UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
------------------
OR
[ ] 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 0 - 20957
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SUN BANCORP, INC.
-----------------
(Exact name of registrant as specified in its charter)
New Jersey 52-1382541
- --------------------------------------------- ----------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification)
226 Landis Avenue, Vineland, New Jersey 08360
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(Address of principal executive offices)
(Zip Code)
(609) 691 - 7700
----------------
(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
$ 1.00 Par Value Common Stock 6,381,331 November 12, 1998
- ----------------------------- --------- -----------------
Class Number of shares outstanding Date
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SUN BANCORP, INC.
VINELAND, NEW JERSEY
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition (Unaudited)
at September 30, 1998 and December 31, 1997 2
Consolidated Statements of Income (Unaudited)
for the three months and nine months ended September 30, 1998 and 1997 3
Consolidated Statements of Cash Flows (Unaudited)
for the nine months ended September 30, 1998 and 1997 4
Notes to Consolidated Financial Statements (Unaudited) 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities and Use of Proceeds 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
SUN BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited) September 30, December 31,
1998 1997
---- ----
<S> <C> <C>
ASSETS
Cash and due from banks $ 33,733,999 $ 34,060,747
Federal funds sold 9,500,000 -
-------------- --------------
Cash and cash equivalents 43,233,999 34,060,747
Investment securities available for sale (amortized cost -
$613,461,646; 1998 and $576,045,766; 1997) 617,239,300 576,278,353
Loans receivable (net of allowance for loan losses -
$5,518,350; 1998 and $4,193,801; 1997) 517,047,009 427,761,049
Bank properties and equipment 25,272,452 24,479,854
Real estate owned, net 254,085 270,114
Accrued interest receivable 8,881,028 6,752,163
Excess of cost over fair value of assets acquired 24,104,400 26,174,146
Deferred taxes 450,721 1,314,043
Other assets 23,454,240 2,882,356
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TOTAL $1,259,937,234 $1,099,972,825
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits $ 806,230,849 $ 695,387,536
Advances from the Federal Home Loan Bank 11,200,000 75,000,000
Federal funds purchased 5,500,000
Securities sold under agreements to repurchase 326,081,181 235,813,503
Other liabilities 23,867,865 4,889,487
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Total liabilities 1,167,379,895 1,016,590,526
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Guaranteed preferred beneficial interest in subordinated debt 28,750,000 28,750,000
SHAREHOLDERS' EQUITY
Preferred stock, none issued - -
Common stock, $1 par value, 10,000,000 shares authorized,
issued and outstanding: 6,381,333 in 1998; and 4,013,791 in 1997 6,381,333 4,013,791
Surplus 39,168,889 38,850,245
Retained earnings 15,763,866 11,614,755
Net unrealized gain on securities available for sale, net of income taxes 2,493,251 153,508
-------------- --------------
Total shareholders' equity 63,807,339 54,632,299
-------------- --------------
TOTAL $1,259,937,234 $1,099,972,825
============== ==============
</TABLE>
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See notes to consolidated financial statements
2
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<TABLE>
<CAPTION>
SUN BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $13,178,689 $ 8,870,169 $34,656,646 $23,658,785
Interest on investment securities 9,846,047 3,612,713 27,408,691 6,905,332
Interest on federal funds sold 9,781 268,563 191,616 332,792
---------- ---------- ---------- ----------
Total interest income 23,034,517 12,751,445 62,256,953 30,896,909
---------- ---------- ---------- ----------
INTEREST EXPENSE:
Interest on deposits 6,549,002 4,582,168 18,409,178 11,138,384
Interest on short-term borrowed funds 4,601,981 1,508,491 12,276,574 2,818,927
Interest on guaranteed preferred beneficial interest in subordinated debt 718,802 726,374 2,159,073 1,551,606
Total interest expense 11,869,785 6,817,033 32,844,825 15,508,917
---------- ---------- ---------- ----------
Net interest income 11,164,732 5,934,412 29,412,128 15,387,992
---------- ---------- ---------- ----------
PROVISION FOR LOAN LOSSES 576,945 420,000 1,587,237 1,245,000
---------- ---------- ---------- ----------
Net interest income after provision for loan losses 10,587,787 5,514,412 27,824,891 14,142,992
---------- ---------- ---------- ----------
OTHER INCOME:
Service charges on deposit accounts 824,042 381,669 2,387,165 967,148
Other service charges 26,583 10,923 65,206 30,757
Gain on sale of loans 1,920 112,361
Gain on sale of investment securities 291,964 75,316 880,881 90,908
Other 276,288 129,402 680,117 283,625
---------- ---------- ---------- ----------
Total other income 1,420,797 597,310 4,125,730 1,372,438
---------- ---------- ---------- ----------
OTHER EXPENSES:
Salaries and employee benefits 4,245,843 2,048,481 10,956,484 5,645,473
Occupancy expense 901,412 462,615 2,434,075 1,171,208
Equipment expense 586,254 355,538 1,643,933 888,463
Professional fees and services 144,626 81,942 399,143 220,237
Data processing expense 534,415 359,398 1,615,862 1,051,856
Loss on sale of fixed assets 54,336 53,136
Amortization of excess of cost over fair value of assets acquired 960,880 424,560 2,866,059 893,380
Postage and supplies 208,019 131,411 571,606 321,441
Insurance 90,528 45,487 237,872 196,698
Other 955,454 463,530 2,452,353 1,316,619
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Total other expenses 8,627,431 4,427,298 23,177,387 11,758,511
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 3,381,153 1,684,424 8,773,234 3,756,919
INCOME TAXES 1,029,000 489,000 2,614,000 1,079,000
---------- ---------- ---------- ----------
NET INCOME $ 2,352,153 $ 1,195,424 $ 6,159,234 $ 2,677,919
========== ========== ========== ==========
Basic earnings per share $ 0.37 $ 0.26 $ 0.97 $ 0.58
========== ========== ========== ==========
Diluted earnings per share $ 0.33 $ 0.23 $ 0.86 $ 0.53
========== ========== ========== ==========
Weighted average shares 6,364,047 4,604,067 6,340,863 4,596,680
========== ========== ========== ==========
</TABLE>
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See notes to consolidated financial statements
3
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<TABLE>
<CAPTION>
SUN BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) For the Nine Months Ended September 30,
