<PAGE> 1
- --------------------------------------------------------------------------------
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(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, 1997.
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: 0-23113
PRIME BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
TEXAS 76-0088973
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12200 NORTHWEST FREEWAY
HOUSTON, TEXAS 77092
(Address of principal executive offices)
(Zip Code)
(713) 209-6000
(Registrant's telephone number, including area code)
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 No x
As of November 12, 1997, there were 9,317,020 shares of the registrant's Common
Stock, par value $.25 per share outstanding.
- --------------------------------------------------------------------------------
<PAGE> 2
PRIME BANCSHARES, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1997 (unaudited) and December 31, 1996 . . . . . . . . 3
Consolidated Statements of Earnings for the Three Months and Nine Months Ended
September 30, 1997 and 1996 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statement of Changes in Shareholders' Equity . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 1997 and 1996 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Interim Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . 8
Item 3 Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . 17
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Item 2. Changes in Securities and Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . 17
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
2
<PAGE> 3
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
PRIME BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents:
Cash and due from banks ........................................................ $ 25,766 $ 34,006
Federal funds sold and other temporary investments ............................. 57,467 --
-------- --------
Total cash and cash equivalents ............................................ 83,233 34,006
-------- --------
Securities:
Available-for-sale ............................................................. 220,379 324,723
Held-to-maturity ............................................................... 235,779 115,902
-------- --------
Total securities ........................................................... 456,158 440,625
-------- --------
Loans, net of allowance for loan losses of $5,006 and $4,436 ................... 394,849 306,857
Premises and equipment, net .................................................... 15,016 9,761
Accrued interest receivable .................................................... 6,861 6,453
Other assets ................................................................... 9,668 3,753
-------- --------
Total assets ............................................................... $965,785 $801,455
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing ............................................................ $148,238 $117,441
Interest-bearing deposits ...................................................... 707,035 577,729
-------- --------
Total deposits ............................................................. 855,273 695,170
-------- --------
Federal funds purchased and securities purchased
under repurchase agreements ................................................ 31,144 9,700
Other liabilities .............................................................. 4,123 34,616
-------- --------
Total liabilities .......................................................... 890,540 739,486
-------- --------
Shareholders' equity:
Preferred stock ................................................................ 7,000 7,000
Common stock ................................................................... 3,003 2,980
Additional capital ............................................................. 9,534 3,824
Retained earnings .............................................................. 56,985 50,113
Net unrealized appreciation of available-for-sale securities, net of tax
of $504, and $996 .......................................................... 978 1,934
-------- --------
77,500 65,851
Less common stock held in treasury--at cost .................................... 2,255 3,882
-------- --------
Total shareholders' equity ................................................. 75,245 61,969
-------- --------
Total liabilities & shareholders' equity ................................... $965,785 $801,455
======== ========
</TABLE>
See accompanying Notes to Interim Consolidated Financial Statements.
3
<PAGE> 4
PRIME BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Nine months ended
------------------- -------------------
September 30, September 30,
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest income:
Loans ...................................................... $ 9,030 $ 6,428 $25,033 $17,753
Securities ................................................. 7,522 7,111 22,833 22,176
Federal funds sold and other temporary investments ......... 241 42 785 215
------- ------- ------- -------
Total interest income .................................. 16,793 13,581 48,651 40,144
Interest expense ........................................... 7,634 5,939 22,175 17,870
------- ------- ------- -------
Net interest income .................................... 9,159 7,642 26,476 22,274
Provision for loan losses .................................. 150 325 675 921
------- ------- ------- -------
Net interest income after provision for loan losses..... 9,009 7,317 25,801 21,353
------- ------- ------- -------
Noninterest income:
Service charges ............................................ 1,819 1,618 5,197 4,702
Other operating income ..................................... 514 498 1,422 1,516
------- ------- ------- -------
Total noninterest income ............................... 2,333 2,116 6,619 6,218
------- ------- ------- -------
Noninterest expense:
Employee compensation and benefits ......................... 4,161 3,243 12,144 9,655
Net bank premises expense .................................. 359 336 977 920
Equipment rentals, depreciation and maintenance ............ 289 289 905 683
Other operating expenses ................................... 2,139 3,060 5,613 5,903
------- ------- ------- -------
Total noninterest expenses ............................. 6,948 6,928 19,639 17,161
------- ------- ------- -------
Earnings before income taxes ........................... 4,394 2,505 12,781 10,410
Provision for income taxes ................................. 1,603 853 4,497 3,548
------- ------- ------- -------
Net earnings before preferred stock dividends .......... 2,791 1,652 8,284 6,862
Preferred stock dividends .............................. 175 175 525 525
------- ------- ------- -------
Net earnings available to common shareholders .......... $ 2,616 $ 1,477 $ 7,759 $ 6,337
======= ======= ======= =======
Earnings per common and common equivalent
share .................................................. $ 0.28 $ 0.16 $ 0.84 $ 0.69
======= ======= ======= =======
</TABLE>
See accompanying Notes to Interim Consolidated Financial Statements.
