<PAGE> 1
================================================================================
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____________ TO ____________
COMMISSION FILE NUMBER: 0-23113
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, including 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 [X] No [ ]
As of October 26, 1999, there were 9,804,483 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, 1999 (unaudited) and December 31, 1998.................2
Consolidated Statements of Earnings for the Three Months and Nine Months Ended
September 30, 1999 and 1998 (unaudited)..............................................................3
Consolidated Statement of Changes in Shareholders' Equity for the Year Ended
December 31, 1998 and the Nine Months Ended September 30, 1999 (unaudited)...........................4
Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1999 and 1998 (unaudited)........................................................5
Notes to Interim Consolidated Financial Statements.....................................................6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations....................8
Item 3. Quantitative and Qualitative Disclosures about Market Risk..............................................18
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.......................................................................................19
Item 2. Changes in Securities...................................................................................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
Signatures.......................................................................................................20
</TABLE>
1
<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,
1999 1998
----------- -----------
(Unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents:
Cash and due from banks ................................. $ 28,830 $ 33,424
Federal funds sold and other temporary investments ...... 33,837 48,472
----------- -----------
Total cash and cash equivalents ..................... 62,667 81,896
----------- -----------
Securities:
Available-for-sale ...................................... 32,290 70,406
Held-to-maturity ........................................ 480,842 366,908
----------- -----------
Total securities .................................... 513,132 437,314
----------- -----------
Loans, net of allowance for loan losses of $6,515 and $6,184 591,065 526,220
Premises and equipment, net ................................ 17,038 16,566
Accrued interest receivable ................................ 6,323 6,151
Other assets ............................................... 9,217 10,185
----------- -----------
Total assets ........................................ $ 1,199,442 $ 1,078,332
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing ..................................... $ 179,250 $ 188,689
Interest-bearing ........................................ 806,004 776,984
----------- -----------
Total deposits ...................................... 985,254 965,673
----------- -----------
Federal funds purchased and securities sold
under repurchase agreements ............................ 18,046 18,743
Other borrowings ........................................... 100,000 --
Other liabilities .......................................... 5,725 4,596
----------- -----------
Total liabilities ................................... 1,109,025 989,012
----------- -----------
Shareholders' equity:
Common stock ............................................ 3,063 3,060
Additional capital ...................................... 14,436 14,402
Retained earnings ....................................... 82,304 73,323
Accumulated other comprehensive income .................. (131) 160
----------- -----------
99,672 90,945
Less common stock held in treasury--at cost ............. 9,255 1,625
----------- -----------
Total shareholders' equity .......................... 90,417 89,320
----------- -----------
Total liabilities and shareholders' equity .......... $ 1,199,442 $ 1,078,332
=========== ===========
</TABLE>
See accompanying Notes to Interim Consolidated Financial Statements.
2
<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,
1999 1998 1999 1998
----------------- -----------------
<S> <C> <C> <C> <C>
Interest income:
Loans ............................................ $12,710 $11,920 $36,631 $34,841
Securities ....................................... 7,930 6,454 23,230 20,991
Federal funds sold and other temporary investments 465 791 1,458 1,864
------- ------- ------- -------
Total interest income ......................... 21,105 19,165 61,319 57,696
Interest expense .................................... 9,381 8,184 26,859 24,670
------- ------- ------- -------
Net interest income ........................... 11,724 10,981 34,460 33,026
Provision for loan losses ........................... 396 275 1,023 700
------- ------- ------- -------
Net interest income after provision for loan
losses ...................................... 11,328 10,706 33,437 32,326
Noninterest income:
Service charges .................................. 2,042 2,047 5,920 6,038
Other operating income ........................... 451 534 1,609 1,651
------- ------- ------- -------
Total noninterest income ...................... 2,493 2,581 7,529 7,689
Noninterest expense:
Employee compensation and benefits ............... 4,975 4,856 15,004 14,614
Net bank premises expense ........................ 537 532 1,577 1,426
Equipment rentals, depreciation and maintenance .. 443 424 1,292 1,169
Realized losses on sale of available for
sale securities ................................ -- -- -- 46
Other operating expenses ......................... 2,081 2,208 6,299 6,672
------- ------- ------- -------
Total noninterest expenses .................... 8,036 8,020 24,172 23,927
------- ------- ------- -------
Earnings before income taxes .................. 5,785 5,267 16,794 16,088
Provision for income taxes .......................... 1,985 1,878 5,826 5,751
------- ------- ------- -------
Net earnings before preferred stock dividends . 3,800 3,389 10,968 10,337
Preferred stock dividends ..................... -- -- -- 25
------- ------- ------- -------
Net earnings available to common shareholders . $ 3,800 $ 3,389 $10,968 $10,312
======= ======= ======= =======
Basic earnings per common share ............... $ 0.39 $ 0.33 $ 1.10 $ 1.01
Diluted earnings per common share ............. $ 0.38 $ 0.32 $ 1.07 $ 0.97
</TABLE>
See accompanying Notes to Interim Consolidated Financial Statements.