---------------------------------------
1998 1997
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<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 6,159,234 $ 2,677,919
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for loan losses 1,587,237 1,245,000
Provision for losses on real estate owned 15,000
Depreciation and amortization 588,396 475,059
Amortization of excess cost over fair value of assets acquired 2,866,059 893,380
Gain on sale of loans (112,361)
Gain on sale of investment securities available for sale (880,881) (90,908)
Loss on sale of bank properties and equipment 53,136
Deferred income taxes (342,002) (526,472)
Change in assets and liabilities which (used) provided cash:
Accrued interest and other assets (22,700,749) (5,594,589)
Accounts payable and accrued expenses 18,978,378 717,002
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Net cash provided by (used in) operating activities 6,143,311 (135,473)
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INVESTING ACTIVITIES:
Purchases of investment securities available for sale (185,403,778) (238,743,619)
Purchases of mortgage-backed securities available for sale (165,380,685)
Proceeds from maturities of investment securities available for sale 36,260,062 12,120,113
Proceeds from maturities of mortgage-backed securities available for sale 73,859,045
Proceeds from sale of investment securities available for sale 155,804,504 19,611,643
Proceeds from sale of mortgage-backed securities available for sale 48,620,131 12,904,591
Proceeds from sale of loans 3,302,708
Net increase in loans (94,029,065) (92,050,136)
Increase in loans resulting from branch acquisitions (34,479) (2,313,292)
Purchase of bank properties and equipment (1,557,978) (855,098)
Increase in bank properties and equipment resulting from branch acquisitions (117,294) (2,302,006)
Proceeds from sale of bank properties and equipment 31,887
Proceeds from guaranteed preferred beneficial interest in subordinated debt 28,750,000
Excess of cost over fair value of assets acquired (796,313) (6,820,931)
Decrease (increase) in real estate owned, net 16,029 (75,140)
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Net cash used in investing activities (129,457,113) (269,741,988)
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FINANCING ACTIVITIES:
Net increase in deposits 85,694,384 54,855,145
Increase in deposits resulting from branch acquisitions 25,148,929 100,473,829
Net borrowings under line of credit and repurchase agreements 20,967,678 118,860,403
Principal payments on borrowed funds (6,000,000)
Proceeds from exercise of stock options 34,667 37,768
Payments for fractional interests resulting from stock dividend (7,251) (4,742)
Proceeds from issuance of common stock 648,647 282,608
------------- -------------
282,608
Net cash provided by financing activities 132,487,054 268,505,011
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 9,173,252 (1,372,450)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 34,060,747 21,806,758
------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 43,233,999 $ 20,434,308
============= =============
</TABLE>
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See notes to consolidated financial statements
4
<PAGE>
SUN BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Summary of Significant Accounting Policies
Basis of Financial Statement Presentation
The audited and unaudited consolidated financial statements contained
herein for Sun Bancorp, Inc. (the "Company") include the accounts of
the Company and its wholly-owned subsidiaries, Sun Capital Trust (the
"Trust"), Sun National Bank (the "Bank") and the Bank's wholly-owned
subsidiaries, Med-Vine, Inc. and Sun Mortgage Company. All significant
inter-company balances and transactions have been eliminated.
The accompanying consolidated financial statements were prepared in
accordance with instructions to Form 10-Q, and therefore, do not
include information or footnotes necessary for a complete presentation
of financial position, results of operations and cash flows in
conformity with generally accepted accounting principles. However, all
normal recurring adjustments that, in the opinion of management, are
necessary for a fair presentation of the financial statements, have
been included. These financial statements should be read in conjunction
with the audited financial statements and the accompanying notes
thereto included in the Company's Annual Report for the period ended
December 31, 1997. The results for the nine months ended September 30,
1998 are not necessarily indicative of the results that may be expected
for the fiscal year ending December 31, 1998 or any other period.
(2) Acquisitions
On February 26, 1998, the Bank purchased the Eatontown branch from
First Savings Bank, Woodbridge, NJ. The Bank acquired approximately
$25,228,000 of deposit liabilities plus accrued interest, $118,000 in
equipment, $34,000 in loans and $119,000 in cash. The Bank paid a
premium of $1,085,000, which is being amortized over seven years.
(3) Loans
The components of loans as of September 30, 1998 and December 31, 1997
were as follows:
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997
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<S> <C> <C>
Commercial and industrial $ 432,006,454 $ 346,475,157
Real estate-residential mortgages 47,986,183 50,178,260
Installment 42,572,722 35,301,433
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Total gross loans 522,565,359 431,954,850
Allowance for loan losses (5,518,350) (4,193,801)
Net Loans $ 517,047,009 $ 427,761,049
============= =============
Non-accrual loans $ 1,445,861 $ 896,902
</TABLE>
5
<PAGE>
(4) Allowance For Loan Losses
Changes in the allowance for loan losses were as follows:
For the nine month
period ended For the year ended
September 30, 1998 December 31, 1997
Balance, beginning of period $ 4,193,801 $ 2,595,312
Charge-offs (277,862) (102,408)
Recoveries 17,926 35,897
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Net charge-offs (259,936) (66,511)
Provision for loan losses 1,587,237 1,665,000
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Balance, end of period $ 5,521,102 $ 4,193,801
=========== ===========
The provision for loan losses charged to expense is based upon past
loan loss experience and an evaluation of estimated losses in the
current loan portfolio, including the evaluation of impaired loans
under Statements of Financial Accounting Standards ("SFAS") Nos. 114
and 118 issued by the Financial Accounting Standards Board. A loan is
considered to be impaired when, based upon current information and
events, it is probable that the Bank will be unable to collect all
amounts due according to the contractual terms of the loan.
