SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB
QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1998
-----------------
Commission File Number 0-22961
-------
ANNAPOLIS NATIONAL BANCORP, INC.
--------------------------------
(Exact name of small business issuer as specified in its charter)
Maryland 52-1648903
-------- ----------
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
180 Admiral Cochrane Drive, Suite 300, Annapolis, Maryland 21401
----------------------------------------------------------------
(Address of principal executive offices)
(410) 224-4455
--------------
(Issuer's telephone number, including area code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
(1) YES X NO
---------- -----------
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
At November 13, 1998, the Registrant had 2,312,306 shares of Common Stock
outstanding.
Transitional Small Business Disclosure Format
YES NO X
---------- -----------
<PAGE>
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE
----
Item 1 - Financial Statements
Consolidated Balance Sheets as of September 30, 1998 and
December 31, 1997 1
Consolidated Income Statements for the Three Months Ended
September 30, 1998 and 1997 and for the Nine Months Ended
September 30, 1998 and 1997 2
Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 1998 and 1997 3 - 4
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 5 - 9
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 10
Item 2 - Changes in Securities 10
Item 3 - Defaults Upon Senior Securities 10
Item 4 - Submission of Matters to a Vote of Security Holders 10
Item 5 - Other Information 10
Item 6 - Exhibits and Reports on Form 8-K 10
SIGNATURES........................................................ 12
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Annapolis National Bancorp, Inc. and Subsidiary
Consolidated Balance Sheets
As of September 30, 1998 and December 31, 1997
(In thousands)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
September 30, December 31,
1998 1997
------------- ------------
<S><C>
Assets
Cash and due from banks $ 3,904 $ 5,611
Federal funds sold and other overnight investments 15,675 20,744
Federal Reserve Bank stock, at cost 330 327
Investment securities available-for-sale 12,895 16,238
Investment securities held-to-maturity 1,997 3,975
Loans, less allowance for credit losses 81,447 70,985
Premises and equipment 2,521 1,239
Core deposits and other intangible assets
acquired 151 216
Accrued interest receivable 817 516
Deferred income taxes 374 766
Other real estate owned 91 43
Other assets 324 167
-------- --------
Total assets $120,526 $120,827
======== ========
Liabilities And Stockholders' Equity
Deposits
Noninterest-bearing $ 11,252 $10,330
Interest-bearing 87,388 85,732
-------- --------
Total deposits 98,640 96,062
Securities sold under agreements to
repurchase 9,635 13,306
Accrued interest and other liabilities 358 372
-------- --------
Total liabilities 108,633 109,740
-------- --------
Stockholders' equity
Preferred stock - $.01 par value $ -- $ --
Common stock - $.01 par value 23 23
Capital surplus 13,135 13,135
Accumulated deficit (1,280) (2,078)
Unrealized losses on investments in available
for sale securities 15 7
-------- --------
Total stockholders' equity 11,893 11,087
-------- --------
Total liabilities and stockholders' equity $120,526 $120,827
======== ========
</TABLE>
<PAGE>
Annapolis National Bancorp, Inc. and Subsidiary
Consolidated Statements of Income
For The Three Month Periods Ended September 30, 1998 and 1997
And The Nine Month Periods Ended September 30, 1998 and 1997
(Unaudited and in thousands)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended Ended
September 30, September 30,
-------------------- -------------------
1998 1997 1998 1997
--------- ---------- -------------------
<S><C>
Interest income
Loans $1,893 $1,943 $5,566 $5,573
Investment securities 240 307 758 645
Federal funds sold and securities purchased 310 182 963 489
------ ------ ------ ------
Total interest income 2,443 2,432 7,287 6,707
Interest expense
Interest bearing deposits 890 890 2,693 2,384
Securities sold under agreements to repurchase 99 98 288 177
Interest on notes payable --- 20 --- 59
------ ------ ------ ------
Total interest expense 989 1,008 2,981 2,655
------ ------ ------ ------
Net interest income 1,454 1,424 4,306 4,052
Provision for credit losses 75 75 225 394
------ ------ ------ ------
Net interest income after provision
for credit losses 1,379 1,349 4,081 3,658
------ ------ ------ ------