4
<PAGE> 5
PRIME BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN
SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Net
unrealized
gain
(loss) on Total
securities Common share-
Preferred Common Additional Retained available- stock in holders'
stock stock capital earnings for-sale treasury equity
--------- -------- ---------- -------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 ........... $ 7,000 $ 2,943 $ 3,721 $ 42,768 $ 5,154 ($ 3,256) $ 58,330
Purchase of treasury stock ............. -- -- -- -- -- (626) (626)
Sale of common stock ................... -- 37 103 -- -- -- 140
Dividends .............................. -- -- -- (1,877) -- -- (1,877)
Net change in unrealized gain
(loss) on available-for-sale
securities, net of tax of $1,659 ... -- -- -- -- (3,220) -- (3,220)
Net earnings for the year .............. -- -- -- 9,222 -- -- 9,222
-------- -------- -------- -------- -------- -------- --------
Balance at December 31, 1996 ........... 7,000 2,980 3,824 50,113 1,934 (3,882) 61,969
Purchase of treasury stock(1) .......... -- -- -- -- -- (408) (408)
Sale of treasury stock(1) .............. -- -- 5,745 -- -- 2,035 7,780
Sale of common stock(1) ................ -- 23 131 -- -- -- 154
Stock issuance cost(1) ................. -- -- (166) -- -- -- (166)
Dividends(1) ........................... -- -- -- (1,412) -- -- (1,412)
Net change in unrealized gain
(loss) on available-for-sale
securities, net of tax of $492(1) .. -- -- -- -- (956) -- (956)
Net earnings(1) ....................... -- -- -- 8,284 -- -- 8,284
-------- -------- -------- -------- -------- -------- --------
Balance at September 30, 1997(1) ....... $ 7,000 $ 3,003 $ 9,534 $ 56,985 $ 978 ($ 2,255) $ 75,245
======== ======== ======== ======== ======== ======== ========
</TABLE>
(1) Unaudited
See accompanying Notes to Interim Consolidated Financial Statements.
5
<PAGE> 6
PRIME BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended
-----------------------------
September 30, September 30,
1997 1996
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings ................................................................... $ 8,284 $ 6,862
Adjustments to reconcile net earnings to net cash provided (used) by
operating activities:
Depreciation ................................................................... 1,135 894
Amortization of premiums, net of (accretion) of discounts on securities ........ (487) (563)
Provision for loan losses ...................................................... 675 921
(Gain) loss on sale of premises, equipment and other real estate ............... 1 14
Change in assets and liabilities, net of effects resulting from the
acquisition of a bank, and the purchase of certain branch
assets and liabilities:
(Increase) decrease in accrued interest receivable ........................... (89) 1,939
Decrease in prepaid and other assets ......................................... 7,737 938
(Decrease) increase in other liabilities ..................................... (30,293) 614
--------- ---------
Net cash (used) provided by operating activities .......................... (13,037) 11,619
Cash flows from investing activities:
Purchases of held-to-maturity securities ....................................... (130,346) --
Proceeds from sales and maturities of available-for-sale securities ............ 111,259 106,036
Purchases of available-for-sale securities ..................................... -- (45,326)
Proceeds from maturities of held-to-maturity securities ........................ 11,948 --
Increase in loans, net of the effects resulting from the acquisition of a
bank, and the purchase of certain branch assets and liabilities ................ (48,225) (58,390)
Purchases of premises and equipment ............................................ (833) (1,007)
Proceeds from sale of premises, equipment and other real estate ................ 5 --
Net decrease in cash resulting from the acquisition of a bank .................. (5,805) --
Net increase in cash resulting from the acquisition of certain branch assets
and the assumption of certain liabilities .................................... 96,502 --
--------- ---------
Net cash provided by investing activities ................................. 34,505 1,313
Cash flows from financing activities:
Change in deposits, net of the effects resulting from the acquisition of a bank,
and the purchase of certain branch assets and liabilities .................... 367 (5,442)
Change in fed funds purchased and securities sold under repurchase
agreements ................................................................... 21,444 --
Purchase of treasury stock ..................................................... (408) (613)
Sale of treasury stock ......................................................... 7,780 --
Stock issuance cost ............................................................ (166) --
Sale of common stock ........................................................... 154 128
Dividends paid ................................................................. (1,412) (1,409)
--------- ---------
Net cash provided (used) from financing activities ........................ 27,759 (7,336)
--------- ---------
Net increase in cash and cash equivalents ................................. 49,227 5,596
Cash and cash equivalents at beginning of period ................................... 34,006 34,904
--------- ---------
Cash and cash equivalents at end of period ......................................... $ 83,233 $ 40,500
========= =========
</TABLE>
See accompanying Notes to Interim Consolidated Financial Statements.
6
<PAGE> 7
PRIME BANCSHARES, INC., AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
(1) BASIS OF PRESENTATION:
The consolidated financial statements include the accounts of Prime
Bancshares, Inc. (the "Company") and its wholly-owned subsidiaries, IBID, Inc.
(IBID) and Prime Bank (the "Bank"). All significant intercompany transactions
and balances have been eliminated.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the rules and regulations of the Securities and
Exchange Commission. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the statements reflect all
adjustments necessary for a fair presentation of the financial position,
results of operations and cash flows of the Company on a consolidated basis,
and all such adjustments are of a normal recurring nature. These financial
statements and the notes thereto should be read in conjunction with the
Company's Registration Statement on Form S-1 (Registration No. 333-33001).
Operating results for the nine month period ended September 30, 1997, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1997.
(2) INCOME PER COMMON SHARE
Income per common share was computed based on the following:
<TABLE>
<CAPTION>
For the quarter ended For the nine months ended
------------------------ -------------------------
September 30, September 30,
1997 1996 1997 1996
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Net earnings available to common shareholders $ 2,616 $ 1,477 $ 7,759 $ 6,337
Average Common shares ....................... 8,861,607 8,815,620 8,859,155 8,804,550
Average Common share equivalents ............ 497,242 440,465 424,521 443,835
---------- ---------- ---------- ----------
9,358,849 9,256,085 9,283,676 9,248,385
---------- ---------- ---------- ----------
Earnings per common share ................... $ 0.28 $ 0.16 $ 0.84 $ 0.69
========== ========== ========== ==========
</TABLE>
(3) CAPITAL STOCK
Common Stock. On September 30, 1997, the Company completed an initial
public offering of shares of its Common Stock. The Company sold 478,000 shares
and certain selling shareholders sold 2,016,707 shares at $17.50 per share.
