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, 1999
------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------------------- ----------------------
Commission file number 0 - 20957
------------------------------------------------------
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
----------------------------------------- -----------------------
(Address of principal executive offices) (Zip Code)
(856) 691 - 7700
----------------
(Registrant's telephone number, including area code)
- -------------------------------------------------------------------------------
(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 10,073,742 November 10, 1999
- ----------------------------- ---------- -----------------
Class Number of shares outstanding Date
<PAGE>
SUN BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
---- ----
(Unaudited)
<S> <C> <C>
ASSETS
Cash and due from banks $ 57,033 $ 54,816
Federal funds sold -- 34,700
----------- -----------
Cash and cash equivalents 57,033 89,516
Investment securities available for sale (amortized cost -
$880,390; 1999 and $622,185; 1998) 850,649 621,421
Loans receivable (net of allowance for loan losses -
$8,389; 1999 and $7,143; 1998) 834,395 689,852
Restricted equity investments 37,171 28,337
Bank properties and equipment, net 31,930 26,007
Real estate owned, net 208 292
Accrued interest receivable 13,282 10,501
Excess of cost over fair value of assets acquired, net 62,856 42,961
Deferred taxes 13,803 2,385
Other assets 8,372 4,131
----------- -----------
TOTAL $ 1,909,699 $ 1,515,403
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits $ 1,239,754 $ 1,025,398
Advances from the Federal Home Loan Bank 4,295 4,386
Loan payable 1,160 1,160
Federal funds purchased 10,000 --
Securities sold under agreements to repurchase 479,256 332,118
Other liabilities 10,344 15,358
----------- -----------
Total liabilities 1,744,809 1,378,420
----------- -----------
Guaranteed preferred beneficial interest in Company's subordinated debt 58,595 58,650
SHAREHOLDERS' EQUITY
Preferred stock, none issued -- --
Common stock, $1 par value, shares authorized, 25,000,000;
issued and outstanding: 10,072,583 in 1999; and 7,165,360 in 1998 10,073 7,165
Surplus 106,499 61,710
Retained earnings 9,998 10,243
Accumulated other comprehensive loss (19,629) (504)
Treasury stock at cost, 35,000 shares in 1999; and 15,000 shares in 1998 (646) (281)
----------- -----------
Total shareholders' equity 106,295 78,333
----------- -----------
TOTAL $ 1,909,699 $ 1,515,403
- ------------------------------------------------------------------------ =========== ===========
</TABLE>
See notes to consolidated financial statements
1
<PAGE>
SUN BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except share amounts)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
1999 1998 1999 1998
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 17,620 $ 11,649 $ 48,728 $ 32,722
Interest on taxable investment securities 10,455 8,859 28,109 24,513
Interest on non-taxable investment securities 648 508 1,749 1,470
Dividends on restricted equity investments 596 479 1,529 1,425
Interest on federal funds sold 154 10 279 192
---------- ---------- ------ --------
Total interest income 29,473 21,505 80,394 60,322
---------- ---------- ------ --------
INTEREST EXPENSE:
Interest on deposits 8,459 6,549 24,403 18,409
Interest on short-term borrowed funds 5,844 4,602 14,090 12,277
Interest on guaranteed preferred beneficial
interest in Company's subordinated debt 1,391 719 4,175 2,159
---------- ---------- ------ --------
Total interest expense 15,694 11,870 42,668 32,845
---------- ---------- ------ --------
Net interest income 13,779 9,635 37,726 27,477
PROVISION FOR LOAN LOSSES 470 577 1,657 1,587
---------- ---------- ------ --------
Net interest income after provision for loan losses 13,309 9,058 36,069 25,890
---------- ---------- ------ --------
OTHER INCOME:
Service charges on deposit accounts 1,045 824 3,322 2,387
Income from mortgage banking operations 722 1,258 2,154 1,258
Other service charges 28 27 86 65
Gain on sale of fixed assets 127 137
Gain on sale of loans 2 2 14 112
Gain on sale of investment securities 2 292 79 881
Other 530 276 1,561 681
---------- ---------- ------ --------
Total other income 2,456 2,679 7,353 5,384
---------- ---------- ------ --------
OTHER EXPENSES:
Salaries and employee benefits 5,313 3,974 14,531 10,280
Occupancy expense 1,452 901 3,917 2,434
Equipment expense 1,111 586 2,735 1,644
Professional fees and services 152 145 322 399
Data processing expense 803 535 2,300 1,616
Amortization of excess of cost over fair value of assets acquired 1,482 961 4,434 2,866
Postage and supplies 368 208 1,082 572
Insurance 164 91 349 238
Other 1,314 955 3,266 2,452
---------- ---------- ---------- ----------
