<PAGE>
United States
Securities and Exchange Commission
Washington, D.C. 20429
FORM 10-Q
/X/ Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarterly period ended September 30, 1999.
/ / Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the transition period from N/A to N/A.
Commission File Number 333-16951
MID-STATE BANCSHARES
(Exact name of registrant as specified in its charter)
CALIFORNIA 77-0442667
- ----------------------------------------- -----------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
1026 GRAND AVE. ARROYO GRANDE, CA 93420
- ------------------------------------------- ----------------------------------
(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number: (805) 473-7700
Securities to be registered under Section 12(b) of the Act: NONE
Securities to be registered under Section 12(g) of the Act:
COMMON STOCK, NO PAR VALUE
(Title of class)
Check whether the Bank (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or 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 / /
As of November 3, 1999, the aggregate market value of the common stock held by
non-affiliates of the Company was: $364,945,464.
Number of shares of common stock of the Company outstanding as of November 3,
1999: 11,285,220 shares.
<PAGE>
MID-STATE BANCSHARES
September 30, 1999
Index
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1 -Financial Statements
Consolidated Statements of Financial Position as of
September 30, 1999, December 31, 1998, and
September 30, 1998 3
Consolidated Statements of Income
for the three month and nine month periods ended
September 30, 1999 and September 30, 1998 4
Consolidated Statements of Comprehensive Income
for the three month and nine month periods ended
September 30, 1999 and September 30, 1998 5
Consolidated Statements of Cash Flows for the
nine month periods ended September 30, 1999
and September 30, 1998 6
Notes to Consolidated Financial Statements 7
Item 2 -Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3 -Quantitative and Qualitative Disclosure
About Market Risk 17
PART II - OTHER INFORMATION
Item 1 -Legal Proceedings 19
Item 2 -Changes in Securities and Use of Proceeds 19
Item 3 -Defaults Upon Senior Securities 19
Item 4 -Submission of Matters to a Vote of Security Holders 19
Item 5 -Other Information 19
Item 6 -Exhibits and Reports on Form 8-K 19
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
MID-STATE BANCSHARES
Consolidated Statements of Financial Position
(Interim Periods Unaudited - figures in 000's)
<TABLE>
<CAPTION>
September 30, December 31, September 30,
ASSETS 1999 1998 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash and Due From Banks $ 51,923 $ 84,557 $ 93,304
Fed Funds Sold 14,000 51,865 43,265
Investment Securities:
Available For Sale 516,799 484,253 465,358
Held-to-Maturity (market value of 33,241 41,916 51,494
$33,152, $42,704 and $52,411,
respectively)
Loans, net of unearned income 722,740 675,481 643,275
Allowance for Loan Losses (14,194) (14,441) (14,820)
- -------------------------------------------------------------------------------------------------------------------
NET LOANS 708,546 661,040 628,455
- -------------------------------------------------------------------------------------------------------------------
Premises and Equipment, Net 30,136 32,603 33,472
Accrued Interest Receivable 12,534 11,491 11,445
Investments in Real Estate, Net 2,270 6,769 8,386
Other Real Estate Owned, Net 17 259 278
Other Assets 17,586 14,572 12,796
- -------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 1,387,052 $ 1,389,325 $ 1,348,253
===================================================================================================================
- -------------------------------------------------------------------------------------------------------------------
LIABILITIES AND EQUITY
Non Interest Bearing Demand $ 241,762 $ 258,629 $ 252,076
NOW Accounts, Money Market
and Savings Deposits 619,221 615,836 593,925
Time Deposits Under $100 232,940 243,439 249,483
Time Deposits $100 or more 109,955 106,575 96,643
- -------------------------------------------------------------------------------------------------------------------
TOTAL DEPOSITS 1,203,878 1,224,479 1,192,127
- -------------------------------------------------------------------------------------------------------------------
Accrued Interest Payable and
Other Liabilities 25,804 13,755 12,084
- -------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 1,229,682 1,238,234 1,204,211
- -------------------------------------------------------------------------------------------------------------------
Shareholders' Equity:
Common Stock and Surplus (Shares 59,661 58,821 57,173
Outstanding of 11,285, 11,206 and
11,211, respectively)
Retained Earnings 99,186 87,887 80,538
Accumulated other comprehensive
(loss) income, net of tax (1,477) 4,383 6,331
- -------------------------------------------------------------------------------------------------------------------
TOTAL EQUITY 157,370 151,091 144,042
- -------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND EQUITY $ 1,387,052 $ 1,389,325 $ 1,348,253
===================================================================================================================
</TABLE>
3
<PAGE>
MID-STATE BANCSHARES
Consolidated Statements of Income
(Unaudited - figures in 000's except earnings per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 16,931 $ 16,622 $ 49,463 $ 49,616
Interest on investment securities - taxable 6,355 7,467 19,552 21,299
Interest on investment securities - tax exempt 1,247 439 2,892 1,269
Interest on fed funds sold, other 819 636 2,230 1,966
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST INCOME 25,352 25,164 74,137 74,150
- ------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on NOW, money market and savings 2,495 2,838 7,326 8,331
Interest on time deposits less than $100 2,572 2,982 8,103 9,883
Interest on time deposits of $100 or more 1,385 1,509 4,016 3,861
Interest on mortgages, other 74 105 214 259
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 6,526 7,434 19,659 22,334
- ------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME BEFORE PROVISION 18,826 17,730 54,478 51,816
Less: Provision for loan losses 20 - 50 300
- ------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION 18,806 17,730 54,428 51,516
- ------------------------------------------------------------------------------------------------------------------------------