The Company paid a dividend of $0.04 per share on October 1, 1997 to
shareholders of record as of September 15, 1997. While the Company has
declared dividends on its Common Stock in the past and currently pays quarterly
dividends aggregating $0.16 per share per annum, there is no assurance that the
Company will continue to pay dividends in the future.
(4) ACQUISITIONS
During 1997, the Company purchased deposits and certain assets of three
branches of a commercial bank. The purchase price was allocated based on the
fair value of the assets acquired and liabilities assumed, and the excess of
cost over the fair value of the net assets acquired of $1,835 is being
amortized over ten years using an accelerated method.
During 1997, the Company purchased all of the assets and liabilities of
First Northwestern Bank, N.A. and purchase accounting was applied. The
acquisition was for approximately $60,200 in deposits and $40,200 in loans.
The purchase
7
<PAGE> 8
price was allocated based on the fair value of the assets acquired and
liabilities assumed, and the excess of cost over the fair value of the net
assets acquired of $3,380 is being amortized over fifteen years using a
straight-line method.
The Company's purchase of deposits and certain assets of the three
branches and the purchase of the assets and liabilities of First Northwestern
Bank, N.A. are referred to herein as the "Acquisitions".
The following summarized pro forma information assumes the First
Northwestern acquisition had occurred on January 1, 1996:
<TABLE>
<CAPTION>
Nine months ended
-----------------------
September 30,
1997 1996
------- -------
<S> <C> <C>
Interest income......................... $49,462 $43,742
Net earnings............................ $8,446 $7,122
Earnings per common and common
equivalent share..................... $0.85 $0.71
</TABLE>
(5) NEW PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) has issued Financial
Accounting Standards No. 128, Earnings Per Share, which is effective for
financial statements issued after December 15, 1997. The new standard
eliminates primary and fully diluted earnings per share and requires the
presentation of basic and diluted earnings per share together with disclosure
of how the per share amounts were computed. The pro forma effect of adopting
the new standard would be basic earnings per share of $0.88 and $0.72 and
diluted earnings per share of $0.84 and $0.69 for the nine months ended
September 30, 1997 and 1996, respectively.
The FASB has issued Financial Accounting Standards No. 130, Reporting
Comprehensive Income, which is effective for financial statements issued after
December 15, 1997. The new standard requires an entity to report and display
comprehensive income and its components. Comprehensive income will include net
earnings plus net unrealized gain or loss on securities.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Prime Bancshares, Inc. (the "Company") is a registered bank holding
company that derives substantially all of its revenues and income from the
operation of Prime Bank (the "Bank"). The Bank is a full service bank that
provides a broad line of financial products and services to small and
medium-sized businesses and consumers through 19 full-service banking
locations, 11 of which are located in the greater Houston metropolitan area.
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations may contain certain forward-looking statements regarding
future financial condition, results of operations, and the Company's business
operations. Such statements involve risks, uncertainties and assumptions,
including, but not limited to, monetary policy and general economic conditions
in Texas and the Houston metropolitan area, the actions of competitors and
customers, the success of the Company in implementing its strategic plan, and
the effects of regulatory restrictions imposed on banks and bank holding
companies generally, as discussed in the Company's Registration Statement on
Form S-1 (Registration No. 333-33001) with the Securities and Exchange
Commission. Should one or more of these risks or uncertainties materialize, or
should these underlying assumptions prove incorrect, actual outcomes may vary
materially from outcomes expected or anticipated by the Company.
OVERVIEW
Net earnings available to common shareholders was $2.6 million ($0.28 per
common share) for the quarter ended September 30, 1997 compared with $1.5
million ($0.16 per common share) for the quarter ended September 30, 1996, an
increase of $1.1 million or 77.1%. Net earnings available to common
shareholders and earnings per share for the quarter ended September 30, 1996
were affected by nonrecurring expenses of approximately $1.4 million, which
consisted mainly of an assessment by the Federal Deposit Insurance Corporation
("FDIC") related to the Bank's deposits insured by the Savings Association
Insurance Fund. Excluding these nonrecurring expenses, net earnings would have
increased
8
<PAGE> 9
$193,000 or 8.0%, and earnings per share would have increased $0.02 or 8.2% for
the quarter ended September 30, 1997 compared with the same period in 1996.
For the quarters ended September 30, 1997 and 1996, respectively, returns on
average common shareholders' equity were 17.33% and 11.11%, and returns on
average assets were 1.19% and 0.86%. For the nine months ended September 30,
1997, net earnings available to common shareholders was $7.8 million ($0.84 per
common share), an increase of $1.4 million from $6.3 million ($0.69 per common
share) for the first nine months of 1996. For the first nine months of 1997
and 1996, respectively, returns on average common shareholders' equity were
18.05% and 16.15%, and returns on average assets were 1.21% and 1.20%.
Total assets were $965.8 million at September 30, 1997 compared with
$801.5 million at December 31, 1996. Loans were $399.9 million at September
30, 1997, an increase of $88.6 million or 28.4% from $311.3 million at December
31, 1996. The increase in loans resulted primarily from internal growth of
$48.4 million, in addition to acquired loans of $40.2 million, which came with
the Acquisitions. Total deposits at September 30, 1997 were $855.3 million, an
increase of $160.1 million or 23.0% from $695.2 million at December 31, 1996.