Total other expenses 12,159 8,356 32,936 22,501
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 3,606 3,381 10,486 8,773
INCOME TAXES 1,147 1,029 3,180 2,614
---------- ---------- ---------- ----------
NET INCOME $ 2,459 $ 2,352 $ 7,306 $ 6,159
========== ========== ========== ==========
Basic earnings per share $ 0.26 $ 0.35 $ 0.90 $ 0.93
========== ========== ========== ==========
Diluted earnings per share $ 0.25 $ 0.31 $ 0.83 $ 0.82
========== ========== ========== ==========
Weighted average shares - basic 9,333,367 6,682,249 8,148,617 6,657,906
========== ========== ========== ==========
Weighted average shares - diluted 10,005,256 7,548,476 8,830,699 7,541,136
- ------------------------------------------------------- ========== ========== ========== ==========
</TABLE>
See notes to consolidated financial statements
2
<PAGE>
SUN BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30,
--------------------------
1999 1998
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 7,306 $ 6,159
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses 1,657 1,587
Provision for losses on real estate owned 23
Depreciation and amortization 1,515 589
Amortization of excess cost over fair value of assets acquired 4,434 2,866
Gain on sale of loans (14) (112)
Gain on sale of investment securities available for sale (79) (881)
Gain on sale of bank properties and equipment (137)
Deferred income taxes (1,566) (342)
Change in assets and liabilities which (used) provided cash:
Accrued interest receivable (2,781) (20,572)
Other assets (4,241) (2,129)
Other liabilities (5,014) 18,978
--------- ---------
Net cash provided by operating activities 1,103 6,143
--------- ---------
INVESTING ACTIVITIES:
Purchases of investment securities available for sale (489,885) (185,404)
Purchases of mortgage-backed securities available for sale (42,210) (165,381)
Purchases of restricted equity investments (8,833)
Proceeds from maturities of investment securities available for sale 165,982 36,260
Proceeds from maturities of mortgage-backed securities available for sale 96,641 73,270
Proceeds from sale of investment securities available for sale 11,130 155,805
Proceeds from sale of mortgage-backed securities available for sale 49,209
Proceeds from sale of loans 829 3,303
Net increase in loans (147,161) (94,155)
Increase in loans resulting from branch acquisitions (71) (34)
Purchase of bank properties and equipment (2,600) (1,558)
Increase in bank properties and equipment resulting from branch acquisitions (4,962) (117)
Proceeds from sale of bank properties and equipment 478
Repurchase of guaranteed preferred beneficial interest in Company's subordinated debt (55)
Excess of cost over fair value of assets acquired (24,401) (797)
Purchase price adjustment of branch assets acquired 71
Proceeds from sale of real estate owned 278 16
--------- ---------
Net cash used in investing activities (444,769) (129,457)
--------- ---------
FINANCING ACTIVITIES:
Net (decrease) increase in deposits (32,310) 85,694
Increase in deposits resulting from branch acquisitions 246,666 25,149
Net borrowings under line of credit and repurchase agreements 157,047 20,967
Proceeds from exercise of stock options 17 35
Payments for fractional interests resulting from stock dividend (3) (7)
Treasury stock purchase (365)
Proceeds from issuance of common stock 40,131 649
--------- ---------
Net cash provided by financing activities 411,183 132,487
--------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (32,483) 9,173
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 89,516 34,061
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 57,033 $ 43,234
- ------------------------------------------------------------------- ========= =========
</TABLE>
See notes to consolidated financial statements
3
<PAGE>
SUN BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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 ("Sun
Trust I"), Sun Capital Trust II ("Sun Trust II"), Sun National Bank,
Delaware ("Sun Delaware"), Sun National Bank ("Sun") and Sun's
wholly-owned subsidiaries, Sun Mortgage Company ("Sun Mortgage"), Sun
Financial Services and Med-Vine, Inc. 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, 1998. The results for the nine months ended September 30,
1999 are not necessarily indicative of the results that may be expected
for the fiscal year ending December 31, 1999 or any other period.
(2) Acquisitions
On September 9, 1999, Sun purchased fourteen New Jersey branch offices
from First Union National Bank. Sun acquired approximately $230,000,000
of deposit liabilities, approximately $4,700,000 in real estate banking
equipment and other assets, $51,000 in loans and approximately
$200,700,000 in cash. Sun paid a premium of approximately $23,700,000,
which is being amortized over twelve years.