OTHER OPERATING INCOME:
Service charges and fees 1,667 1,685 4,945 5,215
Other non interest income 2,800 3,328 8,149 9,592
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER OPERATING INCOME 4,467 5,013 13,094 14,807
- -----------------------------------------------------------------------------------------------------------------------------
OTHER OPERATING EXPENSE:
Salaries and employee benefits 7,394 7,357 22,401 22,767
Occupancy and furniture 2,131 2,044 6,227 6,328
Merger related charges 2,930 6,938 2,930 6,938
Other operating expenses 4,344 3,657 12,363 12,100
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER OPERATING EXPENSE 16,799 19,996 43,921 48,133
- -----------------------------------------------------------------------------------------------------------------------------
Income before taxes 6,474 2,747 23,601 18,190
Provision for income taxes 2,758 2,694 8,300 7,885
- -----------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 3,716 $ 53 $ 15,301 $ 10,305
==============================================================================================================================
EARNINGS PER SHARE - BASIC $ 0.33 $ 0.00 $ 1.36 $ 0.92
- DILUTED $ 0.33 $ 0.00 $ 1.35 $ 0.91
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
MID-STATE BANCSHARES
Consolidated Statements of Comprehensive Income
(Unaudited - figures in 000's)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET INCOME $ 3,716 $ 53 $ 15,301 $ 10,305
- -------------------------------------------------------------------------------------------------------------------------------
OTHER COMPREHENSIVE INCOME BEFORE TAXES:
Unrealized (losses) gains on securities available for sale:
Unrealized holding (losses) gains arising during period (570) 7,163 (9,772) 7,786
Less: reclassification adjustment for losses
included in net income 1 441 1 437
- -------------------------------------------------------------------------------------------------------------------------------
Other comprehensive (loss) income, before tax (571) 6,722 (9,773) 7,349
Income tax (benefit) provision related to items in
comprehensive income (230) 2,402 (3,913) 2,655
- -------------------------------------------------------------------------------------------------------------------------------
OTHER COMPREHENSIVE (LOSS) INCOME, NET OF TAXES (341) 4,320 (5,860) 4,694
- -------------------------------------------------------------------------------------------------------------------------------
COMPREHENSIVE INCOME $ 3,375 $ 4,373 $ 9,441 $14,999
================================================================================================================================
</TABLE>
5
<PAGE>
MID-STATE BANCSHARES
Consolidated Statements of Cash Flows
(Unaudited - figures in 000's)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1999 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 15,301 $ 10,305
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for credit losses 50 300
Depreciation and amortization 2,865 2,941
Net amortization of prem./discounts-investments 2,046 875
Decrease (increase) in accrued interest receivable 1,043 (113)
Increase in other liabilities 5,632 956
Increase in other assets (3,014) (205)
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 23,923 15,059
- -------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Net cash from proceeds of real estate 4,801 5,300
Proceeds from sales and maturities of investments 162,129 132,222
Purchases of investments (197,203) (142,934)
(Increase) decrease in loans (47,259) 400
Purchase of premises and equipment, net (398) (356)
Other changes, net 285 (3,742)
- -------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (77,645) (9,110)
- -------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
(Decrease) increase in deposits (20,401) 10,149
Increase (decrease) in short-term borrowings 6,417 (13)
Exercise of stock options 1,329 1,704
Repurchase of common stock (489) (804)
Cash dividends paid (3,633) (1,937)
- -------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities (16,777) 9,099
- -------------------------------------------------------------------------------------------------------------------
(Decrease) increase in cash and cash equivalents (70,499) 15,048
Cash and cash equivalents, beginning of period 136,422 121,521
- -------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 65,923 $ 136,569
===================================================================================================================
Supplemental Disclosure of Cash Flow Information:
Cash paid for taxes $ 8,215 $ 8,316
Interest paid (net of amounts of capitalized) 19,686 23,493
</TABLE>
6
<PAGE>
MID-STATE BANCSHARES
Notes to Consolidated Financial Statements
(Information with respect to interim periods is unaudited)
NOTE A - BASIS OF PRESENTATION AND MANAGEMENT REPRESENTATION
The accompanying consolidated financial statements include the accounts of
Mid-State Bancshares and its wholly owned subsidiary Mid-State Bank which
includes the Bank and the Bank's subsidiaries, MSB Properties and Mid Coast
Land Company (collectively the "Company" or "Bank" or "Mid-State"). All
significant intercompany transactions have been eliminated in consolidation.
These consolidated financial statements should be read in conjunction with
the Form 10-K Annual Report for the year ended December 31, 1998 of Mid-State
Bancshares. A summary of the Company's significant accounting policies is set
forth in the Notes to Consolidated Financial Statements contained therein.
These consolidated financial statements have been prepared in accordance with
generally accepted accounting principles on a basis consistent with the
accounting policies reflected in the audited consolidated financial
statements included in the Annual Report on Form 10-K for the year ended
December 31, 1998. They do not, however, include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments including
normal recurring accruals considered necessary for a fair presentation have
been included. Operating results for the interim periods presented are not
necessarily indicative of the results that may be expected for any other
interim period or for the year as a whole.
NOTE B - EARNINGS PER SHARE
The following is a reconciliation of net income and shares outstanding to the
income and number of shares used to compute Earnings Per Share ("EPS"). Figures
are in thousands, except earnings per share data.