Deposits acquired with the Acquisitions accounted for approximately $149.7
million of the increase in total deposits, while internal growth contributed
approximately $10.4 million. Shareholders' equity was $75.2 million and $62.0
million at September 30, 1997 and December 31, 1996, respectively. The
increase in shareholders' equity included proceeds of $7.6 million from the
Company's initial public offering of stock, after deducting the underwriting
discount and other expenses. Approximately $6.0 million of the proceeds from
the offering will be used to redeem the Company's Series A preferred stock in
the fourth quarter of 1997, while the remainder will be used for general
corporate purposes.
RESULTS OF OPERATIONS
Interest Income
Interest income for the quarter ended September 30, 1997 was $16.8
million, an increase of $3.2 million or 23.7% from the quarter ended September
30, 1996. The increase was primarily in interest earned on loans, which grew
$2.6 million, resulting principally from growth in average loans of $113.8
million or 40.9% to $392.2 million for the quarter ended September 30, 1997.
Interest earned on securities increased $411,000 or 5.8% for the quarter ended
September 30, 1997 compared with the same period in 1996, which resulted
primarily from an increase in average securities of $30.2 million or 7.0% to
$463.7 million for the quarter ended September 30, 1997.
Interest Expense
Interest expense on deposits and other interest-bearing liabilities was
$7.6 million for the quarter ended September 30, 1997, an increase of $1.7
million or 28.5% from the same period in 1996. The increase resulted primarily
from greater average interest-bearing deposits of $714.7 million for the
quarter ended September 30, 1997 compared with $578.3 million for the same
period in 1996, an increase of $136.4 million or 23.6%. The increase in
interest-bearing deposits resulted primarily from the Acquisitions.
Net Interest Income
Net interest income was $9.2 million for the quarter ended September 30,
1997, an increase of $1.5 million or 19.9% compared with the quarter ended
September 30, 1996. The increase in net interest income was due primarily to
higher average interest-earning assets of $873.1 million, an increase of $158.0
million or 22.1% compared with the same period in 1996. The net interest
margin for the quarter ended September 30, 1997 was 4.16%, down from 4.24% for
the quarter ended September 30, 1996. The decline in the net interest margin
resulted primarily from higher interest rates on certificates of deposit and
money market accounts. The increase in interest rates on certificates of
deposit was largely attributable to acquiring, with the Acquisitions,
certificates of deposits which generally paid higher interest rates than those
of the Company. The increase in interest rates on money market accounts
resulted primarily from the introduction of a new product designed to meet the
needs of the Company's larger commercial customers.
The Company's net interest income is affected by changes in the amount and
mix of interest-earning assets and interest-bearing liabilities, referred to as
a "volume change." It is also affected by changes in yields earned on
interest-earning assets and rates paid on interest-bearing deposits and other
borrowed funds, referred to as a "rate change." The following tables set
forth, for each category of interest-earning assets and interest-bearing
liabilities, the average amounts outstanding, the interest earned or paid on
such amounts, and the average rate earned or paid for the quarters ended
9
<PAGE> 10
September 30, 1997 and 1996 and for the nine months ended September 30, 1997
and 1996. The tables also set forth the average rate earned on total
interest-earning assets, the average rate paid on total interest-bearing
liabilities, and the net interest margin on average total interest-earning
assets for the same periods.
<TABLE>
<CAPTION>
Three months ended September 30,
-------------------------------------------------------------------------------
1997 1996
-------------------------------------- -----------------------------------
Average Interest Average Average Interest Average
outstanding earned/ yield/ outstanding earned/ yield/
balance paid rate balance paid rate
----------- --------- ------- ----------- --------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans ................................. $ 392,246 $ 9,030 9.13% $ 278,459 $ 6,428 9.16%
Securities ............................ 463,712 7,522 6.44% 433,519 7,111 6.51%
Federal funds sold and other
temporary investments ............... 17,117 241 5.59% 3,120 42 5.34%
--------- --------- ----- --------- --------- -----
Total interest-earning assets ....... 873,075 16,793 7.63% 715,098 13,581 7.53%
--------- --------- ----- --------- --------- -----
Less allowance for loan losses ............ (5,097) (3,804)
--------- ---------
Total interest-earning assets, net
of allowance .......................... 867,978 711,294
Nonearning assets ......................... 66,134 49,784
--------- ---------
Total assets ........................ $ 934,112 $ 761,078
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits ...... $ 119,847 613 2.03% $ 108,772 642 2.34%
Savings and money market accounts ..... 165,990 1,269 3.03% 131,990 889 2.67%
Certificates of deposit ............... 428,911 5,746 5.32% 337,583 4,383 5.15%
Federal funds purchased and
securities sold under repurchase
agreements .......................... 529 6 4.50% 1,792 25 5.53%
--------- --------- ----- --------- --------- ----
Total interest-bearing liabilities... 715,277 7,634 4.23% 580,137 5,939 4.06%
--------- --------- ----- --------- --------- ----
Noninterest-bearing liabilities:
Noninterest-bearing demand
deposits ............................ 146,234 115,981
Other liabilities ..................... 5,705 5,208
--------- ---------
Total liabilities ................... 867,216 701,326
Shareholders' equity ...................... 66,896 59,752
--------- ---------
Total liabilities and
shareholders' equity ................ $ 934,112 $ 761,078
========= =========
Net interest income ....................... $ 9,159 $ 7,642
========= =========
Net interest spread ....................... 3.40% 3.47%
===== ====
Net interest margin ....................... 4.16% 4.24%
===== ====
</TABLE>
10
<PAGE> 11
<TABLE>
<CAPTION>
Nine months Ended September 30,
-------------------------------------------------------------------------------