An insignificant delay or insignificant shortfall in amount of payments
does not necessarily result in a loan being identified as impaired. For
this purpose, delays less than 90 days are considered to be
insignificant.
Impairment losses are included in the provision for loan losses. Large
groups of smaller balance, homogeneous loans are collectively evaluated
for impairment, except for those loans restructured under a troubled
debt restructuring. Loans collectively evaluated for impairment include
consumer loans and residential real estate loans, and are not included
in the data that follows:
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997
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<S> <C> <C>
Impaired loans with related reserve for loan
losses calculated under SFAS No. 114 -- --
Impaired loans with no related reserve for loan
losses calculated under SFAS No. 114 $1,110,883 $ 1,157,838
---------- -----------
Total impaired loans $1,110,883 $ 1,157,838
========== ===========
</TABLE>
<TABLE>
<CAPTION>
For the nine months For the year
ended ended
September 30, 1998 December 31, 1997
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<S> <C> <C>
Average impaired loans $ 1,118,861 $ 1,244,522
Interest income recognized on impaired loans $ 52,697 $ 106,715
Cash basis interest income recognized on impaired - $ 82,544
loans
</TABLE>
6
<PAGE>
(5) Deposits
Deposits consist of the following major classifications:
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997
------------------ -----------------
<S> <C> <C>
Demand deposits $294,627,654 $268,655,067
Savings deposits 119,263,146 117,879,048
Time certificates under $100,000 293,618,998 243,257,829
Time certificates $100,000 or more 98,721,051 65,595,592
------------ ------------
Total $806,230,849 $695,387,536
============ ============
</TABLE>
Of the total demand deposits, approximately, $158,198,120 and
$149,499,000 are non-interest bearing at September 30, 1998 and
December 31, 1997, respectively.
(6) Comprehensive Income
The Company adopted SFAS No. 130, Reporting Comprehensive Income,
effective January 1, 1998. This statement requires disclosure of
amounts from transactions and other events which are currently excluded
from the statement of income and are recorded directly to shareholders'
equity. The following table sets forth the components of comprehensive
income for the periods indicated:
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1998 1997 1998 1997
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Unrealized gains on securities:
Unrealized holding gains arising during
period before the effect of income taxes $3,117,034 $ 859,539 $3,545,067 $ 1,028,593
Income tax effect 1,059,791 292,243 1,205,322 349,721
---------- --------- ---------- ---------
Net unrealized holding gains arising
during period $2,057,243 $ 567,296 $2,339,745 $ 678,872
========== ========= ========== =========
</TABLE>
(7) Earnings Per Share
Basic earnings per share is computed by dividing income available to
shareholders (net income), by the weighted average number of shares of
common stock outstanding during the period. Diluted earnings per share
is calculated by dividing net income by the weighted average number of
shares of common stock outstanding increased by the number of common
shares that are assumed to have been purchased with the proceeds from
the exercise of the options (treasury stock method). These purchases
were assumed to have been made at the average market price of the
common stock, which is based on the average price received on common
shares sold. Retroactive recognition has been given to market values,
common stock outstanding and potential common shares for periods prior
to the date of the Company's stock dividends and stock splits, as well
as for the adoption of SFAS No. 128.
7
<PAGE>
<TABLE>
<CAPTION>
For the For the For the
Three Months Ended Nine months Ended Year Ended
September 30, 1998 September 30, 1998 December 31, 1997
------------------ ------------------ -----------------
<S> <C> <C> <C>
Net income $2,352,153 $6,159,234 $4,171,349
Average dilutive stock options outstanding 1,127,732 1,127,732 1,053,873
Average exercise price per share $ 6.51 $ 6.51 $ 6.56
Average market price - diluted basis $ 24.27 $ 25.65 $ 11.87
Average common shares outstanding 6,364,047 6,340,863 4,607,533
Increase in shares due to exercise of
options -- diluted basis 824,977 841,171 471,736
--------- --------- ---------
Adjusted shares outstanding - diluted 7,189,024 7,182,034 5,079,269
========= ========= =========
Net income per share - basic $ 0.37 $ 0.97 $ 0.91
Net income per share - diluted $ 0.33 $ 0.86 $ 0.82
</TABLE>
(8) Guaranteed Preferred Beneficial Interest in Subordinated Debt
The sole asset of the Trust is $28,750,000 principal amount of 9.85%
Junior Subordinated Debentures issued by the Company. The Junior
Subordinated Debentures mature on March 31, 2027.
(9) Pending Acquisitions
On July 20, 1998, the Company entered into a purchase and assumption
agreement with Household Bank, f.s.b., whereby the Company will assume
certain deposit liabilities of eight branches of Beneficial Bank,
Wilmington, Delaware (the "Beneficial Acquisition"). At September 30,
1998, the branches had deposits of approximately $170 million. In
addition, the Company will acquire approximately $128 million of loans
as well as equipment pertaining to the branches. Subject to regulatory
approval and raising additional capital, a separate banking entity, Sun
National Bank, Delaware ("Sun Delaware") will be established. Upon
completion of the acquisition, the deposits, loans and equipment will
be combined into Sun Delaware. The acquisition is expected to be
completed in December 1998.