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
September 30, 1999 September 30, 1998
Earnings Shares EPS Earnings Shares EPS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Income as reported $ 3,716 $ 53
Basic Earnings Per Share:
Income available to
Common Shareholders $ 3,716 11,237 $ 0.33 $ 53 11,210 $ 0.00
Effect of dilutive securities:
Stock Options 132 120
Diluted Earnings Per Share:
Income available to
Common Shareholders $ 3,716 11,369 $ 0.33 $ 53 11,330 $ 0.00
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
September 30, 1999 September 30, 1998
Earnings Shares EPS Earnings Shares EPS
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Income as reported $ 15,301 $ 10,305
Basic Earnings Per Share:
Income available to
Common Shareholders $ 15,301 11,212 $ 1.36 $ 10,305 11,175 $ 0.92
Effect of dilutive securities:
Stock Options 132 121
Diluted Earnings Per Share:
Income available to
Common Shareholders $ 15,301 11,344 $ 1.35 $ 10,305 11,296 $ 0.91
</TABLE>
NOTE C - MERGER OF MID-STATE BANCSHARES AND CITY COMMERCE BANK
As reported in the Company's recent reports on Form 10-Q and Form 8-K, the
Company signed a definitive agreement to merge on April 19, 1999, subject to
the approval of banking regulators and City Commerce Bank shareholders. The
merger became effective at close of business on August 31, 1999. The
agreement provided for the exchange of common stock at an exchange ratio of
.6775 shares of Mid-State Bancshares common stock for each share of City
Commerce common stock, based on the price of Mid-State Bancshares stock
preceding the effective date of the transaction. The merger was structured to
be tax-free, and was accounted for as a pooling-of-interests. As a result of
this accounting treatment, all financial statements presented, including
prior periods, are combined and restated as if the two banks were
historically one unit.
The following summarizes the separate revenue and net income of Mid-State
Bancshares and City Commerce Bank that have been reported in the restated
financial statements included herein (dollars in 000's).
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST AND NON INTEREST INCOME:
Mid-State Bancshares - Pre-merger $ 17,337 $ 26,326 $ 68,087 $ 78,290
City Commerce Bank - Pre-merger 2,337 3,851 8,999 10,667
Mid-State Bancshares - Post-merger 10,145 -- 10,145 --
- -------------------------------------------------------------------------------------------------------------
TOTAL INCOME $ 29,819 $ 30,177 $ 87,231 $ 88,957
=============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET INCOME:
Mid-State Bancshares - Pre-merger $ 3,452 $ (598) $ 14,057 $ 8,831
City Commerce Bank - Pre-merger 369 651 1,349 1,474
Mid-State Bancshares - Post-merger (105) -- (105) --
- --------------------------------------------------------------------------------------------------------------
TOTAL NET INCOME $ 3,716 $ 53 $ 15,301 $ 10,305
==============================================================================================================
</TABLE>
8
<PAGE>
The shares outstanding for Mid-State Bancshares at September 30, 1999 results
from the following activity in 1999:
<TABLE>
<S> <C> <C>
December 31, 1998 - Shares Outstanding: Mid-State Bancshares 10,078,416
City Commerce Bank 1,663,795
City Commerce Bank Stock Repurchased and Retired Prior to Merger (28,570)
City Commerce Bank Stock Options Exercised Prior to Merger 101,108
---------
City Commerce Bank Shares Outstanding August 31, 1999 1,736,333
=========
Shares issued in connection with the exchange of City Commerce
Bank Stock for Mid-State Bancshares Stock (.6775 shares of
Mid-State Bancshares Stock for each share of City Commerce
Bank Stock) 1,176,365
Less: Partial Shares Retired in Exchange - Paid For in Cash (147)
Mid-State Bancshares Stock Options Exercised Prior to Merger 30,386
Mid-State Bancshares Stock Options Exercised After the Merger 200
----------
September 30, 1999 - Shares Outstanding Mid-State Bancshares 11,285,220
==========
</TABLE>
9
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SELECTED FINANCIAL DATA - SUMMARY. The following table provides
certain selected financial data at September 30, 1999 and 1998 and the
results of operations for the 3 month and 9 month periods ended on those
dates (unaudited).
<TABLE>
<CAPTION>
CONSOLIDATED FINANCIAL DATA - MID-STATE BANCSHARES
(Unaudited) Three Months Ended Nine Months Ended
- ---------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA) SEPT. 30, 1999 SEPT. 30, 1998 SEPT. 30, 1999 SEPT. 30, 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Income (not taxable equivalent) $ 25,352 $ 25,164 $ 74,137 $ 74,150
Interest Expense 6,526 7,434 19,659 22,334
- ---------------------------------------------------------------------------------------------------------------------------------
Net Interest Income 18,826 17,730 54,478 51,816
Provision for Loan Losses 20 - 50 300
- ---------------------------------------------------------------------------------------------------------------------------------
Net Interest Income after provision for loan losses 18,806 17,730 54,428 51,516
Non-interest income 4,467 5,013 13,094 14,807
Non-interest expense - operating 13,869 13,058 40,991 41,195
Non-interest expense - merger charges 2,930 6,938 2,930 6,938
- ---------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 6,474 2,747 23,601 18,190
Provision for income taxes 2,758 2,694 8,300 7,885
- ---------------------------------------------------------------------------------------------------------------------------------
Net Income $ 3,716 $ 53 $ 15,301 $ 10,305
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
- ---------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA) SEPT. 30, 1999 SEPT. 30, 1998 SEPT. 30, 1999 SEPT. 30, 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE:
Net Income - basic $ 0.33 $ 0.00 $ 1.36 $ 0.92
Net Income - diluted $ 0.33 $ 0.00 $ 1.35 $ 0.91
Weighted average shares used in Basic E.P.S. calculation 11,237 11,210 11,212 11,175
Weighted average shares used in Diluted E.P.S. calculation 11,369 11,330 11,344 11,296
Cash dividends 0.14 - 0.35 0.17