Non-interest Income
Service charges and fees 110 147 342 308
Mortgage banking fees 37 27 71 69
Other income 48 40 153 177
------ ------ ------ ------
Total non-interest income 195 214 566 554
------ ------ ------ ------
Non-interest Expense
Personnel 634 512 1,760 1,572
Occupancy and equipment 142 136 420 424
Restructuring -- -- -- 796
Other operating expenses 406 397 1,193 1,166
Amortization of intangible assets
acquired 22 22 65 79
------ ------ ------ ------
Total non-interest expense 1,204 1,067 3,438 4,037
------ ------ ------ ------
Income (loss) before income taxes 370 496 1,209 175
Income tax expense (benefit) 126 168 411 (817)
------ ------ ------ ------
Net income $ 244 $ 328 $ 798 $ 992
====== ====== ====== ======
Basic earnings Per Share $ 0.11 $ 0.22 $ 0.35 $ 0.67
====== ====== ====== ======
Diluted earnings per share $ 0.11 $ 0.22 $ 0.34 $ 0.67
====== ====== ====== ======
</TABLE>
<PAGE>
Annapolis National Bancorp, Inc. and Subsidiary
Consolidated Statement of Cash Flows
for the Nine Month Periods Ended September 30, 1998 and 1997
(Unaudited and in thousands)
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30,
-------------------------
1998 1997
------------ ---------
<S><C>
Cash flows from operating activities
Net income $ 798 $ 992
Adjustments to reconcile net income to net cash provided
by operating activities
Deferred income taxes 392 (817)
Write-off of intangibles --- 471
Depreciation and amortization of furniture, equipment,
and leasehold improvements 141 148
Amortization of intangible assets acquired 65 79
Decrease (increase) in accrued interest receivable (301) (166)
Accrued interest on note to stockholder --- (215)
Net loss (gain) on sale of loans, equipment, and
other real estate owned (3) ---
Provision for credit losses 225 394
Other (428) (232)
-------- --------
Net cash provided by operating activities $ 889 $ 654
-------- --------
Cash flows from investing activities
Net increase in loans (10,471) ($4,325)
Investment in securities - held-to-maturity --- (2,247)
Investment in securities - available-for-sale (38,579) (42,852)
Proceeds from redemption of securities
and principal repayments 41,418 37,750
Proceeds form sale of available for sale securities 2,479 ---
Net decrease (increase) in federal funds sold 5,069 (15,697)
Net decrease (increase) in securities purchased
under agreement to resell --- 4,750
Proceeds from sale of equipment 13 ---
Purchase of land (1,389) ---
Purchase of furniture, equipment, and leasehold improvements (43) (26)
-------- --------
Net cash used in investing activities $ (1,503) $(22,647)
-------- --------
</TABLE>
(Continued)
<PAGE>
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30,
-------------------------
1998 1997
------------ ---------
<S><C>
Cash flows from financing activities
Net increase (decrease) in deposits $ 2,578 $ 10,061
Net increase (decrease) in securities sold
under agreements to repurchase (3,671) 7,125
--------
Principal repayment of note payable to stockholder (848)
Net proceeds from sale of common stock 4,509
--------
Net cash provided by financing activities (1,093) 20,847
--------
Net increase (decrease) in cash (1,707) (1,146)
Cash, beginning of period 5,611 6,084
-------- --------
Cash, end of period $ 3,904 $ 4,938
======== ========
Supplemental cash flow information:
Interest paid on deposits and repurchase agreements $ 2,946 $ 2,565
Income taxes paid $ 5 ---
</TABLE>
<PAGE>
Item 2 - Management Discussion and Analyses of Financial Condition and
Results of Operation
Comparison of Financial Condition at September 30, 1998 and December 31, 1997
Total assets at September 30, 1998 were $120.5 million a decrease of
$301,000 or 0.25% from total assets at December 31, 1997 of $120.8 million. The
decrease reflected a shift in interest earning assets from lower yielding short
term liquid assets to higher yielding commercial and real estate loans. Federal
funds sold and other overnight investments decreased $5.1 million or 24.4%,
investment securities-available for sale decreased $3.3 million or 20.6% and
investment securities-held to maturity decreased $2.0 million or 49.8%. This
decrease was partially offset by an increase in net loans of $10.5 million or
14.7%.
Net loans receivable at September 30, 1998 were $81.4 million, an increase
of $10.5 million or 14.7% from net loans receivable of $71.0 million at December
31, 1997. The increase was due to a $12.0 million increase in real estate and
construction loans and was partially offset by a $1.9 million decrease in
commercial loans.