On July 28, 1998, the Bank entered into a purchase and assumption
agreement with Summit Bank ("Summit"), whereby the Bank will assume
certain deposit liabilities of two branch offices from Summit. At March
31, 1998, the branches had deposits of approximately $14,800,000. In
addition, the Bank will acquire account loans as well as property and
equipment pertaining to the branches. The transaction is expected to be
completed during the first quarter of 1999. The agreement is subject to
regulatory approval.
(10) Recent Acquisition
On July 30, 1998, the Bank acquired Allegiance Mortgage Company, Cherry
Hill, NJ ("Allegiance"). Allegiance originates residential mortgage
loans, primarily in New Jersey, for resale in the secondary market. The
Company issued 28,302 shares of common stock in exchange for all the
outstanding shares of Allegiance common stock. The transaction was
accounted for as a pooling of interests. After the acquisition, the
name of the company was changed to Sun Mortgage Company.
8
<PAGE>
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 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 INVOLVE RISKS AND UNCERTAINTIES, SUCH AS
STATEMENTS OF THE COMPANY'S PLANS, OBJECTIVES, EXPECTATIONS, ESTIMATES AND
INTENTIONS, THAT ARE SUBJECT TO CHANGE BASED ON VARIOUS IMPORTANT FACTORS (SOME
OF WHICH ARE BEYOND THE COMPANY'S CONTROL FACTORS THAT MAY CAUSE ACTUAL RESULTS
TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS
INCLUDE, AMONG OTHERS, THE FOLLOWING POSSIBILITIES: (1) EXPECTED COST SAVINGS
FROM THE ACQUISITIONS NOT BEING FULLY REALIZED OR REALIZED WITHIN THE EXPECTED
TIME FRAME; (2) REVENUES FOLLOWING THE ACQUISITIONS BEING LOWER THAN EXPECTED;
(3) A SIGNIFICANT INCREASE IN COMPETITIVE PRESSURES AMONG DEPOSITORY AND OTHER
FINANCIAL INSTITUTIONS; (4) COSTS OR DIFFICULTIES RELATED TO THE INTEGRATION OF
THE ACQUIRED BUSINESS BEING GREATER THAN EXPECTED; (5) CHANGES IN THE INTEREST
RATE ENVIRONMENT RESULTING IN REDUCED MARGINS; (6) GENERAL ECONOMIC OR BUSINESS
CONDITIONS, EITHER NATIONALLY OR IN THE STATES IN WHICH THE COMPANY WILL BE
DOING BUSINESS, BEING LESS FAVORABLE THAN EXPECTED, RESULTING IN, AMONG OTHER
THINGS, A DETERIORATION IN CREDIT QUALITY OR A REDUCED DEMAND FOR CREDIT; (7)
LEGISLATIVE OR REGULATORY CHANGES ADVERSELY AFFECTING THE BUSINESSES IN WHICH
THE COMPANY WILL BE ENGAGED; (8) CHANGES IN THE SECURITIES MARKETS; AND (9)
CHANGES IN THE BANKING INDUSTRY INCLUDING THE EFFECTS OF CONSOLIDATION RESULTING
FROM POSSIBLE MERGERS OF FINANCIAL INSTITUTIONS.
THE COMPANY CAUTIONS THAT THE FOREGOING LIST OF IMPORTANT FACTORS IS NOT
EXCLUSIVE. 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.
9
<PAGE>
Item 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition
Total assets at September 30, 1998 increased by $160.0 million to
$1,260 million as compared to $1,100 million at December 31, 1997. The growth
was primarily due to an increase in the investment securities portfolio of $40.9
million, an increase in net loans of $89.2 million, an increase in federal funds
sold of $9.5 million and an increase in other assets of $20.6 million.
Investment securities available for sale increased $40.9 million, from
$576.3 million at December 31, 1997 to $617.2 million at September 30, 1998. The
increase was primarily a result of net purchases using funds acquired through
increased deposits and higher levels of repurchase agreements.
Net loans at September 30, 1998 amounted to $517.0 million, an increase
of $89.2 million from $427.8 million at December 31, 1997. Of the increase,
$34,000 was the result of loans purchased from First Savings Bank. The increase
was primarily from increased originations of commercial and industrial loans.
The ratio of non-performing assets to total loans and real estate owned at
September 30, 1998 was 0.45% compared to 0.51% at December 31, 1997. The ratio
of allowance for loan losses to total non-performing loans was 236.06% at
September 30, 1998 compared to 189.81% at December 31, 1997. The increase in
this ratio was the result of a higher allowance for loan losses at September 30,
1998. The ratio of allowance for loan losses to total loans was 1.06% at
September 30, 1998 compared to 0.97% at December 31, 1997.
Excess of cost over fair value of assets acquired decreased $2.1
million, from $26.2 million at December 31, 1997 to $24.1 million at September
30, 1998. The decrease was a result of related amortization and a $289,000
refund of the purchase premium from the purchase of The Bank of New York
branches, offset by the addition of a $1.1 million premium paid for the
acquisition of the Eatontown office of First Savings.
Other assets increased $20.6 million, from $2.9 million at December 31,
1997 to $23.5 million at September 30, 1998. The increase was almost entirely
the result of the sale of investment securities during the period that settled
after September 30, 1998.
Total liabilities at September 30, 1998 amounted to $1,167 million
compared to $1,017 million at December 31, 1997, an increase of $150 million.
Total deposits grew to $806.2 million at September 30, 1998, a $110.8
million increase over December 31, 1997 deposits of $695.4 million. The increase
was the result of approximately $25.1 million in deposits acquired from First
Savings Bank, as well as from internal deposit growth of 12.32%.