1997 1996
-------------------------------------- -----------------------------------
Average Interest Average Average Interest Average
outstanding earned/ yield/ outstanding earned/ yield/
balance paid rate balance paid rate
----------- --------- ------- ----------- --------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans ................................. $ 367,332 $ 25,033 9.11% $ 257,146 $ 17,753 9.22%
Securities ............................ 470,166 22,833 6.49% 453,641 22,176 6.53%
Federal funds sold and other
temporary investments ............... 19,252 785 5.45% 5,350 215 5.37%
--------- --------- ---- --------- --------- ----
Total interest-earning assets ....... 856,750 48,651 7.59% 716,137 40,144 7.49%
--------- --------- ---- --------- --------- ----
Less allowance for loan losses ............ (5,006) (3,663)
--------- ---------
Total interest-earning assets, net
of allowance .......................... 851,744 712,474
Nonearning assets ......................... 64,965 50,883
--------- ---------
Total assets ........................ $ 916,709 $ 763,357
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits ...... $ 125,205 1,940 2.07% $ 110,687 1,885 2.27%
Savings and money market accounts ..... 159,698 3,501 2.93% 130,675 2,614 2.67%
Certificates of deposit ............... 421,016 16,703 5.30% 340,900 13,321 5.22%
Federal funds purchased and
securities sold under repurchase
agreements .......................... 764 31 5.42% 1,191 50 5.61%
-------- --------- ---- --------- --------- ----
Total interest-bearing liabilities... 706,683 22,175 4.20% 583,453 17,870 4.09%
-------- --------- ---- --------- --------- ----
Noninterest-bearing liabilities:
Noninterest-bearing demand
deposits ............................ 139,741 114,487
Other liabilities ..................... 5,805 5,995
-------- ---------
Total liabilities ................... 852,229 703,935
Shareholders' equity ...................... 64,480 59,422
-------- ---------
Total liabilities and
shareholders' equity ................ 916,709 $ 763,357
======== =========
Net interest income ....................... $ 26,476 $ 22,274
========= =========
Net interest spread ....................... 3.40% 3.40%
==== ====
Net interest margin ....................... 4.13% 4.15%
==== ====
</TABLE>
11
<PAGE> 12
The following table presents the dollar amount of changes in interest
income and interest expense for the major components of interest-earning assets
and interest-bearing liabilities and distinguishes between the increase
(decrease) related to outstanding balances and the volatility of interest
rates. For purposes of this table, changes attributable to both rate and
volume which can be segregated have been allocated.
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
1997 vs 1996
--------------------------------
Increase (Decrease)
Due to
-------------------
Volume Rate Total
------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C>
Interest-earning assets:
Loans .................................................. $ 2,627 $ (25) $ 2,602
Securities ............................................. 495 (84) 411
Federal funds sold and other temporary
investments .......................................... 188 11 199
------- ------- -------
Total increase (decrease) in interest income ...... 3,310 (98) 3,212
------- ------- -------
Interest-bearing liabilities:
Interest-bearing demand deposits ....................... 65 (94) (29)
Savings and money market accounts ...................... 229 151 380
Certificates of deposit ................................ 1,186 177 1,363
Federal funds purchased and securities sold
under repurchase agreements .......................... (18) (1) (19)
------- ------- -------
Total increase in interest expense ................ 1,462 233 1,695
------- ------- -------
Increase (decrease) in net interest income ............. $ 1,848 $ (331) $ 1,517
======= ======= =======
</TABLE>
Provision and Allowance for Loan Losses
In originating loans, the Company recognizes that credit losses will be
experienced and the risk of loss will vary with, among other things, general
economic conditions, the type of loan being made, the creditworthiness of the
borrower over the term of the loan and, in the case of a collateralized loan,
the quality of the collateral for such loan. The Company maintains an
allowance for loan losses based upon, among other things, such factors as
historical experience, the volume and type of lending conducted by the Company,
the amount of nonperforming assets, regulatory policies, generally accepted
accounting principles, general economic conditions, and other factors related
to the collectibility of loans in the Company's portfolio. In addition to
unallocated allowances, specific allowances are provided for individual loans
when ultimate collection is considered questionable by management after
reviewing the current status of loans which are contractually past due and
considering the net realizable value of the collateral for the loan.
Management actively monitors the Company's asset quality and will
charge-off loans against the allowance for loan losses when appropriate and to
provide specific loss allowances when necessary. Although management believes
it uses the best information available to make determinations with respect to
the allowance for loan losses, future adjustments may be necessary if economic
conditions differ from the assumptions used in making the initial
determinations. As of September 30, 1997, the allowance for loan losses
amounted to $5.0 million (or 1.25% of total loans). The allowance for loan
losses as a percentage of nonperforming loans was 972.04% at September 30,
1997.
Provisions for loan losses are charged to income to bring the total
allowance for loan losses to a level deemed appropriate by management of the
Company based on such factors as historical experience, the volume and type of
lending conducted by the Company, the amount of nonperforming assets,
regulatory policies, generally accepted accounting principles, general economic
conditions, and other factors related to the collectibility of loans in the
Company's portfolio.
12
<PAGE> 13
The provision for loan losses for the quarter ended September 30, 1997 was
$150,000, down from $325,000 for the quarter ended September 30, 1996. The
decline related to continued strong credit quality. For the quarter ended
September 30, 1997, net charge-offs were $255,000 or 0.26% of average loans.