3
<PAGE> 5
PRIME BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Accumulated
other Total
compre- Common share-
Preferred Common Additional Retained hensive stock in holders'
stock stock capital earnings income treasury equity
----------- -------- ---------- -------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1998 ....... $ 1,000 $ 3,003 $ 13,781 $ 61,498 $ 770 $ (1,625) $ 78,427
Comprehensive income:
Net earnings .................. -- -- -- 13,824 -- -- 13,824
Unrealized losses on
securities, net of tax
and reclassification
adjustment .................. -- -- -- -- (610) -- (610)
--------
Comprehensive income ............. -- -- -- -- -- -- 13,214
Sale of common stock ............. -- 57 327 -- -- -- 384
Stock issuance costs ............. -- -- (22) -- -- -- (22)
Redemption of preferred stock .... (1,000) -- (20) -- -- -- (1,020)
Dividends ........................ -- -- -- (1,999) -- -- (1,999)
Benefits received related to
employee stock options ........ -- -- 336 -- -- 336
-------- -------- -------- -------- -------- -------- --------
Balance at December 31, 1998 ..... -- 3,060 14,402 73,323 160 (1,625) $ 89,320
Comprehensive income:
Net earnings(1) ............... -- -- -- 10,968 -- -- 10,968
Unrealized losses on
securities(1) ................. -- -- -- -- (291) (291)
--------
Comprehensive income (1) ......... -- -- -- -- -- -- 10,677
Sale of common stock(1) .......... -- 3 34 -- -- -- 37
Purchase of treasury stock(1) .... -- -- -- -- -- (7,630) (7,630)
Dividends(1) ..................... -- -- -- (1,987) -- -- (1,987)
-------- -------- -------- -------- -------- -------- --------
Balance at September 30, 1999(1).. $ -- $ 3,063 $ 14,436 $ 82,304 $ (131) $ (9,255) $ 90,417
======== ======== ======== ======== ======== ======== ========
</TABLE>
(1) Unaudited
See accompanying Notes to Interim Consolidated Financial Statements.
4
<PAGE> 6
PRIME BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended
September 30,
-------------------------
1999 1998
--------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings ........................................................... $ 10,968 $ 10,337
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization ....................................... 1,836 1,544
Accretion of discounts, net of amortization of premiums on securities 668 (184)
Provision for loan losses ........................................... 1,023 700
Loss (gain) on sale of premises, equipment and other real estate .... 4 (230)
Change in assets and liabilities:
Dividends on Federal Home Loan Bank stock .......................... (182) --
(Increase) decrease in accrued interest receivable ................. (172) 1,244
Decrease in other assets ........................................... 444 1,269
Increase (decrease) in other liabilities ........................... 1,285 (2,680)
--------- ---------
Net cash provided by operating activities ........................ 15,874 12,000
Cash flows from investing activities:
Purchases of held-to-maturity securities ............................... (202,601) (94,245)
Purchases of available-for-sale securities ............................. (15,970) (62)
Proceeds from sales and maturities of available-for-sale securities .... 53,846 87,754
Proceeds from maturities of held-to-maturity securities ................ 87,974 59,755
Increase in loans ...................................................... (65,868) (53,373)
Purchases of premises and equipment .................................... (1,882) (1,242)
Proceeds from sale of premises, equipment and other real estate ........ 94 444
--------- ---------
Net cash used by investing activities ............................ (144,407) (969)
Cash flows from financing activities:
Increase (decrease) in deposits ........................................ 19,581 (28,023)
(Decrease) increase in federal funds purchased and securities sold under
repurchase agreements ................................................ (697) 5,746
Borrowings from the Federal Home Loan Bank of Dallas ................... 100,000 --
Stock issuance cost .................................................... -- (22)
Redemption of preferred stock .......................................... -- (1,020)
Sale of common stock ................................................... 37 383
Purchase of treasury stock ............................................. (7,630) --
Dividends paid ......................................................... (1,987) (1,382)
--------- ---------
Net cash provided (used) by financing activities ................. 109,304 (24,318)
--------- ---------
Net decrease in cash and cash equivalents ........................ (19,229) (13,287)
Cash and cash equivalents at beginning of period ........................... 81,896 67,721
--------- ---------
Cash and cash equivalents at end of period ................................. $ 62,667 $ 54,434
========= =========
</TABLE>
See accompanying Notes to Interim Consolidated Financial Statements.
5
<PAGE> 7
PRIME BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(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 Annual
Report on Form 10-K. Operating results for the nine month period ended September
30, 1999, are not necessarily indicative of the results that may be expected for
the year ending December 31, 1999.