There were $11.2 million in advances from the Federal Home Loan Bank
and no federal funds purchased at September 30, 1998 compared to $75.0 million
and $5.5 million, respectively, at December 31, 1997. The combined net decrease
in these liabilities was due to the availability of funds from increased levels
of deposits and customer repurchase agreements.
Securities sold under agreements to repurchase increased $90.3 million,
from $235.8 million at December 31, 1997 to $326.1 million at September 30,
1998. The increase was the result of an increase of $27.5 million in repurchase
agreements with customers and an increase of $62.8 million in Federal Home Loan
Bank repurchase agreements.
10
<PAGE>
Other liabilities increased $19.0 million, from $4.9 million at
December 31, 1997 to $23.9 million at September 30, 1998. The increase was the
result of the purchase of investment securities during the period that settled
after September 30, 1998.
Total shareholders' equity grew by $9.2 million, from $54.6 million at
December 31, 1997, to $63.8 million at September 30, 1998. The increase was a
result of net earnings of $6.2 million for the nine months ended September 30,
1998 augmented by the issuance of 30,347 shares of common stock through employee
benefit programs and an improvement in the net unrealized gains on securities
available for sale, net of income taxes of $2.1 million.
Liquidity and Capital Resources
Liquidity management is a daily and long-term business function. The
Company's liquidity, represented in part by cash and cash equivalents, is a
product of its operating, investing and financing activities. Proceeds from
repayment of loans, maturities of investment securities, net income and
increases in deposits and borrowings are the primary sources of liquidity of the
Company.
The Company continues to experience commercial loan demand and expects
such demand to continue for the remainder of the current fiscal year. Management
has demonstrated the ability to meet this increased need for funds by attracting
higher levels of deposits, engaging in repurchase agreements, raising capital
and utilizing its lines of credit with other financial institutions. It also has
the ability to liquidate portions of its investment portfolio.
It is the Company's intent to maintain adequate levels of regulatory
capital. The increase of commercial loans has the effect of increasing the level
of risk-based assets and thus lowering the Company's risk-based capital ratios.
In general, commercial loans are categorized as having a 100% risk-weighting
using the calculations required by the Company's regulators. Management monitors
the Company's capital levels, and when appropriate, will recommend additional
capital raising efforts to the Company's board of directors. At September 30,
1998, the Company's Tier 1 risk-based capital, total risk-based capital and
leverage capital ratios were 8.43%, 10.45% and 4.86%, respectively. At that
date, Federal regulators required the Company to maintain at least an 8% total
risk-based capital ratio and a 3% leverage capital ratio.
As discussed in Note (9) of the Notes to Consolidated Financial
Statements (Unaudited), the Company has entered into a purchase and assumption
agreement with Household Bank, f.s.b. in connection with the Beneficial
Acquisition. As a result, it was necessary for the Company to issue additional
securities in order to capitalize Sun Delaware. On October 30, 1998, the
Company, through its subsidiary Sun Capital Trust II, issued $29.9 million of
8.875% Trust Preferred Securities. The Company has also filed a Registration
Statement with the Securities and Exchange Commission with respect to a
potential underwritten public offering of 700,000 shares of common stock. The
offering of such common stock is expected to be completed prior to the
completion of the Beneficial Acquisition.
Comparison of Operating Results for the Three Months Ended September 30, 1998
and 1997.
General. Net income increased by $1.2 million for the three months
ended September 30, 1998 to $2.4 million from $1.2 million for the three months
ended September 30, 1997. Net interest income increased $5.2 million and the
provision for loan losses increased $157,000 for the three months ended
September 30, 1998 compared to the same period in 1997. Other income increased
by $823,000 to $1.4 million for the three months ended September 30, 1998 as
compared to $597,000 for the three months ended September 30, 1997. Other
expenses increased by $4.2 million to $8.6 million for the three months ended
September 30, 1998 as compared to $4.4 million for the three months ended
September 30, 1997. The
11
<PAGE>
return on average assets for the three months ended September 30, 1998 and 1997
were 0.78% and 0.71%, respectively. The return on average equity for the three
months ended September 30, 1998 and 1997 were 15.68% and 16.08%, respectively.
On a cash earnings basis (computed excluding the amortization of
goodwill), net income increased by $1.7 million for the three months ended
September 30, 1998 to $3.3 million, from $1.6 million for the three months ended
September 30, 1997. The cash basis return on average assets for the three months
ended September 30, 1998 and 1997 were 1.10% and 1.10%, respectively. The cash
basis return on average equity for the three months ended September 30, 1998 and
1997 were 22.08% and 21.79%, respectively. The cash basis diluted earnings per
share for the three months ended September 30, 1998 and 1997 were $0.52 and
$0.32, respectively.
Net Interest Income. The increase in net interest income was due to a
$10.2 million increase in interest income partially offset by a $5.1 million
increase in interest expense.
Interest Income. Interest income for the three months ended September
30, 1998 increased approximately $10.2 million, or 80.6%, from $12.8 million for
the same period in 1997 to $23.0 million in 1998. The increase was primarily the
result of an increase of $4.3 million in interest and fees on loans resulting
from acquisitions and internal growth and $6.2 million in interest on investment
securities resulting from the deployment of cash into the investment portfolio,
from funds received from financing transactions, branch acquisitions and deposit
growth. The Beneficial Acquisition and the proposed offering of common stock and
recently completed offering of Trust Preferred Securities are expected to
generate additional net cash that can be deployed into loan growth and
investments that will create interest income.
Interest Expense. Interest expense for the three months ended September
30, 1998 increased approximately $5.1 million, from $6.8 million for the same
period in 1997 to $11.9 million in 1998. This increase was primarily due to a
$2.0 million increase in interest on deposit accounts resulting from
significantly higher deposit balances due to acquisitions and internal growth,
and a $3.1 million increase in interest on borrowed funds resulting from higher
levels of securities sold under agreements to repurchase. The Beneficial
Acquisition and the recent issuance of Trust Preferred Securities will result in
additional interest expense in future periods.