The allowance for credit losses increased $9,000 to $1,186,000 at
September 30, 1998 from $1,177,000 at December 31, 1997. The increase in the
allowance for loan losses reflects additional general reserves of $225,000 and
was offset by net loans charged of $216,000. Management makes periodic
provisions to the allowance for loan losses to maintain the allowance at an
acceptable level commensurate with management's assessment of the credit risk
inherent in the loan portfolio. At September 30, 1998 and 1997 the allowance for
credit losses to total assets was 0.98% and 0.97% respectively.
Deferred income taxes decreased $392,000 or 51.2% to $374,000 from
$766,000 at December 31, 1997. The Company recorded federal tax expense of
$411,000 for the nine months ended September 30, 1998 reflecting an effective
federal tax rate of 34%.
Deposits of $98.6 million at September 30, 1998 represent a $2.6 million
or 2.7% increase from December 31, 1997 deposits of $96.1 million. The increase
was due to a $922,000 or 8.9% increase in non-interest-bearing accounts and a
$1.7 million or 1.9% increase in interest bearing deposits.
Stockholders' equity increased $806,000 or 7.8% to $11.9 million at
September 30, 1998 from $11.1 million at December 31, 1997, due to an increase
in net retained earnings of $798,000, and an increase of $8,000 in the
unrealized gain on investments in available for sale securities.
<PAGE>
Comparison of Operating Results for the Nine Months Ended September 30, 1998 and
1997.
General. Net income for the nine months ended September 30, 1998 totaled
$798,000 or $0.35 per basic share as compared to $992,000 or $0.67 per basic
share for the nine months ended September 30, 1997. The decrease in net income
can be attributed mainly to a one time recognition of a deferred tax adjustment
in the amount of $1.1 million in 1997 as a result of the Company recording the
tax effect of net operating loss carryforwards and other deferred tax assets.
The increase was partially offset a $796,000 one time restructuring expense
resulting from the revised business strategy implemented by the Board of
Directors in February 1997. Also, at September 30, 1998, the net interest margin
decreased to 5.02% from 5.45% at September 30, 1997. The decrease in the net
interest margin was the result of an decrease in the average rate on earning
assets from 9.02% at September 30, 1997 to 8.50% at September 30, 1998, and an
increase in the cost of interest bearing liabilities from 4.02% at September 30,
1997 to 4.05% at September 30, 1998. The decrease in basic earnings per share
can be attributed in part to an additional 833,334 shares of common stock issued
in connection with the Company's successful stock offering which closed on
September 30, 1997.
Net Interest Income. Net interest income increased $254,000 or 6.3% for
the nine months ended September 30, 1998 to $4.3 million from $4.1 million for
the nine months ended September 30, 1997, due primarily to an increase in
interest income of $580,000 and was partially offset by an increase in interest
expense of $326,000.
Interest Income. The increase in interest income was derived primarily
from interest on federal funds and other overnight investments which increased
$474,000 or 96.9% from $489,000 for the nine months ended September 30, 1997 to
$963,000 for the nine months ended September 30, 1998. This increase was due
primarily to a $10.9 million increase in the average balance of federal funds
and other overnight investments from $12.3 million at September 30, 1997 to
$23.2 million at September 30, 1998, and an increase of $113,000 or 17.5% of
interest on investment securities as a result of an increase in the average
balance of $2.8 million or 18.8% from $14.8 million at September 30, 1997 to
$17.4 million at September 30, 1998.
Interest Expense. Interest expense increased $326,000 or 12.3% for
the nine months ended September 30, 1998 as compared to the nine months ended
September 30, 1997, due primarily to a increase in the average balance of
interest bearing deposits of $10.2 million or 11.6% from $88.3 million at
September 30, 1997 to $98.5 million at September 30, 1998. The cost of deposits
increased to 4.17% at September 30, 1998 from 4.09% at September 30, 1997 due
mainly to an increase in the cost of certificate of deposit accounts to 5.62% at
September 30, 1998 from 5.49% at September 30, 1997.
<PAGE>
Provision for Credit Losses. The provision for credit losses for the nine months
ended September 30, 1998 and 1997 totalled $225,000 and $394,000 respectively.
The decrease in the provision for credit losses at September 30, 1998 was
primarily attributable to fewer additional specific reserves on commercial
loans.