(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,
------------------------------- --------------------------------
1999 1998 1999 1998
--------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
Net earnings available to common shareholders...... $3,800 $3,389 $10,968 $10,312
Weighted average common shares used in basic EPS... 9,804,483 10,278,853 9,939,956 10,195,472
Potential dilutive common shares................... 304,810 320,299 290,590 404,642
-------------- ------------- --------------- -------------
Weighted average common and potential dilutive
common shares used in dilutive EPS.............. 10,109,293 10,599,152 10,230,546 10,600,114
-------------- ------------- --------------- -------------
Basic earnings per common share.................... $0.39 $0.33 $1.10 $1.01
============== ============= =============== =============
Diluted earnings per common share.................. $0.38 $0.32 $1.07 $0.97
============== ============= =============== =============
</TABLE>
6
<PAGE> 8
PRIME BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
(3) COMPREHENSIVE INCOME
Comprehensive income is a more inclusive financial reporting
methodology than net earnings and includes disclosure of certain financial
information that historically has not been recognized in the calculation of net
earnings.
The tax effects for components of other comprehensive income are as
follows:
<TABLE>
<CAPTION>
Three months ended September 30,
--------------------------------------------------------------------------
1999 1998
----------------------------------- ------------------------------------
Before Tax Net of Before Tax Net of
Tax (Expense)/ Tax Tax (Expense)/ Tax
Amount Benefit Amount Amount Benefit Amount
----------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Unrealized losses on securities
arising during the period .......... $(26) $9 $(17) $(135) $47 $(88)
Less: Reclassification adjustment
for losses included in net
earnings ........................... -- -- -- -- -- --
------------------------------------ -----------------------------------
Other comprehensive income ........... $(26) $9 $(17) $(135) $47 $(88)
==================================== ===================================
</TABLE>
<TABLE>
<CAPTION>
Nine months ended September 30,
--------------------------------------------------------------------------
1999 1998
----------------------------------- ------------------------------------
Before Tax Net of Before Tax Net of
Tax (Expense)/ Tax Tax (Expense)/ Tax
Amount Benefit Amount Amount Benefit Amount
----------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Unrealized losses on securities
arising during the period......... $(448) $157 $(291) $(754) $264 $(490)
Less: Reclassification adjustment
for losses included in net
earnings.......................... -- -- -- 46 (16) 30
----------------------------------- ------------------------------------
Other comprehensive income.......... $(448) $157 $(291) $(708) $248 $(460)
=================================== ====================================
</TABLE>
(4) PROPOSED MERGER
On July 27, 1999 the Company executed an Agreement and Plan of
Reorganization with Wells Fargo & Company providing for the merger of a
wholly-owned subsidiary of Wells Fargo with and into the Company through an
exchange of stock. This transaction is subject to the approval of the Company's
shareholders and banking regulators.
7
<PAGE> 9
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 21 full-service banking locations,
13 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 Annual Report on Form 10-K
filed 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 were $3.8 million ($0.38
per common share on a diluted basis) for the quarter ended September 30, 1999
compared with $3.4 million ($0.32 per common share on a diluted basis) for the
quarter ended September 30, 1998, an increase of $411,000, or 12.1%. The Company
posted returns on average common equity of 17.00% and 15.87% and returns on
assets of 1.25% and 1.28% for the quarters ended September 30, 1999 and 1998,
respectively. For the nine months ended September 30, 1999, net earnings
available to common shareholders were $11.0 million ($1.07 per common share on a
diluted basis) compared with $10.3 million ($0.97 per common share on a diluted
basis) for the same period in 1998, an increase of $656,000, or 6.4%.
Total assets were $1.2 billion at September 30, 1999, compared with
$1.1 billion at December 31, 1998. Total loans increased to $597.6 million at
September 30, 1999 from $532.4 million at December 31, 1998, an increase of
$65.2 million, or 12.2%. Total deposits were $985.3 million at September 30,
1999 compared with $965.7 million at December 31, 1998. Shareholders' equity was
$90.4 million at September 30, 1999 compared with $89.3 million at December 31,
1998, an increase of $1.1 million, or 1.2%. The increase was primarily due to
net income of $11.0 million during the first nine months of 1999. This was
partially offset by a stock repurchase of 500,000 shares of common stock and
dividends paid on common stock.
8
<PAGE> 10
RESULTS OF OPERATIONS
Interest Income
Interest income for the quarter ended September 30, 1999 was $21.1
million, an increase of $1.9 million, or 10.1%, from the quarter ended September
30, 1998. The increase in interest income was due primarily to a 15.5% increase
in average earning assets. This was partially offset by a decline in the yield
on average earning assets, which decreased 35 basis points compared with the
third quarter of 1998 due to declining market interest rates. For the nine
months ended September 30, 1999, interest income was $61.3 million, up $3.6
million, or 6.3%, from $57.7 million for the same period in 1998, due mainly to
higher average interest-earning assets, including higher average loans.
Interest Expense
Interest expense on deposits and other interest-bearing liabilities was
$9.4 million for the quarter ended September 30, 1999 compared with $8.2 million
for the quarter ended September 30, 1998, an increase of $1.2 million, or 14.6%.