Book value at period-end 13.94 12.85
Ending Shares 11,285 11,211
FINANCIAL RATIOS
Return on assets 1.04% 0.02% 1.47% 1.04%
Return on equity 9.46% 0.15% 13.26% 10.07%
Net interest margin (not taxable equivalent) 5.79% 5.90% 5.75% 5.86%
Net interest margin (taxable equivalent yield) 6.05% 6.00% 5.95% 5.96%
Net loan losses to avg. loans 0.02% 0.21% 0.06% 0.11%
Efficiency ratio (includes impact of merger charges) 72.1% 87.9% 65.0% 72.2%
PERIOD AVERAGES
Total Assets $ 1,411,129 $ 1,351,374 $ 1,389,103 $ 1,322,636
Total Loans 678,562 636,774 669,502 633,984
Total Earning Assets 1,288,942 1,191,826 1,266,889 1,181,707
Total Deposits 1,246,389 1,197,969 1,221,072 1,177,766
Common Equity 155,917 142,029 154,230 136,842
BALANCE SHEET - AT PERIOD-END
Cash and due from banks $ 51,923 $ 93,304
Investments and Fed Funds Sold 564,040 560,117
Loans, net of deferred fees, before allowance for loan losses 722,740 643,275
Allowance for Loan Losses (14,194) (14,820)
Other assets 62,543 66,377
- ---------------------------------------------------------------------------------------------------------------------------------
Total Assets $ 1,387,052 $ 1,348,253
- ---------------------------------------------------------------------------------------------------------------------------------
Non-interest bearing deposits $ 241,762 $ 252,076
Interest bearing deposits 962,116 940,051
Other borrowings 9,465 4,482
Other liabilities 16,339 7,602
Shareholders' equity 157,370 144,042
- ---------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' equity $ 1,387,052 $ 1,348,253
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
<TABLE>
<S> <C> <C>
ASSET QUALITY & CAPITAL - AT PERIOD-END
Non-accrual loans $ 1,541 $ 1,454
Loans past due 90 days or more 5,679 2,288
Other real estate owned 17 278
- ---------------------------------------------------------------------------------------------------------------------------------
Total non performing assets $ 7,237 $ 4,020
=================================================================================================================================
Loan loss allowance to loans, gross 2.0% 2.3%
Non-accrual loans to total loans, gross 0.2% 0.2%
Non performing assets to total assets 0.5% 0.3%
Allowance for loan losses to non performing loans 196.6% 396.0%
Equity to average assets (leverage ratio) 11.2% 10.1%
Tier One capital to risk-adjusted assets 16.3% 15.9%
Total capital to risk-adjusted assets 17.6% 17.2%
</TABLE>
PERFORMANCE SUMMARY. The Company posted net income of $3.7 million in the
third quarter of 1999 compared to a break-even level of $53 thousand in the
third quarter of 1998. For the nine months ended September 30th, net income was
$15.3 million in the 1999 period compared to $10.3 million in the 1998 period.
In reviewing the operating earnings of the Company for these time periods,
Mid-State's core results continue to show improvement. Operating earnings
include adjustments from reported net income to reflect certain non recurring
factors. These factors include the following items; 1) the tax adjusted merger
charges associated with the merger between Mid-State Bank, Bank of Santa Maria
and BSM Bancorp in 1998 and the merger between Mid-State Bancshares and City
Commerce Bank in 1999, 2) one time only net security losses (tax adjusted), 3)
the benefit taken in 1999 for future tax deductions not previously benefited, 4)
the reduction in the Company's valuation allowance in 1998 against its deferred
tax asset, and 5) the tax adjusted gain on sale of Other Real Estate Owned
(OREO). The table below provides a reconciliation of net income to operating
earnings for the comparable periods:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
($ in 000's except per share data) 1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Income $ 3,716 $ 53 $ 15,301 $ 10,305
Add:
Non Recurring Merger Charges 2,060 6,938 2,060 6,938
Securities Losses -- 253 -- 253
Deduct:
Tax Deductions not previously
benefited in prior years (15) -- (1,015) --
Reduction in valuation allowance
against deferred tax asset -- (917) -- (2,751)
Gain on Sale of OREO (17) (619) (86) (1,228)
- -------------------------------------------------------------------------------------------------------------------
Operating Earnings $ 5,744 $ 5,708 $ 16,260 $ 13,517
===================================================================================================================
Operating Earnings
Per Share (diluted) $ 0.51 $ 0.50 $ 1.43 $ 1.20
===================================================================================================================
</TABLE>
11
<PAGE>
NET INTEREST INCOME. Mid-State's year-to-date annualized yield on
average earning assets was 7.82% for the first nine months of 1999 (8.03% on
a taxable equivalent basis) compared to 8.39% in the like 1998 period (8.49%
on a taxable equivalent basis). This decline in yield is related primarily to
the drop in interest rates when comparing the first nine months of 1999 with
the 1998 period. The Prime Rate, to which many of the Bank's loans are tied,
averaged 7.87% in the 1999 period compared to 8.50% in the 1998 period. In a
similar manner, annualized interest expense as a percent of average earning
assets declined from 2.53% in the first nine months of 1998 to 2.07% in this
year's nine month period. This also reflected the general decline in market
interest rates as the Bank lowered rates paid on various deposit products.
Overall, the Bank was able to reduce its interest expense on deposits by an
approximately comparable amount to the decline in interest income from
earning assets. As a result, Mid-State's annualized Net Interest Income,
expressed as a percent of average earning assets, was 5.75% for the nine
month period of 1999 (5.95% on a taxable equivalent basis) compared to 5.86%
in the comparable 1998 period (5.96% on a taxable equivalent basis).
Annualized Net Interest Income as a percent of average total assets was also
substantially similar having been 5.24% in the first nine months of 1998
(5.32% taxable equivalent) compared to 5.24% in the 1999 period (5.43%
taxable equivalent).