Provision for Loan Losses. For the three months ended September 30,
1998, the provision for loan losses amounted to $577,000, an increase of
$157,000, compared to the $420,000 recorded for the same period in 1997. The
increase in the provision for loan losses was due to higher levels of loans
outstanding. Management continually reviews the adequacy of the loan loss
reserve based on internal review of loans and using guidelines promulgated by
the Bank's primary regulator.
Other Income. Other income increased $823,000 for the three-month
period ended September 30, 1998 compared to the three-month period ended
September 30, 1997. The increase was a result of approximately $442,000 in fees
generated by a larger deposit base due to acquisitions and internal growth. This
was augmented by an increase of $217,000 in gains on the sale of investment
securities and an increase of $147,000 in other income.
Other Expenses. Other expenses increased approximately $4.2 million, to
$8.6 million for the three months ended September 30, 1998 as compared to $4.4
million for the same period in 1997. Of the increase, $2.2 million was in
salaries and employee benefits, $439,000 was in occupancy expense, $230,000 was
in equipment expense, $175,000 was in data processing expense, $536,000 was in
amortization of excess of cost over fair value of assets acquired and $491,000
was in other operating expenses. The increase in other expenses reflects the
Company's strategy to support planned expansion. The Company has entered into
two purchase and assumption agreements which, when completed, will result in the
acquisition of a total of ten branch locations, including the eight branch
locations connected with the Beneficial Acquisition. As a result, the Company
expects the level of amortization of excess of cost over fair value of assets
acquired to increase in future periods, subsequent to the completion of the
transactions.
12
<PAGE>
Income Taxes. Applicable income taxes increased $540,000 for the three
months ended September 30, 1998 as compared to the same period in 1997. The
increase resulted from higher pre-tax earnings.
Comparison of Operating Results for the Nine months Ended September 30, 1998 and
1997.
General. Net income increased by $3.5 million for the nine months ended
September 30, 1998 to $6.2 million from $2.7 million for the nine months ended
September 30, 1997. Net interest income increased $14.0 million and the
provision for loan losses increased $342,000 for the nine months ended September
30, 1998 compared to the same period in 1997. Other income increased by $2.8
million to $4.1 million for the nine months ended September 30, 1998 as compared
to $1.4 million for the nine months ended September 30, 1997. Other expenses
increased by $11.4 million to $23.2 million for the nine months ended September
30, 1998 as compared to $11.8 million for the nine months ended September 30,
1997. The return on average assets for the nine months ended September 30, 1998
and 1997 were 0.73% and 0.66%, respectively. The return on average equity for
the nine months ended September 30, 1998 and 1997 were 14.25% and 12.55%,
respectively.
On a cash earnings basis, net income increased by $5.4 million for the
nine months ended September 30, 1998 to $9.0 million, from $3.6 million for the
nine months ended September 30, 1997. The cash basis return on average assets
for the nine months ended September 30, 1998 and 1997 were 1.07% and 0.88%,
respectively. The cash basis return on average equity for the nine months ended
September 30, 1998 and 1997 were 20.88% and 16.74%, respectively. The cash basis
diluted earnings per share for the nine months ended September 30, 1998 and 1997
were $1.26 and $0.71, respectively.
Net Interest Income. The increase in net interest income was due to a
$31.3 million increase in interest income partially offset by a $17.3 million
increase in interest expense.
Interest Income. Interest income for the nine months ended September
30, 1998 increased approximately $31.3 million, or 101.5%, from $30.9 million
for the same period in 1997 to $62.2 million in 1998. The increase was primarily
the result of an increase of $11.0 million in interest and fees on loans
resulting from acquisitions and internal growth and $20.5 million in interest on
investment securities resulting from the deployment of cash received from
financing transactions, branch acquisitions and deposit growth into the
Company's investment portfolio.
Interest Expense. Interest expense for the nine months ended September
30, 1998 increased approximately $17.3 million, from $15.5 million for the same
period in 1997 to $32.8 million in 1998. This increase was primarily due to a
$7.3 million increase in interest on deposit accounts resulting from
significantly higher deposit balances due to acquisitions and internal growth, a
$9.5 million increase in interest on short-term borrowed funds resulting from
higher levels of borrrowings from correspondent banks and securities sold under
agreements to repurchase and a $607,000 increase in interest on guaranteed
preferred beneficial interest in subordinated debt. The Beneficial Acquisition
and the recently completed offering of Trust Preferred Securities will result in
additional interest expense in future periods.
Provision for Loan Losses. For the nine months ended September 30,
1998, the provision for loan losses amounted to $1.6 million, an increase of
$342,000, compared to $1.2 million for the same period in 1997. The increase in
the provision for loan losses was due to higher levels of loans outstanding.
Management continually reviews the adequacy of the loan loss reserve using
guidelines promulgated by the Bank's primary regulator.
Other Income. Other income increased $2.8 million for the nine month
period ended September 30, 1998 compared to the nine month period ended
September 30, 1997. The increase was a result of approximately $1.4 million in
fees generated by a larger base due to deposit acquisitions and internal
13
<PAGE>
growth, augmented by $790,000 in gains from the sale of investment securities
and $396,000 in other income.
