142,
"Goodwill and Other Intangible Assets." Statement No. 141 requires all
business combinations to be accounted for using the purchase method of
accounting as use of the pooling-of-interests method is prohibited. In
addition, this Statement requires that negative goodwill that exists
after the basis of certain acquired assets is reduced to zero should be
recognized as an extraordinary gain. The provisions of this Statement
apply to all business combinations initiated after June 30, 2001.
Statement No. 142 prescribes that goodwill associated with a business
combination and intangible assets with an indefinite useful life should
not be amortized but should be tested for impairment at least annually.
The Statement requires intangibles that are separable from goodwill and
that have a determinable useful life to be amortized over the
determinable useful life. The provisions of this Statement will become
effective for the Bank in January of 2002. Upon adoption of this
statement, goodwill and other intangible assets arising from
acquisitions completed before July 1, 2001 should be accounted for in
accordance with the provisions of this statement. This transition
provision could require a reclassification of a previously separately
recognized intangible to goodwill and vice versa if the intangibles in
question do not meet the new criteria for classification as a
separately recognizable intangible.
Adoption of these statements is not expected to have a material impact
on the Corporation's financial condition or results of operations.
-9-
STEELTON BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
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EARNINGS PER SHARE
The following is a reconciliation of the numerators and denominators of
the basic and diluted earnings per share computations for the period
ended June 30, 2001 and 2000. Shares for 2000 were adjusted for the
impact of a 5% stock dividend declared in November of 2000.
Three Months Ended Six Months Ended
June 30 June 30
2001 2000 2001 2000
-----------------------------------------------------------------------
Numerator, net income $ 44,663 $ 65,517 $ 86,552 $ 154,853
=======================================================================
Denominators:
Average basic shares outstanding 319,473 337,144 319,253 350,861
Average dilutive option effect 14,189 4,357 14,522 4,357
Average restricted stock effect 2,417 16,170 2,731 13,149
-----------------------------------------------------------------------
Average dilutive shares
outstanding 336,079 357,671 336,506 368,367
=======================================================================
Earnings per share:
Basic $ 0.14 $ 0.19 $ 0.27 $ 0.44
=======================================================================
Diluted $ 0.13 $ 0.18 $ 0.25 $ 0.42
=======================================================================
4
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RECLASSIFICATIONS
Certain amounts in the 2000 financial statements have been reclassified
to conform with the 2001 presentation. Such reclassifications had no
impact on reported net income.
-10-
PART I, ITEM 2, MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
The Corporation may from time-to-time make written or oral forward-looking
statements, including statements contained in the Corporation's filings with the
Securities and Exchange Commission (the "Commission") and its reports to
stockholders. Statements made in such documents, other than those concerning
historical information, should be considered forward-looking and subject to
various risks and uncertainties. Such forward-looking statements are made based
upon management's beliefs as well as assumptions made by, and information
currently available to, management pursuant to "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. The Corporation's actual
results may differ materially from the results anticipated in forward-looking
statements due to a variety of factors, including governmental monetary and
fiscal policies, deposit levels, loan demand, loan collateral values, securities
portfolio values and interest rate risk management; the effects of competition
in the banking business and changes in governmental regulations relating to the
banking industry. The Corporation cautions that such factors are not exclusive.
The Corporation does not undertake to update any forward-looking statements that
may be made from time-to-time by, or on behalf of, the Corporation.
Income Statement Performance
For the quarter and six months ended June 30, 2001, Steelton Bancorp reported
net income of $ 44,663 and $ 86,552, respectively, compared with $ 65,517 and $
154,853 for the same periods in 2000. The decline in net income for the current
period is primarily attributable to a 10% decline in net interest income as well
as increased levels of noninterest expense for the first six months of 2001.
The primary source of revenue for the corporation is net interest income, which
represents the difference between interest income recognized on interest-earning
assets such as loans and investments, and interest expense paid on
interest-bearing liabilities such as deposits and Federal Home Loan Bank
borrowings. Levels of net interest income are heavily dependent on the volume of
interest-earning assets and interest-bearing liabilities as well as the interest
rate environment and competitive conditions.