Earning assets on average were $85 million higher in the nine month 1999
period ($1,267 million compared to $1,182 million) which is up about 7.2%
from the like 1998 period. Average deposits in this same time-frame were up
$43 million, or 3.7% ($1,221 million compared to $1,178 million), explaining
part of the increase in average assets. The remaining portion of the increase
is a result of a combination of three factors - (1) the retention of earnings
in the Bank, (2) the decline in investments in real estate and (3) a
reduction in non earning balances held at the Federal Reserve Bank.
PROVISION AND ALLOWANCE FOR LOAN LOSSES. Mid-State recorded a provision
to the allowance for loan losses in the first nine months of 1999 totaling
$50 thousand. The Bank provided $300 thousand in the comparable 1998 period.
Management continues to believe that the allowance, which stands at 2.0% of
total loans at September 30, 1999, down from 2.3% one year earlier, is
adequate to cover inherent losses. The $14.2 million allowance at September
30, 1999 is approximately two times the level of non performing assets which
stand at $7.2 million compared to $4.0 million one year earlier. Non
performing assets consist of loans on nonaccrual status, accruing loans 90
days or more past due and Other Real Estate Owned. Other Real Estate Owned
reflects property acquired through foreclosure which had secured Bank loans
on which the borrower defaulted. While continuing efforts are made to improve
overall asset quality, Management is unable to estimate with certainty, how
and under what terms, problem assets will be resolved. Non performing assets
stood at 0.5% of total assets at the end of September 1999, which is an
increase from the 0.3% level one year earlier.
Changes in the allowance for loan losses for the periods ended September
30, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at beginning of period $ 14,211 $ 15,155 $ 14,441 15,064
Provision for loan losses 20 -- 50 300
Loans charged off (286) (515) (1,196) (1,173)
Recoveries of loans previously
Charged-off 249 180 899 629
- ----------------------------------------------------------------------------------------------------------
Balance at end of period $ 14,194 $ 14,820 $ 14,194 $ 14,820
==========================================================================================================
</TABLE>
12
<PAGE>
At September 30, 1999, the recorded investment in loans which have been
identified as impaired loans, totaled $3,769,000. Of this amount, $2,178,000
related to loans with no valuation allowance and $1,591,000 related to loans
with a corresponding valuation allowance of $365,000. Impaired loans totaled
$11,255,000 at September 30, 1998. Of that amount, $7,898,000 related to
loans with no valuation allowance and $3,358,000 related to loans with a
corresponding valuation allowance of $1,069,000. The valuation allowance for
impaired loans is included within the general allowance shown above and
netted against loans on the consolidated statements of financial position.
For the quarter ended September 30, 1999, the average recorded investment in
impaired loans was $4,974,000 compared to $7,514,000 in the 1998 period. A
loan is identified as impaired when it is probable that interest and
principal will not be collected according to the contractual terms of the
loan agreement. Because this definition is very similar to that used by bank
regulators to determine on which loans interest should not be accrued, the
Bank expects that most impaired loans will be on non-accrual status.
NONINTEREST INCOME. Noninterest income for the first nine months of 1999
was $13.1 million, down from $14.8 million earned in the 1998 period, a
decline of 11.5%. One explanation for the decrease was a drop in service
charge income of some $270 thousand over the comparable periods. This was
primarily related to the fact that the merger of Mid-State Bank and Bank of
Santa Maria led to the consolidation of deposit products, which resulted in
lower cost to Bank customers. Gains on sale of Other Real Estate Owned and
miscellaneous recoveries were also $1.9 million less than the like period of
1998. Various other income items were up when comparing the two periods,
offsetting these declines.
NONINTEREST EXPENSE. Non-interest expense for the first nine months of
1999 was $43.9 million. This compares to $48.1 million in the comparable 1998
period. The biggest reduction was in the area of merger related charges.
These charges totaled $6.9 million in the third quarter of 1998 for the
merger of Mid-State with Bank of Santa Maria compared to $2.9 million in the
third quarter of 1999 for the merger of Mid-State with City Commerce Bank.
There was an overall reduction of $366 thousand charged to expense for
salaries and benefits in the 1999 period compared to the 1998 period, in
spite of certain non recurring expenses in early 1999 totaling $239 thousand.
There were reductions in expense in a variety of categories related to the
synergies resulting from the merger of Mid-State with Bank of Santa Maria in
1998. The first nine months of 1999 compared to the 1998 period saw
reductions of $101 thousand in occupancy and furniture costs, $154 thousand
in accounting and professional fees, and $76 thousand in regulatory expenses.
Other categories of expense showed minor increases, all of which in total
were approximately $500 thousand above the 1998 levels.
PROVISION FOR INCOME TAXES. The year-to-date provision for income taxes
in 1999 was $8.3 million, compared to $7.9 million for the same period in
1998. The effective tax rate in 1999 was 35.2% compared to 43.3% in 1998. The
effective tax rate in 1999 is lower than the prior year's nine month period
due to an increase in tax exempt income recognized by the Company in 1999,
and a larger amount of non deductible merger charges in 1998 compared to 1999.
BALANCE SHEET. Total assets at September 30, 1999 totaled $1,387.1
million, up 2.9% from the level one year earlier of $1,348.3 million. Loans,
net of unearned income, but before allowance for loan losses were a component
of this growth, increasing from $643.3 million at the end of September, 1998
to $722.7 million in 1999. Investments and fed funds sold grew from $560.1
million one year earlier to $564.0 million this year. Other non earning asset
categories declined $3.9 million when comparing 1999 to 1998.
Total asset growth was funded through a $11.8 million increase in
deposits and a $13.3 million increase in stockholders' equity when comparing
1999 over 1998. The increase in stockholders' equity was in spite of a $7.8
13
<PAGE>
million reduction in the amount of gains on securities available for sale.