Set forth below is an analysis of the allowance for loan losses for the
nine months ended September 30, 1997:
<TABLE>
<CAPTION>
Nine months
ended
------------------
September 30, 1997
------------------
(Dollars in
thousands)
---------
<S> <C>
Average loans outstanding .................................. $ 367,332
Gross loans outstanding at end of period ................... 399,855
Allowance for loan losses at beginning of period ........... 4,436
Provision for loan losses .................................. 675
Adjustment due to bank acquisitions ........................ 488
Charge-offs:
Commercial and industrial .............................. (167)
Real estate ............................................ (87)
Consumer ............................................... (617)
Recoveries:
Commercial and industrial .............................. 29
Real estate ............................................ 43
Consumer ............................................... 206
---------
Net loan (charge-offs) recoveries .......................... (593)
---------
Allowance for loan losses at end of period ................. $ 5,006
=========
Ratio of allowance to end of period loans .................. 1.25%
Ratio of net charge-offs to average loans .................. 0.22%
Ratio of allowance to end of period nonperforming loans .... 972.04%
</TABLE>
Noninterest Income
The Company's primary source of noninterest income is service charges on
deposit accounts and other banking service related fees. Noninterest income
for the quarter ended September 30, 1997 was $2.3 million, an increase of
$217,000 or 10.3% compared with noninterest income of $2.1 million for the same
period in 1996. The following table presents, for the periods indicated, the
major categories of noninterest income:
<TABLE>
<CAPTION>
Three months ended Nine months ended
------------------ -----------------
September 30, September 30,
1997 1996 1997 1996
------- ------- ------ ------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Service charges on deposit accounts .... $1,819 $1,618 $5,197 $4,702
Retail services income ................. 319 318 917 914
Mortgage banking ....................... 69 49 150 133
Investment services .................... 63 36 159 119
Securities lending ..................... 18 35 61 91
Other noninterest income ............... 45 60 135 259
------ ------ ------ ------
Total noninterest income ........... $2,333 $2,116 $6,619 $6,218
====== ====== ====== ======
</TABLE>
13
<PAGE> 14
The increase in noninterest income was primarily attributable to an
increase in service charges on deposit accounts. Increased service charges on
deposit accounts resulted primarily from an increase in the number of
transaction accounts, which was due mainly to the Acquisitions.
Noninterest Expenses
Noninterest expenses totaled $6.9 million for the quarter ended September
30, 1997, unchanged from the quarter ended September 30, 1996. The following
table presents, for the periods indicated, the major categories of noninterest
expense:
<TABLE>
<CAPTION>
Three months ended Nine months ended
------------------ ------------------
September 30, September 30,
1997 1996 1997 1996
------- ------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Employee compensation and benefits ..... $ 4,161 $ 3,243 $12,144 $ 9,655
Non-staff expenses:
Net bank premises expense .......... 359 336 977 920
Equipment rentals, depreciation
and maintenance .................. 289 289 905 683
Data processing .................... 460 354 1,493 1,041
Professional fees .................. 219 168 609 506
Regulatory assessments ............. 73 1,788 38 2,122
Ad valorem and franchise taxes ..... 131 105 338 315
Other .............................. 1,256 645 3,135 1,919
------- ------- ------- -------
Total non-staff expenses ...... 2,787 3,685 7,495 7,506
------- ------- ------- -------
Total noninterest expense ..... $ 6,948 $ 6,928 $19,639 $17,161
======= ======= ======= =======
</TABLE>
The quarter ended September 30, 1996 was marked by nonrecurring expenses
of $1.4 million, primarily the FDIC assessment related to the Company's
deposits insured by the Savings Association Insurance Fund. Excluding these
nonrecurring expenses, noninterest expenses would have increased $1.4 million
or 26.3%, due mainly to increased employee compensation and benefits expense.
Employee compensation and benefits expense for the quarter ended September
30, 1997 was $4.2 million, an increase of $918,000 over the same period in
1996. The increase was due primarily to the Acquisitions and hiring additional
lending staff. The number of full-time equivalent employees increased to 425.5
at September 30, 1997 from 376.0 at September 30, 1996.
Data processing expense increased $106,000 or 29.9% to $460,000, due
mainly to continued technology upgrades. Professional fees increased $51,000
or 30.4% to $219,000. The increase related primarily to loan documentation
services and settlement of legal matters. In addition, goodwill amortization
of $129,000, sales tax of $75,000, an increase in expenses related to
repossessed properties of $62,000, and an increase in marketing expenses of
$60,000 contributed to the overall increase in noninterest expenses.
Income Taxes
Income tax expense increased approximately $750,000 to $1.6 million for
the quarter ended September 30 from $853,000 for the same period in 1996. The
increase was primarily attributable to higher pretax net earnings.
FINANCIAL CONDITION
Loan Portfolio
Total loans were $399.9 million at September 30, 1997, an increase of
$88.6 million or 28.4% from $311.3 million at December 31, 1996. The increase
in loans consisted of $48.4 million in internal growth and $40.2 million from
the
14
<PAGE> 15
Acquisitions. Strong internal loan growth was attributable primarily to
directing greater resources to lending, in accordance with the Company's
strategy to increase loans as a percentage of total earning assets. Loans
comprised 43.8% of total earning assets at September 30, 1997 compared with
41.4% at December 31, 1996. Loan growth was greatest in Commercial Banking,
Mortgage Banking and Retail Lending, which, along with Community Banking, make
up the Company's major lines of business.