This was caused by an increase of $146.9 million in average interest bearing
liabilities from quarter to quarter, mainly due to the balance-sheet-leveraging
strategy implemented during the first quarter of 1999, which resulted in other
borrowings of $100.0 million. The increase in interest expense was partially
offset by a 15 basis point decrease in the average interest rate of
interest-bearing liabilities. For the nine months ended September 30, 1999,
interest expense was $26.9 million compared with $24.7 million for the same
period in 1998, an increase of $2.2 million, or 8.9%. The increase primarily
resulted from higher average interest-bearing liabilities.
Net Interest Income
Net interest income was $11.7 million for the quarter ended September
30, 1999 compared with $11.0 million for the quarter ended September 30, 1998,
an increase of $743,000, or 6.8%. The increase in net interest income resulted
primarily from growth in average interest-earning assets of $154.3 million, or
15.5%, from quarter to quarter. This was partially offset by a decrease in the
net interest margin of 33 basis points to 4.04% for the third quarter of 1999.
The decrease in the net interest margin from quarter to quarter is primarily due
to the balance-sheet-leveraging strategy implemented in the first quarter of
1999. Likewise, net interest income increased to $34.5 million for the nine
months ended September 30, 1999 from $33.0 million for the nine months ended
September 30, 1998, an increase of $1.4 million, or 4.3%, due mainly to higher
average interest-earning assets, including higher average loans.
9
<PAGE> 11
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 September 30, 1999
and 1998 and for the nine months ended September 30, 1999 and 1998. 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,
----------------------------------------------------------------------------------
1999 1998
---------------------------------------- ------------------------------------
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 ...................................... $587,425 $12,710 8.58% $528,621 $11,920 8.95%
Securities ........................... 527,090 7,930 5.97% 411,361 6,454 6.22%
Federal funds sold and other
temporary investments ............. 36,169 465 5.10% 56,443 791 5.56%
-------------------------------------- ----------------------------------
Total interest-earning assets ... 1,150,684 21,105 7.28% 996,425 19,165 7.63%
Less allowance for loan losses ............. (6,304) (5,886)
---------- ----------
Total interest-earning assets, net
of allowance ............................ 1,144,380 990,539
Nonearning assets .......................... 60,612 60,120
---------- ----------
Total assets .................... $1,204,992 $1,050,659
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Interest-bearing liabilities:
Interest-bearing demand deposits ..... $130,208 $592 1.80% $122,616 $493 1.60%
Savings and money market accounts .... 206,795 1,558 2.99% 185,475 1,429 3.06%
Certificates of deposit .............. 471,650 5,795 4.87% 451,477 6,014 5.28%
Federal funds purchased and securities
sold under repurchase agreements .. 18,518 200 4.28% 20,699 248 4.75%
Other borrowings ..................... 100,000 1,236 4.90% -- -- --
-------------------------------------- ----------------------------------
Total interest-bearing
liabilities ................... 927,171 9,381 4.01% 780,267 8,184 4.16%
-------------------------------------- ----------------------------------
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits .. 184,152 179,968
Other liabilities .................... 4,998 5,723
---------- ----------
Total liabilities ............... 1,116,321 965,958
Shareholders' equity ....................... 88,671 84,701
---------- ----------
Total liabilities and
shareholders' equity .......... $1,204,992 $1,050,659
========== ==========
Net interest income ........................ $11,724 $10,981
========= =========
Net interest spread ........................ 3.27% 3.47%
====== ======
Net interest margin ........................ 4.04% 4.37%
====== ======
</TABLE>
10
<PAGE> 12
<TABLE>
<CAPTION>
Nine months ended September 30,
----------------------------------------------------------------------------------
1999 1998
---------------------------------------- ------------------------------------
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 ................................ $565,955 $36,631 8.65% $514,008 $34,841 9.06%
Securities ........................... 514,251 23,230 6.04% 440,733 20,991 6.37%
Federal funds sold and other
temporary investments ........... 40,160 1,458 4.85% 45,326 1,864 5.50%
-------------------------------------- -----------------------------------
Total interest-earning assets ... 1,120,366 61,319 7.32% 1,000,067 57,696 7.71%
Less allowance for loan losses ............. (6,264) (5,875)
---------- ----------
Total interest-earning assets, net
of allowance ............................ 1,114,102 994,192
Nonearning assets .......................... 60,207 61,986
---------- ----------
Total assets .................... $1,174,309 $1,056,178
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Interest-bearing liabilities:
Interest-bearing demand deposits ..... $131,476 $1,753 1.78% $126,954 $1,612 1.70%
Savings and money market accounts .... 200,535 4,420 2.95% 183,971 4,213 3.06%
Certificates of deposit .............. 467,507 17,161 4.91% 458,026 18,184 5.31%
Federal funds purchased and securities
sold under repurchase agreements .. 18,600 592 4.26% 18,208 651 4.78%
Other borrowings ..................... 79,853 2,933 4.91% 184 10 7.27%
-------------------------------------- ----------------------------------
Total interest-bearing