For the six months ended June 30, 2001, interest income increased 6% to $ 2.1
million from $ 2.0 million for the same period of 2000. The increase was
primarily driven by loan growth of $808,000 from June 30, 2000 to June 30, 2001.
The loan growth was offset by a $ 1 million investment in bank-owned life
insurance during the second half of 2000, which reduced earning asset levels and
therefore interest income in the first six months of 2001 compared to the same
period last year. For the quarter ended June 30, 2001, interest income declined
less than 1% compared to the same quarter ended June 30, 2000.
In total, for the quarter and six months ended June 30, 2001 interest expense
increased approximately $ 41,000 or 6.5% and $ 193,000 or 16%, respectively,
compared to June 30, 2000. The increase was attributable to an approximately 4%
increase year to date in average deposits and 19% increase year to date in FHLB
borrowings.
As a result of interest expense increasing to a greater extent than interest
income, net interest income declined $ 42,579 and $ 76,581, or 11% and 10% for
the quarter and six months ended June 30, 2001 respectively in comparison to the
same periods in 2000.
-11-
Income Statement Performance (Continued)
The provision for loan losses was $ 4,500 for the second quarter and $ 7,000 for
the first six months of 2001, compared to $ 1,000 for the quarter and year to
date period in 2000. The increase is attributable to an overall increase in
delinquent consumer and residential loans.
Noninterest income excluding securities gains or losses increased $ 23,376 or
19% for the first six months of 2001 and $ 2,545 or 4% for the quarter ended
June 30, 2001 in contrast to the same periods in 2000. The increase was
attributable to the above-mentioned investment in bank-owned life insurance,
which reduced interest income but increased other income.
Noninterest expense increased $ 63,943 or 9% and $ 13,039 or 4% in total from
the first six months and second quarter of 2001, respectively, to the same
periods of 2000. The most substantial increases occurred in equipment expense
due to the addition of a new ATM, the newly expanded drive-through facility of
the Steelton Office, and higher processing costs. In addition, other expense
increased due to professional fees incurred in the formation of a new
subsidiary, Baldwin Investment Corporation. Advertising declined due to fewer
promotions in 2001.
Income tax expense for the first six months of 2001 was $13,784, resulting in an
effective tax rate of 14% compared with 29% for 2000. Similarly, income tax
expense for the second quarter of 2001 of $ 6,723 resulted in an effective tax
rate of 13%, compared with 32% for the same quarter of 2000. Due to declining
levels of earnings, tax-exempt income on securities and bank-owned life
insurance became a larger portion of income before taxes, resulting in the
reduced effective tax rates for 2001.
Balance Sheet Analysis
Total assets increased by $ 1.2 million or 2% from December 31, 2000 to June 30,
2001. The increase was primarily attributable to a $ 2.1 million increase in
cash and equivalents, which was partially offset by a $ 681,580 decline in loans
for the same period. The increase in cash and equivalents was primarily
attributable to deposit growth and investments that were called prior to their
maturity dates. The decline in loans was due primarily to normal run-off that
was not replaced with new growth. The Corporation is not emphasizing loan growth
due to a desire to use available funds to reduce high cost borrowings. An
increase of available for sale securities and corresponding decline in held to
maturity securities of $ 2.9 million is attributable to the Corporation's
decision to transfer investments on January 1, 2001, as permitted by the
adoption of FAS 133.
Deposits increased approximately $ 1.3 million or 4% from December 31, 2000
until June 30, 2001. Conversely, advances from the FHLB decreased $ 350,197 or
2%. Steelton Bancorp's liquidity ratio as defined by OTS regulations was 34% at
June 30, 2001 compared with 27% at December 31, 2000. The Bank has the ability
to borrow funds from the Federal Home Loan Bank of Pittsburgh, if necessary, to
enhance its liquidity position. At June 30, 2001, the Bank could borrow an
additional $ 20 million from the FHLB based on qualifying collateral. Management
believes that liquidity is adequate to meet the borrowing and deposit needs of
its customers.