Non-Interest Income. Non-interest income, which is comprised primarily of
fees and charges on deposit accounts, increased $12,000 or 2.2% to $566,000 at
September 30, 1998 from $554,000 at September 30, 1997. The increase in
non-interest income was primarily due to an increase in fees and charges on
deposit accounts of $34,000 and was partially offset by a decrease in other fee
income of $24,000.
Non-Interest Expense. Non-Interest expense decreased $599,000 or 14.8% for
the nine months ended September 30, 1998 from $4.0 million for the nine months
ended September 30, 1997, to $3.4 million for the nine months ended September
30, 1998. The decrease in non-interest expense was due primarily to a one time
restructuring expense of $796,000 for the nine months ended September 30, 1997
resulting from the implementation of a revised business strategy adopted by the
Board of Directors. Compensation expense increased $188,000 or 12.0% for the
nine months ended September 30, 1998 from $1.6 million for the nine months ended
September 30, 1997 to $1.8 million for the nine months ended September 30, 1998,
due to additional loan personnel in the real estate and mortgage banking
departments and incentive compensation paid for loan originations.
Income Tax Expense. The Company recorded income tax expense for the nine
month period ended September 30, 1998 of $411,000 as compared to an income tax
benefit of $817,000 for the period ended September 30, 1997. The income tax
benefit was the result of a one time recognition of a deferred tax adjustment in
the amount of $1.1 million in 1997 as a result of the Company recording the tax
effect of net operating loss carryforwards and other deferred tax assets. The
Company's federal tax rate is approximately 34%.
Comparison of Operating Results for the Three Months Ended September 30, 1998
and 1997.
General. Net income for the three months ended September 30, 1998 totaled
$244,000 or $0.11 per basic share as compared to $328,000 or $0.22 per basic
share for the three months ended September 30, 1997. The decrease in net income
can be attributed mainly to an increase in compensation expense of $122,000 and
was partially offset by an increase in net interest income which increased
$84,000 at September 30, 1998.
<PAGE>
Interest Income. The increase in interest income was derived primarily
from interest on federal funds and other overnight investments which increased
$128,000 or 70.3% from $182,000 for the three months ended September 30, 1997 to
$310,000 for the three months ended September 30, 1998. This increase was due
primarily to an increase in the average balance of federal funds and other
overnight investments of $8.6 million from $13.3 million for the three months
ended September 30, 1997 to $21.9 million for the three months ended September
30, 1998. Interest on investment securities decreased $67,000 or 21.8% from
$307,000 for the three months ended September 30, 1997 to $240,000 for the three
months ended September 30, 1998 due to a decrease in the average balance of $3.8
million from $20.4 million at September 30, 1997 to $16.5 million at September
30, 1998. Interest on loans decreased $50,000 or 2.6% from $1.943 million for
the three months ended September 30, 1997 to $1.893 million at September 30,
1998. The decrease in interest income is due mainly to a decrease in the yield
from 10.3% at September 30, 1997 to 9.78% at September 30, 1998.
Interest Expense. Interest expense decreased $19,000 or 1.9% for the three
months ended September 30, 1998 as compared to the three months ended September
30, 1997, due primarily to a decrease in the average cost of deposits to 4.09%
at September 30, 1998 from 4.23% at September 30, 1997. This decrease was
partially offset by an increase in the volume of interest bearing liabilities
from $97.4 million for the three months ended September 30, 1997 to $98.2
million for the three months ended September 30, 1998.
Provision for Credit Losses. The provision for credit losses for the three
months ended September 30, 1998 and 1997 totalled $75,000 and was unchanged from
September 30, 1997 reflecting management's assessment of the credit risk in the
loan portfolio.
Non-Interest Income. Non-interest income decreased $19,000 or 8.9% to
$195,000 for the three months ended September 30, 1998 from $214,000 for the
three months ended September 30, 1997. The decrease in non-interest income was
primarily due to lower service charges and fees on accounts of $37,000
reflecting lower fees collected for non sufficient funds activity and was
partially offset by an increase in mortgage banking fees of $10,000 and other
fee income of $8,000.
Non-Interest Expense. Non-interest expense increased $137,000 or 12.8% for
the three months ended September 30, 1998. The increase in non-interest expenses
was primarily due to a $122,000 increase in compensation and related expenses as
a result of restructuring the lending departments including incentive
compensation paid for loan originations.
Income Tax Expense. The Company recorded income tax expense for the three
month period ended September 30, 1998 of $126,000 based on a federal tax rate of
34% which reduced the deferred tax asset established at March 31, 1997 to
$374,000.