(3) Loans
The components of loans as of September 30, 1999 and December 31, 1998
were as follows:
September 30, 1999 December 31, 1998
------------------ -----------------
(In thousands)
(Unaudited)
Commercial and industrial $ 684,833 $ 548,645
Real estate-residential mortgages 81,167 79,188
Installment 76,784 69,162
--------- ---------
Total gross loans 842,784 696,995
Allowance for loan losses (8,389) (7,143)
--------- ---------
Net Loans $ 834,395 $ 689,852
========= =========
Non-accrual loans $ 1,393 $ 1,608
4
<PAGE>
(4) Allowance For Loan Losses
Changes in the allowance for loan losses were as follows:
For the nine months ended For the year ended
September 30, 1999 December 31, 1998
------------------ -----------------
(In thousands)
(Unaudited)
Balance, beginning of period $ 7,143 $ 4,194
Charge-offs (432) (297)
Recoveries 21 33
------- -------
Net charge-offs (411) (264)
Increase due to branch acquisition -- 1,000
Provision for loan losses 1,657 2,213
------- -------
Balance, end of period $ 8,389 $ 7,143
======= =======
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 Company 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, 1999 December 31, 1998
------------------ -----------------
(In thousands)
(Unaudited)
<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 $ 995 $ 1,251
----- -------
Total impaired loans $ 995 $ 1,251
===== =======
</TABLE>
<TABLE>
<CAPTION>
For the
nine months ended For the year ended
September 30, 1999 December 31, 1998
------------------ -----------------
(In thousands)
(Unaudited)
<S> <C> <C>
Average impaired loans $ 1,077 $ 1,115
Interest income recognized on impaired loans $ 24 $ 61
Cash basis interest income recognized on impaired loans $ 25 $ 33
</TABLE>
5
<PAGE>
(5) Deposits
Deposits consist of the following major classifications:
September 30, 1999 December 31, 1998
------------- -----------------
(In thousands)
(Unaudited)
Demand deposits $ 498,943 $ 423,938
Savings deposits 173,345 140,168
Time certificates under $100,000 428,131 317,192
Time certificates $100,000 or more 139,335 144,100
------------ -----------
Total $ 1,239,754 $ 1,025,398
============ ===========
Of the total demand deposits, approximately $251,012,000 (unaudited)
and $211,652,000 are non-interest bearing at September 30, 1999 and
December 31, 1998, 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. Other comprehensive (loss) income for the three-month periods
ended September 30, 1999 and 1998 amounted to ($6,367,339) (unaudited)
and $2,057,241 (unaudited), respectively. Other comprehensive (loss)
income for the nine-month periods ended September 30, 1999 and 1998
amounted to ($19,124,946) (unaudited) and $2,339,745 (unaudited),
respectively.
(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.
<TABLE>
<CAPTION>
For the For the For the
Three Months Ended Nine Months Ended Year Ended
September 30, 1999 September 30, 1999 December 31, 1998
------------------ -------------------- -----------------
(Dollars in thousands)
(Unaudited)
<S> <C> <C> <C>
Net income $ 2,459 $ 7,306 $ 8,784
Average dilutive stock options outstanding 1,159,994 1,189,099 1,480,441
Average exercise price per share $ 6.02 $ 6.29 $ 8.79
Average market price - diluted basis $ 17.10 $ 17.78 $ 23.05
Average common shares outstanding 9,333,367 8,148,617 6,764,668
Increase in shares due to exercise of options
- diluted basis and tax benefit from assumed
Exercise of non-qualified options 671,889 682,082 915,742
---------- --------- ---------
Adjusted shares outstanding - diluted 10,005,256 8,830,699 7,680,410
========== ========= =========
Net income per share - basic $ 0.26 $ 0.90 $ 1.30
Net income per share - diluted $ 0.25 $ 0.83 $ 1.14
</TABLE>
6
<PAGE>
(8) Guaranteed Preferred Beneficial Interest in Company's Subordinated Debt
The sole asset of Sun Trust I is $28,750,000 principal amount of 9.85%
Junior Subordinated Debentures issued by the Company that mature on
March 31, 2027.
The sole asset of Sun Trust II is $29,900,000 principal amount of
8.875% Junior Subordinated Debentures issued by the Company that mature
on December 31, 2028.
During the first quarter of 1999, the Company repurchased 2,200 shares
of Sun Trust I preferred securities.
On November 8, 1999 the Company repurchased 3,500 shares of Sun Trust
II preferred securities.
(9) Stock Repurchase Plan
During October 1999, the Board of Directors of the Company authorized
the initiation of a stock repurchase plan covering up to 9%, or 906,000
shares of the Company's outstanding common stock. The repurchases will
be made from time to time in open-market transactions, subject to the
availability of the stock. As of November 12, 1999, the Company
repurchased 115,651 shares for an aggregate price of approximately
$1,225,000.
7
<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.
8
<PAGE>
Item 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition
Total assets at September 30, 1999 increased by $394.3 million to
$1.910 billion as compared to $1.515 billion at December 31, 1998. Investment
securities available for sale increased $229.2 million, net loans increased
$144.5 million, excess of cost over fair value of assets acquired, net increased
$19.9 million and deferred taxes increased by $11.4 million. These increases
were offset by a decrease in federal funds sold of $34.7 million.
Investment securities available for sale increased $229.2 million, from
$621.4 million at December 31, 1998 to $850.6 million at September 30, 1999.