Other Expenses. Other expenses increased approximately $11.4 million,
to $23.2 million for the nine months ended September 30, 1998 as compared to
$11.8 million for the same period in 1997. Of the increase, $5.3 million was in
salaries and employee benefits, $1.3 million was in occupancy expense, $755,000
was in equipment expense, $179,000 was in professional fees and services,
$564,000 was in data processing expense, $250,000 was in postage and supplies,
$2.0 million was in amortization of excess of cost over fair value of assets
acquired and $1.1 million was in other expenses. The increase in other expenses
reflects the Company's strategy to support planned expansion. Salaries and
benefits increased due to additional staff positions in financial service
centers, lending, loan review, compliance and audit departments. The increase in
occupancy, equipment professional fees and services and data processing expenses
were the result of internal growth and the effect of the Company's acquisitions.
The Company has entered into two purchase and assumption agreements which, when
completed, will result in the acquisition of a total of ten branch locations,
including the eight branch locations in connection with the Beneficial
Acquisition. As a result, the Company expects the level of amortization of
excess of cost over fair value of assets acquired to increase in future periods,
subsequent to the completion of the transactions.
Income Taxes. Applicable income taxes increased $1.5 million for the
nine months ended September 30, 1998 as compared to the same period in 1997. The
increase resulted from higher pre-tax earnings.
Year 2000 Compliance
The Company's board of directors has approved a Year 2000 compliance
plan designed to address the concerns raised by the Year 2000 problem.
Management provides progress reports at least quarterly to the board.
The areas covered by the plan are hardware, software, customers and
service providers. The Company has identified specific issues related to each
area. At September 30, 1998, the Company has completed the assessment phase of
the plan in which assessment tasks have been completed in each group. The
Company has begun its testing phase and its customer awareness phase. Both are
expected to continue until the end of the current year. The Company is satisfied
with the results of the testing it has completed to date. The Company has
contacted its critical service providers and will continue to pursue each of
their compliance efforts. Contingency plans have been developed for critical
functions provided by third-party service providers. There have been no data
center projects that have been deferred due to resources applied to the Year
2000 effort.
The Company's primary system software, licensed from Kirchman
Corporation ("Kirchman"), has been represented to be Year 2000 compliant by
Kirchman. The Company has received the results of an independent testing group
verifying such compliance.
It is expected that Year 2000 compliance will cost approximately
$180,000, of which about $60,000 has been spent. The primary expenditure of
funds will be for the upgrade of equipment, and to a much lesser extent,
computer software, employee salaries and related employee benefits. The source
of funds for Year 2000 costs are expected to derive from current earnings.
Management believes the cost of non-information technology expenses related to
Year 2000 compliance will not have a material adverse effect on the Company's
financial statements.
14
<PAGE>
Item 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Asset and Liability Management
The Company's exposure to interest rate risk results from the difference in
maturities on interest-bearing liabilities and interest-earning assets, the
relative sensitivity of interest-bearing liabilities and interest-earning assets
to interest rates and the volatility of interest rates. Because the Company's
assets have a longer maturity than its liabilities, the Company's earnings will
tend to be negatively affected during periods of rising interest rates.
Conversely, this mismatch should benefit the Company during periods of declining
interest rates. Management monitors the relationship between the interest rate
sensitivity of the Company's assets and liabilities. In this regard, the Company
emphasizes the origination of short-term commercial loans and revolving home
equity loans and de-emphasizes the origination of long-term mortgage loans.
Gap Analysis
Banks and bank holding companies are concerned with the extent to which they are
able to match maturities of interest-earning assets and interest-bearing
liabilities. Examining the extent to which such assets and liabilities are
interest-rate sensitive facilitates such matching and by monitoring a bank's
interest rate sensitivity gap. An asset or liability is considered to be
interest-rate sensitive if it will mature or reprice within a specific time
period. The interest rate sensitivity gap is defined as the excess of
interest-earning assets maturing or repricing within a specific time period over
interest-bearing liabilities maturing or repricing within that time period. On a
quarterly basis, the Company monitors its gap, primarily its six-month and
one-year maturities and works to maintain its gap within a range that does not
exceed a negative 15% of total assets. The Company attempts to maintain its
ratio of rate-sensitive assets to rate-sensitive liabilities between 75% to
125%.
Management and the Board of Directors monitor its gap position at quarterly
meetings. The Asset/Liability Committee of the Bank's Board of Directors meets
to discuss interest rate risk. The Bank uses simulation models to measure the
impact of potential changes of up to 200 basis points in interest rates on net
interest income. As described below, sudden changes to interest rates should not
have a material impact on the Company's results of operations. Should the Bank
experience a positive or negative mismatch in excess of the approved range, it
has a number of remedial options. It has the ability to reposition its
investment portfolio to include securities with more advantageous repricing
and/or maturity characteristics. It can attract variable- or fixed-rate loan
products as appropriate. It can also price deposit products to attract deposits
with maturity characteristics that can lower its exposure to interest rate risk.
At June 30, 1998, the Bank had a slightly positive position with respect to its
exposure to interest rate risk: total interest-earning assets maturing or
repricing within one year exceeded total interest-bearing liabilities maturing
or repricing during the same time period by $6.5 million, representing a
positive cumulative one-year gap ratio of 0.56%. As a result, the yield on
interest-earning assets of the Bank should adjust to changes in interest rates
at a slightly faster rate than the cost of interest-bearing liabilities. Because
the Bank had negligible negative gap characteristics in its shorter maturity
periods, its one-year gap mismatch sould have little effect on net interest
margin during periods of rising or declining market interest rates; there can be
no assurance of this, however, as among other things, the Bank's gap position
changes from period to period.
The following table summarizes the maturity and repricing characteristics of the
Bank's interest-earning assets and interest-bearing liabilities at June 30,
1998. All amounts are categorized by their actual maturity or repricing date
with the exception of interest-bearing demand deposits and savings deposits. The
Bank's historical experience with both interest-bearing demand deposits and
savings deposits reflects an insignificant change in deposit levels for these
core deposits. As a result, the Bank allocates approximately 35% to the 0-3
month category and 65% to the 1-5 year category.