Stockholders' equity increased a total of approximately $ 105,000 from December
31, 2000 until June 30, 2001. Net income, the recognition of expense associated
with restricted stock and increases in the fair value of available for sale
securities all increased equity. Conversely, the Corporation repurchased
approximately 1,400 shares of common stock year to date in 2001, which reduced
equity by the cost of the repurchased shares of $ 20,000.
-12-
Balance Sheet Analysis (Continued)
During July of 2001, the Corporation communicated its offer to repurchase up to
90,000 shares of outstanding common stock, which represents approximately 25% of
total shares, from its shareholders. Under this offer, shareholders may sell
part or all of their shares to the Corporation for not less than $ 14.25, but
not more than $ 16.25 per share, for a total possible cost to the Corporation of
approximately $ 1.5 million. The price will be determined through a procedure
commonly called a "Modified Dutch Auction." The offer is set to expire August
16, 2001, unless extended. If the maximum number of shares are repurchased, the
Bank and Corporation will continue to exceed all required capital ratios to be
considered well capitalized. For additional information, refer to the Schedule
TO, and the Offer to Purchase filed as an Exhibit thereto, filed with the SEC on
July 19, 2001.
Regulatory capital ratios for the bank were as follows at June 30, 2001 compared
with December 31, 2000 and the minimum requirements:
6/30/01 12/31/00 Minimum Requirements
----------------------------------------------
Total Risk-based Capital 20.28% 19.03% 8.00%
Tier 1 Capital 19.76% 18.54% N/A
Leverage Ratio 9.13% 9.27% 4.00%
Asset Quality
The allowance for loan losses increased to $ 154,000 at June 30, 2001 from
approximately $ 150,000 at December 31, 2000. The increase was directly related
to the increase in loans delinquent 90 days or more. The level of loans 90 days
or more past due and nonaccrual loans increased to approximately 1.7% of loans
at June 30, 2001, from .53% at December 31, 2000. Management believes that the
allowance for loan losses was adequate at June 30, 2001 to absorb potential
losses within the loan portfolio.
-13-
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
From time to time, the Corporation and its subsidiary may be a party to
various legal proceedings incident to its or their business. At June 30, 2001,
there were no legal proceedings to which the Corporation or its subsidiary was a
party, or to which of any of their property was subject, which were expected by
management to result in a material loss.
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
None
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The Corporation's annual meeting of stockholders was held on April 18,
2001. Set forth below are the results of the matters voted on at such meeting:
1. The election as director of the nominees
listed with terms to expire in 2005
FOR WITHHELD
---- --------
Marino Falcone 278,899 0
-------------------
Richard E. Farina 289,399 0
-------------------
FOR AGAINST ABSTAIN
--- ------- -------
2. The ratification of the
Steelton Bancorp, Inc.
2000 Stock Option Plan. 215,461 42,956 105
--------------------------
3. The ratification of the
Mechanics Savings Bank
Restricted Stock Plan. 198,495 57,801 2,226
---------------------------
4. The ratification of the appointment
of Beard Miller Company LLP as the
Corporation's independent auditor for the
fiscal year ending December 31, 2001. 306,146 0 105
--------------------------
Item 5. Other Information
-----------------
On July 19, 2001, the Corporation commenced an issuer tender offer to
purchase up to 90,000 shares, or 25%, of its outstanding common stock.
Information regarding the
-14-
offer is set forth in the Corporation's Schedule TO filed with the SEC on July
19, 2001 and the Offer to Purchase filed as an exhibit thereto.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits.
None.
(b) Reports on Form 8-K
None.
- 15 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STEELTON BANCORP, INC.
Date: August 14, 2001 By:/s/ Harold E. Stremmel
-------------------------------------
Harold E. Stremmel
President and Chief Executive Officer
(Principal Executive Officer)
Date: August 14, 2001 By:/s/ Shannon Aylesworth
-------------------------------------
Shannon Aylesworth
Chief Financial Officer
(Principal Accounting Officer)