This increase was primarily attributed to funds acquired through acquisition of
deposits and higher levels of repurchase agreements.
Net loans at September 30, 1999 amounted to $834.4 million, an increase
of $144.5 million from $689.9 million at December 31, 1998. The increase was
primarily from originations of commercial and industrial loans. The ratio of
allowance for loan losses to total non-performing loans was 242.94% at September
30, 1999 compared to 286.41% at December 31, 1998. The decrease in this ratio is
the result of higher amounts of accruing loans contractually past due 90 days or
more offset by the lower amount of non-accruing loans at September 30, 1999. The
ratio of non-performing assets to total loans and real estate owned at September
30, 1999 was 0.43% compared to 0.40% at December 31, 1998. The ratio of
allowance for loan losses to total loans was 1.00% at September 30, 1999
compared to 1.02% at December 31, 1998.
Excess of cost over fair value of assets acquired increased $19.9
million, from $43.0 million at December 31, 1998 to $62.9 million at September
30, 1999. The increase was the result of the $23.7 million premium paid for the
acquisition of fourteen New Jersey branch offices from First Union during the
third quarter and a $660,000 premium paid for the acquisition of two branch
offices from Summit Bank, Hackensack, N.J. during the first quarter. This was
partially offset by the scheduled amortization of $4.4 million and a $71,000
purchase price adjustment of the Household branch assets acquisition.
Deferred taxes at September 30, 1999 amounted to $13.8 million, an
increase of $11.4 million from $2.4 million at December 31, 1998. The increase
was primarily from the income tax effect of the change in net unrealized losses
on available for sale investment securities for the nine-month period ended
September 30, 1999.
The total reduction in the Federal funds sold from $34.7 at December
31, 1998 was primarily used to fund loan originations.
Total liabilities at September 30, 1999 amounted to $1.745 billion
compared to $1.378 billion at December 31, 1998, an increase of $366.4 million.
The increase was the result of approximately $230.0 million in deposits acquired
from First Union, $15.8 million in deposits acquired from Summit, an increase of
$147.2 million of securities sold under agreements to repurchase and an increase
of $10.0 million of Federal funds purchased, partially offset by approximately
$34.3 million decrease in deposits during the first quarter and $5.1 million
decrease in other liabilities.
Federal funds purchased amounted to $10.0 million at September 30,
1999. There were no federal funds purchased at December 31, 1998. These
liabilities were increased, in part, to fund new loans.
9
<PAGE>
Securities sold under agreements to repurchase increased $147.2
million, from $332.1 million at December 31, 1998 to $479.3 million at September
30, 1999. The increase was the result of an increase of $28.7 million in
repurchase agreements with customers and an increase of $118.5 million in
Federal Home Loan Bank repurchase agreements.
Total shareholders' equity increased by $28.0 million, from $78.3
million at December 31, 1998, to $106.3 million at September 30, 1999. The
increase was a result of net proceeds received from the issuance of common stock
amounting to approximately $40.1 million and net earnings of $7.3 million for
the nine months ended September 30, 1999. This was partially offset by a $19.1
million decrease in accumulated other comprehensive income, which is comprised
entirely of net unrealized losses on securities available for sale, net of
income taxes, and the purchase of treasury stock of approximately $365,000.
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 a significant increase in
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. The Company also has the ability to liquidate
portions of its investment portfolio.
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. Until the issuance
of Trust Preferred Securities and additional issuance of common shares, the rate
at which commercial loans have grown has outpaced the internal growth rate of
the Company's capital. At September 30, 1999 the Company, Sun and Sun Delaware
were each in compliance with all of their capital requirements.
Comparison of Operating Results for the Three Months Ended September 30, 1999
and 1998.
General. Net income increased by $107,000 for the three months ended
September 30, 1999 to $2.5 million from $2.4 million for the three months ended
September 30, 1998. Net interest income increased $4.1 million for the three
months ended September 30, 1999 compared to the same period in 1998. The
provision for loan losses decreased approximately $107,000 for the three months
ended September 30, 1999 compared to the same period in 1998. Other income
decreased by $200,000 to $2.5 million for the three months ended September 30,
1999 as compared to $2.7 million for the three months ended September 30, 1998.
Other expenses increased by $3.8 million to $12.2 million for the three months
ended September 30, 1999 as compared to $8.4 million for the three months ended
September 30, 1998. The return on average assets for the three months ended
September 30, 1999 and 1998 were 0.58% and 0.78%, respectively. The return on
average equity for the three months ended September 30, 1999 and 1998 were
10.25% and 15.68%, respectively.
The Company's earnings growth and level of earnings for the three
months ended September 30, 1999 were impacted by Sun Delaware, Sun Mortgage, the
Company's recently opened loan production office in Philadelphia, Pennsylvania
(the "LPO") and the opening of ten new financial service centers.