liabilities ................... 897,971 26,859 4.00% 787,343 24,670 4.19%
-------------------------------------- ----------------------------------
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits .. 184,024 180,666
Other liabilities .................... 4,488 6,319
---------- ----------
Total liabilities ............... 1,086,483 974,328
Shareholders' equity ....................... 87,826 81,850
---------- ----------
Total liabilities and
shareholders' equity .......... $1,174,309 $1,056,178
========== ==========
Net interest income ........................ $34,460 $33,026
========= =========
Net interest spread ........................ 3.32% 3.52%
====== ======
Net interest margin ........................ 4.11% 4.42%
====== ======
</TABLE>
11
<PAGE> 13
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,
--------------------------------------
1999 vs. 1998
--------------------------------------
Increase (decrease)
due to
----------------------
Volume Rate Total
-------- ------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Interest-earning assets:
Loans ........................................ $ 1,326 $ (536) $ 790
Securities ................................ 1,816 (340) 1,476
Federal funds sold and other temporary
investments ............................ (284) (42) (326)
------- ------- -------
Total increase in interest income .... 2,858 (918) 1,940
------- ------- -------
Interest-bearing liabilities:
Interest-bearing demand deposits .......... 31 68 99
Savings and money market accounts ......... 164 (35) 129
Certificates of deposit ................... 269 (488) (219)
Federal funds purchased and securities sold
under repurchase agreements ............ (26) (22) (48)
Other borrowings .......................... 1,236 -- 1,236
------- ------- -------
Total increase in interest expense ... 1,674 (477) 1,197
------- ------- -------
Increase in net interest income ........... $ 1,184 $ (441) $ 743
======= ======= =======
</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 provides
specific loss allowances when necessary. Loans are charged-off against the
allowance for loan losses when appropriate. 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, 1999, the allowance for loan losses amounted
to $6.5 million, or 1.09%, of total loans. The allowance for loan losses as a
percentage of nonperforming loans was 738.7% at September 30, 1999.
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> 14
The provision for loan losses for the nine months ended September 30,
1999 was $1.0 million compared with $700,000 for the same period in 1998. The
increase resulted from continued growth in loans. For the nine months ended
September 30, 1999, net charge-offs were $692,000, or 0.16%, of average loans.
Set forth below is an analysis of the allowance for loan losses for the
nine months ended September 30, 1999:
<TABLE>
<CAPTION>
Nine months
ended
September 30, 1999
--------------------
(Dollars in
thousands)
<S> <C>
Average loans outstanding................................ $565,955
Gross loans outstanding at end of period................. 597,580
Allowance for loan losses at beginning of period......... 6,184
Provision for loan losses................................ 1,023
Charge-offs:
Commercial and industrial............................. (145)
Real estate........................................... (41)
Consumer.............................................. (787)
Recoveries:
Commercial and industrial............................. 19
Real estate........................................... 31
Consumer.............................................. 231
-------------------
Net loan (charge-offs) recoveries........................ (692)
-------------------
Allowance for loan losses at end of period............... $6,515
===================
Ratio of allowance to end of period loans................ 1.09%
Ratio of net charge-offs to average loans................ 0.16%
Ratio of allowance to end of period nonperforming loans.. 738.66%
</TABLE>
Noninterest Income
The Company's primary sources of noninterest income are service charges on
deposit accounts and other banking service related fees. Noninterest income for
the quarter ended September 30, 1999 decreased to $2.5 million from $2.6 million
for the quarter ended September 30, 1998, a decrease of $88,000, or 3.4%. 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,
-------------------------------- --------------------------------
1999 1998 1999 1998
-------------- -------------- -------------- --------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Service charges on deposit accounts..... $2,042 $2,047 $5,920 $6,038
Retail services income.................. 349 325 1,137 1,003
Mortgage banking........................ 14 47 149 174
Investment services..................... 41 94 153 247
Securities lending...................... 4 6 18 20
Other noninterest income................ 43 62 152 207
-------------- -------------- -------------- --------------
Total noninterest income.......... $2,493 $2,581 $7,529 $7,689
============== ============== ============== ==============
</TABLE>
The decrease in noninterest income for the quarter ended September 30,
1999 over the same period in 1998 was mainly due to a decline in ATM surcharges
and mortgage loan processing fees, along with a decline in annuity and mutual
fund sales. This was partially offset by an increase in fees collected from
debit card usage. For the nine
13
<PAGE> 15
months ended September 30, 1999, the decrease in noninterest income compared
with the same period in 1998 was primarily caused by a decrease in fees
collected from insufficiently funded checks, as well as declines in commissions
collected from annuity and mutual fund sales.