The following table summarizes the loan portfolio of the Company by type
of loan as of September 30, 1997 and December 31, 1996:
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
----------------------------- --------------------------------
Amount Percent Amount Percent
-------- ------- -------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Commercial and industrial $39,085 9.77% $ 27,611 8.87%
Real estate:
Construction and land
development 24,755 6.19 17,470 5.61
1-4 family residential 73,034 18.27 51,544 16.56
Commercial mortgages 100,000 25.01 77,220 24.81
Farmland 708 0.18 1,032 0.33
Multi-family residential 5,565 1.39 4,056 1.30
Consumer:
Indirect 101,334 25.34 82,814 26.60
Direct 55,374 13.85 49,546 15.92
-------- ------ -------- ------
Total loans $399,855 100.00% $311,293 100.00%
======== ====== ======== ======
</TABLE>
NONPERFORMING ASSETS
Nonperforming assets were $1.2 million at September 30, 1997, compared
with $288,000 at December 31, 1996. The increase was due primarily to loans
acquired with the Acquisitions. The ratio of nonperforming assets to total
loans and other real estate was 0.31% and 0.09% at September 30, 1997 and
December 31, 1996, respectively. Continued low levels of nonperforming assets
reflect the Company's conservative lending philosophy.
The following table presents information regarding nonperforming assets as
of the dates indicated:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
(Dollars in thousands)
<S> <C> <C>
Nonaccrual loans ............................. $ 515 $ 288
Restructured loans ........................... -- --
------ ------
Total nonperforming loans .................... 515 288
Other real estate ............................ 712 --
------ ------
Total nonperforming assets ................... $1,227 $ 288
====== ======
Accruing loans 90 or more days past due....... $ 405 $ 134
</TABLE>
15
<PAGE> 16
SECURITIES
Securities totaled $456.2 million at September 30, 1997, an increase of
$15.5 million from $440.6 million at December 31, 1996. The increase was
primarily attributable to the investment of funds acquired in the Acquisitions.
At September 30, 1997, securities represented 47.2% of total assets compared to
55.0% of total assets at December 31, 1996. The yield on average securities
for the nine months ended September 30, 1997 was 6.49% compared with 6.53% for
the same period in 1996. At September 30, 1997 securities included $246.3
million in U.S. Treasury securities, $182.6 million in mortgage-backed
securities, and $27.3 million in collateral mortgage obligations. The average
life of the securities portfolio at September 30, 1997 was approximately two
years and five months.
PREMISES AND EQUIPMENT
Premises and equipment totaled $15.0 million at September 30, 1997, an
increase of $5.2 million from $9.8 million at December 31, 1996. The increase
was due primarily to the purchase of a six-story office building in Northwest
Houston which serves as the Company's headquarters. The building was acquired
in conjunction with one of the Acquisitions.
DEPOSITS
At September 30, 1997, demand and savings deposits accounted for
approximately 50.3% of total deposits, while the remainder were certificates of
deposit. Noninterest-bearing demand deposits totaled $148.2 million or 17.3%
of total deposits at September 30, 1997 compared with $117.4 million or 16.9%
of total deposits at December 31, 1996. The average cost of funds, including
noninterest-bearing demand deposits, was 3.50% for the nine months ended
September 30, 1997 compared with 3.42% for the same period in 1996.
BORROWINGS
Securities sold under repurchase agreements totaled $31.1 million at
September 30, 1997. These short-term borrowings represent customers' funds and
are expected to decline during the fourth quarter of 1997. Separately, the
Company has access to purchased funds from correspondent banks. While
purchased funds have been utilized on occasion to take advantage of investment
opportunities, the Company does not generally rely on external funding sources.
LIQUIDITY
The Company's Asset/Liability Management Policy is intended to maintain
adequate liquidity for the Company and thereby enhance its ability to raise
funds to support asset growth, meet deposit withdrawals and lending needs,
maintain reserve requirements and otherwise sustain operations. The Company
accomplishes this primarily through management of the maturities of its
interest-earning assets and interest-bearing liabilities. The Company believes
that its present liquidity position is adequate to meet current and future
needs.
Asset liquidity is provided by cash and assets which are readily
marketable or which will mature in the near future. As of September 30, 1997,
the Company had cash and cash equivalents of $83.2 million, an increase of
$42.7 million compared with $40.5 million at September 30, 1996, the increase
in which was primarily attributable to higher federal funds sold.
The Company's cash flows are composed of three classifications: cash flows
from operating activities, cash flows from investing activities, and cash flows
from financing activities. Net cash (used in) provided by operating activities
was $(13.0) million and $11.6 million for the nine months ended September 30,
1997 and 1996, respectively. For the nine months ended September 30, 1997,
cash flow used in operating activities resulted primarily from paying, in
January 1997, for securities that were purchased in December 1996.
Net cash provided by investing activities was $34.5 million and $1.3
million for the nine months ended September 30, 1997 and 1996, respectively.
Cash flow from investing activities reached a higher level at September 30,
1997 than at September 30, 1996, due primarily to cash provided in the
Acquisitions and to the timing of securities purchased.
16
<PAGE> 17
Net cash provided by (used in) financing activities was $27.8 million and
$(7.3) million for the nine months ended September 30, 1997 and 1996,
respectively. The disparity in net cash provided by (used in) financing
activities for the nine months ended September 30, 1997 compared with the same
period in 1996 related to the increase in customer repurchase agreements in
1997 compared with the decline in deposits that occurred during the first nine
months of 1996.
CAPITAL RESOURCES
Total shareholders' equity as of September 30, 1997 was $75.2 million, an
increase of $13.3 million or approximately 21.4% compared with shareholders'
equity of $62.0 million as of December 31, 1996. The increase was largely
attributable to net earnings, less common and preferred dividends, for the nine
months ended September 30, 1997 of $6.9 million and net proceeds of $7.6
million from issuances of Common Stock.
Both the Board of Governors of the Federal Reserve System, with respect to
the Company, and the Federal Deposit Insurance Corporation, with respect to the
Bank, have established certain minimum risk-based capital standards that apply
to bank holding companies and federally insured banks. The Company's
risk-based capital ratios remain above the levels designated as "Well
Capitalized" on September 30, 1997, with Tier 1 Capital, Total Risk-Based
Capital and Leverage Capital Ratios of 15.23%, 16.34% and 7.21%, respectively.