Shortly after the acquisition of Sun Delaware, two senior executives
unexpectedly resigned from Sun Delaware. While the Company has appointed a new
chief executive officer for Sun Delaware who is experienced in the Delaware
market, the sudden changes in senior management resulted in lower than
10
<PAGE>
expected growth in loans, deposits, fee income and net income.
The start up costs associated with the LPO also adversely impacted
earnings. As is the case with most new businesses, the LPO, which commenced
operations in 1999, has not yet achieved profitability from its operations.
Profitability will depend upon, among other things, the volume of loans
originated by the LPO. As the volume of loans originated increases, the LPO's
operations should become profitable. While there can be no assurance that the
LPO will be able to achieve profitability, the Company expects loan volume to
increase in early 2000, at which time the LPO is expected to become profitable.
To the extent that the LPO is not able to increase loan volume, its operations
may continue to be unprofitable in future periods.
Finally, the 1999 results of operations of the Company were adversely
impacted by the performance of Sun Mortgage. Operations of Sun Mortgage were
negatively impacted by rising interest rates during 1999. Increases in interest
rates slowed the amount of loan refinancings which resulted in a commensurate
decrease in loan fee income. The Company has taken steps to reduce the expenses
of Sun Mortgage to compensate for lower loan origination volume in a rising
interest rate environment. Rising market interest rates could continue to impact
adversely results of operations of Sun Mortgage in future periods.
Net Interest Income. The increase in net interest income was due to a
$8.0 million increase in interest income partially offset by a $3.9 million
increase in interest expense.
Interest Income. Interest income for the three months ended September
30, 1999 increased approximately $8.0 million, or 37.1%, from $21.5 million for
the same period in 1998 to $29.5 million in 1999. The increase was primarily the
result of an increase of $6.0 million in interest and fees on loans and $1.6
million in interest on investment securities resulting primarily from higher
levels of securities sold under repurchase agreements.
Interest Expense. Interest expense for the three months ended September
30, 1999 increased approximately $3.9 million, from $11.8 million for the same
period in 1998 to $15.7 million in 1999. This increase was primarily due to a
$1.9 million increase in interest on deposit accounts resulting from a higher
deposit balances due to acquisitions; a $1.2 million increase in short-term
borrowed funds resulting from higher levels of securities sold under agreements
to repurchase; and a $670,000 increase in interest on guaranteed preferred
beneficial interest in subordinated debt, resulting from the issuance of
additional trust preferred securities in the fourth quarter of 1998.
Provision for Loan Losses. For the three months ended September 30,
1999, the provision for loan losses amounted to $470,000, a decrease of
$107,000, compared to $577,000 for the same period in 1998. Management
continually reviews the adequacy of the loan loss reserve based on management's
review of the quality of loans and the risks inherent in the loan portfolio in
conjunction with guidelines promulgated by the Banks' primary regulator.
Other Income. Other income decreased $200,000 for the three-month
period ended September 30, 1999 compared to the three-month period ended
September 30, 1998. Income from mortgage banking operations for the three-month
period ended September 30, 1999 decreased $578,000 as compared to the same
period in 1998. This decrease was a result of fewer refinancing opportunities
during 1999. In addition, gains from the sale of investment securities decreased
$290,000 for the three-month period ended September 30, 1999 as compared to the
same period in 1998. Partially offsetting these decreases were a $220,000
increase in service charges on deposit accounts generated by a larger customer
base due to deposit acquisitions and an increase of $253,000 in other income.
Other Expenses. Other expenses increased approximately $3.8 million, to
$12.2 million for the three months ended September 30, 1999 as compared to $8.4
million for the same period in 1998. Of the increase, $1.3 million was in
salaries and employee benefits, $550,000 was in occupancy expense, $525,000 was
in
11
<PAGE>
equipment expense, $268,000 was in data processing expense, $521,000 was in
amortization of excess of cost over fair value of assets acquired, $160,000 was
in postage and supplies and $359,000 was in other operating 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, data processing and postage
and supplies expenses were the result of branch expansion and the effect of the
Company's acquisitions.
Income Taxes. Applicable income taxes increased $225,000 for the three
months ended September 30, 1999 as compared to the same period in 1998. The
increase resulted from higher pre-tax earnings.
Comparison of Operating Results for the Nine Months Ended September 30, 1999 and
1998.
General. Net income increased by $1.1 million for the nine months ended
September 30, 1999 to $7.3 million from $6.2 million for the nine months ended
September 30, 1998. Net interest income increased $10.2 million and the
provision for loan losses increased $70,000 for the nine months ended September
30, 1999 compared to the same period in 1998. Other income increased by $2.0
million to $7.4 million for the nine months ended September 30, 1999 as compared
to $5.4 million for the nine months ended September 30, 1998. Other expenses
increased by $10.4 million to $32.9 million for the nine months ended September
30, 1999 as compared to $22.5 million for the nine months ended September 30,
1998. The return on average assets for the nine months ended September 30, 1999
and 1998 were 0.62% and 0.73%, respectively. The return on average equity for
the nine months ended September 30, 1999 and 1998 were 11.69% and 14.25%,
respectively.