15
<PAGE>
<TABLE>
<CAPTION>
Maturity/Repricing Time Periods
(Dollars in Thousands)
0-3 Months 4-12 Months 1-5 Years Over 5 Years Total
---------- ----------- --------- ------------ -----
<S> <C> <C> <C> <C> <C>
Loans Receivable $ 234,235 $ 52,591 $ 165,298 $ 39,070 $ 491,194
Investment Securities 289,635 123,330 96,201 48,226 557,392
Federal funds sold 9,500 -- -- -- 9,500
---------- ---------- ---------- ---------- ----------
Total interest-earning assets 533,370 175,921 261,499 87,296 1,058,086
---------- ---------- ---------- ---------- ----------
Interest-bearing demand deposits 51,695 7,444 39,702 29,952 128,793
Savings deposits 13,075 7,730 41,228 51,536 113,569
Time certificates under $100,000 112,970 112,493 31,709 -- 257,172
Time certificates $100,000 or 51,697 38,174 2,523 -- 92,394
more
Federal Home Loan Bank advances 35,700 -- -- -- 35,700
Federal funds purchased 15,000 -- -- -- 15,000
Securities sold under agreements
To repurchase 256,800 -- -- -- 256,800
---------- ---------- ---------- ---------- ----------
Total interest-bearing liabilities 536,937 165,841 115,162 81,488 899,428
---------- ---------- ---------- ---------- ----------
Periodic Gap $ (3,567) $ 10,080 $ 146,337 $ 5,808 $ 145,760
========== ========== ========== ==========
Cumulative Gap $ (3,567) $ 6,513 $ 152,850 $ 158,658
========== ========== ========== ==========
Cumulative Gap Ratio (0.31%) 0.56% 13.25% 13.75%
========== ========== ========== ==========
</TABLE>
As of the date of filing this report, September 30, 1998 gap data for the Bank
was not available. Management of the Bank does not believe that the September
30, 1998 gap position of the Bank has materially adversely changed from the
Bank's gap position as of June 30, 1998.
16
<PAGE>
PART II - OTHER INFORMATION
Item 1 Legal Proceedings
The Company was not engaged in any legal proceedings of a material
nature at September 30, 1998. From time to time, the Company is a party
to legal proceedings in the ordinary course of business wherein it
enforces its security interest in loans.
Item 2 Changes in Securities and Use of Proceeds
On October 30, 1998, the Company, through its Delaware trust
subsidiary, Sun Capital Trust II ("Trust II"), issued and sold $29.9
million of Trust II's 8.875% Preferred Securities in an underwritten
public offering co-managed by Advest, Inc. and Janney Montgomery Scott,
Inc. Trust II invested the proceeds of such issuance in 8.875% Junior
Subordinated Debentures of the Company (the "Debentures"). The net
proceeds from the issuance of the Debentures of the Company will be
used to provide capital to Sun Delaware for the Beneficial Acquisition
and for the Company's other general corporate purposes.
Item 3 Defaults Upon Senior Securities
Not applicable
Item 4 Submission of Matters to a Vote of Security Holders
Not applicable
Item 5 Other Information
If the Company does not receive notice at its principal executive
offices on or before December 11, 1998 of a shareholder proposal for
consideration at the 1999 annual meeting of shareholders, the proxy
named by the Company's board of directors with respect to the meeting
shall have discretionary voting authority with respect to such
proposal.
Item 6 Exhibits and Reports on Form 8-K
(a) 27 Financial Data Schedule (electronic filing only)
(b) On July 27, 1998, the Company filed a Current Report of Form 8-K
dated July 20, 1998, to report that it had entered into a branch
purchase and deposit assumption agreement with Beneficial National
Bank.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date November 12, 1998 Sun Bancorp, Inc.
----------------- -----------------
(Registrant)
/s/ Philip W. Koebig, III
-------------------------
Philip W. Koebig, III
Executive Vice President
Date November 12, 1998 /s/ Robert F. Mack
----------------- -----------------
Robert F. Mack
Controller
18
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION DERIVED FROM THE
QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL INFORMATION.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 33,734
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 9,500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 617,239
<INVESTMENTS-CARRYING> 617,239
<INVESTMENTS-MARKET> 617,239
<LOANS> 522,565
<ALLOWANCE> 5,518
<TOTAL-ASSETS> 1,259,937
<DEPOSITS> 806,231
<SHORT-TERM> 337,281
<LIABILITIES-OTHER> 23,868
<LONG-TERM> 0
28,750
0
<COMMON> 6,381
<OTHER-SE> 57,426
<TOTAL-LIABILITIES-AND-EQUITY> 1,259,937
<INTEREST-LOAN> 34,657
<INTEREST-INVEST> 27,409
<INTEREST-OTHER> 192
<INTEREST-TOTAL> 62,257
<INTEREST-DEPOSIT> 18,409
<INTEREST-EXPENSE> 32,845
<INTEREST-INCOME-NET> 29,412
<LOAN-LOSSES> 1,587
<SECURITIES-GAINS> 881
<EXPENSE-OTHER> 23,177
<INCOME-PRETAX> 8,773
<INCOME-PRE-EXTRAORDINARY> 8,773
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,159
<EPS-PRIMARY> 0.97
<EPS-DILUTED> 0.86
<YIELD-ACTUAL> 3.81
<LOANS-NON> 1,446
<LOANS-PAST> 893
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,194
<CHARGE-OFFS> 281
<RECOVERIES> 18
<ALLOWANCE-CLOSE> 5,518
<ALLOWANCE-DOMESTIC> 5,518
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 880
</TABLE>