There was also an increase in other borrowing and liabilities of $13.7
million, in comparing the two nine month periods.
Mid-State's loan to deposit ratio of 60.0% at September 30, 1999 is up
from the 54.0% ratio one year earlier. There is ample internal liquidity to
fund improvements in this ratio through Mid-State's investment portfolio
which has 94% of the total categorized as available for sale.
INVESTMENT SECURITIES. Fed funds sold represent $14.0 million of the
$564.0 million portfolio noted above. Of the remaining $550 million, 28% is
invested in U.S. Treasury securities, 26% is invested in U.S. Government
agency obligations, 44% is invested in securities issued by states and
political subdivisions in the U.S. and 2% is invested in mortgage-backed
securities and other securities. 79% of all these investment securities have
stated maturities which are due within five years. Approximately 34% matures
in less than one year. Actual maturities will vary somewhat from stated
maturities because certain issuers, especially in the mortgage-backed
securities portfolio, may have the right to prepay their obligations at a
faster rate than that indicated by their contractual maturity.
CAPITAL RESOURCES. Total shareholders' equity increased from $144.0
million at September 30, 1998 to $157.4 million at September 30, 1999. Net
income over this 12 month time period was $26.0 million, less cash dividends
of $5.2 million, $1.1 million of stock repurchased and a $7.8 million
decrease in unrealized gains on available for sale securities, plus $1.5
million in stock options exercised, accounted for the $13.4 million increase.
Capital at September 30, 1999 continues to be strong with Mid-State
Bancshares' ratio of tier one equity capital to average assets ("leverage
ratio") at 11.2% up from 10.1% one year earlier. Similarly, Mid-State's
ratios of tier one capital and total capital to risk-adjusted assets also
increased. The Tier One ratio went from 15.9% one year earlier to 16.3% at
September 30, 1999. The Total Capital ratio went from 17.2% one year earlier
to 17.6% at September 30, 1999.
LIQUIDITY. Management is not aware of any future capital expenditures or
other significant demands or commitments which would severely impair
liquidity.
DISCLOSURES CONCERNING YEAR 2000 ISSUES - YEAR 2000 READINESS DISCLOSURE.
STATE OF READINESS. The Company began implementation of its Year 2000
Plan in 1997. It has complied with all time-frames associated with that Plan
and is on schedule to meet all remaining deadlines. The most significant
component of that plan was the replacement of the Bank's mainframe computer
and software system with a Year 2000 compliant system. That task was
completed in July 1998 with the installation of the Information Technology
Incorporated software on new Unisys equipment. This system is believed to be
Year 2000 compliant and other banking organizations have completed Year 2000
testing with favorable results. The Company has also completed its own
testing. The system is installed nationwide at some 1,500 data processing
sites for over 3,000 banks. Other systems are also being assessed including
in-house applications, outside vendor applications, environmental systems and
parties with whom the Company exchanges information. This process has been
actively underway for some time, and while no assurance can be given that all
systems will be addressed, the Management feels that it has addressed all
"Mission Critical" processes in a timely matter. Testing of "Mission
Critical" systems and implementations of compliant systems was substantially
complete by early 1999.
Additionally, the Bank has been mailing, and received a number of
positive responses to, its Request for Compliance Assessment Letters to
certain of its credit customers. The Company has also issued Compliance
Acknowledgement Questionnaires to new credit customers. No assurance can be
given that the Year 2000 problem could not negatively effect certain of the
Bank's credit customers. This in turn could negatively affect the Bank.
Management feels that it has proactively addressed the Year 2000 issue as it
may affect its customers
14
<PAGE>
and potential customers. 319 credit relationships meet the Bank's criteria
for an assessment and questionnaire. These relationships represent
approximately 96% of the loans which were considered for analysis. At this
point, one relationship is believed to have a high Year 2000 related risk
which totals $1.0 million. This is down from December 31, 1998 when it was
believed that four relationships represented a high risk totaling
approximately $2.0 million. New information has allowed the Bank to reduce
risk on three credits to the moderate category. Approximately 89 credit
relationships are considered to be of moderate risk, and 229 are considered
to be low risk. The Bank has established reserves within the allowance for
loan losses to provide for Year 2000 related losses. This reserve stood at
$726 thousand at September 30, 1999.
The Company has been designing and distributing printed materials
through mailings and statement stuffers, holding informational seminars for
the Bank's business customers, and engaged a speaker at its October 1997
Annual Economic Symposium who addressed this issue. Year 2000 seminars were
conducted in March 1999 in Santa Maria and San Luis Obispo with over 300
residents in attendance. Moreover, the Bank has proactively participated in
numerous community meetings dealing with this topic. Examples of this
participation include working with the San Luis Obispo Y2K Action Alliance,
exhibits at the Y2K expos, television interviews and tour for a local
television station showcasing the Bank's level of Y2K readiness,
participating in local radio panel discussions on the topic, and
presentations to local community groups on Year 2000 readiness and the
specific accomplishments of the Bank.
During the month of June 1999, the Company sent surveys to all
depositors in order to ascertain the level of customer concern for the year
2000 computer issue. This information will be used during a fourth customer
awareness campaign that will focus on specific concerns as raised in this
survey.
COSTS TO ADDRESS YEAR 2000 ISSUES. It is important to note that the
Company's former computer system had been fully depreciated after serving the
Bank for over 7 years. It was due for replacement irrespective of the Year
2000 issue. The total capital cost of the new mainframe, software, terminals
and ATM's associated with the Bank's conversion to date have totaled
approximately $7.2 million, all of which has been capitalized and will be
amortized over their expected useful lives. It is expected that additional
purchases of certain equipment will be necessary, but the Company does not
expect that the total cost, when allowing for additional charges, will exceed
$7.5 million. Amortizing these capitalized costs over their expected useful
lives, Management would expect monthly depreciation expense of approximately
$125 thousand. A majority of this expected amount did begin impacting the
income statement in August of 1998. The costs associated with the mailings,
questionnaires, seminars and other activities noted above is not expected to
have a material effect on the financial position or results of operations of
the Company.