Noninterest Expenses
Noninterest expenses were relatively flat for the quarter ended September
30, 1999 compared with the same period in 1998, increasing by only $16,000. The
following table presents, for the periods indicated, the major categories of
noninterest expenses:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
-------------------------------- --------------------------------
1999 1998 1999 1998
-------------- -------------- -------------- --------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Employee compensation and benefits....... $4,975 $4,856 $15,004 $14,614
Non-staff expenses:
Net bank premises expense......... 537 532 1,577 1,426
Equipment rentals, depreciation
and maintenance............... 443 424 1,292 1,169
Data processing................... 344 330 1,055 1,463
Professional fees................. 238 305 853 1,093
Regulatory assessments............ 80 77 235 242
Ad valorem and franchise taxes.... 164 174 414 519
Loss on sale of available-for-sale
securities.................... ---- ---- ---- 46
Other............................. 1,255 1,322 3,742 3,355
-------------- -------------- -------------- --------------
Total non-staff expenses.. 3,061 3,164 9,168 9,313
-------------- -------------- -------------- --------------
Total noninterest
expenses............... $8,036 $8,020 $24,172 $23,927
============== ============== ============== ==============
</TABLE>
Employee compensation and benefits expenses were $5.0 million for the
quarter ended September 30, 1999 and $15.0 million for the nine months ended
September 30, 1999, increases of $119,000, or 2.5%, and $390,000, or 2.7%,
compared with the respective periods in 1998. The increase was due primarily to
normal salary increases.
Non-staff expenses were $3.1 million for the quarter ended September 30,
1999, a decrease of $103,000, or 3.3%, from the same period in 1998. Significant
components of this decrease were office supplies costs, stationery and printing
expenses, and legal fees. These are partially offset by increases in
depreciation expense and data processing costs. Excluding expenses related to
the acquisition of Sunbelt National Bank incurred during 1998, non-staff
expenses for the nine months ended September 30, 1999 would have increased
$361,000, or 4.1%, compared with the same period in 1998. These increases are
mainly due to increases in depreciation expense, courier and messenger service
costs, telecommunications expense, and a write-down in other real estate owned.
Income Taxes
Income tax expense increased $107,000 to $2.0 million for the quarter
ended September 30, 1999. The increase was primarily attributable to higher
pretax net earnings.
14
<PAGE> 16
FINANCIAL CONDITION
Loan Portfolio
Total loans increased to $597.6 million at September 30, 1999 from
$532.4 million at December 31, 1998, an increase of $65.2 million, or 12.2%.
Loan growth occurred primarily in commercial and industrial loans, construction
and land development loans, and commercial mortgages. Loans comprised 52.2% of
total earning assets at September 30, 1999 compared with 52.3% at December 31,
1998.
The following table summarizes the loan portfolio of the Company by
type of loan as of September 30, 1999 and December 31, 1998:
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
----------------------------- -----------------------------
Amount Percent Amount Percent
-------------- ------------ -------------- -------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Commercial and industrial............ $70,524 11.80% $50,644 9.51%
Real estate:
Construction and land
development............... 51,592 8.63 38,673 7.26
1-4 family residential......... 113,389 18.98 105,882 19.89
Commercial mortgages........... 200,471 33.55 174,668 32.81
Farmland....................... 1,042 0.17 722 0.14
Multi-family residential....... 7,138 1.19 7,363 1.38
Consumer:
Indirect....................... 90,279 15.11 96,243 18.08
Direct......................... 63,145 10.57 58,209 10.93
-------------- ------------ -------------- -------------
Total loans............... $597,580 100.00% $532,404 100.00%
============== ============ ============== =============
</TABLE>
NONPERFORMING ASSETS
Nonperforming assets were $1.5 million at September 30, 1999 compared with
$1.7 million at December 31, 1998, a decrease of $127,000, or 7.7%. The ratios
of nonperforming assets to total loans and other real estate were 0.25% and
0.31% at September 30, 1999 and December 31, 1998, respectively.
The following table presents information regarding nonperforming assets as
of the dates indicated:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
----------------- -----------------
(Dollars in thousands)
<S> <C> <C>
Nonaccrual loans............................. $870 $808
Restructured loans........................... 12 69
----------------- -----------------
Total nonperforming loans.................... 882 877
Other real estate............................ 642 774
----------------- -----------------
Total nonperforming assets................... $1,524 $1,651
================= =================
Accruing loans 90 or more days past due...... $420 $699
</TABLE>
15
<PAGE> 17
SECURITIES
Securities totaled $513.1 million at September 30, 1999 compared with
$437.3 million at December 31, 1998, an increase of $75.8 million, or 17.3%. The
increase occurred primarily due to an increase in available funds resulting from
the balance-sheet-leveraging strategy implemented in the first quarter of 1999.
At September 30, 1999, securities represented 44.8% of total earning assets
compared with 42.9% of total earning assets at December 31, 1998. The yield on
average securities for the quarter ended September 30, 1999 was 5.97% compared
with 6.22% for the same period in 1998. At September 30, 1999, securities
included $47.7 million in U.S. Treasury securities, $429.0 million in
mortgage-backed securities, $11.8 million in collateralized mortgage
obligations, and $19.4 million in municipal securities. The average life of the
securities portfolio at September 30, 1999 was approximately five years and one
month.
PREMISES AND EQUIPMENT
Premises and equipment totaled $17.0 million at September 30, 1999, an
increase of $472,000, or 2.8%, from $16.6 million at December 31, 1998. The
increase is primarily due to the purchase of property for banking center
expansion.