Net Interest Income. The increase in net interest income was due to a $20.0
million increase in interest income partially offset by a $9.8 million increase
in interest expense.
Interest Income. Interest income for the nine months ended September
30, 1999 increased approximately $20.0 million, or 33.3%, from $60.3 million for
the same period in 1998 to $80.3 million in 1999. The increase was primarily the
result of an increase of $16.0 million in interest and fees on loans resulting
from acquisitions and internal growth and $4.0 million in interest on investment
securities and federal funds sold resulting from the deployment of cash received
from branch acquisitions.
Interest Expense. Interest expense for the nine months ended September
30, 1999 increased approximately $9.8 million, from $32.8 million for the same
period in 1998 to $42.6 million in 1999. This increase was primarily due to a
$6.0 million increase in interest on deposit accounts resulting from
significantly higher deposit balances due to acquisitions, a $1.8 million
increase in interest on borrowed funds resulting from higher levels of
securities sold under agreements to repurchase and a $2.0 million increase in
interest on guaranteed preferred beneficial interest in subordinated debt.
Provision for Loan Losses. For the nine months ended September 30,
1999, the provision for loan losses amounted to $1.7 million, an increase of
$70,000, compared to $1.6 million for the same period in 1998. 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 Banks' primary regulator.
Other Income. Other income increased $2.0 million for the nine-month period
ended September 30, 1999 compared to the nine-month period ended September 30,
1998. Of this amount, $896,000 was the increase from income from mortgage
banking operations for the nine-month period ended September 30, 1999 compared
to the same period in 1998. Service charges on deposit accounts increased
approximately $935,000 as a result of a larger customer base due to deposit
acquisitions, and an increase of $881,000 in other income, and gain on sale of
fixed assets increased $137,000. This was partially offset by a decrease of
12
<PAGE>
$98,000 in gains from the sale of loans and a decrease of $802,000 in gains
on the sale of investment securities.
Other Expenses. Other expenses increased approximately $10.4 million,
to $32.9 million for the nine months ended September 30, 1999 as compared to
$22.5 million for the same period in 1998. Of the increase, $4.3 million was in
salaries and employee benefits, $1.5 million was in occupancy expense, $1.1
million was in equipment expense, $684,000 was in data processing expense,
$511,000 was in postage and supplies, $1.6 million was in amortization of excess
of cost over fair value of assets acquired and $814,000 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 and data processing
expenses were the result of internal growth and the effect of the Company's
acquisitions. The increase in amortization of excess of cost over fair value of
assets acquired is the result of additional acquisitions by the Company through
September 30, 1999.
Income Taxes. Applicable income taxes increased $566,000 for the nine
months ended September 30, 1999 as compared to the same period in 1998. The
increase resulted from higher pre-tax earnings.
Year 2000 Compliance
The Company's operations may be adversely affected if it, or certain
persons with whom it does business, fail to resolve Year 2000 issues. Rapid and
accurate data processing is essential to the Company's operations. Many computer
programs that can only distinguish the final two digits of the year entered are
expected to read entries for the year 2000 as the year 1900 and compute payment,
interest or delinquency based on the wrong date or are expected to be unable to
compute payment, interest, o delinquency.
Failure to resolve year 2000 issues presents the following risks to the
Company:
(1) the Banks could lose customers to other financial
institutions, resulting in a loss of revenue, if the
Company's data processing operation is unable to process
properly customer transactions;
(2) the Federal Home Loan Bank, the Federal Reserve System, and
correspondent banks could fail to provide funds to the Banks
which could materially impair their liquidity and affect
their ability to fund loans and deposit withdrawals;
(3) concern on the part of depositors that year 2000 issues
could impair access to their deposit account balances could
result in the Banks experiencing deposit outflows prior to
December 31, 1999;
(4) the failure of the Bank's commercial and industrial
borrowers to adequately resolve their own year 2000 issues
could render them unable to continue to make timely loan
payments; and
(5) the Company could incur increased personnel costs if
additional staff is required to perform functions that
inoperative systems would have otherwise performed.
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, 1999, the Company had
13
<PAGE>
completed the assessment and testing phases of the plan. The Company has
successfully tested all of its systems and applications. It intends to continue
such testing, as well as completing its customer awareness phase during the
remainder of 1999.