<PAGE>
Comprehensive Income. Effective January 1, 1998 the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 130, Reporting
Comprehensive Income. SFAS No. 130 requires the reporting of comprehensive
income which includes unrealized gains and losses not recognized in net income.
Unrealized gains and losses on available-for-sale securities which have been
reported as a separate component of stockholders' equity are included in
comprehensive income. The adoption of SFAS 130 had no material impact on the
Company's net income or stockholders' equity. For the nine months ended
September 30, 1998 and 1997, total comprehensive income, net of taxes, was
$806,000 and $1,025,000 respectively.
Year 2000 Compliance. As a financial institution, the Company is dependent
on computer systems and applications to conduct its business. The year 2000
(Y2K) issue is the result of computer programs being written using two digits
rather than four digits to define the applicable year. Many of the Company's
computer programs that are date sensitive may recognize a date using "00" as the
year 1900 rather than the year 2000. This could result in a system failure or
miscalculation causing disruption of operations, including among other things, a
temporary inability to process transactions or engage in normal business
activities for both the Company and its customers who rely on its financial
products and services.
The Company is actively engaged and is currently executing certain
critical steps designed to make its computer systems, applications and
facilities Y2K ready. The steps include: (i) awareness; (ii) assessment; (iii)
renovation; (iv) validation; and (v) implementation. During the awareness phase,
the Company identified the project team and responsibilities, prepared and
allocated the project budget, defined the project scope and established program
and management policies. This phase although complete continues to be reviewed.
The assessment phase which entailed an inventory of software, hardware, vendors,
material customers, and facilities has been completed. The renovation phase is
currently in process and the Company will be utilizing internal resources to
test all major mission critical systems (deposits, loans, general ledger) which
are provided by an outside service bureau. The Company is in the process of
converting these mission critical systems to a new service bureau. This
conversion is set to take place on January 25, 1999. In conjunction with the
conversion, the bank will be implementing a new year 2000 ready system at that
time.
This new service bureau platform is currently in the testing phase, and is
approximately 10% complete as of October 31, 1998, with testing targeted to be
completed by December 31, 1998. Completion of the renovation process for the
Bank's new internal systems is targeted for January 31, 1999. Another mission
critical system is the Federal Reserve software system, which is scheduled for
testing in November 1998. The hardware and telecommunications software
supporting this software system was renovated in October 1998. The validation
phase will use test strategies that include testing of internal systems as they
relate to each other and testing external interfaces with business partners. The
final phase is implementation which involves the replacement of the hardware or
software that is not compliant or requires updates.
<PAGE>
An institution wide contingency plan is being developed and is anticipated
to completed by March 31, 1999, with Y2K issues incorporated as part of the
business contingency planning. These plans are intended to enable the Company to
continue to operate to the extent they can safely, include performing certain
processes manually, repairing or obtaining replacement systems, and changing
suppliers. The Company believes, however, that due to the widespread nature of
the potential Y2K issues, the contingency planning process is an ongoing one
which will require further modification as the Company obtains additional
information regarding the Company's internal systems and equipment during the
renovation and testing phases of its Y2K program and the status of third party
Y2K readiness.
The Company has budgeted $675,000 for the costs to convert the data
processing system, including expenses relating to the Y2K effort. To date, the
Company has incurred approximately $275,000 towards this project.. All costs to
date and any remaining costs related to Y2K will be funded through operating
cash flows. The Company does not expect these costs to have a material effect on
its operations.
The Company believes that conversions, renovations and modifications of
its internal systems and equipment will allow it to be Y2K compliant in a timely
manner. There can be no assurances, however, that the Company's internal systems
or equipment or those of third parties on which the Company relies will be Y2K
compliant in a timely manner or that the Company's or third parties contingency
plans will mitigate the effects of non-compliance. The Company is part of a
regulated industry which has issued standards for Y2K and is conducting audits
to ensure compliance with Y2K guidelines. The Company believes its most likely
worst case scenario is that customers could experience some manual processes or
an inability to access their cash immediately. Although the Company does not
believe this scenario will occur, it is assessing the effect of such scenarios.
The Company does not expect that this would have a material averse effect on the
Company's financial position, liquidity and results of operations.