DEPOSITS
Total deposits were $985.3 million at September 30, 1999 compared with
$965.7 million at December 31, 1998, an increase of $19.6 million. At September
30, 1999, demand and savings deposits accounted for approximately 51.3% of total
deposits, while certificates of deposit made up 48.7% of total deposits.
Noninterest-bearing demand deposits totaled $179.3 million, or 18.2%, of total
deposits at September 30, 1999 compared with $188.7 million, or 19.5%, of total
deposits at December 31, 1998. The average cost of deposits, including
noninterest-bearing demand deposits, was 3.17% for the quarter ended September
30, 1999 compared with 3.35% for the same period in 1998. The decline in average
cost of deposits was due mainly to a decline in the average rate paid on
certificates of deposit.
BORROWINGS
Federal funds purchased and securities sold under repurchase agreements
totaled $18.0 million at September 30, 1999. These short-term borrowings
represent customers' funds. Separately, the Company has access to purchased
funds from correspondent banks. The Company also has $100.0 million in
outstanding borrowings from the Federal Home Loan Bank of Dallas incurred in
order to facilitate its balance-sheet-leveraging strategy implemented in the
first quarter of 1999.
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, 1999,
the Company had cash and cash equivalents of $62.7 million, up from $54.4
million at September 30, 1998. The increase was primarily due to growth in
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 provided by operating activities was $15.9
million and $12.0 million for the nine months ended September 30, 1999 and 1998,
respectively.
Net cash used by investing activities was $144.4 million and $1.0 million
for the nine months ended September 30, 1999 and 1998, respectively. The
difference primarily relates to an increase in the amount of securities
purchased.
16
<PAGE> 18
Net cash provided (used) by financing activities was $109.3 million and
$(24.3) million for the nine months ended September 30, 1999 and 1998,
respectively. The difference primarily relates to the borrowing from the Federal
Home Loan Bank, as well as an increase in deposits.
CAPITAL RESOURCES
Total shareholders' equity was $90.4 million at September 30, 1999
compared with $89.3 million at December 31, 1998, an increase of $1.1 million,
or 1.2%. The increase was primarily due to net income of $11.0 million during
the first nine months of 1999. This was partially offset by a stock repurchase
of 500,000 shares of common stock and dividends paid on 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 at September 30, 1999 remain above the levels designated as "well
capitalized" with Tier 1 capital, total risk-based capital and leverage capital
ratios of 12.82%, 13.79% and 7.19%, respectively. The Bank's risk-based capital
ratios at September 30, 1999 remain above the levels designated as "well
capitalized" with Tier-1 capital, total risk-based capital and leverage capital
ratios of 12.79%, 13.75 % and 7.17%, respectively.
YEAR 2000 COMPLIANCE
General
The Company continues to monitor and revise its Year 2000 project
plan to ensure there will be no material adverse effect on customers or
disruption to business operations as a result of a failure of the Company or
third parties to properly process any data on or after January 1, 2000.
State of Readiness
The Company has in place a task force, established in January, 1996,
to address the millennium change issues and to ensure there will be no material
adverse effect on customers or disruption to business operations as a result of
a failure of the Bank or third parties to properly process any data on or after
January 1, 2000. The task force has executive sponsorship from, and reports to,
the Data Processing Steering Committee, which in turn reports to the Board of
Directors. The task force consists of the project manager and the respective
task force members. This group meets periodically to review the project schedule
and its progress.
The project plan consists of five phases: Awareness, Assessment,
Renovation, Validation and Implementation. This plan has been patterned after
the FFIEC interagency statement of May 5, 1997. The Awareness, Assessment,
Renovation and Validation phases are substantially complete; the Implementation
phase is currently in process and on schedule.
The Company has drafted a Year 2000 business recovery contingency and
testing plan in accordance with FFIEC directives. All mission critical software
utilized has been provided by established software companies who retain the
responsibility for Year 2000 compliance. The core application processing systems
(demand and time deposit accounting, loan accounting, general ledger accounting,
and the customer information processing systems) of the Company, and the
hardware upon which it is processed, were tested during the fourth quarter 1998
and, based upon the results, the Company believes these systems to be compliant.
As of March 31, 1999, 100% of the mission critical systems have been either
validated through testing, or have been represented as compliant by the
respective vendor and coupled with an appropriate recovery contingency plan in
the unlikely event of non-compliance.
The FDIC has examined the Company's overall compliance efforts,
specifically regarding Year 2000 issues, in March 1998, March 1999, and again in
July 1999. An outside consulting firm was engaged in November 1998 to review the
Company's testing plan and again in March and August 1999 to review the business
recovery contingency plans.
17
<PAGE> 19
The Company will concentrate its efforts on customer communications and
business resumption contingency plan validation during the last quarter of 1999.
Costs of Compliance
Management has prepared an estimate of costs necessary to validate
and/or remediate mission critical systems. Based upon this estimate, management
does not expect that costs for bringing the Company's computer applications into
Year 2000 compliance will have a materially adverse effect on the Company's
financial condition, results of operations or liquidity. The estimated costs of
validation and remediation is $310,000, of which approximately $260,000 has been
expended with another $50,000 to be expended during the remainder of 1999.