The Company's primary system software is licensed from a third party,
Kirchman Corporation. Kirchman Corporation has represented to the Company that
it is Year 2000 compliant. In 1998, the Company received the results of an
independent testing group that verified such compliance. If, however, Kirchman
Corporation software malfunctions, the Company would likely experience
significant data processing delays, mistakes or failures. These delays, mistakes
or failures could have a significant adverse impact on its financial condition
and profitability. In the event that the Kirchman Corporation is not Year 2000
compliant, the Company will attempt to locate an alternative service bureau. A
disruption of this type in the Company's data processing ability may have a
material adverse effect on the Company. If very few financial institution
service bureaus are operating in the year 2000, replacement costs, assuming the
Company could negotiate an agreement, could be material to the Company. To a
much lesser extent, the Company risks the effects of a malfunction by
telecommunication service providers. The Company could experience a slowing of
operations if the telecommunication service providers suffer malfunctions.
It is expected that Year 2000 compliance will cost approximately
$180,000, of which approximately $160,000 had been expended as of September 30,
1999. The primary expenditure of funds is 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 compliance costs has been derived
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.
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 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 have become increasingly concerned with the extent to which they are able
to match maturities of interest-earning assets and interest-bearing liabilities.
Such matching is facilitated by examining the extent to which such assets and
liabilities are interest-rate sensitive 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 monthly basis,
Management monitors the Company's gap, primarily its six-month and one-year
maturities and works to maintain the gap within a range that does not exceed a
negative 25% of total assets. The Company attempts to maintain its ratio of
rate-sensitive assets to rate-sensitive liabilities between 75% to 125%.
Management monitors the company's gap position at monthly meetings. The
Asset/Liability Committee of the Banks' Boards of Directors meets quarterly to
discuss interest rate risk. The Company uses simulation models to measure the
impact of potential changes of up to 300 basis points in interest rates on the
net interest income of the Company. As described below, sudden changes to
interest rates should not have a material impact to the Company's results of
operations. Should the Company experience a positive or negative mismatch in
excess of the approved range, there are a number of remedial options. The
Company
14
<PAGE>
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 September 30, 1999, the Company had a negative position with respect to its
exposure to interest rate risk: total interest-earning liabilities maturing or
repricing within one year exceeded total interest-bearing assets maturing or
repricing during the same time period by $311.0 million, representing a negative
cumulative one-year gap ratio of 16.28%. As a result, the yield on
interest-earning assets of the Company should adjust to changes in interest
rates at a slightly slower rate than the cost of interest-bearing liabilities.
The following table summarizes the maturity and repricing characteristics of the
Company 's interest-earning assets and interest-bearing liabilities at September
30, 1999. All amounts are categorized by their actual maturity or repricing date
with the exception of interest-bearing demand deposits and savings deposits. As
a result of prior experience during periods of rate volatility resulting in
insignificant changes to levels of core deposits and Management's estimate of
future rate sensitivities, the Company allocates the interest-bearing demand
deposits and the savings deposits into categories noted below. Management's
allocation is based on the estimated effective duration.
<TABLE>
<CAPTION>
Maturity/Repricing Time Periods
At September 30, 1999
(Dollars in Thousands)
0-3 Months 4-12 Months 1-5 Years Over 5 Years Total
---------- ----------- --------- ------------ -----
<S> <C> <C> <C> <C> <C>
Loans Receivable $ 297,361 $ 58,650 $ 350,444 $ 136,329 $ 842,784
Investment Securities 426,838 11,904 102,654 376,166 917,562
Federal funds sold -- -- -- -- 4,900
---------- ---------- ---------- ---------- ----------
Total interest-earning assets 724,199 70,554 453,098 512,495 1,760,346
---------- ---------- ---------- ---------- ----------
Interest-bearing demand deposits 85,580 15,427 85,806 61,119 247,932
Savings deposits 3,959 11,985 66,769 90,631 173,344
Time certificates under $100,000 140,205 228,880 54,373 4,673 428,131
Time certificates $100,000 or more 76,241 54,067 8,773 254 139,335
Federal Home Loan Bank advances 31 97 761 3,406 4,295
Federal funds purchased 10,000 -- -- -- 10,000
Loan payable -- -- 1,160 -- 1,160
Securities sold under agreements
to repurchase 479,256 -- -- -- 479,256
---------- ---------- ---------- ---------- ----------
Total interest-bearing liabilities 795,272 310,456 217,642 160,083 1,483,453
---------- ---------- ---------- ---------- ----------
Periodic Gap $ (71,073) $ (239,902) $ 235,456 $ 352,412 $ 276,893
========== ========== ========== ========== ==========
Cumulative Gap $ (71,073) $ (310,975) $ (75,519) $ 276,893
========== ========== ========== ==========
Cumulative Gap Ratio (3.72%) (16.28%) (3.95%) 14.50%
========== ========== ========== ==========
</TABLE>
15
<PAGE>
The following table sets forth a summary of average balances with corresponding
interest income and interest expense as well as average yield and cost
information for the periods presented. Average balances are derived from daily
balances. Dollar amounts are in thousands.