The Bank's risk-based capital ratios remain above the levels designated as
"Well Capitalized" on September 30, 1997, with Tier-1 Capital, Total Risk-Based
Capital and Leverage Capital Ratios of 13.39%, 14.49% and 6.56%, respectively.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 2. CHANGES IN SECURITIES.
(a) See Item 4 below.
(b) Not applicable.
(c) Not applicable.
(d) On September 30, 1997, the Company completed its initial public
offering (the "Offering") of 2,494,707 shares of the Company's Common Stock,
2,016,707 shares of which were offered by certain selling shareholders of the
Company. The Company received $7.6 million of the proceeds of the Offering
from its sale of Common Stock, after deducting the underwriting discount and
other expenses associated with the Offering. Approximately $6.0 million of the
proceeds will be used to redeem the Company's Series A Preferred Stock in the
fourth quarter of 1997, while the remaining proceeds will be used for general
corporate purposes. The Company did not receive any proceeds from the sale of
Common Stock by the Selling Shareholders.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On August 4, 1997 the Company held a special meeting of its
shareholders to consider and act upon the following items: (i) a proposal to
amend The Company's Restated Articles of Incorporation, as amended, to
increase the number of authorized shares of common stock from 1,000,000 to
50,000,000 shares and to change the par value per share of the common stock
from $10.00 to $0.25, (ii) a proposal to amend the Bylaws of the Company to
provide for the
17
<PAGE> 18
classification of the Board of Directors into three classes of directors with
staggered terms of office, (iii) a proposal to elect seven directors, with two
directors to serve a three year term, three directors to serve a two year term
and two directors to serve a one year term, (iv) a proposal to amend the
Company's bylaws to permit the Bylaws to be amended only by the Board of
Directors, (v) a proposal to amend the Company's Restated Articles of
Incorporation to reduce from two-thirds to a majority the number of shares of
common stock required to approve extraordinary transactions, (vi) a proposal to
amend the Company's Restated Articles of Incorporation to limit, consistent
with Texas law, the liability of the Company's directors for monetary damages
in certain instances, (vii) a proposal to amend the Company's Restated Articles
of Incorporation to increase from 10% to 50% the percentage of the outstanding
shares of the Company entitled to vote that is required to call a special
meeting of the Company's shareholders and (viii) a proposal to approve the
Company's 1997 Stock Incentive Plan.
With respect to the election of directors, the voting was as follows:
<TABLE>
<CAPTION>
Broker
Nominee For Against Withheld Non-Vote
------- --- ------- -------- --------
<S> <C> <C> <C>
Jerry S. Dominy 52,774 0 6
E. J. Guzzo 52,766 0 14
David Pasternak 52,774 0 6
Fredric M. Saunders 52,774 0 6
Stuart D. Saunders 52,774 0 6
C.C. Smitherman 52,774 0 6
James B. Wesley 52,774 0 6
</TABLE>
With respect to the proposals listed in (a) above, other than (iii),
the proposal to elect directors, the vote was as
follows:
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Vote
---- ------- ------- --------
<S> <C> <C> <C>
(i) 52,188 592 0
(ii) 52,774 6 0
(iv) 50,128 2,642 10
(v) 49,966 592 2,222
(vi) 51,838 592 350
(vii) 50,340 602 1,838
(viii) 52,052 592 136
</TABLE>
The above voting does not take into effect a 30 for 1 stock split
approved subsequent to this shareholder meeting.
ITEM 5. OTHER INFORMATION.
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following exhibit is filed with this report:
Exhibit 27. Financial Data Schedule
(b) No reports on Form 8-K were filed by the Company during the three
months ended September 30, 1997.
18
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRIME BANCSHARES, INC.
Registrant
Date: November 12, 1997 By: /s/ FREDRIC M. SAUNDERS
----------------------------------
Fredric M. Saunders
Chairman of the Board and Chief
Executive Officer
(Principal Executive Officer)
Date: November 12, 1997 By: /s/ L. ANDERSON CREEL
----------------------------------
L. Anderson Creel
Senior Vice President and Chief
Financial Officer
(Principal Financial Officer)
19
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 25,759
<INT-BEARING-DEPOSITS> 206
<FED-FUNDS-SOLD> 57,268
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 220,379
<INVESTMENTS-CARRYING> 235,779
<INVESTMENTS-MARKET> 235,564
<LOANS> 399,855
<ALLOWANCE> 5,006
<TOTAL-ASSETS> 965,785
<DEPOSITS> 855,273
<SHORT-TERM> 31,144
<LIABILITIES-OTHER> 4,123
<LONG-TERM> 0
0
7,000
<COMMON> 3,003
<OTHER-SE> 65,242
<TOTAL-LIABILITIES-AND-EQUITY> 965,785
<INTEREST-LOAN> 25,033
<INTEREST-INVEST> 22,833
<INTEREST-OTHER> 785
<INTEREST-TOTAL> 48,651
<INTEREST-DEPOSIT> 22,144
<INTEREST-EXPENSE> 22,175
<INTEREST-INCOME-NET> 26,476
<LOAN-LOSSES> 675
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 19,639
<INCOME-PRETAX> 12,781
<INCOME-PRE-EXTRAORDINARY> 12,781
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,284
<EPS-PRIMARY> 0.84
<EPS-DILUTED> 0.84
<YIELD-ACTUAL> 7.59
<LOANS-NON> 515
<LOANS-PAST> 405
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,436
<CHARGE-OFFS> 871
<RECOVERIES> 278
<ALLOWANCE-CLOSE> 5,006
<ALLOWANCE-DOMESTIC> 5,006
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