RISKS FOR THE COMPANY FROM YEAR 2000 ISSUES. Like all financial
institutions, Mid-State Bank relies heavily on its computer and software
programs to accurately process and keep track of customer financial records
and transactions. Year 2000 related failure of this hardware or software,
especially if for an extended period of time, could pose a significant risk
to the viability of the Company. Management believes that its Year 2000 plan,
especially as it relates to its recent computer hardware and software
conversion noted above, fully mitigates this direct risk from the Year 2000
problem. While the Company has back-up generating capacity for its mainframe
computer system and a contingency plan for its implementation, an extensive
and protracted power outage throughout the Bank's system could prove
difficult to mitigate.
Credit risks associated with the difficulties incurred by the Bank's
customers which have problems resulting from Year 2000 issues are considered
low to moderate. Factors considered include, but are not limited to, 1) the
review of the Request for Compliance Assessment Letters and Compliance
Acknowledgment Questionnaires received to date, 2) the knowledge of the
customer's business, which the Bank possesses, 3) underlying secondary
sources of collateral available to the Bank in the event of default by the
customer, 4) the Bank's
15
<PAGE>
allowance for loan losses, 5) the potential effects of general economic
disruptions (e.g. - transportation, communications, electrical) on the
customer and 6) the "ripple effects" from problems elsewhere in the economy
which end up effecting the customer.
Risks associated with the Year 2000 readiness status of the Company's
vendors have also been reviewed. A due diligence process has been initially
completed with the 325 identified vendors serving the Bank. Responses from
these vendors have been reviewed and assessed. Alternate arrangements will be
made where appropriate, but no major concerns exist at this point. The
Company has since reduced the number of vendors it is tracking to 225.
THE COMPANY'S CONTINGENCY PLAN. The Company set a goal to complete its
Contingency Plans for all Mission Critical processes by June 30, 1999. The
Company has completed all 55 of these plans. The plans were reviewed by an
independent panel and tested by the Year 2000 Committee. The Company's Year
2000 Contingency Plans were approved by the Board of Directors on June 9,
1999. Should additional contingency planning be needed, or revisions to
developed plans be appropriate, Management believes it will still have time
to make adjustments prior to the end of 1999.
CURRENT TARGET DATES. All projects associated with prior target dates
included in the Company's Year 2000 Plan have been completed. While there can
be no guarantee that the Company will be able to continue to meet all future
target dates associated with its Year 2000 Plan, there are no outstanding
exceptions to either its previous or future target dates. By June 30, 1999,
business resumption contingency plans were complete and the testing of all
mission critical systems and implementation of compliant systems was
substantially complete. Additionally, the Company hired an outside consultant
in the third quarter of 1999 to review all of Mid-State's Y2K preparedness
testing and plans. Results of this review were favorable.
It should be noted that the Company will be progressively heightening
its customer awareness efforts in the communities it serves between now and
year-end 1999.
IMPORTANT FACTORS RELATING TO FORWARD-LOOKING STATEMENTS. The Private
Securities Litigation Reform Act of 1995 provides a "safe harbor" for
forward-looking statements so long as those statements are identified as
forward-looking and are accompanied by meaningful cautionary statements
identifying important factors that could cause actual results to differ
materially from those projected in such statements. All of the statements
contained in this Quarterly Report on Form 10-Q which are not identified as
historical should be considered forward-looking. In connection with certain
forward-looking statements contained in this Quarterly Report on Form 10-Q
and those that may be made in the future by or on behalf of the Company which
are identified as forward-looking, the Company notes that there are various
factors that could cause actual results to differ materially from those set
forth in any such forward-looking statements. Such factors include, but are
not limited to, the real estate market, the availability of loans at
acceptable prices, the general level of economic activity both locally and
nationally, interest rates, the actions by the Company's regulatory agencies,
and actions by competitors of the Company. Accordingly, there can be no
assurance that the forward-looking statements contained in this Quarterly
Report on Form 10-Q will be realized or that actual results will not be
significantly higher or lower. The forward-looking statements have not been
audited by, examined by or subjected to agreed-upon procedures by independent
accountants, and no third-party has independently verified or reviewed such
statements. Readers of this Quarterly Report on Form 10-Q should consider
these facts in evaluating the information contained herein. The inclusion of
the forward-looking statements contained in this Quarterly Report on Form
10-Q should not be regarded as a representation by the Company or any other
person that the forward-looking statements contained in this Quarterly Report
on Form 10-Q will be achieved. In light of the foregoing, readers of this
Quarterly Report on Form 10-Q are cautioned not to place undue reliance on
the forward-looking statements contained herein.
16
<PAGE>
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Bank's risk exposure to changes in interest rates is minimal. A recent
review of the potential changes in the Bank's net interest income over a 12
month time horizon showed that it could fluctuate under very extreme
alternative rate scenarios from between +1.2% and -4.0% of the base case
(rates unchanged). The review was completed prior to the merger with City
Commerce Bank. Given the size of City Commerce Bank relative to Mid-State and
the similarities in their loan and deposit products, Management does not
expect a significant change in its overall exposure to changes in interest
rates. The Bank's policy is to maintain a structure of assets and liabilities
which are such that net interest income under alternative rate scenarios will
not vary more than plus or minus 15% of the base forecast over the next 12
months. Management feels that the Bank's exposure to interest rate risk is
manageable and it will continue to strive for an optimal trade-off between
risk and earnings.