The preceding Y2K issue discussion contains various forward looking
statements which represent the Company's belief or expectations regarding future
events. When used in the Y2K discussion, the words "believes," "expects,"
"estimates" and similar expressions are intended to identify forward-looking
statements. Forward looking statements include, without limitation, the
Company's expectations as to when it will complete the renovation and testing
phase of its Y2K program as well as its Y2K contingency plans, its estimated
cost of achieving Y2K readiness; and the Company's belief that its internal
systems and equipment will be Y2K compliant in a timely manner.
<PAGE>
All forward looking statements involve a number of risks and uncertainties
that could cause the actual results to differ materially from the projected
results. Factors that may cause these differences include, but are not limited
to, the availability of qualified personnel and other information technology
resources; the ability to identify and renovate all data sensitive lines of
computer code or to replace imbedded computer chips in affected systems and
equipment; and the actions of government agencies and other third parties with
respect to Y2K problems.
<PAGE>
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
Other than the civil action discussed below, the Company is not
involved in any legal proceedings at this time other than those occurring in the
ordinary course of business. The Company is involved in a civil action filed by
a shareholder against the Company and John W. Marhefka Jr., in the United
States District Court for the District of Maryland on March 11, 1998. The
shareholder alleges federal and state securities law claims and seeks $160,000
in damages arising from the transfer of Company stock by the shareholder to a
family trust. The Company believes the lawsuit is baseless and intends to
vigorously defend against it.
Item 2 - Changes in Securities
None
Item 3 - Defaults Upon Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
None
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Certificate of Incorporation of Annapolis National Bancorp, Inc.*
3.2 Bylaws of Annapolis National Bancorp, Inc.*
11 Statement re: Computation of Per Share Earnings
27 Financial Data Schedule
(b) Reports on Form 8-K
None
*Incorporated by reference to Registration Statement on Form SB-2, as
amended, Commission File Number 333-29841, originally filed with the
Securities and Exchange Commission on September 23, 1997.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ANNAPOLIS NATIONAL BANCORP, INC.
(Registrant)
Date: 11/16/98 /s/ John W. Marhefka, Jr.
---------------- ----------------------------
John W. Marhefka, Jr.
Chief Executive Officer
Date: 11/16/98 /s/ Russell J. Grimes Jr.
---------------- ----------------------------
Russell J.Grimes Jr.
Chief Financial Officer
EXHIBIT 11
Statement re: Computation of Per Share Earnings
(In thousands, except Earnings per Share)
<TABLE>
<CAPTION>
Three Months Ended
September 30, September 30,
1998 1997
------------- -------------
<S><C>
Net income $ 244 $ 328
Average Shares Outstanding 2,312 1,479
Basic Earnings Per Share $0.11 $0.22
<CAPTION>
Nine Months Ended
September 30, September 30,
1998 1997
------------- -------------
<S><C>
Net Income $ 798 $ 992
Average Shares Outstanding 2,321 1,479
Diluted Earnings Per Share $0.34 $0.67
</TABLE>
(1) includes the dilutive effect of 8,344 incentive stock options.
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 3,904
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 15,675
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 12,895
<INVESTMENTS-CARRYING> 1,997
<INVESTMENTS-MARKET> 1,997
<LOANS> 81,447
<ALLOWANCE> 1,186
<TOTAL-ASSETS> 120,526
<DEPOSITS> 98,640
<SHORT-TERM> 0
<LIABILITIES-OTHER> 358
<LONG-TERM> 0
0
0
<COMMON> 23
<OTHER-SE> 11,870
<TOTAL-LIABILITIES-AND-EQUITY> 120,526
<INTEREST-LOAN> 5,566
<INTEREST-INVEST> 758
<INTEREST-OTHER> 963
<INTEREST-TOTAL> 7,287
<INTEREST-DEPOSIT> 2,693
<INTEREST-EXPENSE> 2,981
<INTEREST-INCOME-NET> 4,306
<LOAN-LOSSES> 225
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,438
<INCOME-PRETAX> 1,209
<INCOME-PRE-EXTRAORDINARY> 1,209
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 798
<EPS-PRIMARY> .35
<EPS-DILUTED> .34
<YIELD-ACTUAL> 10.04
<LOANS-NON> 1,548
<LOANS-PAST> 2,042
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,177
<CHARGE-OFFS> 243
<RECOVERIES> 27
<ALLOWANCE-CLOSE> 1,186
<ALLOWANCE-DOMESTIC> 1,186
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 923
</TABLE>