However, management's ability to predict the cost associated with Year 2000
compliance is subject to some uncertainties. While the Company has made efforts
to obtain appropriate representations and assurances from third party vendors
and other organizations that such entities will be able to meet all of their
obligations to the Company without disruption as a result of the Year 2000
issues, there can be no assurance that the Company will not be adversely
impacted by the failure of such third-party entities to achieve Year 2000
compliance.
Risk Related to Third Parties
The Company has performed due diligence with respect to the impact of
Year 2000 noncompliance by funds takers, funds providers, and other third
parties. This impact cannot be accurately gauged. The Company has identified and
contacted customers with borrowing relationships of $1.0 million or more to
evaluate their readiness compliance efforts and will continue to monitor any
potential impact to the Company. Management does not believe the amounts
identified through this process are material in amount to adjust its current
methodology for making provisions to the allowance for loan losses although
there are no assurances that this amount will not be substantially higher than
management's estimate.
Contingency Plans
The Company has tested its business recovery contingency plans with
respect to the Year 2000 date change, and believes that it will be able to
process its own mission critical systems even in the event of a failure of third
parties such as electricity or telecommunications for an extended period of time
and without significant losses. In addition, the Company has in place plans for
providing funds necessary for liquidity needs of its customers through ongoing
monitoring and funding arrangements with other financial institutions, including
the Federal Reserve.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company manages market risk, which for the Company is primarily
interest rate risk, through its Investment Committee. Senior officers and
directors of the Company and the Bank compose the Investment Committee, and they
periodically get advice from external sources to assist in the management of
market risk. The Investment Committee functions in accordance with policies
approved by the Company's Board of Directors.
The Company uses simulation analysis to examine the potential effects
of market changes on net interest income and market value. It considers
macroeconomic variables, Company strategy, liquidity and other factors as it
quantifies market risk. At September 30, 1999, the Company estimated that a 200
basis point rise or decline in market interest rates over the next twelve months
would affect its net interest income for the same period by less than 5.0%.
18
<PAGE> 20
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable
ITEM 2. CHANGES IN SECURITIES
(a) Not applicable
(b) Not applicable
(c) Not applicable
(d) Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are filed with this report:
- Exhibit 2.1. Agreement and Plan of Reorganization
dated July 27, 1999 by and between Prime
Bancshares, Inc. and Wells Fargo & Company
(the "Agreement") (incorporated by reference
to Exhibit 2.1 to the Company's Current
Report on Form 8-K dated July 29, 1999).
- Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K
On July 29, 1999 the Company filed a Form 8-K under Item 5 to
report the execution of the Agreement.
19
<PAGE> 21
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: October 26, 1999 By: /s/ FREDRIC M. SAUNDERS
---------------------------------------
Fredric M. Saunders
Chairman of the Board and Chief
Executive Officer (Principal Executive
Officer)
Date: October 26, 1999 By: /s/ L. ANDERSON CREEL
---------------------------------------
L. Anderson Creel
Executive Vice President and Chief
Financial Officer (Principal Financial
Officer)
20
<PAGE> 22
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2.1. Agreement and Plan of Reorganization
dated July 27, 1999 by and between Prime
Bancshares, Inc. and Wells Fargo & Company
(the "Agreement") (incorporated by reference
to Exhibit 2.1 to the Company's Current
Report on Form 8-K dated July 29, 1999).
27. Financial Data Schedule
<TABLE> <S> <C>
<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> 28,830
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 33,837
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 32,290
<INVESTMENTS-CARRYING> 480,842
<INVESTMENTS-MARKET> 469,172
<LOANS> 597,580
<ALLOWANCE> 6,515
<TOTAL-ASSETS> 1,199,442
<DEPOSITS> 985,254
<SHORT-TERM> 18,046
<LIABILITIES-OTHER> 5,725
<LONG-TERM> 100,000
0
0
<COMMON> 3,063
<OTHER-SE> 87,354
<TOTAL-LIABILITIES-AND-EQUITY> 1,199,442
<INTEREST-LOAN> 36,631
<INTEREST-INVEST> 23,230
<INTEREST-OTHER> 1,458
<INTEREST-TOTAL> 61,319
<INTEREST-DEPOSIT> 23,334
<INTEREST-EXPENSE> 26,859
<INTEREST-INCOME-NET> 34,460
<LOAN-LOSSES> 1,023
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 24,172
<INCOME-PRETAX> 16,794
<INCOME-PRE-EXTRAORDINARY> 16,794
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,968
<EPS-BASIC> 1.10
<EPS-DILUTED> 1.07
<YIELD-ACTUAL> 7.32
<LOANS-NON> 870
<LOANS-PAST> 420
<LOANS-TROUBLED> 12
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 6,184
<CHARGE-OFFS> 973
<RECOVERIES> 281
<ALLOWANCE-CLOSE> 6,515
<ALLOWANCE-DOMESTIC> 6,515
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