The following table presents a summary of the Bank's net interest income
forecasted for the coming 12 months under alternative interest rate scenarios.
<TABLE>
<CAPTION>
Change
From Base
---------
<S> <C>
Rates Down Very Significant -4.0%
(Prime down to 3.75% over 12 months)
Rates Down Significant -3.0%
(Prime down to 5.25% over 12 months)
Rates Down Modestly -1.1%
(Prime down to 6.75% over 12 months)
Base Case - Rates Unchanged --
(Prime unchanged over 12 months)
Rates Up Modestly +1.2%
(Prime up to 8.75% over 12 months)
Rates Up Aggressive +0.1%
(Prime up to 10.25% over 12 months)
Rates Up Very Aggressive -2.7%
(Prime up to 11.75% over 12 months)
</TABLE>
Net interest income under the above scenarios is influenced by the
characteristics of the Bank's assets and liabilities. In the case of N.O.W.,
savings and money market deposits interest is based on rates set at the
discretion of Management ranging from 0.50% to 2.00%. In a downward rate
environment, there is a limit to how far these deposit instruments can be
re-priced and this behavior is similar to that of fixed rate instruments. In
an upward rate environment, the magnitude and timing of changes in rates on
these deposits is assumed to be more reflective of variable rate instruments.
Management believes that under current market conditions, deposit rates would
be increased more aggressively in order to maintain the Bank's deposit base.
It is important to note that the above table is a summary of several
forecasts and actual results may vary. The forecasts are based on estimates
and assumptions of Management that may turn out to be different and may
change over time. Factors affecting these estimates and assumptions include,
but are not limited to - competitors' behavior, economic conditions both
locally and nationally, actions taken by the Federal Reserve Board, customer
behavior, and Management's responses. Historically, the Bank has been able to
manage its Net Interest Income in a fairly narrow range reflecting the Bank's
relative insensitivity to interest rate changes. The impact of
17
<PAGE>
prepayment behavior on mortgages, real estate loans, mortgage backed
securities, securities with call features, etc. is not considered material to
the sensitivity analysis. Over the last 5 years, the Bank's net interest
margin prior to the merger with City Commerce Bank (which is net interest
income divided by average earning assets of the Bank) has ranged from a low
of 5.62% to a high of 5.94% (not taxable equivalent). Based on the scenarios
above, the net interest margin under the alternative scenarios ranges from
5.31% to 5.60%. Management feels this range of scenarios is conservative in
view of its historical performance, but no assurances can be given that
actual experience will fall within this range.
The Bank's exposure with respect to interest rate derivatives, exchange rate
fluctuations, and/or commodity price movements is nil. The Bank does not own
any instruments within these markets.
18
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
Mid-State is not a party to any material legal proceeding.
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
There were no material changes in securities and uses of proceeds
during the period covered by this report.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the Shareholders for a vote during the
third quarter of 1999.
ITEM 5 - OTHER INFORMATION
Not applicable.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
A) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- --------------------------------------------------------------------------------
<S> <C>
1.0 Form S-4 Registration Statement as filed
with the Securities and Exchange Commission
on June 25, 1999 incorporated by reference.
27 Financial Data Schedule (for SEC use only)
</TABLE>
B) Reports on Form 8-K
- --------------------------------------------------------------------------------
In 1999, the Company filed three reports on Form 8-K, one as
an amendment to a November 17, 1998 filing on February 18, 1999 concerning the
Company's dividend policy, one on April 27, 1999 concerning the proposed merger
with City Commerce Bank, and one on September 10, 1999 concerning the completed
City Commerce Bank merger effective at the close of business on August 31, 1999.
19
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Mid-State Bancshares
(registrant)
Date: November 3, 1999 By: /s/ CARROL R. PRUETT
-----------------------------------
CARROL R. PRUETT
President and Chief Executive Officer
Date: November 3, 1999 By /s/ JAMES G. STATHOS
-----------------------------------
JAMES G. STATHOS
Executive Vice President
and Chief Financial Officer
20
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 50,834
<INT-BEARING-DEPOSITS> 1,089
<FED-FUNDS-SOLD> 14,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 516,799
<INVESTMENTS-CARRYING> 33,241
<INVESTMENTS-MARKET> 33,152
<LOANS> 722,740
<ALLOWANCE> 14,194
<TOTAL-ASSETS> 1,387,052
<DEPOSITS> 1,203,878
<SHORT-TERM> 9,465
<LIABILITIES-OTHER> 16,339
<LONG-TERM> 0
0
0
<COMMON> 59,661
<OTHER-SE> 97,709
<TOTAL-LIABILITIES-AND-EQUITY> 1,387,052
<INTEREST-LOAN> 49,463
<INTEREST-INVEST> 22,444
<INTEREST-OTHER> 2,230
<INTEREST-TOTAL> 74,137
<INTEREST-DEPOSIT> 19,445
<INTEREST-EXPENSE> 19,659
<INTEREST-INCOME-NET> 54,478
<LOAN-LOSSES> 50
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 43,921
<INCOME-PRETAX> 23,601
<INCOME-PRE-EXTRAORDINARY> 15,301
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,301
<EPS-BASIC> 1.36
<EPS-DILUTED> 1.35
<YIELD-ACTUAL> 7.82
<LOANS-NON> 1,541
<LOANS-PAST> 5,679
<LOANS-TROUBLED> 2,573
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 14,441
<CHARGE-OFFS> 1,196
<RECOVERIES> 899
<ALLOWANCE-CLOSE> 14,194
<ALLOWANCE-DOMESTIC> 14,194
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,875
</TABLE>