<TABLE>
<CAPTION>
At or for the three months ended At or for the nine months ended
Sept. 30, 1999 Sept. 30, 1999
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
------- -------- ---------- ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable (1) 811,922 $ 17,620 8.68 % 758,952 $ 48,728 8.56%
Investment securities (2) 760,186 12,020 6.32 690,110 32,254 6.23
Federal funds sold 11,720 154 5.26 7,903 279 4.71
--------- ------ --------- ------
Total interest-earning assets 1,583,828 29,794 7.52 1,456,965 81,261 7.44
Non-interest-earning assets 120,591 119,861
---------- ----------
Total assets $1,704,419 $1,576,826
========== ==========
Interest-bearing liabilities:
Interest-bearing deposit accounts $ 865,682 8,459 3.91% $ 836,799 24,403 3.89%
Borrowed money 447,113 5,844 5.23 377,211 14,090 4.98
Guaranteed preferred beneficial interest
in Company's subordinated debt 58,595 1,391 9.50 58,601 4,175 9.50
--------- ------ --------- ------
Total interest-bearing liabilities 1,371,390 15,694 4.58 1,272,611 42,668 4.47
--------- ------ --------- ------
Non-interest-bearing liabilities 237,053 220,869
---------- ----------
Total liabilities 1,608,443 1,493,480
Shareholders' equity 95,976 83,346
---------- ----------
Total liabilities and stockholders equity $1,704,419 $1,576,826
========== ==========
Net interest income $ 14,100 $ 38,593
========== ==========
Interest rate spread (3) 2.94% 2.97%
==== ====
Net yield on interest earning assets (4) 3.56% 3.53%
==== ====
Ratio of average interest-earning assets
to average interest-bearing liabilities 115.49% 114.49%
====== ======
</TABLE>
(1) Average balances include non-accrual loans
(2) Interest earned on non-taxable investment securities is shown on a tax
equivalent basis assuming a 34% marginal federal tax rate for all periods
(3) Interest rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities
(4) Net yield on interest-earning assets represents net interest income as a
percentage of average interest-earning assets
16
<PAGE>
PART II - OTHER INFORMATION
Item 1 Legal Proceedings
The Company is not engaged in any legal proceedings of a material
nature at September 30, 1999. 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
Not applicable
Item 3 Defaults Upon Senior Securities
Not applicable
Item 4 Submission of Matters to a Vote of Security Holders
Not applicable
Item 5 Other Information
Not applicable
Item 6 Exhibits and Reports on Form 8-K
(a) 27 Financial Data Schedule (electronic filing only)
(b) The following current report on Form 8-K was filed during the
quarter ended September 30, 1999:
On September 24, 1999 the Company filed a Current Report on Form
8-K/A No.1 dated September 9, 1999 to report that the Bank had
acquired fourteen branch offices, certain loans and approximately
$231.6 million of deposits from First Union National Bank,
Charlotte, North Carolina.
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.
SUN BANCORP, INC.
Date November 12, 1999 By: /s/ Philip W. Koebig, III
------------------------- ------------------------------
Philip W. Koebig, III
President and
Chief Executive Officer
Date November 12, 1999 By: /s/ Robert F. Mack
-------------------------- --------------------------
Robert F. Mack
Executive Vice President and
Chief Financial Officer
18
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
AUARTERLY 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-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 57,033
<INT-BEARING-DEPOSITS> 988,743
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 887,821
<INVESTMENTS-CARRYING> 887,821
<INVESTMENTS-MARKET> 887,821
<LOANS> 842,784
<ALLOWANCE> 8,389
<TOTAL-ASSETS> 1,909,699
<DEPOSITS> 1,239,754
<SHORT-TERM> 489,384
<LIABILITIES-OTHER> 10,344
<LONG-TERM> 5,327
58,595
0
<COMMON> 10,073
<OTHER-SE> 96,222
<TOTAL-LIABILITIES-AND-EQUITY> 1,909,699
<INTEREST-LOAN> 48,728
<INTEREST-INVEST> 31,387
<INTEREST-OTHER> 279
<INTEREST-TOTAL> 80,394
<INTEREST-DEPOSIT> 24,403
<INTEREST-EXPENSE> 42,668
<INTEREST-INCOME-NET> 37,726
<LOAN-LOSSES> 1,657
<SECURITIES-GAINS> 79
<EXPENSE-OTHER> 32,936
<INCOME-PRETAX> 10,486
<INCOME-PRE-EXTRAORDINARY> 10,486
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,306
<EPS-BASIC> .90
<EPS-DILUTED> .83
<YIELD-ACTUAL> 3.53
<LOANS-NON> 1,393
<LOANS-PAST> 2,060
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 7,143
<CHARGE-OFFS> 432
<RECOVERIES> 21
<ALLOWANCE-CLOSE> 8,389
<ALLOWANCE-DOMESTIC> 8,389
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 38
</TABLE>
